[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