ML21200A229

Reply to Exelons Answer Opposing Petition of Edf Inc. for Leave to Intervene and Request a Hearing

ML21200A229
Person / Time
Site:	Calvert Cliffs, Dresden, Peach Bottom, Salem, Nine Mile Point, Byron, Braidwood, Limerick, Ginna, Clinton, Quad Cities, Zion, FitzPatrick, LaSalle, Crane
Issue date:	07/19/2021
From:	Ross P, Shaw N EDF, Foley Hoag LLP
To:	NRC/OCM
SECY RAS
References
Exelon Generation Company, LLC, RAS 56180
Download: ML21200A229 (13)

Text

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of EXELON GENERATION COMPANY, LLC; EXELON CORPORATION; EXELON FITZPATRICK, LLC; NINE MILE POINT NUCLEAR STATION, LLC; R. E. GINNA NUCLEAR POWER PLANT, LLC; and CALVERT CLIFFS NUCLEAR POWER PLANT, LLC (Calvert Cliffs Nuclear Power Plant, Units 1 and 2; Nine Mile Point Nuclear Station, Units 1 and 2; R. E. Ginna Nuclear Power Plant)

(Consideration of Approval of Transfer of Licenses and Conforming Amendments)

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Docket Nos.

50-317, 50-318, 50-220, 50-410, 72-1036, 50-244, and 72-67 REPLY TO EXELONS ANSWER OPPOSING PETITION OF EDF INC. FOR LEAVE TO INTERVENE AND REQUEST FOR A HEARING I.

Introduction In accordance with the 10 C.F.R. § 2.309, EDF Inc. (EDF) hereby submits this reply to Exelons Answer Opposing the Petition1 of EDF Inc. for Leave to Intervene and Request for a Hearing, filed on July 12, 2021 in the above-captioned proceeding (Answer).2 The Answer was submitted by Exelon Generation Company, LLC (Exelon Generation), on behalf of itself and Exelon Corporation, Exelon FitzPatrick, LLC, Nine Mile Point Nuclear Station, LLC, R.E. Ginna Nuclear Power Plant, LLC, and Calvert Cliffs Nuclear Power Plant, LLC (collectively, Exelon or Applicants).

1 Petition of EDF Inc. for Leave to Intervene and Request for a Hearing (June 14, 2021) (ML21165A295) (Petition).

2 Exelons Answer Opposing the Petition of EDF Inc. for Leave to Intervene and Request for a Hearing (July 12, 2021) (ML21193A365) (Answer).

2 In its Answer, Exelon effectively concedes - as EDF stated in its Contention 1 - that the Spin Transaction cannot proceed so long as EDF retains its ownership interest in the CENG Nuclear Plants.3 Instead, Exelon now takes the position that its license transfer application (LTA or Application)4 seeks only approval of the Spin Transaction after the Put Transaction has closed, which will extinguish EDFs ownership interest in Constellation Energy Nuclear Group, LLC (CENG) and the CENG Nuclear Plants. Curiously, notwithstanding this concession, Applicants do not propose or agree to condition the LTA on the Put Transactions prior closing, but rather oppose such relief as unnecessary.5 In sum, Exelon has no reasonable basis to oppose, and apparently now agrees to the logic of, the Nuclear Regulatory Commission (Commission or NRC) expressly conditioning approval of the LTA on the prior closing of the Put Transaction. Exelons shifting and opportunistic interpretations of its own Application make clear why such a condition is necessary.

Exelon has engaged in a months-long refusal to commit to a condition that the Put Transaction closes first, and has represented to the Federal Energy Regulatory Commission that whether and when the CENG Acquisition closes will have no impact on the [Spin] Transaction[.]6 The Answer, which, for all its bluster, carefully avoids the words condition in describing the Put 3 The CENG Nuclear Plants are Calvert Cliffs Nuclear Power Plant, Units 1 and 2 Renewed Facility Operating License Nos. DPR-53 and DPR-69, NRC Docket Nos. 50-317 and 50-318; Nine Mile Point Nuclear Station, Units 1 and 2, Renewed Facility Operating License Nos. DPR-63 and NPF-69, NRC Docket Nos. 50-220, 50-410, and 72-1036; and R. E. Ginna Nuclear Power Plant Renewed Facility, Operating License No. DPR-18, NRC Docket Nos. 50-244 and 72-67.

4 Exelon Generation Company, LLC et al., Application for Order Approving License Transfers and Proposed Conforming License Amendments (Feb. 25, 2021) (ML21057A273), as supplemented by letter dated March 25, 2021 (ML21084A165) (Application). Unless otherwise stated, citations to the Application will refer to the February 25, 2021 submission.

5 Answer at 14, 25.

6 Application for Authorization under Section 203 of the Federal Power Act and Request for Expedited Consideration at 11, FERC Docket No. EC21-57-000 (20210225-5246) (Feb. 25, 2021); see also Petition at 3-4 (detailing prior conflicting positions and statements of Applicants).

3 Transaction, also acknowledges that Exelon may supplement the LTA to request approval for a modified form of the Spin Transaction in which the Put Transaction has not closed.7 That Exelon has taken inconsistent positions at every step of this process, and before different regulators, undermines its credibility and calls into question whether it actually stands by its assumption that the Spin Transaction will only proceed after the Put Transaction closes.

Its argument that a condition on the LTA approval is not necessary when its Application, Exelon now says, assumes the same thing is illogical, and can only be interpreted as an effort to preserve strategic flexibility and avoid being bound by its own statements if the NRC unconditionally approves the LTA.

Meanwhile, EDF continues to maintain its ownership interest in the CENG Nuclear Plants, and the timing for closing the Put Transaction remains uncertain. Delaying or conditioning a LTA approval is a simple, logical, and necessary step for the NRC to ensure that the Spin Transaction does not impair the financial qualifications of the CENG Nuclear Plants and, consequently, harm EDFs contractual rights.

II.

Contention 1 is Admissible EDFs Contention 1 states:

The proposed Spin Transaction requires the consent of EDF Inc. as long as EDF Inc. holds its ownership interest in CENG. Because EDF Inc. has not provided any such consent, in accordance with 10 C.F.R. § 50.80(b)(2) the proposed license transfer approval should not be granted or made effective until after closing the Put Transaction.

Exelons Answer reinforces why a conditioned or delayed approval is necessary to protect EDFs interests in CENG. As a preliminary matter, Exelon does not dispute that EDFs consent would be required to consummate the Spin Transaction should it occur before the Put 7 Answer at 15.

4 Transaction has closed. Exelon also does not dispute EDFs description of the effects that disregarding EDFs contractual rights would have on the financial qualifications of the CENG Nuclear Plants. Nor could it. As outlined in the Petition, the Applicants intend to terminate the CENG Operating Agreement; terminate the financial support agreements between Exelon Corporation and CENG and replace them with new support agreements between the SpinCo and the individual project subsidiaries; and alter the ownership structure of CENG. Each of these steps, for the reasons explained in detail in EDFs Petition, would require EDFs consent.8 Exelons Answer also does not dispute that the Commission may require Exelon, as applicant, to demonstrate the consent of EDF, as a potentially impacted co-owner, in accordance with 10 C.F.R 50.80(b)(2).9 Instead, Exelon relies solely on a newfound, self-serving interpretation of its own LTA, namely that the proposed transfer described in the LTA assumes that the Put Transaction closes before the Spin Transaction such that Petitioner would not have an ownership interest in Calvert Cliffs, NMP, or Ginna at the time of the Spin Transaction.10 But, tellingly, Exelon also acknowledges that the Application and accompanying financial representations could change at any time to accommodate a delayed closing of the Put Transaction.11 Exelon does not state what form such a modified LTA would take, whether such a modified LTA would be subject to a new 8 See Petition at 10-12.

9 The fact that EDF is a co-owner and not a co-licensee would be, in this regard, a distinction without a difference.

NRC precedent holds that co-owners of nuclear facilities are licensed owners. See Public Service Co. of Indiana (Marble Hill Nuclear Generating Station, Units 1 and 2), ALAB-459, 7 NRC 179, 199-201 (1978). However, NRC practice is that co-owners of upstream parent entities that own nuclear facilities are not licensees. In either case, the co-owners right to consent to a license transfer stems from its ultimate ownership interest and not from licensee status.

10 Answer at 23.

11 Id. at 15.

5 notice and hearing process, what opportunity, if any, EDF would have to protect its undisputed contractual rights as a co-owner of CENG, or what deadlines would apply to EDFs contention to that revised filing.

Given the conflicting positions Exelon has taken before regulatory bodies and in correspondence with EDF with respect to this particular issue, Exelon should not be given the benefit of the doubt. The Petition describes these positions and Exelon does not dispute their veracity.12 Exelon has repeated its intention to proceed with the Spin Transaction even if the Put Transaction has not closed. Yet it has also steadfastly refused to explain to EDF, despite EDFs multiple requests, how it would modify the Spin Transaction in the scenario where the Put Transaction has not closed. This is not a speculative hypothetical scenario. It is a scenario that reflects the status quo, in which EDF holds a 49.99% interest in CENG.

In light of the Answer, Exelon has no reasonable basis to oppose a condition that the Put Transaction close prior to the Spin Transaction. Indeed, based on its statements in the Answer, one would assume Exelon would readily agree to such a condition. Exelons failure to so agree clearly demonstrates that Exelon is merely attempting to preserve room to argue, as it has in recent correspondence, that regardless of whether the Put Transaction has closed, the Spin Transaction will nevertheless proceed.13 The NRC should not indulge this gamesmanship. To preserve EDFs right to contest NRC approval of a plan to complete the Spin Transaction prior to the Put Transaction, Contention 1 should be admitted. Contention 1 would be resolved if the NRC were to either delay approval of the Spin Transaction until EDF no longer has an ownership interest in the 12 See Petition at 3-4.

13 Letter from Rahim Moloo, Counsel for Exelon Corporation & Exelon Generation Company, LLC, to Martin Flumenbaum, Counsel for EDF Inc., at 2 (May 18, 2021).

6 CENG Nuclear Plants, or impose an express condition that the Spin Transaction may only become effective after the Put Transaction has fully closed. Either of these options would align with Exelons new interpretation of its own Application and preserve EDFs undisputed contractual rights and commercial interests in CENG. Furthermore, such a delay or condition would be consistent with past NRC practice and remove any ambiguity as to whether or not NRC approval would permit Exelon to proceed with the Spin Transaction before the Put Transaction closes. The NRC Staff has delayed ruling on applications conditioned on the consummation of commercial arrangements.14 The NRC also routinely issues orders consenting to license transfers that are conditioned on certain future actions by the applicant or the receipt of third-party approvals needed prior to consummation of the underlying transaction.15 For the reasons stated herein and in the Petition, the NRC should do so in this case as well.

III.

Contention 2 is Admissible EDFs Contention 2 states:

The Spin Transaction would harm EDF and potentially reduce financial support for nuclear operations and decommissioning.

14 See, e.g., Letter from Anna H. Bradford, Director, Division of New and Renewed Licenses, U.S. Nuclear Regulatory Commission, to William R. McCollum, Jr., CEO and Chief Nuclear Officer, Nuclear Development, LLC (Nov. 3, 2020) (ML20286A172) (declining to complete review of license transfer application until dispute concerning purchase and sale agreement between NRC applicant and current NRC license holder, and NRCs applicants related right to possess the plant site, was resolved).

15 See id.; see also Order Approving Direct and Indirect Transfers of Control of Licenses and Draft Conforming License Amendments, FirstEnergy Nuclear Operating Co. (Beaver Valley Power Station, Unit Nos. 1 and 2, Davis-Besse Nuclear Power Station, Unit No. 1, and Perry Nuclear Power Plant, Unit No. 1) at 5 (Dec. 2, 2019)

(ML19303C953) (requiring Applicants take all necessary steps to ensure that a provisional trust agreement is implemented and maintained on or by the closing date of the license transfer transaction); Order Approving Transfer of Licenses and Conforming Amendments, Pac. Gas & Elec. Co. (Diablo Canyon Nuclear Power Plant, Units 1 and

2) at 5 (May 27, 2003) (ML031350218) (requiring all necessary regulatory and/or judicial approvals of a bilateral power sales agreement prior to closing of the license transfers).

7 EDF states an admissible contention that the Spin Transaction would harm EDF and potentially reduce financial support for nuclear operations and decommissioning. In claiming inadmissibility, Exelon relies on its purported compliance with quantitative NRC guidance,16 but even if Exelon had so complied it is not dispositive - the NRC, of course, may examine an applicants proffered estimates. As the Commission has previously held, Although satisfaction of those requirements is necessary to the grant of a license transfer application, such satisfaction cannot be deemed always sufficient to satisfy the applicants burden of proof, else the NRC be irrevocably bound by applicants own estimates and left without authority to look behind them.17 EDF does not claim that the financial projections are per se inadequate, but rather that the circumstances of this particular transfer call for more detailed or extensive financial protection.18 Put another way, the reasonable assurance standard in 10 C.F.R. § 50.33(f)(2),

on which Exelon relies so heavily in its Answer, is a qualitative standard and is not coterminous with meeting the quantitative criteria set forth in the relevant NRC guidance.

Here, Exelon does not dispute that the Spin Transaction would result in a significant reduction of approximately $38 million in aggregate financial support provided to the CENG Nuclear Plants. Nor does Exelon dispute that the Spin Transaction would impose plant-specific caps, further limiting the financial resources available in the case of funding shortfalls at any one of the plants. Exelon also fails to acknowledge the obvious fact that pre-Spin Exelon Generation, wholly owned by and with access to support from Exelon Corporation, is a far more creditworthy entity than Exelon Generation post-Spin Transaction. Exelon thereby effectively concedes that 16 Answer at 17 (citing NUREG-1577, Rev. 1, Standard Review Plan on Power Reactor Licensee Financial Qualifications and Decommissioning Funding Assurance § III.1.b (Dec. 13, 2001) (ML013330264)).

17 In the Matter of North Atlantic Energy Service Corp. et al. (Seabrook Station, Unit 1), 49 N.R.C. 201, 220-221 (Mar. 5, 1999) (emphasis in original).

18 Id. at 221.

8 Contention 2 identifies the potential for reduced financial support for nuclear operations and decommissioning at the facilities and, thereby, evidence of harm to EDF. The contention therefore raises a genuine and admissible dispute with regard to the requirement in 10 C.F.R. § 50.33(f)(2) for reasonable assurance of financial qualifications.

IV.

Contention 3 is Admissible EDFs Contention 3 states:

The Application contains insufficient information regarding the Spin Transactions technical and financial implications.

Exelon argues that this contention should not be admitted because it is vague and speculative, but this is because the LTA itself is vague on the matters addressed therein. It is well established that contentions can assert omissions and be admitted for hearing where, as here, the alleged omission relates to a legal requirement. Under 10 C.F.R. § 2.309(f)(1)(vi), a contention asserting that the application fails to contain information on a relevant matter as required by law must be supported by the petitioner through identification of each failure and the supporting reasons for the petitioners belief.19 EDFs burden is only to show the facts necessary to establish that the application omits information that should have been included.20 The facts relied on need not show that the facility cannot be safely operated, but only that the application is incomplete.21 Here, the omitted information identified in the Petition directly relates to several relevant matters as required by law. The continuity of support services and the existing Master Demand Notes and cash pooling arrangements for the CENG Nuclear Plants pertain to the requirement 19 See In re PG&E, 72 N.R.C. 257, 321 (Aug. 4, 2010).

20 In re Powertech (USA), Inc., 72 N.R.C. 361, 395 (Aug. 5, 2010).

21 Id.

9 that Exelon possess or have reasonable assurance of obtaining the funds necessary to cover estimated operation costs for the period of the license.22 With respect to the support services, EDF need not identify what precise level of detail would represent the regulatory bare minimum in the abstract; it need only identify that the Applications information - conclusory statements, one sentence in the notes of a pro forma, and references to the proposed NOSAs - are insufficient.23 That the SpinCo will employ Exelon Generations employees working at the Facilities just before the Spin Transaction does not acknowledge the loss of support services currently provided by Exelon Business Services Company, i.e., employees and business units that may be of Exelon Corporation, not the SpinCo, nor does it provide any detail as to the dis-synergies and disruption that may result from the transition, or how such disruptions would be managed.

The Application also fails to address the continuation of the existing Master Demand Notes and cash pooling arrangements for the CENG Nuclear Plants, which Applicants now seek to terminate and replace. These measures are not mere trifles - they were required by specific conditions imposed by NRC on prior license transfers for the CENG Nuclear Plants as referenced in the proposed contention. Omission of an explanation of and support for deleting the existing requirements is a material omission. In its continued shifting of the sands, Exelon attempts to find no conflict between the April 2020 Put Notice Letter and the Application by stating that the Put Transaction will close before the Spin Transaction occurs.24 But this 22 10 C.F.R § 50.33(f)(2).

23 See Answer at 20 n. 79 (citing Application, Encl. 8 at 21 ¶ 9).

24 See Answer at 22.

10 statement provides yet further support for the Commission to condition any approval on the Put Transaction closing, in addition to the reasons set forth in Contention 1.

V.

EDF has Standing to Intervene Exelon does not dispute that EDF would have standing so long as it remains a co-owner of the CENG Nuclear Plants.25 Exelons sole argument that EDF has failed to establish standing is that, by its own interpretation, its request for NRC approval precludes EDFs standing since the transfer described in the LTA assume[s] the Put Transaction closes before the Spin Transaction. But should the Commission grant the LTA without an express condition that the Put Transaction close first, the logic of which Exelon now appears to concede but refuses to expressly support, the financial security of the plants will be materially affected and EDF will thereby suffer an injury in fact for the reasons set forth in the Petition and referenced herein.

The Commission should not accept Exelons interpretation of the LTA at face value and assume that it will bind Exelons actions in the future. With an unconditionally approved LTA in hand, Exelon would be free to adopt any interpretation of the LTA that serves its going-forward interests. Indeed, the LTA, by Exelons own admission, may be subject to modification to reflect the present status quo - that EDF owns 49.99% of CENG - should the Put Transaction fail to close before the Spin Transaction.26 If this were to occur, EDFs ability to protect its abiding commercial interests in CENG would be unclear. It is not clear whether this modification would involve a new application, a new notice and opportunity for hearing, or simply an amended LTA.

The only clarity is that, under the regulations, any EDF contentions to such a modified application would need to be timely filed. Since the LTA and the Answer leave open the distinct 25 See Answer at 24-26.

26 Answer at 15.

11 possibility that the LTA could simply be modified in the future to allow the Spin Transaction prior to the Put Transaction, EDF has timely filed its request for hearing and presently has standing with respect to the matter.

VI.

EDF Maintains the Right to Request SUNSI Information Exelon claims in its Answer that because EDF has not yet requested access Sensitive Unclassified Non-Safeguards Information (SUNSI) or filed a motion with the Commission in such respect, that EDF is not authorized to access SUNSI in this proceeding.27 To the extent Exelon implies that EDF is precluded from requesting SUNSI or filing such a motion, it is incorrect. EDF maintains the right to request SUNSI information to the extent such information is relevant to any hearing during this proceeding.

The hearing notice does not set a deadline or otherwise foreclose a party from seeking SUNSI to the extent such information would be relevant later in a hearing or at some point in the proceeding after a petition for hearing is filed.28 In drafting its Petition, EDF was able to rely on information available to it as a co-owner of CENG, but may need to request access to SUNSI under a confidentiality agreement or protective order, as necessary, in connection with a hearing.

VII.

Conclusion For the foregoing reasons, EDF requests that the Commission grant the relief requested in the Petition.

27 Answer at 7.

28 Braidwood Station, Units 1 and 2; Byron Station, Unit Nos. 1 and 2; Calvert Cliffs Nuclear Power Plant, Units 1 and 2; Clinton Power Station, Unit No. 1; Dresden Nuclear Power Station, Units 1, 2, and 3; James A. FitzPatrick Nuclear Power Plant; LaSalle County Station, Units 1 and 2; Limerick Generating Station, Units 1 and 2; Nine Mile Point Nuclear Station, Units 1 and 2; Peach Bottom Atomic Power Station, Units 1, 2, and 3; Quad Cities Nuclear Power Station, Units 1 and 2; R. E. Ginna Nuclear Power Plant; Salem Nuclear Units 1 and 2; and the Associated Independent Spent Fuel Storage Installations; Consideration of Approval of Transfer of Licenses and Conforming Amendments, 86 Fed. Reg. 23,437, at 23,440 (May 3, 2021).

12 Dated: July 19, 2021 Respectfully submitted, Executed in Accord with 10 C.F.R. § 2.304(d)

Noah C. Shaw FOLEY HOAG LLP 1301 Avenue of the Americas, 25th floor New York, NY 10019 Phone: (646) 927-5587 Email: ncshaw@foleyhoag.com Signed (electronically) by Peter S. Ross Peter S. Ross FOLEY HOAG LLP 1301 Avenue of the Americas, 25th floor New York, NY 10019 Phone: (646) 927-5596 Email: pross@foleyhoag.com Attorneys for EDF Inc.

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of EXELON GENERATION COMPANY, LLC; EXELON CORPORATION; EXELON FITZPATRICK, LLC; NINE MILE POINT NUCLEAR STATION, LLC; R. E. GINNA NUCLEAR POWER PLANT, LLC; and CALVERT CLIFFS NUCLEAR POWER PLANT, LLC (Calvert Cliffs Nuclear Power Plant, Units 1 and 2; Nine Mile Point Nuclear Station, units 1 and 2; R. E. Ginna Nuclear Power Plant)

(Consideration of Approval of Transfer of Licenses and Conforming Amendments)

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50-317, 50-318, 50-220, 50-410, 72-1036, 50-244, and 72-67 CERTIFICATE OF SERVICE Pursuant to 10 C.F.R. § 2.305, I certify that the foregoing Reply to Exelons Answer Opposing Petition of EDF Inc. for Leave to Intervene and Request for a Hearing was served upon the Electronic Information Exchange (the NRCs E-Filing system), in the above-captioned proceeding.

Dated: July 19, 2021 Respectfully submitted, Signed (electronically) by Peter S. Ross Peter S. Ross FOLEY HOAG LLP 1301 Avenue of the Americas, 25th floor New York, NY 10019 Phone: (646) 927-5596 Email: pross@foleyhoag.com Attorney for EDF Inc.