RC-09-0032, Report of Status of Decommissioning Funding

Report of Status of Decommissioning Funding

ML090910353
Person / Time
Site:	Summer
Issue date:	03/30/2009
From:	Archie J, Swan J South Carolina Electric & Gas Co
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
RC-09-0032
Download: ML090910353 (14)

Text

Jeffrey B. Archie Vice President, Nuclear Operations 803.345.4214 9&

A C

,NA COMPANYMarch 30, 2009 A SCANA COMPANY RC-09-0032 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 South Carolina Electric & Gas Company (SCE&G) and the South Carolina Public Service Authority (Santee Cooper) have undivided 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 two-thirds 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 calendar year preceding 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 $263,161,360 (2008 dollars). Please see Attachment I for the calculation of this amount.

Note: The Company does not maintain separate trusts for funds designated to cover the cost of radiological decommissioning and funds to cover other costs. For purposes of estimating the amount of funds related to items included in the NRC's definition of decommissioning, approximately 88.69% of the accumulated funds are considered to be related to funding costs estimated to be required pursuant to 10 CFR 50.75(b) and (c). This estimate is equal to the ratio of the total radiological decommissioning costs estimated in 1991 site specific cost study prepared for VCSNS to the total cost that served as the basis for establishing the amount collected through electric rates in an electric rate order issued by the Public Service Commission of South Carolina (SCPSC) in 1993.

The calculation is as follows:

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

Document Control Desk RR 1950 RC-09-0032 Page 2 of 4 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 of decommissioning 88.69%

As such, 88.69% of the decommissioning fund balance, after-tax collections, program costs and loan balances are presented in the Financial Assurance Model in Attachment II (The Financial Assurance Model).

The total trust fund balance at December 31, 2008 was

$81,708,049. This balance includes cash and cash surrender values of life insurance policies. The $81,708,049 amount is net of a loan made to the trust by Bank of America in the amount of $27,500,000. However, $27,390,000 of advances from SCE&G to fund premium payments have not been deducted in arriving at the amount accumulated in the trust fund.

The portion of the above accumulated trust fund balance considered to be related to radiological decommissioning requirements addressed in the NRC's financial assurance formula was $72,466,869 at December 31, 2008. This balance includes cash and cash surrender values of life insurance policies. The $72,466,869 amount is net of

$24,389,750, the portion of the Bank of America Loan considered to be applicable to this portion of the fund.

However, $24,292,191 of advances from SCE&G to fund premium payments that are considered to be applicable to this portion of the fund have not been deducted in arriving at the balance. These amounts reflect 88.69% of total balances, as described above.

The portion of the accumulated trust fund balance considered to be related to non-radiological decommissioning costs was

$9,241,180 at December 31, 2008. This balance includes cash and cash surrender values of life insurance policies.

The $9,241,180 amount is net of $3,110,250, the portion of the Bank of America Loan considered to be applicable to this portion of the fund balance. However, $3,097,809 of the advances from SCE&G to fund premium payments that are considered to be applicable to this portion of the fund have not been deducted in arriving at this balance. These amounts reflect 11.31% of total balances, as described above.

Document Control Desk RR 1950 RC-09-0032 Page 3 of 4 A schedule of the annual amounts remaining to be collected; 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.

SCE&G is informed and believes that the Company's use of decommissioning funds does not require prior approval from the SCPSC. Moreover, SCE&G is unaware of any SCPSC requirement prohibiting the Company from using any portion of its decommissioning funds for radiological decommissioning costs.

Please see Attachment I1. The after-tax annual collection amount is currently $1,991,388, which collection amount was based on a 1991 site specific study. Annual amounts collected through rates have not changed since 1993. The after-tax collection amounts shown in the Financial Assurance Model in Attachment II represent 88.69% of the

$1,991,388, or $1,766,162.

Please see Attachment II.

None None None

Document Control Desk RR 1950 RC-09-0032 Page 4 of 4 Site specific cost estimates for License termination, spent fuel Management and site restoration The most recent site specific decommissioning cost study for VCSNS was completed in 2006. The cost estimates taken from that study (in 2006 dollars) were $284,103,870 for license termination, $44,941,756 for spent fuel management and $28,709,826 for site restoration. These estimates represent SCE&G's two-thirds ownership share of costs estimated for the DECON decommissioning alternative. The comparable amounts estimated for the SAFSTOR decommissioning alternative are $362,009,320 for license termination, $58,609,608 for spent fuel management, and $30,362,014 for site restoration.

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

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 K. J. Browne J. H. Hamilton L. A. Reyes R. E. Martin NRC Resident Inspector K. M. Sutton RTS (LTD 282, RR 1950)

File (810.34-2)

DMS (RC-09-0032)

Document Control Desk Attachment I RC-09-0032 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 2.150) + (.13 x 2.746) + (.22 x 9.872))

= ($100,520,000) (1.398+ 0.357+ 2.172)

=

$394,742,040 SCE&G's two-thirds ownership share of 2008 Estimated Cost = $263,161,360 Where:

p

=

2,900 MWt A

=

.65 (NUREG 1307 Rev. 13)

B

=

.13 (NUREG 1307 Rev. 13)

C

=

.22 (NUREG 1307 Rev. 13)

Lx

=

2.150 (Computed Below)

Ex

=

2.746 (Computed Below)

Px

=

1.622 (Computed Below)

Fx

=

4.299 (Computed Below)

Bx

=

9.872 (NUREG 1307 Rev. 13)

Lx

=

(1. 9 8 )Base2005 X 108.5(ECI)/ (100)

=

2.150 Px

=

12/08Value / January 1986 Value

=

185.2/114.2

=

1.622 Fx

=

12/08 Value / January 1986 Value

=

352.5/82.0

=

4.299 Ex

=

((.58Px) + (.42Fx))

=

((.58 x 1.622) + (.42 x 4.299))

=

2.746 The values for the labor adjustment factor (south region), the energy adjustment factor, and the waste burial adjustment factor (Atlantic Compact, direct disposal with vendors) were taken from NUREG 1307, Revision 13.

Document Control Desk Attachment II RC-09-0032 Page 1 of 3 ATTACHMENT II EXPLANATION OF FINANCIAL ASSURANCE MECHANISM AND AMOUNTS REMAINING TO BE COLLECTED Financial Assurance Model SCE&G and Santee Cooper are joint owners of undivided interests in VCSNS. Under the joint ownership arrangement, SCE&G is the operator of VCSNS and shares the ownership, 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, may receive a two-year salary continuation benefit from SCE&G. SCE&G has established a decommissioning trust fund (trust fund) with U.S. Bank, N.A. 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 SCPSC.

Gains and losses related to policy cash surrender values are tax-deferred. Upon the death of the insured, the policy proceeds are remitted tax-free. With regard to general account policies, the trust fund receives the cash surrender value (CSV) and SCE&G receives the death benefit component (minus any CSV paid; plus any interest due from the date of death) n order to recover its term premium and salary continuation payments, if applicable. With regard to separate account policies, SCE&G is currently reinvesting death benefits back into those policies.

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.

As noted earlier in this report, SCE&G does not maintain separate trusts for radiological and non-radiological segments of the decommissioning process. However, based upon rate treatment received in our 1993 electric rate order, 88.69% of after-tax collections (and also 88.69% of the trust fund balances) are considered to relate to items included in the NRC's definition of radiological decommissioning.

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 December 2007, the PSC has not changed this amount. SCE&G reassesses the adequacy of annual collections on a continuing basis as periodic site-specific decommissioning cost studies are completed. As noted earlier, $2,860,181 (88.69% of $3,224,920), or $1,766,162 after-tax, is considered to be related solely to items addressed in the NRC's financial assurance formula.

The Financial Assurance Model on the following page incorporates the 2009 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 $263,161,360 (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 1 RC-09-0032 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 2008 96,856,619 72,466,869 2009 96,856,619 1,766,162 1,363,557 1,945,184 99,204,408 74,814,658 2010 1 99,204,408 1,766,162 1,377,272 1,991,866 101,585,164 77,195,414 2011 101,585,164 1,766,162 1,426,831 2,038,490 103,962,985 79,573,235 2012 103,962,985 1,766,162 1,385,532 2,086,872 106,430,487 82,040,737 2013 106,430,487 1,766,162 1,380,079 2,136,331 108,952,901 84,563,151 2014 108,952,901 1,766,162 1,393,793 2,186,505 111,511,775 87,122,025 2015 111,511,775 1,766,162 1,388,340 2,237,792 114,127,389 89,737,639 2016 114,127,389 1,766,162 1,457,067 2,288,730 116,725,214 92,335,464 2017 116,725,214 1,766,162 1,396,601 2,341,896 119,436,671 95,046,921 2018 119,436,671 1,766,162 1,410,315 2,395,850 122,188,368 97,798,618 2019 122,188,368 1,766,162 1,404,862 2,450,993 125,000,661 100,610,911 2020 125,000,661 1,766,162 1,418,576 2,506,965 127,855,212 103,465,462 2021 127,855,212 1,766,162 1,468,1 35 2,563,065 130,716,304 106,326,554 2022 130,716,304 1,766,162 1,426,837 2,621,113 133,676,742 109,286,992 2023 133,676,742 1,766,162 1,421,383 2,680,430 136,701,951 112,312,201 2024 136,701,951 1,766,162 1,435,098 2,740,660 139,773,675 115,383,925 2025 139,773,675 1,766,162 1,429,644 2,802,204 142,912,397 118,522,647 2026 142,912,397 1,766,162 1,498,371 2,863,604 146,043,792 121,654,042 2027 146,043,792 1,766,162 1,437,905 2,927,441 149,299,490 124,909,740 2028 149,299,490 1,766,162 1,451,619 2,992,281 152,606,314 128,216,564 2029 152,606,314 1,766,162 1,446,166 3,058,526 155,984,836 131,595,086 2030 155,984,836 1,766,162 1,459,880 3,125,822 159,416,940 135,027,190 2031 159,416,940 1,766,162 1,509,440 3,193,473 162,867,135 138,477,385 2032 162,867,135 1,766,162 1,468,141 3,263,303 166,428,459 142,038,709 2033 166,428,459 1,766,162 1,462,688 3,334,639 170,066,572 145,676,822 2034 170,066,572 1,766,162 1,476,402 3,407,127 173,763,459 149,373,709 2035 173,763,459 1,766,162 1,470,949 3,481,173 177,539,845 153,150,095 2036 177,539,845 1,766,162 1,539,676 3,555,327 181,321,658 156,9 31,908 2037 181,321,658 1,766,162 1,479,210 3,632,172 185,240,782 160,851,032 2038 185,240,782 1,766,162 1,492,924 3,710,280 189,224,300 164,834,550 2039 189,224,300 1,766,162 1,487,470 3,790,060 193,293,052 168,903,302 2040 193,293,052 1,766,162 1,501,18 5 3,871,161 197,429,190 173,039,440 2041 197,429,190 1,766,1 62 166,885 24,389,750 3,492,774 178,131,491 178,131,491 2042 178,131,491 1,766,162 137,886 10,658,035 3,382,035 172,483,767 172,483,767 2043 172,483,767 128,303 37,211,016 2,702,889 137,847,337 137,847,337 2044 137,847,337 128,303 64,737,694 1,459,627 74,440,967 74,440,967 2045 74,440,967 128,303 45,237,438 581,505 29,656,731 29,656,731 2046 29,656,731 128,303 29,158,279 7,403 377,552 377,552 2047 377,552 128,303 29,158,279

-28,909,030

-28,909,030 2048

-28,909,030 1 28,303 24,289,794

-53,327,127

-53,327,127 2049

-53,327,127 128,303 47,003,016

-100,458,446

-100,458,446

Document Control Desk Attachment II RC-09-0032 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 Bank of America loan in the amount of

$24,389,750 (88.69% of actual loan balance) in 2041, 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 $263,161,360 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 through the presumed dismantlement period, as allowed for licensees that use the NRC formula to derive decommissioning cost estimates.

Amounts estimated to be required pursuant to 10 CFR 50.75 (b) and (c) in 2008 dollars are expended over the dismantlement period based upon the cost estimates in our 2006 site-specific study (DECON estimate).

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. 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.

As noted earlier, SCE&G will continue to assess the adequacy of annual collections and request rate relief as appropriate, based upon results of models incorporating site specific study cost estimates and a SAFSTOR method of decommissioning.

Lastly, similar to that filed and accepted in connection with our 2007 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-09-0032 Page 1 of 5 ATTACHMENT III NEIL CERTIFICATE OF INSURANCE POLICY NO. X08-052 Decontamination Liability, Decommissioning Liability, and Excess Property Insurance POLICY NO. P08-082 Primary Property and Decontamination Liability Insurance

NEIL Nuclear Electric Insurance Limited Suite 1100 1201 N. Market Street Wilmington, D)E 19801 U.S.A.

Tel 302 888-3000 Fax 302 888-3007 Coqrorate 30)2 573-2213 Finance 302 888-3008 Insurance 302 888-3095 Loss Control CERTIFICATE OF INSURANCE ISSUED TO:

ADDRESS:

United States NRC 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 N. Market Street, Suite 1100, Wilmington, Delaware 19801, under Policy No. X08-052 as follows:

MEMBER INSURED:

ADDRESS:

PROPERTY INSURED:

COVERAGE:

AMOUNT OF INSURANCE:

INSUREDS:

SOUTH CAROLINA ELECTRIC AND GAS COMPANY P.O. Box 764 Columbia, SC 29218 Summer Nuclear Station Decontamination Liability, Decommissioning Liability, and Excess Property Insurance

$1,500,000,000 South Carolina Electric and Gas Company, South Carolina Public Service Authority, and Wachovia Bank as their interests may appear.

12:01 a.m. on April 1, 2008 to 12:01 a.m. on April 1, 2009, Standard time in Hamilton, Bermuda.

POLICY TERM:

X08-052.cloc

LOSS PAYEE CLAUSE:

A.

Expenses covered under the Nuclear Liability Coverage (subsection I.A. I(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.

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.

X08-052.doc

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, 2008 CERTIFICATE EXPIRES: April 1, 2009, unless canceled sooner.

Signed by:

NUCLEAR ELECTRIC INSURANCE LIMITED Charles Boley Lead Underwriter X08-052.doc

NEIL Nuclear Electric Insurance Limited Suite 1100 1201 N. Market Street Wilmington, DE 19801 U.S.A.

Tel 302 888-3000 Fax 302 888-3007 Corporate 302 573-2213 Finance 302 888-3008 Insurance 302 888-3095 Loss Control CERTIFICATE OF INSURANCE ISSUED TO:

ADDRESS:

United States NRC 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 N Market Street, Suite 1100, Wilmington, Delaware 19801, under Policy No. P08-082 as follows:

MEMBER INSURED:

SOUTH CAROLINA ELECTRIC AND GAS COMPANY ADDRESS:

P.O. Box 764 Columbia, South Carolina 29218 PROPERTY INSURED:

COVERAGE:

AMOUNT OF INSURANCE:

INSUREDS:

Summer Nuclear Station Primary Property and Decontamination Liability Insurance

$500,000,000 South Carolina Electric and Gas Company, South Carolina Public Service Authority, and Wachovia Bank, as their interests may appear.

12:01 a.m. on April 1, 2008 to 12:01 a.m. on April 1, 2009, Standard time in Hamilton, Bermuda POLICY TERM:

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 P08-082.doc

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, 2008 CERTIFICATE EXPIRES: April 1, 2009, unless canceled sooner.

Signed by:

NUCLEAR ELECTRIC INSURANCE LIMITED Charles Boley Lead Underwriter P08-082.doc