[Federal Register Volume 63, Number 183 (Tuesday, September 22, 1998)]
[Rules and Regulations]
[Pages 50465-50482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25278]
[[Page 50465]]
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NUCLEAR REGULATORY COMMISSION
10 CFR Parts 30 and 50
RIN 3150-AF41
Financial Assurance Requirements for Decommissioning Nuclear
Power Reactors
AGENCY: Nuclear Regulatory Commission.
ACTION: Final rule.
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SUMMARY: The Nuclear Regulatory Commission (NRC) is amending its
regulations on financial assurance requirements for the decommissioning
of nuclear power plants. The amendments respond to the potential rate
deregulation in the power generating industry and NRC concerns
regarding whether current NRC decommissioning funding assurance
requirements will need to be modified. The amendment requires power
reactor licensees to report periodically on the status of their
decommissioning funds, and on changes in their external trust
agreements and other financial assurance mechanisms. The amendment also
allows licensees to take credit for certain earnings on decommissioning
trust funds.
EFFECTIVE DATE: November 23, 1998.
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:
I. Background
The NRC published an advance notice of proposed rulemaking (ANPR)
for ``Financial Assurance Requirements for Decommissioning Nuclear
Power Reactors'' on April 8, 1996 (61 FR 15427). This action was
developed to amend the NRC's regulations relating to financial
assurance requirements for the decommissioning of nuclear power plants
in anticipation of rate deregulation of the power generating industry.
In response to the comments received on the ANPR, the NRC published a
proposed rule on September 10, 1997 (62 FR 47588). The NRC proposed to:
(1) Revise the definition of ``electric utility'' and related
definitions contained in 10 CFR 50.2; (2) add a definition of the term
``Federal licensee'' to address the issue of which licensees may use
statements of intent; and (3) require power reactor licensees to report
periodically on the status of their decommissioning funds and changes
in their external trust agreements. The rule also would have amended 10
CFR 50.75 to expressly allow licensees to take credit for the earnings
on decommissioning trust funds during the operating and decommissioning
periods.
II. Comments on the Proposed Rule
The Commission received 33 letters containing more than 200
comments on the proposed rule representing 25 licensees or licensee
organizations, 5 State agencies or Public Utility Commissions, 2 public
interest groups, and an individual with no affiliation provided. Copies
of the letters are available for public inspection and copying for a
fee at the Commission's Public Document Room, located at 2120 L Street,
NW. (Lower Level), Washington, DC 20555-0001.
The comments have been organized by topic and an analysis of them
follows.
1. Definition of Electric Utility
A. Linkage Between Decommissioning Financial Assurance Requirements and
Financial Qualification Requirements (i.e., Linkage Between Costs of
Operation, Maintenance, and Decommissioning)
Several commenters, including the Nuclear Energy Institute (NEI),
stated that NRC should not use the term ``electric utility'' in its
decommissioning financial assurance rules because the term is used for
different purposes in the context of NRC's financial qualification
requirements in 10 CFR 50.33(f). These commenters stressed that only
decommissioning costs are of concern with respect to the financial
assurance requirements, whereas only operation and maintenance costs
are of concern with respect to the financial qualification
requirements. By referencing all these costs as well as the cost of
``electricity,'' the proposed definition of electric utility is both
unclear and problematic.
The commenters cited several specific problems. First, the
definition does not adequately express NRC's intent that an entity can
demonstrate adequate assurance if it can ``conclusively demonstrate a
government-mandated, guaranteed revenue stream for all unfunded
decommissioning obligations'' by virtue of a non-bypassable charge that
covers only decommissioning costs. (For example, one commenter stated
that, in California, licensees are assured of recovering
decommissioning costs in distribution rates through non-bypassable
means, although recovery of the costs of operation and maintenance may
not be assured.) Second, the definition could unnecessarily invite
challenges to the rates established by regulators. Specifically, by
requiring that an electric utility's rates be ``sufficient for the
licensee to operate, maintain, and decommission its nuclear plant
safely,'' the proposed definition could imply that NRC may in the
future evaluate the sufficiency of rates established by other
regulatory authorities to cover costs of operations and maintenance.
Third, by referencing ``operation,'' the definition could create or
imply some responsibility for decommissioning funding on the part of
nonowner operators that, they argued, may inhibit the formation of
joint operating companies.
The NRC believes that commenters' concerns in this area were
addressed by the third sentence of the proposed definition, that states
that ``An entity whose rates are established by a regulatory authority
by mechanisms that cover a portion of its costs will be considered to
be an `electric utility' only for that portion of the costs that are
collected in this manner.'' NRC did not intend to have all licensees
consider only the combined costs of operation, maintenance, and
decommissioning. Nevertheless, even some commenters who understood
NRC's intent suggested modifying this third sentence. One suggestion
was to replace it with ``An entity whose rates are established by a
regulatory authority by mechanisms that cover only decommissioning
costs will be considered to be an `electric utility' with respect to
its decommissioning funding responsibilities.'' (Presumably an
additional parallel sentence would address ``costs of operation and
maintenance costs * * * with respect to its financial qualification
requirements.'') Another suggestion was to clarify the third sentence
by referring to recovery of a certain portion or discrete category of
costs. Either of these suggestions would also obviate any need to
include the 10 percent de minimis threshold for non-recovered costs
that was suggested by one commenter (i.e., because the relevant
category of costs--for decommissioning--would be recovered, even if
they were less than 10 percent of all costs), and would allay the
concerns of several commenters that an entity recovering only
decommissioning costs through non-bypassable charges might be
considered less than a 100 percent electric utility for purposes of the
decommissioning requirements.
One possible remedy, as suggested by NEI, would be for NRC to
construct and define a new term such as ``qualified nuclear entity''
that would apply only to
[[Page 50466]]
the decommissioning financial assurance requirements. NEI would define
a qualified nuclear entity as one that obtains decommissioning funds
through: (1) A rate-setting mechanism; (2) a non-bypassable charge
established by legislative or regulatory mandate; or (3) a binding
contractual agreement with another party that is equal in amount to the
entity's decommissioning funding obligation. Only the third option in
NEI's definition is not generally consistent with NRC's proposed
definition. NEI's comment does not fully or adequately explain the
meaning or implications of the binding contractual agreement included
as the third option in its definition. However, other commenters
specifically referenced NEI's comments, and objected to the binding
contractual agreement portion of NEI's suggested definition. Some of
these commenters stated that a binding contractual agreement would
provide inadequate assurance unless the party offering the contract
were appropriately qualified.
As a final point, NEI noted that the term ``electric utility'' may
take on a different meaning as a result of industry restructuring, but
would not alter the existing definition of electric utility which
would, under NEI's proposal, remain applicable to NRC's financial
qualification requirements. The logic of this position is that the
current rule is intended to address the decommissioning financial
assurance requirements rather than the financial qualification
requirements. Nevertheless, the loss of regulatory oversight as a
potential consequence of industry restructuring is as relevant to NRC's
financial qualification requirements as it is to NRC's decommissioning
financial assurance requirements. Therefore, the NRC has adopted
another approach that is intended to address commenters' concerns, but
that does not have some of the shortcomings of NEI's approach. The
Commission has decided not to change the current definition of
``electric utility'' as it applies to financial qualifications
requirements in 10 CFR 50.33(f). Rather, the NRC is clarifying the
applicability of external sinking funds and other mechanisms directly
in 10 CFR 50.75.
B. Direct vs. Indirect Cost Recovery
Some commenters argued against the proposed deletion of the phrase
``either directly or indirectly'' in the first sentence of NRC's
existing definition of electric utility, which states that ``Electric
utility means any entity that generates or distributes electricity and
which recovers the cost of this electricity, either directly or
indirectly, through rates established by the entity itself or by a
separate regulatory authority.'' These commenters stated that allowing
cost recovery based only on regulated rates and non-bypassable charges
might restrict licensees from competing in the open market.
Specifically, the change might prevent licensees with Public Utility
Commission (PUC)-or Federal Energy Regulatory Commission (FERC)-
approved, long-term power sales agreements from qualifying as electric
utilities.
It is not clear whether PUC-or FERC-approved, long-term power sales
agreements would qualify as cost of service regulation or as non-
bypassable charges (and hence as cost recovery through regulated rates)
under either the current definition or the proposed definition.
Assuming that PUCs or FERC analyze these agreements to ensure that they
are consistent with the entity's recovery of all reasonable and prudent
costs, it would be reasonable for NRC to interpret these agreements as
acceptable under either definition. Because this interpretation would
not be obvious under either definition, however, such an interpretation
by NRC would have to be implemented through existing or new guidance
documents, whether or not the phrase is added to the definition. If
these agreements are not consistent with the entity's recovery of all
reasonable and prudent costs, then the phrase ``either directly or
indirectly'' has been deleted appropriately.
Another commenter stated that NRC should not delete the phrase
``directly or indirectly'' because the deletion could be interpreted as
eliminating the exemption from financial qualification requirements
applicable to nonowner operators who cover their costs under contracts
with owners. The commenter claimed that NRC has traditionally held that
nonowner operators are ``electric utilities'' exempt from the regulated
rates of the owners who are contractually committed to pay the
operators' expenses. The logic of the commenter's argument seems to be
that nonowner operators recover the costs of their electricity from
owners, whose rates are directly regulated, thereby making the
operator's cost recovery indirectly regulated. For the reasons that
follow, the final rule should render this concern moot.
C. Consequences of Not Meeting the Definition
One commenter suggested that the proposed definition could result
in the premature shutdown of nuclear power plants that have
insufficient funds set aside to pay for decommissioning. This comment
appears to argue that premature shutdowns may result if, as a result of
an entity's loss of status as an electric utility, it must (but is
unable to) provide up-front financial assurance for decommissioning.
This issue is analyzed in Section 7.B, Prepayment/Up-front Assurance.
D. Implications for State Ratemaking Authority
Some commenters suggested that NRC clarify that it does not intend
to infringe upon State ratemaking authority. To this end, one PUC
stated that the NRC should remove from the definition the requirement
that utilities recover ``the cost of electricity,'' which is only an
intermediate consideration in the development of rates. This commenter
suggested that the definition should be changed to ``any entity that
generates, transmits, or distributes electricity.'' In response, the
NRC has neither the intention nor the authority to infringe on State
ratemaking authority. The NRC believes that the final rule described
below will obviate these commenters' concerns.
E. Regulatory Efficiency
Some commenters suggested that the proposed regulation at
Sec. 50.75(e)(3) be revised to avoid repeating the definition of
electric utility. This comment has been adopted, de facto, by the final
rule.
F. Application of Definition to Public Power Agencies
Some commenters noted that the proposed definition does not appear
to require public power agencies to recover all of their costs in their
rates, only that they set their own rates. In a competitive market, it
does not follow that the authority of such agencies to set their own
rates will, in and of itself, provide assurance of decommissioning
funding.
These comments appear to address the last sentence in the proposed
definition of electric utility:
Public utility districts, municipalities, rural electric
cooperatives, and State and Federal agencies, including associations
of any of the foregoing, that establish their own rates are included
within the meaning of ``electric utility.''
This sentence automatically classifies any licensee that falls in
one of the above-referenced groups (collectively referred to by the
commenter as ``public power agencies'') as an electric utility. Thus,
public power agencies automatically qualify as electric utilities
without consideration of any of the definition's other conditions on
rate recovery. The commenters' assessment
[[Page 50467]]
appears sound in that, in a competitive market, such entities might not
recover all their costs even if they can set their own rates. The
ability to set rates adequate to achieve full cost recovery would be
undermined by the loss of an exclusive service territory. Although the
NRC is retaining, unmodified, the definition of ``electric utility''
for purposes of financial qualifications, the NRC has adopted this
comment in its revised Sec. 50.75(e).
2. Definition of Non-Bypassable Charge
A. Stricter Definition Needed
One commenter suggested revising the definition to require that
monies collected via the non-bypassable charge be available to the
licensee, either through assignment or some other mechanism. This
comment seems reasonable. If charges are not available to the licensee
(e.g., if the revenue stream resulting from the charge has been
assigned to an unrelated party as a result of a securitization), then
the non-bypassable charges would not provide reasonable assurance of
decommissioning funding. The final rule has been modified to reflect
that non-bypassable charges should be available to the licensee as part
of funds for decommissioning deposited in an external sinking fund.
One commenter stated that because decommissioning funding must be
secured and insulated from market risk, the preferred funding method
should be a non-bypassable charge established by a regulatory mandate.
According to the commenter, this approach better assures adequate
funding while removing decommissioning as an issue in future
competition, and also would help utilities in making optimal business
decisions in the competitive environment. Regardless of the validity of
the comment, the NRC believes that it would be encroaching upon the
responsibilities of other regulators if it were to establish a single
method for cost recovery.
B. Link Between Operation, Maintenance, and Decommissioning
One commenter stated that the definition's reference to ``costs
associated with operation, maintenance, and decommissioning'' is
problematic for the same reasons that were noted in the ``electric
utility'' definition. (See discussion and analysis in Section 1-A.)
Another commenter stated that NRC's proposed definition of non-
bypassable charge could be interpreted to mean that operation,
maintenance, and decommissioning costs must all be covered by a charge
in order to meet the definition. This may be inconsistent with actual
charges established by PUCs. For example, a PUC could decide to
establish a charge for decommissioning costs, but not for operation and
maintenance costs.
One feasible solution was suggested by several commenters, who
stated that the definition should be revised to read ``costs associated
with operation, maintenance, or decommissioning. * * * '' They noted
that this is more consistent with the intent of the rule and would not
exclude licensees that recover only decommissioning costs through a
non-bypassable charge, but that recover all other costs through
competition. The final rule reflects this modification.
C. Types of Non-Bypassable Charges
One commenter stated that it is not clear whether the proposed
definition encompasses wire charges, stranded cost charges, transition
charges, exit fees, other similar charges, the securitized proceeds of
a revenue stream, or price cap regulation. If NRC decides to defer to
State regulatory officials, the final rule should be clear in stating
the types of charges covered by the definition. Similarly, other
commenters suggested expanding the definition to include other funding
mechanisms imposed or established by a governmental authority. One
commenter suggested the definition might include a decommissioning
liability covered by State securitization legislation. Another
suggested it might include binding contracts secured by legislation or
a regulatory commission order or both.
The proposed definition, as stated, includes
* * * charges imposed by a governmental authority which affected
entities are required to pay [over an established time period] to
cover costs associated with operation, maintenance, and
decommissioning of a nuclear power plant.
As noted in the previous section, the NRC has modified the
definitions of ``non-bypassable charges'' in the final rule to focus
solely on ``costs associated with decommissioning of a nuclear power
plant.'' With that modification, this definition seems to provide an
effective performance standard for any type of charge that might be
developed by State regulatory officials to cover decommissioning costs.
Consequently, there seems to be little benefit to the commenter's
suggestion, and some possible danger if any specific charges that might
be listed in a revised definition were ultimately implemented by State
regulatory officials in ways that did not meet the currently proposed
definition. Nevertheless, the NRC has cited examples of non-bypassable
charges in its definition, without limiting such charges only to the
cited examples.
Finally, one commenter stated that NRC's commentary that
securitization of a licensee's interest in non-bypassable charges
``may'' be an acceptable method of providing decommissioning funding
assurance seems to suggest that the existence of a licensee's
entitlement to non-securitized irrevocable, non-bypassable charges may
not be sufficient to meet the definition and avoid up-front funding.
This comment, however, seems at odds with the plain meaning of the
definition of non-bypassable charges.
D. Other
Finally, one commenter suggested revising the definition to replace
the phrase ``governmental authority'' with the phrase ``regulatory
authority.'' As pointed out by the commenter, this would make the
definition more consistent with the definitions of ``electric utility''
and ``cost of service regulation.'' The NRC is aware of the difference
and believes the definition as presented better represents the NRC
position because the term ``governmental authority'' is more inclusive
and allows for actions by non ``regulatory authorities,'' such as State
legislatures.
3. Definition of Cost of Service Regulation
The comments addressing the definition of ``cost of service
regulation'' seemed, in general, more directly applicable to other
parts of NRC's proposal, as discussed below.
One commenter stated that the modifier ``all'' should be deleted
from the ``cost of service'' definition. This commenter argued that a
definition requiring that ``all'' reasonable and prudent costs be
recovered invites a challenge to the sufficiency of a licensee's rate
regulation. Similarly, another commenter stated that the definition
should account for the possibility of ``partial'' cost of service
regulation. The NRC believes that commenters'' concerns in this area
were addressed by the third sentence of the proposed definition of
electric utility, that states ``An entity whose rates are established
by a regulatory authority by mechanisms that cover only a portion of
its costs will be considered to be an ``electric utility'' only for
that portion of the costs that are collected in this manner.'' NRC did
not intend to imply that a licensee was subject to cost of service
regulation only in the event that
[[Page 50468]]
all its reasonable and prudent costs are recovered per the definition,
but rather that the licensee would be deemed to be regulated under cost
of service regulation for whatever portion of its reasonable and
prudent costs are covered per the definition. This comment has been
rendered moot by the NRC's revised final rule.
Another commenter stated that the proposed definition of ``cost of
service regulation'' should not exclude ``performance based'' and
``incentive'' ratemaking adopted by some State ratemaking authorities.
This commenter proposed adding the following to the definition: ``Cost
of service regulation includes, but is not limited to, alternative
forms of ratemaking which provide for a portion of costs to be
recovered based on reasonable benchmarks and incentives for good
performance.''
This comment does not seem to recognize that the term ``cost of
service regulation'' is actually referenced as ``traditional cost of
service regulation'' by the proposed definition of electric utility,
which distinguishes cost of service regulation from indirect cost
recovery through non-bypassable charge mechanisms. In the final rule,
this reference to traditional ratemaking is contained in the definition
of ``cost of service regulation.'' In this broader context, the NRC's
intention to keep the present focus of ``cost of service regulation''
seems clear and, moreover, the licensee's suggested additions seem
inappropriate (because they are not precisely consistent with
traditional direct recovery of reasonable and prudent costs). However,
given that the NRC believes that incentive or price-cap-based
ratemaking provides reasonable assurance of decommissioning funding,
the NRC revised the definition of ``cost of service regulation'' to
reflect this concern.
4. Need for General Flexibility
The flexibility issue has two dimensions. First, several commenters
wanted the maximum number of financial assurance options available to
reactor licensees. Second, these commenters urged NRC not to include
specific or detailed criteria in its rules, which should be kept
general, but to address implementation details in a regulatory guide or
similar non-binding form.
Among the various financial assurance mechanisms, there are
differences in cost, availability, and risk (i.e., degree of
assurance). Similarly, because licensees vary in their financial
situations and prospects, they pose different degrees of risk in terms
of their abilities to provide funding for reactor decommissioning.
Making riskier financial assurance mechanisms available to riskier
licensees compounds risk to the public that adequate funds will not be
available when needed. Thus, prudent public policy may limit the range
of mechanisms that should be offered to certain categories of
licensees. This is recognized by the commenters themselves, who more or
less endorsed the NRC framework, which distinguishes a category of
licensees that should not be afforded the option of using an external
sinking funding, by itself, as a mechanism of assurance. The commenters
did not contend that all licensees should be allowed to use all
mechanisms; however, they wanted the external sinking fund option to be
made available to more reactor licensees than might qualify under the
NRC proposal. If this mechanism were equal to the others in terms of
risk, the NRC could make it more available in the interests of
flexibility. Because this option has more risk than other available
assurance options, the NRC believes it is prudent to restrict its use
to licensees with stronger financial or rate regulatory
characteristics.
With respect to keeping the rule general and reserving details for
a regulatory guide, there are two key considerations. First is a matter
of regulatory philosophy and enforcement posture. Reserving details for
regulatory guides is an approach that the NRC has used. However,
regulatory guides are statements of one way in which licensees can meet
regulations and do not establish requirements.
The second consideration is the potential need to change the
requirements. It is much easier to change, add, or delete methods as
acceptable for meeting requirements in regulatory guides than in
regulations. Inasmuch as the NRC's power reactor licensees have begun
on a path of economic restructuring, and will be in a period of
transition for a number of years, the flexibility afforded by using a
regulatory guide as a vehicle for decommissioning financial assurance
requirements may be an advantage. On balance, the NRC is maintaining a
level of detail equivalent to previous rulemaking in this area, and
reserves the right to issue more detailed guidance where necessary. The
NRC, in acknowledging the use of combinations of assurance methods,
cannot list all possibilities, but includes as an example, the recent
New Hampshire legislation that provides for the proportionate liability
of the co-owners of the Seabrook Nuclear Power Station in the event
that another minority owner, Great Bay Power Company, defaults on its
obligations.
5. Applicability of Requirements to Plant Owners and Operators
Two commenters urged the NRC to clarify that the requirements for
decommissioning financial assurance apply only to owners or entities
that have assumed decommissioning liability under contracts and not to
entities that are solely operators. The commenters argued that this
clarification is important to the formation or use of specialized
operating service companies with no ownership interests in the
facilities they operate.
Applying financial assurance requirements to both owners and
operators provides flexibility, since either can demonstrate
compliance. This approach also recognizes scenarios in which the
operator has greater financial resources or creditworthiness or both
than the owner. Such a scenario is conceivable following the economic
restructuring of the electric power industry. To provide greater
flexibility and assurance, the NRC will not specifically exempt
operator licensees from the financial assurance requirement. This is
unlikely to affect the formation or use of operating service companies,
because they can negotiate with reactor owners regarding which party or
parties will be responsible for demonstrating financial assurance for
decommissioning purposes.
6. Site-Specific Cost Estimates
Four commenters addressed the desirability of allowing licensees to
use site-specific decommissioning cost estimates as the basis for
financial assurance and reporting, even if these estimates are less
than the current minimum amounts prescribed in Sec. 50.75. The primary
advantage asserted would be to avoid unnecessary assurance expenses
when a site-specific estimate is less than the current NRC minimum.
Other asserted benefits of allowing licensees to use site-specific cost
estimates below the NRC minimums include greater consistency with PUC
approaches, tax treatment, and possible Financial Accounting Standards
Board (FASB) requirements. Moreover, acceptance of site-specific
estimates might enhance the integrity of the rule, given the perception
stated by several licensees of problems with the current minimum
amounts and the acceptance by PUCs of site-specific cost estimates as
the basis for financial assurance even where the site-specific
estimates are less than the NRC minimums. However, given other
[[Page 50469]]
potential weaknesses in current implementation (primarily relating to
the adequacy of cost estimates and the potential under-funding
indicated by current balances in decommissioning trust funds), such an
allowance could aggravate the risk of potential under-funding
associated with the external sinking fund mechanism. Submittal of site-
specific estimates to the NRC would enable it to better evaluate the
funds needed for decommissioning. However, the Commission has decided
to defer allowing site-specific estimates that are lower than the
amounts specified in 10 CFR 50.75(c) until additional decommissioning
data are obtained. (Staff Requirements Memorandum, SECY 97-251--
Proposed Rule on Nuclear Power Reactor Decommissioning Costs, February
5, 1998.)
7. Alternative Methods of Assurance
A. Alternative Framework Proposed by NEI
NEI's proposed framework for financial assurance for
decommissioning resembles in broad outline NRC's framework, which
broadens the range of allowable assurance mechanisms for reactor
licensees that lose the ability to recover decommissioning costs
through regulated rate fees or other mandatory charges established by a
regulatory body. Although the external sinking fund, standing alone, is
not allowed for the licensees losing such regulatory oversight, the NRC
framework also offers opportunities for case-by-case consideration of
non-standard financial assurance arrangements. Examples include
Sec. 50.75(e)(1)(v), which allows unspecified, other guarantee methods;
and certain contractual arrangements in Sec. 50.75(e)(1)(ii)(C).
The NEI's framework involves three, rather than two, categories of
power reactor licensees. Under the NEI framework, the broader set of
assurance mechanisms (including the current external sinking fund
approach) would be available to: First, licensees meeting the criteria
for ``qualified nuclear entities'' and second, licensees that do not
meet the requirements for ``qualified nuclear entities'' but that
satisfy a set of financial criteria. NEI does not specify in its
comments what these financial criteria would be. Third, licensees that
satisfy neither the criteria for qualified nuclear entities nor the
alternate financial criteria would not be allowed to use the external
sinking fund option, but would be able to use the other mechanisms. NEI
also includes an option for non-standard demonstrations of assurance.
The effect of the NEI proposal would be to make the current
external sinking fund financial assurance option available to a larger
number of licensees than would be allowed under the NRC proposal. This
effect is the result of: (1) Defining ``qualified nuclear entities'' in
terms of criteria that may be less stringent than the proposed criteria
for ``electric utility''; and (2) allowing licensees that satisfy
certain financial criteria also to take advantage of the external
sinking fund option, which they would not be allowed to do under the
NRC proposal. The NEI proposal would mean an increase in the risk that
adequate funds will not be available when needed because of an
inadequate funding rate, inadequate earnings on invested funds, or
premature shutdown. It would decrease the cost to licensees. NRC's
proposal entails less risk of inadequate funding, but greater cost to
licensees.
On balance, to make the external sinking fund option more available
to reactor licensees, the NEI framework would result in greater risk
that sufficient decommissioning funds will not be available when
needed. The NEI proposal also would require the development of
appropriate financial criteria, which would be challenging to develop
because of the unpredictable nature of the industry. An entity that
meets the financial criteria, unlike those licensees who retain the
ability to recover decommissioning costs through regulated rates and
fees or other mandatory charges established by a regulatory body, would
have no guarantee of collecting sufficient funds for decommissioning
and could encounter deteriorating financial conditions that could cause
a reduction or cessation of payments into the external sinking fund.
The NEI framework would produce the same result if the financial
criteria were made an alternate basis for being a ``qualified nuclear
entity.'' This would produce a two-tier framework parallel in structure
to the NRC proposal, though different in content.
Based on these considerations, the NRC is not adopting NEI's
proposed approach. Rather, the NRC is specifying in Sec. 50.75, a
variety of mechanisms for providing decommissioning financial assurance
that licensees may use, depending upon their circumstances. The revised
regulations would also permit the use of ``other guarantee methods''
that are not specifically identified in the regulations.
B. Prepayment/Up-Front Assurance
One commenter addressed the issue of up-front assurance. The
commenter stressed that it is unfair for NRC to require up-front
funding for licensees that no longer meet the definition of ``electric
utility.'' In particular, the commenter argued that licensees have
presumed all along that they would be able to gradually fund
decommissioning throughout their plants' operating lives and that, as a
result, licensees who are no longer considered electric utilities may
be unable to remain in business.
NRC's current financial assurance requirements for decommissioning
nuclear power reactors are based on the premise that the reactors are
owned by regulated or self-regulating entities that recover their
decommissioning costs through a rate-setting process overseen by the
applicable regulating body. This regulatory oversight provides
reasonable assurance that such licensees will recover reactor
decommissioning costs and continue paying into external sinking funds
for decommissioning.
It is true that those licensees no longer able to recover
decommissioning costs through regulated rates and fees or other
mandatory charges established by a regulatory body may incur a greater
burden by having to provide up-front assurance. This up-front assurance
could take the form of prepayment or it could take the form of some
type of surety mechanism (e.g., a letter of credit, or a partner or
self guarantee). It is possible, under some restructuring scenarios,
that this could lead to premature shutdown of some reactors. However,
the likelihood of this occurring is highly doubtful. Many PUCs have
already indicated their intention to allow for the regulated recovery
of decommissioning costs, either through rates or through some type of
non-bypassable charge, even for otherwise deregulated entities. For
licensees that will not be able to collect funds through such a process
after industry restructuring, up-front assurance is necessary to ensure
that reasonable financial assurance is provided for all decommissioning
obligations. In the more competitive environment that is likely to
prevail after restructuring, some of these licensees may not remain
financially viable for reasons not related to decommissioning financial
assurance, further suggesting the need for up-front assurance.
C. Accelerated Funding
In the preamble to its proposed rule, NRC requested comment on
whether accelerated funding should be
[[Page 50470]]
considered as a financial assurance option for licensees no longer
meeting the definition of ``electric utility.'' Several commenters
supported accelerated funding, provided that the accelerated funding
period would be long enough. They generally stressed that, if the
funding period were too short, non-electric utilities would be placed
at a competitive disadvantage, potentially leading to insolvency and
premature shutdown of plants. One commenter asserted that the burden of
accelerated funding would be most severe for licensees with little time
remaining before shutdown. Several commenters offered specific
suggestions regarding the length of an accelerated funding period,
stating that it should last most or all of the remainder of the license
period, two-thirds of the remaining license term or 10 years (whichever
is greater), or five-eighths of the remaining license period. One
suggested that the licensee or the licensee's parent company should
have to pass a financial test for any unfunded amount in order to use
accelerated funding. Others cautioned that accelerated funding could
interfere with licensees' business planning or lead to negative tax
consequences.
For licensees with reactors that have remaining operating lives of
less than the accelerated funding period, the accelerated funding
option would have no impact because licensees' funding schedules would
be no different than they are currently. NRC would have less assurance
from these licensees, given that they would no longer recover
decommissioning costs through regulated rates and fees or other
mandatory charges established by a regulatory body. For licensees
associated with reactors that have remaining operating lives longer
than the accelerated funding period, the accelerated funding option
would be a significantly less burdensome means of demonstrating
financial assurance than full, up-front funding. In all cases, however,
the relative decrease in burden to the licensee must be weighed against
the reduced level of financial assurance provided to NRC during any
accelerated funding period.
The length of an accelerated funding period would affect individual
licensees differently, depending on the amount of unfunded
decommissioning obligation and on the time period that the licensees
would otherwise have had to complete the funding. The greater the
amount of money that must be funded on an accelerated schedule, the
more significant the impact will be on a licensee. For example,
assuming licensees are otherwise identical and have been adequately
funding an external sinking fund all along, the impact of a 10-year
accelerated funding schedule would be greater for a licensee with 25
years of operating life remaining than for a licensee with 15 years of
operating life remaining. (This contrasts with the comment asserting
that impacts would be most severe for licensees with little time
remaining before shutdown. In fact, the opposite is true, except for
licensees that have been making inadequate contributions to their
decommissioning sinking funds.)
The NRC believes that the alternative of requiring accelerated
funding for all plants over a defined period, to cover the possibility
of premature shutdown at some plants, would be too arbitrary and would
lead to wide variations in impacts on licensees. Accelerated funding
results in the inequitable inter-generational problem of the present
generation paying for the decommissioning costs, while the future
generation may receive the benefits of future electricity generation
without incurring the costs of decommissioning. The suggestion that NRC
should allow licensees to use accelerated funding only if they or their
parent companies have sufficient assets is analogous to combining a
self-guarantee or parent company guarantee with the external sinking
fund mechanism. This idea has significant advantages to licensees, and
is discussed in Section 7.J, ``Combinations of Methods.''
Another way to reduce the burden of accelerated funding on
licensees would be to ensure that the accelerated contributions are tax
deductible. Under current Internal Revenue Service (IRS) rules,
accelerated payments into decommissioning funds may not be deductible.
However, these tax changes are beyond the NRC's mandate and
Congressional or IRS action would be required to accomplish them.
Consequently, unless these rules are changed, licensees may be
ineligible to receive tax breaks on deposited funds.
For the reasons stated above, the NRC does not consider accelerated
funding to provide reasonable decommissioning financial assurance.
D. Parent Guarantees/Self-Guarantees
The commenters generally endorsed parent company guarantees and
self-guarantees as a reasonable method of assurance for licensees no
longer meeting the definition of ``electric utility.'' However, a
number of commenters stated that the financial tests specified in
appendices A and C to 10 CFR part 30 are inappropriate for these
licensees and would be overly burdensome. Several commenters suggested
specific revisions to NRC's existing financial tests:
One commenter suggested that NRC allow non-electric
utilities to use: (1) A parent company guarantee from a parent meeting
the criteria for self-guarantees; and (2) a self-guarantee for
licensees meeting at least two of the following criteria:
--Licensee has an investment grade bond rating;
--Licensee's pre-tax income (before interest expense) divided by
interest applicable to debt is greater than or equal to 2; and
--Licensee's net worth is at least twice the current remaining unfunded
cost of decommissioning in current year dollars.
One commenter stated that the self-guarantee test's ``10
times requirement'' for assets should be lower, but did not suggest an
alternative threshold.
One commenter suggested that the financial tests should
require total assets in the U.S. and tangible net worth to be one to
two times the estimated decommissioning costs, rather than what is
currently specified in the tests.
One commenter suggested that the Commission consider
ownership of other revenue-generating assets (besides the nuclear power
plant).
One commenter suggested that the NRC should develop a
process similar to the one used by bond-rating agencies to assess the
ability of firms to continue repaying principal or to continue paying
interest or dividends.
Finally, one commenter suggested that the NRC allow non-
electric utilities to use parent company guarantees in conjunction with
other allowable financial assurance methods, such as external sinking
funds. (The issue of using parent company guarantees in combination
with other mechanisms is discussed in Section 7.J, ``Combinations of
Methods'').
NRC's parent company guarantee is based largely on a financial test
developed by the EPA more than 15 years ago. EPA's test was intended to
assess the financial condition of firms managing hazardous waste that
were seeking to assure closure and post-closure care obligations that
are substantially smaller than typical decommissioning costs for power
reactors. In adopting these tests, the NRC believed that its objectives
for financial assurance would be reasonably met, but recognized that
the tests were most appropriate for materials licensees, although, at
that time, the financial tests were also made applicable to nuclear
power plant licensees who were not ``electric utilities.'' The NRC
realized
[[Page 50471]]
that most power plant licensees would likely use external sinking funds
rather than parent or self-guarantees to provide decommissioning
funding assurance, and thus did not perform a detailed analysis of
their applicability to power plant licensees.
Because deregulation is still in its earliest phases, it is not yet
possible to identify or define the financial characteristics of
entities that may ultimately be responsible for reactor
decommissioning. Consequently, evaluating or improving the test's
applicability to those licensees who are no longer able to recover
decommissioning costs through regulated rates and fees or other
mandatory charges established by a regulatory body may be difficult,
and any criteria that might be developed could become outdated or
misleading relatively quickly. Finally, developing and implementing
alternative tests (such as those suggested by commenters) could place a
substantial burden on the NRC. For these reasons, the NRC is
considering any changes to financial tests separate from this
rulemaking. Nevertheless, the NRC is implementing some changes to
parent and self-guarantees that may make these assurance methods more
viable for power reactor licensees. Section 7.J describes these changes
in more detail.
E. Surety Methods
Three commenters addressed the issue of surety methods of financial
assurance (i.e., surety bonds, letters of credit, lines of credit). The
predominant issue raised by these commenters pertained to the limited
availability of these mechanisms to licensees no longer meeting the
definition of ``electric utility.'' One commenter claimed that because
the majority of generating companies will have an assured recovery
mechanism through non-bypassable charges, there will be no new market
created for surety mechanisms after industry restructuring, and that
licensees required to obtain these mechanisms will be faced with
significant costs. Another argued that NRC should ascertain the
availability of these instruments before issuing a final rule based on
the assumption of their availability. This commenter proposed the
creation of a Government-managed decommissioning insurance plan to
provide such mechanisms (discussed in Section 7.G, ``Government-Managed
Insurance Plan'').
NRC recognizes that there are likely to be limits on the
availability of surety mechanisms such as letters of credit, lines of
credit, and, in particular, surety bonds, to licensees trying to
demonstrate financial assurance. This limited availability would arise
from two factors. First, the amount that would need to be assured under
such a mechanism (i.e., the difference between the licensee's
decommissioning cost estimate and the current balance in its external
sinking fund) could in some cases be quite large and could pose a
significant risk to potential providers of the mechanisms. Second,
mechanism providers also may view some licensees (those that lose the
ability to recover decommissioning costs through regulated rates and
fees or other mandatory charges established by a regulatory body) as
financially risky ventures given their restructured operations and
newly deregulated financial characteristics (e.g., licensees may no
longer have guaranteed service areas). Some licensees may be able to
obtain these mechanisms only after offering significant levels of
collateral to the provider as security. Generating subsidiaries without
access to substantial assets other than the nuclear plant may find it
difficult to provide the necessary collateral and may be unable to
obtain a surety mechanism. Even if surety mechanisms are not available
to some licensees, licensees may be able to use prepayment mechanisms
(e.g., full up-front funding of the external sinking fund), possibly
arranging for the necessary funding prior to restructuring (e.g.,
before a nuclear plant is placed in a generating subsidiary with few
other assets). Licensees may also have access to parent and self-
guarantees, which are still less costly.
F. Power Sales Contracts
Commenters suggested two possible roles for power sales contracts
in the financial assurance program: (1) As a threshold condition for
being able to use the external sinking fund; and (2) as a mechanism for
demonstrating financial assurance. One commenter recommended that power
sales contracts be accepted as a means by which licensees not meeting
NRC's proposed definition of electric utility can qualify to use the
broader range of assurance mechanisms--such as the external sinking
fund. Another commenter concurred, stating that such contracts would be
secured by legislation or a regulatory commission order or both.
Commenters also recommended that, for licensees not qualified to use
the external sinking fund, an assurance mechanism that would allow a
licensee to show that power sales contracts are in place, could provide
some or all decommissioning funding.
There is an important difference between using power sales
contracts as a threshold criterion, for reactor licensees that lose the
ability to recover decommissioning costs through regulated rates and
fees or other mandatory charges established by a regulatory body, and
as a financial assurance mechanism. As a threshold criterion, power
sales contracts would represent evidence of the financial status and
prospects (e.g., sales backlog) of a company. These contracts would be
considered when private financial organizations assess the credit-
worthiness of companies. However, power sales contracts have some
disadvantages that work against their use as a threshold criterion.
First, power sales contracts may have contingencies that make it
difficult to project revenues or earnings. Such contracts are not
equivalent to a Government-mandated revenue stream that would fully
fund decommissioning costs. It also would be very difficult for NRC to
define clearly how it would analyze and evaluate such contracts,
potentially creating issues of fairness, consistency, and
accountability. For example, the NRC would need to assess whether a
given contract covers all licensee costs (including decommissioning),
how binding it is, and its effective term. Unlike financial statement
data, which can be statistically associated with subsequent financial
performance, there is no objective basis or validated test for linking
sales contracts to future financial performance. By making it easier
for licensees that lose the ability to recover decommissioning costs
through regulated rates and fees or other mandatory charges established
by a regulatory body, or that do not have access to a Government-
mandated revenue stream to use the external sinking fund, acceptance of
power sales contracts as a threshold criterion may increase the risk
that funds will not be available when needed. However, under certain
circumstances that the NRC has specified in this final rule, the NRC
believes that long-term contracts can provide levels of decommissioning
funding assurance that are equivalent to other acceptable methods.
Power sales contracts also are unlikely to make good financial
assurance mechanisms, unless they have terms that provide for payment
of decommissioning costs under most likely occurrences. They often lack
the provisions needed to ensure effective and continuing coverage
(e.g., automatic renewal, notice of cancellation). For example, in Town
of Boylston v. FERC (21 F.3D 1130, 305 U.S.APP.D.C. 382),
[[Page 50472]]
municipal purchasers successfully challenged an order to pay reactor
decommissioning costs as a charge under their power purchase contracts.
Moreover, FERC has authority to impose alternative provisions in the
public interest if it finds contracts to be unjust and unreasonable.
Power sales contracts often contain contingencies that may make it
difficult to determine corresponding levels of revenues. Long-term
contracts for the supply of uranium, natural gas, and coal have all
been subject to litigation at one point or another because of market or
regulatory changes, which may be specifically addressed in contracts or
covered under ``force majeure'' 1 clauses. These contracts
typically do not themselves effect the setting aside or guarantee of
monies, although contracts could be written to serve as guarantees or
to require that proceeds be deposited in external sinking funds. The
NRC believes that power sales contracts that contain provisions to
mitigate these shortcomings can provide reasonable assurance of
decommissioning and have been allowed, under specified conditions, in
the final rule.
---------------------------------------------------------------------------
\1\ ``Force majeure'' refers to items largely beyond the control
of the contracting parties (e.g., recession, inflation, severe
market changes) that make it equitable to terminate or renegotiate
contract terms.
---------------------------------------------------------------------------
G. Government-Managed Insurance Plan
Two commenters addressed the NRC's decision to eliminate from
future consideration the concept of a captive insurance pool to pay
unfunded decommissioning costs. One noted only that it agreed with the
decision not to pursue this option. The other commenter, however,
disagreed with the decision and urged the NRC instead to investigate
the creation of a Government-managed decommissioning insurance plan.
Under this plan, the licensee would be able to purchase an insurance
policy from the Federal Government. The cost of the policy could be
determined by each plant's performance history or Systematic Assessment
of Plant Performance (SALP) rating, with poorly run plants paying a
higher premium and well-run plants paying a lower premium. The
commenter noted that Federal Government participation in private
insurance markets is not unprecedented, citing the example of Federal
flood insurance. The commenter weakened the force of his example,
however, by also pointing out that Federal Government participation in
private insurance markets takes place ``especially where the risk is
not readily subject to management or the level of potential exposure is
large.'' Clearly, basing premiums on plant performance history implies
that the commenter would expect poorly-run plants to close more
frequently than well-run plants, suggesting that the risk can be
managed.
The commenter advocating further examination of an insurance plan
did not make clear whether the commenter favored a captive insurance
pool entirely funded by the industry or an insurance system that was
funded, completely or partially, by the Federal Government.
The arguments against a captive insurance pool are strong. The
participants would be able to cause losses simply by not taking action
to set aside adequate funds for decommissioning. Delay in setting aside
funds could be beneficial because of the use value of the funds that a
licensee could reallocate to some other purpose. In addition, the
members of the insurance pool would be in competition with each other,
and could shift costs to competitors by means of the insurance pool.
Thus, an insurance pool for decommissioning would offer no incentive to
licensees to reduce the magnitude of their potential claims on the
pool, either from an insurance standpoint (because their
decommissioning costs are insured) or from an economic standpoint
(because of the advantages to them of delaying payment and of shifting
costs to their competitors).
The commenter's suggestion that rates should be based on plant
performance is unlikely to satisfactorily address the problem of
adverse selection. Those posing higher risks might continue to be more
likely to enter an insurance pool, despite being assessed higher rates,
thus raising the proportion of high-risk insureds. This could increase
the price of the insurance and cause other relatively low-risk entities
to avoid entering the pool, even if they were being charged less. The
nexus between plant performance, however measured, and likelihood of
premature closure is not so clear that the Government agency
responsible for the insurance would be able to set premiums accurately.
Eventually the proportion of high-risk insureds could increase to the
point that providing the insurance becomes unprofitable or impossible.
Alternatively, mandatory participation by low-risk insureds could lead
to situations in which they were subsidizing the high-risk entities,
even with a rate differential.
The commenter did not present any arguments supporting Government
management of a decommissioning insurance plan. If such a plan were set
up without the inclusion of Federal funds, there seems to be little
reason to assign a Government agency to manage it.
Finally, insurance that is partially or wholly subsidized by the
Federal Government, such as flood insurance, would require
Congressional action, and is outside the scope of an NRC rulemaking.
Thus, the Commission is not pursuing this option further.
H. Regulatory Certification
Only one commenter suggested that NRC should reconsider its
dismissal of the possibility of PUC or FERC certification that
licensees within their jurisdiction would be allowed to collect
sufficient revenues through rates to complete decommissioning funding.
That commenter noted that NRC had relied upon the views expressed to
the NRC that ``no current commission can bind a future commission'' and
that a PUC ``could not give a blanket guarantee that all licensees
would be allowed to collect revenues to complete decommissioning
funding.''
This commenter argued that these uncertainties are ``no greater
than those associated with cost of service regulation, which certainly
does not constitute a `guarantee' of availability of sufficient
decommissioning funds,'' noting also that the underlying regulatory
standard is only one of `` `reasonable assurance'.''
The commenter, however, did not address a number of important
considerations. First, the opponents of certification are particularly
well informed. The comments upon which NRC relied in dismissing
certification as an option came from the National Association of
Regulatory Utility Commissioners (NARUC) and several State PUCs, that
are particularly good sources of information concerning the limits of
their own authorities and their ability to bind their successors.
Second, the commenter did not address the argument, presented by NEI
and endorsed by several PUCs, that new Federal legislation would be
necessary to make such certifications binding. Third, the commenter did
not address limitations on FERC's jurisdiction, and consequent
limitations on FERC's ability to make binding certifications. Finally,
the commenter suggested that NRC had adopted a ``guarantee of
availability'' standard rather than the underlying regulatory standard.
Given the weight of arguments in opposition to certification, however,
NRC has concluded that certification is not a viable financial
assurance mechanism.
[[Page 50473]]
I. ``Any Other Method''
A number of commenters stated that NRC should permit more
flexibility in the allowable methods for demonstrating reasonable
assurance of decommissioning funding, particularly for licensees no
longer meeting the definition of ``electric utility.'' Several
commenters suggested that NRC review and evaluate licensee-specific
funding proposals on a case-by-case basis. Another commenter
recommended that NRC allow non-electric utilities to use mechanisms
developed by governmental authorities and approved by NRC. Finally, one
commenter suggested that NRC grant individual licensees or States the
flexibility to develop initiatives/mechanisms for providing reasonable
assurance of funding.
Licensees, as discussed in Sections 7.B and 7.E of this statement
of considerations, may well encounter cost and availability issues in
trying to use some of the financial mechanisms allowed by NRC. In
addition, the applicability of the NRC's parent company guarantees and
self-guarantees to power reactor licensees is questionable (as
discussed in Section 7.D.) because the underlying financial tests were
developed primarily for other types of entities assuring smaller
decommissioning obligations. Consequently, a case-by-case approach,
through which reactor licensees that lose the ability to recover
decommissioning costs through regulated rates and fees or other
mandatory charges established by a regulatory body, could provide
assurance equivalent to the other methods that the NRC is allowing.
However, the NRC will need to ensure that the mechanisms used will, in
fact, provide adequate financial assurance. Although, the NRC expects
that only a very-limited number of licensees will use a case-by-case
approach, this will potentially place a resource burden on the NRC to
review individual ``non-standard'' mechanisms.
J. Combinations of Methods
Several commenters stated that NRC should allow utility licensees
and, in particular, non-utility licensees to use combinations of
mechanisms to demonstrate financial assurance for decommissioning. Two
commenters suggested specifically that NRC allow non-electric utility
licensees to use parent company guarantees or self-guarantees or both
in conjunction with other allowable methods.
NRC's current requirements already allow combinations of
mechanisms, except that two mechanisms--the self-guarantee and the
parent company guarantee--may not be used in combination with other
mechanisms. Allowing combinations of funding methods increases the
regulatory flexibility to licensees trying to meet the requirements.
(Note, however, that a licensee using a combination of mechanisms faces
a greater administrative burden to obtain its mechanisms and,
similarly, NRC faces an increased burden in reviewing multiple
mechanisms.) For mechanisms that guarantee payment (e.g., trust fund,
payment surety bonds, letters of credit), a combination of mechanisms
that equals the total decommissioning cost estimate is unlikely to lead
to any difficulty in assuring that decommissioning funds will be used
for their intended purpose.
Some mechanisms, however, guarantee performance rather than
payment. These mechanisms are self-guarantees, parent company
guarantees, performance surety bonds, and some insurance. The terms of
these mechanisms promise that the issuer will complete required
decommissioning activities if necessary. It can be problematic to
combine a performance mechanism with another mechanism (payment or
performance) because of the inherent subjectivity in valuing
performance. For example, a licensee may wish to combine a $100,000
parent company guarantee with a $100,000 letter of credit to assure a
decommissioning cost estimate totaling $200,000. If the guarantor
proves to be inefficient in conducting decommissioning, it may spend
$100,000 on activities that should have cost less. In this case, the
letter of credit would be inadequate to fund the remaining activities,
even though the guarantor could claim to have fulfilled its performance
guarantee.2
---------------------------------------------------------------------------
\2\ In addition, firms providing guarantees must pass an
underlying financial test which is not ``divisible'' under the
regulations. For example, parent company guarantors must meet a
criterion that they have tangible net worth at least equal to six
times ``the current decommissioning cost estimates (or prescribed
amount if a certification is used).'' Either a potential guarantor
passes this criterion (and other similar and related criteria) in
its entirety or the guarantor fails the test. If the guarantor
cannot pass the criteria, then it is ineligible to provide a
guarantee in any amount. In this case, combining the guarantee with
another mechanism would not be an option. This final rule amends the
financial test sections in Appendices A and C to 10 CFR Part 30 to
address, in part, this issue.
---------------------------------------------------------------------------
However, the NRC believes that this problem is of less concern in
the specific case of a self-guarantee being used in combination with an
external sinking fund because, in this case, the guarantor has no
incentive or ability to shift costs or to avoid greater responsibility.
However, if the self-guarantee were to be combined with a mechanism
such as a letter of credit, that required the licensee to offer
collateral to the issuer, then it is possible that if NRC were to draw
on the letter of credit, the bank might seize the licensee's collateral
which, in turn, might prevent the licensee from performing under the
self-guarantee.
The combination of a parent or self-guarantee and an external
sinking fund also appears to provide a relatively low-cost means for
licensees to demonstrate financial assurance while continuing to
gradually fund decommissioning costs over time (either on the current
schedule or on an accelerated schedule). Because of the low costs of
guarantees, however, allowing this combination of mechanisms could
create an incentive for licensees to delay or cease payments into the
sinking fund and, instead, to rely on the guarantee for as much of the
cost as possible. Given the magnitude of typical decommissioning costs
for reactors, this possibility could hinder the timely conduct of
decommissioning. In other words, decommissioning could be significantly
delayed if, because of a licensee's inadequate contributions to its
sinking fund, a guarantor had to come up with large amounts of money at
the time of decommissioning.
The NRC generally believes that it should not allow licensees to
use parent company guarantees and self-guarantees in combination with
each other to assure decommissioning obligations. Because parent
companies typically consolidate the financial statements of all their
subsidiaries into their own financial statements, combining parent
company guarantees and self-guarantees could result in double counting
of the same limited financial strength to pass separate financial tests
(e.g., one for costs covered by a parent company guarantee, and one for
costs covered by a self-guarantee).
In sum, the NRC has eliminated the prohibition on combining parent
company or self-guarantees with external sinking funds. The NRC will
also consider other combinations of mechanisms on a case-by-case basis
when the aforementioned concerns are addressed.
K. Required Timing of Alternative Methods
Several commenters wrote that the NRC should allow affected
licensees an extended period of time to secure alternative financial
assurance mechanisms. One commenter stated that NRC's current
regulations allow a
[[Page 50474]]
licensee 30 days to develop a submittal describing how decommissioning
funding will be assured if the licensee no longer satisfies a given
criterion (e.g., the definition of ``electric utility''). This
commenter recommended that NRC allow licensees 180 days in these
instances, and also suggested that NRC allow licensees to continue
making payments to their existing decommissioning funds until NRC
approves the alternative funding submittal. Another commenter stressed
that NRC should allow ``adequate transition time for legislative and
regulatory changes to accommodate the new definition of `electric
utility'.''
The comments presented the argument that licensees will need more
time to obtain alternative financial assurance mechanisms (e.g., 180
days) than they would in the event of the cancellation of an existing
mechanism (only 30 days). This argument ignores the fact that
deregulation will not occur instantly and unexpectedly. Licensees are
likely to have months or even years to evaluate whether they may be
able to recover decommissioning costs through regulated rates and fees
or other mandatory charges established by a regulatory body and what
mechanisms they might use to demonstrate financial assurance if and
when that occurs. Consequently, no additional time should be provided
to licensees in response to this comment.
8. Federal Licensees
A. Applicability to Federal Licensees
A number of commenters argued that financial assurance requirements
for electric utilities should apply equally to Federal licensees, that
no special treatment should be afforded Federal licensees, and that all
licensees should satisfy the same requirements. One stated explicitly
that ``Federal'' licensees should be required to provide the same level
of financial assurance as other power reactor licensees, but qualified
his comment by stating that ``the proposed rule should ensure that at
such time as these Federal entities become private enterprises, they
are subject to the definition of `electric utility.' In doing so, they
must provide the same measures of financial assurance currently
required to electric utilities, i.e., they must provide the same level
of external funding or other assurance that would otherwise have been
required of them from the initial issuance of their operating
license.'' This commenter apparently did not oppose the use of
statements of intent by Federal licensees, until the point at which
they become private.
The Tennessee Valley Authority (TVA), the only current Federal
licensee for a nuclear power reactor, was the sole commenter that
argued in favor of special provisions that would apply only to Federal
licensees. It noted, in particular, that under Federal law it is
required to charge rates for power that will produce gross revenues
sufficient to cover all operating expenditures of the power system, and
that such operating expenses are considered to include decommissioning
costs. TVA's arguments are evaluated below.
B. Definition of ``Federal Licensee''
Several commenters made identical, or almost identical,
recommendations concerning the definition of Federal licensee. Each
supported the intent of the definition, which they considered to be to
exclude from the definition any Federal agency whose obligations do not
constitute the obligations of the United States. However, each
recommended that the definition be modified to define a Federal
licensee as ``any NRC licensee, the obligations of which are guaranteed
by and supported by the full faith and credit of the United States
Government.'' Each argued, without explaining fully, that the term
``full faith and credit backing'' is neither defined nor commonly used
in other legislation relating to Federal agencies.
Presumably, the commenters who found the phrase ``full faith and
credit backing'' ambiguous did so because it does not specify that all
obligations of the entity are backed by the credit of the Federal
Government, nor does it say explicitly that the obligations are
``guaranteed,'' as does the proposed replacement definition. The
proposed replacement definition thus is slightly more precise. Much of
the suggested definition has been used previously and commonly in
legislation pertaining to Federal agencies. Thus, it would have the
advantage of removing any ambiguity that might arise from using a
totally new definition. A preliminary search of the United States Code,
Annotated, uncovered a number of situations in which the proposed
phrase is used. For example, under Chapter 50 of Title 7, the Secretary
of Agriculture is empowered under 7 U.S.C.A. 1928, to guarantee certain
agricultural credit real estate loans and emergency loans. Section 1928
specifies that contracts of insurance or guarantee executed by the
Secretary under Chapter 50 ``shall be an obligation supported by the
full faith and credit of the United States.'' Similarly, the Secretary
of the Interior is empowered under Title 16 of the U.S. Code to insure
certain loans of private lenders. Section 470d of Title 16 provides
that ``Any contract of insurance executed by the Secretary under this
section * * * shall be an obligation supported by the full faith and
credit of the United States. * * * '' Finally, under Title 42, Chapter
7 (Social Security) of the U.S. Code, the Secretary of the Treasury can
issue obligations for purchase by the social security trust fund.
Section 401 of Title 42 provides that ``the obligation is supported by
the full faith and credit of the United States. * * * '' The commenters
appear to have identified the phrase generally used to describe such an
obligation, and therefore replacement of the current definition of
``Federal licensee'' with the definition suggested by the commenters
appears warranted.
TVA argued against the proposed definition of Federal licensee
because the proposed definition would preclude TVA's use of the
statement of intent. In its view, there are ``ample reasons'' to
support the continued use of the statement of intent by TVA. In
particular, TVA argued that with respect to decommissioning funding
assurance, ``the key fact is that Federal law requires TVA to
adequately fund the conduct of TVA's power activities, and this
includes operating, maintaining, and decommissioning its nuclear
facilities.'' TVA pointed out that even before decommissioning funding
assurance requirements from NRC, TVA was taking action to ensure that
funds would be available to decommission its nuclear units. TVA argues,
in effect, that a financial assurance requirement other than the
statement of intent amounts to ``imposing separate regulatory
requirements to oversee the manner in which TVA is meeting its
statutory requirements. * * * ''
These arguments amount, in sum, to an assertion that because TVA is
subject to an existing statutory requirement to fund decommissioning,
the Commission should not impose any different, or additional,
requirements. TVA maintains that the NRC should have reasonable
assurance that TVA will have adequate funding to ensure the conduct of
decommissioning activities ``because Federal law requires TVA to
provide such funds.'' (emphasis in original)
It also could be correctly said, however, that Federal law requires
other reactor licensees to provide reasonable assurance of
decommissioning funding. The purpose of financial assurance is to
present a second line of defense, if the financial operations of the
licensee are insufficient, by themselves, to ensure that sufficient
funds are available to carry out decommissioning. TVA
[[Page 50475]]
apparently concedes that its obligations are not supported by the full
faith and credit of the United States Government; therefore, if TVA
cannot fund the decommissioning, the Federal Government is not
obligated to do so. Although the TVA board has the authority to set
electric power rates to meet power system obligations, including
decommissioning, it may not, contrary to its assertions, have the
``unfettered ability'' to do this, because its markets may not support
such rates. TVA noted that its current business plan recommends an
offer to its distributor customers to change their power contracts
after 5 years from a rolling 10-year term to a rolling 5-year term.
TVA appears to misunderstand the purpose of the statement of
intent, which is to obtain a commitment by another, and superior,
governmental entity that the obligations of the subordinate
governmental entity will be paid by the superior entity if the
subordinate entity cannot pay them. Absent such a commitment, which
would be represented by support for the obligations by the full faith
and credit of the United States, there is no ``statement of intent''
upon which TVA can ``continue to be able to rely.''
Following publication of this rule, the NRC will review TVA's
current decommissioning financial assurance arrangements and determine
whether any actions are required in light of the added definition of
``Federal licensee.'' The publication of this rule, by itself, does not
constitute an action of the NRC with respect to TVA's current
decommissioning financial assurance.
9. Reporting on the Status of Decommissioning Funds
A. Use of Financial Accounting Standards Board (FASB) Standard
The commenters generally did not oppose reporting to NRC on the
status of decommissioning funding assurance in accordance with the
requirements of a final FASB promulgation, on the grounds (as expressed
by NEI) that a standard reporting mechanism should be used that does
not add unnecessary burden. However, several commenters did oppose a
requirement that they use the preliminary FASB exposure draft, or any
other FASB-based position that is not final. They argued that changes
from the proposed to the final FASB standard, which cannot be predicted
because the standard is still under development, could make it
inappropriate for meeting NRC's endorsement. Unless the FASB standard
is adopted soon, these commenters argued, other reporting options
should be adopted. Some commenters suggested that regulatory language
need not be changed, but that the contents of DG-1060 would need to be
amended to reduce the reliance on the FASB draft.
Some commenters went further, and expressed criticisms of the FASB
exposure draft, indicating that even if it became final in its current
form they would not find it appropriate for use. In the view of these
commenters, merely recognizing the liability and periodic expense for
decommissioning, which is the focus of the FASB draft, is not
sufficient to ensure adequate funding. In their view, the FASB
standards establish accounting procedures but are not the appropriate
computations for determining necessary cash flows for funding external
trusts. One commenter stressed that the focus of the FASB draft, as
well as issues concerning the appropriate discount rate, also made the
FASB standard questionable for NRC's purposes.
Neither the timing nor the ultimate contents of a FASB standard can
be predicted at this time, and therefore the conclusion is warranted
that alternative requirements should be found. According to a FASB
report of January 14, 1998, the Board reviewed the status of the
project in its October 2, 1997, meeting and decided it should proceed
toward either a second Exposure Draft or a final Statement. However, at
its November 26, 1997, meeting, the Board eliminated certain key
provisions in the exposure draft relating to the scope of the
Statement. According to FASB's ``Current Developments and Plans for
1998'':
FASB will be developing a refined definition of closure/removal
costs that would be applicable to a more general class of long-lived
assets than those covered by the Exposure Draft. The Board will also
be addressing the question of whether the costs of closure/ removal
obligations should be capitalized and will develop criteria to
identify constructive obligations. At this time, there is no time
frame regarding the issuance of a document or final statement.
Although the timing of future action on the draft is uncertain,
reanalysis of the scope issue by the FASB staff during the first
quarter of 1998, as well as FASB's statement that it is postponing
other issues raised on the Exposure Draft until further progress is
made on another Exposure Draft, suggests that action by FASB to issue a
final Statement, or even a revised Exposure Draft, will be delayed for
a considerable time. Notwithstanding any final FASB action, the NRC can
proceed with its own requirement for reporting on the status of
decommissioning funds.
B. Frequency of Reports
Most commenters endorsed ``periodic'' reports to monitor the status
of decommissioning assurance. Several commenters, particularly those
from State PUCs, supported requiring a report soon (nine months) after
the rule becomes effective, and at least every two years thereafter.
(Other commenters from utilities suggested every three years or every 5
years thereafter. The 5-year period was suggested to correspond to the
recommended 5-year adjustment to site-specific cost estimates specified
in Regulatory Guide 1.159.) A majority of the commenters also endorsed
that utilities nearing decommissioning or in the process of
decommissioning submit reports annually. However, commenters noted
ambiguity in the requirement that reports should be submitted annually
by licensees of plants that are within 5 years of their projected end
of operations. Although agreeing with the concept of such annual
reporting, they noted that ``the projected end of operations'' should
be clarified so that it clearly covered premature shutdowns and not
just plants within 5 years of the end of their operating licenses.
Several State commissions submitted almost identical proposed language
amending Sec. 50.75(f) of the proposed rule to require reporting by
licensees for a plant within 5 years of the projected end of
operations, ``or where conditions have changed such that it will close
within 5 years (before the end of its licensed life) or has already
closed (before the end of its licensed life) * * *.'' Requiring annual
reporting on a calendar-year basis would, in the opinion of one
commenter, reduce the administrative burden of annual reporting because
that is how licensees generally gather and accumulate the required
information. Another argued that reporting trust fund balances on an
annual basis suggested that reports should be required by March 31 for
the previous calendar year.
Other commenters noted that when State regulatory bodies require
annual reporting on the status of decommissioning funds, as many do,
NRC's interests are already protected. One commenter could find no
added safety justification for requiring annual reporting within 5
years of decommissioning. A complete report could be required every 5
years, in the opinion of this commenter, with updates annually or
biennially.
Another commenter recommended that NRC delay the reporting
requirements until a Pacific Northwest National Laboratory (PNNL) study
is final. However, the Commission's position is that such a delay would
deny
[[Page 50476]]
the NRC and the public the benefits of the information required to be
reported while conferring negligible benefits on licensees.
Given NRC's information needs, and the multi-million-dollar size of
the contributions that utilities make annually to their decommissioning
funds, the potential pay-off per hour of staff labor that NRC invests
in monitoring of funds is likely to be significant. Thus, the NRC is
adopting a biennial reporting requirement. NRC also is adopting
commenter suggestions that the reporting frequency be increased for
plants approaching the end of commercial operation and for plants where
conditions have changed such that they will prematurely close within 5
years or have already prematurely closed before the end of their
licensed life, or for plants involved in mergers/acquisitions.
C. Contents of Reports
Most of the commenters who addressed reporting did not question the
need for reports on the status of decommissioning funds and they did
not address in detail the contents of such reports. Similarly, most of
the commenters who raised questions about reliance on the FASB draft
for decommissioning status reporting did not recommend alternative
reporting standards. Several commenters implicitly suggested that the
contents of reports submitted to State PUCs would be sufficiently
similar to NRC's requirements, by recommending that copies of State
reports should be acceptable to NRC.
One commenter argued that NRC's proposed ``per unit'' reporting was
unclear about whether individual licensees of a jointly owned plant
would each be required to submit their own status reports, or whether
the plant operator could submit reports on behalf of all co-licensees.
The commenter suggested that having the operator submit the data for
all owners could be the most efficient approach, assuming the aggregate
of available funds is the most important question. In contrast, another
commenter believed that it would be ``prudent'' for NRC to require
annual filings from all co-owners. Requiring filings by all co-owners
would provide NRC with more detailed information, but would also place
on it the burden of combining and assessing the data. The NRC believes
that plant owners and operators should decide who will submit the
required information. However, even if all information is submitted by
the operator, the information will need to be broken down by owner in
order to evaluate each owner's contributions to decommissioning.
One commenter recommended a clarification to ensure that the amount
accumulated to the date of the report means the ``as of'' date, and not
the date of the report. The same commenter wanted to limit the report
to the single item of accumulated trust fund balances, unless NRC had
concerns, based on its knowledge of the plant, about whether the amount
accumulated for decommissioning is sufficient. In that case, more
detailed information could be required.
The comments did not address several issues raised by commenters on
the NRC's Advance Notice of Proposed Rulemaking (ANPR) of April 8, 1996
(61 FR 15427) concerning the information needed by NRC to monitor the
status of decommissioning funds. In particular, the comments on the
proposed rule did not address the 50-plus reporting items suggested by
commenters in response to the ANPR.
How the industry will understand the core concept of the reporting
requirement, the ``status of the decommissioning fund,'' is not
clarified by the comments on the proposed rule. At least one commenter
suggested that ``status'' means simply the ``amount'' of the
decommissioning trusts. Other commenters may be suggesting, by their
emphasis on the responsibility of an operator to coordinate information
from several co-owners, and on the possibility that NRC might need to
obtain follow-up information, that ``status'' can include a
quantitative or qualitative assessment of the ``adequacy'' of the fund
relative to required or estimated decommissioning costs. The extent of
that assessment is not clarified by the comments received, which do not
address whether ``status'' implies a general discussion provided by the
licensee or a specific report prepared by the trustee. The NRC has
addressed some of the commenters' concerns discussed above by modifying
the final rule. Because of their level of detail, other potential
concerns are better addressed by a regulatory guide. The NRC will
consider issuing such guidance after evaluating the first set of
reports received.
10. Rate of Return
NRC's proposed language in 10 CFR 50.75(e)(1)(i) and (ii) allows
licensees to take credit for earnings on their prepaid decommissioning
trust funds or external sinking funds using a 2 percent annual real
rate of return from the time of the funds' collection through the
decommissioning period. If the licensee's rate-setting authority
authorizes the use of another rate, that rate would be used in
projected earnings. By specifying that earnings can be credited
``through the decommissioning period,'' NRC is allowing licensees to
assume earnings credits for both the safe storage period and the period
when funds flow out of the decommissioning financial assurance
mechanisms.
Many commenters generally supported NRC's proposed changes in 10
CFR 50.75. Some described the rate as being reasonable, conservative,
and consistent with FERC's policy of recognizing earnings and
inflation. One commenter specifically endorsed the provision that
allows licensees to use assumed rates of return that are approved by
State regulatory bodies. A few commenters supported the changes but
stated that licensees also should be given the flexibility to use a
rate that is less than the proposed rate.
Other commenters did not support NRC's selection of the 2 percent
rate. One commenter claimed that the proposed 2 percent rate might
result in underfunding if it does not account for the effect of income
taxes. More typically, commenters argued that the rate is too low and
should be increased. Suggested rates were 3 percent and 7 percent. Two
commenters noted that 3 percent and 7 percent discount rates are used
in NRC's regulatory analysis guidance (in NUREG/BR-0058 and SECY 93-
167). Other commenters stated that NRC should allow licensees to use
any ``realistic'' rate of return or any rate they can justify, possibly
in conjunction with periodic reevaluation of the funds collected. A few
commenters argued that NRC should not specify a 2 percent rate of
return during the period following operations (i.e., the safe storage
and outflow periods) and that different rates should be allowed if
specifically approved by a rate-setting authority.
As stated in the preamble to the proposed rule, the 2 percent real
rate of return suggested by NRC is based on historical data on returns
from U.S. Treasury issues, and represents ``as close to a `risk-free'
return as possible.'' Although this rate may seem relatively low given
that higher interest rates are frequently paid on common stocks and
corporate bonds, the lower rates paid on Government securities pose
considerably less risk and are likely to be achieved on a more
consistent basis.
Given the need for ``reasonable'' assurance of decommissioning
funding, there is little justification for selecting a rate greater
than 2 percent. As shown in the table below, the historical average
real return on long-term U.S.
[[Page 50477]]
Government bonds has been very close to 2 percent, and the historical
average real return on ``risk-free'' U.S. Treasury Bills has been less
than 1 percent. Based on this information, NRC would have difficulty
justifying a higher rate.
Real Rates of Return for Sample Time Periods
------------------------------------------------------------------------
Long-term
U.S. treasury government
Rate bills bonds
(percent) (percent)
------------------------------------------------------------------------
Current (1997).......................... 3.49 13.91
Contemporary Average (1975-1994)........ 1.96 7.65
Long-Term Average (1926-1997)........... 0.6 2.1
------------------------------------------------------------------------
Source: Ibbotson Associates, Chicago. Stocks, Bonds, Bills and
Inflation: 1998 Yearbook, Table 4-1 and Table 6-8. Averages are
calculated as geometric means.
The commenter's concern that 2 percent is less than the 7 percent
and 3 percent discount rates called for in NRC's regulatory analysis
guidance is not relevant.3 Discount rates are used for
capital investment analysis and other decision-making purposes but, if
used to calculate contributions to decommissioning funds, could result
in financial assurance levels that are not adequate to pay for all
assured obligations.
---------------------------------------------------------------------------
\3\ NUREG/BR-0058 generally calls for the use of a 7 percent
discount rate, which is the rate recommended by the Office of
Management and Budget (OMB), in the estimation of values and impacts
of a regulatory action. NUREG/BR-0058 also suggests use of an
alternative discount rate of 3 percent for sensitivity analysis
purposes and for cases in which costs occur over a period of more
than 100 years.
---------------------------------------------------------------------------
11. Other
A. Cost Recovery through Rates
Several commenters opposed the inclusion of any mechanism that
provides for a stranded cost bailout of the nuclear industry by
ratepayers, arguing, among other things, that such a bailout would be
unfair, destroy real competition, inhibit employment gains, slow the
economic growth of more viable, cost effective, and less polluting
power generating technologies, and harm the environment by allowing the
continued operation of nuclear power stations that might otherwise shut
down. These comments may reflect a misunderstanding of the roles played
by NRC relative to State PUCs and FERC. Specifically, PUCs and FERC can
determine whether decommissioning costs are stranded or whether they
must be paid by ratepayers. NRC, unlike the PUCs, does not have the
authority to prevent or to allow licensees to pass decommissioning
costs on to customers. Thus, the issue of a ``bailout'' is not relevant
to NRC. In the event that NRC allows financial assurance mechanisms
whereby licensees recover decommissioning costs from ratepayers (e.g.,
external sinking funds funded by wire charges), the mechanism for rate
recovery (e.g., the wire charges) must be authorized by a PUC or by
FERC. Furthermore, the asserted consequences of a ``stranded cost
bailout'' are unsupported.
B. Rate Recovery of Stranded Costs Using PNNL's Formula
One commenter suggested that utilities be allowed to recover in
their rates only a portion of their decommissioning costs.
Specifically, the commenter suggested allowing decommissioning costs to
be recovered up to a maximum amount determined using PNNL's 1993
generic decommissioning cost formula. Estimated costs in excess of the
generic PNNL estimate could not be recovered in rates and would have to
be funded by shareholders. Also, in the event of premature shutdown,
the commenter would make shareholders (rather than ratepayers)
responsible for all decommissioning costs that are not yet funded,
including any unfunded portion of the generic PNNL estimate.
The comment described above addresses how decommissioning costs,
including stranded decommissioning costs, might equitably be divided
between ratepayers and shareholders. However, the comment is not
directly relevant to decommissioning financial assurance. From NRC's
standpoint, it does not matter whether the source for a licensee's
financial assurance is the licensee's ratepayers or its shareholders,
but only that the licensee has provided adequate financial assurance
for decommissioning. The question of how much of the decommissioning
cost should be borne by ratepayers as opposed to shareholders is one
that has traditionally been answered by State PUCs. NRC, unlike the
PUCs, does not have the authority to direct licensees to recover costs
from ratepayers. Although the NRC did sponsor the development of PNNL's
1993 generic decommissioning cost formula, this formula, like its
predecessor in 10 CFR 50.75(c), was designed to help answer a different
question, namely, what constitutes a reasonable minimum level of
decommissioning assurance for a given reactor. Within this more limited
context (and outside the scope of this rulemaking), NRC is currently
evaluating the 1993 formula relative to 10 CFR 50.75(c).
Finding of No Significant Environmental Impact: Availability
The NRC is amending its regulations on financial assurance
requirements for the decommissioning of nuclear power plants. The
amendments are in response to the likelihood of deregulation of the
power generating industry and resulting questions on whether current
NRC regulations concerning decommissioning funds and their financial
mechanisms will need to be modified. The amendments allow a broader
range of assurance mechanisms than under existing regulations for
reactor licensees that lose the ability to recover decommissioning
costs through regulated rates, add definitions of ``Federal licensee''
to address the issue of which licensees may use statements of intent
and other relevant terms, and require power reactor licensees to report
periodically on the status of their decommissioning funds and on the
changes in their external trust agreements. Also, the amendments allow
licensees to take credit for the actual and projected earnings on
decommissioning trust funds.
These changes would have the following effects on nuclear power
reactor licensees: (1) Potentially requiring licensees who have been
``deregulated'' to secure decommissioning financial assurance
instruments that provide full current assurance for projected
decommissioning costs, (2) limiting the types of licensees that can
qualify for the use of Statements of Intent to satisfy decommissioning
financial assurance requirements, (3) requiring periodic reporting on
the status of their accumulation of decommissioning funds, thus leading
to the potential for the NRC to require some remedial action
[[Page 50478]]
if the licensee's actions are inadequate, and (4) permitting licensees
to assume a real rate of return up to 2 percent per annum, or such
other rate as is permitted by a PUC or the FERC, on their accumulated
funds. These actions are of the type focused upon financial assurances
and mechanisms to ensure funding for decommissioning and are not
actions that would have any effect upon the human environment. Neither
this action nor the alternatives considered in the Regulatory Analysis
supporting this final rule would lead to any increase in the effect on
the environment of the decommissioning activities considered in the
final rule published on June 27, 1988 (53 FR 24018), as analyzed in the
``Final Generic Environmental Impact Statement on Decommissioning of
Nuclear Facilities' (NUREG-0586, August 1988).4
---------------------------------------------------------------------------
\4\ Copies of NUREG-0586 are available for inspection or copying
for a fee from the NRC Public Document Room at 2120 L Street NW.
(Lower Level) Washington, DC 20555-0001; telephone (202) 634-3273;
fax (202) 634-3343. Copies may be purchased at current rates from
the U.S. Government Printing Office, PO Box 370892, Washington, DC
20402-9328; telephone (202) 512-2249; or from the National Technical
Information Service by writing NTIS at 5285 Port Royal Road,
Springfield, VA 22161.
---------------------------------------------------------------------------
Promulgation of these rule changes will not introduce any impacts
on the environment not previously considered by the NRC. Therefore, the
Commission has determined, under the National Environmental Policy Act
of 1969, as amended, and the Commission's regulations in subpart A of
10 CFR part 51, that this rule is not a major Federal action
significantly affecting the quality of the human environment and,
therefore, an environmental impact statement is not required. No other
agencies or persons were contacted in reaching this determination, and
the NRC staff is not aware of any other documents related to
consideration of whether there would be any environmental impacts from
the action. The foregoing constitutes the environmental assessment and
finding of no significant impact for this final rule.
Paperwork Reduction Act Statement
This final rule amends information collection requirements that are
subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et
seq.). These requirements were approved by the Office of Management and
Budget, approval number 3150-0011.
The public reporting burden for this information collection is
estimated to average 8 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
information collection. Send comments on any aspect of this information
collection, including suggestions for reducing the burden, to the
Information and Records Management Branch (T-6 F33), U.S. Nuclear
Regulatory Commission, Washington, DC 20555-0001, or by Internet
electronic mail at bjs1@nrc.gov; and to the Desk Officer, Office of
Information and Regulatory Affairs, NEOB-(3150-0011), Office of
Management and Budget, Washington, DC 20503.
Public Protection Notification
If an information collection does not display a currently valid OMB
control number, the NRC may not conduct or sponsor, and a person is not
required to respond to, the information collection.
Regulatory Analysis
The Commission has prepared a Regulatory Analysis of this
regulation. The analysis examines the costs and benefits of the
alternatives considered by the Commission. Interested persons may
examine a copy of the Regulatory Analysis at the NRC Public Document
Room, 2120 L Street NW (Lower Level), Washington, DC. Single copies of
the analysis may be obtained from Brian J. Richter, Office of Nuclear
Reactor Regulation (O-10 H5), U.S. Nuclear Regulatory Commission,
Washington, DC 20555-0001, telephone (301) 415-1978, e-mail
bjr@nrc.gov.
Regulatory Flexibility Certification
As required by the Regulatory Flexibility Act of 1980, 5 U.S.C.
605(b), the Commission certifies that this rule will not have a
significant economic impact on a substantial number of small entities.
This rule affects only the licensing and operation of nuclear power
plants. The companies that own these plants do not fall within the
scope of the definition of ``small entities'' set forth in the
Regulatory Flexibility Act or the Small Business Size Standards set out
in regulations issued by the Small Business Administration at 13 CFR
part 121.
Backfit Analysis
The Regulatory Analysis for the final rule also constitutes the
documentation for the evaluation of backfit requirements, and no
separate backfit analysis has been prepared. As defined in 10 CFR
50.109, the backfit rule applies to
* * * modification of or addition to systems, structures,
components, or design of a facility; or the design approval or
manufacturing license for a facility; or the procedures or
organization required to design, construct or operate a facility;
any of which may result from a new or amended provision in the
Commission rules or the imposition of a regulatory staff position
interpreting the Commission rules that is either new or different
from a previously applicable staff position * * * .
The amendments to NRC's requirements for the financial assurance of
decommissioning of nuclear power plants allow a broader range of
assurance mechanisms for reactor licensees who lose their ability to
recover decommissioning costs through regulated rates and fees or other
mandatory charges established by a regulatory body than previously, and
define ``Federal licensee.'' The amendments also add several associated
definitions; add new reporting requirements pertaining to the use of
prepayment and external sinking funds; impose new reporting
requirements for power reactor licensees on the status of
decommissioning funding that specify the timing and contents of such
reports; and permit power reactor licensees to take credit for up to a
2 percent annual real rate of return (or another rate if permitted by
their rate regulators) on funds set aside for decommissioning from the
time the funds are set aside through the end of the decommissioning
period.
Although some of the changes to the regulations are reporting
requirements, which are not covered by the backfit rule, other elements
in the changes are considered backfits because they would modify,
supplement, or clarify the regulations with respect to: (1) Acceptable
decommissioning funding options under various scenarios; and (2) which
licensees may use statements of intent. The Commission has concluded,
on the basis of the documented evaluation required by 10 CFR
50.109(a)(4) and set forth in the Regulatory Analysis, that the new or
modified requirements are necessary to ensure that nuclear power
reactor licensees provide for adequate protection of the health and
safety of the public in face of a changing competitive and regulatory
environment not envisioned when the reactor decommissioning funding
regulations were promulgated and that the changes to the regulations
are in accord with the common defense and security. Therefore, the NRC
has determined to treat this action as an adequate protection backfit
under 10 CFR 50.109(a)(4)(ii). Consequently, a backfit analysis is not
required and the cost-benefit standards of 10 CFR 50.109(a)(3)
[[Page 50479]]
do not apply. Further, these changes to the regulations are required to
satisfy 10 CFR 50.109(a)(5).
Small Business Regulatory Enforcement Fairness Act
In accordance with the Small Business Regulatory Enforcement
Fairness Act of 1996, the NRC has determined that this action is a
major rule and has verified this determination with the Office of
Information and Regulatory Affairs of the Office of Management and
Budget.
List of Subjects
10 CFR Part 30
Byproduct material, Criminal penalties, Government contracts,
Intergovernmental relations, Isotopes, Nuclear Materials, Radiation
protection, Reporting and recordkeeping requirements.
10 CFR Part 50
Antitrust, Classified information, Criminal penalties, Fire
protection, Intergovernmental relations, Nuclear power plants and
reactors, Radiation protection, Reactor siting criteria, Reporting and
recordkeeping requirements.
For the reasons set out in the preamble and under the authority of
the Atomic Energy Act of 1954, as amended, the Energy Reorganization
Act of 1974, as amended and 5 U.S.C. 552 and 553, the NRC is adopting
the following amendments to 10 CFR parts 30 and 50.
PART 30--RULES OF GENERAL APPLICABILITY TO DOMESTIC LICENSING OF
BYPRODUCT MATERIAL
1. The authority citation for part 30 continues to read as follows:
Authority: Secs. 81, 82, 161, 182, 183, 186, 68 Stat. 935, 948,
953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42
U.S.C. 2111, 2112, 2201, 2232, 2233, 2236, 2282); secs. 201, as
amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C.
5841, 5842, 5846).
Section 30.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat.
2951 as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123, (42
U.S.C. 5851). Section 30.34(b) also issued under sec. 184, 68 Stat.
954, as amended (42 U.S.C. 2234). Section 30.61 also issued under
sec. 187, 68 Stat. 955 (42 U.S.C. 2237).
2. In 10 CFR part 30, appendix A paragraphs II.A.1(ii), (iv),
II.A.2(ii), and (iv) are revised to read as follows:
Appendix A--Criteria Relating to Use of Financial Tests and Parent
Company Guarantees for Providing Reasonable Assurance of Funds for
Decommissioning
* * * * *
II. Financial Test
A. * * *
1. * * *
(ii) Net working capital and tangible net worth each at least
six times the current decommissioning cost estimates for the total
of all facilities or parts thereof (or prescribed amount if a
certification is used), or, for a power reactor licensee, at least
six times the amount of decommissioning funds being assured by a
parent company guarantee for the total of all reactor units or parts
thereof (Tangible net worth shall be calculated to exclude the net
book value of the nuclear unit(s)); and
* * * * *
(iv) Assets located in the United States amounting to at least
90 percent of the total assets or at least six times the current
decommissioning cost estimates for the total of all facilities or
parts thereof (or prescribed amount if a certification is used), or,
for a power reactor licensee, at least six times the amount of
decommissioning funds being assured by a parent company guarantee
for the total of all reactor units or parts thereof.
2. * * *
(ii) Tangible net worth each at least six times the current
decommissioning cost estimates for the total of all facilities or
parts thereof (or prescribed amount if a certification is used), or,
for a power reactor licensee, at least six times the amount of
decommissioning funds being assured by a parent company guarantee
for the total of all reactor units or parts thereof (Tangible net
worth shall be calculated to exclude the net book value of the
nuclear unit(s)); and
* * * * *
(iv) Assets located in the United States amounting to at least
90 percent of the total assets or at least six times the current
decommissioning cost estimates for the total of all facilities or
parts thereof (or prescribed amount if a certification is used), or,
for a power reactor licensee, at least six times the amount of
decommissioning funds being assured by a parent company guarantee
for the total of all reactor units or parts thereof.
* * * * *
3. In 10 CFR part 30 appendix C, paragraphs II.A.(1) and (2) are
revised to read as follows:
Appendix C--Criteria Relating to Use of Financial Tests and Self
Guarantees for Providing Reasonable Assurance of Funds for
Decommissioning
* * * * *
II. Financial Test
A. * * *
(1) Tangible net worth at least 10 times the total current
decommissioning cost estimate for the total of all facilities or
parts thereof (or the current amount required if certification is
used), or, for a power reactor licensee, at least 10 times the
amount of decommissioning funds being assured by a self guarantee,
for all decommissioning activities for which the company is
responsible as self-guaranteeing licensee and as parent-guarantor
for the total of all reactor units or parts thereof (Tangible net
worth shall be calculated to exclude the net book value of the
nuclear unit(s)).
(2) Assets located in the United States amounting to at least 90
percent of total assets or at least 10 times the total current
decommissioning cost estimate for the total of all facilities or
parts thereof (or the current amount required if certification is
used), or, for a power reactor licensee, at least 10 times the
amount of decommissioning funds being assured by a self guarantee,
for all decommissioning activities for which the company is
responsible as self-guaranteeing licensee and as parent-guarantor
for the total of all reactor units or parts thereof.
* * * * *
PART 50--DOMESTIC LICENSING OF PRODUCTION AND UTILIZATION
FACILITIES
4. The authority citation for Part 50 continues to read as follows:
Authority: Secs. 102, 103, 104, 105, 161, 182, 183, 186, 189, 68
Stat. 936, 937, 938, 948, 953, 954, 955, 956, as amended, sec. 234,
83 Stat. 1244, as amended (42 U.S.C. 2132, 2133, 2134, 2135, 2201,
2232, 2233, 2236, 2239, 2282); secs. 201, as amended, 202, 206, 88
Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846).
Section 50.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat.
2951 (42 U.S.C. 5851). Section 50.10 also issued under secs. 101,
185, 68 Stat. 955 as amended (42 U.S.C. 2131, 2235), sec. 102, Pub.
L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.13, 50.54(dd),
and 50.103 also issued under sec. 108, 68 Stat. 939, as amended (42
U.S.C. 2138). Sections 50.23, 50.35, 50.55, and 50.56 also issued
under sec. 185, 68 Stat. 955 (42 U.S.C. 2235). Sections 50.33a,
50.55a and Appendix Q also issued under sec. 102, Pub. L. 91-190, 83
Stat. 853 (42 U.S.C. 4332). Sections 50.34 and 50.54 also issued
under sec. 204, 88 Stat. 1245 (42 U.S.C. 5844). Section 50.37 also
issued under E.O. 12829, 3 CFR 1993 Comp., p. 570; E.O. 12958, as
amended, 3 CFR, 1995 Comp., p. 333; E.O. 12968, 3 CFR 1995 Comp., p.
391. Sections 50.58, 50.91, and 50.92 also issued under Pub. L. 97-
415, 96 Stat. 2073 (42 U.S.C. 2239). Section 50.78 also issued under
sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Sections 50.80--50.81 also
issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234).
Appendix F also issued under sec. 187, 68 Stat. 955 (42 U.S.C.
2237).
5. In Sec. 50.2, the definitions of Cost of service regulation,
Federal licensee, Incentive regulation, Non-bypassable charges, and
Price-cap regulation are added in alphabetical order to read as
follows:
Sec. 50.2 Definitions.
* * * * *
[[Page 50480]]
Cost of service regulation means the traditional system of rate
regulation, or similar regulation, including ``price cap'' or
``incentive'' regulation, in which a rate regulatory authority
generally allows an electric utility to charge its customers the
reasonable and prudent costs of providing electricity services,
including capital, operations, maintenance, fuel, decommissioning, and
other costs required to provide such services.
* * * * *
Federal licensee means any NRC licensee, the obligations of which
are guaranteed by and supported by the full faith and credit of the
United States Government.
* * * * *
Incentive regulation means the system of rate regulation in which a
rate regulatory authority establishes rates that an electric generator
may charge its customers that are based on specified performance
factors, in addition to cost-of-service factors.
* * * * *
Non-bypassable charges mean those charges imposed over an
established time period by a Government authority that affected persons
or entities are required to pay to cover costs associated with the
decommissioning of a nuclear power plant. Such charges include, but are
not limited to, wire charges, stranded cost charges, transition
charges, exit fees, other similar charges, or the securitized proceeds
of a revenue stream.
* * * * *
Price-cap regulation means the system of rate regulation in which a
rate regulatory authority establishes rates that an electric generator
may charge its customers that are based on a specified maximum price of
electricity.
* * * * *
6. In Sec. 50.43, paragraph (a) is revised to read as follows:
Sec. 50.43 Additional standards and provisions affecting class 103
licenses for commercial power.
* * * * *
(a) The NRC will:
(1) Give notice in writing of each application to the regulatory
agency or State as may have jurisdiction over the rates and services
incident to the proposed activity;
(2) Publish notice of the application in trade or news publications
as it deems appropriate to give reasonable notice to municipalities,
private utilities, public bodies, and cooperatives which might have a
potential interest in the utilization or production facility; and
(3) Publish notice of the application once each week for 4
consecutive weeks in the Federal Register. No license will be issued by
the NRC prior to the giving of these notices and until 4 weeks after
the last notice is published in the Federal Register.
* * * * *
7. In Sec. 50.54, the introductory text of paragraph (w) is revised
to read as follows:
Sec. 50.54 Conditions of licenses.
* * * * *
(w) Each power reactor licensee under this part for a production or
utilization facility of the type described in Secs. 50.21(b) or 50.22
shall take reasonable steps to obtain insurance available at reasonable
costs and on reasonable terms from private sources or to demonstrate to
the satisfaction of the NRC that it possesses an equivalent amount of
protection covering the licensee's obligation, in the event of an
accident at the licensee's reactor, to stabilize and decontaminate the
reactor and the reactor station site at which the reactor experiencing
the accident is located, provided that:
* * * * *
8. In Sec. 50.63, paragraph (a)(2) is revised to read as follows:
Sec. 50.63 Loss of alternating current power.
(a) * * *
(2) The reactor core and associated coolant, control, and
protection systems, including station batteries and any other necessary
support systems, must provide sufficient capacity and capability to
ensure that the core is cooled and appropriate containment integrity is
maintained in the event of a station blackout for the specified
duration. The capability for coping with a station blackout of
specified duration shall be determined by an appropriate coping
analysis. Licensees are expected to have the baseline assumptions,
analyses, and related information used in their coping evaluations
available for NRC review.
* * * * *
9. In Sec. 50.73, paragraph (b)(2)(ii)(J)(2)(iv) is revised to read
as follows:
Sec. 50.73 Licensee event report system.
* * * * *
(b) * * *
(2) * * *
(ii) * * *
(J) * * *
(2) * * *
(iv) The type of personnel involved (i.e., contractor personnel,
licensed operator, nonlicensed operator, other licensee personnel).
* * * * *
10. In Sec. 50.75, paragraphs (a), (b), (d), and (e) are revised,
and paragraphs (f)(1), (2), and (3) are redesignated as paragraph
(f)(2), (3), and (4) and a new paragraph (f)(1) is added to read as
follows:
Sec. 50.75 Reporting and recordkeeping for decommissioning planning.
(a) This section establishes requirements for indicating to NRC how
a licensee will provide reasonable assurance that funds will be
available for the decommissioning process. For power reactor licensees,
reasonable assurance consists of a series of steps as provided in
paragraphs (b), (c), (e), and (f) of this section. Funding for the
decommissioning of power reactors may also be subject to the regulation
of Federal or State Government agencies (e.g., Federal Energy
Regulatory Commission (FERC) and State Public Utility Commissions) that
have jurisdiction over rate regulation. The requirements of this
section, in particular paragraph (c) of this section, are in addition
to, and not substitution for, other requirements, and are not intended
to be used, by themselves, by other agencies to establish rates.
(b) Each power reactor applicant for or holder of an operating
license for a production or utilization facility of the type and power
level specified in paragraph (c) of this section shall submit a
decommissioning report, as required by Sec. 50.33(k) of this part.
(1) The report must contain a certification that financial
assurance for decommissioning will be (for a license applicant) or has
been (for a license holder) provided in an amount which may be more but
not less than the amount stated in the table in paragraph (c)(1) of
this section.
(2) The amount to be provided must be adjusted annually using a
rate at least equal to that stated in paragraph (c)(2) of this section.
(3) The amount must use one or more of the methods described in
paragraph (e) of this section as acceptable to the NRC.
(4) The amount stated in the applicant's or licensee's
certification may be based on a cost estimate for decommissioning the
facility. As part of the certification, a copy of the financial
instrument obtained to satisfy the requirements of paragraph (e) of
this section must be submitted to NRC.
* * * * *
(d)(1) Each non-power reactor applicant for or holder of an
operating license for a production or utilization
[[Page 50481]]
facility shall submit a decommissioning report as required by
Sec. 50.33(k) of this part.
(2) The report must:
(i) Contain a cost estimate for decommissioning the facility;
(ii) Indicate which method or methods described in paragraph (e) of
this section as acceptable to the NRC will be used to provide funds for
decommissioning; and
(iii) Provide a description of the means of adjusting the cost
estimate and associated funding level periodically over the life of the
facility.
(e)(1) Financial assurance is to be provided by the following
methods.
(i) Prepayment. Prepayment is the deposit made preceding the start
of operation into an account segregated from licensee assets and
outside the licensee's administrative control of cash or liquid assets
such that the amount of funds would be sufficient to pay
decommissioning costs. Prepayment may be in the form of a trust, escrow
account, Government fund, certificate of deposit, deposit of Government
securities or other payment acceptable to the NRC. A licensee may take
credit for projected earnings on the prepaid decommissioning trust
funds using up to a 2 percent annual real rate of return from the time
of future funds' collection through the projected decommissioning
period. This includes the periods of safe storage, final dismantlement,
and license termination, if the licensee's rate-setting authority does
not authorize the use of another rate. However, actual earnings on
existing funds may be used to calculate future fund needs.
(ii) External sinking fund. An external sinking fund is a fund
established and maintained by setting funds aside periodically in an
account segregated from licensee assets and outside the licensee's
administrative control in which the total amount of funds would be
sufficient to pay decommissioning costs at the time termination of
operation is expected. An external sinking fund may be in the form of a
trust, escrow account, Government fund, certificate of deposit, deposit
of Government securities, or other payment acceptable to the NRC. A
licensee may take credit for projected earnings on the external sinking
funds using up to a 2 percent annual real rate of return from the time
of future funds' collection through the decommissioning period. This
includes the periods of safe storage, final dismantlement, and license
termination, if the licensee's rate-setting authority does not
authorize the use of another rate. However, actual earnings on existing
funds may be used to calculate future fund needs. A licensee, whose
rates for decommissioning costs cover only a portion of such costs, may
make use of these methods only for that portion of such costs that are
collected in one of the manners described in this paragraph,
(e)(1)(ii). This method may be used as the exclusive mechanism relied
upon for providing financial assurance for decommissioning in the
following circumstances:
(A) By a licensee that recovers, either directly or indirectly, the
estimated total cost of decommissioning through rates established by
``cost of service'' or similar ratemaking regulation. Public utility
districts, municipalities, rural electric cooperatives, and State and
Federal agencies, including associations of any of the foregoing, that
establish their own rates and are able to recover their cost of service
allocable to decommissioning, are assumed to meet this condition.
(B) By a licensee whose source of revenues for its external sinking
fund is a ``non-bypassable charge,'' the total amount of which will
provide funds estimated to be needed for decommissioning pursuant to
Secs. 50.75(c), 50.75(f), or 50.82 of this part.
(iii) A surety method, insurance, or other guarantee method:
(A) These methods guarantee that decommissioning costs will be
paid. A surety method may be in the form of a surety bond, letter of
credit, or line of credit. Any surety method or insurance used to
provide financial assurance for decommissioning must contain the
following conditions:
(1) The surety method or insurance must be open-ended, or, if
written for a specified term, such as 5 years, must be renewed
automatically, unless 90 days or more prior to the renewal day the
issuer notifies the NRC, the beneficiary, and the licensee of its
intention not to renew. The surety or insurance must also provide that
the full face amount be paid to the beneficiary automatically prior to
the expiration without proof of forfeiture if the licensee fails to
provide a replacement acceptable to the NRC within 30 days after
receipt of notification of cancellation.
(2) The surety or insurance must be payable to a trust established
for decommissioning costs. The trustee and trust must be acceptable to
the NRC. An acceptable trustee includes an appropriate State or Federal
government agency or an entity that has the authority to act as a
trustee and whose trust operations are regulated and examined by a
Federal or State agency.
(B) A parent company guarantee of funds for decommissioning costs
based on a financial test may be used if the guarantee and test are as
contained in appendix A to 10 CFR part 30.
(C) For commercial companies that issue bonds, a guarantee of funds
by the applicant or licensee for decommissioning costs based on a
financial test may be used if the guarantee and test are as contained
in appendix C to 10 CFR part 30. For commercial companies that do not
issue bonds, a guarantee of funds by the applicant or licensee for
decommissioning costs may be used if the guarantee and test are as
contained in appendix D to 10 CFR part 30. For non-profit entities,
such as colleges, universities, and non-profit hospitals, a guarantee
of funds by the applicant or licensee may be used if the guarantee and
test are as contained in appendix E to 10 CFR part 30. A guarantee by
the applicant or licensee may not be used in any situation in which the
applicant or licensee has a parent company holding majority control of
voting stock of the company.
(iv) For a power reactor licensee that is a Federal licensee, or
for a non-power reactor licensee that is a Federal, State, or local
government licensee, a statement of intent containing a cost estimate
for decommissioning, and indicating that funds for decommissioning will
be obtained when necessary.
(v) Contractual obligation(s) on the part of a licensee's
customer(s), the total amount of which over the duration of the
contract(s) will provide the licensee's total share of uncollected
funds estimated to be needed for decommissioning pursuant to
Secs. 50.75(c), 50.75(f), or Sec. 50.82. To be acceptable to the NRC as
a method of decommissioning funding assurance, the terms of the
contract(s) shall include provisions that the electricity buyer(s) will
pay for the decommissioning obligations specified in the contract(s),
notwithstanding the operational status either of the licensed power
reactor to which the contract(s) pertains or force majeure provisions.
All proceeds from the contract(s) for decommissioning funding will be
deposited to the external sinking fund. The NRC reserves the right to
evaluate the terms of any contract(s) and the financial qualifications
of the contracting entity(ies) offered as assurance for decommissioning
funding.
(vi) Any other mechanism, or combination of mechanisms, that
provides, as determined by the NRC upon its evaluation of the specific
circumstances of each licensee submittal, assurance of decommissioning
funding equivalent to
[[Page 50482]]
that provided by the mechanisms specified in paragraphs (e)(1)(I)-(iv)
of this section. Licensees who do not have sources of funding described
in paragraph (e)(1)(ii) of this section may use an external sinking
fund in combination with a guarantee mechanism, as specified in
paragraph (e)(1)(iii) of this section, provided that the total amount
of funds estimated to be necessary for decommissioning is assured.
(2) The NRC reserves the right to take the following steps in order
to ensure a licensee's adequate accumulation of decommissioning funds:
review, as needed, the rate of accumulation of decommissioning funds;
and, either independently or in cooperation with the FERC and the
licensee's State PUC, take additional actions as appropriate on a case-
by-case basis, including modification of a licensee's schedule for the
accumulation of decommissioning funds.
* * * * *
(f)(1) Each power reactor licensee shall report, on a calendar-year
basis, to the NRC by March 31, 1999, and at least once every 2 years
thereafter on the status of its decommissioning funding for each
reactor or part of a reactor that it owns. The information in this
report must include, at a minimum: the amount of decommissioning funds
estimated to be required pursuant to 10 CFR 50.75(b) and (c); the
amount accumulated to the end of the calendar year preceding the date
of the report; a schedule of the annual amounts remaining to be
collected; the assumptions used regarding rates of escalation in
decommissioning costs, rates of earnings on decommissioning funds, and
rates of other factors used in funding projections; any contracts upon
which the licensee is relying pursuant to paragraph (e)(1)(ii)(C) of
this section; any modifications occurring to a licensee's current
method of providing financial assurance since the last submitted
report; and any material changes to trust agreements. Any licensee for
a plant that is within 5 years of the projected end of its operation,
or where conditions have changed such that it will close within 5 years
(before the end of its licensed life), or has already closed (before
the end of its licensed life), or for plants involved in mergers or
acquisitions shall submit this report annually.
* * * * *
Dated at Rockville, MD this 16th day of September, 1998.
For the Nuclear Regulatory Commission.
John C. Hoyle,
Secretary of the Commission.
[FR Doc. 98-25278 Filed 9-21-98; 8:45 am]
BILLING CODE 7590-01-P
