[Federal Register Volume 61, Number 68 (Monday, April 8, 1996)]
[Proposed Rules]
[Pages 15427-15430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8599]
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NUCLEAR REGULATORY COMMISSION
10 CFR Part 50
RIN 3150-AF41
Financial Assurance Requirements for Decommissioning Nuclear
Power Reactors
AGENCY: Nuclear Regulatory Commission.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Nuclear Regulatory Commission is considering amending its
regulations relating to financial assurance requirements for the
decommissioning of nuclear power plants. Potential deregulation of the
power generating industry has created uncertainty with respect to
whether current NRC regulations concerning decommissioning funds and
the financial mechanisms will require a modification to account for
utility reorganizations not contemplated when current financial
assurance requirements were promulgated. Additionally, the NRC is
considering requiring power reactor licensees to periodically report on
the status of their decommissioning funds. Allowing credit for earnings
on decommissioning trust funds during extended storage will also be
considered. This advance notice of proposed rulemaking is issued to
invite public comment on issues pertaining to the form and content of
the NRC's nuclear power reactor decommissioning financial assurance
requirements as they relate to electric utility deregulation.
DATES: Submit comments by June 24, 1996. Comments received after this
date will be considered if it is practical to do so, but the Commission
is able to assure consideration only for comments received on or before
this date.
ADDRESSES: Mail comments to: The Secretary of the Commission, U.S.
Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention:
Docketing and Service Branch.
Deliver comments to: 11555 Rockville Pike, Rockville, Maryland,
between 7:45 a.m. and 4:15 p.m. Federal workdays.
For information on submitting comments electronically, see the
discussion under Electronic Access in the Supplementary Information
Section.
Examine copies of comments received at: The NRC Public Document
Room, 2120 L Street NW. (Lower Level), Washington, DC.
FOR FURTHER INFORMATION CONTACT: Brian J. Richter, Office of Nuclear
Regulatory Research, U.S. Nuclear Regulatory Commission, Washington, DC
20555-0001, telephone (301) 415-6221, e-mail bjr@nrc.gov.
SUPPLEMENTARY INFORMATION:
Background
Requirements pertaining to financial assurance for the
decommissioning of nuclear power reactors are contained in Sec. 50.75.
Under Sec. 50.75(e)(3), the NRC allows power reactor licensees, who are
defined as ``electric utilities'' 1 under Sec. 50.2, to set aside
funds annually over the estimated life of the reactor for
decommissioning. The NRC provided more flexibility to its electric
utility licensees than other licensees because electric utilities have
existed in a highly structured environment regulated by State public
utility commissions (PUCs) or the Federal Energy Regulatory Commission
(FERC). Under Sec. 50.75(e)(2), the NRC requires licensees other than
electric utilities to set aside an external sinking fund coupled with a
surety method or insurance for any unfunded balance. However, with the
advent of deregulation, the distinction between electric utility
licensees and other licensees will likely be reduced or eliminated.
Thus, the NRC needs to clarify the definition of ``electric utility''
and to require additional assurance of those licensees whose power
reactor costs are no longer regulated.
\\ \1\ ``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. Investor-owned utilities, including generation or
distribution subsidiaries, public utility districts, municipalities,
rural electric cooperatives, and State and Federal agencies,
including associations of any of the foregoing, are included within
the meaning of ``electric utility.''
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Typically, power reactor licensees place decommissioning funds in
external trust or escrow accounts that are reserved for decommissioning
activities.2 Under the definition of external sinking fund, power
reactor licensees must accumulate all the funds estimated to be needed
for decommissioning by the time their facilities are permanently shut
down. Although Sec. 50.75(e) also allows power reactor licensees to use
surety bonds, letters of credit, and prepayment to provide funding
assurance, virtually all power reactor licensees use the external
sinking fund method of assurance.
\\ \2\ Many licensees that have established decommissioning
trust funds for their power reactors are making deposits into their
trust accounts both for decommissioning costs as defined under
Sec. 50.2 and for other decommissioning-associated costs such as
interim spent fuel management and storage and ``green field'' costs.
The NRC allows licensees to deposit funds in the same trust account
as long as the trust has sub-accounts that clearly delineate the
purposes of the sub-account. A trust or sub-account established to
provide assurance of NRC-defined decommissioning costs should be
stipulated to cover NRC-defined decommissioning costs before any
other purpose.
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In addition, Sec. 50.75(e)(3)(iv) provides that an electric utility
that is a Federal Government licensee need only provide assurance in
the form of a statement of intent indicating that decommissioning funds
will be obtained when necessary.
[[Page 15428]]
The intent of Sec. 50.75 is to provide reasonable assurance that
funds for decommissioning will be available when necessary. The
inability of the licensee to provide funding for decommissioning may
adversely affect protection of public health and safety. Also, a lack
of decommissioning funds is a financial risk to taxpayers (i.e., if the
licensee cannot pay for decommissioning, taxpayers would ultimately pay
the bill).
In a related issue, when the Commission issued the decommissioning
rule, the Commission believed that, for a regulated electric utility,
an external reserve account collected over the estimated remaining
reactor life would provide the necessary reasonable assurance. However,
as a conservatism built into the rule, the NRC decided not to allow
licensees to take credit for earnings on their trust funds while their
reactors were in extended safe storage. Rather, the NRC assumed that
during safe storage the rate of return on external decommissioning
trust funds would equal the decommissioning cost escalation rate. Thus,
the after-tax, after-inflation earnings rate effectively would be zero.
When the NRC promulgated the 1988 decommissioning rule, it did not
require licensees to report periodically on the status of their
decommissioning funds. NRC viewed licensee compliance with the funding
assurance requirements as a matter to be determined through the
inspection process when necessary. Also, the NRC recognized in the 1988
decommissioning rule, the PUCs' and FERC's authority to set annual
contribution rates to decommissioning funds and to establish investment
and other management criteria for the funds. The PUCs and FERC also
actively monitor these decommissioning funds as part of their rate
regulatory responsibility. Moreover, the Financial Accounting Standards
Board (FASB), a national organization that sets accounting standards,
recently initiated a review of reporting of decommissioning obligations
on electric utility financial statements. Although FASB has not
established a final standard, it appears that it will increase the
level of detail on power reactor licensees' financial statements. If
adopted, this standard would likely give the NRC and others additional
information on the status of decommissioning funds. However, the advent
of deregulation, and consequently less oversight by FERC or by PUCs,
makes it imperative that the NRC have a source of information to
monitor the status of decommissioning funds.
Specific Proposal
The Commission is considering amending Secs. 50.2, 50.75, and 50.82
to require that electric utility reactor licensees provide assurance
that the full estimated cost of decommissioning will be available
through an acceptable guarantee mechanism if the licensees are no
longer subject to rate regulation by PUCs or FERC, and do not have a
guaranteed source of income. The amendment would also allow licensees
to assume a positive real rate of return on decommissioning funds
during the safe storage period. Lastly, a periodic reporting
requirement would be established.
Specific Considerations
Advice and recommendations on a proposed rule reflecting the
foregoing and any other points considered pertinent are invited from
all interested persons. Comments and supporting reasons are
particularly requested on the following questions arranged by topic:
A. Timing and Extent of Electric Utility Industry Deregulation
A.1. What is the likely timetable for industry restructuring and
deregulation?
A.2. Will the electric utility industry go through several phases
as it responds to deregulation and other competitive pressures? If so,
what will be the likely major changes in business structure that may
occur in each phase? Will rates remain regulated at the retail
distribution level, with deregulation occurring for generation and
transmission? Will retail wheeling become widespread and lead to
deregulation of all sectors of the electric utility industry? Or will
rates remain regulated at the retail distribution level, with
deregulation occurring within the generation and transmission sectors?
What will likely be the final structure of the electric utility
industry, assuming either partial or full deregulation?
A.3. Some States appear to oppose deregulation. Will they be able
to maintain their opposition if neighboring States deregulate? What
will be the industry structure if some States deregulate more than
others? Can a ``hybrid'' system exist effectively?
B. Stranded Costs.
B.1. How will restructuring affect large baseload plants that
currently receive rate relief to cover construction costs or have a
portion yet to be phased into the rate base? Specifically, what is the
probability that and degree to which these costs will be recoverable
should a nuclear power plant be deemed to be non-competitive because of
high construction costs? What will be the source of operating,
maintenance, and capital improvement funds should such a nuclear
generator decide to continue operations? What will be the source of
funds to prematurely and safely shut down an uneconomic plant? Are
transmission access or other surcharges to cover stranded costs likely?
C. Nuclear Financial Qualifications and Decommissioning Funding
Assurance
C.1. If nuclear plants are shut down prematurely, how will
licensees who can no longer pass costs through to ratepayers provide
for a shortfall of decommissioning funds?
C.2. At what point does an operator of a nuclear power plant cease
to be a ``utility'' as defined in Sec. 50.2 of the NRC's regulations?
C.3. If an electric utility reorganizes itself, including divesting
parts of itself, so that the remaining entity operating a reactor is no
longer regulated by a rate-setting State or Federal body, or will cease
to be regulated by a rate-setting State or Federal body if the reactor
ceases operation, would it be appropriate to require financial
assurance for the decommissioning costs in full prior to NRC approval
of such reorganizations? Such assurance could take the form of self-
guarantee, parent company guarantee, certification by the rate-
regulating entity, or other financial surety mechanism to cover the
unfunded decommissioning costs. Should the NRC require additional
assurance for adequate funds for safe operation and decommissioning in
anticipation of deregulation? Should the NRC require, as a condition of
approval of certain reorganizations involving the transfer of control
of a nuclear power plant, that newly created organizations or holding
companies sign a binding agreement that holds them jointly liable for
decommissioning costs associated with that nuclear power plant? What
would be the impact of such actions?
C.4. Should the NRC require a licensee to provide a reasonable
assurance of the availability of funds for decommissioning by imposing
a minimum level of net worth, cash flow, or other financial measure
(similar to 10 CFR Part 30, Appendices A and B)? If below the minimum
levels, the licensee would no longer be allowed to accumulate
decommissioning costs over remaining facility life, but would need a
guarantee that funds would be available for decommissioning through
various financial measures. What financial measures would be effective
and reasonable?
C.5. Would PUCs and FERC be willing to certify that licensees under
their jurisdictions, both electric utility and
[[Page 15429]]
Part 50 licensees other than electric utilities, would be allowed to
collect sufficient revenues through rates to complete decommissioning
funding?
C.6. What would be the impact if the NRC required licensees to
accelerate collection of decommissioning funds such that
decommissioning funding for all plants would be complete within 10
years (or some other time period)?
C.7. Assume that licensees have accumulated funds that are
determined to be adequate based on current estimates of decommissioning
costs. If these estimates turn out to be low far in the future (for
example, if final dismantlement occurs after a 50-year safe storage
period), how will underfunding be remedied? What measures should the
NRC consider for obtaining assurance of funds for such situations?
Should the NRC require larger contingency factors in estimates to cover
such situations?
C.8. Would it be feasible for the nuclear industry to develop a
captive insurance pool to pay for decommissioning funding shortfalls
that result from premature decommissioning? Could such a pool be
structured similarly to Nuclear Mutual Limited (NML) and Nuclear
Electric Insurance Limited (NEIL), who currently insure on-site
property damage and replacement power of member utilities?
C.9. If PUC or FERC oversight is either substantially limited or
eliminated, are there any other options for financial assurance of
decommissioning that the NRC should consider?
D. Decommissioning Funding Assurance and a Federal Government Licensee
D.1. Section 50.75(e)(3)(iv) provides that an electric utility
which is a Federal Government licensee need only provide assurance in
the form of a statement of intent indicating that decommissioning funds
will be obtained when necessary. Since a Federal utility licensee will
likely be confronted with many of the same new competitive pressures as
non-Federal utilities, the question arises, should the regulations
continue to permit the provision of a statement of intent as the method
by which these licensees provide financial assurance for
decommissioning. There is, for example, no Federal law which clearly
provides that the Federal Government would pay the Tennessee Valley
Authority's financial decommissioning obligations should TVA be unable
to do so. Does this fact or any other factors militate for or against
allowing Federal utility licensees to continue to use statements of
intent as the method by which financial assurance for decommissioning
is provided?
E. Status of Decommissioning Trust Funds During Safe Storage Period
E.1. What real rate(s) of return should the NRC allow licensees to
use as credit for earnings on the decommissioning trust funds during
the extended safe storage period?
E.2. What time period(s) should the NRC allow licensees to use in
estimating the credit for earnings on the decommissioning trust funds
during the extended safe storage period?
F. Reporting on the Status of Decommissioning Funds
F.1. What information should the NRC require to be included in the
periodic reporting requirements?
F.2. How often should the NRC require licensees to report on the
status of decommissioning funding?
The preliminary views expressed in this notice may change in light
of comments received. In any case, there will be another opportunity
for additional public comment in connection with any proposed rule that
may be developed by the Commission.
Electronic Access
Comments may be submitted electronically, in either ASCII text or
WordPerfect format (version 5.1 or later), by calling the NRC
Electronic Bulletin Board (BBS) on FedWorld. The bulletin board may be
accessed using a personal computer, a modem, and one of the commonly
available communications software packages, or directly via Internet.
Background documents on the advance notice of proposed rulemaking are
also available, as practical, for downloading and viewing on the
bulletin board.
If using a personal computer and modem, the NRC rulemaking
subsystem on FedWorld can be accessed directly by dialing the toll free
number 1-(800) 303-9672. Communication software parameters should be
set as follows: parity to none, data bits to 8, and stop bits to 1
(N,8,1). Using ANSI or VT-100 terminal emulation, the NRC rulemaking
subsystem can then be accessed by selecting the ``Rules Menu'' option
from the ``NRC Main Menu.'' Users will find the ``FedWorld Online
User's Guides'' particularly helpful. Many NRC subsystems and data
bases also have a ``Help/Information Center'' option that is tailored
to the particular subsystem.
The NRC subsystem on FedWorld can also be accessed by a direct dial
phone number for the main FedWorld BBS, (703) 321-3339, or by using
Telnet via Internet: fedworld.gov. If using (703) 321-3339 to contact
FedWorld, the NRC subsystem will be accessed from the main FedWorld
menu by selecting the ``Regulatory, Government Administration and State
Systems,'' then selecting ``Regulatory Information Mall.'' At that
point, a menu will be displayed that has an option ``U.S. Nuclear
Regulatory Commission'' that will take you to the NRC Online main menu.
The NRC Online area also can be accessed directly by typing ``/go nrc''
at a FedWorld command line. If you access NRC from FedWorld's main
menu, you may return to FedWorld by selecting the ``Return to
FedWorld'' option from the NRC Online Main Menu. However, if you access
NRC at FedWorld by using NRC's toll-free number, you will have full
access to all NRC systems, but you will not have access to the main
FedWorld system.
If you contact FedWorld using Telnet, you will see the NRC area and
menus, including the Rules Menu. Although you will be able to download
documents and leave messages, you will not be able to write comments or
upload files (comments). If you contact FedWorld using FTP, all files
can be accessed and downloaded but uploads are not allowed; all you
will see is a list of files without descriptions (normal Gopher look).
An index file listing all files within a subdirectory, with
descriptions, is available. There is a 15-minute time limit for FTP
access.
Although FedWorld also can be accessed through the World Wide Web,
like FTP that mode only provides access for downloading files and does
not display the NRC Rules Menu.
For more information on NRC bulletin boards call Mr. Arthur Davis,
Systems Integration and Development Branch, NRC, Washington, DC 20555,
telephone (301) 415-5780; e-mail AXD3@nrc.gov.
PART 50--DOMESTIC LICENSING OF PRODUCTION AND UTILIZATION
FACILITIES
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 as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42
U.S.C. 5851). Section 50.10 also issued under secs. 101, 185, 68
Stat. 936, 955, as amended (42 U.S.C. 2131, 2235); sec. 102, Pub. L.
91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections
[[Page 15430]]
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).
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 and 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).
Dated at Rockville, Maryland, this 1st day of April, 1996.
For the Nuclear Regulatory Commission.
John C. Hoyle,
Secretary of the Commission.
[FR Doc. 96-8599 Filed 4-5-96; 8:45 am]
BILLING CODE 7590-01-P
