RC-11-0049, Report of Status of Decommissioning Funding

Report of Status of Decommissioning Funding

ML110940029
Person / Time
Site:	Summer
Issue date:	03/31/2011
From:	Gatlin T, Walker C South Carolina Electric & Gas Co
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
RC-11-0049
Download: ML110940029 (14)

Text

Thomas D. Gatlin Vice President,NuclearOperations 803.345.4342 SCE&GMarch A SCANA COMPANY 31, 2011 RC-1 1-0049 Document Control Desk U. S. Nuclear Regulatory Commission Washington, DC 20555

Subject:

VIRGIL C. SUMMER NUCLEAR STATION UNIT 1 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 The amount of decommissioning funds estimated to be funds estimated to be required required pursuant to 10 CFR 50.75 (b) and (c) for SCE&G's pursuantto 10 CFR 50.75 (b) two-thirds ownership of VCSNS is $298,041,975 (2010 and (c); dollars). Please see Attachment I for the calculation of this amount.

The amount accumulatedat the Note: The Company does not maintain separate trusts for end of the calendaryear funds designated to cover the cost of radiological preceding the date of the report; 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:

Virgil C.Summer Station . Post Office Box 88 . Jenkinsville, SC

• 29065 . T(803) 345-5209

Document Control Desk LTD 282, RR 1950 RC-1 1-0049 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, 2010 was

$102,878,511. This balance includes cash and cash surrender values of life insurance policies. The

$102,878,511 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 $91,242,951 at December 31, 2010. This balance includes cash and cash surrender values of life insurance policies. The $91,242,951 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

$11,636,560 at December 31, 2010. This balance includes cash and cash surrender values of life insurance policies.

The $11,635,560 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 LTD 282, RR 1950 RC-1 1-0049 Page 3 of 4 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.

A schedule of the annual Please see Attachment I1.The after-tax annual collection amounts remaining to be amount is currently $1,991,388, which collection amount was collected; 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.

The assumptions used regarding Please see Attachment I1.

escalationin decommissioning cost, rates of earningson decommissioning funds, and rates of other factors used in funding projections; Any contracts upon which the None licensee is relying pursuantto paragraph(e)(1)(v) of this section; Any modifications occurringto a None licensee's currentmethod of providing financialassurance since the last submitted report; Any material changes to trust None agreements.

Document Control Desk LTD 282, RR 1950 RC-1 1-0049 Page 4 of 4 Site specific cost estimates for The most recent site specific decommissioning cost study License termination, spent fuel for VCSNS was completed in 2006. The cost estimates Management and site taken from that study (in 2006 dollars) were $284,103,870 restoration 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.

Very truly yours, Thomas D. Gatlin Vice President Nuclear Operations, SCE&G Carlette L. Walker Vice-President Nuclear Financial Administration SCE&G SBR/TDG/CLWfjg Attachments c: K. B. Marsh V. M.McCree S. A. Byrne R. E. Martin J. B. Archie NRC Resident Inspector N. S. Carns K. M.Sutton R. J. White RTS (LTD 282, RR 1950)

W. M. Cherry File (810.34-2)

J. H. Hamilton DMS (RC-11-0049)

Document Control Desk Attachment I RC-1 1-0049 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 2010 = ($100,520,000) ((.65 x 2.233) + (.13 x 2.263) + (.22 x 12.280))

= ($100,520,000) (1.452+ 0.294+ 2.702)

= $447,062,962 SCE&G's two-thirds ownership share of 2010 Estimated Cost = $298,041,975 Where:

p = 2,900 MWt A = .65 (NUREG 1307 Rev. 14)

B = .13 (NUREG 1307 Rev. 14)

C = .22 (NUREG 1307 Rev. 14)

Lx = 2.233 (Computed Below)

Ex = 2.263 (Computed Below)

Px = 1.675 (Computed Below)

Fx = 3.074 (Computed Below)

Bx = 12.280 (NUREG 1307 Rev. 14)

Lx = (1.9 8)Ba.2005 X (112.8)ECI / (100)

= 2.233 Px = 12/06Value / January 1986 Value

= 191.3 /114.2

= 1.675 Fx = 12/06 Value / January 1986 Value

= 252.1/82.0

= 3.074 Ex = ((.58Px) + (.42Fx))

= ((.58 x 1.675) + (.42 x 3.074))

= (.972 + 1.291)

= 2.263 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 14.

Document Control Desk Attachment II RC-1 1-0049 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) in 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 SCPSC 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 SCPSC 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 2010 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 $298,041,975 (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-1 1-0049 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 Eanig Ending Balance of Bank Loan 2010 ______ 115,632,701 91,242,951 2011 115,632,701 1,766,162 1,143,112 2,325,115 118,580,866 94,191,116 2012 118,580,866 1,766,162 1,130,463 2,384,331 121,600,896 97,211,146 2013 121,600,896 1,766,162 1,153,645 2,444,268 124,657,681 100,267,931 2014 124,657,681 1,766,162 1,135,287 2,505,771 127,794,327 103,404,577 2015 127,794,327 1,766,162 1,128,115 2,568,647 131,001,021 106,611,271 2016 131,001,021 1,766,162 1,164,755 2,632,049 134,234,477 109,844,727 2017 134,234,477 1,766,162 1,132,938 2,697,354 137,565,055 113,175,305 2018 137,565,055 1,766,162 1,175,289 2,763,119 140,919,047 116,529,297 2019 140,919,047 1,766,162 1,137,762 2,830,949 144,378,396 119,988,646 2020 144,378,396 1,766,162 1,149,757 2,899,896 147,894,697 123,504,947 2021 147,894,697 1,766,162 1,167,229 2,969,873 151,463,503 127,073,753 2022 151,463,503 1,766,162 1,154,581 _________ 3,041,502 155,116,586 130,726,836 2023 155,116,586 1,766,162 1,177,763 3,114,100 158,819,085 134,429,335 2024 158,819,085 1,766,162 1,159,404 3,188,517 162,614,360 138,224,610 2025 162,614,360 1,766,162 1,152,232 3,264,566 166,492,856 142,103,106 2026 166,492,856 1,766,162 1,188,873 3,341,403 170,411,548 146,021,798 2027 170,411,546 1,766,162 1,157,055 _________ 3,420,413 174,441,068 150,051,318 2028 174,441,068 1,766,162 1,199,406 3,500,156 178,507,980 154,118,230 2029 _ 178,507,980 1,766,162 1,161,879 3,582,245 182,694,508 158,304,758 2030 182,694,508 1,766,162 1,173,874 3,665,736 186,952,532 162,562,782 2031 186,952,532 1,766,162 1,191,347 ________ 3,750,547 191,277,894 166,888,144 2032 191,277,894 1,766,162 1,178,698 _________ 3,837,307 195,702,665 171,312,915 2033 _ 195,702,665 1,766,162 1,201,880 ________ 3,925,339 200,192,286 175,802,536 2034 200,192,286 1,766,162 1,183,521 ________ 4,015,499 204,790,426 180,400,676 2035 204,790,426 1,766,162 1,176,349 ________ 4,107,605 209,487,844 185,098,094 2036 209,487,844 1,766,162 1,212,990 4,200,820 214,241,836 189,852,086 2037 214,241,836 1,766,162 1,181,173 4,296,537 219,123,362 194,733,612 2038 219,123,362 1,766,162 1,223,523 4,393,320 224,059,321 199,669,571 2039 224,059,321 1,766,162 1,185,996 4,492,790 229,132,277 204,742,527 2040 229,132,277 1,766,162 1,197,992 4,594,009 234,294,456 209,904,706 2041 234,294,456 1,766,162 138,152 24,389,750 4,230,654 215,763,370 215,763,370 2042 215,763,370 1,766,162 147,736 12,070,700 4,106,222 209,417,318 209,417,318 2043 209,417,318 ______ 138,152 42,143,135 3,342,721 170,478,752 170,478,752 2044 170,478,752 _______138,152 73,318,326 1,940,4451 98,962,719 98,962,719 2045 98,962,719 ______ 138,152 51,233,416 951,823 48,542,974 48,542,974 2046 48,542,974 138,152 33,023,051 307 ,635 15,689,406 15,689,406 2047 15,6946______ 138,152 33,023,05 0 -17,471,797 -17,471,797 2048 -17,471,797 _______138,152 27,509,274 0 -45,119,223 -45,119,22!3 2049 -45,119,223 _______138,152 50,013,213 0 -95,270,588 -95,270,588

Document Control Desk Attachment II RC-1 1-0049 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 $298,041,975 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-1 1-0049 Page 1 of 5 ATTACHMENT III NEIL CERTIFICATE OF INSURANCE POLICY NO. X10-052 Decontamination Liability, Decommissioning Liability, and Excess Property Insurance POLICY NO. P10-082 Primary Property and Decontamination Liability Insurance

Niduclear' Electric hlsurIMCe Limited 120 X. .lMajkc Sltu.'(

SA.

NEIL 30., 08ý1- "000 mm[ m

. 111I laS~

-)02 11;-3 nce ri CERTIFICATE OF INSURANCE ISSUED TO: United States NRC ADDRESS: Washington, DC 20555 Attn: Eric 1. Leeds 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. XIO-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: $1,500,000,000 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, 2010 to 12:01 a.m. on April 1, 2011, Standard time in Hamilton, Bermuda.

Xl 0-052.doc

LOSS PAYEE CLAUSE:

A. Expenses covered under the Nuclear Liability Coverage (subsection I.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. The expenses covered under the Debris Removal and Decontamination Coverage (subsection I. 1(b)), the losses covered under the Property Damage Coverage (subsection .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 II. 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.

X I0-052.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, 2010 CERTIFICATE EXPIRES: April 1, 2011, unless canceled sooner.

Signed by:

NUCLEAR ELECTRIC INSURANCE LIMITED Charles Boley Lead Underwriter X I 0-052.doc

Nuclear Electric 11SInsuaCC Liffited Suu'.ihdi~ol IT1)0 NEIL I SN.A lId

"(40 I

ýý iSIalIce CERTIFICATE OF INSURANCE ISSUED TO: United States NRC ADDRESS: Washington, DC 20555 Attn: Eric J. Leeds 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. P10-082 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 antear.

POLICY TERM: 12:01 a.m. on April 1,2010 to 12:01 a.m. on April 1,2011, 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 Compoanv P I0-082.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 thier 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 1,2010 CERTIFICATE EXPIRES: April 1, 2011, unless canceled sooner.

Signed by:

NUCLEAR ELECTRIC INSURANCE LIMITED Charles Boley Lead Underwriter P1 0-082.doc