NRC-23-0021, ISFSI, Decommissioning Funding Plan Update

ISFSI, Decommissioning Funding Plan Update

ML23089A081
Person / Time
Site:	Fermi, 07200071
Issue date:	03/30/2023
From:	Olson E DTE Electric Company
To:	Office of Nuclear Material Safety and Safeguards, Office of Nuclear Reactor Regulation, Document Control Desk
References
NRC-23-0021
Download: ML23089A081 (1)

Text

El'ic Olson Site Vice P1*esident DTE Electtic Company 6400 N. Dixie Highway, Newpol't, MI 48166 Tel: 734.586.5025 Fax: 734.586.5295 Email: eric.olson@dteenel'gy.com DTE March 30, 2023 10 CFR 72.30 NRC-23-0021 U.S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, DC 20555-0001 Fermi 2 Power Plant NRC Docket No. 50-341 NRC License No. NPF-43

Subject:

Fermi 2 ISFSI Decommissioning Funding Plan Update DTE Electric Company has prepared a decommissioning funding plan update and cost estimate for the Fermi 2 Independent Spent Fuel Storage Installation (ISFSI) pursuant to 10 CFR 72.30(b). As required by 10 CFR 72.30(c), the decommissioning funding plan must be updated at intervals not to exceed 3 years and at the time a renewed license is issued. DTE Electric Company was issued a renewed license for Fermi 2 on December 15, 2016.

Enclosure I provides the updated Fermi 2 ISFSI decommissioning funding plan. Enclosure 2 provides the decommissioning cost estimate for the Fermi 2 ISFSI. The enclosed updated funding plan and cost estimate contain the information required by IO CFR 72.30 to provide reasonable assurance that funds will be available to decommission the Fermi 2 ISFSI. This letter constitutes certification that financial assurance is provided to cover the estimated costs of ISFSI decommissioning per 10 CFR 72.30(b)(6).

No new commitments are being made in this submittal.

Should you have any questions or require additional information, please contact Mr. Eric Frank, Manager- Nuclear Licensing, at (734) 586-4772.

Sincerely, Eric Olson Site Vice President

USNRC NRC-23-0021 Page 2

Enclosures:

1. Fermi 2 ISFSI Decommissioning Funding Plan Update

2. Fermi 2 ISFSI Decommissioning Cost Estimate

3. DTE Electric Nuclear Decommissioning Study for the Fermi 2 Power Plant cc: NRC Project Manager NRC Resident Office Regional Administrator, Region III

Enclosure 1 to NRC-23-0021 Fermi 2 NRC Docket No. 50-341 Operating License No. NPF-43 Fermi 2 ISFSI Decommissioning Funding Plan Update to NRC-23-0021 Page 1 Fermi 2 ISFSI Decommissioning Funding Plan Update Introduction An Independent Spent Fuel Storage Installation (ISFSI) is a facility that is designed and constructed for the interim storage of spent nuclear fuel. Solid reactor-related greater than Class C (GTCC) waste and other radioactive materials associated with spent fuel and reactor-related GTCC waste storage may also be stored at an ISFSI. The licensing requirements for ISFSI are specified in 10 Code of Federal Regulations (CFR) 72. Subpart 72.30 requires a decommissioning plan that provides reasonable assurance that the decontamination and decommissioning of the ISFSI at the end of its useful life will provide adequate protection to the health and safety of the public. This document provides the information required by 10 CFR 72.30.

Decommissioning Funding Plan for Fermi 2 ISFSI A decommissioning funding plan consisting of detailed information is required in 10 CFR 72.30(b). Each of the required items from 10 CFR 72.30(b) are discussed in detail below.

• Requirement 1: Information on how reasonable assurance will be provided that funds will be available to decommission the ISFSI A plant-specific decommissioning cost estimate for ISFSI license termination was prepared for the Fermi 2 ISFSI. The total estimated ISFSI decommissioning cost for license termination is found in Table 2 of Enclosure 2 of this letter. The cost estimate assumes that Fermi 2 will be shut down by March 20, 2045 when the renewed license expires. Approximately $382,000 per year is being deposited into the ISFSI decommissioning fund account based on license termination in 2045. The ISFSI decommissioning fund account deposit amount will be reviewed in the future and may be adjusted to ensure adequate funding is available at the time of license termination in 2045. To achieve the required funding per year, monthly deposits will be made into a separate account for ISFSI decommissioning within the Nuclear Decommissioning Trust Fund (NDT) for Fermi 2. The amount deposited per month is based on electricity sales and will vary from month to month. The performance of the ISFSI account within the NDT Fund will be evaluated periodically and deposits adjusted as appropriate. A report will be submitted to the NRC at least once every three years to address the adequacy of the ISFSI decommissioning funding (see discussion of 10 CFR 72.30(c) below).

• Requirement 2: Detailed cost estimate for decommissioning A detailed plant-specific decommissioning cost estimate has been prepared for the Fermi 2 ISFSI license termination and is presented in Enclosure 2 to this letter. It includes the cost of an independent contractor performing all decommissioning activities, an adequate contingency factor, and the cost of meeting the 10 CFR 20.1402 criteria for unrestricted use. Note that the cost estimate was prepared in 2014 prior to receipt of the renewed to NRC-23-0021 Page 2 license, but is based on the assumption that Fermi 2 will be shut down by March 20, 2045, consistent with the renewed license as discussed above.

Note: DTE Electric provided to the Michigan Public Service Commission a 2020 Fermi 2 Decommissioning Study that included decommissioning costs for ISFSI license termination and site restoration (Enclosure 3). This study assumes Fermi 2 will permanently cease operations on March 20, 2045. The ISFSI decommissioning costs for license termination and site restoration presented in this study and adopted by DTE Electric were approximately $12.6 million in 2019 dollars or approximately $14.1 million in 2022 dollars using the studys 3.8% annual cost escalation factor; however, because this study comingles both ISFSI license termination and ISFSI site restoration costs, DTE Electric continues to use the 2014 ISFSI decommissioning cost estimate (Enclosure 2) for the purposes of 10 CFR 72.30(b).

• Requirement 3: Identification of and justification for using the key assumptions contained in the decommissioning cost estimate The decommissioning cost estimate key assumptions and their justifications are provided in the plant-specific decommissioning cost estimate for the Fermi 2 ISFSI. See Enclosure 2 to this letter.

• Requirement 4: Description of the method of assuring funds for decommissioning, including means for adjusting cost estimates and associated funding levels periodically over the life of the facility DTE Electric Company is a licensee under 10 CFR 50 and a regulated electric utility.

Therefore, as allowed per 10 CFR 72.30(e)(5), the methods of 10 CFR 50.75(e) may be used. Specifically, the Fermi 2 ISFSI decommissioning funding plan utilizes an external sinking fund as described in 10 CFR 50.75(e)(1)(ii)(A) and (B). The Fermi 2 ISFSI decommissioning funding is collected from customers in rates and fees. The calculation for funding required per year assumes net earnings of 1%. This is consistent with assumptions used in DTE Electric Companys rate case submitted to the Michigan Public Service Commission and is conservative compared to the 2% assumption allowed in 10 CFR 50.75. The funds for ISFSI decommissioning are being placed in a separate account in the Fermi 2 NDT Fund. As of December 31, 2022, the account held approximately

$6.5 million. The State Street Bank and Trust Company is the current trustee. The cost estimate of $8.6 million in 2014 dollars shown in Enclosure 2, Table 2 was escalated to

$10.9 million in 2022 dollars using the Consumer Price Index (CPI).

• Requirement 5: Volume of onsite subsurface material containing residual radioactivity that will require remediation to meet the criteria for license termination The decommissioning cost estimate assumptions for material that will need to be remediated and the volume of waste are provided in the plant-specific decommissioning cost estimate for the Fermi 2 ISFSI (Enclosure 2 to this letter).

to NRC-23-0021 Page 3

• Requirement 6: Certification that financial assurance for decommissioning has been provided in the amount of the cost estimate for decommissioning This signed letter provides certification that DTE Electric Company will provide financial assurance for decommissioning the Fermi 2 ISFSI in the amount indicated in Table 2 of Enclosure 2 of the letter.

Updates to Decommissioning Funding Plan for Fermi 2 ISFSI Updates to the decommissioning funding plan are required per 10 CFR 72.30(c). The Fermi 2 ISFSI decommissioning funding plan will be updated and submitted at intervals not to exceed 3 years. The effects, if any, of the following events listed in 10 CFR 72.30(c)(1)-(4) have been specifically considered in the decommissioning cost estimate since the last submittal of the ISFSI decommissioning funding plan:

1. Spills of radioactive material producing additional residual radioactivity in onsite subsurface material No spills of radioactive material producing additional residual radioactivity in onsite subsurface material have occurred.

2. Facility modifications Facility modifications have not had an effect on ISFSI decommissioning costs.

3. Changes in authorized possession limits There were no changes in authorized possession limits.

4. Actual remediation costs that exceed the previous cost estimate No active decommissioning has occurred; thus, there have not been any actual remediation costs that exceed the previous cost estimate.

In addition to these recurring updates, 10 CFR 72.30(c) also requires an update to be submitted at the time of license renewal. DTE Electric Company was issued a renewed license on December 15, 2016.

Enclosure 2 to NRC-23-0021 Fermi 2 NRC Docket No. 50-341 Operating License No. NPF-43 Fermi 2 ISFSI Decommissioning Cost Estimate

DTE Energy D02-1687-14004; Attachment 1 Fermi 2 Nuclear Power Plant ISFSI - 2045 Shutdown Page 1 of 6 10 CFR 72.30 ISFSI Decommissioning Cost Estimate

1. Background and Introduction The Nuclear Regulatory Commission (NRC) issued its final rule on Decommissioning Planning on June 17, 2011,1" with the rule becoming effective on December 17, 2012.

Subpart 72.30, "Financial assurance and recordkeeping for decommissioning," requires that each holder of, or applicant for, a license under this part must submit for NRC review and approval a decommissioning funding plan that contains information on how reasonable assurance will be provided that funds will be available to decommission the Independent Spent Fuel Storage Installation (ISFSI).

In accordance with the rule, this letter provides a detailed cost estimate for decommissioning the ISFSI at Fermi 2 Nuclear Power Plant (Fermi 2) in an amount reflecting:

1. The work is performed by an independent contractor;

2. An adequate contingency factor; and

3. Release of the facility and dry storage systems for unrestricted use, as specified in 10 CFR Part 20.1402 This letter also provides:

1. Identification of the key assumptions contained in the cost estimate; and

2. The volume of onsite subsurface material containing residual radioactivity, if any, that will require remediation to meet the criteria for license termination, and

2. Spent Fuel Management Strategy If the plant receives a 20-year license renewal, the renewed operating license for Fermi 2 would be projected to expire on March 20, 2045. For planning purposes it is projected that up to 96 spent fuel storage casks are required to store approximately 6,528 assemblies. The ISFSI is operated under a Part 50 General License.

Completion of the ISFSI decommissioning process is dependent upon the DOE's ability to remove spent fuel from the site. DOE's repository program assumes that spent fuel allocations will be accepted for disposal from the nation's commercial nuclear plants, with limited exceptions, in the order (the "queue") in which it was discharged from the U.S. Code of Federal Regulations, Title 10, Parts 20, 30, 40, 50, 70 and 72 "Decommissioning Planning,"

Nuclear Regulatory Commission, Federal Register Volume 76, Number 117 (p 35512 et seq.), June 17, 2011 TLG Services, Inc.

DTE Energy D02-1687-14004; Attachment 1 Fermi 2 Nuclear Power Plant ISFSI - 2045 Shutdown Page 2 of 6 reactor.l2 l DTE Energy's current spent fuel management plan for the Fermi 2 spent fuel is based in general upon completion of spent fuel receipt by no later than year 2054.

3. ISFSI Decommissioning Strategy At the conclusion of the spent fuel transfer process the ISFSI will be promptly decommissioned (similar to the power reactor DECON alternative) by removing and disposing of residual radioactivity and verifying that remaining materials satisfy NRC release criteria.

For purposes of providing an estimate for a funding plan, financial assurance is expected to be provided on the basis of a prompt ISFSI decommissioning scenario. In this estimate the ISFSI decommissioning is considered an independent project, regardless of the decommissioning alternative identified for the nuclear power plant.

4. ISFSI Description The Fermi 2 ISFSI uses a Holtec International (Holtec) HI-STORM 100 dry storage system (nominal 68 assemblies per cask). The HI-STORM 100 is comprised of a multi-purpose canister (MPC) and storage overpack. The multi-purpose canisters are assumed to be transferred directly to the DOE and not returned to the station. The remaining overpacks are assumed to have residual radioactivity due to some minor level of neutron-induced activation as a result of the long-term storage of the spent fuel. The cost to dispose of residual radioactivity, and verify that the remaining facility and surrounding environs meet the NRC's radiological limits established for unrestricted use, form the basis of the ISFSI decommissioning estimate.

In addition to the spent fuel casks located on the ISFSI pad after shutdown there may be additional casks used for Greater-than-Class-C (GTCC) storage. The storage overpacks used for the GTCC canisters (estimated quantity of 4) are not expected to have any interior contamination or residual activation and can be reused or disposed of by conventional means after a final status survey.

Table 1 provides the significant quantities and physical dimensions used as the basis in developing the ISFSI decommissioning estimate.

2 U.S. Code of Federal Regulations, Title 10, Part 961.11, Article IV - Responsibilities of the Parties, B. DOE Responsibilities, 5.(a) ... DOE shall issue an annual acceptance priority ranking for receipt of SNF and/or HLW at the DOE repository. This priority ranking shall be based on the age of SNF and/or HLW as calculated from the date of discharge of such materials from the civilian nuclear power reactor. The oldest fuel or waste will have the highest priority for acceptance, except as ... "

TLG Services, Inc.

DTE Energy D02-1687-14004; Attachment 1 Fermi 2 Nuclear Power Plant ISFSI - 2045 Shutdown Page 3 of 6

5. Key Assumptions / Estimating Approach The decommissioning estimate is based on the configuration of the ISFSI expected after all spent fuel and GTCC material has been removed from the site. The configuration of the ISFSI is based on the unit operating until the end of a 20-year renewed license, or March 20, 2045, and the assumptions associated with DOE's spent fuel acceptance, as previously described.

The nominal size of the ISFSI pad is sufficient to store the projected amount of spent fuel and is expected to be approximately 141 feet in width, and 209 feet in length.

It is not expected that the overpacks will have any interior or exterior radioactive surface contamination. It is expected that this assumption would be confirmed as a result of good radiological practice of surveying potentially impacted areas after each spent fuel transfer campaign. Any neutron activation of the steel and concrete is expected to be extremely small. To validate this assumption, the estimate accounts for characterization of 10% of the overpacks; it is likely that some of this characterization will take place well before the last of the fuel is removed from the ISFSI in order to establish a more definitive decommissioning scope.

The decommissioning estimate conservatively assumes that 12 overpacks (equivalent to the number of casks to store the final full core offload) will contain low levels of neutron-induced residual radioactivity that would necessitate remediation at the time of decommissioning. For purposes of this estimate, the overpacks are designated for controlled disposal as low-level radioactive waste.

It is assumed that a small amount of residual contamination will be present at the in-ground cask transfer facility and the lifting cable assemblies of the HI-TRAC vertical cask transporter at the time of decommissioning. It is not expected that there will be any residual contamination left on the concrete ISFSI pad, or other facilities at the Fermi 2 ISFSI, including the ISFSI fabrication pad. It is expected that these assumptions would be confirmed as a result of good radiological practice of surveying potentially impacted areas after each spent fuel transfer campaign. Therefore, it is assumed for this analysis that only the in-ground cask transfer facility and certain components of the HI-TRAC transporter will be contaminated. As such, only verification surveys are included for the other facilities in the decommissioning estimate.

There is no known [3] subsurface material (soil contamination) in the proximity of the ISFSI containing residual radioactivity that will require remediation to meet the criteria for license termination.

To support an application for License Termination, the estimate assumes that a Final Status Survey will be performed; this will include a 100% survey of the concrete 3 Email Lynne Goodman to Francis Seymore, April 30, 2014.

TLG Services, Inc.

DTE Energy D02-1687-14004; Attachment 1 Fermi 2 Nuclear Power Plant ISFSI - 2045 Shutdovn Page 4 of 6 overpack surfaces, and a significant fraction of the ISFSI pad and the immediate area surrounding the pad, and the other ISFSI structures.

Decommissioning is assumed to be performed by an independent contractor. As such, essentially all labor, equipment, and material costs are based on national averages, i.e.,

costs from national publications such as R.S. Means' Building Construction Cost Data (adjusted for regional variations), and laboratory service costs are based on vendor price lists. Those craft labor positions that are expected to be provided locally. DTE Energy, as licensee, will oversee the site activities; the estimate includes DTE Energy's labor and overhead costs.

Low-level radioactive waste packaging and transport costs are based on industry data.

Disposal costs are based on DTE Energy's existing contracted disposal rates.

Costs are reported in 2014 dollars.

Contingency has been added at an overall rate of 25%. This is consistent with the contingency evaluation criteria referenced by the NRC in NUREG-1757.4]

The estimate is limited to costs necessary to terminate the ISFSI's NRC license and meet the §20.1402 criteria for unrestricted use. Disposition of released material and structures is outside the scope of the estimate.

6. Cost Estimate The estimated cost to decommission the ISFSI and release the facility for unrestricted use is provided in Table 2. The cost has been organized into three phases, including:

" An initial planning phase - empty overpacks are characterized and the specifications and work procedures for the decontamination (liner removal) developed.

" The remediation phase - residual radioactivity is removed, packaged in certified waste containers, transported to the low-level waste site, and disposed of at low-level waste.

" The final phase - license termination surveys, independent surveys are completed, and an application for license termination submitted.

In addition to the direct costs associated with a contractor providing the decommissioning services, the estimate also contains costs for the NRC (and NRC contractor), DTE Energy's oversight staff, site security (industrial), and other site operating costs.

For estimating purposes it should be conservatively assumed that all expenditures will be incurred in the year 2054, the year following all spent fuel removal.

4 "Consolidated Decommissioning Guidance, Financial Assurance, Recordkeeping, and Timeliness," U.S.

Nuclear Regulatory Commission's Office of Nuclear Material Safety and Safeguards, NUREG-1757, Volume 3, Revision 1, September 2003 TLG Services, Inc.

DTE Energy D02-1687-14004; Attachment 1 Fermi 2 Nuclear Power Plant ISFSI - 2045 Shutdown Page 5 of 6 Table 1 Significant Quantities and Physical Dimensions ISFSI Pad Residual Item Length (ft) Width ft Radioactivity ISFSI Pad (dimensions are for current pad) 141 141 No ISFSI Pad Expansion (dimensions are for expansion) 141 68 No ISFSI Overpack Item Value Notes (all dimensions are nominal)

Overall Height (inches) 224 Dimensions are nominal Outside Diameter (inches) 133.90 Main cylindrical body of overpack Inside Diameter (inches) 73.50 Dimensions are nominal Inner Liner Thickness (inches) 1.25 Dimensions are nominal Quantity (total) 96 Quantity (with residual radioactivity) 12 Equivalent to the number of overpacks used to store last complete core offload Total Surface Area of Overpack Inner Liner with Residual Radioactivity (square feet) 4,467 Low-Level Radioactive Waste (cubic feet) 25,083 Low-Level Radioactive Waste (packaged density) 82 Other Potentially Impacted Items Item Value Notes In-Ground Cask Transfer Facility 1 Small amount of residual activity HI-TRAC Vertical Cask Transporter 1 Small amount of residual activity ISFSI Equipment Storage Building 1 No residual radioactivity Number of Overpacks used for GTCC storage 4 No residual radioactivity TLG Services, Inc.

DTE Energy D02-1687-14004;Attachment 1 Fermi2 Nuclear PowerPlantISFSI - 2045 Shutdown Page 6 of 6 Table 2 ISFSI Decommissioning Costs' and Waste Volumes Thousands 2014 dollars Person-Hours Waste Volume Oversight and Decon Removal Packaging Transport Disposal Other Total (ft3) Craft Contractor Decommissioning Contractor Planning (characterization, specs and procedures) 332.0 332.0 1,144.0 Remediation (activated liner removal) 300.0 314.5 581.5 2,505.6 17.1 3,718.7 25,056.0 3,115.5 Remediation (Cask Transfer Facility / HI-TRAC Vertical Transporter) 9.5 19.2 5.0 21.7 21.7 1.9 79.0 217.0 441.5 License Termination (radiological surveys) 1,564.0 1,564.0 12,806.4 Subtotal 9.5 319.2 319.5 603.2 2,527.3 1,915.0 5,693.7 25,273.0 16,363.4 1,144.0 Supporting Costs NRC and NRC Contractor Fees and Costs 383.7 383.7 776.0 Insurance 103.0 103.0 Energy Budget 75.8 75.8 Corporate A&G 219.9 219.9 Security (industrial) 193.9 193.9 5,119.7 DTE Energy Oversight Staff 212.7 212.7 3,883.9 Subtotal 1,189.0 1,189.0 9,779.6 Total (w/o contingency) 9.5 319.2 319.5 603.2 2,527.3 3,104.0 6,882.7 25,273.0 16,363.4 10,923.6 Total (w/25% contingency) 11.9 399.0 399.4 754.0 3,159.1 3,880.0 8,603.4 Note 1: For funding planning purposes decommissioning costs can be assumed to be incurred in year 2054 TLG Services, Inc.

Enclosure 3 to NRC-23-0021 Fermi 2 NRC Docket No. 50-341 Operating License No. NPF-43 DTE Electric Nuclear Decommissioning Study for the Fermi 2 Power Plant

DTE Electric Nuclear Decommissioning Study for the Fermi 2 Power Plant in Response to Michigan Public Service Commission Order U-20162, dated May 2, 2019 2020 FERMI 2 DECOMMISSIONING STUDY PAGE 1

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 2 of 86 SECTION ONE 1 Executive Summary As requested by Commission Order U-20162, dated May 02, 2019, DTE Electric is filing this Fermi 2 nuclear decommissioning study to assess the adequacy of the existing funding for the end-of-life decommissioning of the Fermi 2 Power Plant. DTE Electric finds that DTE Electrics existing practice of annual review and update of the Fermi 2 nuclear decommissioning cost estimates is a reasonable and prudent approach further supported by the Fermi 2 site-specific decommissioning cost estimate performed in 2019 and 2020. DTE Electric finds a reasonable and prudent basis, at this time, to leave unchanged the existing Nuclear Decommissioning Funding component of the Nuclear Surcharge of approximately $3 million per year.

DTE Electric finds reasonable and prudent basis for the following assumptions:

The Fermi 2 Power Plant will permanently cease operations no later than March 20, 2045 and immediately begin planning and preparation for the nuclear decommissioning method DECON.

DTE Electric will have concluded the Fermi 2 Power Plants radiological decommissioning and terminated the operating license no later than 2058.

DTE Electric will be responsible for the safety, security and management of Fermi 2s spent fuel until 2105.

The cost to decommission the Fermi 2 Power Plant is approximately $2.2 billion in 2019 dollars. This cost to decommission includes the costs necessary to complete the Fermi 2 radiological decommissioning (terminate the license), Fermi 2 Independent Spent Fuel Installation (ISFSI) decommissioning and Fermi 2 non-radiological decommissioning (site restoration) as well as post-shutdown spent fuel management (spent fuel management program).

A projected compound cost of escalation of 3.8% applied to the Fermi 2 nuclear decommissioning cost of approximately $2.2 billion is a reasonable and prudent forecast.

The Fermi 2 Nuclear Decommissioning Trust (NDT) has, as of December 31, 2019, approximately 76% of the amounts required to complete the Fermi 2 nuclear decommissioning.

The DTE Electric Nuclear Decommissioning Master Trust Agreement (MTA) governs the Fermi 2 NDT. The NDT is an external trust held outside DTE Electrics normal control. The NDT governance is consistent with all Commission orders, state and federal laws and regulations.

DTE Electric provides the Nuclear Regulatory Commission (NRC) reasonable funding assurance exclusively through the NDT (an external sinking fund, as defined by the NRC). The Nuclear Surcharge, as a non-bypassable charge, is a predicate for DTE Electrics continued exclusive reliance on the NDT to provide NRC reasonable funding assurance.

A projected compound post-tax rate of return of 4.8% applied to the Fermi 2 NDT balances is a reasonable and prudent forecast.

Continued application of the existing Nuclear Decommissioning Funding component of the Nuclear Surcharge of approximately $3 million per year is a reasonable and prudent cost to provide reasonable assurance of sufficient NDT funds to complete the Fermi 2 Power Plant nuclear decommissioning no later than the milestone date of December 31, 2044.

The following notable events have occurred since the Commission Order U-20162, date May 02, 2019:

2020 FERMI 2 DECOMMISSIONING STUDY SECTION ONE l EXECUTIVE

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 3 of 86 In Case No. U-20561, as described in the direct testimony of Witness Jeffrey C. Davis, DTE Electric proposed no change to the Nuclear Decommissioning portion of the Nuclear Surcharge and described the projected expenditures forecasted to complete this nuclear decommissioning study. The Commission approved DTE Electrics proposed no change to the Nuclear Decommissioning portion of the Nuclear Surcharge in the Commissions Order U-20561, dated May 8, 2020.

DTE Electric contracted with Energy Solutions, LLC (EnergySolutions) to perform an inventory analysis of the Fermi 2 Power Plant and provide a Fermi 2 Power Plant site-specific decommissioning cost estimate (SDCE) report. DTE Electric contracted with General Electric-Hitachi (GEH), Excel Services, Barpellam, Inc and Holtec International to provide Fermi 2 plant analysis to support the EnergySolutions scope of work. DTE Electric contracted with Callan LLC to provide industry decommissioning data and analytics. DTE Electric personnel performed or provided work direction for the entire scope of this study.

DTE Electric intends this study to provide readers with a policy-level understanding of its Fermi 2 Power Plant operations, perspective towards the U.S. commercial nuclear industry and regulatory context. The Fermi 2 Power Plant has history dating back to 1968 and a future through 2107; DTE Electric respects the thoughtful policy decisions of those prior and appreciates the opportunity to advocate public policies to ensure our obligations to decommission the Fermi 2 Power Plant are reasonably assured.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION ONE l EXECUTIVE

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 4 of 86 SECTION TWO 2 Table of Contents 1 Executive Summary ...................................................................................................................................................................................................... 2 2 Table of Contents ........................................................................................................................................................................................................... 4 3 Lists of Tables and Figures ......................................................................................................................................................................................... 8 3.1 List of tables .......................................................................................................................................................................................................... 8 3.2 List of figures ........................................................................................................................................................................................................ 8 4 Introduction.................................................................................................................................................................................................................. 10 4.1 Company overview ........................................................................................................................................................................................... 10 DTE Electric ....................................................................................................................................................................................................... 10 DTE Electric - Nuclear Generation .............................................................................................................................................................. 10 4.2 Fermi 2 Power Plant overview ...................................................................................................................................................................... 11 Site location....................................................................................................................................................................................................... 11 Site characteristics .......................................................................................................................................................................................... 11 Fermi 2 Power Plant characteristics .......................................................................................................................................................... 12 Fermi 2 ISFSI characteristics ....................................................................................................................................................................... 14 Fermi 1 ............................................................................................................................................................................................................... 18 Fermi 3 ............................................................................................................................................................................................................... 18 4.3 Nuclear industry overview ............................................................................................................................................................................. 18 Industrys decade in review (2010 - 2019) ............................................................................................................................................ 19 Emergence of nuclear decommissioning as an industry ...................................................................................................................... 21 Consolidated Interim Storage Facility ....................................................................................................................................................... 23 5 Remaining life of nuclear assets............................................................................................................................................................................. 24 5.1 Fermi 2 Power Plant ........................................................................................................................................................................................ 24 Nuclear Regulatory Commission (NRC) ..................................................................................................................................................... 24 Fermi 2 NRC licensing basis ......................................................................................................................................................................... 24 Fermi 2 Power Plant end of life conclusion ............................................................................................................................................. 26 5.2 Independent Spent Fuel Storage Installation (ISFSI) .............................................................................................................................. 26 2010 NRC Waste Confidence Decision ..................................................................................................................................................... 27 Nuclear Regulatory Commission (NRC) ..................................................................................................................................................... 28 Fermi 2 ISFSI licensing basis ....................................................................................................................................................................... 29 2020 FERMI 2 DECOMMISSIONING STUDY SECTION TWO l TABLE OF CONTENTS PAGE 4

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 5 of 86 Fermi 2 ISFSI end of life conclusion .......................................................................................................................................................... 30 5.3 Other facilities .................................................................................................................................................................................................... 30 Fermi 1 ............................................................................................................................................................................................................... 30 Fermi 3 ............................................................................................................................................................................................................... 30 Small modular reactors or other nuclear technologies ......................................................................................................................... 30 6 Regulatory dynamics ................................................................................................................................................................................................. 31 6.1 Federal regulations overview ........................................................................................................................................................................ 31 NRC regulations ............................................................................................................................................................................................... 31 FERC regulations ............................................................................................................................................................................................. 33 IRS regulations ................................................................................................................................................................................................. 33 Integrated regulatory framework ............................................................................................................................................................... 33 6.2 State of Michigan regulations overview ..................................................................................................................................................... 36 Settlement Agreement in MPSC Case No U-6150 (Reopened), dated August 26, 1986............................................................ 36 MPSC Order U-8567, dated January 13, 1987 ....................................................................................................................................... 37 MPSC Order U-10102, dated January 21, 1994 .................................................................................................................................... 37 MPSC Order U-14399, dated December 22, 2005 ............................................................................................................................... 37 MPSC Order U-16472, dated October 20, 2011 .................................................................................................................................... 37 MPSC Order U-17767, dated December 11, 2015 ............................................................................................................................... 37 MPSC Order U-20162, dated May 2, 2019 ............................................................................................................................................. 38 MPSC Order U-20561, dated May 8, 2020 ............................................................................................................................................. 38 6.3 Standard Contract ............................................................................................................................................................................................. 38 Yucca Mountain Project ................................................................................................................................................................................ 39 Standard Contract ........................................................................................................................................................................................... 40 Spent nuclear fuel (SNF) fees ....................................................................................................................................................................... 40 Department of Energy (DOE) litigation ..................................................................................................................................................... 41 Nuclear Waste Fund ....................................................................................................................................................................................... 41 7 Decommissioning cost estimates ........................................................................................................................................................................... 42 7.1 Decommissioning cost estimate overview ................................................................................................................................................. 42 Purpose .............................................................................................................................................................................................................. 42 Approaches to cost estimation .................................................................................................................................................................... 42 Elements of cost estimates ........................................................................................................................................................................... 43 7.2 Existing Fermi 2 decommissioning cost estimate .................................................................................................................................... 45 2020 FERMI 2 DECOMMISSIONING STUDY SECTION TWO l TABLE OF CONTENTS PAGE 5

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 6 of 86 Inventory ........................................................................................................................................................................................................... 46 Decommissioning schedule........................................................................................................................................................................... 47 7.3 2020 Fermi 2 site-specific decommissioning cost estimate ................................................................................................................. 48 Inventory ........................................................................................................................................................................................................... 49 Decommissioning schedule........................................................................................................................................................................... 50 7.4 Fermi 2 NRC minimum decommissioning fund requirement ................................................................................................................ 51 7.5 DTE Electric conclusion ................................................................................................................................................................................... 52 8 Nuclear Decommissioning Trust (NDT) ................................................................................................................................................................. 53 8.1 DTE Electric Master Trust Agreement overview ...................................................................................................................................... 53 8.2 Fermi 2 Nuclear Decommissioning Trusts ................................................................................................................................................. 54 NRC radiological decommissioning ............................................................................................................................................................. 55 NRC ISFSI decommissioning......................................................................................................................................................................... 55 NRC irradiated fuel management ................................................................................................................................................................ 55 8.3 DTE Electric Nuclear Surcharge .................................................................................................................................................................... 56 Nuclear Surcharge overview ........................................................................................................................................................................ 56 8.4 Nuclear Decommissioning Funding Portion of Nuclear Surcharge ..................................................................................................... 57 9 NDT funding adequacy.............................................................................................................................................................................................. 59 9.1 Nuclear Decommissioning Trust funding adequacy overview ............................................................................................................. 59 9.2 Nuclear Decommissioning Cost Estimate ................................................................................................................................................... 60 9.3 Inflation rates (cost escalation) ..................................................................................................................................................................... 61 DTE Electric rate of inflation methodology .............................................................................................................................................. 61 Historical rate of inflation for nuclear decommissioning cost estimates ......................................................................................... 61 DTE Electric forecasted rate of inflation ................................................................................................................................................... 66 9.4 Fermi 2 NDT balances ...................................................................................................................................................................................... 67 9.5 Administrative and incidental expenses ..................................................................................................................................................... 70 Taxes ................................................................................................................................................................................................................... 71 9.7 Fund earnings rate ............................................................................................................................................................................................ 72 DTE Electric rate of return methodology.................................................................................................................................................. 73 DTE Electric historical NDT rate of return ................................................................................................................................................ 73 DTE Electric forecasted rate of return ...................................................................................................................................................... 77 9.8 Net rate of return .............................................................................................................................................................................................. 78 9.9 Adequacy of annual provision ....................................................................................................................................................................... 78 2020 FERMI 2 DECOMMISSIONING STUDY SECTION TWO l TABLE OF CONTENTS PAGE 6

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 7 of 86 Total annual Nuclear Decommissioning Funding provision ................................................................................................................ 78 Minimum annual Nuclear Decommissioning Funding provision allocation to license termination .......................................... 79 Minimum annual Nuclear Decommissioning Funding provision allocation to ISFSI decommissioning .................................. 80 Minimum annual Nuclear Decommissioning Funding provision allocation to other decommissioning .................................. 81 Recommended annual Nuclear Decommissioning Funding provision and contributions ........................................................... 82 10 Rate making considerations .................................................................................................................................................................................. 83 11 References ................................................................................................................................................................................................................. 84 2020 FERMI 2 DECOMMISSIONING STUDY SECTION TWO l TABLE OF CONTENTS PAGE 7

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 8 of 86 SECTION THREE 3 Lists of Tables and Figures 3.1 List of tables Table 7.1 Fermi 2 SDCE low-level radioactive waste (LLRW) material inventory (tons) ........................................................................... 49 Table 7.2 Fermi 2 SDCE LLRW material inventory (volume) relative to the NRC NUREG/CR-6174 Reference BWR ...................... 49 Table 9.1 Summary Fermi 2 SDCE costs in thousands of 2019 dollars. ........................................................................................................ 60 Table 9.2 Fermi 2 SDCE by cost element in thousands of 2019 dollars ........................................................................................................ 60 Table 9.3 NUREG-1307, Revision 17 (2019) cost escalation factors for Fermi 2 Power Plant .............................................................. 62 Table 9.4 Fermi 2 NDT balances as of December 31, 2019 in thousands of dollars. ................................................................................ 68 Table 9.5 Fermi 2 Nuclear Decommissioning Fund (NDF) amounts by purpose as of December 31, 2019 in thousands of dollars

............................................................................................................................................................................................................................................. 68 Table 9.6 Nuclear Decommissioning Fund (NDF) funding levels by purpose as of December 31, 2019 in thousands of dollars 69 Table 9.7 Fermi 2 NDT 2015 - 2019 tax expenses in thousands of dollars ................................................................................................ 72 Table 9.8 Fermi 2 NDT 2015 - 2019 administrative and incidental expenses, excluding taxes, in thousands of dollars .............. 72 Table 9.9 Historical Fermi 2 Nuclear Decommissioning Trust (NDT) pre-tax rate of return (%). ............................................................. 74 Table 9.10 Fermi 2 NDT balances (in billions) as of December 31, 2013 - 2019 ....................................................................................... 75 Table 9.11 Recommended annual Nuclear Decommissioning Funding provision and contributions to the Fermi 2 NDT plans ... 82 3.2 List of figures Figure 4.1 Fermi 2 Power Plant site location, Frenchtown Township, Monroe County, Michigan ........................................................ 11 Figure 4.2 Fermi 2 Power Plant site ......................................................................................................................................................................... 12 Figure 4.3 Simplified schematic of generic Boiling Water Reactor (BWR) and a Pressurized Water Reactor (PWR)....................... 13 Figure 4.4 Cutaway of a drywell torus containment structure and example of a GE BWR/4 with a Mark I containment structure

............................................................................................................................................................................................................................................. 14 Figure 4.5 Fermi 2 Independent Spent Fuel Installation (ISFSI) site .............................................................................................................. 15 Figure 4.6 Holtec HI-STORM 100 dry storage system ........................................................................................................................................ 16 Figure 4.7 Fermi 2 Vertical Cask Transport (VCT) vehicle .................................................................................................................................. 17 Figure 4.8 Fermi 2 Cask Transfer Facility (CTF) .................................................................................................................................................... 18 Figure 9.1 The Fermi 2 Power Plan NRC minimum decommissioning funding. ........................................................................................... 63 Figure 9.2 Core Consumer Price Index [CPI] (Series ID CPGRLE01USA657N) growth rate from previous period (1986 - 2018)

............................................................................................................................................................................................................................................. 64 Figure 9.3 Personal Consumption Expenditures: Chain-type Price Index [PCEPI] (1986 - 2018) ......................................................... 65 Figure 9.4 Fermi 2 reactor services costs index (2010 - 2019) ...................................................................................................................... 66 Figure 9.5 Fermi 2 NDT assets as invested on December 31, 2019 .............................................................................................................. 69 Figure 9.6 Fermi 2 Qualified Fund assets as invested on December 31, 2019 ........................................................................................... 70 Figure 9.7 Fermi 2 Nuclear Decommissioning Trust (NDT) index .................................................................................................................... 75 2020 FERMI 2 DECOMMISSIONING STUDY SECTION THREE l TABLE OF FIGURES PAGE 8

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 9 of 86 Figure 9.8 S&P 500 index (SPX) December 31, 1985 through March 31, 2020........................................................................................ 76 Figure 9.9 U.S. Aggregate Bond Index (LBUSTRUU) December 31, 1985 through March 31, 2020 ................................................... 77 2020 FERMI 2 DECOMMISSIONING STUDY SECTION THREE l TABLE OF FIGURES PAGE 9

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 10 of 86 SECTION FOUR 4 Introduction The decommissioning plan assumptions and strategies presented in this study are to provide reasonable assurance of adequate annual funding provisions and eventual available funds for the decommissioning of the DTE Electric Fermi 2 Power Plant by the year 2045. This study does not constitute a commitment by DTE Electric to perform decommissioning work exactly as presented in this document. As is customary in the commercial nuclear industry, DTE Electric expects to refine and improve the decommissioning plan and cost estimates as the Fermi 2 Power Plant approaches end of life in 2045.

4.1 Company overview DTE (NYSE: DTE) is a Detroit-based diversified energy company involved in the development and management of energy-related businesses and services throughout the United States. DTEs operating units include DTE Gas - a natural gas utility engaged in the purchase, storage, transmission, distribution and sale of natural gas to approximately 1.2 million customers throughout Michigan and DTE Electric - an electric utility servicing approximately 2.2 million customers in southeastern Michigan. Within DTE Electrics diverse portfolio of generation assets is the Fermi 2 Power Plant.

DTE Electric DTE Electric (DTEE or Company) is a direct wholly-owned subsidiary of DTE Energy (DTE) and is an electric utility engaged in the generation, purchase, distribution and sale of electricity to approximately 2.2 million customers in southeastern Michigan.

Founded in 1903 as the Detroit Edison Company, DTE Electric is the largest electric utility in Michigan and one of the largest in the United States with over 11,000 megawatts of electricity generation capacity.

DTE Electric is subject to the regulatory jurisdiction of various agencies, including, but not limited to the Michigan Public Service Commission (MPSC or Commission) and the Nuclear Regulatory Commission (NRC). The MPSC has regulatory jurisdiction pertaining to rates, recovery of certain costs, including the costs of generating facilities, conditions of service, accounting and operating-related matters. The NRC has regulatory jurisdiction over all phases of the operation, construction, licensing and decommissioning of DTE Electrics nuclear plant operations.

DTE Electric - Nuclear Generation DTE Electrics Nuclear Generation organization is responsible for the safe operation of the Fermi 2 Power Plant and is the licensee of the Fermi 1 nuclear plant.

The Companys Fermi 2 nuclear power plant represents approximately 30% of Michigans total nuclear generation capacity. At 1.2 million kilowatts, Fermi 2 is capable of producing enough electricity to serve a city of about one million people. The Fermi 2 Power Plant has been providing safe, carbon-free, reliable, cost-effective power to our communities for more than 30 years and has approximately 25 years remaining until its extended operating license expires.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 11 of 86 4.2 Fermi 2 Power Plant overview The power plant is designated as Fermi 2. The DTE Electric Company (DTE Electric or DTEE) is the sole owner and operator of the Fermi 2 Power Plant.

In this section, we describe the Fermi 2 Power Plants site location, site characteristics, plant characteristics and independent spent fuel storage installation (ISFSI) characteristics. We then discuss the Fermi 1 reactor and the option for the Fermi 3 unit.

We intend each of these discussions to provide insights into the unique characteristics of the Fermi 2 Power Plant and deserving of thoughtful deliberations when considering the funding provisions of Fermi 2 Power Plants eventual nuclear decommissioning.

Site location The Fermi 2 Power Plant is located on the western shore of Lake Erie at Lagoona Beach, Frenchtown Township, in Monroe County, Michigan. The Fermi 2 Power Plant is one of three U.S. nuclear plants located on Lake Erie; Davis-Besse and Perry nuclear power plants are located in Ohio. Fermi 2 Power Plant is the only U.S. nuclear plant where Canada is within the 10-mile emergency planning zone.

Figure 4.1 Fermi 2 Power Plant site location, Frenchtown Township, Monroe County, Michigan Lake Erie Fermi 2 Power Plant The plant is approximately eight miles east-northeast of Monroe, Michigan, approximately 28 miles southwest of downtown Detroit, approximately 33 miles southeast of Ann Arbor and approximately 25 miles northeast of Toledo, Ohio. The Fermi 2 Power Plant is one of the operating U.S. commercial nuclear plants within 50 miles of major population centers; approximately 4.7 million people live within 50 miles of the Fermi 2 Power Plant.

Michigan-wide consideration: Michigan is unaffiliated with a low-level radioactive waste (LLRW) compact. As such, the nuclear power plants located in Michigan do not have government-guaranteed access to a LLRW disposal site.

Site characteristics The Fermi 2 site is on approximately 1,260 acres of land owned solely by DTEE and is bounded on the north by Swan Creek, on the east by Lake Erie, on the south by Point Aux Peaux Road and on the west by Toll Road.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 12 of 86 The Fermi 2 site is home to the Detroit River International Wildlife Refuge Lagoona Beach Unit, which is 685 acres of hardwood swamp and coastal wetlands.

The sites Lake Erie shoreline is protected against erosion by shore piling and concrete tetrapod armor.

The General Service Water (GSW) intake for Fermi 2 is a shoreline structure located adjacent to the Fermi 1 intake channel.

This channel is protected by two rock jetties that extend into Lake Erie. The original design of these GSW intake jetties extended approximately 800 into Lake Erie; however, due to erosion the jetties only extend approximately 150 into Lake Erie.

The GSW intake jetties are undergoing a multi-year restoration project using a concrete tetrapod armor design that is forecasted to complete in approximately 2024. Once restored the north GWS jetty will extend approximately 574 into Lake Erie and the south GSW jetty will extend approximately 726 into Lake Erie; each jetty will be approximately 82 wide at lake level and 102 wide at lake bottom.

Transportation facilities are readily available to the Fermi 2 site. Interstate Highways I-75 and I-275 are approximately five miles west of the site. More immediate access to the site is available from the Dixie Highway, which runs north and south approximately two miles west of the site. From Dixie Highway, Enrico Fermi Drive (a paved private access road) enters the site on the western boundary and serves as the sites main entrance. The site also has rail access via a rail spur connected to the Canadian National Railroads main line located approximately four miles west of the site.

Fermi 2 Power Plant characteristics Fermi 2 uses a General Electric (GE) single-cycle, forced-circulation Boiling Water Reactor (BWR) of the BWR/4 class, with a pressure-suppression Mark I containment. The Fermi 2 design power rating is 3,486 MW-thermal (MWt) with gross electric output of 1,235 MW-electric (MWe) and a net electrical output of 1,170 MWe.

The principal structures of the Fermi 2 Power Plant are the Reactor Building, Turbine Building, Auxiliary Building, Residual Heat Removal (RHR) Complex, Radwaste Building, On-site Storage Facility (OSSF), two natural-draft hyperbolic circulating water cooling towers, Independent Spent Fuel Storage Installation (ISFSI) and office buildings.

Figure 4.2 Fermi 2 Power Plant site Cooling towers Auxiliary Building ISFSI Reactor Building Radwaste Building/OSSF RHR Complex Turbine Building Fermi 1 Differentiating characteristics: In in United States, there are 96 operating commercial nuclear reactors. Of those 96, 64 are pressurized water reactor (PWR) designs and 32 are BWRs - again, the Fermi 2 Power plant is a BWR design. Of the 32 U.S.

BWRs, 22 have the Mark I containment structure; only 14 are of GE BWR/4 class with a Mark I containment similar to the 2020 FERMI 2 DECOMMISSIONING STUDY SECTION FOUR l INTRODUCTION PAGE 12

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 13 of 86 Fermi 2 Power Plant. Of the 14 GE BWR/4s with Mark I containments, only seven have a design power rating greater than 3,200 MWt (Browns Ferry Units 1,2,3; Peach Bottom Units 2,3, Fermi 2 and Hope Creek). Of these seven BWR/4 Mark-I designs, only Fermi 2 and Hope Creek use natural draft cooling towers.

Figure 4.3 Simplified schematic of generic Boiling Water Reactor (BWR) and a Pressurized Water Reactor (PWR).

BWR PWR https://www.nrc.gov/images/bwrsm.jpg https://www.nrc.gov/images/pwrsm.jpg As shown in Figure 4.3, a BWR such as the Fermi 2 Power Plant uses a single steam-water loop where the reactor core heats water (figure reference 1,2), which then converts to steam (3) which the steamline directs towards the main turbine (4). In contrast, a PWR uses a two-loop system where the reactor core heats water under pressure (1) which then exchanges heat with a lower pressure water system (2) that converts to steam (3) which the steamline directs towards the main turbine (4). As the BWR steamline drives radioactive steam-water throughout the power plant, BWRs typically have considerably more radioactively contaminated material and equipment than a corresponding PWR.

The primary characteristic of the Mark I containment is the torus containment structure, shown in Figure 4.4; 22 U.S. nuclear plants share the Mark I containment design with the Fermi 2 Power Plant. The torus containment structure is a donunt-shaped suppression chamber located beneath the reactor vessel and contains a reservoir of water. The purpose of the torus containment structure is to absorb energy and provide the reactor with emergency cooling water during accident scenarios.

The Fermi 2 torus containment structure is a continuous, leaktight steel pressure vessel with a major diameter of approximately 113 feet (ft), the interior diameter of the torus is approximately 30 ft and typically contains approximately one million gallons of water during operations; a special coating material protects the interior of the steel torus shell from corrosion.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 14 of 86 Figure 4.4 Cutaway of a drywell torus containment structure and example of a GE BWR/4 with a Mark I containment structure Cutaway Example BWR/4 Torus Perhaps the most recognizable structure associated with nuclear power plants is the natural-draft cooling tower; however, only about a quarter of the nuclear power plants in the U.S. use natural draft cooling towers. The two Fermi 2 natural-draft cooling towers are reinforced concrete hyperbolic structures approximately 400 ft tall with a diameter of approximately 450 at the exterior base. The water flowing through the cooling towers and associated circulating water system is not contaminated; water vapor emanates from the top of the towers during operations.

Fermi 2 ISFSI characteristics The Fermi 2 ISFSI consists of a dry fuel storage system, equipment and facilities. The Fermi 2 dry fuel storage system is the Holtec International (Holtec) HI-STORM 100 (an acronym for Holtec International Storage Module) dry storage system. The Fermi 2 ISFSI equipment consists of Vertical Cask Transport (VCT) equipment and material handling equipment. The Fermi 2 ISFSI facilities consist of an ISFSI Equipment Building, ISFSI Storage Pad, ISFSI Fabrication Pad, ISFSI Transfer Pad and ISFSI Cask Transfer Facility (CTF).

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 15 of 86 Figure 4.5 Fermi 2 Independent Spent Fuel Installation (ISFSI) site ISFSI Equipment Building Cask Transfer Facility ISFSI Fabrication Pad ISFSI Storage Pad Fermi 2 ISFSI dry fuel storage system: The Fermi 2 ISFSI uses a Holtec HI-STORM 100 dry storage system (nominal 68 fuel assemblies per cask). The HI-STORM 100 unit consists of a sealed metallic canister, referred to as a multi-purpose canister (MPC), contained within a storage overpack.

The HI-STORM 100 system accommodates a spectrum of spent nuclear fuel assemblies in a single overpack design by using different MPCs. The MPC is a cylindrical prismatic structure with honeycomb square cross-section storage cavities (storage locations); the number of storage locations depends on the type of fuel. The external dimensions of all Holtec MPCs are identical to allow the use of a single overpack. Each MPC has different internals (baskets) to accommodate distinct fuel characteristics. Holtec identifies each MPC by the maximum number of fuel assemblies the MPC is capable of receiving; for example, the MPC-24 has a maximum capacity of 24 pressurized water reactor (PWR) fuel assemblies and the MPC-68 has a maximum capacity of 68 BWR fuel assemblies. The Fermi 2 ISFSI uses the Holtec MPC-68 and MPC-68M design.

The HI-STORM 100 system is a storage only system and is not suitable for transport.

The HI-STORM 100 system provides spent nuclear fuel (SNF) and radioactive material confinement, radiation shielding, criticality control and passive heat removal independent of any other facility, structures or components. The Fermi 2 HI-STORM 100 system is capable of accepting discharged SNF after approximately seven years of cooling in the spent fuel pool, subject to heat balancing requirements of the Fermi 2 HI-STORM 100 system.

Fermi 2 transports the loaded MPCs from the Fermi 2 Reactor Building to the ISFSI cask transfer pad using the Holtec HI-TRAC (an acronym for Holtec International Transfer Cask) system.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 16 of 86 Figure 4.6 Holtec HI-STORM 100 dry storage system Holtec Multi-purpose canister (MPC) inside a Holtec HI-TRAC Holtec HI-STORM 100 dry storage cask overpacks Fermi 2 ISFSI equipment: The Fermi 2 ISFSI uses a Konecranes Vertical Cask Transport (VCT) which is a single failure proof, American Society of Mechanical Engineers Rules for Construction of Overhead and Gantry Cranes (Top Running Bridge, Multiple Girder) ASME NOG-1-2004 Standard compliant wheeled vehicle used for handling spent fuel casks and the transfer of loaded multi-purpose canister(s) (MPC) from HI-TRAC transfer cask(s) into HI-STORM over pack. The VCT consists of a vehicle mainframe, lifting towers, cask-restraining system inhibiting casks from lateral movement, drive and control system, crossbeams and reeved crane system.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION FOUR l INTRODUCTION PAGE 16

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 17 of 86 Figure 4.7 Fermi 2 Vertical Cask Transport (VCT) vehicle VCT loading a HI-STORM 100 unit at the CTF VCT transferring a HI-STORM 100 unit Fermi 2 ISFSI facilities: The ISFSI Equipment Building provides enclosed parking for the VCT and storage of other ISFSI material handling equipment. The building is an approximately 100 by 55 insulated and fire-protected pre-fabricated steel-panel structure located adjacent to the ISFSI Storage Pad.

The ISFSI Storage Pad provides a level resting surface for dry fuel storage casks. The pad is a 141 by 141 square reinforced concrete structure that is two feet thick and designed to accommodate 64 (expandable to 96) dry fuel storage cask locations.

The pad is compliant with 10 CRF Part 72 licensing requirements for the independent storage of spent nuclear fuel (SNF), high-level radioactive waste and reactor-related greater than Class C waste and with ACI 349 Code Requirements for Nuclear Safety-Related Concrete Structures, 2001. The pad includes a surrounding fence and is dependent on existing Fermi 2 security programs to control physical access to the pad.

The ISFSI Fabrication Pad provides a level surface for completing the manufacture of the dry fuel storage casks.

The ISFSI CTF provides a seismically secure location for fuel transfer. The facility is a subterranean reinforced concrete structure embedded in soils adjacent to the ISFSI haul path.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION FOUR l INTRODUCTION PAGE 17

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 18 of 86 Figure 4.8 Fermi 2 Cask Transfer Facility (CTF)

Fermi 1 Fermi 2 shares a site with the permanently shut down nuclear reactor facility Fermi 1 Power Plant. DTE is the licensee and holder of NRC Fermi 1 Facility Operating License DPR-9, Docket 50-16.

Fermi 1 was a fast breeder reactor cooled by sodium and operated at essentially atmospheric pressure. The Fermi 1 licensee at the time, Power Reactor Development Company (PRDC), decided to decommission Fermi 1 in November of 1972. Fermi 1 does not have spent fuel or Special Nuclear Material (SNM) stored on-site as the fuel was all shipped to the Savannah River Project facility in 1973 and all SNM was certified to be removed from the Fermi 1 site on November 6, 1975.

Fermi 3 Fermi 2 would share a site with the proposed Fermi 3 Power Plant. The NRC issued DTE Electric a combined (construction and operating) license on May 1, 2015. The Fermi 3 Power Plant is licensed as a GE-Hitachi Economic Simplified Boiling-Water Reactor (ESBWR) with a rated power of 4,500 MWt. No structures have been added or removed to the Fermi 2 site in anticipation of Fermi 3 construction. As of December 31, 2019, DTE Electric had not committed to constructing the Fermi 3 Power Plant.

4.3 Nuclear industry overview The U.S. commercial nuclear industry (industry) has undergone significant change in the past decade. Throughout the 2000s, the industry was stable with improving capacity. The 2010s were more volatile to the industry: one new reactor began commercial operations, four reactors began construction - two of which later cancelled, nine reactors permanently shut down, seven reactors announced shutdowns between 2020 and 2025 and seven reactors announced imminent shutdowns but remained operational after state policy changes. As reactors shutdown, companies began to realize different opportunities within the industry and nuclear decommissioning and spent fuel storage emerged as a new competitive market.

In this section, we review the changes in the industry since 2010, we then discuss novel business agreements that have formed between utilities/owners and decommissioning businesses and then we discuss novel business plans for storing spent nuclear fuel. We intend each these discussions to provide summary background and help provide context of future opportunities and risks associated with Fermi 2 Power Plants eventual nuclear decommissioning.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION FOUR l INTRODUCTION PAGE 18

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 19 of 86 Industrys decade in review (2010 - 2019) 2010: The U.S. commercial nuclear fleet (fleet) of 104 operating nuclear reactors reached a peak generation of approximately 807 million MWh in 2010 [EIA19]. The industry was beginning to focus on extending the licensing life of its reactors to a total of 60 years through NRC license renewal; the Oyster Creek Nuclear Generating Station (OCNGS or Oyster Creek) received the NRCs first license renewal approval in 2009. Also, the industry was uprating the existing fleet with the NRC approving four power uprate applications in 2009 adding approximately 56 megawatts electric (MWe) of capacity, reviewing an additional 15 power uprate applications with potential to add 1,145 MWe of capacity, and expecting an additional 39 power uprate applications through 2014 [SECY1070]. The industry was also progressing towards new nuclear generating assets with the Tennessee Valley Authority (TVA) restarting construction of the Watts Bar Unit 2 nuclear plant in 2007 [SECY1015] and the NRC had 18 combined license (COL) applications (for 28 units) under review. The last nuclear power plants to shut down were Zion Nuclear Power Station (ZNPS or Zion), Units 1 & 2 and Millstone Nuclear Power Station, Unit 1 in 1998 [EIA10].

Exelon announced in December 2010 its intention to shut down Oyster Creek in 2019 [EIA11]. Oyster Creek permanently ceased operations on September 17, 2018 [ML18263A163].

2012: By 2012, the industry had received 71 NRC license renewal approvals with another 15 license renewal applications under NRC review and was anticipating an additional 14 license renewal application submissions through 2016. [SECY1284]

The Energy Information Agency (EIA) began projecting [EIA12] the restart of construction of the Bellefonte Nuclear, Unit 1 based on TVAs 2011 Integrated Resource Plan (IRP) [TVA11]. Southern Nuclear Generation and South Carolina Electric & Gas Company (SCE&GC) received the first of the NRC COLs in 2012 to start the construction of the Vogtle Units 3 & 4 and the Virgil C. Summer (VC Summer) Units 2 & 3 respectively [EIA13].

Omaha Public Power District (OPPD) in August 2012 awarded Exelon Generation Company, LLC, a subsidiary of Exelon Corporation (Exelon), a contract to manage the Fort Calhoun Station [ML122541041]. The agreement was reportedly worth 20-years and $400 million for Exelon to manage the nuclear plant [OPPD15]; additionally OPPD reportedly awarded a second contract to Exelon worth approximately $1 million per year to use Exelons management model and operating procedures.

OPPD retained ownership of the nuclear plant under the arrangement [OPPD18].

Dominion Resources, Inc, a subsidiary of Dominion Energy (Dominion), announced in October 2012 its intention to shutdown Kewaunee Power Station in 2013. Kewaunee permanently ceased operations on May 7, 2013 [ML13135A209].

2013: Duke Energy Florida (DEF), a subsidiary of Duke Energy, announced in February 2013 its intention to immediately shutdown Crystal River, Unit 3 (CR-3). CR-3 permanently ceased operations on February 20, 2013 [ML13056A005].

Southern California Edison (SCE) announced in June 2013 its intention to immediately shutdown operations at San Onofre Nuclear Generating Station (SONGS), Units 2 & 3. SONGS permanently ceased operations on June 28, 2013 [ML13183A391].

Entergy Nuclear Vermont Yankee, LLC, a subsidiary of Entergy Corporation (Entergy), announced in September 2013 its intention to shutdown Vermont Yankee Nuclear Power Station in 2014. Vermont Yankee permanently ceased operations on December 29, 2014 [ML15085A047].

2015: DTE Electric receives in May 2015 the Fermi 3 COL from the NRC [ML14323B045].

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 20 of 86 Entergy Nuclear, a subsidiary of Entergy Corporation (Entergy), announced in October 2015 its intention to shutdown Pilgrim Nuclear Power Station in 2019. Pilgrim permanently ceased operations on May 31, 2019 [ML19161A033].

Entergy announced in November 2015 the early retirement of the James A. FitzPatrick Nuclear Power Plant in New York.

However - in January 2017, Entergy announced FitzPatrick would continue operations in the form of a planned sale and license transfer to Exelon; Exelon had agreed to purchase FitzPatrick from Entergy for approximately $110 million following New Yorks adoption of the Clean Energy Standard [ML17012A280].

2016: Exelon reportedly notified the New York State Public Service Commission in June 2016 of its intent to retire early the R.E. Ginna Nuclear Power Plant and the Nine Mile Point Nuclear Station, Unit 1 absent New Yorks adoption of zero emission credits (ZECs). However - Exelon continues to operate both units following New Yorks adoption of the Clean Energy Standard

[EXN16].

Exelon announced its intention in June 2016 the early retirement of the Clinton Power Station and the two-unit Quad Cities Generating Station, both located in Illinois. However - in December 2016, Exelon later announced both plants would continue operating due to Illinois adoption of the Energy Future Jobs Bill [ML16349A311],[ ML16349A314].

OPPD announced in June 2016 its intention to shut down the Fort Calhoun Station in 2016. Fort Calhoun permanently ceased operations on October 2016 [ML16319A254].

Pacific Gas & Electric Company, a subsidiary of PG&E Corporation (PG&E), submitted a joint proposal to the California Public Utility Commission (CPUC) in August 2016 to shut down the two-unit Diablo Canyon Power Plant once the units respective operating licenses expire in 2024 and 2025. In January 2018, the CPUC issued an order accepting the proposed 2024/2025 closure of the Diablo Canyon Power Plant [CPUC18].

Entergy announced in December 2016 its intention to shut down the Palisades Nuclear Plant in October 2018. Entergy amended this announcement in September 2017 to update that Palisades would shut down in the spring of 2022

[ML17271A233].

DTE Electric receives in December 2016 the Fermi 2 renewed license from the NRC [ML16270A546].

2017: Entergy announced in January 2017 an agreement with the State of New Yok to shut down the two-unit Indian Point Nuclear Power Plant no later than April 30, 2020 and April 30, 2021 for Indian Point, Unit 1 and Indian Point, Unit 2 respectively [ML17068A245].

Exelon announced in May 2017 its intention to shut down the Three Mile Island Nuclear Station in 2019. Three Mile Island permanently ceased operations on September 20, 2019 [ML19269E480].

SCE&GC announced in July 2017 its attention to abandon construction of the two VC Summer reactors [ML18198A299].

2018: PSEG Power, LLC, a subsidiary of Public Service Enterprise Group Incorporated (PSEG), filed in February 2018 a Form 8-K notifying the U.S. Securities and Exchange Commission (SEC) of the intention cease capital investments in the Hope Creek Generating Station and the two-unit Salem Nuclear Plant, both in New Jersey, absent New Jerseys adoption of zero emission credits (ZECs). PSEG filed in April 2019 an additional notification of its intention to deactivate both plants absent the awarding 2020 FERMI 2 DECOMMISSIONING STUDY SECTION FOUR l INTRODUCTION PAGE 20

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 21 of 86 of ZEC certificates to both plants [PSEG19]. However - PSEG continues to operate both plants following New Jerseys approval to issue ZEC certificates to both plants.

First Energy Solutions Corp (FES), a subsidiary of FirstEnergy Corporation, announced in March 2018 the early retirement of the Davis-Besse Nuclear Power Station, Perry Nuclear Power Plant (both located in Ohio) and the two-unit Beaver Valley Power Station located in Pennsylvania. FES filed for relief under Chapter 11 bankruptcy in March 2018. However - in July 2019, FES announced Perry and Davis-Besse nuclear plants would continue operations due to Ohios adoption of the Ohio Clean Air Program [ML19207A097]. Beaver Valley Power Plant is likely to continue operations as well.

NextEra Energy Resources, LLC (NextEra) announced in July 2018 an agreement with Interstate Power and Light (using the trade name Alliant Energy), a subsidiary of Alliant Energy Corporation, to shorten the term of the Duane Arnold Energy Center (Duane Arnold or DAEC) purchased power agreement. NextEra Energy Duane Arnold, LLC, NextEra, announced in January 2019 its intention to shut down of the Duane Arnold Energy Center (Duane Arnold or DAEC) in the fourth quarter of 2020

[ML19023A196].

2019: The U.S. fleet of 98 operating nuclear power reactors achieved a new peak generation of approximately 809 million MWe in 2019; the U.S. fleet ended 2019 with 96 operating nuclear reactors as two reactors (Pilgrim and Three Mile Island) permanently ceased operation in 2019 [NEI20].

2020: As of January 1, 2020, the U.S. fleet has 96 operating nuclear reactors. Four nuclear plants (6 reactors) are planning to shut down by 2025. Eleven nuclear plants (16 reactors) are operating because of state policy changes in Illinois, New York, New Jersey, Connecticut, Ohio and Pennsylvania. Two reactors (Vogtle Units 3 & 4) are planning to start commercial operation no later than 2025.

Emergence of nuclear decommissioning as an industry Over the past decade, U.S. commercial nuclear plant licensees have adopted new business models for accomplishing decommissioning. The NRC acknowledges [ML20101H123] four general models:

1. The Licensee Model: The licensee (from when the plant was operating) maintains the license in decommissioning and performs the decommissioning. The licensee could be an electric utility (i.e. regulated cost recovery) or a non-utility company (i.e. a merchant plant). For example, PG&E is using this model to decommission Humboldt Bay Nuclear Power Plant.

2. The Decommissioning Contract Model: The licensee maintains the license in decommissioning and manages a decommissioning contractor. For example, SCE is using this model to decommission SONGS.

3. The Temporary License Transfer Model: The licensee requests a transfer of the license (and its obligations) to a decommissioning company. At the completion of the decommissioning, the license and property transfer back to the original licensee. For example, Exelon is using this model to decommission Zion.

4. The Permanent License Transfer Model: The license requests transfer of the license as part of an asset sale of the nuclear power plant, associated land and spent nuclear fuel to a decommissioning company. For example, Exelon used this model to transfer the obligation to decommission Oyster Creek to a decommissioning company.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION FOUR l INTRODUCTION PAGE 21

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 22 of 86 Hybrid models have emerged and may continue to develop as opportunities dictate. The general trend of the more recently developed models is to transfer more of the legal obligation to decommission nuclear power plants from public electric utilities or large publicly traded companies to smaller private companies.

The Licensee Model: Humboldt Bay Nuclear Power Plant is owned and operated by Pacific Gas and Electric (PG&E). PG&E has retained the property, plant and spent fuel and ISFSI ownership, operations and obligations through the end of decommissioning. Although contracts awarded for specific activities, PG&E remains the primary responsible party for the completion of the decommissioning activities.

PG&E is an electric utility (i.e. a regulated generator) and Humboldt Bay Nuclear Plant is under the jurisdiction of the California Public Utility Commission (CPUC).

Decommissioning Contract Model: San Onofre Nuclear Generating Station (SONGS) is owned by Southern California Edison (SCE) and San Diego Gas and Electric (SDGE) and is operated by SCE. The SONGS agreement is the original plant owners retain the property, plant and spent fuel and ISFSI rights/ownership, operations and obligations through the end of decommissioning.

The original plant owners contract the plants decommissioning to a single entity who is then contractually obligated to complete the decommissioning activities.

Southern California Edison is an electric utility (i.e. a regulated generator) and SONGS is under the jurisdiction of CPUC.

Temporary License Transfer Model: Zion Nuclear Power Station, Units 1 & 2 (Zion or ZNPS) was owned and operated by Exelon Generation Company (Exelon). The Zion asset sale agreement (ASA) transfers plant ownership, operations and obligations to a third party in exchange for the plants nuclear decommissioning trust fund; the original owner retains the property and spent fuel and ISFSI ownership, operations and obligations.

The ASA is outlined for the Nuclear Regulatory Commission (NRC) in the Application for License Transfers and Conforming License Amendments, dated January 25, 2008 [ML080310521]. The NRC approved the Zion ASA in Order Approving the Transfer of License and Conforming Amendment, dated May 4, 2009 [ML090930039].

Exelon is a non-utility merchant generator and Zion is not under the jurisdiction of a public service commission.

Permanent License Transfer Model: Oyster Creek Nuclear Generating Station (OCNGS or Oyster Creek) was owned and operated by Exelon. The Oyster Creek asset purchase sale agreement (PSA) transfers the property, plant and spent fuel and ISFSI ownership, operations and obligations to a third party in exchange for the plant nuclear decommissioning trust fund.

The PSA is outlined for the NRC in the Application for Order Approving Direct Transfer of Renewed Facility Operating License and General License and Proposed Conforming License Amendment, dated August 31, 2018 [ML18243A489]. The NRC approved the Oyster Creek ASA in Order Approving the Transfer of License and Conforming Amendment, dated June 20, 2019

[ML19095A458].

Exelon is a non-utility merchant generator and Oyster Creek is not under the jurisdiction of a public service commission.

Hybrid Temporary/Permanent License Transfer Model: Crystal River Unit 3 Nuclear Generating Plant (CR-3) is owned and operated by Duke Energy Florida (Duke Energy). The proposed CR-3 decommissioning services agreement and purchase and 2020 FERMI 2 DECOMMISSIONING STUDY SECTION FOUR l INTRODUCTION PAGE 22

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 23 of 86 sale agreement (DSA/PSA) transfers spent fuel and ISFSI ownership, operations and obligations as well as the plant operations and obligations to a third party; the original owner retains the property and the plant nuclear decommissioning trust fund.

The DSA/PSA is outlined for the NRC in the Application for Order Consenting to Direct Transfer of Control of Licenses and Approving Conforming License Amendment, dated June 14, 2019 [ML19170A209]. The NRC approved the CR-3 DSA/PSA in Order Approving the Transfer of License and Conforming Amendment, dated April 01, 2020 [ML20069A023].

Duke Energy is an electric utility (i.e. a regulated generator) and CR-3 is under the jurisdiction of the Florida Public Service Commission (FPSC).

Consolidated Interim Storage Facility The use of a Consolidated Interim Storage Facility (CISF) is a recommendation of the Blue Ribbon Commission on Americas Nuclear Future [BRC12]. A CISF is a large-scale, centralized ISFSI capable of accepting the dry-stored spent nuclear fuel (SNF) from multiple commercial nuclear power plants. The Nuclear Waste Policy Act (NWPA) prohibits the Department of Energy (DOE) from accepting title of commercial SNF prior to certain milestones for the establishment of a permanent geological repository. Under the current NWPA, the CISF applicants would be limited, with few exceptions, to contract directly with commercial nuclear power plant owners themselves rather than the DOE to store SNF at their CISF [ML19127A026].

The NRC is reviewing two CISF applications submitted by private commercial entities:

Holtec HI-STORE CIS (Consolidated Interim Storage Facility) - Lea County, New Mexico: Holtec International (Holtec) submitted an application [ML18059A251], dated March 30, 2017, to the NRC to construct and operate an away from reactor (AFR) ISFSI, named HI-STORE CIS, initially authorized to store 500 canisters of SNF for an initial 40-year license duration. Hotlec proposes to use its subterranean HI-STORM UMAX canister storage system currently deployed at SONGS, Callaway and Humboldt Bay nuclear power plants at the HI-STORE CIS. This HI-STORM UMAX system is also physically compatible with the all other Hotlec canister storage systems such as HI-STORM and HI-STAR; however, the only multi-purpose canisters (MPC) included in the HI-STORM UMAX licensing basis are of the Holtec MPC-37 and MPC-89 design.

Waste Control Specialists LLC Consolidated Interim Storage Facility - Andrews County, Texas: Waste Control Specialists LLC (WSC) submitted an application [ML16132A533], dated April 28, 2016, to the NRC to construct and operate monitored retrievable storage (MRS) installation or ISFSI initially authorized to store 5,000 metric tons of uranium (MTU) in dry-cask storage for an initial 40-year license duration. Interim Storage Partners LLC (ISP), a joint venture between WCS and Orano CIS LLC (a subsidiary or Orano USA), revised the April 28, 2016 application [ML18166A003] on June 8, 2018. ISP proposes to use dry storage technology from Orano TN (a subsidiary of Orano USA) and NAC International (NAC) to target stranded ISFSIs at sites of former reactors such as Yankee Rowe, Connecticut Yankee and Rancho Seco nuclear plants [ML18206A550].

2020 FERMI 2 DECOMMISSIONING STUDY SECTION FOUR l INTRODUCTION PAGE 23

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 24 of 86 SECTION FIVE 5 Remaining life of nuclear assets The Fermi 2 Power Plant has been providing DTE Electric customers with safe, reliable, clean and cost-effective electricity since commercial operations began in 1988. In 2019, the Fermi 2 Power Plant set its single-year generation record at 10.3 million MWh, achieved a 98.9% capacity factor and caused avoided emissions of approximately 10 million metric tons of carbon dioxide. The Fermi 2 Power Plant has the capacity to be a key contributor for DTE Electrics emission-free generation fleet for the next two decades.

In this section, we address the remaining life of DTE Electrics nuclear assets located at the Fermi 2 site: Fermi 2 Power Plant, Fermi 2 Independent Spent Fuel Storage Installation (ISFSI), other assets such as the Fermi 1 Power Plant and the Fermi 3 combined operating license (COL). We intend this discussion to DTE Electrics report supporting the remaining life of nuclear generating units as listed in Paragraph 11, Bullet d of the Michigan Public Service Commission (MPSC) Settlement Agreement U-6150 (re-opened), dated August 26, 1986. This report is critical to understanding the time horizons DTE Electric and the MPSC have to address any potential nuclear decommissioning funding shortfalls.

5.1 Fermi 2 Power Plant In this portion of the section, we discuss the anticipated remaining life of the Fermi 2 Power Plant - the nuclear generating unit located at the Fermi 2 site. The discussion reviews Fermi 2 Power Plants historical and future Nuclear Regulatory Commission (NRC) licensing periods. DTE Electric defines the remaining operating life of the Fermi 2 Power Plant as approximately 25 years as limited by its current NRC extended operating license expiring on March 20, 2045.

Nuclear Regulatory Commission (NRC)

The Nuclear Regulatory Commission (NRC) is the independent federal agency responsible for the safe use of radioactive materials for beneficial civilian purposes while protecting people and the environment. The NRC regulates commercial nuclear power plants and other uses of nuclear materials, such as in nuclear medicine, through licensing, inspection and enforcement of its requirements. Prior to the NRCs creation in 1975 (The Energy Reorganization Act of 1974), the Atomic Energy Commission (AEC) had responsibility for nuclear regulation; historic reference to the AEC is not changed.

The operating life of commercial nuclear power plants is determined by the expiration date of the plants NRC operating license.

The initial term of an NRC operating license is 40 years. Commercial nuclear power plants may apply to the NRC and request a license renewal for an additional 20 years to extend operations from 40 years to 60 years. Recent to 2017, commercial nuclear power plants may apply to the NRC and request a subsequent license renewal for a second additional 20 years to extend operations from 60 years to 80 years. A commercial nuclear power plants NRC license must be terminated within 60 years of the permanent cessation of operations.

Fermi 2 NRC licensing basis DTE Electric is the holder of the Fermi 2 NRC operating license NPF-43, Docket Number 50-341. DTE Electric is a direct wholly owned subsidiary of the DTE Energy Company (DTE). Prior to 2013, DTE Electric was the Detroit Edison Company (Detroit Edison or DECo); historic reference to the Detroit Edison Company is not changed.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION FIVE l REMAINING LIFE OF NUCLEAR ASSETS PAGE 24

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 25 of 86 Construction Permit: In April 1969, the Detroit Edison Company submitted an application to the Atomic Energy Commission (AEC) to construct the Enrico Fermi Atomic Power Plant Unit 2. The AEC granted Exemption Authorizations for construction prior to receipt of the construction permit for (1) reactor building foundations and walls below grade in October 1970 and (2) for steel sections below grade in March 1971. The AEC approved the Fermi Power Plant construction permit in September 1972.

Initial Facility Operating License: The Atomic Energy Act of 1954 and NRC regulations limit commercial power reactor licenses to an initial 40 years but also allow licenses to be renewed. Political, economic, antitrust and other considerations - not a nuclear technology limitation - determined the basis for the initial 40-year license term.

The NRC issued the initial Facility Operating License (NPF-33) for the Fermi 2 Power Plant on March 20, 1985 to allow Fermi 2 to load fuel and perform low-power testing; this license issuance marked the start of the initial 40-year term for the Fermi 2 Power Plant. The NRC superseded NPF-33 with Facility Operating License NPF-43 on July 10, 1985 to allow Fermi 2 to operate at 100% power.

The Fermi 2 Power Plant started commercial operations on January 23, 1988. Michigan Public Service Commission established the requirements for Detroit Edison to certify Fermi 2 Power Plants commercial operation status in MPSC Order U-7760, dated April 1, 1986. The Commission concurred with Detroit Edisons certification in MPSC Opinion U-7660, dated February 23, 1988.

License renewal: A commercial nuclear power plant licensee may apply to review its license as early as 20 years before the expiration of its current license. There is no limit on how late a licensee may apply for a license renewal; and if the licensee submits the renewal application at least five years before the expiration of its current license, the plant can continue to operate until the NRC completes its review. In the case of an insufficient renewal application submission prior to at least five years before the current license expiration, the plant may have to stop operating if the license expires before the NRC makes a renewal decision.

The amended 10 CFR 54 Requirements for Renewal of Operating Licenses For Nuclear Power Plants established the NRCs regulatory process for license renewal where the focus of the NRC is on managing the adverse effects of aging to ensure that important passive, long-lived systems, structures and components will continue to perform their intended function in the period of extended operation. [80 FR 22461].

The revised environmental protection regulations in 10 CFR 51 Environmental Protection Regulations for Domestic Licensing and Related Regulatory Functions facilitate the environmental review for license renewal.

The NRC approved the Fermi 2 Power Plant license renewal on December 15, 2016. With the NRCs decision, Fermi 2s licensed life extended 20 years from March 20, 2025 to March 20, 2045. DTE Electric submitted the Fermi 2 Power Plant license renewal to the NRC in April 2014.

Subsequent license renewal (SLR): The NRC defines subsequent license renewal (SLR) to be the period of extended operations from 60 years to 80 years. The NRC first issued SLR evaluation and guidance in 2017 as NUREG-2192 and NUREG-2191.

Turkey Point Nuclear Generating Station (Turkey Point) which is owned and operated by Florida Power & Light (FPL), a wholly owned subsidiary of NextEra Energy, became the first nuclear plant to receive the NRCs approval for SLR in December 2019.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION FIVE l REMAING LIFE OF NUCLEAR ASSETS PAGE 25

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 26 of 86 FLP submitted the Turkey Point SLR application in January 2018, which was approximately 15 years prior to the expiration of Turkey Points extended operating licenses. With the NRCs decision [ML19305C879], Turkey Points two reactors (Units 3 and

4) licensed-life extended from 2032/2033 to 2052/2053 respectively.

Peach Bottom Nuclear Generating Station (Peach Bottom) which is operated by Exelon Generation Company, LLC, a subsidiary of Exelon Corporation (Exelon) and co-owned between Exelon and PSEG Nuclear, LLC, a subsidiary of PSEG Power, LLC, itself a subsidiary of Public Service Enterprise Group, LLC, received the NRCs approval for SLR in March 2020 [ML20010F285].

Exelon submitted the Peach Bottom SLR application in July 2018, which was approximately 15 years prior to the expiration of Peach Bottoms extended operating licenses. With the SLR, Peach Bottoms two reactors (Units 2 and 3) licensed-life extended from 2033/2034 to 2053/5054 respectively.

Dominion Energy Virginia, a subsidiary of Dominion Energy (Dominion), submitted an SLR application for its two-unit Surry Nuclear Power Plant (Surry) in October 2018, which was approximately 15 years prior to the expiration of Surrys extended operating licenses.

In the context of DTE Electric, a subsequent license renewal would extend the licensed-life of the Fermi 2 Power Plant from 2045 to 2065. DTE Electric has not committed to the subsequent license renewal option for the Fermi 2 Power Plant.

Decommissioning: NRC regulations at 10 CFR 50.82(a)(3) state commercial nuclear power plants are to complete decommissioning within 60 years of permanent cessation of operations. Licensees may petition the NRC to permit completion of decommissioning beyond 60 years when necessary to protect public health and safety; factors the NRC will consider in evaluating alternatives include unavailability of waste disposal capacity and other site-specific factors affecting the licensees capability to carry out decommissioning, including the presence of other nuclear facilities at the site.

There are three NRC-approved strategies [53 FR 24018] for decommissioning:

• DECON where the decommissioning strategy is to immediately dismantle the nuclear facility

• SAFSTOR where the decommissioning strategy is to defer dismantling where the nuclear facility is maintained and monitored in a condition that allows radioactivity to decay

• ENTOMB where the decommissioning strategy is to permanently encase the radioactivity contaminants on site in a structurally sound material such as concrete.

Fermi 2 Power Plant end of life conclusion Consistent with the previous discussion, this study assumes Fermi 2 Power Plant will permanently cease operations on March 20, 2045 coinciding with when the Fermi 2 renewed operating license expires. This study assumes DTE Electric will use the DECON strategy to decommission the Fermi 2 Nuclear Power Plant.

5.2 Independent Spent Fuel Storage Installation (ISFSI)

In this section, we discuss the anticipated remaining life of the Fermi 2 Independent Spent Fuel Storage Installation (ISFSI). The discussion reviews the Fermi 2 ISFSIs historical and future Nuclear Regulatory Commission (NRC) licensing periods. DTE Electric concludes the remaining life of the Fermi 2 ISFSI as approximately 85 years, ending March 20, 2105, as limited by the current 2010 NRC Waste Confidence Decision.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION FIVE l REMAING LIFE OF NUCLEAR ASSETS PAGE 26

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 27 of 86 2010 NRC Waste Confidence Decision The NRC Waste Confidence Decisions are periodic assessments to determine the NRCs degree of assurance that radioactive wasted produced by nuclear power plants can be safely disposed of, to determine when such disposal or offsite storage will be available, and to determine whether radioactive wastes can be safely stored onsite past the expiration of the existing facility licenses until offsite disposal or storage is available. [44 FR 61372]

The NRC issued the following initial Waste Confidence Findings on August 31, 1984:

(1) The Commission finds reasonable assurance that safe disposal of HLW [high level waste] and SNF [spent nuclear fuel] in a mined geologic repository is technically feasible; (2) The Commission finds reasonable assurance that one or more mined geologic repositories for commercial HLW and SNF will be available by the years 2007-2009 and that sufficient repository capacity will be available within 30 years beyond the expiration of any reactor operating license to dispose of existing commercial HLW and SNF originating in such reactor and generated up to that time; (3) The Commission finds reasonable assurance that HLW and SNF will be managed in a safe manner until sufficient repository capacity is available to assure the safe disposal of all HLW and SNF; (4) The Commission finds reasonable assurance that, if necessary, spent fuel generated in any reactor can be stored safely and without significant environmental impacts for at least 30 years beyond the expiration of that reactors operating license at that reactors spent fuel storage basin, or at either onsite or offsite independent spent fuel storage installations (ISFSIs);

(5) The Commission finds reasonable assurance that safe independent onsite or offsite spent fuel storage will be made available if such storage capacity is needed [49 FR 34658].

Based on the above findings, the NRC promulgated 10 CFR 51.23(a) to provide a generic determination that for at least 30 years beyond the expiration of reactor operating licenses, no significant environmental impacts would result from the storage of spent fuel in reactor facility storage pools or ISFSIs located at reactor or away-from-reactor sites.

The NRC reviewed the findings in 1989-1990, which resulted in a revision of Findings 2 and 4:

(2) The Commission finds reasonable assurance that at least one mined geologic repository will be available within the first quarter of the twenty-first century, and sufficient repository capacity will be available within 30 years beyond the licensed life for operation (which may include the term of a revised or renewed license) of any reactor to dispose of the commercial HLW and SNF originating in such reactor and generated up to that time; (4) The Commission finds reasonable assurance that, if necessary, spent fuel generated in any reactor can be stored safely and without significant environmental impacts for at least 30 years beyond the licensed life for operation (which may include the term of a revised or renewed license) of that reactor at its spent fuel storage basin, or at either onsite offsite ISFSIs. [55 FR 38474]

The NRC again reviewed its Waste Confidence Findings in 1999 and confirmed the existing findings.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 28 of 86 The NRC again reviewed its Waste Confidence Findings in 2010, which again resulted in a revision of Findings 2 and 4:

(2) The Commission finds reasonable assurance that sufficient mined geologic repository capacity will be available to dispose of the commercial high-level radioactive waste and spent nuclear fuel generated by any reactor when necessary.

(4) The Commission finds reasonable assurance that, if necessary, spent fuel generated in any reactor can be stored safely and without significant environmental impacts for at least 60 years beyond the licensed life for operation (which may include the term of a revised or renewed license) of that reactor in a combination of storage in its spent fuel storage basin and either onsite or offsite independent spent fuel storage installations.

Within the 2010 Waste Confidence Decision [75 FR 81037], the NRC stated they had assumed that the Department of Energy would not build the permanent geological radioactive waste repository at Yucca Mountain and that the Waste Confidence Findings reflects the uncertainty regarding the timing of the availability of a geological repository; however, the U.S. Court of Appeals vacated the 2010 Waste Confidence Decision in 2012 on the basis that the NRC did not perform a sufficient analysis of the environmental risks associated with the updated Decision [USCA12].

The NRC issued the revised Waste Confidence Decision in 2014 [79 FR 56238] adopting the findings of the Generic Environmental Impact Statement (GEIS) for Continued Storage of Spent Nuclear Fuel [NUREG-2157]. The updated Waste Confidence Decision states in summary that spent nuclear fuel can be safely managed during short-term (up to 60 years), long-term (100 years incremental to the initial 60 years) and indefinite timeframes. Although the NRC is confident that a geological repository will be ready by the end of the short-term timeframe, the long-term timeframe allows consideration for a delay in opening the geological repository and the GEIS also considers that a geological repository may never built. The NRC also changed the name from waste confidence to continued storage of spent nuclear fuel.

Consistent with the waste confidence discussion, this study assumes that the Fermi 2 ISFSI casks (containing spent nuclear fuel and high-level waste generated at the Fermi 2 Power Plant) will remain safely stored on-site at the Fermi 2 ISFSI for an additional 60 years beyond the expiration of the Fermi 2 renewed operating license (i.e. March 20, 2105).

Nuclear Regulatory Commission (NRC)

The NRC regulates storage of spent nuclear fuel at independent spent fuel storage installations (ISFSIs) under two licensing options: (1) site-specific license or (2) general license. Under the site-specific license, the NRC issues an ISFSI-only license, valid up to 40 years, that contains technical requirements and operating conditions for the ISFSI and specifies what the licensee is authorized to store at the ISFSI. Under the general license, the NRC authorizes a nuclear power plant licensee to store spent fuel in NRC-approved ISFSI casks at a site licensed to operate a power reactor under 10 CFR 50; the Fermi 2 ISFSI operates under a general license.

General license for SNF storage in an ISFSI at a reactor site: The attributes of a general license for an ISFSI are:

• General licensing provisions specified in 10 CFR Part 72, Subpart K;

• Limited to 10 CFR Part 50 reactor licensees;

• Effective without filing an application or issuance of licensing document;

• Not transferrable unless the 10 CFR Part 50 reactor license is transferred; 2020 FERMI 2 DECOMMISSIONING STUDY SECTION FIVE l REMAING LIFE OF NUCLEAR ASSETS PAGE 28

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 29 of 86

• Authorized for use of only NRC-certified casks (i.e. NRC has issued a Certificate of Compliance (CoC) for the cask);

• Reactor licensee is responsible for assuring generically-approved cask design and site requirements are compatible; and

• Relies on extending reactor licensee experience, qualifications, and programs to ISFSI activities.

The general license for an ISFSI does not have an expiration date per se.

Certificate of Compliance: General licensees, such as DTE Electric, use the Certificate of Compliance (CoC) for in service ISFSI dry casks. The holder of the CoC is the dry cask manufacturer and not the general licensee. The NRC issues new and amended CoC for each specific dry cask model using an application review process. The CoC contains the requirements and operating conditions (fuel specifications, cask leak testing, surveillance, and other requirements) for the cask design and specifies what the licensee may store in the cask system. The initial term for a CoC is 20-years from issuance; CoC renewal terms are in 40-year increments.

Fermi 2 ISFSI licensing basis DTE Electric uses a general license under the Fermi 2 Power Plants 10 CFR 50 operating license to store spent nuclear fuel onsite at the Fermi 2 Independent Spent Fuel Storage Installation (ISFSI). DTE Electric has design approval for the Fermi 2 ISFSI to use the Holtec HI-STORM 100 dry cask design per NRC Certificate of Compliance (CoC) Number 1014, Amendment 5 and Amendment 10 [ML082030116],[ ML19156A068].

The NRC issued the Holtec HI-STORM 100 CoC Number 1014 to Holtec International on May 5, 2000 following an approximately four-year review process. The initial 20-year term of the Hi-STORM 100 CoC was May 31, 2000 through June 1, 2020. In January 2020, Holtec International submitted its application to the NRC to renew the HI-STORM 100 CoC term for 40 additional years (i.e. through June 1, 2060) [ML20049A083]. DTE Electric expects Holtec International, as the CoC holder, to seek 40-year renewals indefinitely in accordance with 10 CFR 72.240.

ISFSI general licensees are limited by the greater of the expiration date of the CoC or the term of the CoC applied to the in service date of the ISFSI cask. For the Fermi 2 HI-STORM 100 system:

1. ISFSI casks placed in service (loaded with spent fuel) prior to June 1, 2020 are licensed for the 20 years following their in-service date.

Once the NRC approves the Holtec HI-STORM 100 CoC renewal application:

2. ISFSI casks placed in service prior to June 1, 2020 will be licensed through at least June 1, 2060.

3. ISFSI casks placed into service after June 1, 2020 will be licensed for 40 years following their in-service date.

Following NRC approval of the Holtec HI-STORM 100 CoC subsequent renewal application:

4. ISFSI casks placed into service before June 1, 2060 will be licensed through at least June 1, 2100.

DTE Electric expects the NRC to approve CoC renewals consistent with the GEIS for Continued Storage of Spent Nuclear Fuel.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION FIVE l REMAING LIFE OF NUCLEAR ASSETS PAGE 29

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 30 of 86 Fermi 2 ISFSI end of life conclusion Consistent with the discussion above, the Fermi 2 ISFSI will cease operations by March 20, 2105, which is 60 years following the shutdown of the Fermi 2 Power Plant. The assumption used in this study is that the Department of Energy will have accepted transfer of all of Fermi 2s spent nuclear fuel and high-level waste for geological deposit by March 20, 2105 and that the decommissioning of the Fermi 2 ISFSI would occur shortly thereafter.

5.3 Other facilities Fermi 1 Fermi 2 Power Plant shares its site with the permanently shut down nuclear reactor facility Fermi 1 Power Plant. DTE Electric is the licensee and holder of NRC Fermi 1 Facility Operating License DPR-9, Docket 50-16.

The Fermi 1 licensee at the time, Power Reactor Development Company (PRDC), decided to decommission Fermi 1 in November of 1972. Fermi 1 does not have spent nuclear fuel or special nuclear material (SNM) stored on-site as all the fuel was shipped to the Savannah River Project facility in 1973 and all SNM was certified to be removed from the Fermi 1 site on November 6, 1975 [ML102290154].

Fermi 1 has been in a decommissioning state since PDRC declared permanent cessation of operations in November of 1972.

Fermi 1 is currently in SAFSTOR status. NRC regulations at 10 CFR 52.82(a)(3) limit the time allowed for DTE Electric to complete the decommissioning activities required for Fermi 1 license termination to no more than 60 years of permanent cessation of operations.

The non-radiological structures such as the Turbine Building and the offices support Fermi 2 operations.

Fermi 1 Nuclear Plant end of life conclusion Consistent with the discussion above, the Fermi 1 Nuclear Plant reached the end of its life in 1972 - as such, this study assumes DTE Electric will have removed the Fermi 1 structures required for license termination no later than the end of 2032.

This study assumes that DTE Electric will remove structures used for the Fermi 2 Power Plant operations after the Fermi 2 Power Plant permanently ceases operations in 2045.

Fermi 3 This study does not consider nor does it preclude the construction or operation of the Fermi 3 Power Plant.

Small modular reactors or other nuclear technologies This study does not consider nor does it preclude the construction or operation of the small modular reactors (SMRs) or other nuclear technologies at the Fermi 2 site.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 31 of 86 SECTION SIX 6 Regulatory dynamics In this section we discuss the regulatory dynamics of nuclear decommissioning and providing reasonable assurance of funding for nuclear decommissioning. We will begin the discussion with an overview of the applicable federal regulations concerning this decommissioning study. We next discuss regulations or orders promulgated for the state of Michigan through the Michigan Public Service Commission. We then complete the section with a discussion on the Nuclear Policy Waste Act of 1982, as amended and the obligations of the Standard Contract.

6.1 Federal regulations overview The Nuclear Regulatory Commission (NRC), Federal Energy Regulatory Commission (FERC), and Internal Revenue Service (IRS) regulate aspects of nuclear decommissioning. In this section we review nuclear decommissioning regulatory constructs by federal agency. We will then discuss key aspects of the integrated nuclear decommissioning regulations.

NRC regulations The Nuclear Regulatory Commission (NRC) regulates nuclear decommissioning trusts at 10 CFR 50.75 and 10 CFR 72.30. The NRC regulates the funding of post-shutdown spent fuel management at 10 CFR 50.54(bb). The NRC regulates nuclear decommissioning activities with the definition at 10 CFR 50.2 and at 10 CFR 50.82. Key updates to the Federal Register include:

1. 53 FR 24018 - - Created 50.2 definition and 50.75. Supplemental info DECON, SAFSTOR

2. 61 FR 39278 - - Made significant amendments to decommissioning rules

3. 63 FR 50465 - - Financial assurance requirements

4. 67 FR 78332 - - Amended rules governing decommissioning trust funds for merchant plants

5. 73 FR 62220 - - NRC discussion on denial to allow pre-shutdown withdrawals

6. 76 FR 35512 - - Mandate to provide for ISFSI funding assurance The NRC issues regulatory guides to describe to the public the methods that NRC staff considers acceptable for use in implementing specific parts of the NRCs regulations, to explain the techniques that the staff uses in evaluating specific problems or postulated accidents and to provide specific guidance to applicants. The NRC regulatory guides supporting nuclear decommissioning include:

1. Regulatory Guide 1.184, Decommissioning Nuclear Reactors, Rev 1 [ML13144A840]

2. Regulatory Guide 1.185, Standard Format and Content for Post-Shutdown Decommissioning Activities Report, Rev 1

[ML13140A038]

3. Regulatory Guide 1.179, Standard Format and Content of License Termination Plans for Nuclear Power Reactors, Rev 2 [ML19128A067]

4. Regulatory Guide 1.202, Standard Format and Content of Decommissioning Cost Estimates for Nuclear Power Reactors, Rev 0 [ML050230008]

2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 31

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 32 of 86

5. Regulatory Guide 1.159 Assuring the Availability of Funds for Decommissioning Nuclear Reactors, Rev 2 -

[ML112160012]

The NRC prepares and issues other publications such as Regulatory Issue Summary (RIS) reports, reports prepared by NRC staff (NUREG) or contractors (NUREG/CR), and written issues papers the NRC staff submits to the NRC Commission to inform them on policy, rulemaking, and adjudicatory matters (SECY).

1. Regulatory Issue Summary (RIS) 2001-07, 10 CFR 50.75 Reporting and Recordkeeping for Decommissioning Planning, Rev 1 [ML083440158]

2. SECY-13-0066 Staff Findings on the Table of Minimum Amounts Required to Demonstrate Decommissioning Funding Assurance [ML13127A234]

3. NUREG-1307, Report on Waste Disposal Charges: Changes in Decommissioning Waste Disposal Costs at Low-Level Waste Burial Facilities, Rev. 17 [ML19037A405]

4. NUREG-1577, Standard Review Plan on Power Reactor Licensee Financial Qualifications and Decommissioning Funding Assurance, Rev. 1 [ML17033B536]

5. NUREG-1700, Standard Review Plan for Evaluating Nuclear Power Reactor License Termination Plans, Rev. 2

[ML18116A124]

6. NUREG-1713 Standard Review Plan for Decommissioning Cost Estimates for Nuclear Power Reactors

[ML043510113]

7. NUREG-0586 Final Generic Environmental Impact Statement (GEIS) on Decommissioning of Nuclear Facilities

[ML18057B048]

The NRC is undertaking proposed rulemaking for Proposed Rule: Regulatory Improvements for Production and Utilization Facilities Transitioning to Decommissioning (RIN 3150-AJ59). The proposed rulemaking consolidates NRC nuclear decommissioning guidance and past practices as well as incorporates a graded approach to the radiological risks associated with nuclear power plants that have permanently ceased operations. Key documents for this proposed rulemaking include:

1. 80 FR 72358 - Advanced notice of proposed rulemaking

2. 82 FR 55954 - Final regulatory analysis

3. SECY-18-0055 Proposed Rule: Regulatory Improvements for Production and Utilization Facilities Transitioning to Decommissioning (RIN 3150-AJ59) [ML18012A021]

4. SECY-18-0055 - Draft Proposed Rule: Regulatory Improvements for Production and Utilization Facilities Transitioning to Decommissioning [ML18012A022]

5. SECY-18-0055 - Regulatory Analysis for the Proposed Rule: Regulatory Improvements for Production and Utilization Facilities Transitioning to Decommissioning [ML18012A024]

6. SECY-18-0055 - Regulatory Guidance of Proposed Rule: Regulatory Improvements for Production and Utilization Facilities Transitioning to Decommissioning [ML18012A228]

7. DG-1346 Proposed RG 1.235 Emergency Planning for Decommissioning Nuclear Reactors [ML17311B018]

8. DG-1347 Revision in RG 1.184 Decommissioning of Nuclear Power Reactors [ML17347A794]

9. DG-1348 Revision to RG 1.159 Assuring the Availability of Funds for Decommissioning Nuclear Reactors

[ML17348B485]

2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 32

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 33 of 86

10. DG-1349 Revision to RG 1.185 Standard Format and Content for Post-Shutdown Decommissioning Activities Report

[ML17353A727]

FERC regulations The Federal Energy Regulatory Commission (FERC) regulates nuclear decommissioning trusts at 18 CFR 35.32 and 18 CFR 35.33. These FERC regulations only apply to trust amounts collected from FERC-jurisdictional customers. Key updates to the Federal Register include:

1. 60 FR 34109 - FERC Order 580 - Adds Subpart E 35.32 and 35.33

2. 62 FR 33342 - FERC Order 580 Final update to Order 580

3. 70 FR 34340 - FERC Order 658 - Relaxes annual reporting requirements IRS regulations The Internal Revenue Service (IRS) regulates nuclear decommissioning trusts at 26 CFR 1.468A. These IRS codes and regulations only apply to qualified trusts:

1. 98 Stat. 604 - Deficit Reduction Act of 1984 - instituted the 468A qualified funds [DRA84]

2. 106 Stat. 2776 (see 3024) - Energy Policy Act of 1992 - eliminated Black Lung restrictions [EPA92]

3. 106 Stat. 2776 (see 3034) - Energy Policy Act of 1992 - changed the USC numbering of Black Lung [EPA92]

4. 119 Stat. 594 (see 1007) - Energy Policy Act of 2005 - fund transfers and ruling amounts [EPA05]

5. 75 FR 80697 - - Clarified spent fuel management status

6. 81 FR 95929 - - Clarified ISFSI construction and self-dealing Integrated regulatory framework NRC minimum formula - NRC regulations at 10 CFR 50.75 define the requirements for commercial reactor license holders such as DTE Electric to demonstrate reasonable assurance of funds for decommissioning while a facility is operating. The formula at 10 CFR 50.75(c) establishes the minimum amount required to demonstrate reasonable assurance of funds for decommissioning reactors by type, subject to footnote 1 of 10 CFR 50.75(c):

Amounts are based on activities related to the definition of "Decommission" in § 50.2 of this part and do not include the cost of removal and disposal of spent fuel or of nonradioactive structures and materials beyond that necessary to terminate the license.

where § 50.2 refers to NRC regulations at 10 CFR 50.2 which defines Decommission as:

Decommission means to remove a facility or site safely from service and reduce residual radioactivity to a level that permits (1) Release of the property for unrestricted use and termination of the license; or (2) Release of the property under restricted conditions and termination of the license.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 33

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 34 of 86 Two studies performed by Pacific Northwest National Laboratory (PNNL) for the NRC in 1978 and 1980 form the basis for the NRC minimum decommissioning fund formula in 10 CFR 50.75(c). The 10 CFR 50.75(c) formula uses a base of 1986 dollars (10 CFR 50.75(c)(1)), which licensees must recalculate annually to current dollars by using an adjustment factor defined in 10 CFR 50.75(c)(2) to account for escalation changes in labor costs, energy costs and low-level waste burial costs

[ML13063A190]. The NRC publishes and makes publicly available biennial revisions to the NRC report NUREG-1307, Report on Waste Burial Changes for licensees to use in determining the adjustment factor.

The result of the 10 CFR 50.75(c) calculation updates the 1986 base dollars to a current year minimum amount that the licensee must certify and hold in an approved financial instrument. The total amounts held in the approved financial instruments, which includes expected earnings and rate collections, must be equal to or greater than the amount calculated from application of the 10 CFR 50.75(c) calculation.

The NRC assessed the continued use of the NRC minimum formula as an adequate measurement to establish a common minimum standard in the 2013 NRC report SECY-13-0066 [ML13127A234], Staff Findings on the Table of Minimum Amounts Required to Demonstrate Decommissioning Funding Assurance. This review was in response to the NRCs Office of the Inspector General (OIG) follow-up audit of the NRCs decommissioning fund program OIG-06-A-07 determination that the NRC delayed implementation of a prior OIG audit report (OIG-99A-16) recommendation to assess the adequacy of the NRC minimum formula. The SECY-0066 also addressed the Government Accountability Office (GAO) report GAP-12-258, NRCs Oversight of Nuclear Power Reactors Decommissioning Funds Could Be Further Strengthened note that the NRC minimum formula is generally less than site-specific cost estimates.

Nuclear Decommissioning Trusts for radiological decommissioning - The NRC regulations at 10 CFR 50.75(e) specify the general requirements for the methods for providing the NRC with reasonable assurance of the availability of funds for nuclear decommissioning. The most common method of meeting this financial assurance requirement is with a trust, typically referred to as a Nuclear Decommissioning Trust (NDT), which places the funding amounts into an account segregated from the licensee assets and outside the licensees or its affiliates administrative control. The licensee may deposit amounts into the NDT using the prepayment or external sinking fund method.

IRS and FERC regulations provide additional requirements for NDTs. Most notably, the IRS regulations have a specific tax treatment for qualified NDT amounts which necessitated licensees establish distinct NDTs for qualified amounts and for nonqualified amounts. FERC regulations require licensees differentiate with each trust the amounts deposited from FERC-jurisdiction customers and the amounts deposited from state-jurisdiction customers.

Given this integrated regulatory framework, licensees that serve state- and FERC-jurisdictional customers would minimally establish two separate NDTs (qualified and nonqualified), each with two plans (state-jurisdiction and FERC jurisdiction). The license would then report the total amounts of these four NDT funds:

1. Qualified state

2. Qualified FERC

3. Nonqualified state

4. Nonqualified FERC to the NRC as the method to meet the financial assurance requirement.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 34

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 35 of 86 Nuclear Decommissioning Trusts for ISFSI decommissioning - NRC regulations at 10 CFR 72.30(e) specify the general requirements for the methods for providing the NRC with reasonable assurance of the availability of funds for Independent Spent Fuel Storage Installation (ISFSI) decommissioning. A common method of meeting this financial assurance requirement is with the NDT. The licensee may deposit amounts into the NDT using the prepayment or external sinking fund method.

NRC regulations as summarized in Regulatory Issue Summary RIS-2001-07, Revision 1, 10 CFR 50.75 Reporting and Recordkeeping for Decommissioning Planning do not preclude licensees from using the same NDT to hold amounts reported for radiological decommissioning funding assurance and other decommissioning amounts; however, the licensee must be able to identify and account for the amounts within each trust associated with radiological decommissioning funding assurance and those amounts for other decommissioning. NRC regulations at 10 CFR 72.30(g) establishes licensees must only use amounts reported for ISFSI decommissioning for ISFSI decommissioning and must monitor those accumulated amounts for market changes. As such, licensees may deposit amounts collected for ISFSI decommissioning reasonable assurance into the licensees NDT, provided the licensee has taken action to segregate the ISFSI amounts from the radiological decommissioning amounts and maintain separate books for each amount.

IRS and FERC regulations apply equally to 10 CFR 72.30(e) amounts and 10 CFR 50.75(e); therefore, licensees using the external sinking fund method and collecting amounts from state and FERC jurisdictional customers would establish an ISFSI decommissioning pool within both the qualified and nonqualified trusts as applicable. The licensee would then report these four NDT funds:

1. Qualified state ISFSI

2. Qualified FERC ISFSI

3. Nonqualified state ISFSI

4. Nonqualified FERC ISFSI to the NRC as the method to meet the financial assurance requirement.

Nuclear Decommissioning Trusts for other decommissioning - NRC regulations at 10 CFR 50.54(bb) specify the general requirements to provide the NRC with irradiated spent fuel program and funding plans to manage irradiated fuel at the reactor following the permanent cessation of operations. NRC regulations for irradiated fuel management are silent as to methods for providing the NRC with reasonable assurance of availability of funds for post-shutdown irradiated fuel management program; however, the NRC has accepted the use of the NDT, coupled with prepayment or external sinking fund as the funding plan for the post-shutdown irradiated spent fuel management plan.

NRC regulations do not preclude licensees from using the same NDT to hold amounts reported for radiological decommissioning and other decommissioning amounts; however, the licensee must be able to identify and account for the amounts within each trust associated with radiological decommissioning funding assurance and those amounts for other decommissioning. As such, licensees may deposit amounts collected for other decommissioning such as funding the post-shutdown irradiated spent fuel management into the licensees NDT, provided the licensee has taken action to segregate the irradiated spent fuel management amounts from the radiological decommissioning amounts and maintain separate books for each amount.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 35

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 36 of 86 IRS and FERC regulations apply equally to other decommissioning amounts and 10 CFR 50.54(bb) decommissioning amounts, as such, there is no requirement or benefit of separating the amounts for other decommissioning and the amounts for 10 CFR 50.54(bb) activities.

6.2 State of Michigan regulations overview The Michigan Public Service Commission (MPSC or Commission) is the State of Michigans state regulatory body charged with protecting the public by ensuring safe, reliable, accessible energy and telecommunications services at reasonable rates for Michigan residents. The Commission regulates the rates and services of investor-owned natural gas and electric utilities (such as DTE Gas and DTE Electric), authorizes energy infrastructure, implements state law governing competition and other aspects of the energy and telecommunications industries. The MPSC has regulatory jurisdiction pertaining to rates, recovery of certain costs, including the costs of generating facilities, conditions of service, accounting and operating-related matters.

MPSC orders govern (1) the establishment of the Fermi 2 decommissioning trusts, (2) the mechanism to fund the trusts, (3) the framework to report the adequacy of the trusts and (4) the use of the trust funds. In this section we discuss the MPSCs regulatory history of Fermi 2 nuclear decommissioning funding orders issues by the MPSC.

Settlement Agreement in MPSC Case No U-6150 (Reopened), dated August 26, 1986 The Settlement Agreement in MPSC Case No U-6150 (Reopened), dated August 26, 1986, is the reference MPSC governance for the Fermi 2 decommissioning trusts. The parties to this settlement agreement include The Detroit Edison Company, MPSC Staff, Michigan Attorney General and the Association of Business Advocating Tariff Equity. The Detroit Edison Company agreed to amongst other stipulations:

1. Establish two external Fermi 2 decommission trusts: a qualified trust and a nonqualified trust

2. Assume the retirement date is consistent with the term of the units operating license

3. Allocate the cost to decommission the unit to all its Michigan jurisdictional retail customers through a surcharge

4. Beginning in 1990 and at three-year intervals thereafter and no later than March 31, report to the Commission on the adequacy of the existing Fermi 2 annual provision. This report is to include the following elements:

a. fund adequacy in light of the amount needed for decommissioning

b. inflation rates

c. fund earning rates

d. remaining life of the nuclear generating units

e. requirements of other taxing or regulatory bodies

f. administrative and incidental expenses of the fund The 1986 Settlement Agreement also ordered the Fermi 2 decommissioning trusts must meet the several objectives including:

1. The trustee is to optimize for tax earnings over the life of the trusts, giving consideration to liquidity, risk, diversification and other prudent investment objectives

2. The trustee is to not invest in any securities issued by the Detroit Edison Company, its successors or assignees

3. No part of the trust assets may be used for or diverted to any purpose other than to fund, in whole or in part the costs of nuclear plant decommissioning or to pay administrative or other incidental expenses including taxes 2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 36

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 37 of 86

4. Once decommissioning has been completed, excess funds are to be refunded to the ratepayers as determined by the Commission

5. If the trust is insufficient to cover the costs of nuclear plant decommissioning, Detroit Edison may petition the Commission for relief

6. The trustee is to keep accurate and detailed books and records. The trustees books and records are to be open to inspection and audit at reasonable times by the Commission MPSC Order U-8567, dated January 13, 1987 The Commission Order U-8567, dated January 13, 1987, adopted Detroit Edisons proposed stipulations to the 1986 Settlement Agreement for the Nuclear Decommissioning Surcharge (NDS) rate schedule and Detroit Edisons model trust agreements. The parties to this stipulation included The Detroit Edison Company, MPSC Staff, Michigan Attorney General and the Association of Business Advocating Tariff Equity. The surcharge was to start within 30 days of the commercial operation of the Fermi 2 Power Plant.

MPSC Order U-10102, dated January 21, 1994 The Commission Order U-10102, dated January 21, 1994 amended the NDS established in MPSC Order U-8567. The Commission ordered Detroit Edison to assume an escalation rate of 6% and an after-tax earnings rate of 7% and to include the cost of removing Fermi 2s non-radioactive structures and materials in the Fermi 2 decommissioning cost estimate.

The Commission Order U-10102 also established the Low-Level Radioactive Waste (LLRW) fund. The Commission acknowledged that LLRW generated during operations is not a recognized decommissioning cost. The Commission approved Detroit Edison an incremental annual provision in the NDS of approximately $4 million. The Commission also approved Detroit Edison to accumulate the LLRW funds in the nonqualified decommissioning trust. The LLRW funds were for the exclusive use to expedite the disposal of LLRW generated during operations should Detroit Edison have access to an LLRW disposal site.

MPSC Order U-14399, dated December 22, 2005 The Commission Order U-14399, dated December 22, 2005 the Commission ordered site security and radiation protection expenses removed from base rates and transferred to the NDS tariff applied to all customers within Detroit Edisons service territory. This 2005 order built upon the Commissions framework established Order U-11452, dated March 8, 1999, which updated the NDS tariff as it applied to Detroit Edisons retail access customers to include an incremental surcharge for Fermi 2 site security and radiation protection expenses.

MPSC Order U-16472, dated October 20, 2011 The Commission Order U-16472, dated October 20, 2011 adopted Detroit Edisons proposal to assume a Fermi 2 retirement date of 2045, consistent with a renewed operating license. The Commission also agreed with Detroit Edisons recommendation to maintain the existing assumed escalation rate of 6% and after-tax earnings rate of 7%. Resulting from this order the Nuclear Decommissioning Surcharge decreased approximately $20 million from $33 million to $13.5 million.

MPSC Order U-17767, dated December 11, 2015 The Commission Order U-17767, dated December 11, 2015 formally updated the name of the annual funding provision from Nuclear Decommissioning Surcharge to Nuclear Surcharge. The Commission agreed with DTE Electrics position that the 2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 37

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 38 of 86 proposed name change more accurately reflected the nature of a surcharge that included components for not only Fermi 2s end-of-life decommissioning but also Fermi 2 site security and radiation protection expenses and the LLRW funding provisions.

The Commission also adopted DTE Electrics proposal to reduce the Fermi 2 decommissioning portion of the surcharge from approximately $13 million to $2.9 million.

The Fermi 2 Nuclear Decommissioning Funding portion of the Nuclear Surcharge was unchanged and uncontested in DTE Electrics 2016 MPSC Case No U-18014. The Fermi 2 nuclear decommissioning portion of the Nuclear Surcharge was unchanged and uncontested in DTE Electrics 2017 MPSC Case No U-18255.

MPSC Order U-20162, dated May 2, 2019 The Commission Order U-20162, dated May 2, 2019, adopted DTE Electrics proposed Nuclear Surcharge where the Fermi 2 Nuclear Decommissioning Funding portion of the Nuclear Surcharge remained unchanged at $2.9 million. The Commission also agreed with DTE Electrics positions: (1) that Nuclear Decommissioning Trust funds have specific purposes and (2) reallocation of funds for other purposes is not straightforward. The Commission also ordered DTE Electric to perform an update to the Fermi 2 nuclear decommissioning study.

MPSC Order U-20561, dated May 8, 2020 The Commission Order U-20561, dated May 8, 2020 adopted DTE Electrics proposed Nuclear Surcharge where the Fermi 2 Nuclear Decommissioning Funding portion of the Nuclear Surcharge remained unchanged at $2.9 million. The Commission also agreed with DTE Electrics position that it was reasonable and prudent to recover expenditures associated with this decommissioning study projected in the Project Evaluation Review Committee (PERC) O&M mechanism.

6.3 Standard Contract The Nuclear Waste Policy Act of 1982 (NWPA) [NWPA], as amended, establishes the U.S. national policy for the financing, siting, licensing, operating and decommissioning of a national geological repository for the disposal of civilian-generated nuclear waste as well as defense-related radioactive materials. Highlights of the NWPA, as amended, include:

The Department of Energy (DOE) has the responsibility to site, operate and decommission the geological repository.

Yucca Mountain is to be the only site eligible for the DOE to consider for the geological repository.

The DOE was to take title of owners and generators spent nuclear fuel (SNF) and high-level waste (HLW) beginning no later than January 31, 1998.

The DOE has a responsibility to establish a fee applied to electricity generated or sold by commercial nuclear power plant owners to cover all costs associated with the disposal of the nuclear waste.

Owners and generators of SNF and HLW have responsibility to make payments for the fees.

Owners and operators of SNF and HLW must execute the Standard Contract with the DOE. The Standard Contract establishes the quid pro quo where in exchange for the owners and generators payments of fees as established by the NWPA, the DOE accepts title of SNF and HLW as expeditiously as possible following commencement of a geological repository and no later than January 31, 1998.

The Department of Treasury was to establish a special Nuclear Waste Fund (NWF) for the collection of the fees.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 38

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 39 of 86 In this section we discuss the aspects of the Standard Contract of particular interest to the Fermi 2 Power Plant decommissioning including the Yucca Mountain Project, the Standard Contract, the spent nuclear fuel fees, DTE Electrics ongoing litigation with the Department of Energy and the Nuclear Waste Fund.

Yucca Mountain Project The Yucca Mountain Project (YMP) is the DOEs collective effort to site, license and construct a geological repository at Yucca Mountain, Nevada. A brief history of DOEs efforts at the Yucca Mountain site includes:

1983 - DOE identified Yucca Mountain as one of nine potentially acceptable sites for the first geological repository 1984 - DOE issued Draft Environmental Assessments (EAs) for each of the nine sites 1986 - DOE issued the final Yucca Mountain EA along with four other high potential sites.

1986 - DOE ranked Yucca Mountain as the number one overall potential site based on its Multi-attribute Utility Analysis 1987 - Congress amended the NWPA to redirect DOE to focus only on Yucca Mountain. Congress took this action out of concern about escalating costs and confidence in Yucca Mountain. [YMP06]

1998 - DOE issued the Viability Assessment of a Repository at Yucca Mountain [ML033580473]

2002 - Secretary of Energy recommended Yucca Mountain as the site of the first geological repository; however, as allowed by the NWPA, the State of Nevada objected to the recommendation, which required the U.S. Congress to override Nevada objection through passage of the Yucca Mountain Development Act. [YMP02]

2005 - Environmental Protection Agency (EPA) proposed to modify its regulations to limit radiation protection exposures over the period from 10,000 years to 1 million years in the future. [70 FR 49014]

2008 - DOE submitted the license application for a high-level waste geological waste repository at Yucca Mountain

[ML081560407]. DOE also issued The Report to the President and the Congress by the Secretary of Energy on the Need for a Second Repository [YMP08].

2009 - The President and Secretary of Energy announced that a repository at Yucca Mountain was not a workable solution and that DOE would terminate the repository program. The Secretary announced a Blue Ribbon Commission on Americas Nuclear Future to evaluate alternatives to Yucca Mountain. DOE submitted to the NRC its request to withdraw the Yucca Mountain license application from review [ML100621397]; the NRC denied the request

[ML101800299].

2011 - Congress did not appropriate monies for Yucca Mountain Project or the NWF; consequently, DOE closed the Office of Civilian Radioactive Waste Management (and the Yucca Mountain Project).

2012 - Blue Ribbon Commission submits its final recommendations for consideration to the President and the Congress. The recommendations did not include restarting the Yucca Mountain Project.

2015 - NRC suspended review of the Yucca Mountain license application after congressionally appropriated funds were exhausted.

2019 - Congress did not include in its appropriations the Presidents requests for monies to restart the Yucca Mountain Project [OIG19].

2020 - The President did not request monies restart the Yucca Mountain Project in its Fiscal Year 2021 budget proposal - ending a three-year attempt to restart the Project.

The Government has spent over 30 years attempting to site and license a geological repository and yet the Yucca Mountain Project today is in a state of suspension and the Government has no working alternatives. Based on the history of the Yucca 2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 39

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 40 of 86 Mountain Project, it would not be reasonable or prudent to assume the Government will have an operating geological repository - let alone two or more - for the indefinite future or any time sooner than necessary.

Standard Contract The Standard Contract is the agreement between the Department of Energy (DOE) and nuclear power plant operators that establishes the terms for both DOE and nuclear power plant operators to meet the obligations set forth in the NWPA. Under the contract, the DOE is to take title to, transport and dispose of spent nuclear fuel (SNF) and high-level radioactive waste (HLW) delivered to the DOE by the nuclear power plant operators; DOE was to begin taking delivery of SNF and HLW no later than January 31, 1998. In exchange for DOEs obligations, nuclear power plant operators are to pay for the DOEs radioactive waste disposal activities through a fee (also known as a spent nuclear fuel fee) authorized under the NWPA. The NWPA mandates that the Nuclear Regulatory Commission (NRC) cannot issue or renew an operating license unless the nuclear power plant operator has entered into the Standard Contract and the Secretary of Energy has affirmed the nuclear power plant operator is in good faith standing. The Standard Contract is non-negotiable.

The Detroit Edison Company executed its Standard Contract with the DOE in June 1983 [USCFC03].

The DOE is in partial breech of the Standard Contract as the DOE has yet to accept delivery of any SNF or HLW from the Fermi 2 Power Plant. Fermi 2 Power Plants entire inventory of SNF and HLW remains onsite, either in wet storage (Spent Fuel Pool) or in dry storage (ISFSI).

Spent nuclear fuel (SNF) fees Article VIII of the Standard Contract (Fees and Terms of Payment) establishes a fee of 1.0 mill per kilowatt-hour (1M/kWh) electricity generated or sold. Article VIII also gives DOE an obligation to review the adequacy of the fees and adjust the 1M/kWh fee, if necessary and subject to a 90-day review of the U.S. Congress, to assure full cost recovery by the U.S.

government.

According to the terms of the Standard Contract between DTE Electric and the DOE and the NWPA, the fee of 1.0 mill per kilowatt-hour (1M/kWh) of electricity generated and sold from Fermi 2 was to fund the costs associated with the disposal of spent nuclear fuel. DTE Electric was to pay the fee directly to the U.S. Government (Government). Through June 30, 2018, DTE Electric had paid approximately $172.1 million to the Government through the fee (reference DTE Electrics June 29, 2019 filing in MPSC Case No. U-15244).

The DOE suspended collection of the spent nuclear fuel (SNF) fee in 2014 following the U.S. Court of Appeals (Court) November 2013 decision in National Association of Regulatory Utility Commissioners v United States Department of Energy, 736 F3d 517

[USCA13]. The Court found the DOE has no viable strategy for geological disposal of nuclear waste; therefore, DOE could not charge nuclear plant operators for the cost of that disposal. The Court did not provide nuclear plant operators relief from the obligation to pay for the cost of their waste disposal. The Court also allows the DOE to resume the fees once again after the DOE is able to conduct a sufficient assessment because either: (1) the DOE revives the Yucca Mountain Project or (2) Congress enacts an alternative plan.

DTE Electric reported to the Michigan Public Service Commission (MPSC) in its April 23, 2014 filing in MPSC Case No U-17593 that it would cease collections for the fee in its 2015 PSCR case (U-17680) and reconcile the 2014 fees paid in its 2014 PSCR 2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 40

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 41 of 86 reconciliation (U-17319R) case. DTE Electric has suspended the collection of the fee since 2015. As discussed above, the Standard Contract binds to DTE Electric to resume payments of the fee once the DOE conducts its sufficient fee assessment.

Department of Energy (DOE) litigation DTE Electric is a party in the litigation against the DOE for both past and future costs associated with DOEs failure to accept spent nuclear fuel under the schedule set forth in the Federal Nuclear Waste Policy Act of 1982 and partial breach of the Standard Contract.

In July 2012, DTE Electric entered into a settlement agreement with the federal government for costs associated with DOEs delay in acceptance of spent nuclear fuel from the Fermi 2 Power Plant for permanent storage. The settlement agreement, including extensions, provides for a claims process and payment of delay-related costs experienced by DTE Electric through 2019. DTE Electric's claims through 2019 are being settled and paid on a timely basis. The settlement proceeds reduce the cost of the ISFSI assets and provide reimbursement for related operating expenses. DTE Electric has not made a determination in regards to future legal action beyond the current settlement agreement.

Although the federal government continues to maintain it has a legal obligation to accept spent nuclear fuel from Fermi 2 Power Plant for permanent storage, there is no certainty as to the future legal positions or obligations of the federal government. Issues relating to long-term waste disposal policy and to the disposition of funds contributed by DTE Electric ratepayers to the federal waste fund await future governmental action.

The Company annually files an update on its litigation with the DOE in the MPSC Case No. U-15244 docket.

Nuclear Waste Fund Nuclear Waste Fund (NWF), a separate fund in Treasury of the United States, for the purpose of radioactive waste disposal activities including licensing, construction and operation of a repository and transportation, readying or packaging of spent nuclear fuel (SNF) or high-level waste (HLW) for disposal in the repository. The Government deposits the fees collected through the Standard Contract into the NWF.

The NWF balance was approximately $40.9 billion as of September 30, 2019 [OIG19]; however, U.S. Congressional budgeting practices prevent the use of the NWF for its intended purpose [BRC12].

2020 FERMI 2 DECOMMISSIONING STUDY SECTION SIX l REGULATORY DYNAMICS PAGE 41

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 42 of 86 SECTION SEVEN 7 Decommissioning cost estimates In this section we discuss nuclear decommissioning cost estimates which are an element of nuclear decommissioning funding adequacy reviews. We first present an overview of the decommissioning costs estimates. We then discuss the basis and conclusions of DTE Electrics existing Fermi 2 decommissioning cost estimate, followed by a discussion on the basis and conclusions of DTE Electrics 2020 Fermi 2 site-specific decommissioning cost estimate. We then review the Fermi 2 Nuclear Regulatory Commission minimum decommissioning fund requirements for the Fermi 2 Power Plant. We close out the discussion with DTE Electrics conclusion and adopted Fermi 2 nuclear decommissioning cost estimates for use in the Fermi 2 nuclear decommissioning funding adequacy review performed later in this study.

7.1 Decommissioning cost estimate overview In this section we present an overview of nuclear decommissioning cost estimates and best practices the industry has developed to reasonably estimate the costs of decommissioning nuclear facilities. This review includes discussion on the purpose of the nuclear decommissioning cost estimate, approaches or methods the industry uses to develop the cost estimates and the elements that constitute a nuclear decommissioning cost estimate. Our intention with this section to provide basic knowledge and concepts to support the readers understanding of DTE Electrics Fermi 2 nuclear decommissioning cost estimates discussed later in this section; additional discussion is available through notable resources such as the Nuclear Regulatory Commission (NRC) Regulatory Guide (RG) 1.202, Revision 0, Standard Format and Content of Decommissioning Cost Estimates for Nuclear Power Reactors, NRC NUREG-1700, Revision 2, Standard Review Plan for Evaluating Nuclear Power Reactor License Termination Plans and the 2015 The Practice of Cost Estimation for Decommissioning of Nuclear Facilities published by the Organization for Economic Co-operation and Development (OECD) Nuclear Energy Agency (NEA).

Purpose The purpose of the decommissioning cost is estimate:

1. Establish overall decommissioning costs. The decommissioning plan assumptions and strategies presented in this study and cost estimate are to provide reasonable assurance of adequate annual funding provisions and eventual available funds for the decommissioning of the DTE Electric Fermi 2 Power Plant by the year 2045.

2. Inform the long-term financing process

3. Later, when the Fermi 2 Power Plant nears the end of its operational life, the cost estimate potentially informs part of the basis for the detailed decommissioning planning.

This cost estimate does not constitute a commitment by DTE Electric to perform decommissioning work exactly as presented in this document. Consistent with Nuclear Regulatory Commission (NRC) Regulatory Guide 1.159, Revision 2, and indeed the nuclear industry, DTE Electric expects to refine and improve the decommissioning plan and cost estimates as the Fermi 2 Power Plant approaches end of life in 2045.

Approaches to cost estimation The nuclear industry generally recognizes five approaches to cost estimating [NEA15]:

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 43 of 86 Bottom-up technique is where estimators use a work statement and specifications or a set of drawings to extract take off material quantities required to be dismantled and removed (inventory) and unit cost factors (costs per unit of productivity - per unit volume or per unit weight). The Fermi 2 site-specific decommissioning estimate (SDCE) commissioned for this study is an example of a bottom-up estimate.

Specific analogy is where estimators use the known cost of an item or project from prior estimates as the basis for the cost of a similar item or project in the new estimate. Estimators make adjustments to these known costs to account for differences in relative complexities of performance, design and operational characteristics. The existing Fermi 2 decommissioning cost estimate uses the 2002 Fermi 2 decommissioning cost estimate report as the basis document; this 2002 report is an example of a specific analogy estimate.

Parametric estimating is where estimators use historical databases on similar systems or subsystems and statistical analysis to find correlations between cost drivers and other system parameters to develop unit cost factors. DTE Electric uses parametric estimating for routine maintenance activities such as breaker replacements. Parametric estimates also form the foundation of unit cost factors used in other estimating techniques.

Cost review and update is where estimators develop estimates by reviewing previous estimates of the same or similar projects for internal logic, completeness of scope, assumptions and estimating methodology. This existing Fermi 2 decommissioning cost estimate (DCE) applies an annual cost review and update to the 2002 Fermi 2 decommissioning cost estimate report.

Expert opinion is where estimators do not have other techniques or data available. Estimators iteratively consult with experts until a converged cost estimate emerges.

As discussed above, DTE Electric uses the above techniques or combination of techniques regularly through the normal course of business and specifically for the Fermi 2 decommissioning cost estimates presented in this study.

Elements of cost estimates Cost estimates have four basic elements: (1) basis of estimate, (2) structure of estimate, (3) work breakdown structure and schedule and (4) uncertainty analysis.

Basis of estimate The basis of estimate is the framework or scope of assumptions estimators rely on to develop the decommissioning cost estimates. Information that forms the basis of the estimate include:

• Assumptions and exclusions;

• boundary conditions and limitations - legal and technical. For example, the regulatory framework we discussed in Section 6;

• decommissioning strategy such as the DECOM strategy;

• end point state such as greenfield vs brownfield;

• facility description and site characterization such as our discussion in Sections 4 and 5;

• spent fuel management such as our discussion in Section 6.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 44 of 86 Structure of the estimate Grouping elements of costs into categories assists in better understanding how these elements impact overall cost.

Decommissioning cost estimates often group into activity-dependent, period-dependent, collateral and contingency costs.

Activity-dependent costs are expenditures associated with performing decommissioning activities such as demolition and decontamination.

Period-dependent costs are those expenditures associated with project duration and includes expenditures for site security, program management, energy usage, engineering and licensing.

Collateral costs are those expenditures associated with special items such as mobilization, equipment, insurance and property taxes.

Contingency is a specific provision for unforecastable elements of cost within the defined project scope. The elements in decommissioning cost estimates typically assume ideal conditions such as work is able to progress without delay or interruption. NRC regulations at 10 CFR 72.30(b)(2)(ii) require the use of an adequate contingency factor to demonstrate financial assurance; NRC acceptance criteria in NUREG-1700, Revision 2, Standard Review Plan for Evaluating Nuclear Power Reactor License Termination Plans, includes a review for contingency of approximately 25%.

Work breakdown structure and schedule The work breakdown structure, chart of accounts and schedule interconnect to describe the scope of the nuclear decommissioning project.

The work breakdown structure (WBS) is a hierarchical decomposition of the scope of the project. Each descending level of the WBS represents an increasingly detailed definition of the project work. A WBS dictionary describes the scope of the work and the major deliverable of the WBS element. The industry-standard WBS structure adopted for this study includes the following five high-level WBS elements:

1. Planning, shutdown, transition and pool-to-pad campaign

2. Radiological decommissioning

3. ISFSI decommissioning

4. Spent fuel management

5. Site restoration, where each high-level WBS then has sub-WBS elements; for example:

4. Spent fuel management 4.1 Construct expansion ISFSI storage pad 4.2 ISFSI operations and maintenance 4.2.1 Maintenance 4.2.2 Facilities, grounds and snow removal 4.3 Spent nuclear fuel and high-level waste disposition 2020 FERMI 2 DECOMMISSIONING STUDY SECTION SEVEN l DECOMMISSIONING COST ESTIMATES PAGE 44

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 45 of 86 Similar to a WBS structure, the decommissioning cost estimate describes the chart of accounts used in the estimating process.

The industry-standard chart of accounts adopted in this study aligns with the NDT funds and includes the following accounts:

1. Radiological decommissioning

2. ISFSI decommissioning

3. Spent fuel management

4. Site restoration The scheduled duration of the decommissioning project affects costs most importantly through period-dependent resources or costs. Key schedule milestones align to deliverables from the WBS structure include:

Permanent removal of the fuel from the reactor core. This milestone marks the permeant cessation of operations and opens the decommissioning project windows.

All fuel placed into dry storage at the sites ISFSI. This milestone allows the licensee to request license amendments to reduce the sites security footprint and emergency response plan requirements and opens the spent fuel management WBS.

License termination. This milestone marks the closure of the radiological decommissioning WBS and allows the licensee to reduce staffing to support only ISFSI operations. At this milestone (because DTE Electrics regulatory obligation to radiologically decommission the Fermi 2 Power Plant would be complete), DTE could appropriate excess nuclear decommissioning trust (NDT) funds from radiological decommissioning to spent fuel management program.

DOE acceptance of spent nuclear fuel and high-level waste. This milestone allows the licensee to demobilize almost all staffing and support and begin decommissioning of the ISFSI and also marks the closure of the spent fuel management program WBS and opening of the ISFSI decommissioning WBS.

ISFSI termination. This milestone completes the licensees work to decommission the site and closeout remaining costs. At this milestone (because DTE Electrics regulatory obligation to restore the Fermi 2 Power Plant site and decommission ISFSI would be complete), DTE Electric would return excess NDT funds to the appropriate customers.

Uncertainty analysis The purpose of this Fermi 2 nuclear decommissioning study is to provide reasonable assurance that the Fermi 2 NDT will have sufficient funds to radiologically decommission and restore to greenfield status the Fermi 2 Power Plant site. Risk analysis addresses those issues beyond the project scope such as change in regulations regarding emergency response requirements, security requirements, worker exposure limits, site release limits, waste transportation or change in waste disposal acceptance criteria that would impact DTE Electrics reasonable assurance. DTE Electric used a qualitative risk analysis tool known as a risk register to outline these potential external risks (negative outcomes) and opportunities (positive outcomes) relative to the Fermi 2 nuclear decommissioning scenario presented in this study.

7.2 Existing Fermi 2 decommissioning cost estimate In this section we discuss the existing Fermi 2 decommissioning cost estimate, which DTE Electric last reviewed with the Michigan Public Service Commission (MPSC) in the 2018 Report on the Adequacy of the Existing Annual Provision of Nuclear Plant Decommissioning and throughout the 2018 DTE Electric main rate case proceeding MPSC Case No. U-20162. This decommissioning cost estimate has proven a reasonable and prudent approach for almost twenty years.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 46 of 86 The basis for the existing Fermi 2 decommissioning cost estimate (DCE) is NRC NUREG/CR-6174 Revised Analyses of Decommissioning for the Reference Boiling Water Reactor Power Station [ML14008A186] and NUREG/CR-6270 Estimating Boiling Water Reactor Decommissioning Costs, modified for factors specific to Fermi 2 Power Plant. DTE Electric performed the original decommissioning study in approximately 2002 [DTE02], which established many parameters of the Fermi 2 nuclear decommissioning project including the estimated Fermi 2 inventory, decommissioning strategy, staffing levels and schedule of decommissioning; this 2002 study was comprehensive including estimated radiological decommissioning, post-shutdown spent fuel stewardship and non-radiological decommissioning (greenfielding), well documented, and consistent with NRC-accepted cost estimate methods for the Post Shutdown Decommissioning Activity Report. Also as required by regulations, DTE Electric has performed annual reviews of this 2002 study since adoption (including adding parameters and cost estimates for the Fermi 2 independent spent fuel installation (ISFSI) decommissioning) and updated the DCE to current dollars.

The use of the reference BWR and DECON scenario was a reasonable and prudent methodology to estimate DTE Electrics Fermi 2 Power Plant decommissioning costs without expending undo effort and resources. DTE Electrics intent for the Fermi 2 DCE was to provide reasonable assurance of sufficient funding to decommission the Fermi 2 Power Plant, an activity not expected to occur until 2045 and not to develop a definitive decommissioning plan and estimate. DTE Electric, as is customary in the nuclear industry, always intended to update and refine the Fermi 2 decommissioning cost estimate as the Fermi 2 Power Plant approached the end of its operating life.

DTE Electric reported to the MPSC in the January 2018 Report on the Adequacy of the Existing Annual Provision of Nuclear Plant Decommissioning that the annual review of Fermi 2 Power Plant DCE yielded an updated decommissioning cost estimate of approximately $2.04 billion as of December 31, 2017. DTE Electrics annual review of the Fermi 2 Power Plant DCE yielded an updated decommissioning cost estimate of approximately $2.2 billion as of December 31, 2019. These estimates are inclusive of the total costs estimated for the Fermi 2 Power Plant radiological decommissioning (also known as license termination), ISFSI decommissioning, post-shutdown spent fuel management (AKA spent fuel management program) and greenfielding (AKA site restoration).

Inventory The Fermi 2 Power Plant DCE uses the inventory developed for the reference reactor as published in NRC NUREG/CR-6174 Revised Analyses of Decommissioning for the Reference Boiling Water Reactor Power Station as its base and then makes adjustments for known differences between the Fermi 2 Power Plant and the reference plant.

Reference plant The NUREG/CR-6174 Revised Analyses of Decommissioning for the Reference Boiling Water Reactor Power Station reference plant was the Washington Public Power Supply Systems 1155 MWe BWR with a Mark II containment system: Washington Nuclear Project Number 2 (WNP-2), located on the Hanford. The NRC had previously performed a decommissioning inventory of the WNP-2 plant in support of NRC NUREG/CR-0672 Technology, Safety and Costs of Decommissioning a Reference Boiling Water Reactor Power Station [PNNL80].

Fermi 2-specific considerations The Fermi 2 DCE used a system-wide comparison of the Fermi 2 Power Plant equipment against the equipment at the reference BWR. The comparison concluded that Fermi 2 decommissioning would be approximately 1.3 times more complex than the reference BWR; key aspects driving this conclusion were:

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 47 of 86 The Fermi 2 Power Plant is a GE designed BWR/4 with a Mark I containment and the reference plant is a GE designed BWR/5 with a Mark II containment. The Mark I (and associated torus containment structure) has more equipment to support its functions that the Mark II (wet well containment structure)

Of comparative systems: Fermi 2 Power Plant had 950 valves. The reference plant had 750.

The Fermi 2 Power Plant had an estimated 11,450 potentially contaminated valves. The reference BWR had an estimated 8,750 potentially contaminated valves.

Fermi 2 Power Plant systems Torus Water Management, Emergency Equipment Cooling, Standby Feedwater, Post Accident Sampling, Reactor Protection System and radiation/activity monitors did not have functional equivalents at the reference BWR.

Fermi 2 Power Plant has almost double the emergency cooling system pumps than the reference BWR.

Decommissioning schedule The Fermi 2 DCE uses the high-level decommissioning schedule developed for the reference reactor DECON scenario as published in NRC NUREG/CR-6174 Revised Analyses of Decommissioning for the Reference Boiling Water Reactor Power Station (1996) and makes adjustments for known differences between the Fermi 2 Power Plant and the DECON scenario.

Reference DECON scenario The reference DECOM scenario divided the decommissioning schedule into four periods:

1. Period 1 - Pre-decommissioning Engineering and Planning, 2.5 years prior through shutdown

2. Period 2 - Reactor Deactivation, shutdown through 1.2 years post-shutdown

3. Period 3 - Safe Storage and Spent Fuel Management, 1.2 years - 3.4 years post-shutdown

4. Period 4 - Dismantlement, 3.4 years - 5 years post-shutdown The reference DECON scenario did not contemplate spent fuel management programs of Independent Spent Fuel Installation (ISFSI) decommissioning beyond license termination. The reference DECOM scenario did not contemplate ISFSI decommissioning costs.

Fermi 2-specifc considerations The original 2002 Fermi 2 DCE relied on an informal study performed in 1997 to determine required adjustments to the reference DECON scenario:

1. Period 1 - decommissioning Engineering and Planning, 5 years prior through shutdown

2. Period 2/Transition year - Reactor Deactivation, shutdown though 1-year post-shutdown

3. Period 3 - Safe Storage and Spent Fuel Management, 1 year - 5 years post-shutdown

4. Period 4 - Dismantlement, 5 years - 9 years post-shutdown

5. Period 5 - ISFSI monitoring, 9 years - 20 years post-shutdown The Fermi 2-specific schedule considerations have been informally updated since 2002 to account for industry and Fermi 2-specific changes including:

• Fermi 2s nuclear fuel will require approximately seven years, not five years, in the spent fuel pool to sufficiently cool down prior to placing the spent fuel into dry cask storage. This change was an outcome of updating forecasted decay 2020 FERMI 2 DECOMMISSIONING STUDY SECTION SEVEN l DECOMMISSIONING COST ESTIMATES PAGE 47

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 48 of 86 heat rates of the Fermi 2 nuclear fuel and accounting for projected burnup exposures with 24-month operating cycles.

• Fermi 2 decommissioning would rely on a rip and ship model, where dismantled contaminated equipment is shipped offsite for waste minimization and disposal, rather than the extensive decontamination efforts envisioned in the reference DECON scenario to preserve schedule. This change was the outcome of DTE Electrics experience with the Fermi 1 Power Plant decommissioning and industry trends.

• Fermi 2s ISFSI will require capacity of 128, not 96, dry-storage cask locations. This change was an outcome of the Fermi 2 license renewal, which extended the operating life of the Fermi 2 Power Plant from 40 years to 60 years and the associated increase for the 20 additional years of spent nuclear fuel.

• Fermi 2s spent nuclear fuel will require at least sixty years, not twenty, of post-shutdown stewardship. This requirement change was an outcome of the 2010 update to the Waste Confidence Decision that extended the acceptable duration of operating an on-site ISFSI from thirty years to sixty years post-shutdown. Further reinforcing this change is the decades-long inaction by the US Government to pursue a permanent geological repository.

7.3 2020 Fermi 2 site-specific decommissioning cost estimate In this section we discuss the 2020 Fermi 2 site-specific decommissioning cost estimate (SDCE) [DTE20], which DTE Electric commissioned EnergySolutions, LLC to prepare in partial response to the Michigan Public Service Commission (MPSC or Commission) U-20162 finding that an updated Fermi 2 nuclear decommissioning study would be beneficial to the Commission.

Whereas the 2002 Fermi 2 decommissioning study used a specific analogy technique with the reference boiling water reactor (BWR) described in the 1996 NRC study as its basis, the 2020 Fermi 2 SDCE uses a bottom-up technique with the Fermi 2 Power Plant specific inventory as its basis. In concert with this bottom-up technique, DTE Electric re-baselined the constituent elements of the Fermi 2 nuclear decommissioning cost estimates for license termination, independent spent fuel installation (ISFSI) decommissioning, spent fuel management program and site restoration. Similar to the 2002 Fermi 2 decommissioning cost study, this 2020 Fermi 2 SDCE is also consistent with NRC-accepted cost estimate methods for the Post Shutdown Decommissioning Activity Report.

The 2020 Fermi 2 SDCE developed using a bottom-up technique from Fermi 2 specific inventories is a reasonable and prudent effort given the Commissions U-20162 discussion of DTE Electrics use of the 2002 Fermi 2 decommissioning study basis. DTE Electrics intent for the 2020 Fermi 2 SDCE is, again, to provide reasonable assurance of sufficient funding to decommission the Fermi 2 Power Plant, an activity not expected to occur until 2045. DTE Electric, as is customary in the nuclear industry, intends to update and refine the Fermi 2 decommissioning cost estimate as the Fermi 2 Power Plant approaches the end of its operating life.

The 2020 Fermi 2 Power Plant SDCE yields a nuclear decommissioning cost estimate for the Fermi 2 Power Plant of approximately $2.2 billion as of December 31, 2019. This estimate establishes the total costs estimated to the Fermi 2 Power Plant license termination as approximately $1.56 billion, ISFSI decommissioning as approximately $0.01 billion, spent fuel management program as approximately $0.51 billion and 2020 FERMI 2 DECOMMISSIONING STUDY SECTION SEVEN l DECOMMISSIONING COST ESTIMATES PAGE 48

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 49 of 86 site restoration as approximately $0.10 billion.

Inventory The Fermi 2 SDCE material inventory uses material take offs, a process which involved reviewing approximately one thousand Fermi 2 Power Plant drawings and technical documents to determine the equipment, dimensions and other characteristics for each structure at the Fermi 2 site to calculate building-specific volumes and weights of each waste stream.

Table 7.1 provides the estimated material inventory summary for the Fermi 2 Power Plant with the total amount of waste estimated at approximately 1.0 million tons. The estimated Class A low-level radioactive waste (LLRW) disposal requirements are approximately 446,488 tons, the estimated Class B/C LLRW disposal requirements are approximately 505 tons and estimated the greater-than-Class-C (GTCC) LLRW disposal requirements are approximately 107 tons. The estimated non-radioactive (Class F) waste disposal requirements are approximately 592,000 tons.

Table 7.1 Fermi 2 SDCE low-level radioactive waste (LLRW) material inventory (tons)

In-situ waste Waste class Waste stream (tons) Transportation and disposal protocol Concrete 365,785 Rail transport to licensed LLRW landfill Class A Metal & debris1 60,603 Rail transport to licensed LLRW landfill Soil & non-inventory material2 20,100 Rail transport to licensed LLRW landfill Class A total (tons) 446,488 Class B/C Metal 505 Truck transport to licensed LLRW landfill Class B/C total (tons) 505 Greater-than-C Metal 107 Stored at ISFSI & transferred to DOE GTCC total (tons) 107 Concrete 400,600 Process and reuse onsite Clean (Class F)

Metal & debris 191,400 Truck transport to local landfills Class F total 592,000 Total estimated waste (tons) 1,039,100 Note 1: Includes dry active waste (DAW) and Class A segments of the reactor vessel Note 2: Includes estimated soil and other waste materials (such as tools) derived from other than plant inventory Table 7.2 provides a comparison of the estimated total LLRW inventory volumes for the Fermi 2 Power Plant at approximately 344,592 cubic yards (cyds) relative to the NRC NUREG/CR-6174 Reference BWR at approximately 19,790 cyds. The Fermi 2 SDCE Class A LLRW volume of approximately 333,369 cyds is consistent with the rip and ship model used in the SDCE. The increased Class B/C and GGTC LLRW waste volumes are as expected given the specific size, model and construction characteristics of the Fermi 2 Power Plant relative to the Reference BWR.

Table 7.2 Fermi 2 SDCE LLRW material inventory (volume) relative to the NRC NUREG/CR-6174 Reference BWR Reference BWR Fermi 2 Power Plant Waste class (NUREG/CR-6174 ) (Fermi 2 SDCE)

Class A 9,776 333,369 Class B/C 9,770 10,202 GTCC 244 1,021 Total waste volume (cyds) 19,790 344,592 2020 FERMI 2 DECOMMISSIONING STUDY SECTION SEVEN l DECOMMISSIONING COST ESTIMATES PAGE 49

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 50 of 86 The NRC describes the classification of low-level radioactive waste at 10 CFR 61.55 where Class A is the lowest classification of LLRW and GTCC is the highest classification. The GTCC LLRW requires geological disposal whereas Class A, B and C LLRW is suitable for near surface disposal, provided the waste form meets regulations.

Decommissioning schedule The Fermi 2 SDCE uses the DECON scenario; a continuation of the DTE Electric decommission strategy used in the existing Fermi 2 DCE. As we have discussed in Section 4, industry experience with the SAFSTOR options have demonstrated that the DECON scenario is a more reasonable and prudent strategy.

NRC decommissioning levels The Fermi 2 SDCE uses decommissioning levels to summarize the status of Fermi 2 Power Plant nuclear fuel. Level Zero commences once the Fermi 2 reactor is permanently shut down and extends until the plant enters Level 1. Because the status of the sites nuclear fuel informs many of the NRCs emergency response and site security regulations, the NRC proposed

[ML18012A024] the following decommissioning levels to provide a more efficient NRC regulatory framework during the decommissioning process by using a graded approach commensurate with the reductions in radiological risk associated with each level:

1. Level 1 commences after the NRCs docketing of Fermi 2 Power Plants certification of permanent cessation of operations and permanent removal of the fuel from the reactor vessel. In this level, Fermi 2 Power Plant spent nuclear fuel (SNF) in the spent fuel pool (SFP) is still susceptible to a zirconium fuel cladding fire within 10 hours1.157407e-4 days <br />0.00278 hours <br />1.653439e-5 weeks <br />3.805e-6 months <br /> under adiabatic heat up conditions. At this level, the Fermi 2 Power Plant would approximately maintain its existing operating emergency response plan and site security plan.

2. Level 2 commences once the fuel in the SFP has decayed and cooled sufficiently that it cannot heat up to clad ignition temperature within 10 hours1.157407e-4 days <br />0.00278 hours <br />1.653439e-5 weeks <br />3.805e-6 months <br /> under adiabatic conditions. DTE Electric forecasts entering Level 2 approximately 18 months following shutdown of the plant. At this level, DTE Electric can and would request to change its emergency response plan to reflect the significantly lower risk to the public.

3. Level 3 commences once DTE Electric has removed the entire SNF inventory from the SFP and into dry cask storage.

Consistent with Fermi 2 Power Plants current licensing basis, DTE Electric forecasts entering Level 3 approximately 5.5 years after entering Level 2. At this level, DTE Electric can and would request to change its emergency response plan and site security plan to reflect the significantly lower risk to the public.

4. Level 4 commences once the Department of Energy (DOE) has accepted title of the entire Fermi 2 SNF inventory and has removed the inventory from the Fermi 2 Power Plant site. Consistent with the discussion in Section 7, DTE Electric forecasts entering Level 4 approximately 53 years after entering Level 3. At this level, DTE Electric can and would decommission the Independent Spent Fuel Installation (ISFSI) and terminate the emergency response plan and site security plan.

Fermi 2 decommissioning periods The Fermi 2 SDCE uses five overlapping project duration windows to divide the Fermi 2 decommissioning project:

1. Period 1 (2045 - 2051): Pre-planning, shut down & transition, and pool-to-pad campaign During this duration window the Fermi 2 Power Plant transitions from Level Zero through Level 1 to Level 2. Costs allocate to Period 2 and Period 4 as appropriate.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 51 of 86

2. Period 2 (2052 - 2059): License termination During this duration window the Fermi 2 Power Plant is at Level 3.

Costs approximately correspond to 10 CFR 50.75(c) requirements.

3. Period 3 (2053 - 2060): Site restoration During this duration window the Fermi 2 Power Plant is at Level 3.

4. Period 4 (2045 - 2105): Dry fuel/CTCC storage & transfer to DOE During this duration window the Fermi 2 Power Plant transitions from Level Zero through Levels 1 and 2 to Level 3. Costs approximately correspond to 10 CFR 50.54(bb) requirements.

5. Period 5 (2106 - 2108): ISFSI decommissioning During this duration window the Fermi 2 Power Plant is at Level 4.

Costs approximately correspond to 10 CFR 72.30(a) requirements.

7.4 Fermi 2 NRC minimum decommissioning fund requirement In this section, we review the most recent DTE Electric Fermi 2 decommissioning cost estimates performed in accordance with Nuclear Regulatory Commission (NRC) regulations. NRC regulations require formal submission of the Fermi 2 radiological decommissioning funding assurance amounts every two years and formal submission of the Fermi 2 Independent Spent Fuel Storage Installation (ISFSI) decommissioning amounts every three years.

Radiological decommissioning 10 CFR 50.75(b) and (c)

The 2019 NRC minimum decommissioning cost estimate, pursuant to NRC regulations at 10 CFR 50.75(b) and (c), was approximately $1.12 billion [ML19087A224]. The labor, energy and burial factors used in DTE Electrics calculation of the NRC minimum requirement for the Fermi 2 decommissioning financial assurance are: Labor (L) = 2.75, Energy (E) = 2.39 and Waste Burial (B) = 28.314. The source of these factors is in accordance with the NUREG-1307, Revision 17 guidance. The Waste Burial (B) factor is consistent with Michigans unaffiliated status with multi-state low-level radioactive waste (LLRW) disposal compacts.

The NRC minimum decommissioning cost estimate does not represent actual cost of decommissioning for specific reactors but is a reference level established to ensure the licensee (DTE Electric) demonstrates adequate financial responsibility for the bulk of funds necessary for a safe decommissioning early in the facility life (reference [53 FR 24018] page 24030). The NRC Staff had concluded that the NRC minimum amounts required to demonstrate decommissioning assurance were adequate for the NRCs regulatory purpose [ML13127A234].

ISFSI decommissioning 10 CFR 72.30 The 2020 NRC Independent Spent Fuel Storage Installation (ISFSI) decommissioning cost estimate, pursuant to NRC regulations at 10 CFR 72.30(b), was approximately $9.6 million [DTE20A]. The estimate uses 2014 ISFSI design characteristics and 2014 forecasted dry cask usage to develop the projected ISFSI inventory and associated disposal costs.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 52 of 86 7.5 DTE Electric conclusion DTE Electric concludes a reasonable and prudent cost estimate for the various aspects of the Fermi 2 decommissioning are:

$1.560 billion for radiological decommissioning (license termination)

$0.013 billion for Independent Spent Fuel Installation (ISFSI) decommissioning

$0.511 billion for post-shutdown spent fuel management (spent fuel storage and transfer)

$0.096 billion for non-radiological decommissioning (site restoration)

$2.179 billion for total Fermi 2 decommissioning costs DTE Electric supports this conclusion with the Fermi 2 site-specific decommissioning cost estimate completed in 2020.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 53 of 86 SECTION EIGHT 8 Nuclear Decommissioning Trust (NDT)

DTE Electric, as a nuclear plant licensee, must provide financial assurance for radiological decommissioning through meeting the requirements of Nuclear Regulatory Commission (NRC) regulations at 10 CFR 50.75 while the Fermi 2 Power Plant is operating. NRC regulations at 10 CFR 50.82 govern the decommissioning process including the use of decommissioning funds.

DTE Electric meets the Fermi 2 NRC financial assurance requirements with a nuclear decommissioning trust (NDT) which holds contributions collected from DTE Electric customers through the Nuclear Surcharge provision. The Fermi 2 NDT consists of a Nuclear Decommissioning Fund and an LLRW Fund.

In this section we discuss the structure of the DTE Electric Nuclear Decommissioning Master Trust [DTE13], its Funds and the allowable uses for such. We then discuss the DTE Electric Nuclear Surcharge, which is an exclusive funding mechanism provided by the Michigan Public Service Commission (MPSC) to collect amounts from DTE Electric customers to hold in the trusts. Our intention with this discussion to provide relevant background information to support the readers understanding of the framework DTE Electric has developed, with oversight from the Michigan Public Service Commission (MPSC), to protect and ensure that amounts collected for the nuclear decommissioning of the Fermi 2 Power Plant are reasonably assured to be available for their intended purpose.

8.1 DTE Electric Master Trust Agreement overview DTE Electric has ownership interests in the nuclear facilities at Fermi 1 Power Plant and Fermi 2 Power Plant, located in Monroe County, Michigan. The Michigan Public Service Commission (MPSC) and Federal Energy Regulatory Commission (FERC) each have ordered DTE Electric to include in rates amounts to collect from customers which are to be placed and held in an external trust fund in order to provide adequate funds to decommission the Fermi 2 Power Plant. DTE Electric has an executed Nuclear Decommissioning Master Trust Agreement between DTE Electric (Company) and State Street Bank and Trust Company (Trustee).

The Nuclear Decommissioning Master Trust Agreement consolidated the Companys Nuclear Decommissioning Trust Agreement for the Fermi 1 Nuclear Power Plant, the Non-Qualified Nuclear Decommissioning Trust Agreement for the Fermi 2 Nuclear Power Plant and the Qualified Nuclear Decommissioning Trust Agreement for the Fermi 2 Nuclear Power Plant to provide for the combined investment of separate trusts. The Master Trust consists of three Funds identified as: Nonqualified Fermi Unit 1 Fund, Nonqualified Fermi Unit 2 Fund and Qualified Fermi Unit 2 Fund. The Trustee maintains books and records necessary to reflect each Fund separately from each other Fund and maintains subaccounts (funds or plans) within each fund as the Company directs.

The Funds are for the exclusive purpose of providing funds for the decommissioning of the Companys nuclear units identified in their respective titles. The Master Trust Agreement defines decommissioning as:

to remove Nuclear Units safely from service and to reduce residual radioactivity to a level that permits release of property for unrestricted use and termination of license, or as otherwise directed by the Nuclear Regulatory Commission (NRC). Decommission also includes other decommissioning activities including but not limited to activities, such as fuel stewardship and site restoration. With respect to funds or accounts specifically identified for 2020 FERMI 2 DECOMMISSIONING STUDY SECTION EIGHT l NUCLEAR DECOMMISSIONING TRUST PAGE 53

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 54 of 86 disposal of radioactive materials, decommission also means the disposal of such radioactive materials, whether or not Fermi 2 has ceased to operate. Decommission also includes other activities and costs, if any, which may be included in the definition of decommission pursuant to Internal Revenue Service regulations and rulings implementing Section 468A of the Code.

None of the assets of the Funds are subject to attachment, garnishment, execution or level in any matter for the benefit of the Companys creditors.

The Nonqualified Fermi Unit 1 Funds serves a standby trust in accordance with Appendix A of 10 CFR 30 because the Company is using a Parent Company Guarantee to provide a portion of financial assurance for Fermi 1 decommissioning. The Company does not classify Fermi 1 as utility plant, so there is no regulatory asset. The Nonqualified Fermi Unit 1 Fund can not be used for the Fermi 2 Power Plant decommissioning; therefore, we do not discuss the Nonqualified Fermi Unit 1 Fund any further.

8.2 Fermi 2 Nuclear Decommissioning Trusts The Fermi 2 Nuclear Decommissioning Trust consists of the two Mater Decommissioning Trust accounts for Fermi 2 Power Plant:

1. The Qualified Fermi 2 Unit Fund (Qualified Fund)

2. The Nonqualified Fermi 2 Unit Fund (Nonqualified Fund) where qualified and nonqualified denotes the different tax code applicability. The Qualified Fund is invested as a single account and the Nonqualified Fund is invested as a separate single account. Both the Qualified and Nonqualified Funds consists of distinct plans to segregate amounts within by jurisdiction and purpose. DTE Electric maintains separate books and records for each distinct plan.

The Qualified Fund consists of four plans:

1. Fermi 2 Qualified MPSC fund

2. Fermi 2 Qualified FERC fund

3. ISFSI Decommissioning fund

4. Fermi 2 Qualified Other Decommissioning fund The Nonqualified Fund consists of four plans:

1. Fermi 2 Nonqualified MPSC fund

2. Fermi 2 Nonqualified FERC fund

3. Fermi 2 Nonqualified Other Decommissioning fund

4. LLRW fund.

The Fermi 2 Qualified MPSC fund, Fermi 2 Qualified FERC fund, ISFSI Decommissioning fund, Fermi 2 Qualified Other Decommissioning fund, Fermi 2 Nonqualified MPSC fund, Fermi 2 Nonqualified FERC fund, and Fermi 2 Nonqualified Other Decommissioning fund are the seven plans that collectively equate to the Nuclear Decommissioning Fund and are for the 2020 FERMI 2 DECOMMISSIONING STUDY SECTION EIGHT l NUCLEAR DECOMMISSIONING TRUST PAGE 54

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 55 of 86 exclusive use of the end-of-life decommissioning of the Fermi 2 Power Plant. The LLRW fund is for the use of the disposal of low-level radioactive waste (LLRW) material generated during plant operations.

NRC radiological decommissioning Radiological decommissioning are those activities required to terminate the Fermi 2 Power Plants license. DTE Electric has certified to the Nuclear Regulatory Commission (NRC) that the Fermi 2 Qualified MPSC fund, Fermi 2 Qualified FERC fund, Fermi 2 Nonqualified MPSC fund and Fermi 2 Nonqualified FERC fund amounts are available for the Fermi 2 radiological decommissioning, pursuant to NRC regulations at 10 CFR 50.75(b) and (c).

Fermi 2 Qualified MPSC fund The Fermi 2 Qualified MPSC fund is a qualified trust fund under IRS code 468A and is for the exclusive use of radiological decommissioning of the Fermi 2 Power Plant and subject to NRC minimum assurance regulations at 10 CFR 50.75(b). The amounts in this fund originated from customers within the MPSC jurisdiction.

Fermi 2 Qualified FERC fund The Fermi 2 Qualified FERC fund is a qualified trust fund under IRS code 468A and is for the exclusive use of radiological decommissioning of the Fermi 2 Power Plant and subject to NRC regulations at 10 CFR 50.75(b). The amounts in this fund originated from customers within the FERC jurisdiction.

Fermi 2 Nonqualified MPSC fund The Fermi 2 Nonqualified MPSC fund is not a qualified trust fund under IRS code 468A but is for the exclusive use of radiological decommissioning of the Fermi 2 Power Plant and subject to NRC regulations at 10 CFR 50.75(b). The amounts in this fund originated from customers within the MPSC jurisdiction.

Fermi 2 Nonqualified FERC fund The Fermi 2 Nonqualified FERC fund is not a qualified trust fund under IRS code 468A but is for the exclusive use of radiological decommissioning of the Fermi 2 Power Plant and subject to NRC regulations at 10 CFR 50.75(b). The amounts in this fund originated from customers within the FERC jurisdiction.

NRC ISFSI decommissioning The ISFSI Decommissioning fund is a qualified trust fund under IRS code 468A and is for the exclusive use of decommissioning the Fermi 2 Power Plant ISFSI and subject to NRC regulations at 10 CFR 72.30. The amounts in this fund originated from customers within the MPSC jurisdiction.

NRC irradiated fuel management Irradiated fuel management are the activities required for post-shutdown fuel stewardship following the certification of permanent cessation of operations and permanent defueling of the Fermi 2 reactor. DTE Electric intends to use portions of the Fermi 2 Qualified Other fund and Fermi 2 Nonqualified Other fund amounts as available for irradiated fuel management, pursuant to NRC regulations at 10 CFR 50.54(bb).

Fermi 2 Qualified Other Decommissioning fund The Fermi 2 Qualified Other Decommissioning fund is a qualified trust fund under IRS code 468A and is for the exclusive use of decommissioning the Fermi 2 Power Plant. DTE Electric does not report this fund as available to the NRC - as such, this fund is 2020 FERMI 2 DECOMMISSIONING STUDY SECTION EIGHT l NUCLEAR DECOMMISSIONING TRUST PAGE 55

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 56 of 86 for the use of post-shutdown fuel stewardship and non-radiological decommissioning (greenfielding or site restoration) of the Fermi 2 Power Plant. The monies in this fund originated from customers within both the MPSC jurisdiction and FERC jurisdiction.

Fermi 2 Nonqualified Other Decommissioning fund The Fermi 2 Nonqualified Other Decommissioning fund is not a qualified trust under IRS code 468A. The fund is for the exclusive use of decommissioning the Fermi 2 Power Plant. DTE Electric does not report this fund as available to the NRC - as such, this fund is available for the use of post-shutdown fuel stewardship and non-radiological decommissioning (greenfielding or site restoration) of the Fermi 2 Power Plant. After the permanent cessation of operations, the NRC will require DTE Electric to report funds available for post-fuel shutdown fuel stewardship per 10 CFR 72. The amounts in this fund originated from customers within both the MPSC jurisdiction and FERC jurisdiction.

8.3 DTE Electric Nuclear Surcharge The exclusive source of amounts for the Fermi 2 NDT is a surcharge collected from the MPSC jurisdictional customer base. We discuss the surcharge in this section.

Nuclear Surcharge overview The Nuclear Surcharge is a non-bypassable charge applied to all electricity usage within DTE Electrics jurisdiction. The Michigan Public Service Commission (MPSC or Commission) reviews the DTE Electric proposed annual Nuclear Surcharge provision during DTE Electrics rate case proceedings. The Commission then authorizes the amount DTE Electric is to collect within the electric rate case order. Attachment B of Order U-17767, dated December 11, 2015 provides a summary of the Nuclear Surcharge:

On January 1987 MPSC Order authorized the establishment of an external trust fund to finance the decommissioning of Fermi 2 Power Plant when its operating license expires. The Order approves a decommissioning surcharge on customer bills under which the funds are collected. Pursuant to Commission Order U-10102 dated January 21, 1994, a revised surcharge became effective with service rendered on and after January 22, 1994. In the same order, the Commission authorized the establishment of an external fund to finance the disposal of low-level radioactive waste during the operating life of Fermi 2 Power Plant. Pursuant to an order in Case No. U-14399, costs associated with site security and radiation protection services were removed from base rates and transferred to the Nuclear Surcharge.

The Nuclear Surcharge then has three separate components (two for Fermi 2 operations and one for Fermi 2 decommissioning):

1. Site Security and Radiation Protection Funding - DTE Electric records this portion of the Nuclear Surcharge to offset current year site security and radiation protection O&M costs.

2. Low-level Radioactive Waste Funding (LLRW) - DTE Electric deposits this portion of the Nuclear Surcharge into the LLRW Fund, used to offset the operational expenses resulting from the disposal of LLRW generated during Fermi 2 operations.

3. Nuclear Decommissioning Funding - DTE Electric deposits this portion of the Nuclear Surcharge into the Nuclear Decommissioning Fund.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 57 of 86 As the scope of this study is Fermi 2 decommissioning, we use the balance of this section to discuss the Nuclear Decommissioning Funding portion of the Nuclear Surcharge.

8.4 Nuclear Decommissioning Funding Portion of Nuclear Surcharge The Nuclear Decommissioning Funding (NDF) portion of the Nuclear Surcharge is the exclusive DTE Electric mechanism authorized by the Commission to provide contributions to the Nuclear Decommissioning Fund. The Commission authorizes the annual surcharge amount DTE Electric for the Nuclear Decommissioning Funding.

NRC regulations The Nuclear Decommissioning Funding portion of the Nuclear Surcharge is a non-bypassable charge according to the NRC definition at 10 CFR 50.2:

Non-bypassable charges mean those charges imposed over an established time period by a Government authority that affected persons or entities are required to pay to cover costs associated with the decommissioning of a nuclear power plant. Such charges include, but are not limited to, wire charges, stranded cost charges, transition charges, exit fees, other similar charges, or the securitized proceeds of a revenue stream.

With the non-bypassable charge, the Fermi 2 Nuclear Decommissioning Trust qualifies as an external sinking fund as summarized in revision 2 of the NRC Regulatory Guide 1.159 Assuring the Availability of Funding for Decommissioning Nuclear Reactors:

External Sinking FundA fund established and maintained by setting funds aside periodically, in an account segregated from licensee assets and outside the administrative control of the licensee and its subsidiaries or affiliates, in which the total amount of funds would be sufficient to pay decommissioning costs at the time permanent termination of operations is expected. An external sinking fund may be in the form of a trust, escrow account, government fund, certificate of deposit, deposit of government securities, or other payment acceptable to the NRC.

The DTE Electric exclusive use of the external sinking fund method to provide the NRC with reasonable assurance of funding availability is consistent with NRC regulations at 10 CFR 50.75(e)(1)(ii):

The external sinking fund method may be used as the exclusive mechanism relied upon for providing financial assurance for decommissioning in the following circumstances:

(B) By a licensee whose source of revenues for its external sinking fund is a "non-bypassable charge," the total amount of which will provide funds estimated to be needed for decommissioning pursuant to §§ 50.75(c), 50.75(f), or 50.82 of this part.

Because the Nuclear Decommissioning Funding Portion of the Nuclear Surcharge is the exclusive method DTE Electric has identified to the NRC to provide reasonable assurance, DTE Electric must continue to collect at least a nominal annual amount to maintain this method. Suspension or discontinuance of the Nuclear Decommissioning Portion of the Nuclear Surcharge would require NRC notification (10 CFR 50.75(f)(1).

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 58 of 86 Allocation of the Nuclear Decommissioning Funding provision The MPSC approves the total annual provision for Nuclear Decommissioning Funding; DTE Electric determines the allocation of the amounts collected from the annual Nuclear Decommissioning Funding provision to each NDT plan.

DTE Electric must factor minimum annual funding commitments as well as each funds adequacy into the allocation of the amounts collected from the annual Nuclear Decommissioning Funding provision. DTE Electric has the following approximate annual funding commitments with the NRC:

1. $12 per year allocated to radiological decommissioning [ML19087A224]

2. $382,000 per year allocated to ISFSI decommissioning [ML17089A789].

DTE Electric last updated the allocation in 2017 [DTE17] following the NRC approval of the Fermi 2 license renewal. The current allocation of the Nuclear Decommissioning Funding provision is approximately:

• 14% or ~$420,000 per year to ISFSI Decommissioning fund. This amount is to ensure DTE Electric contributes at least the NRC commitment of $382,000 per year to the ISFSI Decommissioning fund regardless of DTE Electric sales.

• 0% or ~$12 per year to Fermi 2 Qualified MPSC fund. This amount is to ensure DTE Electric contributes at least $1/

month to satisfy the NRC that DTE Electric is maintaining the NDTs status as an external sinking fund.

• 86% or ~$2,580,000 per year to Fermi 2 Qualified Other Decommissioning fund. This amount is to ensure DTE Electric contributes the balance of the Nuclear Decommissioning Funding provision to post-fuel stewardship and site restoration as these activities are underfunded.

We address the recommended future allocation of the Nuclear Decommissioning Funding provision in the Funding Adequacy discussion later in this report.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 59 of 86 SECTION NINE 9 NDT funding adequacy In this section, we will discuss the elements used to calculate DTE Electrics 2020 Fermi 2 Nuclear Decommissioning Trust (NDT) funding adequacy. Our intention with this discussion is to support the readers understanding and walk through the elements of assessing the funding adequacy of the Fermi 2 Nuclear Decommissioning Trust. The goal of this sections discussion is to provide reasonable assurance that DTE Electrics annual Nuclear Decommissioning Funding provision is adequate.

9.1 Nuclear Decommissioning Trust funding adequacy overview In this section we provide an overview of the DTE Electric Nuclear Decommissioning Trust funding adequacy review where we introduce the mathematical model for determining the required minimum annual Nuclear Decommissioning Funding provision for reasonable assurance and the elements required to use the model.

We use a simple model to calculate the required annual Nuclear Decommissioning Funding provision of the Nuclear Surcharge NSNDF

= ( ) ((1+) ), 9.1 1

where, SDCEf is the Fermi 2 site-specific cost estimate (SDCE) at the time of expected shut down (i.e. December 31, 2044),

given no contributions where

= 0 (1 + ) where SDCE0 is the Fermi 2 site-specific cost estimate (SDCE) at time of reference for the review (i.e.

December 31, 2019) r is the projected rate of escalation from starting date t0 to time of expected shutdown tf t is the time t in years growth from starting date t0 to time of expected shutdown tf NDTf is the balance of Fermi 2 Nuclear Decommissioning Fund at the time of expected shutdown (i.e. December 31, 2044), assuming no contributions where

= 0 (1 + ) where NDT0 is the balance of Fermi 2 Nuclear Decommissioning Fund at time of reference for the review (i.e. December 31, 2019) i is the projected effective rate of growth from starting date t0 to time of expected shutdown tf t is the time t in years growth from starting date t0 to time of expected shutdown tf Well make two important notes for this model:

1. The rate of growth applied to assets is the effective rate of growth. This is to say, if we assume:

NDT0 = 100; i = 7%; and t = 2 years; then the expected available NDT balance at the end of two years would be $114.49 after paying for taxes and administrative and incidental expenses.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION NINE l NDT FUNDING ADEQUACY PAGE 59

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 60 of 86

2. This model uses a single constant rate of inflation and a single constant effective rate of return on assets to calculate the required annual collections to achieve the minimum amounts within the specified time period, which is a reasonable model to provide reasonable assurance without overburdening reviewers with additional inputs; however we must exercise care when updating the elements of the model, particularly, the rates of inflation and escalation, where, because of compounding effects - just a tenth of a percent change in either rate element can result in significant changes in the calculated required annual collections. Fundamentally, for any set of potential rates using the same net difference, the lower the rate of inflation, the less annual collections required; for example, keeping all other elements constant, using 0% rate of inflation and 0% effective rate of growth on assets will result in a lower calculated annual collection than using a 4% rate of inflation and a 4% effective rate of growth on assets even though both calculations use a net zero difference between the rate of inflation and the effective rate of growth on assets.

We use the balance of this discussion to establish the values for each element of the funding adequacy model discussed above:

Fermi 2 SDCE at December 31, 2019 Rate of escalation as applied to the SDCE from December 31, 2019 through December 31, 2044 Fermi 2 Nuclear Decommissioning Fund balance as of December 31, 2019 Effective rate of growth as applied to the NDT and its funds from December 31, 2019 through December 31, 2044 which must account for applied taxes and incidental and administrative expenses.

9.2 Nuclear Decommissioning Cost Estimate For this funding adequacy review, we adopt the Fermi 2 Site-Specific Decommissioning Cost Estimate (SCDC) as discussed in Section 7.4. This adoption is a reasonable and prudent approach given the Michigan Public Service Commission (MPSC) requested this updated study precisely to obtain a decommissioning cost estimate using more Fermi 2 site-specific considerations. The total estimated cost to decommission the Fermi 2 Power Plant is approximately $2.2 billion as of December 31, 2019 and detailed in Tables 9.1 and 9.2.

Table 9.1 Summary Fermi 2 SDCE costs in thousands of 2019 dollars.

Fermi 2 decommissioning activity Cost estimate License termination $1,559,579.2 ISFSI decommissioning 12,608.5 Spent fuel management program 510,843.3 Site restoration 96,141.3 Total Fermi 2 site-specific decommissioning cost estimate (SDCE) $2,179,172.3 Table 9.2 Fermi 2 SDCE by cost element in thousands of 2019 dollars Fermi 2 decommissioning activity Labor Materials Disposal Other Total License termination $487,126.2 $121,724.1 $585,460.4 $365,268.6 $1,559,579.2 ISFSI decommissioning 6,223.4 2,139.2 455.0 3,790.9 12,608.5 Spent fuel management program 236,337.4 82,600.0 25,048.6 166,857.3 510,843.3 Site restoration 26,864.7 39,723.2 13,755.3 15,798.1 96,141.3 Total Fermi 2 SDCE $756,551.7 $246,186.5 $624,719.3 $551,714.9 $2,179,172.3 2020 FERMI 2 DECOMMISSIONING STUDY SECTION NINE l NDT FUNDING ADEQUACY PAGE 60

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 61 of 86 We retain the basis of the SDCE as well, most notably, we maintain that Fermi 2 Power Plant will shut down on March 20, 2045; therefore, the amounts in the Fermi 2 NDT balances must be sufficient no later than December 31, 2044, which is consistent with the existing Fermi 2 decommissioning cost estimate.

As we have discussed prior, because of each power plants unique characteristics, strategies and situations there are pitfalls associated with simple benchmarking of the industrys nuclear decommissioning cost estimates; however, the Commission expressed interest in better understanding how the Fermi 2 decommissioning cost estimate related to those throughout the industry and to that end DTE Electric worked with Callan LLC (Callan) to provide a draft benchmarking analysis [CAL20] of the various elements used by DTE Electric in modeling nuclear decommissioning funding adequacy. The Callan analysis demonstrates that using industry information available to Callan, DTE Electrics Fermi 2 decommissioning cost estimates were within the industrys expected range for BWRs as of 2018, after scaling for known differences in published estimates.

9.3 Inflation rates (cost escalation)

As we have discussed earlier in this section, the inflation rate or cost escalation rate used in our nuclear decommissioning funding adequacy model is an important factor to consider. The requirement of the Settlement Agreement in Michigan Public Service Commission (MPSC) Case No. U-6150 (Re-opened), dated August 26, 1986 states DTE Electric is to include a review of inflation rates in DTE Electrics report on the adequacy of the annual Nuclear Decommissioning Funding provision; we intend this section to satisfy the inflation rates review.

For this section we discuss the projected rate of inflation (or cost escalations) for the Fermi 2 SDCE where we begin with a review of the incumbent rate of inflation approved by the Michigan Public Service Commission (MPSC or Commission) and then transition to a historical perspective of actual rate of inflation experienced by the different elements of nuclear decommissioning activities. We close out the section with a recommendation for a reasonable and prudent going-forward rate of inflation for use in this funding adequacy review.

DTE Electric rate of inflation methodology DTE Electrics existing nuclear decommissioning funding adequacy model uses the rate of inflation of 6%. The Michigan Public Service Commission last approved the use of this 6% rate of inflation model in Order U-20162, dated May 2, 2019; the MPSC has consistently approved the use of the 6% rate of inflation since Commission Order U-10102, dated January 21, 1994.

The Commissions approval of the 6% rate of inflation has been demonstrated as reasonable (through 2019) when applied to DTE Electrics annual review and update of the 2002 Fermi 2 nuclear decommissioning cost estimate. As we have discussed in prior sections of this study, applying the 6% rate of inflation in DTE Electrics annual review and update of the 2002 Fermi 2 decommissioning cost estimate resulted in a total decommissioning cost estimate within 0.5% of the 2020 Fermi 2 site-specific decommissioning cost estimate as of December 31, 2019.

Historical rate of inflation for nuclear decommissioning cost estimates Regulatory guidance for nuclear decommissioning cost escalation factors The NRC issues a bi-annual publication named NUREG-1307, Report on Waste Burial Charges Changes in Decommissioning Waste Disposal Costs at Low-Level Waste Burial Facilities [ML19037A405], which provides the regulatory guidance on cost escalation factors for the NRC minimum nuclear decommissioning cost estimates. In this report, the NRC publishes the results 2020 FERMI 2 DECOMMISSIONING STUDY SECTION NINE l NDT FUNDING ADEQUACY PAGE 61

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 62 of 86 of updated Pacific Northwest National Laboratory (PNNL) analyses of cost escalation for low-level radioactive waste (LLRW) disposal based on LLRW burial facilities rate changes. The report also specifies the sources to obtain labor and energy escalation rates. Using Revision 17 of this report, we present the relevant Fermi 2 Power Plant decommissioning cost escalation factors in Table 9.3:

Table 9.3 NUREG-1307, Revision 17 (2019) cost escalation factors for Fermi 2 Power Plant Cost escalation Compound cost Basket weighting Basket-weighted Basket-weighted factor escalation (%) cost escalation compound cost (1986 - 2018) factor escalation (%)

Component (1986 - 2018)

Labor (Lx) 2.75 3.211 0.65 1.79 Energy (Ex) 2.39 2.759 0.13 0.31 Burial (Bx) 28.34 11.016 0.22 6.23 Total 8.33 6.85 Table 9.3 shows that the basket-weighted compound cost escalation for the NRC minimum cost estimates for a BWR in the Midwest was approximately 6.9% for the period 1986 - 2018. The labor component (Lx) cost escalation factor uses the U.S.

Bureau of Labor Statistics (BLS) Total compensation for Private industry workers in Midwest, Index (Series ID CIU2010000000230I) as its reference. The energy component (Ex) cost escalation factor uses a combination of the Producer Price Index (PPI) for industrial electrical power (PPI Commodity Code 543) and the PPI for light fuel oils (PPI Commodity Code 0573). The compound cost escalation for the 1986 - 2018 period is the conversion of the cost escalation factor into an annualized cost escalation rate. The basket-weighting is the fraction of that components costs to the total decommissioning cost estimate for the NRCs reference BWR. The basket-weighted cost escalation factor is the result of multiplying each components cost escalation factor by its basket weighting; the sum of these products (8.33) is the total cost escalation factor to convert the 1986-dollar decommissioning cost estimate into 2018 dollars. The basked-weighted compound cost escalation of 6.85% is the equivalent compound cost escalation rate for the 32-year period 1986 - 2018 (March 2019 submittal to the NRC).

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 63 of 86 Figure 9.1 The Fermi 2 Power Plan NRC minimum decommissioning funding.

10,000 NRC minimum funding requirement (M$)

1,000 100 10 1

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Year of calculation Figure 9.1 shows that the period from 1986 - 1998 experienced the highest rate of cost escalation. Although it is plausible, we will experience a similar period of high inflation, we believe it is reasonable and prudent to focus within the 20-year period between 1998 and 2018. The 20-year compound growth rate of the NRC minimum funding requirement was approximately 3.5% for the years 1998 - 2018.

U.S. inflation trends We use two common U.S. inflation measures to better understand the historical context of the growth shown in decommissioning costs over time: Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE).

CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Core CPI excludes cost changes due to food and energy prices. The U.S. Bureau of Labor and Statistics (BLS) maintains the CPI and Core CPI calculations, which are available as seasonally-adjusted or not seasonally-adjusted.

Figure 9.2 shows that the Core CPI annual, not seasonally-adjusted, rates were highest from 1986 through 1992 which follows the general escalation trend as the calculated NRC minimum funding amounts.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 64 of 86 Figure 9.2 Core Consumer Price Index [CPI] (Series ID CPGRLE01USA657N) growth rate from previous period (1986 - 2018) 6.0 Consumer Price Index (CPI) growth rate (%)

5.0 4.0 3.0 2.0 1.0 0.0 1986 1991 1996 2001 2006 2011 2016 Year PCE is a measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. PCE is similar to CPI in that it is a measure of inflation and follows similar trends; however, PCE tracks the prices of a different basket of goods than CPI and notably PCE uses substitution effect (a model that assumes consumers will alter purchasing habits if one good experiences higher inflation than similar goods) whereas CPI does not. PCE inflation tends to be lower than CPI inflation. Core PCE excludes costs of food and energy. The Bureau of Economic Analysis maintains the PCE and Core PCE calculations which are available as seasonally-adjusted or not seasonally-adjusted. The Federal Reserve states its goal for inflation in terms of PCE.

Figure 9.3 shows that the Personal Consumption Chain-type Price Index [PCEPI] follows the same general escalation trend as the NRC minimum funding amounts - the highest escalation rates occurred between approximately 1986 and 1992. To align with our decommissioning cost escalation data from prior, the PCEPI 32-year compound rate was approximately 2.2% for the years 1986 - 2018 and the PCEPI 16-year compound rate was approximately1.8% for years 1986 - 2018. To closeout the discussion, we note the PCEPI 10-year compound rate was approximately 1.6% for years 2010 - 2019.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 65 of 86 Figure 9.3 Personal Consumption Expenditures: Chain-type Price Index [PCEPI] (1986 - 2018) 1,000 Personal Consumption Expenditures:

100 Chain-type Price Index [PCEPI]

10 1

1985 1990 1995 2000 2005 2010 2015 Year The Board of Governors of the Federal Reserve System confirmed to the U.S. Congress its long-term PCE target is 2% in the February 2020 Monetary Policy Report. The shorter-term Federal Reserve expectation for PCE changes range between 2.0%

and 2.2% through 2022.

Fermi-specific cost escalation trends We now review historical cost escalation more specific to the Fermi 2 Power Plant and its circumstances.

Using a similar methodology as NUREG-1307, Figure 9.4 shows the indexed costs associated with nuclear services for the 10-year period 2010 - 2019. Nuclear services are suppliers that provide specialized boiling water reactor (BWR) services such as project management, technical engineering, fuel handling and BWR vessel maintenance. During decommissioning activities, reactor services would support activities such as project management, engineering, fuel handling and containment vessel segmentation. As reactor services is a specialty service with a limited market, DTE Electric would expect minimal substitution effect and higher cost escalation than the broader labor market, which is demonstrated in Figure 9.4 as the 9-year escalation rate for reactor services was approximately 3.4% for the period 2010 - 2019.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 66 of 86 Figure 9.4 Fermi 2 reactor services costs index (2010 - 2019) 140.00 135.00 Nuclear services costs index 130.00 125.00 120.00 115.00 110.00 105.00 100.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year (Cost survey as of January 1)

The costs associated with nuclear-specific services as well as radioactive waste disposal have a demonstrated history of escalating at a rate greater than the general rate of inflation.

DTE Electric forecasted rate of inflation Note: This discussion involves forward looking statements developed by DTE Electric in February of 2020 as applied to NDT costs.

We use Federal Reserve guidance for forecasting cost escalation. The Federal Reserve published a study in 2010 of inflation forecasting techniques and outcomes and determined that naive forecasts or expectation forecasts demonstrated the most accuracy over more complicated analysis. In fact, it is the expert opinion of the Governors of the Federal Reserve that determines the Federal Reserves forecasted escalation of the PCE. The Federal Reserve uses a long-term target (or projection) of 2% growth in PCE over the long-term [FMOC19] - it is this 2% basis that we use to support the forecasted rate of inflation.

From our historical review of cost escalations, we can reasonably conclude that nuclear decommissioning costs (and other nuclear services) will continue to escalate at a cost greater than the target PCE. Nuclear decommissioning services, while an emerging market, will always be limited in growth potential due to the small number of potential customers; as such it is reasonable to assume that the in future, like current, substitution effect will be minimal. Listed here are the takeaways from the previous historical discussion:

The 1986 - 2019 compound escalation rate in the NRC minimum nuclear decommissioning funding amount for the Fermi 2 Power Plant was 6.8%. These escalation rates are inclusive of waste burial, labor and energy costs.

The 1999 - 2019 compound escalation rate for the NRC minimum nuclear decommissioning funding amount for the Fermi 2 Power Plant was approximately 3.5%. These escalation rates are inclusive of waste burial, labor and energy 2020 FERMI 2 DECOMMISSIONING STUDY SECTION NINE l NDT FUNDING ADEQUACY PAGE 66

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 67 of 86 costs; approximately double (2x) the personal consumption expenditure price index (PCEPI) compound escalation rate of approximately 1.8% for the same period. A reasonable forecasted rate cost escalation for similar decommissioning scope is then approximately 3.9%.

The 2010 - 2019 compound escalation rate for specialty nuclear services labor was approximately 3.4%;

approximately 2.3x the PCEPI compound escalation rate of approximately 1.5% for the same period. A reasonable forecasted rate cost escalation for similar specialty nuclear services scope is the approximately 4.6%.

We also have from Callans survey of U.S. BWR owners that their nuclear decommissioning cost escalation projections vary from a low of approximately 2.5% to a high of 6% with 3.9% as the median escalation rate. This survey could be considered a close approximation to the industrys expert opinion of projected nuclear decommissioning cost escalation rates.

We remain confident that the past use of the 6% cost escalation rate for DTE Electrics Fermi 2 Power Plant nuclear decommissioning funding adequacy models was reasonable and prudent. As we had discussed prior, the 6% factor applied to the annual review and update of the 2002 Fermi 2 decommissioning cost estimate yielded results similar to the 2020 Fermi 2 site-specific decommissioning cost estimate. DTE Electric has used the 6% inflation model to lower the annual funding provision twice in the since 2011. Additionally, the historical growth in the Fermi 2 Power Plants NRC minimum decommissioning funding amounts also support the 6% model. Continued use of the 6% inflation could also be considered reasonable and prudent, given the success of the model over a time of relatively stable and low inflation rates. That said, we do find it reasonable to propose an alternative recommendation in this study given we are now only 25 years away from the decommissioning of the Fermi 2 Power Plant and have a newly developed bottom-up site-specific decommissioning cost estimate using 2019 dollars.

Our recommendation is to use a 3.8% escalation factor in this studys nuclear decommissioning funding adequacy model.

Modeling at 3.8% would be reasonable and prudent considering the lower inflation rates of the past twenty years and the Federal Reserves projection for inflation rates to remain stable around 2% for the long term. We have demonstrated that nuclear decommissioning costs (inclusive of disposal, energy and labor costs) as well as services specific to working at a BWR facility escalate at rates 1.9x to 2.3x greater than the PCEPI measure. This recommendation is also supported by a survey of other BWR owners, where the median escalation factor projected was 3.9%.

9.4 Fermi 2 NDT balances In this section we review balances for each fund or plan within the Fermi 2 Nuclear Decommissioning Trust (NDT). We review the balances to provide the reader with an understanding of where Fermi 2 amounts are deposited which then informs later analysis with respect to projected rate of return on NDT assets and current NDT shortfalls.

The total Fermi 2 NDT balance as of December 31, 2019 was approximately $1.658 billion ($1,658,358.4 thousand). We show the balances of the Qualified Fund at approximately $1.488 billion and the Nonqualified Fund at approximately $0.171 billion in Table 9.4 along with the balances of each plan within the Funds.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 68 of 86 Table 9.4 Fermi 2 NDT balances as of December 31, 2019 in thousands of dollars.

Qualified Fund Nonqualified Fund Fund balance Fund balance Plan name (as of 12/31/2019) Plan name (as of 12/31/2019)

Qualified MPSC $1,394,721.7 Nonqualified MPSC $144,020.3 Qualified FERC 6,600.0 Nonqualified FERC 6,404.7 ISFSI 4,823.5 Qualified Other Decommissioning 81,561.3 Nonqualified Other Decommissioning 11,882.0 LLRW 8,371.8 Total Qualified Fund $1,487,706.6 Total Nonqualified Fund $170,678.8 We recast the plan balances from Table 9.4 into purpose-based nuclear decommissioning amounts in Table 9.5 where Qualified MPSC and Qualified FERC funds are the qualified amounts set aside for the Fermi 2 Power Plant license termination, Nonqualified MPSC and Nonqualified FERC funds are the nonqualified amounts set aside for license termination; ISFSI fund is the qualified amount set aside for the Fermi 2 ISFSI decommissioning; Qualified Other Decommissioning fund is the qualified amount set aside for spent fuel management and site restoration and Nonqualified Other Decommissioning is the nonqualified amount set aside for spent fuel management and site restoration; we exclude the LLRW fund from Table 9.5 because the LLRW fund is set aside for disposal of LLRW generated during plant operations and is not a decommissioning fund. Also recall our discussion from Section 6, that transfer of amounts from one fund to another fund is inflexible due to the integrated and interlocking regulatory framework.

Table 9.5 Fermi 2 Nuclear Decommissioning Fund (NDF) amounts by purpose as of December 31, 2019 in thousands of dollars Purpose Qualified amounts Nonqualified amounts Total amounts License termination $1,401,321.8 $150,425.0 $1,551,746.8 ISFSI decommissioning 4,823.5 0.0 4,823.5 Spent fuel management and site restoration 81,561.3 11,882.0 93,443.3 Total Nuclear Decommissioning Fund $1,487,706.6 $162,307.0 $1,650,013.7 Table 9.6 presents the Fermi 2 NDF funding shortfalls as of December 31, 2019, where the Nuclear Decommissioning Fund (NDF) balance of $1.65 billion is approximately $0.53 billion short of the $2.18 billion required to nuclear decommission the Fermi 2 Power Plant per the 2020 Fermi 2 site-specific decommissioning cost estimate; approximately 97% of the projected shortfall is attributable to spent fuel management and site restoration, which is only approximately 15% funded as of December 31, 2019. The ISFSI decommissioning fund is approximately 38% funded; however, the projected shortfall is only approximately $7.8 million. The license termination fund is essentially fully funded at approximately 99% with a projected shortfall of approximately $7.8 million. We find Table 9.6 useful as it demonstrates the amounts of funds that must be generated (in 2019 $s) by the end of the Fermi 2 Power Plants operating life in 2045 either through the annual Nuclear Decommissioning Funding mechanism, through fund growth or a combination of fund growth and annual collections.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 69 of 86 Table 9.6 Nuclear Decommissioning Fund (NDF) funding levels by purpose as of December 31, 2019 in thousands of dollars NDF balance Estimate Purpose Shortfall (as of 12/31/2019) (as of 12/31/2019)

License termination $1,551,746.8 $1,559,579.2 ($7,832.4)

ISFSI decommissioning 4,823.5 12,608.5 (7,784.9)

Spent fuel management and site restoration 93,443.3 606,984.6 (513,541.3)

Total Nuclear Decommissioning Fund $1,650,013.7 $2,179,172.3 ($529,158.7)

NDT asset allocation The MPSC Settlement Agreement U-6150 (reopened), dated August 26, 1986, defines the objective of the trusts investments is to optimize after tax earnings over the life of the trust, giving consideration to liquidity, risk, diversification, and other prudent investment objectives. The DTE Energy Investment Committee is responsible for the asset allocation and investment manager selection for the Fermi 2 NDT. The Investment Committee currently maintains an equity target of 65% within a policy range of 40 to 80% for the NDT.

Figure 9.5 presents the Fermi 2 NDT assets as the amounts DTE Electric had invested as of December 31, 2019.

Approximately 44% (~$732.6 million) of the NDT assets were in domestic equity and approximately 20% (~334.0 million) of assets were in international equity. Approximately 3% (~43.6 million) of the NDT assets were in alternative investments such as private equity. Approximately 33% (~548.2 million) of the NDT assets were in fixed income, such as municipal bonds, and cash.

Figure 9.5 Fermi 2 NDT assets as invested on December 31, 2019 Domestic equity: $732.6M (44%)

International equity: $334.0M (20%)

Alternatives: $43.6M (3%)

Fixed income + cash: $548.2M (33%)

The Fermi 2 Qualified Fund and the Fermi 2 Nonqualified Fund are each separate investment accounts within the NDT. The Fermi 2 Qualified Fund investment allocation is predominantly equity assets (both US and non-US equities) with the balance in fixed income and cash assets as shown in Figure 9.6. The Fermi 2 Nonqualified Fund investment allocation is entirely fixed income and cash assets.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 70 of 86 Figure 9.6 Fermi 2 Qualified Fund assets as invested on December 31, 2019 Domestic equity: $732.6M (49%)

International equity: $334.0M (22%)

Alternatives: $43.6M (3%)

Fixed income + cash: $377.5M (25%)

9.5 Administrative and incidental expenses In this section we discuss administrative and incidental expenses (including taxes) of the Fermi 2 NDT. The requirement of the Settlement Agreement in Michigan Public Service Commission (MPSC) Case No. U-6150 (Reopened), dated August 26, 1986 states DTE Electric is to include a review of administrative and incidental expenses of the fund in DTE Electrics report on the adequacy of the annual Nuclear Decommissioning Funding provision; we intend this section to satisfy the administrative and incidental expenses review.

Nuclear Regulatory Commission (NRC) regulations at 10 CFR 50.75(h)(2) permits the distributions from the Fermi 2 NDT for ordinary administrative costs (including taxes) and other incidental expenses of the trusts such as legal, accounting, actuarial and trustee expenses in connection with the operation of the trusts. The Settlement Agreement in MPSC Case No. U-6150 (Reopened), Section 13(c.) also permits such distributions:

No part of the assets of the trust may be used for, or diverted to, any purpose other than to fund, in whole or part, the costs of nuclear plant decommissioning or to pay administrative and other incidental expenses, including taxes, if applicable, of the fund.

The DTE Electric Nuclear Decommissioning Master Trust Agreement has provisions that allow for the payment of administrative and incidental expenses in Article II, Section 2.03:

The Trustee shall pay, as directed by the Company, the administrative costs and other incidental expenses of a Nonqualified Fund, including all federal, state, and local taxes, if any, imposed directly on the Nonqualified Fund, legal expenses, accounting expenses, actuarial expenses and trustee expenses, from the assets of the Nonqualified Fund and shall pay, as directed by the Company, the administrative costs and other incidental expenses of a Qualified Fund, as defined in the Special Terms, from the assets of the Qualified Fund.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 71 of 86 Exhibit A Special Terms of the Qualified Nuclear Decommissioning Reserve Fund of the DTE Electric Nuclear Decommissioning Master Trust Agreement states in Section 1. (a):

Administrative costs and other incidental expenses of the Qualified Fund shall mean all ordinary and necessary expenses incurred in connection with the operation of a Qualified Fund, as provided in Treas. Reg. Section 1.468A-5(a)(3)(ii)(A) or any corresponding future Treasury Regulation, including without limitation, federal, state and local income tax, legal expenses, accounting expenses, actuarial expenses and trustee expenses.

Taxes DTE Electrics Fermi 2 NDT activity is subject to federal and state income tax assessments. Taxable income is the amount of income used to calculate how much tax DTE Electric or the trust owes to the government in a given year. Taxable income includes earning from appreciated assets that have been sold during the year, income from dividends and interest less deductions for trustee fees, accounting fees, taxes, etc. Income from tax exempt bonds are not subject to federal income tax and excluded from calculation of the taxable income.

The Fermi 2 NDT has two separate accounts or Funds: (1) the Fermi 2 Qualified Fund is a tax-advantaged trust that satisfies the requirements of Internal Revenue Code (ICR) § 468A and (2) the Fermi 2 Nonqualified Fund is not similarly tax-advantaged and is not subject to the requirements of § 468A.

Federal treatment of nuclear decommissioning trust contributions The Fermi 2 Qualified Fund meets the requirements of IRC § 468A and U.S. Treasury regulations at 26 CFR 1.468A-5. The tax-advantaged attributes of a qualified trust include the ability for DTE Electric to deduct amounts contributed into the Fermi 2 Qualified Fund, which allows DTE Electric to fund the Fermi 2 Power Plant decommissioning liability on a pre-tax basis; additionally, any realized investment gains are subject to a federal income tax rate of 20% rather than DTE Electrics federal corporate tax rate. Prior to contributing or changing the amounts contributed to the Fermi 2 Qualified Funds, DTE Electric had to first request and receive from the Internal Revenue Service (IRS) a Schedule of Ruling Amounts. The IRS Schedule of Ruling Amounts potentially limits the amount of allowable annual contributions to the qualified trust.

The Fermi 2 Nonqualified Fund does not meet the requirements of IRC § 468A and U.S. Treasury regulations at 26 CFR 1.468A-5 and is treated as a grantor trust of DTE Electric for income tax purposes under U.S. Treasury regulations at 26 CFR 1.671-1.678. As a nonqualified fund, contributions paid into the Fermi 2 Nonqualified Fund are not deductible; additionally, any realized investment gains are subject to tax at DTE Electrics federal corporate tax rate.

Amended schedule of ruling amounts In March 2017, DTE Electric filed an application to the Internal Revenue Service (IRS) for an Amended Schedule of Ruling Amounts for the Fermi 2 Power Plant retroactive to January 2016. DTE Electric filed for two reasons: (1) as requested by DTE Electric in MPSC Case No. U-17767, the Commission ordered the Nuclear Decommissioning Funding provision of the Nuclear Surcharge reduced by greater than 50% (from ~$13 million to ~$3 million) and (2) the NRC approved DTE Electrics application for a 20-year license extension. On July 10, 2017 the IRS approved DTE Electric's request [IRS17]. As a result of this IRS Ruling, 100% of DTE Electrics surcharge collections related to end-of-life decommissioning are eligible for deposit in the qualified trust, which carries tax-advantaged attributes of a current federal tax deduction and a slightly lower federal tax rate.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 72 of 86 State of Michigan treatment of nuclear decommissioning trust contributions DTE Electric contributions to the Fermi 2 Qualified Fund are deductible from the State of Michigan Corporate Income Tax (CIT).

DTE contributions to the Fermi 2 Nonqualified Fund are not deductible and would be subject to the Michigan CIT at the statuary rate of 6%. For both the Fermi 2 Qualified Fund and Fermi 2 Nonqualified Fund, any realized investment gains are subject to the Michigan CIT rate of 6%.

Historical taxes Table 9.7 provides the total tax expenses for the Fermi 2 NDT and its component Funds. The 2019 tax expenses total approximately $9.9 million with approximately $9.5 million attributable to the Fermi 2 Qualified Fund and $0.4 million attributable to the Fermi 2 Nonqualified Fund.

Table 9.7 Fermi 2 NDT 2015 - 2019 tax expenses in thousands of dollars values in '000s 2015 2016 2017 2018 2019 Fermi 2 Qualified Fund 11,567 9,115 17,635 18,346 9,470 Fermi 2 Nonqualified Fund 448 0 617 1,522 448 Fermi 2 Nuclear Decommissioning Trust 12,015 9,115 18,252 19,868 9,918 Other administrative and incidental expenses Table 9.8 provides the other administrative and incidental costs, excluding taxes. The 2019 NDT administrative and incidental expenses totaled approximately $4.4 million and included expenses for the investment manager, custody expense and professional fees. The 2019 expenses were approximately 0.3% of the Fermi 2 NDTs ending balance.

Table 9.8 Fermi 2 NDT 2015 - 2019 administrative and incidental expenses, excluding taxes, in thousands of dollars values in '000s 2015 2016 2017 2018 2019 Fermi 2 Qualified Fund 3,223 3,161 3,819 4,038 4,099 Fermi 2 Nonqualified Fund 345 349 316 385 301 Fermi 2 Nuclear Decommissioning Trust 3,568 3,511 4,136 4,423 4,401 We incorporate the administrative and incidental expenses into the Fermi 2 NDT fund earnings rate discussed in the next section.

9.7 Fund earnings rate As we have discussed earlier in this section, the Fermi 2 NDT fund earnings rate or rate of return on assets used in our nuclear decommissioning funding adequacy model is another important factor to consider. The requirement of the Settlement Agreement in Michigan Public Service Commission (MPSC) Case No. U-6150 (Re-opened), dated August 26, 1986 states DTE Electric is to include a review of fund earnings rate in DTE Electrics report on the adequacy of the annual Nuclear Decommissioning Funding provision; we intend this section to satisfy the fund earning rate review.

For this section we discuss the projected rate of return for the Fermi 2 Nuclear Decommissioning Trust (NDT) assets where we begin with a review of the incumbent rate of return approved by the Michigan Public Service Commission (MPSC or Commission) and then transition to a historical perspective of actual rate of return experienced by the NDT assets. We close 2020 FERMI 2 DECOMMISSIONING STUDY SECTION NINE l NDT FUNDING ADEQUACY PAGE 72

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 73 of 86 out the section with a recommendation for a reasonable and prudent going-forward rate of return on NDT assets for use in this funding adequacy review.

Throughout this section we analyze different types of rates of return where:

Pre-tax rate of return is the return on assets prior to the accounting for taxes the investor must pay.

Post-tax rate of return is the return on assets after the investor pays taxes. The reader may also think of post-tax rate of return as the effective return after accounting for administrative and incidental expenses and taxes.

DTE Electric rate of return methodology DTE Electrics existing nuclear decommissioning funding adequacy model uses an effective rate of return of 7%. The Michigan Public Service Commission last approved the use of this 7% rate of return model in Order U-20162, dated May 2, 2019; the MPSC has consistently approved the use of the 7% after-tax rate of return since Commission Order U-10102, dated January 21, 1994.

The use of the 7% fund earnings rate was reasonable and prudent for use in the funding adequacy model because of its use in conjunction with 6% cost escalation to produce a modeled net 1% real rate of return.

DTE Electric historical NDT rate of return Regulatory guidance for nuclear decommissioning trust fund earnings rate Nuclear Regulatory Commission (NRC) regulations at 10 CRF 50.75(e)(1)(ii) allows licensees to take credit for projected earnings on external sinking funds of up to two percent annual real rate of return.

DTE Electric-specific nuclear decommissioning trust fund earnings rate Table 9.9 provides the Fermi 2 NDTs pre-tax rates of return dating back to 1989, approximately the trusts inception. DTE Electric does not calculate annual post-tax rates of return. DTE Electric calculated rates of returns for the two separate accounts (Fermi 2 Qualified Fund and Fermi 2 Nonqualified Fund) starting in 2009.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 74 of 86 Table 9.9 Historical Fermi 2 Nuclear Decommissioning Trust (NDT) pre-tax rate of return (%).

Individual Fund (Qualified or Nonqualified) pre-tax rates of return are unavailable prior to 2009.

1989 Nuclear Decommissioning Trust 8.1 Fermi 2 Qualified Fund Fermi 2 Nonqualified Fund 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Nuclear Decommissioning Trust 7.2 10.8 7.2 7.6 1.2 11.5 12.4 21.6 18.4 10.5 Fermi 2 Qualified Fund Fermi 2 Nonqualified Fund 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Nuclear Decommissioning Trust -2.3 -2.1 -7.2 18.0 8.8 3.7 10.5 7.8 -18.8 17.4 Fermi 2 Qualified Fund 18.3 Fermi 2 Nonqualified Fund 12.8 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Nuclear Decommissioning Trust 12.2 1.2 11.2 14.2 4.9 -0.5 7.1 15.6 -5.6 21.0 Fermi 2 Qualified Fund 12.2 -0.7 11.9 17.0 4.2 -1.1 8.1 17.1 -6.5 22.8 Fermi 2 Nonqualified Fund 3.8 11.4 6.8 -2.3 10.1 3.9 1.0 5.2 1.7 6.9 Figure 9.7 illustrates the concept of a Fermi 2 NDT index as a tool to visualize the compound effect of pre-tax rates of return throughout the history of the NDT. The NDTs pre-tax 31-year compound rate of return approximately is 7.2% dating back to NDTs inception; however, the NDTs pre-tax 2000-2019 20-year compound rate of return was only approximately 5.4%

resulting from the impacts of the Dot-com Bust of the late 1990s and the Housing Market Bust of the late 2000s..

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 75 of 86 Figure 9.7 Fermi 2 Nuclear Decommissioning Trust (NDT) index 900 800 700 Fermi 2 NDT index 600 500 400 300 200 100 0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Year (as of December 31)

Table 9.10 provides the Fermi 2 NDT fund balances as of December 31, 2013 through 2019 to provide an understanding of the effects of line items such as fund contributions (from the annual Nuclear Decommissioning Funding provision of the Nuclear Surcharge), dividends, administrative and incidental expenses and taxes have had on the NDT balance. Please recall the NDT balances also include the LLRW Fund whose amounts are for the exclusive use of LLRW disposal during Fermi 2 Power Plant operations. DTE Electric used the December 31, 2013 NDT balance of approximately $1.188 billion in rate case U-17767 to support the current annual Nuclear Decommissioning Funding provision of the Nuclear Surcharge of approximately $2.9 million. The NDT balance has grown at a compound annual effective rate of approximately 4.9% over this time, factoring contributions.

Table 9.10 Fermi 2 NDT balances (in billions) as of December 31, 2013 - 2019 2013 2014 2015 2016 2017 2018 2019 Fermi 2 Qualified Fund 1.045 1.081 1.068 1.147 1.323 1.220 1.488 Fermi 2 Nonqualified Fund 0.144 0.156 0.166 0.171 0.166 0.155 0.171 Fermi 2 NDT balance 1.188 1.238 1.234 1.318 1.489 1.375 1.658 U.S. market trends We provide historical context of general U.S. market trends using common indexes for U.S. equities and bonds. The S&P 500 (SPX) is a stock market index that measures the performance of 500 large companies in U.S. stock exchanges The U.S.

Aggregate Bond Index (LBUSTRUU) is a bond market index that represents investment grade bonds traded in the U.S. and is a proxy for the U.S. bond market performance. The investments of NDT assets serve the purpose of providing reasonable assurance of funding for the nuclear decommissioning of the Fermi 2 Power Plant, which is a different purpose than the two indexes mentioned; we provide these indexes only to show general trends in the U.S. markets and not to provide a benchmark for NDT performance.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 76 of 86 Figure 9.8 trends the closing values of S&P 500 Index (SPX) from December 31, 1985 through March 30, 2020; we also note a few key milestone dates in recent investment history. The growth of this index is volatile where the compound annual growth rate from December 31, 1985 through 2019 was approximately 8.4% and approximately 4.0% from December 31, 1999 through 2019 and approximately 11.2% from December 31, 2009 through 2019. We also note the SPX had fallen approximately 20% between December 31, 2019 and March 31, 2020 due to COVID-19 uncertainty.

Figure 9.8 S&P 500 index (SPX) December 31, 1985 through March 31, 2020 COVID-19 Q4 2018 downturn S&P 500 Index Dot-com Bubble Housing Bubble Black Monday 1985 1990 1995 2000 2005 2010 2015 Year (as of December 31)

Figure 9.9 trends the closing values of the U.S. Aggregate Bond Index (LBUSTRUU) from December 31, 1985 through March 30, 2020. The growth of this bond index has been more consistent but deaccelerating growth over time than the SPX where the compound annual growth rate from December 31, 1985 through 2019 was approximately 6.4% and approximately 5.0%

from December 31, 1999 through 2019 and approximately 3.7% from December 31, 2009 through 2019.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 77 of 86 Figure 9.9 U.S. Aggregate Bond Index (LBUSTRUU) December 31, 1985 through March 31, 2020 U.S. Aggregate Bond Index 1985 1990 1995 2000 2005 2010 2015 Year (as of December 31)

DTE Electric forecasted rate of return Note: This discussion involves forward looking statements developed by DTE Electric in February of 2020.

The continued use of the 7% as the long-term after-tax effective return on NDT investments would not be reasonable or prudent with the understanding the NDT fund earnings rate was only approximately 7.2% on a pre-tax basis since approximately trust inception and only approximately 5.4% on a pre-tax basis since 1999.

As a lower post-tax effective rate of return on NDT assets would be reasonable and prudent, DTE Trust Investments performed an analysis to recommend a new after-tax rate return to apply to NDT assets. As an outcome of their analysis, DTE Trust Investments recommends a projected after-tax effective rate of return range of 4.8% to 4.9% for the Fermi 2 Qualified Fund and 2.4% to 3.0% for the Fermi 2 Nonqualified Fund as a reasonable and prudent for the purposes of forecasting the NDT balances through December 31, 2044; DTE Trust Investments calculates the total Fermi 2 NDT after-tax effective rate of return as a range of 4.6% to 4.8% through December 31, 2044.

Our recommendation is to use a 4.8% after-tax effective rate of return factor on NDT assets in this studys nuclear decommissioning funding adequacy model. The 4.8% rate is reasonable and prudent considering the allocation of NDT assets between equities and fixed income investments, historical performance of the NDT assets and the analysis of DTE Trust Investments.

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Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 78 of 86 9.8 Net rate of return The Michigan Public Service Commission (MPSC or Commission) has supported a 1% differential for the rate of inflation (cost escalation) and the fund earns rate (after-tax effective rate of return on assets) dating back to 1994 and MPSC Case No. U-10102, dated January 21, 1994. We believe this 1% differential has a demonstrated record of reasonableness and prudency.

We recommend maintaining the 1% differential between the modeled rate of inflation and after-tax rate of return with reduction in the rate of inflation from the existing 6% to 3.8% and a corresponding reduction to the after-tax effective rate of return from 7% to 4.8% as a reasonable and prudent measure. The 1% net earnings differential is consistent with DTE Electrics most recent funding adequacy reports submitted to the Nuclear Regulatory Commission.

9.9 Adequacy of annual provision In this section we complete the calculations within the funding adequacy model we presented in Section 9.1 to determine an adequate annual Nuclear Decommissioning Funding provision for the Nuclear Surcharge. We will also use the model to determine the required allocation of the annual provision to each of the Nuclear Decommissioning Funds individual plans, subject to DTE Electrics regulatory filings.

The Michigan Public Service Commission established the amount of the existing annual provision for the Fermi 2 Nuclear Decommissioning Funding portion of the Nuclear Surcharge at approximately $2.9 million in MPSC Order U-17767, December 11, 2015. The Commission explicitly reaffirmed in the $2.9 million annual provision in MPSC Order U-20261, date May 2, 2019.

Total annual Nuclear Decommissioning Funding provision We complete our simple model to calculate the required annual Nuclear Decommissioning Funding provision of the Nuclear Surcharge NSNDF 0.048

= ( ) ((1+) ) ~($5,536.4 $5,327.5) ((1+0.048)25 ) ~$4.5, 9.2 1 1

where, SDCEf of $5,536.4 million is the Fermi 2 site-specific cost estimate (SDCE) at the time of expected shut down (i.e.

December 31, 2044), given no contributions where

= 0 (1 + ) ~$2,179.2(1 + 0.038)25 ~$5,536.4 where SDCE0 is the Fermi 2 site-specific cost estimate (SDCE) at time of reference for the review (i.e.

December 31, 2019) of approximately $2,179.2 million r is the projected rate of escalation of 3.8% from starting date t0 to time of expected shutdown tf t is the time t in years growth of 25 years from starting date t0 to time of expected shutdown tf NDTf of $5,327.5 million is the balance of Fermi 2 Nuclear Decommissioning Fund at the time of expected shutdown (i.e. December 31, 2044), assuming no contributions where

= 0 (1 + ) ~$1,650.0(1 + 0.048)25 ~$5,327.5 where 2020 FERMI 2 DECOMMISSIONING STUDY SECTION NINE l NDT FUNDING ADEQUACY PAGE 78

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 79 of 86 NDT0 is the balance of Fermi 2 Nuclear Decommissioning Fund at time of reference for the review (i.e. December 31, 2019) of approximately $1,650.0 million i is the projected effective rate of growth of 4.8% from starting date t0 to time of expected shutdown tf t is the time t in years growth of 25 years from starting date t0 to time of expected shutdown tf Our model projects the required annual Nuclear Decommissioning Funding provision of the Nuclear Surcharge as approximately

$4.5 million. The existing annual provision for the Fermi 2 Nuclear Decommissioning Funding portion of the Nuclear Surcharge at approximately $2.9 million, which is approximately $1.6 million per year less than the approximately $4.5 million calculated here.

We understand from Section 9.4 the two funds partially funded nuclear decommissioning funds are ISFSI decommissioning and spent fuel management and site restoration while the license termination is essentially fully funded. Within this context, we must investigate the reasonableness and prudency of potentially recommending an approximately $1.6 million increase in the annual Nuclear Decommissioning Funding provision.

Minimum annual Nuclear Decommissioning Funding provision allocation to license termination The Fermi 2 licensing termination funding is approximately 99% funded with a shortfall of approximately $7.8 million, meaning

- if the Fermi 2 Power Plant were to have permanently ceased operations on December 31, 2019 the Fermi 2 NDT was sufficiently funded to reasonably assure DTE Electric could complete its regulatory obligations to radiologically decommission and terminate the license of the Fermi 2 Power Plant without additional contributions to the NDT. The existing annual Nuclear Decommissioning Funding contribution to license termination (radiological decommissioning) is approximately $12; however; applying our simple model to only the license termination decommissioning funding, we calculate the required annual contributions to the license termination fund as approximately ($22.6) million:

0.048

= ( ) ((1+) ) ~($3,962.2 $5,010.2) ((1+0.048)25 ) ~($22.6), 9.3 1 1

where, SDCERadIf of $3,962.2 million is the Fermi 2 site-specific cost estimate (SDCE) for radiological decommissioning (license termination) at the time of expected shut down (i.e. December 31, 2044), given no contributions where

= 0 (1 + ) ~$1,559.6(1 + 0.038)25 ~$3,5962.2 where SDCERad0 is the Fermi 2 site-specific cost estimate (SDCE) for radiological decommissioning at time of reference for the review (i.e. December 31, 2019) of approximately $1,559.6 million r is the projected rate of escalation of 3.8% from starting date t0 to time of expected shutdown tf t is the time t in years growth of 25 years from starting date t0 to time of expected shutdown tf NDTRadf of $5,010.2 million is the balance of Fermi 2 radiological decommissioning (license termination) fund at the time of expected shutdown (i.e. December 31, 2044), assuming no contributions where

= 0 (1 + ) ~$1,551.7(1 + 0.048)25 ~$5,010.2 where NDTRad0 is the balance of Fermi 2 radiological decommissioning fund at time of reference for the review (i.e. December 31, 2019) of approximately $1,551.7 million i is the projected effective rate of growth of 4.8% from starting date t0 to time of expected shutdown tf 2020 FERMI 2 DECOMMISSIONING STUDY SECTION NINE l NDT FUNDING ADEQUACY PAGE 79

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 80 of 86 t is the time t in years growth of 25 years from starting date t0 to time of expected shutdown tf With a negative annual funding requirement, we have reasonable assurance of adequate funding for the regulatory required radiological decommissioning and license termination aspects of the Fermi 2 Power Plant nuclear decommissioning expected to start in 2045. Also, with a negative annual funding requirement associated with these funds, we understand that one or more other aspects of the nuclear decommissioning will have the offsetting positive requirement.

We recommend maintaining the existing annual Nuclear Decommissioning Funding contributions of $12 per year to license termination funds, specifically the Fermi Qualified MPSC fund. While the Fermi 2 Power Plant continues to operate, we believe it is reasonable and prudent to maintain the Fermi 2 NDTs external sinking fund status and the Nuclear Surcharges a non-bypassable charge status with the Nuclear Regulatory Commission (NRC). The Nuclear Decommissioning Funding provision of the Nuclear Surcharge must contribute at least $1 per month to the Fermi 2 NDT to maintain the status which is consistent with DTE Electrics most recent Fermi 2 decommissioning funding assurance filing with the NRC.

Minimum annual Nuclear Decommissioning Funding provision allocation to ISFSI decommissioning The Fermi 2 ISFSI decommissioning funding is approximately38% funded with a shortfall of approximately $7.8 million. The existing annual Nuclear Decommissioning Funding contributions to ISFSI decommissioning are approximately $0.38 million.

Applying our simple model to only the ISFSI decommissioning funding, we calculate the required annual contributions to the ISFSI fund as approximately $0.354 million:

0.048

= ( ) ((1+) ) ~($32.03 $15.57) ((1+0.048)25 ) ~$0.35, 9.3 1 1

where, SDCEISFSIf of $32.03 million is the Fermi 2 site-specific cost estimate (SDCE) for ISFSI decommissioning at the time of expected shut down (i.e. December 31, 2044), given no contributions where

= 0 (1 + ) ~$12.61(1 + 0.038)25 ~$32.03 where SDCEISFSI0 is the Fermi 2 site-specific cost estimate (SDCE) for ISFSI decommissioning at time of reference for the review (i.e. December 31, 2019) of approximately $2,179.2 million r is the projected rate of escalation of 3.8% from starting date t0 to time of expected shutdown tf t is the time t in years growth of 25 years from starting date t0 to time of expected shutdown tf NDTISFSIf of $15.57 million is the balance of Fermi 2 ISFSI fund at the time of expected shutdown (i.e. December 31, 2044), assuming no contributions where

= 0 (1 + ) ~$4.82(1 + 0.048)25 ~$15.73 where NDTISFSI0 is the balance of Fermi 2 ISFSI fund at time of reference for the review (i.e. December 31, 2019) of approximately $4.82 million i is the projected effective rate of growth of 4.8% from starting date t0 to time of expected shutdown tf t is the time t in years growth of 25 years from starting date t0 to time of expected shutdown tf We recommend maintaining the existing Nuclear Decommissioning Funding contributions to ISFSI decommissioning at approximately $0.38 million. At $0.38 million per year, there would be reasonable assurance of the minimum contributions of approximately $0.35 million in a scenario of lower-than-expected electricity sales. DTE Electric is providing the NRC with 2020 FERMI 2 DECOMMISSIONING STUDY SECTION NINE l NDT FUNDING ADEQUACY PAGE 80

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 81 of 86 reasonable assurance of ISFSI decommissioning funding using the Fermi 2 ISFSI qualified fund as an external sinking fund as described in 10 CFR 72.20(e)(5) and 10 CFR 50.75(e)(1)(ii)(A) and (B). We find it essential to continue the annual Nuclear Decommissioning Funding contributions to the ISFSI fund to maintain the existing method of providing financial assurance; otherwise, NRC regulations would require DTE Electric to change the funding assurance method to another option available under 10 CFR 72.30(e) such as prepayment method.

Minimum annual Nuclear Decommissioning Funding provision allocation to other decommissioning The Fermi 2 other decommissioning funding (spent fuel management and site restoration) is approximately15% funded with a shortfall of approximately $513.5 million. The existing annual Nuclear Decommissioning Funding contributions to other decommissioning funds is approximately $2.5 million.

Applying our simple model to only the other decommissioning funding, we calculate the required annual contributions to the other decommissioning funds as approximately $26.7 million:

0.048

= ( ) ((1+) ) ~($1,542.1 $301.7) ((1+0.048)25 ) ~$26.7 9.3 1 1

where, SDCEOtherf of $1,542.1 million is the Fermi 2 site-specific cost estimate (SDCE) for other decommissioning at the time of expected shut down (i.e. December 31, 2044), given no contributions where

= 0 (1 + ) ~$0.607(1 + 0.038)25 ~$1,542.1 where SDCEOther0 is the Fermi 2 site-specific cost estimate (SDCE) for other decommissioning at time of reference for the review (i.e. December 31, 2019) of approximately $607.0 million r is the projected rate of escalation of 3.8% from starting date t0 to time of expected shutdown tf t is the time t in years growth of 25 years from starting date t0 to time of expected shutdown tf NDTOtherf of $301.7 million is the balance of Fermi 2 Other Decommissioning funds at the time of expected shutdown (i.e. December 31, 2044), assuming no contributions where

= 0 (1 + ) ~$93.4(1 + 0.048)25 ~$301.7 where NDTOther0 is the balance of Fermi 2 ISFSI fund at time of reference for the review (i.e. December 31, 2019) of approximately $93.4 million i is the projected effective rate of growth of 4.8% from starting date t0 to time of expected shutdown tf t is the time t in years growth of 25 years from starting date t0 to time of expected shutdown tf Annual contributions of approximately $26.7 million to other decommissioning would be reasonable and prudent to provide reasonable assurance of funding for other decommissioning activities such as spent fuel management and site restoration; however, we know from the previous calculations that the radiological decommissioning and license termination funds have an offsetting negative funding requirement which tempers the requirement to increase contributions to other decommissioning funds to the approximately $26.7 million as we understand that proposed NRC rulemaking [NRC-2015-0070] would change NRC regulations to allow the use of license termination funds to offset spent fuel management costs.

Because we have a reasonable understanding that NRC regulations will allow for the eventual use of license termination funds for the purpose of post-shutdown spent fuel management, we recommend maintaining the existing annual Nuclear 2020 FERMI 2 DECOMMISSIONING STUDY SECTION NINE l NDT FUNDING ADEQUACY PAGE 81

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 82 of 86 Decommissioning Funding contributions of approximately $2.5 million to the other decommissioning funds, specifically the Fermi 2 Qualified Other Decommissioning fund.

Recommended annual Nuclear Decommissioning Funding provision and contributions We recommend maintaining the annual Nuclear Decommissioning Funding provision of the Nuclear Surcharge as approximately $2.9 million as provided in Table 9.11. As we have discussed throughout this study, our purpose is to provide reasonable assurance of adequate funding for the nuclear decommissioning (including license termination, ISFSI decommissioning, spent fuel management and site restoration) of the Fermi 2 Power Plant following its cessation of operations in 2045. We summarize the recommended contributions from the approximately $2.9 million annual Nuclear Decommissioning Funding provisions to individual Fermi 2 NDT plans:

Table 9.11 Recommended annual Nuclear Decommissioning Funding provision and contributions to the Fermi 2 NDT plans Fermi 2 NDT plan Purpose Annual provision ($)

Qualified MPSC License termination (radiological decommissioning) 12 ISFSI ISFSI decommissioning 382,000 Qualified Other Decommissioning Spent fuel management and site restoration 2,484,549 Nuclear Decommisioning Funding 2,866,561 2020 FERMI 2 DECOMMISSIONING STUDY SECTION NINE l NDT FUNDING ADEQUACY PAGE 82

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 83 of 86 SECTION TEN 10 Rate making considerations The nuclear decommissioning of the Fermi 2 Power Plant is an obligation that spans generations. True funding assurance only occurs across generations with supportive public policy provided by the Michigan Public Service Commission (Commission) -

supportive public policy that includes the Commissions long-standing policy that the decommissioning of the Fermi 2 Power Plant should be an obligation of all customers and applied through the non-bypassable Nuclear Surcharge, use of external trust to place the assets outside the normal control of contemporary concerns and rate orders, laws and regulations that ensure the proper audit and end use of the assets for their original purpose. The purpose of this study is to provide the Commission with information and context DTE Electric believes to be relevant to continued supportive public policy.

We recommend the Commission:

1. Approve the continued collections of the annual Nuclear Decommissioning Funding provision of the Nuclear Surcharge at approximately $2.9 million per year as a reasonable and prudent request. This recommendation is no change to the status quo.

2. Approve of DTE Electrics Fermi 2 site-specific decommissioning cost estimate (SDCEC) of approximately $2.179 billion in 2019 dollars as a reasonable and prudent SDCE.

3. Approve of DTE Electrics use of 3.8% as the compound escalation rate for the Fermi 2 nuclear decommissioning costs as a reasonable and prudent forecast. This recommendation will change the status quo of 6%.

4. Approve of DTE Electrics use of 4.8% as the compound post-tax growth rate for the amounts in the Fermi 2 Nuclear Decommissioning Trust (NDT). This recommendation will change the status quo of 7%.

5. Find this study completes DTE Electrics obligation to present the Commission with an updated Fermi 2 nuclear decommissioning study, as ordered in Case No. U-20162 on May 2, 2019.

2020 FERMI 2 DECOMMISSIONING STUDY SECTION TEN l RATE MAKING CONSIDERATIONS PAGE 83

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 84 of 86 SECTION 11 11 References We have provided in this study a comprehensive list of references. Reference citations are denoted by [ ] and are listed as applicable in the Reference section of this study. Citations Nuclear Regulatory Committee (NRC) Agencywide Documents Access and Management System (ADAMS) official record keeping system start with ML and are not relisted in this section of this study. Citations of the Federal Register use the format ## FR #####, for example: 55 FR 38474 as in, starting page 38474 of Volume 55 of the U.S. Federal Register and are not relisted in section.

[BRC12] Blue Ribbon Committee on Americas Nuclear Future, Report to the Secretary of Energy (January 2012)

[CAL20] Callan LLC for DTE Electric, Draft - Nuclear Decommissioning Review: Enrico Fermi Power Plant 2 versus Peers (March 31, 2020)

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[DTE02] DTE Electric, Memorandum: Fermi 2 Decommissioning Cost Estimate, NAEF-02-0030 (December 10, 2002)

[DTE13] DTE Electric, Amended and Restated Nuclear Decommissioning Master Trust Agreement (August 12, 2013)

[DTE17] DTE Electric, Memorandum: Review of Allocation of Contributions to NDT Accounts (August 8, 2017)

[DTE20] EnergySolutions, LLC for DTE Electric, 2019 Fermi 2 Decommissioning Cost Estimate for DTE Electric, Enrico Fermi 2 Power Plant (May 07, 2020)

[DTE20A] DTE Electric, Memorandum: Fermi 2 ISFSI Decommissioning Funding Plan Update, NRC-20-0020 (March 30, 2020

[DRA84] Deficit Reduction Act of 1984, Pub. L.98-369, 98 Stat. 604 (July 18, 1984)

[EIA10] U.S. Energy Information Agency, Annual Energy Outlook 2010 with Projections to 2035, DOE/EIA-0383(2010) (April 2010)

[EIA11] U.S. Energy Information Agency, Annual Energy Outlook 2011 with Projections to 2035, DOE/EIA-0383(2011) (April 2011)

[EIA12] U.S. Energy Information Agency, Annual Energy Outlook 2012 with Projections to 2035, DOE/EIA-0383(2012) (June 2012)

[EIA13] U.S. Energy Information Agency, Annual Energy Outlook 2013 with Projections to 2040, DOE/EIA-0383(2013) (June 2013)

[EIA19] U.S. Energy Information Agency, Today in Energy (March 21, 2019) 2020 FERMI 2 DECOMMISSIONING STUDY SECTION 11 l REFERENCES PAGE 84

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 85 of 86

[EPA92] Energy Policy Act of 1992, Pub. L. 102-486, 106 Stat. 2776 (October 24, 1992)

[EPA05] Energy Policy Act of 2005, Pub. L. 109-58, 119 Stat. 594 (August 8, 2005)

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[IRS17] U.S. Internal Revenue Service, Revised Schedule of Ruling Amounts Fermi Boiling Water Reactor Power Station, Unit Two (July 10, 2017)

[NEA15] Nuclear Energy Agency Organization for Economic Co-Operation and Development, The Practice of Cost Estimation for Decommissioning of Nuclear Facilities, NEA No. 7237, (2015)

[NEI20] Nuclear Energy Institute, Nuclear by the Numbers (2020)

[NUREG-2157] U.S. Nuclear Regulatory Commission, Generic Environmental Impact Statement for Continued Storage of Spent Nuclear Fuel Final Report, NUREG-2157 (2014)

[NWPA] U.S. Department of Energy, National Waste Policy Act as Amended with Appropriations Acts Appended, https://www.energy.gov/downloads/nuclear-waste-policy-act (March 2004)

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[OPPD15] Omaha Public Power District, Omaha Public Power District (Nebraska) Electric System Revenue Bonds, 2015 Series C, https://www.oppd.com/media/166460/2015-2_13-neoppd02a-fin_2015c.pdf (2015)

[OPPD18] Omaha World-Herald, More than $150 million later, OPPD says its almost done paying nuclear plant operator, https://www.omaha.com/money/more-than-million-later-oppd-says-it-s-almost-done/article_eb1fb556-0f6c-5cd5-ac9f-740969275fc9.html (January 13, 2018)

[PNNL80] Pacific Northwest National Laboratory for U.S. Nuclear Regulatory Commission, Technology, Safety and Costs of Decommissioning a Reference Boiling Water Reactor Power Station, NUREG/CR-0672 (1980)

[PSEG19] Public Service Enterprise Group Incorporated, United States Securities and Exchange Commission Form 8-K (April 16, 2019)

[SECY1070] U.S. Nuclear Regulatory Commission, Status Report on Power Uprates, SECY-10-0070 (May 20, 2010) 2020 FERMI 2 DECOMMISSIONING STUDY SECTION 11 l REFERENCES PAGE 85

Michigan Public Service Commission Case No. U-20836 DTE Electric Company Exhibit A-20, Schedule J2 Witness: J. C. Davis 2020 Fermi 2 Decommissioning Study Page 86 of 86

[SECY1015] U.S. Nuclear Regulatory Commission, Second Annual Status of Reactivation of Construction and Licensing for the Watts Bar Nuclear Plant, Unit 2, SECY-10-0015 (February 1, 2010)

[SECY1284] U.S. Nuclear Regulatory Commission, Status Report on Power Uprates, SECY-12-0084 (June 15, 2012)

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[USCA12] U.S. Court of Appeals for the District of Columbia Circuit, State of New Yort, et al v Nuclear Regulatory Commission and United States of America (June 8, 2012)

[USCA13] U.S. Court of Appeals for the District of Columbia Circuit, National Association of Regulatory Utility Commissioners v United States Department of Energy (November 19, 2013)

[USCFC02] U.S. Court of Federal Claims, The Detroit Edison Company v The United States (April 23, 2003)

[YMP02] Joint Resolution, Pub. L. 107-200, 116 Stat. 735 (July 23, 2002)

[YMP06] Senator James M. Inhofe, U.S. Senate Committee on Environment and Public Works Majority Staff, Yucca Mountain: The Most Studied Real Estate on the Plant, Report to the Chairman (March 2006)

[YMP08] U.S. Department of Energy, The Report to the President and the Congress by the Secretary of Energy on the Need for a Second Repository, DOE/RW-0595 (December 2008) 2020 FERMI 2 DECOMMISSIONING STUDY SECTION 11 l REFERENCES PAGE 86