[Federal Register Volume 59, Number 104 (Wednesday, June 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13263]
[[Page Unknown]]
[Federal Register: June 1, 1994]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM94-14-000]
Nuclear Plant Decommissioning Trust Fund Guidelines; Notice of
Proposed Rulemaking
May 25, 1994.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Energy Regulatory Commission (Commission) is
proposing to adopt rules setting forth the guidelines for the
formation, organization, and purpose of nuclear plant decommissioning
trust funds, and for nuclear plant decommissioning trust fund
investments.
DATES: An original and 14 copies of the written comments on this
proposed rule must be filed with the Commission by August 1, 1994. An
original and 14 copies of reply comments must be filed with the
Commission by August 30, 1994. All comments should reference Docket No.
RM94-14-000.
ADDRESSES: Office of the Secretary, Federal Energy Regulatory
Commission, 825 North Capitol Street, NE., Washington, DC 20426.
FOR FURTHER INFORMATION CONTACT:
Joseph C. Lynch (Legal Information), Federal Energy Regulatory
Commission, 825 North Capitol Street, NE., Washington, DC 20426, (202)
208-2128.
James K. Guest (Accounting Information), Deputy Chief Accountant,
Office of Chief Accountant, Federal Energy Regulatory Commission, 810
First St. NE., Washington, DC 20426, (202) 219-2602.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in room 3104, at 941 North
Capitol Street, NE., Washington, DC 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user and may be accessed using a personal computer with a modem by
dialing (202) 208-1397. To access CIPS, set your communications
software to use 300, 1200, or 2400 bps, full duplex, no parity, 8 data
bits and 1 stop bit. CIPS can also be accessed at 9600 bps by dialing
(202) 208-1781. The full text of the document will be available on CIPS
for 30 days from the date of issuance. The complete text on diskette in
WordPerfect format may also be purchased from the Commission's copy
contractor, La Dorn Systems Corporation, also located in room 3104, 941
North Capitol Street, NE., Washington, DC 20426.
Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A.
Bailey, James J. Hoecker, William L. Massey, and Donald F. Santa,
Jr.
I. Introduction
The Federal Energy Regulatory Commission is proposing to amend 18
CFR part 35 by adding a new subpart E, which would set forth the
guidelines for the formation, organization, and purpose of nuclear
plant decommissioning trust funds (Fund) by public utilities and for
the investment of Fund assets.
II. Public Reporting Burden
The proposed rule, if adopted, would codify and clarify the
Commission's guidelines regarding the organization and operation of
Funds. The public reporting requirements for the information collection
requirements contained in this rule are estimated to average 4 hours
per response. The information will be submitted to the Commission on an
annual basis. The number of respondents is estimated to be 72. The
burden estimate includes the time required to implement the standards,
search existing data sources, gather and maintain the data needed, and
complete and review the information. The annual burden associated with
this information requirement will be 288 hours.
Comments regarding these burden estimates or any other aspect of
this information collection requirement, including suggestions for
reducing this burden, should be filed at the Federal Energy Regulatory
Commission, 941 North Capitol Street, NE., Washington, DC 20426
[Attention: Michael Miller, Information Services Division, (202) 208-
1415, FAX (202) 208-2425], and sent to the Office of Information and
Regulatory Affairs of OMB (Attention: Desk Officer for Federal Energy
Regulatory Commission).
III. Background
In System Energy Resources, Inc. (System Energy I),1 the
Commission set forth the guidelines for public utilities to use when
creating nuclear plant decommissioning funds and investing Fund assets.
These guidelines, inter alia, were based on the then applicable
Internal Revenue Service (IRS) standards for Fund investments, which
imposed on Fund investments the same investment restrictions that the
Internal Revenue Code (IRC) imposed on Black Lung Disability
Trusts.2 These investment restrictions limit investments to
relatively conservative investments.
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\1\37 FERC Sec. 61,261 (1986).
\2\36 FERC at 61,726-728. IRC section 486A(e)(4) imposed
investment restrictions on Fund investments by cross-referencing IRC
section 501(c)21, which allows a deduction for a contribution only
to those Black Lung Disability Trusts that meet certain investment
restrictions.
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However, Section 1917 of the Energy Policy Act of 1992,3 among
other things, repealed the portion of section 468A(e)(4) of the IRC
that restricted the types of assets in which a Fund could invest and
still qualify for tax benefits. On December 30, 1992, the IRS amended
its regulations to reflect the statutory change.
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\3\Pub. L. No. 102-486, 106 Stat. 2776, 3024-25 (1992); see 26
U.S.C. Sec. 468A(e) (1988).
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In response to section 1917 of the Energy Policy Act and the IRS's
revised regulations, the Commission, in System Energy Resources, Inc.
(System Energy II),4 clarified its policy regarding permissible
Fund investments. In that order, the Commission announced its policy to
continue to restrict Fund investments to Black Lung assets. The
Commission's order provided that:
\4\65 FERC 61,083 (1993).
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Except to the extent that a public utility can demonstrate in
advance that a proposal [to deviate from the guidelines] offers
equal or greater assurance of the availability of funds at the time
of decommissioning and is at least as beneficial to consumers as the
guidelines specified below, public utilities shall limit the
investments in Nuclear Decommissioning Reserve Funds to: (1) public
debt securities of the United States; (2) obligations of a State or
local government which are not in default as to principal or
interest; and (3) time or demand deposits in a bank, as defined in
26 U.S.C. 581 [5] or an insured credit union, within the
meaning of 12 U.S.C. 1752(7), [6] located in the United States.
[7]
\5\26 U.S.C. 581 provides that the term ``bank'' means a bank or
trust company incorporated and doing business under the laws of the
United States (including laws relating to the District of Columbia)
or of any State, a substantial part of the business of which
consists of receiving deposits and making loans and discounts, or
exercising fiduciary powers similar to those permitted to national
banks under authority of the Comptroller of the Currency, and which
is subject by law to supervision and examination by State or Federal
authority having supervision over banking institutions. Such term
also means a domestic building and loan association.
\6\12 U.S.C. 1752(7) provides that the term ``insured credit
union'' means any credit union the member accounts of which are
insured in accordance with the provisions of subchapter II of this
chapter.
\7\65 FERC at 61,514.
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Subsequently, Commonwealth Edison Company (Edison), the Arkansas
Public Service Commission, the Louisiana Public Service Commission, and
the Mississippi Public Service Commission (jointly, State Commissions),
the City of New Orleans, Louisiana (New Orleans), Duke Power Company
(Duke) (on its own behalf and with TU Electric Company, jointly, Duke/
TU), the Edison Electric Institute (EEI), a group of investment
advisory and trust companies (Investment/Trust Companies),8 Maine
Yankee Atomic Power Company (Maine Yankee), the National Association of
Regulatory Utility Commissioners (NARUC), Oglethorpe Power Corporation,
Old Dominion Electric Cooperative, the National Rural Electric
Cooperative Association, and North Carolina Electric Membership
Corporation (collectively, Cooperatives), System Energy Resources
(System Energy), a group of electric utility companies (Utility
Companies),9 the Pennsylvania Public Utility Commission
(Pennsylvania Commission) and the Department of Energy filed requests
for rehearing of System Energy II.10
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\8\A list of the investment advisory and trust companies appears
in Appendix A. Note: This Appendix will not appear in the Code of
Federal Regulations.
\9\A list of the Utility Companies appears in Appendix B. Note:
This Appendix will not appear in the Code of Federal Regulations.
\1\0We will treat the requests for rehearing of System Energy II
as comments in this proceeding. However, these parties may still
file initial and reply comments, as provided below, if they wish to
do so.
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Companies, Cooperatives, the Department of Energy, Duke, Edison,
Edison Electric, Investment/Trust Companies, NARUC, New Orleans,
Pennsylvania Commission, State Commissions and the Utility Companies
(collectively, Commenters) argue, among other things, that the
Commission should vacate its order in System Energy II and adopt
alternative standards for Fund investments. While the Department of
Energy does not assert that the Black Lung guidelines for Fund
investments are necessarily incorrect, it suggests that the Commission
should have the benefit of a more extensive examination of this matter
before it adopts a policy that may guide Fund investments for many
years.\11\
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\11\Contemporaneously with this order we are issuing an order
denying rehearing in System Energy II. However, we are commencing
this Notice of Proposed Rulemaking to accord those guidelines
further consideration. Utilities must continue to abide by the Black
Lung guidelines pending completion of this rulemaking.
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IV. Criticisms of Black Lung Guidelines
Commenters recognize that the Commission's goal in System Energy II
was to provide the greatest assurance possible that the necessary funds
will be available at the time of decommissioning. But Commenters submit
that the investment standards that the Commission set forth in System
Energy II are inappropriate to this end. Their criticisms of the System
Energy II guidelines have several principal themes with numerous
variations. They argue that the guidelines: (a) Are not a guarantee
against loss; (b) will result in increased risk that the returns will
be insufficient to meet the decommissioning obligation; (c) will
increase costs to customers to make up for what Commenters see as an
unnecessary shortfall; (d) are inconsistent with the intention of
Congress in removing the Black Lung restrictions on nuclear
decommissioning trust funds from the IRC; and (e) will result in
increased litigation and administrative costs.
Commenters maintain that restricting Fund investments to Black Lung
assets will not necessarily minimize the risk that those funds will be
lost. They state that many state and local obligations that are not in
default (and so qualify as Black Lung assets) are, nevertheless,
extremely risky.\12\
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\12\Cooperatives Comments at 12; Duke Comments at 4, n.2; EEI
Comments at 11; Investment/Trust Companies Comments at 14; Utility
Companies Comments at 14.
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Commenters state that decommissioning is inflation-sensitive
because it is a long-term obligation, and the decommissioning process
is labor and energy intensive.\13\ Commenters argue that Black Lung
restrictions do not allow Funds to adjust for inflation and that
imposition of these guidelines results in greater collections from
ratepayers than would otherwise occur if Funds could acquire prudent
investments providing greater yields.\14\ Commenters urge the
Commission to allow Funds to diversify beyond Black Lung assets; they
argue that broader investment options will ensure that adequate funds
will be available for decommissioning, while at the same time reducing
the amount that public utilities must collect from their wholesale
customers to meet the decommissioning liability.\15\
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\13\See, e.g. Cooperatives Comments at 11; Investment/Trust
Companies Comments at 12; Utility Companies Comments at 12.
\14\See, e.g. Cooperatives Comments at 12.
\15\Cooperatives Comments at 13-14; Duke Comments at 4, n.2; EEI
Comments at 7-9; Investment/Trust Companies Comments at 14-17; New
Orleans Comments at 3-4; Utility Companies Comments at 14-17.
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Commenters contend that the Commission's order restricting Fund
investments to Black Lung assets is inconsistent with Congress' intent
in removing Black Lung restrictions on Fund investments from the
IRC.\16\ Commenters also note that the Commission's Black Lung
restrictions on Fund investments may be incompatible with state
guidelines for that portion of Fund investments that is state-
jurisdictional.\17\ They fear that a discrepancy between Commission and
state guidelines may result both in increased administrative costs (and
reduced efficiency) and in increased litigation.\18\
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\16\Investment/Trust Companies Comments at 13; Utility Companies
Comments at 13.
\17\EEI is aware of only one state that limits Fund investments
to Black Lung assets. EEI Comments at 14.
\18\Investment/Trust Companies Comments at 7; Utility Companies
Comments at 17.
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V. Commenters' Recommendations
Commenters propose that the Commission withdraw the Black Lung
guidelines and adopt one of several investment standards that would
permit investment in a broader range of assets. Commenters suggest, for
example, that the Commission adopt the prudent person standard that
Congress has imposed for the investment of pension plan assets.\19\
They argue that this standard is well-established and that investment
advisors and other fiduciaries thoroughly understand its requirements.
Most importantly, they submit, the prudent person standard permits an
investment advisor or other fiduciary to tailor investments to general
economic conditions, taking into account the remaining life of the
plant before decommissioning.\20\
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\19\29 U.S.C. 1104.
\20\Cooperatives Comments at 16-17; Investment/Trust Companies
Comments at 18-19; Utility Companies Comments at 18-19.
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Commenters also suggest that, as an alternative to the prudent
person standard, the Commission could either adopt the prudent investor
standard,\21\ or prescribe investment-grade limitations on investments
in equities and corporate bonds and limit the portion of the Fund
assets that a trustee may invest in particular classes of assets.\22\
Duke/TU suggests that it may be appropriate for Funds to take
additional risks in the early years in order to achieve higher returns,
while investing more cautiously in the later years to ensure protection
of principal.\23\ New Orleans suggests that the Commission might apply
to Funds the investment standards that it is adopting for Post-
Employment Benefits Other Than Pensions.\24\
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\21\Cooperatives suggest this standard, which appears at section
227 Restatement (Third) of Trusts. See Restatement (Third) of Trusts
section 227 (1992). Cooperatives state that the prudent investor
standard highlights diversification as fundamental to risk
management and would allow Fund trustees the flexibility to obtain
the maximum return on ratepayer-contributed funds. Cooperatives
Comments at 14-16.
\22\Cooperatives Comments at 17; Investment/Trust Companies
Comments at 19-20; Utility Companies Comments at 19-20.
\23\Duke/TU Comments at 13; see EEI Comments at 10.
\24\New Orleans Comments at 5-6; see Post Employment Benefits
Other Than Pensions, 61 FERC 61,330 (1992), rehearing denied, 65
FERC 61,035 (1993).
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Commenters also suggest that, where the Commission-jurisdictional
portion of a decommissioning trust fund is relatively small, the
Commission could consider using state-imposed investment restrictions
for the Commission-jurisdictional portion of the decommissioning trust
fund.\25\
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\25\Investment/Trust Companies Comments at 20; Utility Companies
Comments at 20. Cooperatives state that the Commission ``defers'' to
state regulation of securities issuances under section 204 of the
Federal Power Act (FPA), and suggest that the Commission could also
``defer'' to state standards of fiduciary care governing Fund
investments. However, we note that the Commission does not ``defer''
to state regulation of securities issuances under section 204 of the
FPA. Rather, the Commission does not have jurisdiction over
issuances of securities or assumptions of liability of a public
utility organized and operating in a state that regulates the public
utility's issuances of securities or assumptions of liability. 16
U.S.C. 824c(f).
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VI. Alternative Proposed Guidelines
Based on the comments that it has accepted into this proceeding,
and on the Commission's evaluation of this issue, the Commission is
reconsidering its guidelines for Funds and for Fund investments. The
Commission proposes to adopt, in proposed Sec. 35.32, certain general
guidelines for Funds\26\ and, in proposed Sec. 35.33, one of three
alternative specific guidelines for Fund investments that appear in the
proposed regulatory text.
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\26\These have long been established, although not codified in
the Commission's regulations, and were not at issue in System Energy
II. Compare 37 FERC at 61,726-28 with 65 FERC at 61,513-14.
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The general guidelines will be in Sec. 35.32. They will govern the
organization and operation of the Fund. The general guidelines provide
that the Fund must be an external trust fund and that the Trustee must
be independent of the utility, have a net worth of at least $100
million, and exercise the care that a reasonable person would use in
the same circumstances.\27\ The general guidelines further provide that
the Trustee must keep accurate and detailed records, and open the Fund
to inspection and audit. The Trustee also must limit Fund investments
to those that the Commission allows and must not invest in any
securities of the utility that owns the plant, or in the utility's
affiliates, associates, successors or assigns.
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\27\We note that we invite comments below on the meaning of the
reasonable person standard under Alternatives 2 and 3; we likewise
invite comments on its meaning in this more general context.
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The Trustee may only use the Fund to decommission the nuclear power
plant to which the Fund relates, and to pay any administrative or other
expenses of the Fund. If Fund balances exceed the amount necessary for
plant decommissioning, the utility will refund the excess to its
customers in a manner that the Commission will determine. The utility
must deposit in the Fund at least quarterly all monies that it collects
in Commission-jurisdictional rates to fund decommissioning.
The general guidelines also provide that establishing a Fund does
not relieve a utility of any obligation that it may have to
decommission a nuclear power plant.
The specific guidelines will be in Sec. 35.33. They will control
what investments a Trustee may make. The Commission is considering
three alternative specific guidelines for Fund investments: Alternative
1: No change (i.e., continue using the Black Lung guidelines);\28\
Alternative 2: The use of a reasonable person standard with no express
limitations; or Alternative 3: The use of the reasonable person
standard, but with express limitations on the quality of investments
and the proportion of Fund assets that the trustee may invest in
particular classes of assets over the life of the Fund.\29\
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\28\Several parties have challenged the Commission's
jurisdiction to continue to impose Black Lung guidelines for Fund
investments. The Commission requests comments on this issue.
\29\In Alternative 3, the Commission proposes particular express
limitations on Fund investments. The Commission invites comments not
only on the concept of express limitations generally, but also on
the particular express limitations proposed.
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In deciding how Fund assets should be invested, the competing
concerns are security on the one hand and maximizing return on the
other hand. Alternative 1 is a continuation of the Black Lung
guidelines. The Commission explained in both System Energy I and System
Energy II that its overriding concern was that funds be available at
the time decommissioning takes place. This concern prompted the
Commission previously to rely upon the Black Lung guidelines as
defining the limits of what were permissible investments. This concern
is equally present today. Consequently, one of the options under
consideration is the continuation of the Black Lung guidelines.
Alternative 2 envisions the use of a ``reasonable person''
standard--a standard that encompasses greater flexibility. In the
context of a review of the prudence of a utility's decisionmaking, the
Commission has explained this standard as follows:
In performing our duty to determine the prudence of specific
costs, the appropriate test to be used is whether they are costs
which a reasonable utility management * * * would have made, in good
faith, under the same circumstances, and at the relevant point in
time * * *. [O]ur task is to review the prudence of the utility's
actions and the costs resulting therefrom based on the particular
circumstances existing either at the time the challenged costs were
actually incurred, or the time the utility became committed to incur
those expenses.[\30\]
\30\New England Power Company, Opinion No. 231, 31 FERC 61,047
at 61,084 (1985).
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However, we recognize that what we are concerned with here is a
different factual setting. Accordingly, in addition to requesting
comments on Alternative 2 generally, the Commission also solicits
comments on what should be the precise definition and content of this
standard in this circumstance. Should the standard encompass the
``prudent person'' standard, which has long governed trust
investment,\31\ or should it, for example, embody the ``prudent
investor'' standard, which Cooperatives have proposed?\32\ The two
standards are different. The prudent person standard focuses on each
investment individually and also proscribes certain investments as too
risky.\33\ The prudent investor standard, in contrast, does not focus
on any single investment but rather insists on an evaluation of the
entire portfolio (and thus allows more risk).\34\ The Commission also
requests comments on the use of other standards to govern Fund
investments.
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\31\See Restatements (Second) of Trusts Sec. 227 (1959).
\32\See Cooperatives Comments at 14-16.
\33\See Restatement (Second) of Trusts section 227 & comments a
through o (1959).
\34\See Restatement (Third) of Trusts Sec. 227 (1992).
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Alternative 3 provides for a reasonable person standard, and also
provides express guidelines on what Fund investments are and are not
permissible. In this regard, the Commission solicits comments on
Alternative 3 generally, and also both on the definition and content of
the reasonable person standard in this circumstance\35\ and, as noted
supra note 29, on the particular express limitations on Fund
investments.
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\35\Because Alternative 3 contains express limitations on Fund
investments while Alternative 2 does not, we invite comments on
whether the definition and content of a reasonable person standard
would be the same no matter which alternative is selected, or would
they be different.
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Finally, the Commission also requests comments on two additional
issues: (1) The treatment of monies collected in rates for
decommissioning prior to the effective date of a final rule in this
proceeding (and earnings on such contributions); and (2) whether, and
under what circumstances, the Commission should allow state trust funds
and standards to be employed for that portion of contributions and
earnings that are related to Commission-jurisdictional service.
VII. Environmental Statement
Commission regulations require that an environmental assessment or
an environmental impact statement be prepared for any Commission action
that may have a significant adverse effect on the human
environment.\36\ The Commission has categorically excluded certain
actions from this requirement as not having a significant effect on the
human environment--such as electric rate filings under sections 205 and
206 of the FPA and the establishment of just and reasonable rates.\37\
The proposed rule, regarding the collection and subsequent investment
of monies to fund nuclear plant decommissioning, involves such matters.
Accordingly, no environmental consideration is necessary.
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\36\Regulations Implementing the National Environmental Policy
Act, Order No. 486, 52 FR 47987 (Dec. 17, 1987); FERC Stats. &
Regs., Regulations Preambles 1986-90 30,783 (1987)(codified at 18
CFR Part 380).
\37\18 CFR 380.4(a)(15).
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VIII. Regulatory Flexibility Act Certification
The Regulatory Flexibility Act\38\ requires rulemakings to either
contain a description and analysis of the impact the proposed rule will
have on small entities or a certification that the rule will not have a
substantial economic impact on a substantial number of small entities.
Most public utilities to which the proposed rule would apply do not
fall within the definition of small entity.\39\ Consequently, the
Commission certifies that this proposed rule will not have ``a
significant economic impact on a substantial number of small
entities.''
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\38\5 U.S.C. 601-612.
\39\See 5 U.S.C. 601(3), citing to section 3 of the Small
Business Act, 15 U.S.C. 632, which defines ``small business
concern'' as a business that is independently owned and operated and
that is not dominant in its field of operation.
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IX. Information Collection Statement
The Office of Management and Budget's (OMB) regulations\40\ require
that OMB approve certain information collection requirements imposed by
an agency. The information collection requirements in this proposed
rule are contained in FERC-516 ``Electric Rate Filings'' (1902-0096).
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\40\5 CFR 1320.13.
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The Commission uses the data collected in these information
requirements to carry out its regulatory responsibilities pursuant to
the Federal Power Act and the Energy Policy Act of 1992. The
Commission's Office of Electric Power Regulation uses the data for
determination of electric rate filings submitted by industry. The
Office of the Chief Accountant uses the data to ensure that industry
has followed the appropriate procedures for assumptions of obligation
and also to ensure that jurisdictional companies comply with the
Uniform System of Accounts.
Interested persons may send comments regarding collection of
information to the Federal Energy Regulatory Commission, 825 North
Capitol Street, NE., Washington, DC 20426 [Attention: Michael Miller,
(202) 208-1415]; and to the Office of Management and Budget,
Washington, DC 20503 [Attention: Desk Officer for the Federal Energy
Regulatory Commission].
X. Public Comment Procedures
The Commission invites interested persons to submit written
comments on the proposed guidelines. Parties must file with the
Commission an original and 14 copies of their comments no later than
August 1, 1994. Parties must file an original and 14 copies of reply
comments with the Commission no later than August 30, 1994. Parties
should submit their comments and reply comments to the Office of the
Secretary, Federal Energy Regulatory Commission, 825 North Capitol
Street, NE., Washington, DC 20426, and should refer to Docket No. RM94-
14-000.
All written comments will be placed in the Commission's public
files and will be available for inspection in the Commission's Public
Reference Section, Room 3408, at 941 North Capitol Street, NE.,
Washington, DC 20426, during regular business hours.
List of Subjects in 18 CFR Part 35
Electric power rates, Electric utilities, Reporting and
recordkeeping requirements.
By direction of the Commission.
Lois D. Cashell,
Secretary.
In consideration of the foregoing, the Commission proposes to amend
part 35, chapter I, title 18, Code of Federal Regulations, as set forth
below.
PART 35--FILING OF RATE SCHEDULES
1. The authority citation for Part 35 continues to read as follows:
Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42
U.S.C. 7101-7352.
2. 18 CFR Part 35 is amended by adding Subpart E--Regulations
Governing Nuclear Plant Decommissioning Trust Funds, consisting of
Sec. 35.32 and one of three alternative proposed Sec. 35.33, to read as
follows:
Subpart E--Regulations Governing Nuclear Plant Decommissioning Trust
Funds
Sec.
35.32 General provisions.
35.33 Specific provisions.
Sec. 35.32 General provisions.
(a) In order to provide funds for the decommissioning of a nuclear
power plant, a public utility must establish, organize and maintain a
nuclear plant decommissioning trust fund (Fund). The Fund must meet the
following criteria:
(1) The Fund must be an external trust fund in the United States
under the control of a Trustee (Trustee) that is independent of the
utility, its subsidiaries, affiliates or associates.
(2) The Trustee must exercise the standard of care, whether in
investing or otherwise, that a reasonable person would use in the same
circumstances.
(3) The Trustee shall have a net worth of at least $100 million.
(4) The Trustee shall keep accurate and detailed accounts of all
investments, receipts, disbursements and transactions of the Fund. All
accounts, books and records relating to the Fund shall be open to
inspection and audit at reasonable times by the utility or its designee
or by the Commission or its designee. The utility or its designee must
notify the Commission prior to performing any such inspection or audit.
The Commission may direct the utility to conduct an audit or
inspection.
(5) Absent the express authorization of the Commission, no part of
the assets of the Fund may be used for, or diverted to, any purpose
other than to fund the costs of decommissioning the nuclear power plant
to which the Fund relates, and to pay administrative costs and other
incidental expenses, including taxes, of the Fund.
(6) If the Fund balances exceed the amount actually expended for
decommissioning after decommissioning has been completed, the utility
shall refund the excess jurisdictional amount to jurisdictional
ratepayers, in a manner to be determined by the Commission.
(7) The Trustee shall limit Fund investments to those investments
that the Commission allows in the specific provisions of Sec. 35.33.
The Trustee shall not in any circumstance invest in any securities of
the utility, its subsidiaries, affiliates, or associates or their
successors or assigns.
(8) The Trustee shall maximize the after-tax earnings over the life
of the Fund, giving consideration to liquidity, risk, diversification
and other prudent investment objectives, consistent with sound business
practices and subject to the specific provisions of Sec. 35.33.
(9) Each utility shall seek to minimize the payment of taxes with
respect to amounts collected for nuclear power plant decommissioning.
In this regard, the utility shall develop, organize and maintain the
Fund, when it is consistent with sound business practices to do so, to
take maximum advantage of any tax deductions and credits.
(10) Each utility shall deposit in the Fund at least quarterly (or
more often if the utility wishes to make deposits more often) all
monies collected in Commission-jurisdictional rates to fund nuclear
power plant decommissioning.
(b) The establishment, organization, and maintenance of the Fund
shall not relieve the utility or its subsidiaries, affiliates or
associates of any obligations they may have as to the decommissioning
of the nuclear power plant.
Sec. 35.33 Specific provisions.
Alternative 1:
(a) In addition to the general provisions of Sec. 35.32, the
Trustee must observe the following specific provisions of
Sec. 35.33(b).
(b) The Trustee may only use Fund assets to:
(1) Satisfy the liability of a utility for decommissioning costs of
the nuclear power plant to which the Fund relates as provided by
Sec. 35.32; and
(2) Pay administrative costs and other incidental expenses,
including taxes of the Fund as provided by Sec. 35.32; and
(3) To the extent that the Trustee does not currently require the
assets of the Fund for the purposes described in paragraphs (b)(1) and
(b)(2), the Trustee may only invest those assets in:
(i) Public debt securities of the United States;
(ii) Obligations of state or local governments that are not in
default as to principal or interest; or
(iii) Time or demand deposits in a bank, as defined in 26 U.S.C.
581 or in an insured credit union, within the meaning of 12 U.S.C.
1752(7), located in the United States.
(c) The utility must submit to the Commission by June 30 of each
year a copy of the financial report furnished to the utility by the
Fund trustee that shows for the most recent 12-month period: (1) Fund
assets and liabilities at the beginning of the period; (2) Activity of
the Fund during the period, including contributions received, purchases
and sales of investments, gains and losses from investment activity,
disbursements from the Fund for decommissioning activity and payment of
Fund expenses, including income taxes; and (3) Fund assets and
liabilities at the end of the period. If an independent public
accountant has expressed an opinion on the report or on any portion of
the report, then that opinion must accompany the report.
Alternative 2:
(a) In addition to the general provisions of Sec. 35.32, the
Trustee must observe the following specific provisions of
Sec. 35.33(b).
(b) The Trustee may only use Fund assets to:
(1) Satisfy the liability of a utility for decommissioning costs of
the nuclear power plant to which the Fund relates as provided by
Sec. 35.32; and
(2) Pay administrative costs and other incidental expenses,
including taxes of the Fund as provided by Sec. 35.32; and
(3) To the extent that the Trustee does not currently require the
assets of the Fund for the purposes described in paragraphs (b)(1) and
(b)(2), the Trustee, when investing Fund assets, must exercise the same
standard of care that a reasonable person would exercise in the same
circumstances.
(c) The utility must submit to the Commission by June 30 of each
year a copy of the financial report furnished to the utility by the
Fund trustee that shows for the most recent 12-month period: (1) Fund
assets and liabilities at the beginning of the period; (2) Activity of
the Fund during the period, including contributions received, purchases
and sales of investments, gains and losses from investment activity,
disbursements from the Fund for decommissioning activity and payment of
Fund expenses, including income taxes; and (3) Fund assets and
liabilities at the end of the period. If an independent public
accountant has expressed an opinion on the report or on any portion of
the report, then that opinion must accompany the report.
Alternative 3:
(a) In addition to the general provisions of Sec. 35.32, the
Trustee must observe the following specific provisions of
Sec. 35.33(b).
(b) The Trustee may only use Fund assets to:
(1) Satisfy the liability of a public utility for decommissioning
costs of the nuclear power plant to which the Fund relates as provided
by Sec. 35.32; and
(2) Pay administrative costs and other incidental expenses,
including taxes of the Fund as provided by Sec. 35.32; and
(3) To the extent that the Trustee does not currently require the
assets of the Fund for the purposes described in paragraphs (b)(1) and
(b)(2), the Trustee, when investing Fund assets: (i) must exercise the
same standard of care that a reasonable person would exercise in the
same circumstances; and
(ii) must conform to the following guidelines:
(A) The Trustee must limit investment in equity securities to no
more than a fixed percentage of Fund assets. As the nuclear power plant
gets closer to the end of its licensed life, this percentage must
decrease according to the following schedule:
(1) Commencement of operation until 15 years from end of license =
50 percent;
(2) 15 years from end of license to 10 years from end of license =
40 percent;
(3) 10 years from end of license to 5 years from end of license =
25 percent;
(4) 5 years from end of license to 2 years from end of license = 10
percent;
(5) 2 years from end of license to end of license = 0 percent.
(B) The Trustee must limit all investments, as follows:
(1) Common stocks must be listed on a principal exchange, and each
company's common stock must have an aggregate market value of no less
than $500 million and a rating of not lower than A- (Standard & Poors).
(2) Corporate, state, municipal, and local bonds must have a rating
of not lower than Aa (Moody's) or A- (Standard & Poors).
(3) The Trustee may invest in cash equivalents, such as United
States Treasury bills or high-grade commercial paper (i.e., of not
lower quality than A-2 (Standard & Poors) or P-2 (Moody's)).
(4) The Trustee may invest no more than 10 percent of the market
value of the Fund in a single industry and no more than 2 percent of
the market value of the Fund in a single company or its subsidiaries,
affiliates or associates.
(c) The utility must submit to the Commission by June 30 of each
year a copy of the financial report furnished to the utility by the
Fund trustee that shows for the most recent 12-month period: (1) Fund
assets and liabilities at the beginning of the period; (2) Activity of
the Fund during the period, including contributions received, purchases
and sales of investments, gains and losses from investment activity,
disbursements from the Fund for decommissioning activity and payment of
Fund expenses, including income taxes; and (3) Fund assets and
liabilities at the end of the period. If an independent public
accountant has expressed an opinion on the report or on any portion of
the report, then that opinion must accompany the report.
[FR Doc. 94-13263 Filed 5-31-94; 8:45 am]
BILLING CODE 6717-01-P
