ML20203G225
| ML20203G225 | |
| Person / Time | |
|---|---|
| Issue date: | 11/28/1997 |
| From: | Callan L NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | |
| References | |
| SECY-97-274, SECY-97-274-01, SECY-97-274-1, SECY-97-274-R, NUDOCS 9803020237 | |
| Download: ML20203G225 (7) | |
Text
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November 28, 1997 POLICY ISSUE --
SECY-97-274 EOR:
TheCommiggption Vote)
FROM: L. Joseph Callan Exveutive Director for Operations
SUBJECT:
RESPONSE ' ) REQUEST FOR RECONSIDERATION OR DELAY OF IMPLEMENTATION OF THE PORTION OF THE FINAL POLICY STATEMENT ON RESTRUCTURING AND ECONOMIC DEREGULATION OF THE ELECTRIC UTILITY INDUSTRY ADDRESSING JOINT AND SEVERAL LIABILITY OF OWNERS PURPOSE:
To advise the Commission of the staff's recommendation that the Commission deny the request for reconsideration or delay of implementation of the Commission's Final Policy Statement.
DISCUSSION:
By letter dated October 14,1997, a group of eight municipal and cooperatively owned electric utility systems' (" Publicly Owned Systems") filed the " Publicly Owned Systems' Request for Reconsideration or, in the Alternative, Motion to Delay Effectiveness of a Portion of the Final Policy Statement in Order to Receive Additional Public Comment." The request seeks reconsideration of the portion of the Final Policy Statement which addresses joint and several liability of co-owners and co-licensees of nuclear power plants.
Contacts: Robert S. Wood, NRR NOTE: TO BE MADE PUBLICLY AVAILABLE WEN 415-1255 Tile FINAL SRM IS MADE AVAILABLE Susan L. Uttal, OGC 415-1582
' The group is composed of the American Public Power Association, the Connecticut Municipal Electric Energy Cooperative, the North Carolina Municipal Power Agency No.1, the New Hampshire Electric Cooperative, Inc., the Ho! yoke (MA) Gas & Electric Department, the City of Riverside (CA) Electric Department, the City of Anaheim (CA) Public Utilities Department, and the City of Azusa (CA) Electric Department.
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l The Commissioners 2-The Final Policy Statement acknowledged the NRC's implicit acceptance of the pro rata division of costs and output between co-owners and co-licensees, which is the standard practice of the !
industry. The Final Policy Statement went on to note that the NRC believes that pro rata l division should remain the operative practice, but reserved the right, "in highly unusual situations where adequate protection of public health and safety would be compromised if such action were not taken, to consider imposing joint and several liability on co-owners of more than do minimis shares when one or more co owners have defaulted."
The Publicly Owned Systems' request for reconsideration of that portion of the Policy Statement is based on four objections:
. First, the imposition of joint and several liability would upset the reasonable expectations of co-owners and investors because it is contrary to the contractual basis of many joint ownership arrangements, which are based on a pro rata allocation of liability for costs.
. Second, the possible imposition of joint and several liability generates confusion regarding the scope of an individual owner's liability, in that it creates the possibility that an owner of a smail percentage of a plant could be liable for a much larger share of operating and decommissioning costs. The Policy Statement does not define do minimis or enunciate a standard for application of joint and severalliability. Such uncertainty, it is asserted, could adversely affect an owner's ability to raise capitel. In addition, the Policy Statement appears to be inconsistent with the Commission's
" Proposed Rule on Financial Assurance Requirements for Decommissioning Nuclear Power Plants," 62 Fed. Reg. 47588 [1997), in which the Commiesion noted the difficulties in attempting to impose joint and several liability for decommissioning.
. Third, the Publicly Owned Systems argue that the imposition of joint and several liability raises substantiallegalissues: whether it is a violation of the constitutional prohibitions against impairment of contracts, abrogation of due process, or constitutes an unlawful "taking"; whether it is within the scope of the Commission's statutory authority under the Atomic Energy Act ; and whether it is arbitrary, capricious, and an abuse of discretion.
. Fourth, it is asserted that the creation of the uncertainty regarding liability appears to be unnecessary and unsettling in the present climate of restructuring and may complicate the transfer of nuclear generation assets, and the Commission should defer implementation untilit receives comments regarding the "real-world" implications of the policy.
The Publicly Owned Systems also request, in the attemative, an additional 90-day period for public comment on the issue of imposition of joint and severalliability.
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1, The Commissioners 3-Issues raised by the Publicly Owned Systems were considered by the staf f in draf ting the Final Policy Statement. The same or similar issues were raised by commenters responding to the Draft Policy Statement. As indicated in the supplementary information accompanying the Final Policy Statement, virtually all who commented on the issue of joint and several liability were opposed to its imposition on co owners of licensed facilities and raised the issues of the effect on business arrangements and impairment of contracts. Nonetheless, the Commission determined to leave open the possibility that joint and severalliability might be imposed, should unusual circumstances deleteriously affecting public health and safety be presented.
The Final Policy Statement did not create a binding rule or regulation and did not alter any private contractual arrangements. A statement of policy creates no binding regulation or rule for licensees. See Limarick Ecology Action vs. NRC,869 F. 2d 719,736 (1989). It is only binding on the cgency. Moreover, the Policy Statement expressed no change in prior NRC practice. Soo Public Sorvico Company of New Hampshiro (Seabrook Station, Units 1 and 2),
CLl 8810,28 NRC 573 (1988), [Due to bankruptcy of the largest joint owner of the facility, the Commission required two other co owners / licensees to be jointly and severally liable during the pendency of the license for low power testing for any deficiency in the amount of decommissioning funding assurance).
In addition, the Final Policy Statement did not state that the NRC will abrogate contractual relations creating pro-rata responsibilities or interfere with a pro-rata division of responsibility.
In fact, the Final Policy Statement acknowledged that pro-rata division of responsibility is the norm, and should remain the operative stindard.
The Final Policy Statement is fully consistent with the " Proposed Rule on Financial Assurance Requirements for Decommissioning Nuclear Power Plants,"(62 Fed. Reg. 47588 (September 10,1997]), wherein the NRC noted that the imposition of joint and several liability for decommissioning costs may not be necessary because the Commission considers the level of financial assurance for decommissioning to be adequate. Thus, the NRC saw "no need to impose an additional regulatory obligation of joint liability on co-owners or co licensees,"
(62 Fed. Reg. 47588 at 47594).8 Similarly, the Final Policy Statement does not impose any regulatpry obligation on licensees.
8 If the Publicly Owned Systems, nevertheless, believe there is some inconsistency between the proposed rule and the Final Policy Statement, they may offer such comment with respect to the proposed rule.
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The Commissioners -4 The comment period for the draft policy statement, which was open from September 23,1996 i until February 9,1997, provided ample time for comment on all issues raised. It is unlikely that l' an additional comment period would provide any information or insight on this issue not
- previously brought to the attention of the Commission, t
i COORDINATION:
This paper and the attached response to the submittal of the Publicly Owned Systems were jointly developed by the Office of Nuclear Reactor Regulation and the Office of the General Counsel.
RECOMMENDATION:
i That the Commission respond to the Publicly Owned Systems' request by denying it in toto, as presented in the attached letter to Gary J. Newell, i
L. Jospph Callan :
l- Exer 90ve Director for Operations
Attachment:
Letter to Gary J. Newell s Commissioners' comments or consent should be provided directly to the Office of the Secretary by Coli Tuesday, December 16, 1997
- Commission Staff Office comments, if any, should be submitted to the conmiissioners NLT Tuesday, December 9, 1997, with an information copy to the Office of the Secretary. If the paper is of such a nature that it requires additional review d
and comment, the Commissioners and the Secretariat should be apprised of when comments may be expected.
DISTRIBUTION:
Commissioners
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l Attachment 1
I date ;
I l
Gary J. Newell, Esq.
Spiegel & McDiarmid ;
1350 New York Avenue, N. W.
Washington, D. C. 20005-4798 RE: FINAL POLICY STATEMENT ON THE RESTRUCTURING AND ECONOMIC DEREGULATION OF THE ELECTRIC UTILITY INDUSTRY Deat Mr. Newell:
By letter dated October 14,1997, you filed " Publicly Owned Systems' Request for Reconsideration or, in the Alternative, Motion to Delay Effectiveness of a Portion of the Final Policy Statement in Order to Receive Additional Public Comment", on behalf of eight municipal and cooperatively owned electric utility systems (" Publicly Owned Systems"). The Publicly Owned Systems requested that the Commission reconsider that portion of the Final Policy Statement which addressed joint and severalliability of co-owners / licensees of nuclear plants.
For the following reasons, the Commission declines to reconsider or delay the effectiveness of that portion of the Final Policy Statement.
The Final Policy Statement did not create a binding rule or regulation it in no way altered any private contractual arrangements. Moreover, it expressed no change in prior NRC practice it set forth a view that the NRC may, under unusual, specific circumstances, consider imposing joint and several responsibility on co-owners / licensees of nuclear plants. A statement of policy creates no binding regulation or rule for licensees. See Umerick Ecology Action v. NRC, 869 F. 2d 719,736 (3rd Cir.1989). Thus, no rights or obligations of licensees are affected by the policy statement.
In addition, the NRC has not stated that it will abrogate contractual relations creating pro mta responsibilities or interfere with a pro-rata division of responsibility. In fact, the NRC acknowledged that pro-mta division of responsibility is the norm, and should remain the operative standard. Rather, the NRC expressed the view that in extraordinary circumstances, where public health and safety is adversely affected, it would consider imposing joint and several responsibility. This does not represent a departure from previous Commission practice.
See, e.g., Public Service Company of New Hampshire (Seabrook Station, Units 1 and 2),
CLl 8810,28 NRC 573 (1988),
The Final Policy Statement is fully consistent with the " Proposed Rule on Financial Assurance Requirements for Decommissioning Nuclear Power Plants", (62 Fed. Reg. 47588 (September 10,1997)), wherein the NRC noted that the impci' tion of joint and several liability for decommissioning costs may not be necessar; Secause the ommission considers the level of financial assurance for decommissioning to be 3 dequr* i us the NRC saw "no need to impose an additional regulatory obligation of joint liabil. grp owners or co-licensees."
62 Fed, Reg. 47588 at 47594. If the Publicly Owned Uthao, nevertheless, believe there is some inconsistency between the proposed rule and the Final Policy Statement, they may offer
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I Gary J. Newell 2-such comment with respect to the proposed rule. The Final Policy Statement does not impose I any regulatory obligation on licensees. As stated above, it is a statement of policy, not a binding rule. It merely leaves open the possibility that under certain unusual circumstances, the l NRC may consider imposing joint and several liability.
The Commission sees no need to delay the effectiveness of that portion of the policy statement pending additional comment. The comment period for the draft policy statement, which was open from September 23,1996 until February 9,1997, provided ample time for comment on all issues raised. It is unlikely that an additional comment period would providn information or insight on this issue not previously brought to the attention of the Commisshtt For the foregoing reasons, the Commission declines to reconsider or delay implementation of the Final Policy Statement.
Sincerely, John C. Hoyle, Secretary