ML20126L827
| ML20126L827 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 06/14/1990 |
| From: | Martin J NRC OFFICE OF INSPECTION & ENFORCEMENT (IE REGION V) |
| To: | Taylor J NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| Shared Package | |
| ML20126L802 | List: |
| References | |
| FOIA-92-218 NUDOCS 9301080128 | |
| Download: ML20126L827 (3) | |
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UNITED STATES NUCLEAR REGULATORY COMMISSION o
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,d,4 WALNUT CPIEf K, CAllFORNI A 94596 JUN 141933 MEMORANDUM FOR:
James M. Taylor Executive Director for Operations FROM:
John D. Martin Regional Administrator
SUBJECT:
SCHEDULE AND STATUS OF STAFF ACTIONS RELATED TO.
THE DIAGNOSTIC EVALUATION AT PALO VERDE Your March 14, 1990, memorandum requested that I provide a summary of the l
schedule and. status of the items under my responsibility related to the diagnostic evaluation of the Palo Verde Nuclear Generating Station performed by AE00.
The attached enclosure provides that. summary. As you are aware, Arizona Public Service Company (APS) plans to provide a business plan for-Palo Verde.as a response to the Diagnostic Evaluation Team Report. ' That plan is scheduled to be submitted to the NRC by the end of July.
We intend to have additional discussions regarding this plan in future meetings with APS management.
The Region will continue to review and assess the licensee's progress towards improvement in the maintenance and engineering areas, which have been found previously to be weak.
The Region is particularly concerned with the DET findings related to the licensee's inadequate programs for check valves and motor perated valves. The Region intends to review this area in depth in.
future inspections.
By September 14, 1990, I will provide a status report on the resolution of the items in the enclosure or the plans for ther actions for items not yet compieted.
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donn B.' Martin Regional Administrator
Enclosure:
Sucinary Schedule and Status cc:
T. Murley, NRR E. Jordan, AE00 J. Partlow, NRR D. Crutchfield, NRR G. Holahan, NRR J. Larkins, NRR T. Chan, NRR M. Slosson, OED0 n9 6,.
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a Enclosure-PALO VERDE-DIAGNOSTIC EVALUATION REGION Y SCHEDULE AND STATUS 1.
Action:
(Item 1 of 3/14/90 memorandum) Review and evaluate the adequacy of the licensee's response to the DET report giving particular emphasis to-their-proposed plans and actions to address areas [particularly noted by the DET to need increased licensee attention). Also, prepare.
correspondence for signature by the EDO, which replies to the licensee's response to the DET report.
Schedule and status:
The licensee's response to the DET-report is scheduled to be submitted by_the end of July. Within 30 days of the receipt of the submittal, Region V-will coordinate the NRC's review and response with NRR and AE00 and submit it for the E00's signature.
[Within 45 days, issue the NRC's response]
2.
Action:
(Region V identified) Evaluate and issue any enforcement action based on the DET findings in coordination with NRR, AE00, and OE.
Schedule and status:
Region V is evaluating potential enforcement actions and coordinating our actions with the other offices _ involved.. Any enforcement _ action will be issued by June 30, 1990.
3.
Action:
(Region V id?ntified) Conduct detailed discussions-of the licensee's business plan which addresses-the observations of the DET.
Schedule and status: Within 90 days of the date of receipt of the I
licensee's business plan, Region V will have a discussion of the plan with senior APS management.
Further discussions will be held, as needed..as the plan is developed by APS.
4.
Action:
(Region V identified) Review the implementation of the licensee's corrective actions to the DET findings end conclusions and any resulting enforcement actions.
Schedule and status: Within 180 days of the receipt of the licensee's response to the DET and any_ enforcement actions, Region V will verify the adequacy and implementation of the licensee's corrective actions.
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FollCYISSUE August 15, 1990 (Notation Vote) 5ECY-90-290 for:
The Comissioners from:
James M. Taylor Executive Director for Operations Subiect:
POLICY STATEMENT ON ECONOMIC PERFORtiANCE INCENTIVE REGULATION AND ASSOCIATED l'ON!TORING ACTIVITIES
Purpose:
To respond to the Comission's memorandum of fiay 8,1990, which required that the staff (1) prepare a policy statement that sets forth the views of the Comission concerning economic performance incentives, and (2) develop a mechanism to monitor and evaluate the poter,tial safety consequences of these programs before they go into effect.
Background:
The staff presented SECY-90-046 on February 13, 1990, in response to the Comission's request to update and evaluate economic performance incentives imposed on power plant licensees by State regulatory comissions.
The staff made a presentation to the Comission on this matter on April 3,1990.
That presentation included information on the current situation of State-imposed economic performance incentive programs, an analysis of those programs that could affect the public health and safety, and an evaluation of the options for NRC to deal with programs it deerrs unsatisfactory.
Discussion:
A draft Policy Statement on economic perfomance incentives is enclosed for the Comission's consideration. The staff suggests that the Policy Statement be published as a proposed statement for public coment. We would solicit coments from State regulatory comissions that regulate nuclear utilities and any other entity that cares to respond.
A proposed cover letter requesting coments on the proposed Policy Statement is included as Enclosure 2.
This Policy Statement covers each NOTE:
TO BE MADE PUBLICLY AVAILABLE WHEN THE FINAL SRM IS MADE
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UE CONTACT:
Darrel A. Nash, NRR 492-1256 f
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1 the Comissioners 2-r t
of the Comission's five points of concern, (See COMKR-90-003 and COMJC 90 002, included as Enclosure 3) concentrating on the distinguishing features of acceptable and unacceptable incen.
tive programs from NL 's perspective of public health and safety.
Additionally, the staff is establisning a tracking system to go substantially beyond the periodic surve of licensees and State regulatory commissions, in respor se to the Comission request, we are pursuing three initiatives to obtain early notification and evaluation of incentive programs.
First of all, we are preparing a Generic Letter described herein, which will be sent to all licensees of comer,cial nuclear reactors.
The Generic Letter will request from licensees that, on a 1'
voluntary basis, NRC be given early notification of any new, or significant change in, economic performance incentive programs imposed on commercial reactor licensees and that licensees perform an evaluation of possible impacts that these new or changed programs will have on safety. We will point out the advantages to licensees in ke2 ping NRC a
-concerns relating to incentive programs.pprised of safety The second initiative will be to send the final Policy Statement, as approved by the Commission, to all State utility regulatory) conmissions and the Federal Energy Regulatory Comission (FERC with a cover letter.
The cover letter will explain the Policy Statement and will ask for their cooperation in keeping NRC informedofStateandFERCinitiativesto(1)develo programs that will apply to nuclear-reactors, or (2)p incentive make major modifications to existing programs.
Finally, the staff intends to subscribe to a newsletter which[
among other things, focuses on actions planned or taken by rate regulatory commissions.
This will supplement the first two-actions and provide NRC with an independent source of new or modified economic performance incentive programs.
The policy Statement has been prepared to reflect the level of concern expressed in the Staff Requirements Memo (SRM).
The Ocmission may wish to consider if a higher level of concern should be comunicated by stating that some ir":entive programs are unacceptable. The higher the level of concern or opposition.
the greater the likelihood that an effort will be made by licensees to involve the NRC in state regulatory comission proceedings.
If the stated level of concern is lower, there will be less likelihood of an argument by licensees that the NRC would prohibit such programs. - The staff recomends the-bt. lance expressed in the SRM and has prepared the Policy Statement accordingly.
The primary con arn with economic performance incentives relates to penalties appl.ed to operational measures. These tend to
m The Conr.issioners.
direct 6ttention to decisions on when to shut down a reactor or to maintain operations at some level.
In addition, con-struction cost disallowances h6ve been identified as economic perform 6nce incentives by some $ tate regulatory comissions.
In a few instances, the staff has been concerned that very large construction cost disallowances can im5act' funds needed for safe p16nt operation. -Our response to t1ese ections br$ been to emphasize to licensees that financial difficulties were in no way to be a justification for less than full commitment to saft plant operation.
In $ elected cases, we have increased inspection resources at facilities where licensees were undt.r financial stress during certain phases of startup and operation.
We are evaluating whether actions beyond the Folicy Stettuent and Generic Letter are warranted fter these retrospectin cost disallowances.
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015Cl;s510H TO BE INCLL'DED lli GEktLIC LETTER The FRC is primerily concerned with safety impacts of incentive goals. s that f ocus on short term operational or performance procran 1he NRC supports econcmic perfornance incentive programs thdt reward a licensee for a sound operations and maintenance progran and for correcting recurrent or predictable failures-or other potential prctlems that could lead to an operational trensient, unplanned plart outage, or derating.
Licensees are requestec to advise NRC whenever a State rate regulatory commission or FERC tales an official action relating to the establishment of an econoniic perforrance incentive program including a notice of hearing, and craft or*
final progrce adopted.
The fo110wir,9 infornation is to be_provided where available:
(11 the beginning and ending dates of the incentive program,-
(2) the performance reasures to be used for the rewards or pentities, (3) the period covered by a performance neasure to assess a reward or penalty, (4) the method of determining revcrds e Jen61 ties including matters such as the existence of null '.vnes, identification of sharp thresholds between rewards and penalties, (5) an indication of whether the rewards and penalties are established according to (i) prede-termined formulae, (ii) the discretion of FERC or State commissions,or(iii)negotiationstobeconductedbetween licensees and commissions; and (6) indicators of whether any programs make use of SALP, or performance indicators developed either by NRC or another entity.
In addition-, 11cer. sees will be requested to provide to the NRC an analysis of the expected safety consequences of _new or substantially modified programs before they are implemented.
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The Cornissioners
-4.
Tinally, licensees are requested to report significant rewards or penalties from implementation of the incentive programs and provide the results of their assessment of the potential safety impact.
Significant penalties will be determined by effects on a licensee's (1) return on cotpon equity, (2) net cash flow, and (3) interest cove' rage on long-term debt.
Recomendation:
It is recomended that the Conmission approve the enclosed draf t Policy Staternent for public coment in the federal R.?$%,t31 Coordination:
This paper has been reviewed by the Of fice of the General Counsel and it has no legal objection to it.
/W'//
h Jam s 11. Taylor E
utive Direc or for Operations
Enclosures:
1.
Policy Statement on Economic Perforn,ance incentives 2.
Letter to be Sent to the federal Energy Regulatory Comission and to State Utility Regulatory Comissions 3.
COMKR-90-003 and COMJC-90-002, Economic Peformance incentive Regulation Commissioners' com-ents or consent should be provided directly to the Of fice of the Secretsry by CCB Wednesday; August 25, 1990.
Commission Staff Office comments, if any, should be submitted to the Commissioners NLT Wednesday, August 22, 1990, with an information copy to the Office of the Secretary.
If the paper ic of such a nature that it, requires additional time for analytical review and comment, the Commissioners and the Secretariat should be appr.isen of when comments may be expected.
DISTRIBUTION:
Commissioners OGC OIG GPA REGIONAL OFFICES EDO ACRS ACNW ASLBP ASLAP SECY
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i Concission Draf t policy Stattunt on the possible Safety impacts of Economic performance incentives AGEllCY:
Nuclear Regulatory Commission ACTION:
Draft policy statement Sl'MMARY : This statenent presents the policy of the Nuclear pegulatory Commission (h0C) with respect to the pcssible safety impacts of economic performance incentive prograns established by State conmissions regulating electric utilities. The policy statement (1) contains a discussion of the potertial irnpact of the policies crd actions of State regulatory bodies, emphasizing that such actions can have either a positive or negative impact on public health and safety; (2) reflects the Comnission's concern that certain forms of economic perforrance incentive regulatico have the potential for adversely affecting nuclear plant operation' anc public herith and safety;- (3)- specifically identi-fies those methods or approaches that are of. particular-concern (e.g. use 'of sharp thresholds, measurerent of performance over very shcrt time intervals, lack of. " null rone," and inappropriate ' reliance on SAlp scores); (4) indicates that the !!pC will ccr.tinue to nonitor the application of economic performance incentives and performance criteria to nuclear _ powcr plant operations; and (5) urges licensees and State regulatory concissions to apprise the. NRC of-econonic perforr;6nce incentive progrens _ that are being considered for appli-cation to NRC-licensees,
' DATES:
The connent period expires 75 days after publication in the rederal-Register. Comments received after this time willibe considered if it POLICY STATEMENT-
is practical to do so, tut assurence of consideration cannet be given except fcr comments received on or before this cate, ADDRESSES:
l< ail written comments to the Secretary, U.S. Nuclear Regulatory Comrission, Washingten, D.C. 20555,-Attention: Docketing and Service Branch Deliver commerts to One White flint flerth,11555 Rockville pike, Rockville, liarylarf between 7:30 a.m. and 4: 15 p.m. federal workdays.
Comments may also be delivered to the NRC Public Document Room,1717 H Street NW, Washington, D.C.,
betoeen 7:45 a.m. and 4: 15 p.m.
Copies of comments received ray be examined at the NPC Public Docunent Roon..
FOR ftTTHER INf 0Rf3110fl C0f.T/CT:
flertin J. Virgilio, Chief, Policy. Development _
and Technical Surport Branch Office of Peclear Reactor Regulation, U.S. Nuclear Reguletory -Commission, Washington D.C. 20555, Telcphone: (301)492-1254 SUPPLE!:EfiTARY INFORMATION:
Introcuction: After reviewing the inforretion on economic performance incentive programs pet in place by State regulatory commissions that regulate-the economic
. returns of utilities operating nuclear power plants, the Commission has decided that it would be appropriate to set forth its views on the possible cafety impacts of such programs in a Commission Policy Staterent.
Background:
A nurber of State regulatory concissior.s have established economic perfcreance incentive programs relating to electric power plants. Some programs t-
-P-POLICY STATEl'ENT
Enclosure I havt e7isted urchcoged for e rur t er of yetrs, whereat others have been substen-tielly rnodified tr ere newly established.
NRC monitors and evaluetes these inter.tive progrers to determine their possible impact on the safe operation of nucicer power reettors.
The hPC firnly tt.lievet thet these programs should not create incentivts to operett a plant whet. It should be shut down for safety r e a s o r,s.
Policy Statenent:
The Comission's views on econcmic pcrformante incentive progrars art es folicwr:
Potent 161 Ir pacts iht IEC r(cognizes thtt the existinc prograr.:s vary considerably from State to Statt and that tht plans are not (6sily classified, es[ccially as to their pos-sit it inpact on sife plant operations.
However, certuin general characteristics of prcerars can be tuluoted ar.d found to be either desirable (or at least neutrel) or unt'esirable in their safcty in: pact.
A desiratie plan provides inctntives to mal..e irprovenents in operation and main-tenar ce that result in Icog-term improvenent in the reliability of the reactor, i
main generator ard their support systers.
An undesirable plan provides inter.tives to operate a facility with potentisi safety problems or to start up before fully ready merely to rneet an operational goal.
A desirable eccremic performance inct.ntive rewards a utility for a sound opera-tions anc maintenance program and for correcting recurrent or predictable 3-POLICY STA1E!!ENT
failures or other potential probler.:, that could lead to an operational transient, unplanned plant outage or derating.
Such an incentive is a desired result because a well run plant and prompt correction of problems enhance safety.
Unanticipated transients and shutdowns challenge operators and safety systems and, although a low probability, could initiate a more serious event.
Improved perforr.ance in a utility's operational organization, which can be encouraged by economic performance incentives, can be conducive to improving both safety and economic performance.
However, the Corriission's concern with incentive plans is that, in the interest of real or perceived short-term economic benefit, utilities might hurry work, take short cuts, or delay a shutdown for maintenance in order to meet a deadline, a cost limitation, or other incentive plan factor. Such a program could encourage, directly or indirectly, the adoption of actions designed to maximize measured perforrance in the short-term at the expense of plant safety (public health and s a f ety).
If a licensee keeps a reactor online when it should be taken down for preventive or corrective maintenance and uses shortcuts or compressed work schedules to minimize down time, these actions could adversely impact safety, potential Adverse Impacts on plant _01eration and Public Health and SafetL Some specific features of incentive plans now used by some States could adversely affect public health and safety. Thesefeaturesare(1)sharpthresholdsbe-tween rewards and penalties, (or between pena _1 ties and null zones, or rewards and null zones) and (2) performance measurements having short time intervals. POLICY STATEMENT
A sharp threshold occurs when a licensee misses a target capacity factor and must bear a large part or all of the resulting replacement power costs. A sharp threshold provides an incentive to continue plant operation to achieve a target capacity factor to avoid the large replacement power cost or to earn a sub-stantial reward, This type of incentive could deflect attention from safe plant operation.
performance measurements for short-term intervals provide incentives to focus on a short-tern target, such as a higher capacity factor or availability factor.
This target could become the primary focus, diverting attention from long-term goals of reliability and operational safety.
In contrast, performance measure-ments for long-tern intervals provide incentives to the utility to follow sound maintenance and operational practices and make system and component changes so that the licensee improves operating performance in terms of availability and capacity factors.
Short-term measurements tend to make safety and economic goals conflict;
-long-term measurements tend to make the two goals complementary.
_ Specific features That Cause NRC Concern Sharp thresholds and short-term performance measures can adversely impact safety.
In addition,' plans that use NRC periodic performance assessments and performance indicators of the NRC industry as a basis for rewards or penalties present POLICY STATEMENT.
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several major concerns.
First, the NRC's Systematic Assessment of Licensee performance (SALP) was developed to assist the NRC in assessing the performance relative to the safety of individual facilities and to serve as a basis for communicating to the licensee.
The NRC staff expects licensees to focus on the facts in the SALP report, the issues identified, and the apparent root cause of problems.
The prospect of financial rewards or punishments for licensees bas d on SALP ratings causes concern in that it may change the focus of the SALP process from the underlying issues, where it should properly be, to the numerical ratings themselves.
If the issues identified in a SALP report ere obscured by concerns over the financial consequences incurred at a result of that rating, the process may not achieve the desired results.
Similarly, performance indicators were developed to assist NRC, and the licensees in identifying trends and areas of performance that should receive a.
more detailed assessment.
Basing rewards or penalties on the indicators could direct a licensee's attention toward improving the scores by possibly inappro-priate means rather than toward identifying and correcting underlying-safety conditions.
Contir.ued NRC Monitor _ing Program The NRC will periodically survey State regulatory commissions having rate regu-lation over power reactors and the Federal Energy Regulatory Coninission (FERC) to determine any new or substantial changes in programs and to ascertain how-
-the programs have been implemented, including the imposition of large penalties. POLICY STATEMENT
The surny results will be evalurted to identify safety concerns from inappro.
priate progrars and penalties that detract from safety performance. We plan to update the survey annually.
We will periodically assess the frequency of the surveys to determine the need for schedule adjustments.
Li_censees arc' Utility Corcissions Urged To Inform NRC of Prooram initiatives 1
The NRC shouir' be apprised of econocic perfornance incentive prograns-that are being planned by State r(gulatory coroissioni and that can impact safety, f requently, these programs are developed in coordination with regulated utilities.
Toward this erd, the NPC rill be requesting that licensees report whenever these i
corrissions are developing or substantia 113 revising economic performance i nc e r,t i v es. The objectivt will be that NRC te informed of the principal features of the trogran se thtt their lilely impact on plant safety can be assessed.
Further, hkl will be reoresting licensees to report the pen 61 ties assessed through those progrnra as they occur.
Np.C-also will be' seeking the. cooperation of FERC etc the Statt utility regtStory coreissions.te advise the NRC of initiatives tc impose or char.ge an ecor.ctric performance incentive program that applies to an NRC licensee.
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TEXT Of LETTER TO BE SENT TO THE FEDERAL ENERGY REGULATORY COMMIS$10N AND T STATE UTILITY REGULATORY COMMIS$10NS REQUESTING COMMENTS ON THE PROPOSED STATEMENT ON ECONOMIC PERFORMANCE INCENTIVES (Heading)
A number of State regulatory commissions and the Federal Energy Regulatory Comission (FERC) have established economic performance incentive programs relating to commercial nuclear reactors. Some programs have existed for a number of years, whereas others have been substantially modified or are newly established. The U.S. Nuclear Regulatory Commission (NRC) has monitored these
. programs through periodic surveys of State commissions and licensees to determine whether they create incentives for reactor licensees to change operating or maintenance practices in such a way that safety is diminished.
in reviewing the programs in effect in 1989, the Commission has determined that a few economic performance incentive programs have the potential to direct licensees' attention away from the primary responsibility of safe operation and toward attempting to meet an operational goal to avoid a penalty or. receive a reward.
As a result, the Commission directed the NRC staff to develop a proposed Policy Statement that describes desirable and undesirable-features of these programs with respect-to licensee's responsibilities for public health and safety. Enclosed for your consideration is a copy of the proposed Policy Statement.
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Your cccperatiot, in providing comients to the NRC on tiis matter will be greatly appreciated.
The NPC has indicated in the past that properly devised economic perforn.doce incentive prograns crn fneet beth the goals of economical and safe operation.
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James M. Taylor Executive Director for Operations 1
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May 8, 199G orescr or, q COMKR-90-003 and sicnivAni COMJC-90-002 4
E MEMORANDUM TOR:
James M. Taylor Executivo Director for Operations FROM:
6,8 m el J. Chilk, Socratary SUIRECT ECONOMIC INCENTIVE REGULATION r
At the recent staff briefing on Economic Incentive Regulation of Nuclear Power Plants various concerns were expressed by the Commission.
Upon further consideration, the Commission (with Commicsioners Roberts, Rogers, Curtiss, and Romich agrooing) has agreed that it would be appropriate for the Commission to set forth its views on this matter in a commission policy Statement on Economic Incontive Regulation.
In addition, the Commission believes that the NRC should have some mechanism to monitor and evaluate the potential safety consequences of proposed economic i
incentive programs before such programs go into offect.
Accordingly, the staff should:
1.
. develop and submit a Policy Statomont on Economic Incontive Regulation for the commission's consideration.
The proposed policy statement should -- (1) contair, a discussion of the potential impact of the policies and actions of stato regulatory bodies, emphasizing that such actions can have either a positive or negative impact on public-health and safety; (ii) reflect the Commission's concern that certain f orms of economic incentive ragulation have the potential for adversely affecting nuclear power plant operation and.public health and safety; and (iii) specifically identify those methods or approaches that are of particular concern (e.g.,
use of sharp thresholds,- measurement of performance over very short time intervals, lack of " null zone", inappropriate reliance on SALp scores); (iv) indicate that the NRC will continue to monitor the application of economic incentives and performance criteria to nuclear power plant operations; and-(v) urge licensees and public utility commissions to apprise the NRC of economic incentivo programs that are being considered for application to-NRC licensees.
(EDO)
(SECY Suspense 7/1/90) i
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2.
establish a tracking system, as originally recommended in srCY-85-260, to monitor proposals for, and impicmentation of, perf ormance incentives applicable to nuclear power plants.
The tracking system should provide for early notification when an incentive plan is proposed, instituted, or substantially modified, or when significant rewards or penalties are imposed under such plans.
Additionally, the tracking system should provide sufficient information in a timely manner so as to permit the staff to evaluate the potential safety consequences of such plans prior to such plans' going into effect.
(EDO)
(SECY Suspense:
7/1/90)
Chairman Carr disagreest he believes that the investment of resources proposed is inappropriate at this time.
He favors continuing with the program of monitoring by the staff as described in SECY-90-046.
If adverso impacts are noted, the Commission would then select from the options presented in the paper to protect public health and safety, cc:
Chairman Carr Commissioner Roberts commissioner Rogers commissioner Curtics Commiscicner Remick OGC OIC
.