[Federal Register Volume 71, Number 93 (Monday, May 15, 2006)]
[Rules and Regulations]
[Pages 28200-28225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-4398]



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Part V





Department of Energy





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10 CFR Part 950



Standby Support for Certain Nuclear Plant Delays; Interim Rule

  Federal Register / Vol. 71, No. 93 / Monday, May 15, 2006 / Rules and 
Regulations  

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DEPARTMENT OF ENERGY

10 CFR Part 950

RIN 1901-AB17


Standby Support for Certain Nuclear Plant Delays

AGENCY: Department of Energy.

ACTION: Interim final rule and request for comment.

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SUMMARY: The Department of Energy (Department) is promulgating interim 
final regulations to implement section 638 of the Energy Policy Act of 
2005, which authorizes the Secretary of Energy to enter into Standby 
Support Contracts with sponsors of advanced nuclear power facilities to 
provide risk insurance for certain delays attributed to the regulatory 
process or litigation.

DATES: Effective Date: This interim final rule is effective June 14, 
2006, except for Sec. Sec.  950.10(b), 950.12(a) and 950.23 which 
contain information collection requirements that have not been approved 
by the Office of Management and Budget (OMB). The Department of Energy 
will publish a document in the Federal Register announcing the 
effective date of those sections.
    Comment Date: Written comments must be received by June 14, 2006. 
Comments may be mailed to the address given in the ADDRESSES section 
below. Comments also may be submitted electronically by e-mailing them 
to: [email protected]. We note that e-mail submissions 
will avoid delay currently associated with security screening of U.S. 
Postal Service mail.

ADDRESSES: You may submit written comments, identified by RIN Number 
1901-AB17, by any of the following methods:
    1. E-mail to [email protected]. Include RIN 1901-
AB17 and ``Interim Final Rule Comments'' in the subject line of the e-
mail. Please include the full body of your comments in the text of the 
message or an attachment.
    2. Federal eRulemaking Portal: http://www.regulations.gov. Follow 
the instructions for submitting comments.
    3. Mail: Address the comments to Kenneth Chuck Wade, Office of 
Nuclear Energy, (NE-30) U.S. Department of Energy, Forrestal Building, 
1000 Independence Avenue, SW, Washington, DC 20585. The Department 
requires, in hard copy, a signed original and three copies of all 
comments. Due to potential delays in the Department's receipt and 
processing of mail sent through the U.S. Postal Service, we encourage 
commenters to submit comments electronically to ensure timely receipt.

FOR FURTHER INFORMATION CONTACT: Kenneth Chuck Wade, Project Manager, 
Office of Nuclear Energy, NE-30, U.S. Department of Energy, 1000 
Independence Avenue, SW., Washington, DC 20585. (301) 903-6509 or 
Marvin Shaw, Attorney-Advisor, U.S. Department of Energy, Office of the 
General Counsel, GC-52, 1000 Independence Avenue, SW., Washington, DC 
20585. (202) 586-2906.

SUPPLEMENTARY INFORMATION:

I. Section 638 of the Energy Policy Act of 2005
II. Rulemaking History
III. Interim Final Rule
    A. Overview of the Rule
    B. Section-By-Section Analysis
IV. Regulatory Review Requirements
    A. Review Under Executive Order 12866
    B. Review Under Executive Order 12988
    C. Review Under Executive Order 13132
    D. Review Under Executive Order 13175
    E. Review Under the Regulatory Flexibility Act
    F. Review Under the Paperwork Reduction Act
    G. Review Under the National Environmental Policy Act
    H. Review Under the Unfunded Mandates Reform Act
    I. Review Under Executive Order 13211
    J. Review Under the Treasury and General Government 
Appropriations Act 1999
    K. Review Under the Treasury and General Government 
Appropriations Act 2001
    L. Congressional Notification
V. Approval of the Office of Secretary

I. Section 638 of the Energy Policy Act of 2005

    On August 8, 2005, President Bush signed into law the Energy Policy 
Act of 2005 (the Act) (Pub. L. 109-58, 119 Stat. 594). Section 638 of 
the Act addresses the President's proposal to reduce uncertainty in the 
licensing of advanced nuclear facilities. (42 U.S.C. 16014). The 
purpose of section 638 is to facilitate the construction and full power 
operation of new advanced nuclear facilities by providing risk 
insurance for such projects. Such insurance is intended to reduce 
financial disincentives and uncertainties for sponsors that are beyond 
their control in order to encourage investment in the construction of 
new advanced nuclear facilities. By providing insurance to cover 
certain of these risks, the Federal government can reduce the financial 
risk to project sponsors that invest in advanced nuclear facilities 
that the Administration and Congress believe are necessary to promote a 
more diverse and secure supply of energy for the Nation.
    Section 638 contains a number of provisions to establish the 
Standby Support Program (the ``Program''). These provisions are related 
to (1) the Secretary's authority to enter into contracts and details 
related to such contracts, (2) the establishment of funding accounts, 
(3) the funding of these accounts, (4) the types of regulatory and 
litigation delays Congress determined were to be covered by the 
Program, (6) the types of delays that Congress determined were to be 
excluded from coverage, (7) the amount of coverage for up to six 
advanced nuclear facilities with a distinction made for the initial two 
reactors and the subsequent four reactors, (8) the types of costs to be 
covered by the Program, and (9) reporting requirements by the Nuclear 
Regulatory Commission (``Commission'').
    Section 638(g) provides for regulations necessary to carry out 
section 638. This section directs the Secretary to issue an interim 
final rule within 270 days after enactment of the Act and to adopt 
final regulations within one year after enactment.

II. Rulemaking History

    Prior to developing and issuing this interim final rule, the 
Department issued a Notice of Inquiry (NOI) and request for comments to 
provide an opportunity for public input. (70 FR 71107, November 25, 
2005) The NOI discussed the major topics related to section 638, 
including the types of sponsors and facilities covered, the Secretary's 
contracting authority, appropriations and funding accounts, covered and 
excluded delays, covered costs and requirements, and disagreements and 
dispute resolution. For some topics, this NOI indicated implementation 
approaches and interpretations under consideration by the Department. 
The NOI included a general request for comments and identified certain 
topics on which the Department specifically requested comments. Among 
other matters, the Department sought comment about how the statute 
could be implemented most effectively to achieve the objective of 
reducing the risks associated with certain delays in the advanced 
nuclear facility licensing process and thereby facilitating the 
expeditious construction and operation of new advanced nuclear 
facilities.
    On December 15, 2005, the Department sponsored a public workshop to 
allow the public to provide oral comments about section 638 and the 
NOI. Over 60 people attended the public workshop. A transcript of the

[[Page 28201]]

proceedings is posted at www.nuclear.gov.
    The Department received nine written comments on the NOI, including 
comments from the Commission, a nuclear energy trade association, 
several utilities and other potential sponsors, an economic consulting 
firm, and a public advocacy group. In addition to responding to the 
questions posed in the NOI, the commenters provided their general views 
on implementing section 638.

III. Interim Final Rule

A. Overview of the Rule

    The interim final rule establishes a new part 950 in Title 10 of 
the Code of Federal Regulations (CFR). The rule sets forth the 
procedures, requirements and limitations for the award and 
administration of Standby Support Contracts indemnifying a project 
sponsor for certain costs that may be incurred due to a delay in full 
power operation of the sponsor's advanced nuclear facility.
    Subpart A sets forth the purpose, scope and applicability, and 
definitions of the regulation.
    Subpart B sets forth provisions addressing the Standby Support 
Contract process, including the process whereby a sponsor and the 
Program Administrator would enter into a Conditional Agreement prior to 
a Standby Support Contract, obligations of a sponsor prior to entering 
into a Conditional Agreement, the provisions of that Conditional 
Agreement, conditions precedent that a sponsor must satisfy prior to 
entering into a Standby Support Contract, funding issues related to the 
Standby Support Program, reconciliation of costs, and termination of a 
Conditional Agreement. Subpart B also addresses the provisions for each 
Standby Support Contract. These include general contracts terms, 
including the contract's purpose, the advanced nuclear facility that is 
the subject of the contract, the sponsor's contribution, the maximum 
aggregate compensation, the term of the contract, cancellation 
provisions, termination by sponsor, assignment, claims administration, 
and dispute resolution; and specific contract terms that implement 
section 638's provisions related to covered events, exclusions, covered 
delay, and covered costs.
    Subpart C sets forth the claims administration process, including 
the submission of claims and payment of covered costs under a Standby 
Support Contract. This subpart includes sections addressing 
notification by a sponsor of a covered event, covered event 
determinations made by the Department's Claims Administrator, 
certification of covered costs by the sponsor, determination of covered 
costs by the Claims Administrator, issuance of a Claim Determination of 
a covered delay and covered costs by the Claims Administrator, 
conditions for payment of covered costs, and adjustments for and 
payment of covered costs.
    Subpart D sets forth provisions related to dispute resolution, 
including disputes involving covered events and disputes involving 
covered costs. In each case, subpart D provides a two-step process, 
first requiring non-binding mediation and then binding arbitration, if 
the parties cannot reach agreement.
    Subpart E sets forth miscellaneous provisions about the 
Department's authority to monitor and audit a sponsor's activities and 
the public disclosure of information provided by a sponsor to the 
Department.

B. Section-by-Section Analysis

Subpart A--General Provisions

Section 950.1 Purpose
    The Department is adopting this interim final rule to provide risk 
insurance to facilitate the construction and full power operation of 
new advanced nuclear facilities. Section 638 provided for such 
insurance to reduce the financial disincentives that make sponsors 
reluctant to invest in construction of new advanced nuclear facilities, 
including the risk that a facility may be constructed but may not 
achieve full power operation in a timely manner.
    In response to the NOI, commenters stated that there are additional 
factors that the Department should consider in implementing the 
statute. These include having well-defined regulations that are 
sufficiently definite and realistic, protecting taxpayer funds from 
being unreasonably allocated to the nuclear industry, and ensuring that 
the regulations do not undermine the government's traditional role of 
ensuring the safe design and operation of nuclear facilities.
    The Department agrees with these general comments. Accordingly, the 
Department has implemented section 638 in a transparent manner that is 
sufficiently detailed, workable, and fair. This regulatory framework 
will provide sponsors risk insurance for certain regulatory and 
litigation delays, while protecting taxpayer funds by having sponsors 
contribute a portion of the premium for this insurance. Further, the 
Department intends that this insurance reflects the magnitude of the 
risk and the extent of the protection provided. The Department also is 
mindful that in facilitating the construction and full power operation 
of advanced nuclear facilities, its efforts should not undermine the 
responsibility of government agencies to address safety concerns during 
the permitting and licensing processes for such new facilities.
    In the NOI, the Department requested comment on whether a sponsor 
should be eligible to participate in the Standby Support Program as 
well as any loan guarantee program for which the sponsor may be 
eligible pursuant to Title XVII of the Act, or the production tax 
credits for advanced nuclear facilities in section 1306 of the Act. 
(Subsequent to the NOI, the Department has become aware of other 
Federal programs such as the Rural Utility Service that may provide 
subsidies to a sponsor. Accordingly, any consideration of multiple 
subsidies would include such additional programs). The Department 
requests comment on whether sponsors should be eligible to participate 
in multiple loan guarantee or other subsidy programs and, if so, on 
whether clarification is needed on issues such as the amounts an entity 
can receive under more than one Federal program.

Section 950.3 Definitions

    Certain definitions set forth in the Act are included in the 
interim final rule verbatim from the Act, and are repeated in the rule 
for ease of reference. In several areas, the interim final rule 
clarifies or further defines terms in the statutory definitions. In 
addition, the interim final rule defines certain terms that are either 
referenced in section 638 but not defined or are in addition to terms 
in the statute. The following provides an explanation of certain key 
definitions that may benefit from additional description and 
clarification here. Other terms are discussed in the section discussing 
subpart B.
    Advanced nuclear facility. Several commenters suggested that 
further clarification of the definition of advanced nuclear facility is 
warranted because it relates to the issue of project eligibility. 
Commenters also specifically requested further clarification of the 
phrase ``substantially similar'' in the statutory definition of the 
term advanced nuclear facility. One commenter suggested that the 
definition include the concept that no reactor design that is certified 
by the Commission after December 31, 1993 should be considered 
``substantially similar'' to a design certified by the Commission prior 
to that date, and that the rule should not include a ``no later

[[Page 28202]]

than'' date for design certification, thereby providing sponsors the 
ability to proceed with design certification and combined licensing on 
a parallel process.
    The definition of advanced nuclear facility in the interim final 
rule is taken verbatim from the Act. After reviewing current reactor 
designs, the Department concludes that there are likely no reactor 
designs that have been approved after December 31, 1993 that are 
``substantially similar'' to designs that were certified before that 
date for which potential project sponsors have suggested interest. The 
Westinghouse System 80-plus design is the only reactor design which is 
somewhat similar to a pre-1993 design, called the System 80. However, 
there are enough differences between the two designs to indicate that 
they should not be considered substantially similar. Based on the 
Department's review, any reactor design that obtains design 
certification by the Commission after December 31, 1993 likely will not 
be considered substantially similar. In particular, appendices to 10 
CFR part 52 (Appendix A, ``Design Certification Rule for the U.S. 
Advanced Boiling Water Reactor, Appendix B, ``Design Certification Rule 
for the System 80+ Design,'' and Appendix C, ``Design Certification 
Rule for the AP600 Design'') specify reactor designs that have received 
certification by the Commission. Nevertheless, the Department reserves 
the right to make a final determination if a project sponsor chooses a 
design that the Department has not anticipated. This interpretation 
meets the statute's intent to promote advanced nuclear reactor designs 
by eliminating from eligibility a nuclear reactor design whose major 
elements had been reviewed and approved by the Commission prior to 
December 31, 1993.
    In recognition of the fact that some sponsors may pursue design 
certification in tandem with the combined license process, the 
Department has decided not to impose a ``no later than'' date for 
Commission design, review, and approval. However, at the time a sponsor 
has satisfied the other conditions precedent to enter into a Standby 
Support Contract with the Department, including obtaining a combined 
license and commences construction, a determination would then be made 
as to whether the sponsor's reactor design was approved after December 
31, 1993 and is not ``substantially similar'' to a reactor design of 
comparable capacity that was approved on or before that date.
    Commencement of construction. Several commenters also requested 
that the Department define the phrase ``commencement of construction'' 
in the regulations, and suggested an appropriate definition would 
include the pouring of safety-related concrete. It was noted that this 
action by a sponsor was an accurate and clear indicator of a ``real'' 
project, with a high likelihood of achieving commercial operation, 
thereby satisfying the Act's statutory intent. Clarity on this topic is 
particularly important since a sponsor is eligible for a Standby 
Support Contract only if, in addition to receiving a combined license, 
the sponsor has commenced construction. Commencement of construction is 
defined to mean the point in time when a sponsor initiates the pouring 
of safety-related concrete for the reactor building. This definition 
represents a clear and unambiguous event, and an event that denotes a 
firm commitment to nuclear plant construction in accord with the 
purposes of the Act.
    Combined license. One commenter suggests that the term ``combined 
license'' not be altered since it was established by the Commission and 
should therefore be identical to that in 10 CFR part 52. The definition 
of combined license in the interim final rule is taken verbatim from 
section 638 of the Act. The Department notes that the definition of 
combined license is somewhat different in the Commission's licensing 
regulations, 10 CFR part 52, although the Department believes that this 
difference is not significant. Nevertheless, to clarify, the Department 
interprets the definition of ``combined license'' in the Act and part 
950 as having the same meaning as that term is given in the Commission 
regulations at 10 CFR 52.3.
    Sponsor. The Department sought comment in the NOI on the definition 
of sponsor. Many commenters agreed a definition was necessary because 
it addresses the question of contract eligibility. In particular, 
commenters requested further clarification of the phrase ``applied 
for'' in the definition of sponsor. They suggested that an appropriate 
clarification would indicate that ``applied for'' meant that a 
sponsor's application was accepted as sufficient for docketing by the 
Commission, and not merely submitted to the Commission.
    The Department agrees that clarification of the phrase ``applied 
for'' is warranted, and the clarification suggested by the commenters 
is reasonable and appropriate. The intent of the Act is to encourage 
the development of advanced nuclear facilities. An initial and 
essential step toward that goal is the submission of a combined license 
application to the Commission. While the Department fully supports this 
goal, it is also important that the Department utilize its limited 
resources to enter into Conditional Agreements only with those entities 
that have provided the Commission with an application of sufficient 
quality to be docketed by the Commission. Under the Commission's 
regulations, any person may submit an application for a combined 
license. However, the Commission will accept such an application for 
docketing only after it has conducted a preliminary review to determine 
whether the application is complete and contains sufficient information 
to support the Commission's detailed technical review. The Department 
believes it is appropriate to clarify that a sponsor is any person that 
has ``applied for'' a combined license and such application by the 
person has been docketed by the Commission. The Department is aware of 
the possibility that one entity may be receiving payments for a covered 
event, but that the debt obligation may actually be held by an entity 
other than the sponsor. The Department emphasizes that only a sponsor 
is eligible to enter a Standby Support Contract and thus be eligible 
for covered costs under the Standby Support Program. If necessary, the 
Department may include provisions in the Standby Support Contract to 
ensure that only a sponsor is eligible for payments under the Program.

Subpart B--Standby Support Contract Process

Section 950.10 Conditional Agreement

Purpose
    Section 638(b) authorizes the Secretary to enter into Standby 
Support Contracts with sponsors of advanced nuclear facilities. That 
paragraph directs that sufficient funding be placed in designated 
Departmental accounts before the contracts are executed. In the NOI, 
the Department noted that the Secretary has considerable discretion as 
to the timing and method of entering into Standby Support Contracts. 
The NOI then stated the Department's tentative goal of permitting 
sponsors to enter into Standby Support Contracts as early as 
practicable, while recognizing that entering into a contract with a 
sponsor before the sponsor receives a combined license and commences 
construction may raise implementation issues. Consequently, the NOI 
stated that the Department should consider entering into ``binding 
agreements'' with sponsors that submit combined license

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applications that are docketed by the Commission. Although the 
Conditional Agreements between the Department and project sponsors 
would not themselves be Standby Support Contracts, they would commit 
the Department to enter into Standby Support Contracts with the first 6 
project sponsors who have met the requirements of the conditional 
agreements and section 638 (including the provision of adequate 
budgetary resources) have been satisfied.
    Commenters generally agreed with the Department's discussion of the 
benefits of a two-step approach in which an agreement could be 
converted into a Standby Support Contract when a combined license is 
issued by the Commission and construction commences, and the 
requirements of the statute, including adequate budgetary resources, 
are otherwise satisfied. Industry commenters noted that long before 
construction, a project developer would need to obtain approval from 
its Board of Directors and obtain construction financing. In contrast, 
one commenter stated that the Department should not enter into binding 
agreements, which it stated was inconsistent with section 638's 
provision that the Secretary ``shall not enter into a contract unless 
sufficient funds are already in the Standby Support Program Account to 
cover the facility's debt costs.'' In addition to these general 
comments about a two-step implementation process, commenters provided 
additional detailed comments which will be addressed below.
    The Department concludes that it is consistent with the provisions 
in section 638 and the statutory goal of facilitating the construction 
and operation of advanced nuclear facilities to implement a two-step 
process involving a Conditional Agreement, which then can, for the 
first six qualifying sponsors, be converted into a Standby Support 
Contract at a later date, if the sponsor meets certain conditions and 
budgeting resources are provided. Specifically, the Department has 
significant discretion to establish the procedures needed to manage the 
Standby Support Program, provided that they are consistent with section 
638. Such a two-step implementation process allows the Department and 
potential sponsors to manage the difficult timing issues inherent in 
both the federal appropriations process and business concerns in 
planning and financing a multi-billion dollar advanced nuclear 
facility. In making this determination to require a Conditional 
Agreement, the Department reviewed other similar federal programs, 
including the Department of Transportation's Transportation 
Infrastructure Finance and Innovation Act (TIFIA) program, which 
provides loans for surface transportation projects. (See 64 FR 29742, 
June 2, 1999.) The TIFIA program first requires a potential recipient 
to enter into a ``conditional term sheet,'' which commits the 
Department of Transportation to provide federal assistance to a project 
at a future point in time upon satisfaction of specified conditions. 
The Conditional Agreement is similar in concept to the TIFIA program. 
Unlike TIFIA (under which funds are obligated at this ``commitment'' 
point), no funds would be obligated when the Conditional Agreement is 
signed. Rather, a Standby Support Contract would be executed only after 
sufficient budgetary resources are available.
Eligibility
    In the NOI, the Department discussed tying the implementation of 
the Standby Support Program to the Commission's process for issuing a 
combined license set forth in 10 CFR part 52. Specifically, the NOI 
stated that the Department should be able to enter into an initial 
agreement with a sponsor that submits a combined license application at 
any time on or after such application is submitted. Commenters, 
including the Commission, generally agreed with tying the initial 
agreement to the Commission's analysis of combined license 
applications. Accordingly, the Department in Sec.  950.10(b) of the 
interim final rule specifies that a sponsor is eligible to enter into a 
Conditional Agreement with the Program Administrator after the sponsor 
has submitted a combined license application and the Commission has 
docketed the combined license application, and after the sponsor has 
submitted information to the Department and the Program Administrator 
has determined that information to be complete, accurate and the 
Conditional Agreement is consistent with applicable statutes and 
regulations. (The Department notes that in today's interim final rule, 
the notice distinguishes the terms ``Program Administrator'' and 
``Department.'' ``Program Administrator'' is used to identify 
situations involving the execution of a Conditional Agreement or a 
Standby Support Contract; whereas, ``Department'' is used to identify 
general statements of policy and situations involving more general 
matters such as funding and appropriations). The Department notes that 
it costs millions of dollars to prepare an application for a combined 
license and that the Commission has the discretion to reject any such 
application that is incomplete. The Department further notes that 
section 638 provides the Secretary with broad discretion to issue 
regulations implementing the Standby Support Program. Accordingly, the 
Department has determined that it is appropriate to allow a sponsor to 
enter into a Conditional Agreement at any time on or after the 
Commission dockets a combined license application, because the sponsor 
has shown sufficient seriousness and its combined license application 
is of sufficient quality.
    Section 950.10(b) further indicates that a sponsor may enter into a 
Conditional Agreement from the time the Commission dockets its combined 
license application but before the Commission has issued the license. 
The Department notes that it will likely take several years for the 
Commission to issue the combined license, a time period which the 
Department has determined is sufficient for a sponsor to decide whether 
it wants to participate in the Standby Support Program.
    In section 950.10(b), the Department further requires a sponsor 
that plans to enter into a Conditional Agreement to provide certain 
information including: (1) An electronic copy of the combined license 
application docketed by the Commission pursuant to 10 CFR part 52; and 
if applicable, an electronic copy of the early site permit or 
environmental report referenced or included with the sponsor's combined 
license application; (2) a summary schedule identifying the projected 
dates of construction, testing and full power operation; (3) a detailed 
plan of intended financing for the project including the credit 
structure and all sources and uses of funds for the project, and the 
projected cash flows for all debt obligations of the advanced nuclear 
facility which would be covered under the Standby Support Contract; (4) 
the sponsor's estimate of the amount and timing of the Standby Support 
payments for debt service under covered delays; and (5) the estimated 
dollar amount to be allocated to the sponsor's covered costs for 
principal or interest on the debt obligation of the advanced nuclear 
facility and for incremental costs, including whether these amounts 
would be different if the advanced nuclear facility is one of the 
initial two reactors or one of the subsequent four reactors.
    The Department notes that this information is needed to determine 
the score under the Federal Credit Reform Act of 1990 (FCRA). This 
documentation requirement should pose only a nominal burden on a 
sponsor

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because the sponsor likely has this information readily available in 
the normal course of obtaining financing for the advanced nuclear 
facility and Commission approval for a combined license. The Department 
will not use this documentation to select among potential sponsors. 
Rather, the actual awarding of a Standby Support Contract is based on 
fulfillment of the requirements and conditions in the Conditional 
Agreement, including the Commission's issuing of a combined license and 
the sponsor's commencement of construction (i.e., the pouring of 
safety-related concrete for the reactor building). This documentation 
will allow the Department's representative, the Program Administrator, 
to enter into a Conditional Agreement and to monitor the progress of 
various competing sponsors, prior to entering into Standby Support 
Contracts. This relatively modest information requirement is in lieu of 
an application process similar to those required by the Department of 
Transportation's Transportation Infrastructure Finance and Innovation 
Act (TIFIA) program or the Overseas Private Investment Corporation 
(OPIC). For these reasons, the Department generally agrees with the 
commenters who, in response to the NOI, noted that it would be 
appropriate for the Department to request the combined license 
application in lieu of a separate application to the Department to be 
eligible for a Standby Support Contract.
    In section 950.10(c), the Department sets forth the bases upon 
which it will determine whether to enter into a Conditional Agreement. 
This determination will be based on a review of the information 
provided by the sponsor under Sec.  950.10(b) to determine eligibility 
for a Conditional Agreement, and the accuracy and completeness of the 
information provided. The Department also will determine whether the 
Conditional Agreement may be executed consistent with applicable 
statutes or regulations, including the National Environmental Policy 
Act (NEPA). The Department anticipates that its environmental review 
under NEPA for the Conditional Agreement or Standby Support Contract 
would acknowledge or be based upon the NEPA review conducted by the 
Commission in relation to its review and approval of the sponsor's 
combined license application.

Section 950.11 Terms and Conditions of the Conditional Agreement

General
    Section 950.11(a) requires that the Conditional Agreement include a 
provision requiring the Program Administrator and the sponsor to enter 
into a Standby Support Contract, provided that a sponsor is one of the 
first six sponsors to fulfill the conditions precedent to a contract, 
and subject to certain statutory funding requirements and limitations, 
which are set forth in Sec.  950.12, and any other applicable 
contractual, statutory and regulatory requirements. Upon a satisfaction 
of these conditions precedent, the Program Administrator will enter 
into a Standby Support Contract with the first six sponsors. Imposing 
such requirements is consistent with the goal of section 638 which is 
for the Department to enter into such a contract to facilitate the 
construction and full power operation of advanced nuclear facilities.
    This approach strikes a balance between two different concerns 
expressed by commenters. Most industry commenters stated that the 
``binding'' agreement should be binding on the Department without 
conditions, not be contingent on subsequent appropriations, and be 
subject to specific performance. Other commenters stated that it was 
inappropriate for the Department to needlessly commit itself to such 
contracts. The Department believes that given the statutory 
constraints, a sponsor has as much certainty as possible that it can 
rely on the Conditional Agreement in which the Program Administrator 
agrees to enter into a Standby Support Contract, provided the critical 
regulatory and statutory conditions precedent are met. The Department 
further believes that it would be imprudent to commit the Secretary and 
future Secretaries to enter into a Standby Support Contract, absent any 
of these conditions precedent. This commitment, of course, remains 
subject to the normal budgetary process and does not (and could not) 
obligate the President to seek, nor the Congress to provide, budget 
authority for a Standby Support Contract.
    In both the public workshop and in comments to the NOI, several 
potential sponsors stated that it was critical to understand the 
pricing of the loan costs related to the Program Account, prior to a 
sponsor entering into such a Standby Support Contract. They noted that 
the key to an effective Standby Support Program would be the premium 
charged to cover the principal or interest of a loan. If the sponsor's 
portion of the premium were too high, project sponsors likely would 
elect not to use the coverage. Industry commenters recommended that the 
loan costs be priced similarly to other insurance coverage provided by 
OPIC and other private and public insurers against sovereign political 
risk. These commenters stated that OPIC risk insurance carries an 
annual premium of 40-70 basis points of the face value of coverage and 
that the commercial insurance market carries an annual premium of 100 
basis points. Accordingly, a $500 million Standby Support Contract 
would cost a sponsor $5 million per year.
    The Department agrees with the general proposition that a sponsor 
should know its funding needs prior to execution of the Standby Support 
Contract, and has included Sec.  950.11(b), (c) and (d) in the 
regulations to reflect the need for specificity, transparency and 
accuracy on funding of Standby Support Contracts prior to execution. 
Nevertheless, the Department emphasizes that the sponsor's contribution 
is based on the amount of appropriated funds, and that the cost 
estimate for the Program Account will be calculated consistent with 
FCRA.
    The Department notes that there are significant differences between 
the risks being covered by the Standby Support Program and those 
covered by OPIC. OPIC and the traditional commercial insurance market 
pool the risk faced by potential insured entities. For instance, OPIC 
typically provides insurance coverage for scores of different projects 
at a given time. Accordingly, by distributing the risk among many 
projects, the insurer--whether OPIC or a commercial insurer--spreads 
the risk among many projects. OPIC uses a risk management strategy that 
diversifies risk based on sector and geographic location. Such risk 
diversification is not possible in the Standby Support Program. 
Moreover, the average size of an individual liability is smaller for an 
OPIC insured policy than for Standby Support, allowing OPIC to have 
greater risk diversification for an equal amount of underwritten 
policy.
    In response to the NOI and at the public workshop, several 
potential sponsors indicated little interest in obtaining coverage for 
incremental costs. Given the differences between the Program Account 
and the Grant Account, the Department believes that it is reasonable to 
expect that the amount of funding a sponsor would be willing to provide 
for the Grant Account, if it decides to obtain coverage for incremental 
costs, would be less than for the Program Account. As with the

[[Page 28205]]

Program Account, the sponsor and the Department will be required to 
indicate the anticipated amounts each would expect to contribute to the 
Grant Account. For each account, the Department has no obligation to 
make contributions in excess of any amounts appropriated for that 
purpose.
Allocation of Coverage and Funding
    Section 950.11(b) and (c) address the issues related to section 
638(b)(2), which establishes a funding requirement that must be met 
before the Program Administrator can enter into a Standby Support 
Contract. To carry out these statutory provisions and depending on 
whether the coverage is for one of the initial two or for the 
subsequent four reactors, the Department requires in Sec.  950.11(b) 
that the Conditional Agreement include a provision addressing how to 
allocate the $500 million or the $250 million between the accounts. The 
Department notes that there is a certain degree of uncertainty inherent 
at the Conditional Agreement stage, given that this step precedes 
entering into a Standby Support Contract possibly by several years and 
that funding and appropriations issues likely will have not yet been 
decided. Accordingly, the Department believes that it is sufficient at 
the time of the Conditional Agreement to have the parties agree upon 
the anticipated amounts for each account.
    Section 950.11(c) specifically addresses the issue of how the 
Standby Support Contracts will be funded. Section 638 mandates that 
before entering into a Standby Support Contract, the Department 
establish two separate accounts and have a specified amount of funds in 
the relevant accounts before entering into a contract. The first 
account is a ``Standby Support Program Account'' (``Program Account''), 
and the second account is a ``Standby Support Grant Account'' (``Grant 
Account''). Section 638 treats the funding requirements differently for 
each account. Section 638(b)(2) specifies that consistent with the cost 
of a loan guarantee under FCRA, the Program Account receives 
appropriations or loan guarantee fees in an amount sufficient to cover 
the loan costs in advance of the Standby Support contract; this may be 
a combination of appropriated funds and loan guarantee fees from the 
sponsor or other non-Federal source. The funds in the Program Account 
must be in an amount sufficient to cover the loan costs for the 
principal or interest on the debt obligation of the advanced nuclear 
facility covered by a Standby Support Contract for the time period of 
covered delay in full power operation, as described in section 
638(d)(5)(A). Section 638(b)(2)(C)(ii) specifies that the Grant Account 
must receive funds appropriated to the Secretary, funds paid to the 
Secretary by the sponsor, or a combination of both appropriated funds 
and sponsor payments. The funds in the Grant Account must be sufficient 
to cover the incremental cost of replacement power the sponsor may need 
to purchase to fulfill power supply contracts for the time period of 
covered delay in full power operation, as described in section 
638(d)(5)(B). (Section 638(c)(ii) refers to three different paragraphs 
in paragraph (d)(5); however, only one of those referenced paragraphs, 
(d)(5)(B), was enacted into law.) With respect to the Grant Account, 
the Secretary's responsibility to pay covered costs is expressly 
limited in section 638(d)(4) to the payment of those costs for which 
the Secretary has received appropriations or payments from a non-
federal source in an amount sufficient to pay the covered costs. 
Section 638 does not contain such a limitation with respect to the 
Program Account. For either account, section 638(d)(4)(B) permits the 
Secretary to receive and accept payments from any non-federal source.
    With respect to the question of which party is responsible for 
funding the Standby Support Contracts, Congress provided a flexible 
mechanism for the parties to consider in structuring the contracts. In 
general, section 638 allows for the Program Account and Grant Account 
to be funded by contributions from government appropriations, the 
sponsor, or a non-federal source; or a combination of these sources. 
The Department has structured its regulations to reflect this statutory 
intent. An explanation of the funding requirements for each account is 
described below.
    Pursuant to section 638, Sec.  950.11(c) requires that each 
Conditional Agreement contain a provision that the Program Account or 
the Grant Account be funded in advance of the Standby Support Contract. 
The Program Account is required to be funded by appropriated funds that 
are received by the Department, or a combination of appropriated funds 
and loan guarantee fees that are in an amount equal to the loan costs 
associated with the amount of principal or interest covered by the 
available indemnification. Section 950.11(c)(1) further requires the 
parties to specify in the Conditional Agreement the anticipated amount 
or anticipated percentage of the total funding in the Program Account 
to be contributed by appropriated funds to the Department, by the 
sponsor or by a non-federal source. The purpose of this provision is to 
obtain some specificity as to the anticipated funding responsibilities 
of the Department and the sponsor, and thereby aid both the Department 
and the sponsor in preparing for a Standby Support Contract in the 
future.
    Section 950.11(c)(2) requires each Conditional Agreement contain a 
provision that the Grant Account be funded in an amount equal to the 
amount of coverage allocated to cover incremental costs. Section 
950.11(c)(2) further requires the parties to specify in the Conditional 
Agreement the anticipated amount or anticipated percentage of the total 
funding in the Grant Account to be contributed by appropriated funds to 
the Department, by the sponsor, or by a non-federal source.
    The similar language in Sec.  950.11(c)(1) and (2) reflects the 
Department's understanding that funding for each account may come from 
a combination of Department appropriations and contributions by the 
sponsor or other non-federal source, and that these options should be 
available for the parties to consider. The Department believes it is 
reasonable and consistent with Congressional intent to maintain the 
option that some or all of the funding may be provided by the sponsor, 
while recognizing that the same option holds true for Congressional 
appropriations.
    For the Department, the actual funding contribution anticipated 
under the Conditional Agreement is dependent on the extent to which 
Congress appropriates funds for a particular Standby Support Contract. 
For the sponsor, the actual funding contribution under the Conditional 
Agreement is dependent upon how much the sponsor anticipates 
contributing--which could be all, some or nothing--taking into account 
the fact that the Department's contribution is subject to Congressional 
appropriations. The Department believes such an approach is reasonable 
since, while there is no guarantee as to what amount of funds, if any, 
will be appropriated for funding either the Program or Grant Accounts 
for a particular Standby Support Contract, it is likely that one of the 
factors that will be considered in deciding whether to appropriate 
funds will be the extent to which the sponsor provided funds. In that 
regard, the Department would expect that sponsors would view funding 
the Program Account similar to an insurance contract. That is, like an 
insurance contract, the sponsor (insured) is responsible for paying the 
insurance premium and the Department

[[Page 28206]]

(insurer) is responsible for paying the cost of any valid claims 
covered by the insurance.
    The most significant difference between funding the Program Account 
and Grant Account is that only the Program Account is subject to the 
FCRA. In section 638, Congress clearly directed that the funding in the 
Program Account is to be the ``loan cost'' associated with the covered 
costs for principal or interest on the debt obligation of the sponsor's 
advanced nuclear facility, where loan cost has the same meaning as 
``cost of a loan guarantee'' under FCRA. FCRA is a federal law designed 
to improve the cost structure and budgetary basis of federal credit 
programs. Under FCRA, the cost to the federal government of a loan 
guarantee made to a private entity is generally equal to the net 
present value of the estimated costs to cover defaults and 
delinquencies, interest, or other payments under the loan. In other 
words, the amount of the loan cost is not the same as the loan amount 
itself, but a lesser amount that represents the net present value of 
anticipated long-term costs to the Government of providing the loan 
guarantee.
    In accordance with section 638, the Department defines the loan 
costs for a Standby Support Contract consistent with FCRA. In so doing, 
the Department necessarily adopts the method for calculating the amount 
of funding for the account, that is, the loan cost, consistent with 
FCRA. Further, the Department interprets section 638, and the specific 
requirement in section 638(b)(2) that the Program Account need only 
contain amounts sufficient to cover the loan costs, to mean that the 
Program Account does not need to be funded in an amount equal to the 
costs for which coverage is provided and that are specified in section 
638(b)(5)(A). This method of funding the Program Account is consistent 
with FCRA, and is a logical outgrowth of the Congressional directive in 
section 638(b)(2) to define loan costs consistent with the cost of a 
loan guarantee under FCRA. Similarly, the Department's responsibilities 
under section 638 to pay covered costs out of the Program Account are 
consistent with loan guarantee programs under FCRA. (See 2 U.S.C. 
661a(3)). That is, the Department is required to pay any claims for 
covered costs under the Program Account, up to the available 
indemnification, without further appropriations to the Secretary for 
such payments. (See 2 U.S.C. 661d(c)).
    Although section 638 does not contain an express directive 
regarding this obligation of the Department, such as a provision that 
the contract is backed by the full faith and credit of the United 
States, it is within the Department's discretion to interpret statutory 
intent where Congress is silent or unclear, and implement the statute 
according to its interpretation. The Department's interpretation of its 
need to pay covered costs under the Program Account is consistent with 
FCRA and the obligations of the federal government under other credit 
programs. Moreover, it is not necessary for Congress to include a 
provision specifying that the Department's obligation for such costs is 
backed by the full faith and credit of the United States. Though it 
would have been desirable had such language been included in section 
638, its absence does not negate the Department's obligation to pay the 
covered costs under section 638 and FCRA, nor does its absence prevent 
the Department from entering into a contract backed by the full faith 
and credit of the United States. Accordingly, the Secretary of the 
Treasury would be required to fund future obligations arising from the 
payment of covered costs under section 505(c) of FCRA, even though 
section 638 does not expressly use the term ``full faith and credit.''
    The applicability of FCRA to the Program Account contrasts with the 
Secretary's obligation to pay covered costs under the Grant Account. 
Section 638(d)(4) specifies conditions on the Secretary's obligation to 
pay certain covered costs. That provision limits the Secretary's 
obligation to pay covered costs under section 638(d)(5)(B) (i.e., 
incremental costs) to the receipt of funds sufficient to pay those 
covered costs. Congress did not place a similar restriction on the 
Department's obligation to pay covered costs under section 638(d)(5)(A) 
(i.e., principal or interest on debt obligation).
    Reconciliation. Given the potentially lengthy period of time 
between execution of a Conditional Agreement and execution of a Standby 
Support Contract, the Department believes it is necessary to re-assess 
the amount of funds necessary prior to execution of the Standby Support 
Contract. Accordingly, in Sec.  950.11(d), each Conditional Agreement 
is required to include a provision that the sponsor provide no later 
than 90 days prior to execution of a Standby Support Contract 
sufficient information for the Program Administrator to recalculate the 
loan costs and the incremental costs associated with the advanced 
nuclear facility, taking into consideration whether the sponsor's 
advanced nuclear facility is one of the initial two reactors or the 
subsequent four reactors. The Department believes that having the 
reconciliation process within 90 days of executing the Standby Support 
Contract provides the sponsor and Department additional certainty that 
the pricing will realistically reflect the risks associated with the 
Standby Support Contract.
Limitations
    Section 950.11(e) addresses limitations related to the Department 
entering into a Standby Support Contract. In particular, each 
Conditional Agreement is required to include a provision limiting the 
Department's obligations to contribute federal funding to the Program 
Account or the Grant Account to only those amounts, if any, that are 
appropriated to the Department in advance of the Standby Support 
Contract for the purpose of funding the Program Account or Grant 
Account. The purpose of this provision is to recognize and clarify that 
the Department's contribution is contingent upon Congressional 
appropriations.
    Section 950.11(e) further provides that if the amount of 
appropriated funds is not sufficient to fund the Department's 
anticipated contribution under the Conditional Agreement, the sponsor 
has the option to either (1) not execute a Standby Support Contract or 
(2) provide additional contributions to fund the total amount of 
coverage in either the Program Account, Grant Account, or both accounts 
as specified in the Conditional Agreement. The Department believes that 
these provisions take into account the change in circumstances that may 
occur between the time of the Conditional Agreement and the Standby 
Support Contract. The provision also provides a sponsor the option 
either to enter into a contract or forego that opportunity. 
Nevertheless, if the sponsor elects to execute the Standby Support 
Contract, it is required to make up the difference attributable to the 
Department and fully fund the total amount of costs as specified in the 
Conditional Agreement. Moreover, the sponsor may not elect to change 
the allocation of coverage for either account based on the Department's 
lowered contribution level and thereby potentially negate its 
additional contribution. This provision is reasonable and consistent 
with the purposes of section 638 to provide more coverage to those 
sponsors that are first in line in the construction and operation of 
advanced nuclear facilities.
Termination of Conditional Agreements
    The Department has determined that it is appropriate to specify 
situations in which the Conditional Agreement should no longer remain 
in effect. These

[[Page 28207]]

situations, specified in Sec.  950.11(f), include when a sponsor enters 
into a Standby Support Contract with the Program Administrator, when 
the sponsor has commenced construction of an advanced nuclear facility 
but declines to enter into a Standby Support Contract within 30 days 
after commencement of construction, when the sponsor notifies the 
Program Administrator that it wishes to terminate the Conditional 
Agreement, when contracts for three different reactor designs have been 
executed and the Conditional Agreement is for another reactor design 
(thereby implementing section 638(b)(1)), and when the Department has 
reached the statutory limit and entered into six Standby Support 
Contracts. In addition to being the logical outgrowth of administering 
a regulatory program, this provision allows other sponsors to take 
advantage of the Standby Support Program when a different sponsor 
wishes to terminate coverage. Such flexibility anticipates evolving 
circumstances and is consistent with the Department's goal to 
facilitate the full power operation of advanced nuclear facilities. 
Further, it is consistent with several commenters' concern that this 
risk insurance might be tied up by a sponsor but not be used.

Sections 950.12, 950.13 and 950.14 Standby Support Contract

    Section 950.12 sets forth the conditions and limitations associated 
with the execution of a Standby Support Contract. Section 950.13 
addresses the contract's purpose, identification of the advanced 
nuclear facility covered under the contract, amount of sponsor 
contribution, maximum aggregate compensation, term, cancellation, 
termination by sponsor, assignment, claims administration, and dispute 
resolution. In addition, Sec.  950.14 sets forth provisions addressing 
the interrelated issues of covered events, exclusions, covered delay, 
and covered costs. Each of these provisions will be discussed below.
    In the NOI, the Department addressed whether to include various 
terms and conditions via regulation or in a sample contract. A few 
commenters recommended that the Department provide a standard contract 
format, which they believed would allow them to evaluate its effect on 
risk allocation and the resulting impact on financing.
    The Department has determined that it is sufficient to include the 
critical contract terms in this regulation rather than provide a sample 
contract at this time. The Department believes that a sponsor can 
appropriately evaluate the potential contract's effect on risk 
allocation and financing during the pre-contract discussions set forth 
in Sec. Sec.  950.10 and 950.11. Accordingly, including a sample 
contract is not necessary.

Section 950.12 Standby Support Contract Conditions

Conditions Precedent
    In Sec.  950.12(a), the Department sets forth nine conditions 
precedent that a sponsor must fulfill to be eligible to enter into a 
Standby Support Contract. These provisions must be included in the 
Standby Support Contract. By requiring satisfaction of the conditions 
precedent prior to obtaining a Standby Support Contract, the Department 
intends to ensure that the sponsor will be able to construct an 
advanced nuclear facility. Accordingly, such protections are consistent 
with some commenters' concerns that the Standby Support Contracts only 
be awarded to viable entities. The Department has undertaken to require 
practicable and necessary conditions precedent that should not impose 
an unreasonable burden on a sponsor. The conditions precedent are the 
logical outgrowth of the provisions of section 638 of the Act and the 
Commission's licensing process. Some of these conditions precedent 
relate to the regulatory process, while others closely correlate to the 
actual construction of the advanced nuclear facility. Among those tied 
to the regulatory process are the need for the sponsor to have: (1) A 
Conditional Agreement with the Department, (2) a combined license 
issued by the Commission, (3) the payment of any required fees into the 
Program Account and the Grant Account, (4) a detailed schedule for the 
completion of the sponsor's performance of inspections, tests, analyses 
and acceptance criteria (ITAAC) and for informing the Commission of 
such completion, and (5) a detailed system-level construction schedule 
identifying projected dates of construction, testing and full power 
operation of the advanced nuclear facility. The regulation requires the 
sponsor to provide the detailed schedule for completing ITAAC and 
informing the Commission of ITAAC completion, and the systems-level 
construction schedule no later than ninety days prior to execution of 
the Standby Support Contract. This timing requirement will facilitate 
the contracting process so it is done in an orderly fashion. Among 
those tied to any construction project include documentation that the 
sponsor has: (1) Obtained all Federal, State or local permits required 
by law to commence construction, (2) commenced construction, and (3) 
obtained coverage of required insurance for the project. Further, no 
later than ninety days prior to execution of the Standby Support 
Contract, the sponsor must provide to the Program Administrator, a 
detailed and up-to-date plan of financing for the project including the 
credit structure and all sources and uses of funds for the project, 
including the projected cash flows for all debt obligations of the 
advanced nuclear facility.
    The Department will review the foregoing information, as well as 
any applicable statutes and regulations, and enter into a Standby 
Support Contract upon satisfaction that the conditions precedent have 
been met, the contract is consistent with applicable statutes and 
regulations, and the necessary funding is in place.
Funding and Limitations
    In Sec.  950.12(b), the Department requires that no later than 
thirty days prior to execution of the Standby Support Contract, funds 
in an amount sufficient to fully cover the loan costs or incremental 
costs as specified in the Conditional Agreement shall be deposited in 
the Program Account or the Grant Account. The purpose of this provision 
is to ensure that the administration and funding of the Standby Support 
Program occurs in an efficient and orderly manner.
    In Sec.  950.12(c), the Department provides limitations about 
entering into a Standby Support Contract, based on statutory direction 
in section 638, that sufficient funding for a contract must be 
deposited in either the Program Account of Grant Account prior to 
execution of the contract.

Section 950.13 Standby Support Contract: General Provisions

General Contract Provisions
    In Sec.  950.13, the Department specifies that each Standby Support 
Contract include provisions addressing basic contract terms, including 
the contract's purpose, covered facility, sponsor contribution, maximum 
aggregate compensation, the term, cancellation, termination by a 
sponsor, assignment, claims administration, and dispute resolution.
    Covered Facility. Section 950.13(b) requires each Standby Support 
Contract to include a provision specifying that the Secretary provide 
coverage only for an advanced nuclear facility, which must be owned by 
a non-federal entity, pursuant to section 638. In addition, this 
section requires the contract to

[[Page 28208]]

include the specific advanced nuclear facility to be covered, the 
reactor design, and its location. Inclusion of the facility's location 
is standard for any property insurance contract. Inclusion of the 
reactor type is necessary to implement section 638(b)(1).
    Sponsor Contribution. Section 950.13(c) requires each Standby 
Support Contract to include a provision specifying the amount that a 
sponsor has contributed to fund each type of account. This is necessary 
to implement the funding and appropriations considerations in section 
638(b), which distinguish between the Program Account and the Grant 
Account.
    Maximum Aggregate Compensation. Section 950.13(d) requires each 
Standby Support Contract to include a provision specifying the maximum 
amount of coverage permitted by section 638(d). Specifically, the 
provision states that the Department is prohibited from paying 
compensation under the contract in an aggregate amount that exceeds the 
amount of coverage up to $500 million each for the initial two reactors 
or up to $250 million each for the subsequent four reactors. In 
addition, the Secretary may include a provision setting a minimum 
amount of coverage, given that the Department will incur significant 
costs in implementing and administering the program. These potential 
costs include evaluating the funding for coverage, contract 
negotiations, monitoring, claims administration, and dispute 
resolution.
    Term. Section 950.13(e) requires each Standby Support Contract to 
include a provision specifying the date at which the contract commences 
as well as the term of the contract. The Department notes that the 
contract's effective date will be the date at which it has been signed 
by both the sponsor and the Program Administrator. Subject to the 
cancellation provisions in paragraph (f), the contract terminates when 
full power operation is achieved, and when all claims have been paid or 
any disputes involving claims under the contract have been resolved in 
accordance with the claims administration process in subpart C and the 
dispute resolution process in subpart D.
    Cancellation Provisions. Section 950.13(f) requires each Standby 
Support Contract to include a provision specifying that the parties may 
cancel the contract under certain conditions. First, the Program 
Administrator may cancel the contract if the sponsor abandons the 
project, provided that the abandonment is not caused by a covered event 
or force majeure. Second, the sponsor may cancel the contract if the 
sponsor determines that it no longer requires continued coverage. In 
either case, this provision requires the party canceling the contract 
to provide written notification to the other party. Third, the parties 
may cancel the contract for other causes as agreed upon. Such 
cancellation provisions are consistent with requests by commenters that 
the Department should have the right to cancel a contract where a 
project has been abandoned. However, the Department decided not to 
require a fixed timeframe for determining that a sponsor is 
experiencing an unexcused, extended suspension of construction, because 
the Department believes mandating cancellation based on a fixed 
timeframe would inappropriately reduce the Department's flexibility in 
assessing a particular situation. Nevertheless, the Department's 
general decision to include cancellation provisions is consistent with 
the Department's goal of facilitating the construction and operation of 
advanced nuclear facilities.
    Section 950.13(g) contains a limitation that if a sponsor elects to 
terminate a Standby Support Contract, then the sponsor or any related 
party is prohibited from entering into another Standby Support 
Contract. Such a provision is necessary to prohibit potential sponsors 
from ``gaming'' the Standby Support Program. Specifically, a sponsor 
could be on the verge of full power operation of an advanced nuclear 
facility, without the need to make any claims on the Standby Support 
Program. Absent this provision, the sponsor could terminate its initial 
Standby Support Contract and then enter into a new contract for a 
different facility.
    Assignment. Several commenters stated that it is necessary to 
permit a sponsor to transfer its rights and obligations under the 
contract. This would allow project lenders or other entities to 
complete a project. These commenters requested that the sponsor have 
full discretion to assign its rights under the contract.
    The Department generally agrees that it may be appropriate to allow 
a sponsor to assign its rights under the Standby Support Contract. 
Accordingly, Sec.  950.13(h) requires each Standby Support Contract to 
include a provision specifying the assignment of a sponsor's rights and 
obligations under the contract. Specifically, this provision states 
that the sponsor is permitted to assign the rights under the contract 
with the Secretary's prior approval. The sponsor must obtain this 
approval, in writing, prior to assigning such rights. The Department 
believes that it is necessary to retain oversight related to the 
assignment of such rights, given that such assignments typically 
involve significantly changed circumstances with new parties. The 
Department notes that any transfer of control over a license requires 
prior Commission approval.
    Claims Administration. Section 950.13(i) requires each Standby 
Support Contract to include a provision specifying a mechanism for 
administering claims pursuant to the procedures set forth in subpart C.
    Dispute Resolution. Section 950.13(j) requires each Standby Support 
Contract to include a provision specifying a mechanism for resolving 
disputes about the terms of the Standby Support Contract pursuant to 
the procedures set forth in Subpart D.
    Reestimation. Section 950.13(k) requires each Standby Support 
Contract to include a provision specifying that consistent with the 
Federal Credit Reform Act (FCRA), the sponsor provide all needed 
documentation to allow the Department to annually re-estimate the loan 
cost needed in the financing account under 2 U.S.C. 661a(7) funded by 
the Program Account. The ``financing account'' is defined by FCRA as 
``the non-budget account or accounts associated with each credit 
program account which holds balances, receives the cost payment from 
the credit program account, and also includes all other cash flows to 
and from the Government resulting from direct loan obligations or loan 
guarantee commitments made on or after October 1, 1991.''

Section 950.14 Covered Events, Exclusions, Covered Delay, and Covered 
Costs

    Section 638(c) specifies situations in which the Secretary will pay 
``covered costs.'' Among the situations expressly set forth in 
paragraph (c)(1) are: (A) ``the failure of the Commission to comply 
with schedules for review and approval of inspections, tests, analyses, 
and acceptance criteria [ITAAC] established under the combined license 
or the conduct of preoperational hearings by the Commission * * *'' or 
(B) ``litigation that delays the commencement of full-power operations 
* * *''
Covered Events
    Section 950.13(a) requires each Standby Support Contract to include 
a provision setting forth an agreement between the parties that 
addresses the contract's purpose, which is for the Secretary to provide 
compensation for covered costs incurred by a sponsor against covered 
events that result in a covered delay of full power operation of

[[Page 28209]]

an advanced nuclear facility. Aside from the term ``covered event,'' 
these other terms--Secretary, covered costs, sponsor, covered delay, 
full power operation, and advanced nuclear facility--are referenced in 
section 638. The Department determined it is necessary to add the term 
``covered event'' to reflect that not all events appearing to fall 
under section 638(c)(1) will warrant compensation. Compensation is 
dependent on whether a covered event in fact leads to a delay in full 
power operation. For instance, there may be a delay in the Commission 
staff's meeting the ITAAC review schedule for an individual ITAAC, but 
the delay does not actually cause a delay in full power operation, 
because other factors may have caused the delay. In addition, there may 
be a delay in meeting the ITAAC review schedule but the ITAAC-related 
delay may have no actual effect on a facility obtaining full power 
operation. The same may be true for delays attributable to the pre-
operational hearing or litigation.
    ITAAC Delays. In the NOI, the Department first noted that the 
covered delay set forth in paragraph (c)(1)(A) are closely related to 
the Commission's part 52 combined licensing process. The Commission 
requires verification that the licensee has completed the required 
inspections, tests, and analyses, and that the acceptance criteria have 
been met before the reactor can operate. However, the Commission's 
regulations do not set any schedules for completing ITAAC review. 
Rather, under the combined license application, the licensee sets the 
schedule for ITAACs and may change the schedule as circumstances 
warrant. Although the Commission may set informal, internal schedules 
for auditing the licensee's performance of its ITAAC and will provide 
public notice upon completion of its review, there is no regulatory 
requirement for the Commission's conduct or timing of such auditing.
    Potential sponsors commented that realistic, definite schedules for 
review and approval of ITAAC be included in the contracts executed in 
accordance with section 638. The nuclear energy trade association 
commented that ITAACs were not unreasonably complex, because they are 
precise, quantitative and unambiguous indicators that provide 
unambiguous and unequivocal proof that the plant will operate safely. 
It then stated that the small percentage of total ITAAC that are 
completed late in the process, but on schedule should not represent a 
potential source of delay in commercial operation.
    In its comments to the NOI, the Commission again emphasized that 
its regulations do not require any schedule for completing ITAAC 
review. It further stated that the licensee is not bound to any 
schedule for completion of an ITAAC. Nor is the Commission staff bound 
to any schedule for review of a licensee statement that an individual 
acceptance criterion has been met or that all ITAACs have been met. 
Notwithstanding the complexity of the ITAACs, their facility-specific 
nature, the lack of a required review schedule, and the possibility 
that a licensee may leave large numbers of ITAAC for resolution in the 
last few weeks before fuel load, the Commission did note that:

    The NRC staff intends to coordinate its schedule for ITAAC 
review with the licensee's schedule for performing the [ITAACs] and 
submitting ITAAC determination letters. In order to do so, the NRC 
would have to develop guidance on the length of ITAAC reviews, 
particularly those reviews occurring during the final 20% of 
construction schedule and the six months before the schedule fuel 
load * * * The staff believes this process could be used for setting 
the schedules for ITAAC review to which Section 638 refers. The 
staff envisions that a licensee would submit its schedule for 
meeting the ITAAC to be completed in the final 20% of the 
construction schedule as soon as the licensee develops such a 
schedule. Without comment on the licensee's schedule or otherwise 
reviewing it, the NRC would determine the review time for each ITAAC 
in accordance with the guidance and issue a schedule for ITAAC 
review that could be referenced in the insurance contract.

    Based on these comments and the Department's understanding of the 
ITAAC process, Sec.  950.14(a)(1) requires each Standby Support 
Contract to include a provision setting forth a two-tier level of 
review for assessing whether an ITAAC-related delay should be 
considered a covered event. The Department further notes that the 
Commission issued a notice of proposed rulemaking in which it is 
considering modifying the ITAAC process (See, 71 FR 12782, March 13, 
2006). If between the Department's issuance of this interim final rule 
and determining whether there has been an ITAAC-related delay under a 
Standby Support Contract, the Commission issues any rule, guidance, 
audit procedures or formal opinions setting schedules for its review of 
ITAACs, then such Commission rules--whether formal or informal--would 
guide the Department in determining whether a delay in a sponsor's 
ITAAC schedule should be considered a covered event. Given that the 
Commission is considering amending part 52 and addressed the issue of 
ITAAC schedules in a public workshop held on March 14, 2006, it is 
possible that the Commission will issue such guidance by the time the 
Standby Support Contracts take effect.
    The Commission has indicated that it intends to issue such 
guidance, and would initially set a schedule for reviewing the 
sponsor's completion of ITAAC, based on the sponsor's schedule for 
informing the Commission that the ITAAC have been completed. The 
Commission has also indicated that it would make its review schedule 
available to the sponsor and the Department. In any event, the 
Commission commented that nothing in this rule shall be interpreted to 
require or encourage the Commission or its staff to render any required 
safety determination without the necessary and sufficient documentation 
of information from the sponsor/licensee (including any of its 
contractors, sub-contractors, vendors, manufacturers, consultants, 
etc.) needed to ensure adequate protection and common defense and 
security under the Commission's regulations.
    Nevertheless, if the Commission has not provided any rules, 
guidance, audit procedures or formal opinions setting schedules for 
ITAAC review, then the Department, pursuant to Sec.  950.14(a)(2), 
would evaluate the sponsor's proposed schedule for Commission review of 
ITAAC completion, subject to the Department's review and approval for 
such a schedule. In such a situation, the sponsor is required to submit 
its initial schedule for informing the Commission of ITAAC completion, 
along with any revisions of that schedule and a suggested schedule for 
review of completed ITAAC by the Commission.
    Preoperational Hearing. Section 638(c)(1)(A) refers to delays in 
full power operation of advanced nuclear facilities caused by ``the 
conduct of preoperational hearings by the Commission * * *''. In the 
NOI, the Department requested comment about two possible 
interpretations: (1) To allow coverage only for delays associated with 
preoperational hearings under part 52 or (2) to allow coverage for 
delays associated with any preoperational hearings, regardless of who 
requested or caused the hearing and regardless of whether there was a 
``failure'' of any kind by the Commission.
    Several potential sponsors commented that the phrase ``the conduct 
of pre-operational hearings by the Commission'' should include any 
delay covered by any pre-operational hearings. These commenters contend 
such an interpretation reflects the plain language and intent of the 
statute. In

[[Page 28210]]

contrast, one commenter stated that only hearings under 10 CFR 52.103 
should be covered, given that a broader reading would undermine the 
Commission's safety mission. The Commission commented that the scope of 
a pre-operational hearing concerns only whether the ITAAC have been or 
will be satisfied. In addition, the Commission commented that a person 
seeking such a hearing must meet the standards of 10 CFR 52.103(b), 
i.e., the petitioner must show prima facie that one or more of the 
acceptance criteria have not been met and the specific operational 
consequence of nonconformance would be contrary to public health and 
safety.
    The Department has determined that for purposes of the Standby 
Support Contracts, the phrase ``the conduct of pre-operational hearings 
by the Commission'' means the non-mandatory hearing conducted by the 
Commission in accordance with 10 CFR 52.103. The Department included a 
definition of this term in the regulations to avoid any confusion that 
this term referred to more than one type of pre-operational hearing or 
to some other hearing that the Commission may conduct in the context of 
a part 52 licensing proceeding. The Department believes that it would 
be inappropriate and unnecessary to broaden the term to include all 
hearings taking place prior to operation or fuel load, particularly in 
light of the Commission's comment about how it views the Sec.  52.103 
hearing. Under the Commission's rules addressing part 52, it is 
unlikely that any other hearing would be held by the Commission other 
than the one already expressly set forth at Sec.  52.103.
    Litigation. Section 638(c)(1)(B) refers to ``litigation that delays 
the commencement of full-power operations * * *'' In the NOI, the 
Department noted that the Act is silent as to what type of litigation 
section 638 refers. The Department further noted its inclination to 
interpret the term ``litigation'' in paragraph (c)(1)(B) as meaning 
only litigation in State, Federal, or tribal courts, including appeals 
of Commission licensing decisions, and excluding administrative 
litigation that occurs at the Commission as part of the combined 
license process, because paragraph (c)(1)(A) already refers to certain 
Commission proceedings that may delay full power operation. The 
Department requested comment as to what type of litigation-related 
delays should be covered by the Program.
    Several commenters suggested the definition of litigation should be 
broadly defined, while other commenters suggested the definition should 
be narrow. Under a broad definition, litigation would encompass both 
judicial and administrative litigation, including any hearings under 10 
CFR 52.103 and any litigation commenced before or after issuance of the 
combined license, as well as litigation initiated by a sponsor, a 
governmental agency or a third party. Under a narrow definition 
suggested by some commenters, litigation would not include 
administrative litigation before the Commission, appeals of Commission 
decisions to the courts, or any litigation other than frivolous claims.
    The Department has decided to define litigation in the interim 
final rule to include only adjudication in State, federal, or tribal 
courts, including appeals of Commission decisions related to the 
combined license to such courts, and excluding administrative 
litigation that occurs at the Commission related to the combined 
license process. The Department believes this is the most reasonable 
interpretation of the term as used in the Act. Since the Act covers the 
risk of a pre-operational hearing, and Commission reviews of ITAAC, the 
Department assumed that the reference to litigation is to litigation 
outside the context of the Commission proceeding on the combined 
license. On the other hand, the Act does not suggest a limitation based 
on what party brings suit. Hence, the interim final rule would apply to 
litigation, if in federal, State or tribal court, initiated by a 
sponsor, a governmental agency or a third party. In addition, any 
appeal of a Commission decision to an appropriate court would be 
considered ``litigation.'' The Department interprets this term to apply 
only to situations in which a sponsor is unable to continue 
construction or attain full power operation based on a court order, 
e.g., a stay of a permit, a Temporary Restraining Order (TRO), or an 
injunction. It does not apply to or cover delays that are only 
secondarily caused by the litigation, e.g., a company's decision to 
delay operation because a matter is in litigation, even though a court 
has not barred operation or the permit at issue is in effect.
Exclusions
    Section 638(c)(2) expressly precludes the Secretary from paying 
costs resulting from three general areas: ``(A) The failure of the 
sponsor to take any action required by law or regulation; (B) events 
within the control of the sponsor; or (C) normal business risks.'' In 
the NOI, the Department requested comment on how best to interpret and 
apply this section, including examples of each category of exclusion.
    No commenter addressed situations involving the failure of the 
sponsor to take any action required by law or regulation. Nevertheless, 
the Department has decided to require each Standby Support Contract to 
include a provision addressing this exclusion of coverage for the 
failure of a sponsor to take actions required by law or regulation. For 
example, in the construction of any large commercial project, including 
an advanced nuclear facility, a builder is required to obtain permits 
and take other steps required by Federal, State, and local laws, 
regulations and ordinances. In particular, a builder typically has to 
comply with environmental laws such as those related to pollution 
abatement or protection of human health or the environment (including 
ambient air, surface water, ground water, and land surface 
requirements). Further, with respect to an advanced nuclear facility, a 
sponsor may have to comply with other laws or regulations due to its 
unique characteristics. Where a sponsor had failed to take any of these 
or similar types of actions required by law or regulation, any 
associated delay would not be covered. Section 950.14(b) further 
requires the Standby Support Contract to include a provision that 
excludes coverage for events in which the sponsor either must re-
perform an ITAAC due to a Commission disapproval of the sponsor's 
ITAACs or redress deficiencies in ITAACs as a result of a Commission 
disapproval of fuel loading.
    All commenters agreed that standby support should not extend to 
delays and losses caused by factors that fall within the control of a 
sponsor. Potential sponsors and the nuclear industry trade association 
stated that situations like the late delivery of equipment should not 
be covered. Several commenters stated that the Department needs to 
provide examples of such events and define the terms ``events within 
the control of the sponsor'' and ``normal business risk.''
    The Department agrees with those commenters that requested examples 
of events it considers within the control of the sponsor. To this end, 
the Department reviewed commercial insurance contracts and practices, 
particularly for large construction projects, in developing Sec.  
950.14(b)(2) which sets forth a list of examples of such situations. 
Based on this review, the Department provides the following, non-
exhaustive set of examples for situations within the control of a 
sponsor. These include delays attributable to a range of project 
planning and construction problems including wear and tear, rust,

[[Page 28211]]

deterioration, latent defects in property and routine construction 
delays; and labor-management disputes. In addition, other events the 
Department considers within the sponsor's control include (1) the 
sponsor's performance of inspections, tests, analyses, and acceptance 
criteria in accordance with its schedule, (2) the sponsor's obtaining 
adequate funding for construction and testing of the advanced nuclear 
facility, and (3) the sponsor's decision not to continue construction 
or not to attain full power operation as the result of litigation in 
which the sponsor is not subject to a court order.
    With respect to normal business risks, a utility recommended that 
it would be appropriate to define this term as ``traditional exposures 
for which insurance is currently available on commercially reasonable 
terms and conditions.'' Commenters further recommended that the 
Department follow generally accepted practices in the insurance 
industry.
    The Department generally agrees with the commenters and has 
provided examples of normal business risk consistent with standard 
industry practice. These include events where businesses normally would 
be expected to absorb any additional cost burdens including costs 
resulting from changing economics or market conditions, weather delays, 
labor difficulties, supplier/contractor failures, and other 
difficulties. Normal business risks also would include those related to 
obtaining approvals or permits from regulatory agencies, except for the 
regulatory approvals that constitute a covered delay under the Standby 
Support Contracts. In other words, the Department interprets ``normal 
business risk'' to mean all the typical risks of a commercial 
enterprise, except for those risks that ordinarily may be considered a 
``normal business risk'' but, in this case, Congress determined should 
be covered risks under the contracts. Other examples of normal business 
risks set forth in standard commercial insurance contracts include (1) 
delays attributable to force majeure such as strike or weather delay, 
the failure of power or other utility services supplied to the 
location, (2) natural events such as earthquake, landslide, mudslide, 
volcanic eruption, other earth movement, flood, (3) government action 
meaning the seizure or destruction of property by order of governmental 
authority, (4) acts or decisions, including the failure to act or 
decide, of any person, group, organization, or government body 
(excluding those acts or decisions or failure to act or decide by the 
Commission that are covered events), (5) supplier or subcontractor 
delays in performance, (6) litigation, whether initiated by the sponsor 
or another party, that is not a covered event, (7) failure to timely 
obtain regulatory permits or approvals that is not a covered event, and 
(8) unrealistic and overly ambitious schedules set by the sponsor.
    The Department agrees with commenters that it would be 
impracticable to develop an all-inclusive list addressing all such 
delays in all future situations. Accordingly, in addition to this 
preamble discussion providing some examples of exclusions, the 
Department has developed a claims administration process which is 
discussed in subpart C.
Covered Delay and Full Power Operation
    Whether a covered event leads to covered delay depends on whether 
the covered event directly causes a delay in full power operation of an 
advanced nuclear facility. Accordingly, the concept of full power 
operation is a critical element in determining covered delay and 
covered costs under a Standby Support Contract.
    Several commenters suggested that the Department should define full 
power operation to mean at or near 100 percent of power on a sustained 
basis. These commenters reasoned that defining full power operation to 
be operation at five percent or greater is not consistent with the 
intent of the Act, and that this interpretation, though applicable in 
the context of a part 50 reactor license, is not useful or applicable 
under a part 52 license where the regulations do not expressly require 
Commission authorization for power operations greater than five 
percent.
    The Department notes that Congress did not define this term in the 
Act, leaving it to the Department's discretion. This term is defined in 
the interim final rule as that point at which the sponsor first 
synchronizes the advanced nuclear facility to the electrical grid. The 
Department notes that such an event typically occurs between 10 to 25 
percent of a facility's licensed thermal power capacity. The Department 
believes that this definition of full power operation is appropriate 
because it is clear, addresses the sponsor's desire for coverage until 
it is able to generate revenue from the facility, and represents a 
point where the risks covered under the contracts are either not 
applicable or no longer likely to occur. Once the Commission has found 
that the acceptance criteria have been met in accordance with 10 CFR 
52.103(g), the Commission's review of ITAAC is complete. The sponsor 
may then load fuel and begin power ascension testing. Hence, there is 
no opportunity after fuel load for a delay in full power operation 
caused by the Commission's failure to review and approve ITAAC on 
schedule. Similarly, any delay from a pre-operational hearing would not 
exist after fuel load, since the covered event also would only occur 
prior to loading fuel. The remaining risk, litigation in Federal, State 
or tribal court that delays the sponsor from achieving full power 
operation, is less likely to occur after fuel load and the first time 
the sponsor synchronizes to the electrical grid. Even if this type of 
delay could occur after first grid connection, there is no clear or 
reasoned basis to determine precisely when that time may occur in 
operating life of an advanced nuclear facility.
    Based on these considerations, Sec.  950.14(c) requires each 
Standby Support Contract to include a provision specifying the payment 
of covered costs if a covered event is determined to cause a delay in 
attainment of full power operation. In addition, for a contract for one 
of the subsequent four reactors, payment for covered delay will occur 
only after the initial 180-day period of delay.
    Due Diligence. Section 638(e) specifies that any Standby Support 
Contract requires ``the sponsor to use due diligence to shorten, and to 
end, the delay covered by the contract.'' In the NOI, the Department 
requested comments on how this term should be used in the context of a 
Standby Support Contract. Two commenters recommended that the 
Department define due diligence consistent with the concept of using 
commercially reasonable efforts to shorten and end the delay. They 
further commented that the Department should have the burden of 
demonstrating that a sponsor failed to use due diligence.
    Section 950.14(c)(2) requires each Standby Support Contract to 
include a provision to require the sponsor to use due diligence to 
mitigate, shorten, and end covered delay under the contract. Similarly, 
Sec.  950.23(b)(2)(iii) requires a sponsor to use due diligence to 
mitigate, shorten and end the covered delay and the associated costs. 
The Department notes that Black's Law Dictionary defines ``diligence'' 
as (1) a continual effort to accomplish something and (2) the attention 
and care required from a person in a given situation. In turn, Black's 
Law Dictionary defines ``due diligence'' as ``[t]he diligence 
reasonably expected from, and ordinarily exercised by a person who 
seeks to satisfy a legal requirement or a discharge of an

[[Page 28212]]

obligation.'' As several commenters noted, the claims administration 
process set forth in subpart C is the forum for determining whether a 
sponsor in fact acted with due diligence to mitigate, shorten or end 
the covered delay and associated costs under the Standby Support 
Contract. The Department notes that requiring a sponsor to use due 
diligence to mitigate costs associated with the Standby Support 
Contract is consistent with general principles of mitigating damages in 
contract disputes.
Covered Costs
    Paragraph (d) of Section 638 provides for the coverage of costs 
that result from a delay during construction and in gaining approval 
for full power operation, specifically (A) principal or interest and 
(B) incremental cost of purchasing power to meet contractual 
agreements. In the NOI, the Department requested comments on how these 
costs should be documented, especially the extent to which they are 
used in calculating the funding needed prior to entering into a 
contract. In particular, although the Department stated that it 
anticipated only covering those costs specifically described in 
paragraphs (d)(5)(i) and (ii), it noted that it might consider 
providing coverage for costs in addition to those specifically 
described in those sections.
    Commenters expressed divergent views on whether to have an 
expansive or limited interpretation of paragraph (d)(5) which states 
that the covered costs shall be those that result from certain delays 
``including'' the costs specifically described in that provision (e.g., 
principal or interest). Two commenters agreed with a more limited 
reading of ``including.'' One stated that the statute clearly states 
``including'' and does not state ``including but not limited to.'' That 
commenter stated that to interpret the statute otherwise would be an 
improper broadening of the law. In contrast, potential sponsors 
commented that the statute's use of the term ``including'' without any 
additional qualifying language such as ``and limited solely to'' 
suggests that Congress intended an inclusive and expansive definition 
of covered costs. They suggested coverage for additional costs such as 
operations and management including the costs of demobilization and 
remobilization, idle time costs incurred in respect to equipment and 
labor, increased general and administrative costs, and escalation of 
costs for completion of construction.
    The Department believes that there is more than one reasonable 
interpretation of paragraph (d)(5) and that it is not clear on its 
face; as a result, the Department has broad discretion to interpret the 
term ``including'' in paragraph (d)(5). After reviewing the 
implications of interpreting the term broadly, the Department has 
concluded that it is more appropriate to limit the concept of covered 
costs to those expressly set forth in paragraph (d)(5). This will 
enable the Department to control the costs of the program, without 
undermining the purpose of section 638 which is to facilitate the 
construction and full power operation of advanced nuclear facilities. 
Moreover, expanding the coverage to down-time costs suggested by some 
commenters could reduce a sponsor's incentive to expeditiously complete 
a project. Accordingly, Sec.  950.14(d) requires each contract to 
include a provision to specify that the covered costs under the Program 
Account are limited to principal or interest on any debt obligation 
financing the advanced nuclear facility. The Program Account would not 
cover penalty interest or other charges due to borrower delinquency or 
other failure to meet debt terms that are not related to a covered 
event. In other words, under the Program Account the Department will 
indemnify sponsors for the cost of principal or interest on the debt 
obligation for the period or duration of covered delay, less 180 days 
for one of the subsequent four reactors.
    Covered costs under the Grant Account involve the incremental 
difference between (i) the fair market price of power purchased to meet 
the contractual supply agreements that would have been met by the 
advanced nuclear facility but for the delay; and (ii) the contractual 
price of power from the advanced nuclear facility subject to the delay.
    The Department has defined fair market price of power and 
contractual price of power as follows in Sec.  950.25: The fair market 
price may be determined by the lower of the two options: (A) The actual 
cost of the short-term supply contract for replacement power, purchased 
by the sponsor, during the period of delay, or (B) for each day by its 
day ahead weighted average index price in $/MWh at the hub 
geographically nearest to the delayed nuclear facility posted the 
previous day by the Intercontinental Exchange (ICE) or an alternate 
electronic marketplace deemed as reliable by the Secretary. The 
determination of which option represents the lower price necessarily 
cannot be an after-the fact mechanical determination but rather must be 
made in the context of whether the sponsor exercised due diligence in 
selecting an option to pursue.
    In addition, the contractual price of power is calculated as the 
price for which power would be sold if full power operation of the 
advanced nuclear facility had not been delayed. In the event of covered 
delay, standby support coverage would indemnify the sponsor for the 
extra costs that may be incurred purchasing replacement power at a 
higher price than the price at which the sponsor has sold it because 
the sponsor may be required to make firm power deliveries regardless of 
the delay and at sales prices that may be below the current market 
price of power in the sponsor's region. The amount indemnified is a 
function of the incremental difference between the current market price 
for replacement power purchase and the contractual selling price for 
firm power deliveries, as well as the quantity of power under contract. 
Only the quantity of power that is under contract at the time of the 
covered event, i.e., only power that had been contracted for prior to 
the occurrence of a covered event will be used to determine the amount 
of replacement power indemnified for the associated portion of covered 
delay. In addition, only supply contracts that have a definite date for 
delivery that cannot be met due to a covered delay would be eligible 
for cost recovery. The upper limit on the amount of power deliveries 
from the advanced nuclear facility can be no more than the net 
generating capability, which is calculated by using the average nuclear 
industry-wide capacity factor and site usage and line losses.
    The Department determined that it would be inappropriate to adopt a 
commenter's recommendation to offer a pre-defined ``weekly indemnity'' 
for debt service and other costs when the Standby Support Contract is 
implemented. The commenter suggested that the Department emulate the 
Accidental Outage Policy or business interruption-type insurance 
provided by the Nuclear Electric Insurance Limited (NEIL). The 
Department notes that providing a pre-defined ``weekly indemnity'' 
patterned after NEIL would be inconsistent with section 638. A pre-
defined amount might allow for payments in excess of those actually 
incurred by a sponsor.

Subpart C--Claims Administration Process

    Subpart C of the regulation sets forth the procedures and 
conditions to be followed by a sponsor for the submission of claims and 
the payment of covered costs under a Standby Support Contract. In the 
NOI, the Department requested comment on how

[[Page 28213]]

it should determine covered costs and covered delay under the 
contracts. Recognizing the inherent difficulty in prescribing ahead of 
time all the factors that may determine whether a delay is covered by 
the contract or the costs are properly calculated and recoverable, 
several commenters suggested the Department institute a claims 
management process to handle such issues as they arise. They also 
recommended that the Department institute a claims procedure to 
expedite processing and payment of covered costs.
    Industry commented that the insured should have the burden of 
making a good-faith showing of a covered delay and covered loss. The 
Department believes that a sponsor has the burden of establishing that 
there is a covered event, covered delay and covered loss, as the 
sponsor is the entity primarily in possession of the facts necessary to 
support aclaim. Accordingly, Sec.  950.20 states that ``a sponsor is 
required to establish that there is a covered event, a covered delay 
and a covered loss.''
    In establishing an efficient and workable claims administration 
process, the Department reviewed claims administration of other Federal 
agencies and private sector insurers of large construction projects, 
including the procedures established by the Department of the Treasury 
to implement its Terrorism Risk Insurance Program at 31 CFR part 50. 
(69 FR 39296, June 29, 2004)
    Based on this analysis, the Department, in subpart C, establishes a 
two-step process for filing and payment of claims for covered costs. 
The first step in the process, covered in Sec. Sec.  950.21 and 950.22, 
is a notice requirement regarding the occurrence of a covered event. 
The second step in the process, covered in Sec. Sec.  950.23 through 
950.28, is the requirements for certification of covered costs and the 
procedures for payment of those costs by the Department. The process is 
set up this way to ensure that the Department is receiving timely, 
advance notice of events that may result in covered delay, so that when 
the sponsor submits a claim for covered costs the Department can more 
quickly and accurately determine the duration of a covered delay and 
the associated covered costs. This bifurcation is particularly 
necessary given that the period of coverage will extend over several 
years, i.e., from commencement of construction through testing to full 
power operation of the facility. A covered event may occur at various 
times during this multi-year period. On the other hand, a determination 
that covered delay occurred, and the exact duration of the delay, can 
only be made at the time when full power operation is scheduled to 
occur. This point in time may come several years after the covered 
event. Accordingly, the regulations provide for early notification of 
covered events that will enable the Department to determine whether an 
event qualifies for coverage, and any changes in schedules and other 
expectations as a result of the event. In addition, the regulations 
provide for payment of claims at the time when the sponsor expected to 
attain full power operation to enable the Department to determine 
accurately whether a covered delay occurred, the duration of the delay, 
and the amount of covered costs to be paid.
Covered Event Determination
    The first step in the claims process, Sec.  950.21, is for the 
sponsor to notify the Claims Administrator that a covered event has 
occurred, and provide certain information in support of the claim. For 
example, the sponsor provides information about the covered event, its 
duration, the sponsor's projection of the duration of covered delay, 
and any revisions to schedules for construction, testing or ITAAC 
review resulting from the event. An authorized representative of the 
sponsor is required to sign the notification of a covered event, and 
certify that the notification is made in good faith, and represents 
that the supporting information is accurate and complete to the best of 
the sponsor's knowledge and belief.
    The Claims Administrator is the official within the Department 
responsible for the administration of the Standby Support Contracts, 
including the responsibility to determine whether claims are 
appropriate and should be paid. This information is reviewed by the 
Claims Administrator and, within 60 days of receipt, the Claims 
Administrator issues a determination whether the event is a covered 
event under the contract. The second step in Sec.  950.22 provides the 
Department with the opportunity to evaluate the threshold question of 
whether the event is in fact an event covered by the contract. The 
Claims Administrator bases his or her decision on review of the 
conditions and exclusions under subpart B for a covered event. For 
example, if the Commission failed to review an ITAAC on the approved 
schedule under Sec.  950.14(a), and this failure of the Commission was 
not caused by one of the events excluded from coverage under Sec.  
950.14(b), e.g., an event within the control of the sponsor, then the 
event is a covered event. If the Claims Administrator does not agree 
with the sponsor's representation of the event as a covered event, then 
the sponsor must invoke the dispute resolution procedures in subpart D. 
In addition, the Claims Administrator considers the effect of 
concurrent events (e.g, a litigation delay at the same time as a 
strike) on whether there is a covered delay in full power operation. 
The parties are bound by any Final Determination on Covered Events, and 
the sponsor may rely on that in any future claim for payment of covered 
costs.
Covered Cost Determination
    The next step in the process under Sec.  950.23 is for the sponsor 
to submit a claim for payment of covered costs when the sponsor is 
within 120 days of its expected date of full power operation, but for 
the covered delay. The sponsor's claim, referred to as the 
Certification of Covered Costs, establishes the sponsor's basis for the 
claim, including supporting documentation such as detailed information 
about the expected duration of the covered delay and associated covered 
costs. To the extent the sponsor cannot determine the total amount of 
covered costs in the requisite time period prior to the expected date 
of full power operation, either because all costs are not then known or 
new covered events occur after the time of filing the Certification, 
then the sponsor may file a Supplementary Certification of Covered 
Costs.
    The Claims Administrator reviews the information in the Certificate 
of Covered Costs, and determines whether the costs should be paid based 
upon an evaluation of the duration of the delay in achieving full power 
operation caused by the covered event(s), adjusting for any delay in 
full power operation that is not the result of a covered event and 
therefore excluded from coverage. This evaluation and determination by 
the Claims Administrator is referred to as the Claim Determination. The 
Department pays those claims that are covered by the contract, pays an 
adjusted amount if determined appropriate, or rejects the claim. If the 
sponsor does not agree with the Claims Administrator's Claim 
Determination, then the procedures in subpart D are invoked to resolve 
the dispute.
    To facilitate the process, Sec.  950.25 specifies the method the 
Claims Administrator uses to calculate covered costs, and Sec.  950.26 
describes the adjustments to covered costs the Claims Administrator may 
make in that process.

[[Page 28214]]

    Once a Claim Determination is rendered, and assuming there is no 
dispute, then the Department pays the covered costs in accordance with 
the Claim Determination and other conditions of payment as specified in 
Sec.  950.27, such as a finding that the claim is not fraudulent, 
collusive, in bad faith, or otherwise designed to circumvent the 
purposes of the Act and the regulations. Other conditions include the 
limitation that payments may not exceed the aggregate amounts 
permissible under the Act; that is, no more than $500 million each for 
the initial two reactors and $250 million each for the subsequent four 
reactors.
    Section 950.28 addresses the payment method for covered costs. 
Assuming all conditions are met, periodic payments are made when the 
sponsor has incurred and is obligated to pay the costs covered under 
the contract.

Subpart D--Dispute Resolution Process

    In the NOI, the Department noted that as with any commercial 
insurance contract, a sponsor may disagree with the Department as to an 
interpretation of a provision in the Standby Support Contract. After 
further noting that the Act does not require any particular dispute 
resolution mechanism or procedure, the Department requested comment on 
how disputes between sponsors and the Department should be resolved, 
and what dispute resolution provisions should be included in the 
applicable regulations or contracts.
    Industry commenters recommended the use of third party binding 
arbitration to settle claims about covered events and covered delay. 
The choice of binding arbitration as the preferred method of dispute 
resolution was to provide a forum that was fast, efficient and not 
subject to protracted litigation. The commenters recommended private 
arbitrators to administer the processing of these claims and to act as 
neutral evaluators.

Covered Events and Covered Costs Dispute Resolution

    The Department generally agrees with the commenters' view that 
claims should be resolved as effectively and efficiently as possible. 
The dispute resolution methods that are set forth in subpart D address 
these concerns. Subpart D provides a two step dispute resolution 
process for resolving claims that first calls for mediation and then a 
Summary Trial with Binding Decision.
    Specifically, subpart D addresses two types of disputes: those 
involving covered events in Sec. Sec.  950.31 and 950.32 and those 
involving covered costs in Sec. Sec.  950.33 and 950.34. For 
completeness, subpart D, Sec. Sec.  950.36 and 950.37, also provides 
the same two step dispute resolution process for other contract matters 
that may be in dispute and would benefit from resolution in an 
efficient and effective manner.
    If a sponsor initially disagrees with the Claims Administrator's 
determination on what constitutes a covered event or covered delay, it 
may file a rebuttal to that decision (Sponsor's Rebuttal). Within 15 
days of the submission of the Sponsor's Rebuttal, subpart D requires 
the parties, i.e., the sponsor and the claims administrator, to attempt 
to resolve the claim dispute through mediation. The subpart further 
requires the mediation neutral(s) to be mutually selected by the 
parties and the cost of the process to be equally shared. Mediation is 
a flexible negotiation-based process whereby a third party neutral 
assists the parties in their dispute resolution efforts. If the parties 
reach settlement during the mediation process that settlement 
constitutes a Final Claim Determination. If, however, the parties 
cannot reach a settlement, they would proceed to the second available 
dispute resolution process for resolving the claim--the Summary Trial 
with Binding Decision.
    This process has been used in the government contracts arena for 
many years. Scheduling of summary trials before the Department of 
Energy's Board of Contract Appeals (Board) is expedited, discovery is 
limited, and the parties try the matter informally, with relaxed rules 
of evidence, either before a single administrative judge or a panel of 
administrative judges. A summary or ``bench'' decision will be issued 
at the conclusion of the trial or as set forth in these regulations no 
later than 10 days post hearing. The parties agree in advance that the 
Board's decision is final and not appealable.
    The Department has decided to use the Board rather than a third-
party commercial arbitrator for dispute resolution because the services 
provided by the Board and a commercial arbitrator are essentially the 
same, but the Board does not charge for the use of its services. 
Consequently, any costs are minimal for the parties. In contrast, 
commercial arbitrators charge significant fees for conducting 
arbitration.

Subpart E--Audit Investigations and Other Provisions

    As with any program in which the government is providing grants or 
other subsidies to the public, the Department may audit the costs 
associated with the Standby Support Program. Accordingly, in Sec.  
950.41, the Department reserves the right to examine any pertinent 
documents and records of a sponsor. The Department may also direct the 
sponsor to submit to an audit by a public accountant or equivalent 
acceptable to the Secretary. Such an audit provision is patterned after 
the Department's authority in 10 CFR part 800, Loans for Bid or 
Proposal Preparation by Minority Business Enterprises Seeking DOE 
Contracts and Assistance.
    In section 950.42, the Department addresses the public disclosure 
of information received from a sponsor. Industry representative at the 
public workshop expressed concern that much information in the part 52 
application process and under the Standby Support Program contained 
proprietary information that should not be disclosed to the public. In 
contrast, the advocacy group commented that all information under the 
Standby Support Program should be made public. The Department generally 
believes that such information should be made public, unless the 
sponsor demonstrates that the information, if made public, would 
divulge trade secrets or other proprietary information. Such an 
approach is consistent with the Freedom of Information of Act's 
approach to such information at 5 U.S.C. 552 and the Department's rules 
at 10 CFR part 1004.

IV. Regulatory Review Requirements

A. Review Under Executive Order 12866

    The Department has determined that today's regulatory action is an 
``economically significant regulatory action'' under Executive Order 
12866, ``Regulatory Planning and Review'' (58 FR 51735, October 4, 
1993), as amended by Executive Order 13258 (67 FR 9385, February 26, 
2002). Accordingly, the Department submitted this interim final to the 
Office of Information and Regulatory Affairs of the Office of 
Management and Budget, which has completed its review under E.O. 12866.
    This discussion assesses the potential costs and benefits of this 
rule. This regulation affects only those entities that voluntarily 
elect to apply for standby support and are selected to receive such 
standby support assistance. It imposes no direct costs on non-
participants. The economic impact of this regulatory action is 
uncertain because the nature and size of the projects to be assisted 
will not be known until specific project applicants come forward and 
because it is not possible to predict the scope, frequency or timing of 
the events that would be subject to payment of standby support. The 
Department notes that the

[[Page 28215]]

costs are the amount of monies needed in the Program Account for the 
Federal government to extend Standby Support. The Department has not 
completed an estimate of the cost of this risk insurance for the 
interim final rule rule, but a preliminary analysis indicates that the 
rule may exceed $100 million in any one year, and will therefore be 
treated as an economically significant rulemaking. For purposes of 
review under E.O. 12866, the final rule will provide a best estimate of 
the cost to fund the full Standby Support Program.
    To promote the construction of new nuclear power plants, the 
Secretary of Energy Advisory Board formed the Nuclear Energy Task Force 
(NETF) in July 2004 to ``assess the issues and determine the key 
factors that must be addressed if the Federal government and industry 
are to commit to the financing, construction, and deployment of new 
nuclear power generation plants to meet the nation's electric power 
demands in the 21st Century.'' NETF determined that the ITAAC process 
and the possibility of a hearing on satisfaction of the ITAAC may 
create regulatory disruption after substantial funds have been 
expended. Achieving the purpose of the revised regulatory process will 
be thwarted if the Commission does not keep the ITAAC process focused 
narrowly on those issues that must be subject to post-construction 
verification. NETF concluded that this new regulatory process which has 
not been tested in practice, poses a significant risk factor to 
generating companies. Similarly, the Department funded a report which 
defined critical risks and investment issues. (Business Case for New 
Nuclear Power Plants: Bringing Public and Private Resources Together 
for Nuclear Energy, Scully Capital, July 2002, available at https://www.ne.doe.gov.home/bc/businesscase.html). Its conclusions were similar 
to NETF's recommendations in that one of the critical risks with the 
construction of new nuclear power plants is the regulatory risk 
associated with the ITAAC process.
    The costs associated with a delay caused by the regulatory process 
or litigation could be significant and there is no well-established 
method of assessing the likelihood of such events until the new 
regulatory process is tested. As a result there is no market mechanism 
available to mitigate this risk factor. The Standby Support Program is 
meant to address this market failure. The overriding purpose of the 
Standby Support Program is to facilitate the construction and full 
power operation of new advanced nuclear facilities so that project 
sponsors can invest in electric generation facilities that the 
Administration and Congress believe are necessary to promote a more 
diverse and secure supply of energy for the Nation.
    Given that the cost to the government will be dependent on the 
state of the licensing process, Congress has mandated quarterly reports 
to Congress and the Secretary of the Department from the Commission 
summarizing the status of licensing actions associated with the 
advanced nuclear facility that voluntarily applies and is selected for 
a Standby Support Contract.
    The Department anticipates that the Standby Support Program will 
facilitate the construction of new nuclear facilities by decreasing the 
financial risks related to the combined license process. The program 
establishes a maximum of $500 million in insurance as the limit for 
each of the first two reactors covered and $250 million for each of the 
subsequent four reactors.
    Under the Federal Credit Reform Act of 1990 (FCRA), the amount of 
budget authority necessary to support a Federal credit instrument 
depends upon the subsidy cost (i.e., the net present value of the 
estimated cash flow of payments by the government to cover the expected 
value of the principal or interest on any debt obligation of the owner 
of an advanced nuclear facility during covered delay). This subsidy 
cost in Standby Support Program equates to the ``cost of a loan 
guarantee'' under section 502(5)(C) of FCRA. Under the Standby Support 
Program and FCRA, the Federal government is not authorized to extend 
credit assistance unless it has sufficient funds in the Program Account 
either in the form of budget authority or fees charged by the program 
to offset any potential losses. The Department anticipates that all of 
the funds in the Program Account needed for the Standby Support Program 
will be contributed by private industry through a risk premium.
    With respect to the Grant Account, section (b)(2)(C)(ii) states 
that that account should contain the total cash amount that would be 
needed to cover the cost of the incremental difference between the 
contractual price of power and the fair market value of power, as 
explained in Sec.  950.14. Given that FCRA is not mentioned with 
respect to the Grant Account, the Grant Account is not funded as a 
present value of expected payments like the Program Account, but 
rather, is required to be funded with the upper limit of possible 
payments. For example, if a sponsor elects to have a maximum of $500 
million to cover the incremental cost of purchasing power from the open 
market because of a delay covered by a Standby Support Contract 
occurred, then the Grant Account is required to be funded with $500 
million, before the Department can enter into a Standby Support 
Contract with the sponsor covering the Grant Account. The Grant Account 
and Program Account, jointly, address the risks addressed by the 
studies mentioned above as well as respond to the Congress' 
requirements in section 638.
    While the exact economic effects of the Standby Support cannot be 
determined, an estimate can be made from recent developments. The 
benefit estimate entails the investment by the private sector in 
nuclear power plants. The monetary value of reduced air pollution or 
monetarily subscribing a value to energy security is not included. To 
examine the benefits, the Westinghouse AP1000 reactor is used as an 
example of ``advanced nuclear reactor.'' In December 2005 the 
Commission approved the design of Westinghouse's AP1000 reactor that 
has a capacity of 1,117 megawatts. Plant costs can be referred in 
overnight capital costs terms. Overnight capital costs assume that the 
plant can be built ``overnight'', and do not include interest and 
financial costs. Initial overnight capital cost estimates are 
approximately $1,400 per kilowatt for the first couple of plants and 
decreasing to $1,000 per kilowatt for the nth plant. There are 1,000 
kilowatts in a megawatt. Thus six plants represent an investment of 
$6.7 billion to $9.4 billion.
    The Department has concluded that the Standby Support Program will 
promote the construction of new advanced nuclear facilities. The 
Standby Support Program will help decrease a critical regulatory risk 
factor that currently constrains the private sector from engaging in 
the construction of new advanced nuclear facilities. Electricity from 
nuclear energy promotes clean air by the lack of emissions, and 
national security by reducing dependence on foreign sources of energy, 
while being economically efficient. These benefits are anticipated to 
far surpass the direct costs to the Federal government and to the 
entities that elect to participate in the program.

B. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform'' (61 FR 4779, February 7, 1996) imposes on 
Federal agencies the general duty to adhere to the following 
requirements: Eliminate drafting errors and needless ambiguity, write

[[Page 28216]]

regulations to minimize litigation, provide a clear legal standard for 
affected conduct rather than a general standard, and promote 
simplification and burden reduction. Section 3(b) requires Federal 
agencies to make every reasonable effort to ensure that a regulation, 
among other things: Clearly specifies the preemptive effect, if any, 
adequately defines key terms, and addresses other important issues 
affecting the clarity and general draftsmanship under guidelines issued 
by the Attorney General. Section 3(c) of Executive Order 12988 requires 
Executive agencies to review regulations in light of applicable 
standards in section 3(a) and section 3(b) to determine whether they 
are met or it is unreasonable to meet one or more of them. The 
Department has completed the required review and determined that, to 
the extent permitted by law; this final rule meets the relevant 
standards of Executive Order 12988.

C. Review Under Executive Order 13132

    Executive Order 13132 (64 FR 43255, August 10, 1999), imposes 
certain requirements on agencies formulating and implementing policies 
or regulations that preempt State law or that have federalism 
implications. Agencies are required to examine the constitutional and 
statutory authority supporting any action that would limit the 
policymaking discretion of the States and carefully assess the 
necessity for such actions.
    Today's regulatory action has been determined not to be a ``policy 
that has federalism implications,'' that is, it does not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, nor on the distribution of 
power and responsibility among the various levels of government under 
Executive Order 13132 (64 FR 43255, August 10, 1999). Accordingly, no 
``federalism summary impact statement'' was prepared or subjected to 
review under the Executive Order by the Director of the Office of 
Management and Budget.

D. Review Under Executive Order 13175

    Under Executive Order 13175 (65 FR 67249, November 6, 2000) on 
``Consultation and Coordination with Indian Tribal Governments,'' the 
Department may not issue a discretionary rule that has ``tribal 
implications'' and imposes substantial direct compliance costs on 
Indian tribal governments. The Department has determined that this 
final rule does not have such effects and concluded that Executive 
Order 13175 does not apply to this rule.

E. Reviews Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.) 
requires that an agency prepare an initial regulatory flexibility 
analysis for any regulation which a general notice of proposed 
rulemaking is required, unless the agency certifies that the rule, if 
promulgated, will not have a significant economic impact on a 
substantial number of small entities (5 U.S.C. 605(b)). Given that no 
general notice of proposed rulemaking is required, no regulatory 
flexibility analysis is required.

F. Review Under the Paperwork Reduction Act

    Section 950.10(b) contains information collection requirements 
pertaining to eligibility; Sec.  950.12(a) contains information 
collection requirements pertaining to fulfillment of conditions 
precedent to a Standby Support Contract; and Sec.  950.23 contains 
information collection requirements pertaining to submission of claims 
for payment of covered costs under a Standby Support Contract. As 
indicated in the DATES section of this notice of interim final 
rulemaking, these provisions will not become effective until the Office 
of Management and Budget (OMB) has approved them pursuant to the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and the 
procedures implementing that Act, 5 CFR 1320.1 et seq. Shortly after 
publication of today's rule, the Department will issue a notice seeking 
public comment under the Paperwork Reduction Act on the information 
collection requirements in these sections of today's rule. After 
considering any public comments received in response to that notice, 
the Department will submit the proposed collection of information to 
OMB for approval pursuant to 44 U.S.C. 3507. An agency may not conduct, 
and a person is not required to respond to a collection of information, 
unless it displays a currently valid OMB control number. After OMB 
approves the information collection requirements, the Department will 
publish a notice in the Federal Register that announces the effective 
date and displays the OMB control number for these sections of the 
rule.

G. Review Under the National Environmental Policy Act

    The Department has concluded that promulgation of these regulations 
fall into the class of actions that does not individually or 
cumulatively have a significant impact on the human environment as set 
forth in the Department regulations implementing the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). 
Specifically, the rule is covered under the categorical exclusion in 
paragraph A6 of Appendix A to subpart D, 10 CFR part 1021, which 
applies to the establishment of procedural rulemakings. Accordingly, 
neither an environmental assessment nor an environmental impact 
statement is required.

H. Review Under the Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to prepare a written assessment of the 
effects of any Federal mandate in a proposed or final agency regulation 
that may result in the expenditure by states, tribal, or local 
governments, on the aggregate, or by the private sector, of $100 
million in any one year. The Act also requires a Federal agency to 
develop an effective process to permit timely input by elected 
officials of state, tribal, or local governments on a proposed 
``significant intergovernmental mandate,'' and requires an agency plan 
for giving notice and opportunity to provide timely input to 
potentially affected small governments before establishing any 
requirements that might significantly or uniquely affect small 
governments. The Department has determined that the rule published 
today does not contain any Federal mandates affecting states, tribal, 
or local governments, so these requirements do not apply.

I. Review Under Executive Order 13211

    Executive Order 13211 (Actions Concerning Regulations That 
Significantly Affect Energy, Supply, Distribution, or Use), 66 FR 28355 
(May 22, 2001) requires preparation and submission to OMB of a 
Statement of Energy Effects for significant regulatory actions under 
Executive Order 12866 that are likely to have a significant adverse 
effect on the supply, distribution, or use of energy. The Department 
has determined that the rule published today does not have a 
significant adverse effect on the supply, distribution, or use of 
energy and thus the requirement to prepare a Statement of Energy 
Effects does not apply.

J. Review Under the Treasury and General Government Appropriations Act, 
1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a 
``Family

[[Page 28217]]

Policymaking Assessment'' for any rule that may affect family well-
being. This rule has no impact on the autonomy or integrity of the 
family as an institution. Accordingly, The Department has concluded 
that it is not necessary to prepare a Family Policymaking Assessment.

K. Review Under the Treasury and General Government Appropriations Act, 
2001

    The Treasury and General Government Appropriations Act, 2001 (44 
U.S.C. 3516, note) provides for agencies to review most dissemination 
of information to the public under guidelines established by each 
agency pursuant to general guidelines issued by OMB. OMB's guidelines 
were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were 
published at 67 FR 62446 (Oct. 7, 2002). The Department has reviewed 
today's final rule under the OMB and Department of Energy guidelines, 
and has concluded that it is consistent with applicable policies in 
those guidelines.

L. Congressional Notification

    As required by 5 U.S.C. 801, the Department will submit to Congress 
a report regarding the issuance of today's interim final rule prior to 
the effective date set forth at the outset of this rulemaking. The 
report will state that it has been determined that the rule is not a 
``major rule'' as defined by 5 U.S.C. 801(2).

V. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this interim 
final rule.

List of Subjects in 10 CFR Part 950

    Government contracts, Nuclear safety.

    Issued in Washington, DC, on May 6, 2006.
Dennis R. Spurgeon,
Assistant Secretary, Office of Nuclear Energy.

0
For the reasons set forth in the preamble, the Department of Energy is 
amending Chapter III of title 10 of the Code of Federal Regulations by 
adding a new part 950 to read as follows:

PART 950--STANDBY SUPPORT FOR CERTAIN NUCLEAR PLANT DELAYS

Subpart A--General Provisions
Sec.
950.1 Purpose.
950.2 Scope and applicability.
950.3 Definitions.
Subpart B--Standby Support Contract Process
950.10 Conditional agreement.
950.11 Terms and conditions of Conditional Agreement.
950.12 Standby Support Contract conditions.
950.13 Standby Support Contract: General provisions.
950.14 Standby Support Contract: Covered events, exclusions, covered 
delay, and covered cost provisions.
Subpart C--Claims Administration Process
950.20 General provisions.
950.21 Notification of covered event.
950.22 Covered event determination.
950.23 Claims process for payment of covered costs.
950.24 Claims determination for covered costs.
950.25 Calculation of covered costs.
950.26 Adjustments to claim for payment of covered costs.
950.27 Conditions for payment of covered costs.
950.28 Payment of covered costs.
Subpart D--Dispute Resolution Process
950.30 General.
950.31 Covered event dispute resolution.
950.32 Final determination on covered events.
950.33 Covered costs dispute resolution.
950.34 Final claim determination.
950.35 Payment of final claim determination.
950.36 Other contract matters in dispute.
950.37 Final agreement or final decision.
Subpart E--Audit and Investigations and Other Provisions
950.40 General.
950.41 Monitoring/Auditing.
950.42 Disclosure.

    Authority: 42 U.S.C. 2201, 42 U.S.C. 7101 et seq., and 42 U.S.C. 
16014.

Subpart A--General Provisions


Sec.  950.1  Purpose.

    The purpose of this part is to facilitate the construction and full 
power operation of new advanced nuclear facilities by providing risk 
insurance for certain delays attributed to the Nuclear Regulatory 
Commission regulatory process or to litigation.


Sec.  950.2  Scope and applicability.

    This part sets forth the policies and procedures for the award and 
administration of Standby Support Contracts between the Department and 
sponsors of new advanced nuclear facilities.


Sec.  950.3  Definitions.

    For the purposes of this part:
    Act means the Energy Policy Act of 2005.
    Advanced nuclear facility means any nuclear facility the reactor 
design for which is approved after December 31, 1993, by the Nuclear 
Regulatory Commission (and such design or a substantially similar 
design of comparable capacity was not approved on or before that date).
    Available indemnification means $500 million with respect to the 
initial two reactors and $250 million with respect to the subsequent 
four reactors.
    Claims Administrator means the official in the Department of Energy 
responsible for the administration of the Standby Support Contracts, 
including the responsibility to approve or disapprove claims submitted 
by a sponsor for payment of covered costs under the Standby Support 
Contract.
    Combined license means a combined construction and operating 
license (COL) for an advanced nuclear facility issued by the 
Commission.
    Commencement of construction means the point in time when a sponsor 
initiates the pouring of safety-related concrete for the reactor 
building.
    Commission means the Nuclear Regulatory Commission (NRC).
    Conditional Agreement means a contractual agreement between the 
Department and a sponsor under which the Department will execute a 
Standby Support Contract with the sponsor if and only if the sponsor is 
one of the first six sponsors to satisfy the conditions precedent to 
execution of a Standby Support Contract, and if funding and other 
applicable contractual, statutory and regulatory requirements are 
satisfied.
    Construction means the construction activities related to the 
advanced nuclear facility encompassed in the time period after 
commencement of construction and before the initiation of fuel load for 
the advanced nuclear facility.
    Covered cost means:
    (1) Principal or interest on any debt obligation financing an 
advanced nuclear facility (but excluding charges due to a borrower's 
failure to meet a debt obligation unrelated to the delay); and
    (2) Incremental costs that are incurred as a result of covered 
delay.
    Covered delay means a delay in the attainment of full power 
operation of an advanced nuclear facility caused by a covered event, as 
defined by this section.
    Covered event means an event that may result in a covered delay due 
to:
    (1) The failure of the Commission to comply with schedules for 
review and approval of inspections, tests, analyses and acceptance 
criteria established under the combined license;
    (2) The conduct of pre-operational hearings by the Commission for 
the advanced nuclear facility; or
    (3) Litigation that delays the commencement of full power 
operations of the advanced nuclear facility.

[[Page 28218]]

    Department means the United States Department of Energy.
    Full power operation means the point at which the sponsor first 
synchronizes the advanced nuclear facility to the electrical grid.
    Grant account means the account established by the Secretary that 
receives appropriations or non-Federal funds in an amount sufficient to 
cover the amount of incremental costs for which indemnification is 
available under a Standby Support Contract.
    Incremental costs means the incremental difference between:
    (1) The fair market price of power purchased to meet the 
contractual supply agreements that would have been met by the advanced 
nuclear facility but for a covered delay; and
    (2) The contractual price of power from the advanced nuclear 
facility subject to the delay.
    Initial two reactors means the first two reactors covered by 
Standby Support Contracts that receive a combined license and commence 
construction.
    Litigation means adjudication in Federal, State, or tribal courts, 
including appeals of Commission decisions related to the combined 
license process to such courts, but excluding administrative litigation 
that occurs at the Commission related to the combined license process.
    Loan cost means the net present value of the estimated cash flows 
of:
    (1) Payments by the government to cover defaults and delinquencies, 
interest subsidies, or other payments; and
    (2) Payments to the government including origination and other 
fees, penalties and recoveries, as outlined under the Federal Credit 
Reform Act of 1990.
    Pre-operational hearing means a hearing held pursuant to the 
Commission's regulation in 10 CFR 52.103.
    Program account means the account established by the Secretary that 
receives appropriations or loan guarantee fees in an amount sufficient 
to cover the loan costs.
    Program Administrator means the Department official authorized by 
the Secretary to represent the Department in the administration and 
management of the Standby Support Program, including negotiating with 
and entering into a Conditional Agreement or a Standby Support Contract 
with a sponsor.
    Related party means the sponsor's parent company, a subsidiary of 
the sponsor, or a subsidiary of the parent company of the sponsor.
    Secretary means the Secretary of Energy or a designee.
    Sponsor means a person whose application for a combined licensed 
for an advanced nuclear facility has been docketed by the Commission.
    Standby Support Contract means the contract that, when entered into 
by a sponsor and the Program Administrator pursuant to section 638 of 
the Energy Policy Act of 2005 after satisfaction of the conditions in 
Sec.  950.12 and any other applicable contractual, statutory and 
regulatory requirements, establishes the obligation of the Department 
to compensate covered costs in the event of a covered delay subject to 
the terms and conditions specified in the Standby Support Contract.
    Standby Support Program means the program established by section 
638 of the Act as administered by the Department of Energy.
    Subsequent four reactors means the next four reactors covered by 
Standby Support Contracts, after the initial two reactors, which 
receive a combined license and commence construction.
    System-level construction schedule means an electronic critical 
path method schedule identifying the dates and durations of plant 
systems installation (but excluding details of components or parts 
installation), sequences and interrelationships, and milestone dates 
from commencement of construction through full power operation, using 
software acceptable to the Department.

Subpart B--Standby Support Contract Process


Sec.  950.10  Conditional agreement.

    (a) Purpose. The Department and a sponsor may enter into a 
Conditional Agreement. The Department will enter into a Standby Support 
Contract with the first six sponsors to satisfy the specified 
conditions precedent for a Standby Support Contract if and only if all 
funding and other contractual, statutory and regulatory requirements 
have been satisfied.
    (b) Eligibility. A sponsor is eligible to enter into a Conditional 
Agreement with the Program Administrator after the sponsor has 
submitted to the Department the following information but before the 
sponsor receives approval of the combined license application from the 
Commission:
    (1) An electronic copy of the combined license application docketed 
by the Commission pursuant to 10 CFR part 52, and if applicable, an 
electronic copy of the design certification or early site permit, or 
environmental report referenced or included with the sponsor's combined 
license application;
    (2) A summary schedule identifying the projected dates of 
construction, testing, and full power operation;
    (3) A detailed business plan that includes intended financing for 
the project including the credit structure and all sources and uses of 
funds for the project, the most recent private credit rating or other 
similar credit analysis for project related covered financing, and the 
projected cash flows for all debt obligations of the advanced nuclear 
facility which would be covered under the Standby Support Contract;
    (4) The sponsor's estimate of the amount and timing of the Standby 
Support payments for debt service under covered delays; and
    (5) The estimated dollar amount to be allocated to the sponsor's 
covered costs for principal or interest on the debt obligation of the 
advanced nuclear facility and for incremental costs, including whether 
these amounts would be different if the advanced nuclear facility is 
one of the initial two reactors or one of the subsequent four reactors.
    (c) The Program Administrator shall enter into a Conditional 
Agreement with a sponsor upon a determination by the Department that 
the sponsor is eligible for a Conditional Agreement, the information 
provided by the sponsor under paragraph (b) of this section is accurate 
and complete, and the Conditional Agreement is consistent with 
applicable laws and regulations.


Sec.  950.11  Terms and conditions of the Conditional Agreement.

    (a) General. Each Conditional Agreement shall include a provision 
specifying that the Program Administrator and the sponsor will enter 
into a Standby Support Contract provided that the sponsor is one of the 
first six sponsors to fulfill the conditions precedent specified in 
Sec.  950.12, subject to certain funding requirements and limitations 
specified in Sec.  950.12 and any other applicable contractual, 
statutory and regulatory requirements.
    (b) Allocation of coverage. Each Conditional Agreement shall 
include a provision specifying the amount of coverage to be allocated 
under the Standby Support Contract to cover principal or interest costs 
and to cover incremental costs, including a provision on whether the 
allocation shall be different if the advanced nuclear facility is one 
of the initial two reactors or one of the subsequent four reactors, 
subject to paragraphs (c) and (d) of this section.
    (c) Funding. Each Conditional Agreement shall contain a provision 
that the Program Account or Grant Account shall be funded in advance of

[[Page 28219]]

execution of the Standby Support Contract and in the following manner, 
subject to the conditions of paragraphs (d) and (e) of this section. 
Under no circumstances will the amount of the coverage for payments of 
principal and interest under a Standby Support Contract exceed 80 
percent of the total of the financing guaranteed under that Contract.
    (1) The Program Account shall receive funds appropriated to the 
Department or a combination of appropriated funds and loan guarantee 
fees that are in an amount equal to the loan costs associated with the 
amount of principal or interest covered by the available 
indemnification. The parties shall specify in the Conditional Agreement 
the anticipated amount or anticipated percentage of the total funding 
in the Program Account to be contributed by appropriated funds to the 
Department, by the sponsor or by a non-federal source.
    (2) The Grant Account shall receive funds appropriated to the 
Department, or a combination of appropriated funds and funds from the 
sponsor or other non-federal source, in an amount equal to the 
incremental costs. The parties shall specify in the Conditional 
Agreement the anticipated amount or anticipated percentage of the total 
funding in the Grant Account to be contributed by appropriated funds to 
the Department, by the sponsor, or by a non-federal source.
    (d) Reconciliation. Each Conditional Agreement shall include a 
provision that the sponsor shall provide no later than ninety (90) days 
prior to execution of a Standby Support Contract sufficient information 
for the Program Administrator to recalculate the loan costs and the 
incremental costs associated with the advanced nuclear facility, taking 
into account whether the sponsor's advanced nuclear facility is one of 
the initial two reactors or the subsequent four reactors.
    (e) Limitations. Each Conditional Agreement shall contain a 
provision that limits the Department's contribution of Federal funding 
to the Program Account or the Grant Account to only those amounts, if 
any, that are appropriated to the Department in advance of the Standby 
Support Contract for the purpose of funding the Program Account or 
Grant Account. In the event the amount of appropriated funds to the 
Department for deposit in the Program Account or Grant Account is not 
sufficient to result in an amount equal to the full amount of the loan 
costs or incremental costs under the Conditional Agreement, the sponsor 
shall no later than sixty (60) days prior to execution of the Standby 
Support Contract:
    (1) Notify the Department that it shall not execute a Standby 
Support Contract; or
    (2) Notify the Department that it shall provide additional 
contributions to the Program Account or Grant Account necessary to fund 
the total amount of loan costs or incremental costs as specified in the 
Conditional Agreement. The sponsor shall not have the option to provide 
additional funds to the Program Account or Grant Account that would 
fund less than the full amount necessary to fund that account.
    (f) Termination of Conditional Agreements. Each Conditional 
Agreement shall include a provision that the Conditional Agreement 
remains in effect until such time as:
    (1) The sponsor enters into a Standby Support Contract with the 
Program Administrator;
    (2) The sponsor has commenced construction on an advanced nuclear 
facility and has not entered into a Standby Support Contract with the 
Program Administrator within thirty (30) days after commencement of 
construction;
    (3) The sponsor notifies the Program Administrator in writing that 
it wishes to terminate the Conditional Agreement, thereby extinguishing 
any rights or obligations it may have under the Conditional Agreement;
    (4) The Program Administrator has entered into Standby Support 
Contracts that cover three different reactor designs, and the 
Conditional Agreement is for an advanced nuclear facility of a 
different reactor design than those covered under existing Standby 
Support Contracts; or
    (5) The Program Administrator has entered into six Standby Support 
Contracts.


Sec.  950.12  Standby Support Contract conditions.

    (a) Conditions precedent. If the Program Administrator has not 
entered into six Standby Support Contracts, the Program Administrator 
shall enter into a Standby Support Contract with the sponsor, 
consistent with applicable statutes and regulations and subject to the 
conditions set forth in paragraphs (b) and (c) of this section, upon a 
determination by the Department that all the conditions precedent to a 
Standby Support Contract have been fulfilled, including that the 
sponsor has:
    (1) A Conditional Agreement with the Department, consistent with 
this subpart;
    (2) A combined license issued by the Commission;
    (3) Documentation that it possesses all Federal, State, or local 
permits required by law to commence construction;
    (4) Documentation that it has commenced construction of the 
advanced nuclear facility;
    (5) Documented coverage of required insurance for the project;
    (6) Paid any required fees into the Program Account and the Grant 
Account, as set forth in the Conditional Agreement and paragraph (b) of 
this section;
    (7) Provided to the Program Administrator, no later than ninety 
(90) days prior to execution of the contract, the sponsor's detailed 
schedule for completing the inspections, tests, analyses and acceptance 
criteria in the combined license and informing the Commission that the 
acceptance criteria have been met; and the sponsor's proposed schedule 
for review of such inspections, tests, analyses and acceptance criteria 
by the Commission, consistent with Sec.  950.14(a) and which the 
Department will evaluate and approve; and
    (8) Provided to the Program Administrator, no later than ninety 
(90) days prior to execution of the contract, a detailed systems-level 
construction schedule that includes a schedule identifying projected 
dates of construction, testing and full power operation of the advanced 
nuclear facility and which the Department will evaluate and approve.
    (9) Provided to the Program Administrator, no later than ninety 
(90) days prior to the execution of the contract, a detailed and up-to-
date plan of financing for the project including the credit structure 
and all sources and uses of funds for the project, and the projected 
cash flows for all debt obligations of the advanced nuclear facility.
    (b) Funding. No later than thirty (30) days prior to execution of 
the contract, and consistent with section 638(b)(2)(C), funds in an 
amount sufficient to fully cover the loan costs or incremental costs as 
specified in the Conditional Agreement have been made available and 
shall be deposited in the Program Account or the Grant Account 
respectively.
    (c) Limitations. The Department shall not enter into a Standby 
Support Contract, if:
    (1) Program Account. There are insufficient funds deposited in the 
Program Account to cover the loan costs of the advanced nuclear 
facility under the Standby Support Contract as specified in the 
Conditional Agreement and paragraph (b) of this section; or

[[Page 28220]]

    (2) Grant Account. The Department has not deposited in the Grant 
Account sufficient funds to cover the incremental costs of the advanced 
nuclear facility under the Standby Support Contract as specified in the 
Conditional Agreement and paragraph (b) of this section.


Sec.  950.13  Standby Support Contract: General provisions.

    (a) Purpose. Each Standby Support Contract shall include a 
provision setting forth an agreement between the parties in which the 
Department shall provide compensation for covered costs incurred by a 
sponsor for covered events that result in a covered delay of full power 
operation of an advanced nuclear facility.
    (b) Covered facility. Each Standby Support Contract shall include a 
provision of coverage only for an advanced nuclear facility which is 
not a federal entity. Each Standby Support Contract shall also include 
a provision to specify the advanced nuclear facility to be covered, 
along with the reactor design, and the location of the advanced nuclear 
facility.
    (c) Sponsor contribution. Each Standby Support Contract shall 
include a provision to specify the amount that a sponsor has 
contributed to funding each type of account.
    (d) Maximum aggregate compensation. Each Standby Support Contract 
shall include a provision to specify that the Program Administrator 
shall not pay compensation under the contract in an aggregate amount 
that exceeds the amount of coverage up to $500 million each for the 
initial two reactors or up to $250 million each for the subsequent four 
reactors. The Department may set a minimum amount of coverage.
    (e) Term. Each Standby Support Contract shall include a provision 
to specify the date at which the contract commences as well as the term 
of the contract. The contract shall enter into force on the date it has 
been signed by both the sponsor and the Program Administrator. Subject 
to the cancellation provisions set forth in paragraph (f) of this 
section, the contract shall terminate when all claims have been paid up 
to the full amounts to be covered under the Standby Support Contract, 
or all disputes involving claims under the contract have been resolved 
in accordance with subpart D of this part.
    (f) Cancellation provisions. Each Standby Support Contract shall 
provide for cancellation in the following circumstances:
    (1) If the sponsor abandons construction, and the abandonment is 
not caused by a covered event or force majeure, the Program 
Administrator may cancel the Standby Support Contract by giving written 
notice thereof to the sponsor and the parties have no further rights or 
obligations under the contract.
    (2) If the sponsor does not require continuing coverage under the 
contract, the sponsor may cancel the Standby Support Contract by giving 
written notice thereof to the Program Administrator and the parties 
have no further rights or obligations under the contract.
    (3) For such other cause as agreed to by the parties.
    (g) Termination by sponsor. Each Standby Support Contract shall 
include a provision that prohibits a sponsor or any related party from 
executing another Standby Support Contract, if the sponsor elects to 
terminate its Standby Support Contract.
    (h) Assignment. Each Standby Support Contract shall include a 
provision on assignment of a sponsor's rights and obligations under the 
contract. The Program Administrator shall permit assignment of rights 
under the contract with the Department's prior approval. The sponsor 
may not assign its rights under the contract without the prior written 
approval of the Program Administrator and any attempt to do so is null 
and void.
    (i) Claims administration. Each Standby Support Contract shall 
include a provision to specify a mechanism for administering claims 
pursuant to the procedures set forth in subpart C of this part.
    (j) Dispute resolution. Consistent with the Administrative Dispute 
Resolution Act, each Standby Support Contract shall include a provision 
to specify a mechanism for resolving disputes pursuant to the 
procedures set forth in subpart D of this part.
    (k) Re-estimation. Consistent with the Federal Credit Reform Act 
(FCRA), the sponsor shall provide all needed documentation as required 
in Sec.  950.12 to allow the Department to annually re-estimate the 
loan cost needed in the financing account as that term is used in 2 
U.S.C. 661a(7) and funded by the Program Account.


Sec.  950.14  Standby Support Contract: Covered events, exclusions, 
covered delay and covered cost provisions.

    (a) Covered events. Subject to the exclusions set forth in 
paragraph (b) of this section, each Standby Support Contract shall 
include a provision setting forth the type of events that are covered 
events under the contract. The type of events shall include:
    (1) The Commission's failure to review the sponsor's inspections, 
tests, analyses and acceptance criteria in accordance with the 
Commission's rules, guidance, audit procedures, or formal opinions, in 
the case where the Commission has in place any rules, guidance, audit 
procedures or formal opinions setting schedules for its review of 
inspections, tests, analyses, and acceptance criteria under a combined 
license or the sponsor's combined license;
    (2) The Commission's failure to review the sponsor's inspections, 
tests, analyses, and acceptance criteria on the schedule for such 
review proposed by the sponsor, subject to the Department's review and 
approval of such schedule, including review of any informal guidance or 
opinion of the Commission that has been provided to the sponsor or the 
Department, in the case where the Commission has not provided any 
rules, guidance, audit procedures or formal Commission opinions setting 
schedules for review of inspections, tests, analyses and acceptance 
criteria under a combined license, or under the sponsor's combined 
license;
    (3) The conduct of a pre-operational hearing in accordance with 10 
CFR 52.103; and
    (4) Litigation in State, Federal or tribal courts, including 
appeals of Commission decisions related to an application for a 
combined license to such courts, and excluding administrative 
litigation that occurs at the Commission related to the combined 
license.
    (b) Exclusions. Each Standby Support Contract shall include a 
provision setting forth the type of events that are excluded as covered 
costs under the contract, and for which any associated delay in the 
attainment of full power operations is not a covered delay. The types 
of excluded events are:
    (1) The failure of the sponsor to take any action required by law, 
regulation, or ordinance, including but not limited to:
    (i) The sponsor's failure to comply with environmental laws or 
regulations such as those related to pollution abatement or human 
health and the environment;
    (ii) The sponsor's re-performance of any inspections, tests, 
analyses or re-demonstration that acceptance criteria have been met due 
to Commission non-acceptance of the sponsor's submitted results of 
inspections, tests, analyses, and demonstration of acceptance criteria;
    (iii) Delays attributable to the sponsor's actions to redress any 
deficiencies in inspections, tests,

[[Page 28221]]

analyses or acceptance criteria as a result of a Commission disapproval 
of fuel loading; or
    (2) Events within the control of the sponsor, including but not 
limited to delays attributable to:
    (i) Project planning and construction problems;
    (ii) Labor-management disputes;
    (iii) The sponsor's failure to perform inspections, tests, analyses 
and to demonstrate acceptance criteria are met or failure to inform the 
Commission of the successful completion of inspections, tests, analyses 
and demonstration of meeting acceptance criteria in accordance with its 
schedule;
    (iv) The lack of adequate funding for construction and testing of 
the advanced nuclear facility;
    (v) A sponsor's decision not to continue construction or attain 
full power operation unless such action is required by a court order.
    (3) Normal business risks, including but not limited to:
    (i) Delays attributable to force majeure events such as a strike or 
the failure of power or other utility services supplied to the 
location, or natural events such as severe weather, earthquake, 
landslide, mudslide, volcanic eruption, other earth movement, or flood;
    (ii) Government action meaning the seizure or destruction of 
property by order of governmental authority;
    (iii) War or military action;
    (iv) Acts or decisions, including the failure to act or decide, of 
any person, group, organization, or government body (excluding those 
acts or decisions or failure to act or decide by the Commission that 
are covered events);
    (v) Supplier or subcontractor delays in performance;
    (vi) Litigation, whether initiated by the sponsor or another party, 
that is not a covered event under paragraph (a) of this section;
    (vii) Failure to timely obtain regulatory permits or approvals that 
are not covered events under paragraph (a) of this section; or (viii) 
Unrealistic and overly ambitious schedules set by the sponsor.
    (c) Covered delay. Each Standby Support Contract shall include a 
provision for the payment of covered costs, in accordance with the 
procedures in subpart C of this part for the payment of covered costs, 
if a covered event(s) is determined to be the cause of delay in 
attainment of full power operation, provided that:
    (1) Under Standby Support Contracts for the subsequent four 
reactors, covered delay may occur only after the initial 180-day period 
of delay, and
    (2) The sponsor has used due diligence to mitigate, shorten, and 
end, the covered delay and associated costs covered by the Standby 
Support Contract and demonstrated this to the Program Administrator.
    (d) Covered costs. Each Standby Support Contract shall include a 
provision to specify the type of costs for which the Department shall 
provide payment to a sponsor for covered delay in accordance with the 
procedures set forth in subparts C and D of this part. The types of 
costs shall be limited to either or both, dependent upon the terms of 
the contract:
    (1) The principal or interest on which the loan costs for the 
Program Account was calculated; and
    (2) The incremental costs on which funding for the Grant Account 
was calculated.

Subpart C--Claims Administration Process


Sec.  950.20  General provisions.

    The parties shall include provisions in the Standby Support 
Contract to specify the procedures and conditions set forth in this 
subpart for the submission of claims and the payment of covered costs 
under the Standby Support Contract. A sponsor is required to establish 
that there is a covered event, a covered delay and a covered loss.


Sec.  950.21  Notification of covered event.

    (a) A sponsor shall submit in writing to the Claims Administrator a 
notification that a covered event has occurred that has delayed the 
schedule for construction or testing and that may cause covered delay. 
The sponsor shall submit to the Claims Administrator within thirty (30) 
days of the end of the covered event and contain the following 
information:
    (1) A description and explanation of the covered event, including 
supporting documentation of the event;
    (2) The duration of the delay in the schedule for construction, 
testing and full power operation, and the schedule for inspections, 
tests, analyses and acceptance criteria, if applicable;
    (3) The sponsor's projection of the duration of covered delay;
    (4) A revised schedule for construction, testing and full power 
operation, including the dates of system level construction or testing 
that had been conducted prior to the event; and
    (5) A revised inspections, tests, analyses, and acceptance criteria 
schedule, if applicable, including the dates of Commission review of 
inspections, tests, analyses, and acceptance criteria that had been 
conducted prior to the event.
    (b) An authorized representative of the sponsor shall sign the 
notification of a covered event, certify the notification is made in 
good faith, and represent that the supporting information is accurate 
and complete to the sponsor's knowledge and belief.


Sec.  950.22  Covered event determination.

    (a) Completeness review. Upon notification of a covered event from 
the sponsor, the Claims Administrator shall review the notification for 
completeness within thirty (30) days of receipt. If the notification is 
not complete, the Claims Administrator shall return the notification 
within thirty (30) days of receipt and specify the incomplete 
information for submission by the sponsor to the Claims Administrator 
in time for a determination by the Claims Administrator in accordance 
with paragraph (c) of this section.
    (b) Covered Event Determination. The Claims Administrator shall 
review the notification and supporting information to determine whether 
there is agreement by the Claims Administrator with the sponsor's 
representation of the event as a covered event (Covered Event 
Determination) based on a review of the contract conditions for covered 
events and excluded events.
    (c) Timing. The Claims Administrator shall notify the sponsor 
within sixty (60) days of receipt of the notification whether the 
Administrator agrees with the sponsor's representation, disagrees with 
the representation, or requires further information. If the sponsor 
disagrees with the Covered Event Determination, the parties shall 
resolve the dispute in accordance with the procedures set forth in 
subpart D of this part.


Sec.  950.23  Claims process for payment of covered costs.

    (a) General. No more than 120 days of when a sponsor was scheduled 
to attain full power operation and expects it will incur covered costs, 
the sponsor may make a claim upon the Department for the payment of its 
covered costs under the Standby Support Contract. The sponsor shall 
file a Certification of Covered Costs and thereafter such Supplementary 
Certifications of Covered Costs as may be necessary to receive payment 
under the Standby Support Contract for covered costs.
    (b) Certification of Covered Costs. The Certification of Covered 
Costs shall include the following:
    (1) A Claim Report, including the information specified in 
paragraph (c) of this section;
    (2) A certification by the sponsor that:
    (i) The covered costs listed on the Claim Report filed pursuant to 
this

[[Page 28222]]

section are losses to be incurred by the sponsor;
    (ii) The claims for the covered costs were processed in accordance 
with appropriate business practices and the procedures specified in 
this subpart; and
    (iii) The sponsor has used due diligence to mitigate, shorten, and 
end, the covered delay and associated costs covered by the Standby 
Support Contract.
    (c) Claim Report. For purposes of this part, a ``Claim Report'' is 
a report of information about a sponsor's underlying claims that, in 
the aggregate, constitute the sponsor's covered costs. The Claim Report 
shall include, but is not limited to:
    (1) Detailed information substantiating the duration of the covered 
delay;
    (2) Detailed information about the covered costs associated with 
covered delay, including as applicable:
    (i) The amount of payment for principal or interest during the 
covered delay, including the relevant dates of payment, amounts of 
payment and any other information deemed relevant by the Department, 
and the name of the holder of the debt, if the debt obligation is held 
by a Federal agency; or
    (ii) The underlying payment during the covered delay related to the 
incremental cost of purchasing power to meet contractual agreements, 
including any documentation deemed relevant by the Department to 
calculate the fair market price of power.
    (d) Supplementary Certification of Covered Cost. If the total 
amount of the covered costs due to a sponsor under the Standby Support 
Contract has not been determined at the time the Certification of 
Covered Costs has been filed, the sponsor shall file monthly, or on a 
schedule otherwise determined by the Claims Administrator, 
Supplementary Certifications of Covered Costs updating the amount of 
the covered costs owed to the sponsor. Supplementary Certifications of 
Covered Costs shall include a Claim Report and a certification as 
described in this section.
    (e) Supplementary information. In addition to the information 
required in paragraphs (b) and (c) of this section, the Claims 
Administrator may request such additional supporting documentation as 
required to ascertain the appropriate covered costs sustained by a 
sponsor.


Sec.  950.24  Claims determination for covered costs.

    (a) No later than thirty (30) days from the sponsor's submission of 
a Certification of Covered Costs, the Claims Administrator shall issue 
a Claim Determination identifying those claimed costs deemed to be 
reasonable and appropriate based on an evaluation of:
    (1) The duration of covered delay, taking into account contributory 
or concurrent delays resulting from events excluded from coverage;
    (2) The covered costs associated with covered delay, including an 
assessment of the sponsor's due diligence in mitigating or ending 
covered costs, as set forth in Sec.  950.23;
    (3) Any adjustments to the covered costs, as set forth in Sec.  
950.26; and
    (4) Other information as necessary and appropriate.
    (b) The Claim Determination shall state the Claims Administrator's 
determination that the claim shall be paid in full, paid in an adjusted 
amount as deemed appropriate by the Claims Administrator, or rejected 
in full.
    (c) Should the Claims Administrator conclude that the sponsor has 
not supplied the required information in the Certification of Covered 
Costs or any supporting documentation sufficient to allow reasonable 
verification of the duration of the covered delay or covered costs, the 
Claims Administrator shall so inform the sponsor and specify the nature 
of additional documentation requested, in time for the sponsor to 
supply supplemental documentation and for the Claims Administrator to 
issue the Claim Determination.
    (d) Should the Claims Administrator find that any claimed covered 
costs are not appropriate or otherwise should be considered excluded 
costs under the Standby Support Contract, the Claims Administrator 
shall identify such costs and state the reason(s) for that decision in 
writing. If the parties cannot agree on the covered costs, they shall 
resolve the dispute in accordance with the requirements in subpart D of 
this part.


Sec.  950.25  Calculation of covered costs.

    (a) The Claims Administrator shall calculate the appropriate amount 
of the covered costs claimed in the Certification of Covered Costs as 
follows:
    (1) Costs covered by Program Account Loan guarantee. The principal 
or interest on any debt obligation financing the advanced nuclear 
facility for the duration of covered delay to the extent the debt 
obligation was included in the calculation of the loan cost; and
    (2) Costs covered by Grant Account. The incremental costs 
calculated for the duration of the covered delay. In calculating the 
incremental cost of power, the Claims Administrator shall consider:
    (i) Fair market price. The fair market price may be determined by 
the lower of the two options: the actual cost of the short-term supply 
contract for replacement power, purchased by the sponsor, during the 
period of delay, or for each day of replacement power by its day-ahead 
weighted average index price in $/MWh at the hub geographically nearest 
to the advanced nuclear facility as posted on the previous day by the 
Intercontinental Exchange (ICE) or an alternate electronic marketplace 
deemed reliable by the Department. The daily MWh assumed to be covered 
is no more than its nameplate capacity multiplied by 24 hours; 
multiplied by the capacity-weighted U.S. average capacity factor in the 
previous calendar year, including in the calculation any and all 
commercial nuclear power units that operated in the United States for 
any part of the previous calendar year; and multiplied by the average 
of the ratios of the net generation to the grid for calculating 
payments to the Nuclear Waste Fund to the nameplate capacity for each 
nuclear unit included. In addition, the Claims Administrator may 
consider ``fair market price'' from other published indices or prices 
at regional trading hubs and bilateral contracts for similar delivered 
firm power products and the costs incurred, including acquisition 
costs, to move the power to the contract-specified point of delivery, 
as well as the provisions of the covered contract regarding replacement 
power costs for delivery default; and
    (ii) Contractual price of power. The contractual price of power 
shall be determined as the daily weighted average price in equivalent 
$/MWh under a contractual supply agreement(s) for delivery of firm 
power that the sponsor entered into prior to any covered event. The 
daily MWh assumed to be covered is no more than the advanced nuclear 
facility's nameplate capacity multiplied by 24 hours; multiplied by the 
capacity-weighted U.S. average capacity factor in the previous calendar 
year, including in the calculation any and all commercial nuclear power 
units that operated in the United States for any part of the previous 
calendar year; and multiplied by the average of the ratios of the net 
generation to the grid for calculating payments to the Nuclear Waste 
Fund to the nameplate capacity for each nuclear unit included.


Sec.  950.26  Adjustments to claim for payment of covered costs.

    (a) Aggregate amount of covered costs. The sponsor's aggregate 
amount of

[[Page 28223]]

covered costs shall be reduced by any amounts that are determined to be 
either excluded or not covered.
    (b) Amount of Department share of covered costs. The Department 
share of covered costs shall be adjusted as follows:
    (1) No excess recoveries. The share of covered costs paid by the 
Department to a sponsor shall not be greater than the limitations set 
forth in Sec.  950.27(d).
    (2) Reduction of amount payable. The share of covered costs paid by 
the Department shall be reduced by the appropriate amount consistent 
with the following:
    (i) Excluded claims. The Department shall ensure that no payment 
shall be made for costs resulting from events that are not covered 
under the contract as specified in Sec.  950.14; and
    (ii) Sponsor due diligence. Each sponsor shall ensure and 
demonstrate that it uses due diligence to mitigate, shorten, and to end 
the covered delay and associated costs covered by the Standby Support 
Contract.


Sec.  950.27  Conditions for payment of covered costs.

    (a) General. The Department shall pay the covered costs associated 
with a Standby Support Contract in accordance with the Claim 
Determination issued by the Claims Administrator under Sec.  950.24 or 
the Final Claim Determination under Sec.  950.34, provided that:
    (1) Neither the sponsor's claim for covered costs nor any other 
document submitted to support the underlying claim is fraudulent, 
collusive, made in bad faith, dishonest or otherwise designed to 
circumvent the purposes of the Act and regulations;
    (2) The losses submitted for payment are within the scope of 
coverage issued by the Department under the terms and conditions of the 
Standby Support Contract as specified in subpart B of this part; and
    (3) The procedures specified in this subpart have been followed and 
all conditions for payment have been met.
    (b) Adjustments to payments. In the event of fraud or 
miscalculation, the Department may subsequently adjust, including an 
adjustment obligating the sponsor to repay any payment made under 
paragraph (a) of this section.
    (c) Suspension of payment for covered costs. If the Department paid 
or is paying covered costs under paragraph (a) of this section, and 
subsequently makes a determination that a sponsor has failed to meet 
any of the requirements for payment specified in paragraph (a) of this 
section for a particular covered cost, the Department may suspend 
payment of covered costs pending investigation and audit of the 
sponsor's covered costs.
    (d) Amount payable. The Department's share of compensation for the 
initial two reactors is 100 percent of the covered costs of covered 
delay but not more than the coverage in the contract or $500 million 
per contract, whichever is less; and for the subsequent four reactors, 
not more than 50 percent of the covered costs of the covered delay but 
not more than the coverage in the contract or $250 million per 
contract, whichever is less. The Department's share of compensation for 
the subsequent four reactors is further limited in that the payment is 
for covered costs of a covered delay that occurs after the initial 180-
day period of covered delay.


Sec.  950.28  Payment of covered costs.

    (a) General. The Department shall pay to a sponsor the appropriate 
covered costs due the sponsor, provided that there are no disputes 
between the sponsor and the Department. Payment shall be made in such 
installments and on such conditions as the Department determines 
appropriate. Any overpayments by the Department of the covered costs 
shall be offset from future payments to the sponsor or returned by the 
sponsor to the Department within forty-five (45) days. If there is a 
dispute, then the Department shall pay the undisputed costs and defer 
payment of the disputed portion upon resolution of the dispute in 
accordance with the procedures in subpart D of this part. If the 
covered costs include principal or interest owed on a loan made or 
guaranteed by a Federal agency, the Department shall instead pay that 
Federal agency the covered costs, rather than the sponsor.
    (b) Timing of payment. The sponsor may receive payment of covered 
costs when:
    (1) The Department has approved payment of the covered cost as 
specified in this subpart; and
    (2) The sponsor has incurred and is obligated to pay the costs for 
which payment is requested.
    (c) Payment process. The covered costs shall be paid to the sponsor 
designated on the Certification of Covered Costs required by Sec.  
950.23. A sponsor that requests payment of the covered costs must 
receive payment through electronic funds transfer.

Subpart D--Dispute Resolution Process


Sec.  950.30  General.

    The parties, i.e., the sponsor and the Department, shall include 
provisions in the Standby Support Contract that specify the procedures 
set forth in this subpart for the resolution of disputes under a 
Standby Support Contract. Sec. Sec.  950.31 and 950.32 address disputes 
involving covered events; Sec. Sec.  950.33 and 950.34 address disputes 
involving covered costs; and Sec. Sec.  950.36 and 950.37 address 
disputes involving other contract matters.


Sec.  950.31  Covered event dispute resolution.

    (a) If a sponsor disagrees with the Covered Event Determination 
rendered in accordance with Sec.  950.22 and cannot resolve the dispute 
informally with the Claims Administrator, then the disagreement is 
subject to resolution as follows:
    (1) A sponsor shall, within thirty (30) days of receipt of the 
Covered Event Determination, deliver to the Claims Administrator 
written notice of a sponsor's rebuttal which sets forth reasons for its 
disagreement, including any expert opinion obtained by the sponsor.
    (2) After submission of the sponsor's rebuttal to the Claims 
Administrator, the parties shall have fifteen (15) days during which 
time they must informally and in good faith participate in mediation to 
attempt to resolve the disagreement before instituting the process 
under paragraph (b) of this section. If the parties reach agreement 
through mediation, the agreement shall constitute a Final Determination 
on Covered Events.
    (3) The parties shall jointly select the neutral(s). The parties 
shall share equally the cost of the mediation.
    (b) If the parties cannot resolve the disagreement through 
mediation under the timeframe established under paragraph (a)(2) of 
this section and the sponsor elects to continue pursuing the claim, the 
sponsor shall within ten (10) days submit any remaining issues in 
controversy to the Department of Energy Board of Contract Appeals 
(Board) or its successor, for binding resolution by an Administrative 
Judge of the Board utilizing the Board's Summary Trial with Binding 
Decision process. The parties shall abide by the procedures of the 
Board for Summary Trial with Binding Decision. The parties agree that 
the decision of the Board constitutes a Final Determination on Covered 
Events.

[[Page 28224]]

Sec.  950.32  Final Determination on covered events.

    (a) If the parties reach a Final Determination on Covered Events 
through mediation, or Summary Trial with Binding Decision as set forth 
in this subpart, the Final Determination on Covered Events is a final 
settlement of the issue, made by the sponsor and the Program 
Administrator. The sponsor, and the Department, may rely on, and 
neither may challenge, the Final Determination on Covered Events in any 
future Certification of Covered Costs related to the covered event that 
was the subject of that Initial Determination.
    (b) The parties agree that no appeal shall be taken or further 
review sought, and that the Final Determination on Covered Events is 
final, conclusive, non-appealable and may not be set aside, except for 
fraud.


Sec.  950.33  Covered costs dispute resolution.

    (a) If a sponsor disagrees with the Claim Determination rendered in 
accordance with Sec.  950.24 and cannot resolve the dispute informally 
with the Claims Administrator, then the parties agree that any dispute 
must be resolved as follows:
    (1) A sponsor shall, within thirty (30) days of receipt of the 
Claim Determination, deliver to the Claims Administrator in writing 
notice of and reasons for its disagreement (Sponsor's Rebuttal), 
including any expert opinion obtained by the sponsor.
    (2) After submission of the sponsor's rebuttal to the Claims 
Administrator, the parties have fifteen (15) days to informally and in 
good faith participate in mediation to resolve the disagreement before 
instituting the process under paragraph (b) of this section. If the 
parties reach agreement through mediation, the agreement shall 
constitute a Final Claim Determination.
    (3) The parties shall jointly select the mediator(s). The parties 
shall share equally the cost of the mediator(s).
    (b) If the parties cannot resolve the disagreement through 
mediation under the timeframe established under paragraph (a)(2) of 
this section, any remaining issues in controversy shall be submitted by 
the sponsor within ten (10) days to the Department of Energy Board of 
Contract Appeals (Board) or its successor, for binding arbitration by 
an Administrative Judge of the Board utilizing the Board's Summary 
Trial with Binding Decision process. The parties shall abide by the 
procedures of the Board for Summary Trial with Binding Decision. The 
parties agree that the decision of the Board shall constitute a Final 
Claim Determination.


Sec.  950.34  Final claim determination.

    (a) If the parties reach a Final Claim Determination through 
mediation, or Summary Trial with Binding Decision as set forth in this 
subpart, the Final Claim Determination is a final settlement of the 
issue, made by the sponsor and the Program Administrator.
    (b) The parties agree that no appeal shall be taken or further 
review sought and that the Final Claim Determination is final, 
conclusive, non-appealable, and may not be set aside, except for fraud.


Sec.  950.35  Payment of final claim determination.

    Once a Final Claim Determination is reached by the methods set 
forth in this subpart, the parties intend that such a Final Claim 
Determination shall constitute a final settlement of the claim and the 
sponsor may immediately present to the Department a Final Claim 
Determination for payment.


Sec.  950.36  Other contract matters in dispute.

    (a) If the parties disagree over terms or conditions of the Standby 
Support Contract other than disagreements related to covered events or 
covered costs, then the parties shall engage in informal dispute 
resolution as follows:
    (1) The parties shall engage in good faith efforts to resolve the 
dispute after written notification by one party to the other that there 
is a contract matter in dispute.
    (2) If the parties cannot reach a resolution of the matter in 
disagreement within thirty (30) days of the written notification of the 
matter in dispute, then the parties shall have fifteen (15) days during 
which time they must informally and in good faith participate in 
mediation to attempt to resolve the disagreement before instituting the 
process under paragraph (b) of this section. If the parties reach 
agreement through mediation, the agreement shall constitute a Final 
Agreement on the matter in dispute.
    (3) The parties shall jointly select the neutral(s). The parties 
shall share equally the cost of the mediation.
    (b) If the parties cannot resolve the disagreement through 
mediation under the timeframe established in paragraph (a)(2) of this 
section and either party elects to continue pursuing the disagreement, 
that party shall within ten (10) days submit any remaining issues in 
controversy to the Department of Energy Board of Contract Appeals 
(Board) or its successor, for binding resolution by an Administrative 
Judge of the Board utilizing the Board's Summary Trial with Binding 
Decision process. The parties shall abide by the procedures of the 
Board for Summary Trial with Binding Decision. The parties shall agree 
that the decision of the Board constitutes a Final Decision on the 
matter in dispute.


Sec.  950.37  Final agreement or final decision.

    (a) If the parties reach a Final Agreement on a contract matter in 
dispute through mediation, or a Final Decision on a contract matter in 
dispute through a Summary Trial with Binding Decision as set forth in 
this subpart, the Final Agreement or Final Decision is a final 
settlement of the contract matter in dispute, made by the sponsor and 
the Program Administrator.
    (b) The parties agree that no appeal shall be taken or further 
review sought, and that the Final Agreement or Final Decision is final, 
conclusive, non-appealable and may not be set aside, except for fraud.

Subpart E--Audit and Investigations and Other Provisions


Sec.  950.40  General.

    The parties shall include a provision in the Standby Support 
Contract that specifies the procedures in this subpart for the 
monitoring, auditing and disclosure of information under a Standby 
Support Contract.


Sec.  950.41  Monitoring/Auditing.

    The Department has the right to audit any and all costs associated 
with the Standby Support Contracts. Auditors who are employees of the 
United States government, who are designated by the Secretary of Energy 
or by the Comptroller General of the United States, shall have access 
to, and the right to examine, at the sponsor's site or elsewhere, any 
pertinent documents and records of a sponsor at reasonable times under 
reasonable circumstances. The Secretary may direct the sponsor to 
submit to an audit by a public accountant or equivalent acceptable to 
the Secretary.


Sec.  950.42  Disclosure.

    Information received from a sponsor by the Department may be 
available to the public subject to the provision of 5 U.S.C. 552, 18 
U.S.C. 1905 and 10 CFR part 1004; provided that:
    (a) Subject to the requirements of law, information such as trade 
secrets, commercial and financial information that a sponsor submits to 
the Department in writing shall not be disclosed without prior notice 
to the sponsor in accordance with Department regulations concerning the 
public disclosure of information. Any submitter asserting that the 
information is privileged or confidential should

[[Page 28225]]

appropriately identify and mark such information.
    (b) Upon a showing satisfactory to the Program Administrator that 
any information or portion thereof obtained under this regulation 
would, if made public, divulge trade secrets or other proprietary 
information, the Department may not disclose such information.

[FR Doc. 06-4398 Filed 5-12-06; 8:45 am]
BILLING CODE 6450-01-P