ML23156A041

PRM-050-064 - 64FR00432 - Atlantic City Electric Co., Austin Energy, Central Maine Power Co., Delmarva Power & Light Co., So. Mississippi Elec. Power Assoc., & Wash Elec. Coop

ML23156A041
Person / Time
Issue date:	01/05/1999
From:	NRC/SECY
To:
References
PRM-050-064, 64FR00432
Download: ML23156A041 (1)

Text

ADAMS Template: SECY-067 DOCUMENT DATE: 01/05/1999 TITLE: PRM-050-064 - 64FR00432 - ATLANTIC CITY ELECTRIC CO., AUSTIN ENERGY, CENTRAL MAINE POWER CO.,

DELMARVA POWER & LIGHT CO., SO. MISSISSIPPI ELEC.

POWER ASSOC., & WASH ELEC. COOP.

CASE

REFERENCE:

PRM-050-064 64FR00432 KEYWORD: RULEMAKING COMMENTS Document Sensitivity: Non-sensitive - SUNSI Review Complete

Federal Register Cite No .: PR/PRM No .:

' . Federal Register Publication Date: Issue No. 2 64FR432 PRM-050-064 01/05/99 Comment Period Expires : 03/22/99 Comment Period Extended : Final Rule Date :

Contact Person(s): Mail Stop(s): Telephone Extension(s) :

a) David L. Meyer T-6D59 301-415-7163 bl Brian Richter O-11F1 301-415-1978 cl Carol Galla!lher T-6D59 301 -4 15-5905 Comments Entered Comments Acknowledged in Database Distributed Index Printed Labels Printed (card; e-mail)

(No ./Date/lnitials) {Date /Initials) (Date/Initials) {Date/Initials) (Date )

FRN - Petition for FRN - Petition for 01/06/99 ATB Rulernaking; Notice of Rulemaking; Notice of Receipt Receipt 0 1/06/99 01 /06/99

1. 1 03/1 5/99 ATB #1 03/15/99 ATB 03 / 15/99 ATB 03/17/99 ATB 03 / 17/99

1. 2-6 03/23/99 ATB #2 -6 03/23 /99 ATB 03 /23/99 ATB 03/25 /99 ATB 03/25/99

1. 7- 9 03/24/99 ATB #7 -9 03/24/9 9 ATB 03 /24/99 ATB 03/25/99 ATB 03/25/9 9

1. 10-12 03/25/99 ATB #10-12 03 /2 4/99 ATB 03 /25/99 ATB 03/31 /99 ATB 03 /3 1 /9 9

1. 13 03/26/99 ATB #13 03/26 /99 ATB 03 /2 6 /99 ATB 03 /31 /99 ATB 03/31 /99

1. 14 03/30/99 ATB #14 03/26/99 ATB 03/26/99 ATB 03/31/99 ATB 03 /31 /9 9

1. 15 03/30/99 ATB #15 03 /30 /99 ATB 03/3 0/99 ATB 03 / 31/99 ATB 03/31/99

1. 16 04/ 13/99 ATB #16 04/13/99 ATB 04/13/99 ATB 04/19/99 ATB 04/ 19/99 Ltr fm Vietti-Cook to Martin N/A Malsch 08/03/00 ATB FRN - Denial of Petition for N/A Rulemaking 08/03/00 ATB FRN Petition denied by Final N/A FR . Motion to modify denied by ltr. Dated 3/6/02.

Ltr. Fm . J .N. Norwood, 01 / 13/03 ESN 01 / 13/03 ESN 01 /13/03 ESN NA Spiegel & McDiarmid 01 /13/03 ESN

From: Emile Julian To: Annette Vietti-Cook Date: Thu, Nov 16, 2000 1:14 PM

Subject:

Re: Fwd: "Publicly-Owned Systems" motions re the joint and several regulatory responsibility RM petition I think the approach suggested by Steve Lewis is a good approach. I would however, suggest that when a letter is drafted that the Commission Legal Assistants are informed, before it is issued. the denial of the Publicly Owned Systems' Motion could lead to an appeal to a Federal Appellate Court. If there is a potential for an appeal the Commission should be aware of that potential.

I suggest informing Steve that the approach is O.K., but with the question of whether the Commission has been or will be informed of the approach.

Emile

>>> Annette Vietti-Cook 11 /15 2:42 PM >>>

Your views?

,Pa From: Robert Wood To: Alzonia Shepard, Annette Vietti-Cook, Brian Rich ...

Date: Wed, Nov 15, 2000 3:11 PM

Subject:

Re: "Publicly-Owned Systems" motions re the joint and several regulatory responsibility RM petition Steve; I don't have a problem with your proposed approach generally, and specifically with respect to adding a statement that the publicly-owned systems are not foreclosed from challenging any NRC action to impose J&S liability.

Bob

>>> Stephen Lewis 11 /15 2:22 PM >>>

11/15/00 To SECY; Rules & Directives Branch, ADM; and NRR:

Dave Meyer received from Emile Julian a document titled PUBLICLY OWNED SYSTEMS' MOTION FOR MODIFICATION OR, IN THE ALTERNATIVE, REQUEST FOR REHEARING OF ORDER DENYING PETITION FOR RULEMAKING, dated September 22, 2000. The motion and request relate to the Commission's denial of a petition for rulemaking filed by Atlantic City Electric Comany and others. 65 Fed.

Reg. 46661 (July 31, 2000).

Dave, in turn, referred the motion/request to OGC. Procedurally, I suggest that the response to the motion/request should be issued by the Secretary. This is how a similar motion from Eric Epstein regarding a separate rulemaking petition that he filed was recently handled (letter from Annette Vietti-Cook to Eric Epstein, dated September 20, 2000).

I have discussed the motion/request with John Cordes and Grace Kim to get their perspective, since Commission action was already taken on the petition. We came to the conclusion that the Publicly Owned Systems have not set forth any arguments that should cause the Commission to modify its denial or "rehear" the petition. We are also of the view, however, that it would be perfectly appropriate to state to the Publicly Owned Systems that the petition denial does not foreclose them from contesting any plant-specific NRC action to impose regulatory responsibilities upon co-owners that would entail costs beyond their contractual pro rata shares in the facility. Such an NRC action is considered unlikely, and we have already so stated in the petition denial.

If this approach is satisfactory to SECY, ADM, and NRR, OGC will undertake to draft the reply letter for the Secretary's signature. Please reply to me, since I will be responsible for drafting the reply.

Thanks, Steve Lewis NOTE: ATTORNEY-CLIENT INFORMATION; LIMITED TO NRC UNLESS THE COMMISSION DETERMINES OTHERWISE CC: Joseph Gray, Stuart Treby, Susan Uttal

-~-

/

UNITED STATES OF AMERICA / DOCKETED BEFORE THE NUCLEAR REGULATORY COMMISSION SEP 2 2 2000 Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Docket No. PRM-50-64 Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.

PUBLICLY OWNED SYSTEMS' MOTION FOR MODIFICATION OR, IN THE ALTERNATIVE, REQUEST FOR REHEARING OF ORDER DENYING PETITION FOR RULEMAKING The American Public Power Association, ElectriCities of North Carolina, Inc.,

Florida Municipal Power Agency, New Hampshire Electric Cooperative, Inc.,

Massachusetts Municipal Wholesale Electric Company, the City of Anaheim, California, and the Town of Lyndonville, Vermont (hereinafter, "Publicly Owned Systems") 1 hereby move for modification of the Commission's July 25, 2000 order2 denying the petition for rulemaking submitted in this docket by Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc. (hereinafter, "Petitioners"). In the alternative, the Publicly Owned Systems request rehearing of certain elements of the July 25 order.

1 The Publicly Owned Systems filed comments concerning the Petition for Rulemaking on March 22, 1999.

The members of the Publicly Owned Systems group are described in Appendix A to those comments.

2 65 Fed. Reg. 46661 (2000).

I. MOTION FOR MODIFICATION OF THE JULY 25TH ORDER A. The Commission Should Modify the July 25th Order to Remove The Portions of the Order that Relate to the Commission's Claimed Authority to Impose Joint and Several Regulatory Responsibility.

The July 25 th order sets forth in detail the grounds for the Commission's denial of the Petition for Rulemaking. The reasoning expressed by the Commission in denying the Petition may be viewed as falling into two distinct categories: (1) grounds that are based on the position that the Commission has legal authority to impose joint and several liability or "regulatory responsibility," 3 and (2) grounds that do not depend on such claimed legal authority.

Specifically, in the course of denying the Petition, the Commission addressed arguments by the Petitioners and other commenters that the Commission lacks the legal authority to impose joint and several regulatory responsibility. For example, the Commission asserted that it has "broad statutory authority under the [Atomic Energy Act]

to take necessary actions to protect public health and safety," including the imposition of joint and several regulatory responsibility where necessary. 4 The Commission also rejected the argument that the imposition of joint and several regulatory responsibility would be contrary to the prohibition against retroactive rulemaking, stating that it had never "approved" contracts providing for the pro rata allocation of nuclear plant costs. 5 3

In the July 25 th order, the Commission explained why it believes the term "regulatory responsibility" is more precise than "liability" in this context. Publicly Owned Systems use the terms interchangeably herein.

4 See Comment JO and Response, 65 Fed. Reg. at 46664.

5 See Comment 4 and Response, id. at 46662-3.

2

However, a number of the grounds stated by the Commission for denying the Petition are independent of any assertion as to the Commission's legal authority to impose joint and several regulatory responsibility. For example, the Commission stated that, insofar as the allocation of liability for plant costs was concerned, the petitioners had failed to support their proposed distinction between operators, operating owners and non-operating owners. 6 The Commission also pointed out what it viewed to be internal inconsistencies in the reasoning of the Petition. 7 Notwithstanding the fact that Petitioners and other commenters had raised questions concerning the Commission's legal authority to impose joint and several regulatory responsibility, those portions of the July 25 th order which address the issue of legal authority are not necessary to the Commission's disposition of the Petition for Rulemaking at hand. Other reasons independent of the Commission's claim of legal authority are stated in the July 25 th order, and those reasons may constitute legally sufficient grounds for the Commission's action. The portions of the order that discuss the Commission's claimed legal authority are in the nature of dictum which needlessly raises issues that are a matter of substantial legal controversy.

Where other grounds for denial of the Petition for Rulemaking may be deemed to provide a sufficient legal basis for the Commission's action, 8 the Commission should 6

See Comment 17 and Response, id. at 46665.

7 See Comment 20 and Response, id.

8 This is not to suggest that the Publicly Owned Systems agree with the Commission's reasoning in these areas. Rather, the point is simply to note that the July 25 th order contains reasoning on which the Commission may rely for its action without engendering further controversy as to the Commission's legal authority to impose joint and several regulatory responsibility.

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seek to avoid fostering unnecessary controversy in this manner, particularly in light of the NRC's previous statements reserving the issue of its legal authority for a future fact-specific case, as discussed below. For this reason, Publicly Owned Systems request that the Commission modify its July 25 th order to eliminate those portions in which the Commission asserts the legal authority to impose joint and several regulatory responsibility on licensees.

B. If the Commission Declines to Modify the July 25th Order, It Should Confirm that Affected Parties May Challenge the Commission's Claimed Legal Authority to Impose Joint and Several Regulatory Responsibility at Such Time as the Commission Actually Seeks to Exercise That Authority.

In the event that the Commission declines to modify its July 25 th order as set forth above, Publicly Owned Systems request that the Commission confirm that affected parties have the right to challenge the Commission's legal authority to impose joint and several regulatory responsibility, de nova, at such time as the Commission may actually seek to exercise that claimed authority in a specific factual setting.

Such express confirmation would be consistent with the manner in which the identical question was resolved in previous litigation. Specifically, the Commission first claimed that it had the authority to impose joint and several liability in its "Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry" (hereinafter, "Final Policy Statement"), 62 Fed. Reg. 44071 (1997). Following denial of Publicly Owned Systems' request for reconsideration of the Final Policy Statement, the Publicly Owned Systems filed a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit. American Public Power Association, et al.

v. Nuclear Regulatory Commission, D.C. Cir. Case No. 98-1219. The NRC filed a 4

Motion to Dismiss the petition for review on June 8, 1998, arguing that the NRC's Final Policy Statement was not ripe for judicial review. In its Motion to Dismiss (at p. 7), the NRC stated that "[t]he time to address the legal question of whether the NRC can impose joint and several liability will be when, if at all, the issue arises in practice, in the context of the specific facts that the agency believes warrant the action" (emphasis added).

Subsequently, counsel for the Publicly Owned Systems discussed the pending Motion to Dismiss with the NRC's counsel, and received NRC's authorization to include the following statement in their answer to the NRC's Motion to Dismiss:

Counsel for petitioners is authorized to state that it is the NRC counsel's position that, should petitioners seek to raise and litigate ab initio the legal issue of whether the NRC has the authority to impose joint and several liability on minority licensee/owners, such a challenge would not be precluded by petitioners' not pursuing the present litigation.

NRC counsel states that it can foresee no circumstances in which it would argue otherwise.

"Petitioners' Answer to Respondents' Motion to Dismiss," filed June 18, 1998 in D.C.

Cir. Case No. 98-1219, at p. 3. On that basis, the Publicly Owned Systems advised the court that they did not oppose dismissal of their petition for review on grounds of lack of ripeness.

In a per curiam order issued August 3, 1998, the Court of Appeals dismissed the action on the following basis:

ORDERED that the motion [to dismiss] be granted. The agency action at issue is not ripe for judicial review at this time. See Ohio Forestry Association v. Sierra Club, 118 S.

Ct. 1665 (1998). This dismissal is without prejudice to any right petitioners may have to challenge the agency action at issue in an appropriate circumstance.

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Thus, in prior litigation involving the Commission's claim of authority to impose joint and several liability, the NRC and the Court of Appeals recognized that the appropriate setting in which to raise a challenge to that authority would be in the context of the Commission's assertion of that claimed authority in a specific factual setting.

The NRC should adopt the same practice here. Commission dictum in an order denying a petition for rulemaking is no more "ripe" for review than a policy statement, and the same pragmatic reasons favoring resolution of a legal issue only if it should arise in a real situation is particularly pertinent in this case, as was recognized earlier by the NRC. Accordingly, the Commission should state that any party may challenge the NRC's legal authority to impose joint and several regulatory responsibility in a specific factual setting, de nova, with the intent that both the NRC and the parties shall, if necessary, resolve the issue in a future, concrete case.

II. CONDITIONAL REQUEST FOR REHEARING OF THE JULY 25' ORDER Participants in this rulemaking proceeding face something of a dilemma as a result of the NRC's decision to include in the July 25 th order an extensive discussion of its claimed legal authority to impose joint and several regulatory responsibility. Parties that question the basis for the NRC' s claim of legal authority must decide whether to seek review of the Commission's order as it now stands. In earlier similar circumstances, both the NRC and interested parties agreed that the optimal way to proceed was to defer resolution of the legal authority issue. Publicly Owned Systems believe this can be accomplished by: (i) a modification of the July 25 th order to eliminate those portions of the order that assert the Commission's legal authority to impose joint and several 6

regulatory responsibility, as set forth in Section LA above; or (ii) an explicit confirmation that affected parties may challenge the Commission's claimed legal authority to impose joint and several regulatory responsibility at such time as the NRC seeks to exercise that authority in a future fact-specific case, as set forth in Section LB above.

If the Commission declines to take either of these two actions (or such other action as would reserve the legal authority issue for later resolution), then Publicly Owned Systems request rehearing of the July 25 th order. The grounds on which rehearing is sought, in such event, are as follows:

A. The Commission Lacks Statutory Authority to Impose Joint and Several Liability.

The Commission has assumed that its statutory mandate to protect the public health and safety confers the authority to hold any single licensee responsible for 100% of the costs of operating or decommissioning a nuclear generating unit. However, as the petitioners noted in their Petition for Rulemaking, there is nothing in the Atomic Energy Act or the NRC's regulations that authorizes the Commission to impose "liability" of any sort, let alone "joint and several liability," on nuclear plant licensees. The NRC's change in nomenclature to "joint and several regulatory responsibility" does not obscure the fact that the Commission seeks to override express contractual allocations of financial responsibility among the co-owners of a plant. The Commission simply lacks the statutory authority to take such action.

B. The Commission Has Failed to Follow the Required Procedure for Adopting a Policy of Imposing Joint and Several Liability.

Although the NRC argues that its new policy is only to consider imposition of joint and several liability, the plain fact is that the Commission's new policy is a complete 7

reversal of the NRC' s long-standing previous policy of accepting pro rata allocations of cost responsibility among co-owners of a nuclear generating unit. Even if it were assumed that the Commission possesses the legal authority to adopt its new approach, such a fundamental change in policy may not be adopted absent a rulemaking procedure establishing a new policy. However, no such procedure for the policy change has been followed. 9 C. Imposition of Joint and Several Liability Constitutes Prohibited Retroactive Rulemaking and is Legally Impermissible on Other Grounds.

As Publicly Owned Systems previously have argued, nuclear plant licensees (as well as regulators and the investment community) have long relied on the NRC's historical acceptance of joint ownership contracts setting forth specified allocations of cost responsibility. See "Comments of Publicly Owned Systems on Petition for Rulemaking," filed March 22, 1999, at pp. 4-9. The imposition of joint and several liability represents a complete reversal of the Commission's long-standing practice in this regard. Thus, even if it were assumed, arguendo, that the Commission has the legal authority to adopt a policy of joint and several liability -- a point which Publicly Owned Systems by no means concede, and, in fact, vigorously contest -- the NRC clearly lacks the discretion to apply that new policy to joint ownership arrangements which were 9

The Commission's consideration and rejection of the Petition for Rulemaking does not constitute a substitute for a formal notice and comment rulemaking procedure. A formal rulemaking procedure would establish whether a change in policy is required in order for the Commission to discharge its statutory duties. However, as the Commission has recognized, payments toward decommissioning have continued unabated even in the extreme circumstances in which nuclear plant owners were forced into outright bankruptcy. See Final Policy Statement, 62 Fed. Reg. 44071 at 44077 n. 3 (1997). Clearly, the Commission has expressed no concern that there is an impending crisis in nuclear plant funding that requires the adoption of a new policy of imposing joint and several liability.

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developed in reliance on the prior policy. See Bowen v. Georgetown University Hospital, 488 U.S. 204 (1988). The imposition of joint and several liability constitutes prohibited retroactive rulemaking, and is, on that basis, legally impermissible. See "Comments of Publicly Owned Systems on Petition for Rulemaking," at pp. 9-12. Furthermore, in light of the numerous existing joint ownership arrangements premised on the pro rata sharing of costs, the imposition of joint and several liability violates constitutional prohibitions against the impairment of contract, abrogates constitutional rights of due process, and constitutes an unconstitutional "taking" of property.

III. CONCLUSION WHEREFORE, based on the foregoing, Publicly Owned Systems move the NRC to modify its July 25 th order to eliminate those portions of the order that set forth the Commission's claim of legal authority to impose joint and several regulatory responsibility. In the alternative, Publicly Owned Systems urge the NRC to confirm that affected parties have the right to challenge the Commission's legal authority to impose joint and several regulatory responsibility in any future concrete instance in which the Commission seeks to exercise that claimed authority. Based on the disposition of the previous legal challenge to the Final Policy Statement, we assume that the Commission would find the latter alternative acceptable. However, Publicly Owned Systems are open to such other relief as the Commission may adopt as would accomplish the same result, namely, to defer until a concrete situation the resolution of a substantial legal issue.

th If the NRC declines to modify its July 25 order or provide confirmation of parties' rights (or provide equivalent relief) as stated above, Publicly Owned Systems 9

respectfully request rehearing of the July 25 th order on the grounds set forth in Part II, supra.

Respectfully submitted, Attorneys for Publicly Owned Systems Law Offices of:

Spiegel & McDiarmid Suite 1100 1350 New York A venue, NW Washington, DC 20005-4798 (202) 879-4000 September 22, 2000 10

CERTIFICATE OF SERVICE I hereby certify that I have on this 22nd day of September, 2000, caused the foregoing document to be sent by first-class mail to all parties shown on the attached list.

Law Offices of:

Spiegel & McDiarmid 1350 New York Avenue, NW Suite 1100 Washington, DC 20005-4798 (202) 879-4000

Joseph R. Egan, Esq.

Martin G. Malsch, Esq.

Egan & Associates, P.C.

LeBoeuf, Lamb, Greene & MacRae, LLP 11710 Plaza America Drive 1875 Connecticut Avenue, N.W.

Suite 2000 Washington, D.C. 20009 Reston, VA 20190 Mr. Marvin S. Fertel John Holt, Manager Nuclear Energy Institute Fuels and Transportation 1776 I Street, N.W. National Rural Electric Cooperative Assoc.

Suite 400 4301 Wilson Boulevard Washington, D.C. 20006-3708 Arlington, VA 22203-1860 R. John Gianfrancesco, Jr., Manager Mr. Mark J. Wetterhahn Administrative Support and Special Projects Winston & Strawn Florida Power & Light Company 1400 L Street, N.W.

P. 0. Box 14000 Washington, D.C. 20005-3502 Juno Beach, FL 33408-0420 Garrett D. Edwards, Director-Licensing Richard N. George, Esq.

PECO Energy Company Nixon, Hargrave, Devans & Doyle, LLP Nuclear Group Headquarters Clinton Square 965 Chesterbrook Boulevard P . 0. Box 1051 Wayne, PA 19087-5691 Rochester, NY 14603-1051 Mr. James M. Levine Mr. Gary J. Taylor Arizona Public Service Company South Carolina Electric & Gas Co.

Palo Verde Nuclear Generating Station Virgil C. Summer Nuclear Station Mail Station 7602 P.P. Box 88 P. 0. Box 52034 Jenkinsville, SC 29065 Phoenix, AZ 85072-2034

John T. Ward, Esq.

K.N. Kappatos, Vice President Sullivan & Ward, P.C.

Engineering & Operations 801 Grand Old Dominion Electric Cooperative Suite 3500 P. 0. Box 2310 Des Moines, Iowa 50309-2719 Glen Allen, VA 23058-2310 Richard D. Barker, Manager William DeGrandis, Esq.

Fossil & Nuclear Operations Paul, Hastings, Janofsky & Walker Oglethorpe Power Corporation 1299 Pennsylvania Avenue, N.W.

2100 East Exchange Place Washington, D. C. 20004-2400 P. 0. Box 1349 Tucker, GA 30085-1349 Richard J. Midulla, Exec. V.P. & General Mgr.

Michael A. Swiger, Esq.

Seminole Electric Cooperative, Inc.

VanNess, Feldman, P.C.

16313 North Dale Mabry Highway 1050 Thomas Jefferson Street, N.W.

P. 0. Box 272000 Washington, D.C. 20007-3877 Tampa, FL 33688-2000 John D. Draghi, Esq.

Huber, Lawrence & Abell 605 Third Avenue 27 th Floor New York, NY 10158

Docket No.: PRM-050-064 01/13/2003 FR Cite: 64FR00432 In the Matter of Atlantic city Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.; Receipt of Petition for Rulemaking Comment Comment Docket Document Miscellaneous Accession Number Submitted by Representing Date Date Description Number I Garrett D. Edwards PECO Energy Company 12/30/1998 12/29/1998 2 Michael A. Swiger, Esquire Long Island Power 03/22/ I999 03/22/1999 Authority 2 Michael A. Swiger, Esquire Long Island Power 03/22/ l 999 03/2211999 Authority 3 Mark J. Wetterhahn, Esquire Carolina Power & Light 03/22/ I999 03/19/ I 999 Company, Commonwealth Edison Company, Duke Energy Corporation, Niagara Mohawk Power Corporation, Northeast Utilities, and South 3 Mark J. Wetterhahn, Esquire Carolina Power & Light 03/22/1999 03/19/1999 Company, Commonwealth Edison Company, Duke Energy Corporation, Niagara Mohawk Power Corporation, Northeast Utilities, and South 2

Docket No.: PRM-050-064 01/13/2003 FR Cite: 64FR00432 In the Matter of Atlantic City Electric Company, Austin Energy, Central Maine Power Co., Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.

Comment Comment Docket Document Miscellaneous Accession Number Submitted by Representing Date Date Description Number 4 John T. Ward, Esq., and Central Iowa Power 03/22/1999 03/19/1999 William DeGrandis, Esq. Cooperative 4 John T. Ward, Esq., and Central Iowa Power 03/22/1999 03/19/1999 William DeGrandis, Esq. Cooperative 5 John T. Ward , Esq. and Com Belt Power 03/22/1999 03/ 19/1999 William DeGrandis, Esq. Cooperative 5 John T. Ward, Esq. and Com Belt Power 03/22/ I999 03/ I9/ 1999 William DeGrandis, Esq . Cooperative 6 Richard N. George Rochester Gas and 03/22/1999 03/22/1999 Electric Corporation and Central Hudson Gas &

Electric Company 3

Docket No.: PRM-050-064 01/13/2003 FR Cite: 64FR00432 In the Matter of Atlantic city Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.; Receipt of Petition for Rulemaking Comment Comment Docket Document Miscellaneous Accession Number Submitted by Representing Date Date Description Number 7 John Holt National Rural Electric 03/23/1999 03/19/1999 Cooperative Association 7 John Holt National Rural Electric 03/23/1999 03/19/1999 Cooperative Association 12/30/1998 I 2/29/1998 Federal Register Notice -

Petition for Rulemaking; Notice ofreceipt 12/30/1998 12/29/1998 Federal Register Notice -

Petition for Rulemaking; Notice of receipt 1 Garrett D. Edwards PECO Energy Company 12/30/1998 12/29/1998

Docket No.: PRM-050-064 01/13/2003 FR Cite: 64FR00432 In the Matter of Atlantic city Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.; Receipt of Petition for Rulemaking Comment Comment Docket Document Miscellaneous Accession Number Submitted by Representing Date Date Description Number 6 Richard N. George Rochester Gas and 03/22/1999 03/22/1999 Electric Corporation and Central Hudson Gas &

Electric Company 8 Gary J. Newell, Esq Publicly Owned 03/23/1999 03/22/1999 Systems - Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & light Company, South Mississippi Electric 8 Gary J. Newell , Esq Publicly Owned 03/23/1999 03/22/1999 Systems - Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & light Company, South Mississippi Electric 9 Richard D. Barker Oglethorpe Power 03/23/1999 03/22/1999 Manager, Fossil and Nuclear Corporation Operations 9 Richard D. Barker Oglethorpe Power 03/23/1999 03/22/1999 Manager, Fossil and Nuclear Corporation Operations 4

Docket No.: PRM-050-064 01/13/:ZO0J FR Cite: 64FR00432 In the Matter of Atlantic City Electric Company, Austin Energy, Central Maine Power Co., Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.

Comment Comment Docket Document Miscellaneous Accession Number Submitted by Representing Date Date Description Number 10 Richard J. Midulla Seminole Electric 03/24/ 1999 03/18/ 1999 Executive Vice President and Cooperative, Inc.

General Manager 10 Richard J. Midulla Seminole Electric 03/24/1999 03/18/1999 Executive Vice President and Cooperative, Inc.

General Manager 11 Marvin S. Fertel Nuclear Energy Institute 03/24/1999 03/22/1999 Senior Vice President, Nuclear Infrastructure Support and International Programs 11 Marvin S. Fertel Nuclear Energy Institute 03/24/1999 03/22/1999 Senior Vice President, Nuclear Infrastructure Support and International Programs 12 K. N. Kappatos Old Dominion Electric 03/24/1999 03/22/1999 Vice President, Engineering Cooperative and Operations 5

Docket No.: PRM-050-064 01/13/2003 FR Cite: 64FR00432 In the Matter of Atlantic city Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.; Receipt of Petition for Rulemaking Comment Comment Docket Document Miscellaneous Accession Number Submitted by Representing Date Date Description Number 12 K. N. Kappatos Old Dominion Electric 03/24/1999 03/22/1999 Vice President, Engineering Cooperative and Operations 13 Gary J. Taylor South Carolina Electric & 03/26/1999 03/22/1999 Vice President, Nuclear Gas Company Operations 13 Gary J. Taylor South Carolina Electric & 03/26/1999 03/22/1999 Vice President, Nuclear Gas Company Operations 14 James M. Levine Arizona Public Service 03/26/1999 03/18/ l 999 Senior Vice President, Nuclear Company 14 James M. Levine Arizona Public Service 03/26/1999 03/18/1999 Senior Vice President, Nuclear Company 6

Docket No.: PRM-050-064 01/13/2003 FR Cite: 64FR00432 In the Matter of Atlantic City Electric Company, Austin Energy, Central Maine Power Co., Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.

Comment Comment Docket Document Miscellaneous Accession Number Submitted by Representing Date Date Description Number 15 R. John Gianfrancesco, Jr. Florida Power & Light 03/29/1999 03/16/1999 Manager - Administrative Company Suppon and Special Projects 15 R. John Gianfrancesco, Jr. Florida Power & Light 03/29/1999 03/16/1999 Manager - Administrative Company Support and Special Projects 16 John D. Draghi, Esq. New York State Electric 04/12/1999 04/09/1999

& Gas Corporation

- 16 John D. Draghi, Esq. New York State Electric

& Gas Corporation 04/12/1999 04/09/1999 12/30/1998 12/29/1998 Federal Register Notice -

Petition for Rulemaking; Notice of receipt 7

Docket No.: PRM-050-064 01/13/1003 FR Cite: 64FR00432 In the Matter of Atlantic City Electric Company, Austin Energy, Central Maine Power Co., Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.

Comment Comment Docket Document Miscellaneous Accession Number Submitted by Representing Date Date Description Number 12/30/1998 12/29/1998 Federal Register Notice -

Petition for Rulemaking; Notice of receipt Dini Schut 02/28/2000 02/15/2000 Supplement to Comment No.

315 submitted by Dini Schut Dini Schut 02/28/2000 02/ 15/2000 Supplement to Comment No.

315 submitted by Dini Schut 07/25/2000 07/25/2000 Letter from Annette Vietti-Cook to Martin G. Malsch, Esq.

denying petition for rulemaking he filed.

07/25/2000 07/25/2000 Letter from Annette Vietti-Cook to Martin G. Malsch, Esq.

denying petition for rulemaking he filed.

8

Docket No.: PRM-050-064 01/13/2003 FR Cite: 64FR00432 In the Matter of Atlantic City Electric Company, Austin Energy, Central Maine Power Co., Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.

Comment Comment Docket Document Miscellaneous Accession Number Submitted by Representing Date Date Description Number 07/25/2000 07/25/2000 Federal Register Notice - Denial of petition for rulemaking 07/25/2000 07/25/2000 Federal Register Notice - Denial of petition for rulemaking 01/08/2003 01/02/2003 Ltr. From Spiegel & ML030090010 McDiarmid, James N. Horwood enclosing a change of address.

01/08/2003 01/02/2003 Ltr. From Spiegel & ML030090010 McDiarmid, James N. Horwood enclosing a change of address.

9

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\ SPIEGE L & MCDIARMID GEORGE SPIEGEL ( 1919- 1 997 ) ASSOC I ATES ROBERT C . McOIARM I O 1333 NE W HAM PS H I RE AVE N UE , NW DAVID B. L I EB ROBERT A. JABLON W ASHINGTON , DC 20036 PABLO O . N OESCH JAMES N . HORWOOO ANDREA G . LON I AN FRANCES E . FRANC I S LARISSA A. SHAM R A J OANIE L I . DAVIO S ON WWW . SPIEGELMCD . COM STEPHEN C . PEARSON" THOMAS C . TRAUGER ALLISON L. DRIVER JOHN J . CORBETT TRACY E . CONNOR""

CYNT H IA S . BOGOR AD Te l e p hone 202 . 879.4000 (* M I NI E R OJII TH l" Oflll I A flll ONLVJ l .. M M I " OJI' THI ~A AJII: ONLY)

GARY J . NEWELL Facs i mile 202 . 393 .2866 SCOTT H . STRAUSS E - ma i l I NFO@SP I EGELMCD . COM OF COUNSEL BEN FINKELSTE I N ALAN J . ROTH LISA G . DOWDEN LEE C . WH I TE RISE J . PETE R S D irect Di al ( 202) 879-40 0 2 SANDRA J . S T R E BEL PETER J . HOPK I NS EMA I L J AMES . HORWOOD@SP I EGELMCD . COM MARG A RET A . MCGO L DRICK DAVID E . POMPER MARK S . HEGED U S WI L LIAM S . HUANG BAR R Y M . $ M OLER M ATT H E W W . WA RD MA RG A R ET A . M EISER JEFFREY A . SCHWA R Z GOVERNME N T AFFAIRS DIRECTOR KENNE T H A. BROWN (NOT A lll l M IUI OF THI IAll: J January 2, 2003 DOCKETED USNRC Office of the Clerk January 8, 2003 (1 0:54AM)

Nuclear Regulatory Commission Office of Public Affairs OFFICE OF SECRETARY Washington, D.C. 20555 RULEMAKINGS AND ADJUDICATIONS STAFF Re: Change of Address

Dear Sir/Madam:

Kindly change the address for Spiegel & McDiarmid to 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036 pursuant to the enclosed Praecipe, and return a date stamped copy of the Praecipe to this office in the self-addressed, stamped envelop provided.

Thank you for your assistance in this matter.

Sincerely,

~

es N. Horwood JNH:fh

UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Docket No. PRM-50-64 Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.

PRAECIPE (Change of Address)

Effective immediately, the undersigned counsel have moved their offices. The Clerk is respectfully requested to correct the address of counsel from 1350 New York Avenue, N.W., Suite 1100, Washington, D.C. 20005 to:

Frances E. Francis Gary J. Newell SPIEGEL & MCDIARMID 1333 New Hampshire Avenue, N.W.

Washington, D.C. 20036 All other information remains unchanged.

l i

I J Respectfully submitted, Frances E. Francis Attorneys for American Public Power Association, ElectriCities of North Carolina, Inc., Florida Municipal Power Agency, New Hampshire Electric Cooperative, Inc., Massachusetts Municipal Wholesale Electric Company, The City of Anaheim, California, and The Town of Lyndonville, Vermont Law Offices of:

Spiegel & McDiarmid 1333 New Hampshire A venue, NW Washington, DC 20036 (202) 879-4000 January 2, 2003 2

']/ , <-"

l-_ 1 _:.;

UNITED STATES NUCLEAR REGULATORY COMMISSION DOCKETED WASHINGTON , D.C. 20555-0001 USNRC March 6, 2002 2002 HAR -6 PH 3: 34 OFFIC . , ! f1 C Sl:. CHE TAR Y RULE MAKINGS AND ADJUDICATIONS STAFF Frances E. Francis, Esq.

Gary J. Newell, Esq.

Spiegel & McDiarmid Suite 1100 1350 New York Avenue, NW Washington , D.C. 20005-4798

Dear Ms. Francis and Mr. Newell:

This letter provides the Commission's response to Publicly Owned Systems' Motion for Modification or, In the Alternative, Request for Rehearing of Order Denying Petition for Rulemaking ("Motion") , dated September 22, 2000. Please accept our apologies for the delay in this response . Regrettably, the staff did not identify until recently that we had failed to respond to your motion, or alternative request.

Your motion was filed in response to the Commission's denial of a petition for rulemaking filed by Atlantic City Electric Company, et al. , regarding the potential financial liability of minority owners of nuclear power plants should other joint owners become financially incapable of bearing their responsibilities for the safe operation or decommissioning of a nuclear power plant.

65 FR 46661 (July 31, 2000). Your motion requests that the Commission :

...confirm that affected parties have the right to challenge the Commission 's legal authority to impose joint and several responsibility, de nova, at such time as the Commission may actually seek to exercise that claimed authority in a specific factual setting . Motion, p. 4 .

As reflected in your motion, Section 1.8, the Commission has already provided you such assurances in discussions with you that led to your representation before the United States Court of Appeals for the D.C. Circuit, that:

Counsel for petitioners is authorized to state that it is the NRC counsel's position that, should petitioners seek to raise and litigate ab initio the legal issue of whether the NRC has the authority to impose joint and several liability on minority licensee/owners, such challenge would not be precluded by petitioners ' not pursuing the present litigation

[petition for review of "Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry," 62 FR 44071 (August 19, 1997)]. NRC counsel states that it can foresee no circumstances in which it would argue otherwise.

"Petitioners' Answer to Respondents' Motion to Dismiss, " in D.C . Circuit Case No. 98-1219.

---~.,.

-*.i*J. F. Francis, Esq. 2 G. Newell, Esq.

The above recitation continues to reflect the Commission's position. As indicated there, we can foresee no circumstance in which the NRG would argue against a minority owner seeking to contest the NRC's authority in a particular case to impose "joint and several regulatory

• responsibility" 1 against that co-owner. Id., response to Comment 6.

We intend for this letter to provide the confirmation requested in the Motion. Therefore, it is unnecessary to respond to your "Conditional Request for Rehearing." If you have any questions regarding this letter, please direct them to Stephen H. Lewis of the NRC's Office of the General Counsel, at (301) 415-1684.

• Sincerely,

• Annette Vietti-Cook Secretary of the Commission 1

As stated in the Commission's response to Comment 6 in the Motion:

The Commission notes that the term, "joint and several liability," may have connotations for contract law that the Commission did not intend to convey and that the term "joint and several regulatory responsibility" more accurately reflects the intent of the Commission's policy statement. 65 FR 46661, at 46663.

F. Francis, Esq. 2 G. Newell, Esq.

The above recitation continues to reflect the Commission's position. As indicated there, we can foresee no circumstance in which the NRG would argue against a minority owner seeking to contest the NRC's authority in a particular case to impose "joint and several regulatory responsibility" 2 against that co-owner. Id., response to Comment 6.

We intend for this letter to provide the confirmation requested in the Motion. Therefore, it is unnecessary to respond to your "Conditional Request for Rehearing." If you have any questions regarding this letter, please direct them to Stephen H. Lewis of the NRC's Office of the General Counsel, at (301) 415-1684.

Sincerely,

/RA/

Annette Vietti-Cook Secretary of the Commission ADAMS AN: ML-020420141 Template No.: SECY-005 This document should / X / should notj_J be made available to the PUBLIC / /

Ticket No.:

DISTRIBUTION:.;

KCyr R&FC RF/CHRON JGray SBurns TRothschild Mle~ar JGray DDambly CCarpenter LChandler OHassell A Vietti-Cook CCameron SLewis CHRON JGoldberg JCordes CCarnahan (e-mail) STreby CHRON OGG R/F DOCUMENT NAME: G:\RFC\SHL\publicly owned.wpd ~,, .

To receive a copy of this document, indicate in the box: "C" = Copy without enc osures "E" = Copy with enclosures "N" = No copy *Previously concurred 9 SECY NAME S. Lewis JCordes

• S. Treby* A. Vietti-Cook DATE 02/08/02 . 02/08/02 02/08/02 02/ /02 OFFICIAL RECORD COPY 2

As stated in the Commission's response to Comment 6 in the Motion:

The Commission notes that the term, "joint and several liability," may have connotations for contract law that the Commission did not intend to convey and that the term "joint and several regulatory responsibility" more accurately reflects the intent of the Commission's policy statement. 66 FR 46661, at 46663.

F. Francis, Esq. 2 G. Newell, Esq.

The above recitation continues to reflect the Commission's position. As indicated there, we can foresee no circumstance in which the NRC would argue against a minority owner seeking to contest the NRC's authority in a particular case to impose "joint and several regulatory responsibility" 2 against that co-owner. Id., response to Comment 6.

We intend for this letter to provide .the confirmation requested in the Motion. Therefore, it is unnec::essary to respond to your "Conditional Request for Rehearing." If you have any questions regarding this letter,.please direct them to Stephen H. Lewis of the NRC's Office of the General Oqunsel, at (301) 415-1684.

Sincerely, Ann~tte Vietti-Cook Secretary of the Commission

• This document should L1 should Ticket No.:

ML-0037XXXX M l-<O~ -14 I Template No.:

t L1 be mdc:re'available to the PUBLIC I I DISTRIBUTION:

KCyr MLeasar SBurns TRothschild CCarpenter JGray DDambly AVietti-Cook LChandler DHassell CCameron. SLewis JGoldberg JCordes CCarnahan (e-mail) STreby

• OGC R/F JGray

.UMENT NAME: G:\RFC\SHL\publicly owned.wpd To receive a copy of this document, indicate in the box: "C" = "E" = Copy with enclosures "N" = No copy OFFICE RFC/OGC RFC/OG OGC ADM NRR NAME S. Lewis,/,"N'f... S. Treby' J. Gray M. Lessar DATE 02/~02 02/. 1/02 02/ /02 02/ /02 02/ /02 OFFICIAL RECORD COPY 2

As stated in the Commission's response to Comment 6 in the Motion:

The Commission notes that the term, "joint and several liability," may have connotations for contract law that the Commission did not intend to convey and that the term "joint and several regulatory responsibility" more accurately reflects the intent of the Commission's policy statement. 65 FR 46661, at 46663 ..

UNITED STATES OF AMERICA BEFORE THE oocKETEO NUCLEAR REGULATORY COMMISSION Sf P 2 2 2nno

~~

AtWiJ"'~ffk"ir Atlantic City Electric Company, Austin ~-,'1..i Energy, Central Maine Power

• Company, Delmarva Power & Light . Docket No. PRM-:.50-64 .... ,

Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.

PUBLICLY OWNED SYSTEMS' MOTION FOR MODIFICATION OR, IN THE ALTERNATIVE, REQUEST FOR REHEARING OF ORDER DENYING PETITION FOR RULEMAKING The American Public Power Association, ElectriCities of North Carolina, Inc.,

Florida Municipal Power Agency, New Hampshire Electric Cooperative, Inc.,

Massachusetts Mm}jcipal Wholei;ale Electric Company, the City of Anaheim, California, and the Town of Lyndonville, Vermont (hereinafter, "Publicly Owned Systems") 1.,.J1~r~llYc:1s,-.

,,}~BR~~::!BEID94iJts~#P:rtof the Commission's July 25, 2000 order2 denying the petition for

• rulemaking submitted in this docket by Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc. (hereinafter, "Petitioners"). In the alternative, the Publicly Owned SystemS,I',(?,94~§,tJ:C;?p,y~D,g,.gK,r--:e,,,.

':..*_:,;,.:.,_1._.,_*-*~1 '~.*,.,.,..,.,,., * ,*~ * , --".*'1/4 ..* ~---*. ' ,* .* , _.* - ,**

1 The Publicly Owned Systems filed comments concerning the Petition for Rulemaking on March 22, 1999.

The members of the Publicly Owned Systems group are described in Appendix A to those comments.

2 65 Fed. Reg. 46661 (2000).

I. MOTION FOR MODIFICATION OF THE JULY 25m ORDER A. The Commission Should Modify the July 2s'h Order to Remove The Porti.ons of the Order that Relate to the Commission's Claimed Authority to Impose Joint and Several Regulatory Responsibility.

The July 25 th order sets forth in detail the grounds for the Commission's denial of the Petition for Rulemaking. The reasoning expressed by the Commission in denying the Petition may be viewed as falling into two distinct categories: (1) grounds that are based on the position that the Commission has legal authority to impose joint and several

• liability or "regulatory responsibility,"3 and (2) grounds that do not depend on such claimed legal authority.

Specifically, in the course of denying the Petition, thr,,f,,9wmi§~,!QD)J,.<j9I~S~.~9-'.'.

,m:,:&!,!,SS,9.!,§"'~Y.J~~~~~tiBRHt~~amtQtlwr,~omrnenters:Jh~t tbe,Coqmpssion lacks .the legal vI!Hfuc;>.Jjty;;,tqjIDpo~e joint and several *regulatory resp.ortsH)jl'ity. For example, the Commission asserted that it has "broad statutory authority under the [Atomic Energy Act]

to take necessary actions to protect public health and safety," including the imposition of

• joint and several regulatory responsibility where necessary. 4 The Commission also rejected the argument that the imposition of joint and several regulatory responsibility 5

.. rt~ver _.. approved" contra.cts proy,iding for t11e

'[<:*-t_., ~ *,~,~-~ . '... , ,:. . '.. *:,'. ,*, ... ~-. ::*. _*j' '. *..: ,,*; : :."~ ; : ,~ , -,. * * -,* ., *::. * ; .* *. \ * * \.~: ... ,

pro rpta, a.llocati<)!l

• <* ~- . * .*-:* *, . "_;.;F * *'**.

• _,:-:;.

of_nuc_le~rpl.antcosts.

!": ;,_ ', \(~.:*:,\('";: >,,_.~t* :** --;,_-" ;,<~"**:_;. '* ,,. .. ;.::,~:~. :,.:_;_;2 :* ~-

3 In the July 25 th order, the Commission explained why it'believes the term "regulatory responsibility" is more precise than "liability" in this context Publicly Owned Systems use the terms interchangeably herein.

4 See Comment JO and Response, 65 Fed. Reg_ at 46664.

5 See Comment 4 and Response, id. at 46662-3.

2

However, a number of the grounds stated by the Commission for denying the Petition are independent of any assertion as to the Commission's legal authority to impose joint and several regulatory responsibility. For example, the Commission stated that, insofar as the allocation of liability for plant costs was concerned, the petitioners had failed to support their proposed distinction be.tween operators, operating owners and non-operating owners. 6 The Commission also pointed out what it viewed to be internal inconsistencies in the reasoning of the Petition. 7

• .'I\_ "';f.

.x_,-

~ ~

o. \ regulatory Notwithstanding the fact that Petitioners and other commenters had raised

s~./ questions concerning the Commission's legal authority to impose joint and several responsibility, those portions of the July 25 th order which address the issue of

_ ___::.-------:e-.------------. -

s ~ ",}!

_-2/' ~ (- " .legal authority are not n~f~§.~'!n'.J_Q the Commi§~Lo_ii_~disposition of the Petition for 0

~sc,-1 Rulemaking at hand. Other reasons independent of the Commission's claim of legal r:-_..,c~\.:-0' authority are stated in the July 25 th order, and those reasons may constitute legally 0-,i-sufficient grounds for the Commission's action. The portions of the order that discuss the Nci' Sd *

---

r~ e 011'.

• Commission's claimed legal authority are in the nature of dictum which needlessly rais_es~t,/;~:,-

issues that are a matter of substantial legal controversy. . o+-.=Yh--c.

&1/_(\,~1I.

Where other grounds for denial of the Petition for Rulemaking may be deemed to provide a sufficient legal basis for the Commission's action, 8 the Commission should 6 .

See Comment 17 and Response, id. at 46665.

7 See Comment 20 and Response, id.

8 This is not to suggest that the Publicly Owned Systems agree with the Commission's reasoning in these areas. Rather, the point is simply to note that the July 25 th order contains reasoning on which the Commission may rely for its action without engendering further controversy as to the Commission's legal authority to impose joint and several regulatory responsibility.

3

s,;n~~9.~;;,~-~,£f,i,fiS~~~,~-k~:gt~,f,~~!~.<;t~l~~t**Y. For this reason, Publicly Owned Systems request

.,,_ * - ~ " * - - - _ _ __ c- . ~. . - *-* - ,. _,_. , -* r.**. ;,,':..., ......~-

• that the Commission modify its July 25 th order to eliminate those portions in which the Commission asserts the legal authority to impose joint and several regulatory responsibility on licensees.

B. **,;tlt_flJe_,,~f!"!!!!iflP~{-9~f!i~e§,"'!::'.M'!t!ihclh~-,!ul~,~S::'lf!c,('!r,!~t,_.::>

. $_hould,on.fii;m.,tfi!ll:4f[e,.~letlrlllY!li'lS.l!!Jiy~(;q9.{h!.,~ge,;{'1,,g_;r~ftK *

• ,C;,'Q.mmissw.nls.rCla_im~4,J#.g4kA'YJhJ1,_riJJ.-:.!'!cc.lmeJ!f~r-lo,i,;tltJl!l/*xr

$t1,:,,,~r<<lrl!i!KYlmf!t:J,J~~R.9l!:.~i~i/j/,y:t!J.r:SY:~h/f.i!!J-f;"!l~JIJf;o;:,,,,.

,.:~~'!l!'J!':~~tt,n-,A~tually,,Settk.~,~°'-~~e1;c,,,i:s:~:*'P1!f!:,1!'!:t~'!li!l.t.*j In the event that the Commission declines to modify its July 25 th order as set forth

\-t~r frort'I pcµ:ti~~

h.~Y~Jp~ "

rjg~t tq ,.c~_all~nge th.~--Cgmw,i$~i911'

• *-<--**.*.*,, .... *-,*'c-. , '*' * . *" ***'

s }eg~ .~\lthorityJ<>.illlpose joint and <;;' C2 cr-e~ ~

,::.. *c:,:,,..,,.w.*:,,:,:.',"*,-'*.*?*..c;",*'*:*:*lfo.- ~\t.t..

-~:~Xe,r~J:,t~g4~~t~D.:'.{~$PPB&J1liltty, de npvo;at such tim~-,a~ tqe __Cp~~~-~9R,II1~~,-~~!~any, ,-~ ,s\ _ a.s

~o, ...,-r,

'"~r"~*"tR,~i~rRt~-~. . ~i!t.P!~w.~4J 1µ~1J9tjty i.~.,~,,.~P~~~fi~,J~siH~t-~~JHpg:. . .:*- r ,-e:/(tc.,

Such express confirmation would be consistent with the manner in which the i s.s i.,."f!..s identical question was resolved in previous litigation. Specifically, the Commission first claimed that it had the authority to impose joint and several liability in its "Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry" (hereinafter, "Final Policy Statement"), 62 Fed. Reg. 44071 (1997). Following denial of Publicly Owned Systems' request for reconsideration of the Final Policy Statement, the Publicly Owned Systems filed a petition for review in the U.S. Court of

• Appeals for the District of Columbia Circuit. American Public Power Association, et al.

v. Nuclear Regulatory Commission, D.C. Cir. Case No. 98-1219. The NRC filed a 4

Motion to Dismiss the petition for review on June 8, 1998, arguing that the NRC's Final

~11_,I

-,__ :J~ Policy Statement was not ripe for judicial review -,g\Jl~~g~gg\9-.DJ~J1,li~f!\\;1!,,7,},.!%'... , 0 ,

(_ -~~}' ~Q;--~-~~;-~~~!::~. t~-~1::Jt.l~~-' ~;~~,~~,.~~~~~-~cs. ~hflJ~&~Bg~~~-tgn:~f .~~~'~P-~~,!~,c,~S-~:~~/?JP,?~,~- ' , ,

• " ~ r,;.

L, r.,l'(_j'a-~ :;:;"~* (~ *. ') .J.~iiU:~:e~~~s;~~~~r~,~~;~~~,~~2'.,;~Bl~-~~"~-~~~h:~~~,ff{~.~/,~;~,:i,~,~'~'~"'-~r-~S~,,i~TTJ?f$}fJi.S~?::m~~g::

?.~t~~~-~c:c,,

-~

~ { \) \ *r'"()-( of the specific facts that the agency believes waI'.l"a11_tJh~ ~~t_i,c:,;1(J~mphasis added).

r_ *r;:;:_,*..,,._._,. ',;*,,,._, :.:, .., :,, >-*'>-"/ ..,.: *.*, ... ;,..-.. :., ,,!.,,',,,, . .,*-:.:.*:_:,*.;*., .*:,.,;*.* .... ,- ,; .. -.,. ,,., ': '-- ..**"*.* ,, ."* :**

N"""'t \-~'\._~ll-- -~1ubsequently, counsel for the Publicly Owned Systems discussed the pending Motion to 1' a,c- ,-!CJ *'\' ,J; <t,"'

-;::.-<, ':i ~ ~,l* Dismiss with the NRC's counsel, and received NRC's authorization to include the

' ~ x_ ,

0

( 'QJ2. S~,-_'"')_following statement in their answer to the NRC's Motion to Dismiss:

"\) -I' ~L,-'!~~:}'\_,f Counsel for petitioners is authorized to state that it is the

~x ';:! NRC counsel's position that, should petitioners see.k_to "0 _'1 /,i.,,,"J _raise and litigate ab initio the legal issue of whether_th_e__

_ 1/2. """/c:,...' NRC has the authority to impose joint and several liabilit)'__

' .v 2n minority licensee/owner~, __s.,y~b. ~c~q.~JJ~ng_~woµld.notbf?.* --

\~ ~ _pr~yJµg~.g 1?,y p~titi_OI}~rs'c.1wfpiirsiiing the piesen,t litig~tion .. ',

. NRCcounseI,states that it can for~see TlQ c;.i:r:~ui;n~tan.c=es in*.*!,

.,:ivh.i_ch:Ji ~pulcl. a.rg~~ qt.b,eQYi,~e ...

"Petitioners' Answer to Respondents' Motion to Dismiss," filed June 18, 1998 in D.C.

Cir. Case No. 98-1219, at p. 3. On that basis, the Publicly Owned Systems advised the

• court that they did not oppose dismissal of their petition for review on grounds of lack of npeness.

In a per curiam order issued August 3, 1998, the Court of Appeals dismissed the action on the following basis:

ORDERED that the motion [to dismiss] be granted.~

a ency action at issue is not ripe for judicial review at this

~ See Ohio Forestry ssociation v. Sierra Club, 118 S.

Ct. 1665 ( 1998) .. Jhis,dismissal .is without,prejud_ic~, to any rjgh~:peti,t~QP~r.~ n1~y.hay~ !o,~haB~ng~Jhe _agency,ac,tion.at,_

.)sst1e in ..an,appropriat~ circ,umstance ...

5

.. - ~ W ~ <AJ- W ovi IcL b-e_ --1/"--e,_. e.... t-+ <LC+- rt.') ., ---r/~e b se. j v\_ (.l_ --J--or

,¥1-:.:_ JI!, h f ~ \ ( .,J U (_ -0\:e.._ s+~ ft-- -h f~

wtod t ~-e_ Je rd 4 /

~~ Jvt-\:_d o Thus, in prior litigation involving the Commission's claim of authority to impose joint and several liability, the NRC and the Court of Appeals recognized that the appropriate setting in which to raise a challenge to that authority would be in the context of the Co~ssion's assertion of that claimed authority .in a specific factual setting.

~ '

~~ '

'\_,X:. V The NRC should adopt the same practice here. Commis~ion dictum in an order u

':-) .v41.t"'denying a petition for rulemaking is no more "rip~" for review than a policy statement,

• . ~ yJ ~ ' '

\it, "-.ov~./t* and the same pragmatic reasons favoring resolution of a legal issue only if it should arise

~~ e,

\~\,-t,,~ (' ~"- ,_,, -.l in a real situation is particularly pertinent in this case, as was recognized earlier by the

\ I}- QD(\_

, Q,~' o-- ')(

• NRC. 1Et8E~~B¥,z:,fl:leF'fp~s~j(?n,skH~Jfi,,staft,f~~~:>~Y,J;>aq>,V11~X<J?.h~lenge,,tlle,:~C;,,s,-_, .

u \, v'-

0-~'x 0 ~ 1f:£~L~H~!1P~ttx~o.ip:1pQ&,~.j9;i,_9;;~cts,~~rK~ -~~m!A~99':-,ff~l?:'J~~U~i~tx;,jp~.,~Py.Sific.,fact9al-'. i s'>I"' '"s~W:u&,.llfhfl.P:V.~;Wi~Jve.,int~.~tt,h~tboth,tll~,,:,NJlG*and*the;,partieS:'Shall:;;'if,'necessary;~,;>

II.

Participants in this rulemaking proceeding face something of a dilemma as a result of the NRC's decision to include in the July 25 th order an extensive discussion of its claimed legal authority to impose joint and several regulatory responsibility. Parties that question the basis for the NRC's claim of legal authority must decide whether to seek review of the Commission's order as it now stands. In earlier similar circumstances, both the NRC and interested parties agreed that the optimal way to proceed was to defer resolution of the legal authority issue. Publicly Owned Systems believe this can be

\*

accomplished by: (i) a modification of the July 25 th order to eliminate those portions of the order that assert the Commission's legal authority to impose joint and several 6

,t,i¥1~R1~1~,i~~r:zilii~r.~'1!tiit:~P~!,PH~,g~e,;;~~,~~J;;{Qtt!!;ip,,§,~~JQ!;\,i~llz,g~,~~h;;;'tt1>>

,,J(jl!e Commission declines to take either ofJh~~~ ~Q..a~µp1,t§,(QL~1J.~A,,Q!h~r-

!>;;',,.~*i,'.*z:.:,~~?i;SJJ?£\¥?f?,~~r;?i§:1Jrfi:.~R~if<J}~?~*~t~~iJ?'.!Jl{i~t§:tr~1'l3t~~;f:t\11{t!iJi-:a:itt!i~}(j~~;'f:{~~l_:;J~tf.t~'!!?~.-;.:-x,,ctl.s{,;r,;~] ::*, :~9 *.:~~ ~ f0'<~(*a.~ Ui\1.:,?,. *~*%-::*. i;,;J.~~11

,3~9rµpp0~--~o~i~xS~,~grr~J~@>~e,g~,,~u~ptjJ~'./~,~,?~Jgr.!a.te~-~~0,Iµtion)."t~en~1,!~~li9!~*,;:.,

• 1:',;tJa~~i,9.t:?§.~f!fffi~;r~~x,~~~~-~~.~!1¥.~Bf::~5iJH!t~.?~t,,,e!fl~{:,:.]}1e grounds on which rehearing

• is sought, in such event, are as follows:

A. The Commission Lacks Statutory Authority to Impose Joint and Several Liability.

The Commission has assumed that its statutory mandate to protect the public health and safety confers the authority to hold any single licensee responsible for 100% of the costs of operating or decommissioning a nuclear generating unit. However, as the petitioners noted in their Petition for Rulemaking, there is nothing in the Atomic Energy Act or the NRC's regulations that authorizes the Commission to impose "liability" of any

• sort, let alone "joint and several liability," on nuclear plant licensees. The NRC's change in nomenclature to "joint and several regulatory responsibility" does not obscure the fact that the Commission seeks to override express contractual allocations of financial responsibility among the co-owners of a plant. The Commission simply lacks the statutory authority to take such action.

B. The Commission Has Failed to Follow the Required Procedure for Adopting a Policy of Imposing Joint and Several Liability.

Although the NRC argues that its new policy is only to consider imposition of joint and several liability, the plain fact is that the Commission's new policy is a complete 7

reversal of the NRC' s long-standing previous policy of accepting pro rata allocations of cost responsibility among co-owners of a nuclear generating unit. Even if it were assumed that the Commission possesses the legal authority to adopt its new approach, such a fundamental change in policy may not be adopted absent a rulemaking procedure establishing a new policy. However, no such procedure for the policy change has been followed. 9 C. Imposition of Joint and Several Liability Constitutes Prohibited Retroactive Rulemaking and is Legally Impermissible on Other Grounds.

As Publicly Owned Systems previously have argued, nuclear plant licensees (as well as regulators and the investment community) have long relied on the NRC's historical acceptance of joint ownership contracts setting forth specified allocations of cost responsibility. See "Comments of Publicly Owned Systems on Petition for Rulemaking," filed March 22, 1999, at pp. 4-9. The imposition of joint and several liability represents a complete revers81 of the Commission's long-standing practice in this

• regard. Thus, even if it were assumed, arguendo, that the Commission has the legal authority to adopt a policy of joint and several liability -- a point, which Publicly Owned Systems by no means concede, and, in fact, vigorously contest -- the NRC clearly lacks the discretion to apply that new policy to joint ownership arrangements which were 9

The Commission's consideration and rejection of the Petition for Rulemaking does not constitute a substitute for a formal notice and comment rulemaking procedure. A formal rulemaking procedure would establish whether a change in policy is required in order for the Commission to discharge its statutory duties. However, as the Commission has recognized, payments toward decommissioning have continued unabated even in the extreme circumstances in which nuclear plant owners were forced into outright bankruptcy. See Final Policy Statement, 62 Fed. Reg. 44071 at 44077 n. 3 (1997). Clearly, the Commission has expressed no concern that there is an impending crisis in nuclear plant funding that requires the adoption of a new policy of imposing joint and several liability.

8

.T developed in reliance on the prior policy. See Bowen v. Georgetown University Hospital, 488 U.S. 204 (1988). The imposition of joint and several liability constitutes prohibited retroactive rulemaking, and is, on that basis, legally impermissible. See "Comments of Publicly Owned Systems on Petition for Rulemaking," at pp. 9-12. Furthermore, in light of the numerous existing joint ownership arrangements premised on the pro rata sharing, of costs, the imposition of joint and several liability violates constitutional prohibitions against the impairment of contract, abrogates constitutional rights of due process, and

• constitutes an unconstitutional "taking" of property.

III. CONCLUSION WHEREFORE, based on the foregoing, Publicly Owned Systems move the NRC to modify its July 25 th order to eliminate those portions of the order that set forth the Commission's claim of legal authority to impose joint and several regulatory responsibility. In the alternative, Publicly Owned Systems urge the NRC to confirm that affected parties have the right to challenge the Commission's legal authority to impose

• joint and several regulatory responsibility in any future concrete instance in which the Commission seeks to exercise that claimed authority. Based on the disposition of the previous legal challenge to the Final Policy Statement, we assume that the Commission would find the latter alternative acceptable. However, Publicly Owned Systems are open to such other relief as the Commission may adopt as would accomplish the same result, namely, to defer until a concrete situation the resolution of a substantial legal issue.

If the NRC declines to modify its July 25 th order or provide confirmation of parties' rights (or provide equivalent relief) as stated above, Publicly Owned Systems 9

• respectfully request rehearing of the July 25 th order on the grounds set forth 10 Part II, supra.

Respectfully submitted,

('

Attorneys for Publicly Owned Systems Law Offices of:.

Spiegel & McDiarmid Suite 1100 1350 New York Avenue, NW Washington, DC 20005-4798 (202) 879-4000

, September 22, 2000

CERTIFICATE OF SERVICE I hereby certify that I have on this 22nd day of September, 2000, caused the foregoing document to be sent by first-class mail to all parties shown on the attached list.

• Law Offices of:

Spiegel & McDiarmid 1350 New York Avenue, NW Suite 1100 Washington, DC 20005-4798 (202) 879-4000

Joseph R. Egan, Esq.

Martin G. Malsch, Esq.

Egan & Associates, P.C.

LeBoeuf, Lamb, Greene & MacRae, LLP 11710 Plaza America Drive 1875-Connecticut Avenue, N.W.

Suite 2000 Washington, D.C. 20009 Reston, VA 20190 Mr. Marvin S. Fertel

• John Holt, Manager Nuclear Energy Institute Fuels and Transt>ortation 1776 I Street, N.W. National Rural Electric Cooperative Assoc.

Suite 400 4301 Wilson Boulevard

.ashington, D.C. 20006-3708 Arlington, VA 22203-1860 R. John Gianfrancesco, Jr., Manager Mr. Mark J. Wetterhahn Administrative Support and Special Projects Winston & Strawn .

Florida Power & Light Company 1400 L Street, N.W.

P. 0. Box 14000 Washington, D.C. 20005-3502 Juno Beach, FL 33408-0420

• Garrett D. Edwards, Direc.tor-Licensing PECO Energy Company Richard N. George, Esq.

Nixon, Hargrave, Devans & Doyle, LLP Nuclear Group Headquarters Clinton Square 965 Chesterbrook Boulevard P. 0. Box 1051 Wayne, PA 19087-5691 Rochester, NY 14603-1051 Mr. James M. Levine Mr. Gary J. Taylor Arizona Public Service Company South Carolina Electric & Gas Co.

Palo Verde Nuclear Generating Station Virgil C. Summer Nuclear Station Mail Station 7602 P.P. Box 88 P. 0. Box 52034 Jenkinsville, SC 29065 Phoenix, AZ 85072-2034

I John T. Ward, Esq.

K.N. Kappatos, Vice President Sullivan & Ward, P.C.

Engineering & Operations 801 Grand Old Dominion Electric Cooperative Suite 3500 P. 0. Box 2310 Des Moines, Iowa 50309-2719 Glen Allen, VA 23058-2310 Richard D. Barker, Manager William DeGrandis, Esq.

Fossil & Nuclear Operations Paul, Hastings, Jan ofsky & Walker Oglethorpe Power Corporat~on 1299 Pennsylvania A venue, N.W.

2100 East Exchange Place Washington, D. C. 20004-2400 P. 0. Box 1349 Tucker, GA 30085-1349 Richard J. Midulla, Exec. V.P. & General Mgr.

Michael A. Swiger, Esq.

Semh1ole Electric Cooperative, Inc. .

VanNess, Feldman, P.C.

16313 North Dale Mabry Highway 1050 Thomas Jefferson Street, N.W.

P. 0. Box 272000 .

. Washington, D.C. 20007-3877 Tampa, FL 33688-2000

• John D. Draghi, Esq.

Huber, Lawrence & Abell 605 Third A venue 27 th Floor New York, NY 10158

46661

• .:z. In§ 920.302, paragraph (a)(3) is . ACTION: Denial of petitioll..fur . Company; Delinanra Power 1k Light revised to read ll!i follows: * .rulemaking. _* *

• Company, South Mississippi Eleptric *

• Power Association, _md Washington U20.302 Grade, size, pack. and container . SUIIMAAV:-The Nuclear Regulatory * .

• Electric Cooperative, Inc. The

• regulatlori. * .Commission ~C or "Commission") is petitioners requested that the NRC _

(a)* *

• denying a petition for rulemaking * *

• amend the enforcement provisions*of (1) * *

• wbmitted by the Atlantic City Electric NRC regulatioi;ua to clarify NRC policy *

(2) * * * - ..

Company, Austin Energy, Central Maine regarding the pobmtial liability of joint *

(3) Maturlty Requirements. Such . . Power Company, Delmarva Power&: owners if other joint owners become- *

• kiwifruit shall have a minimum of 6.2

• Light Company, South Mississippi * :financially incapable of-bearing their . *..

percent soluble solids at. the time of inspection.

• * .. ~ c Power Ass_ociation, ~d . ' share of the burden for safe operation or ,.

-Washington Electric Cooperative,.Inc. *. **decommissioning of a nuclear power (PRM-5o-64). The. peJitioneiuequested j>lanl .* . . .- . * . * * - _ .

that the enfore!!Inent provisions of NRC .The petitioners are.concerned. that the .

PART 944--FRUITS; IMPORT " * ~tions.be.am,ended, to* cler.i.fy-.NRC . NRC's "Final Policy Statement on the .

REGU~TIONS ..

bur~~~-* * .*

. * ?~licy reg~g the-~otential~ility of R,estructuring and Economic. ** * *. .

3. In § 944,550, paragreph (a) is '

• _Jomt-owners*if:~ Joint o ~ * ;*. Deregulatiol,1 of the Electric Utility * * .

revised to read B1i follows: . * * . bec_omfl.financ,aJly*mcapable ofbeanng . Industry;' (Policy*Statement) published .

• thmr ~ o( the* on Augwrt 19, 1997 {62° FR 44071), has * *

• f 944.550 Kiwifruit Import regullltlon. . . .ope~a,~ or decom~~suonmg of~ /

• _. resulted in con.fusion among joint- . * * *

~~~u:~:=;~=:t~ct . :&'t~~~~,=~~t.~J:ie~~on -

of 1937, as amended; the importation .

n

din~f:i~~~7!:f&tru:

NRC !!,~~1.U! n,~t t~ ~P;D:88. * * . *** .* *

• owner of a relatively small share of a. .

af:the.

• into the United.States of any kiwifruit _ . respoDSl~~ti~~:~ 01_1erating or * ,

• nuclear power plant. .ID: the Policy -.

• is prohibited unless such kiwifruit .

• dec_QlDlD.lSSlD~ cp~ p1ll'8tl8Ilt to ~C

• Statement, the Commission indicated meets all the -requirements of the U;S~ regulat.C1~;1'<l~~bi ?n co-Qwners m ,. that it "reservee the right, !ll highly *. * '

No. 1 grade as defined in the United a u:um.ner .lllc.~lB~t With contractual . unUBual situations where*adequate ..

States Standards for Grades of Kiwifruit ow,nersbip agreements,. except, and,.only protection of ~e public healt4 and . : *

(V CFR 51.2335 through 51.2340), except ~-a lut~ort;-wh~'.highly ~usual> *. safety would be compromised, if such * .

that the kiwifruit shall be .not badly ..

• ofarcumsthe..~ s 'n,3latmg_ to ~e PJOt0<1:ti~

• _. ~on _w~_.not tab~,1D co1!si'!8_r

• misshapen," and an additional tolerance * -. -pllblic 8 ~~alth and-~ reqwre

• rmprnnng iomt and Beveral liability -on*

• of 7 percent is provided for kiwifruit iti,~o; the petitio~-would not :JJD.prove, - ** co-owners of more then de .minimis ** * ,

that is "badly misshapen, and except the NRC'aregulatory ;process and *,- * *

• shares when orie or more co-ownBIB that such kiwifruit shall have a . . *

• main~ the same level of prot~ 0 { *. have defaulted. (This is as opposed to .

minimum of 6.2 percent soluble solid11. pie public health and,~ety prorlc!ed * , , dividing costs by using a pro rate share ::

Such fruit shall be at least S~ 45,;,i*

• nnd er current Co~m~ regulaticna, *

• appI¥ch...l The petitioners believe-that a ..

r

. which means there shall be a maximum legal-precedent, and policies.* : . * , *

• joint owner could 1incur the burden of .

of 55 pieces of fruit-and the average ADDRESSES: Copi!IB of the petition fur *

• all, .or an excessive portion, of a plant's

• weight of all samples in e specific lot rulemaking, the public comments

• costs if other joint owli.ers *or the . '.

• must weigh at least a pounds {3,632-

• receiv~, and the NRC's letter of denial . operators defaulted or became:;

kilograms), provided that no individual _to the peti~oner ere available for public

• financially incapable of bearing their*

. sample may be less than 7 pounds 1.2,

• inspection or copying in the NRC Public 8here of the-burden. The petitionms * -* *

• ounces (3.472 kilograms). Document Room, 2120 L Street NW: * . believe that the NRC has changed its ..

• * * ,. * (Lower Level), Wa.ehington, D.C. These

• policy so that it:would DBW-ignore -~ .

• documents are. also available at the*

• existing *pro rate cost sharing *_ *.--. * : *

• Dated: July 27, 2000. NRC's rulemeldng website at http:// *.

• errangements thatit had p1:evi01rilly * * , -. *

• Ro~rt C. Keeney;* .tuleforum.llnl.gov. * * * .sanctioned, The* ~etitioners stated ~t _* ,

Deputy AdminiEtrator, F.ruit and V-egetable. FDR FUlfflfEFI INFORMA110N CONTACT: :.. !_-* . the NRC has published no .inforIDBtion.'.,

Programs, ** * .*.

[FR Doc. 00-19342 Filed 7-27--00; 1:45 pni]

• B.r~.a~.h~$~f* Office of Nuclear *' >. regardirig what would...const:itute a*-d,i-Reector Regulii-tion, *U.S. Nuclear ** _. . *minim.is shme and thauhe particular_. -

IIIWNG COD£ 341~ . ,, . .

. Regulatory Com.mission, WBBhington, circumstances.\Dld~which the NRC ,. -*.

=================== ~ DC 20555-0001, telephtJDe (301) *415-,,

• might find the imposition of joint and

• t 978; e-mail-bjr@nrc.gov.

• several liability µeeessary ta protecrthe NUCLEAR REGULATORY . SUPPLEMENTARY INFORMATlON: :' : : public hmrlth and safety are not defined:

COMMISSION *. The petitioners-have concluded that"

• The Petition * **

• these factors have. caused much * : .

• On January 5, 1999 {64 FR 432)°,.the*, *. confusion and liilcertainty about the

• . [Docket No. PRM-50--64] NRC published a notice of receipt:of a . pote~tial liability of a joint owner.~ and ,*

petition for rulemeking (PRM) ft.led by

• can a:dversely affect.the ability tOl raiae .

Atlantic City Elactitc Company, Auatln the Atlantic City E l ~ Company, ~ . capital in :an :uncertain market that is Energy, Central Maine Power *.* . -Atmin Emugy, CentralMaine*P_ower undergoing consolidation and _

Company, Delmarva Power & Ught. . _ _ _ _ . .* . ...

• restructuring. ,_ .. * ** * * - * * * * * **

Company' South Mlsal1alppl* Etectr.lc . l In the FiDal Policy Statemant cm the- _. The peti tioners.reque11ted .that the. ** .

Power Auoclatlon, and Washington r- *. lblstructudq l!nd Deregul,ition or the Electric isrue of potential liability among-joint-* :

Electric Cooperative1 Inc* Denial of UtUity Indm!Jy,"' publuihed on August 19, 1997 (62 owners...be.re_solved by e.menc:lingtlte* *

• FR 44071), the N1IC refsm!d to "joint rmd sevtff!ll Petltlon tor Rule,naklng.."' . lllilblllty," AA diM:twed subsequently in this notice, regulations co.ncem:ing emon:ement in .

the NRC believes that "Joint and_ l!ll!V!lrW regulatory .to CFR part 50. The petitioners,

• AGENCY: Nucla~ Regulatory nisponaibillty" more BCCUMltely n,flecta the concept proposed that the NRC's regulations be .

Commission. * **

• intended m the final policy ststeml!lllL . .

• amended to provide that if tbe NRC

46_!}62 Federal Register/Vol &s;**No. 147./Monday, July ai, 2000/Proposed. Rules

• . im.~0~11 additional -requirements to*. , .: *.*, .* essential to protecting public.health and

• retroactiv~ly impose joint and several . i protect public health and safety, the.**.: . -safety, e,g.,*where one otthe other co-* .. liability, citing Bowen v. Geozgetown

• 0 ;.

. NRC wouldlooldimt, ID__the entity*. * . :: .. owners iti'no-longer capable of pa~. . University Hospital, 48& US 205 (,._988).

• licensed to operate a uuclear:power * :. ,-:, .ita p.ro mta share of costs. The mle **. * . (1) ..

. P,~tto~e ~hatever.costs_are_ * ,* ** -~

• change conte~plate4 by the:petltiori. *

• 1!-esponse.:CoIDD)i~sion action *..

• mcurred m meeting those reqwmments. could prohi'b1t the-Commission ~om ..

• erurunng that opera~ or *

• r

• The ptltitionars also'requested that the : . remedying su~ a situation. It wo~d: ,

• decommissioning funds are available :

• ff * ,. regulations be amended to.provide tha\', , sugge'!lt. that no matter bow inucb a co- *. from co-applicants/co-licensees.*

~ if the NRG imposes these additional,, . owner's financial outlook* changes for* regardless of the. contractual .

-<< * . *requirements *on-co-oWDers (licensees)..: . the worse from the time.of initial *:.. . arrangements among co-owners for*pro M . *wlio are-notlieenaed to op~te: the* . * .,

• _licensing; the C~inmis!iion may*not ~a,* ~ta s ~ of c~sts does not constitute*

! *..

• plant, tha *NRC would not-llDpose upon. all necessary ~on to ensure safe . *~ . a retroactive action. Contrary to thll

l.i! any of thosa licensees a proportional .

• operation or decommiilsioniiig. Such a**

• commenter's assumption, the .

" ** . nspomibility greater than that reflected . scheme would be inconsistentwith the* Commission never "approved~* the * .*

!)! in contracta establishing the allocation.. Commisiion*s longstanding authority. to private contractual arrangements fo~ the

i . .

1L . of respODBibility among the co-owners-. ; *

• take mgulatory action in *situations- . *** **

• sharing of costs among co-owners/co- *

• Public Co~nts 011 du, Petition

.- * * * µivolv.ing changed circumstances from licensees, The Commission's *

.. : ... * ::., **initial:licensi:ng,SeeAtomic~ergyAct. considerationofco-applicants'/co-f; . , ~ .. Th~ NRCrece~".8d-7&comments*. *.. *: '.' §§ 186, .1B7, _42 U.s:c. 223~, 2237; 10

• Uce1:19ees' cost-sharing arrangements t,

• covenng 20 ~~:C areas &om 1& ; *.* * ~ 50,100; Cf., AlJ,Che111Jc~ Isotope t . ** _commenters, ....., of ~ho~ were licensees. Enrichment; Inc.; LBP-90-28, 32 NR,C . determining, under 10 CFR 50.33,.if the initially was solely for the purpose of

"/ . . * . or-groups 1'8presenting licens~ 0~ ~ .

• 30 (1990):(Licensing Bo~ sustained . . co,applicants/co-licenseea had the * **

) * ~8-co~entera.11 ~~ elegnc .utilities . *staff ~vocatio~of cons~o~ f ermits. - financial.qualifications necessary to .

1* . (mcluding five cooperatives} and five_~ . * .. ofa licensee tbitt*had failed:to disclose .. : *construct and operate the nuclear power ft .:

comm~D.ts weN from industry gtoupa,. * - * ~ ~e ~ci_al c:onditi~ during.the * . pl_ant. After the Commission assured ** *

!; Of ~ uidustry i:l'°upa, two represen1't<l . onguial licensing pi;oceeding). _ ** : itself that the co-applicants' /co- ..

.* ;,' electr:ic*coo~eratives and three . : ~- ., * :::_ , . Comment 2. ~on-operating co-own~rs licensees' financial qualifications .

ft IBf1:9~e1~.ted invest~owned electric**. :: ...

• should:not be liable for more than thell

• provided for reasonable assurance that*

utilitie~ .. ~of!l all_ ~f the.comm..en~**: co. n ~ y . ~ d ~po~ share of . co-applicants/co-licensees together I

_ . .agreed with_ the pe~tionms that NRC . : ..addi!,ional. ColDIIll8~f-on~lDlp~sed~. . . would be able to fay for all nec~ssary *

.s~o~not~p?se Jaint_ands~v~ ... , . reqU11'9ments. (1) . . . *. -.costsofconstruction and operation, the

. . . liability ?n-1ts _li_c~nsees .. The .*. ". .***. * *

• Response: See response to Comment *commission's inquiry was satisfied and

. coope~tive .utili~es also agreed with ,: . 1. * . . . .- . the a ro riate finding could he made.a

• _ oth~ issues 9!1d in general favo1:9d_ the,, Comment 3.:The PoliCY; Sta~ent has .. The tl'~sion has reviewed co-

• f;\_ . p~tion. Th~ mvestm;-owned-u~tie11, '*.. created uncertain~ ~- mmon~ owners . owners' /co-licensees' provisions for fU disagreed with ~theussµennd, .. .-* .. '. ,,

• becau~ the,Commiss10~ co_uld unpose ... decommissioning financial assurance, t!

• consequently weze ~aµist the petition,.,--~ . operi,.ting or decommiea10~ costs on . suant to*lD CFR 50. 75 .in a similar .:

,> The .topic areu 11USed by the ** , *. . .* co-owners greater than their contractual pur * .

L

(_1 .commenter& fo~ (~$ the nuµibei-o~ ob~gatione..This*policy~ould aft'~ the ..

comment8I'IJ making that statement . *.. , ability of co-owners to raise funds m Mr. alifi ~

'danc~ on financial di *

( ..:

• appearing in paren~ses_)..The NR(;'s. :: , ;financial markets. (&)> . . . .. _. qu cations s_c1oses no intent to, t; . nsponaes are-contained in th~. * ., . :*;_!:. * * -Response: The Commission believes th

!lpprove e specific co -sh~ st t 1 . . paragraphs_ after*each-comment:.". '* ,.-,:- *. *that, given the lim,itations. of this policy* . arrangements ma~e b_etween licensees,

§: :-* Comme!1t l. The Policy Stateµienfi~ : ' to highly. unusual.circumstances and i~s as opposed to reviewing the* . * ..

'?* at odda with.the pm ~ta-share . : .... *.:* ., inapplicability to those co-licensees* .

• _ . 8;1"l'angements to ensure that the

¥*; * . _contra~el agreements (reviewed and *** . with de minim.is shares, minoricy . . . _ . hcens1;9s toge~er l?qssess the necessary I *~ approved by the NRC). 1!he Commission licensees will not experience significant.. fJnanci~ qualifications. Altho?gh power L.,' . should clarify thatit will n,ot iinpase,.' : .. *uncertainty. The.Commission notes.that - reactor li_censes frequently recite the i*) . operating or decommissimrlng costs on. . comments on:the petition from.investor~ *o.wnership percentages of the CO*.

l .ij co-owners greater than their. contrar;:tual. .owned utilities or their representatives : . ~cen~ees, those percentages _do not l1 Qbligations.(10) *. *... . **. : ,_:_*. didnotexpressconcimiaboutthe.

• mvanab~yi:9fi~~ee.]!ocationof *

!} . -R~spo11se~11te~mmission:hu .* :**:.- impactofraisingfimds-in:capital * ,._.

• deco~s1onmg~dingobligation.s.*_

! [

• d~ded against taking the requested _: . .-. maruts*, even though investor-owned

• By~ting o~ership percentages, ~e

aritio~ because it could .~versely "!fed .- . u~ties must go to essentially the same.. staff did not ~tend t o ~ any finding

, public health and safety,m those highly . capital markets as the minority owners, . about pr~p~rli?nal allo~ation ?f . . .

1 ; unusual circumatances whttn public.** . * *. *

• Comment 4.. NRC imposition of joint .*

• decomnuSS1onmg funding obligations.

J. *health1Uld safety araat.risk and all*.:* . ~ and several liability.on co-licensees in* Therefore, the co-o~ers had n?

. other:remediee have been e:xbaustecl-, . : . a manner-inconsistent with co*licensees' reasonable e~ec~tion that ~e~

, . , Because all co-owners are co-licensees.* . contractual agreements would constitute regulatory obligations were limited by

- l: .

• each licensee is ult:iniately responsibl~ . ... unlawful retroactive-rulemaki,ng (4) and

• those arrangements. In the absence of

-:

• for*complying with the CommissioJl"s . *. *is an unconstitutional impa.innent of

• any re~atory "approval"*by the NRC

• *! regulations and the terms of th~ license., -contracts and a .taking" of property** * * . of the I!nvate con!I"actusl arrangement

• l Although; in virtually all situations.;the .. :without compensation. The Atomic* . by co,lic~nsees with respect top~ rata

. *Commission expects that obligations.. ,. . Energy Act of-1954. as amended, does .* c.ost ~haring. there~ no legal basis for under a license will be _handled on a pro :* not contain explicit authori?.ation. for .a claim of:.~troactiVlty

• rata.bssi.8 among arownem, it-cannot.*.* . the*Commission: to impose retroactive: *

• rul e outl.~~l.1

~ Y unusualsituati'

. . . ona m, * * ; . * *..-wea. -** on the sub.JUct of"JOm* t an d several * . Operating 2

However, since1984.theNRChssnotn,qUUllll License Stagueview of tha 6nancw.

. which it would seek a co,,owner, to pay:~ .. _µability i and therefore, the Comirussiori.

• qualifications of "electric utilitl.u," u defined in more than its pro mta. share when~.. ,.: .,, .>- does not possess autho_rity to ... *.. :*

• the Co~ion's regulations (10 CFR 50,zi *

,.. 5 Federal Register/Vol.* 65, No: 147/Monday, Juiy 31., 2000/Proposed Rules***. 46663 7orthermore, Commission action

• no other regulatory action would protect . of j~int md ~ev~ respondbility on*a

~ognizing joint and several regulatory the public _health end safety; such as .. ;, *

• casHJy:..CSSe basis, when thie responsibility on cc,.licanseee 3,- e.g., to

• through bankruptcy courts or financial consideration becomes necessary in * -

ensure that operating or . markets ..(Financial markets would come highly unliSuel cucumstances after all decommissioning funds are available into play, for example, if a financially * -. other remedies have failed. A unit*by*

• from co-applicants/~licensees *

• trouliled licensee ware to seek . * * . unit listing of plant o:wnenhip

• regardless of the contractual refinancing of.its ownership alwe or if* percent.ages is contained in NUREG/CR-::-

111T8ll8ements among co.owners for pro it'were to sell its share to another party.) . 8500, Rev, 1, "'Owners of Nuclear ~ower rata sharing of costs, does not alter and

• Comment 6. The NRC should clarify . Plants" (March 2000). * * .*

therefore leaves undisturbed the . *. .. .its intent with reapect to potentiel . , . , -The CoJDJDission iioes not intend.to contmctual-rights of a cc,.owner to :financial obligations of nuclear po~

• imp_ose inordinate financial stress on its recover costs from another co-owner * .* plant liCBIJB89S. (3) * *. * . * . . . licens~s by seeking their payment o(

under their contractual agreements in a. . 11.esponse: The Coinmiseion believes additional safety-related costs above private cause -0f action or-in a * . - that it Jiu already clearly stated its

• their normal pro *rata* ahare as .a nsult 9f bankruptcy proceeding. The * . **

• intent with respect to potential financi.i *default by a co-owner. The Commission enforcement of those arrangements obligations of nuclear power plant * *

• recognizes that, .particularly for smaller .

appropriately lies with the parties to licensees in the Policy Statement.*. ro the municipal and cooperative enti.tiea, ,*

those pro rata-share contracts and the axbmt that the petitio~ers are seeking

• requiring them~ ~y for more than --

courta, not the NRC, which is neither a

• clarification, the Com.missi<1n trustii*that thejr pro rata share (an already . * : .-. ,

• party to the contracts nor a tribunal with * *the petitioners will find that . * *. sutistantial sum. particularly for a authority to enforce *them. Because

• clarification in this denial no,:i.ce,-. . smaller entity} could be . ..

Commission. action to impose joint and

• including ~e C-ommis11ion's iesponse to . counterproductive by potentially .. *-

several responsibility has no legel effect.. these comments. The Commission notes caushlg additional defaults by. those- .

upon the private contractual

• that the term, "joint and several

• entities. In practice, it is unUkely that .

arrangements for cost sharing ainong*co-* liability," may have connotations for . the Commission would be able _to obtain licensees, it per se follows that this *contract law that the Commission did . . ad<4tional funds &om *a sariously ...

Commission action does not constitute not intend to ~vey and that the term financially stressed 111118ller licensee _to an unconstitu~onel impairment of the "joint and several regulatory *. * * . cover a defaulting licensee's safety

• contractual cost sharing agreements : responsibility" more ~tely reflects : 9Xpenses. As indicated, tpe Commission among co.licensees, nor does it * * . the intent of the Comm.issii;,n's policy

• would only consider imposing a joint ..

constitute an unlawful taking."** statement Comm.ission*guidance on *** ... and several regulatory responsibility jn.

In sum, the Commission never *.financial o~ligations is alao provided-in highly unusual m.d, presumably, quite*

approved the private contractual the '.'Standard Review Plan on Power . *rare cin:umstances after all other . . .

• arrangements among co-licensees/c~

• Reactor Financial Qualifications and :feasible remedies have been exhausted..

• owners for sharing of costs. Therefore, Decommissioning Funding Assurance,. In any event,. the Com¢ission does . *.

Commission impc;,sition of joint and NUREG-1577, Rev. 1.(March 1999).* . not find it advisable to_establiah what .

several regulatory responsibility.that Comment 'I. The NRC should define would constitute~ de mini.ml,~ of may be inconsistent with these private Dl' clarify "de minimis share"-and "joint plant ownership applicable to all: , , .

• cont;ractuel arrangements would not

• and several liability" in "highly unumal cireumstances. If the Coinmission ~

constitute retroactive rulemaking. * :

• circum.etances." (5) -- *. . * * - * . . _

• to establish a numerical de minimis. :*

Comment 5. If the Commission . r* Response: NJ referenced m the Policy threshold of general applicability, it _

imposed an additional financial burden Statement, '_'de mini.mis share'.! means a *woul~ likely do so by_ a process that on the remaining owners of a nuclear power plant (NPP), and if the rate*

level

. even*m

?ft;} ownership ~low which, . provides an opp~rtunity for public *..

y unusual circumBtan.ces * . comment on the proposea numerical

• authorities would not .allow additional .where recourse to all other potential . . threshold. However, the Commission ..

costs into the rate bub, the result would remedies (e.g., rate ~ators, *. , *. ,. . does not bell~ thatestabliiihing a O ,.

drive the c~owners into financial

• bankruptcy proceedings} has failed. the *

• numerical de minimiB threshold is .

distress, creating further risks. This , ~mmi~11)~n would not attempt to .appropriate; the Commissimi needs to' action would not only affect :minority Impose JDmt and seyeral regulatory ~ n:ttain flexibility to rel!lpond to P!1fflci:tlar

• owners of NPPs, but also investors and -responsibility_ on mwority co-owners of CU'CWllStances.. , . .. . , . . . . . ..

• State regulatory authorities. (6) . ! * . _ a. plant. The Commission did not specify As noted abov1t, lhe Commission ,.

Response: If a licensee experiences a numerical _velue in the Policy .. * . . .. intends to wie the term. **j~int OJ!d . * *.- -: :

financial difficulties, thnninority * .

• Statement _for "dunin.imisshare. The , several regulatory responsib~ty" in:. * .

owners of NPPs as well as investors *and Commission recognizes that a. licensee *.* place of "joint and several liability."** : ~

State regulatory authorities would likely with a relatively small percentage of . With regar-licensees tQ BBS1pll8

~1pan1~llity 1n lieu or "joint mid~ Commission believes thatitis -. . additional heelth ana aafety *., .* *. . , . .

liability. . . * ** * *.'. .- .., . : ** appropriate to eveluate the imposition* expenditures in excess of their p~ rata *

---

=-------:---~------------------------------------------

16664 . Federltl llegisfer /Voi. 65, No~ 141/Mcinday, July 31, 2000./Proposed Rules

. .fhare only after all otheriamedies ha~e.' necessary actiom to.protect public . bankruptcy courts were unable _to solve been*exhausted (e.g.* rate regulators, * . health and safety; See AEA section l&l

• the problem. * * * * * * * **

bankruptcy courts},*. ..:' * . ,,*,. ;. _, *.. -~*, b &:: i, 42.U.S.C. 2201 b &i. In fact- . *. Comment 13. II the Com.mission does Comment 8._ NRC's rule on Financial .. apecifi~ ~tances joinf and several not act early (in ident!fying and acting

• K: Assurance Requirements for : * * - . ,. : * *

• regulatory responsibility has been - .,

• on a licensee having deteriorating Decommi.ssioning Nu~ear Power Plan~ imposed. SeePubUcServiceCompany** financial circumstances) and fails to * .

II

• 3

~

(September 22',.199a; 63 FR 50~65),

• identified problems that could result*

of New HampsluM (Seabrook Station, track the actual performance of an Units 1 and 2), CLI-88-10, 28 NRC 573 ** operator, because it could act late in any from trying to impose joint and several**.* (198&): Order agairui( Safety Light event; the Commission runs the risk of liability. The Policy Statement does not Corporation;itll predecessor.-* * *. * *- *. - * . tplerating a deteriorating perform9l'., .

explain why it ~

• a position different cotporatfon, and several wholly-owned . rather than i.mposb.lg the discipline of.

from the rule. (3} * * * * * * ,. **-. * . *

• subsidiaries of the predecessor (54 FR more rigorous regulatory attention. (3l

~asponse: The Commission does .not 12~35-38; 1989). "1though joint and Response: The Commission believes l:t bell~ thfJ,t _the ~olicy ~tatement takes several regulatory ~spoiisibili~ has *

• that it has the means at its disposal to 1:~

I;.

a position different from thir final rule only been imposed m compelling identify and respond to a poor on Financial Assurance Requirements. * ,circumstances where such action wes .

• performer- Through oosite inspections, *.

l for Decommissioning Nucleai: Pelwer necessary to protect public health and - thB biennial decommissioning ~ding r~ ,

'I'.

Plants,. ~t suppl~melits ~t.-.Th~ * .. _: .. *

• s~ety; the ~ommissiori ~lieves it hll.8 - status reports required to be filed by *,

~* *:

. Comnuss1on addressed- "Jomt liability'.* . thia authonty. Further, it would be NRC power reactor licenseea under 10 in some detail in the proposed rule, .. _, inconsistent with the Commission's- CFR 50.75(f)(1), and other actions, the published in thB Federal RegistBr on*. -* .., oveniding mission tci protect public .* Commission is able to keep track of the

• September 10, 1997 (62 FR 47588); Both* health and.aafety for the Commission to performance of an operator. The

.:-.,-;* the rule and the Policy Statement stated ~ova-its flexibility to impose joint* Commission expects that these that under virtually all CU'CUIDBtances, . * . and several regulatory responsibility in . meche.xµsms would identify

'i . pro rata division of decommissioning is tho!ie highly unus~al tjrcumstanc:es performance problems end problems L! - acceptable, although the rule did not where this action is warranted. That - with respect to the adequacy of financial 1fj explicitly address financial assurance ~ position is reflected in the Policy -

"bmhly unU8Ual circumstances. ** - . *

• Statement (see 82 FR 44074) and the Comment 9. The'Commissfon should - Commission rejects the petitioners'

• assurance before extraordinary measures would need. to be taken.

Comment 14. The Commission should focus its au~rity on the defaul~ ctr . mquest that this JJOSition ~ ~odi.fied._ amend its regulati9ns to provide that, ill; owner and 1ts customen, not the other ** Comment 11. The CoIIllD1Ss1on baa imposing new arrangemenbl, it will look co-owners and their cwrtomers. (1).. * . more than sufficient safeguards to fl¢ to the entity having the operating Responll6: The Comin.isiiion intends to 8IlBUre adequate fundµig for NPP

• responsibility, and allow the existing focus on those licen.seea that am not* . * . opprations and decommissioning, even contractual arrangements to work in fulfilling their obligations undm: the;:

• if one of the licensees experiences. _ how that operator passes through the license to protect public health and: .,* - - financial distreas. (1) * * ** additional costs. The Commission

_safety. This would include a focus on ; ** lfesponsa: The Coin.mission believes should not impose obligations beyond .

the *defaulting licensee and; as necessary the ~temant to be generally true, but the pro rata or othe, contractual

~ protect public ?,ealth and safety in * * .

• C?nmden that there coul~ be * .. arrangements in place. (3) *

• highly unusual circumstances, on the _crcumstanc:es under which recourse .to Response: The commenters suggested.

. o~er non-de ininimis licensees; . *the financial resources of ell joint , that the Commission initiate a Comment 10. The Commission doea owners that exceed a de minimis rulemaking that would.require the NRC not have the legal authority to* impo.se . . *. ownership level might be needed for the to look: first at the plant opei:ator for

• joint and several li~bility. (10) Joint and . perticulsr plaut involved. * * : . financial responsibility. The _..

several liability ia neither necessary nm:**

• Co'!IDlent. 12. Private m ~ m s are Commission does not intend to initiate-.

proper, and should be promptly *.*, . ..: sJlffici!n~ without reallocation by the -~ this action because the plant operator.

• removed by an appropriate nile. (1) '

• Co~s1on. There is ~o basis to-- . _ may not have majority, or even any, .

Reaponse: The im1_>ositi?n 9f a , _.. ~lieve that the Commission is better - ownership of the faci,lity in many cues.

regulatory obligation of jpmt and several informed or better able to resolve . The Commission also believes that it responsibility for thB costi! of operat:icm

• financial lllTIID8Bme~ts than the parties should 'retain flexibility in those highly.

and decommissioning among ~ _-_ and the relevant capital markets. (3)'

• unusual circumstances when pro rata .

licensees of a NPP ia neither expressly - !fespone: The Commissi_on agrees

• responsibility would endanger public authorized nor prohibited under the ~ th t_ha co~enters that. m generel, it health and safety. With respect to the ...

Atomic Energy. Act of 1954, as amended. llil not bett~ ~rmed nor better able to

• commenter.1' .position on contractual*

(AEA) or related case law. However 'the resolve_ finanrnal vrangements than the arrangements, the NRC has addressed

-Commission has broad statutory. *'

• parties and the rel~~ capital markets. that poi,nt in its responses to Comment&.

authority under the. AEA to tab _. * ***

• However, the ~ m o n II charge is to 1 and 4. *

• * * * * *,:

• protect the public health and safety,

• Comment 15. The Commission's

-Comm!M--Ion*~ dial If~ 1119 , *

-.T'lul-_ When the Commission finds that a *

• assertion that the policy statement

• Inadequate fundl to operm lhl, far:lllty safaly, thti- licenaee'11 financial distress is such that .expressed no change in prior NRC .

appruprial& action would be £or Iha Cammi.Illian ta* .*11 cannot fulfill its obligations under the practice or policy" is "inexplicable and

• order Iha plant to c:aueaperatioa. Thua, it would license, and, as a result, the public's - insupportable.". Also, th'e commenter be highly unU11WfurlhaColllllD1Mion. toiectulre-openlion undar tbMe c:in:uimtancu. HoWWIII'.

health ....

d sefety-ft*y

&llA

_ttr___._ed, the _. . says that the Commission be lllllUL~

• should llhould II co-liCllllSIIII or co-owns der.ult on. ltl *.' *

• Commission is obligated to address t:hiit provide for a.full hearing if it considers

• decommiaiomng fundms obligation. and*, In turn; -. situation*with whatever remedies it is

• a change in these policies in the future:

- cn,nta ii halth imd IIUIJtJ' problem and no othsr *

• authorized to use, Also, as indic:atsd (1) _ _ .

• n,couru wom availllhla. tha Commlulon would be b mome llbly ta MIIJlt ID impo~

• Jo.int.imd aavilml.. *

• a ova, the Commission would only Response: The NRC policy statement regulatory nnponaihlllty fur dacommlAIDDina . . . intervene llB a last resort when the-. in question was published in the ..

funding 011 the remaini.DI ownmalllc-. financliil markets, rate regulatora, or* - Federal _Register as a proposed policy

. Federal Register/Vol. 65, No. 147 /Monday, July 31, 2000/Proposed Rules

' statem8llt with a request for public* *. *obligations). The petitioners also do* a.ot requmdt to impoe~ the ~~ments .

46665

~ comment on the issue of the allocation provide any evidence as to how.the

• and attendant financial demands first on of responsibility of C<rOwners (61 FR * *. gran~g of the petition w~mld improv~ . the co-owner licensed-to operate the 49711, 49713 (1996)). -The Commission the NRC's regulatory .procesa by : . . NPP if financial problems* affect one or

• responded to the comments it received : continuing to ensure that the NRC may . more of tho licensees of an.NPP. . .*...

on joint and several liability in take any*necessary steps within its .R.euoDII for Denial * . .

publishing the final policy statement (62 . statutory authority to asBUM protection- .* * * .,.... * * ** * ,*.- *.

FR 40071, 49074 (1997)): Moreover, ,

• of the pu'b.lic health and safety; , ~- * . . . .The Commission is 4enying the .

because all co-owners are co-licensees . * . Comment_ 18. The NRC's existing *. ,*

• petition for the followµig masons:

under NRC 181Jal precedent, See*Public financial assurance regulations are.clear 1. The Coau:niuion has almady .

Service Co. of Indiana, Inc. (Marble Hill n,gardinJf a licensee's and operator's .

• publicly articulated its policy.not to

• Nuclear Generating Station, Units 1 and* responsibility for ensuring safe * : , impose operating or decommissioning 2), ALAB--459, 7 NRC 179, 198-201 operation end that decommissioning

• costs on co-ownBrB in a mannei' * * *

• (1978), the Commission does not believe costs .are available for a NP,P. (5) The inconsistent with their agreedcupon pm that the policy statement represents a . commsnters fail to* see what- *. "' .- m~ shares, except whenhighly unusual.

change in previous policy. In ~ddition,

• extraordinary circumstances could arise circumstan~s relating to .the protection as described above (Comments 1 and 7),

• that would allow NRC to consider . of.the p_ublic s health and safetr ~uire under virtually ell circumstances short implementing joint and several liability. this ~ction'. rurther, !he Co;8llDISSI~n has of1he highly unusual, the Commission given their view that -decommusioning .* publicly articulated its policy that it .

will continue to defer to co-owners' funding levels are adequate. (2) ... would not seek more ~ pro ra~ . .

contractually determined divisions of .. Response: .See.responses to Commenl!I shares ~m co-owners with de zru.nmus

• responsibility. Also, see the ~sponse to 6 and 1.. . .* * * . ownership of the NPP. .. *.

Comm8llt 10. * . .

• Comment 19. The petitioners * - 2. The PRM would reqUU'8 th~ . .

Comment 16. H the rulernaking . ~ _ ,;nisconstru~ the plain language of the lice~ed operator cif III plant to be _th~* :

continues, it is important that the PRM : *NRC *Policy Statement (~) ;* * * : . _ first unpos~~ upon by ~e Commission be more closely aligned and consistent , ]1.esponse: The CommisS10D agrees . should additional reqwrements be .

with the existing financial aseurance with the comment. because thit policy *. needed. This unnecessarily limits the requirements. (1) .

• statement discussion llJ).d the responi!! Commission's flexibility when h.Wtly 1l.86ponse: The Commission does not to Comment 15 have indicated that :.. unusual circumstances affecting the intend to initiate a rulemaking in under virtually ell circwiistances shott *, protection of public 'health and safety re~ponse to the PRM. Hence, the point *o~ th~ r~ end highly unus11al, the ~C . would .1'89-ui.re .action by the . *.

nused by the commenter is moot. .

• will continlll! to d'efer to co-o~en* *. CommlSSlOn.

Comment 1'l. The PRM should not be contractually determined divisio~ of . . .3. The petitioners' attempt to establish granted because comm.enters disagree fun4ing rasponsibility._Howev_er, es one an artificial distinction betwpen the -

~th the petitioners' proposed solution, commenter noted, "The petition appears .operator, operating owner, and non-

• that would establish an artificial

• to 8S8Ulile that the NRC will impos~ . operating owner would be counter to .

.distinction between the operator, . joint and 1everal liability at the first sign Commission legal precedent within the opera.ting owner, and non-operating of financial difficulty or insolvency." context of Commission consideration of

• • owners that would shift the :financial This is not the Commission's intent. ..*

• the imposition of joint RIJd several burden to the operator or-operating *. Comment 20. The commenter is . . regulatory responsibility. * * *-*

owner. The PRM would not improve the *opposed to the petitioners' position that .. 4. Further, the petitioners contradict NRC's regulatory proceu, or benefit the

• the Commission should iequi.re _the *

• themselves by claiming that the industry, end could be subject to - entity (the co-owner and also the .*.* . Com.mission sh!;n,tld not impose ..

misinterpretation. The proposed cliqe licensed operator of the plant) to be the . operating or decommissioning costs on would unfairly and inappropriately

• first imposed upon by ~e Commission .co-owners greater .than their contractual burden the licensed operator, who could if additional mqui.remeiits are needed.. obligations. However, the P,etitioners be a minority co-owner, en entity the . There is no basis for singling out the

• also stated that the financial burden petition is atte~~ting to protect..

• operating co-o~~ ~or this ~ .* shoul~ be shilted to_ the operator or .

Further, the petitioners do not cite any burden. (1). . * * * * * * . *. *

• operating owner (with no reference to statutes, regulations, etc. that justify the Resporu;e: The Commission agrees

• the contractual obligations). .

proposed rule. (5) . .* * . with the comment, becaU9e the . ' , . 5. Commission action ensuring that

• Respon~e: The Commission agrees petitioners' position appears to b!i

• operating or decommissioning funds are that ~~g the PRM would establish contrary tn the position the petitioners

• available from co-applicants/co- *

• an artificial (and unwarranted far

• presented in c:;omment 1 (i.e.; NRC *

• licensees regardless of the contractual purpo~es of financial assurance for. . should clarify that 1t will not impose arrangements among co.owners for pro operati.ons end decommissioning) *

• operating or decommissioning costs on *. rata sharing of costs does not constitute distinction between operating and non~ co-owners greeter than th~ir contractual. a retroactive action, Contrary to the operating owners. The petitioners' obligations). Also, as noted in the

• petitioners' assertion,.the Commission.*

attempt to establish this artificial . . . response to Comment 1, 11

• 11

• NRC . never "approved" the private * * ..

distinction is counter _to NRC legal . ,_ ~ects that obligations under a ¥cense contractual arrangements for.the sharing precedent referred to in the response to will be handled on a pro rata by1s . . of costs among CD-0Wll8f8, The . .

Comment 15 (i.e., that all co-own1m1 ue among co-ownm*** * "'" Nevertheless, Commission's consideration of co- -

• co-li~ensees). Further, the petitioners' the Commieeion considers it necessary

• applicants' or co-licensees' cost-sharing position here appears to be contrary to to maintain the flexibility it has to ** arrangements initielly was solely for.the the petitioner's position as discussed in consider the circumstances* regarding purpose of determining, under*10 CFR C~ent 1 (i.e., NRC should clarify that essuran.ce of operations and * *.. . * . 50.33, if the CO'-applicants/co-licensees, it will not impose operating or .. decommissioning funds .on *a cas9-:by- . as a group, had the financial *.

decommissioning costs _ o n ~ cal!le b!lBis. The Commission do_es not

• qualifications necessary to cciristruct.

greater than their contra~. *i, ::-.*::;i,*. ', find merit in !l regulation that_yrould_. and operate the_ nuclear.power planL

• f *

' 46666 Federal Register/Vol. 65; No. 147 /Monday, July 3ti 2000/Propased Rules

~-~~~~~~~~~~~~=~=~=~~~=~~~~~~~~~~~~~~~=~=~~~~

-&u~1sequenlly. the Commission also. *.. ;

• is intended to addrees the identified

• For each issue,. state what specific

.. considered cost.sharing rimmgements*. . unsafe condition.. . . . change to the proposed AD is being

• with respect to decommiaaioning- . DATES: Co~ents must be ~~ived by . requested. . .* * :' * .

• Include justification (e.g.,*reasons or financial UBUrallC8, but did not *

• September 14, 2oor;>. . * ** ..

"approve'" the contractual arrangements *

• data) for each request. * * .

iJi ~t context either. ~ ~ y . *' ' : ADDRESSES: Submit comments in: ~- Comments are.specifically invited on Com.,mis,ion !lcti~n to recogofza joint. *

• triplica~ to the F'.ed~ral Aviation the overall regulatory, economic, * . *.

and several regulatory responsibility on A~stration (FAA), T.ranspot:t. environmental, and anmgy aspects of

• co-licensees does notcOllmtute AirplaneDiJectcirate, ANM-114, . the proposed rule. All comments

• mtroactive ,:egulatory action. *. -' ;;* .. . . Attention: Rules Docket No: 99-NM- submitted will be available, both before.*

8: Commissi~ ~on BD;SUring that 373-AD, i601 Lind Avenue, SW.,

• and after the closing date for comments,

. operatiug or decommissioning funds 1118 Renton, W~shington 98055-405&. * *: . . '.

• in the Rules Dock.et for examination by .

available from co-li~ees* regardless of Comments may be inspected at this**

• interested persons. A report * **

the contractual_ arrangeDients among co- location between 9:00 a;m. and 3:00 *summarizing each FAA-public contact

" owners for pro *rata ~ of costs does p.m., Monday through Friday; except.

• concerned with the subst.ance of this i', not. alter, .and th8l'!ffore leaves * * .*. Federal holidays. Comments may be ** proposal will be filed in the Rules t:,.'.' undisturbed, the coritrac;tual rights ~f ~

• submi~ed via fax to (425} 221...12a2. . Docket. . .

I co-owner to recover costs from *another Comments.may alsQ be sent via the * . *.

• Commenters wishing the FAA to *

• co-qwnei under their cont:racfual :Internet using the following address: g.. _ acknowledge receipt of their-comments

~ t s I.ii a priv~~ cause* of don'* anm*nprmcomment@faa.gov. Comments submitted in response to this notice t~

• or hi a banhuptcy p~eedi.ng. . *

• sent via fax or the Internet must contain must submit a self-addressed, stamped

~- . 7. Lastly, the PRM does* not show*how "Docket No. 99-NM-373-AD" in the ** postcard on which the following

.y * . the proposed rule would' improve the . subject line and need not be submitted

• statement is made: "Comments to .

f NRC's. regulatory process and mafuta.ili:: in triplicate. Comments sent via the -

• Dock.et Number 99-NM-373-AD." The

)\ . the same ~el o( protection of public*'*.* Intefo*.met as adttached electronic files must postcard will be date stamped and l: health and safety provided under . . :** .. be rmatte i:n Microsoft Word 97 for returned to the commenter.

• i CU!i'elit Commission regulations, legal .*

• Windows or ASCII text. Availability ofNPRMs precedent, and policies. ..* *. .* .. * . .

• Theservice information refereµced in

.., For reasons cited in this document, :* *. the proposed_ rule may be obtained from,

• Any person may obtain a c~py of this the Commission denies the petition;* * . ; . Boeing Commercial 4,irplane Group,. : ** a NPRM by submitting request to the FAA, Transport Airplane Directorate.

Dated at Rockville, ~land,~ 25.th ihly P.O. Box 37Q7, Seattle, Washington ANM-114, Attention: Rules Docket No..

of July, 2000. * , . . . . . * , *. 98124-2207. This.information may be 99-NM-373-AD, 1601 Lind Avenue,

. For the Nuclear Regulatory,.Commi.ssion. ., examined at the FAA, TJ"anspo~ * . . ~W., Renton, Washington 98055-405_6.

Anmtte Vietti-Cook, * - . . AirplllllB Directorate, lBOi Llnd SecretaryoftheCommission.' * ... ** .. *...

• Avenue,SW.,Rent.on, Was~on. Discussion *

. [FR Doc. 00,.:.19242 Filud 7.:.2~;.8:45 Bin}

• FOR FURTHER INFORMATION CONTACT: St.an * ** The FM has received a report that * .

• mwNci cooe 7llll0-01...P. * ... '.. Wood, Aerospace Engineel"; Airframe. corrosion was found on an axle on the ..

~ch, ANM-1208, FAA, Transport

• main landing gear (MLG) of a Boeing

• Airplane D.il'ectorate, Seattle Aircraft - Model 777-200 series airplane. The .

DEPARTMENT OF TRANSPORTATION :. Certification Office, 1601 Lind Avenu&;

• corrosion occurred in an area on which*

i . SW., Renton, Washington 98055-4058; chrome plating was missing.

! Federal :'lVliltlon Administration telephone (425) 221.:.2112; fax (425) Investigation revealed that the chrome 5 * - 221-1181. *

• plating on that axle was applied ,

• ij *,4 cFR Part** *

• su,PLEMENTARv 1NFOR11AT10N: *

• incorrectly. The manufacturer's records J

{ [Docbt Na. .,.111-373-AD)

RIN 2120-AAM-Comments Invited

• Interested pers~DB- are invited to .

indicated that 18 axles were plated at

• the same time, and the manufacturer has determined that the plating on these

• I * ** participate in the making of the* other axles (which are installed on a ,,

.total of eight airplanes) was also applied

• _;__, . Altworthlnau Directives*, Boeing *; *., _**. proposedrul e by suh IDltting

• su. ch. * . *.

.. ~ I m-200 ~rl~ Alrpln* *,. *:* ,. , written data. views, or arguments as, . "incorrectly. This condition, if not,

• corrected, could result in corrosion of

-; AGENCY: Federal Aviation they may desire. Comn;11i~catiolis shall the MLG axle, which could result in i Administration, DOT. . identify the Rules Dock.et number and cracking and failure of the axle. Failure ACTION: Notice___ of pro~osed rulem_ ..~.-~... . be submitted in triplicate to the address of one axle could result in loss of the *:*

(NP ~ specili_e~ above. All communications

- RM). * *' * * : ** * * ** * *

• receiyed on or before the closing date . ** MLG wheels on that axle. Failure of * *

SUMMARY

Thii document proposes the . for comments, speci£ied above, will be.

,more than one axle on one MLG could*

result in loss of multiple wheels and .

adoption of a new airworthiness- * . * . considered before tuing action on th11 reduced controllability of the airplane*

directive (AD) that is applicable to, ..

• proposed rule. The proposals contained on the ground. . *. .

certain Boeing- Model 777.:...200 series in this notice may .be changed in light

• airplanes. This proposal would require . - of the cohmients received.. . .. .

• Explanation of Relevant Servic~

replacement of certain components.: . * . Submit comments using the following . Information * .

• This action is necessary to prevent .... : format:... * * . * * * . * *' * . * *. . * * * . . The FAA has reviewed and approved corrosion of the axle of the main landing

• Organize comments issue-by-issue. Boeing Alert Service Bulletin 77'T-

• gear, which ~uld result 'in cracking and .For example, discuss a request to. . , * . * .

• 32A.0024, dated August 12, 1999, which fail~ of the axle, loss of the wheels on, change the compliance timtJ and a : *

• describes procedures for replacement of that axle, and reduced controllability of request to change the service bulletin existing defective MLG axles with new .

the.airplane on the ground. This action* refe~nce as two separate issues.:.. axles. Accomplispment of the actions***

.il I

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7 From: Stephen Lewis To: Emile Julian Date: 2/21/02 6:37PM

Subject:

Re: Response to Publicaly Owned systems' Motion Emile:

I wanted to acknowledge your e-mail, although I am not going to be back in the office until Tuesday, 2/26.

I will get back to you at that time.

Steve

>>> Emile Julian 02/21/02 01 :26PM >>>

Stu and Steve, Annette asked me to contact you for an identification of the basis for the statement in a letter to the Attorneys for the Publicly Owned Systems that a delay in response was due to the staff not "identifying until recently that we had failed to respond to your motion etc." Additionally, by this letter, if she is responding to the motion on behalf of the Commission, should the Commission be advised in advance of

. sending the letter?

Thanks, Emile CC: - Stuart Treby

DOCKET NUMBER PETITION RULE P.RM 's!J-i,cf

"( b'l~'-/3[)..) [7590-01 -P]

NUCLEAR REGULATORY COMMISSION 10 CFR Part 50

• oo J .6 P2 :57

[Docket No. PRM-50-64] 0

/'

Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, Sm.th Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.;

Denial of Petition for Rulemaking AGENCY: Nuclear Regulatory Commission .

. ACTION: Denial of petition for rulemaking.

SUMMARY

The Nuclear Regulatory Commission (NRC or "Commission") is denying a petition for rulemaking submitted by the Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc. (PRM-50-64). The petitioners requested that the enforcement provisions of NRC regulations be amended to clarify NRC policy regarding the potential liability of joint owners if other joint owners become financially incapable of bearing their share of the burden for sc1.fe operation or decommissioning of a nuclear power plant. 1 The Commission is denying the petition because the NRC's intent is not to impose responsibilities for operating or decommissioning costs pursuant to NRC regulatory requirements on co-owners in a manner inconsistent with contractual ownership agreements, except, and only as a last resort, when highly unusual circumstances relating to the protection of the public's health and safety require it. Also, the petition would not improve the NRC's 1

ln the "Final Policy Statement on the Restructuring and Deregulation of the Electric Utility Industry," published on August 19, 1997 (62 FR 44071 ), the NRC referred to "joint and several liability." As discussed subsequently in this notice, the NRC believes that "joint and several regulatory responsibility" more accurately reflects the concept intended in the final policy statement.

~ - 17n 7'/31/00 J'" '15FR 4"1

2 regulatory process and maintain the same level of protection of the public health and safety provided under current Commission regulations, legal precedent, and policies.

ADDRESSES: Copies of the petition for rulemaking, the public comments received, and the NRC's letter 0f denial to the petitioner are available for public inspection or copying in the NRC Public Document Room, 2120 L Street NW. (Lower Level), Washington, D.C. These documents are also available at the NRC's rulemaking website at http://ruleforum.llnl.gov .

• FOR FURTHER INFORMATION CONTACT: Brian J. Richter, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone (301) 415-1978, e-mail-bjr@nrc.gov.

SUPPLEMENTARY INFORMATION:

The Petition

• On January 5, 1999 (64 FR 432), the NRC published a notice of receipt of a petition for rulemaking (PAM) filed by the Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc. The petitioners requested that the NRC amend the enforcement provisions of NRC regulations to clarify NRC policy regarding the potential liability of joint owners if other joint owners become financially incapable of bearing their share of the burden for safe operation or decommissioning of a nuclear power plant.

3 The petitioners are concerned that the NRC's "Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry" (Policy Statement)

• published on August 19, 1997 (62 FR 44071 ), has resulted in confusion among joint owners of nuclear power plants regarding the-potential liability of the owner of a relatively smafl share of a nuclear power plant. In the Policy Statement, the Commission indicated that it "reserves the right, in highly unusual situations where adequate. protection of the public health and safety

' . I would be compromised, if such action were not taken, to consider imposing joint and several liability on co-owners of more *than de minim is shares when orie or more co-owners have defaulted." (This is as opposed to dividing costs by using a pro iata share approach.) The petitioners believe that a joint owner could incur the burden of all, or an excessive portion, of a plant's costs if other joint owners or the operators defaulted or became financially incapable of bearing their share of the burden. The petitioners believe that the NRG has changed its policy so that it would now ignore existing pro rata cost sharing arrangements that it had previously sanctioned. The petitioners stated that the NRG has published no information regarding what would constitute a de minimis share arid that the particular circumstances under which the NRG might find the imposition of joint and several liability necessary to protect the public health and safety are not defined.

The petitioners have concluded that these factors have caused much confusion and uncertainty about the potential liability of a joint owner, and can adversely affect the ability to raise capital *in an uncertain market that is undergoing consolid~tion and restructuring.

The petitioners requested that the issue of potential liability among joint owners be resolved by amending the regulations conceming enforcement in 10 CFR Part 50. The petitioners proposed that the NRC's regulations be amended to provide that if the NRG imposes additional requirements to protect public health and safety, the NRG would look first to the entity licensed to operate a nuclear power plant to assume whatever costs are incurred in meeting those requirements. The petitioners also requested that the regulations be amended to provide

4 that if the NRC imposes these additional requirements on co-owners (licensees) who are not licensed to operate the plant, the NRC would not impose upon any of those licensees a proportional responsibility greater than that reflected in contracts establishing the allocation of responsibility among the co-owners.

Public Comments on the Petition The NRC received 76 comments covering 20 topic areas from 16 commenters, all of whom were licensees or groups representing licensees. Of the 16 commenters, 11 were electric utilities (including five cooperatives) and five comments were from industry groups. Of the industry groups, two represented electric cooperatives and three represented investor-owned electric utilities. Almost all of the commenters agreed with the petitioners that NRC should not impose joint and several liability on its licensees. The cooperative utilities also agreed with other issues and in general favored the petition. The investor-owned utilities disagreed_ with other issues and consequently were against the petition.

The topic areas raised by the commenters follow (with the number of commenters making that statement appearing in parentheses). The NRC's responses are contained in the paragraphs after each comment.

Comment 1. The Policy Statement is at odds with the pro rata share contractual agreements (reviewed _and approved by the NRC). The Commission should clarify that it will not impuse operating or decommissioning costs on co-owners greater than their contractual obligations.

(10)

5 Response: The Commission has decided against taking the requested action because it could adversely affect public health and safety in those highly unusual circumstances when public health and safety are at risk and all other remedies have been exhausted. Because all co-owners are co-licensees, each licensee is ultimately responsible for complying with the Commission's regulations and the terms of the license. Although, in virtually all situations, the Commission expects that obligations under a license will be handled on a pro rata basis among co-owners, it cannot rule out highly unusual situations in which it would seek a co-owner to pay more than its pro rata share when essential to protecting public .health and safety, ~ ; where one of the other co-owners is no longer capable of paying its pro rata share of costs. The rule change contemplated by the petition could prohibit the Commission from remedying such a situation. It would suggest that no matter how much a co-owner's financial outlook changes for the worse from the time of initial licensing, the Commission may not take all necessary action to ensure safe operation or decommissioning. Such a scheme would be inconsistent with the Commission's longstanding authority to take regulatory action in situations involving changed circumstances from initial licensing. See Atomic Energy Act §§ 186, 187, 42 USC 2236, 2237;

• 10 C.F.R § 50.100; Cf., All Chemical Isotope Enrichment. Inc., LBP-90-26, 32 NRC 30 (1990)

(Licensing Board sustained staff revocation of construction permits of a licensee that had failed to disclose its true financial condition during the original licensing proceeding).

Comment 2. Non-operating co-owners should not be liable for more than their contractually agreed upon share of additional, Commission-imposed requirements. (1)

Response: See response to Comment 1.

6 Comment 3. The Policy Statement has created uncertainty for minority owners because the Commission could impose operating or decommissioning costs on co-owners greater than their contractual obligations. This policy could affect the ability of co-owners to raise funds in financial markets. (6)

Response: The Commission believes that, given the limitations of this policy to highly unusual circumstances and its inapplicability to those co-licensees with de minimis shares, minority licensees will not experience significant uncertainty. The Commission notes that comments on the petition from investor-owned utilities or their representatives did not express concern about the impact of raising funds in capital markets, even though investor-owned utilities must go to essentially the same capital markets as the minority owners.

Comment 4. NRC imposition of joint and several liability on co-licensees in a manner inconsistent with co-licensees'. contractual agreements would constitute unlawful retroactive rulemaking (4) and is an unconstitutional impairment of contracts and a "taking" of property without compensation. The Atomic Energy Act of 1954, as amended, does not contain explicit authorization for the Commission to impose retroactive rules on the subject of joint and several liability, and therefore, the Commission does .not possess authority to retroactively impose joint and several liability, citing Bowen v. Georgetown University Hospital, 488 US*205 (1988). (1)

Response: Commission action ensuring that operating or decommissioning funds are available from co-applicants/co-licensees regardless of the contractual arrangements among co-owners for pro rata sharing of costs does not constitute a retroactive action. Contrary to the commenter's assumption, the Commission never "approved" the private contractual arrangements for the sharing of costs among co-owners/co-licensees. The Commission's consideration of co-applicants'/co-licensees' cost-sharing arrangements initially was solely for

7 the purpose of determining, under 10 CFR 50.33, if the co-applicants/co-licensees had the financial qualifications necessary to construct and operate the nuclear power plant. After the Commission assured itself that the co-applicants'/co-licensees' financial qualifications provided for reasonable assurance that co-applicants/co-licensees together would be able to pay for all necessary costs of construction and operation, the Commission's inquiry was satisfied and the appropriate finding could be made. 2 The Commission has reviewed co-owners'/co-licensees' provisions for decommissioning financial assurance, pursuant to 10 CFR 50.75 in a similar manner.

Staff guidance on financial qualifications discloses no intent to approve the specific cost-sharing arrangements made between licensees, as opposed to reviewing the arrangements to ensure that the licensees together possess the necessary financial qualifications. Although power reactor licenses frequently recite the ownership percentages of the co-licensees, those percentages do not invariably reflect the allocation of decommissioning funding obligations. By reciting ownership percentages, th~ staff did not intend to make any finding about proportional

• allocation of decommissioning funding obligations. Therefore, the co-owners had no reasonable exrectation that their regulatory obligations were limited by those arrangements. In the absence of any regulatory "approval" by the NRG of the private contractual arrangement by co-licensees with respect to pro rata cost sharing, there is no legal basis for a claim of retroactivity.

2 However, since 1984, the NRG has not required Operating License Stage review of the financial qualifications of "electric utilities," as defined in the Commission's regulations (1 O CFR 50.2).

8 Furthermore, Commission action recognizing joint and several regulatory responsibility on co-licensees3, e.g., to ensure that operating or decommissioning funds are available from co-applicants/co-licensees regardless of the contractual arrangements among co-owners for pro rata sharing of costs, does not alter and therefore leaves undisturbed the contractual rights of a co-owner to recover costs from another co-owner under their contractt.:al agreements in a private cause of action or in a bankruptcy proceeding. The enforcement of those arrangements appropriately lies with the parties to those pro rata - share contracts and the courts, not the NRC, which is neither a party to the contracts nor a tribunal with authority to enforce them.

Because Commission action to impose joint and several responsibility has no legal effect upon the private contractual arrangements for cost sharing among co-licensees, it per se follows that this Commission action does not constitute an unconstitutional impairment of the contractual cost sharing agreements among co-licensees, nor does it constitute an unlawful "taking."

. In sum, the Commission never approved the private contractual arrangements among co-licensees/co-owners for sharing of costs. Therefore, Commission imposition of joint and

• several regulatory responsibility that may be inconsistent with these privat.e contractual arrangements would not constitute retroactive rulemaking.

Comment 5. If the Commission imposed an additional financial burden on the remaining owners of a nuclear power plant (NPP), and if the rate authorities would not allow additional costs into the rate base, the result would drive the co-owners .into financial distress, creating further risks. This action would not only affect minority owners of NPPs, but also investors and State regulatory authorities. (6) 3 As discussed later in this notice,. the NRC believes that the term, "joint and several regulatory responsibility" more accurately reflects the intent of the NRC's policy statement.

Thus, the NRC will use the term "joint and several regulatory responsibility" in lieu of "joint and several liability."

• 9 Response: If a licensee experiences financial difficulties, the minority owners of NPPs as well as investors and State regulatory authorities would likely be affected whether or not the Commission imposed additional responsibilities on the minority owners above their pro rata share. Also, the Commission would consider imposing any additional burden oniy under highly unusual circumstances in which no other regulatory action would protect the public health and safety,* such as through bankruptcy courts or financial markets. (Financial markets would come

.into play, for example, if a financially troubled licensee were to seek refinancing of its ownership share or if it were to sell its share to another party.)

Comment 6. The NRC should clarify its intent with respect to potential financial obligations of nuclear power plant licensees. (3)

Response: The Commission believes that it has already clearly stated its intent with respect to potential financial obligations of nuclear power plant licensees in the Policy Statement. To the extent that the petitioners are seeking clarification, the Commission trusts that the petitioners will find that clarification in this denial notice, including the Commission's response to these comments. The Commission notes that the t13rm, "joint and several liability," may have connotations for contract law that the Commission did not intend to convey and that the term "joint and several regulatory responsibility more accurately reflects the intent of the Commission's policy statement. Commission guidance on financial obligations is also provided in the "Standard Review Plan on Power Reactor Financial Qualifications and Decommissioning Funding Assurance" NUREG-1577, Rev. 1 (March 1999).

Comment 7. The NRC should define or clarify "de minimis share" and "joint and several liability" in "highly unusual circumstances." (5)

• I I

I

.i I

10 Response: As referenced in the Policy Statement, "de minimis share" means a level of plant.

ownership below which, even in highly 1,musual circumstances where .recourse to all other potential remedies (e.g., rate regulators, bankruptcy proceedings) has failed, the Commission would_ not attempt to impose joint and several regulatory responsibility on minority co-owners of a plant. The (;ommission did not specify a numerical value in the Policy Statement for "de minimis share:" The Commission recognizes that a licensee with a relatively small percentage of plant ownership is unlikely in most circumstances to have sufficient resources available t_o assume responsibility for significantly more than its pro rata share if a co-owner defaults. For example, relatively small portions of nuclear units may be owned by small rural electric cooperatives or small municipal electric systems. In addition, ownership arrangements and percentages vary substantially from plant to plant. Given this variation, the Commission believes that it is appropriate to evaluate the impositipn of joint and severa~ responsibility on a

. case-by-case basis, when this consideration becomes necessary in highly ,unusual circumstances after all other remedies have failed.- A unit-by-unit listing of plant ownership percentages is contained in NUREG/CR-6500, Rev. 1, "Owners of NuclearPower Plants" (March 2000).

The Commission does not intend to impose inordinate financial stress on its licensees by seeking their payment of additional safety-related costs above their normal pro rata share as a result of default by a* co-owner. The Commission recognizes that, particularly for smaller_

municipal and cooperative entities, requiring them to pay for more than their pro _rata share (an already substantial sum, particularly for a smaller entity) could be counterproductive by potentially causing additional defaults by those entities. In practice, it is unlikely that the Commission would be able to obtain additional funds from a seriously financially stressed

I

,I 11 smaller licensee to cover a defaulting licensee's safety expenses. As indicated, the Commission would only consider imposing a joint and several regulatory re~ponsibility in highly unusual and, presumably, quite rare circumstances after all other feasible remedies have been

• exhausted.

In any event, the Commission does not find it advisable to establish what would constitute a de minimis share of plant ownership applicable to all circumstances. If the Commission were to establish a numerical de minimis threshold of general applicability, it would likely do so by a process that provides an opportunity for public comment on the proposed numerical threshold.

However, the Commission does not believe that establishing a numerical de minimis threshold is appropriate; the Commission needs to retain flexibility to respond to particular circumstances.

As noted above, the Commission intends to use the term "joint and several regulatory responsibility in place of "joint and several liability." With regard to Commission regulations regarding NPPs, the obligations for w~ich the co~owners/co-licensees could be jointly and severally responsible are those in the Commission's regulations or identified in the license.

(See also the response to Comment 1.) By "highly unusual circumstances" we mean circumstances when the public health and safety may be at risk because of lack of appropriate action by licensees. The Commission would consider requiring other co-owners/co-licensees to assume additional health and safety expenditures in excess of their pro rata share only after all other remedies have been exhausted (e.g., rate regulators, bankruptcy courts). 4 4

The Commission recognizes that if there are inadequate funds to operate the facility safely, the appropriate action would be for the Commission to order the plant to cease operation. Thus, it would be highly unusual for the Commission to require operation under these circumstances. However, should a co-licensee or co-owner default on its decommissioning funding obligation, and, in turn, create a health and safety problem and no other recourse were available, the Commission would be more likely to seek to impose a joint and several regulatory responsibility for decommissioning funding on the remaining owners/licensees. *

• 12 Comment 8. NRC's rule on Financial f.ssurance Requirements for Decommissioning. Nuclear Power Plants (September 22, 1998; 63 FR 50465), identified problems that could result from trying to impose joint and several liability. The Policy Statement does not explain why it takes a position different from the rule. (3)

Response: The Commission does not believe that the Policy Statement takes a position different from the final rule on Financial Assurance Requirements for Decommissioning Nuclear Power Plants, but supplements it. The Commission addressed "joint liability" in some detail in the proposed rule, published in the Federal Register on September 10, 1997 (62 FR 47588).

Both the rule and the Policy Statement stated that under virtually all circumstances, pro rata division of decommissioning is acceptable, although the rule did not explicitly address financial assurance in "highly unusual circumstances."

Comment 9. The Commission should focus its authority on the defaulting co-owner and its customers, not the other co-owners and their customers. (1)

• Response: The Commission intends to focus on those licensees that are not fulfilling their obligations under the license to protect public health and safety. This would include a focus on the defa.ulting licensee and, as necessary to protect public health and safety in highly unusual circumstances, on the other non-de minimis licensees.

Comment 10. The Commission does not have the legal authority to impose joint and several liability. (10) Joint and several liability is neither necessary nor proper, and should'be promptly removed by an appropriate rule. (1)

13 Response: The_imposition of a regulatory obligation of joint and several responsibility for the

. costs of operation and decommissioning among co-licensees of a NPP is neither expressly authorized nor prohibited under the Atomic Energy Act of 1954, as amended (AEA) or related case law. However, the Commission has broad statutory authority under the AEA to take necessary actions to protect public health and safe_ty. See AEA section 161 b & i, 42 USC 2201

• b & i. In fact-specific circumstances joint and several regulatory responsibility has been imposed. See Public Service Company of New Hampshire (Seabrook Station, Units 1 and 2),

CLl-88-10, 28 NRC 573 (1988); Order against Safety Light Corporation, its predecessor co"rporation, and several wholly-owned subsidiaries of the predecessor (54 FR 12035-38, 1989).

Although joint and several regulatory responsibility has only been imposed in compelling circumstances where.such action was necessary to P,rotect public health and safety, the Commission believes it has this authority. Further, it would .be inconsistent with the Commission's overriding mission to protect public health and safety for the Commission to remove its flexibility to impose joint and several regulatory responsibility in those highly unusual circumstances where this action is warranted. That position is reflected in the_ Policy Statement (see 62 FR 44074) and the Commission rejects the petitioners' request that this position be modified.

Comment 11. The Commission has more than sufficient safeguards to ensure adequate funding for NPP ~perations and decommissioning, even if one of the Hcense~s experiences financial distress. (1)

Response: The Commission believes the statement to be generally true, but considers that there could be circumstances under which recourse to the financial resources of all joint owners that exceed a de minimis ownership level might be needed for the particular plant involved.

14 Comment 12. Private mechanisms are sufficient without reallocation by the Commission.

There is no basis to believe that the Commission is better informed or better able to resolve financial arrangements than the parties and the relevant capital markets. (3)

Response: The Commission agrees with the commenters that, in general, it is not better informed nor better able to resolve financial arrangements than the parties and the relevant capital markets. However, the Commission's charge is to protect the public health and safety.

• • When the Commission finds that a licensee's financial distress is such that it cannot fulfill its obligations under the license, and, as a result, the public's health and safety may be affected, the Commission is obligated to address this situation with whatever remedies it is authorized to use. Also, as indicated above, the Commission would only inteNene as a last resort when the financial markets, rate regulators, or bankruptcy courts were unable to solve the problem.

Comment 13. If the Commission does not act early (in identifying and acting on a licensee having deteriorating financial circumstances) and fails to track the actual performance of an

• operator, because it could act late in any event, the Commission runs the risk of tolerating a deteriorating performer, rather than imposing the discipline of more rigorous regulatory attention. (3)

Response: The Commission believes that it has the means at its disposal to identify and respond to a poor performer. Through onsite inspections, the biennial decommissioning funding status reports required to be filed by NRC power reactor licensees under 10 CFR 50.75(f)(1 ), and other actions, the Commission is able to keep track of the performance of an operator. The Commission expects that these mechanisms would identify performance problems-and problems with respect to the adequacy of financial assurance before extraordinary measures would need to be taken.

15 Comment 14. The Commission should amend its regulations to provide that, in imposing new arrangements, it will look first to the entity having the operating responsibility, and allow the I . existing contractual arrangements to work in how that operator passes through the additional costs. The Commission should .not impose obligations beyond the pro rata or other contractual arrangements in place. (3)

I I

Response: The commenters suggested that the Commission initiate a rulemaking that would I

require the NRC to look first at the plant operator for financial responsibility. The Commission does not intend to initiate this action because the plant operator may not have majority, or even*

any, ownership of the facility in many cases. The Commission also believes that it should retain flexibility in those highly unusual circumstances when pro rata responsibility would endanger I

. I public health and safety. With respect to the commenters' position oil contractual I

arrangements, the NRC has addressed that point in its responses to Comments 1 and 4.

.Comment 15. The Commission's assertion that the policy statement "expressed no change in prior NRC practice or policy" is "inexplicable and insupportable." Also, the commenter says that the Commission should provide for a full hearing if it considers a change in these policies in the future. (1)

Response: The NRC policy statement in question was published in the Federal Register as a proposed policy statement with a request for public comment on the issue of the allocation of responsibility of co-owners (61 FR 49711, 49713 (1996)). The Commission responded to the comments it received on joint and several liability in publishing the final policy statement

16 (62 FR 49071, 49074 (1997)). Moreover, because all co-owners are co-licensees under NRC legal precedent; See Public Service Co. of Indiana, Inc. (Marble Hill Nuclear Generating Station, Units 1 and 2), ALAB-459, 7 NRC 179, 198-201 (1978), the Commission does not believe that the policy statement represents a change in previous policy. In addition, as described above (Comments 1 and 7), under virtually all circumstance~ short of the highly unusual, the Commission will continue to defer to co-owners' contractually determined divisions of responsibility. Also, see the response to Comment 10.

Comment 16. If the rulemaking continues, it is important that the PAM be more closely aligned and consistent with the existing financial assurance requirements. (1)

Response:

• The Commission does not intend to initiate a rulemaking in response to the PAM. Hence, the point raised by the commenter is moot.

Comment 17. The PAM should not be granted because commenters disagree with the petitioners' proposed solution, that would establish. an artificial distinction between the operator, operating owner, and non-operating owners that would shift the financial burden to the operator or operating owner. The PAM would not improve the NRC's regulatory process, or benefit the industry, and could be subject to misinterpretation. The proposed change would unfairly and inappropriately burden the licensed operator, who could be a minority co-owner, an entity the petition is attempting to protect. Further, the petitioners do not cite any statutes, regulations, etc. that justify the proposed rule. (5)

17 Response: The Commission agrees that granting the PRM would establish an artificial (and unwarranted for purposes of financial assurance *for operations and decommissioning) distinction between operating and non-operating owners. The petitioners' attempt to establish this artificial distinction is counter to NRC legal precedent referred to in -the response to Comment 15 (i.e., that all co-owners are co-licensees). Further, the petitioners' position here appears to be contrary to the petitioner's position as discussed in Comment 1 (i.e., NRC should clarify that it will not impose operating or decommissioning costs on co-owners greater than their contractual obligations). The petitioners also do not provide any evidence as to how the

• granting of the petition would improve the NRC's regulatory process by continuing to ensure that the NRC may take any necessary steps within its statutory authority to assure protection of the public health and safety.

Comment 18. The NRC's existing financial assurance regulations are clear regarding a licensee's and operator's responsibility for ensuring safe operation and that decommissioning costs are available for a NPP. (5) The comm enters fail to see what extraordinary

• circumstances could arise that would allow NRC to consider implementing joiht and several liability, g_iven their view that decommissioning funding levels are adequate. (2)

Response: See responses to Comments 6 and 7.

Comment 19. The petitioners misconstrue the plain language of the NRC Policy Statement. (4)

Response: The Commission agrees with the comment, because the policy statement discussion and the response to Comment 15 have indicated that under virtually all circumstances short of the rare and highly unusual, the NRC will continue to defer to co-owners' contractually determined divisions of funding responsibility. However, as one commenter noted,

18 "The petition appears to assume that the NRC will impose joint and several liability at the first sign of financial difficulty or insolvency." This is not the Commission's intent.

Comment 20. The commenter is opposed to the petitioners' position that the Commission should requir9 the entity (the co-owner and also the licensed operator of the plant) to be the first imp<;>sed upon by the Commission if additional requirements are needed. There is no basis

-for singling out the operating co-owner for this extra burden. (1)

• Response: The Commission agrees with the comment, because the petitioners' position appears**to be contrary to the position the petitioners presented in Comment 1 (i.e., NRC should clarify that it will not impose operating or decommissioning costs on co-owners greater than their contractual obligations). Also, as noted in the response to Comment 1, "... NRC expects that obligations under a license will be handled on a pro rata basis among co-owners ... "

Nevertheless, the Commission considers it necessary to maintain the flexibility it has to consider the circumstances regarding assurance of operations and decommissioning funds on

• • a case-by-case basis. The Commission does not find merit in a regulation that would require it to impose the requirements and attendant financial demands first on the co-owner licensed to operate the NPP if financial problems affect one or more of the licensees of an NPP.

Reasons for Denial .

The Commission is denying the petition for the following reasons: *

1. The Commission has already publicly articulated its policy not to impose operating or decommissioning costs on co-owners in a manner inconsistent with their agreed-upon pro rata shares, except when highly unusual circumstances relating to the protection of the public's

19 health and safety require this action. Further, the Commission has publicly articulated its policy that it would not seek more than pro rata shares from co-owners with de minimis ownership of the NPP.

2. The PRM wou!d require the licensed operator of a plant to be the first imposed upon by the Commission should additional requirements be needed. This unnecessarily limits the Commission's flexibility when highly unusual circumstances affecting the protection of public health and safety would require action by the Commission.

3. The petitioners' attempt to establish an artificial distinction between the operator, operating owner, and non-operating owner would be counter to Commission legal precedent within the context of Commission consideration of the imposition of joint and several regulatory responsibility:

4. Further, the petitioners contradict themselves by claiming that the Commission should not impose operating or decommissioning costs on co-owners greater than their contractual obligations. However, the petitioners also stated that the financial burden should be shifted to the operator or operating owner (with no reference to the contractual obligations) .

5. Commission action ensuring that operating or decommissioning funds are available from co-applicants/co-licensees regardless of the contractual arrangements among co-owners for pro rata sharing of costs does not constitute a retroactive action. Contrary to the petitioners' assertion, the Commission never "approved" the private contractual arrangements for the sharing of costs among co-owners. The Commission's consideration of co-applicants' or co-

. licensees' cost-sharing arrangements initially was solely for the purpose of determining, unde:,*

10 CFR 50.33, if the co-applicants/co-licensees, as a group, had the financial qualifications necessary to construct and operate the nuclear power plant. Subsequently, the Commission

20 also considered cost-sharing arrangements with respect to decommissioning financial assurance, but did not "approve" the contractual arrangements in that context either.

Accordingly, Commission action to recognize joint and several regulatory responsibility on co-licensees does not constitute retroactive regulatory action.

6. Commission action ensuring that operating or decommissioning funds are available from co-licensees regardless of the contractual arrangements among co-owners for pro rata sharing of costs does not alter, and therefore leaves undisturbed, the contractual rights of a co-owner to recover costs from another co-owner under their contractual agreements in a private cause of action or in a bankruptcy proceeding.

7. Lastly, the PRM does not show how the proposed rule would improve the NRC's regulatory process and maintain the same level of protection of public health and safety provided under current Commission regulatiqns, legal precedent, and policies.

For reasons cited in this document, the Commission denies-the petition.

Dated at Rockville, Maryland, this J,.5:tb day of July, 2000 .

For the Nuclear Regulatory Commission.

~J,v=--<-aJ' Annette Vietti-Cook, Secretary of the Commission.

UNITED STATES

.NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20555-0001 July 25, 2000

Ut~rs I

'00 JUL 25 P~ :12 OFFilCE OF THE SECRETARY Martin G. Malsch, Esq. DOCKET NUMBER Egan & Associates, P.C.

2300 N Street, N.W. PETITION RULE PRM S"0- t t../

Washington, D.C. 20037 T61F~</3~)

SUBJECT:

PETITION FOR RULEMAKING REGARDING JOINT AND SEVERAL LIABILITY OF NON-OPERATING CO-OWNERS OF NUCLEAR POWER PLANTS

Dear Mr. Malsch:

I am *responding to the November 3, 1998, petition for rulemaking you filed on behalf of Atlantic City Electric Company; Austin Energy; Central Maine Power Company; Delmarva Power & Light Company; South Mississippi Electric Power Association; and Washington Electric Cooperative, Inc. The petitioners requested that the issue of potential liability among joint owners be resolved by amending the regulations concerning ~nforcement in 10 CFR Part 50. The petitioners propose that the Nuclear Regulatory Commission's (NRC's) regulations be amended to provide that if the NRG imposes additional requirements to protect public health and safety, it will look first to the entity licensed to operate a nuclear power plant to assume whatever costs are incurred in meeting those requirements. The petitioners also requested that Part 50 be amended to provide that if the NRG imposes these additional requirements on co-owners (licensees) who are not licensed to operate the plant, the NRG will not impose upon any of those licensees a proportional responsibility greater than that reflected in contracts establishing the allocation of responsibility among the co-owners.

The NRC published a notice of receipt of the petition and request for comment in the January 5, 1999 (64 FR 432), issue of the Federal Register. Subsequently, the NRG heard from 16 commenters. NRG has analyzed the petition and public comments and has decided to deny the petition. A summary of the Commission's reasoning is provided below.

In its analysis of the petition and comments, the Commission notes that it has already publicly articulated its policy not to impose operating or decommissioning costs on co-owners in a manner inconsistent with their agreed-upon pro rata shares, except when highly unusual circumstances relating to the protection of public health and safety require this action. Further,

, the Commission has publicly articulated its policy ttiatit would not seek more than pro rata shares from co-owners with de minimis ownership of a nuclear power plant.

The Commission also notes that the petition also sought to have the licensed operator of a .

plant be the first imposed upon by the NRG should additional requirements be needed. This would have unnecessarily limited the Commission's flexibility when highly unusual circumstances affecting the protection of public health and safety would require this action.

Martin G. Malsch, Esq. 2 Also, the petitioners' attempt to establish an artificial distinction between the operator, operating

,owner, and non-operating owner would be counter to Commission legal precedent, within the context of Commission consideration of the imposition of joint and several liability or responsibility.

Commission action ensuring that operatin*g or decommissioning funds are available from co-applicants/licensees regardless of the contractual arrangements among co-owners for pro rata sharing of costs, does not constitute an unlawful exercise of retroactivity. Contrary to the petitioners' assertion, the Commission never "approved" the private contractual arrangements for the sharing of costs among co-owners. The Commission's consideration of co-applicants' cost-sharing arrangements was solely for the purpose of determining, pursuant to 1o CFR 50.33, whether the co-applicants had the financial qualifications necessary to construct and operate the nuclear power plant. Since the Commission never approved the private cost-sharing arrangements, co-licensees had no reasonable expectation that the Commission mig,ht exercise its regulatory authority in appropriate instances in a manner inconsistent with those

. private contractual arrangements..Accordingly, Commission action to recognize joint and several regulatory responsibility on co-licensees does not constitute retroactive regulatory action.

Commission action ensuring that operating or decommissioning funds are available from co-applicants/licensees regardless ofthe contractual arrangements among co-owners for pro rata sharing of costs, *does not alter, and.therefore leaves undistu_rbed the contractual rights of a co-owner to recover costs from another co-owner in accordance with their contractual agreements in a private cause of action or in a-bankruptcy proceeding.

• Further, the petitioners' position eontradicts itself by claiming that the Commission should not impose operating or decommissioning costs on co-owners greater than their contractual obligations, but the petitioners also stated that the financial burden should be shifted to the operator or operating owner (with no reference to the contractual obligations).

Lastly, the petition does not show how its requested rule change would improve the NRC's regulatory _process and maintain the same level of protection of public health and safety provided under current Commission regulations, legal precedent, and policies. Accordingly, the Commission has denied the petition. A detailed discussion of the Commission's reasoning in this matter is contained in the enclosed notice of Denial of Petition for Rulemaking, which will be published in the Federal Register~-~*--

• Sincerely,

~~-~- -L~?----,/ .

Annette Vietti-Cook Secretary of the Commission

Enclosure:

Notice of Denial of Petition for Rulemak~ng

LAW OFFICES OF HUBER LAWRENCE & ABELL 605 THI RD AVENUE GREGORY .J. BLASI N E W YOR K , N . Y. 10158 W ILLIAM D . BOOTH LEONAR D BLUM DAN I ELS, BROWN TARAS G . BORKOWSKY TELEPHONE KATHERINE W. CONSTAN STUART A. CAPLAN SERE N A C. DIGNAN *

(2 12) 682-6200 WILLIAM .J . CRONIN THEODORE F. DUYER AMY A. DAVIS FACSIMILE ANDREW D. FISHER SETH A. DAVIS ARYEH B. FISHMAN

.JOHN D. DRAGHI ( 212)66 1-5759 DAVI D H. HARR I SON N ICHOLAS A . GIANNASCA AMYL . KNOLL B AR B A RA S * .JOST * .JASON A. LEWIS WASHINGTON OFFICE FRANK LEE .JOHN R . MATSON, W

• RICHARD M. LORENZO 1001 G STREET , N.W. MARGARET MAYORA FRANK .J. MILLE R ALESSANDRA M. MESS I NEO WASHINGTON, D.C. 20001 GLENN B . ROBBINS ERIC W. NELSEN

.JONATHAN D. SCHNEIDER (202) 737-3880 LORI D . REYNOLDS DAN L . ROSENBAUM NORMA N ABELL MICHAEL S. S I EGEL R OBE RT G . GRASSI

• NO T ADMITTED IN NEW YORK HOWARD M . SCHMERTZ

.JOHN TRO.JANOWSKI DIRECT DIAL 455-5508 COUNSEL OuCKE:T UMBER PETITION RULE ~.,....:;.5 o .. f.ot./

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April 9 , 1999 VIA FEDERAL EXPRESS

)> 0 Mr . John C. Hoyle 0.::n" c...

Secretary C -=

U.S. Nuc l ear Regul ator y Commission  ::z:,.

One White Flint North ;g 11555 Rockville Pike Rockvi l l e, Maryland 20852-2738 -

N Attn: Rulemaking and Adjudications -,:,

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Re: Docket No. PRM 64 Pet i t i on for ,Rul e ma luing Regarding Joint and Several Liability of Notl-Q Operating Co - Owners of Nuclear Power Plants

Dear Mr. Hoyle :

New York State Electric & Gas Corporation ( 11 NYSEG 11 or "Company") he'r eby submi t s this letter in response t o the abov e-captioned petition for rulemaking.

NYSEG supplies , markets and del i vers e l ectri c i ty t o 817,000 customers and natural gas to 243,000 customers across more than one - third of New York State . The Company holds an 1 8 percent interest i n the Nine Mile Un it 2 nuclear plant ( "NM- Unit 2") , located near Scriba , New York. 1 1

Niagara Mohawk Power Corporation i s t he opera t or and 41 per cent co-owner of NM-Unit 2 . The other co-owners of NM - Unit 2 are: Long Island Power Authority , with an 1 8 percent interest ; Rochester Gas and Electri c Cor porat i on, with a 14 percent interest; and Central Hudson Gas and Electric Corporation , with a 9 percent APR 19 1999

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u. J, NUCLEA REGULATORY CC811SS1ot r;uLEMAKINGS &ADJ OFFICE OFTHESEaE'ARY OF THE COIIIM!S!!tON

HUBER LAWRENCE & ABELL April 9, 1999 Page 2 NYSEG agrees with the comments filed herein that the Nuclear Regulatory Commission's ("NRC's") Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry ("Policy Statement" ) 2 has created substantial uncertainty for minority owners because the NRC suggests that it may impose operating or decommissioning costs on co-owners greater their contractual obligations. ~ ' Comments of Long Island Power Authority, at pp. 1-2. NYSEG urges the NRC to take this opportunity to clarify the Policy Statement and find that the owners' contractual arrangements will continue to govern each owner's potential liability.

Respectfully submitted, cc: Jim Rettberg, NYSEG i n t erest .

2 62 Fed . Reg . 44,071 (Augus t 19, 1 997).

Florida Power & Light Company, P. 0. Box 14000, Juno Beach, FL 33408-0420 HAR 1 6 1999 L-99-71 OCKET NUMBER Ms. Annette L. Vietti-Cook Secretary PROPOSED RULE PR So - " t/ 0 ::tJ Q

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( b'IP-R '13i)  ;=C U.S. Nuclear Regulatory Commission Washington, DC 20555  ::i::

0 Re: Florida Power & Light Company Comments fer Petition for Rulemaking- Liability of Joint Owners of Nuclear Power Plant (64 Fed. Reg. 432 (Jan. 5, 1999)) o

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Dear Ms. Vietti-Cook:

-ri Florida Power & Light Company (FPL), the majority owner and the entity licensed to operate St.

Lucie Nuclear Plant Unit 2, and the sole owner and operator of St. Lucie Nuclear Plant, Unit 1, and the Turkey Point Nuclear Plant, Units 3 and 4, hereby submits the following comments on the above-referenced Petition for Rulemaking. FPL also endorses the comments of the Nuclear Energy Institute on the Petition for Rulemaking. For the reasons set forth below, FPL urges the Commission to deny the Petition for Rulemaking.

The Petition calls for a revision to 10 CFR Part 50 that would impose two new requirements applicable to power reactor licensees. First, the proposal calls for a requirement that the Nuclear Regulatory Commission (NRC) will not impose liability in excess of the agreed allocation of responsibility among all the owners and operators as reflected in ownership agreements relating to the nuclear plant. Second, the proposed revision calls for shifting the potential liability for nuclear operations first to the entity licensed to possess and operate the nuclear plant. As a joint owner and licensed operator of one nuclear unit, FPL could be substantially affected if the Petition is granted in whole or in part.

FPL agrees with the Petitioners that no owner should be legally responsible for more than their proportionate share of investment in the plant in the event of a default in funding by one or more co-owners. Such action is not authorized by law. Such action would also clearly be contrary to the investment-backed expectations of all parties that bargained for and entered into pro rata cost sharing agreements, and in FPL's case, would be contrary to the joint ownership arrangement of St. Lucie Unit 2 mandated by antitrust proceedings during the licensing of that unit.

To implement this concept, the Petition calls for rulemaking that would require an owner of a share of nuclear power plant to bear financial responsibility or liability in excess of the amount of the actual investment in that plant simply because of the status of that owner as the licensed operator of the plant. FPL strongly opposes rulemaking to codify this concept. There is simply no legal authority, in the Atomic Energy Act or elsewhere, that would authorize NRC to add such a requirement to its regulations.

AR 3 1 1999 an FPL Group company

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Ms. Annette L. Vietti-Cook Page 2 In this regard, FPL agrees with the legal analysis provided in the Petition which concludes that NRC lacks plenary authority to impose liability on joint owners similar to that authority vested in the Environmental Protection Agency under the Comprehensive Environmental Response, Compensation, and Liability Act. Further, the Petition provides no cited legal authority to support their request that the facility operator should be afforded some special legal status and held liable if non-operating co-owners default on their financial obligations to support safe plant operation or decommissioning.

FPL appreciates the opportunity to comment on the Petition for Rulemaking.

Sincerely yours,

• R. John Gianfrancesco, Jr.

Manager Administrative Support and Special Projects j :\msr\nuclicge~oint.wpd

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James M. Levine TEL (602)393-5300 Mail Station 7602 Palo Verde Nuclear Senior Vice President FAX (602)393-6077 P.O. Box 52034 Generating Station Nuclear Phoenix, AZ 85072-2034

• 99 MAR 26 P? :3 1 OF;~- . 102-04262-JMUSAB/RKB

~i-...1 I Secretary AD~'_,:_ March 18, 1999 ATTN: Rulemakings and Adjudication's Staff U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 DOCKET NUMBER PETITION RULE PRM ,£0-hl/

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Dear Sirs:

Subject:

Palo Verde Nuclear Generating Station (PVNGS)

Units 1, 2, and 3 Docket Nos. STN 50-528/529/530 Comments on "Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.; Receipt of Petition for Rulemaking (64 Fed. Reg.

432, January 5, 1999)."

Arizona Public Service Company (APS) submits the following comments in response to the Nuclear Regulatory Commission's request for comments on the "Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power &

Light Company, South Mississippi Electric Power Association , and Washington Electric Cooperative, Inc.; Receipt of Petition for Rulemaking (64 Fed. Reg. 432, January 5, 1999)."

APS fully endorses the comments provided by the Nuclear Energy Institute (NEI) on behalf of the nuclear industry. APS recommends that the Commission not approve the petitioner's request for rulemaking, docketed as PRM-50-64.

APS, as a joint owner and operator of the Palo Verde Nuclear Generating Station, understands the petitioner's desire for added clarification with respect to potential financial obligations of nuclear power plant licensees as reflected in the NRC's "Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry (62 Fed. Reg. 44077, August 10, 1998)." Specifically, we acknowledge that, if anything, it may be beneficial for the NRG to provide greater clarification regarding the use of "joint and several" liability in "highly unusual circumstances" as discussed in the NRC's policy statement.

AR 3 1 1999

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Secretary, U.S. Nuclear Regulatory Commission Comments on Receipt of Petition for Rulemaking Page 2 APS does not believe that a rulemaking proceeding is necessary to provide further clarification. In fact, APS believes the proposed rulemaking would not benefit the nuclear power industry because the proposed change would unfairly and inappropriately burden the licensed operator, and may be subject to misinterpretation.

APS believes that joint ownership agreements can adequately address this issue, and in fact, APS' joint ownership/participation agreement contains provisions for dealing with such situations should it be necessary. In addition, the NRC's existing regulatory authority to condition operation of nuclear reactors on the satisfaction of: 1) either the criteria for "electric utility" status or financial qualification requirements, and 2) decommissioning funding assurance, is sufficient to ensure financial obligations are satisfactorily met to protect the public health and safety.

Please contact Mr. Scott Bauer at (602) 393-5978 if you have any questions. This letter does not make any commitments to the NRC.

V JML/SAB/RKB/rlh cc: E. W. Merschoff M. B. Fields J. H. Moorman

DOGKF.:TEO us~~

March 22, 1999 MR 26 AO :SO RC-99-0060 "99 A SCANA COMPANY 0

HL AO,., I F Secretary U.S. Nuclear Regulatory Commission Washington, DC 20555 Attention: Rulemaking and Adjudications Staff Gentlemen:

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Subject:

VIRGIL C. SUMMER NUCLEAR STATION DOCKET NO. 50-395 Nuclear perations OPERATING LICENSE NO. NPF-12 COMMENTS ON PROPOSED RULEMAKING RE: JOINT AND SEVERAL LIABILITY OF NON-OPERATING CO-OWNERS OF NUCLEAR PLANTS South Carolina Electric & Gas Company (SCE&G) has reviewed the proposed petition for rulemaking: 64 Federal Register 432 (January 5, 1999) "Joint and Several Liability of Non-Operating Co-Owners of Nuclear Plants." SCE&G endorses comments submitted by Winston and Strawn and the Nuclear Energy South Carolina Electric & Gos Co Virgil C. Summer Nuclear Station Institute (NEI) .

P 0. Box 88 Je1 South Carolina If there are any questions, please call at your convenience.

n 803.345.4344 Very t 803.34 5.5209 www.scono.com SBR/GJT/sbr c: J. L. Skolds W. F. Conway R. J. White L. A. Reyes R.R. Mahan NSRC RTS (PR 990001 )

File (811 .02, 50.088) MAR 31 1!!9 OMS (RC-99-0060) C ."'11 NUCLEAR EXCELLENCE -A SUMMER TRADITION!

DOCKETE

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• 99 MAR~ ~ 7 Old Dominion March 22, 1999 Electric Cboperative Via U.S. Mail and Internet or hi ADJ Mr. John C. Hoyle Secretary U.S. Nuclear Regulatory Commission DOCKET NUMBER Washington, D.C. 20555-0001 PETITION RULE PAM 5 o- lot./

( & 'I FR 'I 32)

ATTENTION: Rulemaking and Adjudications Staff

SUBJECT:

Docket No. PRM-50-64

Dear Mr. Hoyle:

Old Dominion Electric Cooperative ("Old Dominion") is a Virginia power supply cooperative and a non-operating co-owner of a nuclear power plant. Old Dominion holds an 11.6% ownership interest in the North Anna Nuclear Power Station in Virginia. Old Dominion receives a pro rata share of the energy produced by the plant and is responsible for a pro rata share of plant expenses based on its 11.6% ownership interest but has no control over operation of the facility. On behalf of its members, Old Dominion offers the following comments in response to the Nuclear Regulatory Commission's January 5, 1999, Federal Register notice in Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.: Receipt of Petition for Rule making, Docket No.

PRM-50-64, 64 Fed. Reg. 432 (1999).

Old Dominion shares the petitioners' concerns about the inclusion of a "joint and several liability" clause for co-owner/licensees in NRC's Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry, 10 C.F.R. Part 50. Old Dominion acknowledges and understands NRC's concern about ensuring the public health and safety under all circumstances. However, Old Dominion supports th e p etitioners' argument that a better understanding of NRC's position is necessary, particularly with respect to potential financial obligations that may be imposed on minority co-owners of nuclear power plants that generally have no control over operating the plants.

MAR 3 1-1999 4cknowledged by card....... ..........* ~

Mailing Address: Innsbrook Corporate Center P. 0. Box 2310 4201 Dominion Boulevard Glen Allen, Virginia 23058-2310 Glen Allen, Virginia 23060 Telephone: 804/747-0592 FAX: 804/747-3742

. NUCLEAR REGULATORY COllllf?SK)N LEMAKINGS &ADJU[)ICAll(lt8811fF OFFICE ~lHE SECRE1MV OF THE COUMIS8ION Docllll&ltSt , ,s tmark 0MB -3fa.~/99 ies ~ ' /

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In the Policy Statement, the Commission correctly recognized that many licensed nuclear power plants are jointly-owned facilities. The Commission also recognized that "co-owners and co-licensees generally divide costs and output from their facilities by using a contractually-defined, pro rata share standard" and stated its belief that this pro rata sharing of plant costs "should continue to be the operative practice." However, the Commission went on to state that such pro rata cost-sharing arrangements might be ignored by the Commission in certain "highly unusual" circumstances. In its Policy Statement, the Commission reserved the right to consider imposing joint and several liability on "co-owners of more than de minimus shares" when one or more co-owners have defaulted.

Old Dominion shares the petitioners' concern that the Commission's statement may create substantial confusion about the potenti~l liability of individual joint owners of a nuclear plant. The relevant portion of the Policy Statement appears to create the possibility that the owner of a small ownership share of a nuclear power plant, with no control over operations, could be expected to bear the burden of all, or a substantial portion, of a plant's costs if other co-owners or the operator were to default or become financially incapable of bearing their share of the burden. In addition, there is no explanation of what would constitute a de minimus share of a plant and no discussion of the particular circumstances under which the Commission might find the imposition of joint and several liability necessary to protect the public health and safety. With an 11.6% share in interest, Old Dominion is especially concerned about where the line of de minimus ownership would be drawn.

These factors spawn a great deal of uncertainty regarding the potential liability of a joint owner. Such uncertainty can adversely affect both the ability of a joint owner to raise capital in the financial markets and the cost of raising such capital, even for activities that bear no relationship to nuclear power plant operations. This is particularly unsettling to an industry undergoing restructuring. There appears to be a developing market for the purchase and sale of nuclear power plants; the Commission's Policy Statement could stifle the emergence and the vitality of this market. The potential to have liability imposed under the joint and several liability statement could severely hamper a minority co-owner's ability to sell its interest in a nuclear unit.

The prospect of Jomt and several liability, even in limited circumstances, is directly contrary to the contractual basis on which numerous joint ownership arrangements for nuclear power plants have been structured, including Old Dominion's arrangement with Virginia Power. In most such arrangements, ownership commitments were made and substantial sums of capital raised based on a contractual pro rata* allocation

of liability for plant costs. The reasonable expectations of co-owners and investors (for Old Dominion, its bondholders) would be defeated by the imposition of joint and several liability, especially given the Commission's general acceptance and approval of pro rata allocations. Assessments of assets and liabilities for purposes of a potential sale of ownership interests becomes more difficult in light of speculation about the meaning of the Commission's Policy Statement and the circumstances in which the Commission might carry out its threat to impose joint and several liability.

The Atomic Energy Act of 1954, as amended, does not give the NRC the authority to impose or redistribute the liability of nuclear plant owners.

This lack of statutory authority opens the door to future litigation should the NRC attempt to impose joint and several liability on a co-owner. Due to the lack of clear statutory authority and to the confusion engendered by the statement, Old Dominion urges in the Commission to delete the paragraph containing the joint and several liability provision from the Final Policy Statement.

Thank you for the opportunity to comment on this petition.

Sincerely,

(;v.~

K.N. Kappatos Vice President - Engineering & Operations

EI OOCK[TEO f . - *. * ,,

I_,

NUCLEAR ENERGY INSTITUTE

• 99 MA t 24 ~".1'1 :33 Marvin S. Fertel SEN IOR VICE PRLSID ENT lr- NUCl fAR I NFRA ST RUCTURE SUPPORT I & IN l lRNA T IONA L PROGRAMS I\C March 22, 1999 DOCKET NUMBER ,,

PETITION RULE PRM 5 o -to.,

Ms. Annette Vietti-Cook Secretary l [pt/FRt/3:;J U.S. Nuclear Regulatory Commission Washington, D.C. 20555-0001 ATTENTION: Rulemakings and Adjudications Staff

SUBJECT:

Nuclear Energy Institute's Comments on Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.; Receipt of Petition for Rulemaking (64 Fed. Reg. 432, January 5, 1999).

Dear Ms. Vietti-Cook:

These comments are submitted by the Nuclear Energy Institute (NEI) 1 on behalf of the nuclear energy industry in response to the Nuclear Regulatory Commission's Federal Register Notice on Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.; Receipt ofPetition for Rulemaking (64 Fed. Reg. 432, January 5, 1999).

NEI does not believe that a rulemaking proceeding, as proposed in the petition, is desirable or necessary to provide clarification on the NRC's Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry (62 Fed. Reg. 44077, August 10, 1998). In fact, NEI believes the NRC's position on the responsibility of NRC licensees (as expressed in the Policy Statement) is clear, although we believe there are serious and substantive legal questions about whether the Commission has the authority to impose joint and several liability.

1 NEI is the organization responsible for establishing unified nuclear industry policy on matters affecting the nuclear energy industry, including regulatory aspects of generic operational and technical issues. NEI members include all utilities licensed to operate commercial nuclear power plants in the United States, nuclear plant designers, major architect/ engineering firms, fuel fabrication facilities, materials licensees, and other organizations and individuals involved in the nuclear energy industry.

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Ms. Annette Vietti-Cook March 22, 1999 Page 2 NEI interprets the policy statement to reflect NRC's intent to exercise the full extent of its authority under the Atomic Energy Act to assure adequate protection of public health and safety, should nuclear power plant owners fail to resolve financial matters that are necessary to protect public health and safety, e.g., the funding of decommissioning activities. Imposition of joint and several liability by NRC as part of the exercise of that authority, however, regardless of circumstances, requires a valid legal and factual basis. The existence of that legal basis is not evident from the material contained in the NRC policy statement.

The NRC certainly has authority to condition operation of a nuclear reactor on a licensee's ability to satisfy 1) NRC financial qualification requirements, and 2) decommissioning funding assurance. Beyond those requirements, the legal basis for the imposition of "joint and several liability" is not sufficiently justified.

NEI believes that the petition, if approved, would not improve the NRC's regulatory process and would not be of overall benefit to the nuclear power industry. The proposed change to the enforcement provisions unfairly and inappropriately burden the licensed operator, who may be a minority co-owner, an entity the petition is attempting to protect. Also, we believe the proposed regulatory change, if adopted, could also be subject to possible misinterpretation.

For all these reasons, NEI urges the commission to deny the petition filed by Atlantic City Electric Company et al.

The Enclosure to this letter provides further information on our position. If you have any questions, please contact me directly (202.739.8125), or Richard Myers of the NEI staff (202.739.8021; e-mail: rjm@nei.org).

Sincerely, Marvin S. Fertel

c. The Honorable Shirley A. Jackson, Chairman, NRC The Honorable Greta J. Dicus, Commissioner, NRC The Honorable Nils J. Diaz, Commissioner, NRC The Honorable Edward McGaffigan, Jr., Commissioner, NRC The Honorable Jeffrey S. Merrifield, Commissioner, NRC Dr. William D. Travers, EDO/NRC

ENCLOSURE TO NEI LETTER TO NRC (MARCH 22, 1999)

In re: Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.; Receipt ofPetition for Rulemaking (64 Fed. Reg. 432, January 5, 1999).

BACKGROUND INFORMATION AND SUPPORTING STATEMENTS The NRC Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry (August 10, 1998) states:

"Many of the NRC's power reactor licensees own their plants jointly with other, unrelated organizations. Although some co-owners may only be authorized to have an ownership interest in the nuclear facility and its nuclear material, and not to operate it, the NRC views all co-owners as co-licensees who are responsible for complying with the terms of their licenses. See Public Service Company of Indiana, Inc. (Marble Hill Nuclear Generating Station, Units 1 and 2), ALAB-459, 7 NRC 179, 200-201 (1978). The NRC is concerned about the effects on the availability of operating and decommissioning funds, and about the division of responsibility for operating and decommissioning funds, when co-owners file for bankruptcy or otherwise encounter financial difficultyt- . The NRC recognizes that co-owners and co-licensees generally divide costs and output from their facilities using a contractually defined, pro rata share standard. The NRC has implicitly accepted this practice in the past and believes that it should continue to be the operative practice, but reserves the right, in highly unusual situations where adequate protection ofpublic health and safety would be compromised if such action were not taken, to consider imposing joint and several liability on co-owners of more than de minimis shares when one or more co-owners have defaulted." (62 Fed. Reg. 44077, August 10, 1998)

(Emphasis added.)

In the Statement of Considerations for the policy statement, the section titled NRC's Response to Comments ofJoint Ownership, repeats the same language virtually verbatim.

+ The NRC has had experience with three licensees who have had much greater than de minimis shares of nuclear power plants and who filed under Chapter 11 of the U.S. Bankruptcy Code: Public Service Company of New Hampshire (PSNH), a co-owner and operator of the Seabrook plant; El Paso Electric Company (EPEC), a co-owner of the Palo Verde plant; and Cajun Electric Power Cooperative (Cajun), a co-owner of the River Bend plant. Both PSNH and EPEC continued their pro rata contributions for the operating and decommissioning expenses for their plants and successfully emerged from bankruptcy.

Cajun remains in bankruptcy. [Note: Subsequent to the NRC's promulgation of the Final Policy Statement, Cajun transferred its ownership share to the majority owner and fully prefunded its share of the decommissioning fund by order of the bankruptcy court.}

I. The Petitioners Misconstrue The Plain Language of the NRC Policy Statement Although the policy statement does not indicate what specific circumstances would justify the imposition of joint and several liability, it is clear from the NRC Policy Statement and its Statement of Considerations that, in all but the most unusual and egregious circumstances, the NRC intends to give licensees the latitude to resolve financial difficulties based on existing contractual arrangements.

It appears that the petition from Atlantic City Electric Company et al. gives little credence to the NRC's assertion, in its policy statement, that the NRC will "consider" imposing joint and several liability only "in highly unusual circumstances." The petition appears to assume that the NRC will impose joint and several liability at the first sign of financial difficulty or insolvency. The policy statement is clear that this is not the Commission's intention .

• Further, the petitioners acknowledge that there has never been a situation where a nuclear power plant licensee was incapable of satisfying its safety obligations. In addition, the petitioners state that there is ample authority, which should be recognized by the NRC, that a licensee cannot abandon its safety obligations even in cases of bankruptcy (Midlantic National Bank v. New Jersey Department of Environmental Protection, 474 U.S. 494, 506-07 (1986)).

II. The Legal Basis for Imposition of Joint and Several Liability Has Not Been Established Although the policy statement reflects NRC's intent to exercise the full extent of its authority under the Atomic Energy Act to assure adequate protection of public health and safety if nuclear power plant owners fail to resolve financial matters that are necessary to protect public health and safety--e.g., the funding of decommissioning activities--imposition of joint and liability by NRC as part of the exercise of that authority requires a valid legal and factual basis. NRC certainly has the authority to condition operation of a nuclear reactor on a licensee's ability to satisfy 1) the definition of "electric utility" or other financial qualification requirements, and 2) decommissioning funding assurance. Beyond those requirements, the legal basis for the imposition of "joint and several liability" is questionable, at best.

The prospect that NRC could impose joint and several liability without regard for percentage ownership interest, contractual commitments and well established regulatory understandings could create extreme and unacceptable uncertainty for nuclear power plant licensees. Many operating agreements among co-owners, which were executed well before the NRC adopted its Policy Statement and accepted by the NRC, expressly preclude joint and several liability among co-owners. The reasonable expectations of co-owners, investors, bondholders and public utility commissions would be contravened if the NRC were to attempt to impose joint and several liability. NEI believes that the NRC should acknowledge that the imposition of joint and several liability is an extreme measure, which only will be pursued when the NRC has exhausted other legal avenues and alternatives in a time frame commensurate with the protection of public health and safety requirements.

Realistically, the existing policy statement provides significant regulatory incentive to co-owners to resolve financial difficulties that could impact safety. The mere suggestion that the NRC may consider imposing joint and several liability is a significant incentive for the owners to reach an agreement among themselves on how to address a financial issue that potentially impacts public health and safety, rather than face the prospect of federal imposition of liability on an undefined basis.

III. The Petitioners' Remedy is Unacceptable and Places an Inappropriate Burden on Other Licensees Although the petition from Atlantic City Electric Company et al. takes issue with the imposition of joint and several liability on owners-specifically minority co-owners-its proposal to address the issue is inappropriate. The Atlantic City petition proposes to address the issue by imposing additional and disproportionate financial burdens on the licensed operator, in most cases another co-owner. Further, there are instances where the licensed operator is a minority owner, or not even an owner, just an operator. If implemented, the petition could unfairly and inappropriately burden a minority owner or a non-owner with significant additional liability.

For all these reasons, the petition for rulemaking filed by Atlantic City Electric Company should be denied.

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({Seminole Electric O OPERATIVE, INC.

IN PARTNERSHIP WITH THOSE WE SERVE DOCKETED UC:' D("

'- l f ~ ._J March 18, 1999 *99 MAR 24 All :24 OFr*,

RLJl -

ADJL,. I Mr. John C. Hoyle, Secretary U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 DOCKET NUMBER ET1TION RlLE PRM 5 o- t,, t/

ATTENTION: Rulemaking and Adjudications Staff p (~~~!?¥32)

RE: Docket No. PRM-50-64

Dear Mr. Hoyle:

Seminole Electric Cooperative, Inc. (Seminole) is a generation and transmission cooperative serving ten Member distribution systems in the state of Florida which in turn serve over 650,000 retail Member consumers. While over eighty percent of the energy we sell to our Members is generated by our own coal-fired facilities, we are a non-operating minority owner of Florida Power Corporation's Crystal River Unit 3 Nuclear Plant. Our system peak is over 3,100 MW, and the amount of nuclear capacity meeting this demand is a mere 14. 7 MW, or 1. 697 percent of the total output of Crystal River Unit 3. On behalf of our Members, Seminole offers the following comments on the Nuclear Regulatory Commission's Federal Register Notice on Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.: Receipt of Petition for Rulemaking (64 Fed. Reg. 432, January 5, 1999).

Seminole shares the concern of the petitioners over the inclusion of the "joint and several liability" clause for co-owner /licensees in NRC' s Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry, 10 C.F.R. Part 50. We understand and fully support NRC's concerns over ensuring the public health and safety under all circumstances. However, it is our belief that greater clarification of NR,C' s int~nt is necessary, particularly with respect to potential financial obligations of nuclear power plant licensees.

In the Final Policy Statement, NRC acknowledges that pro-rata division of responsibility is the norm, and should remain the operative standard. NRC has not stated that it will abrogate the contractual relations creating the pro-rata responsibilities. NRC has expressed, however, that under extraordinary circumstances, where public health and safety is adversely affected, it would consider imposing joint and several liability responsibility of more than "de minimis shares" when one or more owners have defaulted, in order to address the health issue.

NRC has the responsibility to ensure that adequate funds are available for decommissioning of nuclear reactors. It is our understanding, and NRC has so stated, that the current utility financial MAR 3 1 1999 16313 North Dale Mabry Highway P.O. Box 272000 Tampa, Florida 33688-2000 ~edged by card* I II u,at Telephone 813.963.0994 Fax 813 .264.7906 www.seminole-electric .com

lJ.S. NUCLEAR REGULATORY COMMISSION AULEMAKINGS&ADJUOICATION81Wf OFRCE OFTffE SECFETARY OF THE COMMIS8ION DoanentSl!dlsb Postmark Date 3~/131/ &JC/

Copies Received I Add'I Copies Reproduced s' m~

Mr. John C. Hoyle, Secretary March 18, 1999 Page 2 assurances for decommissioning funding levels are adequate; therefore, Seminole fails to see what extraordinary circumstances could arise that would allow NRC to consider implementing a joint and several liability. Certainly, a clarification of the circumstances that could trigger the condition for the "joint and several liability" should be described. The potential liability raises many concerns. The extent and information on the "de minimis" shares also has to be explained and defined.

If a ninety-percent owner of a nuclear plant is in financial distress, requiring the ten percent owner to pick up the burden would just add a second owner in distress. The minority owners are not walking away from their responsibilities, but do not have the financial resources available to assume the additional burden.

Similar to all minority owners, we continue to have a need to raise funds for new construction, capital improvements, and continued operations of our non-nuclear facilities. The potential liability imposed by NRC' s statement of "joint and several liability" could hamper our ability to raise funds. This is particularly stressing to us at a time when our industry is undergoing restructuring. We are making great efforts at lowering our costs in order to be competitive. The risk associated with potential unlimited liability due to minority ownership of a nuclear power plant, could increase our cost of capital.

Because of the high cost associated with owning nuclear plants, we are attempting to sell our ownership share. Again, the potential liability imposed by the "joint and several liability" statement could pose a very large hurdle over our ability to sell our share in the nuclear unit.

The Atomic Energy Act of 1954, as amended, does not give the NRC the authority to impose liability on nuclear plant owners. The Act does give NRC the regulatory authority to impose safety obligations on the licensees. This lack of liability authority in the Act opens the door to future litigation should the NRC even attempt to impose the condition of joint and several liability.

Based upon the above, we urge the Commission to delete the paragraph containing the "joint and several liability" clause as contained in the Final Policy Statement. In lieu of its deletion, we urge that the clause be expanded to define the full parameters of what could trigger the implementation of "joint and several" and the full extent and l'iabilit)" involved in the "de minimis" shares .

We appreciate the opportunity to comment on this petition.

Very truly yours, Executive Vice President and General Manager jlf

• OglethorpePower (j)

OOCt{ETE l' Oglethorp e Power Corporation

• 99 , R 23 P3 :27 2100 East Exc hange Place PO Box 1349 Tucker, GA 30085 -1349 VI phone 77 0-270-7600 March 22, 1999 I fax 770-270-7872 4n Electric Membership Cooperat"&

A_

DOCKET NUMBER PETITION RULE PRM So- lo C/

Ms. Annette L. Vietti-Cook (<,'/FR '13~)

Secretary of the Commission United States Nuclear Regulatory Commission 11555 Rockville Pike

• Rockville, MD 20852-2739

Dear Ms. Vietti-Cook:

Subject:

Comments on Petition for Rulemaking, Docket No. PRM 50-64 Pursuant to a notice in the Federal Register, 64 Fed. Reg. 432 (January 5, 1999) concerning a petition for rule making (the "Petition") filed by Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power &

Light Company, South Mississippi Electric Power Association, and the Washington Electric Cooperative, Inc. (hereinafter, "Petitioners"), docketed by the Nuclear Regulatory Commission ("the Commission") as PRM 64, Oglethorpe Power Corporation ("Oglethorpe Power") hereby provides its comments on the issues raised by the Petition.

I. Oglethorpe Power's Interests Oglethorpe Power is an electric membership corporation organized and existing under the laws of the State of Georgia, with its principal place of business located at 2100 East Exchange Place, Tucker, Georgia, 30085-2088. Oglethorpe Power was formed by its 39 Member Cooperatives (the "EMCs") to provide economic and efficient electric power to be used by the 39 EMCs to serve their member-consumers. Each EMC is itself an electric membership corporation, organized and existing under Georgia law, and providing retail electric service to its members, including residential, industrial and commercial customers. The 39 EMCs each serve a defined area of Georgia under the Georgia Territorial Act. The 39 EM Cs serve more than one million retail member-consumers in Georgia, representing more than 2.6 million people.

e A member of the National Rural Electric Cooperative Association

-\cknowledged by card -~~~ ..,~,

IJ.~ NUClEAR REGULA I u, ULEMAKINGS & ADJUOICATIO OFFJCE OF THE SECRETAR OF THE COMMISSIC Doa.ment Static:

Postmark Date .3 Copies Received___

b~IC/'i I FC Adcfl Q)pies Reproduced _ 5___ ~

~~

~~

Secretary Page2 March 22, 1999 In order to serve the load of its 39 Members, Oglethorpe Power has acquired and holds interests in two nuclear plants, comprising four operating nuclear units --

Vogtle Units 1 and 2 (a 30% interest in each); and Hatch Units 1 and 2 (30%

interest in each). Oglethorpe Power's interests are co-owned with Georgia Power Company (a subsidiary of The Southern Company), the Municipal Electric Authority of Georgia ("MEAG") and the City of Dalton. The co-owners are each licensed by the Commission for their interest in the units. The units are operated by the Southern Nuclear Operating Company (SONOPCO), also a subsidiary of The Southern Company, under contract with the co-owners. SONOPCO has been licensed by the Commission for the operation of the units.

Pursuant to the contracts under which the interests in the units are held and operated, Oglethorpe Power is required to pay certain costs related to the facilities on a pro rata basis and has the right to receive the same pro rata share of the units' output. While Oglethorpe Power accepts its obligations under those contracts, and its obligations under its licenses issued by the Commission, Oglethorpe Power agrees with the petitioners that the Commission's enforcement regulations properly take into account the limited role of co-owners in circumstances such as Plants Hatch and Vogtle, and that the Commission clarify its policy regarding the financial obligations of co-owners.

II. Comments on the Issues Raised by the Petition Oglethorpe Power is familiar with the issues raised by the restructuring occurring within the electric utility sector generally, and the potential effects of economic deregulation. Indeed, Oglethorpe Power restructured itself in order to better match its corporate organization to the coming demands of the more competitive market.

In 1997, Oglethorpe Power completed a transition, in which its transmission assets and obligations were assigned to Georgia Transmission Company ("GTC"), an electric membership corporation owned by Oglethorpe Power and its 39 Members, while Oglethorpe Power retained the interests in nuclear, fossil and hydroelectric generating stations, and certain power purchase arrangements and the corresponding obligation to meet the loads of the 39 members. In the same restructuring, responsibility for system operations, and the related assets, were transferred to Georgia System Operations Corporation ("GSOC").

The Petitioners are all non-operating joint owners of nuclear plants, and the petition raises concerns about the liability of non-operating joint owners in the event co-owners or operating licensee were to default on or become financially incapable of bearing their share of the continued costs of operating the nuclear unit

Secretary Page3 March 22, 1999 in compliance with Commission and other requirements. The Petitioners fear that in that circumstance, the Commission might ignore existing pro rata or other contractual arrangements on cost responsibility, and shift to the non-operating co-owners all or an excessive portion of the relevant costs. 64 Fed. Reg. at 433, col.1.

Because the Petitioners believe the Commission's initial Policy Statement on these issues, 62 Fed. Reg. 44071 (August 19, 1997), engendered confusion in the regulated community, the Petitioners ask that the issue of potential liability be resolved by the Commission's amending its regulations.

The Commission's August 1997 policy statement alluded to highly unusual circumstances" where it might impose joint and several liability for the relevant costs and obligations on any owner of "more than a de minimis" share of the plant.

Because the Commission had not better defined the circumstances or its understanding of "more than de minimis", the Petitioners were concerned that the owner of a small share of a nuclear unit could be held responsible for an excessive portion of the costs. The Petitioners ask that the regulations specifically provide that in imposing additional requirements by rule, order or amendment, the additional requirements "will be directed first to the person licensed to possess and operate the facility." If the additional requirements must be imposed on co-owners not licensees to operate, "then the Commission will not impose greater than the agreed allocation of responsibility among all the owners and operators reflected in applicable joint ownership or similar agreements pertaining to the plant." 64 Fed .

Reg. 433, Col. 3.

Oglethorpe Power provides the following comments on the issues raised by the Petition.

1. Ownership Agreements Reflect Carefully Structured Arrangements In general, the co-ownership agreements relating to nuclear units reflect very carefully structured financial and other arrangements governing all aspects of the obligations of the co-owner. Each co-owner had at the time of entry into the relationship, and continues thereafter to have, significant concern that the other co-owners have the financial and organizational ability to perform the obligations, and there are usually security or other arrangements to address changes in the parties' circumstances. These arrangements include legal structures, certain rights to compel performance, and other provisions which the parties have used both to define their obligations and to put boundaries around those obligations. Those arrangements, including their limitations, have in tum been used by the parties

Secretary Page4 March 22, 1999 and relied upon by them and third parties, in financing arrangements, other regulatory filings, and similar matters.

A Commission determination to impose liability outside of the bounds of those contractual arrangements would undercut the parties' own careful arrangements and settled expectations established in reliance on them. At a minimum, any such retroactive imposition would raise substantial issues about the Commission's authority and the rights of others. It would be preferable for all parties concerned to rely on the contractual arrangements .

• 2. The Commission Should Not Impose Unfair Obligations or Obligations which Exceed Parties' Circumstances In entering into co-ownership arrangements, the non-operating parties normally sought to limit their rights and obligations to a level consistent with their circumstances. That is, for example, the percentage interest in unit was dependent on the need for additional generation capacity, or to match to expectations about other power supply arrangements. The financial and related obligations in tum were linked to the level of ownership interests and rights in capacity. Charges to the customers or ratepayers of the co-owners reflect that interest, because under standard ratemaking principles, the ratepayers should not have a greater rate obligation than the related benefit they receive.

If the Commission were to impose additional burdens on co-owners, the Commission's determinations would cause substantial conflicts with rate and other determinations by other agencies. In the event that the relevant rate authorities determined that the additional costs imposed by the Commission could not be passed through, the Commission's action, rather than resolving an unfortunate financial circumstance, would compound that circumstance and could drive the co-owners into financial distress, creating still further risks. It is grossly unfair to impose additional and unforeseen costs on the co-owners, in these circumstances.

3. Private Market Mechanisms Are Sufficient Without Reallocation To date, even in circumstances as dramatic as the event at the Three Mile Island Plant, and as financially draining to utilities as the Seabrook, LILCO or other units with significant cost increases, the NRC has never been required to reallocate the financial obligations to co-owners. While the changes now occurring in the electric industry have not reduced the likelihood of financial risk, there is no basis to believe that the financial markets and private party arrangements have become

Secretary Page5 March 22, 1999 less adept at recognizing and relieving the financial problem. The NRC's policy statement is apparently premised on a Commission view that in some unspecified circumstance, it would be required not only to identify a safety or other regulatory step which was required to protect the public interest, but it would then also be required to allocate among the co-owners the cost of taking that step.

Where the Commission has a proper basis to impose additional requirements, and the history of nuclear power in the United States demonstrates that the Commission has not hesitated to impose new requirements when it believed the public interest demanded it, co-owners and operators have to date been able to arrange among themselves the allocation of the cost of compliance. There is no indication that any new requirement would be so dramatically different that the same mechanisms to fund compliance would not suffice.

If the Commission's concern is not that the requirement would be so different, but that the financial circumstances of one or more of the co-owners would be so fragile, that is all the more reason for the Commission not to reallocate the obligation.

Reducing or altering one party's financial obligation and imposing it on the other co-owners effectively transfers the obligations without the concomitant rights, and undermines the financial strength of the remaining co-owners. There is no basis to believe that the Commission is better informed or better able to resolve financial arrangements than the parties and the relevant capital markets.

4. The Commission Has Other Means to Prevent the Alleged Risk If in fact the Commission's concern is the potential for greater financial fragility for some co-owners or operators, the Commission need not (and probably should not) delay until a particular "unusual" circumstance has arisen before addressing the concerns. Both co-owners and holders of operating licenses are required to demonstrate a proper basis to obtain and retain the relevant license. In the event that a licensee's, particularly an operating licensee's, financial circumstances are believed to be deteriorating to such an extent that its ability to fund required activities is at issue, the Commission should already have begun appropriate proceedings to determine the licensee's qualifications and to have required the licensee to resolve the concerns or to surrender the license. Proceeding at the earlier time assures that the Commission can raise its concerns in a manner which will allow all interested parties an opportunity to address the issue, and allows co-owners to put appropriate private arrangements in place, while not increasing their liability unwillingly. To the degree the Commission instead asserts authority to retroactively increase co-owner liability, the Commission may create a condition

Secretary Page6 March 22, 1999 that reduces rather than enhances public safety. If the Commission does not act early and fails to track the actual performance of an operator, because it assumes that it could in any event act late, it runs the risk of tolerating a deteriorating performer, rather than imposing the discipline of more rigorous regulatory attention.

5. The Petition Should be Granted Because any determination by the Commission to reallocate liability outside of the arrangements agreed among the co-owners or between the co-owners and an operator would undercut arrangements carefully structured and relied upon by the contracting parties and third parties, would undercut other regulatory arrangements, would risk undermining the financial stability of the other owners and is not necessary for the Commission to assure compliance with its requirements, Oglethorpe Power believes that the Commission should amend its regulations to provide that in imposing new arrangements, the Commission will look first to the entity with the operating license responsibility, and allow the existing contractual arrangements to work in how that operator passes the additional costs through. Where there is a question about financial obligations, the Commission should not impose obligations beyond the pro rata or other contractual arrangement in place.

Very truly yours, Richard D. Barker Manager, Fossil & Nuclear Operations Overnight Mail & Fax (301-415-1101)

RDB:sd cc: Mr. Jerry Saacks, Oglethorpe Power Mr. Clarence D. Mitchell, Oglethorpe Power Mr. George Taylor, Oglethorpe Power Mr. Charles Patrizia, PHJ&W

7 SPIEGEL & MCDIARMID GEORGE SPIEGEL (1919-1997) DOCKETED

,c,!

MATTHEW W. WARD JEFFREY A. SCHWARZ ROBERT C. MCDIARMID 1350 NEW YORK AVENUE, NW WASHINGTON, DC 20005-4798 U 1 \ ,

• DAVID B. LIEB ROBERT A. JABLON -PABLO 0. NOESCH JAMES N. HORWOOD TONY LIN ALAN J. ROTH "ANDREA G. LONI AN TELEPHONE (202) 879-4000

• 99 t1AR 23 p 2 :59 FRANCES E. FRANCIS DANIEL I. DAVIDSON FACSIMILE (202) 393-2866 OF COUNSEL THOMAS C. TRAUGER EMAIL SPIEGEL@SPIEGELMCD.COM LEE C. WHITE JOHN J. CORBETT SANDRA J. STREBEL CYNTHIA S. BOGORAD MARGARET A. MCGOLDRICK GARY J. NEWELL DIRECT DIAL (202> 879-4011 n SCOTT H. STRAUSS BEN FINKELSTEIN EMAIL NEWELLG@SPIEGELMCD.caM' t-R1 I

• u 1

1C P. DANIEL BRUNER PUBLIC AFFAIRS DIRECTOR LISA G. DOWDEN RISE J. PETERS AOJ:,J ,\1 !KENNETH A. BROWN (NOT A MEMBER OF THE BAR)

PETER J. HOPKINS DAVIDE. POMPER March 22, 1999 -

+ MEMIER OF MD BAR ONLY MEM19EII OF SC BAR ONLY

MEMBER OF M.-, 8AR ONLY DOCKET NUMBE Via Hand Delivery J Secretary U.S. Nuclear Regulatory Commission Washington, D.C. 20555 ATTN: Rulemaking and Adjudications Staff RE: Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc., Docket No. PRM-50-64

Dear Mr. Secretary:

Enclosed for filing are Comments of the Publicly Owned Systems in response to the Petition for Rulemaking in the above-captioned docket.

• Please contact the undersigned if you have any questions concerning these comments.

gz: Ed ZZ lf!/?L

~ 16t!:Jewell Attorney* for Publicly Owned Systems WOC ~ . Wn'..Ju r :;1* 1u !1 d GJN:c Enclosure MAR 25 1999

U.S. NUCLEAR REGULATORY COMM! 1 ~

RULEMAKINGS&AOJUOICATION8 OFFICE OFT+IE SECRETARY' OF THE COMMISSIO DocllnentStallslts Pos1mark Date ff D CopiesRecaed /

Add'I Coples Repro(b:ed_S-- _____

~/~

UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Docket No. PRM-50-64 Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.

COMMENTS OF PUBLICLY OWNED SYSTEMS ON PETITION FOR RULEMAKING The American Public Power Association, ElectriCities of North Carolina, Inc.,

Florida Municipal Power Agency, New Hampshire Electric Cooperative, Inc.,

Massachusetts Municipal Wholesale Electric Company, the City of Anaheim, California, and the Town of Lyndonville, Vermont (hereinafter, "Publicly Owned Systems") hereby submit their comments in response to the Petition for Rulemaking filed in the above-captioned docket.

• The Petition for Rulemaking was filed by Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mis-sissippi Electric Power Association, and Washington Electric Cooperative, Inc. (herein-after, "Petitioners"). The Petitioners are all nonoperating joint owners of nuclear plants who express concerns about the issuance of a policy statement1 in which the Nuclear 1

"Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry" (hereinafter, "Policy Statement"), 62 Fed. Reg. 44071 (1997).

Regulatory Commission ("NRC," "the Commission") claims the authority to impose joint and several liability on nuclear plant co-owners in certain circumstances. The Petitioners argue that the Commission's statements create uncertainty about co-owners' potential liability that adversely affects the ability of joint owners to raise capital and may stifle the sale of nuclear plant ownership interests. The Petitioners request that the issue of joint and several liability be resolved by amending certain of the Commission's regulations contained in 10 CFR Part 50 to state that the NRC will look first to the party licensed to operate the facility, but in any event will respect the allocation of financial responsibility that is contained in joint ownership contracts. The Commission issued notice of the Petition for Rulemaking on January 29, 1999 (64 Fed. Reg. 432), and requested comments.

Communications concerning this docket should be addressed to the following counsel for Publicly Owned Systems:

Gary J. Newell Spiegel & McDiarmid Suite 1100 1350 New York Avenue, NW Washington, DC 20005-4798 Telephone: (202) 879-4000 Facsimile: (202) 393-2866 E-mail: newellg@spiegelmcd.com I.

PUBLICLY OWNED SYSTEMS' INTEREST IN THIS DOCKET The American Public Power Association ("APPA") is the national service organization representing the interests of the nation's approximately 2,000 municipal and other state and local government-owned utilities throughout the United States.

Approximately 1,870 of these systems are cities and municipal governments that currently own and control the day-to-day operations of their electric utility systems.

APPA members include state public power agencies and serve many of the nation's largest cities. Collectively, APPA members serve 15 percent of all kilowatt-hour sales to ultimate customers in the United States. A number of APPA's members are nonoperating minority owners of nuclear plant interests.

Each of the other Publicly Owned Systems is a nonoperatingjoint owner of one or more commercial nuclear generating stations licensed by the NRC. The specific ownership interests of these Publicly Owned Systems are described in.Appendix A. In most instances, the Publicly Owned Systems own minority interests in the relevant plant or plants. In all instances, the joint ownership agreements, to which the Publicly Owned Systems are parties, allocate financial responsibility for plant costs in accordance with each owner's percentage interest in the plant. Thus, the Publicly Owned Systems would be directly affected by any Commission policy (or action taken in furtherance of a policy) that purports to override contractual allocations of financial responsibility and to impose joint and several liability for plant costs, especially when such joint and several liability has been expressly excluded from the contract or is not addressed in the contract.

II.

COMMENTS CONCERNING THE PETITION FOR RULEMAKING A. Co-Owner Cost Responsibility Is Clearly Established by Existing Arrangements, Which Have Been Reviewed and Accepted by the Commission Over the Course of Decades.

The Commission's comments in the Policy Statement concerning joint and several liability are unfortunate on several counts. First and foremost, these comments directly undercut the nuclear power industry's long-standing reliance on contractual allocations of financial responsibility, which have served as the cornerstone for numerous joint ownership arrangements under which nuclear plants have been constructed and operated for the benefit of electricity ratepayers.

As the Petitioners correctly observe, the imposition of joint and several liability would overturn the reasonable and legitimate expectations of many entities and institu-tions with direct interests in nuclear joint ownership arrangements. These entities and institutions include the co-owners themselves (who entered into joint ownership arrange-ments based on their acceptance of specified levels of financial responsibility); investors (who provided the funds for purchases of joint ownership interests in reliance on the terms expressed in the underlying contracts); and state regulatory commissions (which authorized the co-owners' purchases of ownership interests on the basis of the contractual cost allocations). Each of these entities and institutions would see their long-standing legitimate expectations about the financial responsibility of co-owners completely overthrown by the imposition of joint and several liability for nuclear plant costs.

It is important to recognize that these long-standing industry expectations were not formulated in isolation from the NRC's knowledge or, indeed, Without its

involvement. In fact, these expectations were in large measure actively fostered by the Commission's own consideration and approval of numerous joint ownership arrangements.

To be specific, the NRC's regulations in 10 CPR Part 50 set forth detailed requirements for the submission of information that would allow the Commission to evaluate the financial qualifications of applicants for nuclear plant construction permits and operating licenses. In particular, 10 CPR § 50.33(:t) and Appendix C to Part 50 require applicants to submit "information sufficient to demonstrate to the Commission the financial qualification of the applicant to carry out, in accordance with regulations in this chapter, the activities for which the permit or license is sought."

In conducting its evaluation of applicants' financial qualifications, the Commis-sion has reviewed each applicant's financial capability in relation to the specific owner-ship share owned or proposed to be acquired by the applicant. Thus, in the case of an entity that sought to acquire a minority interest in a plant, the Commission has considered whether that entity has the financial capability to fund the portion of plant costs which corresponds to the interest being acquired.2 A case in point illustrates this long-standing practice.

2 The Commission's Atomic Safety and Licensing Appeal Board ruled in 1978 that co-owners of a plant must be co-applicants for any permit or license. Public Service Co. ofIndiana, ALAB-459, 7 NRC 179 (1978). Thus, an entity seeking to acquire a share of a plant must provide the fmancial qualifications information called for by 10 CFR § 50.33(+/-) and Appendix C, but, as noted, its qualifications have been evaluated in relation to the share being acquired.

In July, 1981, North Carolina Municipal Power Agency Number 3

("NCMPA #3")3 executed contracts with Carolina Power & Light Company ("CP&L")

pursuant to which NCMPA #3 would purchase specified minority interests in certain then-operating and then-under-construction generating facilities on the CP&L system.

The facilities in which ownership interests were to be acquired included units at the Brunswick Steam Electric Plant and the Shearon Harris Nuclear Power Plant. In Septem-ber 1981, CP&L filed a proposed amendment to the operating license for Brunswick Units 1 and 2 to add NCMPA #3 as a co-owner of those units. A similar contemporane-ous filing was made to amend the construction permit and operating license application for the units at the Harris Plant. CP&L's applications specified that NCMPA #3 would acquire an 18.7% interest in each of the Brunswick Units and a 16.5% interest in each of the Harris Units. CP&L's application also provided responses to questions from the Commission's staff concerning the financial qualifications ofNCMPA #3. Certain of those questions were specifically directed toward NCMPA #3 's capability to meet the

• portion of plant costs that corresponded to the ownership share being acquired. The responses provided by CP&L and NCMP A #3 set forth the bases for their contention that 4

3 Subsequent to the events described in text, North Carolina Municipal Power Agency #3 changed its name to North Carolina Eastern Municipal Power Agency.

4 For example, in connection with both the Brunswick and Harris amendments, the Commission Staff submitted questions to the applicants for information about the financial qualifications of the municipal applicant (NCMPA #3). Staff's Question No. 12 stated: "Describe the applicant's plan for financing its share of the cost of eventual shut-down of the facility and maintenance in a safe shut-down condition."

(emphasis added)

NCMPA #3 was capable of meeting the financial obligations associated with the specific percentage interest in each plant that was being acquired by NCMP A #3.

The NRC granted the applications for amendment of the Brunswick licenses and the Harris Plant permit on November 2 and 3, 1981, respectively. In granting the requested amendments, the Commission expressly tied its findings concerning the financial capability of the acquiring party to the specific ownership interests proposed to be acquired Thus, the Commission's Director of Licensing stated as follows in approving the amendment of the Brunswick license:

We have determined that, pursuant to 10 CFR 50.33(f) and Appendix C to 10 CFR Part 50, [NCMPA #3] is financially qualified to acquire, operate and safely decommission the facility to the extent of an 18. 7 percent undivided ownership interest. (emphasis added)

The formal amendments to the operating licenses for the two Brunswick Units similarly state as an express finding of the Commission that NCMPA #3 "is financially qualified to acquire, operate, and safely decommission the facility to the extent of an 18. 7 percent undivided ownership interest." Similar language is included in the amendment of the Harris Plant construction permit, as to which the Director of Licensing made the following statement in approving the amendment:

We have reviewed your application, along with the supporting information, and have concluded that North Carolina Municipal Power Agency Number 3 is financially qualified to participate in the ownership of the Shearon Harris facility to the extent of [al 16.5% undivided ownership interest. (emphasis added)

Based on these approvals,5 NCMPA #3 closed on its purchase of ownership shares in the Brunswick and Harris plants in April, 1982.

The aforementioned approvals were, in each case, premised on analyses of NCMP A #3 's financial qualifications prepared by the Commission's staff. Those analy-ses -- a "Safety Evaluation Report" in the case of the Harris Plant amendment, and an "Analysis of Financial Qualifications" in the case of the Brunswick Station amendment--

expressly addressed NCMPA #3 's financial capabilities strictly in relation to the specific share of plant ownership proposed to be acquired. 6 There is absolutely no mention in

• these analyses of the financial qualifications ofNCMPA #3 in relation to any potential imposition of "joint and several liability," nor is there any suggestion in any of the Commission's regulations or orders that NCMPA #3 (or any other co-owner) might someday be required to bear more than its ownership-related share of plant costs.

The NRC's analysis of the application to add NCMPA #3 as a co-licensee of the Brunswick and Harris plants -- and, specifically, the NRC's analysis ofNCMPA #3's 5

Copies of the orders granting these approvals are provided in Appendix B to these Comments.

6 Thus, for example, the "Safety Evaluation Report" prepared in connection with the Commission's consideration of the Harris Plant permit amendment addressed ( at pp. 2-3) NCMPA #3's ability to raise capital for the funds due at closing and the total cost of purchase for the 16.5% share of the Harris Plant proposed to be acquired by NCMPA #3. The Report made a determination (at pp. 3-4) that "[NCMPA

1. 3's] plan to fund its proposed ownership interest in the facility from proceeds derived from the issuance of its revenue bonds constitutes a reasonable financing plan... ," and that "issuance of the requested amendments transferring ownership percentages from CP&L to [NCMPA #3] will not be inimical to the health and safety of the public." Similarly, the Analysis of Financial Qualifications prepared by the Office of State Programs in connection with the Commission's consideration of the Brunswick license amendment observed (at pp. 6-7) that NCMPA #3 "will pay its proportionate share of all costs associated with the cancellation, retirement or decommissioning of the facility," and that the joint ownership contract "requires

[NCMPA #3] to bear its share of the costs of cancellation or decommissioning of any Unit which is retired or decommissioned after the date of Commercial Operation of such Unit." (emphasis added)

financial qualifications in relation to the ownership share proposed to be acquired -- is typical of how joint ownership arrangements historically have been addressed by the C_ommission. Thus, the Commission's assertion that the Policy Statement "expressed no change in prior NRC practice or policy,"7 is inexplicable and insupportable. Joint and several liability represents a total departure from the Commission practice that was in effect prior to the issuance of the Policy Statement. Such a radical policy shift must be supported by substantial evidence and a thorough explanation of the agency's reasoning -- as well as by an analysis of the impact of the change on parties who reasonably relied on the prior policy -- but these essential elements have yet to be offered by the Commission.

B. If the Commission Wishes to Consider a Change in Its Established Policy Concerning Co-Owner Cost Responsibility, It Must Do So in a Context That Takes Into Consideration Parties' Reliance on the Past Policy and the Impacts ofAny Proposed Change in the Policy.

For the reasons stated above, Publicly Owned Systems maintain that the financial responsibilities of nuclear plant co-owners should remain fixed by their existing contractual arrangements, which have had the Commission's express endorsement for decades. During this time, regulatory approvals have been obtained, contracts with purchasers of output have been signed and billions of dollars of financing have been raised from the investing public in express reliance on contractual allocations of financial 7

See letter dated February 20, 1998 from NRC *secretary Hoyle to Gary Newell, rejecting a request for reconsideration of the Policy Statement that had been filed by the Publicly Owned Systems group.

responsibility. Even if it were assumed, arguendo, that the Commission has the legal authority to adopt a policy of joint and several liability -- a point which Publicly Owned Systems by no means concede, and, in fact, vigorously contest -- the NRC clearly lacks the discretion to apply that new policy to joint ownership arrangements which were developed in reliance on the prior policy. See Bowen v. Georgetown University Hospital, 8

488 U.S. 204 (1988). As a result, existing joint ownership arrangements would need to 8

The application of joint and several liability to the allocation of financial responsibilities under joint ownership arrangements developed under the prior policy would constitute a retroactive application of the new rule because, among other things, the rule would impose new substantive obligations and attach new financial liabilities in respect to transactions already past. However, as the U.S. Supreme Court stated in Georgetown Hospital:

It is axiomatic that an administrative agency's power to promulgate legislative regulations is limited to the authority delegated by Congress.

... [A] statutory grant of legislative rulemaking power will not, as a general matter, be understood to encompass the power to promulgate retroactive rules unless that power is conveyed by Congress in express terms. (citation omitted). Even where some substantialjustification for retroactive rulemaking is presented, courts should be reluctant to find such authority absent an express statutory grant.

488 U.S. at 208. No such authority to engage in retroactive rulemaking is provided by the Atomic Energy Act, however (see 42 U.S.C. § 220l(p)). Furthermore, even if the NRC were to argue that a rule on joint and several liability merely interprets the existing statutory law, that interpretation clearly diverges from the policy formerly applied by the Commission. In any case, such an argument would be unavailing because the United States Court of Appeals for the District of Columbia Circuit has held that the prohibition against retroactive rules set forth in Georgetown Hospital applies to interpretive rules as well as to legislative rules:

[T]he conclusion that the rules at issue here are interpretive does not in itself legitimate their application to prior transactions. We agree with the government's implicit concession that interpretive rules, no less than legislative rules, are subject to Georgetown Hospital 's ban on retroactivity. The Administrative Procedure Act's definition ofa "rule" -- "the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy ... ", 5 U.S.C. § 551(4) -- draws no distinction between rules that "interpret" law and rules that "prescribe" law: both must be of "future effect". Cf Georgetown Hospital, 488 U.S. at 216-23, 109 S.Ct. at 476-79 (Scalia, J., concurring).

Health Ins. Assn. ofAmerica v. Shala/a, 23 F.3d 412,423 (D.C. Cir. 1994), cert. denied, 513 U.S. 1147

[Footnote continued on following page]

be "grandfathered" and exempted from any new policy affecting the allocation of financial responsibilities.

In any event, if the Commission wishes to return to the settled issue of co-owner cost responsibility -- in response to the Petitioners' request, or otherwise -- it should do so only with full recognition and consideration of (i) the past reliance on contracts in delin-eating the extent of each owner's liability, and (ii) the impacts of a change in policy on specific parties who made substantial commitments in reliance on the prior practice. To be specific, the Commission's conclusions about joint and several liability must be developed from an evidentiary record that provides a full understanding of the impacts of such a policy on parties who have relied on contractual allocations of cost, which would include, at a minimum, the following:

• Minority owners of nuclear plants,9 many of which are relatively small consumer-owned utilities (cities, towns and cooperatives) that lack the "deep pockets" to carry the financial obligations of other owners (as well as their own), and whose other legitimate public activities would be placed in great jeopardy if they were exposed to open-ended liability for nuclear plant costs; (1995). In any event, since a joint and several liability rule would constitute a "prescription" of a "practice bearing on," among other things, "financial structures," such a rule is applicable only "for the future" under the Administrative Procedure Act (in particular, 5 U.S.C. § 551(4)).

9 Although the Commission indicates in the Policy Statement that the owners of de minimis shares would not be forced to bear the burden of joint and several liability, there is no insight given as to the threshold beyond which an owner is no longer considered de minimis.

• State regulatory authorities, who approved joint ownership commit-tp.ents by entities subject to their jurisdiction based on the belief that the associated burden on ultimate consumers would be capped by the contractual allocation of costs; and

• Members of the investing public~ who purchased bonds issued by minority owners based on legitimate representations as to each own-

• er' s share of plant costs, and who could well face the prospect of a default by an owner that is later forced to bear costs that were allocated by contract to other plant owners.

In short, if the Commission wishes to reconsider its past policy of respecting contractual cost-sharing provisions, that reconsideration must include the gathering and evaluation of evidence concerning the actual impacts on affected parties that would result from overturning the existing practice. Consideration of the question entirely in the abstract would necessarily force the NRC to rely on sheer speculation as to the impacts on these parties of a change in its policies. In order for the NRC to make informed judg-ments about a change in the allocation of cost responsibilities in nuclear joint ownership arrangements, it is necessary for the Commission to gather and evaluate evidence about the real-world impacts on actual parties of that change.

In stating that the Commission should refrain from considering the issue of co-owner cost responsibility as a purely abstract question, Publicly Owned Systems should not be viewed as conceding in any way that the Commission actually possesses the legal authority to modify or override an existing contractual allocation of cost

I

• responsibilities. To the contrary, as noted above, such an action would violate the proscription against retroactive rulemaking, Georgetown Hospital, supra, unless existing arrangements were exempted from the new policy. Furthermore, as we have previously 10 pointed out to the Commission, the Policy Statement raises substantial legal issues and concerns as to, at a minimum, the following: (1) whether, in light of numerous existing joint ownership arrangements premised on pro rata sharing of costs, the imposition of joint and several liability violates constitutional prohibitions against the impairment of contract, abrogates constitutional rights of due process, and/or constitutes an unconstitutional "taking" of property; (2) whether the imposition of joint and several liability is within the Commission's statutory authority under the Atomic Energy Act; and (3) whether, in light of the Commission's past acceptance ofpro rata sharing arrangements and the substantial commitments made in reliance on that practice, the imposition of joint and several liability is arbitrary, capricious, and an abuse of discretion..

Regardless of whether the NRC's legal authority to override existing cost allocations is better tested in a rulemaking context or in the context of an actual attempt by the Commission to exercise that purported authority, 11 it would be a mistake in either context 10 "Publicly Owned Systems' Request for Reconsideration or, in the Alternative, Motion to Delay Effectiveness of a Portion of the Final Policy Statement in Order to Receive Additional Public Comment,"

filed with the Commission on October 14, 1997.

11 The right of parties to contest the Commission's legal authority to impose joint and several liability in an actual case was fully preserved by the order of the United States Court of Appeals for the District of Columbia Circuit dismissing for lack of ripeness the petition for review filed in American Public Power Assn., et al. v. Nuclear Regulatory Commission and the United States ofAmerica, Case No. 98-1219 (order issued August 3, 1998).

to address the question without fully considering the impacts on actual parties of any attempted exercise of that authority.

In the meantime, the Commission could do much to allay the concerns raised by the Petitioners by reaffirming the NRC's intent to respect contract provisions, and by indicating that it will provide for a full hearing should it again consider a change in its policies in the future. Were the Commission to provide these assurances, the Petitioners' request could be dismissed as unnecessary.

Respectfully submitted, Frances E. Francis Gary ~ 1 1 ~

Attorneys for Publicly Owned Systems Law Offices of:

Spiegel & McDiarmid Suite 1100 1350NewYorkAvenue~ NW Washington, DC 20005-4798 (202) 879-4000 March 22, 1999 Doc#: 108031

Appendix A APPENDIX A DESCRIPTION OF NUCLEAR OWNERSHIP INTERESTS HELD BY THE PUBLICLY OWNED SYSTEMS American Public Power Association ("APPA") is the national service organization representing the interests of the nation's approximately 2,000 municipal and other state and local government-owned utilities throughout the United States. APPA members serve some of the nation's largest cities, such as Los Angeles, Sacramento,

• Seattle, Phoenix (Salt River Project), Jacksonville, Austin, San Antonio, Nashville, Memphis, Cleveland, Omaha and Orlando. Several state public power agencies, such as New York Power Authority, South Carolina Public Service Authority, and Lower Colorado River Authority in Texas, provide electric power to many communities within their states. However, the majority of APPA's members are located in small and medium-sized cities in every state except Hawaii. Collectively, public power utilities deliver electric energy to one of every seven electric consumers in the United States.

Some APP A members directly own undivided interests in nuclear generating plants, while other APP A members are full or partial requirements customers of electric utility companies that own or participate in nuclear generating plants.

ElectriCities of North Carolina, Inc. is a Joint Municipal Assistance Agency under the General Statutes of North Carolina. ElectriCities is the management services provider for North Carolina's two municipal joint action agencies: North Carolina Municipal Power Agency No. 1 (NCMPA #1) and North Carolina Eastern Municipal 1

Power Agency (NCEMPA). NCMPA #1 is the owner ofa 75% undivided ownership interest in Unit No. 2 at the Catawba Nuclear Station, a two-unit nuclear generating station operated by Duke Power Company. Through the contractual cost sharing provisions of its joint ownership contracts with Duke, NCMPA #1 bears 37.5% of the total costs of the Catawba Nuclear Station. NCEMPA is the owner of 18.33% undivided ownership interests in Units 1 and 2 at the Brunswick Steam Electric Plant, and a 16.17%

undivided ownership interest in Unit No. 1 at the Shearon Harris Nuclear Power Plant.

The Brunswick and Harris stations are operated by Carolina Power & Light Company, which also owns the remaining portions of the enumerated units.

Florida Municipal Power Agency ("FMP A") is a political subdivision of the State of Florida engaged in the development of bulk power supply for its municipal electric system members. FMPA is the owner of an 8.806% undivided ownership interest in Unit No. 2 at the St. Lucie nuclear power station, a two-unit electric generating facility located near Fort Pierce, Florida and operated by Florida Power & Light Company. In addition, certain ofFMPA's members have entitlements to output from the Crystal River No. 3 nuclear generating unit, operated by Florida Power Corporation.

New Hampshire Electric Cooperative, Inc. ("NHEC") is a consumer-owned electric cooperative that provides service in parts of nine New Hampshire counties.

NHEC is the owner of an approximately 2.17% undivided ownership interest in Unit No. 1 at the Seabrook Nuclear Station, which is operated by Public Service Company of New Hampshire (a subsidiary of Northeast Utilities).

2

Massachusetts Municipal Wholesale Electric Company ("MMWEC") is a political subdivision of the Commonwealth of Massachusetts engaged in the development of bulk power supply for its municipal electric system members. MMWEC is a joint owner of Millstone Unit No. 3 (a nuclear electric generating unit located at the three-unit Millstone station operated by Northeast Utilities and located near Waterford, Connecticut) and Unit No. 1 at the Seabrook nuclear power station (a single-unit generating station operated by Public Service Company of New Hampshire and located in Seabrook, New Hampshire). MMWEC's share of Millstone 3 capability is 55.2

• megawatts, and its share of Seabrook 1 capability is 133.3 megawatts.

The City of Anaheim, California ("Anaheim") owns and operates a municipal electric utility system and provides retail electric service to residential, commercial and industrial customers in and around the City. Anaheim is the owner of 3.16% undivided interests in Units 2 and 3 of the San Onofre Nuclear Generating Station, which is operated by Southern California Edison Company .

• The Town of Lyndonville, Vermont ("Lyndonville") operates a municipal electric utility system serving customers in and around its municipal boundaries.

Lyndonville owns a 1.085% ownership share of the Vermont Yankee Nuclear Power Plant, located near Vernon, Vermont.

3

Appendix B-1

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D. C. 20555 November 2, 1981

• Docket Nos. 50-325 50..:324 Mr. J. A. Jones Senior Executive Vice President Carolina Power & Light Company 336 Fayetteville Street Raleigh, North Carblina 27602

Dear Mr. Jones:

The Conmission has issued the enclosed Amendment Nos. 42 and 65 to Facility Operating Licenses Nos. DPR-71 and DPR-62 for the Brunswick Steam Electric Plant, Units l and 2 {the facility). The amendments consist of changes to the Licenses in response to your submittals of September 3, 1981 and October 19, 1981.

These changes reflect the addition of North Carolina Municipal Power Agency Number 3 (Power Agency) as a co-owner of the facility. We have determined that, pursuant to 10 CFR 50.33(f) and Appendix C to 10 CFR Part 50, Power Agency is financially qualified to acquire, operate, and safely decommission the faci 1i ty to the extent of an 18. 7 percent undi v.i ded ownership interest. Carolina Power & Light Company shall retain exclusive responsibility for the operation and maintenance and the construction of capital additions to the facility .

• We have determined that the amendments do not authorize a change in effluent types or total amounts nor an increase in power level and will not result in any significant environmental impact. Having made this determination, we have further concluded that the amendments involve an action which is insignificant from the standpoint of environmental impact and pursuant to 10 CFR §51.5(d)(4) that an environmental impact statement, negative declaration or environmental impact appraisal need not be prepared in connection with the issuance of the amendments.

We have further concluded that the amendments do not involve significant new safety information of a type not considered by a previous Commission safety review of the facility. They do not involve a significant increase in the probability or consequences of an accident, do not involve a significant decrease in a safety margin and, therefore, do not involve a significant hazards consideration. We have also concluded that there is reasonable assurance that the health and safety of the public will not be endangered by this action.

Mr. J. A. Jones 2 Copies of the Analysis of Financial Qualifications and the Notice of Issuance are also enclosed.

Sincerely,

--.~/~ts--

Thomas A~i?'iJ%~iit~, Chief Operating Reactors Branch #2 Division of Licensing

Enclosures:

1. Amendment No. 42 to DPR-71

2. Amendment No. 65 to DPR-62 3, Analysis of Financial Qualifications

4. Notice cc: w/enclosures See next page

~r. J. A. Jones Carolina Power & Light Company

~

cc:

Richard E. Jones_. "Esquire Carolina Power & Light Company 336 Fayetteville Stre~t Raleigh, North*c~rolirii 27602.

Georie F. Trow6~id~e, Esqui~e -

• Shaw, Pitt~an 1 Potts &Trowbridge 1800 M sireet, N: w. ....

~ashington, D. C. 20036 Mr. Charles R. Dietz Pl ant Manager * *

• P. - 0. Box 458

• Southport, North Carolina 28461 Mr. Franky Thomas, Chairman Board of Corrrni$sioners P. 0. Box 249 Bolivia, North Carolina 28422 Mrs. Chrys Baggett State Clearinghouse Budget & Management 116 ~est Jones Street Ralei~h, North Carolina 27603 So~~h;:*ort - Brunswick Count.y Library

• 1c; ~- ~o~re Street

• Sc~~h:~rt, ~ort~ Caro1i~a

. 28461 U. S. Environmental Protection Agency Region IV Office

• Regional Radiation Representative 345 Co~rtland Street, N. W.

Atlanta, Georgia 30308 Resident Inspector .

U.- S. Nuclear-Regulatory' Cor.1fnissi-On P. 0. Box 1 057 Southport, North Carolina 28461

UNITED STATES NUCLEAR REGULATORY COMMISSION

• . WASHINGTON, D. C. 20555 CAROLINA POWER &LIGHT COMPANY

. DOCKET NO. 50-325 BRUNSWICK STEAM ELECTRIC PLANT, UNIT NO*. 1 AMENDMENT TO FACILITY OPERATING LICENSE Amendment No. 42 .,.

License No *. DPR-71

_l. _The Nuclear Regulatory .Commission (the Commis~ion) has found that:*

-- A. .The application for amendment by Carolina Power & Light Comp-any dated September* 3, 1981 as supplemented October 19, 1981 complies with the standards and requirements of the Atomic Energy Act of*

1954, as amended: (the Act), and the Comnission 1 s rules and regula-ti ens set forth in 10 CFR Chapter I; . . . . . - , : ..

• B. .The facil_ i~y wil 1 . operate in .,&onfonnity with the app~ication, the prov1s1ons of the Act, and the rules a~d regulations of the Commission;

• C. Thete is reasonable assurance (i) that the activities authorized by this amendment can be conducted without endangering the heaith and safety of the public, and. (ii) that such *activitfes will be conducted in compliance with the Commission 1 s regulations; D. The issuance of this amendment will not be inimical to the common defense ai:rd security or to the heal th and safety of the public;

• and

[: N9~th Carolina Municipal Power Age~cy Number 3 is financially qualified to acquire, operate, ~nd safely decommission the facility to the extent of an 18.7 percent undivided ownership interest.

F. The issuance o~ this amendmerit is in accordance with 10 CFR Part 51

,.- -~ef _:the_.C01!Jn11ssjo"!-'S*regulations::and all a.ppli~able requirements hav~ b~en satisfied. * ~

2. Accordingly, paragraph 2.A of Facility Operating License No. DPR-71 is hereby amended to read as follows:

This license applies to the Br~nswict Steam Electric Plant, Unit l, ~

a bbi'ling water reactor and associated equipment (the facility),

owned by the Carolina .Power & Light Company and North C~rolina

2 Municipal Power Agency Number 3 and operated by Carolina Power

& Light Company~ The facility is located on the Cape Fear River, near Southport in Brunswick County, North Carolina, and is described in the Fina*1 Safety Analysis Report" as supplemented 11 and amended (Amendments 1 through .31) and the "Environmental Report" as supplemented .and amended. _

3. This license amendment is effective as of the d~te of issuance *.

FOR THE .NUCLEAR REGULATORY COMMISSION Ippolito, Chief

-Operating Reactors Branch #2 Division of Licensing Date of Issuance: November 2, l 981

UNITED STATES

. NUCLEAR REGULATORY COMMISSION WASHINGTON, D. C. 20555 CAROLINA POWER & LIGHT COMPANY DOCKET NO. 50-324 BRUNSWICK STEAM ELECTRIC PLANT, UNIT flO. 2.

AMENDMENT TO FACILITY OPERATING LICENSE Amendment No. 65 License No. DPR-62'

• .1.- The Nuc1ear.Regulatory Comm~ssi9n (the Commission) has found that:

A. The application for amendment by Carolina Power & Light. Company dated Sep~ember 3, 1981 as supplemented October 19, 1981 complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's .rules and regula-tions set forth in 10 CFR Chapter I; B. The facility wil 1 operate in confonnity with* the application, .

the provisions of the Act, and the rules and regulations of the Commission; C. ihere is reasonable assurance (i) *that the activities authorized by this amendment can be conducted without endangering the health and safety of the public, and (ii) that such activities will be conducted in compliance with the Commission's regulations; D. The issuan~e of this amendment will not be inimical to the common

~efense and security or to the health a~d *safety ~f the public; and E. North Carolina Municipal Power Agency Number 3 is financially qualified to acquire, operate, and safely decommission the facility to the extent.of an 18.7 percent undivided ownership interest.

F. The issuance 6f this amendment is in accordance with 10 CFR Part 51 of-tfie Commis*sion's -regulations and all *applicable requirements have been satisfied. . \

2. Accordingly, paragraph 2.A of Facility Operating License No. DPR-62 is hereby amended to read as follows:

This *license applies to the Bruniwick ~team Electric Plant, Unit 2, a boiling water reactor and associated equipment (the facility),

owned by the Carolina Power &Light Company and North Care*

--....... 2 Municipal Power Agency Number 3 and operated by Carolina Power

&Light Company. The facility is located on the Cape Fear River, near Southport in Brunswick County, North Carolina, and is described in the "Final Safety Analysis Report" as supplemented and amended (Amendments l through 29) and the "Environmental Report" as -supplemented and

. . - amended {Supplements l through 7) *.

3. -This license amendment is effective as of the date of issuance.

• • FOR THE NUCLEAR REGULATORY COMMISSION Thomas Ippolito, Chief Operating-Reactors Branch ~2

• Division of Licensing Date of Issuance:* November 2, 1981

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D. C. 20555 ANALYSIS OF FINANCIAL QUALIFICATIONS BY THE OFFICE OF STATE PROGRAMS SUPPORTING AMENDMENT NO. 42 TO FACILITY LICENSE NO. DPR-71 AND AMENDMENT NO~ 65 TO FACILITY LICENSE NO .. DPR-62

• cAROLINA POWER & LIGHT COMPANY BRUNSWICK STEAM ELECTRIC PLANT, UNIT NOS. l AND 2

• . *ooCKET NOS. 50~325 AND"50~324 .,.,

Financial *qualifications of*the*Transferee The NRC regulations relating to the determination of an applicant's financial qualifications are in Section 50.33(f) and Appendix C to 10 CFR Part 50. These regulations state that there must be reasonable assurance that an applicant can obtain the necessary funds to cover the estimated construction costs of a p.roposed nuclear plant and its related -

fuel cycle costs. Ultimately, this means that an applicant must demonstrate a reasonable financing plan tn light of relevant circumstances. This .

• standard of reasonable assurance, however, must be viewed in light of the period of time from the purchase of ownership interest to the date of commercial operation. In the case of Brunswick Steam.Electric Plant, Unit _Nos. 1 and 2 (the facility), the two units are completed in con-struction and are presently owned and operated by Carolina P_ower & Light Company (CP&L). Consequently, we must make certain basic assumptions in our fi na11cia 1 analysis' about future conditions for analysis of the financing of_partial ownership, operation, and ultimate decommissioning by the proposed transferee. Our analysis of the proposed transferee's financial qualifications requires that ~e vaTidly assume that there will

- 2

~

be rational regulatory policies with respect to the setting of rate$ for the recovery of oper~tio,:i and~ecorrmissioning exp~nse~ a~d:that viable capital markets will exist *. T~e former assumption 1mp~ies that-rates will be set to at least cover the costs-of-service, including-the

- . -- costs of capital necessary f9r- purcha-se of North- Carolina Power Agency Number 3's (The Power Agency)_prop9sed 18.7 percent* undivided ownership interest in_ the facility. Tne* latter assumption implies that* capital will be_

available to.The Power Agency at some price to allow acquisition of partial ownership interest in the facility. Given these funda~ental assumptions, our_evalu~tion is then focused on the reasonableness of the proposed transferee's financial pl ans, in 1i ght of relevant cfrcutnstances, to participate in its proposed share of the estimated operating and decomnissioning costs of the facility.

The following analysis summarizes our review of the information submitted by CP&L and addresses the financial qualifications of The Power Agency to finance their proposed -proportionate share of the costs associated with the ownershii;i, operation, and decommissioning of the facility.

Cost Estimates and Amount of Ownership Interests Proposed for Transfer The ~ost recent cost information for the proposed 18.7 percent partial ownership transfers of the facility are stated in the financial information submitted under CP&L'*s September 3, 1981 license amen_dment request. This cost is $244.3 million.

... The timing of payments to meet the above- costs for acquisition of The Power Agency's 18.7 percent proposed ownership interest assumes that 33 percent of the closing will occur on January l, 1982, 36 percent will

~; I

occur on July l, 1982, and the final 31 percent will be consumnated on December 1, 1982.

Estimated Operating Costs of Facility For the purpose of estimating the facility's operating -cost, the year 1981 was adopted by CP&L as the first year of corrmercial operation.

. ~

Estimates of the total annual cost of operating*the facility for each or the first five years -are presented below. A11 operating co*st estimates are based on a combined peak net ele~trical capacity of 1580 megawatts.

Operating costs include all costs associated with operation and maintenance including nuclear fuel burnup and capital costs.

Brunswick l and 2 Year ,,, Estimated Annual Operating Costs (Dollars in Millions) 1981 $ 145. 9 1982 $ 217.3 1983 $ 179. 6 1984 $ 150.2

• 1985 Es ti mated Costs to Decornmi ssion the Facility

$ 155.4 CP&L has proposed that upon the expiration of the facility's useful life; it wjll entomb it in a safe storage mode for a period of 30 years after which it will be completely dismantled. CP&L estimated that costs necessary to decommission the facility would be $125.4 million for Unit 0

No. l a~d $167: 9 mi i l i on -for Unit No. 2* under the entombment/ d~ferred dismantlement mode for the entire facility. These costs are estimated on a present value basis in 1980 dollars and are estimated to total The estimated costs to decommission

$293.3 mil,-ion for the entire facility.

4 -

Unit No. l are expected to be less tha~ Unit No. 2 since Unit No. 2 will be entombed first and decommissioning of the common systems for both units will be performed in conjunction with Unit No. 2. In addition, the-monitoring and. surveillance*equipment for this corrrnon facility will be installed with the Unit No. 2 effort. Therefore, the entombment of Unit No. 1-will require le~s equipment and effort since the common ...

systems for entombment_wi1l:havealready been installed with the_Unit No. 2 effort .

• Under contract with the NRC, the Pacific Northwest Laboratory operated by~Battelle Memo~ia1 Ins~itute 1s~~ed its report Technolo_gy, Safety, 11 and Costs.of Decommissioning a Reference Boiling Water Reactor Power Sta ti on 11 -NUREG/CR-0672 (June 1980)". ,.,..In this report the Pacific Northwest Laboratory (PNL) estimated the costs of decorrmissioning a large. (1155 M\*Je) boiling water reactor power station under various types of decommissioning methods. For the immediate dismantlement method .

of decommissioning, s

PNL estimated that total costs*would be $66.67 million in 1978 dollars for a one unit facility; or $133.34 million for two units. As CP&L 1 s estimate allows for a higher contingency factor, it is more conservative to adopt i.t herein in determining CP&L s ability to finance such amounts.

1 Description of Business of Proposed Co-Owner The Powe~* Agency is a* public body corporate and politic and an ,~nstrumentality of the State of North Carolina, incorporated under North Carolina statutes in December 1976. The Power Agency was ~reated to plan, develop, construct, and operate generation and transmission facilities. The

Power Agency has been granted all of the powers necessary or convenient to *carry out such purposes. In this respect, The Power Agency has .

proposed to enter into* contracts with thirty-six political subdivision participants (Participants), Uf!~er which The Power Agency is to* b*e the-sole- and exclusive bulk power supplier for e.ach such Participant in excess of any allotment of federal power from Southeastern Power_Adminirtration

• or_ of. the output of any resource such- po*litical subdivision may deve1op and install_ pursuant to provisions of the Supplemental Power Sales Agreement in effect between Power Agency and Participant. Each Participant 1s obligated to take or pay for its entitlement share of power from any owned project, such as the facility. The tenns of said *contracts are for the life of the project or so lon,.g. as any of Po\1er Agency's bonds*

issued to finance the project are outstanding, but not exceeding 50 years .

• Source of Funds to Power Agency to Acquire Partial Ownership Interest in the Facility, Operate It Upon Completion, and Ultimately Decommission It Like other*facilities that it has acquired or will acquire, The Power Agency 1 s ownership interest acquisition in the project will be financed through issuance

~ - -

of . ta~.... ex~mpt

- . revenue ~ands. _ .

Under the Power Coordination Agreement and the Operating and Fuel Agreement between Power Agency- and CP&L, The Power Agency covenants to set rates adequate to cover all its costs. No regulatory approvals are

4

- 6 required by Power Agency in setting rates to its Participantsw The Participants, as municipalities of the State of North Carolina, have authority to establish their own retail rates for service to their customers. The State of North Carolina covenants and agrees that so long as any bonds of Power_Agency are outs~nding and unpaid, the State will not limit or alter the .. .

rights of -any Participant or of Power AgencY.,.,.

to establish, maintain, revise, charge and collect electric rates to ful f_i 11 the terms of any* agreement for the project.

The obligations of each Participant to make payments to Power Agency under the Project Po~er Sales Agreement will be an expense of its Electric System, and the Participant will not be required to make payments to Power Agency except from--fevenues of its Electric System.

Each Participant will covenant in the Project Power Sales Agreement that it will fix and charge rates for electric service supplied from its Electric System sufficient to meet all of its obligations under the Project Power Sales Agreement and to pay any and all other amounts payable from such"revenues including cost of operation and of any general obligation bonds issued by the Participant to finance its electric system.

Pursuant to the Project _Agr~ements between CP&L and Power Agency, The

. r . - . : . '

Power Agency will pay its proportionate share of all costs assqciated with the cancellation, retirement or decommissioning of the facility.

The Purchase, Construction ~nd Ownership Agreement requires The Power

Agency to bear _its share of the costs of cancellation or deconrnissioning of any Unit which is retired or-decommissioned after the date of Commercial Operation of such Unit. These commitments extend for whatever peri~d of time is necessary to compJete _the canc~llation, retirement or decommissioning process so that no further expenditure of funds is required.

The Power Agency will include iri its Monthly Project Power Costs to be .,.

• charged to its Participants pursuant to the Initial Project Power.Sales*

Agreements amounts suffi c'i ent to enable Power Agency to meet its commftment to bear its share of the costs of *cancellation, retirement or decommissioning o;f the facility.

• Each Pa*rtfcipant agrees in the Initial Project Power Sales Agreement to pay its Pa-rticipant' s share of such Monthly Project Power Costs. Such costs are defined ..a-s including all costs incurred t:iy Power Agency resulting from the retirement or decommissioning of the Initial Project, and the providing of res~rves for such purposes. The Initial Project Power Sales Agreement imposes an unconditional 11 take or pay" commitment, thereby obligating each Participant to pay its Participant s 1 Share of Monthly f>roject Power Costs whether or not the Joint Facilities are completed, operable, operating, or retired or decommissioned and notwithstanding the suspension, interruption, interference, reduction or curtailment of the output of the Joint Facilities, or the power and

_ energy c_ont.rac-t;ed_ for,. in whole or in part, for a-ny re.ason whatsoever.

The Power Agency will establish a reserve for such costs in the** Decomnissioning Fund established pursuant to the Bond Resolution proposed to be adopted by Power Agency's Board of Conmissioners for-the facility.

Financial Qualifications Conclusion In accordance with the-**regufati-ons- c1ted-herein an applicant must demonstrate that it has- reasonable as_s_urance_ of obtaining _the necessary funds to cover the estimated costs of the activities contemplated under the licens~; Bas~d upon the p~eceding analyses of its pro~~sed~i~~ricing plans, we con~lude that the North Carolina Power Agency Number 3 has reasonable financing 'pia~s tri- lig"ht of *relevant* circumstances to acquir*e, -

operate, and pennanently stiutdown;_-if netessary, and maintain *the facility in a safe condition to the extent of *its 18.7 percen*t *owne-rship interest.

Accordingly, we conclude that the North Carolina Power Agency Number 3.

has financing plans that provide a . reasonable

..,,. assurance that funds can.

be obtained to finance its proposed respective undivided ownership interest shares in the facility. As a result, we have determined that The Power Agency is financially qualified to participate in facility to the extent of its 18.7 pefcent proposed ownership interest. This conclusion is based upon our_, determination that The Power Agency's proposed plan to fund its 18.7 percent ownership interest in the facility from proceeds derived from the issuance of its revenue bonds constitutes a reasonable financing plan in light of relevant circumstances.

, Furthermore, we have det-ermi ne9 that Power Agency has- reasonable assurance -

under 10 CFR 50.33(f) of obtaining the necessary funds to cover the estimated operating costs of the facility. In this respect, the Power

_Agency has demonstrated that it has avaflabl-e resources sufficient to

cover estimated costs for each of the first five years of operation plus the estimated costs of permanent shut down and maintenance of the facility in a safe.condition as required by 10 CFR Part 50, Appendix C(I)(B). As a consequence of this, we find that The .

Power Agency. is financially qualified to acquire, operate, and safely decommission the facility to the extent ofJa 18.7 percent undivided.ownership interest. In summary, -~

.our* conclusion is based upon the status as a public utility, its unilateral ability to establish rates w1th its Participants, the requirement that it recover operating and decommissioning expenses and the legal requirements present in the various agreements between CP&L, The Power Agency, and Participants to the-*Power-Agency~-

Appendix B-2

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D. C. 20555 November 3, 1981 Docket Nos.: SJ-400/401 and 50-402 /403 Mr. J. A. Jones Vice Chainnan Carolina Po't.er & Light Company Post Office Box 1551 Raleigh, North Carolina 27602

Dear Mr. Jones:

Subject:

Issuance of Amendments to Construction Permits for Shearon Harris Nuclear Power Plant, Units 1, 2, 3, and 4 Your letter, dated September 3, 1981 transmitted an application for amendments to the Construction Pennits for Shearon Harris Nuclear Power Plant, Units 1, 2, 3 and 4*, to add North Carolina Municipal Po't.er Agency t4umber _3 (Po't.er Agency) as a co-owner and to transfer a 16.5% undivided ownership interest in the Shearon Harris facility from Carolina Po't.er and LJght Company to the Power Agency. In support of your application, a number of exhibits were submitted by letter, also dated September 3, 1981.

We have reviewed your application, along with the supporting information, and have concluded that North Carolina Municipal Po\\er Agency Number 3 is financially qualified to participate in the ownership of the Shearon Harris facility to the extent of 16.5% undivided ownership interest. Further, we conclude that this action does not involve a significant hazards consideration,

• does not-constitute an unreasonable risk to the health and safety of the public, and is not inimical to the common defense and security. The bases for these conclusions are set forth in the enclosed safety evaluation.

We have also concluded that the amendments involve actions which are in-significant from the standpoint of environmental impact and that, pursuant to 10 CFR Section 51.5(d)(4), an enviromiental impact statement or negative declaration and an environmental impact appraisal nee9 not be prepared in connection with the issuance of the amendments.*

Amendment No. 1 to CPPR-158, Amendment No. 1 *to CPPR-159, Amendment No. 1 to CPPR-160, Amendment No 1 to CPPR-161, and a related notice which has been forwarded to the Office of the Federal Register for publication are en-closed.

Sincerely,

---

~

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Darrell G. Eisenhut, Director Division of Licensing Office of Nuclear Reactor Regulation

Enclosures:

1.

• Amendment No. 1 to CPPR-158

2. Amendment No. 1 to CPPR-159

3. *Amendment No. 1 to CPPR-16O

4. Amendment No. 1 To CPPR-161

5. Safety Evaluation

6. Federal Register Notice

SHEARON HARRIS Mr. J. A. Jones Board of County Commissioners of Vice Chainnan Chatham County Carolina Po\Er & Light Company P. 0. Box 111 Post Office Box 1551 Pittsboro, North Carolina 27312 Raleigh, North Carolina 27602 Chairman George F. Trowbridge, Esq. Board of County Commissioners of Shaw, Pittman, Potts & l~ake County Trowbridge P. 0. Box 550 1800 M Street, N. W. Raleigh, North Carolina 27602 Washington, D. C. 20036 Attorney General Richard E. Jones, Esq. Department of Justice*

Associate General Counsel Justice Building Carolina Po\Er & Light Company Raleigh, North Carolina 27602 411 Fayetteville Street Mall '

Raleigh, North Carolina 27602 Thomas S. Erwin, Esq.

115 W. Morgan Street Raleigh, North Carolina 27602 M. David Gordon Attorney Associate General State of North Carolina P. O. Box 629 Raleigh, North Carolina 27602 George Maxwell Resident Inspector/Harris NPS c/o U. s. Nuclear Regulatory Conmission Route 2, Box 99 Raeford, North Carolina 28371 Charles D. Barham, .Jr.

Vice President and Senior Counsel Carolina Power & Light Canpany Post Office Box 1551 Raleigh, North Carolina 27602 Office of Intergovernmental Relations 116 West Jones Str~et Raleigh, North Carolina 27603 Federal Energy Regulatory Commission 825 North Capital Street, N.E.

Washington, D.C. 20426 Chairman North Carolina Utilities Commission 430 North Salisbury Street Dobbs Building Raleigh, North Carolina 27602

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D. C. 20555 CAROLINA POWER AND LIGHT COMPANY NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 DOCKET NO. 50-400 SHEARON HARRIS NUCLEAR POWER PLANT, UNIT NO. 1 AMENDMENT TO CONSTRUCTION PERMIT Amendment No. 1 Construction Permit No. CPPR-158

1. The Nuclear Regulatory Commission (the Commission) having found that:

A. The application for amendment contained in a letter dated September 3, 1981, and supplemented by a second letter dated September 3, 1981, for the purpose of adding North Carolina Municipal Power Agency Number 3, as a co-owner of the Shearon Harris Nuclear Power Plant, Unit 1, complies with the standards and requirements of the Atomic Energy Act of 1954, as amended, and the Commission's rules and regulations set forth in 10 CFR Chapter I:

B. North Carolina Municipal Power Agency Number 3 is qualified to finance its proposed 16.5 percent undivided ownership interest in the facility.

C. The issuance of this amendment will not be inimical to the common defense and security or to the health and safety of the public; and D. Issuance of this amendment will not result in any environmental impacts not previously considered.

2. Accordingly, Construction Permit No. CPPR-158 is amended to reflect a change in ownership shares as follows:

A. Revise paragraph 1.B as follows:

B. The Carolina Power & Light Company and North Carolina Municipal Power Agency Number 3 (the applicants) have described the proposed design of the Shearon Harris Nuclear Power Plant, Unit No. 1 (the facility), including, but not limited to the principal architectural and engineering criteria for the design and have

. identified the major features or components incorporated therein for the protection of the health and safety of the public;

B. Revise paragraph 1. Fas follows:

F. The Carolina Power & Light Company is technically qualified to design and construct the proposed facility;

c. All other references to "applicant" shall read 11 applicants 11 and shall include North Carolina Municipal Power Agency Number 3.

D. Add the following at the end of para*graph 2:

Whereas the Carolina Power & Light Company and North Carolina Municipal Power Agency Number 3, as co-owners, will share in the ownership of the facility, the Carolina Power & Light Company shall retain exclusive responsibility for the design and construction of the facility.

• 3. This amendment is effective as of the date of issuance.

FOk THE NUCLEAR REGULATORY COMMISSION

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.,.:** Darrell G. Eisenhut,* Director Division of Licensing Date of Issuance: November 3, 1981

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D. C. 20555 CAROLINA POWER AND LIGHT COMPANY NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 DOCKET NO. 50-401 SHEARON HARRIS NUCLEAR POWER PLANT, UNIT NO. 2 AMENDMENT TO CONSTRUCTION PERMIT Amendment No. 1 Construction Permit No~ CPPR-159

1. The Nuclear Regulatory Commission (the Commission) h_aving found that:

A. The application for amendment contained in a letter dated September 3, 1981, and supplemented by a second letter dated September 3, 1981, for the purpose of adding North Carolina Municipal Power Agency Number 3, as a cci-owner of the Shearon Harris Nuclear Power Plant, Unit* 2, complies with the standards and requirements of the Atomic Energy Act of 1954, as amended, and the Commission's rules and regulations set forth in 10 CFR Chapter I:

B. North Carolina Municipal Power Agency Number 3 is qualified to finance its proposed 16.5 percent undivided ownership interest in the facility.

C. The issuance of this amendment will not be inimical to the common defense and security or to the health and safety of the public; and D. Issuance of this amendment will not result in any environmental impacts

• 2.

not previously considered.

Accordingly, Construction Permit No. CPPR-159' is amended to reflect a change in ownership shares as follows:

A. Revise paragraph 1.B as follows:

B. The Carolina Power & Light Company and North Carolina Municipal Power Agency Number 3 (the applicants) have described the proposed design of the Shearon Harris Nuclear Power Plant, Unit No. 2 (the facility), including, but not limited to the principal architectural and engineering criteria for the design and have identified the major features or components incorporated therein for the protection of the health and safety of the public;

B. Revise paragraph 1. Fas follows:

F. The Carolina Power & Light Company is technically qualified to design and construct the proposed facility;

c. All other references to "applicant" shall read 11 applicants 11 and shall include North Carolina Municipal Power Agency Number 3.

D. Add the following at the end of paragraph 2:

W~ereas the Carolina Power & Light Company and North Carolina Municipal Power Agency Number 3, as co-owners, will share in the ownership of the facility, the Carolina Power & Light Company shall .retain exclusive responsibility for the design and construction of the facility.

3. This amendment is effective as of the date of issuance.

FOR THE NUCLEAR REGULAT(Jl{Y COMMISSION

) )

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Darrell G. EisenhUt, Director Division of Licensing Date of Issuance: November 3, 1981

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D. C. 20555 CAROLINA POWER AND LIGHT COMPANY NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 DOCKET NO. 50-402 SHEARON HARRIS NUCLEAR POWER PLANT, UNIT NO. 3 AMENDMENT TO CONSTRUCTION PERMIT Amendment No. 1 Construction Permit No. CPPR-160

1. The Nuclear Regulatory Commission (the Conmission) having found that:

A. The application for amendment contained in a letter dated September 3, 1981, and supplemented by a second letter dated September 3, 1981, for the purpose of adding North Carolina Municipal Power Agency Number 3, as a co-owner of the Shearon Harris Nuclear Power Plant, Unit 3, complies with the standards and requirements of the Atomic Energy Act of 1954, as amended, and the Commission s rules and 1

regulations set forth in 10 CFR Chapter I:

B. North Carolina Municipal Power Agency Number 3 is qualified to finance its proposed 16.5 percent undivided ownership interest in the facility.

c. The issuance of this amendment will not be inimical to the common defense and security or to the health and safety of the public; and D. Issuance of this amendment will not result in any environmental impacts not previously considered.

2. Accordingly, Construction Permit No. CPPR-160 is amended to reflect a change in ownership shares as follows:

A. Revise paragraph l.B as follows:

B. The Carolina Power & Light Company and North Carolina Municipal Power Agency Number 3 (the applicants) have described the proposed design of the Shearon Harris Nuclear Power Plant, Unit No. 3 (the facility), including, but not limited to the principal architectural and engineering criteria for the design and have identified the major features or com~onents incorporated therein for the protection of the health and safety of the public;

B. Revise paragraph 1. Fas follows:

F. The Carolina Power & Light Company is technically qualified to design and construct the proposed facility;

c. All other references to "applicant" shall read "applicants" and shall include North Carolina Municipal Power Agency Number 3~

o. Add the following at the end of paragraph 2:

Whereas the Carolina Power & Light Company and North Carolina Municipal Power Agency Number 3, as co-owners, will share in the ownership of

_the facility, the Carolina Power & Light Company shall retain exclusive responsibility for the design and construction of the facility.

3. This amendment is effective as of the date of issuance.

FOR THE NUCLEAR REGULATORY COMMISSION j

-71* ,, C* ~- 1 ( .* *~* *

• 1/

Darrell G. Eisenhut, Director Division of Licensing Date of Issuance: November 3, 1981

,1>1\REGu e'-*, l-1 i~ ..,.o UNITED STATES 1

.- \ NUCLEAR REGULATORY COMMISSION

~ ':sitm~. : f 0

WASHINGTON, D. C. 20555

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CAROLINA POWER AND LIGHT COMPANY NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 DOCKET NO. 50-403 SHEARON HARRIS NUCLEA~ POWER PLANT, UNIT NO. 4 AMENDMENT TO CONSTRUCTION PERMIT Amendment No. 1 Construction Permit No. CPPR-161 L The Nuciear Regulatory Commission (the Commission) having found that:

A. The application for amendment contained in a letter dated September 3,

• 1981, and supplemented by a second letter dated September 3, 1981, for the purpose of adding North Carolina Municipal Power Agency Number 3, as a co-owner of the Shearon Harris Nuclear Power Plant, Unit 4, complies with the standards and requirements of the Atomic Energy Act of 1954, as amended, and the Commission's rules and regulations set forth in 10 CFR Chapter I:

B. North Carolina Municipal Power Agency Number 3 is qualified to finance its proposed 16.5 percent undivided ownership interest in the facility. *

c. The issuance of this amendment will not be inimical to the common defense and security or to the health and safety of the public; and D. Issuance of this amendment will not result in any environmental impacts

• not previously considered.

Accordingly, Construction Permit No. CPPR-161 is amended to reflect a change in ownership shares as follows:

A. Revise paragraph 1.B as follows:

B. The Carolina Power & Light Company and North Carolina Municipal Power Agency Number 3 (the applicants) have described the proposed design of the Shearon Harris Nuclear Power Plant, Unit No. 4 (the facility}, including, but not limited to the principal architectural and engineering criteria for the design and have identified the major features or components incorporated therein for the protection of the health and safety of the public;

B. Revise paragraph 1. Fas follows:

F. The Carolina Power & Light. Company is technically qualified to design and construct the proposed facility;

c. All other references to "applicant" shall read "applicants" and shall include North Carolina Municipal Power Agency Number 3.

D. Add the following at the end of paragraph 2:

Whereas the Carolina Power & Light Company and North Carolina Municipal Power Agency Number 3, as co-owners, will share in *the ownership of the facility, the Carolina Power & Light Company shall retain exclusive responsi bi 1i ty for the design and construction of the faci 1i ty *

3. This amendment is effective as of the date of issuance.

FOR THE NUCLEAR REGULATORY COMMISSION

)

., 1 Darrell G. Eisenhut; Director Division of Licensing Date of Issuance: November 3, 1981

Safety Evaluation Report Shearon Harris Nuclear Power Plant, Units 1, 2, 3 and 4 INTRODUCTION By letter dated September 3, 1981, Carolina Power & Light Company (CP&L}

submitted a request for amendments to its construction permits (CPPR Nos.

158, 159, 160 and 161} for the Shearon Harris Nuclear Power Plant, Units 1, 2, 3 and 4, to add a co-owner and to secure approval of a transfer in ownership percentages to the proposed co-owner. This request involved a transfer from CP&L of a 16.5 percent undivided ownership share in Shearon Harris, Units 1, 2, 3 and 4, to North Carolina Municipal Power Agency No. 3 (Power Agency). In support of the request, CP&L transmitted a number of exhibits by letter also dated September 3, 1981. The request for amendments states that CP&L will retain exclusive responsibility for the design and construction of the facility.

The purpose of this Safety Evaluation is to present the results of the staff's analysis of the proposed addition of a co-owner to the Shearon Harris facility.

Since CP&L will retain exclusive responsibility for the design and construction of the facility, the only issue which required an evaluation is the proposed co-owner's (Power Agency) financial qualifications to assume a 16.5 percent share of Shearon Harris.

ANALYSIS Financial Qualification Regulations and Analysis Assumptions The NRC regulations relating to the aetermination of an applicant's financial qualificati-0ns are in Section 50.33(f) and Appendix C to 10 CFR Part 50.

These regulations state that there must be reasonable assurance that an applicant can obtain the necessary funds to cover the estimated c.onstructi on cost of a nuclear plant and its related fuel cycle costs. Ultimately, this means that an applicant must demonstrate a reasonable financing plan in light of relevant circumstances. This standard of ~easonable assurance, however, must be viewed in light of the period of time from the purchase of ownership interest to the date of commercial operation. The expected commercial operation date for the Shearon Harris facility is estimated to be in 1985 for Unit 1, 1988 for Unit 2, 1994 for Unit 3, and 1992 for Unit 4. Consequently, we must make certafn basic assumptions in our financial analysis about future condi.tions. Our analysis of the proposed co-owner's financial qualifications requires that we validly assume that there will be rational regulatory policies with respect to the setting of rates and that viable capital markets will exist. The former assumption implies that rates will be set to at least cover the cost of service, including the cost of capital necessary for the Pm'ler Agency to purchase the proposed 16.5 percent undivided ownership interest in Shearon Harris, Units 1, 2, 3 and 4. The latter assumption implies that capital will be available to the Power A9ency at some price. Given these fundamental assumptions, our evaluation is then focused on the reasonableness of the proposed co-owner's financial plans, in light of relevant circumstances, to participate in its proposed share of the estimated construction costs of the facility.

, The following analysis sulllllarizes our review of the information submitted by the applicant and addresses the financial qualifications of the Power Agency to finance its proposed proportionate share of the costs associated with the design and construction of the Shearon Harris facility.

Cost Estimates and Amount of Ownership Interests Proposed for Transfer The most recent cost information for the proposed partial ownership transfers of Shearon Harris, Units 1, 2, 3 and 4, are stated in the financial information submitted by letters dated September 3, 1981. These costs are surrmarized as follows on a basis for both amounts due at closing and total costs for purchase of ownership interests by ~he Power Agency:

Cost of Purchase Total for Power Agency Cost of Purchase Shearon Harris Units . Due at Closings *for Power Agen*cy (Dollars in Millions) (Dollars in Millions)

Unit 1 $2~6.9 $ 312.9 Unit 2 $ 55.1 $ 177 .5 Unit 3 $ 12.3 $ 290.3 Unit 4 $ 20.5 $ 276.3 Total $324.8 $1,057.0 The timing of payments to meet the above costs for acquisition of the Power Agency's 16.5 percent proposed undivided ownership interest assumes that 33 percent of the closing wi 11 occur on January 1, 1982, 36- percent wi 11 occur on July 1, 1982, and the final 31 percent will be consunvnated on December 1, 1982.

For subsequent constuction costs and progress payments, on the first day of each month after the first closing, CP&L will submit to the Power Agency a statement showing the amount due from the Power Agency for construction expenditures expected to be incurred in the following month.

The Power Agency's payment will be due on the first of the month following the month of each such statement. When the costs actually incurred in that month become known, CP&L will make an adjustment on the next monthly statement submitted to the Power Agency to correct any differences between the Power Agency I s progress payment and its share of the costs actually incurred.

Description of Business of Proposed Co-Owner The Power A~ency is a public body corporate and politic and an instrumentality of the State of North Carolina, incorporated under North Carolina statutes in December, 1976. The Power Agency was created to plan, develop, construct, and operate generation and transmission facilities. The Power Agency has been*

granted all of the powers necessary or convenient to carry out such purposes.

In this respect, the Power Agency has proposed to enter into contracts with thirty-six political subdivision participants (Participants), under which the Power Agency is to be the sole and exclusive bulk power supplier for each such

Participant in excess of any allotment of federal power from Southeastern Power Administration or of the output of any resource such political subdivision may develop and install pursuant to provisions of the Supplemental Power Sal es Agreeme_nt in effect between the Power Agency and Participant. Each Participant is obligated to take or pay for its entitlement share of power from any owned project, such as the Shearon Harris Units. The terms of said contracts are for the life of the project or so long as any of the Power Agency 1 s bonds issued to finance the project are outstanding, but not exceeding 50 years.

Source of Funds to Power Agency Under the Power Coordination Agreement and the Operating and Fuel Agreement between the Power Agency and ~P&L, the Power Agency covenants to set rates adequate to cover all its costs. No regulatory approvals are required by the Power Agency in setting rates to its Participants. The Participants, as municipalities of the State of North Carolina, have authority to establish-their own retail rates for service to their customers. The State of North Carolina covenants and agrees that so long as any bonds of the Power Agency are outstanding and unpaid, the State will not limit or alter the rights of any Participant or of the Power Agency to establish, maintain, revise, charge and collect electric.rates to fulfill the terms of any agreement for the project.

The obligations *of each Participant to make payments to the Power Agency under the Project Power Sales Agreement will be an expense of its Electric System, and the Participant will not be required to make payments to the

. Power Agency except from revenues of its Electric System. Each Participant will covenant in the Project Power Sales Agreement that it will fix and charge rates for electric service supplied from its Electric System sufficient to meet all of its obligations under the Project Power Sales Agreement and to pay any and all other amounts payable from such revenues, including costs of operation and of any general obligation bonds issued by the Participant to fi~ance its electric system.

The Power Agency s proposed 16.5 percent undivided ownership interest in 1

the project will be financed through issuance of tax exempt revenue bonds.

CONCLUSION Based upon the above analysis, we conclude that The North Carolina Municipal Power Agency No. 3 has financing plans that provide a reasonable* assurance that funds can be obtained to finance its proposed undivided ownership interest in Shearon Harris, Units 1, 2, 3 and 4. As a result, we have determined that the Power Agency is financially qualified to participate in the design and construction of Shearon harris, to the extent of its 16.5 percent proposed undivided ownership interest. This conclusion is based upon our determination that the Power Agency I s pl an_ to fund its proposed ownership interest in the facility from proceeds derived from the issuance of its revenue bonds constitutes a reasonable financing plan in liyht of relevant circumstances.

On the basis of the above conclusion, we find that the issuance of the requested amendments transferring ownership percentages from CP&L to the Power Agency will not be inimical to the health and safety of the public. We find that the requested amendments do not involve a significant hazards con-sideration because this action will not involve any significant increase in the probability or consequences of an accident, and this action will not involve any significant decrease in safety margin.

Date Issued: November 3, 1981

• 99 MAR 23 A9 :48 March 19, 1999 Mr. John C. Hoyle Secretary U.S. Nuclear Regulatory Commission Washington, D.C. 20555-0001 ATTENTION: Rulemaking and Adjudications Staff

SUBJECT:

Docket No. PRM-50-64

Dear Mr. Hoyle:

These comments are submitted on behalf of the National Rural Electric Cooperative Association (NRECA) which represents the national interests of consumer-owned cooperative electric utilities. The nearly 1,000 electric co-ops serve more than 30 million people in 46 states and in 2,600 of the nation's 3,100 counties. Over seventy percent of the electricity generated by the electric cooperatives comes from coal fired power plants, however, the cooperatives collectively own minority capacity in nuclear power plants exceeding 3,000 MW. On behalf of our members, the NRECA offers the following comments on the Nuclear Regulatory Commission's Federal Register Notice on Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power

& Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.: Receipt of PetitionforRulemaking (64 Fed.Reg. 432, January 5, 1999).

NRECA shares the concern of the petitioners over the inclusion qf the "joint and several liability" clause for co-owner/licensees in NRC's Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry, 10 C.F .R. Part

50. We understand and fully support NRC's concerns over ensuring the public health and safety under all circumstances. However, it is our belief that greater clarification of NRC's intent is necessary, particularly with respect to potential financial obligations of nuclear power plant licensees.

Currently, twelve rural electric cooperatives own partial ownership in 17 nuclear units.

The amount of ownership varies from as little as 0.59 % (>Vashington Electric MAR 25 1999

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Cooperative, East Montpelier, Vermont) up to as much as 56.25 % (North Carolina EMC, Raleigh, North Carolina). Most of the participation, however, is on the order of approximately 10 percent ownership. None of the rural electric cooperatives are operators of nuclear units. In the Final Policy Statement, NRC acknowledges that pro-rata division of responsibility is the norm, and should remain the operative standard. NRC has not stated that it will. abrogate the contractual relations creating the pro-rata responsibilities. NRC has expressed, however, that under extraordinary circumstances, where public health and safety is adversely affected, it would consider imposing joint and several liability responsibility of more than "de minimus shares" when one or more owners have defaulted, in order to address the health issue.

NRC has the responsibility to ensure that adequate funds are available for decommissioning of nuclear reactors. It is our understanding, and NRC has so stated, that the current utility financial assurances for decommissioning funding levels are adequate. Failure to contribute to the decommissioning fund due to utility bankruptcy is unacceptable, and is not permitted by the bankruptcy law. Cajun Electric Cooperative, Baton Rouge, Louisiana, declared a Chapter 11 bankruptcy, but continued making payments into the fund. In fact, although still in bankruptcy, Cajun transferred its thirty-percent ownership of the River Bend nuclear plant, as well as its share of the decommissioning funding, to Entergy Corporation, the owner of the other seventy-percent share.

Since decommissioning funding levels are adequate, NRECA fails to see what extraordinary circumstances could arise that would allow NRC to consider implementing a joint and several liability. Certainly, a clarification of the circumstances that could trigger the condition for the "joint and several liability" should be described. The potential liability raises many concerns. The extent and information on the "de minimus" shares also has to be explained and defined.

If a ninety-percent owner of a nuclear plant is in financial distress, requiring the ten percent owner to pick up the burden would just add a second owner in distress. The minority owners are not walking away from their responsibilities, but do not have the financial resources available to assume the additional burden.

These minority owners also have to raise funds for new construction, capital improvements and continued operations of their non-nuclear facilities. The potential liability imposed by NRC's statement of "joint and several liability" could hamper the co-owners abilities to raise funds. This is particularly stressing to a utility in an industry that is under-going restructuring. Most utilities are making great efforts at lowering their costs in order to be competitive. The risk associated with potential unlimited liability due to minority ownership of a nuclear power plant, could increase the cost of capital to the co-owners.

In some instances, because of the high cost associated with owning nuclear plants, a number of cooperatives, in order to remain competitive, are attempting to sell their

ownership shares. Again, the potential liability imposed by the 'joint and several liability" I

statement could pose a very large hurdle over the cooperative's ability to sell their shares in the nuclear unit.

The Atomic Energy Act of 1954, as amended, does not give the NRC the authority to impose liability on nuclear plant owners. The Act does give NRC the regulatory authority to impose safety obligations on the licensees. This lack ofliability authority in the Act opens the door to future litigation should the NRC even attempt to impose the condition of joint and several liability.

Based upon the above, we urge the Commission to delete the paragraph containing the "joint and several liability" clause as contained in the Final Policy Statement. In lieu of its deletion, we urge that the clause be expanded to define the full parameters of what could trigger the implementation of "joint and several" and the full extent and liability involved

-.in the "de minimum" shares.

We appreciate the opportunity to comment on this petition.

Sincerely, John Holt Manager, Fuels and Transportation 4301 Wilson Blvd.

Arlington, VA 22203

March 22, 1999 NOTE TO: Emile Julian Chief, Docketing and Services Branch FROM: Carol Gallagher ~ * /}_,A J JA A ~

ADM, DAS C,Cu-tl r*---i--

SUBJECT:

DOCKETING OF COMMENT ON PRM-50-64, "POTENTIAL LIABILITY OF JOINT OWNERS OF NUCLEAR PLANTS" Attached for docketing is a comment letter related to the subject petition for rulemaking.

This comment was received via the rulemaking website on March 19, 1999. The submitter's name is John Holt, 4301 Wilson Blvd., Arlington, VA 22203 Please send a copy of the docketed comment to Brian Richter (mail stop O11-F-1) for his records.

Attachment:

As stated cc w/o attachment:

B. Richter

Nixon, Hargrave, Devans & Doyle Attorneys and Counselors at Law ONE MEYCORP PLAZA CLINTO N SQUARE 437 MADISON AVENUE ALBANY, NEW YORK 12207 POST OFFICE BOX 105 1 NEW YORK, NEW YORK 10022 (SI B ) 42?-2650 (212) 940-3000 ROCHESTER , NEW YORK 14603 -105 1,._,..

(716) 263-1000 '::!':J t1AR 22 P4 :46 1eoo MAIN PLACE TOWER SUITE 700 FAX: (716) 263-1600 BUFFALO, NEW YORK 14202 ONE THOMAS CIRCL£ (7 16 ) 853 -810 0 WRITER'S DIRECT DIAL NUMBER: {7181263-1528 or- WA.SHI NG TON, O. C. 20005

{202) 457-5300 I

990 STEWART AVENUE GARDEN CITY, NEW VORK 11530 ADJ

{516) 832-7500 March 22, 1999 CKET U BER ftll""Tl'ftntJ Rlli PR 50- r, '1-Mr. John C. Hoyle ( e,<1 F~ '/3~)

Secretary U.S. Nuclear Regulatory Commission Washington, DC 20555 Attention: Rulemaking and Adjudications Staff RE: Docket No. PRM-50-64: Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.; Receipt of Petition for Rulemaking

Dear Mr. Hoyle:

The following Comments are submitted on behalf of Rochester Gas and Electric Corporation and Central Hudson Gas & Electric Corporation ("NY Licensees") in response to the above-referenced petition pursuant to Commission Notice published January 5, 1999 (64 Fed.

Reg. 432) .

• Rochester Gas and Electric Corporation ("RG&E") is a regulated public utility serving approximately 344,000 electric retail customers, all within New York State. RG&E is the sole owner and the licensed operator of the R.E. Ginna Nuclear Unit located in the Town of Ontario, Wayne County, New York; RG&E is an owner of a 14 percent interest in, but is not the licensed operator 1 of, the Nine Mile Nuclear Unit No. 2 located in the Town of Scriba, Oswego County, New York.

Central Hudson Gas & Electric Corporation ("CHG&E") is a regulated public utility serving approximately 270,000 electric retail customers, all within New York State. CHG&E is an owner of a 9 percent interest in, but is not the licensed operator of, the Nine Mile Nuclear Unit No. 2 located in the Town of Scriba, Oswego County, New York.

The Petitioners, objecting on both legal and policy grounds to the Commission's suggestion in its August 19, 1997 Policy Statement (62 Fed. Reg. 44071) that it can impose joint and several liability on plant co-owners, advocate a rule that additional requirements found Niagara Mohawk Power Corporation is the licensed operator of Nine Mile Nuclear Unit No. 2.

R282489.I MAR 7 5 198

~knowledged by ........

U.S. Nua.EAR-REGULATORY COMMlSSION RULEMAKINGS &ADJU)ICATIONS STAFF OFFICE OFlHE SECRETARY Of THE COMMISSION DocllUaltSlatisllcs Paalln8lk Oate _ _ _--=-i..K.-- -

Cq)lesRaoalved _ _ _;.._._ __

Nixon. Hargrave. Devans & D'D1'le U.P Mr. John C. Hoyle March 22, 1999 Page2 necessary by the Commission would be imposed first upon the co-owner that is the licensed operator of the plant, and that non-operating co-owners would not be liable for more than their contractually agreed share of such additional Commission-imposed requirements. NY Licensees agree with the latter aspect of the proposed rule, but disagree with the former aspect.

Joint and Several Liability NY Licensees agree with the Petitioners that the Commission should not, and legally may not, disregard long-standing contractually determined cost-sharing provisions among co-owners pursuant to agreements submitted to the Commission in the relevant licensing proceedings, and now impose joint and several liability upon such co-owners. Under the Commission's Policy Statement suggestion, the last co-owner(s) standing (solvent) and its customers would be left "holding the bag." Such a result is as unnecessary as it is inappropriate.

In the case of a license transfer, the appropriate answer seems quite straight-forward. The potential buyer may not acquire an interest in a nuclear plant without the Commission's permission. The Commission has ample authority to condition a license transfer upon the transferee providing adequate assurance of its financial ability to operate, to decommission, and 2

to deal with disposition of spent fuel. (If state approval of a transfer of electric plant is required, and if that state wants greater financial assurance, it may be able to require such assurance as a condition of its approval of the transfer.)

Where no change in the co-ownership of a plant is involved, the appropriate answer is similarly straight-forward. Nuclear plants co-owned by utilities, cooperatives, or government entities were built to fulfill the obligation to render safe and adequate service to customers. The costs of decommissioning (and of storing and disposing of spent fuel) have always been understood to be part of the cost of the service rendered and have been included in rates routinely. If a co-owner is no longer able to complete the funding of its obligations, the customers of that co-owner should do so. They have benefited from that co-owner's share of the plant output; the other co-owners and their customers have not. The Commission should focus its authority on the defaulting co-owner and its customers, not the other co-owners and their customers.

Operating Licensee It should be obvious from the foregoing that the position of NY Licensees is founded on adherence to agreed upon obligations. Thus, unless the operating co-owner has agreed to be liable for the obligations of a defaulting co-owner, in whole or in part, there is no basis for singling out the operating co-owner for such an extra burden. As noted above, none of the non-defaulting co-owners should bear that burden.

2 See, for example, N.Y. Public Service Law§ 70.

R282489.)

Nixon. Hargrave. Devans & D~le UP Mr. John C. Hoyle March 22, 1999 Page 3 Summary The joint and several liability suggestion put forth in the Commission's Policy Statement will seriously impede the transition of nuclear plants to competition, and raise the spectre for co-owners of potentially devastating contingent liabilities. The suggestion is neither necessary nor proper, and should be removed promptly by an appropriate rule.

Respectfully submitted, Robert J. Glasser, Esq.

Gould & Wilke Attorneys for Central Hudson Gas & Electric Corporation R282489.)

• _09- t1AR 22 P4 :07 March 19, 1999 0:,

Secretary United States Nuclear Regulatory Commission DOCKET NUMBER 11555 Rockville Pike PE11TIO RULE PRM 5 o- t/

Rockville, MD ( (pf./PR t/3~)

ATTN: Rulemaking and Adjudications Staff RE: Corn Belt Power Cooperative - Comments for Rulemaking Docket No. PRM-50-64 Ladies and Gentlemen:

Pursuant to notice in the Federal Register, 64 Fed. Reg. 432 (January 5, 1999) concerning a petition for rulemaking (the "Petition") filed by Atlantic City Electric City Company, Austin Energy, Central Main Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc. (hereinafter "Petitioners"), docketed by the Nuclear Regulatory Commission (the "Commission") as PRM-50-64, Corn Belt Power Cooperative ("Corn Belt") hereby provides its comments on the issues raised by the Petition.

I. Com Belt Interest Corn Belt is a generation and transmission electric cooperative headquartered in Humboldt, Iowa. Corn Belt provides wholesale electric service in Iowa to thirteen member distribution systems located in the state oflowa. Twelve of the member systems are themselves rural electric distribution cooperatives and one member system is a municipal electric cooperative organized primarily for the purpose of supplying electric power to twelve municipally owned electric utilities. Corn Belt's member systems are located in rural areas of central and north central Iowa. The Corn Belt member systems supply electric power to 35,000 retail consumers excluding customers supplied by the municipal electric cooperative.

Corn Belt owns an undivided ten percent interest of the Duane Arnold Energy Center which is located approximately ten miles northwest of Cedar Rapids. This plant is a 535 megawatt nuclear-fueled unit and Corn Belt's ownership share is 53.5 megawatts. The unit first came into service in 1974.

Pursuant to ownership and operating agreements with IES Utilities, Inc. (Alliant), Corn Belt is required to pay its share of costs related to DAEC facilities on a pro rata basis and does

ll.S. NUCLEAR REGUu JO vUl\~~ON R LEMAKINGS &ADJUulCATIONS STAFF FFICE OFTiiE SECRETAR OFTHE COMMISSION Documents

Secretary United States Nuclear Regulatory Commission March 19, 1999 Page 2 have rights to receive its share of the units' output. Corn Belt has always accepted its obligations under the ownership, operating and transmission agreements and its obligations under the license issued by the Commission. Corn Belt agrees with the Petitioners that the Commission enforcement regulations properly take into account the limited role of co-owners in circumstances such as the DAEC plant, and it urges the Commission to clarify its policy regarding the financial obligations of co-owners.

II. Comments on the Issues Raised by Restructuring of the Utility Industry.

Corn Belt is very involved with issues raised by the restructuring occurring within the electric utility industry and the potential effects this can have on operation of generating plants in particular.

The Petitioners are all non-operating joint owners of nuclear plants, and the petition raises concerns about the liability of non-operating joint owners in the event co-owners or the operating licensee were to default in or become financially incapable of bearing their share of the continued costs of operating the nuclear unit in compliance with Commission and other requirements. The Petitioners fear that in that circumstance, the Commission might ignore existing pro rata or other contractual arrangements on cost responsibility, and shift to the non-operating co-owners all or an excessive portion of the relevant costs. 64 Fed. Reg. at 433, Col. 1. Because the Petitioners believe the commission's initial Policy Statement on these issues, 62 Fed. Reg. 44071 (August 19, 1997), engendered confusion in the regulated community, the Petitioners ask that the issue of potential liability be resolved by the Commission's amending its regulations.

The Commission's August 1997 policy statement alluded to "highly unusual circumstances" where it might impose joint and several liability for the relevant costs and obligations on any owner of "more than a de minimis" share of the plant. Because the Commission had not better defined the circumstances or its understanding of "more than de minimis," the Petitioners were concerned that the owner of a small share of a nuclear unit could be held responsible for an excessive portion of the costs. The Petitioners ask that the regulations specifically provide that in imposing additional requirements by rule, order or amendment, the additional requirements "will be directed first to the persons licensed to possess and operate the facility." If the additional requirements must be imposed on co-owners, not licenses to operate, "then the Commission will not impose greater than the agreed allocation of responsibility among all the owners and operators reflected in applicable joint ownership or similar agreements pertaining to the plant." 64 Fed. Reg., Col. 3.

Secretary United States Nuclear Regulatory Commission March 19, 1999 Page 3 III. Comments on the Issues Raised by the Petition.

A. Ownership Agreement Requirements.

The CIPCO, Corn Belt, IES Ownership Agreement relating to DAEC reflects a long history of carefully structured financial and operating arrangements governing all aspects of the obligations of each co-owner. Each co-owner had at the time of entry into the relationship, and continues thereafter to have, significant concern that the other co-owners have the financial and organizational ability to perform the obligations, and there are contractual arrangements to address changes in the parties' circumstances. These arrangements include legal structures, which the parties have used both to define their obligations and to put boundaries around those obligations. Those arrangements, including their limitations, have in turn been used by the parties and relied upon by them and third parties, in financing arrangements, other regulatory filings, and similar matters.

A Commission determination to impose liability outside of the bounds of those contractual arrangements would undercut the parties' own careful arrangements and settle expectations established in reliance on them. At a minimum, any such retroactive imposition would raise substantial issues about the Commission's authority and the rights of others. It would be preferable for all parties concerned to rely on the contractual arrangements.

B. The Commission Should Not Impose Unfair Obligations or Obligations Which Exceed Parties' Circumstances.

In entering into the DAEC Agreements, the parties sought to limit their rights and obligations to a level consistent with their circumstances. The percentage interest in the unit was developed to meet price supply needs. The financial and related obligations in turn were linked to the level of ownership interests and rights in capacity. Charges to the customers or ratepayers of the co-owners reflect that interest, because under standard ratemaking principles, the ratepayers should not have a greater rate obligation than the related benefit they receive.

If the Commission were to impose additional burdens on DAEC owners, the Commission's determinations would cause substantial conflicts with rate and other determinations by other agencies. In the event that the relevant rate authorities determined that the additional costs imposed by the Commission could not be passed through, the Commission's action, rather than resolving an unfortunate financial circumstance, would compound that circumstance and could drive the co-owners into financial distress, creating still further risks. It is grossly unfair to impose additional and unforeseen costs on the co-owners in these circumstances.

Secretary United States Nuclear Regulatory Commission March 19, 1999 Page4 C. Private Market Mechanisms Are Sufficient Without Reallocation.

To date, even in circumstances as dramatic as the event at the Three Mile Island Plant, and as financially draining to utilities as the Seabrook, LILCO or other units with significant cost increases, the NRC has never been required to reallocate the financial obligations to co-owners.

While the changes now occurring in the electric industry have not reduced the likelihood of financial risk, there is no basis to believe that the financial markets and private party arrangements have become less adept at recognizing and relieving the financial problem. The NRC's policy statement is apparently premised on a Commission view that in some unspecified circumstance, it would be required not only to identify a safety or other regulatory step which was required to protect the public interest, but it would then also be required to allocate among the co-owners the cost of taking that step.

Where the Commission has a proper basis to impose additional requirements, and the history of nuclear power in the United States demonstrates that the Commission has not hesitated to impose new requirements when it believed the public interest demanded it, co-owners and operators have to date been able to arrange among themselves the allocation of the cost of compliance. There is no indication that any new requirement would be so dramatically different that the same mechanisms to fund compliance would not suffice.

If the Commission's concern is not that the requirement would be so different, but that the financial circumstances of one or more of the co-owners would be so fragile, that is all the more reason for the Commission not to reallocate the obligation. Reducing or altering one party"s financial obligation and imposing it on the other co-owners effectively transfers the obligations without the concomitant rights, and undermines the financial strength of the remaining co-owners. There is no basis to believe that the Commission is better informed or better able to resolve financial arrangements than the parties and the relevant capital markets.

D. The Commission Has Other Means to Prevent the Alleged Risk.

If in fact the Commission's concern is the potential for greater financial fragility for some co-owners or operators, the Commission need not (and probably should not) delay until a particular "unusual" circumstance has arisen before addressing the concerns. Both co-owners and holders of operating licenses are required to demonstrate a proper basis to obtain and retain the relevant license. In the event that a licensee's, particularly an operating licensee's, financial circumstances are believed to be deteriorating to such an extent that its ability to fund required activities is at issue, the Commission should already have begun appropriate proceedings to determine the licensee's qualifications and to have required the licensee to resolve the concerns or to surrender the license. Proceeding at the earlier time assures that the Commission can raise its concerns in a manner which will allow all interested parties an opportunity to address the issue, and allows co-owners to put appropriate private arrangements in place, while not increasing their liability unwillingly. To the degree the Commission instead asserts authority to

Secretary United States Nuclear Regulatory Commission March 19, 1999 Page 5 retroactively increase co-owner liability, the Commission may create a condition that reduces rather than enhances public safety. If the Commission does not act early and fails to track the actual performance of an operator, because it assumes that it could in any event act late, it runs the risk of tolerating a deteriorating performer, rather than imposing the discipline of more rigorous regulatory attention.

E. The Petition Should Be Granted.

Because any determination by the Commission to reallocate liability outside of the arrangements agreed among the co-owners or between eh co-owners and an operator would undercut arrangements carefully structured and relied upon by the contracting parties and third parties, would undercut other regulatory arrangements, would risk undermining the financial stability of the other owners and is not necessary for the Commission to assure compliance with its requirements, Com Belt believes that the Commission should amend its regulations to provide that in imposing new arrangements, the Commission will look first to the entity with the operating license responsibility, and allow the existing contractual arrangements to work in how that operator passes the additional costs through. Where there is a question about financial obligations, the Commission should not impose obligations beyond the pro rata or other contractual arrangement in place.

Very truly yours, SULLIVAN & WARD, P.C.

By:

PAUL, HASTINGS, JANOFSKY & WALKER By:

William DeGrandis ATTORNEYS FOR CENTRAL IOWA POWER COOPERATIVE

OOCt{E TEO

• 99 MAR 22 P4 :07 March 19, 1999 Secretary DOCKET NUMBER United States Nuclear Regulatory Commission p ,r 1fl"lntt.l RULE PR So~r, c/

11555 Rockville Pike l,'/ FR q3:l)

Rockville, MD ATTN: Rulemaking and Adjudications Staff

• RE: Central Iowa Power Cooperative - Comments for Rulemaking Docket No. PRM-50-64 Ladies and Gentlemen:

Pursuant to notice in the Federal Register, 64 Fed. Reg. 432 (January 5, 1999) concerning a petition for rulemaking (the "Petition") filed by Atlantic City Electric City Company, Austin Energy, Central Main Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc. (hereinafter "Petitioners"), docketed by the Nuclear Regulatory Commission (the "Commission") as PRM-50-64, Central Iowa Power Cooperative ("CIPCO") hereby provides its comments on the issues raised by the Petition.

• I. CIPCO Interest CIPCO is a generation and transmission electric cooperative headquartered in Cedar Rapids, Iowa. CIPCO provides wholesale electric service in Iowa to fifteen member distribution systems located in the state of Iowa. Fourteen of the member systems are themselves rural electric distribution cooperatives and one member system is a municipal electric cooperative organized primarily for the purpose of supplying electric power to twelve municipally owned electric utilities. CIPCO's member systems are located in rural areas of eastern, central and southwestern Iowa. The CIPCO member systems supply electric power to over 90,000 retail consumers excluding customers supplied by the municipal electric cooperative. The territory covered by all of the member systems serves a total population of approximately 250,000.

CIPCO owns an undivided twenty percent interest of the Duane Arnold Energy Center which is located approximately ten miles northwest of Cedar Rapids. This plant is a 535 megawatt nuclear-fueled unit and CIPCO's ownership share is 107 megawatts. The unit first came into service in 1974.

lJ .. NUCLEAR REGULATORY COMMASStON RUL MAKI GS&AOJUDICATIONSSTAFF OFFICE OF THE SECRETARY OF THE COMMISSION DocumentSmtisllcs HD

Secretary United States Nuclear Regulatory Commission March 19, 1999 Page2 Pursuant to ownership and operating agreements with IES Utilities, Inc. (Alliant), CIPCO is required to pay its share of costs related to DAEC facilities and does have rights to receive its share of the units' output. CIPCO has always accepted its obligations under the ownership, operating and transmission agreements and its obligations under the license issued by the Commission. CIPCO agrees with the Petitioners that the Commission enforcement regulations properly take into account the limited role of co-owners in circumstances such as the DAEC plant, and it urges the Commission to clarify its policy regarding the financial obligations of co-owners.

II. Comments on the Issues Raised by Restructuring of the Utility Industry .

• CIPCO is very involved with issues raised by the restructuring occurring within the electric utility industry and the potential effects this can have on operation of generating plants in particular.

The Petitioners are all non-operating joint owners of nuclear plants, and the petition raises concerns about the liability of non-operating joint owners in the event co-owners or the operating licensee were to default in or become financially incapable of bearing their share of the continued costs of operating the nuclear unit in compliance with Commission and other requirements. The Petitioners fear that in that circumstance, the Commission might ignore existing pro rata or other contractual arrangements on cost responsibility, and shift to the non-operating co-owners all or an excessive portion of the relevant costs. 64 Fed. Reg. at 433, Col. 1. Because the Petitioners believe the commission's initial Policy Statement on these issues, 62 Fed. Reg. 44071 (August 19, 1997), engendered confusion in the regulated community, the Petitioners ask that the issue of potential liability be resolved by the Commission's amending its regulations.

The Commission's August 1997 policy statement alluded to "highly unusual circumstances" where it might impose joint and several liability for the relevant costs and obligations on any owner of "more than a de minimis" share of the plant. Because the Commission had not better defined the circumstances or its understanding of "more than de minimis," the Petitioners were concerned that the owner of a small share of a nuclear unit could be held responsible for an excessive portion of the costs. The Petitioners ask that the regulations specifically provide that in imposing additional requirements by rule, order or amendment, the additional requirements "will be directed first to the persons licensed to possess and operate the facility." If the additional requirements must be imposed on co-owners, not licenses to operate, "then the Commission will not impose greater than the agreed allocation of responsibility among all the owners and operators reflected in applicable joint ownership or similar agreements pertaining to the plant." 64 Fed. Reg., Col. 3.

Secretary United States Nuclear Regulatory Commission March 19, 1999 Page 3 III. Comments on the Issues Raised by the Petition.

A. Ownership Agreement Requirements.

The CIPCO, Com Belt, IES Ownership Agreement relating to DAEC reflects a long history of carefully structured financial and operating arrangements governing all aspects of the obligations of each co-owner. Each co-owner had at the time of entry into the relationship, and continues thereafter to have, significant concern that the other co-owners have the financial and organizational ability to perform the obligations, and there are contractual arrangements to address changes in the parties' circumstances. These arrangements include legal structures, which the parties have used both to define their obligations and to put boundaries around those obligations. Those arrangements, including their limitations, have in tum been used by the parties and relied upon by them and third parties, in financing arrangements, other regulatory filings, and similar matters.

A Commission determination to impose liability outside of the bounds of those contractual arrangements would undercut the parties' own careful arrangements and settle expectations established in reliance on them. At a minimum, any such retroactive imposition would raise substantial issues about the Commission's authority and the rights of others. It would be preferable for all parties concerned to rely on the contractual arrangements.

B. The Commission Should Not Impose Unfair Obligations or Obligations Which Exceed Parties' Circumstances.

In entering into the DAEC Agreements, the parties sought to limit their rights and obligations to a level consistent with their circumstances. The percentage interest in the unit was developed to meet price supply needs. The financial and related obligations in tum were linked to the level of ownership interests and rights in capacity. Charges to the customers or ratepayers of the co-owners reflect that interest, because under standard ratemaking principles, the ratepayers should not have a greater rate obligation than the related benefit they receive.

If the Commission were to impose additional burdens on DAEC owners, the Commission's determinations would cause substantial conflicts with rate and other determinations by other agencies. In the event that the relevant rate authorities determined that the additional costs imposed by the Commission could not be passed through, the Commission's action, rather than resolving an unfortunate financial circumstance, would compound that circumstance and could drive the co-owners into financial distress, creating still further risks. It is grossly unfair to impose additional and unforeseen costs on the co-owners in these circumstances.

Secretary United States Nuclear Regulatory Commission March 19, 1999 Page4 C. Private Market Mechanisms Are Sufficient Without Reallocation.

To date, even in circumstances as dramatic as the event at the Three Mile Island Plant, and as financially draining to utilities as the Seabrook, LILCO or other units with significant cost increases, the NRC has never been required to reallocate the financial obligations to co-owners.

While the changes now occurring in the electric industry have not reduced the likelihood of financial risk, there is no basis to believe that the financial markets and private party arrangements have become less adept at recognizing and relieving the financial problem. The NRC's policy statement is apparently premised on a Commission view that in some unspecified circumstance, it would be required not only to identify a safety or other regulatory step which was required to protect the public interest, but it would then also be required to allocate among the co-owners the cost of taking that step.

Where the Commission has a proper basis to impose additional requirements, and the history of nuclear power in the United States demonstrates that the Commission has not hesitated to impose new requirements when it believed the public interest demanded it, co-owners and operators have to date been able to arrange among themselves the allocation of the cost of compliance. There is no indication that any new requirement would be so dramatically different that the same mechanisms to fund compliance would not suffice.

If the Commission's concern is not that the requirement would be so different, but that the financial circumstances of one or more of the co-owners would be so fragile, that is all the more reason for the Commission not to reallocate the obligation. Reducing or altering one party"s financial obligation and imposing it on the other co-owners effectively transfers the obligations without the concomitant rights, and undermines the financial strength of the remaining co-owners. There is no basis to believe that the Commission is better informed or better able to resolve financial arrangements than the parties and the relevant capital markets.

D. The Commission Has Other Means to Prevent the Alleged Risk.

If in fact the Commission's concern is the potential for greater financial fragility for some co-owners or operators, the Commission need not (and probably should not) delay until a particular "unusual" circumstance has arisen before addressing the concerns. Both co-owners and holders of operating licenses are required to demonstrate a proper basis to obtain and retain the relevant license. In the event that a licensee's, particularly an operating licensee's, financial circumstances are believed to be deteriorating to such an extent that its ability to fund required activities is at issue, the Commission should already have begun appropriate proceedings to determine the licensee's qualifications and to have required the licensee to resolve the concerns or to surrender the license. Proceeding at the earlier time assures that the Commission can raise its concerns in a manner which will allow all interested parties an opportunity to address the issue, and allows co-owners to put appropriate private arrangements in place, while not increasing their liability unwillingly. To the degree the Commission instead asserts authority to

Secretary United States Nuclear Regulatory Commission March 19, 1999 Page 5 retroactively increase co-owner liability, the Commission may create a condition that reduces rather than enhances public safety. If the Commission does not act early and fails to track the actual performance of an operator, because it assumes that it could in any event act late, it runs the risk of tolerating a deteriorating performer, rather than imposing the discipline of more rigorous regulatory attention.

E. The Petition Should Be Granted.

Because any determination by the Commission to reallocate liability outside of the arrangements agreed among the co-owners or between eh co-owners and an operator would undercut arrangements carefully structured and relied upon by the contracting parties and third parties, would undercut other regulatory arrangements, would risk undermining the financial stability of the other owners and is not necessary for the Commission to assure compliance with its requirements, CIPCO believes that the Commission should amend its regulations to provide that in imposing new arrangements, the Commission will look first to the entity with the operating license responsibility, and allow the existing contractual arrangements to work in how that operator passes the additional costs through. Where there is a question about financial obligations, the Commission should not impose obligations beyond the pro rata or other contractual arrangement in place.

Very truly yours, SULLIVAN & WARD, P.C.

By:

all!)J\_____

John T. Ward PAUL, HASTINGS, JANOFSKY & WALKER By: /L_/4:

William DeGrandis a /4h ATTORNEYS FOR CENTRAL IOWA POWER COOPERATIVE

WINSTON & STR~

1

_'N ~:o 35 WEST WACKER DRIVE 1400 L STREET, N.W. 6, RUE DU C IRQUE CHICAGO. ILLINOIS 60601-9703 WASHINGTON , DC.20005-350299 MAR 22 p 3 :49 75008 PARIS, FRANCE 200 PARK AVENUE (202) 371-5700 43, RUE DU RHONE NEW YORK , NY 10166-4193 1204 GENEVA, SWITZERLAND

- - /-'-

FAC SIMI LE (202) 371 - 595 1 '

MARKJ . WETTERHAHN A:_,Jl (202) 371-5703 mwetterh@winston.com March 19, 1999 DOCKET UMBER PETITION RULE ~RM 5 o.. '- tj

( ?;<(FR 1/3~)

Ms. Annette Vietti-Cook Secretary of the Commission U.S. Nuclear Regulatory Commission Washington, D.C. 20555 ATTN.: Docketing and Service Branch Re: Comments on Petition for Rulemaking: 64 Fed. Reg. 432 (January 5, 1999)

Dear Ms. Vietti-Cook:

On January 5, 1999, the U.S . Nuclear Regulatory Commission ("NRC") published in the Federal Register a petition for rulemaking. This petition concerned the potential liability of nuclear plant owners if another owner of a nuclear power station becomes financially incapable of bearing its share of the burden for safe operation or decommissioning of a nuclear power plant. On behalf of Carolina Power & Light Company, Commonwealth Edison Company, Duke Energy Corporation, Niagara Mohawk Power Corporation, Northeast Utilities, and South Carolina Electric

& Gas, we submit the attached comments to the petition for rulemaking.

Mark J. Wetterhahn Enclosure 4\cknowledged by card _MAR

_2_ 5 1999

1.1.S. NUCLEAR REGULATORY GuMMtv i I AUlEMAKINGS &ADJUDICATIONS ST OFFICE OF T+IE SECRETARY OF THE COMMl:~ION Doctlnent Statistic

WINSTON & STRAWN Comments on Petition for Rulemaking: 64 Fed. Reg. 432 (January 5, 1999)

In August 1997, NRC released its "Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry"11 ("Policy Statement"). The purpose of the Policy Statement was to express NRC' s views regarding its expectations for, and intended approach to, its power reactor licensees as the electric utility industry moves from an environment of rate regulation toward greater competition. With regard to joint ownership, NRC said:

The NRC recognizes that co-owners and co-licensees generally divide costs and output from their facilities by using a contractually-defined, pro rata share standard.

The NRC has implicitly accepted this practice in the past and believes that it should continue to be the operative practice, but reserves the right, in highly unusual situations where adequate protection of public health and safety would be compromised if such action were not taken, to consider imposing joint and several liability on co-owners of more than de minimis shares when one or more co-owners have defaulted Y On January 5, 1999, NRC published in the Federal Register a notice of receipt for a petition for rulemaking submitted by several non-operating owners of nuclear power plants. The Petitioners requested that the enforcement provisions ofNRC's regulations be amended to clarify NRC policy regarding the potential liability of nuclear plant owners if another owner of a nuclear power station becomes financially incapable of bearing its share of the costs for safe operation or decommissioning of a nuclear power plant.

We agree with Petitioners' assertion that, where there are multiple owners of nuclear power plants, joint and several liability is directly contrary to the agreed upon contractual relationship among the parties. NRC reviewed and approved these agreements as part of the licensing process.

Under these NRC-approved agreements, ownership commitments were made and capital raised based on a pro rata allocation of liability for plant costs. To impose additional and unlimited liability in the future, i.e., to make one licensee the guarantor of the responsibilities of another licensee, would be contrary to the reasonable expectations of both owners and investors in the project. We also agree with Petitioners' argument that there is no statutory or regulatory basis for NRC' s imposition of any liability on nuclear plant owners, joint and several or otherwise, beyond what was proposed in the application and approved by the NRC.

In September 1997, NRC opined on the imposition of joint and several liability in its 11 62 Fed. Reg. 44,071 (1997).

y Id. at 44,074 (emphasis added).

Page 1

WINSTON & STRAWN "Proposed Rule on Financial Assurance Requirements for Decommissioning Nuclear Power Plants." 11 NRC said that, "[t]he regulations do not explicitly impose joint liability on co-owners and co-licensees. . . . [J]oint liability may create problems with respect to potential disagreement on decommissioning methods, the inhibition of flexibility, the weakening of competitive position, and the difficulty in implementation."+/-!

Although we agree with Petitioners' view that NRC may not impose joint and several liability on nuclear plant owners, we strongly disagree with their proposed solution. The petitioners propose to shift potential liability among owners to the operating owner, by including the following language in the enforcement provisions ofNRC's regulations in 10 CFR Part 50:

Whenever the Commission finds it necessary or desirable to impose additional requirements by rule, order or amendment on a person subject to this part to promote or protect the public health and safety, the additional requirements will be directed first to the person licensed to possess and operate the facility. If it becomes necessary to impose additional requirements on persons who only own the facility, and were never licensed to operate, then the Commission will not impose greater than the agreed allocation of responsibility among all the owners and operators reflected in applicable joint ownership or similar agreements pertaining to the plant. 21 By this language, Petitioners are apparently seeking to establish an artificial distinction between the operator or operating owner and non-operating owners that would shift the financial burden to the operator or operating owner. 21 Moreover, Petitioners have not cited any statutes, regulations, or Commission decisions which support the proposed language. Just as there is no basis, statutory or otherwise, for NRC to impose joint and several liability on co-owners, there is no basis to create this artificial distinction and make the operator or operating owner the guarantor for the other owners.

Indeed, the allocation of financial responsibilities and liabilities among co-owners has been established by contracts entered into by those owners. The underlying contractual ownership arrangements, regardless of whether or not an owner is authorized to operate the facility, have been accepted by the NRC in licensing the facility. For the NRC to impose extra-contractual obligations of joint and several liability, or to prioritize liability among owners, as Petitioners propose, could raise 62 Fed. Reg. 47,588 (1997).

Id. at 47,594.

64 Fed. Reg. 432, 433 (1999) (emphasis added).

§! In their proposed language, Petitioners appear to be using language found in most plants' operating licenses, i.e., "possess and operate," to designate a licensee which owns and operates or operates the facility on behalf of the other owners.

Page 2

WINSTON & STRAWN substantial questions of retroactive imposition of liability and taking of property without just compensation. Further, Petitioners' approach is particularly inappropriate in those instances where joint ownership was thrust upon the operating owner by the NRC and the Department of Justice in the antitrust review process under AEA § 105.c.

The shifting ofliability is even more unjust and unwarranted at nuclear power plants, such as Millstone Unit 3 and Seabrook, where the operator is different than the majority owner. In each of these instances, the operator owns no interest in the plant and performs its duties, at cost, on behalf of the joint owners.

In conclusion, we agree with Petitioners' view that the mere implication that NRC can impose joint and several liability is directly contrary to the contractual basis on which most joint ownership agreements for nuclear plants have been structured and which has been accepted by NRC.

We also agree with Petitioners' argument that there is no statutory or regulatory basis for NRC's apportionment of any liability on nuclear plant co-owners, joint and several or otherwise, that differs from the contractual relationship already approved by the NRC. We do, however, disagree with Petitioners' proposal to add language to the enforcement provisions of NRC' s regulations which would do just that by establishing an artificial distinction between operating owners and non-operating owners and shift potential liability among owners to the operating owner. Petitioners have not cited any statutes, regulations, or Commission decisions which support the proposed language.

We believe that the NRC is without authority to impose joint and several liability on nuclear plant owners. Therefore, this petition for rulemaking should be denied. If, however, NRC decides to consider this petition any further, it is our position that joint and several liability should not be allowed, and liability should be imposed only in accordance with the contractual relationships already approved by the NRC.

Page 3

r

• A PROFESSIONAL CORPORATION 1050 Thomas Jefferson Street N.W.

Washington, D.C. 20007-3877 (202) 298-1800 Telephone (202) 338-2416 Facsimile Va.nN"es.s '99 MAR 22 P3 :38 Feldman Seattle, Washington ATTORNEYS AT LAW (206) 623-9372 Or I .

RU,.

ADJLJ1JI "F Michael A Svviger (202) 298-1891 DOCKET UMBER March 22, 1999 PETITI RULE PR 50 .. 1,,cJ

<,1./FR 432)

BY HAND DELIVERY Secretary U.S. Nuclear Regulatory Commission 11555 Rockville Pike Rockville, Maryland Re: Comments of Long Island Power Authority in Support of Petition Docket No. PRM-50-64 Attention: Rulemaking and Adjudications Staff:

Enclosed for filing in the above-referenced docket is an original of the Comments of Long Island Power Authority in Support of Petition . Also enclosed are two extra copies to be time-stamped and returned in the envelope provided.

Sincerely, 1r/,i ~Ja Su;.'f'-

Michael A. Swiger Counsel for Long Island Power Authority Enclosures MAR 25 1999

O.S.NUCLEAR REGULATORY C MMISSION RtJI.EMAl(INGS &ADJUDICATIONS STAFF OFFICE OFT-HE SECRETARY OF THE COMMISSI Document Stati

• I-Iv

UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION PETITION FOR RULEMAKING REGARDING JOINT AND SEVERAL Docket No. PRM-50-64 LIABILITY OF NON-OPERATING CO-OWNERS OF NUCLEAR POWER PLANTS COMMENTS OF LONG ISLAND POWER AUTHORITY IN SUPPORT OF PETITION I. INTRODUCTION Pursuant to the Nuclear Regulatory Commission's ("NRC's") notice issued December 30, 1998,11 and its regulations at 10 C.F.R. § 2.802

( 1 998), the Long Island Power Authority ("Authority") hereby submits its

• comments in support of the above-referenced petition.

The Authority shares the petitioners' concern that the NRC's Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry ("Policy Statement"),-'-' by raising the specter of joint and several liability among co-owners for operating and decommissioning 1/ 64 Fed. Reg. 432 (January 5, 1999).

2,./

62 Fed. Reg. 44,071 (August 19, 1997).

costs, has created substantial uncertainty for minority owners. This uncertainty could affect co-owners' costs of raising capital in the financial markets, even for activities unrelated to nuclear power plants, and could inhibit the emerging market for sale of nuclear power plants. Even the prospect of burdening a minority owner with all or an excessive share of a plant's operating and/or decommissioning costs is fundamentally contrary to the pro rata share contractual arrangements among co-owners which have made the commercial development of nuclear energy in this country possible.

The Authority agrees with the petitioners that, in light of the current extensive safeguards for ensuring adequate nuclear power plant funding, the NRC should clarify that it will not impose operating or decommissioning costs on co-owners greater than their contractual obligations.

II. THE AUTHORITY'S INTEREST IN THE PETITION The Authority is a corporate municipal instrumentality and political subdivision of the State of New York. Through its subsidiary, Long Island Lighting Company, d/b/a LIPA, the Authority is responsible for meeting the electric requirements on Long Island, including Nassau and Suffolk Counties and the Rockaway section of the New York City Borough of Queens. The Authority establishes rates and policies for LIPA and is responsible for obtaining all necessary financing to meet LIPA's public utility responsibilities.

LIPA is a co-owner with an 18 percent share of the Nine Mile Point Unit 2 nuclear plant located near Scriba, New York, a 1,161 megawatt

("MW") boiling water reactor. The Niagara Mohawk Power Corporation

("NiMo") is the operator and 41 percent co-owner of Unit 2, and the operator and sole owner of Nine Mile Point Unit 1, a 613 MW boiling water reactor. 11 The Authority is concerned about the implications of the Policy Statement for LIPA's minority ownership share of Nine Mile Point Unit 2 .

• Ill. DISCUSSION A. Joint and Several Liability Would Undermine the Contractual Basis for Nuclear Power Plant Funding.

In the Policy Statement, the NRC "recognizes that co-owners and co-licensees generally divide costs and output from their facilities by using a contractually-defined, pro rata share standard." The NRC also acknowledges that it "has implicitly accepted this practice in the past and believes that it should continue to be the operative practice." Nonetheless, the Policy Statement "reserves the right, in highly unusual situations where adequate protection of public health and safety would be compromised if such action were not taken, to consider imposing joint and several liability on a, The other co-owners of Unit 2 are: New York State Electric & Gas Corporation, with an 1 8 percent interest; Rochester Gas and Electric Corporation, with a 14 percent interest; and Central Hudson Gas and Electric Corporation, with a 9 percent interest.

co-owners of more than de minimis shares when one or more co-owners have defaulted. " 11 The Policy Statement fails to explain how contractual, pro rata ownership can continue to be the "operative practice" if there is a looming threat of joint and several liability should one or more co-owners experience financial difficulty. Nuclear power plants are capital intensive enterprises.

Diversity of ownership made construction of many of these facilities possible. In most if not all instances of co-ownership, ownership commitments were made and substantial sums of capital raised based on a contractual pro rata allocation of liability for plant costs. The Policy Statement threatens to jeopardize the viability of the co-ownership arrangements that underlie nuclear power plant funding.

The Policy Statement§/ cites Public Service Company of Indiana. Inc.

(Marble Hill Nuclear Generating Station, Units 1 and 2), 21 for the principle that the NRC views all co-owners as co-licensees who are responsible for complying with the terms of their licenses. However, that case only involved the question of whether a co-owner must be a co-licensee, not whether ii 62 Fed. Reg. at 44,077.

liL.

ALAB-459, 7 NRC 179, 200-01 (1978).

contractual arrangements for a pro rata allocation of liability among co-licensees can or should be abrogated by NRC order. Public Service Co. of New Hampshire (Seabrook Station, Units 1 and 2), 11 also is distinguishable.

In Seabrook, the NRC did not unilaterally impose joint and several liability on existing co-licensees. Rather, it conditioned a low-power testing license on the co-applicants' agreement to joint and several liability, in light of the "unique" circumstances of the Public Service Company of New Hampshire bankruptcy. Moreover, the co-applicants' liability was limited to making up deficiencies in a special fund with an identified monetary minimum.

In its Proposed Rule on Financial Assurance Reguirements for Decommissioning Nuclear Power Reactors.!!.' the NRC pointed out the problems that could result from trying to impose joint liability on co-owners for decommissioning costs, including: potential disagreement on decommissioning methods, inhibition of flexibility, weakening of competitive position, and difficulty in implementation.~' The NRC further pointed out that under the proposed rule, joint liability as a condition of license transfer would appear unnecessary because:

ll CLl-88-10, 28 NRC 573 (1988).

62 Fed. Reg. 47,588 (September 10, 1997).

l!L. at 47,594.

restructured entities would either have to have adequate coverage of decommissioning funding obligations through some non-bypassable cost recovery mechanism or would be required to provide the types of up-front assurance described in

§ 50. 75(e)(2). Those licensees who remain utilities would have the funding assurance provided through being rate-regulated under § 50. 75(e)(3). The Commission considers this level of assurance to be adeguate and therefore sees no need to impose an additional regulatory obligation of joint liability on co-owners or co-ljcensees. 101 The NRC adopted the proposed changes to its decommissioning funding requirements in its Final Rule. 111 The Policy Statement does not explain why it takes a different position than the contemporaneously issued Proposed Rule on financial assurance. Contrary to the NRC's assertions, the Policy Statement is a significant and disturbing departure from previous NRC policy and precedent.

B. The NRC Lacks Statutory Authority To Impose Joint and Several Liability.

The Authority agrees with the petitioners that there are substantial questions regarding the NRC's legal authority to impose joint and several liability on co-owners, as set forth in Petitioners' Memorandum of Law in Support of Petition for Rulemaking.

lQI kt.. (emphasis added).

11/

63 Fed. Reg. 50,465 (September 22, 1998).

C. Existing Safeguards Are More Than Sufficient To Ensure Adequate Nuclear Power Plant Funding.

As discussed above, the NRC recently issued a Final Rule amending its regulations relating to financial assurance requirements for the decommissioning of nuclear power plants in anticipation of rate deregulation of the electric industry.-12.I The NRC's regulations require up-front assurance for decommissioning funding for non-electric utilities, i.e., entities not assured cost recovery through rates.-Ll.l The Final Rule added a further

• requirement for biennial reporting by each licensee on the status of its decommissioning funding.-li.l The NRC regulations at 10 C.F.R. § 50.80 also provide for NRC prior review and approval of transfers of operating licenses associated with mergers, formation of holding companies, sales of facilities and portions of facilities, and other changes in ownership or control. The NRC evaluates the financial qualifications associated with these transfers. ll/

.111 63 Fed. Reg. 50,465 (1998).

lll See 10 C.F.R. § 50.75(e).

10 C.F.R. § 50. 75(f)(1), as amended. See 63 Fed. Reg. at 50,482.

NU REG -1577, Standard Review Plan on Power Reactor Licensee Financial Qualifications and Decommissioning Funding Assurance, Draft Report for Comment (January 1 997), at 4.

Finally, the NRC's regulations impose financial qualifications requirements on applicants for nuclear power plants operating licenses. 121 The NRC also conducts general follow-up reviews of licensees' financial health. 121 In the Policy Statement, the NRC stated that it will evaluate whether enhancements to its financial qualifications requirements are necessary in light of electric utility restructuring. The Policy Statement goes on to state:

However, the NRC continues to believe that its primary tool for evaluating and ensuring safe operations at its licensed facilities is through its inspection and enforcement programs. In its previous experience, the NRC has found that there is only an indirect relationship between financial gualjfjcations and operational safety ... ..1.l!'

The Policy Statementli' acknowledges that two of the three nuclear licensees who have filed for bankruptcy --- Public Service Company of New Hampshire and El Paso Electric Company -- continued their pro rata contributions for operating and decommissioning expenses and successfully emerged from bankruptcy. It is the Authority's understanding that Cajun Electric Power Cooperative, the third licensee, also has continued to meet its pro rata financial obligations.

10 C.F.R. § 50.33(f).

NUREG-1577 at 4.

62 Fed. Reg. at 44,073 (emphasis added).

.1.ll.l ld..,_ at 44,077 n.3.

t .

In sum, there are more than sufficient safeguards in place to ensure adequate funding for nuclear plant operations and decommissioning, even in those instances in which a co-licensee experiences financial distress.

D. The Threat of Joint and Several Liability Has Undesirable Market Impacts.

The Policy Statement makes no attempt to define the circumstances under which it would consider imposing joint and several liability. Instead, it offers only the generalized criteria that if one or more co-owners files for bankruptcy or "otherwise encounter[s] financial difficulty," it may abrogate the financial arrangements "where adequate protection of public health and safety would be compromised if such action were not taken. " 201 The Policy Statement creates the prospect that the owner of a relatively small minority interest in a nuclear plant could incur a disproportionate share, if not the entirety, of the plant's operating and/or decommissioning costs if other owners were to incur financial difficulties.n1 This possibility creates serious concerns for minority owners.

Moreover, the NRC offers no detailed criteria or explanation of when circumstances might require its imposition of joint liability. Would a co-20/

kl.. at 44,077.

ill Although the NRC does not define de minimis share, the Authority assumes that LIPA's 18 percent interest in Nine Mile Point Unit 2 would be considered more than de minimis.

licensee entering into bankruptcy be sufficient? As noted above, in each of the instances in which licensees have filed under Chapter 11, the licensees continued to meet their pro rata obligations for operating and decommissioning expenses. Thus, the Policy Statement makes it difficult if not impossible to quantify or assess the risk to minority co-owners and their bondholders or shareholders.

The uncertainty created by the Policy Statement as to the potential liability of co-owners could affect their costs of raising capital in the financial markets. The potential risks are so enormous and undefined that this uncertainty could even affect the costs of a co-owner's activities unrelated to nuclear plant operations.

The Policy Statement's potential impacts are magnified by restructuring of the electric industry and the growing market in transfer of ownership interests in nuclear power plants. By potentially weakening the financial position and integrity of its co-licensees, the Policy Statement could unintentionally promote the very situation it hopes to avoid, i.e., uncertainty regarding the sufficiency of funds to assure safe operations and decommissioning. Further, it will tend to discourage diversity of ownership which has traditionally been a source of financial strength for the nuclear generation industry.

IV. CONCLUSION To avoid these adverse impacts, and in light of the current extensive safeguards for ensuring adequate nuclear power plant funding, the NRC should clarify that it will not impose operating or decommissioning costs on co-owners greater than their contractual obligations.

Respectfully submitted,

!'71(;~~~

David P. Yaffe Michael A. Swiger Counsel for Long Island Power Authority March 22, 1 999

(!)

PECO NUCLEAR PECO Energy Company Nuclear Group Headquarters 965 Chesterbrook Boulevard

• 99 HAR 15 A10 :S9 Wayne, PA 19087-5691 0 -

,,u I I ADJU_

LJ(., 'MBE:R March 11 , 1999 PEi ION RULE PAM 5 o-, t/

~ FR43:;.)

Mr. John C. Hoyle Secretary of the Commission U.S. Nuclear Regulatory Commission Washington, DC 20555-0001

Subject:

Comments Concerning 10CFR50 Petition for Rulemaking (64FR432, dated January 5, 1999)

Dear Mr. Hoyle:

This letter is being submitted in response to the NRC's request for comments regarding a 10CFR50 Petition for Rulemaking published in the Federal Register (i.e., 64FR432, dated January 5, 1999). This rulemaking petition was filed by the Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power and Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc. (petitioners).

The petitioners are requesting that the NRC amend its enforcement provisions to clarify NRC policy regarding the potential liability of joint owners if other joint owners become financially incapable of bearing their share of the burden for safe operation or decommissioning of a nuclear power plant.

PECO Energy appreciates the opportunity to comment on this Petition for Rulemaking. We recommend that the NRC provide definitions for the terms "de minimis share" and 'Joint and several liability" since they are used in this petition. We believe that the regulations governing financial assurance requirements are clear regarding a licensee's and operator's responsibility for ensuring the safe operation, and assuring that decommissioning costs are available for a nuclear power plant. Therefore, if the NRC continues with rulemaking, it is important that this petition be more closely aligned and consistent with the existing financial assurance requirements.

If you have any questions, please do not hesitate to contact us.

Very uly yours, _

/?fl__.52 Director - Licensing AR I 7 1999

~knowlooged by cara *--....-IWAW~,A,.

ClEAP REGULATOR SSION NULil::MAI\IM.:IS &ADJUDICATIONS STAFF OFFICE OF THE SECRETAR Of THE COMMl~IO Document SMtlstic6 3/11/99 I F I

DOCKET UMBER DOctrE ED PETITION RULE PAM 5o- fo t.f us 10 c

( hi/FR L/3:l.) [7590-01-P]

'98 OEC 30 A1 1 :16 NUCLEAR REGULATORY COMMISSION 10 CFR Part 50 OH-I hlJ ~

ADJl.l' F

[Docket No. PRM-50-64]

Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc. ;

Receipt of Petition for Rulemaking AGENCY: Nuclear Regulatory Commission.

ACTION: Petition for rulemaking; Notice of receipt.

SUMMARY

The Nuclear Regulatory Commission (NRC) has received and requests public comment on a petition for rulemaking filed by the Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc. (petitioners). The petition has been docketed by the Commission and has been assigned Docket No. PRM-50-64. The petitioners are all non-operating joint owners of nuclear plants who have concerns about potential safety impacts that could result from economic deregulation and restructuring of the electric utility industry. The petitioners are requesting that the enforcement provisions of NRC regulations be amended to clarify NRC policy regarding the potential liability of joint owners if other joint owners become financially incapable of bearing their share of the burden for safe operation or decommissioning of a nuclear power plant.

~~ ~,:J.I /9'fCJ DATE: Submit comments by (7e- days follewiFI~ publicatior I i11 tlie Federal ~sgisteB.

Comments received after this date will be considered if it is practical to do so, but assurance of consideration cannot be given except as to comments received on or

2 before this date.

AUDRESSES: Submit comments to: Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555. Attention: Rulemaking and Adjudications staff.

Deliver comments to 11555 Rockville Pike, Rockville, Maryland, between 7:30 am and 4: 15 pm on Federal workdays.

For a copy of the petition, write: David L. Meyer, Chief, Rules and Directives Branch, Division of Administrative Services, Office of Administration, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001.

You may also provide comments via the NRC's interactive rulemaking website through the NRC home page (http://www.nrc.gov). This site provides the availability to upload comments as files (any format), if your web browser supports that function. For information about the interactive rulemaking website, contact Ms. Carol Gallagher, (301) 415-5905 (e-mail: CAG@nrc.gov).

FOR FURTHER INFORMATION CONTACT: David L. Meyer, Office of Administration, U.S. Nuclear Regulatory Commission, Washington, DC 20555. Telephone: 301-415-7163 or Toll Free: 1-800-368-5642 or E-mail: DLM1 @NRG.GOV.

SUPPLEMENTARY INFORMATION:

Background

The Nuclear Regulatory Commission received a petition for rulemaking submitted by the petitioners. The petitioners are all non-operating joint owners of nuclear power plants who are concerned about their potential liability in the event that other co-owners or the licensee(s) licensed to possess and operate those nuclear power plants were to default on, or become financially incapable of bearing, their share

6 operators .reflected in applicable joint ownership or similar agreements pertaining to the plant.

Although the petitioners agree that all licensees must comply with their licenses, they believe the prospect of joint and several liability is directly contrary to joint ownership agreements in which ownership commitments were made and substantial sums of capital were raised based on a contractual pro rata allocation of liability for plant costs. The petitioners also contend that accounting of assets and liabilities for potential sales of ownership interests is made more uncertain because of the unsettled potential joint liability issue.

In addition to the petition for rulemaking, the petitioners have attached a document entitled, "Memorandum of Law in Support of Petition for Rulemaking." The petitioners state that the Atomic Energy Act of 1954, as amended (AEA), does not authorize tfle NRC to impose any liability (per se) and only allows the NRC to impose certain substantive safety obligations on licensees. The petitioners state that the Price Anderson Act (AEA §170), contains an elaborate statutory framework for public liability and associated actions, and provides for various fees and NRC involvement in deferred premiums. However, the petitioners contend that the NRC has no public safety authority to impose liability or initiate or adjudicate claims of liability on behalf of the public.

Under the Price Anderson Act, the petitioners note that legal actions are brought by injured persons, rules for decision in public liability cases are derived from State law, and that the U.S. district courts have jurisdiction to adjudicate claims. The petitioners note that although the AEA and congressional appropriations acts permit the NRC to

5 obligations.

The petitioners contend that these factors create much uncertainty as to the potential liability of a joint owner and could adversely affect a joint owner's ability to raise capital in an industry undergoing consolidation and restructuring. The petitioners believe there is an emerging market for the sale of nuclear power plants and interest in those plants that could be stifled. The petitioners also believe that the unsettled potential liability issue could prevent co-owning utilities from being acquired by other utilities because actual or projected costs, such as decommissioning costs, are unknown.

The petitioners stated that a group of joint owners requested NRG review of the Policy Statement and ultimately petitioned for judicial review in the U.S. Court of Appeals for the D.C. Circuit, American Public Power Association, et al. v. Nuclear Regulatory Commission, et al. (Case No. 98-1219). Although the case was dismissed after an agreement between the parties, the NRG stipulated that future legal challenges on the potential liability issue of joint owners would not be precluded by the dismissal.

The petitioners have proposed the following language they believe will eliminate confusion and establish a stable regulatory process on the potential liability issue, and request that it be included among the enforcement provisions in 10 CFR Part 50:

Whenever the Commission finds it necessary or desirable to impose additional requirements by rule, order or amendment on a person subject to this part to promote or protect the public health and safety, the additional requirements will be directed first to the person licensed to possess and operate the facility.

If it becomes necessary to impose additional requirements on persons who only own the facility, and were never licensed to operate, then the Commission will not impose greater than the agreed allocation of responsibility among all the owners and

4 The NRC has determined that the petition meets the threshold sufficiency requirements for a petition for rulemaking under 10 CFR 2.802. The petition has been docketed as PRM-50-64. The NRC is soliciting public comment on the petition for rulemaking.

Discussion of the Petition The petitioners note that the NRC Policy Statement issued on August 13, 1997 and published in the Federal Register on August 19, 1997 (62 Fed. Reg. 44071 ), "Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry (Policy Statement) contemplated how NRC would respond to potential safety impacts on power reactor licensees that could result from economic deregulation and restructuring of the electric utility industry. Although the NRC recognized that many licensed nuclear power plants are jointly owned facilities, the petitioners are concerned that the NRC stated that pro rata cost sharing arrangements might be ignored in "highly unusual situations where adequate protection of public health and safety would be compromised if such action were not taken, to consider imposing joint and several liability on co-owners of more than a de minimis share when one or more co-owners have defaulted." The petitioners are also concerned that the NRC has published no information regarding what would constitute a de minimis share and the situation where the NRC might find the imposition of joint and several liability necessary to protect the public health and safety. The petitioners believe that the quoted portion of the Policy Statement appears to create a possibility that the owner of a small share of a nuclear power plant could be held responsible for all or an excessive portion of a plant's costs if other co-owners or the operators became financially incapable of meeting their pro rata

3 of the costs of operating in accordance with NRG requirements. Specifically, the petitioners are concerned that the NRG's "Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry" (Policy Statement) published on August 19, 1997 (62 Fed. Reg. 44071 ), has resulted in confusion among joint owners of nuclear power plants regarding the potential liability of the owner of a relatively small ownership share of a nuclear power plant. The petitioners believe that a joint owner could incur the burden of all or an excessive portion of a plant's costs if other joint owners or the operators defaulted or became financially incapable of bearing their share of the burden. The petitioners believe that the NRG might ignore existing pro rata cost sharing arrangements. The petitioners also believe that the NRG has published no information regarding what would constitute a de minimis share and under what circumstances the NRG might find the imposition of joint and several liability necessary to protect the public health and safety.

The petitioners have concluded that these factors have caused much confusion and uncertainty about the potential liability of a joint owner, and can adversely affect the ability to raise capital in an uncertain market that is undergoing consolidation and restructuring. The petitioners believe that the Policy Statement might stifle the emerging market for the sale of nuclear power plants and associated interests, and have concluded that the unsettled nature of potential liability would adversely affect joint owners who wish to be acquired by other utilities because decommissioning costs are unknown. The petitioners request that the issue of potential liability among joint owners be resolved by amending the regulations pertaining to enforcement in 10 GFR Part 50.

7 impose and collect fees, they believe the power to create fee liability does not extend to other types of ljability. The petitioners believe that although the NRC has authority to impose financiat qualifications requirements and has used this authority to require funds to be provided for decommissioning, no comparable funding requirement for operation exists. The petitioners also note that although the Environmental Protection Agency, under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), has authority to initiate safety improvements at taxpayers' expense and then sue the licensee for reimbursement, nothing in the AEA allows the NRC to decommission a plant and impose liability for reimbursement. The petitioners state that the NRC policy on joint and several liability could be understood to "... hold co-licensees jointly and severally responsible for meeting specific substantive safety obligations under the AEA. However, even as so understood, the Commission's statement is directly contrary to the contractual basis on which joint ownership arrangements for nuclear power plants have been structured. In most, if not all, such arrangements, ownership commitments were made and substantial sums of capital raised based on a contractual pro rata allocation of responsibility for plant costs." (Emphasis in original).

The petitioners state that because the NRC has implicitly accepted these arrangements, all interested parties would have their reasonable expectations overturned by the imposition of joint and several liability.

The petitioners assert that NRC has approved many agreements among co-owners based on a contractual pro rata allocation of responsibility for plant costs. The petitioners assert that a draconian imposition of liability is not necessary because even nuclear power plant licensees in bankruptcy have always been able to comply with NRC

8 safety requirements. The petitioners note that the situation at Three Mile Island Unit 2 afler the accident was adequately addressed by the accident cleanup insurance requirements in 10 CFR § 50.54(w). The petitioners believe that the NRC has never faced a situation where a nuclear power reactor licensee was financially unable to meet its safety obligations and that even with the operating licensee in bankruptcy, the NRC's safety authority is preserved. The petitioners cite Midlantic National Bank v. New Jersey Department of Environmental Protection, 474 U.S. 494, 506-507 (1986); Ohio v.

Kovacs, 469 U.S. 274 (1985); and Penn Terra, Ltd. v. Department of Environmental Resources, 733 F. 2d 267 (3 rd Cir. 1984), as cases which found that a bankruptcy court does not have the power to authorize an abandonment without compliance with environmental laws and protection of the public's health and safety.

The petitioners also believe the Policy Statement is inconsistent with the final rure published on September 22, 1998 (63 FR 50465), and associated proposed rule that was published on September 10, 1997 (62 FR 47588), "Financial Assurance Requirements for Decommissioning Nuclear Power Reactors," in which the NRC noted difficulties that could stem from attempting to impose joint liability on co-owners and co-licensees for decommissioning costs. These difficulties included problems regarding potential disagreements on decommissioning methods, the inhibition of flexibility, the weakening of competitive position, and implementation that the petitioners believe exist regarding potential joint owner liability. The petitioners reiterate that under the AEA, it would be unreasonable and unlawful for the NRC to impose "an onerous safety obligation on non-operating co-owners simply because the person with the real safety obligation-the operator-is facing financial difficulty" especially when the N RC has the

9 authority to impose financial qualifications requirements on those who propose to operate a reactor.

The petitioners also contend that the Policy Statement raises questions of impermissible retroactivity to nuclear power plant owners. The petitioners note that in Landgraf v. USI Film Products, 511 U.S. 244, 265-266 (1994), the Supreme Court has held that:

[E]lementary considerations of fairness dictate that individuals should have an opportunity to know what the law is and to conform their conduct accordingly; settled expectations should not be lightly disrupted * * *. In a free, dynamic, society, creativity in both commercial and artistic endeavors is fostered by a rule of Law that gives people confidence about the legal consequences of their actions.

In General Motors Corp. v. Romein, 503 U.S. 181, 191 (1992), the petitioners note that the Supreme Court ruled that: "Retroactive legislation presents problems of unfairness that are more serious than those posed by prospective legislation, because it can deprive citizens of legitimate expectations and upset settled transactions." In Bowen v .

• Georgetown Univ. Hospital, 488 U.S. 204, 208 (1988), the petitioners also noted that the Supreme Court found that "congressional enactments and administrative rules will not be construed to have retroactive effect unless their language requires this result."

The petitioners believe that these cited decisions illustrate that an NRC order imposing onerous safety requirements on a co-owner licensee disregard pro rata sharing agreements, defeat legitimate expectations, and upset settled transactions.

The petitioners assert that joint owners have relied upon pro rata arrangements for decades with implicit NRC approval and that the industry restructuring and emerging market for nuclear power plants require that these sharing agreements continue. The

10 petitioners believe that under Bowen, the NRC cannot issue retroactive rules unless that authority is granted explicWy by statute. The petitioners believe that the NRC does not possess this authority because nothing in the AEA specifically gives the NRC the power to issue retroactive rules.

The petitioners distinguish backfit rules from those that are retroactive. The petitioners acknowledge that the vast majority of NRC backfits apply to plant operation after the effective date of the backfit and could never have been applied without the beginning of plant operation. However, the petitioners state that the imposition of new requirements on non-operating co-owners without regard for pro rata cost sharing agreements is distinguishable from a backfit because entities licensed to own or operate have no reasonable expectation that the NRC will never impose additional safety requirements as a condition of continued operation. The petitioners maintain that for non-operating co-owners there is reasonable expectation that the NRC would continue to honor pro rata cost-sharing contractual agreements even though NRC has power to impose additional safety measures.

The petitioners acknowledge that any determination that an NRC rule or order is impermissibly retroactive will be made by the courts. However, the petitioners have concluded that an NRC imposition of a new operational safety requirement on a non-operating co-owner group that holds all co-owners equally responsible and disregards pro rata cost-sharing agreements would be unreasonable and unlawful.

Lastly, the petitioners acknowledge that the NRC has the authority to prevent an unsafe plant from operating. They also agree that a plant that cannot operate is a liability, not an asset. The petitioners cite Public Service Company of New Hampshire

11 (Seabrook Station, Units 1 and 2), CLl-88-10, 28 NRG 573 (1988), and state that it is in the interest of all licensees, co-owners, and operators to agree on the funding of necessary safety measures so the plant can operate. However, the petitioners believe that the Policy Statement interferes with licensees' rights to make their own decisions regarding allocation of safety expenses. The petitioners have concluded that NRG interference in allocation decisions among co-owners is not necessary for safety and creates potentially great difficulties for co-owning utilities who wish to consolidate, restructure, or sell assets.

The Petitioners' Conclusions The petitioners have concluded that the NRG Policy Statement regarding electric utility deregulation and restructuring has caused great confusion among non-operating co-owners about the issue of potential joint liability if an operating licensee becomes financially incapable of meeting license conditions. The petitioners have concluded that the NRG might ignore existing pro rata contractual agreements among joint licensees and that no information has been published regarding what would constitute a de minimis share or under what circumstances the NRG might find the imposition of joint liability necessary to protect the public health and safety. The petitioners have also concluded that the unsettled potential liability issue could mean that a co-owner of a very small ownership share could become financially incapable of fulfilling its contractual obligations. Lastly, the petitioners have concluded that these factors might stifle an emerging market for the sale of nuclear power plants and associated interests because future operating and decommissioning costs are unknown.

12 The petitioners request that the issue of potential liability among joint owners be resolved as requested in their petition by amending the regulations pertaining to enforcement in 10 CFR Part 50.

Dated at Rockville, Maryland, this~;ay o f ~

For the Nuclear Regulatory Commission.

Secretary of the Commission.

EGAN & ASSOCIATES, P. C.

Counselors at Law 2300 N Street, N. W.

Washington, D. C. 20037 Telephone (202) 663-9200 Fax (202) 661-9066 November 3, 1998 VIA LOCAL COURIER Secretary Office of the Secretary of the Commission U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 ATTENTION: Emile L. Julian, Chief: Docketin1: and Services Branch

Dear Mr. Secretary:

In accordance with 10 CFR § 2.802, enclosed for filing are an original and two copies of a Petition for Rulemaking submitted on behalf of Atlantic City Electric Company; Austin Energy; Central Maine Power Company; Delmarva Power & Light Company; South Mississippi Electric Power Association; and Washington Electric

• Cooperative, Inc. This petition relates to the subject of joint and several liability of non-operating co-owners of nuclear power plants.

Would you please file-stamp one of the enclosed copies and return it to the courier for our records. If there are any questions regarding the petition, please do not hesitate to give me a call at (202) 663-9338.

Sincerely, Martin G. Malsch MGM/ec Enclosures

IN THE UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION COMMISSIONERS:

Shirley Ann Jackson, Chairman Nils J. Diaz Greta J. Dicus Edward McGaffigan, Jr.

Jeffrey Merrifield In the Matter of: Docket No. - - - - -

Petition for Rulemaking Regarding Joint and Several Liability of Non-Operating Co-Owners of Nuclear Power Plants.

PETITION FOR RULEMAKING I. INTRODUCTION

1. This petition for rulemaking is filed by Atlantic City Electric Company, Aus~ Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.

("Petitioners"). Petitioners are all non-operating co-owners of nuclear power plants. The

• ,: \/:'

petition is filed pursuant to 5 U.S.C. §§ 553(e) and 10 CFR Part 2, Subpart H.

2. On August 13, 1997, the U.S. Nuclear Regulatory Commission ("NRC

or "Commission") issued a "Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry" (Policy Statement") (62 Fed. Reg. 44071).

PETITION FOR RULEMAKING-Page 1

The Policy Statement was issued by NRC after consideration of public comments on a draft policy statement published in the Federal Register on September 23, 1996 (61 Fed.

Reg. 49711). The purpose of the Policy Statement was to discuss NRC's concerns regarding the potential safety impacts on NRC power reactor licensees which could result from economic deregulation and restructuring of the electric utility indust:iy and the means by which NRC intends to address those concerns.

3. In the Policy Statement, the Commission correctly recognized that many licensed nuclear power plants are jointly-owned facilities. The Commission also recognized that "co-owners and co-licensees generally divide costs and output from their facilities by using a contractually-defined, pro rata share standard." The Commission further stated that it believed this pro rata sharing of plant costs "should continue to be the operative practice." However, the Commission then went on to state that such pro rata cost-sharing arrangements might be ignored by the Commission in certain circumstances.

[The Commission] reserves the right, in highly unusual situations where adequate protection of public health and safety would be compromised if such action were not taken, to consider imposing joint and several liability on co-owners of more than de minimus shares when one or more co-owners have defaulted. 1 1

The Commission also indicated that it viewed all co-owners as "co-licensees who are responsible for complying with the terms of their licenses." It is of course true that licensees must comply with their licenses.

PETITTON FOR RULEMAKING- Page 2

4. A group of publicly-owned joint owners sought Commission reconsideration of the above-quoted portion of the Commission's Policy Statement and, when reconsideration was not forthcoming, petitioned for judicial review in the U.S.

Court of Appeals for the D. C. Circuit, American Public Power Association, et al. v.

Nuclear Regulatory Commission, et al. (Case No. 98-1219). Petitioner later agreed to dismissal of the case after discussing the matter with NRC counsel and receiving NRC authorization to make the following representation to the court:

• Counsel for petitioners is authorized to state that it is the NRC counsel's position that, should petitioners seek to raise and litigate ab initio the legal issue of whether the NRC has the authority to impose joint and several liability on minority licensee/owners, such a challenge would not be precluded by petitioners' not pursuing the present litigation. NRC counsel states that it can foresee no circumstances in which it would argue otherwise.

II. THE CURRENT STATE OF CONFUSION

• 5. Thus, notwithstanding dismissal of the petition, it is clear that no one is precluded from raising and litigating in any future case in which NRC seeks to impose joint and several liability on a licensed co-owner, any legal challenge to the imposition of joint and several liability, including the right to raise and litigate the issue whether NRC has the legal authority to impose such liability. However, this still leaves the above-quoted portion of the NRC's Policy Statement in effect-whatever "in effect" may mean for such a Policy Statement in these circumstances. As a result, there remains substantial PETmON FOR RULEMAKING-Page 3

confusion about individual joint owners' potential liabilities. The quoted portion of the Policy Statement appears to create the possibility that the owner of a relatively small ownership share of a nuclear power plant could incur the burden of all, or an excessive portion of a plant's costs if other co-owners or the operators were to default or become financially incapable of bearing their share of the burden. Further, there is no information provided as to what would constitute a "de minimus" share, and the particular circumstances under which the Commission might find the imposition of joint and several

• liability necessary to protect the public health and safety are undefined. These factors considered collectively create a vast cloud of uncertainty as to the potential liability of a joint owner. This can adversely effect the ability of the joint owners to raise capital in the financial markets (or the costs of raising capital) even for activities that are unrelated to nuclear power plant operations. This is especially unsettling to an industt.y undergoing consolidation and restructuring. There is an emerging market for the sale of nuclear power plants and interests in those plants, and the Commission's Policy Statement might stifle the emergence and vitality of this market. Finally, the unsettled nature of this issue could serve as a "poison pill" to co-owning utilities seeking to be acquired by other utilities, since actual or projected decommissioning costs are an unknown contingent liability.

PETmON FOR RULEMAKING- Page 4

III. THE PROPOSED RULE

6. The Commission has acknowledged on numerous prior occasions the need for a predictable and stable regulatory process. The situation described above is the antithesis of this. Petitioners submit that the following rule change is necessary in order to eliminate confusion and establish a stable and predictable regulatory process, at least in this particular area. Thus, Petitioners propose the following language to be included among the "Enforcement" provisions of 10 CFR Part 50:

Whenever the Commission finds it necessary or desirable to .

impose additional requirements by rule, order or amendment on a person subject to this part to promote or protect the public health and safety, the additional requirements will be directed first to the person licensed to possess and operate the facility.

If it becomes necessary to impose additional requirements on persons who only own the facility, and were never licensed to operate, then the Commission will not impose greater than the agreed allocation of responsibility among all the owners and operators reflected in applicable joint ownership or similar agreements pertaining to the plant.

IV. REASONS FOR THE RULE

7. The prospect of joint and several liability, even in limited circumstances, is directly contrary to the contractual basis on which numerous joint ownership arrangements for nuclear plants have been structured. In most, if not all, such arrangements, ownership commitments were made and substantial sums of capital raised based on a contractual pro rata allocation of liability for plant costs. The reasonable expectations of co-owners and investors (e.g., bondholders), as well as rate commissions, PETITION FOR RULEMAKING- Page 5

would be completely overturned by the imposition of joint and several liability, especially given the Commission's prior acceptance of pro rata allocations. Assessments of assets and.liabilities for purposes of a potential sale of ownership interests is made more difficult by speculation about the meaning of the Commission's Policy Statement and the circumstances in which the Commission might cany out its threat to impose joint and several liability.

8. Moreover, nothing in the Atomic Energy Act of 1954, as amended

• ("AEA"), or NRC's regulations authorizes the Commission to impose any "liability,"

much less "joint and several liability," as those terms are ordinarily understood. At most, the Commission may, in the exercise of its regulatory powers under the AEA, impose certain substantive safety obligations on licensees. The Commission has no authority under the AEA, comparable to the U.S. Environmental Protection Agency's authority under the Comprehensive Environmental Response, Compensation, and Liability Act

("CERCLA"), to institute safety improvements at taxpayers' expense and then sue the licensee for reimbursement. Thus, the Commission's statement about joint and several liability is all the more confusing.

9. At most, the quoted Commission statement regarding joint and several liability might be understood as a Commission statement that it could hold co-licensees jointly and severally responsible for meeting specific substantive safety obligations under the AEA. However, even as so understood, the Commission statement is directly PETITION FOR RULEMAKING-Page 6

contrary to the contractual basis on which numerous joint ownership arrangements for nuclear power plants have been structured. In most, if not all, such arrangements, ownership commitments were made and substantial sums of capital raised based on a contractual pro rata allocation of responsibility for plant costs. NRC has long acquiesced to such arrangements. The reasonable expectations of co-owners, investors, bondholders and rate commissions would be completely overturned by imposition now of joint and several liability. This is all the more evident given that NRC acknowledged in the Policy Statement that it implicitly accepted the practice of pro rata allocation in the past.

10. Moreover, there is no need for such a draconian Commission imposition of liability. Nuclear power reactor licensees, even licensees in bankruptcy, have always been able to comply with Commission-mandated safety requirements, and the Commission has never confronted the situation where a nuclear power reactor licensee was financially unable to meet its safety obligations. 2 Even in the very extreme case,

• with the operating licensee in bankruptcy, the Commission's safety authority is preserved.

Mid/antic National Bankv. New Jersey Department ofEnvironmental Protection, 474 U.S. 494, 506-507 (1986) ("The Bankruptcy Court does not have the power to authorize an abandonment without formulating conditions that will adequately protect the public's health and safety.") See also, Ohio v Kovacs, 469 U.S. 274 (1985); Penn Terra, Ltd v.

2 The unique situation at TMI Unit 2, following the accident, is ameliorated by the accident cleanup insurance requirements in 10 CFR § 50.54(w).

PETITION FOR RULEMAKING-Page 7

Department ofEnvironmental Resources, 733 F. 2d 267 (3rd Cir. 1984) (automatic stay under bankruptcy laws does not stay injunction to require compliance with environmental laws); In re METCOA, Inc., fdba the Pesses Company, Adversary Case No. B-85-0092 (Ban1cr., N.D. Ohio, Nov. 18, 1996).

11. The quoted Commission statement on joint and several liability is also inconsistent with the Commission's September 4, 1997, "Proposed Rule on Financial Assurance Requirements for Decommissioning Nuclear Power Plants" (62 Fed. Reg .

• 47588). In that proposed rule, the Commission noted the difficulties that could arise from attempting to impose joint liability on co-owners and co-licensees for decommissioning costs. The Commission noted that these difficulties include problems with respect to potential disagreement on decommissioning methods, the inhibition of flexibility, the weakening of competitive position, and difficulty in implementation (62 Fed. Reg. 47594). These same factors should be considered decisive here as well. 3

• 12. NRC's quoted statement regarding joint and several liability raises serious legal questions. No provision of the AEA authorizes the Commission to impose 'joint and several liability," as the term is ordinarily understood. Moreover, the imposition of joint and several liability, if understood as the imposition of a joint and several safety regulatory obligation on a group of co-owner licensees, is contrary to the overall intent 3

The final rule is consistent with the proposed rule in this respect. 63 Fed. Reg. 50465 (Sept. 22, 1998)

PETITION FOR RULEMAKING- Page 8

of the AEA that there be a proportionality or symmetry between the safety obligations imposed by the Commission and the scope of licensed activity. Given that ownership by itself poses no safety hazard, it would be unreasonable for the Commission to impose an onerous safety obligation on non-operating co-owners simply because the person with the real safety obligation-the operator-is facing financial difficulty. This is especially the case given that the Commission has ample authority to assure the financial qualifications of operating licensees. Atomic Energy Act § 182a. The Policy Statement raises further questions of impermissible retroactivity, as applied to those currently owning nuclear power reactors. A Memorandum of Law is attached hereto in further support of this petition.

13. Finally, the Commission has plenary authority to prevent an unsafe plant from operating, and a plant which cannot operate is a liability rather than an asset. In the real world, it is in the interest of all of the licensees, co-owners and operators, to agree as to the funding of necessary safety measures so that the plant may operate. See, e.g.,

Public Service Company ofNew Hampshire (Seabrook Station, Units 1 and 2),

CLI-88-10, 28 NRC 573 (1988). The Commission's Policy Statement interferes with the right of licensees to reach their own decisions as to allocation of safety expenses.

Everyone has the same objective-safe plant operation-and Commission interference in allocation decisions among co-owners is not necessary for safety, and it creates PETITION FOR RULEMAKING- Page 9

potentially huge and unnecessazy problems for co-owning utilities as they seek to consolidate, restructure, or spin off assets.

V. CONCLUSION

14. For the above reasons, petitioners respectfully request that this petition be granted, and that the regulations in 10 CFR Part 50 be amended as suggested.

Respectfully submitted, Martin G. Malsch Joseph R. Egan EGAN & ASSOCIATES, P.C.

2300 N Street, N.W.

Suite 600 Washington, D.C. 20037 (202) 663-9338 (Telephone)

(202) 663-9066 (Facsimile)

COUNSEL FOR PETITIONERS

• DATED: November 3, 1998 PETITION FOR RULEMAKING- Page 10

Attachment IN THE UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION COMMISSIONERS:

Shirley Ann Jackson, Chairman Nils J. Diaz Edward McGaffigan, Jr.

In the Matter of: Docket No. - - - - -

Petition for Rulemaking Regarding Joint and Several Liability of Non-Operating Co~Owners of Nuclear Power Plants.

MEMORANDUM OF LAW IN SUPPORT OF PETITION FOR RULEMAKING

1. For the reasons set forth below, the Atomic Energy Act of 1954, as amended ("AEA"), does not authorize the U.S. Nuclear Regulatoiy Commission

("NRC" or "Commission") to issue any rule or order to a group of non-operating co-owners holding them jointly and severally liable," as those legal terms are ordinarily understood. Instead, if the Commission's reference to joint and several liability is intended to mean that the Commission may, in the stated circumstances, impose a new operational safety requirement on a group of non-operating co-owners which holds all and each of them equally responsible, without regard for pro rata sharing agreements, or for the principal responsibility of the operator, then such a requirement would also be unreasonable and unlawful. Moreover, it would be unnecessaiy for safety.

I. THE ATOMIC ENERGY ACT IN GENERAL

2. The AEA grants the Commission authority to promulgate rules and orders necessaiy or desirable to protect and promote the public health and safety. AEA §§ 161b and 16 li. 1 Nowhere here, or elsewhere in the AEA, is the Commission granted power to do anything referred to as imposing "liability," let alone something called joint and several liability." To be sure, the Price Anderson Act ("Act"), as amended (principally AEA § 170) sets forth an elaborate statutory framework for "public liability" and "public

• liability actions," and provides for various fees and Commission involvement in deferred premiums. But notably absent from this Act is any indication that, in order to protect safety, the Commission may itself impose liability or initiate or adjudicate claims of liability on behalf of the public. Instead, under the Price Anderson Act, as amended, legal actions are brought by injured persons, the rules for decision in public liability actions are derived from state law, to the extent consistent with the AEA, and the U.S.

• district courts are vested withjurisdiction to adjudicate claims (AEA §§ llhh, 170).

1 These sections of the AEA authorize both rules and orders. The AEA also grants separate authority to the Commission to promulgate rules applicable to its licensees to protect and promote public health and safety. AEA §§ 103a, 103b, 161b, 161i, 161p, 182a, 183, and 187. The Commission may also impose reporting, record-keeping, and inspection requirements by rule or order under AEA § 1610. The purported reservation of power to impose joint and several liability applied to "highly unusual situations." This clearly suggests a reservation of a case-specific ordering power, rather than a power to address a generic problem by rule. Moreover, the Policy Statement, especially considered in conjunction with the statement ofNRC counsel, is not a rule.

MEMORANDUM OF LAW IN SUPPORT OF PETITION FOR RULEMAKING- Page 2

3. The Independent Offices Appropriation Act of 1952, AEA § 161w, and various Congressional Appropriations acts, grant power to the Commission to impose and collect fees, but this implicit power to create fee liability does not extend to other kinds of liability.

4. The Commission has authority to impose financial qualifications requirements, and has exercised this authority to require that funds be provided for decommissioning. 10 CFR § 50.75. But there is no comparable funding requirement for

• operation. Moreover, it was never contemplated that these financial qualifications rules would empower the Commission to decommission a plant and impose liability for reimbursement.

5. In sum, there is nothing in the AEA which grants the Commission power to impose any "liability" for safety measures, as that legal term is ordinarily understood, and there is no Commission power under the AEA, comparable to the power of the Environmental Protection Agency under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), to initiate substantive safety measures at a plant at taxpayers' expense, and sue the responsible party or parties for reimbursement.

To our knowledge, the Commission has never claimed such power. At most, the purported reservation of power to impose joint and several liability" can be understood as an effort to reserve the power to impose a regulatory safety obligation on a group of co-owner licensees which requires that all and each of them comply to the same extent.

MEMORANDUM OF LAW IN SUPPORT OF PETITION FOR RULEMAKING- Page 3

II. ADDITIONAL SAFETY REQUIREMENTS

6. The AEA contemplates a proportionality between the scope of the licensed activity and the nature of the safety obligations imposed. For example, the principle statutory- basis for the Commission's imposition of additional safety requirements on licensees is AEA §§ 161b and 161i, and both these subsections authorize the imposition of safety measures "to govern" the possession and use of nuclear materials and other AE~-authorized activities. The term "govern" suggests clearly that the additional safety measures must bear a direct relation, or at least be in proportion, to risk posed by the licensed activity. More fundamentally, the imposition of safety requirements, wholly out of proportion to the safety risk of the licensed activity, would be unreasonable and unlawful under 5 U.S.C. § 706.

7. Ownership of a nuclear power plant, without actual possession or operational responsibility or authority, carries no safety risk. Indeed, the AEA as a whole contains little concern for ownership without physical possession. Abolition of government ownership of special nuclear material in 1964 was never considered to be significant for regulatory purposes. Section 184 of the AEA expresses specific concern for direct or indirect transfers only when they involve the "right to utilize or produce special nuclear material," and for the rights of secured creditors only when they are sought to be enforced (by assumption of actual possession of the secured interests).

See 10 CFR § 50.81(a)(2). Section 170r of the AEA goes even further, making it clear MEMORANDUM OF LAW IN SUPPORT OF PETITION FOR RULEMAKING-Page 4

that persons under a bona fide lease cannot be held liable for an incident unless they are in actual possession at the time of the incident.

8. Given the need for proportionality, the lack of safety significance associated with ownership, and the structure of the AEA as a whole, it would be arbitrary, capricious, and unlawful for the Commission to impose onerous safety obligations on persons licensed only to own-and never licensed to physically possess or operate-the plant, merely because the more appropriate subject of enforcement (the person licensed to operate) is in financial difficulty. This is all the more evident given that the Commission has ample authority to impose financial qualifications requirements on persons proposing to operate. AEA § 182a. The problem ofretroactivity, discussed below, would make such an imposition even more unreasonable.

III. RETROACTIVITY

9. As the U.S. Supreme Court has noted:

"[E]lementary considerations of fairness dictate that individuals should have an opportunity to know what the law is and to conform their conduct accordingly; settled expectations should not be lightly disrupted.... fu a free, dynamic, society, creativity in both commercial and artistic endeavors is fostered by a rule of law that gives people confidence about the legal consequences of their actions."

Landgrafv. USI Film Products, 511 U.S. 244 at 265-266 (1994). See also General Motors Corp. v. Romein, 503 U.S. 181, 191 (19.92). ("Retroactive legislation presents MEMORANDUM OF LAW IN SUPPORT OF PETITION FOR RULEMAKING-Page 5

problems of unfairness that are more serious than those posed by prospective legislation, because it can deprive citizens of legitimate expectations and upset settled transactions.")

10. Accordingly, a presumption against retroactivity builds on a legal doctrine "deeply rooted in our jurisprudence" and "centuries older than our Republic." Landgraf at 265, quoting Kaiser Aluminum & Chemical Corp., v. Bonjorno, 494 U.S. 827, 842-844, 855-856 (1990) (Scalia, J., concurring). Thus, the Supreme Court held in Bowen v.

Georgetown Univ. Hospital, 488 U.S. 204, 208 (1988) that "congressional enactments and administrative rules will not be construed to have retroactive effect unless their language requires this result."

11. There can be no question that an order imposing onerous safety obligations on a co-owner group, without regard for pro rata sharing agreements among them, would, in the words of the Supreme Court, defeat legitimate expectations and upset settled transactions. Co-owners have relied upon pro rata sharing arrangements for decades, with implicit if not explicit Commission approval, and the realities of utility restructuring and the emerging market for nuclear power plants make it imperative that these sharing arrangements continue.

12. Under the teaching of Bowen, agencies do not have the authority to issue retroactive rules unless such authority is granted explicitly (i.e., the statutory language requires this result). This requirement assures that Congress has made the fundamental policy judgments concerning the proper temporal reach of its laws. See Landgraf at 273.

MEMORANDUM OF LAW IN SUPPORT OF PETITION FOR RULEMAKING-Page 6

Nothing in the AEA specifically grants the Commission the power to issue retroactive rules, and so the result under Bowen is that the Commission lacks such authority.

13. A retroactive rule is one which would "impair any rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed." Landgraf at 280. A Commission rule which imposed new safety obligations on a group of non-operating co-owners without regard for their pro rata sharing agreement would, in effect, impose new duties with respect to past transactions, namely the co-owners' prior acquisition of their ownership interests and their execution of ownership agreements.

14. On the other hand, a rule is not retroactive merely because it applies to cases arising from past conduct. The Supreme Court in Landgraf gives, as an example, a law banning gambling as applied to someone who has begun to construct a casino.

Landgraf at 269, note 24. In such cases, the law is not retroactive because, strictly speaking, it applies only to future conduct (for example, completion of casino construction), even though the future conduct was foreshadowed by conduct antidating the law's enactment. The vast majority of Commission backfits may fall in this category in the sense that they apply to plant operation after the effective date of the backfit, but could never have applied without commencement of operation, an event antidating the backfit. However, the imposition of new requirements on non-operating co-owners without regard for pro rata cost-sharing agreements is distinguishable from the usual MEMORANDUM OF LAW IN SUPPORT OF PETITTON FOR RULEMAKING-Page 7

backfit. Persons licensed to own or operate have no reasonable expectation that the Commission will never impose additional safety requirements as a condition of continued operation. But, in the case of non-operating co-owners, there was a reasonable expectation, even given the Commission's power to impose additional safety measures, that the Commission would continue to honor pro rata cost-sharing agreements in the exercise of this power.

IV. CONCLUSION

15. The Supreme Court has stated that "[a]ny test of retroactivity will leave room for disagreement in hard cases, and is unlikely to classify the enormous variety of legal challenges with perfect philosophical clarity." Landgraf at 270. In the final analysis, any determination that a Commission rule or order is impermissibly retroactive will be made by the courts. However, regardless of the strict legal classification which may be accorded a Commission imposition of joint and several liability, it remains that the fundamental policy underlying the presumption against retroactive laws would apply fully to such an action, since it would deprive co-owners of legitimate expectations and upset settled transactions. Ultimately, this has a direct bearing on the fundamental reasonableness of the Commission action.

16. When the fundamental policy underlying the presumption against retroactivity is taken into account, along with the need for proportionality, the lack of safety risk associated with ownership (and the structure of the AEA as a whole), it is

• MEMORANDUM OF LAW IN SUPPORT OF PETITION FOR RULEMAKING- Page 8

clear that a Commission imposition of a new operational safety requirement on a non-operating co-owner group, which holds all of them equally responsible without regard for pro rata cost-sharing agreements, would be unreasonable and unlawful.

Respectfully submitted,

~-----

Martin G. Malsch Joseph R. Egan EGAN & ASSOCIATES, P.C.

2300 N Street, N.W.

Suite 600 Washington, D.C. 20037 (202) 663-9338 (Telephone)

(202) 663-9066 (Facsimile)

COUNSEL FOR PETITIONERS DATED: November 3, 1998 MEMORANDUM OF LAW IN SUPPORT OF PETITION FOR RULEMAKING- Page 9