RC-03-0073, Report of Status of Decommissioning Funding (RR-1950)
| ML030990480 | |
| Person / Time | |
|---|---|
| Site: | Summer  |
| Issue date: | 03/28/2003 |
| From: | Byrne S, Swan J South Carolina Electric & Gas Co |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| RC-03-0073 | |
| Download: ML030990480 (13) | |
Text
Stephen A. Byrne Senior Vice Pi esidenit. Nu leat Op7eratilons 803 345 4622 A SCANA COMPANY March 28, 2003 RC-03-0073 Document Control Desk U. S. Nuclear Regulatory Commission Washington, DC 20555 Gentlemen:
Subject:
VIRGIL C. SUMMER NUCLEAR STATION DOCKET NO. 50/395 OPERATING LICENSE NO. NPF-12 REPORT OF STATUS OF DECOMMISSIONING FUNDING (RR-1950)
South Carolina Electric and Gas Company (SCE&G) and the South Carolina Public Service Authority (Santee Cooper) have ownership interests of two-thirds and one-third respectively in the V. C. Summer Nuclear Station (VCSNS). As provided in 10 CFR 50.75(f)(1), SCE&G is required to report to the Nuclear Regulatory Commission (NRC), by March 31, 1999, and every two years thereafter, on the status of its decommissioning funding for its share of ownership of VCSNS.
Santee Cooper discloses the required information relative to its one-third ownership share in a separate submittal.
The following information is submitted pursuant to the requirement of 10 CFR 50.75(f)(1):
The amount of decommissioning funds estimated to be required pursuant to 10 CFR 50.75 (b) and (c);
The amount accumulated at the end of the calendaryearpreceding the date of the report; The amount of decommissioning funds estimated to be required pursuant to 10 CFR 50.75 (b) and (c) for SCE&G's two-thirds ownership of VCSNS is
$224,829,733 (2002 dollars). Please see Attachment I for the calculation of this amount.
The trust fund balance as of December 31, 2002 was $61,953,118. The trust fund balance includes cash and cash surrender values of life insurance policies held by the Trust. The face amount of life insurance policies in force as of December 31, 2002 was $251,382,365. Please refer to Attachment II for more information. Please note that approximately $7 million of the $61,953,1 18 is for items not included in 10 CFR 50.75(b) and (c).
,4CJD SCE&G I Virgil ( Summer Nuclear Station
- P. Box 88
- Jenkinsville, South Carolina 29065.T (803) 345.5209.-wwwscana.cm
Document Control Desk RR 1950 RC-03-0073 Page 2 of 3 A schedule of the annual amounts remaining to be collected; Please see Attachment II for a schedule of the annual amounts remaining to be collected. Please note that approximately 11.3% of the collection amounts shown in this schedule are for items not included in 10 CFR 50.75 (b) and (c) determined as follows:
Site specific study (1991) estimate of decommissioning costs pursuant to NRC definition (two-thirds portion)
Customer collection basis (two-thirds portion)
Percent related to items not included in NRC definition
$118,256,667 133,333,333 11.31%
The assumptions used regarding escalation in decommissioning cost, rates of earnings on decommissioning funds, and rates of other factors used in funding projections; Any contracts upon which the licensee is relying pursuant to paragraph (e)(1)(v) of this section; Any modifications occurring to a licensee's current method of providing financial assurance since the last submitted report; Any material changes to trust agreements.
Please see Attachment II for the assumptions used regarding escalation in decommissioning costs, rates of earnings on decommissioning funds, and other assumptions used in funding projections.
None None None - - It should be noted that the Trustee is now Wachovia Bank, N.A., successor to First Union National Bank effective upon their recent merger.
If you have any questions, please call Very truly yours, Stephen A. Byrne Senior Vice President Nuclear Operations, SCE&G James E. Sv Controller, S van, IV
- CE&G
Document Control Desk RR 1950 RC-03-0073 Page 3 of 3 c:
N. 0. Lorick N. S. Carns T. G. Eppink R. J. White L. A. Reyes K. R. Cotton NRC Resident Inspector K. Sutton Deloitte & Touche LLP INPO Records Center NSRC RTS (RR 1950)
File (810.34)
DMS (RC-03-0073)
Document Control Desk Attachment I RC-03-0073 Page 1 of 1 ATTACHMENT I CALCULATION OF AMOUNT OF DECOMMISSIONING FUNDS ESTIMATED TO BE REQUIRED PURSUANT TO 10 CFR 50.75 (B) AND (C);
Base Amount for PWR between 1,200 MWt and 3,400 MWt 1986 Base Cost
= $(75 + 0.0088p) million
= $(75 + 0.0088 x 2900) million
= $100,520,000 Estimated Cost (Year X)= (1986 $ Base Cost) (ALx + BEx + CBx)
= ($100,520,000) {(.65 x 1.794) + (.13 x 1.143) + (.22 x 9.273)}
=
$337,244,600 SCE&G's two-thirds ownership share of 2002 Estimated Cost = S224,829,733 Where:
p
=
2,900 MWt A
=
.65 (NU B
=
.13 (NU C
=
.22 (NU Lx
=
1.794 (Cor Ex
=
1.143 (Cor Px
=
1.222 (Cor Fx
=
1.033 (Cor Bx
=
9.273 (NU REG 1307 Rev. 10)
REG 1307 Rev. 10)
REG 1307 Rev. 10)
Inputed Below)
Inputed Below)
Inputed Below)
Inputed Below)
REG 1307 Rev. 10)
Lx
=
(1 59.0)Ba.e 1989 X (1.441 )sca.Ig Factor/
=
1.794 (1 2 7.7)ase 1981 Px
=
12/02 Value / January 1986 Value
=
139.6/114.2
=
1.222 Fx
=
12/02 Value / January 1986 Value
=
84.7 / 82.0
=
1.033 Ex
=
{(.58Px) + (.42Fx)1
=
{(.58 x 1.222) + (.42 x 1.033)1
=
1.143 December 31, 2002 values in the following Bureau of Labor Statistics indices were used to compute NRC minimum requirements:
Employment Cost Index - South Region Producer Price Index - Commodities Producer Price Index - Commodities Series ID: ecu13202i Series ID: wpu0543 Series ID. wpu0573
Document Control Desk Attachment II RC-03-0073 Page I of 6 ATTACHMENT II EXPLANATION OF FINANCIAL ASSURANCE MECHANISM AND AMOUNTS REMAINING TO BE COLLECTED Financial Assurance Mechanism SCE&G is the operator of VCSNS and shares the operating costs and energy output of the plant with Santee Cooper in the proportions of two-thirds and one-third, respectively. SCE&G utilizes a program referred to as the Cost of Money Reduction Plan (COMReP) for funding its share of the costs of decommissioning VCSNS. Under this plan, funds collected through rates are used to purchase life insurance policies on key company personnel who, in return for being a qualified participant in the plan, receive a two-year salary continuation benefit from SCE&G. SCE&G has established a decommissioning trust fund (trust fund) with Wachovia Bank, N.A. (successor to First Union National Bank) as Trustee. SCE&G and the trust fund are beneficiaries of the life insurance policies. COMReP, Inc. of Omaha, Nebraska, is the servicing agent for the life insurance policies. Through the purchase of life insurance contracts, SCE&G and the trust fund are able to take advantage of income tax provisions that allow SCE&G to accrue earnings on the life insurance contracts on a tax deferred basis. In a letter dated July 13, 1989, the NRC indicated that the COMReP program satisfies the investment criteria of its financial assurance regulations. Further, this funding methodology has been approved by the South Carolina Public Service Commission (PSC).
Amounts collected through electric rates for decommissioning are transferred by SCE&G to the trust fund. The value of the policies compounds on a tax deferred basis. Upon the death of insured personnel, the policy proceeds are remitted tax-free. The trust fund receives the cash surrender value and SCE&G receives the death benefit component in order to recover its term premium and salary continuation payments, if applicable.
In our June 1993 rate case, the PSC approved gross annual collections for decommissioning in the amount of $3,224,920, based upon costs estimates contained in a 1991 site-specific study.
The amount approved was supported by a COMReP model which incorporated the proposed annual collections and projected cash flows generated by the COMReP program based upon plan assumptions including specific rates of return. In a rate order issued in January 2003, the PSC did not address any changes to the amount included in rates for decommissioning. As such, the $3,224,920 established in 1993 is unchanged. SCE&G will reassess the adequacy of annual collections when a decision is reached by the NRC regarding SCE&G's application for a twenty-year life extension for VCSNS and on a continuing basis as future decommissioning cost studies are completed.
The schedule (Financial Assurance Model) on page 3 of 6 incorporates within the above referenced COMReP model the annual amounts remaining to be collected and the amounts of decommissioning funds estimated to be expended pursuant to 10 CFR 50.75 (b) and (c). The
$224,829,733 (calculated in Attachment I) is spread by year based upon the spread of costs (labor, equipment, etc.) in our 2000 site-specific study (DECON estimate). These payments (in 2002 dollars) are then escalated as described below along with the other assumptions underlying the schedule.
Document Control Desk Attachment II RC-03-0073 Page 2 of 6 Other Relevant Assumptions in the Financial Assurance Model The assumed escalation rates applied to decommissioning cost estimates are based on a forecast provided by Global Insight's DriQuest, a forecasting service to which SCE&G subscribes. The forecast simulation (dataset) used is the T250802, August 25-year trendlong forecast which is produced twice a year. The variables used for the decommissioning cost categories are as follows: Employment Cost Index-Total Private Compensation for Labor; Producer Price Index-Machinery and Equipment for Equipment and Materials; Producer Price Index-Fuels, Related Products & Power for Energy; and Consumer Price Index for Commodities other than Food & Energy for Burial and Other. These forecasts extend only to 2027. Therefore, a compound growth rate based on the last five years of the available forecast is used to escalate costs beyond 2027. A compound growth rate based upon the forecasts for the years 2002-2027 is used to escalate costs through 2027. The escalation rates used are as follows:
Employment cost index - total private compensation (ECIWSSP)
Producer price index-fuels, related products & power (WP105)
Producer price index-machinery & equipment (WP1 1)
Core consumer price index (excludes food & energy) (CPI©FAE)
Employment cost index - total private compensation (ECIWSSP)
Producer price index-fuels, related products & power (WP1 05)
Producer price index-machinery & equipment (WP1 1)
Core consumer price index (excludes food & energy) (CPI@?FAE)
CPGR 2027-2022 4.13%
2.69%
0.46%
3.66%
QPGR 2027-2002 3.97%
2.13%
0.25%
3.13%
Earnings are derived based upon the external trust's beginning balance, collection amounts, decommissioning payments and the external trust's ending balance derived from the COMReP model.
Earnings are credited to the fund at the end of each year.
Within the COMReP Model, the projected insurance values are based upon a current average portfolio earnings rate. The assumed weighted average earnings rate on all investments is approximately 7.21 %.
Document Control Desk Attachment II RC-03-0073 Page 3 of 6 Financial Assurance Model External Trust Annual Annual External Trust Beginning Collection Payments For Ending Year Balance Amounts Decommissioning Earnings Balance 2003 61,953,118 1,991,388 0
4,541,208 68,485,714 2004 68,485,714 1,991,388 0
5,012,477 75,489,579 2005 75,489,579 1,991,388 0
5,517,745 82,998,712 2006 82,998,712 1,991,388 0
6,059,464 91,049,564 2007 91,049,564 1,991,388 0
6,640,262 99,681,214 2008 99,681,214 1,991,388 0
7,262,961 108,935,563 2009 108,935,563 1,991,388 0
7,930,581 118,857,532 2010 118,857,532 1,991,388 0
8,646,365 129,495,285 2011 129,495,285 1,991,388 0
9,413,786 140,900,459 2012 140,900,459 1,991,388 0
10,236,570 153,128,417 2013 153,128,417 1,991,388 0
11,118,710 166,238,515 2014 166,238,515 1,991,388 0
12,064,489 180,294,392 2015 180,294,392 1,991,388 0
13,078,498 195,364,278 2016 195,364,278 1,991,388 0
14,165,659 211,521,325 2017 211,521,325 1,991,388 0
15,331,249 228,843,962 2018 228,843,962 1,991,388 0
16,580,926 247,416,276 2019 247,416,276 1,991,388 0
17,920,757 267,328,421 2020 267,328,421 1,991,388 0
19,357,244 288,677,053 2021 288,677,053 1,991,388 0
20,897,362 311,565,803 2022 311,565,803 1,991,388
-23,601,290 21,697,272 311,653,173 2023 311,653,173 0
-66,872,833 20,070,912 264,851,252 2024 264,851,252 0
-60,749,458 16,915,436 221,017,230 2025 221,017,230 0
-60,252,981 13,771,102 174,535,351 2026 174,535,351 0
-60,361,887 10,413,911 124,587,375 2027 124,587,375 0
-62,425,374 6,736,169 68,898,170 2028 68,898,170 0
-52,017,369 3,094,102 19,974,903 2029 19,974,903 0
-23,470,748 594,410
-2,901,435 2030
-2,901,435 0
-28,918,967
-1,252,439
-33,072,841 2031
-33,072,841 0
-2,972,278
-2,493,129
-38,538,248 2032
-38,538,248 0
-3,102,854
-2,892,120
-44,533,222 2033
-44,533,222 0
-3,221,491
-3,328,885
-51,083,598 2034
-51,083,598 0
-3,353,832
-3,806,211
-58,243,641 2035
-58,243,641 0
-3,491,613
-4,327,715
-66,062,969 2036
-66,062,969 0
-3,645,018
-4,897,345
-74,605,332 2037
-74,605,332 0
-26,621,296
-6,342,371
-107,568,999 Notes 0
The above analysis appropriately reflects contributions to the trust on an after-tax basis (i.e., taxes are accrued on the $3,224,920 annual collections prior to their deposit). The rate of return incorporated in the analysis is derived from the COMReP model-supporting PSC approved collections for decommissioning discussed earlier. Further, while this rate of return appropriately reflects the tax-deferral aspects of the life insurance contracts, the analysis does not consider the effects of presumed tax deductibility of decommissioning payments in the years in which such payments are made. Were this tax deductibility considered in the above model, the funding would be more than adequate.
Document Control Desk Attachment II RC-03-0073 Page 4 of 6 In 2002, SCE&G filed an application with the NRC for a twenty-year license extension for VCSNS, which, if approved, would allow the plant to operate into 2042. The analysis (Supplemental Financial Assurance Model) on page 5 of 6 incorporates the same assumptions as the analysis on page 3 of 6, but also incorporates the assumptions that (i) the license renewal application is approved, (ii) decommissioning payments begin in 2042 versus 2022 and (iii) collections continue through 2042. The funding shortfall is greatly reduced under these assumptions. As in the other model, consideration of tax deductibility of decommissioning payments would eliminate the indicated shortfall.
The above models are based on the NRC formula-based cost estimate and a DECON (immediate decommissioning) methodology. SCE&G has instead adopted a deferred decommissioning (SAFSTOR) methodology based on a site-specific study completed in 2000. Under the SAFSTOR methodology, the site will be maintained over a period of approximately 60 years in such a manner as to allow for subsequent decontamination that permits release for unrestricted use in 2084, or 2104 if the twenty-year life extension, discussed above, is approved. Under the SAFSTOR methodology, projected cash flows generated under the COMReP program are more than adequate to fund our decommissioning costs assuming a twenty-year life extension of VCSNS.
Lastly, similar to that filed and accepted in connection with our 2001 report of status, we have enclosed a current certificate of insurance evidencing our coverage for decontamination and decommissioning liabilities.
Document Control Desk 1 RC-03-0073 Page 5 of 6 Supplemental Financial Assurance Model (Assuming Life Extension)
External Trust Annual Annual External Trust Beginning Collection Payments For Ending Year Balance Amounts Decommissionin Earnings Balance 2003 61,953,118 1,991,388 0
3,471,845 67,416,351 2004 67,416,351 1,991,388 0
3,773,161 73,180,900 2005 73,180,900 1,991,388 0
4,091,096 79,263,384 2006 79,263,384 1,991,388 0
4,426,566 85,681,338 2007 85,681,338 1,991,388 0
4,780,539 92,453,26 2008 92,453,265 1,991,388 0
5,154,034 99,598,687 2009 99,598,687 1,991,388 0
5,548,129 107,138,204 2010 107,138,204 1,991,388 0
5,963,959 115,093,551 2011 115,093,551 1,991,388 0
6,402,724 123,487,663 2012 123,487,663 1,991,388 0
6,865,689 132,344,740 2013 132,344,740 1,991,388 0
7,354,187 141,690,315 2014 141,690,315 1,991,388 0
7,869,628 151,551,331 2015 151,551,331 1,991,388 0
8,413,497 161,956,216 2016 161,956,216 1,991,388 0
8,987,363 172,934,967 2017 172,934,967 1,991,388 0
9,592,879 184,519,234 2018 184,519,234 1,991,388 0
10,231,791 196,742,413 2019 196,742,413 1,991,388 0
10,905,942 209,639,743 2020 209,639,743 1,991,388 0
11,617,274 223,248,405 2021 223,248,405 1,991,388 0
12,367,839 237,607,632 2022 237,607,632 1,991,388 0
13,159,800 252,758,820 2023 252,758,820 1,991,388 0
13,995,441 268,745,649 2024 268,745,649 1,991,388 0
14,877,170 285,614,20 2025 285,614,207 1,991,388 0
15,807,529 303,413,124 2026 303,413,124 1,991,388 0
16,789,201 322,193,713 2027 322,193,713 1,991,388 0
17,825,016 342,010,117 2028 342,010,117 1,991,388 0
18,917,959 362,919,46 2029 362,919,464 1,991,388 0
20,071,182 384,982,034 2030 384,982,034 1,991,388 0
21,288,009 408,261,431 2031 408,261,431 1,991,388 0
22,571,949 432,824,768 2032 432,824,768 1,991,388 0
23,926,702 458,742,858 2033 458,742,858 1,991,388 0
25,356,174 486,090,420 2034 486,090,420 1,991,388 0
26,864,487 514,946,295 2035 514,946,29 1,991,388 0
28,455,989 545,393,672 2036 545,393,672 1,991,388 0
30,135,267 577,520,32 2037 577,520,327 1,991,388 0
31,907,163 611,418,878 2038 611,418,878 1,991,388 0
33,776,786 647,187,052 2039 647,187,052 1,991,388 0
35,749,525 684,927,965 2040 684,927,96 1,991,38E 0
37,831,067 724,750,420
Document Control Desk Attachment II RC-03-0073 Page 6 of 6 Supplemental Financial Assurance Model (Assuming Life Extension) (continued)
External Trust Annual Annual External Trust Beginning Balance Collection Payments For Ending Year Amounts Decommissionin Earnings Balance 2041 724,750,42 1,991,388 0
40,027,413 766,769,221 2042 766,769,221 1,991,388
-46,559,729 41,060,930 763,261,810 2043 763,261,81 0 0
-134,345,638 38,391,720 667,307,892 2044 667,307,89 0
-125,124,710 33,353,812 575,536,994 2045 575,536,994 0
-124,709,198 28,303,787 479,131,583 2046 479,131,583 0
-125,202,961 22,973,079 376,901,701 2047 376,901,701 0
-129,985,358 17,202,863 264,119,206 2048 264,119,206 _
-109,872,174 11,537,174 165,784,206 2049 165,784,206 0
-49,141,092 7,788,42 124,431,537 2050 124,431,537 0
-59,255,234 5,228,765 70,405,068 2051 70,405,068 0
-6,650,198 3,699,693 67,454,563 2052 67,454,563 0
-6,942,473 3,528,902 64,040,992 2053 64,040,992 0
-7,208,044 3,333,30 60,166,256 2054 60,166,256 0
-7,504,286 3,111,434 55,773,404 2055 55,773,404 0
-7,812,709 2,860,64 50,821,343 2056 50,821,343 0
-8,156,104 2,578,054 45,243,293 2057 45,243,293 0
54,904,523 981,23
-8,679,993
Document Control Desk Attachment III RC-03-0073 Page 1 of 3 huNdir
?,tur timrmer biitain 5ulle I k 1201 N~beqrvA Wbiltngy.
DE 34!J1WI USA N F. IL CERTIFICATE OF INSURANCE
.o%
IT~
Td 3O1 t(M Yk 1XI PI 573-2ZI-ritula-51! M&YO La: Chnn i ISSUED TO:
United States NRC ADDRESS:
Washlnton. DG 20555 Attn:
Sam Collins Direcor of Nuclear Rmector Regulbtion THLIS IS TO CERnIFY that insurance has been effected with NUCLLAR ELECrMIC INSUR0NCE LIMITED), 1201 MarkWt Street, Suite 100, Wilmington. lilaware 19K1I, under Policy No. X03-052 2s follow,:
MEMBER INSURED:
ADDRESS:
PROPER1YINSWED:
SOUTH CAROLINA ELEIC ACt) (AS COMPANYi P.O. Box 764 Col]umbia, SC 2B2I8 Sutitmer iNuclr Statlon COVERAGE-IDecontaminatian liability, Iecommissioning Liability, and Excess Propert" In mance AMOUNT OF INSUkRNCE:
INSURMS:
POLICYTERM:
$1.5(.X,00,0()
South Carolina Eleciri and Gas Company, South Carolina Public Snitcr Authority, and Wachovia Bank as their Interests may
- appcar, 12:01 a.m. on April 1, 203 to 12:01 am on April 1 20, Standard lUme in Hamilton, Bcrmuida,
Document Control Desk Attachment IlI RC-03-0073 Page 2 of 3 I.S PAYEE CLAUSE:
A.
Expert~se coVeretl underf the Nuclear Liability Coverage (pf rph V 0(a))
sluill be adjosted with the Member Insured and pavible to:
outh Crolina Eletdric and Gas COmpny The Merber Insured may, by written noticle to tHI 1nSUrer, designate other payees.
B.
The expenses covered under the Deris Remorvat and Decontamination Covera (paragph KI1(b)), the losscs covered under the Fruperly Damnae Coverage (paragraph V.1()), aind the sses covered 'ider the FutictionA Total 1oss Covertge (paragaph Y.2()) shall be adjusted with the Memibes Insured and payable lo; South C jiina Electric and (as Company The Member Insured uray, by written notice lo the Inswrer, desipiate other payees.
C.
Expenses covered under the Decommissioning Liability CoverAge (subsection V 1I) shall be idjusted with the Member 1ifad Ard payable 1o:
Sotli Carlilna Fectric and Gfm NtiLjnr D ommmsinning Trust and South Caroling Public Senice Authtirilv Ndccar f)commissionr lgignte.ryqLFnd Rhe Membor Insured may, by vritten nIoice to the Inrsurer designate otlhr payees.
Document Control Desk Attachment III RC-03-0073 Page 3 of 3 This Certificale is not tran-sernble anrd nmay b canciktd thy iUCLEAR ELECTRIC INSURANCE COMPANTY by ghing 60 days wi-itten notice to the party to wham this Certificate is issued prior to cuncellation of the instiraoce d(kscribe herin, uinles sspecifically provided for otherswise inder the Terms, Conditions wid 3cqfiprns of the Policy.
TiHIS CERTIFIGTE is for information nly; it is not a contract of insurance but attests that a polic ;s lumbered hereit, and ws it stnmds at the date of this Certificate, has nccr issued by the Gompany, Said policy is subject lo change by endcqsemein and tanceilation in accordance with its lernis.
EFFECTIVE DATE OF THIS CERTIEICATE: April 1, 2003 CER1TF[CmaT FXPIRES: April 1, 2004, unless canceled sooner.
Signed by:
NIUCLEAR EL.ECTRJC INSURACE, I.MITED cRrad WiLson Viace President-1n.5uLrance