[Federal Register Volume 61, Number 68 (Monday, April 8, 1996)]
[Proposed Rules]
[Pages 15427-15430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8599]



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NUCLEAR REGULATORY COMMISSION

10 CFR Part 50

RIN 3150-AF41


Financial Assurance Requirements for Decommissioning Nuclear 
Power Reactors

AGENCY: Nuclear Regulatory Commission.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Nuclear Regulatory Commission is considering amending its 
regulations relating to financial assurance requirements for the 
decommissioning of nuclear power plants. Potential deregulation of the 
power generating industry has created uncertainty with respect to 
whether current NRC regulations concerning decommissioning funds and 
the financial mechanisms will require a modification to account for 
utility reorganizations not contemplated when current financial 
assurance requirements were promulgated. Additionally, the NRC is 
considering requiring power reactor licensees to periodically report on 
the status of their decommissioning funds. Allowing credit for earnings 
on decommissioning trust funds during extended storage will also be 
considered. This advance notice of proposed rulemaking is issued to 
invite public comment on issues pertaining to the form and content of 
the NRC's nuclear power reactor decommissioning financial assurance 
requirements as they relate to electric utility deregulation.

DATES: Submit comments by June 24, 1996. Comments received after this 
date will be considered if it is practical to do so, but the Commission 
is able to assure consideration only for comments received on or before 
this date.

ADDRESSES: Mail comments to: The Secretary of the Commission, U.S. 
Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: 
Docketing and Service Branch.
    Deliver comments to: 11555 Rockville Pike, Rockville, Maryland, 
between 7:45 a.m. and 4:15 p.m. Federal workdays.
    For information on submitting comments electronically, see the 
discussion under Electronic Access in the Supplementary Information 
Section.
    Examine copies of comments received at: The NRC Public Document 
Room, 2120 L Street NW. (Lower Level), Washington, DC.

FOR FURTHER INFORMATION CONTACT: Brian J. Richter, Office of Nuclear 
Regulatory Research, U.S. Nuclear Regulatory Commission, Washington, DC 
20555-0001, telephone (301) 415-6221, e-mail [email protected].

SUPPLEMENTARY INFORMATION:

Background

    Requirements pertaining to financial assurance for the 
decommissioning of nuclear power reactors are contained in Sec. 50.75. 
Under Sec. 50.75(e)(3), the NRC allows power reactor licensees, who are 
defined as ``electric utilities'' 1 under Sec. 50.2, to set aside 
funds annually over the estimated life of the reactor for 
decommissioning. The NRC provided more flexibility to its electric 
utility licensees than other licensees because electric utilities have 
existed in a highly structured environment regulated by State public 
utility commissions (PUCs) or the Federal Energy Regulatory Commission 
(FERC). Under Sec. 50.75(e)(2), the NRC requires licensees other than 
electric utilities to set aside an external sinking fund coupled with a 
surety method or insurance for any unfunded balance. However, with the 
advent of deregulation, the distinction between electric utility 
licensees and other licensees will likely be reduced or eliminated. 
Thus, the NRC needs to clarify the definition of ``electric utility'' 
and to require additional assurance of those licensees whose power 
reactor costs are no longer regulated.

    \\ \1\ ``Electric utility means any entity that generates or 
distributes electricity and which recovers the cost of this 
electricity, either directly or indirectly, through rates 
established by the entity itself or by a separate regulatory 
authority. Investor-owned utilities, including generation or 
distribution subsidiaries, public utility districts, municipalities, 
rural electric cooperatives, and State and Federal agencies, 
including associations of any of the foregoing, are included within 
the meaning of ``electric utility.''
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    Typically, power reactor licensees place decommissioning funds in 
external trust or escrow accounts that are reserved for decommissioning 
activities.2 Under the definition of external sinking fund, power 
reactor licensees must accumulate all the funds estimated to be needed 
for decommissioning by the time their facilities are permanently shut 
down. Although Sec. 50.75(e) also allows power reactor licensees to use 
surety bonds, letters of credit, and prepayment to provide funding 
assurance, virtually all power reactor licensees use the external 
sinking fund method of assurance.

    \\ \2\ Many licensees that have established decommissioning 
trust funds for their power reactors are making deposits into their 
trust accounts both for decommissioning costs as defined under 
Sec. 50.2 and for other decommissioning-associated costs such as 
interim spent fuel management and storage and ``green field'' costs. 
The NRC allows licensees to deposit funds in the same trust account 
as long as the trust has sub-accounts that clearly delineate the 
purposes of the sub-account. A trust or sub-account established to 
provide assurance of NRC-defined decommissioning costs should be 
stipulated to cover NRC-defined decommissioning costs before any 
other purpose.
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    In addition, Sec. 50.75(e)(3)(iv) provides that an electric utility 
that is a Federal Government licensee need only provide assurance in 
the form of a statement of intent indicating that decommissioning funds 
will be obtained when necessary.

[[Page 15428]]

    The intent of Sec. 50.75 is to provide reasonable assurance that 
funds for decommissioning will be available when necessary. The 
inability of the licensee to provide funding for decommissioning may 
adversely affect protection of public health and safety. Also, a lack 
of decommissioning funds is a financial risk to taxpayers (i.e., if the 
licensee cannot pay for decommissioning, taxpayers would ultimately pay 
the bill).
    In a related issue, when the Commission issued the decommissioning 
rule, the Commission believed that, for a regulated electric utility, 
an external reserve account collected over the estimated remaining 
reactor life would provide the necessary reasonable assurance. However, 
as a conservatism built into the rule, the NRC decided not to allow 
licensees to take credit for earnings on their trust funds while their 
reactors were in extended safe storage. Rather, the NRC assumed that 
during safe storage the rate of return on external decommissioning 
trust funds would equal the decommissioning cost escalation rate. Thus, 
the after-tax, after-inflation earnings rate effectively would be zero.
    When the NRC promulgated the 1988 decommissioning rule, it did not 
require licensees to report periodically on the status of their 
decommissioning funds. NRC viewed licensee compliance with the funding 
assurance requirements as a matter to be determined through the 
inspection process when necessary. Also, the NRC recognized in the 1988 
decommissioning rule, the PUCs' and FERC's authority to set annual 
contribution rates to decommissioning funds and to establish investment 
and other management criteria for the funds. The PUCs and FERC also 
actively monitor these decommissioning funds as part of their rate 
regulatory responsibility. Moreover, the Financial Accounting Standards 
Board (FASB), a national organization that sets accounting standards, 
recently initiated a review of reporting of decommissioning obligations 
on electric utility financial statements. Although FASB has not 
established a final standard, it appears that it will increase the 
level of detail on power reactor licensees' financial statements. If 
adopted, this standard would likely give the NRC and others additional 
information on the status of decommissioning funds. However, the advent 
of deregulation, and consequently less oversight by FERC or by PUCs, 
makes it imperative that the NRC have a source of information to 
monitor the status of decommissioning funds.

Specific Proposal

    The Commission is considering amending Secs. 50.2, 50.75, and 50.82 
to require that electric utility reactor licensees provide assurance 
that the full estimated cost of decommissioning will be available 
through an acceptable guarantee mechanism if the licensees are no 
longer subject to rate regulation by PUCs or FERC, and do not have a 
guaranteed source of income. The amendment would also allow licensees 
to assume a positive real rate of return on decommissioning funds 
during the safe storage period. Lastly, a periodic reporting 
requirement would be established.

Specific Considerations

    Advice and recommendations on a proposed rule reflecting the 
foregoing and any other points considered pertinent are invited from 
all interested persons. Comments and supporting reasons are 
particularly requested on the following questions arranged by topic:

A. Timing and Extent of Electric Utility Industry Deregulation

    A.1. What is the likely timetable for industry restructuring and 
deregulation?
    A.2. Will the electric utility industry go through several phases 
as it responds to deregulation and other competitive pressures? If so, 
what will be the likely major changes in business structure that may 
occur in each phase? Will rates remain regulated at the retail 
distribution level, with deregulation occurring for generation and 
transmission? Will retail wheeling become widespread and lead to 
deregulation of all sectors of the electric utility industry? Or will 
rates remain regulated at the retail distribution level, with 
deregulation occurring within the generation and transmission sectors? 
What will likely be the final structure of the electric utility 
industry, assuming either partial or full deregulation?
    A.3. Some States appear to oppose deregulation. Will they be able 
to maintain their opposition if neighboring States deregulate? What 
will be the industry structure if some States deregulate more than 
others? Can a ``hybrid'' system exist effectively?

B. Stranded Costs.

    B.1. How will restructuring affect large baseload plants that 
currently receive rate relief to cover construction costs or have a 
portion yet to be phased into the rate base? Specifically, what is the 
probability that and degree to which these costs will be recoverable 
should a nuclear power plant be deemed to be non-competitive because of 
high construction costs? What will be the source of operating, 
maintenance, and capital improvement funds should such a nuclear 
generator decide to continue operations? What will be the source of 
funds to prematurely and safely shut down an uneconomic plant? Are 
transmission access or other surcharges to cover stranded costs likely?

C. Nuclear Financial Qualifications and Decommissioning Funding 
Assurance

    C.1. If nuclear plants are shut down prematurely, how will 
licensees who can no longer pass costs through to ratepayers provide 
for a shortfall of decommissioning funds?
    C.2. At what point does an operator of a nuclear power plant cease 
to be a ``utility'' as defined in Sec. 50.2 of the NRC's regulations?
    C.3. If an electric utility reorganizes itself, including divesting 
parts of itself, so that the remaining entity operating a reactor is no 
longer regulated by a rate-setting State or Federal body, or will cease 
to be regulated by a rate-setting State or Federal body if the reactor 
ceases operation, would it be appropriate to require financial 
assurance for the decommissioning costs in full prior to NRC approval 
of such reorganizations? Such assurance could take the form of self-
guarantee, parent company guarantee, certification by the rate-
regulating entity, or other financial surety mechanism to cover the 
unfunded decommissioning costs. Should the NRC require additional 
assurance for adequate funds for safe operation and decommissioning in 
anticipation of deregulation? Should the NRC require, as a condition of 
approval of certain reorganizations involving the transfer of control 
of a nuclear power plant, that newly created organizations or holding 
companies sign a binding agreement that holds them jointly liable for 
decommissioning costs associated with that nuclear power plant? What 
would be the impact of such actions?
    C.4. Should the NRC require a licensee to provide a reasonable 
assurance of the availability of funds for decommissioning by imposing 
a minimum level of net worth, cash flow, or other financial measure 
(similar to 10 CFR Part 30, Appendices A and B)? If below the minimum 
levels, the licensee would no longer be allowed to accumulate 
decommissioning costs over remaining facility life, but would need a 
guarantee that funds would be available for decommissioning through 
various financial measures. What financial measures would be effective 
and reasonable?
    C.5. Would PUCs and FERC be willing to certify that licensees under 
their jurisdictions, both electric utility and

[[Page 15429]]
Part 50 licensees other than electric utilities, would be allowed to 
collect sufficient revenues through rates to complete decommissioning 
funding?
    C.6. What would be the impact if the NRC required licensees to 
accelerate collection of decommissioning funds such that 
decommissioning funding for all plants would be complete within 10 
years (or some other time period)?
    C.7. Assume that licensees have accumulated funds that are 
determined to be adequate based on current estimates of decommissioning 
costs. If these estimates turn out to be low far in the future (for 
example, if final dismantlement occurs after a 50-year safe storage 
period), how will underfunding be remedied? What measures should the 
NRC consider for obtaining assurance of funds for such situations? 
Should the NRC require larger contingency factors in estimates to cover 
such situations?
    C.8. Would it be feasible for the nuclear industry to develop a 
captive insurance pool to pay for decommissioning funding shortfalls 
that result from premature decommissioning? Could such a pool be 
structured similarly to Nuclear Mutual Limited (NML) and Nuclear 
Electric Insurance Limited (NEIL), who currently insure on-site 
property damage and replacement power of member utilities?
    C.9. If PUC or FERC oversight is either substantially limited or 
eliminated, are there any other options for financial assurance of 
decommissioning that the NRC should consider?

D. Decommissioning Funding Assurance and a Federal Government Licensee

    D.1. Section 50.75(e)(3)(iv) provides that an electric utility 
which is a Federal Government licensee need only provide assurance in 
the form of a statement of intent indicating that decommissioning funds 
will be obtained when necessary. Since a Federal utility licensee will 
likely be confronted with many of the same new competitive pressures as 
non-Federal utilities, the question arises, should the regulations 
continue to permit the provision of a statement of intent as the method 
by which these licensees provide financial assurance for 
decommissioning. There is, for example, no Federal law which clearly 
provides that the Federal Government would pay the Tennessee Valley 
Authority's financial decommissioning obligations should TVA be unable 
to do so. Does this fact or any other factors militate for or against 
allowing Federal utility licensees to continue to use statements of 
intent as the method by which financial assurance for decommissioning 
is provided?

E. Status of Decommissioning Trust Funds During Safe Storage Period

    E.1. What real rate(s) of return should the NRC allow licensees to 
use as credit for earnings on the decommissioning trust funds during 
the extended safe storage period?
    E.2. What time period(s) should the NRC allow licensees to use in 
estimating the credit for earnings on the decommissioning trust funds 
during the extended safe storage period?

F. Reporting on the Status of Decommissioning Funds

    F.1. What information should the NRC require to be included in the 
periodic reporting requirements?
    F.2. How often should the NRC require licensees to report on the 
status of decommissioning funding?
    The preliminary views expressed in this notice may change in light 
of comments received. In any case, there will be another opportunity 
for additional public comment in connection with any proposed rule that 
may be developed by the Commission.

Electronic Access

    Comments may be submitted electronically, in either ASCII text or 
WordPerfect format (version 5.1 or later), by calling the NRC 
Electronic Bulletin Board (BBS) on FedWorld. The bulletin board may be 
accessed using a personal computer, a modem, and one of the commonly 
available communications software packages, or directly via Internet. 
Background documents on the advance notice of proposed rulemaking are 
also available, as practical, for downloading and viewing on the 
bulletin board.
    If using a personal computer and modem, the NRC rulemaking 
subsystem on FedWorld can be accessed directly by dialing the toll free 
number 1-(800) 303-9672. Communication software parameters should be 
set as follows: parity to none, data bits to 8, and stop bits to 1 
(N,8,1). Using ANSI or VT-100 terminal emulation, the NRC rulemaking 
subsystem can then be accessed by selecting the ``Rules Menu'' option 
from the ``NRC Main Menu.'' Users will find the ``FedWorld Online 
User's Guides'' particularly helpful. Many NRC subsystems and data 
bases also have a ``Help/Information Center'' option that is tailored 
to the particular subsystem.
    The NRC subsystem on FedWorld can also be accessed by a direct dial 
phone number for the main FedWorld BBS, (703) 321-3339, or by using 
Telnet via Internet: fedworld.gov. If using (703) 321-3339 to contact 
FedWorld, the NRC subsystem will be accessed from the main FedWorld 
menu by selecting the ``Regulatory, Government Administration and State 
Systems,'' then selecting ``Regulatory Information Mall.'' At that 
point, a menu will be displayed that has an option ``U.S. Nuclear 
Regulatory Commission'' that will take you to the NRC Online main menu. 
The NRC Online area also can be accessed directly by typing ``/go nrc'' 
at a FedWorld command line. If you access NRC from FedWorld's main 
menu, you may return to FedWorld by selecting the ``Return to 
FedWorld'' option from the NRC Online Main Menu. However, if you access 
NRC at FedWorld by using NRC's toll-free number, you will have full 
access to all NRC systems, but you will not have access to the main 
FedWorld system.
    If you contact FedWorld using Telnet, you will see the NRC area and 
menus, including the Rules Menu. Although you will be able to download 
documents and leave messages, you will not be able to write comments or 
upload files (comments). If you contact FedWorld using FTP, all files 
can be accessed and downloaded but uploads are not allowed; all you 
will see is a list of files without descriptions (normal Gopher look). 
An index file listing all files within a subdirectory, with 
descriptions, is available. There is a 15-minute time limit for FTP 
access.
    Although FedWorld also can be accessed through the World Wide Web, 
like FTP that mode only provides access for downloading files and does 
not display the NRC Rules Menu.
    For more information on NRC bulletin boards call Mr. Arthur Davis, 
Systems Integration and Development Branch, NRC, Washington, DC 20555, 
telephone (301) 415-5780; e-mail AXD[email protected].

PART 50--DOMESTIC LICENSING OF PRODUCTION AND UTILIZATION 
FACILITIES

    The authority citation for Part 50 continues to read as follows:

    Authority: Secs. 102, 103, 104, 105, 161, 182, 183, 186, 189, 68 
Stat. 936, 937, 938, 948, 953, 954, 955, 956, as amended, sec. 234, 
83 Stat. 1244, as amended (42 U.S.C. 2132, 2133, 2134, 2135, 2201, 
2232, 2233, 2236, 2239, 2282); secs. 201, as amended, 202, 206, 88 
Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846).
    Section 50.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 
2951 as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 
U.S.C. 5851). Section 50.10 also issued under secs. 101, 185, 68 
Stat. 936, 955, as amended (42 U.S.C. 2131, 2235); sec. 102, Pub. L. 
91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections

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50.13, 50.54(dd), and 50.103 also issued under sec. 108, 68 Stat. 
939, as amended (42 U.S.C. 2138). Sections 50.23, 50.35, 50.55, and 
50.56 also issued under sec. 185, 68 Stat. 955 (42 U.S.C. 2235). 
Sections 50.33a, 50.55a and Appendix Q also issued under sec. 102, 
Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.34 and 
50.54 also issued under sec. 204, 88 Stat. 1245 (42 U.S.C. 5844). 
Sections 50.58, 50.91, and 50.92 also issued under Pub. L. 97-415, 
96 Stat. 2073 (42 U.S.C. 2239). Section 50.78 also issued under sec. 
122, 68 Stat. 939 (42 U.S.C. 2152). Sections 50.80 and 50.81 also 
issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). 
Appendix F also issued under sec. 187, 68 Stat. 955 (42 U.S.C. 
2237).

    Dated at Rockville, Maryland, this 1st day of April, 1996.

    For the Nuclear Regulatory Commission.
John C. Hoyle,
Secretary of the Commission.
[FR Doc. 96-8599 Filed 4-5-96; 8:45 am]
BILLING CODE 7590-01-P