ML20141B825

Responds to Re Potential Misuse of Licensees Critical self-assessment Findings in Private Litigation, Utility Prudence Litigation & Ratemaking Proceedings.Nrc Does Not See Need to Issue New Policy Statement

ML20141B825
Person / Time
Issue date:	05/07/1997
From:	Shirley Ann Jackson, The Chairman NRC COMMISSION (OCM)
To:	Reynolds N WINSTON & STRAWN
Shared Package
ML20141B830	List: ML20141B825
References
NUDOCS 9705160038
Download: ML20141B825 (5)

Text

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UNITED STATES p' , NUCLEAR REGULATORY COMMISSION

, g WASHINGTON, D.C. 20086-0001 May 7,1997 1

\.....

CHAmn4AN 1 Mr. Nicholas S. Reynolds Mr. Daniel F. Stenger Ms. Anne W. Cottingham

! Winston & Strawn

! 1400 L Street, N.W. I i Washington, D.C. 20005-3502

' l

Dear Sirs and Madam:

I am responding to your letter of April 2,1997, concerning the potential misuse of licensees' critical self-assessment findings in private litigation,  ;

L utility prudence litigation, and ratemaking proceedings. You recomended, on- l

( behalf of the Nuclear Utility Backfitting and Reform Group, that the U.S. H g

Nuclear Regulatory Comission (NRC) issue a policy statement to discourage the  !

use of self-assessment findings against licensees in prudence cases, private  !

litigation, or utility rate proceedings. ~

l In the Final Policy Statement on the Possible Safety Impacts of Economic Performance Incentives, effective July 24, 1991 (enclosed), the Commission  ;

noted its concern about undue reliance on SALP ratings in economic performance ,

incentive programs. As you expressly recognized in your letter, the policy .

statement also addressed concerns about any State public utility commission's I undue reliance on a utility's corrective actions following an incident to justify the disallowance of costs related to the incident, .and also with

, ratemaking actions that might be interpreted as penalizing a utility for improving its own procedures or methods of operation. The issues raised in your letter concerning the use of licensee self-assessments, root cause evaluations and systematic assessment of licensee performance scores against licensees in prudence cases, private litigation, or utility rate proceedings are additional examples of the potential types of public use issues discussed in the Commission policy statement. Because the Commission views the specific issues as .similar in nature to the public use issues already discussed in the policy statement, the Commission does not see a need to issue a new policy statement on the specific topics mentioned in your letter.

The NRC will continue to monitor State regulatory commission program changes

, and trends from public use issues periodically to determine if further action or policy changes are needed. Thank you for your interest and views on this 1

matter.

l Sincerely, i

i i

160004 L>Q Shirley Ann Jackson I

pv

Enclosure:

As stated L

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• '"~ ll 9705160038 970507 '*

PDR COMMS NRCC -

' CORRESPONDENCE PDR .,

1 POLICY STATEMEN i~S

2. Upon receiving such a referral. the emphasizing that these actions can have Chief of the Public Document Branch either a positive or negative effect on shallinform the requester of the NRC public health and safety;(2) reflects the

[

policy on the subject and shall notify the Commission's concern that certain Office of the GeneralCounsel of the gorms of economic performance request. If a statute or reguhition clearl;. keh M MNam may a6tMy requires release of the in!crmat:on affect the operation of nuclear plants requested the Chief of the Pubhc and the pubhc health and safety;(3)

Docurnent Room may release the information prior to notification of the specifics!!y identifies those methods Office of the General Counsel. that are of particular concem (e.g. the use of sharp thresholds, the

3. If the request is accompamed by a law enforcement agencv's wntien measurement of performance over very short time intervals, the lack of "nuil statement providina a c' lear besis for a determination that the information is zones " and inappropriate reliknce on requested by the law enfercement systematic assessment of licensee agency for purposes of a cruninal performance (SALP) scores or other investisation reasendly related to the performance indicators; (4) indicates

! individual about whom the information that the NRC will continue to monitor Is requested or to a document in the PDR the application of EPIs and perforrrance l

l collection. the Chief of the Public criteria to nuclear power plant Document Branch shall refer the request operations; and (5) urges licensees and

State regulatory commissions to inform to the General Counsel, who shall l consult with appropriate staff offices the NRC of EPl programs that are being before determining whether to grant the considered for apphcation to NRC request. licensees.

4. An NRC employee who is served EFFECTIVE DATE:This policy statement with a court order requiring disclosu e becomes effective July 24.1991.

i of the name or other identification nf Fon FunTHam INFowM Avion CONTACT:

[ any pDR user or data or documents Anthony T.Gody Sr Chief. Policy

sought or obtained by any PDR user l shall seek guidance from the Chief of the Development and Technical Support Public Document Branch and the Branch. Office of Nuclear Reactor General Counsel regarding the Regulation. U.S. Nuclear Regulatory appropriate response to the order.s Commission Washington.DC,20555.

Dated at Rockville. Maryland, this 7th day Telephone:(301) 492-1254.

of October.1966. St!F*LEMENTARY INFORM AflON:In For the Nuclest Regulatory Comm! seton.* exercising their lurisdiction over the Samuell. Chuk. economics of the generation of Secretary of the Comm/ssion. electricity, a number of State regulatory commissions and the Federal Energy Regulatory Commission (FERC) have established economic performance incentive (EPI) programs for electric power plants. Although some programs have existed unchenged for a number of years, others have been substantially i

modified or are newly estabhshed. They I can significantly help to improve the economic performance of electric power 56 FR 33945 plants.They can also affect the safety of Published 7/24/91 nuclear power plants. The NRC Effective 7/24/91 monitora and evaluates these incentive programs to determine the effect that they may have on the safe operation of nuclear power reactors.

Possible Safety impacts of Economic After reviewing the information on I Performance incentives: Final Policy EPl programs established by State Statement regulatory commissions that regulate the AoENcy: Nuclear Regulatory economic returns of utilities operating l

Cormnission. nuclear power plants, the Commission

! Action: Final policy statement. decided that it should set forth its views

> in,a, Commission Policy Statement on j sWMMAny:This statement presents the ' the manner in which such programs

! final policy of the Nuclear Regulatory could affect safety, Commission (NRO) with respect to the possible safety impacts of economic Surnmary of Comments

• hw procedures rotating to the prodm; tion of performance incentive (EPI) programs On Octgber 28,1990, the NRC established by State commissions publis,hed the draft policy statement.

refe'e

,yg ,YnIIo7h?c! C1 t i see M regulating electric utilities. The policy Possible Safety Impacts of Economic 3m

• Commisooner Roberts was not present he the statement (1) Contains a discussion of Performance incentives." in the Federal

' e ffmnanon of this otder, wha.h he would hee the possible effect of the policies and Register (55 FR 43231). The NRC epproved had t,e twen present. actions of State regulatory bodies, received 37 comments: 14 from State PS AD-5 September 29,1995 l

l POUCY ST .EME.JS l

i public utility commissions,12 from meeting these targets if a utility can adversely affect the pubhc health and l utility licensees or law firms show that its nuclear operations were safety.

i representing utility licensees, and 11 prudent. The State public utihty from public interest groups trade cornmissions generally indicated that

• ** """*d' associatior.s. non affiliated individuals. States cannot legally ba precluded nor Many of the comments related to the l or governmental bodies other than should be precluded from adopting role of the NRC in EP! programs. The public utility commissions. performance standards that encourage NRC certainly agrees that economic ,

Most of the commenters believed that utilities to both economically and safely regulatory agencies should be the groups  !

the NRC should provide advice but not operate nuclear power plants. to develop and approve EPIs. However. 'l endorse any specific EPl program. They the NRC reviews matters that raise indicated that the NRC should monitor y ,'ayu its bl c r tere Research safety concerns at licensed facilities.

the effectiveness of EPI programs but The NRC deals with safety issues Group (MASSPIRG) provided a regardless of the source of the concern.

should not interfere in the proceedings of State public utility commissions. substantial amount of comments. It was The commenters provided a number a major partici Pant in the settlement of suggestions for changing the Policy Almost all of the commenters also indicated that the NRC, the utilities, and agreement that resulted in the Statement particularly to more clearly the State utility commissions should Massachusetts performance incentive specify certain issues.The NRC believes plan for the Boston Edison Company this should not be done. A wide variety continue to communicate with one another. Many of the utilities or their relating to the Ihlgrim Nuclear Plant. of acceptable EPlprograms could be representatives that commented stated MASSPIRC generally supported the devised. Because rate regulatory that the NRC should discourage the use oyectives of the draft Policy Statement agencies and licensees are more familiar of EP!s in the absence of evidence that and desired to work with NRC.in with economic regulatory options than is they promote safety. Further, a number identifying superior alternative the NRC, they are more capable of of utility commenters indicated that the indicators for use in EPf plar.s. devising plans to meet these regulatory SALP scores and other performance MASSPIRG indicated that the objectives. It is the position of the NRC indientors should not be used for Massachusetts plan was of necessity in that the Policy Statement provides assessing penalties. In addition certain confidence because it was a part of a sufficient guidance on safety issues for commenters stated that regulators larger settlement with the Boston Edison the parties to use in developing or should not use the results of root cause Company. MASSPIRC stated that it mproving EPl programs.

and self-assessment analysis to understood the concerns that the NRC Somelicensees commented that the determine if costs should be disallowed, had previously expressed relating to the NRC should allow licensees to use of SALP scores and performance voluntarily report to it on EPl programs. I in separate correspondence. one utility '

informed the Commission or its concerns indicators. However, in developing the These licensees also indicated that the plan for the Boston Edison Company, NRC should not require licensees to that State regulators had used the MASSPIRG used expert consultants and evaluate or analyte information.

utility's voluntary corrective actions tn searched for indicators that could flowever, the NRC believes that some justify a disallowance. Certain correlate with long.run economic i

commenters alm > believed that the NRC EPl programs clearly could be of major performance. correspond with recurrent safety concern, and that the NRC must should evaluate the manner in which Pdgrim problems, encourage the timely specific epi programs either benefit or obtain sufficient information to properly maintenance of equipment, and provide conduct its regulatory responsibility.

hinder safety but should not ehdorse specific types of programs. Finally, some cornmenters suggested that the Policy

'* I[1 n lea e n mic nd afe y * ""*'"'8"'""*""Y performance. MASSPIRG also looked "**"*"""#8"'"

Statement should be more specific by for indicators that were easy to evaluate ""*U stating, for example, the difference to develop EPl programs because other and use in an incentive system and ng atoy manen an also imoM l between a long-term performance would cover a broad range of plant measure and a short term performance While the NRC concedes that such activities and systems.

negotiations may be necessary. it is measure. The Pacific Gas and Electric Company p og a y a p Most of the State public utility (PG&E) provided many comments on the ", t d {,9 t '

unt I commissions that commented indicated manner in which the comprehensive after f nal adoption.The NRC is issuing that rationalincentive programs do not performance based ratemaking the Policy Statement to improve adversely affect the operation of nuclear settlement approved in 1988 by the communications with agencies having power plants and thus do not adversely Califorma Public Utilities Commission ec n mic ngulatory responsibilities of affect public health and safety. Many of (CPUC) for the Diablo Canyon Nuclear Power Plant provides long-term rP the States that commented indicated g], car ul con idering all the that they do not use any of the criteria igcentives to improve the reliability of comments on the draft Policy Statement.

of concern to the NRC. such as sharp t e Diablo Canyon plant.The settlement, which will be in effect for 28 the NRC has decided to issue the final threshcids, short term performance p g g ;g g measures, or SALP scores. The State years. provides a number of incentives the draft Pohey Statement' utility commissien for New York stated to PGaE to improve the reliability and that it does not penalize or reward safety of plant operations. PG&E Statement of Policy utilities for operating at or close to the assumes risks associated with industry's average capacity factors. equipment failures, prolonged outages, and new regulatory requirements for the hm.'%e ,

The NRC recognizes that the existing However, it imposes penalties and programs very considerably from State entire 28 year period of the settlement.

rewards on a sliding scale for deviations to State and that the plans are not easily This program provides PC&E with an from the target factors. The State utihty classified. especially as to the effect that economic incentive to ensure that the commission for North Carolina stated plant opuatn well over many years. they may have on the safe operation of that it establishes targets based on long. The Diablo Canyon settlement does not plants. However, certam general 1 term averages of nuclear capacity W ns erm puformance characteristics of programs can be I factors for testing the efficiency of nieasurements with sharp thresholds evaluated and found te have an effect nuclear plant 8.eneration. It does not and does not use SALP scores-features on safety that is either desirable (or at automatically impose penalties for not that the NRC has identified that may least neutral) or undesirable.

September 29,1995 PS-AD-6

POLICY STATEMENTS l

A desirable plan provides incentives which a licensee narrowly misses a expects licensees to focur on the facts in to make reasonable improvements in target capacity factor and must bear a the SAI.P report. the issues identified, operation and maintenance that re; ult in large part or all of the resulting and the apparent root causes of long term improvement in the reliability replacement power costs. By creating a problems. By determining financial of the reactor, the main generator, and sharp threshold in its incentive program, rewards or punishments for the licensee their support sytems. An undesirable a State could prompt a licensee to based on SALP. the State may cause the plan provides incentives to operate a continue to operate a plant to achieve a licensee to focus on improving the l facility that could have safety problems target capacity factor in order to avoid numerical scores instead of addressing '

or to start up before it is fully ready, the large replacement power cost or to the underlying issues. where the focus merely to meet an operational goal. earn a substantial reward.This type of should be. if the issues identified in l A desirable EPI program rewards a incentive could divert attention from SALP reports are obscured by concerns I utility for having sound operations and safe plant operation. To minimize these over the financial consequences l rnaintenance programs and for effects. States should consider incurred as . result of those ratings. the correcting recurrent or predictable incorporating a reasonably broad null process may not achieve the desired failures or other problems that could zone of acceptable performance in objective and may instead prompt a lead to an operational transient, an which no rewards or penalties are licensee to take corrective actions that unplanned plant outage.,or a derating. imposed. produce rapid results rather than taking Such an incentive is destrable because a Performance measurements for short- those that yield the highest increase in well run plant and the prompt correction term mtervals would' encourage the safety in the long term. Undue emphasis of problems enhance safety. licensee to focus on a short term target on performance indicators in an i Unanticipated transients anel shutdowns or performance goals such as a higher l incentive pr gram could prompt a -

challenge operators and safety systems capacity factor or availability factor.

and, although with a low probability. This target could become the primary pcenseet mprove the scores by taking focus, diverting attention from long term inappropriate actions rather than by could initiate a more scrious event.

goals of reliability and operational identifying and correcting underi>ing Economic performance incantives can encourage a utility's operational safety. In contrast, performance safety conditions.'

organization to improve its performance, measurements for long term intervals The Commission is also concerned which car, help to improve both safety would prompt the utility to follow sound about State public utility commission and economic performance. However, maintenar.ce and operational practices ratemaking actions that might be current safety and economic to improve operating performance. For interpreted as penalizing a utility for requirements also provide utilities with example, an incentive program could improving its own procedures or incentives to operate safe plants. include a three or four year period with methods of operation. For example.

The current influence of incentive a rolling average capacity factor where a State public utility commission plans on reactor safety is believed to be evaluation period and could account for observes that a utility has modified its small. However, the Commission's other factors such as refueling outages. procedures following an incident. infers concern with incentive plans is that, in inclement weather and other periodic from the utility's actions that the original the interest of real or perceived short. events. Short term measurements tend procedures must have been inadequate, term economic benefit, the utility might to make safety and economic goals and then disallows certain costs on the hurry work, take short cuts, cr delay a conflict with each other, while long-term.

basis of such assumed inadequacies. the measurements tend to make the tw shutdown for maintenance in order to goals complementary.

d 4 h e a strong disincentive meet a deadline, a cost limitation. or other incentive plan factor. Other Specio/ Features or RotemokinB operations and procedures in the future.

Therefore, an incentive program could Actions That Cm.se NRC Concern. Such State pubik utility commission directly or indirectly encourage the The Commission is also concerned action can discourage utilities from utility to maximize measured about undue reliance on NRC's SALP making needed improvements in performance in the short term at the ratings in EPl programs and about any procedures and operations and, thus, expense of plant safety (publa ..ealth State public utility commission's undue can be detrimental to the long. term and safety). By keeping a reactor on line reliance on a utility's corrective actions safety of operation.

when it shound be taken down for following an incident to justify the preventive or corrective maintenance disallowance of costs related to tae Continued NRC Monitoring Program and by using shortcuts or compressed incident. The NRC will periodically survey work schedules to minimize down time. Sharp thresholds and short term the licensee could decrease the margm FERC and State regulatory commissions performance measures coupled with that regulate the utility rates of power -

of safety. substantial reliance on NRC's SALP reactors to identify any new prarams Adverse Effects on Plant Operation and ratings can adversely affect safety and or substantial changes in existing Public Heo/th ondSofety present sever al maior concerns. First.

the NRC's SALP ratings assist the NRC programs and to ascertain how the Some specific features of incentive and licensees in identifying trends and plans now used by some States could areas of performance that should -

adversely affect public health and receive a more detailed assessment. in i rar further 6nformation on esisima economic safety. These features are (1) Sharp assessing the safety of the performance incentiv' Programs and the possible effect of such Ps'"* *" "acl' '* f** *" WREMM I thresholds between rewards and at individual facilities, and in l penalties (or between penalties and null communicating to the licensee. 's I e$"e*pt N*\ c$p e*s' f IR H zones. or rewards and null zones) and Therefore, these ratings address may be purch...d from the supenniendent of (2) performance measurements that selected areas of licensee activity, but oocameni.. O s Govmmeni Pnntms Office P O have short time intervals. The NRC do not necessarily cover all significant Box von 2. washington. Dc 2comos2 copies are believes that these features should not performance areas. Furthet, the scores also available from the National Technical be allowed to prompt licensees to and ratings are not based on absolute P Ro Road 3",'Qd $ibe s2 3 p , able for operate a plant when ,ti should be shu,t quantitative considerations, and pai,gn,,,,,,,, ,, ,,,g,, ,, the NR C Pubhc down for safety reasons. therefore produce numerical scores that Documeni Room. 2120 L sireet. Nw. washinston.

A sharp threshold is a situation in are of hmited significance. The NRC oc.

PS AD 7 September 29,1995

POLICY STAT""ENTS programs have been implemented, and to determine if large penalties have been imposed.

We will update the survey annually.

We will periodically assess the frequency of the surveys to determine

, the need to adjust the schedule.

Licensees and Utility Commissions Urged To inform NRC ofProgram initiatives The NRC needs to be informed of EPl programs that are being planned by State regulatory commissions and that can affect safety. Information on these progran.a enables the Commission to judge not only whether they could adversely affect safety but also whether they could enhance safety. A number of commenters supported certain features -

of an EP! program. The Commission has reviewed these features and believes State Public Utility Commissions (PUCs) may want to consider these features in establishing programs that prompt licensees to both economically and safely operate nuclear power plants.

These features include (1) capacity factor targets based upon industry's average performance to account for problems throughout the industry,(2) equal opportunities for rewards and penalties. (3) the " banking" of superior performance to offset lower performance, and (4) using performance measures of the entire system instead of those for a specific unit. Frequently, the States develop ihese programs in '

coordination with regulated utilities.

Therefore, the NRC will request by generic letter that licensees report ,

whenever these commissions develop or  ;

substantially revise EPIs.The NRC also (

will ask FERC and the State utility i regulatory commissions to discuss with I the NRC initiatives to impose or change l an EPI program that applies to an NRC licensee.The NRC will take these actions in <,rder to gain information on the principal features of the program so that the NRC can assess the extent to j which the program will affect plant safety. Further, by a generic letter, the NRC will request licensees to report the rewards and penalties assessed through l these programs as they occur. A free exchange of information betweer. the ~

NRC and the agencies with economic jurisdiction over nuclear utilities will i help the NRC and those agencies to work together to achieve the goals of the safe and economic operation of nuclear .

power plants.

i Dated at Rockville. Maryland, this 18th day of July 1991.

For the Nuclear Regulatory Commission.

i Samuel 1. Chilk.

Secretary ofthe Commission.

June 28,1996 (reset) PS-AD-8 inent page is PS-AD-13)

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