ML20198J366
| ML20198J366 | |
| Person / Time | |
|---|---|
| Issue date: | 08/27/1997 |
| From: | Bahadur S NRC OFFICE OF NUCLEAR REGULATORY RESEARCH (RES) |
| To: | Meyer D NRC OFFICE OF ADMINISTRATION (ADM) |
| Shared Package | |
| ML20008B465 | List:
|
| References | |
| FRN-62FR47588, RULE-PR-50 AF41-1-040, AF41-1-40, NUDOCS 9710160130 | |
| Download: ML20198J366 (85) | |
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August 27, 1997 MEMORANDUM T0: David L. Meyer Chief 1 Reles Review & Girectives Branch Division of Freedom of Information and Publications Services Office of Administration FROM: Sher Bahadur. Acting Chief Originaisionedby Regulation Development Branch
< Division of Regulatory Applications Office of Nuclear Regulatory Research
SUBJECT:
IMPLEMENTATION OF COMMISSION ACTION: PROPOSED NEW 10 CFR PART 50 (WITS NO. 9500112)
By memoranda dated June 30, 1997, and August 15, 1997, the Secretary of the Comission indicated that the Comission (with all Commissioners agreeing) has approved the p oposed rule on Financial Assurance Requirements for Decomissionin Nuclear Power Reactors set out in SECY-97-102.
Please implement the Commission's action by arranging for publication of the attached proposed rule in the Federal Reaister allowing 75 days for public comment.
Attoched is a marked up copy of those pages from the Federal Reaister Notice showing Commission requested changes for transmittal to the Of fice of the Secretary. ,
Also attached is a Congressional letter package for transmittal to DCA and two copies of the public announcement for transmittal to OPA.
-In addition, attached is a copy of the draft regulatory analysis for transmittal to the PDR.
Attachments:
- 1. FR Notice + 5 Copies & Diskette
- 2. Marked up Pages of FR Notice
- 3. Congressional Letter Package
- 4. Public Announcement (2)
- 5. Draft Regulatory Analysis Distribution:
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NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 306f44001
%...../ August 27, 1997 MEMORANDUM TO: David L, Meyer, Chief - --
Rules Review & Directives Branch Division of Freedom of Information and Publication; Services Office of Administration FROM: Sher Bahadur, Acting Chief Regulation Development Branch Division of Regulatory Applications Office of Nuclear Regulatv y P.esearch
SUBJECT:
IMPLEMENTATION OF COMMISSION ACTION: PROPOSED NEW 10 CFR PART 50 (WITS N0. 9500112)
By memoranda dated June 30, 1997, and August 15. 1997, the Secretary of the
.Comission indicated that the Commission (with all Comissioners agreeing) has approved the p oposed rule on Financial Assurance Requirements for Decommission 1n Nuclear Power Reactors set out in SECY-97-102.
Please implement the Commission's action by arranging for publication of the attached proposed rule in the Federal Reaister allowing 75 days for public coment.
Attached is a marked up copy of those pages from the Federal Reaister Notice showing Comission requested changes for transmittal to the Office of the-Secretary.
Also attached is a Congressional letter package for transmittal to CCA and two copies of the public announcement for transmittal to OPA.
In addition, attached is a copy of the draft regulatory analysis for transmittal to the PDR. .
Attachments:
- 1. FR Notice + 5 Copies & Diskette
- 2. Hurked up Pages of FR Notice
- 3. Congressional-Letter Package
- 4. Public Announcement (2)
- 5. Draft Regulatory Analysis -
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V ATTACHMENT I FEDERAL REGISTER NOTICE l
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[7590-01-P)
NUCLEAR REGULATORY COMMISSION l
10 CFR Part 50 RIN 3150-AF41 Financial Assurance Requirements for
. . . . Decommissioning Nuclear Power Reactors AGENCY: Nuclear Regulatory Commission.-
ACTION:. Proposed rule.
SUMMARY
- The Nuclear Regulatory Commission (NRC) is proposing to amend its regulations on financial assurance requirements for the decommissioning of nuclear power plants. The proposed amendments are in response to the potential deregulation of the power generating industry and respond to questions on whether current NRC regulations concerning decommissioning funds and their financial mechanisms will need to be modified. The proposed action would require power reactor. licensees to report periodically on the status of their decommissioning funds and on the changes in their exte'rnal trust agreements. Also, .the proposed amendment would allow licensees to take credit for the earning on decommissioning trust funds.
DATE: Submit comments by (insert a date to allow 75 days public comment]
, 1997. Comments received after this date will be considered if it is practical to do so, but the Commission is able to assure
-consideration only for comments received on or before this date.
- j
ADDRESSES: : Mail comments'to: The Secretary of the Commission, U.S. Nuclear-
- Regulatory Commission, Washington, DC 20555-0001, Attention: Docketing and Service Branch. '
-Deliver comments to:- 11555 Rockville Pike, Rockville, Maryland, between 7:30'am an'd 4il5 pm, Federal = workdays.-
Examine copies of comments received at:. The NRC Public Document Room, 2120 L Street NW. (Lower Level), Washington, DC.
FOR FURTHER INFORMATION CONTACT:- Brian J. Richter, Office of Nuclear-Regulatory Research, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone (301) 415-6221, e-mail bjr9nrc. gov.
SUPPLEMENTARY INFORMATION: '
Background.
- The NRC published an advance notice of proposed rulemaking_ (ANPR) for
'" Financial Assurance Requirements for Decommissioning Nuclear Power Reactors" on April 8, 1996 (61 FR 15427). The Netc was seeking comments en its proposal.
to amend-10 CFR 50.2, 50.75, and 50.82 to require that' electric utility-reactor licensees provide assurance that the-full estimated cost of i
decommissioning their reactors-will be available through an acceptable =
guarantee mechanism if the licensees are no longer subject.to rate regulation by State public utility commissions _ (PUCs) or the Federal Energy Regulatory Commission (FERC).and.do not have a guaranteed source of income. The proposed
. amendments would_ also allow licensees to assume a positive real rate of return-
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on decommissioning funds during the safe storage period. Lastly, a periodic reporting requirement would be established The ANPR specifically requested comments on the above amendments and on six areas of consideration for decomissioning:
-1. The timing and extent of deregulation of the electric utility industry;
- 2. Stranded costs;
- 3. Financial qualifications and decomissioning funding assurance for nuclear power plants;-
- 4. Decomissioning funding assurance for a Federal Government licensee;
- 5. The status of decomissioning trust funds during the safe storage period; and 6.- Reporting on the status of decomissioning funds.
In response, the NRC' received 650 comments from 42 commenters, and the comenters have been classified ir.to 4 groups. The largest group of respondents was utilities and utility groups (28 commenters), followed by public utility commissions ~and related organizations (9 commenters). Two public interest groups submitted comments, as did a group of 3 commenters referred to as "other."
The discussion of the comments received is presented by general comment area and specific questions posed within each area. The questions appear in the order as presented in the ANPR, followed by the Commission's responses.
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l Olscussion of Comments A. TIMING AND EXTENT OF ELECTRIC UTILITY INDUSTRY DEREGULATION A.1 LftelyTimetable On the issue of the timing and ext.nnt of deregulation, most commenters addressed only the timing question, if commenters also discussed the question of extent, they generally only distinguished between deregulation of the wholesale market and deregulation of retail power sales, although timing estimates usually referred to retail deregulation. Almost half of the commenters did not take a position on the timing issue. Seven commenters stated that the timing of deregulation could not be predicted.
Several commenters stated only that they took the same position as the Nuclear Energy Institute (NEI), an organization that represents many nuclear utilities. NEI estimated that about ten years would be necessary to bring about restructuring and deregulation. A few commenters suggested that from five to ten years would be sufficient. Two commenters pointed to events in States that were scheduled to occur as early as 1998 and others predicted significant deregulation within five years or less or " rapidly." Two commenters suggested that deregulation would take place slowly and require a considerable time to complete.
A.2 Restructurina or Dereculation Scenario Phases of Doreaulation. Several commenters stated that an initial phase of deregulation of the generation or wholesale electricity market has already begun and is likely to continue. Utilities are now preparing for deregulation by undertaking cost reductions (e.g., workforce reductions, contract
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renegotiations, regulatory asset reductions, operating cost reductions), {
strategicalliabcesandmergers,andexpansionintounregulatedvenues. !
- Five commenters expressed their belief that a second deregulatory phase o uld ;
- -follow and lead to the restructuring of the transmission sector and to retail ;
competition. However, many commentirs noted that,significant uncertainty J f exists regarding the breadth, timing, and-implementation of the new l 1
competitive. electricity business.. q 4
The pace of deregulation, according to one comenter, will be set by i Federal and Stste regulation.- One comenter ' stated that competition would be - l
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phased in slowly with existing generation assets'being "kept whole" through -
standard regulated rates.
Ultimate Extent of Rate Reaulation or Dereaulation. Four commenters ;
i expect-that electricity prices from generators will ultimately be largely. i deregulated or, unregulated '. One comentor stated that- generation of ,
electricity will become partially deregulated, but may not be fully .
deregulated if reliance on market forces'does notaadequately ensure safe and reliable generation supplies.
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, ~ Nine commenters expect that transmission rates will' rem'ain subject to ,
Federal . Energy Regulatory Comission jurisdiction. Regional power markets-
-(RPM)' and independent' system operators (ISO) (discussed below) would also fall -
l J under FERCf jurisdiction, according _to.one' comenter. Ten comenters Lanticipate-that distribution (retail) rates are likely to remain subject to I .
- State? jurisdiction. .One of these comenters stated that distribution rates >
may be' regul'ated. u'nder a price ' cap or incentive-based ~ regulation.
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Retail wheeling and pool-based pricing' will provide market pricing at all levels including the retail level, according to one commenter. Three commenters believe that retail wheeling will become widespread.
One commenter indicated that nuclear power plants and non-utility generators, even if released from rate regulation by States or FERC, may
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remain under some forms of regulation, including State and Federal siting and environmental regulation.
Rgsultino Business and Industry Structure. Although one commenter stated that NRC should abandon any attempt to anticipate market structure, other commenters suggested that the following features might characterize the industry subsequent to deregulation and restructuring:
- Functional unbundling which is the divestiture of generation, transmission, or distribution systems.
. Many, and perhaps all, transmission systems operated on a State-wide or region-wide basis. An 150 will operate the system, coordinating' energy produedon and delivery with demand and provide a pool-based spot market
. price for energy. RPMS.or power market exchanges (PMEs) for competitive generation will accept bids from all generators that want to participate in the market,- establish the clearing price, and determine the sequence of generator dispatch. Bilateral contracts for the direct' purchase of power will also be allowed.
- Different treatment for nuclear generation than for other types of '
utility-owned generation. Even if nuclear generation is permitted to compete in an open market,-some regulatory mechanisms may remain in
- Retai1' wheeling refers to the selling of bulk power to a retail . customer by way of a third party's transmission system. Pool-based pricing is a.
pooling of electricity produced by various generators for resale to consumers.
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place to ensure that nuclear-related costs (safety, security, waste disposal, decommissioning) are recovered by some means other than the
- market price of power. One of these commenters stated that regulated
[ local distribution companies would end up owning nuclear generating l
plants.
- Continued economic viability for nuclear generation for many years"as a result of marginal costs that are quite low. Another commenter argued, however, that there is no obvious deregulated market for many or most existing nuclear power plants because of the uncertainty of the costs of decommissioning and the disposal of high-level nuclear wastes. This commenter stated that neither NRC rulemakings nor short-term passage of time will resolve these issues. A third commenter asserted that competitive pressures will lead to the early retirement of some nuclear plants. '
One commenter argued that, given the changes under consideration and already under way, it is no longer credible to assume that utilities can always raise rates or otherwise recover whatever costs are needed to safely operate and decommission nuclear plants. Another commenter suggested that if the NRC chooses to proceed with a rulemaking, the rule should accommodate both nuclear units subject to traditional regulation and nuclear units in the competitive markets.
A1 Differences in State Policies and Imolications Commenters expressed viewpoints on the likely differences in State deregulatory efforts and policies. One commenter declared that all States will ultimately undergo restructuring and deregulation in some form. Nine l
commenters, however, suggested that some States may reject restructuring
' entirely, regardless of what other States do.
Four commenters feel that States will possibly or probably be compelled by competitive forces to deregulate, particularly if neighboring States do so.
One of these commenters added that States within a geographic region (where there are no physica1' barriers to electric transmission) afe~1ikely to migrate to a similar industry structure, either as a result of Federal legislation or market pressures. Two other commenters provided examples of market or political presuures that could affect neighboring-States' decisions to deregulate.
One commenter stated that some regulators in States that already enjoy
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low-cost electric service appear reluctant to endorse competition because of t
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concerns that indigenous utilities will seek to sell power to the external.
L j- market where profit margins could be_ greater. Should market factors provide an advantage to States that foster competition (by' allowing indigenous
' utilities to gain strength by acquiring market' share), States that resist competition could put their utilities at a disadvantage. While State .
regulators may elect to defer the decision on competition, economic or social pressures could influence that decision.
Another commenter indi;ated that States implementing retail competition may face the risk that a utility in a neighboring State could obtain open' access' without reciprocal access being provided to in-State utilities seeking to enter the State that does not provide competition.
Three commenters remarked that reform may proceed at different speeds in
- different States because of local market and political- pressures. One of a
these commenters recommended that NRC accommodate the varied pace to avoid hindering or forcing transitions.
In response to the ANPR's query regarding " hybrid" systems, one commenter believes that a hybrid system of regulation is likely to emerge as States deal with economic , issues in a variety of ways. Another commenter
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stated that a hybrid system could exist for soie~ time. A third commenter reported that, while a hybrid system could probably exist, it may not result in the least expensive electricity. Under a hybrid system, industry structure may vary from region to region. Other commenters, however, felt that a hybrid system is unlikely to prevail. They stated that a hybrid may be operationally N
cumbersome or even unworkable because the rnarkets are not defined by State boundaries and because the grid is highly integrated and interdependent. One of these commenters also stated that a patchwork or hybrid system may reduce the opportunities to market some nuclear generation. Three commenters said they could not predict whether_a hybrid system can exist or how one State's policies will affect its neighbors.
E One commenter expressed concern that deregulation and reduced oversight l at the State level may reduce the certainty that out-of-State partial owners T of nuclear-facilities will collect and expend decommissioning funds.
Resoonse. The above questions were posed for comment so the NRC could obtain estimates on the timing of deregulation, phases, and possible different approaches that may be used in how States would address deregulation. These comments are being grouped under one response as they all contribute to whether the Commission should proceed with a proposed rule now. While the responses to this set of questions ran the gamut of opinion on this issue, the comments have not caused the Commission to change its position that it must act now'to be in a position.to respond to the upcoming changes in the electric utility environment that could affect protection of public health and safety.
Increased competition could result in economic pressures that affect how licensees address maintenance and safety in nuclear power plant operations, as
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well as the availability of adequate funds for decommissioning. The comments received and the NRC staff's independent review of deregulation activities also indicate that NRC power reactor licensees are likely to have sufficient notice of changes in their regulatory regimes so as to be able to secure necessary financial assurance for decomissioning should they no longer qualify, in whole or in part, as electric utilities. (1he staff notes that most, if not all, PVCS and FERC are addressing decommissioning funding assurance in their deregulatory initiatives.) Hence, these comments reinforce the Commission's position that a rule is necessary and timely, given electric utility restructuring and the deregulation legislation being prcposed or enacted in several States and by Congress.
B. STRANDED COSTS Many commenters expressed the view that regulators are likely to allow prudently incurred stranded costs to be recovered in some manner. Many of these commenters felt this was particularly true for prudently incurred decommissioning costs. Following are viewpoints typical of these comments.
The probability is high that regulatory mechanisms will be developed to replace cost recovery procedures established through " traditional" regulatory procedures. These mechanisms (e.g., wire charges, non-bypassable customer fees, including securitization, exit fees) may be different tr.,m current
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[ mechanisms, but'the probability of recoverability under these mechanisms is no less than it would have been under conventional regulation. The mechanism chosen, and its associated equitable allocation of cost responsibility between customers and shareholders, will be determined through the inevitable give and take of the restructuring process, if one is implemented.
FERC, in' Order 588,' April 24,1996, effectively established a precedent that, for electric sales under FERC jurisdiction, there will be full .ecovery ;
of all costs that were prudently incurred, based on an expectation of serving customers in the future, but have or may become stranded as a result of moving to a competitive market. Although the FERC order pertains to wholesale markets, most believe the precedent has been set and the same standard will apply to stranded costs that result from retail competitinn. It is reasonable to assume that legislators and generators will take distinct precautions in relation to nuclear generation. Even if nuclear plants are permitted to compete on the same basis as other baseload generation, regulatory mechanisms must be in place to ensure that certain costs (safety, security, waste disposal, and plant decommissioning) are recovered by some means other than the market price of power, plausible mechanisms that regulators could use to recover costs include competition transition charges and non-bypassable charges. One utility fully expects that ther_e would be 100 percent recovery of nuclear stranded costs in a restructured electric industry.
However, other commenters expressed some uncertainty. Some commenters thought cost recovery was appropriate, but did not address its likelihood. In some cases, commenters advocated specific NRC action to address the situation.
One commenter stated-it is premature to speculate as to who will ultimately bear the responsibility for stranded costs (estimated between $7
l l and $1'/ billion in New Jersey alone). While FERC Order 888 addresses this issue for the wholesale market, that decision remains open to legal challenges that may affect its final outcome. Moreover, because potential retail
- stranded costs are orders of magnitude larger than wholesale stranded costs, a different solution to this issue for retail competition may ultimately be
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deemedappropriate. Where stranded costs may be determined to be recoverable, it is conceivable that those costs will be recovered through some form of non-bypassable " wire" charge.
The commenter further stated that it is not clear how con =truction costs will be treated as State PUCs define policy for restructuring. FERC and some State PUCs already have proceedings under way to determine the amount and means of stranded cost recovery. There is also the possibility of Congressional action. NRC should take a proactive position with FERC and State regulators that potential stranded costs, including those that may be related to specific decommissioning cost obligations, should be recovered by the electric utility as part of their rates. (Several other commenters also suggested that NRC should aggressively lobby FERC and/or PUCs to allow utilities to recover stranded decommissioning costs.)
One PUC does not accept that any source of electrical generation is "non-competitive" per se, and thus does not accept that nuclear plants are non-competitive because of high construction costs. It is premature, an oversimplification of a complex issue, and a potential disincentive to mitigate costs to label any type of generation non-competitive at this early stage in re J.ructuring. Even if nuclear generation is sold at less than current combried fixed and variable costs, the market price will probab'.y exceed the variable component, so there will be some recovery of fixed costs.
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Costs that are not recoverable could be the subject of rederal or State stranded cost proceedings, federal and State authorities must inquire whether the unit is necessary to the continued safe and reliable operatibn of the interconnected grid, and if the answer is yes, a proration of the costs may be necessary among all customer classes that benefit from the continued operation
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of the unit. If the unit is not necessary, it should be removed from service.
The individual State commissiont #111 have to decide who should bear the cost to prematurely shut down, as opposed to decommission, an uneconomic plant.
A commenter stated that the treatment accorded stranded investment or costs may vary from jurisdiction to jurisdiction and few generalizations.are possible. The NRC should not become embroiled in individual rate proceedings or debates about particular cost recovery mechanisms, but should instead define a clear policy that, from a public health and safety perspective, licensees must be allowed to maintain an adequate financial posture to support ongoing safe operation and decommissioning. The NRC's policy statement' should be a strong statement of its expectations. NRC should par'*:ipate in the NARUC subcommittee addressing restructuring.
Some commenters stated that decommissioning obligations are qualitatively different from other stranded costs. FERC has not yet adopted a mechanism that provides for recovery of decommissioning costs. Order 888 provides for recoury of wholesalt stranded costs through the " revenues lost" approach. However, this approach only accounts for and allows recovery of fixed costs already incurred by utilities and does not address costs that must be collected in ihe future. A better solution is for the Federal Government
'Sgg Draft Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry (61 FR 49711; September 23, 1996).
.\>t. __ ____ __ _ _ _
to assure the continuing recovery of decommissioning costs in utility rates, through non-bypassable fees to be paid by utility customers leaving the system, or through other surcharges tied to the use'of transmission facilities. The NRC should support cost recovery initiatives and help educate State commissions on the importance of ensuring continued full collection of decommissioning costs.
Another commenter noted that the best ultimate assurance of the
- collection of the cost of decommissioning is the ability of the plant to operate at sufficiently low marginal costs to collect decommissioriing costs in gross margins. The NRC could improve the likelihood of this outcome by (1) encouraging the IRS to allow payments for decommissioning costs to be generally deductible rather than deductible only if they are ordered by a regulatory agency and (2) strengthening utilities' efforts to recover stranded costs. As plants are further depreciated and the cost of nonnuclear generation escalates, existing plant!, will become more competitive.
Some commenters asserted that in the process of identifying well-run plants and seeking the sale or closing of the not-well-run plants, the problem of who should pay for unrecovered costs must be addressed. To the extent that the nonsalability is caused by problems created by poor management, the seller is responsible. If the NRC or another agency would undertake a program to address the problem of poorly performing nuclear plants and encourage
-continued maintenance of efficiently operated plants, many of the questions asked by the ANPR might find answers. Timeliness in identifying poorly performing plants is critical because while the industry is reforming itself, the ability to affect the inventory of nuclear plants is at its highest level.
Once plants have been evaluated, the NRC should be prepared with a task force
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l to recommend an orderly plan for the disposition of- those few plants and l
operators who will not be recommended for further operations.
A few commenters believed that the full burden of covering the costs, including decommissioning costs, of uneconomic nuclear plants should fall on utility shareholders rather than customers unless thare is a compelling case otherwise.
Resnonse. The Commission does not see a need to modify its position that-its regulations need to be modified at this time to address the changing regulatory situation for power reactor licensees because of the comments received. -Specifically, the Commission agrees with the commenters who hold the view that regulators are likely to allow prudently incurrN stranded costs to be recovered in some manner and do not see a need to interfere in the-financial regulation of nuclear power plants with respect to the question of stranded costs. Some of the comments, in which actions were proposed for th' NRC's involvement with respect to stranded costs, were beyond the NRC's f.phere of regulation, Examples include having the NRC identify poorly run plants, requiring the plants to be sold and for the Federal Government to be the i
purchaser of last resort ~ and' even run the plants if necessary.
The NRC has addressed the issue of stranded-decommissioning costs-elsewhere in this notice. However, the NRC is aware that stranded costs, insofar as their recovery affects a licensee's ability to obtain sufficient
'unds to protect public. health and safety, must be addressed to ensure that they are being adequately handled.
Further,-States are considering a number
- of options for assessing non-bypassable charges to recover decommissioning costs ,as well as other stranded costs. One such option is "securitization,"
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which entails financing the recovery of stranded costs through issuance of bonds whose priacipal and interest would be repaid by an irrevocable, non-bypassable charge set by S' tate statute on an electric utility's distribution customers. Because the income stream to repay the bonds would be securitized by the irrevocable, non-bypassable charge, the bonds would be highly rated and would thus require a lower , interest rate than riskier debt. Also, these securitized bonds would not be part of the utility's capital structure, and so would not reflect the higher cost of equity capital. The spread in interest cost between highly rated securitized debt and lower rated utility capital that includes both debt and equity makes securitization attractive to many states. The NRC believes that securitization has the potential to provide an acceptable method of decommissioning funding assurance, although other mechanisms that involve non-bypassable charges provide comparable levels of assurance and should not be excluded from consideration by State authorities.
As stated in the NRC 5 "Diaft Policy Statement on the Restructuring and Economic Deregulation of the. Electric Utility Industry" September 23,-1996 (61 FR 49711): "Notwithstanding the primary role-of economic regulators in rate matters, the NRC'has authority under the Atomic Energy Act of 1954, as amended, (AEA) to take actions that may affect a licensee's financial situation when these actions are warranted to protect public health and safety." The policy also goes on to explain that the NRC will work and consult more closely in the future with the National Association of Regulatory Utility Commissioners (NARUC), FERC, and the Securities and Exchange Commission (SEC) so that the NRC may express its positions on safety and encourage the various regulatory bodies to continue their allowances of adequate expenditures for plant safety. Lastly, the proposed reporting
l requirements of this ralemaking are seen by the NRC as a vehicle for the Commission to monitor this potential concern.
C. NUCLEAR FINANCIAL QUALIFICATIONS AND DECMt11SSIONING FUNDING ASSURANCE C.1 Fundina Assurance if Plants Shut _Down Prematurely Most commenters accepted the premise of the question, whether costs of a shortfall in decommissioning funding of a prematurely shut down plant could be passed along to ratepayers. This cor.clusion was based in part on past experience and in part on a belief that State PUCs will develop methods to ensure that decommissioning costs are coverad. Several commenters said that recovery-from ratepayers or shareholders would depend on the plant management's responsibility for the premature shutdown. If management were deemed responsible, efforts would be made to have the shareholders pay for !
decommissioning; but if the management were not deemed responsible, State PUCs would-find methods to have the ratepayers provide the funds. Commenters noted that, in the past, decommissioning costs had been recovered for prematurely closed reactors (e.g., Dresden 1, Fort St. Vrain, San Onofre Unit 1, Trojan,
' Yankee Rowe). In a transition from full regulation to full competition, one commenter suggested a window to allow continued or possibly accelerated recovery. Another commenter said that a surcharge might be placed on customers. Under competition.. recovery J.ould be made through other revenue streams of the licensee, a non-bypassable fee, or debt or equity of the licensee.. Two other commenters suggested that transmission charges would be the most likely source of funding. Retained earnings of the utility were suggested as a source of funds. Two commenters expected shareholders to be
responsible for providing decommissioning funds in cases of premature shutdown.
' Two commenters, including one PUC, conceded that PUCs might not have jurisdiction to require fun'aing from ratepayers. Under such circumstances, one PUC stated, funding of decommissioning would be greatly dependent on :e
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financial viability of the regulated firm. The risk of recovery would rest squarely on its shareholders. If the shareholders could not pay, the liability would then transfer to taxpayers. For this reason, the commenter suggested, decommissioning might be accorded special tr:atment.
One commenter argued that the solution to premature shutdown was for NRC to require assurance for decommissioning costs prior to approving reorganizations or license transfers. Potential funding shortfalls should be addressed, another argued, on-a case-by-case basis, and might be avoided by sale of the nuclear plant to an entity better able to' manage it effectively.
Two others suggested that a proper funding mechanism would have to be identified and put into place at shutdown, without further specifying what that mechanism could be. In the opinion of one of these commenters, such funding could be a difficult problem because currently, on an aggregate basis, utilities' decommissioning costs are only about 25 percent funded (ab9ut $9 billion out of $35 billion), although plants are at about 43 percent of their aggregate service lives. Early underfunding could force high back-end
' funding, making the plants uncompetitive.
A commenter stated that, contrary to the planned 40-year operating life of nuclear pocr plants, material and operating evidence suggests plants' operating lives are closer to 15-25 years. Hence, the plan to recoup decommissioning costs of over a 40-year operating life may be unrealistic.
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NEl took the position that the source of funds to shut down a plant prematurely would be different from company to company and would have.to come from other ongoing revenue streams of the company or from alternative sources such as transmission or distribution charges, e>'t fees charged customers leaving the. system, or other regulatory charges. NEI also supported NRC requirements for financial asserance, such as those currently found in 10 CW 50.75. Five commenters stated that they explicitly adopted the NEI position.
Resoonse. The Commission recognizes the importance of decommissioning funding assurance for prematurely shutdown plants and believes that its current case-specific approach, outlined in 6 50.82, strikes the best balance between level of assurance and cost. The alternative of requiring accelerated '
funding for all plants over a defined period, to cover the possibility of premature shutdown at some plants, would be too arbitrary and would lead to wide variations in impacts on licensees. Accelerated funding results in the inequitable inter-generational problem of the present generation paying for the decommissioning costs, while the future generation may receive the
.b^enefits of future electricity generation without incurring the costs of decommissioning. Although the Commission is not proposing to expressly v
require accelerated funding to address premature shutdowns, to the extent that
. licensees no longer qualify, in whole or in part, as electric- utilities, they will, in effect, have to " accelerate" funding by getting "up-front" forms of financial assurance. The staff expects, however, that PUCs and FERC will
, + address decomissioning funding through cost recovery mechanisms. The Commission is aware that some plants have not operated for the full 40 years.
However, it is likely that some plants will continue operatir.g for the full 40 I
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years and beyond. Therefore, the Commission does not believe any change is required for the planned 40-year life.
C.2 When Does an Ooerator Cease To Be a Utility On the question of when an ope-ator of a nuclear power plant ceases to
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be a " utility" as defined in 10 CFR 50.2, seven commenters interpreted the definition strictly and concluded that, if an operator ceases to satisfy the terms-of the definition, the operator is no longer a " utility." Several commenters used almost the same for;aula: an operator would cease to be a
" utility" when it ceases to provide service to retail or wholesale customers at rates set by a separate regulatory authority. One commenter supported a clarification of NRC's regulations that would establish its _ continued ability to require the proper accumulation of decommissioning funds, while'two argued
-that the NRC should relax its definition to cover entities that purchase
-elec.tricity and recover the costs from rates charged customers or from other revenue guarantees. Another commenter argued that NRC should seek additior.a1
'I assurance in advance of deregulation..
NEI stated the contrary argument, noting that it is not apparent that any licensee will fall outside the definition of " utility" in the near future, even after restructuring. NEI argued that as long as a licensee has adequate cost-recovery mechanisms under the authority of State or Federal regulations, it should continue to be considered a utility.
Other commenters; argued that even after deregulation the price charged for electricity will be established by the regulatory process or in other ways tha' uill mean a nuclear plant w'.11 continue to be an " electric utility." One stated that the term " electric utility" should be construed to include all 4
} entities that have been authorized by a State PUC, FERC, or other governing entity to recover decommissioning costs from customers. Two commenters expected plants to remain subject to State PVC jurisdiction, and therefore to satisfy the regulatory definition. Another argued that if a portion of a vertically integrated company is subject to cost recovery pricing, the
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definition is satisfied. Two said that if a plant sets its own rates for electricity, the definition is satisfied.
One commenter rejected the NRC's emphasis on an operator's satisfying the definition of utility, and argued that the emphasis should be on the financhl viability of the entity responsible for decommissioning the unit.
Resoonse. Consistent with the position taken in the ANPR, the NRC is proposing to revise its definition of " electric utility" to introduce additional flexibility to address potential impacts of electric industry deregulation. The Commission notes that the key component of the revised l definition is a licensee's rates being established either through cost-of-service mechanisms or through-other non-bypassable charge mechanisms, such as wire charges, non-bypassable customer fees, including securitization or exit fees, by a rate-regulating authority. Several States are considering deregulation of future operations of nuclear power plants so that revenues
- will not be determincd by cost-of-service but by market-set prices. Should a licensee be under the jurisdiction of a rate-regulating authority for only a y
portion of the licensee's cost of operation, covering only a corresponding portion of the decommissioning costs that are recoverable by rates set by a rate-regulating authority, the licensee will be considered to be an " electric utility" only for that part of the Commission's regulations to which those !
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a i L -
l portions oficosts pertain. = For example; _ if a' licensee were able to collect 40 Epercent of itsidecommissioning costs.through rate-regulated activities, such:
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?as traditional 1 cost of service regulation or use of non-bypassable charges, ithe remaining 60 percent?of:the costs would.need to be accountei for:in a manner consistent with methods-acceptable for a licensee-other than an
- electric. utility. In this proposed rule? fne _ definitions of sevrral relevant .
E terms are also provided;for the first time in i 50.2. It is note <1 that:some co-menters; misinterpreted'the intent of the existing definition ot' " electric' utility" with respect to, entities that establish rates themselves. As: stated-
-;in the proposed definition,:those entities 11nclude only public utility- j districts, municipalities, rural electric- cooperatives, and State.and Federal agencies. -Therefore, the proposed definition is being proffered an ;
iclarification and to show the continued importance the NRC places on the role of-regulatory authorities in the_ setting of electriciutilities' rates with frespect to the collection (f: funds for decommissioning and other. costs. This-- -
'is consistent With the NRC's draft policy statement.
C.3: Assurance 00tions
- The following topics were discussed-by commenters in response to the ANPR's; questions relating to the options to be. considered if an electric -
- utility;found itself operating a reactor that was no longer regulated by a rate-setting State or Federal body. .
a
-Full Vo-Front Assurance. Most commenters opposed requiring all nuclear plants- to provide full up-front assurance,1cften arguing that it is
- unnecessary _ or that it is overly burdensome to nuclear plant owners. Many c
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commenters reminded NRC that deregulation does not inherently mean a total lack of regulatior or a. lack of cost recovery. One commenter believed NRC i should, at the time of restructuring, require only an assurance level l
l commensurate with the completed percentage of the operating life of the plant.
One commenter oppose: advance funding on the grounds that doing so would incorrectly view all properiy Mecuted reorganizations as reruiting in-successor operators being unqualified to ensure decommissioning compliance.
One commenter believe: that assurance should be provided before licensees are exposed to the full pressures of competition (3-5 years). Two commenters supported the idea of requiring assurance prior to NRC's approval of reorganizations that transfer control of a nuclear plant.
Many commenters 7. wor requiring reasonable financial assurance for entities that cease to be rate-regulated utilities. Many of these commenters, and others, view NRC's current regulations as basically adequate to address these situations, although the regulations might expand upon the allowable methods of assurance.
Additional Financial Assunpce Methods. Additional financial assurance methods suggested include continued rate-regulating entity determinations, an appropriate charge for decommissioning in contracts for the plant's output or in the transmission or distribution charges of the licensee or its affiliate if the charges are assigned to the licensee or its decommissioning fund, and exit foes charged against customers leaving the system. A few commenters would-include-any insurance for premature decommissioning caused by an accident. One commenter would allow utilities to establish any method that
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may be develuped, including methods requiring approval of PUCs or FERC. Two
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others would allow assurance through a plan for gradually recovering ,
decommissioning funds via rates and prices, even for deregulated entities.
Others argued that NRC should offer the utilities flexibility and that each '
situation should be assessed on a case-by-case basis if and when it occurs.
Timin'a of Ruie~makina. With regard to the timing of the rulemaking, a few commenters support prompt NRC regulatory action to ensure that adequate
- financial assurance is in place prior to restructuring, before waiting further to learn exactly how the industry will develop. Several other commenters, however, believe that rulemaking is premature until more is known about restructuring. Several commenters suggested that NRC already has the authority to approve or disapprove any transfer of license related to a merger or reorganization. Two commenters stated that NRC should evaluate the '
-regulations only after further studies that (1) identify those nuclear plant.s that are not likely to survive the imposition of competitive forces (i.e., j those plants that are not run efficiently or that cannot be made to run wall),
or (2) develop quantitative measures for assessing the adequacy of decommissioning funds and rates of accrual. New rules, according to or.e commenter, should be timed to enable utilities to take advantage of s'.randed cost recovery.
Added Assurances for Safe Operation and Decommissionina. Mr.ny commenters voiced opposition to the ANPR's query regarding whethar the NRC should require additional assurance for adequate funds for safe operation and decommissioning in' anticipation of deregulation. One commentr.r argued that C 1
additional assurances in this area may not add to or strengthen the obligation already imposed by the terms and conditions of the license. Others reasoned it unrecessary, given other existing NRC requirements and FERC's framework fdr recovery of stranded costs, including decommissioning.
Only one commenter supported additional assurance for safe operation and
~ decommissioning in anticipation of deregulation.
Joint Liability. In response to the ANPR's query regarding newly created organizations or holding companies being held jointly liable for decommissioning costs, four commenters supported the idea because of the added assurance it would provide. Three commenters would consider requiring joint liability on a pro rata basis, possibly taking into account the remaining years of licensed life. One commenter cautioned that jointly liable parties may disagree on decommissioning methods (e.g., prompt vs. deferred) because of the cash flow implications.
Numerous other commenters opposed the idea of joint liability, arguing that it was unnecessary, would inhibit flexibility, would weaken competitive position, or would undermine the separate corporate identity or the responsibility of the individus1 entities. Some of these commenters suggested that joint liability could be acceptable if it were an optional method of financial assurance. .
One commenter stated that new owners and operators should have to assume the responsibilities and liabilities of the previous owners and operators.
The concept of joint -liability is defined in Black's Law Dictionary (4th Ed.) as:
One wherein joint obligor has right to insist that co-obligor be joined as a codefendant with him, that is, that they be sued jointly.
l Another stated that the financial assurance obligation should follow the owners and operators, whether regulated or unregulated, who have-incentives to properly manage and operate the units. '
Impacts. Many commenters claimed that requiring full up-front assurance
"~ would be overly burdensome to nuclear plant owners, Others argued that additional assurances could inhibit competitiveness relative to nonnuclear facilities, impede reorganization, aggravate potential stranded investment, or create additional problems for utilities, ratepayers, or taxpayers at a time when competitive forces are already causing economic concerns. Examples of such problems would include the difficulty for affiliated businesses to raise capital, or the need for affiliated entities to charge more for its services reducing its competitive position in the industry. Some commenters argued these effects could reduce the likelihood that decommissioning will be fully funded or could increase the likelihood of premature shutdown.
Resoonse. The Commission is addressing most of these comments by revising the definition of " electric utility" and by instituting a reporting requirement. As to the issue of requiring full up-front funding in advance of deregulation, the Commission agrees with the commenters that such a requirement would be overly burdensome if applied to all licensees. However, given the proposed change to the definition of " electric utility" in this action, any licensee no longer overseen by a rate-setting regulatory authority, i.e., a licenser other than_ an electric utility, would need to comply with the decommissioning funding assurance requirements of
& 50.75(e)(2) unless that licensee can otherwise conclusively demonstrate a
I government-mandated, guaranteed revenue stream for all unfunded decommissioning obligations. The options contained in that section include l prepayment; an external sinking. fund coupled with a surety method or insurance for any unfunded balance; or a surety method, insurance, or other guarantee method.
The Commission emphasizes that the changes to the definition of
" electric. utility" introduce additional f_lexibility to address deregulatory developments, lhus, the NRC would expect licensees to be more likely to continue to qualify, in whole or in part, as electric utilities under the revised definition. Although licensees who no longer qualify, in whole or in part, as electric utilities could encounter difficulties in securing alternative decommissioning funding, experience to date . indicates that PUCs and FERC are addressing decommissioning costs through various recovery mechanisms.
The timing of the rulemaking was addressed in the response to comments in section A of this notice. Any additional rulemaking in this area would result from experience gained from industry and regulatory actions. As several of the commenters stated, the NRC has the authority to approve or disapprove any transfer of licen:e related to a merger or reorganization.
Section 184 of the Atomic Energy Act of 1954, as amended, and 10 CFR 50.80 provide that control over a license may not be transferred, directly or indirectly, unless the Commission consents to such transfer in writing.
The regulations de not explicitly impose joint liability on co-owners and co-licensees. As stated by some commenters, joint liability may create problems with respect to potential disagreement on decommissioning methods, the inhibition of flexibility, the weakening of competitive position, and the o
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difficulty. in implementation. Also, as some noted, joint liability may not _be-needed. The new owners and operators should assume the obligation to safely operate the. facility and assure adequate.fuhding for decommissioning, as' they have the incentives- to properly manage and: operate the -units. More
-importantly, however, is the fact that with the proposed modified definition of. " electric utility,"' restructured entities would either have to have adequate coverage of decommissioning funding obligations through some non-bypassable cost recovery mechanism'or would be required to provide the types' of up-front assurar.ce described-in_9 50.75(e)(2). Those licensees who remain utilities would have the funding assurance provided through being rate-
- regulated under 5 50.75(e)(3). The Commission considers this level of assurance to be adequate and therefore sees no need to impose an additional regulatory obligation of joint liability on co-owners or co-licensees.
Lastly, with respect to the question of_ impacts, the Commission has considered the comments relating to potential impacts in arriving at the positions taken. The Commission understands that financial assurance would
-place a burden on licensees that may affect their competitiveness in a deregulated environment. The Commission has chosen 1!o take an approach that' wouldiereate no additional financial impact over present regulations-for, electric utilities and has also expanded the definition. of. electric utility to-accommodate types of rate regulation not previously anticipated. There are
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also sufficient existing options to_ demonstrate financial assurance for non-electric utilities. Entities without adequate financial capital may find it
' difficult to both finance up-front decommissioning funding and operate a nuclear power plant safely. These newly formed companies may not be good
-_ candidates for nuclear power plant ownership.
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- iC;4;- Financial Test Qualifications '
' -a About- half the commenters _ flatly opposed requiring licensees to
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Tdemonstrate financial-assurance byl satisfying minimum standards of net worth,
< cash _ flow, or other financial measures.
Many of the comenters, including' NEI and .four commenters_ who adopted . 1
.the NEl position; argued that such a test was not'necessary or appropriate.
If NRC-is concerned about~ the financial condition'of a particular_ licensee,t
. Ethree comenters said,L an individualized case-by-case review would be more
" appropriate.-. Some comenters said-that financial measures appropriate for investor-owned-utilities would not be _useful for ' cooperatives, or for utilities that do not have parent companies. Because generation and- <
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transmission companies typically are highly leveraged, with.many o.f their-- q assets!:in the. nuclear- generating facility, they cannot meet-a test with at tangible net worth requirement of- ten: times the currentidecomissioning costs,
'but.this;does not mean that they cannot satisfy their. financial- obligations.
0A non-bypassable charge was suggested as _ an alternative.
TS ome comenters suggested that NRC shoul[ adopt more than ;one
' alternative test, none of which would be mandatory. Any alternative adopted-
.should' be consistent among; owners, and should notl discriminate against one class _'of owners, and should not be applied as:a. static one-time requirement.
' 0therisuggestions' included a' requirement that_ a^ firm Nmonstrate that it had.
d
'" ample margins, subsequent to restructuring" to cover funding contributions or- l to ' cover- decomissioning costs in the' event of a premature shutdown. Another.
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suggested disclosure standards, developed through the Financial Acounting qStandards Board, for use in ' annual reports and 10-K filings, that would be reviewed by Federal regulators. Still another argued that measures of market 4
4
I value and cash flow, rather than net worth, were appropriate in a competitive environment, and that the ratio of available cash and cash equivalents to unfunded-decommissioning requirements would be the best measure of ability to support deconenissioning, along with an assessment of the utility's competitive situation. Determining whether a utility had minimum cash flow sufficient to maintain its plants in a non-operating, interim stage prior to decommissioning, and the period of time the utility could sustain such cash flows, was suggested by one commenter.
One commenter suggested using a financial test as an indicator, from which a Federal agency could determine that the utility needed assurance of continued rate recovery of the decommissioning obligation.
Only two commenters endorsed a test of financial stability as a financial test qualification. One pointed to assets sufficient to fund an immediate decommissioning, or a minimum level of financial stability (measured through investment grade securities) or insurance, or a surety to cover decommissioning costs as three potentially acceptable mechanisms. The other approved of parent or self-guarantees, but noted that generators with nuclear facilities might have difficulty meeting the financial test criteria, including the investment grade bond ra'.ing requirement.
Resoonse. With the proposed revision of the definitiun of " electric utility," licensees who no longer meet the new definition will need to comply with the requirements of 5 50.75(e)(2), which describes the acceptable methods of financial assurance for decommissioning for a licensee other than an electric utility. These methods are flexible and contain at least four major categories of acceptable methods to ensure funding for decommissioning as
identified in the previous response. Few commenters offered insights on other potential test qualifications, although several stated that the financial structure of utilities means that meeting the criteria in 10 CFR Part 30 could be problematic. The NRC would need to conduct additional research and analysis to determine.which additional financial measures would be most useful
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and appropriate if a financial test requirement for parent or self-guarantee were pursued.- Criteria could be identified and thresholds developed, but evolution of- the industry might mean that the criteria would become outdated and misleading relatively quickly. Hence, the Commission will continue to evaluate this issue, but is not presently offering any changes to its financial test criteria.
C.5 PUC/FERC Certification Only two commenters gave unequivocal support to the idea of requiring PUC/FERC certification. One encouraged NRC to undertake direct dialogue on certifications with the appropriate PUCs and FERC; the other stated that PUCs and FERC must undertake such certifications ind that NRC should impress upon them the importance of doing so. A few PUCs, in the opinion of this commenter, such as California and New York, had already recognized the need to provide this assurance during restructuring. Two other commenters expressed optimism that State regulators would resolve the decommissioning funding problem in the transition to competition, with or without certification, but one went on to say that certification would probably be unnecessary. Of these, six adopted the NEI position, which was that without new Federal legislation it would be difficult to require legally binding certification s from PUCs or FERC. Requiring a licensee to obtain such certification would l
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-place 11t in noncompliance, with_no way_of achieving compliance. If a licensee did obtain certification, however, NEI suggested that it be allowed to satisfy p the financial assurance requirements using that mechanism.
Two commenters opposed to certification argued that it would be counter-productive because the utility would have no incentive to maintain adequate
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~ decommissioning-funds. NARUC and several PUCs either opposed the idea or '
expressed strong reservations about it. NARUC noted first that no current commission -can' bind a future commission at either the Federal or State level.
1However, NARUC was confl1ent that State PUCs would examine the causes of underfunding, if it occurreo, and seek remedies. A~PUC stated that'it might not have the authority to certify-that- nuclear plant licensees under its jurisdiction would be allowed to collect decommissioning funds- through rates -
after restructuring, and another PVC similarly stated that it_ could not give a blanket guarantee that all licensees wou1J be allowed to collect revenues to complete-decommissioning funding. A third-PUC stated that no current commission could -legally bind a future commission, so it could not identify an effective form of certifi-ation. Another PVC also _ expressed doubt about how certification.would change current procedures, in which PUCs can adjust rates based on-the cause for.at,d the prudence of'the underfunding. A different PUC noted that, in the past, ratemaking authorities had allowed recovery end-expected them to 'act in the future in the same way, but could not be certain that they would issue certifications. Another PUC stated that it already has and would' maintain authority to ensure that utilities collect sufficient funds for decommissioning. One commenter pointed'out that FERC has jurisdiction only'over rates for wholesale sales of power. Over 80 percent of decommissioning costs are recovered through rates for retail power sales, over
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.which PUCs have jurisdiction. ) Relying on State regulators would be particularly problematic for multi-State utilities Another commenter stated that within five years the issue would become moot And certification would become impractical because of competition and evolvirig antitrust law. A
.public interest group had questions about whether PUCs snd FERC could certify, but in any case thought NRC should concentrate instead on the licensees." -
- Another commenter noted that since a significant portion of nuclear licensees' --
business are not_ FERC-regulated, FERC certification would have no relevance to them.. -
One commenter suggested procedures through which NRC could . interact with State PUCs and FERC; the NRC could determine that a utility's rate of recovery j for-decommissioning was insufficient, and that determination could be the basis of an action by a PUC to modify the rates.
The final-set of commenters argued that the question of certification
'was on'e that the PUCs and FERC should determine.
Resoonse. The commission does not plan to' implement certification by
. t' he' State PUC's or FERC because of the reasons given-in many of the comments outlined-above. Although " certification" initially appeared to the NRC to be -
an: option meri.ing further consideration, since experience to date has eindicated that PUCs and FERC are addressing decommissioning funding assurance ,
through more. viable mechanisms, the NRC is not pursuing .this option further.
C'. 6 Imoact of Accelerated Fundino Only-a small number of commenters supported the idea of accelerating
. funding of decommissioning costs. Two expressed general support. Two
provided quantitative-analyses that suggested that the impact of accelerated funding-would not create a large financial burden on .either licensees or ratepayers. The Public Utility Commission of _ Texas reported analysis for
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three Texas plants that suggested that, for a ten-year recovery period, electric base rates would need to be increased by about 0.5 percent and the For i~tive-year fund earnings would be increased by about 50 percent'.
recovery- period, rates would increase by about 1 percent; total life-of-
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facility contributions by-customers would be decreased by about 55 percent.
-In addition to arguments that the burden would not be great, another argument made in support of accelerated funding was that, after funding was completed, the licensees who had paid up their decommissioning funds would be in a-better competitive position. Commenters also argued that earnings from the accelerated funding, 'because they _would have a longer time to earn interest, would grow substantially and provide a-gain to the: licensees that they would not otherwise obtain. b Licensees both supporting and opposing accelerated funding noted that unless the Internal Revenue Service changed its rule on the deductibility of ,
- payments into the decommissioning trust fund, the accelerated payments would not be deductible. The NRC was urged to encourage the IRS to change the rule.
Almost three-quarters of the commenters opposed accelerated funding of decommissioning. Their arguments against the idea stressed (1) that it would
- adversely impact the competitive situation of nuclear licensees and (2) that it would be-inequitable because the amount that each plant would have to supply in an accelerated payment would depend on the age of the plant and the amount it had previously paid in' the its decommissioning fund. The financial marketplace, rather than regulation, should determine the speed with which
r 4 funding is provided. Acolerated funding,-in the view of some commenters,-
could.not be accomplished through rate increases and would have to be paid by licensees' stockholders. One commenter argued that utility shareholders should bear the burden of decommissioning costs, but would not do so under accelerated funding. 0ther commenters argued that accelerated. funding would
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shift the costs of decomissioning onto current"fatepayers from future ratepayers. Commente*s believed accelerated-funding would lead to cash flow problems for licensees and could result in increased borrowing to cover cash-outl ays. Accelerated funding could lead to the shutdown of marginal facilities,'which would be contrary to the intent of the policy and lead to additional shortfalls of decommissioning funding. One commenter argued that the amount of-decommissioning funding that will ultimately be required is too uncertain to be collected through accelerated funding.
'Resoonse. The Commission continues to be concerned with the availability and efficacy of financial assurance mechanisms for decommissioning for those licensees whose rate regulatory oversight by FERC or the State PUC's is substantially reduced or eliminated. -Under the NRC's-current regulations (and as proposed to be modified in this rule), .icensees
= who no longer meet the definition of " electric utility" may use financial assurance mechanisms for decommissioning as defined in 10 CFR 50.75(e)(2),
including (i) prepayment; (ii) an external sinking fund coupled with a suroty method or insurance; (iii) a surety method, insurance, or othee guarantae method, including parent company guarantees and self guarantees coupled with financial tests; a'nd (iv), in the case of Federal, State, or local licensees, l
a statement of intent.
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The~ Commissten is concerned that these. financial assurance mechanisms may not be available>to some licensees and is thus asking' for additional comment-on alternative methods of financial-assurance that would provide
. assurance equivalent to that already provided under the Commission's regulations. For example, in the. advance netice of proposed rulemaking,-the Commission raised the issue of whethir requiring the acceleratic'n of decommissioning funding over a shorter period of time.(e.g., 10 years) than the period of the operating license would provide an equivalent level of assurance to current allowed mechanisms. As discussed above, most commenters
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' stated'their opposition to accelerated decommissioning funding. However, this-opposition appeared to~be predicated on the assumption that the NRC would
- require accelerated funding for all power reactor = licensees, and not only
.those who no longer met the definition of'" electric utility." Thus, the~
Commission is asking-for additional comments on whether this, or some other equivalent assurance mechanism, should receive additional consideration in this rulemakingifor those entities which would not be classified as " electric utilities."
C7 Potential Shortfalls from Underestimates of Costs
' Commenters suggested a range of responses to decommissioning shortfalls
. occurring as many as 50 years into tae future, after a period of safe storage.
None, however, clearly identified a source of funding to make up the shortfall.
NEI and eight additional commenters argued that there is a reasonable probability- that future cost estimates could decrease rather than increase because of several ' factors, including accumulated industry experience, t 'r
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i Lapplication of new' technologies; nd reductions in:the ultimate disposal volumes of decommissioning. wastes. They also suggested that periodic re-estimates of decommissioning costs and adjustments to the rate of collection to reflect these re-estimates, both during operation and in the
. post-operation phase, could ' resolve the problem.
7 -S'everal othe'r comme 5ters emphasized solutions that involved cost estimates. One PUC suggested that the NRC should allow utilities to use
. State-required facility-specific cost estimates if they were higher than NRC estinates. Two others suggested that NRC should review cost estimates every five years, with 'more frequent reviews as license termination approsches. The utility Decommissioning Group predicted that shortfalls would be unlikely to arise suddenly or to be drastic. Two utilities also suggested that periodic a reviews of cost estimates, coupled with-increased collections as necessary,
'would remedy underfunding. Two other commenters made only the general-statement that current procedures would be adequate, and any shortfalls should be handled through appropriate funding mechanisms.
Some commenters recognized that the problem of underfunding arising
- :after the safe storage period could be serious. One public interest group did not suggest any remedy,-stating only that NRC could br "irtually'certain that the funds accumulated for-decommissioning would be insufficient. A utility suggested'that the only solution would be to delay decommissioning activities to allow the decommissioning fund to accumulate additional earnings and to
. modify the: decommissioning plans to' reduce cash flow needs.- Another <
p -suggestion was that-NRC.could require every licensee to adopt an investment-strategy that would ensure that-the decommissioning fund earned at least- the rate of inflation measured by the consumer price index (CPI), and that NRC
L lL could require th'e _ utility to place additional money into the fund if riecessary. -
Several commenters recomended approaches to the problem that involved
-PUCs. -Two suggested that underfunding would be remedied by application to the PUC. One suggested such PUC-involvement would occur after the shortfall was
-identified, tne otn'er-suggested that PUCs would take potential shortfalls into account prior to utility restructuring and that the shortfall would not occur until after several years of competition. This commenter suggested that a wires charge-could be usedIto ensure that such shortfalls did not occur.
Three commenters said that'NRC should intervene with State PUCs to ensure that shortfalls do not occur, either_ immediately or when the underfunding was recognized. - A few commenters argued that the causes of the shortfall should be identified. If the plant's management was responsible, the additional decommissioning costs should be recovered from stockholders. NRC could require additional contributions if the invested _ decommissioning funds-are insufficient. ~ Alternatively, if the utility management is not responsible, i customers should bear the additional cost. However,-as one PUC noted, underestimates that are not identified until far into the future could become a social problem. If the underestimate is not identified until after the plant is removed from service, no ratepayers will be required to provide additional funding. If the company still exists and is solvent, shareholders i
may-be held accountable, but only to the point of insolvency. Gross underestimates could very well bankrupt the company and plata a significant burden on regulators and legislators to step in to fund completion of the decommissioning.
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None of the-commenters recommended increasing contingency factors to provide for potential shortfalls far in the future. Several argued that' contingency factors are intended to address " unforeseeable cos' elements" or that contingencies are inappropriate for some other reason. The size of such-contingencies would be too arbitrary. In addition, some State PVCS would not
- apply larger contingencies, particularly since the current. cost estimates already contain a _ significant contingency factor. Finally one commenter argued that larger contingencies would lead to over-collection and distortion of prices for electricity. Seven commenters joined NEI in taking a position against the use of contingencies _ to address the problem of potential
. shortfalls occurring far in the future.
Response. The Commission sees its proposed reporting requirement as a way to keep informed of licensees' decommissioning funding status and potential underestimates of cost. However, the Commission has undertaken a study to analyze the actual costs incurred by the power reactor licensees that are in the process of decommissioning, and the Commission will- act accordingly after studying'those results. Further, the Commission has the authority to require power reactor licensees to submit their current financial assurance.
mechanisms for NRC review, revision as necessary, and approval. The
. Commission reserves the right-to take the following steps in order to assure a
. licensee's adequate accumulation of decommissioning funds: . review, as needed, the! rate of ' accumulation of deco.nmissioning funds; and either _ independently or
.in cooperation with either the FERC and the State PUC's, take additional actions as appropriate on a case-by-case basis, including modification of a licensee's schedule for accumulation of decommissioning funds.
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C.8 Cantive Insurance Pool-The idea of, setting up a captive insurance pool to pay unfunded
- decommissioning costs-did not obtain strong support.' A few commenters ,
endorsed it, with qualifications. One said that, in fact, the mechanism would
- more nearly resemble a mutual insurance pool, and Usted a number of factors, including the size of prr.eiums, when deregulation occurred. Federal mandates, the ability;to recover costs, and the attitude of participants, that would determine success. Several commenters responded that if such a pool could be developed, it would be a useful or constructive mechanism.
NEI and six commenters taking the same position expressed doubts about the usefulness of such a pool, but suggested that the industry should examine Lit. They argued that in addition to an insurance pool, NRC should also consider approving self-insurance as an option.
Almost half the commenters expressed strong doubts about- the insurance concept. -No'such product currently exists, and insuring against shortfalls in funding a known and planned event would be a novel concept, open to problems of adverse selection and moral hazard." Some commenters said it would be difficult to underwrite, and wondered whether_in a competitive environment one t
company would be _ interested in supporting the financial obligations of its
.'"If the risk of the insurable event varies between potential buyers, if the buyers know their risk level better than the ins 9rer, and if- the coverage
'is not mandatory, then the worst risks will' tend to buy the most insurance.
AsLa result, the loss experience will tend to be higher than expected, premiums will increase, the best risks will leave the programs, and the process can cycle on itself until only the worst risks are left." This phenomenon is known as adverse selection. Moral hazard is defined as a general laxity in loss. prevention, laxity in cost control, once a loss has occurred, and the intentional destrur. tion of property. U.S. Nuclear
-Regulatory Commission, " Design, Costs, and Acceptability of an Electric Utility Self-Insurance Pool for Assuring the Adequacy of Funds for Nuclear Power Plant Decommissioning Expense," NUREG/CR-2370, December 1981.
, -_J
competitors. .A cross-subsidy;of this sort, one said, was what deregulation
.was being undertaken to eliminate. Participation also.might be affected by the policies of individual State PUCs.1 Premium setting would be difficult
'because~of the_ possibility ~.that utilities that had been prepared to pay their-decommissioning costs would be reluctant to subsidize utilities that had not, and because premiums, to provide sufficient coverage, might need to be large.
Th'e pool could face the problem of motivating utilities to close plants when it would otherwise not be economic to do so, or motivating State PUCs to.
-disallow the recovery of decommissioning costs through rates in reliance on
.the pool Some utilities might' underestimate their decommissioning costs, to keep their premiums low. A pool-would increase costs of electricity because,
.in addition to decommissioning costs, insurance premiums would need to be recovered- Finally,'one serious decommissioning shortfall might deplete the i
pool, Other ccmmenters stated flatly that they opposed the concept. Several.
said that it raised the problem of insuring against an-event that a facility could choose to create (the moral hazard problem). An insurance pool would create, at the least, 'an incentive for less responsible utilities to underfund-their decommissioning assurance, burdening responsible utilities with high insurance premiums. .Some commenters argued that licensees demonstrating
- strong financial capability should not be required to participate.
' Reinsurance- and diversification to larger pools would make better policy, in the. view-of one commenter.
Resoonse. The Commission recognizes the problems associated with the concept of a captive insurance pool as identified by the above commenters, and
-w -m-.__ ..__
believes that they are: serious enough to eliminate-this option _from further-consideration. The Commission is also of the opinion that those in favor of-this option do not offer ~ sufficient evidence that the_ identified problems can be overcome.
C.9 Other 00tions for NRC in Case of Limited Role for PUC or FERC Commenters suggested a _ wide ' variety of financial assurance options for-NRC to consider if- PUC or FERC oversight is limited or eliminated. One utility suggested that financial assurance requirements should be focused on-the financial viability of the responsible entity.- Other utilities suggested, as nonregulatory showings,_ self-guarantees or other tests of financial strength such as ownership of other-revenue-producing assets (e.g.,
electricity transmission and/or distribution and/or natural-gas operations).
Another relevant factor could be whether the licensee has insurance for premature decommissioning caused by an accident. One commenter stated its opposition to the use of surety bonds and -insurance because of cost and limited availability.
Two utility commenters suggested that regulatory approaches include mandated or allowed stranded cost recovery through a charge on distribution or ,
transmission or. some other charge on all electric power or energy sales, regulatory certification that such costs.will be recovered, and other
. arrangements involving regulatory control such as priority dispatch for nuclear units. Another commenter suggested that NRC could request FERC to clarify Order No. 888 to-make certain that competitive access or other transmission charges intended to recover stranded costs also include a load-
-proportionate contribution to fund decommissioning costs. Another commenter
stated that NRC and FERC should urge Congress to adopt stranded cost legislation that will ensure recovery of decommissioning costs as the most-prudent solution. The commenter specifically advocates a wires charge that would include decomrrissioning costs.
One commenter asked NRC to consider its actions in the event that a licensee enters into bankruptcy. In such a case, the NRC could enter the proceeuing and argue that full funding for decommissioning must be fulfilled as the first priority. The commenter also asked NRC to consider proposing legislation that would amend the Bankruptcy Code to give first priority to nuclear decommissioning costs, as the Supreme Court has already held for hazardous waste cleanup costs.
NEl and several other commenters raised the possibility that NRC could
- rely on the Financial Accounting Standards Board's' (FASB) financial disclosures for information in assessing the nature, timing, and extent of the company's commitment of its future rasources.
According to one commenter, NRC should evaluate each utility's particular situation on a case-by-case basis to determine the degree of assurance needed depending on the financial strength of the utility, the size of the remaining -unfunded obligation, the age of the plant, and other factors 6 as may be appropriate to the specific situation. Another believes NRC could retain control through. licensing constraints and financial evaluations made when NRC approves transfers of assets and licenses.
A number of utilities commented that NRC need not identify all options immediately,but could ultimately authorize a number of alternative 6 The Financial Accounting Standards Board is a private body that .
establishes authoritative financial accounting and reporting standards' in the United States.
approaches, either based on 10 CFR-50.75 or on options that have not-yet been recognized. A PUC commenter asked NRC to work collaboratively with States to explore, as necessary, alternative financial assurance mechanisms in the event that privately owned nuclear generators are no longer regulated.
One commenter suggested that NRC's support for existing Federal obligati6ns 'to provide a national nuclear fuel repository would also contribute to the financial assurance of responsible nuclear decommissioning.
Another called for financial assurance to be mandated at the Federal level, and a third said NRC shouia consider whether DOE responsibility can be developed for providing solutions to decommissioning.
Four commenters said no other options were necessary. They reasoned that current options are sufficient irrespective of PVC or FERC oversight, regulatory oversight is unlikely to be curtailed, and FASB standards and competitive pressures will provide sufficient assurance.
Resoonse. The Commission believes that additional consideration of accelerated decommissioning funding or other alternative financial assurance mechanisms may be warranted, as discussed in its response at C.6. In
. addition, it should be pointed out that the Commission enters bankruptcy proceedings to protect the integrity of the decommissioning funding, as suggested by a commenter. Also, the Commission is proposing use of the FASB
- standard as a means for the reporting decommissioning obligations. Further, the Commission believes that the proposed change to the definition of
" electric utility" will be adequate to address all contingencies with respect to financial assurance for decommissioning under deregulation. Further, the 1
u e
proposed reporting req 11rement will provide the NRC with the opportunity to be
--informed on the status of licensees' financial-assurance for decommissioning.
4
~
-D. Federal Government Licensee Use of Statement of Intent Slightly fewer than half of the commenters (20 commenters) expressed an
~~
opinion on this question. Almost'all commenters took the position that Federal licensees should be treated in the same way es non-Federal licensees.
NEl argued that regardless of who owns the plant, a number of options for financial-assurance should be allowed, and the current options should continue to be permitted. One commenter stated clearly that because Federal licensees were expected to face the same problems as other licensees, they should be required-to set aside-funds rather than rely on statements of intent. Several-commenters pointed out- that different treatment for Federal licensees could
- create competitive advantages for the Federal licensees. NRC should ensure that the playing field remained level. One licensee argued that if a
-fincncial assurance option, such as a statement of intent, meets NRC's '
criteria. -it should be available for use by all licensees. Others took the position that the statement of intent should not be allowed, because-it does not-provide any assurance. Its use by Federal licensees-means that the taxpayers are providing the assurance. One licensee questioned the long-term financial cond' tion of the Tennessee Valley Authority (TVA). One commentsr argued'that use of tax exempt bonds provides a similar competitive advantage to those licensees who can is:ue them.
Only TVA took the position that ample reasons exist for continuing the g use of = statements of intent. as provided under the current regulations.
.However, TVA also provided an extended description of the steps it has taken
l s-p:
[- [tofuseanexterna11 r trust,"a11 requirements" contracts,-:anditspowertoissue lndebtednessitoTensure its 'decomissioning; costs.-
t
[ ~p (Resoonse?- The NRC's Office'of the Inspector General published an Auditi JReport "NRC's Decommissioning Financial Assurance Requirements-for Federal?
fi.icensees:May Not be Sufficient," OIG/95A-20, dated April 3,:1996. ~ Theinport -
M found that "...NRC's-decision to~ allow Federal licensees to use-a! statement =of
^
~
intent...was basedLprimarily_ontthe:assumptionithat:the Federal Government-souldL pay the financial obligations ~ of the lone:FederalLlicensee....should it be unable Ltoz do so. However, based on our- review of the U.S. Code and - -
' discussions'with officials-from the_ Department of the Treasury, the Office- of
- Management and- Budgetiand TVA; we believe NRC's assumption ~is questionable."
'The re' port also found!"...that, although not required,;TVA has established a fund dedicated to' meet it'sidecomissioning obligations. However,:because this
- 'iscantinternal fund it can:be_ used for other purposes.- In fact,_TVA had'at 1
- one time temporarily depleted its decommissioning fund.'"
-~
1The majorit.y of those _who commented were opposed:to allowing the TVA's _l Luse:ofia statementlof intent.- their reason basically being that all-licensees 1should have1 the same?" level playing _ field." The Commission, however, does not-believe'that--the elimination of the statement.of-intent option for a Federal licensee can be justified on a~ public; health and safety basis. The Commission-Jbelievesi that the risk of a Federal licensee not being able:to fund its Ed ecommissioning expenses 11s remote, as:the' Commission 'is proposing to define a
^
'" Federal 111ce;.see" as having the full faith and credit backing of the Federal Government. The Commission considers the issue of whether TVA qualifies for s
- ' Jthe use:of, a--statement of intent ,to be distinguishable from the question of e
+
y< r 3 ...
whetheriot'her " Federal 111censees" :should have this. option. ' Further, the-Comission does:'nct- believeilt- to be Lin the public, interest- to foreclose the -
possibility:.of.a future: licensee withithe full. faith and credit backing =of.the Federal-Government using-aistatement of intent. Hence, the Commission does-
- not propo::6 to eliminate the statement of intent as an option for Federal 111censees,:but realizes that this proposed definition may result-in the TVA no
~
- longer being.able to meet NRC's definition of;" Federal . licensee."
e E. - TRUST FUND EARNINGS CREDIT-FOR EXTENDED SAFE STORAGE PERIOD ~
Two comenters opposed credits for- earnings during __extendedisafe -
-- storage, _' arguing- that earnings _ assumptions could- be manipulated _and that- ,
earnings could otherwise actlas a hedge against increases in the cost of decommissioning- . Seventeen comenters, however, supported allowing cmdit for.
^
earnings on, funds (during. extended ' storage periods._ Some ~of these comenters argued that. if credits for earnings are not allowed, more funds than necessary Lwould_ be collected, thereby_ generating unwarranted expense for_-licensees and in
- customers and possibly intergenerationa11 inequities.
5 AnDadditionalieighttcomenters supported allowing earnings credits,4 nots only for the extended safe storage' period, butEalso for other periods:-
+- ihe period before _ safe; storage, when funds are accumulated;
- The~ decommissioning period, when funds flow out of the trud.s; 'and
_ . g-
- Both the accumulation and outflow periods..
Three commenters expressed' the opinion that States:should decide whether orf not to' allow credit; for projected earnings.
One' group of commenters understood that NRC's ANPR considered a net positive' rate of return when assessing the status of decommissioning funding
1durino a SAFSTOR oeriod, and not-that a licensee would be allowed to consider L prospectively ldurino the license term the possibility of a' net positive rate -
of return over some extended' period following shutdown-and prior to actual decommissioning. :These commenters felt that it-would be largely irrelevant to start considering positive earnings'during a SAFSTOR period because, by the time ofl termination of operations, licensees- should have already ' accumulated
_ sufficient-funds to pay for decommissioning.
Another commenter disagreed with the position that excludes'the benefit-of! future tax deductions (i.e., in "non-qualified" trust accounts) in determining the adequacy of a licensee's decommissioning funding program because: the deductions will have value -for those who assume the responsibility for_ decommissioning.
Resoonse. The Commission-is proposing to allow credit for earnings and
- believes that its existing implicit assumption of a zero rate of return is too conservative and not borne out by the data. The Commission.is proposing _
licensees may take credit using a 2 percent real rate of return from the time-of the funds' collection through' the decommissioning period. As stated below, this proposed action provides licensees relief from current requirements with no adverse impact on public health and safety,. licensees, or. NRC resources, and the proposed reporting requirements would allow the licensees'
-_decommis<ioning funds to be monitored by the Commission.
E.1 Real Rate'of Return Five commenters took the position that NRC should-not specify a single-allowable rate of return, but should allow licensees -to take cre'dit for any
- 4.3 -
e
._ -/ .
rate they can justify given their srecific situation. Some of these commenters supported their positions by stating that licensees employ different investment strategies depending on factors such as the number of plants, when they expect to begin decommissicning, applicable State taxes, and whether the funds are in a qualified or nonqualified trust. Another commenter suggested that p'lant-specific annualized rates could be justified based on historical data. Considerab, judgment will be needed to develop the rate, argued one utility group, but no more judgment than is needed in developing decommissioning cost estimates.
Three commenters suggested that NRC use long-term, historical rates for the asset allocation employed, adjusted by the long-term, historical inflation rate.
Six commenters stated that NRC should not specify a single allowable rate of return, but should define the basis on which licensees may select an appropriate positive-real rate.
Four commenters expressed the view that States should decide the rate, and a fifth commenter thought either States or FERC should decide the rate.
Another commenter thoujht the rate should be determined by an (unidentified)
" acceptable third party."
One commenter suggested an after-tax rate of 3 percent as reasonable and achievable with acceptable levels of investment risk (e.g., 50 percent equity, 50 percent fixed income). Another commenter proposed a rate of 3 percent because that rate is the historical real return on Treasury bonds. One commenter felt NRC should float the values based on-contemporary 30-year Treasuries.
m _..__
f Two commenters opposed the use of a positive rate assumption for earnings during extended safe storage, arguing that earnings assumptions could
'be manipulated and that earnings could otherwise act as a hedge against increases in the cost of decommissioning.
~ ~
Response. Based on the NRC review of historical data, real (i.e.,
inflation adjusted, after tax) rates of return using U.S. Treasury issues have been on the order of 2 percent. Therefore, the Commission proposes to use a 2-percent real rate of return throughout the decommissioning collection period as a default earnings amount and in the safe storage period as a specified amount. The NRC acknowledges that the historical data is subject to some degree of interpretation, and that a 3 percent real rate may be viewed ty some as a " reasonable" measure for this parameter. While some may propose use of higher values based en other types of investments, the Commission believes the proposed value represents as close to a " risk free" return as possible and has increased confidence that the 2 percent value car. be consistently achieved. ,
Higher earnings amounts will be allowed during the period of reactor operation if specifically approved by a rate-setting authority. To the extent that earnings in a given year prove to be greater than 2 percent, the balance of the fund will be greater than anticipated. Licensees may take this higher balance into account in calculating subsequent contributions to their sinking funds. This means the size of subsequent contributions will decrease, even though these subsequent contributions will still be based on a 2 percent earnings assumption. if rates turn out to be lower than this, 10 CFR 50.82 e already provides that licensees are to adjust decommissioning funds during
~
- f. safe storage to reflect changes in cost estimates. Thus, there is litt1e risk
that there will be major shortfalls in decommissinning funds. Further, the
= proposed reporting requirements will allow the licensees' decommissioning funds to be monitored by the Comission.
E.2 App.tporiate Tbne Period Twelve commenters expressed the view that credit for projected earnings "-
should be allowed over the full length of the extended safe storage period.
An additional eight commenters also thought credit should be allowed for-earnings projected over additional periods:
. The period before safe storage, when funds are accumulated.
- The decommissioning period, when funds flow out of the trusts.
- Both the accumulation and outflow periods. .
Two more would allow commensurate credit for a period with site-specific schedules for funding and decommissioning - Another commenter noted that considerable judgment would be needed to determine the appropriate time period, but no more than would'be needed to develop the decommissioning cost estimate. Four commenters, all PUCs or PVC groups, felt NRC should leave the issue of the length of the period to the States.
Only two commenters suggested that credit be limited to a-fixed number of years. One of these suggested 10 years. The other proposed a maximum of
- 20. years,andaminimumof5 years.
Two commenters opposed the use of positive earnings assumptions during au period, arguing that earnirgs assumptions could be manipulated and that earnings.could otherwise act as a hedge against increases in the cost of
_ decommissioning-.
l Response. The Commission proposes ta allow licensees to take credit for earnings on external sinking funds from the time of the funds' collection through the decommissicning period. Because the NRC is requiring the funding, )
it is reasonable for the NRC to providr. for a positive rate of return on the collected funds, where justified. Further, the NRC is proposing a longer period in which credit should be allowed for earnings ~because"the justification for allowing a posit' eve rate of return over the safe storage period also holds for allowing credit from the time of fund collection through the decommissioning period. Agr.in, the proposed reporting requirement provides the NRC with the ability to monitor licensees' decommissioning funds.
Lastly this proposed action.provides licensees relief from current requirements with no adverst impact on public health and safety, licensees, or NRC resources.
F. REPORTING ON THE STA7US OF DEC0ltilSSIONING FUNDS Many commenters stpported a reporting requirement in light of concerns about decommissioning funding. Some of these felt that NRC should require relatively ccmprehensive reports because NRC's authority extends beyond that of FERC and the States, and because FERC and the States do not always require
. uniform information to be submitted at regular intervals. One commenter stated that an NRC regulatory amendment is needed even in the absence of' deregulation to correct the- flawed assumption that PUCs and FERC actively monitor decommissionin;, funds. The commenter stated that PUC and FERC monitoring efforts are, in most cases, limited in scope and may take place infrequently (i.e., when a rate case is filed). Each PVC is generally
. concerned only about its jurisdictional portion of the decommissioning funds, J
and FERC's jurisdiction is limited to only the wholesale portion of a company's sales. Moreover, many States do not have jurisdiction over municipal and cooperative agencies, some of which are owners or partial owners of nuclear plants. Therefore, the NRC may be the only regulating agency that can provide an effective and timely monitoring function for all the funds
"~
required for decommissioning, Three commenters opposed a reporting requirement as unnecessary, while two others believed suh a requirement was premature and could conflict with or be duplicative of information that may be required by forthcoming FASB standards. Two commenters stated that NRC requirements should not duplicate requirements of States or FASB. Lastly, a commenter stated that if PUC oversight is limited or eliminated, NRC should assume oversight of decommissioning funds.
Response. The Commission is proposing that a periodic reporting requirement be implemented.so that the Commission has appropriate assurance that licensees are collecting their required decommissioning funds. The benefits of obtaining this information through a reporting requirement, in terms of both determining licensee compliance with NRC decommissioning funding regulations and responding to Congressional and other requests, outweigh the l minimal impact of the requirement and would be less burdensome to licensees and the NRC than relying on the existing NitC inspection process.
l F.1 Contents Three commenters stated that reporting requirements would be unobjectionable if they were minimal and limited to material of the nature historically piovided to State regulators or in other financial reports.
Similarly, others stated that NRC should rely on the same information as will be required by the proposed FASB statement regardilig accounting for certain liabilities related to closure or removal of long-lived assets. Five commenters agreed with the NE! that reports should be kept as simple as possible. One commenter stated tnarcorr.prehensive reports should be prepared for each facility, integrating information for all owners. Thus, if a facility has multiple owners, one consolidated report would be prepared with separate data for each owner attached. On the other hand, one commenter argued that reports should be based on the licensee's interest in the nuclear unit and ap_t on a total unit basis.
One group of commenters stated that NRC could make the annual reports from piant operators available to the public, which would be consistent with the availability of information required under proposed FASB standards.
A PVC stated that New Jersey's reporting rules may be adequate for NRC's purposes.
Suggested contents for the reports included 50 iteuis under the following general headings: Decommissioning Costs and Activities, Contributions, Trust Status and Activity, Other Financial Information, and several Miscellaneous Items.
Besoonse. The Commission is in the process of issuing a draft regulatory guide on this proposed requirement which would endorse FASB draft standard No.158-B, " Accounting for Certain Liabilities Related to Closure or Removal of Long-Lived Assets." The NRC is endorsing this draft FASB standard as a means of providing guidance for licensees to comply with those poitions
=
[
i of the NRC's regulations regarding a licensee's reporting on the status of its decommissioning funding. Licensees would comply with the FASB standard once it becomes final in order to remain consistent with generally accepted
- i accounting principles. The NRC believes that the FASB standard would, if .
adopted, provide the required information. Hewever, because of the ambiguity i in the FASB' standard with~ respect to whether the required information will be ;
reported on a per-unit basis,; the NRC has defined its reporting requirement to include such per-unit information. The NRC has reviewed the proposed contents of the reports on decommissioning funds to ensure that the needs of the agency are balanced versus the time constraints of the licensees in assembling the reports. The Commission is also proposing to require that an) modifications to a licensee's external trust agreement also be reported.
F.2 Freauency Several'commenters stated that licensees should report on the status of decommissioninc funds on.an annual basis. Others believed reports should be .
required no more frequently than annually. '
NEl stated that NRC should not require licensees to report on the status of their decommissioning funds any more frequently than every 3.-to 5-years. NEl noted that SEC rules and-proposed FASB standards require utilities to disclose the decommissioning costs in financial statements.
Two commenters suggested reporting at 5-year intervals. One of these suggested that interim status reports could be required'on an annual basis.
One commenter stated that NRC should require no more frequent reporting.
beyond FASB requirements. Another commenter stated that reports should be no less frequent than specified by the Securities and Exchange Act of 1934.
+---r ,.v,e.-e-a., .w-, ,s.y - - . + n % -,ev. y-,,-y.- pr y . -.-ww, ,
One commenter suggested that NRC consider more frequent reporting for plants, approaching the end of commercial operation and for plants experiencing operating problems. One commenter stated that the timing of required reports
= should parallel that of other reports such as FERC Form 1, SEC 10-K, and annual financial reports. Similarly, two commenters felt that annual reports should be catisid'by NRC by September 30 of the following year. Two commenters stated that interim reports could be required for significant events (e.g.,
merger, . acquisition, financial deterioration). This commenter also suggested that limited or negative growth of the fund in a given year due to overall market conditions should agi automatically trigger adjustments to funding levels but rather that a 3- to 5-year time frame should be used.
Resoonse. The Commission is proposing that every-licensee submit its initial report on the status of decommissioning funds to the NRC within 9 months after the effective date of this rule, and at least once every 2 years thereafter. Annual submission is not being proposed as an option because the NRC believes it can adequately review licensee financial assurance status for decommissioning biennially while reducing licensee reporting burden. However, the. licensee (s) of any plant that is within 5 years of its planned end of operation would be required to submit its report annually.
G. COMMENTS ON TOPICS NOT SPECIFICALLY RAISED IN THE ANPR Commenters suggested several actions that NRC had not asked about specifically in the ANPR. First, a commenter stated that NRC should require sites'to be decommissioned to " green field" status, consistent with FERC
_ guidelines.
1 1
1
.._. _ ___. - - _ - - - - . J
1 Resoonse. The Commission's position is that once radioactive I
contamination of the reactor facility is removed to a level acceptable to the NRC, there is no longer a health and safety concern preventing the NRC license from being terminated.
~^
.A commenter suggested the imposition of a mandatory insurance requirement for licensees to cover fund shortfalls at the time of premature decommissioning in States where accelerated collection from ratepayers and intergenerational subsidies are not allowed.
Response. The Commission does not agree with the commenter on the need for mandatory insurance. As stated in the response to comments on Stranded Costs, Section B, the previously referenced " Draft Policy Statement on the Restructuring and Economic Deregulation of the-Electric Utility Industry" stated.that the NRC has the authority "to take actions that may affect a licensee's financial situation when these actions are warranted to protect
'public health and safety." The Commission believes that there are enough alternatives available to address the potential problems caused by premature decommissioning so that mandatory insurance would not be required.
One commenter stated that the reqeirements for subaccounts should be waived. Their position is that licensees that have contributed monies to a single trust fund for multiple decommissioning-related purposes be required simply to demonstrate to the.NRC that there are or will be sufficient assets in the trust. fund, in the aggregate, to pay for the NRC-defined
decommissioning cost.of the nuclear unit and for any other decommissioning-related purposes identified in the trust agreement.
Resoonse. The Commission is not concerned with the details of how a licensee keeps accounts for decommissioning as long as a licensee is able to demonstrate, on a per-unit basis, the amount of funds identified and available for the required decommissioning purposes. Thus, the Commission accepts the commenter's position in general, although it notes that there is no current requirement, only guidance, relating to the use of subaccounts.
A commenter stated that NRC should undertake as a priority task the identification of nuclear plants that do not perform well. For plants with performance problems, NRC should take aggressive steps to persuade the operator to sell the plant to another operator at a price that recognizes its market value or to terminate the license. In some cases, particularly when plants were financed with bond indentures or other instruments that limit the owner.'s ability to sell the plant or impose conditions on such sales, these restrictions would need to be identified in the process of identifying well-run plants. Further, the commenter states that if the plant does not produce a price acceptable to the operator, the Federal Government will offer a price that will provide the operator with some fraction of the purchase price and take over control and ownership, including any decommissioning fees that have been . collected. The Federal Government would restart any plant it believes
- can continue as a source of power and will decommission the others from public funds.
i Resoonse. The Commission does not see its position as one to force a licensee to sell its plant. While the NRC oses aggressively attempt to identify poorly performing plants through 'such processes as the " Watch List,"
the decision as to whether another entity should become the operator of a facility is for the owners of that facility to make. Although the NRC would have to approve any transfer of control over any power plant license under Section 184 of the Atomic Energy Act and 10 CFR 50.80, the NRC is reluctant to become involved in the business decision-making processes of the licensees on such ratters. As to the NRC taking over poorly performing plants, the Atomic Energy A t confers " takeover" authority on the NRC only in extremely limited circumstatees. Sag Section 108 of the Atomic Energy Act (42 U.S.C. 2138) limiting such authority to circumstances where ". .the Congress declares that a state of war or national emergency exists...."
A commenter stated that the NRC should develop a reliable, sound estimate (or method of estimating) decommissioning costs, and should update the estimates on a regular basis to incorporate technological and other changes.
ResDonse. The Commission is planning to revise its estimates of decommissianing costs after it obtains actual plant-specific data from ongoing decommissioning projects.
Another commenter stated that NRC should sponsor technical conferences on decommissioning so the pace of technological resolutions for cleaning up and decommissioning plants could be increased.
. ?
L Response. While the proposed action is not a suggested rulemaking. the Commission is taking the suggestion under consideration. However, the Commission 11s aware of a number of deregulation and decommissioning conferences that have been held or are being planned.
A commenter stated that the NRC should ask separately about other financial issues because changes to the definition of " electric utility" could have implications in contexts other than decommissioning, such as general financial qualifications reviews for initial licensing and related license-amendments, from which utilities are now exempted.
Resoonse. While the Commission is not presently asking questions on other financial issues, it is attempting to address the concerns by proposing revisions to Part 50 to be consistent _with the proposed change in the definition'of " electric utility."
A commenter stated that NRC should delay action as the Texas PVC has initiated three regulatory investigation projects focusing on the restructuring and partial deregulation of the electric industry in that State.
Further, the State has not developed a formal policy on many of the issues set forth in the ANPR.
Resoonse. It is because of the number and variety of State actions
-being proposed in.the areas of deregulation and restructuring that the Commission is proposing this rulemaking now. The Commission wishes to prepare for any new' types of nuclear power generating licensees resulting from the 60 -
l
L States'. actions. However, the Commission is well aware that this proposed rulemaking may not be the last action for it to undertake in this area.
One commenter stated that the Commission should support revisions to Internal Revenue Code Section 468A regarding deductibility for contributions
-to an external fund.
Response. The commenter does not make a suggestion as to what should be done in this rulemaking. Rather, the suggestion goes to questions regarding consideration of whether any changes to the U.S. Code are needed to address decommissioning financial assurance, in particular any changes to the Bank-ruptcy Code. This matter will be addressed separately by the NRC as-part of its input to an inter-agency review process for the development of proposed legislation.
Lastly, a commenter stated that the NRC should hold all licensees to the =
same high standard for assurance of decommissioning funds. Previously, the NRC had one standard for non-utility licensees and a much more lenient standard for rate-regulated utilities. NRC must establish strict and thorough standards for the collection, investment, segregation, and reporting of decommissioning funds and those standards must apply to all licensees, including those that have traditionally been considered regulated utilities.
Fesconse. The Commission position is that it is not necessary to impose any additional decommissioning funding requirements on those entities that meet the proposed definition of " electric utility." However, as explained
(. ,
above,'the Commission believes that those entities that no longer meet the' proposed definition'should be required to meet the more " strict" standards.
The Commission- also believes that most power reactor licensees would be allowed to fund decommissioning costs through non-bypassable charges.
.To summarize, the Commission's underlying philosophy of financial assurance for decommissioning is unchanged. Basically, those licensees that remain " electric utilities" by the Commission's revised definition should follow the same financial assurance regulations as before. However,-the Commi sion believes that this. proposed rulemaking provides for adequate protection in the face of a changing environment that was not envisioned when the existing rule was originally written. Further, with deregulation, the-Commission does not believe that it would be able to identify all the potential' types of licensees to which it will be exposed. Therefore, new and unique restructuring proposals will necessarily involve ad hoc reviews =by the NRC. Further, the Commissicn will exercise direct oversight.of such reviews to maintain consistent NRC policy toward new entities. In addition to the proposed definition revisions, the Commission is proposing two other modifications. The first is to require power.reacter-licensees to periodically repwrt on the status of their decommissioning funds and changes
'to their external trust agreements. Second, the Commission is proposing to allow licensees to take credit for the earnings on decommissioning trust funds. The. Commission does not see the need to take actions proposed by some commenters that would, in its view, strain licensees unnecessarily, because of
_ licensees' competing needs.
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SECTION BY SECTION DESCRIPTION OF CHANGES 10 CFR Part 50 Section 50.2 is amended to revise the definition of " electric utility" in response to deregulation of the electric generating industry. The section
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also is amended by the insertion of definitions of previously undefined lerms that aid in the understanding of the NRC's rulemaking position. Further,
" Federal licensee" is defined, so that the characteristics of a licensee that may make use of a statement o# intent as a mechanism to satisfy financial assurancs requirements for decommissioning is clarified. Sections 50.43, 50.54, 50.63, 50.73, and 50.75 are amended to replace the term " licensees" or a similar term depending on the context for the term " electric utility" to be consistent with the proposed changes to 10 CFR 50.2.
Section 50.43 is amended so States are added to regulatory agencies as those entities to which the Commission will give notice of application for a class 103 license for a commercial power generation facility.
Section 50.54(w) is amended by requiring that power reactors, as opposed to electric utilities, obtain insui'nce in the manner prescribed.
Section 50.63 is amended so that licensees, as opposed to the originally used term utilities, are required to provide specific material for NRC review relating to reactor core and associated systems.
-Section 50.73 is amended to refer to " licensee" rather than " utility" personnel in stating the information required to be reported regarding personnel errors related to matters requiring a Licensee Event Report.
Section 50.75 is amended in three paragraphs to include the definitional
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change in the. reporting and recordkeeping for decommissioning planning.
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e Section 50.75 also is amended to allow licensees to take 2 percent credit on earnings for prepaid trust funds and external sinking funds, to institute a reporting requirement for licensees on the status of their l decommissioning funding and on changes to licensees' external trust agreements.
Electronic Access Comments may be submitted electronically, in either ASCII text or Wordperfect format (version 5.1 or later), by calling the NRC Electronic Bulletin Board (BBS) on FedWorld. The bulletin board may be accessed using a personal computer, a modem, and one of the commonly available communications software packages, or directly via Internet. Background documents on the advance notice of proposed rulemaking are also available, as practical, for downloading and viewing on the bulletin board.
If using >a personal computer and modem, the NRC rulemaking subsystem on FedWorld can be accessed directly by dialing the toll free number 1-(800) 303-9672. Communication software parameters should be set as follows: parity to none, data bits to 8, and stop bits to 1 (N,8,1). Using ANSI or VT-100 terminal emulation, the NRC rulemaking subsystem can then be accessed by selecting the " Rules Menu" option from the "NRC Main Menu." Users will find the "FedWorld Online User's Guides" particularly helpful. Many NRC subsystems and data bases also have a " Help /Information Center" option that is tailored to the particular subsystem.
The-NRC subsystem on FedWorld can also be accessed by a direct dial phone number for the main FedWorld BBS, (703) 321-3339, or by using Telnet via
- Internet: fedworld. gov. If using.(703) 321-3339 to contact FedWorld, the NRC subsystem will be accessed from the main FedWor1.d menu by selecting the
" Regulatory, Government Administration and State Systems," then selecting
-* Regulatory Information Hall." ~ At that point, a menu will be displayed that has an option "U.S. Nuclear Regulatory Commission" that will take you to the NRC Online main menu. The NRC Online are also~ can oe~a~ccessed directly by typing "/go nrc" at a FedWorld command line. If you access NRC from FedWorld's main menu,-you may return to FedWorld by- selecting the " Return to FedWorld" option from the NRC Online Main Menu. However, if you access NRC at FedWorld_ by using MC's toll-free number, you will have full access to all NRC systems, but yta will not '.yve access to the main FedWorld system.
If you contact FedWo d using Telnet, you will see the NRC area and menus, including the Rules Menu. Although you will be able,to download documents and leave messages, you will not be able to write comments or upload files (comments).- If you contact FedWorld using FTP,- all files can be
-accessed and download:d but uploads are not allowed; all you will see is a list of files without descriptions (normal Gopher look). An index file listing all files within a subdirectory, with descriptions, is available.
4 There is a 15-minute time limit.for FTP access.
Although FedWorld also can be_ accessed through the World Wide Web, like
- FTP that ' mode only provides access for downloading files and does not display G the NRC Rules Menu.
You may also access the NRC's interactive rulemaking web site through the NRC home page (http://www.nrc. gov). This site provides the same access as the FedWorld bulletin board, including the facility to upload comments as
' files (anyf format) if your web browse' r supports that function.
For more information on NRC bulletin boards call Mr. Arthur Davis, Systems integration and Development Branch, NRC, Washington, DC 20555, telephone-(301) 415-5780; e-mail AXD39nrc. gov. For information about the interactive rulemaking site, contact Ms. Carol Gallagher, (301) 415-6215; e-mail CAG@nrc. gov.
Finding of No Significant Environmental Impact: Availability The NRC is proposing to amend its regulations on financial assurance requirements for the decommissioning of nuclear power plants. The proposed amendments are in response to the likelihood of deregulation of the power generating industry and resulting questions on whether current NRC regulations concerning decommissioning funds and their financial mechanisms will need to be modified. The proposed action would revise the definition of " electric utility" contained in 10 CFR 50.2, would add a definition of " Federal
-licensee" to address the issue of which licensees.may use. statements of intent, and would require power reactor licensees to report periodically on the status of their deconmissioning funds and on the changes in their external trust agreements. Also, the proposed amendments would allow licensees to take credit for the earning on decommissioning trust funds.
These proposed changes could have the following effects on nuclear power reactor licensees: (1) potentially requiring licensees who have been
" deregulated" to secure decommissioning financial assurante instruments that
. provide full current coverage of projected decommissioning costs, (2) limiting the types of licensees that can qualify for the use of Statements of Intent to satisfy-decommissioning financial assurance requirements, (3) requiring
- _ _ _ _ _ _ _ _ l
periodic reporting on the status of their accumulation of decommissioning funds, thus leading to the potential for the NRC to require some remedial action if the licensee's actions are inadequate, and (4) permitting licensees to assume a real rate of return of two percent per annum, or such other rate as is permitted by a Public Utility Commission or the Federal Energy.
Regulatory Commission, on tEie'ir accumulated funds. These actions are of the type focused upon financial assurances and mechanisms to assure funding for decommissioning and are not actions that would have any effect upon the human environment. Neither this+ action nor the alternatives-considered in the Regulatory Analysis supporting the proposed rule would lead to any increase in the effect on the environment of the decommissioning activities considered in the final rule published on June 27,1988 (53 FR 24018)', as analyzed in the Final Generic Environmental Impact Statement on Decommissioning of Nuclear Facilities (NVREG-0586, August 1988).6' Promulgation of these rule changes would not introduce any impacts on the environment not previously considered by the NRC. Therefore, the Commission has determined, under the National Environmental Policy Act of 1969, as amended, and the Commission's regulations in subpart A of 10 CFR Part 51, that this rule, if adopted, would not be a major Federal action significantly affecting the quality of the human environment and, therefore, an environmental impact statement is not required. No.other agencies or persons were contacted in reaching this determination,.and the NRC staff is
' Copies = of NUREG-0586'are available for inspection or copying for a fee from the NRC Public Document Room at 2120 L Street NW. (Lower Level).
Washington. DC 20555-0001; telephone (202) 634-3273; fax (202) 634-3343.
Copies may be purchased at current rates from the U.S. Government Printing Office, P.O. Box 370892, Washington, DC 20402-9328; telephone (202) 512-2249; or from the National Technical Information Service by writing NTIS at 5285 Port Royal Road, Springfield, VA. 22161. -
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not aware of. any other documents related to consideration of whether there.
would be .4ny environmental impacts of the proposed action. The foregoing constitutes the environmental assessment and finding of no significant impact I
for this proposed rule.
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Paperwork Reduction Act Statement This proposed rule ~ amends information collection requirements that are subject'to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). This rule has been submitted to the Office of Management and Budget for review and approval of the information collection requirements.
The public reporting burden for this information collection is estimated to average 8 hours9.259259e-5 days <br />0.00222 hours <br />1.322751e-5 weeks <br />3.044e-6 months <br /> per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the information collection. The ,
U.S. Nuclear Regulatory Commission is seeking public: comment on the potential impact of the information collections contained in the proposed rule and on the following issues:
- 1. Is the proposed information collection necessary for the proper performance of the-functions of the NRC, including whether the information will have practical utility?
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- 2. Is the estimate of burden accurate?
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- 3. Is there a way tr enhance the quality, utility, and clarity
, of the infort n to be collected?
- 4. How can the burden of the information collection be minimized, including the use of automated collection
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techniques?
Send comments on any aspect of this proposed information collection, including suggestions for reducing the burden, to the-Information and Records Management Branch (T 6 F33), U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, or by Interne' electronic mail at BJS10NRC. GOV; and-to the Desk Officer, Office of Information and Regulatory Affairs, NE08-10202. (3150-0011), Office of Management and Budget, Washington, DC 20503.
Comments to DMB on the information collections or on the above issues sh'ould be submitted by (insert date 30 days after_ publication in the Federal Register).- Comments received after this date will be considered if it is practical to do so, but assurance of consideration cannot be given to comments received after this date.
Public Protection Notification The NRC may not conduct or sponsor, and a person is not required to respond to,- an information collection unless it displays a currently valid OMB control number.
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- Regulatory Analysis ,
a The Commission has prepared a draft regulatory analysis' on this proposed '
regulation. The analysis examines the costs and benefits of the < alternatives ;
considered by the Comission.- The draft analysis is- available for inspection. ;
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in the NRC Public Document Room, 2120 L Street NW.- (Lower Level), Washington, DC. Single' copies of the analysis may be obtained from Brian J. : Richter,. -f Office of Nuclear Regulatory Research, U.S Nuclear Regulatory Comission,
[ -Washington,-DC 20555-0001, telephone-(301) 415-6221, e-mail - bj r9nrc. gov. .
- - The Commission requasts public comment .on the draft analysis. Comments an the-draft analysis may.be submitted to the NRC as indicated under the t
! ADDRESSES heading.-
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[ Regulatory Flexibility Certification i
In accordance with the Regulatory Flexibility Act of 1980-(5 U.S.C.
605(b)) as amended by the Small Business Regulatory Enforcement Fairness Act Lof 1996, Pub. L; No. 104-121 (March 29,_1996), the Commission certifies that' ;
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'this rule will not, if. promulgated, have.a significant economic impact.on a substantial number of small entities. This~ proposed ~ rule affects only.the; licensing, operation and decommissioning of nuclear power plants. The-companies that own)these plar.t: do not fall in the scope of, the definition of ,
"small: entities" set forth in the NRC's size standards (10 CFR 2.810).
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Backfit Analysis The regulatory analysis for the proposed rul'e also constitutes the documentation for the evaluation of backfit requirements, and no separate backfit analysis has been prepared. As defined in 10 CFR 50.109, the backfit rule applies to
... modification of or addition to systems, structures, components, or design of a facility; or the design approval of manufacturing license for a facility; or the procedures or organization required to design, construct, or operate a facility; any of which may result from a new or amended provision in the Commission rules or the imposition of a regulatory staff position interpreting the Commission rules that is either new or different from a previously applicable staff position-....
The proposed amendments to NRC's requirements for the financial assurance of decommissioning of nuclear power plants would revise the definition of " electric utility," define " Federal licensee," and add several associated definitions; add new reporting requirements pertaining to the use of prepayment and external sinking funds; impose new reporting requirements for power reactor licensees on the status of decommissioning funding that specify the timing and contents of such reports; and permit power reactor licensees to take credit for a 2 na- + ' annual real rate of return on funds set aside for decommissioning from the time the funds are set aside through the end of the decommissioning period. These proposed actions are necessary to ensure that nuclear por reactors provide for adequate protection of the health and safety of the public in the face of a changing environment not envisioned when the reactor decommissioning funding regulations were promulgated.
Although some of the changes proposed to the regulations are reporting requirements, which are not covered by the backfit rule, other elements in the I
a_ .,.a, .... , . . . . . . . . , , , , , . , , . ., .
proposed changes ccald be considered backfits because they would modify or clarify procedures with respect to (1) ac'eptable decommissioning funding options under various scenarios, (2) what licensees may use statements of intent, and (3) permitted credit for real rates of return on funds set aside for decommissioning. The NRC has determined to treat this action as an >
adequate protection backfit, because the action is necessary for the NRC to maintain assurance of adequate funding for power plant decommissioning, particularly-in the face of the uncertainties associated with electric utility restructuring and deregulation. Accordingly, these proposed changes to the
-regulations are-required to satisfy 10 CFR 50.109(a)(5) and a full backfit analysis is not required pursuant to 10 CFR 50.109(a)(4)(ii).
List of Subjects in 10 CFR Part 50
' Antitrus'., Classified information, Criminal penalties, Fire protection, Intergovernmental relations, Nuclear power plants and reactors, Radiation protection, Reactor siting criteria, Reporting and recordkeeping requirements.
l For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended, the Energy Reorganization Act of 1974, as amended, and 5 U.S.C. 553, the NRC is proposing to adopt the following' amendments to 10 CFR Part 50.
PART 50--DOMESTIC LICENSING OF PRODUCTION AND UTIllZATION FACILITIES
- 1. The authority citation for Part 50 continues to read as follows:
i_-_--
i AUTHORITY: Secs.-102, 103, 104, 105, 161, 182, 183, 186, 189, 68 Stat.
I 936, 937, 938, 948, 953, 954, 955, 956, as amended, sec. 234, 83 Stat. 1244, as amended (42 U.S.C. 2132, 2133, 2134, 2135, 2201, 2232, 2233, 2236, 2239, 2282); secs. 201, as' amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846).
Section 50.7. also issued under Pub. L.95-601, sec.10, 92 Stat. 2951 (42 U.S.C. 5851). Section 50.10 also' issued under secs. 101, 185, 4
68 Stat. 955.as amended (42 U.S.C. 2131, 2235), sec. 102, Pub. L.91-190, 83 i Stat. 853 (42 U.S.C. 4332). Sections 50.13, and 50.54(dd), and 50.103 also issued under sec; 108, 68 Stat. 939, as amended (42 U.S.C. 2138). Sections 50.23, -50.35, 50.55~, and 50.56 also issued under sec. 185, 68 Stat. 955 (42 .
U.S.C. 2235). Sections 50.33a, 50.55a and Appendix Q also issued under sec.
! 102, Pub. L.91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.34 and'50.54 also issued ender sec. 204, 88 Stat.1245 (42 U.S.C. b844). Sections 50.58,
- 50.91, and 50.92 also issued under Pub. L.97-415, 96 Stat. 2073 (42 U.S.C. ,
2239). Section 50.78 also issued under sec.122, 68 Stat. 939 (42 U.S.C. ,
i 2152). Sections 50.80 - 50.81 also issued under sec.184, 68 Stat. 954, as amended (42 U.S.C. 2234). Appendix F also issued under .sec.187, 68 Stat. 955 (42 U.S.C 2237).
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- 2. - In Section 50.2 the definition of Electric Utility, is revised and the definitions of Cost of service reaulation, Federal licensee, and Non-bvoassable charaes are added in alphabetical order to read as follows: .
6~50.2 Definitions.
e w w-- r s w .= - w,,, m , -
a n-- -----,nmmnr- , .-~..,n, -m, 7, - . - , - - , ---a
Cost of service reaulation means the traditional system of rate regulation ir which a rate regulatory authority allows an electric utility to charge its customers all reasonable and prudent _ costs of providing electricity services, including a return on the investment required to provide such services.
Electric utility means any entity that generates, transmits, or distributes electricity and that recovers the cost of this electricity through rates established by a regulatory authority, such that the rates are sufficient for the licensee to operate, maintain, and decommission its nuclear plant safely. Rates must be established by a regulatory authority either directly through traditional cost of service regulation or indirectly through another non-bypassable charge mechanism. An-entity whose rates are established by a regulatory authority by mechanisms that cover only a portion of'its costs will be considered to be an " electric utility" only for that portion of the costs.that are collected in this manner. Public utility districts, municipalities, rural electric cooperatives, and State and Federal agencies, including associations of any of the foregoing, that establish their own rates are included within the meaning of " electric utility."
Federal licensee means any NRC licensee that has the full faith and credit backing of the United States Government.
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- Non-bypassable charaqi means those charges imposed oy a governmental authority which affected persons or entities are required to pay to cover costs associated with operation, mr.intenance, and decommissioning of a nuclear
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power plant. Affected individuals and entities would be required to pay those charges over an established time period.
- 3. In Section 50.43, paragraph (a) is revised to read as follows:
6 50.43 Additional standards and orovisions affectina class 103 licenses for s9mmercial oower.
(a) The Commission will give notice in writing of each application to such regulatory agency or State as may have jurisdiction over the rates and services incident to the proposed activity; will publish notice of the application in such trade or news publications as it deems appropriate to give '
reasonable notice to municipalities, private utilities, public bodies, and cooperatives which might have a potential interest in such utilization or production facility; and will publish notice of the application once each week for 4 consecutive weeks in the Federal Register. No license will be issued by the Commission prior to the giving of such notices and until 4 weeks after the last publication in ti
- aieral Register.
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- 4. In Section 50.54, the introductory text of paragraph (w) is revised to read as follows:
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6 50.54- Conditions of licenses.
(w) Each power reactor licensee under this part for a production or utilization facility of the type described in Sections 50.21(b) or 50.22 shall take reasonable steps to obtain insurance available at reasonable costs and on reasonable terms from private sources or to demonstrate to the satisfaction of the Commission that it possesses an equivalent amount of protection covering the licensee's obligation, in the event of an accident at the licensee's reactor, to stabilire and decontaminate the reactor and the reactor station site at which the reactor experiencing the accident is located, provided that:
- 5. In Section 50.63, paragraph (a)(2) is revised to read as follows:
6 50.63 Loss of alternatina current power.
(a)
(2) The reactor core and associated coolant,' control, and protection
.syst ems, including station batteries and any other necessary support systems, must provide sufficient capacity and capability to ensure that the core is l
cooled and appropriate containment integrity is maintained ;n the event of a station blackout for the specified duration. The capability for. coping with a station blackout of specifit:d duration shall be determine by an appropriate
[3 coping analysis. Licensees are expected to have the baseline assumptions, analyses, and related information used in their coping evaluations available
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for NRC review.
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6._ In Section 50.73, paragraph (b)(2)(ii)(J)(2)(ly) is revised to read as follows:
6 50.73 Licensee event report system.
(b)
(2)
(ii) * * *
(J)
(2)
(ly) The type of personnel involved (i.e., contractor personnel, licensed operator, nonlicensed operator, other licensee personnel.)
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- 7. In Section 50.75, paragraphs (a), (b), (d), (e)(1)(i), (e)(1)(ii),
(e)(3) are revised and paragraphs (f)(1), (2), and (3) are redesignated as paragraph (f)(2), (3), and (4) and a new paragraph (f)(1) is added to read as follows:
6 50.75 Reportina and recordkeepina for decommission 1na plannina.
(a) This section establishes requirements for indicating to NRC how reasonable assurance will be provided that funds will be available for decommissioning. For power reactor licensees it consists of a step-wise procedure as provided in paragraphs (b), (c), (e), and (f) of this section.
Funding for decommissioning of electric ttilities is also subject to the regulation of agencies (e.g., Federal Energy Regulatory Commission (FERC) and State Public Utility Commissions) having jurisdiction over rate regulation.
The requirements of this section, in particular paragraph (c), are in addition to, and not substitution for, other requirements, and are not intended to be used, by themselves, by other agencies to establish rates.
-(b) Each power reactor applicant for or holder of an operating license for a production or utilization facility of the type and power level specified in paragraph (c) of this section shall submit a decommissioning report, as required by 10 CFR 50.33(k) of this part containing a certification that financial assurance for decommissioning will be provided in an amount which may be more but not less than the amount stated in the table in paragraph (c)(1) of this section, adjusted annually using a rate at least equal to that stated in paragraph (c)(2) of this section, by one or more of the methods described in paragraph (e) of this section as acceptable to the Comm;ssion.
The amount stated in the applicant's or l'icensee's certification may be based 1
on a cost estimate for decommissioning the facility. As part of the certification, a copy of the financial . instrument obtained to satisfy the requirements of paragraph (e) of this section is to be submitted to NRC.
(d) Each non-power reactor applicant for or holder of an operating license for a production or utilization facility shall submit a decommissioning report as required by 10 CFR 50.33(k) of this part containing a cost estimate for decommissioning the facility, an indication of which method or methods described in paragraph (e) of this section as acceptable to the Commission will be used to provide funds for decommissioning, and a description of the means of adjusting the cost estimate and associated funding I level periodically over the life of the facility.
(e)(1)
(i) 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 dacommissioning costs. Prepayment may be in the form of a trust, escrow account, government fund, certificate of deposit, or deposit of government securities. A licensee may take credit ~on earnings on the prepaid decommissioning trust funds using a 2 percent annual real rate of return from the time of the funds' collection through the
. decommissioning period, if the licensee's rate-setting authority does not authorize the use of another rate.
l (ii) External sinking fund. An external sinking fund is a fund established and maintained by setting funds aside periodically in an account segregated from licensee assets and cutside the licensee's administrative
] control in which the total amount of funds would be sufficient to pay l_ O commissioning costs at the time termination of operation is expected. An external sinking fund may be in tns To'rm of a trust, escrow account, government fund, certificate of deposit, or deposit of governcent securities.
3 A licensee may take credit for earnings on the external sinking funds using a 2 percent annual real rate.of return from the time of the funds' collection ti, rough the decommissioning period, if the licensee's rate-setting authority does not authorize the use of another rate.
(3) For an electric utility, its rates must be sufficient to recover the ccst of the electricity it generates, transmits, or distributes. These rates must be established by a regulatory authority such that they are sufficient for the licensee to operate, maintain, and decommission its plant safely. The Commission reserves the right to take the following steps in order to assure a licensee's adequate accumulation of decommissicaing funds:
review, as needed, the rate of accumulation of decommissioning funds; and either independently or in cooperation with either the FERC and the State PUC's, take additional actions as appropriate on a case-by-case basis,
-including modification of a licensee's schedule for accumulation of decommissioning funds.
Acceptable methods of providing financial assurance for decommissioning for_an electric utility are-(f)(1). Each powet reactor licensee shall report to the NRC within 9 months after [the effective date of this rule), and at least once every 2
' years thereafter on the status of its decommissioning funding for each reactor. '
facility or part of a reactor facility that it owns.- The-information11n this-report must include, at a minimum: tb amount of: decommissioning funds -
estimated to-be required pursuant to 10 CFR 50.75(b) and (c); the amount accumulated-to the date of the report; a schedule of the annual amounts remaining to be collected; _the assumptions used regarding rates of escalation in decommissioning costs,_ rates of earnings in decommissioning trust funds, and rates of other factors (e.g., discount rates) used inLfundinq projections; and any modifications occurring to a licensee's current trust agreement since
- the last submitted report. Any licensee for a plant that is within 5 years of
- the projected end of its operation shall submit such a report annually.
.i Dated' at Rockville, Maryland, this day of , 1997.
For the Nuclear Regulatory Commission.
John C. Hoyle, Secretary of the Commission.
} ,
cc: Control Murphy 1 _Riani File NG. JR.
RESEARCH ACTION ITEM July 2, 1997 MAIL CONTROL FORM 3:21 pm FROM: EDO RES No.: 970268 TO: THADANI/ COLLINS EDO No.:
ACTION NECES/APPR?: N FOIA No.: WITS No.: 9500112 DESCRIPTION: STAFF REQS-SECY-97-102-PROPOSSED RULE ON-FINANCIAL ASSURANCE REQUIREMENTS....
SFECIAL INSTRUCTIONS:
DOCUMENT DATE: June 30, 1997 RECEIVED BY RES: July 2, 1997 DUE TO RES: August 8,1997 DUE TO EDO: August 15,1997 ASSIGNED TO: J. MURPHY, DRA FOR SIGNATURE OF:
ROUTING:
A. THADANI RICHTER
, COSTANZI RIANI I g
BmO.DUR DONNELL/
AULUCK SUMMEROUR Q /[
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ACT10Ig
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- Action:-Thadani, RES/ Collins, NRR-bg No .. UNITED STATES p g Cys: Callan ~
NUCLEAR REGULATORY COMMISSION
. WASHINGTON. D.C. 205$5-0001 Thompson-dordan
, .a Norry
- + , ***** ,e,'
' June 30, 1997 Blaha
,. Paperiello NMSS orrice oF.THE Bangart, SP st e n t TAnv_ -
-Shelton, CIO Meyer, ADM BRichter, RES MEMORANDUM TO: L. Joseph Callan
~
Exe at e Director for Operations FROM: J s k C.-Hoy , Secretary
SUBJECT:
STAFF REQUIREMENTS - SECY-97-102 - PROPOSED RULE ON FINANCIAL ASSURANCE REQUIREMENTS FOR DECOMMISSIONING NUCLEAR POWER REACTORS r
The. commission has approved publication-of the proposed rule on
- financial assurance-requirements in the Eederal Recister subject to the following comments.
- 1. The staff should consider whether the term " bench marking" should be replaced with more suitable language that more accurately reflects the amount of funding _for decommissioning that NRC believes a licensee should possess-at given points in a plant's operating-life.
'2.: -The initial' reporting period should be stt no later than 9 months after_the effective date_of the rule. Thereafter, the reporting period should be every two-years. Revisions-to the-Federal Reaister notice (FRN)'are provided in the attachment. ,y
- 3. The proposed rule and supplemental information shoul'd state M that the Commission reserves-the flexibility to take the e following steps in' order to assure a licensee's adequate r
-accumulation of decommissioning funds: (1) review, as d needed, the_ rate of accumulation of decommissioning funds; !
p and-(2) either independently or in cooperation with.either
.the_FERC and the state PUCs, take additional actions as appropriate on a case-by-case basis, including modification of a licensee's schedule for accumulation of decommissioning funds.
~
SECY NOTE: THIS SRM,.SECY-97-102, AND THE COMMISSION VOTING RECORD CONTAINING THE VOTE SHEETS OF ALL COMMISSIONERS WILL BE MADE PUBLICLY AVAILABLE 5 WORKING DAYS FROt4 THE DATE OF THIS SRM.
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I i f 4. After reviewing the initial reports from-licensees on the status of decommissioning funds, the staff should advise the Commission on the need for further rulemaking. In making a recommendation, the staff should consult with the National Aasociation of Regulatory Utility Commissioners, the Federel Energy Regulatory Commission, and the Securities and Exchange Commission.
- 5. The statements of consideration regarding stranded costs '
should discuss that securitization of utility stranded assets is being considered as a financial recovery tool and as a non-bypassable charge mechanism. Revisions to the FRN
_are provided in the attachment
- 6. A copy of the dra'ft Financial Accounting Standards Board (FASB) standard No. 158-B should be made available in the public document room.
46903- (RES) (SECY Suspense: e-/29/97) 9500112 8/22/97 Conforming changes described in this SRM should be included in the policy statement in SECY-97-117. (NRR) 9600115
Attachment:
As stated cc: Chairman Jackson Commissioner Rogers Commissioner Dicus Commissioner Diaz Commissioner McGaffigan OGC CIO CFO .
OCA OIG Office Directors, Regions, ACRS, ACNW, ASLBP (via E-Mail)
1 I. Reporting Requirement l On page 55, FRN, " Response" at top of page:
The Commission is. proposing that every licensee submit its l
initial report on the status of decommissioning funds to the NRC within 9 months after the effective date of this rule, and at least once every 2 years thereafter...
Page 79, FRN:
(f) (1) Each power teattvr licensee shall report to the NRC within 9 months af ter [the ef fective da:e of this rule) , and at least once every 2 years thereafter on the status of its decommissioning funding for each reactor facility or part of a reactor facility that it owns...
III. Securitization Page 10, FRN, in second line from the bottom of the page:
These mechanisms (e.g., wire charges, non-bypassable customer fees, including securitization, exit fees)...
Page 15 of FRN, " Response" insert after the second sentence of the second paragraph:
"Further, States are considering a number of options for assessing non-bypassable charges to recover decommissioning costs, as-well as other stranded costs. One such option is "securitization," which entails financing the recovery of stranded costs through issuance of bonds whose principal and interest would be repaid by an irrevocable, non-bypassable charge set by State statute on an electric utility's distribution customers. Because the income stream to repay the bonds would be securitized by the irrevocable, non-bypassable charge, the bonds would be highly rated and would thus require a lower interest rate than riskier debt. Also, these securitized bonds would not be part of the utility's capital structure, and so would not u-reflect the higher cost of equity capital. The spread in interest cost between highly rated securitized debt and lower rated utility capital that includes both debt and equity makes securitization attractive to many States. The NRC believes that securitization has the potential to provide an acceptable method of decommissioning funding assurance, although other mechanisms that involve non-bypassable charges may provide comparable levels of assurance and should not be excluded from consideration by State authorities."
Last paragraph would then begin: "As stated in the NRC's..." I/ _
In the last line on page 20 (response), after the words:
...through other non-bypassable mechanisms," insert: "such as wire charges, non-bypassable customer fees, including
securitization, or exit fees,"
^
Lastly, the third sentence from the end of the last paragraph in the-response.on page 19 should have the word "some" inserted between the words "that" and " plants."
e
M ur .
[ 'o UNITED STATES
, [L' - -
NUCLEAR REGut:ATORY: COMMISSION
.- - WASHINGTON. D C. 20665-0001
. .}. ~
x o****y June '30, 1997 OFFICE OF THE i SECRETARY-COMMISSION-VOTING RECORD DECISION ITEM: SECY-97-102 TITLE: PROPOSED RULE ON FINANCIAL ASSURANCE REQUIREMENTS _FOR DECOMMISSIONING NUCLEAR-POWER REACTORS The Commission (with all Commissioners agreeing) approved the subject paper-as_ recorded in the Staff Requirements Memorandum-
<(SRM) of June 30, 1997.
-This Record contains a summary of voting on this matter together with the. individual vote sheets, views and comments of the Commissioners, and the SRM of June.30, 1997.
gehn C. Hoyle Secretary of the-Commission Attachments:
- 1. Voting Summary
- 2. Commissioner Vote Sheets
.3.-Final SRM cc: Chairman Jackson Commissioner Rogers Commissioner Dicus-Commissioner Diaz Commissioner McGaffigan OGC-EDO PDR-DCS Oh 7 OM 'h Y j o
a.
VOTING
SUMMARY
--SEC 102
' RECORDED--VOTES -
NOT. _
j APRVD DISAPRVD ABSTAIN PARTICIP COMMENTS DATE CHRM. JACKSON X. X- 6/19/97
- COMR.--ROGERS. X 5/18/97_-
- COMR.EDICUS X- X- 6/23/97-
- COMR.--DIAZ- - -X:- X- 6/13/97 COMR.: McGAFFIGAN X- X- 6/26/97
' COMMENT RESOLUTION
~
' In their: vote. sheets, - all Commissioners approved the staf f's .-
l: recommendation:andisome provided additional comments.
Subsequently,-the comments of the Commission were:-incorporated.-
into the-guidance _to' staff as reflected in the SRM issued onLJune E30,s.1997.
S e
'g -
.1 -, . . ., .
l N O T A--T-I O N- VOTE.
RESPONSE-SHEET TO: John C.--Hoyle, Secretary FROM: CHAIRMAN JACKSON
SUBJECT:
SECY-97-102 ' rRuPOdEli RULE ON FINANCIAL' ASSURANCE REQUIREMENTS FOR DECOMMISSIONING NUCLEAR POWER REACTORS
- Approved X w/ comments Disapproved Abstain Not Participating -Request Discussion COMMENTS:
See-attached comments
/L
. Shirley Ann Jackson SIGNATURE Release Vote /X / June 1% 1997 DATE Withhold Vote / /
Entered on "AS"- Yes x No
f .. .
u m- .
. - iCOMMENTS ON SECY 97-102; PROPOSED RULE ON FINANCIAL ASSURANCE-
- REQUIREMENTS FOR DECOMMISSIONING NUCLEAR POWER REACTORS ti. Reporting Regr' ment?
(The reporting requirement should support the Commission in two ways. First, it will provide the Commission with.information to keep abreast of financial situations that may have l potential safety impacts on licen. sees. Second, it will provide the information to evaluate - _
iwhether adequate amounts are provided in decommissioning trust funds for all nuclear power-4 l plants; With the rapid changes that are occurring with the transition to_a competitive market, and for the NRC to appropriately respond to these changes, it is important that the NRC have .
information on the status of decommissioning funds as soon as possible.
- JT: arefore,.the licensee't initial report on the status of decommissioning funds should be . !
Lsubmitted to the NRC within 9 months after the effective date of the final r'lle.
Recommended revisions to the FRN are provided in the attachment..
' 2L Benchmarking:
- The policy paper raises benchmarking as an issue and the potential for a future rulernaking.-
_ Benchmarking in this context refers to the amount of funding for decommissioning that the~.
NRC believes a licensee should possess at given points in a nuclear power plant's projected '
operational life (amortization). For example, the NRC coulo nsider requiring licensees to accumulate 25 percent of their decommissioning funds (less the credit for eamings on
- decommissioning funds as_ allowed by this proposed rulemaking) by the end of the tenth year:
- of a plant's projected 40_ years of operation; l NRC has traditionally relied on the FERC and the PUC's to ensure that all unfunded (decommissioning obligations of the licensees would be col 4cted. - The underpinning of the -
change in the definition of " electric utility", in the proposed rule is that we appreciate this :
. relationship with. the FERC and the State PUCs, and we will continue to rely on these ;
economic regulators for decisions on the collection, amortization,'and disbursement of decommissioning t[ust fundsc
.While all State PUC's require some type of reporting on the status of decommissioning -
financial assuran'ce,: the scope, level of detail, the frequency of reporting and the degree of scrutiny of the reports by the various PUCs can differ substantially from State to State.
- With the variability in the level and the scrutiny given by PUCs to cost estimates, the
, ; Commission must. ensure that our responsibilities continue to be met as changes result from.
(economic deregulation by appropriately addressing the issue at this time, rather than -
{ completely. leaving the subject of benchmarking to a later rulemaking.
'I believe that this proposed rule must generally address benchmarking. The proposed rule
. 'should specify that a new regulatory requirement would only be triggered should the initial
' reports and follow on reports indicate that decommissioning funds are not being set aside at f an appropriate rate, taking into account the specific financial situation of the licensee. The
- proposed rule and the supplementary information accompanying the proposed rule should set forth that the Commission reserves the flexibility to review, as needed the rate of
- accumulation of decommissioning funds, and either independently or in cooperation with N U
r.
~'
. . either the FERC and the state PUCs to take additional actions as appropriate on a case-by-
- case basis, including modification of a licensee's schedule for accumulation of decommissioning funds to assure a licensee's adequate accumulation of decommissioning funds.
- 3. Securitization:
Securitization has emerged as a financial mechanism to recover stranded assets by the ,
electric utility industry as it transitions to a competitive market. The Federal Reaister statements of consideration regarding stranded costs should discuss that securitization of utility stranded assets is being considered as a financial recovery _ tool and as a non- -
- bypassable charge mechanism.- Recommended language is provided in the attachment.
4,- The draft Financial Accounting Standards Board (FASB) standard No.158-B l'n the propose'd rule, the NRC is endorsing the draft Financial Accounting Standards' Board . l (FASB) standard No.158-8, " Accounting for Certain Liabilities Related to Closure or Removal
- of Long-Lived Asset" as a means of providing guidance for licensees to comply with NRC regulations regarding licensee reporting on the status of decommissioning funding.
Licensees would comply with the FASB standard once it becomes final. Page 6 of the policy papet discusses that NRC plans to endorse the draft FASB standard, and aiso states that the staff is issuing a draft regulatory guide that endorses the draft FASB standard to comply with the NRC proposed reporting requirements. A copy of the draft FASB standard should be provided as an enclosure to the paper.
4
s
. Attachment"- t
- 4
, l. Reporting Requirement I
-_On page 55,' FRN,'"ResporM" at top of page:
L The Commission is proposing that every licensee submit its initial report on the status of decommissioning funds to the NRC within 9 months after the effective date of this rule, and -
at least once every 3 years thereafter...
Page 79, FRN: .. .
~ (f)(1) : Each power reactor licensee shall report to the NRC within 9 months after [the effective date of this rule), and at least once every 3 years thereafter on the status of its -
= ; decommissioning funding for each reactor facility or part of a reactor facility that it owns...
~
111. Securitization -
Page 10, FRN, in second line from the bottom'of the page:
- These mechanisms (e.g., wire charges, non-bypassable customer fees, including
- securitization, exit fees)...
1
- Page 15 of FRN, " Response" insert after the second sentence of the second paragraph.
1"Further,- States are considering a number of options for assessing non-bypassable chargesL ,
to recover decommissioning costs, as well as other stranded costs. One such option is -
." securitization," which entails financing the recovery of stranded costs through issuance of-bonds whose principal and interest would be repnid by an irrevocable, non-bypassable Lcharge set by State statute on an electric utility's distribution customers. Because the income (stream to repay the bonds would be securitized by the irrevocable, non-bypassable charge,;
W lthe bonds would be highly rated and would thus require a lower interest rate than riskier :
- debt.fAlso, these securitized bonds would not be part of the utility's capital structure, and so :
. would not reflect the higher cost of equity capital. The spread in interest coat between highly -
rated securitized debt and lower rated utility capital that includes both debt and equity makes
'securitization attractive to many States. The NRC believes that securitization has the
' potential to provide an acceptable method of decommissioning funding assurance, although Lother. mechanisms that involve non-bypassabia charges may provide comparable levels of
- ' assurance and should not be excluded from consideration by State authorities."
J Last paragraph would then begin: "As stated in the NRC's..."
(in the last line 'on page 20 (response), after the words: "...through other non-bypassable '
- mechanisms," insert: "such as wire charges, non-eypassable customer fees, including
- securitization, or exit fees,"
Lastly, the third sentence from the end of the last paragraph in the response should have the -
- i word " soma" inserted between the words "that" and " plants."
l 2_
NOTATION VOTE RESPONSE SHEET TO: John C. Hoyle, Secretary FROM: COMMISSIONER ROGERS
SUBJECT:
SECY-97-102 - PROPOSED RULE ON FINANCIAL ASSURANCE REQUIREMENTS FOR DECOMMISSIONING NUCLEAR POWER REACTORS
-Approved 4Yee:.#. Disapproved Abstain Not Participating _
Request Discussion COMMENTS:
M < tcA P
%9b SIGNATURE Q Release Vote /
/ ,tA>R (f f77)
DATE
. Withhold vote ./ /
Entered on "AS" Yes . No
~
N 0 T'A T-I O N -V O-T E RESPONSE SHEET
' TO: John C. Hoyle Secretary of the Commission FROM: . ronegicSIONER DICUS
SUBJECT:
SECY-97-102, PROPOSED RULE ON FINANCIAt.
ASSURANCE-REQUIREMENTS FOR DECOMMISSIONING NUCLEAR POWER REACTORS Approved-- X W/CMTS Disapproved Abstain Not Participating Request Discussion i COMMENTS: 'I approve._ the staff proposal to publish this proposed rulemaking subject to the following comments:
0 I believe the agency needs to have initial funding status information sooner rather than later. I am also concerned that,
-given the ability for the financial status of licensees to change in a relatively short time frame, the-proposed reporting period of three years-may be too lengthy. :Therefore, I believe that the initial reporting period should be set at no laterithan one year following the effective date of the rule.. This-will allow licensees to establish a reporting date consistent with other financial. reports they must prepare. Thereafter, I believe the reporting-period should be every two years rather than the-staff's proposed'three year period.
o I support the comments of Chairman-Jackson.
'O The " bench marking" terminology should be replaced with more suitable-language such as " incremental decommissioning funding" consistent with Commissioner Diaz's comments.
Ak e. +nn Release Vote / X/
S@
Ow Z3, IT1 ')
DATE Withhold vote / /
, Entered on "AS" Yes M No
~
Lf ~
nnon D IP ' .. . . . . . . . _ _ - _ _ _ _ _ _ _ _ _
\ NOTATI ON VOTE RESPONSE SHEET TO: John C. Hoyle, Secretary FROM: COMMISSIONER DIAZ
SUBJECT:
SECY-97-102 - PROPOSED RULE ON FINANCIAL ASSURANCE REQUIREMENTS FOR DECOMMISSIONING NUCLEAR POWER REACTORS Approved { . Disapproved Abstain vf 7 Not Participating Request Discussion COMMENTS:
I approve the publication of the proposed rule. In the Federal Register Notice the staff should request specific comment on its proposed case by case approach for periodically determining whether a licensee's decommissioning fund is adequate during the life of the license (currently called " benchmarking"). I would recommend that the staff consider a term other than
- benchmarking" to describe this incremental funding; it does not appear apopppriate for this opplication.
. 3
/gNAME )
~ Release Vote / V[ 6-\3M DATE Withhold Vote / /
^
Entered on "AS" Yes No
- q6 D%cW If l'
N O T A T I'O N VOTE RESPONSE SHEET TO: -
John C. Hoyle, Secretary FROM: COMMISSIONER MCGAFFIGAN
SUBJECT:
SECY-97-102 - PROPOSED RULE ON FINANCIAL .
ASSURANCE REQUIREMENTS FOR DECOMMISSIONING NUCLEAR POWER REACTORS Approved 4- Disapproved Abstain Not Participating Request Discussion COMMENTS: g{()
b !m .
SIGNA % )
Release Vote /Y / b!)C!17 DATE Withhold vote / /
Entered on "AS" Yes X No
.j ^,01013 M b 3f f
- c. , - . .,.
1 COMMISSIONER McGAFFIGAN'S COMMENTS ON SECY 97-102
'I approve the publication of the proposed rule. With respect to the issue of" benchmarking" or the rate at which decommissioning funds are accumulated, I believe the w. ing in SECY 97-117, " Final Policy Statement on Restructuring and Economic Deregubtion of the Electric Utility Industry," is sufficient in establishing the NRC's position. The staff should continue -
to follow this issue and after reviewing the initial reports from licensees on the status of
' commissioning funds, advise the Commission on the need for further rulemaking to resolve A issue. In making their recommendation. the staff should consult with the National
& ,cciation of Regulatory Utility Commissioners, Federal Energy Regulatory Commission, and uie Security and Exchange Commission. I also agree with the Chairman's comments on the reporting requirements, securitization and the Draft FASB Standard.
6 C'
7 _
ggu %*o UNITED STATES
-y y NUCLEAR REGULATORY COMMISSION WASHINGTON, D A 20555-0001
{ j.
%r ese* /
! June 30, 1997 OFFICE OF THE
-SECRETARY MEMORANDUM TO: L.' Joseph Callan
,"-* Exe at e Director for Operations
-FROM: J C. Hoyl ,
WSecretary
SUBJECT:
STAFF REQUIREMENTS - SECY-97-102 - PROPOSED RULE ON FINANCIAL ASSURANCE REQUIREMENTS FOR DECOMMISSIONING NUCLEAR-POWER REACTORS The Commission _has approved publication of the proposed rule on financial assurance requirements in the Federal Recister subject to the following comments.
- 1. The staff should consider whether the term " bench marking" i should be replaced with more suitable language that more accurately reflects the amount of funding for decommissioning that NRC believes a licensee should possess at given points in a plant's operating life. -
- 2. The initial reporting period should be set no later than 9 months after the effective date of the-rule. Thereafter, the reporting period should be every two years. Revisions to the Federal Recister notice (FRN) are provided in the attachment.
- 3. The proposed rule and supplemental information should state tnat the Commission reserves the flexibility to take the following steps in order to assure a licensee's adequate accumulation of decommissioning funds: (1) review, as needed, the rate of accumulation of decommissioning funds; and (2) either independently o. in cooperation with either the FERC and the state PUCs, take additional actions as appropriate on a case-by-case basis, inclu.'ing modification of a licensee's schedule for accumulation of decommissioning funds.
SECY NOTE: THIS SRM, SECY-97-102, AND THE COMMISSION VOTING RECORD CONTAINING THE VOTE SHEETS OF ALL COMMISSIONERS WILL BE MADE PUBLICLY AVAILABLE 5 WORKING DAYS FROM THE DATE OF THIS SRM.
/
a cc: Control Murphy
/ Riani File NG. 3R.
RESEARCH ACTION-ITEM August 20, 1997 ' MAIL CONTROL FORM 2:04 pm FROM: EDO TO: KNAPP RES No.: 970319 EDO No.:
ACTION NECES/APPR?: N FOIA No.: WITS No.: 9500112 DESCRIPTION: STAFF REQS-COMSAJ-97-009-ADDITIONAcuvMMENTS ON-SECY-97-102-PROPOSED RULE....
SPECIAL INSTRUCTIONS:
DOCUMENT DATE: August .1997 RECEIVED BY RES:
DUE TO RES: August 15,21, 1997 DUE TO EDO: August 21,1997 <
ASSIGNED TO: J. MURPHY,-DRA:
FOR-SIGNATURE OF:
ROUTING:
M. KNAPP SUMMEROUR B. MORRIS
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