ML20217A789
| ML20217A789 | |
| Person / Time | |
|---|---|
| Issue date: | 08/13/1997 |
| From: | Rathbun D NRC OFFICE OF CONGRESSIONAL AFFAIRS (OCA) |
| To: | Gingrich N, Gore A HOUSE OF REP., SENATE, PRESIDENT OF THE SENATE |
| Shared Package | |
| ML20217A782 | List: |
| References | |
| CCS, NUDOCS 9709220131 | |
| Download: ML20217A789 (2) | |
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UNITED STATES g
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NUCLEAR REGULATORY COMMISSION 2
WASHINoTON, D.C. Mt August 13, 1997 The Honorable Al Gore President of the United States Senate Washington, DC 20510
Dear Mr. Gore:
Pursuant to Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 801, the Nuclear Regulatory Commission (NRC) is submitting a final policy statement regarding the NRC's expectations for, and intended approach to, its power reactor licensees as the electric utility
. industry moves from an environment of rate regulation toward greater competition. The NRC has concerns about the possible effects that rate deregulation and disaggregation resulting from various restructuring actions involving power reactor licensees could have on the protection of public health and safety.
This final policy statement sets out policies and describes actions that are necessary, based on current regulatory requirements, to ensure that power reactor licensees remain financially qualified to ensure continued safe operation and decommissioning.
We have determined that this action is not a " major rule" as defined in 5 U.S.C. 804(2). We have confirmed this determination with the Office of Management and Budget.
Enclosed is a copy of the final policy statement which is being transmitted to the Federal Register for publication.
This final policy statement is scheduled to become effective 60 days after publication in the Federal Register.
Sincerely,
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Dennis K. Rathbun, Director Office of Congressional Affairs Enclosure-Final Policy Statement 9709223131 970813 PDR ORG NRCC
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'i UNITED STATES g
,j NUCLEAR REGULATORY COMMISSION i
WASHINGTON, D.C. 3066H001 o%...../
August 13, 1997 The Honorable Newt Gingrich Speaker of the United States House of Representatives Washington, DC 20510
Dear Mr. Gingrich:
Pursuant to Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 801, the Nuclear Regulatory Commission (NRC) is submitting a final policy statement regarding the NRC's expectations for, and intended approach to, its power reactor licensees as the electric utility industry moves from an environment of rate regulation toward greater competition. The NRC has corcerns about the possible effects that rate deregulation and disaggregation resulting from various restructuring actions involving power reactor licensees could have on the protection of public l
l health and safety.
This final policy statement sets out pclicies and describes actions that are necessary, based on current regulatory requirements, to ensure that power reactor licensees remain financially qualified to ensure continued safe operation and decommissioning.
We have determined that this action is not a " major rule" as defined in 5 U.S.C. 804(2).
We have confirmed this determination with the Office of Management and Budget.
Enclosed-is a copy of the final policy statement which is being transmitted to the Federal Register for publication. This final policy statement is scheduled to become effective 60 days after publication in the Federal Register.
Sincerely, Dennis K. Rat bun, Director Office of Congressional Affairs
Enclosure:
Final Policy Statement i
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(7590-01-P]
NUCLEAR REGULATORY COMMISSION 10 CFR Part 50 Final Policy Statement on the 4
Restructuring and Economic Deregulation of the Electric Utility Industry AGENCY:
Nuclear Regulatory Comission.
4 ACTION:
Final Policy Statement,
SUMMARY
The U. S. Nuclear Regulatory Commission (NRC) is issuing this final statement of policy regarding its expectations for, and intended approach to.
L its power reactor licensees as the electric utility industry moves from an environment of rate regulation toward greater competition.
The NRC has concerns about the possible effects that rate deregulation and disaggregation resulting from various restructuring actions involving power reactor licensees I
could have on the protection of public health and safety.
EFFECTIVE DATE: This policy statement becomes effective on [ insert a date 60 days after publication].
FOR FURTHER INFORMATION CONTACT:
Robert S. Wood. Office of Nuclear Reactor-Regulation. U.S. Nuclear Regulatory Commission. Washington. DC 20555-0001.
-telephone (301) 415-1255, e-mail RSW10nrc. gov.
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. SUPPLEMENTARY lINFORMATION:-
1. Background
On September 23, 1996, the NRC issued a draft policy statement for public comment =(61 FR 49711).
The purpose of the draft policy statement was to provide a discussion of the NRC's concerns regarding the potential safety impacts on NRC power reactor licensees which could result from the economic deregulation and restructuring of the electric utility industry and the_means by which NRC intends to address those concerns.
Because of the interest-expressed by several commenters, the NRC extended the public comment-period to February 9, 1997.
II. Summary of and Reg,onse to Comments The_NRC received-32 public comments on the draft policy statement: 14:
from electric utility licensees or their representatives, 8 from State public utility commissions (PUCs) or other State agencies, 5 from public interest
-groups. 4 from private consultants and individuals, and 1 from a labor union.
The following _ list provides the names and_ comment numbers referenced in this notice:
2
1.
Nuclear Information and Resource Service -- comment extension request only 2.
Public Service Commission of Wisconsin 3.
Engineering Applied Sciences. Inc.
4.
TV Electric 5.
Public Service Electric & Gas Company i
6.
Minnesota Department of Public Service 4
7.
Spiegel & McDiarmid on behalf of 5 publicly-owned systems 8.
IFALCO Enterprises. Inc., Citizens Action Coalition of Indiana.
inc., and Public Citizen. Inc.
i 9.
Wisconsin Energency Hunagement. Bureau of Technological Hazards 10.
Illinais Department of Nuclear Safety 11.
International Brotherhood of Eiectrical Workers 12.
Consolidated Edison Company of New York, Inc.
13.
Cer,terior Energy 14.
GPU Nuclear
- 15. Commonwealth Edison Company 16.
Vermont Department of Public Service 17.
Marilyn Elie
- 18. GE Stockholders' Alliance for a Sustainable Nuclear-Free Future
- 19. Women Speak Out for Peace and Justice 20.
New England Poaer Company 3
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21.
NucTear Information and Resource Service 22.
New Jersey Division of the Ratepayer Advocate
- 23. Southern California Edison Company e
24.
Entergy Operations. Inc 25.
Nuclear Energy Institute
- 26. Arizona Public Service Company 27.
Massachusetts Office of the Attorney General
- 28. Winston and Strawn on behalf of the Utility Decommissioning Group 29.
Dave Crawford and Diane Peterson 30.
National Rural Electric Cooperative Association 31.
Schlissel Technical Consulting. Inc.
32.
National Association of Regulatory Utility Commissioners i
General Comments:
Most commenters viewed the issuance of the draft policy statement as timely and appeared to understand the reasons for the NRC's concernt.
Some directly supported the NRC's overall approach, particularly the five actions listea in Section Ill. Commenter 14. for example, stated that these five actions should provide sufficient focus for NRC actions.
Commenter 5 believes that the NRC's current authority is sufficient to cope with any safety issues raised by rate deregulation.
Commenter 31 shares the NRC's concerns but 4
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v indicated that the draft policy statement did not address the key issue, namely, whether economic deregulation of nuclear power is compatible with the protection of public health and safety.
Other comments, particularly from electric utility licensees and their i
representatives, suggested _that sane'NRC concerns are overstated, for L
example. Commenter 4 recommended elimination of language in the policy I
statement that implies that deregulation is inevitable, Other commenters, l
suggested that the policy statement should recognize that change will occur _at L
different rates and, therefore. the NRC should indivicsally evaluate restructuring as it affects each nuclear plant.
In any case, restructuring l.
will not occur so rapidly or secretly that the NRC will not know about it.
-Others stated that many services will remain regulated and that the PUCs will act responsibly.
Further. there is no basis for the NRC to conclude-that
- licensees will'be unable to provide-adequate financial assurance for safe operations 1and decommissioning. The National Association of Regulatory Utility Commissioners (NARUC) stated that in view of the experimental nature offmany. State actions, the NRC should approach deregulation cautiously.
Finally,:several commenters asked the NRC to avoid actions that would serve as impediments to deregulation.
Commenters representing public interest groups generally thought that 5
e the draft policy statement did not go far enough in addressing safety concerns related to deregulation.
These commenters stated that the NRC should take immediate action with respect to on-line maintenance practices, extended refueling cycles and downtime during refueling, and up-front funding of decommissioning, among other issues.
Some suggested that the policy statement specifically include discussion of possible negative safety risks from economic deregulation, such as cutting corners and deferring capital investments, These commenters also urged the NRC to expand its inspection and compliance resources to counter the adverse safety impacts that these commenters believe will result from deregulation.
NRC's Resoonse to General Comments:
Regarding the issue of whether the rolicy statement should address the compatibility between economic deregulation and the protection of public health and safety, the NRC believes that economic deregulation does not preclude adequate protection of public health and safety.
However, due to the increased uncertainty engendered by state-by-state deregulation of the electric power industry, the NRC is concerned about the possible impact on the protection of public health and safety. Thus, in the draft policy statement, the NRC expressed its general concerns about the possible effects of deregulation, realizing that such concerns can be either vitiated or 6
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exacerbated depending on specific deregulation approaches that are-8 t
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In this respect, the NRC recognizes that deregulation will occur 4
i at different times, in different degrees, and in some jurisdictions, perhaps i
l-l not at all, and the final policy statement more explicitly recognizes these facts. With respect to the concerns expressed by public interest groups about the impact.of certain potential safety practices, such as on-line maintenance L
I and outage duration, the NRC has addressed, and will continue to address, L
these issues as safety issues.
This policy statement is not meant to be a substitute for regulatory remedies to specific safety problems.
l-1 Sufficiency of Current Reaulatory Framework and Incentives for Safe Doeration:
Although most commenters indicated that the NRC's current regulatory I
framework is adequate to protect public health and safety, others disagreed.
Commenter 21. for example, cited the experience with the Millstone facility and indicated that'it is "of increasing concern that NRC cannot accurately determine the extent and scope that economics plays in the reductions of reactor safety margins and the deferral of' safety significant issues." This commenter concluded that the policy statement has not adequately addressed safety hazards brought about by managerial malpractice in response to economic pressures. -Other commenters stated that the NRC must continue to ensure that its own inspection and oversight programs identify when a licensee is failing 7
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to devote sufficient resources to ensuring safe (operations, specifically as:a:
1 hf'i result'of deficiencies resulting from economic pressure.
Whennecessa'i,th'e r
NRC'sho'uld seek additiual inspection and compliance resources from Congress.
.Comenter 9 stated that the. emphasis and focus on emergency planning may lessen. Comr.ienter 10 suggested that the Nf!C's shift to performance-based and.
risk informed regulations may potentially threaten established safety margins.
This conuncater urged the NRC to establish current, vigorous probabilistic' risk assessments (PRAs) to identify the risks, which would be used _in all appropriate areas cf plant operation as a cornerstone to maintaining cost-effective safety margins in a changing environment.
Many commenters did not view deregulation as necessarily a disincentive to safe operation. They cited the inceritive to operate safely and use preventive maintenance due to the premium placed on unit availability.
Another commenter expressed the beliaf that near-term economic incentives' exist for expenditures to' maintain reliable operation. However, this incsntive decreases as a plant ages and thus'is of greater concern later in a
. plant's life.
Commenter 23 suggested that the policy statement be modified to 1
support a licensee's use of the 10 CFR 50.59-review process to determine that establishment' of an Independent System Operator-(ISO) does not involve an unreviewed safety question.
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Other comenters indicated that disincentives to safe operation should be dealt with by li m mg reactor operating cycles to 18 months and requiring at least 250 hours0.00289 days <br />0.0694 hours <br />4.133598e-4 weeks <br />9.5125e-5 months <br /> for refueling outages.
These commenters also opposed on-line maintenance.
Another comenter expressed cancern that deregulation would be a disincentive to continuing tooperation among nuclear generators, such as early reporting of safety and operationally significant events and continuation of the Institute of Nuclear Power Operations (INPO).
Additionally, the pressure f
on the NRC to reduce costs to licensees will increase, as will pressure to reduce use of the " watch list." This commenter cited the an" logy of the resultant events at the Federal Aviation Administration (FAA) when the airlines were deregulated and urged the NRC to avoid the FAA's mistakes. This commenter also suggested that incentive regulation of nuclear plants may become an alternative to full deregulation and that the NRC should study incentive prograris used at Diablo Canyon and Pilgrim.
E C e, Resnonse to Comments 6rtSufficiency oLCurrent Reauhtory Framework and incentives for Safe Goeration:
The NRC shares many of the concerns expressed by commenters about the potential impact of economic deregulation on specific safety programs and 9
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practices.
As discussed in the NRC's response to general coments, the NRC will continue to evaluate specific safety concerns or 10 CFR 50.59 review processes as part of its safety oversight programs.
For example, on-line maintenance and increased fuel burnon are being considered through the NRC's safety review and inspection oversight programs.
Reductions in manpower and training costs, and other reductions in operation and maintenance (0&M) and capital additions budgets are of continuing concern to the NRC.
The NRC is considering changes to the Senior Management Meeting process that would f;
include consideration of economic trends. However, scause the safety I
concerns that commenters expressed exist, in many cases, independently of
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N onomic deregulation. the NRC believes that these issues have been and are
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E more appropriately considered in other NRC programs. Also independently of
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economic deregt>lation, the NRC is striviny x, inake its regulatory program as efficient and effectivG as pnssiMe -- thrcugh use of risk analysis and other I
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techniques -- so that the resources of the agency and of licensees are devoted to the mut safety-significant matters.
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The NRC has extensively reviewed State perfcnnance incentive programs and does not belleve significant additional review is warranted at this time.
(See E
footnote 2 in the Policy Statement below.)
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E Faial OualificP.iODS 10 i
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Commenters. expressed varied opinions.
Although some viewed the NRC's current financial qualifications regulatory framework as sufficient. others believed that additional measures may-be necessary.
Comenter 20 indicated that the critical-question for the NRC is whether, in the absence of independent financial assurances to the NRC from its licensees, rate regulators have comitted to provide licensees with sufficient financial resources. Comenter 2 stated that if recovery of stranded costs is not allowed or is severely restricted, a large number of premature shutdowns may j
occur, further straining licensees' financial qualifications and diminishing their ability to decomission safely, In this vein. Comenter 15 urged that the NRC aggressively affirm that stranded capital costs must be recovered by utilities.
Comenter 16 indicated that those nuclear plant licensces that are no longer rate regulated should have s'ufficient buffering funds to proceed safely from operations to decomissioning, Commenter 8 stated that the NRC should shut down the _ plants of licensees with questionable financial ability to sustain: safe operations in a competitive environment and should require
-them to decomission their facilities.
Operating costs that cannot be recovered competitively should be borne by the licensee, not the ratepayer or
'the taxpayer.
Commenter 22 believes that the NRC should institute ongoing-financial qualifications reviews every 2 to 5 years for all power reactor licensees, including those that still meet the NRC's definition of " electric utility." Comenter 31 recomends that the NRC examine whether mergers and 11
joint operating agreements would dilute or weaken units and utilities that are performing well by spreading or diverting axisting management attention.
personnel, and other resources over a larger number of units.
Other commenters appeared quite optimistic that additional financial qualifications reviews would be unnecessary.
Commenter 15 suggested that the l
NRC should avoid conflicts with other agencies having jurisdiction over financial qualifications and should not condition license transfers.
Commenter 25 and others indicated that holding companies should not be subject to 10 CFR 50.80 license transfer reviews. At most, the NRC should use a
" negative consent" approac. to formation of holding companies.
This commenter also recommended that the NRC provide more explicit guidance on the "no significant hazards" criteria that are used with license amendments.
Commenter 23 asked that the NRC adopt clear criteria for approval of license transfer re:..ests and use clear, unambiguous standards for license transfers to non-utility licensees such as those offered in the Draft Standard Review Plan (SRP) on Financial Qualifications and Decommissioning Funding Assurance (61 FR 68309: December 27, 1996).
The regulations in 10 CFR 50.33(f) for non-utility licensees should be modified and should include standards for extended, unplanned outages, such as minimum am:unts for retained e6rnings, insurance, and contractual arrangements.
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Commenter 22 suggested that "securitization" may be an advantageous method of reducing stranded cost charges to customers.
Consequently, the NRC should' endorse securitization as permissible from a regulatory. ' legal., and public policy perspective.
Finally, two commenters urged the NRC to factor in Price Anderson
- obligations _in its deliberations on financial qualifications.
NRC's Resoonse to Comments on Financial Qualifications:
The NRC remains concerned about the impacts.of deregulation on its. power reactor licensees' financia' qualifications.
The NRC's existing regulatory framework under 10 CFR 50.33(f) requires financial qualifications reviews for
- those licensees that no longer meet the definition of " electric utility" at i
the operating license (OL) stage.
Paragraph 4 of 10 CFR 50.33(f) also
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provides that the NRC may seek additional'or more detailed information rasecting an applicant's'or a licensee's financial arrangements and status'47
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funds if the Commission considers this information appropriate.
The NRC will.
evaluate additional rulemaking, separate from the proposed rulemaking on financial assurance requirements for decommissioning, to determine whether enhancements to its financial qualifications requirements are necessary in anticipation that some power reactor licensees will no longer be " electric 13 1
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t utilities." However, the NRC continues to believe that its primary tool for I
evaluating and ensuring safe operations at its licensed facilities is through its inspection and enforcement programs.
In its previous experience, the NRC lo has found that there ts only an indirect relationship between financial qualifications and operat.onal safety, but it is continuing to study this 0
issue.
Although enhanced financial qualifications reviews may provide the NRC with valuable additional insights on a licensee's general qualifications to operate its facilities safely, it is not clear that enhanced financial qualifications programs by themselves would prove to be a sufficient indicator of general ability to operate a facility safely.
I With respect to the issue of decomissioning and stranded costs, many states are considering securitization as a non bypassable charge mechanism to fund tr,e recovery of deccm issioning, and other stranded costs.
The NRC believer that securitization has the potential to provide an acceptable meDod of decomissioning funding assurance, although other mechanisms that involve non-bypassable charges may provide comp;rable levels of assurance and should
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not be excluded from consideration by State authorities.
With respect _ to transfers of a license under 10 CFR 50.80, the NRC must review and approve in writing all such transfers, if such transfers teet the appr?nriate NRC standards. The NRC does not believe that Sect on 184 of the 14 h
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Atomic Energy Act of 1954, as amended, allows the NRC to approve transfers by
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" negative consent "
The NRC will continue to use its current method of evaluating a i
licensee's cash flow under 10 CFR 140.21 to determine a licensee's ability to pay deferred premiums under the Price-Anderson Act.
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- Decommissionino Fundina Assurance:
I The consensus appeared to be that the NRC should work closely with State regulators to provide for assurance of decommissioning funding, Commenter 13 i
recommended that the policy statement include a call for the continued recovery of decommissioning costs through regulated rates and tariffs in all jurisdictions. ~ Similarly. Commenter 16 s0ggested that the NRC maintain awareness of State decommissioning proceedings, monitor funding adequacy based on the estimates produced in State proceedings, and work with the host State to ensure that adequate amounts are provided in decommissioning trust funds.
Another commenter stated that additional decommissioning funding assurance 1
should be required on an ad hoc basis and that the NRC should not require accelerated decommissioning funding.
s Many State and licensee commenters asked the NRC to accept non-15 l
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bypassable charges orlother mechanisms, such as dedicated revenue streams, as proof of decommissioning funding assurance. Similarly, those'licen' sees'Whose States require such mechanisms should be co'isidered " electric utilities" under the_NRC's regulations.
Many commenters also. suggested that the NRC take a' more proactive role-with the Congress, the Executive Branch, and others in t
-order-to increase assurance of decommissioning funds.
Most public interest group commenters advocated that the NRC end " fund-as-you-go" decommissioning by requiring full, up-front decommissioning for y
unfunded balances. These commenters also asked that any stranded cost
-recovery'be applied to external decommissioning trusts and that investors bear the greater share in funding any decommissioning shortfall.
Other comments sought the elimination of internal decommissioning-funding and asked that
-decommissioning be funded at a level that would permit a third party to complete decommissioning.
u Other specific comments in the decommissioning area included (1) a recommendation that the NRC add an explicit statement;to the policy statement that would' inform licensees of the NRC's right to assess the timing and liquidity.of decommissioning funds (Commenter 3): (2) a recommendation for an
. increase in decommissioning reporting requirements and assurance that funds are not diverted to non-decommissioning uses: (3) recognitica that if charges 16
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are placed on current electricity customers while competition increases, cons'umers will avoid nuclear power and will, therefore, avoid contributing to decomissioning funding: and (4) recognition that decomissioning is not a stranded cost, because stranded costs are known and measurable costs that have already been incurred, whereas decomissioning costs are not fully known and have yet to be incurred.
NRC's Resoonse to Comments on Decommissionina Fundina Assurance:
Many of these coments parallel coments received on the Advance Notice of Proposed Rulemaking (ANPR) (61 FR 15427: April 8. 1996) that sought comment on restructuring issues as they may relate to decommissioning funding assurance. The NRC is developing a proposed rule that considers most of these comments.
With respect to the specific coment that the policy statement should indicate that NRC retains the right to assess the timing and liquidity of decommissioning funds the NRC agrees and will add such a statement.
Because of the long history of effective rate regulatory oversight and recovery of safety-related expenses through rates, in the 1988 decommissioning rule (53 FR 24018: June 27, 1988), the NRC deferred to the PUCs and the Federal Energy Regulatory Commission (FERC) on the timing and liquidity of decommissioning trust fund deposits.
However, the NRC has the authority to assess the timing and liquidity of such deposits by its licensees, and intends 17 a
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to exercise this authority with those licensees.who lose rate regulatory oversight.
Similarly.10 CFR 50.82 specifies a schedule for decomissioning l
trust fund withdrawals and the NRC will thus continue to assess the timing of such withdrawals.
Reaulatory Interface:
Most commenters support NRC's working closely with State and Federal rate regulators, although some public interest groups stated that such an effort would offer scant protection to the public (Comenter 17).
Many thought that the focus of this cooperation should be on the assurance of recovery of decommissioning costs. Some comenters believe that the NRC should take a more proactive role and that the NRC can play a special role in educating rate regulators.
Commenter 22 proposed that the NRC maintain a dialogue with all classes of ratepayers. perhaps through the National Association of State Utility Consumer Advocates.
Other suggested venues for NRC-State regulatory interface included the National Governors Association, the National Conference of State Legislatures, the American Legislative Exchange. and similar groups (Comenter 25).
Comenter 15 suggested that the NRC and NARUC convene a joint conference on stranded capital cost recovery.
As previously mentioned, several comenters indicated that the NRC should act to educate Congress and seek legislation in areas relevant to plant safety and 18
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4 restructuring, for example, a national excise tax to fund decommissioning.
Finally. Commenter 22 suggested that the NRC review the States' plans for cost recovery to ensure that, once recovered through rates. these revenues are employed for the purpose for which : hey were collected.
NRC's Resnonse to Comments on Reaulatory Interface:
The NRC believes that the policy statement adequately covered the NRC's intent to work closely with rate regulators and others as deregulation proceeds. The NRC will consider expanding contacts to include the other groups identified.
Although the NRC will testify before Congress when asked to speak on its views on deregulation as related to protecting public health and safety, the NRC is evaluating whether it should make specific recommendations on mechanisms to handle decommissioning costs and operational costs.
The NRC recognizes that Federal legislation might be of benefit in resolving these issues. However, the NRC also recognizes the vital role that States have played and will continue to play in resolving these issues and is fully prepared to work with the States through either State or federally sponsored initiatives.
Joint Ownershio:
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Virtually all who commented in this area believe that the NRC should not impose joint and several liability on co owners of nuclear plants.
- Rather, each co owner should be limited to its pro rata share of operating and decomissioning expenses.
The NRC should not look to one owner to " bail out" another owner.
Commenter 28 suggested that any effort to alter the current legal and financial relationship among co owners would retroactively alter.
and likely jeopardize, the business arrangements that underpin co ounership.
Several of those who commented on this issue also pointed to the bankruotcy laws as one way of ensuring that co owners pay their pro rata share, although Commenter 22 suggested that recent NRC experience with bankrupt licensees may not hold true in the future.
No one directly commented on the issue of non-owner operators. although 3 comments addressed this issue peripherally.
NRC's Resoonse to Comments on Joi,nt Ownershio:
The NRC recognizes that co owners and co-licensees generally divide costs and output from their facilities by using a contractually defined. pro rata share standard. The NRC has implicitly accepted this practice in the past and believes that it should continue to be the operative practice. but reserves 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 mere than de 20
minfmis shares when one or more co owners have defaulted.
The NRC is
-addressing the issue of non. owner operators separately.
Antitrust:
Most commenters viewed NRC antitrust reviews as redundant to those
- performed by other agencies, especially in view of FERC Order 888, and recommended that the NRC act to eliminate this redundancy, Commenter 22 suggested that the NRC develop a memorandum of understanding with FERC and the Securities and Exchange Commission (SEC) that would allow the NRC to rely on the judgments of these agencies about market power that do not raise issues unique to the NRC's mandate, Another commenter recommended working with the
- Department of Justice to develop a list of guidelines and criteria to evaluate requests for ownership changes, NRC's Resoonse to Comments on Antitrust:
The NRC is statutorily required under the Atomic Energy Act of 1954, as amended (AEA), in connection with an application for a license to construct or operate a facility under section 103, to evaluate an applicant's or a licensee's activities under the NRC. license to determine that these activities do not create or maintain a situation inconsistent with the antitrust laws.of 21
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the United States.
However, the NRC has begun to work with FERC. SEC and the Department of Justice to develop methods by which the NRC can minimize duplication of effort on antitrust issues, while carrying out its statutory responsibilities.
The NRC will also consider seeking legislation to eliminate
'ts review to the extent that its review duplicates the efforts of other I
federal agencies.
Other Issues:
Several commenters made observations not directly addressed in the draft policy statement.
Commenter 5 stated that nuclear plant operators in the Northeast United States are subsidizing dirtier coa 1 generation from Western l
U.S. generators.
Accordingly.-the NRC should articulate its views on the need 4
for nuclear power and its value for fuel diversity and environmental protection.
Commenter 16 recommended that the NRC urge the Department of Energy to proceed with interim spent fuel storage to reduce uncertainty and costs facing nuclear plant operators.
NRC's Resoonse to Coments on Other Issues:
The NRC does not have a role in advocating tho positions stated in these comments.
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POLICY STATEMENT I.
Basis This policy statement recognizes the changes that are occurring in the electric utility industry and the importance these changes may have for the NRC and its licensees.
The NRC's principal mission 1s to regulate the nation's civilian use of byproduct, source, and special nuclear materials,to ensure adequate protection of public health and safety, to promote the common defense and security and to protect the environment.
As part of carrying out this mission, the NRC must monitor licensee activities and any changes in licensee activities, as well as external factors that may affect the ability of individual licensees to safely operate and deconrnission licensed power production facilities.
II. Background The electric utility industry is entering a period of economic deregulation and restructuring that is intended to lead to increased competition in the industry.
Increasing competition may force integrated power systems to separate (or "disaggregate") their systems into functional l
areas.
Thus, some licensees may divest electrical generation assets from l
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transmission and distribution assets by forming separate subsidiaries or even separate companies for generation.
Disaggregation may involve utility restructuring, mergers, and corporate spinoffs that lead to changes in owners or operators of licensed power reactors and may cause some licensees.
including owners, to cease being an " electric utility" as defined in 10 CFR 50.2.1 Such changes may affect the licensing basis under which the NRC originally found a licensee to be financially qualified, either as an
" electric utility" or otherwise. to construct, operate, or own its power plant as well as to accumulate adequate funds to ensure decommissioning at the end of reactor life. (See discussion below.)
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Rate regulators have typically allowed an electric utility to recover prudently incurred costs of generating, transmitting, and distributing electric services.
Consequently, in 1984, the NRC eliminated financial qualifications reviews at the OL stage for those licensees that met the definition of " electric utility" in 10 CFR 50.2 (49 FR 35747: September 12.
1984). The NRC based this decision on the assumption that "the rate process
! Section 50.2 defines " electric utility" as "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 and distribution subsidiaries, public utility districts, municipalities, rural electric cooperatives. and State and Federal agencies, including associations of any of the foregoin". are included within the meaning of ' electric utility.'"
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assures that funds needed for safe operation will be made available to regulated electric utilities" (49 FR 35747, at 35750).
However, the NRC recognized that financial qualifications reviews for OL applicants might be appropriate in particular cases in which, for example, "the local public utility comission will not allow the total cost of operating the facility to be recovered through rates" (49 FR 35747, at 35751).
The Comission also has expressed concern about various State proposals to implement economic performance incentive programs.'
In its 1988 decomissioning rule, the NRC again distinguished between electric utilities and other licensees by allowing " electric utilities" to accumulate funds for decomissioning over the remaining terms of their operating licenses.
NRC regulations require its other licensees (with the added exception of State and Federal gove'rnment licensees of certain facilities) to provide funding assurance for the full estimated cost of decomissioning, either through full up-front funding or by some allowable guarantee or surety mechanism.
2 See Possible Safety Impacts of Economic Performance incentives: Final Policy Statement (56 FR 33945: July 24, 1991), for the NRC's concerns relating to State economic performance incentive standards and programs.
The NRC understands that States instituted many of these programs as a means of encouraging electric utilities to lower electric rates to consumers.
As States deregulate electric utilities under their jurisdictions, these economic performance incentive programs ultimately may be replaced by full market competition.
25
l i
A discussion of the NRC review process is contained in two draft Standard Review Plans (SRPs) that the NRC issued for coment: NUREG'
" Standard Review Plan on Power Reactor Licensee Financial Qualifications and Decommissioning Funding Assurance" (January 1997); and NUREG 1574. " Standard l
Review Plan on Antitrust" (January 1997).
In addition, the NRC issued an
- Administrative Letter on June 21. 1996, that informed power reactor licensees i
of their ongoing responsibility to inform and obtain advance approval from-the
- NRC for any changes that would constitute a transfer of the license, directly or indirectly through transfer of control of the NRC license to any person pursuant to 10 CFR 50.80. This administrative letter also reminded addressees 0f their responsibility to ensure that information regarding a licensee's financial qualifications and decommissioning funding assurance that may have a significant implication for public health and safety is promptly reported to the NRC.
III. Specific Policies The NRC is concerned abvut the potential impact of utility restructuring on public health and safety..The NRC has not found a consistent-relationship k
between a licensee's financial health and general indicators of safety such as the NRC's Systematic Assessment of Licensee Performance. The NRC has traditionally relied on its inspection process to indicate when safety 26
--.---. -..L-...-.
performance has begun to show adverse trends. On the basis of inspection proghamresults,theNRCcantakeappropriateaction, including, ultimately, plant shutdown. to protact public health and safety.
However, if a plant is permanently shut down, that plant's licensee (s) may no longer have access to adequate revenues or other sources of funds for decommissioning the facility.
If rate deregulation and organizational divestiture occur concurrently with the shutdown of a nuclear plant either by NRC action or by a licensee's economic decision, that licensee may not be able to provide adequate assurance of decommissioning funds.
Thus. the NRC believes that its concerns about deregulation and restructuring lie in the areas of adequacy of decommissioning funds and the potential effect that economic deregulation may have on operational safety.
As the electric utility industry moves from an environment-of substantial economic regulation to one of increased competition, the NRC is concerned about the pace of restructuring and rate deregulation.
Approval.of organizational and rate deregulation changes may occur rapidly.
The pace and degree of such changes could affect the factual underpinnings of the NRC's previous conclusions that power reactor licensees have access to adequate
. funds for operations and can reliably accumulata adequate funds for decomissioning over the operating lives of their facilities.
For example, rate deregulation could create situations in which a licensee that previously 27
met the NRC's definition of an " electric utility" under 10 CFR 50.2 may. at some point, no longer qualify for such status. At that point, the'NRC'will
- require licensees to submit proof pursuant to 10 CFR 50.33(f)(4) that they remain financially qualified and will require them to meet the more stringent decommissioning funding assurance requirements of 10 CFR 50.75 that are applicable to non electric utilities.
Although new and unique restructuring proposals will necessarily involve case by-case reviews by the NRC. the NRC staff will advise the Commission of such proposals so that the Commission will have the option of exercising direct oversight of such reviews to maintain consistent NRC policy toward new entities. As patterns of restructuring begin to emerge, the NRC will consider standardizing its framework further to streamline, where possible, its case-by case review process. The NRC has considered, and will continue to consider mergers and the outright sales'of facilities, or portions of facilities, to require NRC notification and prior approval in accordance with 10 CFR 50.80 in order to ensure that the transferee or licensee is appropriately qualified.
For example, in certain merger situations, the NRC determines whether the surviving organization will remain an " electric utility" as defined in 10 CFR 50.2.
If a licenJe applicant or a licensee fails to meet this definition, the NRC will seek additional assurance of financial qualifications to operate and i
dec minssion the facility pursuant to 10 CFR 50.33(f) and 50.75 and as 28
~
discussed in more detail in its SRP on these subjects.
The NRC has also advised licensees that the formation of holding companies requires notification and approval pursuant to 10 CFR 50.80.
In consideration of these concerns, the NRC will evaluate deregulation and restructuring activities as they evolve.
Recognizing that the electric utility industry is likely to undergo great change, as restructuring progresses, the NRC will continue to evaluate the need for regulatory or policy changes to meet the effects of deregulation.
The NRC will take all appropriate actions to carry out its mission to protect the health and safety of the public and, to the extent of its statutory mandate, to ensure consistency with federal antitrust laws.
The NRC intends to implement policies and take action as described in this policy statement to ensure that its power reactor licensees remain financially qualified to ensure continued safe operations and decommissioning.
In summary, the NRC will--
Continue to conduct its financial qualifications, decommissioning e
funding and antitrust reviews as described in the SRPs developed in concert with this policy statement:
Identify all owners, indirect as well as direct, of nuclear power 29
plants:
Establish and maintain working relationships with State and Federal rate regulators; and Reevaluate its regd ations for their adequacy to address changes e
resulting from rate deregulation.
A. Adecuacy of Current Reculatory Framwork The NRC believes that its regu'latory framework is gcnerally sufficient, at this time, to address the restructurings and reorganizations that will likely arise as a result of electric utility deregulation.
Absent changes to the NRC's regulatory scheme, the NRC's review process will follow the current framework.
The NRC believes that its financial qualifications requirements are sufficiently broad as to provide an adequate framework to adequately review new or unique situations that are not explici'ly covered in 10 CFR 50.33(f) and Appendix C to Part 50, for financial qualifications, and in 10 CFR 50.75 for decommissioning funding assurance.
However, in order to remove any ambiguities in its regulations and to address those situations that may not be adequately covered under current regulations, the NRC is considering rulemaking to revise its decommissioning funding assurance requirements, as described in Section I!!.E.
The NRC is evaluating whether modification to its financial qualifications regulations are warranted.
30
I B. NRC Resoonsibilities Vis a-Vis State and Federal Economic Reaulator,5 t
The NRC has recognized the primary role that State and Federal economic regulators have served, and in many cases will continue to serve. in settina rates that include appropriate levels of furs.ng for safe operation and decommissioning. For example, the preamble to the 1988 decommissioning rule contained the following statement: "The rule, and the NRC's implementation of it, does not deal with financial ratemaking issues such as rate of fund collection, procedures for fund collection, cost to ratepayers. taxation effects, equitability between early and late ratepayers, accounting procedures, ratepayer versus stockholder considerations, responsiveness to char ge and other similar concerns....These matters are outside NRC's jurisdiction and are the responsibility of the State PUCs and [the Federal Energy Regulatory Commission] FERC" (53 FR 24018; June 27, 1988, at 24038).
i Notwithstanding the primary role of economic regulators in rate matters.
the NRC has authority under the AEA to take actions that may affect a licensee's financial situation when these actions are warranted to protect public health and safety. To date, the NRC has found no significant instances in which State or Federal rate regulation has 'ed to disallowance of funds for safety-related operational and decommissioning expenses.
Some rate regulatcrs may have chosen to reduce allowable profit margins through rate disallowances.
31
t or 1scensees have for other reasons encountered financial difficulty.
4 In order for the NRC to make its 53fety views known and to encourage l
l rate regulators to continue their practi.ce of allowing adequate expenditures I
r for nuclear plant safety-as electric' utilities face deregulation, the NRC has taken a numbee of actions to increase cooperation with State and Federal rate and-financial regulators to promote dialogue and minimize the possibility of i
- rate deregulation or other actions that would have an adverse effect on safety. The NRC intends to continue to work and consult with the State PUCs.
individual.ly or through NARUC. and with FERC and other Federal agencies to coordinate activities and exchange information.
However, the Commission also reserves the flexibility to take appropriate steps in order to assure a i
licensee's adequate accumulation of decommissioning-funds, C. Co owner Division of Rosoonsibility l
1 Many of the NRC's power reactor licensees own their plants jointly with other unrelated organizations. Although some co owners may only be authorized to have an ownership interest in the nuclear facility and its
~
nuclear m6terial. and not to operate it. the NRC views all co owners as co--
g licensees who are responsible for complying with t'ne terms of their licenses.
t-
.See PubMc Service Corrpany of Indf ana. Inc. [ Marble Hill Nuclear Generating 32 L
t-y-n-r-e.-
iei-ww,v.--<',m,4-
,-,,,,v,+w-,,.w-,,w-.4*w-r,,,
m,--.,.--msw-,-
... ~
me,m,x,,,-*w,,
..,-+w,--
,,rp-,
,.w,m-+ep,9-we-,e,,.
Station, Units 1 and 2). Al.AB 459, 7 NRC 179. 200 201 (1978). The NRC is concerned about the effects on the availability of operating and decommissioning funds, and about the division of responsibility for operating and decommissioning funds, when co owners file for bankruptcy or otherwise encounter financial difficulty.3 The NRC recognizes that co owners and co-licensees general'.y divide costs and output from their-facilities using a contractually defined, pro rata share standard. The NRC has implicitly accepted this practice in the past and believes that it should continue to be the operative practice, but reserves 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 de minfmis shares when one or more co owners have
-defaulted.
8 The NRC has had experience with three licensees who have had much greater than de minimis shares of nuclear power plants and who filed under Chapter 11 of the U.S. Bankruptcy Code: Public Service Company of New Hampshire (PSNH), a co owner and operator of the Seabrook plant: El Paso Electric Company (EPEC), a co-owner of the Palo Verde plant: andCajun Eicctric Power Cooperative (Cajun), a co owner of the River Bend plant, Both PSNH and EPEC continued their pro rata contributions for the operating and decomissioning expenses for their plants and successfully emerged from bankruptcy. Cajun remains-in bankruptcy.
33
4 D. Financial Qualifications Reviews The NRC believes that the existing regulatory framework contained in 10 CfR 50.33(f) and in the guidance in 10 CFR Part 50, Appendix C. is generally sufficient at this time to provide reasonable assurance of the financial qualifications of both electric utility and non electric utility applicants and licensees under the various ownership arrangements of which the I
staff is currently aware.
Licensees that remain " electric utilities" will not be subject to NRC financial qualif.1 cations review. Other than to determine.
that such licensees.- in fact, remain " electric utilities." -However, the NRC is evaluating the need to develop additional requirements to ensure against potential dilution of the capability for safe. operation and decommissioning that could arise from rate deregulation and restructuring.
Section 184 of the AEA and 10 CFR 50.80 provide that no license shall be transferred. directly or indirectly, through transfer of control of the license, unless the Commission consents in writing.
The NRC will continue to review transfers to determine their potential impact on the licensee's ability both to mait.'. in adequate _ technical qualifications and organizational control and authority over the_ facility _ and to provide adequate. funds for safe operation and decommissioning. Such consent is clearly required.when a l
I corporate entity ' seeks to transfer a license it holds to a different corporate 34 4
I
.r-w -, v w w-u + Ne w m -s <e r-
.e-.---
~,n,m
,.,,,., e v w.w
-,,--v
..r.--an,
,.,.n.--,w-,.,--
--e se. -
--.-.-,-.wv,...,
,~.a
-*,s e
m.,-,
m.-,we..v-.,
e.. e entity. See Long Island Lfghting Co. [Shoreham Nuclear Power Station, Unit 1)
CL1 92-4, 35 NRC 69 (1992).
The NRC staff has advised licensees that agency consent must be sought and obtained under 10 CFR 50.80 for the formation of a t
i new holding company over an existing licensee.
Other types of transactions, including where non licensee organizations are proposed to have some degree of involvement in the management or operation of the plant, have been considered 1
l by the staff on a case by-case basis to determine whether 10 CFR 50.80 consent is required.
The NRC is evaluating what types of transfers or restructurings should be subject to 10 CFR 50.80 review.
The NRC staff will inform the Commission of unique or unusual licensee restructuring actions.
E. Decommissionina Fundina Assurance Reviews t
The NRC believes that the existing decommissioning funding assurance provisions in 10 CFR 50.75 generally provide an adequate regulatory basis for i
existing and possible new licensees to provide reasonable assurance of i
decommissioning funds.
However, to examine this and other issues related to decommissioning funding assurance in anticipation of rate deregulation, the 4
NRC published an ANPR (61 FR 15427: April 8, 1996).
The NRC is considering a proposed rulemaking developed in response to the comments received on the ANPR.
In addition, the NRC wishes to emphasize that it retains the right to assess the timing of decommissioning trust fund deposits and withdrawals and 35 J
-~
s.--.
.-w
_____.m r
i the liquidity of decommissioning funds for those licensees that no longer have 1
rate regulatory oversight and insofar as such timing would potentially impact the protection of public health and safety.
l F.
Antitrust Reviews 1
The NRC is statutorily required under the AEA in connection with an application for a license to construct or operate a facility under section 103, to evaluate an applicant's or a licensee's activities under the NRC license to determine whether these activities create or maintain a situation inconsistent with the antitrust laws of the United States. However, the NRC will explore with FERC. SEC, and the Department of Justice methods by which the NRC can minimize duplication of effort on antitrust issues, while F
maintaining its statutory responsibilities.
The NRC will consider seeking legislation eliminating its review mandate to the extent that NRC reviews are duplicated by other agencies.
The NRC anticipates that competitive reviews over the next 5 to 10 years will arise primarily from changes in control of-licensed facilities.- The regulatory review addressing transfer of control of licenses under 10 CFR 50.80 will be used to determine whether new owners or operators will te subject to an NRC review with respect to antitrust matters.
36
i SKAt.L BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT In accordance with the Small Business Regulatory Enforcement Act of 1996, the NRC has determined that this action is not a " major rule" and has verified thiu determination with the Office of Information and Regulatory Affairs, Office of Management and Budget.
ELECTRONIC ACCESS The NRC electronic Bulletin Board System (BBS) cn FedWorld may be l
accessed by using a personal computer, a modem. and one of the commonly available communications software packages, or directly by way of Internet.
Background documents on the final policy statement are also available, as 5
practical, for d unloading and viewing on the bulletin board.
If using ; personal computer and modem, the NRC subsystem on FedWorld can be accessed directly by dialing the toll-free number (800) 303-9672.
Communication software parameters should be set as follows: parity to none, data bits to 8. and stop oits to 1 (N.8.1).
Using ANS! or VT-100 terminal emulation, the NRC subsystem can then be accessed by selecting the
" Rules Menu" option from the "NRC Main Menu." Many NRC subsystems and databases also have a " Help /Information Center" option that is tailored to the particular subsystem.
f 37
The NRC subsystem on FedWorld can also be accessed bj a dire'.' Jial telephone number for the main FedWorld BBS, (703) 321-3339, or Ly using'Telnet via Internet: fedworld. gov.
If using (703) 321-3339 to contact FedWorld, the NRC subsystem will be accessed from the main FedWorld menu by selecting the
" Regulatory, Government Administration and State Systems " then selecting
" Regulatory Information Mail." At that point, a menu will be displayed that has an option "U.S. Nuclear Regulatory Commission," which will take you to the NRC on-line main menu. The NRC On line area also can be accessed directly by.
typing "/go nrc" at c. 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 on line main menu.
However. if cou access NRC at FedWorld by using NRC's toll free number, you will have full access to all NRC systems, but you will not have access to the main FedWorld system If you contact FedWorld 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 downloaded 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.
There is a 15 minute time limit for FTP access, 38
,,a l
Although FedWorld can also be accessed through the World Wide Web, like FTP, that mode only provides access for downloading files and does not display the NRC Rules menu.
For more information on NRC bulletin boards call Mr. Arthur Davis, Systems Integration and Development Branch, NRC, Washington, DC 20555-0001, telephone (301) 415 5780: e mail AXD3@nrc. gov.
Dated at Rockville, Maryland, this /3 (~A day of August, 1997.
For the Nuclear Regulatory Commission.
L dG John (?'. Hoyle,/
Secedtary of the Commission.
39