View source for LR-N08-0182, Response to Request for Additional Information - Request for Exemption from 10 CFR 50.82(a)(8)

{{Adams
| number = ML082550401
| issue date = 09/03/2008
| title = Response to Request for Additional Information - Request for Exemption from 10 CFR 50.82(a)(8)
| author name = Braun R
| author affiliation = PSEG Nuclear, LLC
| addressee name = 
| addressee affiliation = NRC/Document Control Desk, NRC/NRR
| docket = 05000311
| license number = DPR-075
| contact person = 
| case reference number = LR-N08-0182
| document type = Letter type:LR
| page count = 8
| project = 
| stage = Response to RAI
}}

=Text=
{{#Wiki_filter:6l,                                    PSEG Nuclear LLC P.O. Box 236,, Hancocks Bridge, NJ 08038-0236 0 PSEG NuclearL.L. C.
10 CFR 50.12 SEP 0 3 2008                                                                    10 CFR 50.82 LR-N08-0182 U.S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, DC 20555-0001 Salem Nuclear Generating Station Unit 2 Facility Operating License No. DPR-75 NRC Docket No. 50-311

==Subject:==
Response to Request for Additional Information - Request for Exemption from 10 CFR 50.82(a)(8)

==References:==
(1) Letter from PSEG to NRC: "Request for Exemption from 10 CFR 50.82(a)(8), Salem Nuclear Generating Station, Unit 2, Facility Operating License DPR-75, Docket No. 50-311", dated April 7, 2008 In Reference 1, PSEG Nuclear LLC (PSEG) submitted an exemption request to permit the withdrawal of certain funds from the nuclear decommissioning trust funds (DTF) maintained by PSEG Nuclear for the Salem Nuclear Generating Station Unit 2. Specifically, PSEG Nuclear requested an exemption from provisions of 10 CFR 50.82(a)(8)(i) and (ii) .which may restrict the withdrawal of funds from DTF until after permanent plant shutdown. The purpose of the exemption request is to permit the use of DTF to pay for the disposal of certain major radioactive components (MRCs). These MRCs are the four steam generators that were removed from Salem Unit 2 during the Spring 2008 outage.
The NRC provided PSEG a Request for Additional Information (RAI) on the exemption request.
The response to the RAI is provided as an attachment to this submittal.
Should you have any questions regarding this submittal, please contact Mr. Jeff Keenan at (856) 339-5429.
Sincerely, Robert C. Braun Site Vice President Salem Generating Station 4oo/

Document Control Desk                                        SEP 0 3820 Page 2 LR-N08-0182

==Attachment:==
(1)
C      Mr. Samuel Collins, Administrator - Region I U. S. Nuclear Regulatory Commission 475 Allendale Road King of Prussia, PA 19406 U. S. Nuclear Regulatory Commission Attn: Mr. R. Ennis, Licensing Project Manager - Salem Mail Stop 08B1 Washington, DC 20555-0001 USNRC Senior Resident Inspector - Salem (X24)
Mr. P. Mulligan, Manager IV Bureau of Nuclear Engineering P.O. Box 415 Trenton, NJ 08625 LR-N08-0182 REQUEST FOR ADDITIONAL INFORMATION REGARDING PROPOSED EXEMPTION DECOMMISSIONG TRUST FUND SALEM NUCLEAR GENERATING STATION, UNIT NO. 2 DOCKET NO. 50-311 By application dated April 7, 2008, PSEG Nuclear LLC (PSEG or the licensee) submitted a proposed exemption from the provisions of Section 50.82(a)(8) of Title 10 of the Code of FederalRegulations (10 CFR) for Salem Nuclear Generating Station (Salem), Unit No. 2. The proposed exemption would permit the immediate withdrawal of certain funds from the decommissioning trust funds (DTF), maintained by the licensee for Salem Unit No. 2, to pay for the disposal of certain major radioactive components. Specifically, the licensee plans to dispose of the four steam generators that were removed from Salem Unit No. 2 during the spring 2008 refueling outage.
The Nuclear Regulatory Commission (NRC) staff has reviewed the information the licensee provided that supports the proposed exemption and would like to discuss the following issues to clarify the submittal.
: 1)       Enclosure 2, entitled, "Decommissioning Cost Analysis for the Salem Nuclear Generating Station, Units 1 and 2" (Document P07-1425-003, Revision 0) was prepared for PSEG by TLG Services, Inc. dated December 2002.                            What is the adjustment/escalation factor that would be used to adjust the cost estimate to 2008 dollars? What is the adjusted cost in 2008 dollars to decommission Salem Unit No. 2?

===Response===
The adjusted cost in 2008 dollars is $724.4 million. The adjustment/escalation factor used is 1.21 (i.e., 21%), which is actual average labor escalation (based on multiple applicable craft costs from the applicable geographical area) from December 2002 to 2008. The bulk of the project cost is labor, therefore use of this escalation factor is appropriate.
: 2)       Enclosure 2, page xii, estimated the license termination cost for Salem Unit No. 2 as
         $544.9 million in 2002 dollars and indicated that that cost included spent fuel management costs. Site restoration costs were estimated at $53.7 million for a total cost of $598.7 million in 2002 dollars. Identify the radiological part of the $544.9 million.
1 LR-N08-0182

===Response===
The radiological part of the $544.9 million is $420.1 million ($544.9 - $124.8 million, the spent fuel management cost, as provided in Appendix C of the 2002 TLG Report). The radiological part escalated to 2008 dollars is $508.3 million (using the 1.21 adjustment/escalation factor discussed in question 1).
: 3)       Enclosure 1, Section IV.A.1, "Status of the Decommissioning Trust Fund" indicated that the DTF balance as of December 31, 2006, totaled $224.8 million for PSEG's 54.7 percent ownership, and, based on the NRC formula in 10 CFR 50.75, is approximately $204.4 million for PSEG's share. In 2008 dollars, provide PSEG's amount it is responsible for of the site-specific cost estimate and exclude the spent fuel costs.

===Response===
The PSEG share (57.41%; see discussion in question 4 below) of the site-specific cost estimate (excluding spent fuel costs) in 2008 dollars is $329.1 million, as shown in the table below. This is based on the 2002 TLG cost estimate using an adjustment/escalation factor of 1.21 (i.e., 21%), as discussed in the response to question 1.
Total in 2002 2002 PS Share   Total in 2008   2008 PS Share Dollars      @57.41%           Dollars       @57.41%
Site Specific cost estimate w/contingency     598.6M        343.7M           724.3M          415.8M Less spent fuel management cost       124.8M         71.6M           151.OM          86.7M Total    473.8M        272.1M           573.3M          329.1 M
: 4)       Enclosure 1, Section IV.A.2, "Site-Specific Decommissioning Cost Estimate Is Comprehensive" indicated that PSEG's share is $71.6 million for spent fuel cost. How was that cost developed and what year dollars were used as the basis for the cost? For the NRC staff's analysis, the staff assumed a 3.0 percent inflation rate, based on historical data, resulting in an estimated total cost of $700.0 million in 2008 dollars based on the TLG's 2002 cost estimate. The staff analysis estimated that PSEG's obligation would be approximately $383.0 million, based on a 54.7 percent ownership, which included spent fuel and site restoration costs, and approximately $348.0 million for radiological and spent fuel costs, excluding site restoration cost. Based on PSEG's spent fuel cost, the staff analysis resulted in a radiological cost estimate of approximately $277.0 million in 2008 dollars ($348.0 - $71.6). PSEG's analysis indicted that their share is $206.9 million (page 4) including a spent fuel cost of $71.6 and greenfield cost based on a 54.7 percent ownership. PSEG's estimate compared to the NRC's estimate is $348.0 million compared to $124.8 million (page 4). The staff requests that PSEG reconcile the significant difference between PSEG's and NRC's cost estimates, as the NRC was not able to reconcile these differences.
2 A hLR-N08-0182

===Response===
The spent fuel cost was developed by multiplying the spent fuel management cost from the 2002 TLG Report ($124.8 million on page 22 of Appendix C) by 57.41% (PSEG Nuclear share), resulting in $71.6 million PSEG has identified two errors in the April exemption request submittal: (1) In Enclosure 1, Section IV.A.1, and in the Cover Letter, a transposition error was made in the PSEG Nuclear ownership percentage; the correct PSEG ownership percentage is 57.41%,
versus the 54.71% that was provided. Consequently, the PSEG Nuclear share of the large component disposal cost is $5.74 million. (2) In Enclosure 1, Section IV.A.2, the
       $378.2 million number was inadvertently identified as the total estimated cost; in actuality the $378.2 million 1 represents a 54.71% share. Consequently, there was no need to further multiply the $378.2 million by the PSEG Nuclear share percentage; therefore the $206.9 million number that was provided in Section IV.A.2 as the PSEG Nuclear share was in error and superfluous to the $378.2 million number.
To reconcile the difference between PSEG's and NRC's cost estimates, PSEG has developed the following table that provides a comparison (including identification of errors contained in the April exemption request) of: (1) the cost estimate developed by the NRC in the RAI, and (2) a revised, corrected cost estimate (in 2008 dollars) that corrects previous errors and reconciles the differences. (Note that the only remaining difference is the escalation factor used by the NRC (3% per year inflation) versus the escalation factor used by PSEG (21% increase over the time period), which accounts for the slight variation in the final calculated numbers.)
In addition, the $378.2 number was based on a different escalation factor; the correct number is
   $415.8 million, as discussed and shown in the table below.
3 LR-N08-0182 Decommissioning Study ($ x Million)
Description                                                      NRC                                   PSEG 2002*          2008          2008 Adj**       2002*          2008 Site Specific Cost Lic. Termination                 420.1                                         420.1          508.3 Spent Fuel Mgmt.                   124.8                                          124.8         151.0 Site Restoration                 53.7                                           53.7          65.0 Total (100%)                                         598.6           700.0          700.0           598.6         724.3 PSEG % Share                                                              54.70%         54.70%           57.41%       57.41%          57.41%
PSEG Share (w/Spent Fuel)                                                      327.4          382.9           401.9          343.7         415.8 Spent Fuel dollars                (71.6)          (71.6)          (86.7)         (71.6)        (86.7)
PS share (w/o Spent Fuel)                                                      255.8          311.3           315.2          272.1          329.1 Site Restoration ( PS Share)                                                  (29.4)          (35.2)          (37.3)         (30.8)        (37.3)
PS share (w/o Site Restoration & Spent Fuel)                                   226.5          276.1           277.9          241.2          291.8 Projected DTF Balance as of 12/08 (PSEG share)                                                        j       207.0j                        213.5
* Based on data from the 2002 TLG Report
** This column provides the correct PSEG Share and 2008 Spent Fuel cost
***The number provided in the April exemption request (Section IV.A.2) was $378.2; $415.8 is the correct number appropriately escalated and multiplied for PSEG share 4
LR-N08-0182
: 5)     Enclosure 1, Section IV.A.1, indicated that PSEG's share of the DTF is $224.8 million, as of December 31, 2006, which included $ 71.6 million in spent fuel costs (i.e., approximately $153.2 million when the spent fuel cost is subtracted). This amount includes the greenfield cost. What is the amount, in 2008 dollars, when greenfield cost is removed? The NRC staff initially applied a 2 percent real rate of return on the DTF balance of $153.2 million for the remaining plant life and the prorated credit into the immediate dismantlement period resulting in a DTF balance of $207 million. If the site restoration cost is subtracted, the DTF would not meet the NRC's formula amount and the DTF balance would be significantly less than the site-specific cost estimate. The staff requests that PSEG confirm these costs and indicate how the DTF will be supplemented. This staffs analysis did not subtract the steam generator cost from the balance as the DTF appears to be under-funded.

===Response===
As of December 31, 2007, PSEG's balance for the DTF was $213.5 million. This amount is lower than the balance as of December 31, 2006 due to expected year-to-year fluctuations in the market value of the DTF assets. Over time, however, the DTF assets are expected to have significant earnings, as well as a positive rate of earnings as compared with the increase in decommissioning costs. In fact, NRC's rules in 10 CFR 50.75(e)(1)(i) allow the assumption of a 2% real rate of return in earnings through the current operating license and into an assumed 7 year period of DECON. With earnings credited at 2% through April 2020 plus 3.5 years thereafter and current cost estimates held in constant dollars, the current DTF balances should be considered as worth $291.7 million for purposes of comparison with the NRC minimum decommissioning funding assurance. This compares very favorably with the NRC minimum of $223.5 million, calculated as of December 31, 2007.
The entire DTF balance is currently available to fund the License Termination costs for purposes of satisfying the financial assurance requirements in 10 CFR 50.75(c). As such, PSEG does not believe that the DTF is underfunded. Moreover, if $6 million is subtracted from the current DTF balance before calculating 2% earnings as described above, the remaining funds would be viewed under NRC regulations as worth approximately $283.5 million, which also is substantially higher than the minimum funding requirement.
PSEG notes that there is no basis for NRC to deduct spent fuel management costs or site restoration costs from the current DTF balances. PSEG has not created any segregated subaccounts for the funding of the costs for spent fuel management and site restoration. PSEG has made funding plans based upon its current site specific estimates. However, the actual costs and source of funds for spent fuel management are subject to change and variability depending upon the current and future performance of the Department of Energy (DOE) in meeting its obligations for spent fuel disposal and current or future litigation regarding DOE's failure to meet its contractual obligations to dispose of the spent fuel. Moreover, under 10 CFR 50.54(bb), the NRC's rules do not require that PSEG establish any plan for its management of spent fuel and the funding any such costs until April 2015. With license renewal, this regulatory requirement would not apply until April 2035.
5 LR-N08-0182 Nevertheless, PSEG expects that earnings of the DTF assets will accrue at a rate that is greater than the 2% percent real rate of return permitted under NRC's regulations. Thus, PSEG expects the DTF balances to be adequate to fund its entire share of the site specific cost estimate, which, as noted above, is currently estimated to be $415.8 million.
With license renewal, the DTF balances would experience earnings for an additional 20 years prior to decommissioning. If earnings were calculated at just 2%, the DTF balance with assumed earnings would total $433 million in today's dollars and compare favorably with PSEG's share of the current estimate.
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