RC-07-0063, Amended Report of Status of Decommissioning Funding

Amended Report of Status of Decommissioning Funding

ML071160059
Person / Time
Site:	Summer
Issue date:	04/24/2007
From:	Archie J, Swan J South Carolina Electric & Gas Co
To:	Dusaniwskyj M Document Control Desk, Office of Nuclear Reactor Regulation
References
RC-07-0063
Download: ML071160059 (7)

Text

Jeffrey B. Archie Vice President,Nuclear Operations 803.345.4214

ýMvCýjEý&za 8 A SCANA COMPANY April 24, 2007 RC-07-0063 Document Control Desk U. S. Nuclear Regulatory Commission Washington, DC 20555 Attention: Mr. Michael Dusaniwskyj

Subject:

VIRGIL C. SUMMER NUCLEAR STATION DOCKET NO. 50/395 OPERATING LICENSE NO. NPF-12 AMENDED REPORT OF STATUS OF DECOMMISSIONING FUNDING

Reference:

1. J. B. Archie, SCE&G, letter to Document Control Desk dated March 28, 2007, RC-07-0043.

2. Telecons between Michael Dusaniwskyj, NRC, and SCE&G Staff (Bruce Thompson, Arnie Cribb, Robert Caldwell, Susan Reese, Ernest McCravy)

This report is an amendment to the Report of Status of Decommissioning Funding filed with the U.S. Nuclear Regulatory Commission (NRC) on March 28, 2007. Based on discussions with you, this amended report reflects revisions to trust balances, collection amounts, program costs and loan repayment amounts reflected in the Financial Assurance Model (the "Model") in Attachment II in order to limit the Model solely to those estimated (radiological) costs specifically addressed by the NRC's financial assurance formula (10 CFR 50.75 (b) and (c)).

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

SCE&G I Virgil C.Summer Nuclear Station

• P.0.Box 88 . Jenkinsville, South Carolina 29065 1T(803) 345.5209 ° www.sceg.com Accc I

Document Control Desk RR 1950 RC-07-0063 Page 2 of 3 The amount accumulated at the The accumulated trust fund balance which could be end of the calendaryear considered to be related solely to radiological costs preceding the date of the report; addressed in the NRC's financial assurance formula, as of December 31, 2006, was $73,761,428. This balance includes cash and cash surrender values of life insurance policies. See Attachment.II for more information. The

$73,761,428 is net of loans made to the trust by Bank of America in the amount of $24.4 million. However, approximately $24.3 million of advances from SCE&G to fund premium payments have not been deducted in arriving at the amount accumulated in the trust fund. These amounts reflect 88.69% of actual balances in the trust, as described above.

A schedule of the annual Please see Attachment I1. The total after-tax annual amounts remaining to be collection amount is currently $1,991,388, which collection collected; amount was based on a 1991 site-specific cost study.

Annual amounts collected through rates have not changed since 1993. For purposes of the revised Model, approximately 88.69% of the current collection amounts could be considered to be related to items 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 costs/collections related to items included in NRC definition 88.69%

Therefore, the annual after-tax amounts to be collected which could be considered to be related solely to items addressed in the NRC's financial assurance formula are shown as $1,766,162 (.8869 x $1,991,388) in the Financial Assurance Model in Attachment II.

The assumptions used regarding Please see Attachment II.

rates of escalation in decommissioning cost, rates of earnings on decommissioning funds, and rates of otherfactors used in funding projections; Any contracts upon which the None licensee is relying pursuantto paragraph(e)(1)(v) of this section;

Document Control Desk RR 1950 RC-07-0063 Page 3 of 3 Any modifications occurringto a None licensee's current method of providing financialassurance since the last submitted report; Any materialchanges to trust None agreements.

Ifyou have any questions, please call Mr. Bruce Thompson at (803) 931-5042.

Very truly yours, J # fryyB.Archie Vice President Nuclear Operations, SCE&G eý 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)

PRSF (RC-07-0063)

Document Control Desk Attachment I RC-07-0063 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 x 8.600))

= ($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 1307Rev. 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 )B.se 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 x 1.468) + (.42 x 2.456))

= (.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: wpuO543 and wpu0573)

Document Control Desk Attachment II RC-07-0063 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, of which $2,860,181 (88.69%) or $1,766,162 after-tax, could be considered to be related solely to items addressed in the NRC's financial assurance formula, 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 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 decommissioning costs 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 Model are discussed on page 3 of 3.

Document Control Desk Attachment 11 RC-07-0063 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 Erigs Ending Balance of Bank Loan 2006 98,151,178 73,761,428 2007 98,151,178 1,766,162 1,453,906 1,969,269 100,432,703 76,042,953 2008 100,432,703 1,766,162 1,467,658 2,014,624 102,745,831 78,356,081 2009 102,745,831 1,766,162 1,462,244 2,060,995 105,110,744 80,720,994 2010 105,110,744 1,766,162 1,475,996 2,108,018 107,508,929 83,119,179 2011 107,508,929 1,766,162 1,523,850 2,155,025 109,906,265 85,516,515 2012 109,906,265 1,766,162 1,484,334 2,203,762 112,391,855 88,002,105 2013 112,391,855 1,766,162 1,478,918 2,253,582 114,932,681 90,542,931 2014 114,932,681 1,766,162 1,492,671 2,304,123 117,510,295 93,120,545 2015 117,510,295 1,766,162 1,487,256 2,355,784 120,144,986 95,755,236 2016 120,144,986 1,766,162 1,554,278 2,407,137 122,764,007 98,374,257 2017 122,764,007 1,766,162 1,495,594 2,460,692 125,495,267 101,105,517 2018 125,495,267 1,766,162 1,509,347 2,515,042 128,267,124 103,877,374 2019 128,267,124 1,766,162 1,503,931 2,570,587 131,099,941 106,710,191 2020 131,099,941 1,766,162 1,517,685 2,626,968 133,975,387 109,585,637 2021 133,975,387 1,766,162 1,565,538 2,683,520 136,859,531 112,469,781 2022 136,859,531 1,766,162 1,526,021 2,741,993 139,841,665 115,451,915 2023 139,841,665 1,766,162 1,520,607 2,801,744 142,888,965 118,499,215 2024 142,888,965 1,766,162 1,534,359 2,862,415 145,983,183 121,593,433 2025 145,983,183 1,766,162 1,528,944 2,924,408 149,144,809 124,755,059 2026 149,144,809 1,766,162 1,595,966 2,986,300 152,301,305 127,911,555 2027 152,301,305 1,766,162 1,537,282 3,050,604 155,580,790 131,191,040 2028 155,580,790 1,766,162 1,551,035 3,115,918 158,911,835 134,522,085 2029 158,911,835 1,766,162 1,545,619 3,182,648 162,315,026 137,925,276 2030 162,315,026 1,766,162 1,559,372 3,250,436 165,772,252 141,382,502 2031 165,772,252 1,766,162 1,607,226 3.318,624 169.249.811 144,860,061 2032 169,249,811 1,766,162 1,567,710 3,388,965 172,837,228 148,447,478 2033 172,837,228 1,766,162 1,562,295 3,460,822 176,501,918 152,112,168 2034 176,501,918 1,766,162 1,576,048 3,533,841 180,225,872 155,836,122 2035 180,225,872 1,766,162 1,570,632 3,608,428 184,029,830 159,640,080 2036 184,029,830 1,766,162 1,637,655 3,683,167 187,841,504 163,451,754 2037 187,841,504 1,766,162 1,578,970 3,760,574 191,789,270 167,399,520 2038 191,789,270 1,766,162 1,592,723 3,839,254 195,801,963 171,412,213 2039 195,801,963 1,766,162 1,587,307 3,919,616 .199,900,435 175,510,685 2040 199,900,435 1,766,162 1,601,060 4,001,311- 204,066,847 179,677,097 2041 204,066,847 1,766,162 185,530 24,389,750 3,625,155 184,882,884 184,882,884 2042 184,882,884 1,766,162 85,435 9,298,770 3,545,297 180,810,138 180,810,138 2043 180,810,138 75,851 32,545,695 2,963,772 151,152,364 151,152,364 2044 151,152,364 85,435 58,117,313 1,858,992 94,808,608 94,808,608 2045 94,808,608 75,851 39,519,773 1,104,260 56,317,243 56,317,243 2046 56,317,243 138,704 25,571,618 612,138 31,219,060 31,219,060 2047 31,219,060 75,851 25,571,618 111,432 5,683,022 5,683,022 2048 5,683,022 85,435 20,922,233 -306,493 -15,631,139 -15,631,139 2049 -15,631,139 ______ 75,851 45,214,424 -60,921,414 -60,921,414

Document Control Desk Attachment II RC-07-0063 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 $24,389,750 (88.69% of actual loan balance)

Bank of America loan in 2041, the repayment of SCE&G advances in the amount of

$24,292,191 (88.69% of total advances) 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. These costs are shown in the model at 88.69% of total estimated program 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 timing of expenditure reflected in 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 88.69% of after-tax collections (and also 88.69% of the trust fund balances) relate to items 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 Model incorporates the NRC formula-based cost estimates and the DECON (immediate decommissioning) methodology. In contrast, SCE&G currently intends to utilize a deferred decommissioning (SAFSTOR) methodology. 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 prepared using these assumptions and reflecting a site-specific cost study completed in 2006 do not indicate funding deficits.