ML20199K386

Petition for Determination That Great Bay Power Corp'S Acceleration of Decommissioning Trust Fund Payments Would Provide Reasonable Asurance of Decommissioning Funding Or,In Alternative,Would Merit Permanent Exemption

ML20199K386
Person / Time
Site:	Seabrook
Issue date:	01/29/1998
From:	Charnoff G AFFILIATION NOT ASSIGNED, SHAW, PITTMAN, POTTS & TROWBRIDGE
To:	NRC COMMISSION (OCM)
Shared Package
ML20199K369	List: ML20199K364 ML20199K386
References
NUDOCS 9802060174
Download: ML20199K386 (11)

Text

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UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION in the Matter of )

)

North Atlantic Energy Service Corporation and )

Great Bay Power Corporation ) Docket No. 50 443

) (License No. NPF 86)

(Scabrook Station, Unit No.1) )

)

{ PETITION FOR A DETERMINATION TIIAT GREAT IIAY POWER CORPORATION'S ACCELERATION OF ITS DECOMMISSIONING TRUST FUND PAYMENTS WOULD PROVIDE REASONABLE ASSURANCE OF DECOMMISSIONING FUNDING OR,IN Tile ALTERNATIVE, WOULD MERIT A PERMANENT EXEMPTION Great Bay Power Corporation (Great Bay) respectfully requests the NRC to formally l

detemiine that an acceleration of payments by Great Bay, as set forth below, to the decommissioning trust fund for Seabrook Station Unit 1 provides " reasonable assurance" within the meaning of the NRC's regulations that funds wili be available for the decommissioning of Great Bay's pro rata share of the Seabrook facility. Great Bay makes this request in an effort to provide a final, definitive resolution of the outstanding issues with the NRC concerning Great llay's decommissioning funding. In the alternative, Great Bay requests a permanent exemption under 10 C.F.R. Q 50.12 in reliance on Great Bay's proposed acceleration ofits decommissioning trust fund payments, as set forth herein.

Background Infonnation Great Bay and the other Seabrook owners currently pay funds into the decommissioning trust ftmd for Seabrook in accordance with the monthly schedule of payments established by the 9002060174 900130 ADOCK 0500 3

New llampshire Nuclear Decommissioning Finance Cornmittee ("NDFC"). The level of decommissioning funding currently being provided is greater than the minimum level of funding that i. required under the NRC's current regulatory framework. The NDFC is established under Chapter 162 F (" Decommissioning of Nuclear Electric Generating Facilities") of the New llampshire statutes to assure adequate funding for the decommissioning of the Seabrook facility.

The NDFC has responsibility to determine (1) the amount of the Nuclear Decommissioning Financing Fund (" Decommissioning Fund") to be established for the Seabrook facility and (2) the amount of the regular monthly payments to be paid into the Decommissioning Fund by each l of the Seabrook owners in order to reach the level of decommissioning funding determined to be necessary by the NDFC. The statute requires the amount of the Decommissioning Fund to be

" sufficient to cover all costs of decommissioning the facility" and to achieve and maintain "the level of decommissioning required" by the NAC. RSA 162 F:218 The monthly schedule of payments established by the NDFC provides for payments by each of the owners to fund their 3 proportionate share of Seabrook's decommissioning costs such that sufficient funds will be accumulated in the Decommissioning Fund by October 17, 2026, the expiration date for the Seabrook operating licence, to cover the expected cost of Seabrook's decommissioning.

The Seabrook owners have also filed with the NRC the Decommissioning Funding Assurance Report and Certification submitted pursuant to 10 C.F.R. 6 50.33(k)(2) and 10 C.F.R.

f 50.75 for the Seabrook facility. This Report and Certification was initially filed with the NRC by New Hampshire Yankee as agent for the joint owners on December 27,1989 and updated on U

The NDFC is to conduct a review arinually of the adequacy of the level of funding and the funding schedules and may make changes as appropriate to take into account changed circumstances. RSA 162 F:17 and 162 F:22.

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L July 23,1990. This Repoit and Certification includes a copy of the Master Tr.ist Agreement for the Decommissioning Fumd and. as updated in July 1990, prov!ded the NRC the schedule f E payments based on the estimated cost of decommissioning Seabrook then mandated by the NDFC. The Report and Certification also certified that financial assurance for decommissioning Seabrook would be pt vided in "an aggregate amount not less than the inflation adjusted minimum amount required by 10 CFR 50.75(c)." The Report and Certification noted that the actual decommissioning requirements then established by the NDFC e .. . .mimum amount required by 10 C.r.R. s 50.75(c) by more than 100 p sue estimated deccmmissioning cost for the Seabrook facility then e+ aned by the NDFC (on which payments to the Decommissioning Fund were based) was $272.7 million (1990 dollars); the minimum amount as determined under 10 C.F.R. G 50.75(c) was approximately $130.75 million (Septemaer 1989 dollars).

Since the filing of the Report and Certification with the NRC, both the estimated decommissioning costs and schedule of monthly payments as mandated by the NDFC for the Seabrook facility have increased. The curm.n estimated cost of decommissioning the Seabrook E

plant used by the NDFC to determine the level of required monthly payments by each of the Seabrook owners to the Decommis>ioning Fund is now 4 ~3.1 million (January 1998 dollars).

The basis of this estimate is a 1994 site specific cost estimate prepared by Nonh Atlantic2 as g- reviewed and approved by the NDFC afict public hearing as mandated by RSA 162-F:22.

Further, the Fourth Supplemental Order of the NDFC requires a comprehensive I

North Atlantic relied on a base cost e+timate developed by TLG Services adjusted for LLRW escalation methodology and applied additional contig:ncies for Lt W cost and for decommissioning delays associated with high level waste.

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e decommissioning update to be completed and submitted in March 1998 concerning commissioning ftmding for the Seabrook facility, which will, among other items, review and recalculate the decommissioning cost estimate as necessary. Such a comprehensive update is to be submitted every fourth yeai thereafkr.

Proposed Acceleration of Decommissioning Funding c id Request for Reasonable Assurance Determination.

in order to resolve the outstanding issues concerning Great Bay's decommissioning funding, Great Bay proposes to accelerate its payments to the Seabroc* commissioning Fund such that Great Bay will have contributed sufTicient funds to the fun i by the year 2015 to allow sufricient monies to accumulate -- with no iurther payments by Great Bay to the fund -- to the full estimated amount of Greet Bay's decommissioning obligation, as determined by the NDFC, by the time the current operatirg license expires in October 2026. This is au acceleration by 11 years of Great Bay's contributions to the Decommissioning Fund.

l To facilitate this proposed acceleration of contributicas to the Decommissioning Fund, Great Bay requests that the Commission make a formal determination that this acceleration of decommissioning funding by Great Bay provides " reasonable assurance" witi.:n the meaning of its regulations,10 C.F.R. 50.33(k)(2) and 10 C.F.R. { 50.75(a), that funds will be available for decommissioning Great Bay's pro rata share of the Seabrook facility attributable to its 12.1%

ctynership of 3e f~ility. The NRC's regulations identify three " acceptable methods of providing financial assurance for decommissioning" by licensees tLat are not an electric utility as defined by the NRC, and are set forth in 10 C.F.R. { 50.75(e)(2). This regulation does not, however, by

its terms preclude non-electric utilities from using other methods which in their particular circumstances provide reasonable assurance of decommissioning fending.

Great Bay submits that the NRC can approve within the framework of its existing regulations other methods of providing decommissioning funding for norrelectric utilities which, in the applicable circumstances, provide reasmable assurance within the meaning of the regulations. The NRC regulation,10 C.F.R. Q 50.75(e), reflects the NRC's generic determination that the methods set forth there are acceptable for providing reasonable assuran:e of deommissioning funding with no further review or approval on a case-by-case basis required by the NRC Ssg Yankee Atomic Electric Comnary,(Yaakee Nuclear Power Station), CLI-96-7, l

l 43 NRC 235. 251 (1996); Eacific Gas and Elects .Comnany (Diablo Canyon Nuclear Power Plants, Units 1 and 2), LBP-93-1,37 NRC 5,30 (1993). However, this generic determination does not preclude the NRC from determining upon further review that an alternative method may, in particular circumstances, provide the necessar, .easonabL assurance required by the regulations. As discussed below, Great Bay believes that its proposed acceleration of decommissioning funding will, in its particular circumstances, provide reasonable assurance of the availability of decommissioning funds as required by 'NRC regulation.

Accordingly, in order to allow Great Bay to structure its financ. .] affairs for the foreseeable future, Great Bay requests the NRC to issue a formal determination that Great Bay's proposed acceleration of decommissioniv. funding is an acceptable method, in its circumstances, of providing reasonable assurance of decommissioning funding in accordance with the NRC's regulations. Alternatively, in the event the NRC concludes that its decommissioning regulations do not expressly provide for its format approval of decommissioning funding methods that differ

.- 1 trom those set forth in 10 C.F.R. { 50.75(e), Grmt Bay requests that tiu NRC issue a permanent exemption under 10 C.F.R. Q 50.12 on the basis that Great Bay's proposed acceleration of decommissioning funding provides reasonable assurance of decommissioning funding, albeit in a manner different than the methods set forth in the regulations. If the Commission determines that Great Bay's proposed acceleration provides reasonable assurance, the requirements of 10 C.F.R. y 50.12 for an exemption would clearly be met.8 The Commission has recognized that the regulation requiring reasonable assurance of decommissioning ftmds "does not contemplate" an " ironclad" or "absalute guarantee of such funds " Yankee Atomic Electric Comnany (Yankee Nuclear Power Station), CLI 95-7,43 NRC 234, 262 (1996). Rather the " regulation was intended only to require ' reasonable assurance of funds for decommissioning.'" Id. (emphasis in original). Great Bay believes that its pronosed acceleration of decommissioning funding provides reasonable assurance in its circumstances that decommissioning funding will be available when necessary for the following reasons.

i Based on a determination of rensonable assurance, such an exemption would "not present an undue risk to the public health and safety." 10 C.F.R. f 50.12(aXI). Further, "special circumstances" would be present in the following respus. Eirst. application of the literal terms of 10 C.F.R. f 50.75(eX2) would "not be necessary to achieve the underlying purpose of the rule." 10 C.F.R. 6 50.12(aX2Xii), since reasonable assurance would be provided by the acceleration of de.ommissioning funding as set forth in the text above. Second. compliance with the literal terms of 10 C.F.R. i 50.75(e)(2) "would result in endue hardship." 10 C.F.R. f 50.12(aX2)(iii). As set forth in Gre;; Bay's six-month status report, Great Bay could only obtain a surety by essentially prefunding the entire an at of Great Bay's decommissioning liability, which Great Bay is financially unable to do. Ihird, in these chcumsts 4 application of the requirements of 10 C.F.R. s 53.75(eX2) would not serve -- and in fact would defea'- the underlying purpose of this rule,10 C.F.R. 6 50.12(aX2Xii), for es determined by the NRC Staffitselfin the July 23rd Exemption Order, for Great Bay to fund or collateralize the insurer for its entire decommissioning obligation "wot.ld make it difficult, if not impossible, for Great Bay to meet its cay-to-day obligations." EQuIth.

Great Bay's status report reflects its good faith attempt and its inability to comply with the literal requirements of 10 C.F.R. 9 50.75(eX2).10 C.F.R. 6 50.12(aX2Xv).

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Eirst, Seabrock is a new, low-cost, well-operated plant that is not facing any threat to its continued operation for the reasonably foreseeable future. As a new plant commencing operation

n 1990, Seabrook was licensed against the modern and stricter regulatory requirements.

Sscond, Seabrook is one of the lowest cost operating nuclear plants in the country, in 1996, (a non-refueling outage year) Seabrook was the third lowest cost nuclear plant in the nation with a total production cost of 12.96 mills per kilowatt hour. Sec Nucleonics Week, "U.S. Utility Operating Costs,1996," Jum 12,1997 ("1997 Nucleonics Week"). In 1995, (a refueling outage l

year) Seabrook was significantly '.elow the average cost of nuclear plants of 22.39 mills per kwh with a cost of 17.44 mills per kwh. Srm Nucleonics Week, "U.S. Utility Operating Costs,1995,"

June 6,1996 ("1996 Nucleonics Week").

Further, the cost of generating power at Seabrook compares very favorably with the operatmg costs of generating electricity from other sources of energy, such as coal, oil, and r.atural gas. The average operating costs of coal-fired plants in the United States in 1996 was 18.3 mills per kwh; the average operating costs of gas-fired plants was 33.8 mils per kwh; and the average operating costs of oil-fired plants was 41.4 mils per kwh; the three year average operating costs for 1994-1996 for coal, gas and oil were 18.8 mils per kwh,30.3 mils per kwh, and 37 mils per kwh respectively .L' Seabrook's average operating costs over the last three years was 18.03 mils per kwh, below the average operating costs for coal-fired plants and significantly below the average operating costs for oil-fired and gas-fired plants.

• This cost data was compiled by Utility Data Institute.

Accordingly, Great Bay is, and should remain for the foreseeable future, competitively positioned to sell the output from its ownership share of Seabrook and to recover its costs, including its share of Seabrook's decommissioning costs. As set forth in Exhibit I to Great Bay's supplemental filing in support of its petition for reconsideration,2 Great Bay is currently recovering -- and fully expects to continue to recover -- its costs of generating electricity at the Seabrook Station, including decommissioning costs.

Third, the estimated decommissioning cost for the Seabrook facility is based on the current plant specific estimate of $473.1 million, not the lower limit allowed by the NRC regulations. Further, that estimate is to be updated in several months and, as required by the New 11ampshire NDFC, a comprehensive review and updat. will be undertaken every four years. The NDFC's requirement for continual updates of Seabrook's decommissioning costs ensures the NRC that the monies being set aside by Great Bay will in fact cover its share of the expected decommissioning costs of the Seabrook facility. Moreover, in general, the close oversight and respasibilities of the NDFC under New Hampshire law provides additional assurances that appropriate adjustments that take into account future changes in circumstances will be mt.de to ensure the adequacy of the decommissioning funding for Seabrook.

Fourth, Great Bay's proposed acceleration of decommissioning funding will result in sufficient funds being available at the end of 25 years of operation - 11 years prior to the end of the current operating license for Seabrook -- to allow sufficient monies to accumulate, with no further payments by Great Bay, to fully cover Great Bay's decommissioning obligation at the end E

" Supplement to Great Bay Power Corporation's Petition for Partial Reconsideration of Exemption Order to Submit Requested Cost Data and to R: quest, in the Attemative, a Further Exemption," dated June 4,1997.

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of the current operating license period. This 11 plus years of acceleration of decommissioning funding provides the NRC reasonable assurance that decommissioning funds will be available when needed. Ex;.erience reflects that those nuclear power plants that are shutdown prematurely are usually older plants nearing the end of their operating license period. As plants approach the end of their operating license, they are more likely to be shut down prematurely because these are fewer operating years (unless the licensees seek license renewal) over which any necessary s capital expenditures may be recovered.

For example, other plants that have recently shut down prematurely, such as Maine Yankee and Connecticut Yankee, involved older plants at which .*arge expenditures were believed to be required in order to continue operation. Connecticut Yankee had operated close to 30 years at the time the decision was made to prematurely shut down the plant and Maine Yankee haa operated approximately 25 years. Similarly, Commonwealth Edison has just announced that Zion, which has operated approximately 25 years, will be shutdown. And, of f

course, there are more than a dozen commercial nuclear power plants still operating that have already accrued more than 25 years of operating experience each.

Acceleration of the payment of Great Bay's decommissioning funds to the year 2015 will assure that sufficient funds are set aside after 25. years of operation, which can accrue without further contribution by Great Bay to cover its decommissioning funding for Seabrook. Thus, Great Bay would have provided its decommissioning funding before the period of time at which Seabrook, based on other plants histories, might become vulnerable to premature shutdown.

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Einh, accelerated funding as a form of financial assurance is often used by banks in connection with the limited recourse financing customarily used for long term independent power projects where the principal collateral for the bank loans is the power project itself and the revenue generated thereby. In such circumstances, banks typica'ly require that the debt Le paid off within 2/3 or 3/4 of the remaining expected life of the project. Such an approach is employed by the banks in recognition of the fact that power projects often incur significant capital expenditures as they approach the end of their operating life. Thus, the acceleration of decommissioning funding provides the NRC the same type of reasonable assurance as demanded by commercial financial institutions in analogous circumstances.

s S1.uh, Eastern Utilities Associates, the former parent of Great Bay, has guaranteed to cover up to $10 million of Great Bay's decommissioning costs associated with its ownerrhip interest in Seabrook in the event Great Bay is unable to pay its share of decommissioning costs.

As a practical matter, this guarantee means that Great Bay's proposed acceleration of decommissioning ft.nding wili result in sufficient funds being available, assuming no further contributions are made, significantly in advance of the year 2015. This guarantee provides additional assurance that sufficient decommissioning funds will be available in the event Seabrook is prematurely shut down as it approaches the end ofits operating license period.

Seventh, Great Bay will commit to providing the Director of the Office of Nuclear Reactor Regulation its quarterly financial reports, including statements ofincome, cash flow, and balance sheets as they are prepared for submission to the Securities and Exchange Commission after the close of each calendar quarter so that the NRC can track Great Bay's financial condition

and take appropriate action if warranted by the circumstances. Further, Great Bay will advise the Director immediately in writing in the event any circumstances or conditions develop that threaten Great Bey's future ability to meet its decommissioning funding obligation, or if Great Bay is in default of any month!y payment to the fund.

'l For the above reasons, Great Bay believes that under the applicable circumstances described above, its proposed acceleration of decominissioning funds govides " reasonable assurance" in accordance wit 1 the NRC's regulation that funds will be available for decomuissioning its 12.1% ownership share of the Seabrook plant. Great Bay will promptly implement the accelerated funding proposed herein, in conformance with the investment guidelines set out by the NDFC, upon a formal determination by the NRC that Great Bay's proposed acceleration of decommissioning funding will satisfy the regulatory requirements for reasonable assurance of decommissioning funding, or, attematively, after the NRC issues a permanent exemption on the basis that the accelerated funding is an acceptable attemative to the 3

methods prescribed by the regulation for providing reasonable assurance of decommissioning funding.

Respectfully submitted, GREAT Bp POWER CORPORATION

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By: /~ AAe/

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'~

/ uru Gerald Chamoff \

' Shaw, Pittman, Potts & Trowbridge 2300 N Street, N.W.

Washington, D.C. 20037 (202) 663-8032 January 29,1998

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