ML23009B329

NRC Presentation for Public Meeting Regarding the Alternatives to the Use of Credit Ratings

ML23009B329
Person / Time
Issue date:	01/09/2023
From:	Gregory Trussell NRC/NMSS/DREFS/MRPB
To:
References
NRC-2017-0021
Download: ML23009B329 (27)

Text

Alternatives to the Use of Credit Ratings 10 CFR Part 30 January 25, 2023 1

Meeting Ground Rules Hold questions until after the presentation Participants will be muted until Q&A session Not accepting formal comments during this meeting We will be going through the various ways to submit comments 2

Purpose of Public Meeting Provide an overview of:

The proposed rulemaking to facilitate public input during comment period Background on the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) and its impact on NRC regulations Staff's proposed approach for compliance with Dodd-Frank 3

Agenda Opening Remarks

Background

Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)

NRC Decommissioning Funding Assurance Requirements and the Use of Credit Ratings NRC Regulations Impacted by Dodd-Frank The NRC's Rulemaking - Alternatives to the Use of Credit Ratings Discussion Questions and Submitting Comments Road Ahead and Closing Remarks 4

Opening Remarks Credit Rating 5

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Background===

What is the Dodd-Frank Act?

Which NRC regulations are impacted?

What are NRCs decommissioning funding assurance regulations and surety instruments?

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Dodd-Frank Impact on Federal Agency Regulations SEC. 939. REMOVAL OF STATUTORY REFERENCES TO CREDIT RATINGS.

SEC. 939A. REVIEW OF RELIANCE ON RATINGS.

Each Federal Agency shall:

1. Review any regulation that requires use of credit-worthiness and references regarding credit ratings

2. Modify Regulations - remove reference to or requirement of reliance on credit ratings and substitute a standard of credit-worthiness that each respective agency shall determine as appropriate for such regulations

3. Transmit a report to Congress containing a description of modifications made to its regulations 7

NRC Decommissioning Funding Assurance Requirements and Surety Instruments NRC decommissioning funding assurance regulations:

Byproduct Material Licensees - 10 CFR 30.35(f)(2)

Source Material Licensees - 10 CFR 40.36(e)(2)

Production and Utilization Licensees -10 CFR 50.75(e)(1)(iii)

Special Nuclear Material Licensees - 10 CFR 70.25(f)(2)

Spent Fuel, HLW and GTCC Licensees - 10 CFR 72.30(e)(2)

Surety Instruments Prepayment External Sinking Fund Other Surety Methods Surety bond Letter of credit Insurance Self Guarantee (SG) and Parent Company Guarantee (PCG) 8

NRC Regulations Impacted by Dodd-Frank 10 CFR Part 30, Appendix A -

Parent Company Guarantee II.A.2. - bond rating and 3 financial metrics 10 CFR Part 30, Appendix C -

Self Guarantee II.A. - bond rating and 2 financial metrics (and one class of equity security registered with the SEC) 9

NRC Regulations Impacted by Dodd-Frank (cont.)

Colleges, Universities, and Hospitals 10 CFR Part 30, Appendix E - Self Guarantee II.A.(1) - bond rating only (for nonprofit colleges/universities that issue bonds)

II.B.(1) - bond rating only (for nonprofit hospitals that issue bonds) 10

The NRC's Rulemaking -

Alternatives to the Use of Credit Ratings The Rule will:

Remove Bond Rating Criteria for use of Guarantee Mechanisms currently cited in Appendices A, C, E Those criteria are AAA, AA, A, or BBB Standard and Poor's rating and Aaa, Aa, A, or Baa Moody's rating.

Replace with new creditworthiness criteria standard "Creditworthiness that demonstrates an adequate capacity to provide full and timely payment of the amount guaranteed, if necessary."

NRC to assess creditworthiness and make determination based on information submitted by the applicant/licensee 11

As proposed Financial Tests Appendix A Parent Company To pass the financial test, the parent company must meet the criteria of either paragraph A.1 or A.2. The proposed rule impacts the financial test in A.2 which includes:

Creditworthiness that demonstrates an adequate capacity to provide full and timely payment of the amount guaranteed, if necessary; and Total net worth at least six times the amount of decommissioning funds being assured by a parent company guarantee for the total of all nuclear facilities or parts thereof (or prescribed amount if a certification is used); and Tangible net worth of at least $21 million; and Assets located in the United States amounting to at least 90 percent of the total 12

As proposed Self Guarantee for Commercial Companies in Appendix C (1) Tangible net worth of at least $21 million, and total net worth at least 10 times the amount of decommissioning funds being assured by a self-guarantee for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor for the total of all nuclear facilities or parts thereof (or the current amount required if certification is used) (and)

(2) Assets located in the United States amounting to at least 90 percent of total assets or at least 10 times the amount of decommissioning funds being assured by a self-guarantee, for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor for the total of all nuclear facilities or parts thereof (or the current amount required if certification is used) (and)

(3) Creditworthiness that demonstrates an adequate capacity to provide full and timely payment of the amount guaranteed, if necessary.

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As proposed Appendix E Criteria for Nonprofit Colleges and Universities (2) Creditworthiness that demonstrates an adequate capacity to provide full and timely payment of the amount guaranteed, if necessary.

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As proposed Appendix E Criteria for Hospitals Creditworthiness that demonstrates an adequate capacity to provide full and timely payment of the amount guaranteed, if necessary.

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Examples of Data to Support Creditworthiness Determination for use of Parent/Self Guarantee as provided in draft NRC Guidance Financial Metrics and other data would include:

Revenue and historic trends in revenue; Net income and historic trends in net income; Capital structure and recent changes in capital structure; Annual free cash flow, interest expense, interest coverage; Statements and assessments from third parties, including bond and corporate credit ratings.

No single piece of financial data stands alone as a determinant of a licensees creditworthiness. In most cases, such a determination requires analyses of multiple pieces of financial data.

Interim Staff Guidance at ADAMS Accession No. ML21306A361 16

Proposed Rulemaking The proposed rule published on January 3, 2023, with a 75-day comment period ending March 20, 2023 (88 FR 25,link )

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How to Submit Public Comments

• Regulations.gov (Docket NRC-2017-0021, link to regulations.gov) 1

• Mail to Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, 2 ATTN: Rulemakings and Adjudications

• Email to Rulemaking.Comments@nrc.gov 3

• Date: by March 20, 2023 4

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Public Questions How to Ask a Question Raise your hand On Teams, use the Raise Your Hand feature On the phone, Press *5 Please begin by introducing yourself OR Send your question using the Teams chat feature and the facilitator will read it aloud 19

Proposed Rule Question 1 Question 1) Would this proposed rule present additional risk to the public regarding reasonable assurance that NRC licensees have adequate funding to decommission their facilities? If yes, please explain.

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Question 2 Question 2) Does the draft guidance effectively communicate the necessary information to be submitted to the NRC that will enable the NRC to effectively determine a licensees creditworthiness?

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Question 3 Question 3) Does the draft regulatory analysis capture all of the NRC and licensee costs required by this proposed rule?

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Question 4 Question 4) One commenter on the ANPR argues that section 939A of the Dodd-Frank Act is focused on issue credit ratings of specific financial obligations, such as long-and short-term bonds, rather than issuer credit ratings or corporate family ratings, and that the statute does not preclude the use of issuer or corporate family credit ratings in federal regulations. Should the NRC interpret the statute and implementing regulations as making this distinction? Does the statute permit NRC to use issuer or corporate family credit ratings in Part 30? If so, should the NRC do so?

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How to Submit Public Comments

• Regulations.gov (Docket NRC-2017-0021, link to regulations.gov) 1

• Mail to Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, 2 ATTN: Rulemakings and Adjudications

• Email to Rulemaking.Comments@nrc.gov 3

• Date: by March 20, 2023 4

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Questions?

More questions?

Contact:

Gregory.Trussell@nrc.gov 25

Road Ahead and Closing Remarks 26

How Did We Do?

Email feedback to:

Gregory.Trussell@nrc.gov 27