ML20211M681
| ML20211M681 | |
| Person / Time | |
|---|---|
| Issue date: | 09/01/1995 |
| From: | Taylor J NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | |
| Shared Package | |
| ML20008B465 | List:
|
| References | |
| FRN-62FR47588, RULE-PR-50 AF41-1-008, AF41-1-8, SECY-95-223, SECY-95-223-01, SECY-95-223-1, SECY-95-223-R, NUDOCS 9710150102 | |
| Download: ML20211M681 (25) | |
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RULEMAKING ISSUE (Information)
September 1, 1995 SECY-95-223 l
FOR:
The Comissioners O
FROM:
James M. Taylor Executive Director for Operations
SUBJECT:
NUCLEAR POWER REACTOR DECOMMISSIONING FINANCIAL ASSFtANCE REQUIREMENTS PURPOSE:
To inform the Comission of the staff's rulemaking plans for amending the nuclear power reactor decomissioning financial assurance rule.
BACKGROUND:
The staff has determined that there is a need to update NRC's financial assurance requirements for the decomissioning of nuclear power plants.
Recent studies have shown that the present decomissioning cost requirements are outdated and not based on the most recent technology.
Also, the impact of deregulation of the power generating industry has created additional uncertainty with respect to the availability of decomissioning funds. As a result, the staff is planning to make two amendments to 10 CFR 50.75 to address these concerns.
The first proposed amendment would modify the amount of the funds required to accomplish the decomissioning and the second would modify the financial mechanism required to provide the decomissioning funds when needed, along with the monitoring of such a mechanism.
plSCUSSION:
In an April 17, 1995, me.morandum to the Commission (Attachment 1), the Executive Director for Operations (EDO) informed the Comission on the status of staff activities relating to the reevaluation of reactor decomissioning costs. That memo identified five issues to be addressed by the staff in the development of the rulemaking plan on amending the nuclear power reactor decomissioning financial assurance requirements.
Contact:
NOTE: TO BE MADE PUBLICLY AVAILABLE IN Brian J. Richter, RES S WORKING DAYS FROM THE DATE OF THIS PAPER 415-6221 9710150102 971003 50 6 47588 PDR g
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Issue (1). raised in the referenced memorandum was whether the current funding requirements in i 50.75 should be amended.
The staff recommends they should.
l Issue (2) is whether maintenance costs associated with the storage of spent fuel should be considered a decommissioning expense. The staff recommends f
that.thef should not.
Issue (3) is whether decommissioning costs should address costs to clean up the site to " green field" status.
" Green field"
. status, as used_ here, refers to the cost of returning the site to its original state beyond what must be spent to remove the radioactive material. The staff
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recommends.that these costs should not be included as decommissioning costs.
Issue (4) is whether NRC regulations should have provisions for periodic 3
- reporting on a licensee's accumulation of decommissioning funds.
The staff
' recommends-these reporting requirements be required by NRC regulations..-Issue (5) is whether NRC regulations should include provisions to ad&ess;the potential for changes in the financial status of licensees due to a. change in i
ownership and its subsequent effect on decommissioning funding.
The staff recommends that this item should also be required by NRC regulations.
j With respect to the proposed action to resolve issue (1) regarding power
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reactor decommissioning cost requirements, the staff plans to-amend 10 CFR 50.75 by replacing the outdated funding amounts presently prescribed with recently revised values based on newer technology and assumptions. Also, i
. licensees would be allowed to use site-specific decommissioning cost estimates in addition to the constant dollar amounts specified in i 50.75.
This action is identified as ites C2LP-01 in.a May 10, 1995, memorandum from James M.
Taylor to the Commission, "Rulemaking Activities Under Responsibility of the l
EDO: Rulemaking~ Plan and Review Process." Since this amendment-imposes ao new requirements or burden on licensees and will not result in an increase in
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financial risk, it involves a minor policy issue. Therefore, the staff proposes that it be approved by the EDO.
To accelerate the process for a
achieving increased flexibility'for licensees afforded by this amendment, a l
separate rulemaking plan (Attachment 2) has been developed in accordance with Management _ Directive 6.3.
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For the proposed action to resolve issues (4) and (5) on power reactor decommissioning financial assurance implementation requirements, the staff i-plans to clarify decommissioning funding requirements for electrical 1
generating entities without direct &ccess to a rate base and require periodic l
reporting within i 50.75 to verify the availability of the decommissioning
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funds..The staff also proposes to allow credit for earnings during safe 4
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storage periods. This action will be added to the next revision of the May 10, 1995, planning document discussed above. This amendment represents a major policy issue that will require Commission approval.
The rulemaking plan for this amendment is provided in Attachment 3.
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mes M. T lor xecutive Director-for Operations Att3chments: As stated (3)
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Memorandum from James M. Taylor to the Cownission dated April 17, 1995
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NUCLEAR REGULATORY COMMISSION p
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,o April 17, 1995 MEMORANDUM TO:
The Chairman Commissioner Rogers Commissioner de Planque FRON:
James M. Taylor s L.
- f Executive Direc ir for Operations STATUS OF STAFF I.CTIVITIES RELATED TO DECOMMISSIONIN
SUBJECT:
RE-EVALUATION (RES-930301) (WITS-9300118)
This memorandum provides information to the Comission on the status of staff activities related to a re-evaluation of reactor decommissioning costs. By 30, 1994 (attached), the staff provided the memorandum dated November Comission with information on costs associated with returning a decommissioned site to a " green field" st dus and with the management of spent J
That memorandum also provided a status of the studies undertaken tc 4
fuel.
update the decomissioning costs used in the development of the 1988 D decomissioning rule.
In the in October 1993 (NUREG/CR-5884), and September 1994 (NUREG/CR-6714).
i memorandum, the staff indicated that after resolution of November 30, 1994, public coments on the draf t NUREG documents, a proposed rule would be forwarded to the Comission by March 1995.
The contractor has just completed resolution of public coment on the PWR.
NUREG and publication of this NUREG is anticipated within the next month.
Finalization of this NUREG was delayed to allow time for the contractor to provide support for the radiological crites la for decomissioning rulemaking.
The comment-period has closed on the draft b1R NUREG, and this NUREG is expected to be finalized by September 1995.
The staff is currently developing a rulemaking plan following Management Directive 6.3 and will provide a copy to the Comission by the end of May(1) 1995, with the staff's recomendations to address the following icsues:
whether the current funding requirements in 10 CFR 50.75 should be amended, (2) whether maintenance costs associated with the storage of spent fuel shou be considered a decommissioning expense, (3) whether decomissioning costs should address costs to clean up the site to " green field" status, (4) whether NRC regulations should have provisions for periodic repor s
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include provisions to address the potential for changes in the financial status of licensees due to a change in ownership and its subsequent effect on decommissioning funding.
Attachment:
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Rulemaking Plan for Amending Nuclear Power Reactor Decommissiening Cost Requirements I
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7 RULEMAKING PLAN FOR AMENDING NUCLEAR POWER REACTOR DECOPttISSIONING COST REQUIREMENTS 4
Lead Office:
Office of Nuclear Regulatory Research Staff
Contact:
Brian Richter, RDB Concurrences:
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-RULEMAKING PLAN FOR AMENDING NUCLEAR POWER. REACTOR DECOMISSIONING COST REQUIRENENTS 3
l-I REGULATORY PROBLEM AND ISSUES TO BE RESOLVr0 The staff has detemined that there is a need to revise NRC's financial 4
assurance requirements for the decommissioning of nuclear power plants as
'recent studies have shown that the present funding requirements for f
decommissioning are outdated and not based on the most recent technology.
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i Currant rule reauirements.
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Requirements pertaining ta financial assurance for the decommissioning of nuclear power reactors are contained in i 50.75, which among other things,-
specifies generic decomissioning costs for PWRs and BWRs of $105 million and
$135 million, respectively.(1986 $). An inflation formula is also prescribed-4 l
. (that account; for the cost of labor, energy, and waste burial) in i 50.75 for
' licensees to use in performing periodic updates of their decommissioning cost estimates.
Raoulatory problem to be resolved.
The decommissioning cost estimates derived from i 50.75 are at variance with recent studies from Battelle Pacific Northwest Laboratories (PNL).
j Consequently, the present: regulations, which require more funds. than presently -
4 estimated, may represent:an unnecessary financial burden on power reactor s
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- licensees.
f The present i 50.75 was issued in 1988 and contains 1986 dollar-adjusted i
estimates based on PNL studies completed in 1978 for the reference PWR i'
(NUREG/CR-0130) and in 1980 for the reference BWR:(NUREG/CR-0672).
4 During.the years since the initial decommissioning cost estimates were
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conducted, a number of changes in decommissioning technology and the framework for waste disposal have occurred. To provide current technical bases for decommiissioning cost analyses, the NRC staff contracted with PNL to revise the t
decommissioning cost estimates fer the reference PWR and BWR plants.(Trojan I
and WNP-2, respectively).- These will be used as part of the NRC's review of
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the' reasonableness.of licensee-submitted decommissioning and radiation dose estimates.
L The situation with respect to waste disposai has drastically _ changed since the original PNL estimates were completed. When those studies were conducted, waste disposal was not considered a problzm as it was assumed that low level P
waste could be disposed of easily and at rmers.ble costs and that spent fuel would be reprocessed.
Because of the current high cost of low level waste:
(LLW) disposal, licensees hm J.Wertaken efforts to reduce waste volume.
Based on these efforts for the reference PWR analysis, the. waste disposal volume-estimate from the original study was reduced from approximately 18,340 i
to 8250 cubic' meters _(24,000 to 10,800 cubic yards).
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'A final report for the reference PWR will be published (NUREG/CR-5884) after p
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the resolution of public coments, and a draft report is being revised to include resolution of )ublic coments for the reference BWR (NUREG/CR-6174).
The PNL results from tie analysis are presented in Table 1.
(These results may be subject to some minor adjustment when the final NUREG/CR-5884 is issued.) The first column of the tabic provides estimates of the current rule in 1986 dollars, The next two columns provide estimates based upon the existing rule but in 1993 dollars. The last two columns contain the estimates based upon the revised PNL values.
TABLE 1 DECOMMISSIONING COST ESTIMATES
- Current Rule Current Rule Revised PNL Estimates (1986 $)
Comparables (1993 $)
(1993 $)
Hanford Barnwell Hanford Barnwell PWR
$105
$154
$371
$133
$227 BWR
$135
$196
$419
$158
$305 Sources:
U.S. NRC, " Revised Analyses of Decomissioning for the Reference Pressurized Water Reactor Power Station," NUREG/CR-5884 (PNL-8742), Vols. I and 2, forthcoming.
U.S. NRC, " Revised Analyses of Decomissioning for the Reference Boiling Water Reactor Power Station," (Draft Report for Comment)
NUREG/CR-6174 (PNL-9975), Vols. I and 2, Sept.1994.
Values are expressed in millions of dollars.
The lower costs for the revised estimates arise mainly because of an expected lower volume of waste, compensating for the currently higher cost of disposal.
Also, in preparing the above referenced NUREG/CR's (0130 and 0672),.PNL performed detailed technical studies of decomissioning costs, with the information available at that time, using t'vo model facilities (the Trojan reactor for the PWR case and WNP-2 for the BWR case).
In situations where data was scarce, assumptions were used to obtain conservative but reasonable bounds on the decomissioning costs. These calculations were intended to be one-time estimates and thus parameter variability, as it might pertain to other reactor decommissioning situations, was not considered to any significant extent (e.g., use of unit cost factors for performing repetitive tasks, amount and size of piping required cutting and disposal, etc.).
Site-specific decomissioning cost estimates have also been developed since the original PNL studies were completed.
TLG Corporation has performed the 2
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majority of the decommissioning cost estimates for industry, and these estimates have been consistently higher than the PNL estimates.
L Because of the apparent disparity between many industry cost estimates, c
primarily done by TLG, and the PNL results, a detailed decommissioning cost comparison of the PNL and TLG results was performed by PNL for the reference i
.BWR used in the earlier PNL study (NOREG/CR-0672, Addendum 4; December 1990).
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The results of that comparison indicated that the PNL estimates-are about 50%
lower than the TLG ones, caused primarily by large differences in estimates of staff hours to perfom tasks. While-PNL gives reasons for the comparative F
cost differences,-ultimately they arise because of reasonable, but differing, i
- engineering judgements. Moreover, given the inherent uncertainties of:some of i
these estimates, a difference of this magnitude is considered reasonable as U
stated in SECY-91-164, a Commission paper on " Decommissioning Costs," dated
_May 31, 1991.- Additionally. the statements of consideration to the present-i 50.75 (53 FR 24018; June 27, 1988) indicated that the. intent of the i:
- financial assurance provision is not to precisely estimate decommissioning i
costs, but to ensure that the bulk of the funds-will be available for
- decommissioning.
- Further, the present. rule contains an inflation formula for licensees.to use
- in;their annual updates of the decommissioning cost estimates. - The inflation formula contains coefficients for low level waste, labor, and energy _ cost 4 adjustments.- These coeficients were changed by the revised PNL cost estimates. The new inflation formula would require a revision to the regulations. _ By placing the inflation formula and parameters in a regulatory guide,: any future changes to these coeficients would'not require a rule change, and there would be more flexiblility for licensees in updating r
decommissioning costs: estimates.
Finally,'some other factors may have contributed to confusion concerning-decommissioning costs. Many licensees include contributors'suchias the-(1)..
cost of storing spent fuel.and (2) the cost of returning the. site to its original-state beyond.what must be spent to remove the radioactive material.
Item (2) is referred to as.the " green field" cost. Such costs;are not
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included -in the PNL estimates nor. required by the NRC.
I PRELIMINARY. REGULATORY ANALYSIS
-Ootions.
Based on the above, the following options were considered for the power i
reactor decommissioning cost requirements:
-(1):
No action, except removal of the inflation formula and the
-reference to NUREG-1307; (2)
Use tha.PNL. raevaluation _results to replace the PWR and BWR fueding amounts prescribed in the current rule; (3)
Same as Option (2) but also. allow licensees to submit case-specific decommissioning cost estimates; 3
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(4)
In addition to either Option (2) or (3) inc1"de the cost of the maintenance and storage of_the spent fuel that has been l
permanently removed from the reactor vessel to be a required decossissioning cost;-and
-(5)
Require the cost of restoring the site to a " green field" conditica to be a decommissioning cost.
It should be noted that all options, including Option (1), call for removal of the inflation formula and the reference to NUREG-1307 presented in the rule as discussed under " Regulatory problem to be resolved."
l Decision critatig.
Option (1): This is the no action option, which retains the current-decommissioning cost estimating methodology, but would call-for the removal of
- the inflation _ formula-and the reference to NUREG-1307 presented in the current 3
- rule.
It provides no other reduced burden or enhanced flexibility to
- 1icensees.
Option (2): Option (2):-replaces the constant up-front required decommissioning costs with the revised PNL numbers. The annual inflation formula specified in i 50.75 to update the up-front decommissioning costs would be removed through amendment in Option (1) and not included in Option (2)'.- This formula would be included in a regulatory guide.
Option (3):- This option gives more flexibility to the licensee than Options (1) or (2) by allowing the licensee to submit a site-specific decommissioning cost analysis instead of the generic values. Option-(3) may provide additional savings to the licensee because the required level of decommissioning funding may be reduced. Alternatively, it may allow licensees tc collect more. funds to cover a higher estimate of required decommissioning funding.- Using' a site-specific cost-estimate would provide the licensee-greater flexibility.in dealing with site-specific assues.such as differences-
. in decommissioning methodology, expected waste volumes, and anticipated labor.-
. efforts to perform: specific tasks. This would be fairer to ratepayers than
- using the generic estimate provided-in the rule. Moreover, licensees would be able to use an existing PC-based, NRC-endorsed code to incorporate site-specific conditions into their cost estimate. Note however, that annual decommissioning cost updates would oe required for.the site-specific cost-estimates,_ just as they presently -are ~ for the constant dollar-amounts.
For licensee submittal of site-specific decommiss'ioning cost estimates, the n
- burden on the NRC staff may be lessened by issuance of-a regulatory guide endorsing use of the NRC code or a licensee supplied one. However, additional NRC staff resources'would-be needed for the review if many licensees elect to use the site-specific funding option for decommissioning cost estimates.
Should half of the licensees use the option, it is estimated that the NRC's
- burden would amount to 0.2 staff year.
Assuming the licensee elected to use a site-specific cust estimate and used 4
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the NRC-enoorsed code, it is estimated that the licensee burden would be about 40 hours4.62963e-4 days <br />0.0111 hours <br />6.613757e-5 weeks <br />1.522e-5 months <br /> to input and run the NRC-endorsed code.
If the licensee were required to provide NRC specified input parameters with their cost estimate, it is estimated that, for those licensee cost estimates that the NRC staff chooses to audit, the NRC staff burden to input and run the NRC-endorsed code would be about 8 hours9.259259e-5 days <br />0.00222 hours <br />1.322751e-5 weeks <br />3.044e-6 months <br />. The requirements for code use and input parameter specifications would be described in a regulatory guide.
Further, the staff intends to ask for public coment in the Federal Reaister notice on the merits of using one or both of the elements of Option (3).
Option (4): The cost of maintenance and storage of spent fuel is an operational cost that a licensee is obliged to assume based on the conditions of its license.
Licensees are currently contributing to a fund for permanent spent fuel disposal and have contracts with the Department of Energy for disposition of spent fuel.
In this regard, it can be considered not directly i
pertinent to decommissioning.
Furthermore, the requirement for providing.
financial assurance for the maintenance and storage of spent fuel after the reactor permanently ceases operation is already contained in i 50.54(bb).
Including this cost up-front would place additional burden on licensees l
because it would increase the amount of decommissioning funds for which a licensee must provide early financial assurance. As in the current rule regarding financial assurance for power reactor decommissioning, a licensee can provide this assurance through an accumulation of funds in an external reserve account.
Option (5): The requirement for providing up-front funding for restoring the i
site to " green field" would be totally new.
The most compelling argument l
-against this option is that once radioactive 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.
Therefore, it is recommended that such costs not be included as 4
decommission %g costs. Also, it should be noted that the PNL modeling for decommissioning costs did not assume restoration to " green field" as a starting objective and is not included in their current decommissioning cost results.
The preferred option, Option (3), is the same as Option (2) but also allows for site-specific decommissioning cost estimates by the licensee in addition to the constant dollar amounts specified in i 50.75 that give the minimum amounts of. decommissioning funds for which the licensee must provide assurance.
Option (3) would not require any additional action on the part t the licensee. Any change in the level of funding in the licensee's decommissioning fund would be at the licensee's discretion. These funds could either be reduced from current values to the new lower funding levels based on the NRC-endorsed code, or be based on a site-specific analysis. This would be accomplished.at no change in risk to the public's health and safety. The formula to account for cost adjustments would be removed from 5 50.75 and a revised formula would be placed in a regulatory guide. The use of this a
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revised formula is not expected at any time in the future to increase the required level of decommissioning funding above the previously required value.
Therefore, Option (3) would not constitute a backfit.
OGC'S LEGAL SUFFICIENCY ANALYSIS DEMONSTRATING THAT N0 KNOWN BASIS EXISTS FOR LEGAL OBJECTION OGC finds that the options for the rulemakings delineated in this plan are within the authority of the Commission, granted to the agency to protect the public health and safety through licensing of commercial production and utilization facilities under the Atomic Energy Act of 1954,.as amended.
Of primary concern in developing the proposed rule is the question of the backfit justifications for the proposed options.
Some portions of the proposed options for the rule may be voluntary in nature, and therefore may not involve a backfit. Other portions of the rule may require a backfit justification. The staff should be prepared to address the backfit issue as the proposed rule is developed.
While the above must be addressed as the options in this plan are pursued, there is nothing evident at this time to indicate that these legal issues will prevent successful pursuit of the course of action recommended in this rulemaking plan.
AGREEMENT STATE CONSIDERATIONS Although, Agreement States do not license power reactors, they are involved to some degree in the low level waste disposal process and associated costs.
SUPPORTING DOCUMENTS For all options, a regulatory guide containing the revised inflation values and reference to the most recent NUREG-1307 is required.
For Option (3), an expanded regulatory guide on the implemer,tation of the financial assurance methodology would be appropriate.
RESOURCES REQUIRED Resources are included in the current Five Year Plan to complete and implement the rulemaking. The offices involved are RES, NRR, and OGC.
IS IT RECOMMENDED THAT THE EDO ISSUE THE RULE IN ACCORDANCE WITH MANAGEMENT
' DIRECTIVE 9.177 Yes. Since this amendment imposes no new requirements or burden on licensees and will not result in an increase in financial risk,-it involves a minor policy issue. Therefore, the staff proposes that it be approved by the EDO.
LEAD OFFICE STAFF AND STAFF WITHIN EACH OFFICE WHO WILL BE INVOLVED RES/DRA Thomas Martin Brian Richter 6
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NRR Seymour Weiss Anthony Markley/ Robert Wood OGC Stewart Treby Bradley Jones USE OF STEERING GROUP No.
These rule amendments are not considared to be significantly complex to warrant a steering group.
ENHANCED PUBLIC FARTICIPATION No.
The impacts of up-front decomissioning funding have already been accounted for in eatlier decommissicning rulemaking. These proposed amendments are simply providing the licensees with greater flexibility of implementation.
SCHEDULE Expressed in terms of time from approval of the Rulemaking Plan.
Proposed rule to EDO, includes Regulatory Guide 6 months Public coment period ends 9 months
-Final rule to ED0 1 year
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RULEMAKING PLAN FOR AMENDING NUCLEAR POWER REACTOR DEC0tWISSIONING FINANCIAL ASSURANCE IMPLEMENTATION REQUIREMENTS-Lead Office:
Office of Nuclear. Regulatory Research Staff
Contact:
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RULEMAKING PLAN FOR AMENDING NUCLEAR POWER REACTOR DECOMMISSIONING FINANCIAL ASSURANCE
-IMPLEMENTATION REQUIREMENTS J
REGULATORY PROBLEM AND ISSUES TO BE RESOLVED The staff has determined that there is a naed to update NRC's financial assurance requirements for the decomissioning of nuclear power plants.
The impact of deregulation of the power generating industry has created potential uncertainty with respect to the availability of decommissioning funds and requires a modification of the financial mechanism required to provide the decommissioning funds when needed.
Along with the modification, a monitoring of such a mechanism would be required.
Current rule requirements.
Requirements pertaining to financial assurance for the decomissioning of nuclear power reactors are contained in 5 50.75. Under i 50.75(e)(3),.the NRC allows power reactor licensees, who are defined as " electric utilities" under 10 CFR 50.2, to set aside funds annually over the estimated life of the reactor; It was the capability to collect funds through the ratepayer that allowed these licensees to use an external sinking fund. Under i 50.75(e)(2),
the NRC requires non-electric utilities to set aside an external sinking fund coupled with a surety method or insurance.
However, with the advent of deregulation, the NRC needs to clarify the definition of " electric utility"8 These funds are to be placed in external decomissioning trust or escrow 4
accounts so as to be-reserved only for decomissioning activities.'
Under the definition of r.xternal sinking fund, power reactor licensees must accumulate all the funds estimated to be needed for decomissioning by the time their facilities are permanently shut down. Althmgh 5 50.75(e) also allows power reactor licensees to use surety bonds, leti.ers of credit, and
' Electric utility means any entity that generates or distributes electricity and which recovers the cost of this electricity, either directly or indirectly, through rates established by the entity itself or by a separate regulatory authority.
Investor-owned utilities, including generation or distribution subsidiaries, public utility districts, municipalities, rural electric cooperatives, and State and Federal agencies, including associations J
of any of the foregoing, are included within the meaning of " electric utility."
- Note: Many licensees that have established decomissioning trust funds for their power reactors are making deposits into their trust accounts both for decc;.snissioning costs as defined under i 50.2 and for other decomissioning-associated costs such as interim spent fuel management and storage and " green field" costs. The NRC allows licensees to deposit funds in the same trust account as long as the trust has sub-accounts which clearly delineate the purposes of the sub-account.
A trust or sub-account established to prcvide assurance of NRC-defined decomissioning costs should be j
prioritized to cover NRC-defined decomissioning costs before any other j
- purpose,
I prepayment to provide funding assurance, virtually all power reactor licensees use the external sinking fund method of assurance.
Regarding the financial assurance implementation requirement, the intent of the current decomissioning rule is that the assurance mechanism ensures that funds for decomissioning can be obtained when necessary with reasonable assurance. The inability of the licensee to provide such assurance can be considered in some circumstances, if cleanup is over long periods, to result in a health and safety issue and certainly is a financial risk to taxpayers (i.e., if the licensee cannot pay for decomissioning, the taxpayers would ultimately pay the bill.)
Such a finding provided the basis for the current decomissioning rule requirements. At the time the decommissionir.g rule was finalized, the Comission believed that for a regulated power reactor utility, an external reserve account collected over the estimated remaining reactor life would provide the necessary required reasonable assurance.
As a conservatism built into the rule, the NRC decided not to allow licensees to take credit for earnings on their trust funds while their reactors were in extended safe storage.
Rather, the NRC implicitly assumed that, during safe storage the rate of return on external decomissionirig trust funds would equal the decommissioning cost escalation rate.
Thus, the after-tax, after inflation earnings rate would effectively be zero.
When the NRC proniulgated the 1988 decommissioning rule, it did not require licensses to report periodically on the status of their decommissioning funds.
Rather, NRC viewed licensee compliante with the funding assurance requirements as a matter to be determined through the inspection process when necessary.
Also, the NRC respects the State Public Utility Commissions' (PUCs) and the Federal Energy Regulatory Comission's (FERC) authority to set annual contribution rates to decomissioning funds and to establish investment and other management criteria for the funds.
The PUCs and FERC also actively monitor decomissioning funds of licensees under their jurisdiction as part of their rate regulatory responsibility. Moreever, the Financial Accounting Standards Board (FASB), a national organization tht sets accounting standards, recently initiated a review of reporting of decommissioning obligations on electric utility financial statements. Although FASB has nat established a final standard, it appears that it will increase the level of detail on their financial statements.
If adopted, this standard would likely give the.NRC and others additional inforn.ation on the status of decommissioning funds.
For these reasor-the staff has not devoted significant resources to date on determ-ag decommissioning fund status.
Regulatory problem to be resolved.
For the following reasons, the staff is considering amending the rule.
Issue A:
Should we limit or supplement the method for assuring (ne availability of decommissioning funds for situations where electric utilities' access to collection of funds from ratepayers becomes restricted due to the impact of deregulation?
FERC and several State PUCs (e.g., California and Michigan) have recently initiated policy changes that wnuld, over the next several years, deregulate 2
utilities providing electric services. Although exact prediction of the structure of the future electric utility industry is difficult, there may be cases where companies providing electricity generation, including generation from nuclear power reactors, will be separated from companies providing both bulk transmission services for wholesale and distribution to the end-use customer. As these policy changes were developing, several owners of NRC-licensed power reactors established holding companies that control NRC licensees.
In view of impending 'itility deregulation, the distinction between owners and operators of nuclear power plants may become less clear.. All plant co-owners are licensees but they may only be licensed to possess the plant and its radioactive material.
Normally, only one licensee, usually the majority owner, is licensed to operate the plant. However, some utilities have established generating subsidiaries to operate the plant.
If the utility parent remains on the license, or otherwise comits through operating agreements or other mechanisms, to pay safety-related costs, including decomissioning, there shotid be no serious concern that decomissioning funds will be unavailable. However, as deregulation proceeds, both plant operators and co-owners may reduce or eliminate their links with affiliated electric utilities.
As indicated in SECY-94-280 (November 18,1994), the staff's position is that there appears to be no imediate safety concern with these reorganizations, particularly since the staff has sought and received commitments that licensees will notify the NRC when significant assets are transferred from a licensee to its non-licensed parent company.
However in the longer-term, trends in deregulation and reorganization may cause power reactor licensees to have sv. aller asset bases and reduced recourse to decommissioning cost recovery through rates approved by PUCs or FERC. This would be contraiy to the assumptions underlying the Comission's decision to allow regulated electric utilities more liberal methods (i.e., uninsured external sinking. fund) of providing decomissioning funding assurance than other NRC licensees.
Issue B:
Should the NRC allow licensees to take credit for earnings on their trust funds during an extended safe stoiage period?
Some licensees have argued that they are able to earn a positive real rate of return on their decomissioning funds during safe storage. These licensees argue that by requiring all decomissioning funds to have been collected by shutdown, the NRC may require some licensees to collect more funds from ratepayers than is absolutely necessary given the potential for accrual of interest.
If, as a result, substantially more funds than needed are collected from ratepayers while the plant was operating, this would result in an I
unwarranted expense to licensecs, their ratepayers, or stockholders. Also, inequities could be created between generations of ratepayers.
Issue C:
Should the NRC determine compliance with decomissioning funding assurance regulations by power reactor licensees through a periodic reporting requirement or through the inspection process?
The NRC has not deemed it necessary nor has monitored licensee compliance with 3
(
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l the decomissioning rule's funding assurance requirements. The evolving situation with utility financial viability has resulted in a need for the NRC to monitor more closely the availability of decomissioning funds as required.
Recently the Cajun Electric Power Cooperative, a licensee of the River Bend nuclear power plant, filed for Chapter 11 Bankruptcy.
Cajun is past due on the payment on some of its liabilities. Documents submitted by Cajun and Gulf States Utilities indicate that Cajun has made and continues to make required payments for the ultimate decomissioning of the Rivor Bend unit. Two other power reactor licensees went through Chapter 11 bankruptcy reorganization without degradation of decomissioning funding assurance Also, for the past several years Congress and various media organizations have requested the NRC to provide information on the status of decomissioning funds. The NRC has thus far been unable to honor these requests.
PRELIMINARY REGULATORY ANALYSIS Ontions.
Based on the information presented above, the options for rul: amendment considerations concerning implementation of financial assurant.< mechanisms and monitoring of the financial assurance plan can be enumerated in the following three categories. The first relates to the financial assurance implementation mechanism. The second relates to the collection of decomissioning funds by licensees during the safe storage period. The last addresses licensee monitoring or reporting to confirm compliance with financial assurance requirements.
Each of the three issues discussed above ha:: both a no-action option and one that, if adopted, would chinae existing NRC policy.
A.
Additional assurance needed due to deregulation?
(1)
No action option (i.e., retain the current financial assurance implementation mechanism);
(2)
Revise the regulations to require that electric utility reactor licensees provide assurance that the full estimated cost of decomissioning will be available through a formal guarantee mechanism if they are no longer able to set rates or are not subject to rate regulation by the PUCs or FERC (e.g., restrict the definition of " electric utility" in 550.2 to exclude reference to indirect ability to recover cost of electricity generation or
'To date, the Bankruptcy Court has considered decommissioning and other safety-related expenses for nuclear power plant licensees to be high priority expenses and has allowed them to be paid ahead of most other creditor claims.
While these experiences provide some comfort that bankruptcies are not presenting imediate problems for decomissioning fund adequacy, there is no assurance that Bankruptcy Courts will treat unregulated power generators in the same manner as regulated utilities.
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i I'4 distribution)[
J B. -
5 Allow credit for. earnings during safe storage period?
- ( 1 ) -- No' action option'(i.e., continue;to~ require all funds needed for=
p decommissioning to be_ available at-time of _ shutdown);
1
_(2)- - Allow licensees to collect decommissioning funds during the safe storage period.and/or allow licensees to assume a positive real-rate of return-on decommissioning funds _during safe storage; b
C.
Collection monitoring through reporting?
t' j,
(1)
- No action option (i.e., continue to require no periodic reporting -
.of decommissioning funding requirements, but allow for their J
+-
[
, l inspection); and.
1-l
~(2)
Implement a periodic reporting requirement.
p.-
L Decision esiteria.
E
- Option (A-1):' Continue allowing power reactor licensees to fund
[
decommissioning over the estimated remaining life of the-facility without-
[
requiring a formal guarantee mechanism for the balance of decommissioning costs 1that remains unfunded. This option,:the na action' option, would-maintain the distinction between electric utility licensees as currently
' defined and other NRC-licensed facilities and would cor.tinue to recognize the 3
j:
t-
- unique-status 'of regulated electric utilities in terms of their ability to f
-provide.long-term assurance of decommissioning-funding through the rate-making -
-process.
[
.that,Lin situations where an electric utility's_ access to collect funds from Option-(A-2):
Revise the Commission's decommissioning' regulations to require ratepayers is: limited due.to deregulation, power reac_ tor licensees provide assurance of the full estimated cost of decommissioning through a formal l
--guarantee mechanism. This could take the form of.either: _ '(a)'a guarantee of R
any.unfunded decomissioning liability with prepayment, a. surety bond, letter b
. of-credit, or other method allowed in i 50.75(e)(1);iii); (b) a parent company-L or self guarantee through passing a financial test similar in _ scope to the one l
contained in 10 CFR Part 30, Appendices A and C, to assure that a licensee has 1
c-an adequate resource base to fund decommissioning; or-(c) a certification to the NRC from the rate-making authority that all unfunded decommissioning obligations under NRC ' regulations will be collected in rates.
L
_ Licensees'must be able to obtain funds for decommissioning when.necessary, i
The inability of-.a licensee to provide decommissioning funding assurance may result.in a potential' heath and safety issue and clearly a financial risk to i
taxpayers.
For a regulated power reactor utility,Ean_ external reserve account
- z would. provide the-necessary required reasonable assurance. This reasonable assurance may cease-to exist if electric utilities are deregulated,
~
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particularly if a power reactor is shut down prematurely '. Therefore, the staff regards Option (A-2) as the recommended option because it provides additional assurance that decomissioning funds will be available along with a tiered system of choices to licensees in selecting financial assurance mechanisms that are appropriate to their circumstances.
Comparison of Options (A-1) and (A-2): The regulatory analysis for Option (A-
- 1) was considered in the 1988 decomissioning rule. Because this option proposes to continue the current methods of funding assurance, no adriitional costs or benefits should occur. Option (A-2) would impact only those licensees that were no longer able to set rates subject to a PUC or FERC.
There are presently no power reactor licensees in this category.
For those non-rate setting licensees that would attempt to qualify for a parent company or self-guarantee, the staff estimates 8 to 40 hours4.62963e-4 days <br />0.0111 hours <br />6.613757e-5 weeks <br />1.522e-5 months <br /> would be needed to complete the financial test documents. The burden on the NRC to review these documents would be approximately 2 hours2.314815e-5 days <br />5.555556e-4 hours <br />3.306878e-6 weeks <br />7.61e-7 months <br /> per licensee.
If one-third of the present licensees were in this category, the total burden on the NRC is estimated to be less than 100 staff hours.
Those licensees unable to qualify for the financial test would be required under Option (A-2) to obtain a surety bond, letter of credit, or other acceptable guarantee mechar. ism for the projected urfunded decommissioning expense balance.
If this balance is assumed to be $100 million for the typical licensee, at a cost of 1% to 2% of the amount guaranteed, the cost per affected licensee would be $1 million to O million per year.
This cost would decline as licensees' decommissioning trust funds increased over time. Total cost to all licensees would thus be $40 villion to $120 million per year to start, but would subsequently decline as decommissioning trust funds increased.
However, these costs would only be incurred in cases where licensees can no longer collect decomissioning costs through rate payments.
Option (B-1):
Continue to require all funds needed for decommissioning to be avail:ble at time of shutdown.
- For power reactor licensees who are " electric utilities" as defined in 5 50.2, including generating or operating subsidiaries, decomissioning funding assurance for prematurely shut down plants was addressed in a 1992 rulemaking (57 FR 30383; July 9,1992).
This rule amended 5 50.82 to provide that the NRC will evaluate, on a case-by-case basis, the decomissioning funding plans of licensees who have not accumulated sufficient funds because their plants were shut down prematurely.
Essentially the NRC evaluates the particular safety and financial situation of each licensee to determine if the ability of a licensee to collect funds after shutdown provides reasonable assurance that funds will be available when needed.
The staff has evaluated several funding plans on a case-by-case basis and has found that, for electric utilities that are regulated or set their own rates, this approach has worked well.
However, without rate regulation or rate-setting ability, assurance of decommissioning costs, particularly for prematurely shut down plants, may not be adequately provided under current NRC policy.
6
Option (B-2):
Allow licensees to collect decommissioning funds during the safe storage period and/or allow licensees to assume a positive real rate of return on decommissioning funds during safe storage.
With respect-to when decomissioning funds should be available, reasonable assurance is best provided by having funds collected during plant operation (Option (B-1)). However, the assumption of a zero real rate of return is too conservative. Given that historically, real (i.e. inflation-adjusted, after-tax) rates of return using U.S. Treasury issues have been around 2%, the staff proposes to allow licensees to ese this rate in their calculations (Option (B-2)).
If-rates turn out to be lower than this, 5 50.82 already provides that licensees are to adjust decomissioning funds during safe storage to reflect changes in cost estimates. Thus, there is little risk that there will be.
2 major shortfalls in decomissioning funds.
Comparison of Options (B-1) and (B-2):
Since Option (B-1) is the present situation, and the staff is proposing relief from current requirements, Option (B-2), there is no adverse impact on licensee or NRC resources.
Option'(C-1):
Continue to require no periodic reporting, but rely on the inspection process to determine power reactor licensee compliance with NRC decommissioning funding requirements.
Option (C-2):
Implement a periodic reporting requirement.
With respect to reporting requirementt, the staff recomends Option (C-2), to implement a periodic reporting requirement. The staff needs appropriate assurance that licensees'are collecting their required decommissioning funds.
}
This can be done by licensees submitting a simple statement to the NRC of information they have available regarding funds in their external account, This choice is considerably less costly to both the licensee and the NRC than relying on inspections and involves little effort.
It is intended that in the proposed rule coments be solicited from the public on which method of' providing such information to the NRC would be preferred.
Comparisons of Options (C-1) and (C-2): Because of close PVC and FERC monitoring, the staff believes that the great majority of licensees prepare and submit annual reports on decommissioning fund status to their rate regulators.
Asking licensees to submit a copy of this report to the NRC would require only minimal effort by each licensee. On the other hand, obtaining this information through the inspection process would likely be more burdensome for the NRC and for those licensees inspected each year. The staff concluded that the benefit of obtaining this information through a reporting requirement, in terms of both determining licensee' compliance with NRC decommissioning.tunding regulations and responding to Congressional and other requests, outweigh the minimal impact of the requirement and, as explained below, would be less burdensome to licensees and the NRC than relying on the NRC inspection process. Thus, the staff is proposing options for the Commission's consideration.
If the NRC imoosed a periodic reporting requirement (e.g., every 3 years) on 7
l l
the status of decomissioning funding assurance, the staff estimates that licensees would submit approximately 100 reports every 3 years, or an average of 33 reports each year.
In some cases, a report will cover more than one power reactor owned by the same licensee.
In other cases, co-owners will submit separate reports for their proportionate shares of the same reactor.
The impact on licensee resources should be minimal. As indicated above, most power reactor licensees already prepare annual reports for their PUCs or FERC containing the information that would be required in a period!c report. Also, virtually all licensees receive periodic reports from their decommissioning.
trustees giving the status of decommissioning funds. Thus, no licensee should need to expend additional preparation time in complying with an NRC reporting requirement. The impact on licensees would be in copying and transmitting information they already have, which staff estimates to be approximately 2 staff-hours per licensee or 66 staff-hours annually.
If the NRC were to use FASB information, if it becomes available, no additional impact on licensees would occur since the staff could obtain this information from publicly available sources.
Licensees that the NRC chose to inspect in any year would spend at least 5 staff-hours and, possibly, considerably more time preparing for the inspection, assisting the NRC during the inspection, and responding to the ir.spection results.
It should take approximately 1 NRC-staff hour on average to review and analyze each report. An annual summary report based on the submissions current up to that year should require approximately 8 NRC-staff hours to prepare and disseminate. No contractor effort should be needed.
Thus, total NRC staff effort should be about 41 staff-hours annually (i.e., 33 reports x 1 NRC-staff hour + 8 NRC-staff hours) for a decommissioning funding status report. Using FASB information would entail similar staff effort.
The primary option to annual reports would be for the NRC to monitor compliance through selective annual inspections r:f licensees. A reasonable annual inspection rate would be about 20%, or approximately 22 units, each year.
Although the time to review each report would be the same (i.e., I staff-hour for each report), the staff would require additional coordination and communication time with the licensee for each inspection.
If inspections were conducted from NRC headquarters by written correspondence or telephone, staff estimates an additional 1.5 staff-hours per inspection would be required for this coordination and communication time, if inspections were conducted at licensees' facilities, required coordination and communication time would likely increase on average to at least 8 staff-hours per inspection.
An annual summary report based on the annual inspections conducted would also require about 8 staff-hours to prepare and disseminate. Thus, annual NRC staff requirements for an inspection approach would be from 63 staff-hours for headquarters-based inspections to 206 staff-hours for field-based inspections.
Therefore, the staff believes that a periodic report would likely have a much smaller impact on NRC staff resources than selective inspections.
With respect to the backfit rule, the conditions under which nuclear power reactors have been regulated have changed greatly since the rule was written.
Because of the NRC responding to these changing circumstances, this action is a case of adequate protection, not requiring a backfit analysis.
Specifically with respect to Option (A-2), the lack of adequate financial assurance is a 8
potential health and safety concern and a financial risk to taxpayers.
The choice of a tiered option approach for the licensee, however, would help mitigate impacts that the use of-an Option (A-2) requirement would impose.
With respect to the-backfit-rule regarding Option (C-2), the reporting requirement is a reasonable and cost-effective mechanism to confirm compliance.
Use of Option (C-2) would be a much more efficient expenditure of effort on the part of the licensee and the NRC than selective inspections.
4
- However, to mitigate any impacts this action would impose, it is intended that coments be solicited from the public on the option to choose for-the reporting requirement..
OGC'S LEGAL SUFFICIENCY ANALYSIS DEMONSTRATING THAT NO KNOWN BASIS EXISTS FOR LEGAL OBJECTION OGC finds that the options for the rulemakings delineated in this plan a,e within the authority of the Commission, granted to the agency to protect the public health and safety through licensing of commercial production and i
utilization facilities under the Atomic Energy Act of 1954, as amended.
Of primary concern in developing the proposed rule is the question of the backfit justification for the proposed rule.
Since the pr' mary impetus for the rulemaki1g appears to be the newly developed corporate organizations, the proposal seems to be a prime candidate for justification as changes necessary to maintain "rtequate safety "
For the options addressing new corporate organizat M
.;e staff should plan to explicitly address the question of
" adequate
. tion of public health and safety" in discussing the applicabii af backfit rule.
The backfit issue must also be adoressed for the issue of periodic reporting.
It is premature at this juncture to reach a a
conclusion on whether a reporting requirement can be justified under the backfit rule..
i The staff will need to consider and get appropriate OMB approvals related to paperwork reduction activities as the financial reporting options are pursued.
As the staff pursues the options related to various corporate organizations, it will be necessary to develop strong justifications for why certain reactor owners and operators are being designated as requiring additional actions for financial assurance. These justifications will provide significant input for the backfit discussions to the extent the justifications are used to explain the basis for concluding that " adequate public health and safety" considerations satisfy backfit questions associated with this rulemaking.
While the above issues must be addressed as the-options in this plan are pursued, there is nothing evident at this time to indicate that these legal
. issues will prevent successful pursuit of the course of action recommended in this rulemaking plan.
AGREEMENT STATE CONSIDERATIONS Although Agreement States do not license power reactors, they are involved to some degree in the low level waste disposal process and associated costs.
9
I.
SUPPORTING DOCUMENTS A Regulatory Guide or Branch Technical Position will need to be published for this action.
RESOURCES REQUIRED Resources are ir.cluded in the current Five Year Plan to complete and implement the rulemaking. The offices involved are RES, NRR, and OGC.
IS IT RECOMMENDED THAT THE EDO ISSUE THE RULE IN ACCORDANCE WITH HANAGEMFNT DIRECTIVE 9.177 No.
Due to the imposition of additional requirements of reporting and providing additional assurance of decommissioning fund availability, this is regarded as more than a minor amendment and should require a notation vote on the part of the Commission.
LEAD OFFICE STAFF AND STAFF WITHIN EACH OFFICE WHO WILL BE INVOLVED RES/DRA Thomas Martin Brian Richter /Raj Auluck NRR Seymour Weiss Anthony Markley/ Robert Wood OGC Stewart Treby Bradley Jones USE OF STEERING GROUP No.
These rule amendments are not considered to be significantly complex to warrant a steering group.
EN!iANCED PUBLIC PARTICIPATION No. The impacts of up-front decommissioning funding have already been accounted for in earlier decommissioning rulemaking. These proposed amendments are simply providing the licensees with greater flexibility of implementation.
SCHEDULE Expressed in terms of time from approval of the Rulemaking Plan.
Proposed rule to EDO, includes Regulatory Guide I year Public comment period ends 18 months Final rule to ED0 2 years 10
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