RC-07-0043, V.C. Summer Report of Status of Decommissioning Funding (RR-1950)

V.C. Summer Report of Status of Decommissioning Funding (RR-1950)

ML070920052
Person / Time
Site:	Summer
Issue date:	03/28/2007
From:	Archie J, Swan J South Carolina Electric & Gas Co
To:	Document Control Desk, NRC/NRR/ADRO
References
RC-07-0043, RR-1950
Download: ML070920052 (12)

Text

Jeffrey B. Archie Vice President, Nuclear Operations 803.345.4214 A scANA COMPANY March 28, 2007 RC-07-0043 Document Control Desk U. S. Nuclear Regulatory Commission Washington, DC 20555

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 The amount of decommissioning funds estimated "Lo be funds estimated to be required required pursuant to 10 CFR 50.75 (b) and (c) for SCE&G's pursuant to 10 CFR 50.75 (b) two-thirds ownership of VCSNS is $232,469,253 (2006 and (c); dollars). Please see Attachment I for the calculation of this amount.

The amount accumulatedat the The trust fund balance as of December 31, 2006 was end of the calendaryear $83,167,694. This balance includes cash and cash preceding the date of the report; surrender values of life insurance policies. See Attachment II for more information. The $83,167,694 is net of loans made to the trust by Bank of America in the amount of

$27.5 million. However, approximately $27.4 million of advances from SCE&G to fund premium payments have not been deducted in arriving at the amount accumulated in the trust fund.

SCE&G I Virgil C.Summer Nuclear Station - P.0.Box 88 . Jenkinsville, South Carolina 29065 .T (803) 345.5209 -www.scana.com

Document Control Desk RR 1950 RC-07-0043 Page 2 of 3 A schedule of the annual Please see Attachment I1. The after-tax annual collection amounts remainingto be amount is currently $1,991,388. Annual amounts collected collected; through rates have not changed since 1993. Please note that approximately 11.3% of the current 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) $118,256,667 Customer collection basis (two-thirds portion) 133,333,333 Percent of collections related to items not included in NRC definition 11.31%

The assumptions used regarding Please see Attachment I1.

escalation in decommissioning cost, rates of earnings on decommissioning funds, and rates of other factors used in funding projections; Any contracts upon which the None licensee is relying pursuant to paragraph(e)(1)(v) of this section; Any modifications occurring to a None licensee's current method of providing financial assurance since the last submitted report; Any material changes to trust None agreements.

Document Control Desk RR 1950 RC-07-0043 Page 3 of 3 If you have any questions, please call Mr. Bruce Thompson at (803) 931-5042.

Very truly yours, Jeffrey B. Archie Vice President Nuclear Operations, SCE&G James E. Swan, IV Controller, SCE&G SBR/JBA/JES/dr c: K. B. Marsh S. A. Byrne N. S. Carns R. J. White J. H. Hamilton W. D. Travers R. E. Martin NRC Resident Inspector K. M. Sutton RTS (LTD 282, RR 1950)

File (810.34-2)

DMS (RC-07-0043)

Document Control Desk Attachment I RC-07-0043 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) (A Lx + B Ex + C Bx)

Estimated Cost 2006 = ($100,520,000) ((.65 x 2.049) + (.13 x 1.883) + (.22 x8.600))

= ($100,520,000) (1.332+ 0.245+ 1.892)

= $348,703,880 SCE&G's two-thirds ownership share of 2006 Estimated Cost = $232,469,253 Where:

p = 2,900 MWt A .65 (NUREG 1307 Rev. 12)

B .13 (NUREG 1307 Rev. 12)

C .22 (NUREG 1307 Rev. 12)

Lx 2.049 (Computed Below)

Ex 1.883 (Computed Below)

Px 1.468 (Computed Below)

Fx 2.456 (Computed Below)

Bx 8.600 (NUREG 1307 Rev. 12)

Lx = (1.9 8 )Base 2005 X (103.5)ECI/ (100)

= 2.049 Px = 12/06Value / January 1986 Value

= 167.6/114.2

= 1.468 Fx = 12/06 Value / January 1986 Value

= 201.4/ 82.0

= 2.456 Ex = ((.58Px) + (.42Fx))

= ((.58 xl.468) + (.42 x2.456))

= (.8514+ 1.0315)

= 1.8829 March 5, 2007 values in the following Bureau of Labor Statistics indices were used to compute NRC minimum requirements:

Employment Cost Index (ECI)- South Region (Series ID: CIU2010000000220i)

Producer Price Index - Commodities - (Series ID: wpu0543 and wpu0573)

Document Control Desk Attachment II RC-07-0043 Page 1 of 3 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. Under the plan used by SCE&G to fund its share of the costs of decommissioning VCSNS, funds collected through rates are invested in life insurance policies on key company personnel who, in return for participating 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. Lynch & Associates 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 program satisfies the investment criteria of its financial assurance regulations. Further, this funding methodology has been approved by the South Carolina Public Service Commission (SCPSC).

The value of the policies compounds on a tax deferred basis. Upon the death of the insured, the policy proceeds are remitted tax-free, with the trust fund receiving the cash surrender value and SCE&G receiving the death benefit component in order to recover its term premium and salary continuation payments, if applicable. Designated amounts collected through electric rates, insurance proceeds, and interest on proceeds, less after-tax expenses of the program, are transferred by SCE&G to the trust fund.

In SCE&G's June 1993 electric rate case, the PSC approved gross annual collections for decommissioning in the amount of $3,224,920, based upon cost estimates contained in a 1991 site-specific study. In subsequent rate orders, including a rate order issued in January 2005, the PSC has not changed this amount. SCE&G will reassess the adequacy of annual collections on a continuing basis as future site-specific decommissioning cost studies are completed.

The schedule (Financial Assurance Model) on page 2 incorporates the 2007 beginning trust fund balance (gross of loans) and projections of annual amounts (after-tax) collected through electric rates, program costs (net of tax), investment earnings, payments of amounts of decommissioning funds estimated to be required pursuant to 10 CFR 50.75 (b) and (c), and repayments of loans and advances. The estimated timing of expenditure of the $232,469,253 (calculated in Attachment I) is based on our 2006 site-specific study (DECON estimate). Relevant assumptions used in the Financial Assurance Model are discussed on page 3 of 3.

Document Control Desk Attachment 11 RC-07-0043 Page 2 of 3 Financial Assurance Model Schedule of External Trust, Annual Decommissioning Beginning Collection Program Costs, Payments/Loan Investment External Trust, Balance, Net Year Balance Amounts Net of Tax Repayments Earnings Ending Balance of Bank Loan 2007 110,667,694 1,991,388 1,639,312 2,220,395 113,240,165 85,740,165 2008 113,240,165 1,991,388 1,654,818 2,271,535 115,848,270 88,348,270 2009 1 115,848,270 1,991,388 1,648,713 2,323,819 118,514,764 91,014,764 2010 118,514,764 1,991,388 1,664,219 2,376,839 121,218,772 93,718,772 2011 121,218,772 1,991,388 1,718,176 2,429,840 123,921,823 96,421,823 2012 123,921,823 1,991,388 1,673,620 2,484,792 126,724,383 99,224,383 2013 126,724,383 1,991,388 1,667,514 2,540,965 129,589,222 102,089,222 2014 129,589,222 1,991,388 1,683,021 2,597,952 132,495,541 104,995,541 2015 132,495,541 1,991,388 1,676,915 2,656,200 135,466,214 107,966,214 2016 135,466,214 1,991,388 1,752,484 2,714,102 138,419,221 110,919,221 2017 138,419,221 1,991,388 1,686,316 2,774,486 141,498,779 113,998,779 2018 141,498,779 1,991,388 1,701,823 2,835,767 144,624,110 117,124,110 2019 144,624,110 1,991,388 1,695,717 2,898,396 147,818,177 120,318,177 2020 147,818,177 1,991,388 1,711,224 2,961,967 151,060,308 123,560,308 2021 151,060,308 1,991,388 1,765,180 3,025,730 154,312,246 126,812,246 2022 154,312,246 1,991,388 1,720,624 3,091,660 157,674,670 130,174,670 2023 157,674,670 1,991,388 1,714,519 3,159,031 161,110,570 133,610,570 2024 161,110,570 1,991,388 1,730,025 3,227,439 164,599,372 137,099,372 2025 164,599,372 1,991,388 1,723,919 3,297,337 168,164,178 140,664,178 2026 168,164,178 1,991,388 1,799,488 3,367,122 171,723,199 144,223,199 2027 171,723,199 1,991,388 1,733,320 3,439,625 175,420,893 147,920,893 2028 175,420,893 1,991,388 1,748,827 3,513,269 179,176,723 151,676,723 2029 179,176,723 1,991,388 1,742,721 3,588,508 183,013,897 155,513,897 2030 183,013,897 1,991,388 1,758,228 3,664,941 186,911,999 159,411,999 2031 '186,911,999 1,991,388 1,812,184 3,741,824 190,833,027 163,333,027 2032 190,833,027 1,991,388 1,767,629 3,821,136 194,877,921 167,377,921 2033 194,877,921 1,991,388 1,761,523 3,902,156 199,009,942 171,509,942 2034 199,009,942 1,991,388 1,777,030 3,984,486 203,208,786 175,708,786 2035 203,208,786 1,991,388 1,770,924 4,068,585 207,497,835 179,997,835 2036 207,497,835 1,991,388 1,846,493 4,152,855 211,795,585 184,295,585 2037 211,795,585 1,991,388 1,780,325 4,240,133 216,246,781 188,746,781 2038 216,246,781 1,991,388 1,795,831 4,328,847 220,771,184 193,271,184 2039 220,771,184 1,991,388 1,789,725 4,419,457 225,392,304 197,892,304 2040 225,392,304 1,991,388 1,805,232 -4,511,569 230,090,030 202,590,030 2041 230,090,030 1,991,388 209,189 27,500,000 4,087,445 208,459,673 208,459,673 2042 208,459,673 1,991,388 96,330 9,298,770 4,021,119 205,077,080 205,077,080 2043 205,077,080 ______ 85,524 32,545,695 3,448,917 175,894,779 175,894,779 2044 175,894,779 _______96,330 58,117,313 2,353,623 120,034,758 120,034,758 2045 120,034,758 85,524 39,519,773 1,608,589 82,038,051 82,038,051 2046 82,038,051 156,392 25,571,618 1,126,201 57,436,241 57,436,241 2047 57,436,241 85,524 25,571,618 635,5812 32,414,681 32,414,681 2048 32,414,681 96,330 20,922,233 227,'922 11,624,0141 11,624,041 2049 11,624,041 85,524 48,312,233 - -36,773,716 -36,773,716

Document Control Desk Attachment II RC-07-0043 Page 3 of 3 Relevant assumptions used in the model to project decommissioning funds through 2049 are as follows:

" Annual payments include the repayment of the $27.5 million Bank of America loan in 2041, the repayment of SCE&G advances in the amount of $27,390,000 in 2049, as well as payments for decommissioning totaling $232,469,253 over the period 2042 -

2049.

• Estimated program costs (net of tax benefits) that are paid by SCE&G or the trust include salary continuation payments to beneficiaries of the insured, loan interest payments, and legal and administrative costs.

• The assumed real rate of return on invested funds is 2%.

• This 2% earnings credit is taken into the presumed dismantlement period, as allowed for licensees that use the 10 CFR 50.75 (b) and (c) formula for decommissioning cost estimates.

" Amounts estimated to be required pursuant to 10 CFR 50.75 (b) and (c) in 2006 dollars are expended over the dismantlement period based upon the cost estimates in our 2006 site-specific study (DECON estimate).

SCE&G does not maintain separate trusts for radiological and non-radiological segments of the decommissioning process. As noted earlier, based upon rate treatment received in our 1993 electric rate order, it could be presumed that 11.31% of after-tax collections (and also 11.31% of the trust fund balances) relate to items not included in the NRC's definition of decommissioning.

It should be noted that the above does not consider the effects of presumed income tax deductibility of decommissioning payments in the years in which such payments are made.

Additionally, the above Financial Assurance Model incorporates the NRC formula-based cost estimates and the DECON (immediate decommissioning) methodology. SCE&G currently intends to utilize a deferred decommissioning (SAFSTOR) methodology based on a site-specific study completed in 2006. Under the SAFSTOR methodology, the site will be placed and maintained for an extended period in a condition that allows for subsequent decontamination to levels that permit release for unrestricted use in 2104. Models using these assumptions do not indicate funding deficits.

Lastly, similar to that filed and accepted in connection with our 2005 report of status, we have enclosed current certificates of insurance evidencing our coverage for premature decontamination and decommissioning liabilities.

Document Control Desk Attachment III RC-07-0043 Page 1 of 5 ATTACHMENT III NEIL CERTIFICATE OF INSURANCE POLICY NO. X06-052 Decontamination Liability, Decommissioning Liability, and Excess Property Insurance POLICY NO. P06-082 Primary Property and Decontamination Liability Insurance

Nuclear Electric Insurance Limited N EI L

'02 8S8-3I CERTIFICATE OF INSURANCE 30)2 888S-.109 IiLosiiniuc ISSUED TO: United States NRC ADDRESS: Washington, DC 20555 Attn: James Dyer Director of Nuclear Reactor Regulation THIS IS TO CERTIFY that insurance has been effected with NUCLEAR ELECTRIC INSURANCE LIMITED, 1201 Market Street, Suite 1100, Wilmington, Delaware 19801, under Policy No. P06-082 as follows:

MEMBER INSURED: SOUTH CAROLINA ELECTRIC AND GAS COMPANY ADDRESS: P.O. Box 764 Columbia, South Carolina 29218 PROPERTY INSURED: Summer Nuclear Station COVERAGE: Primary Property and Decontamination Liability Insurance AMOUNT OF INSURANCE: $500,000,000 INSUREDS: South Carolina Electric and Gas Company, South Carolina Public Service Authority, and Wachovia Bank, as their interests may appear.

POLICY TERM: 12:01 a.m. on April 1, 2006 to 12:01 a.m. onApril 1, 2007, Standard time in Hamilton, Bermuda LOSS PAYEE CLAUSE: A. Expenses covered under Section I.A.2 shall be adjusted with the Member Insured and payable to:

South Carolina Electric and Gas Company The Member Insured may, by written notice to the Insurer, designate other payees.

B. The expenses covered under the Debris Removal and Decontamination Coverage (subsection 1.1(b)), the losses covered under the Property Damage Coverage (subsection 1.1(c)), and the losses covered under the Functional Total Loss Coverage (subsection 1.2(a)) shall be adjusted with the Member Insured and payable to:

South Carolina Electric and Gas Company The Member Insured may, by written notice to the Insurer, designate other payees.

C. Expenses covered under the Decommissioning Liability Coverage (subsection 11. 1) shall be adjusted with the Member Insured and payable to:

South Carolina Electric and Gas Nuclear Decommissioning Trust and South Carolina Public Service Authority Nuclear Decommissioning Internal Fund The Member Insured may, by written notice to the Insurer, designate other payees.

This Certificate is not transferable and may be canceled by NUCLEAR ELECTRIC INSURANCE COMPANY by giving 60 days written notice to the party to whom this Certificate is issued prior to cancellation of the insurance described herein, unless specifically provided for otherwise under the Terms, Conditions and Exceptions of the Policy.

THIS CERTIFICATE is for information only; it is not a contract of insurance but attests that a policy as numbered herein, and as it stands at the date of this Certificate, has been issued by the Company. Said policy is subject to change by endorsement and cancellation in accordance with its terms.

EFFECTIVE DATE OF THIS CERTIFICATE: April 1, 2006 CERTIFICATE EXPIRES: April 1, 2007, unless canceled sooner.

Signed by:

NUCLEAR ELECTRIC INSURANCE LIMITED Charles C. Boley Lead Underwriter

Nuclear lNectric Insurance Limited 1'0 \ Nht lt1iwl NEIL 302 888-3095 Louss Control CERTIFICATE OF INSURANCE ISSUED TO: United States NRC ADDRESS: Washington, DC 20555 Attn: James Dyer Director of Nuclear Reactor Regulation TillS ISTO CERTIFY that insurance has been effected with NUCLEAR ELECTRIC INSURANCE LIMITED, 1201 Market Street, Suite 1100, Wilmington, Delaware 19801, under Policy No. X06-052 as follows:

MEMBER INSURED: SOUTH CAROLINA ELECTRIC AND GAS COMPANY ADDRESS: P.O. Box 764 Columbia, SC 29218 PROPERTY INSURED: Summer Nuclear Station COVERAGE: Decontamination Liability, Decommissioning Liability, and Excess Property Insurance AMOUNT OF INSURANCE: $1,500,000,o000 INSUREDS: South Carolina Electric and Gas Company, South Carolina Public Service Authority, and Wachovia Bank as their interests may appear.

POLICY TERM: 12:01 a.m. on April 1, 2006 to 12:01 a.m. on April 1, 2007, Standard time in Hamilton, Bermuda.

LOSS PAYEE CLAUSE: A. Expenses covered under the Nuclear Liability Coverage (subsection l.A. 1(a)) shall be adjusted with the Member Insured and payable to:

South Carolina Electric and Gas Company The Member Insured may, by written notice to the Insurer, designate other payees.

B. All other covered Losses shall be adjusted with the Member Insured and payable to:

Losses, if any under this policy except losses to Nuclear Fuel and except as otherwise provided shall be adjusted with South Carolina Electric and Gas Company. Losses aggregating at $50,000 or more are to be payable jointly to South Carolina Electric and Gas Company and The Chase Manhattan Bank (formerly Chemical Bank) as successor Trustee as their interests may appear.

Losses to Nuclear Fuel are to be adjusted with and payable to South Carolina Electric and Gas Company, PruLease, Inc., Bank of America National Trust and Savings Association: Credit Suisse (New York Branch); and Columbia Fuels Inc.,

as loss payees as their interests may appear. The receipt of the payee so designated shall constitute a release in full of all liability with respect to such loss.

The Member Insured may, by written notice to the Insurer, designate other payees.

This Certificate is not transferable and may be canceled by NUCLEAR ELECTRIC INSURANCE LIMITED by giving 60 days written notice to the party to whom this Certificate is issued prior to cancellation of the insurance described herein, unless specifically provided for otherwise under the Terms, Conditions and Exceptions of the Policy.

THIS CERTIFICATE is for information only; it is not a contract of insurance but attests that a policy as numbered herein, and as it stands at the date of this Certificate, has been issued by the Company. Said policy is subject to change by endorsement and cancellation in accordance with its terms.

EFFECTIVE DATE OF THIS CERTIFICATE: April 1,2006 CERTIFICATE EXPIRES: April 1, 2007, unless canceled sooner.

Signed by:

NUCLEAR ELECTRIC INSURANCE LIMITED Charles C.Boley Lead Underwriter