[Federal Register Volume 63, Number 196 (Friday, October 9, 1998)]
[Proposed Rules]
[Pages 54389-54391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-27200]


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NUCLEAR REGULATORY COMMISSION

10 CFR Part 50


Preliminary Criterion on the Use of Non-Owner Operating Companies

AGENCY: Nuclear Regulatory Commission.

ACTION: Proposed criterion for non-owner operating service companies.

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SUMMARY: In anticipation of an expected increase in the use of non-
owner operating companies, the NRC is seeking public comment on a 
proposed evaluation criterion concerning whether the use of contract 
service operating companies in connection with the operation of nuclear 
power reactors requires approval by the NRC under the regulations 
governing transfer of licenses. Comments on other criteria that should 
be considered concerning non-owner operators are also invited. 
Publication of draft regulatory guidance related to the screening 
criteria for the transfer of licenses is scheduled for June 1999.

DATES: Comments should be submitted by January 15, 1999. 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.


[[Page 54390]]


ADDRESSES: Mail comments to: Secretary, U.S. Nuclear Regulatory 
Commission, Washington, D.C. 20555, Attention: Rulemakings and 
Adjudications Staff.
    Deliver comments to: 11555 Rockville Pike, Rockville, Maryland, 
between 7:30 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, D.C.

FOR FURTHER INFORMATION CONTACT: Michael J. Davis, Office of Nuclear 
Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 
20555, telephone (301) 415-1016, e-mail [email protected].

SUPPLEMENTARY INFORMATION:

Background

    On June 21, 1996, the NRC issued Administrative Letter (AL) 96-02, 
``Licensee Responsibilities Related to Financial Qualifications,'' 
reminding power reactor licensees of their ongoing obligation to seek 
and obtain prior written consent from the NRC for any changes that 
would constitute a transfer of an NRC license, directly or indirectly, 
through transfer of control of the license pursuant to 10 CFR 50.80 and 
Section 184 of the Atomic Energy Act as amended. AL 96-02 primarily 
addressed restructuring activities, such as mergers, the formation of 
holding companies, and sales of facilities or portions of facilities.
    The use of service companies to provide operational support in the 
operation of nuclear power facilities may also require NRC review and 
approval and a conforming license amendment, depending on the extent to 
which the ability to control operations is being transferred and the 
degree of autonomy being granted to the operating company.
    There has been limited experience with the introduction of non-
owner operating companies. In most instances to date, an existing 
operating organization was split off from the owner and transferred to 
a newly formed operating company affiliated with the owner and its 
parent company. Examples include the transfer approval and license 
amendments for Farley Units 1 and 2, Hatch Units 1 and 2, and Vogtle 
Units 1 and 2 when Southern Nuclear Operating Company became the 
licensed operator of the facilities in place of Alabama Power Company 
and Georgia Power Company. All three companies are subsidiaries of the 
Southern Company. Another similar example is the transfer approval and 
license amendment for River Bend Unit 1 when Entergy Operations, Inc., 
a subsidiary of Entergy Corporation, became the licensed operator at 
the same time Entergy Corporation acquired Gulf States Utilities, the 
former operator. In each of these cases, there was no wholesale change 
of operating personnel, only a transfer of the existing operating 
organization to a new operating company. In each of these cases, the 
licensees recognized that review and approval under 10 CFR 50.80 was 
necessary.
    In another example, in early 1997, Maine Yankee Atomic Power 
Company (MYAPC) entered into a management services agreement with 
Entergy Nuclear, Inc., to provide operations management personnel, 
including the positions of Maine Yankee President and Vice President, 
Licensing. The Entergy personnel provided were to become employees of 
MYAPC while at the same time remaining employees of Entergy Nuclear, 
Inc., and would serve at the pleasure of and take direction from the 
MYAPC Board of Directors. MYAPC stated in a letter dated February 6, 
1997, to the NRC that it had concluded that neither the management 
services agreement with Entergy nor the specific management changes 
would require prior NRC approval or a Technical Specification (TS) 
change. The NRC staff concurred with this assessment, since MYAPC 
retained ultimate safety-related decisionmaking authority and Entergy 
personnel were concurrently to become employees of MYAPC.
    A similar management services agreement was initiated in early 1998 
in which Illinois Power contracted with PECO Energy to provide certain 
management, technical, and support services to Clinton Power Station 
(CPS). The senior managers provided by PECO Energy were integrated into 
the Illinois Power organization and are subject to the direction of 
Illinois Power. The most senior PECO Energy manager, serving as Chief 
Nuclear Officer for CPS, also became a dual employee and a corporate 
officer of Illinois Power. Illinois Power stated in a letter dated 
January 23, 1998, that it had ``concluded that neither the Management 
Services Agreement with PECO Energy nor the resulting specific 
management changes require NRC approval. Illinois Power remains the 
operating licensee for CPS, with ultimate authority to control, and 
responsibility for, safe plant operation and regulatory compliance.'' 
The NRC concurred with that assessment.

Discussion

    As nuclear utilities evolve within a deregulated environment, the 
NRC staff recognizes that various alternative and potentially complex 
non-owner operator arrangements may be pursued by licensees. With 
regard to such new arrangements, the NRC staff recognizes that the 
decision on whether 10 CFR 50.80 consent is necessary, as discussed in 
SECY-97-144, depends on the extent to which the ability to control 
operations (within the broadest sense of the Commission's regulations 
and the terms of the operating license) is being transferred and the 
degree of autonomy granted to the operating company. The NRC staff also 
recognizes that a more detailed criterion for the submission of new 
arrangements pursuant to 10 CFR 50.80 for NRC review and consent could 
be helpful in identifying for licensees the NRC staff's information 
needs for such reviews, thereby contributing to more timely reviews.
    The NRC staff has developed a proposed criterion regarding changes 
to nuclear plant operating entities by which the need for NRC review 
and consent under 10 CFR 50.80 can be judged. The NRC staff has focused 
this criterion on the concept of final decisionmaking authority: If an 
operating service company provides advice but does not make the final 
decision in a particular area that cannot be overruled or is not 
subject to reversal by the existing licensee, then there has been no 
transfer of operating authority for that area. The areas to be 
considered include the following:
     Decision to shut down for repairs.
     Decision to start up the plant.
     Approval of licensee event reports.
     Decision on whether to make a 10 CFR 50.72 report.
     Authority to make operability determinations.
     Authority to change staffing levels.
     Authority to control the terms of employment for licensed 
staff.
     Authority to make organizational changes.
     Decision to defer repairs.
     Authority for quality assurance responsibilities 
(selecting audits, approving audit reports, accepting audit responses).
     Budget-setting and spending authority.
     Decision to continue operation with equipment problems.
     Authority over the design control of the facility.
     Decision to continue operations or permanently cease 
operation.
    If a threshold review indicates that the new entity is being 
granted such final decisionmaking authority in these areas, then the 
NRC staff would expect the licensee to request full NRC review and 
consent under 10 CFR 50.80. If the

[[Page 54391]]

NRC staff concludes that the new entity is qualified to become a 
licensee, an order approving the proposed transfer would be issued. 
Before implementation of the transfer, a conforming license amendment 
request would need to be submitted and, following consent under 10 CFR 
50.80, the license would be amended upon implementation of the transfer 
to reflect the new transferee.
    In addition to this preliminary criterion, the NRC staff notes that 
lines of authority and responsibility in the organizational chain of 
command are specified in plant Technical Specifications (TS) in the 
administrative controls section (Section 5.0 of the Standard TS) or in 
Updated Final Safety Analysis Reports (UFSAR). When considering the use 
of service company management talent, the NRC staff expects licensees 
to consider the licensing basis to identify what management structure, 
authorities, and responsibilities were previously approved. If the 
lines of authority or responsibilities specified in the TS are being 
materially changed, the change would need review and approval by NRC as 
a license amendment under 10 CFR 50.90 before implementation. The NRC 
staff expects that licensees will ensure that service company personnel 
meet UFSAR or TS-specified educational and experience requirements for 
the positions they will be taking and will seek approval for any 
license changes they deem necessary.
    Licensees and members of the public are invited to submit comments 
on the proposed criterion regarding changes to nuclear plant operating 
entities by which the need for 10 CFR 50.80 consent can be determined. 
Comments on other criteria that should be considered concerning non-
owner operators are also invited.

    Dated at Rockville, Maryland, this 5th day of October, 1998.

    For the Nuclear Regulatory Commission.
John C. Hoyle,
Secretary of the Commission.
[FR Doc. 98-27200 Filed 10-8-98; 8:45 am]
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