ML23080A186
| ML23080A186 | |
| Person / Time | |
|---|---|
| Site: | Nuclear Energy Institute |
| Issue date: | 03/17/2023 |
| From: | True D Nuclear Energy Institute |
| To: | NRC/SECY/RAS |
| References | |
| NRC-2017-0021, 88FR25, PR-30, PR-40, PR-50, PR-70, PR-72 | |
| Download: ML23080A186 (1) | |
Text
3/20/23, 9:29 AM blob:https://www.fdms.gov/d18e10b9-870d-4170-91eb-7a3ec3357e5e As of: 3/20/23, 9:29 AM Received: March 17, 2023 PUBLIC SUBMISSION Status: Pending_Post Tracking No. lfc-pu6m-0sqw Comments Due: March 20, 2023 Submission Type: Web Docket: NRC-2017-0021 Alternatives to the Use of Credit Ratings (Dodd-Frank Act of 2010)
Comment On: NRC-2017-0021-0009 Alternatives to the Use of Credit Ratings Document: NRC-2017-0021-DRAFT-0008 Comment on FR Doc # 2022-27935 Submitter Information Email: atb@nei.org Organization: Nuclear Energy Institute General Comment See attached file(s)
Attachments 03-17-23_NRC_Comments on Notice of Proposed Rulemaking - Alternatives to the Use of Credit Ratings blob:https://www.fdms.gov/d18e10b9-870d-4170-91eb-7a3ec3357e5e 1/1
DOUGLAS E. TRUE Senior Vice President and Chief Nuclear Officer 1201 F Street, NW, Suite 1100 Washington, DC 20004 P: 202.739.8083 det@nei.org nei.org March 17, 2023 Office of the Secretary U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 Attn: Rulemaking and Adjudications Staff Submitted via Regulations.gov
Subject:
Industry Comments on Notice of Proposed Rulemaking, Alternatives to the Use of Credit Ratings
[Docket ID: NRC-2017-0021]
Project Number: 689 On behalf of its members, the Nuclear Energy Institute (NEI) 1 appreciates the opportunity to comment on the Notice of Proposed Rulemaking (Proposed Rule) 2 that would amend the Commissions decommissioning financial assurance requirements to address Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act or the Act). 3 Section 939A requires federal agencies to identify and remove all references to credit ratings in their regulations, and to substitute alternative standards of creditworthiness, taking into account the agency-specific regulatory purpose of those standards. Several of the financial tests provided in the Appendices to 10 CFR Part 30 and used in conjunction with the parent and self-guarantee methods of decommissioning funding assurance reference bond ratings and, thus, the NRC has concluded that these tests must be addressed under Section 939A.
NEI provided detailed comments 4 on the Advance Notice of Proposed Rulemaking (ANPR) that preceded this proposed rule. 5 In those comments, NEI recommended that the NRC revise its regulations to comply with Section 939A in a way that preserved the use of parent-company guarantees and self-guarantees and would not substantially alter the status quo. The proposed rule and associated draft guidance document 6 make 1 NEI is responsible for establishing unified policy on behalf of its members and relating to matters affecting the nuclear energy industry, including the regulatory aspects of the generic operational and technical issues. NEIs members include entities licensed to operate commercial nuclear power plants in the United States, nuclear plant designers, major architect and engineering firms, fuel cycle facilities, nuclear materials licensees, and other organizations involved in the nuclear energy industry.
2 88 Fed. Reg. 25 (Jan. 3, 2023).
3 Pub. L. 111-203, 124 Stat. 1376 (July 21, 2010).
4 Industry Comments on Advance Notice of Proposed Rulemaking, Alternatives to the Use of Credit Ratings, [Docket ID:
NRC-2017-0021](March 9, 2021)(ANPR Comments).
5 85 Fed. Reg. 82950 (Dec. 21, 2020).
6 Draft Interim Staff Guidance on Removal of Bond Ratings from Parent and Self-Guarantees, Decommissioning Financial Assurance, U.S. Nuclear Regulatory Commission (Draft Guidance).
The Office of the Secretary March 17, 2023 Page 2 significant progress towards achieving that outcome but can and should be improved to provide additional clarity and predictability for both NRC staff and licensees.
Specifically, NEI respectfully requests that the preamble to the rule, as well as the Draft Guidance, be modified to clarify that an investment grade rating issued by a Nationally Recognized Statistical Rating Organization (NRSRO), 7 is one acceptable method of complying with the new creditworthiness tests included in the appendices to Part 30. An example would be a bond rating that meets the conditions imposed in the NRCs 2011 Decommissioning Planning Rule. 8 These bond ratings would include the relevant companys most recent uninsured, uncollateralized, and unencumbered, investment grade bond issuance. 9 In its current form, the Draft Guidance published with the proposed rule simply provides a list of the types of information and data that could be considered in determining whether a parent company or licensee meets the new creditworthiness requirement included in the proposed rule. Although that list includes bond ratings provided by NRSROs, the Draft Guidance is not clear on what specific information would be sufficient to meet the new creditworthiness standard. Further, the Draft Guidance suggests that multiple pieces of financial data would be necessary to demonstrate a parent company or licensees creditworthiness. 10 In addition, the preamble to the proposed rule simply states that review of a licensees creditworthiness could include evaluation of financial data available from the licensee, open sources, and third parties, and may include credit ratings. 11 As discussed in more detail below and in our ANPR Comments, the Commission has already concluded that use of bond ratings, as qualified above and considered in conjunction with the other prongs of the financial tests provided in Part 30, is sufficient to demonstrate creditworthiness. 12 As currently written, the Draft Guidance introduces unnecessary uncertainty into methods available to licensees to demonstrate compliance with the financial tests.
I. The Financial Tests in the Appendices to 10 CFR Part 30 do not Rely Exclusively on Bond Ratings to Determine a Guarantors Ability to Meet its Obligations As a starting proposition, it is important to point out that the existing financial tests at issue do not rely exclusively on bond ratings as an indicator of either a parent company or licensees ability to meet its obligations under a parent company guarantee or self-guarantee. To the contrary, these are multipronged financial tests that include several indicators of a companys ability to meet its financial obligations. For 7 NRSROs are registered with by the Securities and Exchange Commission. A current list of registered NRSROs can be found here https://www.sec.gov/about/divisions-offices/office-credit-ratings/current-nrsros. Investment grade ratings refer to the four highest rating categories (e.g., for many NRSROs, AAA, AA, A and BBB, or Aaa, Aa, A and Baa) including adjustments within such categories (e.g., + or or 1, 2 or 3).
8 Decommissioning Planning; Final Rule, 76 Fed. Reg. 35,512 (June 17, 2011) (2011 Decommissioning Planning Rule).
9 In situations where a companys uninsured, uncollateralized and unencumbered bonds are not then outstanding, licensees should be permitted to rely on such companys senior unsecured long-term ratings, which express the equivalent concept of creditworthiness.
10 Draft Guidance, at p. 6.
11 88 Fed. Reg. 25, 27.
12 76 Fed. Reg. 35,524-26.
The Office of the Secretary March 17, 2023 Page 3 example, under the relevant financial test for parent company guarantees in Appendix A to 10 CFR Part 30 the parent company must have:
(1) A current rating for its most recent uninsured, uncollateralized, and unencumbered bond issuance of AAA, AA, A, or BBB (including adjustments of + and -) as issued by Standard and Poors or Aaa, Aa, A, or Baa (including adjustment of 1, 2, or 3) as issued by Moodys; and (2) Total net worth at least six times the amount of decommissioning funds being assured by a parent company guarantee for the total of all nuclear facilities or parts thereof (or prescribed amount if a certification is used); and (3) Tangible net worth of at least $21 million; and (4) Assets located in the United States amounting to at least 90 percent of the total assets or at least six times the current decommissioning cost estimates for the total of all facilities or parts thereof (or prescribed amount if a certification is used), or, for a power reactor licensee, at least six times the amount of decommissioning funds being assured by a parent company guarantee for the total of all reactor units or parts thereof. 13 With respect to self-guarantees, the relevant financial test in Appendix C to 10 CFR Part 30 requires the licensee to have all the following:
(1) Tangible net worth of at least $21 million, and total net worth at least 10 times the amount of decommissioning funds being assured by a self-guarantee for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor for the total of all nuclear facilities or parts thereof (or the current amount required if certification is used).
(2) Assets located in the United States amounting to at least 90 percent of total assets or at least 10 times the amount of decommissioning funds being assured by a self-guarantee, for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor for the total of all nuclear facilities or parts thereof (or the current amount required if certification is used).
(3) A current rating for its most recent uninsured, uncollateralized, and unencumbered bond issuance of AAA, AA, or A (including adjustments of + and -) as issued by Standard and Poors, or Aaa, Aa, or A (including adjustments of 1, 2, or 3) as issued by Moodys. 14 II. The Multi-Pronged Financial Tests in the Appendices to 10 CFR Part 30 Already Consider and Adequately Address the Risk of Overreliance on Credit Ratings As discussed in our ANPR Comments, 15 the multi-pronged financial tests in Part 30 already reflect the Commissions consideration of the risk associated with overreliance on certain credit ratings that prompted the requirements of Section 939A, and incorporate specific requirements designed to mitigate that risk.
Specifically, the Commission explicitly considered the potential for overreliance on bond ratings and the 13 10 CFR Part 30, Appendix A, Section II.A.2 (emphasis added).
14 10 CFR Part 30, Appendix C, Section II.A.
15 ANPR Comments, at Attach. pp. 11-13.
The Office of the Secretary March 17, 2023 Page 4 associated regulatory implications in its 2011 Decommissioning Planning Rule, which was finalized nearly one year after promulgation of the Dodd-Frank Act. 16 At that time, the Commission noted that recent events and trends suggest that a high bond rating by itself does not necessarily signal financial strength and may not provide the additional assurance that the NRC is seeking. 17 These concerns stemmed directly from the same 2007-2009 financial crisis that prompted promulgation of the Dodd-Frank Act. Specifically, the crisis cause[d] the NRC to question the adequacy of the bond rating requirement to provide financial assurance. 18 After consideration of the issue, the Commission concluded that the bond rating requirement in Appendices A and C to 10 CFR Part 30 should be coupled with another requirement, and that the minimum tangible net worth requirement is an adequate accompaniment. 19 In addition to pairing the use of bond ratings with the tangible net worth requirement, the NRC cited two other related considerations in support of its conclusion that the reference to bond ratings in the appendices to Part 30 was appropriate. First, it noted that to provide additional assurance of the efficacy of a companys current bond rating, the final rule required that the bond must be uninsured, uncollateralized, and unencumbered to be used in the financial test. 20 The Commission found that this requirement is desirable and increases assurance because [a]n uninsured, uncollateralized, and unencumbered bond rating is an opinion as to the issuers ability to meet its repayment obligations in a timely manner. 21 In addition, the Commission emphasized that licensees who opt to use the parent company guarantee or self-guarantee as a financial assurance option must pass the tests on an annual basis. 22 The NRC noted that because a company that satisfies the minimum tangible net worth criterion and has an investment grade bond rating is less likely to default in a one-year period, the annual repassage requirement would provide adequate time for the guarantor to obtain alternative financial assurance, if necessary. 23 III. The Dodd-Frank Act Does Not Prohibit the NRC from Considering Credit Ratings as One Element of its Multi-Pronged Financial Tests As explained in our ANPR Comments, Section 939A seeks to prevent agencies from relying exclusively, or otherwise excessively, on credit ratings. However, it does not categorically prohibit agencies from considering credit ratings as one factoramong various othersin their regulatory evaluations or decision-making processes. This fact is manifest in the legislative history of the Dodd-Frank Act and in the rulemakings conducted by major financial regulatory agencies to address the Acts requirements, including 16 See NRC, Decommissioning Planning; Final Rule, 76 Fed. Reg. 35,512 (June 17, 2011) (2011 Decommissioning Planning Rule).
17 Id. at 35,525.
18 See id. at 35,525 (citing Katz, J., Salinas, E., & Stephanou, C., Credit Rating Agencies: No Easy Regulatory Solution, Crisis Response: Public Policy for the Private Sector, Note Number 8, 4-5 (October 2009),
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1485140; Katz; OBrien, B., Fitch Fells Berkshires Credit Rating, Barrons (March 13, 2009), http://blogs.barrons.com/stockstowatchtoday/2009/03/13/fitch-fells-berkshires-credit-rating/).
19 Id.
20 Id. The bond criterion in Appendix E to 10 CFR Part 30 already contained this requirement.
21 Id. at 35,543 (emphasis added). In contrast, and for reasons explained in the 2011 Decommissioning Planning Rule, the NRC concluded that when a rated bond has insurance or pledged assets to provide additional security, the bond rating may not directly reflect the creditworthiness of the bond issuer. Id. at 35,525.
22 Id. at 35,524-25. The licensee must annually submit to the NRC revised financial statements, financial test data, and an auditors special report.
23 Id. at 35,524.
The Office of the Secretary March 17, 2023 Page 5 the Office of the Comptroller of Currency (OCC), the Securities and Exchange Commission (SEC), the National Credit Union Administration (NCUA), and the Commodity Futures Trading Commission (CFTC). The legislative history and examples of such rulemakings are discussed in our ANPR Comments. 24 It is important to reiterate that Section 939A provides federal agencies with discretion in implementing the Acts requirement that agencies remove any reference to or requirement of reliance on credit ratings. 25 Specifically, the relevant paragraph in Section 939A directs federal agencies to replace such references with such standard[s] of credit-worthiness as each respective agency shall determine as appropriate for such regulations. 26 Federal agencies are further directed to seek to establish, to the extent feasible, uniform standards of credit-worthiness for use by each such agency, taking into account the entities regulated by each such agency and the purposes for which such entities would rely on such standards of credit-worthiness. 27 Consistent with the plain language and legislative history of Section 939A, numerous federal agencies with significant financial regulatory responsibilities and expertise have concluded that they have discretion in adopting the alternative standard of creditworthiness required by that statutory provision. That discretion is informed by the agencies specific statutory responsibilities and the nature of the entities they regulate and allows for agency consideration of credit ratings as one element of the required analysis, where appropriate. 28 In the context of NRCs regulation of decommissioning funding assurance, it is the parent company or licensees ability to meet its obligations under the guarantee, and not the quality of any specific security or investment product that is at issue. Thus, the new creditworthiness element of the financial tests in the Appendices to 10 CFR Part 30 should not be viewed in isolation. Rather, it must be viewed in its proper contextas a single element in a set of multi-pronged financial tests designed to provide reasonable assurance of a parent company or licensees ability to meet its commitments under a guarantee, which is, in turn, one of several methods available to licensees to fund decommissioning. Thus, the limited use of certain bond ratings (e.g., uncollateralized, uninsured, unencumbered) to meet the proposed creditworthiness standard would be one of several considerations (e.g., tangible net worth, total net worth, percentage of assets located in the U.S., annual confirmation that financial tests are met) used by the NRC to determine whether the guarantee method provides reasonable decommissioning funding assurance in a specific instance.
This limited use of bond ratings is appropriate in the context of the NRCs regulations and completely consistent with the direction in Section 939A for implementing agencies to [t]ak[e] into account the entities regulated by each such agency and the purposes for which such entities would rely on such standards of credit-worthiness. 29 24 ANPR Comments, at Attach. pp. 4-7.
25 Pub. Law 111-203, Sec. 939A(b)(emphasis added).
26 Id.
27 Id.
28 See ANPR Comments, at Attach. pp. 6-7.
29 Pub. Law 111-203, Sec. 939A(b).
The Office of the Secretary March 17, 2023 Page 6 IV. There are No Discernable Quantitative or Qualitative Benefits Associated with the Uncertainty Created by the Draft Guidance Published with the Proposed Rule As described above, the Commission took a reasoned approach in its 2011 Decommissioning Planning Ruleensuring that the risk of overreliance on bond ratings was mitigated, while recognizing the value of certain bond ratings as one element in meeting the multi-pronged financial tests provided in Part 30.
Nothing in the Dodd-Frank Act generally, or Section 939A specifically, calls the Commissions 2011 conclusions into question.
As the NRC points out in the proposed rule, [i]n the Act, Congress finds that ratings on structured financial products have proven to be inaccurate and that [t]his inaccuracy contributed significantly to the mismanagement of risks by financial institutions and investors. 30 Standard and Poors provides the following description of structured financial products:
A structured finance instrument is a particular type of debt issue created through a process known as securitization. In essence, securitization involves pooling individual financial assets, such as mortgage or auto loans, and creating, or structuring, separate debt securities that are sold to investors to fund the purchase of these assets.
The creation of structured finance instruments, such as residential mortgage-backed securities (RMBS), asset-backed securities (ABS), and collateralized debt obligations (CDOs),
typically involves three parties: an originator, an arranger, and a special purpose entity or SPE, that issues the securities. 31 Although Section 939A is written broadly to require removal of any reference to or requirement of reliance on credit ratings from an agencys regulations, the corporate bonds referenced in the appendices to 10 CFR Part 30 are not the type of structured financial products that are the focus of the congressional finding found in Section 931 of the Act and cited in the preamble of the proposed rule. There is no indication in the rulemaking record for this rule that the corporate bond ratings, as qualified in the 2011 Decommissioning Planning Rule and relied upon in the appendices to 10 CFR Part 30, have proven to be inaccurate or unsuitable for the limited purposes they serve in the NRCs regulatory framework.
As detailed in the Regulatory Analysis published with the proposed rule, this rule is estimated to impose approximately $1,610,000 in costs (undiscounted) on the industry and NRC. The industry costs come primarily in the form of licensee time associated with reviewing the new regulation, updating licensee procedures, and compiling and submitting financial information to meet the new rule. 32 At the same time, there are no quantifiable benefits associated with this rulemaking. 33 The Regulatory Analysis describes the qualitative benefits of the rulemaking, stating the attributes of improvements to knowledge and public 30 88 Fed. Reg. 25, 26 (quoting Public Law 111-203, Sec. 931(5)) (internal quotation marks omitted) (emphasis added).
31 Guide to Credit Rating Essentials: What are credit ratings and how to they work, S&P Global Ratings (2022), at p. 11.
(available at https://www.spglobal.com/ratings/_division-assets/pdfs/guide_to_credit_rating_essentials_digital.pdf) 32 Regulatory Analysis for Proposed Rule: Alternatives to the Use of Credit Ratings, U.S. Nuclear Regulatory Commission (Dec. 2022), at pp. 11-13 (Draft Regulatory Analysis).
33 Id., at p. vi.
The Office of the Secretary March 17, 2023 Page 7 confidence would produce qualitative benefits for the industry and NRC. 34 With respect to improvements in knowledge, the Regulatory Analysis explains:
The modified reporting requirements will improve the NRCs knowledge of the financial stability of its licensees in terms of their decommissioning funding obligations. The proposed rule would also enhance the accountability and transparency of the NRCs financial assurance requirements. Bond ratings for financial products can be inaccurate and could contribute to the mismanagement of risks, which in turn could adversely impact a licensees ability to meet its financial assurance requirements. The rule changes are designed to modify the NRCs financial assurance requirements that are part of the overall NRC strategy to maintain safety and protection of public health and the environment during decommissioning and decontamination of nuclear facilities. 35 As explained above, the congressional finding regarding the inaccuracy of ratings relied upon in the proposed rule and seemingly in the Regulatory Analysis was specific to structured financial products. These products are not the same as the uninsured, uncollateralized, and unencumbered bonds referenced in Part
- 30. While we understand the NRCs need to comply with the broad direction in Section 939A to remove any reference to or requirement of reliance on credit ratings from its regulations, nothing in Section 939A or the findings in Section 931 provides any support for the conclusion that the bond ratings referenced in NRCs regulations are inaccurate; that NRCs limited use of bond ratings creates any risks that could adversely impact a licensees ability to meet its financial assurance obligations; 36 or that the Commissions conclusions in the 2011 Decommissioning Planning Rulemaking are in need of revision.
When used properly and in combination with static financial metrics, credit ratings (including bond ratings) can enhance a decisionmakers assessment of creditworthiness because rating agencies are able to assess credit quality with a myriad of factors beyond historical metrics. These factors include forward-looking expectations (e.g., expected growth and profitability) and qualitative factors (e.g., country risk, industry characteristics, and entity-specific factors) that can build a more comprehensive view of a companys risk profile. It is unclear how requiring licensees to submit additional, undefined financial information will improve the NRCs knowledge of the financial stability of its licensees.
Specifically, while the Draft Guidance provides multiple examples of data to be considered in creditworthiness evaluationse.g., total annual revenue, total annual income, capital structure, total annual free cash flow, annual interest expense, annual interest coverage, as well as ratings provided by NRSROs, 37 it also states that in most cases a creditworthiness evaluation will require analyses of multiple pieces of financial data. 38 The multipronged financial tests in Part 30 already consider multiple pieces of financial data, and there is no reason that an investment-grade bond rating issued by a registered NRSRO, standing on its own, would not be sufficient to meet the new creditworthiness prong of those tests. Indeed, NRSROs already consider multiple pieces of financial information in deriving their ratings. 39 Without that certainty, 34 Id., at p. 19.
35 Id.
36 Id.
37 Draft Guidance, at 6.
38 Id. at 5.
39 See, e.g., Guide to Credit Rating Essentials: What are credit ratings and how to they work, S&P Global Ratings (2022), at pg. 10, (available at https://www.spglobal.com/ratings/_division-assets/pdfs/guide_to_credit_rating_essentials_digital.pdf);
Rating Symbols and Definitions, Moodys (2022), at pgs. 34-36, (available at https://ratings.moodys.com/api/rmc-
The Office of the Secretary March 17, 2023 Page 8 licensees will not know what combinations of the information listed in the Draft Guidance will be sufficient, or if additional information outside the examples provided will be necessary. The uncertainty created by the Draft Guidance stands in stark contrast to the reliable and consistent framework provided by the rest of the agencys decommissioning funding regulations.
The other qualitative benefit cited in the Regulatory Analysis is the increased public confidence in NRCs role as a responsible industry regulator that would result from the NRC modifying its regulations in accordance with Section 939A of the Dodd-Frank Act. NEI does not object to the NRC modifying the regulations to comply with the admittedly broad direction provided in Section 939A. However, that modification can be accomplished, while also providing the reliability, clarity, and efficiency offered by allowing the continued use of investment grade ratings on uninsured, uncollateralized, unencumbered bonds as a method to meet one prong of the NRCs multi-pronged financial test for parent and self-guarantees.
In sum, there are no discernable benefits (quantitative or qualitative) to interpreting the new creditworthiness requirement in a way that undermines the Commissions prior conclusions regarding the appropriateness of the limited use of ratings on uninsured, uncollateralized, unencumbered bonds. Allowing use of these ratings as stand-alone support for meeting the new creditworthiness requirement eliminates unnecessary uncertainty with respect to the information necessary for a licensee to demonstrate that it meets the new creditworthiness prong of the financial tests provided in the appendices to 10 CFR Part 30.
The other examples provided in the Draft Guidance should be retained for use by licensees that choose not to use bond ratings to demonstrate creditworthiness. Further, NEI believes that the identified industry and NRC implementation and operations costs would be significantly reduced if the guidance and preamble to the final rule clarified that the bond ratings identified above remain one acceptable method of demonstrating compliance with the new creditworthiness element of the financial tests in the appendices to 10 CFR Part 30.
V. Responses to Questions Posed in the Proposed Rule (Question 1) Would this proposed rule present additional risk to the public regarding reasonable assurance that NRC licensees have adequate funding to decommission their facilities? If yes, please explain.
No. As explained above and in the Commissions 2011 Decommissioning Planning Rulemaking, the current financial tests in the appendices to 10 CFR Part 30 already adequately address the overreliance concerns that played a role in promulgation of the Dodd-Frank Act and Section 939A specifically. The current financial tests are sound, and the purpose of this rulemaking should simply be to comply with the broad requirement in Section 939A to remove any reference to or requirement of reliance on credit ratings and to substitute in such regulations such standard of credit-worthiness as each respective agency shall determine as appropriate for such regulations. As discussed above, the final guidance and preamble to the final rule should be revised to clarify that an investment grade rating of an uninsured, uncollateralized, unencumbered bond issued by an SEC-registered NRSRO is one acceptable method of meeting the new creditworthiness prong of the agencys multi-pronged financial tests.
documents/53954); and The Rating Process (How Fitch Assigns Credit Ratings), Fitch Ratings (2022), at pgs. 3, 6, (available at https://www.fitchratings.com/research/corporate-finance/the-rating-process-how-fitch-assigns-credit-ratings-24-02-2022).
The Office of the Secretary March 17, 2023 Page 9 (Question 2) Does the draft guidance effectively communicate the necessary information to be submitted to the NRC that will enable the NRC to effectively determine a licensees creditworthiness?
No. As explained above, the draft guidance should be revised to make it clear that the Commissions conclusions in the 2011 Decommissioning Planning Rulemaking remain sound and, therefore, production of the most recent uninsured, uncollateralized, and unencumbered, investment grade rating, as issued by an SEC-registered NRSRO, would continue to be sufficient to meet the new creditworthiness requirement. The additional information discussed in the draft guidance should be retained as guidance for licensees that choose not to use bond ratings as a method to comply with the new creditworthiness requirement.
(Question 3) Does the draft regulatory analysis capture all of the NRC and licensee costs required by this proposed rule?
Likely, no. It is difficult to capture all the NRC and licensee costs because the Draft Guidance does not provide sufficient clarity about what information a licensee will need to provide to the NRC to meet the new creditworthiness standard. We appreciate the NRC staffs view expressed in the Regulatory Analysis that the process of licensees demonstrating creditworthiness will be fairly straightforward for most affected licensees and that [i]n future years, after the first submission, the staff estimates that licensees will expend a low level of effort each year to repeat the successful process and demonstrate creditworthiness to the NRC. 40 But the draft guidance provides no durable assurance that the NRC staffs current estimates will hold true in the future. The modifications suggested in our comments would close that gap providing reliability, clarity, and efficiency, while not requiring licensee reliance on bond ratings. This approach is consistent with the Commissions Principles of Good Regulation. 41 (Question 4) One commenter on the ANPR argues that section 939A of the Dodd- Frank Act is focused on issue credit ratings of specific financial obligations, such as long- and short-term bonds, rather than issuer credit ratings or corporate family ratings, and that the statute does not preclude the use of issuer or corporate family credit ratings in Federal regulations.
Should the NRC interpret the statute and implementing regulations as making this distinction?
Does the statute permit NRC to use issuer or corporate family credit ratings in part 30? If so, should the NRC do so?
As explained above and in our ANPR Comments, the Dodd-Frank Act did not categorically prohibit reliance on credit ratings (including corporate bond ratings). Rather, the Act sought to prevent overreliance on credit ratings by Federal regulators and others. Thus, issuer credit ratings, in addition to bond ratings, may be a useful tool to demonstrate creditworthiness of a parent company or licensee. In the context of the NRCs regulatory framework, the Commission has already addressed the question of overreliance on the bond ratings used in the appendices to 10 CFR Part 30 and concluded that the multi-pronged financial tests and other requirements adequately mitigate against any such overreliance. In addition, as described above in Section IV, the finding in Section 931 of the Act was focused on the inaccuracy of ratings on structured financial products, which are categorically different from the company bond ratings traditionally used in the financial tests in Part 30. Thus, NEI believes that the proposed rule change, in conjunction with the changes to the rules preamble and Draft Guidance recommended in these comments, strike the appropriate balance 40 Id., at p. 12.
41 Nuclear Regulatory Commissions Principles of Good Regulation, https://www.nrc.gov/about-nrc/values.html#principles.
The Office of the Secretary March 17, 2023 Page 10 between the need for literal compliance with the direction provided in Section 939A and the flexibility and discretion left for NRC as an implementing agency.
We appreciate the opportunity to provide our views on the proposed rule and look forward to participating as the rulemaking process continues. If you have any questions regarding these comments, please contact Jerry Bonanno (jxb@nei.org) or Bruce Montgomery (bsm@nei.org).
Sincerely, Douglas E. True c: John Lubinski, NMSS, NRC Christopher Regan, NMSS, REFS, NRC Tara Inverso, NMSS, REFS, NRC