RC-13-0051, Report of Status of Decommissioning Funding

Report of Status of Decommissioning Funding

ML13091A078
Person / Time
Site:	Summer
Issue date:	03/27/2013
From:	Gatlin T, Walker C South Carolina Electric & Gas Co, South Carolina Public Service Authority
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
RC-13-0051
Download: ML13091A078 (13)

Text

Thomas D. Gatlin Vice President,Nuclear Operations 803.345.4342 March 27, 2013 A SCANA COMPANY RC-13-0051 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 and 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 pursuant to 10 CFR 50.75 (b) and two-thirds ownership of VCSNS is $329,236,507 (2012 (c); dollars). Please see Attachment I for the calculation of this amount.

The amount accumulated at the Note: The Company does not maintain separate trusts for end of the calendaryear preceding funds designated to cover the costs of radiological 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 a 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 - F (803) 345-5209

Document Control Desk LTD 282, RR 1950 RC-1 3-0051 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, 2012 was

$121,366,940, net of tax. This balance includes cash and cash surrender values of life insurance policies and is net of a loan made to the trust by Bank of America in the amount of $27,500,000. However, advances of $27,390,000 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 $107,640,339, net of tax, at December 31, 2012. This balance includes cash and cash surrender values of life insurance policies and 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, advances of

$24,292,191 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 $13,726,601, net of tax, at December 31, 2012. This balance includes cash and cash surrender values of life insurance policies and 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, advances of $3,097,809 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-13-0051 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 annualamounts Please see Attachment I1. The after-tax annual collection remaining to be collected; 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.

The assumptions used regarding Please see Attachment I1.

escalationin decommissioning cost, rates of earningson decommissioningfunds, 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 occurringto a None licensee's current method of providing financialassurancesince the last submitted report; Any materialchanges to trust None agreements.

Document Control Desk LTD 282, RR 1950 RC-13-0051 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 2012. The cost estimates management and site taken from that study (in 2012 dollars) were $336,034,670 restoration for license termination, $255,530,670 for spent fuel management and $38,686,000 for site restoration. These estimates represent SCE&G's two-thirds ownership share of costs estimated for the DECON decommissioning alternative.

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 Walker Vice President Nuclear Financial Administration, SCE&G SBR/TDG/CLW/ts Attachments c: K. B. Marsh V. M. McCree S. A. Byrne E. A. Brown J. B. Archie NRC Resident Inspector N. S. Cams K. M. Sutton J. W. Williams RTS (LTD 282, RR 1950)

W. M. Cherry File (810.34-2)

J. H. Hamilton DMS (RC-13-0051)

Document Control Desk Attachment I RC-1 3-0051 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 2012 = ($100,520,000) ((.65 x 2.332) + (.13 x 2.632) + (.22 x 13.885))

= ($100,520,000) (1.516+ 0.342+ 3.055)

= $493,854,760 SCE&G's two-thirds ownership share of 2012 Estimated Cost = $329236,507 Where:

p = 2,900 MWt A = .65 (NUREG 1307 Rev. 15)

B = .13 (NUREG 1307 Rev. 15)

C = .22 (NUREG 1307 Rev. 15)

Lx = 2.332 (Computed Below)

Ex = 2.632 (Computed Below)

Px = 1.865 (Computed Below)

Fx = 3.690 (Computed Below)

Bx = 13.885 (NUREG 1307 Rev. 15) 9 8 Lx = (l. )Base 2005 X (1 17.8)ECI / (100)

= 2.332 Px = December 2012 Value / January 1986 Value

= 213.0 / 114.2

= 1.865 F, = December 2012 Value / January 1986 Value

= 302.6 / 82.0

= 3.690 Ex = ((.58Px) + (.42Fx))

= ((.58 x 1.865) + (.42 x 3.690))

= (1.082 + 1.55)

= 2.632 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 15.

Document Control Desk Attachment II RC-13-0051 Page 1 of 3 ATTACHMENT II EXPLANATION OF FINANCIAL ASSURANCE MECHANISM AND AMOUNTS REMAINING TO BE COLLECTED Financial Assurance Mechanism 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 2012, the PSC has not changed this amount. SCE&G reassesses the adequacy of annual collections on a periodic basis as 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 2013 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 $329,236,507 (calculated in Attachment I) is based on our 2012 site-specific study (DECON estimate). Relevant assumptions used in the Financial Assurance Model are discussed on page 3 of 3.

Document Control Desk Attachment II RC-13-0051 Page 2 of 3 Financial Assurance Model Schedule of External Trust, Annual Program Decommissioning Beginning Collection Costs, Payments/Loan Investment External Trust, Balance, Net Year Balance Amounts Net of Tax Repayments Earnings Ending Balnce of Bank Loan 2012 132,030,089 107,640,339 2013 132,030,089 1,766,162 376,060 2,668,404 136,088,595 111,698,845 2014 136,088,595 1,766,162 372,458 2,749,646 140,231,945 115,842,195 2015 140,231,945 1,766,162 400,150 2,831,959 144,429,916 120,040,166 2016 144,429,916 1,766,162 434,373 2,915,234 148,676,939 124,287,189 2017 148,676,939 1,766,162 538,224 2,998,098 152,902,975 128,513,225 2018 152,902,975 1,766,162 584,216 3,081,698 157,166,619 132,776,869 2019 157,166,619 1,766,162 637,585 3,165,904 161,461,100 137,071,350 2020 161,461,100 1,766,162 697,879 3,250,588 165,779,971 141,390,221 2021 165,779,971 1,766,162 741,263 3,336,097 170,140,967 145,751,217 2022 170,140,967 1,766,162 825,463 3,421,633 174,503,299 150,113,549 2023 174,503,299 1,766,162 878,150 3,507,826 178,899,137 154,509,387 2024 178,899,137 1,766,162 871,242 3,595,881 183,389,938 159,000,188 2025 183,389,938 1,766,162 905,046 3,685,021 187,936,075 163,546,325 2026 187,936,075 1,766,162 941,996 3,775,205 192,535,446 168,145,696 2027 192,535,446 1,766,162 1,004,279 3,865,947 197,163,276 172,773,526 2028 197,163,276 1,766,162 1,003,701 3,958,515 201,884,252 177,494,502 2029 201,884,252 1,766,162 1,003,964 4,052,929 206,699,379 182,309,629 2030 206,699,379 1,766,162 1,008,526 4,149,140 211,606,155 187,216,405 2031 211,606,155 1,766,162 1,032,528 4,246,796 216,586,585 192,196,835 2032 216,586,585 1,766,162 1,078,707 4,345,481 221,619,521 197,229,771 2033 221,619,521 1,766,162 1,068,432 4,446,345 226,763,596 202,373,846 2034 226,763,596 1,766,162 1,051,708 4,549,561 232,027,611 207,637,861 2035 232,027,611 1,766,162 1,079,434 4,654,287 237,368,626 212,978,876 2036 237,368,626 1,766,162 1,065,513 4,761,386 242,830,661 218,440,911 2037 242,830,661 1,766,162 1,106,799 4,869,800 248,359,824 223,970,074 2038 248,359,824 1,766,162 1,110,954 4,980,301 253,995,333 229,605,583 2039 253,995,333 1,766,162 1,092,734 5,093,375 259,762,136 235,372,386 2040 259,762,136 1,766,162 1,086,348 5,208,839 265,650,789 241,261,039 2041 265,650,789 1,766,162 168,151 24,389,750 4,857,181 247,716,231 247,716,231 2042 247,716,231 1,766,162 157,198 14,815,643 4,690,191 239,199,743 239,199,743 2043 239,199,743 157,198 51,755,979 3,745,731 191,032,297 191,032,297 2044 191,032,297 157,198 74,835,458 2,320,793 118,360,434 118,360,434 2045 118,360,434 157,198 56,101,901 1,242,027 63,343,362 63,343,362 2046 63,343,362 157,198 39,903,465 465,654 23,748,353 23,748,353 2047 23,748,353 157,198 24,890,280 0 -1,299,125 -1,299,125 2048 -1,299,125 157,198 2,864,358 0 -4,320,681 -4,320,681 2049 -4,320,681 157,198 88,361,615 0 -92,839,494 -92,839,494

Document Control Desk Attachment II RC-1 3-0051 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 $329,236,508 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% based on the provisions of 10 CFR 50.75(e)(1)(ii) which allows "up to a 2 percent annual real rate of return" for licensees that provide decommissioning cost estimates according to the NRC formulas under 10 CFR 50.75(c).

• This 2% earnings credit is taken through the presumed dismantlement period, as allowed for licensees that use the NRC formula under 10 CFR 50.75(c) to derive decommissioning cost estimates.

• Amounts estimated to be required pursuant to 10 CFR 50.75 (b) and (c) in 2012 dollars are expended over the dismantlement period based upon the cost estimates in our 2012 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 2011 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-13-0051 Page 1 of 5 ATTACHMENT III NEIL CERTIFICATE OF INSURANCE POLICY NO. X12-052 Decontamination Liability, Decommissioning Liability, and Excess Property Insurance POLICY NO. P12-082 Primary Property and Decontamination Liability Insurance

Nuclear Electric Insurance Limited Suite 1100 1201 N. Markct Stccet Wilmington, DE 19801 U.S.A.

NEIL Tel 302 888-3000 Fax 302 8,8.-3007 C'orporate 302 57.3-2213 F'inane ...

302 888-3008 Insurnece 31)2 988-3095 Loss Control 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. Xl12-052 as follows:

MEMBER INSURED: SOUTH CAROLINA ELECTRIC AND GAS COMPANY ADDRESS: P.O. Box 764 Columbia, SC 29218 PROPERTY INSURED: Sumumner Nuclear Station COVERAGE: Decontamination Liability, Decommissioning Liability, and Excess Property Insurance AMOUNT OF INSURANCE: $2,250,000,000 INSUREDS: South Carolina Electric & Gas Company and South Carolina Public Service Authority.

POLICY TERM: 12:01 a.m. on April 1, 2012 to 12:01 a.m. on April 1,2013, Standard time in Hamilton, Bermuda.

LOSS PAYEE CLAUSE:

A. Expenses covered under the Nuclear Liability Coverage (subsection L.A.I (a)) shall be adjusted with the Member Insured and payable to:

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

XI 2-052.doc

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

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

South Carolina Electric & Gas Nuclear Decommissioning Trust and South Carolina Public Service Authority Nuclear Decommissioning-Intemal 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, 2012 CERTIFICATE EXPIRES: April 1,2013, unless canceled sooner.

Signed by:

NUCLEAR ELECTRIC INSURANCE LIMITED Charles Boley Lead Underwriter X 12-052.doc

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

NEIL Tel 302 888-3000 Fax 302 888-3007 Corporate 302.573-221.3 Fiiiancc.

302 888-3008 Insurance CERTIFICATE OF INSURANCE 302 888-3095 Loss Control 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. P12-082 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 and South Carolina Public Service Authority POLICY TERM: 12:01 a.m. on April 1, 2012 to 12:01 a.m. on April 1,2013, 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 Comnanv The Member Insured may, by written notice to the Insurer, designate other payees.

P 12-082.doc

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

Loss, if any under this policy, except losses to Nuclear Fuel, and exce/_pt as to materials and supplies and except as otherwise provided shall be adjusted with South Carolina Electric & Gas Company except-as-to any particular loss less than the greater of Ten Million Dollars ($10,00000) and three per centum (3%) of the sumof.x) therincipalj amount of Securities Outstanding on the date of such particular loss and (y) the principal

.amount of the Class A Bonds Outstanding on thedate of such particular loss, other than Class A Bonds delivered to and held by the Trustee hereunder, to be made payable to The Bank of New York Mellon Trust Compazny, N.A.. successor to NationsBank of Georgia.

National Associatio as trustee as the interest of the Trustee may appea.

Payments, if any, under this policy with respect to loss or*damage to the Nuclear Fuel covered tundcrthIe Nuclear Fuel Security Agreement dated October 25, 2010, between South Carolina Fuel Company. Inc. and Wells Fargo Bank, National Association, as Collateral Agent, shall be made to such Collateral Agent as its intere.st mayapper 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 1,2012 CERTIFICATE EXPIRES: April 1, 2013, unless canceled sooner.

Signed by:

NUCLEAR ELECTRIC INSURANCE LIMITED Charles Boley Lead Underwriter P12-082.doc