ML17090A112

Report of Status of Decommissioning Funding

ML17090A112
Person / Time
Site:	Summer
Issue date:	03/30/2017
From:	Crosby M Santee Cooper, South Carolina Electric & Gas Co, South Carolina Public Service Authority
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
Download: ML17090A112 (8)

Text

,~antee cooper' March 30, 2017 Michael R. Crosby Senior Vice President Document Control Desk Nuclear Energy U. S. Nuclear Regulatory Commission (843) 761-4126 Washi.pgton, D. C. 20555 fax: (843) 761-7037

Subject:

Virgil C. Summer Nuclear. Station Unit 1 mrcrosby@santeecooper.com Docket No. 50/395 Operating License No. NPF-12 Report of Status of Decommissioning Funding

Dear Sir/Madam:

The South Carolina Public Service Authority (Authority) and South Carolina Electric & Gas Company (SCE&G) have ownership interests of one-third and two-thirds, respectively, in the Virgil C. Summer Nuclear Station Unit L As provided in 10 CFR § 50.75 (f)(l), each power reactor licensee is required to report to the Nuclear Regulatory Commission (NRC) on a calendar year basis, beginning March 31, 1999, and every two years thereafter, the status of its decommissioning funding for each reactor or share of reactor it owns. SCE&G has advised the Authority that it will disclose the required information relative to its two-thirds ownership share in a separate submittal.

The Authority's one-third share using the NRC fonnula for the minimum funding required for license termination is approximately $143 million as of December 31, 2016. This one-third liability is funded by payments to an external sinking fund as provided for in 10 CFR § 50.75. The escalated one-third liability for license termination costs is expected to total $312 million, stated in dollars of the year of expenditure. The market value of the external fund was approximately $131 million as of December 31, 2016. (Please see Attachment I.)

A site-specific decommissioning study completed in 2016 identified the total decommissioning costs for the site. Total site decommissioning includes license tennination, spent fuel management and site restoration.

The total costs identified by the study are in excess of NRC formula for ~ininium funding requirements.

Further, as the result of a 2006 settlement with the Department of Energy (DOE), the Authority expects to receive reimbursement for spent fuel management costs incurred that would have been avoided had the DOE met its contractual obligation to store spent fuel. The one-third liability in excess of the NRC minimum funding requirements less DOE reimbursements is estimated by the Authority to be approximately $176 million as of December 31, 2016. The escalated one-third liability is expected to be approximately $1. 773 billion, stated in dollars of the year of expenditure. The market value of the Authority's internal fund, designated for spent fuel management and site restoration, was approximately $87 million as of December 31, 2016. (Please see Attachment 1.)

If there are any questions concerning this report, please contact me at (843) 761-4126.

Sincerely, AW\AA..(Cro~

Michael R.

Senior Vice President Nuclear Energy MRC:trw Attachment cc: Catherine Haney Shawn A Williams NRC Resident Inspector One Riverwood Drive I Moncks Corner, SC 29461-2901 I (8 43) 761-8000 I P.O. Box 2946101 I Moncks Corner, SC 29461-6101

Attachment 1 l(a). The minimum decommissioning fund estimate, pursuant to 10 CFR § 50.75 (b) and (c). $J4J,542,,_04Q Base Amount for PWR between 1,200 MWt and 3,400 MWt Estimated Cost (Year X) (1986 $Base Cost) (ALx + BEx + CBx)

($100,520,000) {(.65 x 2.499) + (.13 x 1.871) + (.22 x 10.971)}

$430,326,120 Authority's one-third share of2016 Estimated Cost= $143,442,040 Where:

.65 10 CFR § 50.75 (c)(2)

.13 10 CFR § 50.75 (c)(2)

.22 10 CFR § 50.75 (c)(2) 2.429 (Computed Below) 1.871 (Computed Below) 1.883 (Computed Below) 1.854 (Computed Below) 10.971 (NUREG 1307 Rev. 16) 1986 $Base Cost ($75,000,000 + .0088Pmillion)

($75,000,000 + 25,520,000)

$100,520,000 p 2,900MWt Lx Base Lx (Dec 2005) x ECI(Qtr 4 2016) I 100 1.98 x 126.2 I 100 2.499 Px December 2016 Value I January 1986 Value 215.0 I 114.2 1.883 December 2016 Value I January 1986 Value 152.0 i 82.0 1.854

{(.58Px) + (.42Fx)}

{(.58 x 1.883) + (.42 x 1.854)}

(1.092 + 0.779) 1.871 -

Fourth Quarter 2016 I December 2016 values in the following Bureau of Labor Statistics indices were used to compute NRC minimum requirements:

Employment Cost Index - Total compensation, private industry, South region Series ID: CIU2010000000220I Producer Price Index - Commodities (Industrial electric power)

Series ID: wpu0543 Producer Price Index - Commodities (Light fuel oils)

Series ID: wpu0573 1of4

Attachment 1 l(b). Escalation of the Authority's one-third share of the minimum funding requirement through the end of decommissioning.

• Cost categories Labor, Equipment & Materials, Burial, and Other were estimated in a site-specific decommissioning study. These costs were escalated through the end of the decommissioning period based on various indices and estimates. Ultimate decommissioning costs to be funded fro1Il the external trust are estimated at $311,695 ,3 82 iii escalated dollars.

2. Market value of the external trust fund at December 31, 2016 for items included in 10 CFR § 50.75. $13Ll?5.284

3. Schedule of annual amounts remaining to be collected for items in 10 CFR § 50.75.

2016 Dolla.rs Segirmi11g DecommJssia11irig . Ann*uai .: . Ending. *Real.Rates Year *s~lan~e* :Expenditur.es Deposits' Earning$* Balance Qf Return 2017 131, 175,284 0 1, 114,990 132,290,274 0.0085 2018 132,290,274 0 1, 111,238 133,401,512 0.0084 2019 133,401,512 0 (1,227,294 134,628,806 0.0092 2020 134,628,806 0 1,346,288 135,975,094 0.0100 2021 135,975,094 0 1,414,141 137,389,235 0.0104 2022 137,389,235 0 1,456,326 138,845,561 0.0106 2023 138,845,561 0 1,541, 186 140,386,747 0.0111 2024 140,386,747 0 1,488,100 141,874,846 0.0106 2025 141,874,846 0 1,588,998 143,463,845 0.0112 2026 143,463,845 0 1,606,795 145,070,640 0.0112 2027 145,070,640 0 1,624,791 146,695,431 0.0112 2028 146,695,431 0 1,628,319 148,323, 750 0.0111 2029 148,323, 750 0 1,646,394 149,970,144 0.0111 2030 149,970,144 0 1,664,669 151,634,812 0.0111 2031 151,634,812 0 1,667,983 153,302, 795 0.0110 2032 153,302, 795 0 1,686,331 154,989, 126 0.0110 2033 154,989, 126 0 1;704,880 156,694,006 0.0110 2034 156,694,006 0 1,723,634 158,417,640 0.0110 2035 158,417,640 0 1,726,752 160, 144,393 0.0109 2036 160,144,393 0 1,745,574 161,889,967 0.0109 2037 161,889,967 0 1,764,601 163,654,567 0.0109 2038 163,654,567 0 1,767,469 165,422,037 0.0108 2039 165,422, 037 0 1,786,558 167,208,595 0.0108 2040 167,208,595 0 1,805,853 169,014,447 0.0108 2041 169,014,447 0 1,808,455 170,822,902 0.0107 2042 170,822,902 8,538,217 1,736,446 164,021, 131 0.0107 2043 164,021, 131 20,491,720 1,535,765 145, 065, 176 0.0107 2044 145, 065, 176 20,491,720 1,332,936 125,906,392 0.0107 2045 125,906,392 20,491,720 1,117,396 106, 532, 067 0.0106 2046 106,532,067 20,491,720 912,028 86,952,375 0.0106 2047 86,952,375 20,491,720 704,483 67, 165,138 *0.0106 2048 67, 165, 138 20,491,720 490,071 47, 163,489 0.0105 2049 47, 163,489 11,953,503 369,705 35,579,691 0.0105 2 of4

Attachment 1 Beginning Decpmmissioning Ar:mu.aJ Ending Year Bala.nee Expenditures Deposits Earnings Balance Total 131, 175,284 143, 442, 040 0 47,846,447 35,579,691

4. The assumptions used regarding escalation in decommissioning cost, rates of earnings on decommissioning funds, and rates of other factors used i.n funding projections follow:

., The above schedule of annual amounts remaining to be collected is based on a DECON method of decommissioning. In contrast, the Authority currently intends to utilize a SAFSTOR method of decommissioning.

Costs are escalated by four categories identified in the 2016 site-specific study using the following rates: labor (2.7%), equipment and materials (1.2%), waste burial (3.8%) and other (2.8%). These rates were proposed in an internal memorandum and approved on March 27, 2017 by the Senior Vice President ofNuclear Energy and represent the Authority's best estimate of future cost increases (see Attachment 2). The schedule below shows weighted average escalation rates reflecting the above cost categories weighted by individual category costs over the sum of the four categories.

" Waste vendors will be utilized.

0 The trust fund accrues earnings in accordance with estimated effective yield (approximately 3.8% as shown below). The Authority's Board of Directors approves all customer rates. As the rate-regulatory authority, the Board adopted on March 22, 1999 a resolution containing the following language: "Upon recommendation of management, the Board of Directors auth01izes the use of the effective yield of the trust portfolio for purposes of determining future decommissioning funding needs."

A B (A- B)

'Projected Weighted Average Year Earning Rates Escalation Rates . Real Rates of .Return 2017 0.0346 0.0261 0:0085 2018 0.0345 0.0261 0.0084 2019 0.0354 0.0262 0.0092 2020 0.0362 0.0262 0.0100 2021 0.0366 0.0262 0.0104 2022 0.0369 0.0263 0.0106 2023 0.0374 0.0263 0.0111 2024 0.0369 0.0263 0.0106 2025 0.0376 0.0264 0.0112 2026 0.0376 0.0264 0.0112 2027 0.0376 0.0264 0.0112 2028 0.0376 0.0265 0.0111 2029 0.0376 0.0265 0.0111 2030 0.0376 0.0265 0.0111 2031 0.0376 0.0266 0.0110 2032 0.0376 0.0266 0.0110 2033 0.0376 0.0266 0.0110 2034 0.0376 0.0266 0.0110 2035 0.0376 0.0267 0.0109 3 of4

Attachment 1 2036 0.0376 0.0267 0.0109 2037 0.0376 0.0267 0.0109 2038 0.0376 0.0268 0.0108 2039 0.0376 0.0268 0.0108 2040 0.0376 0.0268 . 0.0108 2041 0.0376 0.0269 0.0107 2042 0.0376 0.0269 0.0107 2043 0.0376 0.0269 0.0107 2044 0.0376 0.0269 0.0107 2045 0.0376 0.0270 0.0106 2046 0.0376 0.0270 0.0106 2047 0.0376 0.0270 0.0106 2048 0.0376 0.0271 0.0105 2049 0.0376 0.0271 0.0105

5. Contracts upon which the licensee is relaying pursuant to 10 CFR § 50.75 (e) (1) (v).

None.

6. Modifications to the current funding assurance methods.

None.

7. Material changes to Trust Agreements.

None.

8. Authority's one-third share of the 2016 Site-Specific Study (SAFSTOR method).

Yetir"hf.

• E?CP~na itu_re

• 20'.1*6 o:ouars *, collar':?

NRC Minimum Funding Requirements - License Termination (radiological decommissioning costs) (1) 143,442,040 311,695,382 Excess Site-Specific Study Costs (license termination, spent fuel management and site restoration costs) Net of Estimated DOE Reimbursements (spent fuel management costs) (2) 175,545,793 1,773, 151,467 2016 Site-Specific Study Costs (license termination, spent fuel management and site restoration costs) Net of Estimated DOE Reimbursements (spent fuel management costs) (2) 318,987 ,833 2,084,846,849 (1) Expenditure years are 2042-2049 (2) Expenditure years are 2042-2104

9. Market value of the internal fund at December 31, 2016 for spent fuel management and site restoration 4 of4

~~antee cooper Attachment 2 INTER-OFFICE COMMUNICATION DATE: March 27, 2017 TO: Michael Crosby, Senior Vice President, Nuclear Energy FROM: Thomas Wagner, Financial Analyst III, VC Summer Unit 1 Operations f {( t)

SUBJECT:

VC Summer Unit 1 Decommissioning Study Update As required by the Nuclear Regulatory Commission (NRC) and in accordance with prudent utility practice, Santee Cooper systematically sets aside funds to provide for the eventual decommissioning of VC Summer Nuclear Station Unit 1. The annual decommissioning funding deposit amount is currently based on NRC requirements, estimated cost escalation and fund earnings rates, the results of a site-specific decommissioning study conducted by TLG Services, Inc. in 2012, and estimated Department of Energy (DOE) reimbursement of spent fuel storage costs.

In 2016, TLG updated the 2012 decommissioning cost study. The chart below compares the results of the 2012 TLG study with the 2016 study update.

Comparison of TLG Study Results - $000s

.**20i6 Study .* 1ricrease<*

Year of Costs 2012 2016 2016 2016 Decommissioning Costs@ 1/3 315,125 368,034 369,588 1,554 The findings of the 2016 study indicate that since 2012, the overall cost for decommissioning has escalated approximately $1.6 million more than anticipated by current funding assumptions. The variance is attributable to the addition of three structures to plant inventory (FLEX storage building, emergency response building and combined maintenance shop) and differences in estimated and actual cost escalations.

In conjunction with the 2016 decommissioning cost study, TLG completed a related asset retirement obligation (ARO) study. This second study was used as a basis for revising the ARO liability associated with decommissioning VC Summer Unit 1. Based on the results of the two studies, current cost escalation assumptions have been reviewed and changes are recommended. The new proposed cost escalation assumptions by cost category are as follows:

Cuxrerit .. Pt<>R9~ed

• Cost Cate'goi-y, *Escalation

• Esc;,alati9n

• • .'* . J\S$utli~tid~ . Ass~.f~p.tion Labor 3.13% 2.70%

Equipment &

Materials 5.95% 1.20%

Burial 2.92% 3.78%

Other 4.96% 2.78%

Michael Crosby Attachment 2 March 27, 2017 Page Two The proposed escalation rates for Labor, Equipment & Materials, and Other are derived from published indices and.are used by TLG to establish a basis for change in the ARO liability. No readily-available published index for Burial costs exists; however, TLG determined that adding one percent to the Consumer Price Index reasonably correlated to the change in Burial costs over the last decade.

The TLG 2016 decommissioning cost study includes a SAFSTOR scenario in which the plant upon cessation of operations is placed into safe storage, the spent fuel is moved to the Independent Spent Fuel Storage Installation (ISFSI) and stored for approximately 53 years until DOE takes possession of it, and the plant is decommissioned and license terminated within the required 60-year period. This is in contrast to the current DECON funding assumption in which decommissioning is initiated immediately upon plant closure. SCE&G has indicated its intention to decommission the plant under a SAFSTOR scenario. In order to align with SCE&G and recognize the most likely eventuality, it is proposed that SAFSTOR be adopted for funding purposes. The one-third cost for SAFSTOR in 2016 dollars is $415 million.

Pr.ejected earnings for the trust and the internal fund were recently reevaluated by Santee Cooper's Treasury department and both have decreased. From March 2015 to March 2017, the weighted average estimated earnings rate for the trust decreased from 4.4% to 3.8%, while the weighted average rate for the internal fund decreased from 4.3% to 3.8%.

The NRC required minimum funding amount was also updated based on the prescribed minimum funding formula and updated escalation factors. The NRC minimum amount decreased 12.4% from the prior year due to a 21.0% decrease in the burial escalation factor. The other two escalation factors, labor and energy, both increased partially offsetting the burial decrease. The overall impact on trust funding levels is significantly positive.

Based on the results of the 2016 TLG decommissioning cost study, the proposed escalation rates and SAFSTOR scenario, the updated earnings rates and NRC minimum funding amount, and the current 75%

reimbursement assumption of spent fuel storage costs by DOE, the amounts on deposit in the Santee Cooper decommissioning accounts are currently sufficient to meet anticipated future VC Summer Unit 1 decommissioning obligations. However, these funds could become insufficient should decommissioning costs estimates, cost escalation assumptions, assumed fund earnings rates or DOE reimbursement assumptions change in the future.

The TLG decommissioning cost estimate does not include additional amounts for financial risk or uncertainty. Consideration of these financial risks affects funding decisions. Examples of these risks as identified in the TLG study include, but are not limited to, the following:

1. Premature decommissioning

2. Delays in the approval of the decommissioning plan due to* intervention, public participation in local community meetings, legal challenges, and national and local hearings

3. Regulatory changes

4. Price escalation uncertainty

5. Fund earnings rate uncertainty These ri.sks, as well as the funding assumptions, must be reviewed periodically and are likely to result in changes to future funding level requirements.

As a result of the 2016 TLG study update and an evaluation of estimated cost esca.lation rates, it is recommended that additional deposits into the decommissioning funds be suspended until such time that assumption changes or policy changes require that deposits be reinstated. Funding will be re-evaluated annually, and consideration given to actual fund balances, projected funds' earnings rates, and NRC

Michael Crosby Attachment 2 March 27, 2017 Page Three minimum funding requirements, among other considerations. In addition, the decommissioning cost study will be updated periodically to reflect current regulations; technologies, and trends.

Effective January 1, 2017, monthly deposits to the decommissioning trust and the internal decommissioning fund will be suspended as shown below:

• 2016 2017 & .Later ..

Current Proposed Increase.*

Funding Funding (Dec_rease)

Trust $218,845 $0 {$218,845)

Internal Fund $59,045 $0 ($59,045)

Transfer from Internal Fund $0 $0 $0 Total Monthly $277,890 $0 {$277,890)

Total Annual $3,334,680 $0 ($3,334,680)

Please let me know if you have any questions or would like to discuss further.

Concurrence: ~ Michael Crosby

(.y~ Date Senior Vice President, NUC,: Energy cc: Mike Baxley Jeff Armfield Suzanne Ritter Shawan Gillians