[Federal Register Volume 61, Number 185 (Monday, September 23, 1996)]
[Proposed Rules]
[Pages 49711-49714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24275]
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NUCLEAR REGULATORY COMMISSION
10 CFR Part 50
Draft Policy Statement on the Restructuring and Economic
Deregulation of the Electric Utility Industry
AGENCY: Nuclear Regulatory Commission.
ACTION: Draft Policy Statement request for public comment.
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SUMMARY: The NRC is seeking comment on the draft statement of policy
regarding its expectations for, and intended approach to, its power
reactor licensees as the electric utility industry moves from an
environment of rate regulation toward greater competition. The NRC is
concerned that rate deregulation and disaggregation resulting from
various restructurings involving power reactor licensees could have
adverse effects on the protection of public health and safety.
DATES: The public is invited to submit comments on this draft Policy
Statement by December 9, 1996. Comments received after this date will
be considered if it is practical to do so, but assurance of
consideration cannot be given except as to comments received on or
before this date. On the basis of the submitted comments, the
Commission will determine whether to modify the draft Policy Statement
before issuing it in final form.
ADDRESSES: Mail comments to: Secretary, U.S. Nuclear Regulatory
Commission, Washington DC 20555, 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.
Examine copies of comments received at: The NRC Public Document
Room, 2120 L Street NW (Lower Level), Washington, DC.
FOR FURTHER INFORMATION CONTACT: Robert S. Wood, Office of Nuclear
Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC
20555, telephone (301) 415-1255, e-mail RSW1@nrc.gov; or, for the
antitrust aspects of this policy statement, William Lambe, telephone
(301) 415-1277, e-mail [email protected]
SUPPLEMENTARY INFORMATION:
I. Purpose
The purpose of this draft policy statement is to provide a
discussion of the NRC's concerns regarding the potential safety impacts
on NRC power reactor licensees resulting from the economic deregulation
and restructuring of the electric utility industry and the means by
which NRC intends to address those concerns. This draft policy
statement recognizes the changes that are occurring in the electric
utility industry and the importance these changes may have for the NRC
and its licensees. The NRC's principal mission is to regulate the
Nation's civilian use of byproduct, source, and special nuclear
materials to ensure adequate protection of the public health and
safety, to promote the common defense and security, and to protect the
environment. As part of carrying out this mission, the NRC must monitor
licensee activities and any changes in licensee activities, as well as
external factors that may affect the ability of individual licensees to
safely operate and decommission licensed power production facilities.
II. Background
The electric utility industry is entering a period of economic
deregulation and restructuring which is intended to lead to increased
competition in the industry. Increasing competition may force
integrated power systems to separate (or ``disaggregate'') their
systems into functional areas. Thus, some licensees may divest
electrical generation assets from transmission and distribution assets
by forming separate subsidiaries or even separate companies for
generation. Disaggregation may involve utility restructuring, mergers,
and corporate spin-offs that lead to changes in owners or operators of
licensed power reactors and may cause some licensees, including owners,
to cease being an ``electric utility'' as defined in 10 CFR 50.2.1
Such changes may affect the
[[Page 49712]]
licensing basis under which the NRC originally found a licensee to be
financially qualified to construct, operate or own its power plant, as
well as to accumulate adequate funds to ensure decommissioning at the
end of reactor life.
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\1\ Section 50.2 defines ``electric utility'' as ``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 and
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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Rate regulators have typically allowed an electric utility to
recover prudently incurred costs of generating, transmitting, and
distributing electric services. Consequently, in 1984, the NRC
eliminated financial qualifications reviews at the operating license
stage for those licensees that met the definition of ``electric
utility'' in 10 CFR 50.2 (49 FR 35747; Sept. 12, 1984). The NRC based
this decision on the assumption that ``the rate process assures that
funds needed for safe operation will be made available to regulated
electric utilities'' (49 FR at 35750). However, the NRC recognized that
financial qualifications reviews for operating license applicants might
be appropriate in particular cases where, for example, ``the local
public utility commission will not allow the total cost of operating
the facility to be recovered through rates'' (49 FR at 35751). The
Commission also has expressed potential concern with various State
proposals to implement economic performance incentive programs.2
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\2\ See Possible Safety Impacts of Economic Performance
Incentives: Final Policy Statement, (56 FR 33945; July 24, 1991),
for the NRC's concerns relating to State economic performance
incentive standards and programs. The NRC understands that States
instituted many of these programs as a means of encouraging electric
utilities to lower electric rates to consumers. As States deregulate
electric utilities under their jurisdictions, these economic
performance incentive programs ultimately may be replaced by full
market competition.
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In its 1988 decommissioning rule, the NRC again distinguished
between electric utilities and other licensees by allowing ``electric
utilities'' to accumulate funds for decommissioning over the remaining
terms of their operating licenses. NRC regulations require its other
licensees (with the added exception of State and Federal government
licensees of certain facilities) to provide funding assurance for the
full estimated cost of decommissioning, either through full up-front
funding or by some allowable guarantee or surety mechanism.
A discussion of the current and future NRC review process will be
contained in two Standard Review Plans that the NRC plans to issue--one
for financial qualifications and decommissioning funding assurance
reviews and the other for antitrust reviews. In addition, the NRC
issued an Administrative Letter on June 21, 1996, that informed power
reactor licensees of their ongoing responsibility to inform, and obtain
advance approval from the NRC for any changes that would constitute a
transfer of the license, directly or indirectly, through transfer of
control of the NRC license to any person pursuant to 10 CFR 50.80. This
administrative letter also reminded addressees of their responsibility
to assure that information regarding a licensee's financial
qualifications and decommissioning funding assurance which may have a
significant implication for public health and safety is promptly
reported to the NRC.
III. Policy Statement
The NRC is concerned with the potential impact of utility
restructuring on public health and safety. The NRC has not found a
consistent relationship between a licensee's financial health and
general indicators of safety such as the NRC's Systematic Assessment of
Licensee Performance (SALP). Thus, the NRC has traditionally relied on
its inspection process to indicate when safety performance has begun to
show adverse trends. Based on inspection program results, the NRC can
take appropriate action, including, ultimately, plant shutdown, to
protect public health and safety. However, if a plant is permanently
shut down, that plant's licensee(s) may no longer have access to
adequate revenues or other sources of funds for decommissioning the
facility. If rate deregulation and organizational divestiture occur
concurrently with the shutdown of a nuclear plant either by NRC action
or by a licensee's economic decision, that licensee may not be able to
provide adequate assurance of decommissioning funds. Thus, the NRC
believes that its concerns with deregulation and restructuring lie
primarily in the area of adequacy of decommissioning funds, although it
is also concerned with the potential effect that economic deregulation
may have on operational safety.
As the electric utility industry moves from an environment of
substantial economic regulation to one of increased competition, the
NRC is concerned about the pace of restructuring and rate deregulation.
Approval of organizational and rate deregulation changes may occur
rapidly without the NRC's knowledge. The pace and degree of such
changes could affect the factual underpinnings of the NRC's previous
conclusions that power reactor licensees can reliably accumulate
adequate funds for operations and decommissioning over the operating
lives of their facilities. For example, rate deregulation could create
situations where a licensee that previously qualified as an ``electric
utility'' under 10 CFR 50.2 may, at some point, no longer qualify for
such status. At that point, the NRC may require licensees to submit
proof pursuant to 10 CFR 50.33(f)(4) that they remain financially
qualified and will require them to meet the more stringent
decommissioning funding assurance requirements of 10 CFR 50.75 that are
applicable to non-electric utilities.
Although new and unique restructuring proposals will necessarily
involve ad hoc reviews by the NRC, the Commission will exercise direct
oversight of such reviews to maintain consistent NRC policy toward new
entities. The NRC has considered mergers, the formation of holding
companies, and the outright sales of facilities, or portions of
facilities, to require NRC notification and prior approval in
accordance with 10 CFR 50.80 in order to ensure that the transferee is
appropriately qualified. For example, the NRC determines whether the
surviving organization will remain an ``electric utility'' as defined
in 10 CFR 50.2.
In consideration of these concerns, the NRC will be evaluating
deregulation and restructuring activities as they evolve. The NRC will
take all appropriate actions to carry out its mission to protect the
health and safety of the public and, to the extent of its statutory
mandate, to ensure consistency with Federal antitrust laws.
The NRC intends to implement policies and take action as described
in this policy statement to ensure that its power reactor licensees
remain responsible for safe operations and decommissioning. In summary,
the NRC will:
(1) Continue to conduct its financial qualifications,
decommissioning funding and antitrust reviews as described in the
Standard Review Plans being developed in concert with this policy
statement;
(2) Identify all owners, indirect as well as direct, of nuclear
power plants;
(3) Establish and maintain staff-level working relationships with
State and Federal rate regulators;
(4) Evaluate the relative responsibilities of power plant co-
owners/co-licensees; and
(5) Reevaluate its regulations for their adequacy to address
changes resulting from rate deregulation.
[[Page 49713]]
IV. Issues Related to Restructuring and Economic Deregulation of the
Electric Utility Industry
The NRC believes that its regulatory framework is generally
sufficient to address many of the restructurings and reorganizations
that will likely arise as a result of electric utility deregulation. In
many instances, the NRC's review process will follow the current
framework, or will otherwise follow policies consistent with the NRC's
current regulations. However, the NRC believes that several other
policy issues need to be further evaluated and options developed.
Therefore, this section addresses NRC policies with respect to electric
utility restructuring and economic deregulation both as these policies
can be carried out under current regulations and as matters under
consideration for further resolution.
A. NRC Responsibilities vis-a-vis State and Federal Economic Regulators
The NRC has recognized the primary role that State and Federal
economic regulators serve in setting rates that include appropriate
levels of funding for safe operation and decommissioning. For example,
the preamble to the 1988 decommissioning rule stated: ``The rule, and
the NRC's implementation of it, does not deal with financial ratemaking
issues such as rate of fund collection, procedures for fund collection,
cost to ratepayers, taxation effects, equitability between early and
late ratepayers, accounting procedures, ratepayer versus stockholder
considerations, responsiveness to change and other similar concerns* *
*. These matters are outside NRC's jurisdiction and are the
responsibility of the State PUCs and [the Federal Energy Regulatory
Commission] FERC'' (53 FR at 24038; June 27, 1988).
Notwithstanding the primary role of economic regulators in rate
matters, the NRC has authority under the Atomic Energy Act of 1954, as
amended, (AEA) to take actions that may affect a licensee's financial
situation when these actions are warranted to protect public health and
safety. To date, the NRC has found no significant instances where State
or Federal rate regulation has led to disallowance of funds for safety-
related operational and decommissioning expenses. Some rate regulators
may have chosen to reduce allowable profit margins through rate
disallowances, or licensees have for other reasons encountered
financial difficulty.
In order for the NRC to make its safety views known and to
encourage rate regulators to continue their practice of allowing
adequate expenditures for nuclear plant safety as electric utilities
face deregulation, the NRC intends to take a number of actions to
increase cooperation with State and Federal rate and financial
regulators to promote dialogue and minimize the possibility of rate
deregulation or other actions that would have an adverse safety impact.
We intend to work and consult with the State PUCs through the National
Association of Regulatory Utility Commissioners (NARUC), and with FERC
and the Securities and Exchange Commission (SEC) to coordinate
activities and exchange information.
B. Co-owner Division of Responsibility
Many of the NRC's power reactor licensees own their plants jointly
with other, non-related organizations. Although some co-owners may be
only authorized to possess the nuclear facility and its nuclear
material, and not to operate it, the NRC views all co-owners as co-
licensees who are responsible for complying with the terms of their
licenses. Public Service Company of Indiana, Inc. (Marble Hill Nuclear
Generating Station, Units 1 & 2), ALAB-459, 7 NRC 179, 200-201 (1978).
The NRC is concerned about the effects on the availability of operating
and decommissioning funds, and about the division of responsibility for
operating and decommissioning funds, when co-owners file for bankruptcy
or otherwise encounter financial difficulty.3 The NRC is
evaluating courses of action to ensure that operating and
decommissioning costs are paid by owners.
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\3\ The NRC has had experience with 3 licensees who have had
much greater than de minimis shares of nuclear power plants and who
filed under Chapter 11 of the U.S. Bankruptcy Code: Public Service
Company of New Hampshire (PSNH), a co-owner and operator of the
Seabrook plant; El Paso Electric Company (EPEC), a co-owner of the
Palo Verde plant; and Cajun Electric Power Cooperative (Cajun), a
co-owner of the River Bend plant. Both PSNH and EPEC continued their
pro rata contributions for the operating and decommissioning
expenses for their plants and successfully emerged from bankruptcy.
Cajun remains in bankruptcy.
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C. Financial Qualifications Reviews
The NRC believes that the existing regulatory framework contained
in Sec. 50.33(f) and in the guidance in 10 CFR part 50, appendix C, is
generally sufficient at this time to provide reasonable assurance of
the financial qualifications of both electric utility and non-electric
utility applicants and licensees under the various ownership
arrangements of which the staff is currently aware. Licensees that
remain ``electric utilities'' will not be subject to NRC financial
qualifications review, other than to determine that such licensees, in
fact, remain ``electric utilities.'' However, the NRC is evaluating the
need to develop additional requirements to ensure against potential
dilution of capability for safe operation and decommissioning that
could arise from rate deregulation and restructuring.
Section 184 of the Atomic Energy Act and 10 CFR 50.80 provide that
no license shall be transferred, directly or indirectly, through
transfer of control of the license, unless the Commission consents in
writing. The NRC intends to review transfers to determine their
potential impact on the licensee's ability both to maintain adequate
technical qualifications and organizational control and authority over
the facility and to provide adequate funds for safe operation and
decommissioning. Such consent is clearly required where a corporate
entity seeks to transfer a license it holds to a different corporate
entity. See Long Island Lighting Co. (Shoreham Nuclear Power Station,
Unit 1) CLI-92-4, 35 NRC 69 (1992). The NRC staff has advised licensees
that agency consent should be sought and obtained under Sec. 50.80 for
the formation of a new holding company over an existing licensee. Other
types of transactions, including those involving transfers of operating
authority or responsibility to non-licensed organizations, have been
considered by the staff on a case by case basis to determine whether
Sec. 50.80 consent is required. The NRC is evaluating what types of
transfers or restructurings should be subject to Sec. 50.80 review.
Effective December 28, 1995, all orders approving Sec. 50.80 transfers
have been signed by the Director, Office of Nuclear Reactor Regulation.
The NRC staff will inform the Commission of unique or unusual licensee
restructuring actions.
D. Decommissioning Funding Assurance Compliance Reviews
The NRC believes that the existing decommissioning funding
assurance provisions in Sec. 50.75 generally provide an adequate
regulatory basis for new licensees to provide reasonable assurance of
decommissioning funds. However, to address this and other issues
related to decommissioning funding assurance in anticipation of rate
deregulation, the NRC published an advance notice of proposed
rulemaking (ANPR) (61 FR 15427; April 8, 1996).
E. Antitrust Reviews
The NRC must be able to accurately identify all owners of its
licensees to meaningfully assess whether there have been ``significant
changes'' since the
[[Page 49714]]
licensing reviews. The NRC anticipates that competitive reviews over
the next 5 to 10 years will arise primarily from changes in control of
licensed facilities. The regulatory review addressing transfer of
control of licenses under 10 CFR 50.80 will be used to determine
whether new owners or operators will be subject to an NRC significant
change review with respect to antitrust matters.
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 by using a personal computer, a modem, and one of the commonly
available communications software packages, or directly via Internet.
Background documents on the draft policy statement 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 (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.'' 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
telephone 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 Mail.'' 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 can also 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.
Dated at Rockville, Maryland, this 16th day of September 1996.
For the Nuclear Regulatory Commission.
John C. Hoyle,
Secretary of the Commission.
[FR Doc. 96-24275 Filed 9-20-96; 8:45 am]
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