[Federal Register Volume 71, Number 155 (Friday, August 11, 2006)]
[Rules and Regulations]
[Pages 46306-46333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-6818]



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Part III





Department of Energy





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10 CFR Part 950



Standby Support for Certain Nuclear Plant Delays; Final Rule

  Federal Register / Vol. 71, No. 155 / Friday, August 11, 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: Final rule.

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SUMMARY: The Department of Energy (Department) is adopting, with 
changes, the interim final rule published on May 15, 2006. This interim 
final rule established a new part 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 final rule will become effective on 
September 11, 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.

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. Final Rule
    A. Overview of the Rule
    B. Section-by-Section Analysis
    C. Cost Analysis of Standby Support Program
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 
certain regulatory and litigation risks 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, 
which 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, (5) the types of delays that Congress determined were to be 
excluded from coverage, (6) the maximum amount of coverage available 
for up to six advanced nuclear facilities with a distinction made for 
the initial two reactors and the subsequent four reactors, (7) the 
types of costs to be covered by the Program, (8) the requirements for a 
sponsor of an advanced nuclear facility, and (9) reporting requirements 
by the Nuclear Regulatory Commission (``Commission'').
    Section 638(g) requires the Department to issue regulations 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 final rule, the Department 
held a public workshop and published two Federal Register notices: a 
Notice of Inquiry (NOI) (70 FR 71107, November 25, 2005) and an interim 
final rule (71 FR 28200, May 15, 2006).
    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. 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 facilitate 
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 
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.
    On May 6, 2006, the Department issued an interim final rule that 
established a new part 950 in Title 10 of the Code of Federal 
Regulations (CFR), Standby Support for Certain Nuclear Plant Delays. 
The rule includes five subparts that set forth the procedures, 
requirements and limitations for the award and administration of 
Standby Support Contracts that indemnify a project sponsor of certain 
costs that may be incurred due to a delay in full power operation of 
the sponsor's advanced nuclear facility.
    Subpart A set forth the purpose, scope and applicability, and 
definitions of the regulation. Subpart B set forth provisions 
addressing the Standby Support Contract process, including the process 
whereby a sponsor and the Program Administrator\1\ enter into a

[[Page 46307]]

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 
must be satisfied 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 
addressed the provisions for each Standby Support Contract. These 
include general contract terms, such as 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 
set forth the claims administration process, including the submission 
of claims and payment of covered costs under a Standby Support 
Contract. Subpart D set forth provisions related to dispute resolution, 
including disputes involving covered events and disputes involving 
covered costs. In each case, subpart D provided a two-step process, 
first requiring non-binding mediation and then binding arbitration, if 
the parties cannot reach agreement. Subpart E set 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.
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    \1\ In this notice of final rulemaking, the Department 
distinguishes among the terms ``Program Administrator,'' ``Claims 
Administrator,'' and ``Department.'' ``Program Administrator'' is 
used to identify situations in which a Department representative 
executes a Conditional Agreement or a Standby Support Contract; 
``Claim Administrator'' is used to identify situations in which a 
Department representative administers the claims process; and 
``Department'' is used to identify general statements of policy and 
situations involving more general matters such as funding and 
appropriations.
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    The Department received four written comments addressing the 
interim final rule, including comments from a nuclear industry trade 
association, two utilities, and a public advocacy group. In telephone 
communications and a meeting, interested persons provided verbal 
communications to Department representatives that addressed the same 
issues raised in written comments on the interim final rule. The 
Department responds to all the relevant comments in section III of the 
preamble to this final rule.

III. Final Rule

A. Overview

    In today's final rule, the Department has largely adopted the 
provisions set forth in the interim final rule. The revised 10 CFR part 
950 adopted by this final rule will become effective thirty days after 
the final rule's publication in the Federal Register. The changes 
between the interim final rule and the final rule will not have any 
effect, given that the Department anticipates that no sponsor will 
apply for a combined license until after the final rule takes effect 
later in 2006. In addition to some editorial and other non-substantive 
changes that modify and clarify the interim final rule, particularly in 
subparts C and D, the Department is making the following changes 
including:
     In section 950.3, the definition for ``litigation'' has 
been modified to include ``local courts;'' (See also 950.14(a)(4))
     In section 950.3, the definition for ``pre-operational 
hearing'' has been modified to state ``any Commission hearing, that is 
provided for in 10 CFR part 52, after issuance of the combined license 
that is provided for in 10 CFR part 52;'' (See also 950.14(a)(3))
     In section 950.11(b), the following clarifying sentence 
has been added: ``A sponsor may elect to allocate 100 percent of the 
coverage to either the Program Account or the Grant Account.''
     In section 950.11(c)(1), the following clarifying sentence 
has been added with respect to funding: ``Covered costs paid through 
the Program Account are backed by the full faith and credit of the 
United States;''
     In section 950.11(e), the provision addressing the process 
by which the anticipated contributions are specified in the Conditional 
Agreement has been clarified;
     In section 950.12(c), the provision on limitations to 
entering into a Standby Support Contract has been modified;
     In section 950.12(d), the following section has been added 
with respect to abandonment of a project and cancellation by the 
Department: ``(1) If the Program Administrator cancels a Standby 
Support Contract for abandonment pursuant to 950.13(f)(1), the Program 
Administrator may re-execute a Standby Support Contract with a sponsor 
other than a sponsor or that sponsor's assignee with whom the 
Department had a cancelled contract, provided that any such replacement 
Standby Support Contract is executed in accordance with the terms and 
conditions set forth in this part, and shall be deemed to be one of the 
subsequent four reactors under this part. (2) Not more than two Standby 
Support Contracts may be re-executed in situations involving 
abandonment and cancellation by the Program Administrator.''
     In section 950.13(f), the following has been added with 
respect to cancellation of a Standby Support Contract: ``(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.''
     In section 950.13(h), the following has been added with 
respect to assignment of payments: ``The Program Administrator shall 
permit the assignment of payment of covered costs with prior written 
notice to the Department.''
     In section 950.13(k), the following has been added with 
respect to reestimation under the Federal Credit Reform Act (FCRA) of 
1990: ``The sponsor is neither responsible for any increase in loan 
costs, nor entitled to recoup fees for any decrease in loan costs, 
resulting from the re-estimation conducted pursuant to FCRA.''
     In section 950.14(b), certain types of excluded events 
have been deleted.
     In section 950.14, an additional section, 950.14(e), has 
been added to address adjustments to the inspections, tests, analysis 
and acceptance criteria (ITAAC) schedule.
     In section 950.20, the following has been added with 
respect to exclusions: ``the Department is required to establish an 
exclusion in accordance with 950.14(b).''
     Sections 950.21, 950.22, and 950.24 have been modified to 
add information reporting requirements and to clarify the Department's 
role in establishing an exclusion.
     Subpart D has been revised to specify that dispute 
resolution will be administered by the Civilian Board of Contract 
Appeals.
    The preamble first provides a section-by-section response to the 
specific comments on the interim final rule and explains modifications 
from the interim final rule to the final rule. The preamble then 
provides a detailed discussion of the Standby Support Program's 
estimated costs.
B. Section-by-Section Analysis

Section 950.1--Purpose

    In section 950.1 of the interim final rule, the Department stated 
that ``The

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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.''
    The public advocacy group commented that the Department should 
avoid using taxpayer funds to provide an expensive subsidy to the 
nuclear industry. Industry commenters stated that they believe the 
program should provide broad coverage and financial certainty.
    The Department notes that Congress specifically authorized the 
Standby Support Program and provided explicit direction on calculating 
the premium for the insurance and allocating this premium between 
appropriated funds and funds from sponsors or other non-Federal 
sources. The Department has sought to ensure that, in implementing this 
authorization and direction, it put in place a Program that facilitates 
the construction and full power operation of new advanced nuclear 
facilities, protects taxpayer funds, reflects both the magnitude of the 
risk presented and the protection provided against that risk, and 
avoids undermining the safety of constructing advanced nuclear 
facilities. The Department continues to believe that the regulations 
developed by the Department are appropriate and necessary to effectuate 
section 638's objectives.
Multiple Incentive Programs
    The Department requested comment on whether sponsors should be 
eligible to participate in multiple Federal Government loan guarantee 
or other programs intended to incentivize the construction and 
operation of nuclear facilities and, if so, whether clarification is 
needed on issues such as the amounts an entity can receive under more 
than one Federal program.
    In response to the interim final rule, industry commenters stated 
that participation in the different programs established under the Act 
should not limit a project sponsor's eligibility for any of these 
programs, or the amounts that a sponsor can receive under them. 
Industry commenters stated that the objective of these incentives is to 
facilitate and encourage the construction and full power operation of 
new advanced nuclear facilities and that the programs are 
complementary, not exclusive. For example, commenters stated that the 
cost of any loan guarantee should be adjusted downward to reflect the 
reduced risk of default on the underlying debt obligation as a result 
of the Standby Support Program. The public advocacy group stated that 
the nuclear industry includes some of the country's wealthiest 
companies and should not be eligible for numerous subsidies for the 
same plant.
    The Department has determined that the Act does not prohibit a 
sponsor from acquiring for a specific facility more than one, or even 
all, of the various forms of incentives provided under the Act. 
Therefore, in this final rule, the Department is not prohibiting a 
sponsor from being eligible for all of the incentive programs for which 
the Act makes it eligible.
Section 950.3--Definitions
    Advanced nuclear facility. In the notice of interim final 
rulemaking, the Department took the definition of ``advanced nuclear 
facility'' verbatim from the Act. The Department further noted 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. Nevertheless, the Department reserved the 
right to make a final determination if a project sponsor chooses a 
design that the Department has not anticipated.
    The Department received two comments addressing this issue. The 
public advocacy group stated that companies should not be encouraged to 
apply for design certification at the same time as a combined license. 
In contrast, the industry trade association generally agreed with the 
definition in the interim final rule, yet requested that the Department 
clarify the use of the word ``approved,'' particularly with respect to 
what constitutes design approval. Industry further stated that under 
the Commission's rules in 10 CFR part 52, Commission design approval 
may be obtained in two ways. The design may be certified in a 
rulemaking proceeding, or the design may be approved in the combined 
licensing proceeding itself. The trade association stated that the Act 
does not address these two paths to design approval, and requested that 
the final rule state explicitly that either path to design approval is 
acceptable under the rule.
    The Department agrees with the trade association's comment that the 
pathway for approval is subject to the Commission's rules under 10 CFR 
part 52, and that design approval may be obtained by either path. 
Nevertheless, the Department has determined that there is no reason to 
amplify or alter the statutorily specified definition. Consistent with 
section 638, the definition at section 950.3 states that an advanced 
nuclear facility must be approved by the Commission and makes no 
distinction as to when or how such approval is issued other then what 
is stated in section 638 (i.e., ``the approval is made after December 
31, 1993.'') Although the Department agrees that sponsors should be 
encouraged to obtain design approval prior to filing a combined license 
application with the Commission, thereby expediting the combined 
license review process, such a stringent requirement is not mandated by 
the Act and is not necessary to support the purposes of the Standby 
Support Program.
    Covered Event--Litigation. Section 638(c)(1)(B) refers to 
``litigation that delays the commencement of full-power operations * * 
* '' In the interim final rule, the Department defined litigation 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. (See 
also section 950.14(a)(4) which addresses covered events.)
    The Department received divergent comments on the definition of 
litigation. The public advocacy group expressed concern that the 
definition for litigation was overly expansive, claiming that it should 
cover only frivolous lawsuits; on the other hand, industry commenters 
believed it was not expansive enough. The public advocacy group 
disagreed with including in the definition appeals of Commission 
decisions to the courts and in including litigation involving safety or 
security issues. The industry commenters requested that administrative 
litigation that occurs at the Commission related to the combined 
license should not be excluded from the definition. The industry trade 
association stated that Congress did not intend to condition the 
coverage based on the type of litigation causing the delay or when such 
delay occurs. Further, the industry commenters objected to the 
Department's interpretation that only litigation resulting in a court 
order enjoining the sponsor's actions would be eligible as a covered 
delay.
    As explained in the interim final rule, the Department has broad 
authority to interpret the terms in section 638, including the terms 
``litigation'' and ``pre-operational hearing.'' After reviewing the 
comments in light of section 638, the Department has determined that it 
is appropriate to adopt the definition in the interim final, except for 
minor changes as discussed below.

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    Section 638(c) sets forth three types of events for coverage, which 
Congress terms ``Inclusions.'' These are (1) ITAAC-related delays, (2) 
pre-operational hearings, and (3) litigation. Based on this statutory 
delineation, the Department has determined that most of the requested 
changes to the definition set forth in the interim rule would be 
inappropriate and inconsistent with section 638. With respect to the 
public advocacy groups' request to include only frivolous lawsuits and 
to exclude appeals of Commission decisions to the courts, the 
Department has determined that such an interpretation would be 
inconsistent with the reference in section 638(c)(1)(B), without 
qualifications, to litigation that delays commencement of full power 
operation of the advanced nuclear facility. Obviously, litigation that 
is not ``frivolous'' has the potential to delay full operation of a 
facility. Moreover, what constitutes a ``frivolous'' lawsuit can itself 
be a question involving substantial uncertainty and the Department 
believes it would be counter to the purposes of section 638 to import 
this uncertainty into the Standby Support Program.
    With respect to industry's specific requests, the Department has 
determined that most of them would likewise be inconsistent with the 
reference in section 638(c)(1)(B). Even if one assumes that the term 
``litigation'' is ambiguous, the Department has determined that as a 
matter of policy, industry's suggested expansions of the term 
litigation are inappropriate, except for including litigation in local 
courts. Industry requested that the Department expand the definition of 
``litigation'' to include any administrative litigation that occurs at 
the Commission related to the combined licensing process, and 
arbitration proceedings and orders. The Department reaffirms its 
previous determination that since section 638(c)(1)(A) covers the risk 
of pre-operational hearings and Commission review of ITAACs, the 
reference in section 638(c)(1)(B) to litigation should be interpreted 
to mean litigation outside the context of the Commission proceeding on 
the combined license. For the Department to adopt the industry's 
recommendation to interpret the term ``litigation'' even more broadly 
would effectively nullify these distinctions and undermine 
Congressional intent. The industry's recommended broad interpretation 
also likely would increase the risk that a covered event would occur 
and the insurance be triggered, thereby increasing (perhaps 
substantially) the premium for the risk insurance. The Department has 
determined that the better approach is to define each covered delay 
clearly and distinctly recognizing section 638's structure which 
delineates only certain delays that are eligible for cost recovery by 
categories, i.e., ITAAC-related delays, pre-operational hearings, and 
litigation.
    With respect to the exclusionary language for administrative 
litigation at the Commission that is in the definition of litigation, 
this language is intended to clearly distinguish between proceedings 
that are conducted before the Commission from litigation that is 
conducted before a court of law. The Department could remove the 
exclusion language from the definition of litigation, but the effect 
would be the same. That is, a sponsor could be covered for delays 
associated with litigation that occurs in a court of law outside the 
context of the Commission, e.g., in state, federal, tribal or local 
courts. This definition of litigation precludes coverage for any form 
of proceeding that occurs before the Commission, whether or not the 
exclusion is expressly stated in the definition. Accordingly, the 
Department has determined that it would be inappropriate and 
unnecessary to remove the exclusion for other administrative litigation 
at the Commission.
    Furthermore, the Department notes that by defining litigation to 
include only litigation in the courts, it is also excluding 
administrative litigation at federal or state agencies other than the 
Commission. As explained above, the Department interprets the Act to 
provide coverage for specific events. Even though proceedings at other 
federal or state agencies may be referred to as ``administrative 
litigation'' and may affect the sponsor's ability to construct or 
operate an advanced nuclear facility, the Department does not believe 
the language of the Act is properly interpreted to include those 
proceedings within the definition of litigation. Such an interpretation 
requested by the commenters would significantly expand the definition 
of litigation beyond the Act's objectives. As a consequence, it would 
also increase the cost of the risk insurance program. The Department 
notes, however, that such administrative proceedings may lead to court 
litigation and, as such, coverage for delays may be possible under the 
Standby Support Contract.
    Similarly, the Department has determined that it would be 
inappropriate to expand the term litigation to cover ``arbitration'' 
which is defined as ``a method of dispute resolution involving one or 
more neutral third parties who are usually agreed to by the disputing 
parties and whose decision is binding.'' Black's Law Dictionary Eighth 
Edition (2004). It is generally understood that such dispute resolution 
is outside of litigation and the court system. The Department's 
exclusion of arbitration from the definition of litigation is not 
intended to discourage parties from alternative forms of dispute 
resolution. Rather, the Department recognizes the value of arbitration, 
either to avoid litigation or as a mechanism to end litigation in court 
(in which case the arbitration would be encompassed by the litigation 
giving rise to the arbitration and thus, as a practical matter, would 
be covered), but believes that it is an overly broad view of the term 
litigation not within the coverage of section 638. The Department also 
notes that making the term more expansive would result in increased 
cost of the risk insurance and the program.
    Covered events--Pre-operational Hearings. In the interim final 
rule, the Department defined pre-operational hearing to mean ``a 
hearing held pursuant to the Commission's regulation in 10 CFR 
52.103.'' In the preamble of the interim final rule, the Department 
stated that it would be inappropriate and unnecessary to broaden the 
term to include all hearings taking place prior to operation or fuel 
load.
    The industry trade association expressed its view that Congress did 
not intend to limit this coverage to only the hearing provided for in 
10 CFR 52.103, but to any other hearings the Commission holds with 
respect to the part 52 licensing procedure and any Commission appeals 
or remands associated with the hearing. The industry trade association 
provided the example of hearings that may be requested, pursuant to 10 
CFR 52.97, in the event a sponsor makes modifications, additions, or 
deletions to the combined license. It further stated that such a 
limitation would be contrary to Congress's intent to provide protection 
from delays resulting from the untested licensing process, and to 
remove this regulatory uncertainty as a barrier to the development of 
new nuclear power plants.
    Based on further review, the Department has determined that it is 
appropriate to provide coverage for other types of Commission pre-
operational hearings that occur after issuance of a combined license 
that are directly related to the part 52 proceeding on the combined 
license and are so referenced in the regulation. For

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example, the Department notes that under part 52, the Commission 
addresses the situation where, prior to fuel load or initial 
operations, a party may petition to modify the terms or conditions of 
the combined license and in so doing may invoke procedures for a non-
mandatory hearing. Thus, an expansion of the definition of pre-
operational hearing to include such hearings is consistent with the 
language in section 638(c)(1). It is also consistent with the 
distinction in that section to provide coverage for two separate 
events: pre-operational hearings by the Commission and litigation. 
Based on these considerations, the Department has revised the 
definition for pre-operational hearing to state ``any hearing held by 
the Commission after issuance of the combined license that is provided 
for by part 52.''
    However, the Department has determined that the Act's language 
should not be interpreted so broadly as to categorically include in the 
definition of pre-operational hearings any and all Commission appeals 
or remands associated with the hearing. The Act defines a covered delay 
as ``the conduct of pre-operational hearings by the Commission.'' Like 
the term litigation, the term pre-operational hearing is subject to 
interpretation. The Department has determined that as a matter of 
policy, the industry's suggested expansion of this definition is 
inappropriate. The Department recognizes that the outcome of a 
Commission hearing may result in additional proceedings, such as 
appeals and remands, which may in turn cause a delay in construction or 
operations. A similar outcome is also possible in the context of 
litigation. Nevertheless, the Department does not believe it is 
appropriate or necessary to define the terms pre-operational hearings 
or litigation to necessarily include those additional proceedings. 
Rather, the Department believes that it is appropriate to determine 
through the claims administration process whether based on the facts of 
the case any ensuing proceedings are part of, or the same as, the pre-
operational hearing or litigation that is a covered event. The 
Department notes that such additional proceedings may fall within the 
category of an excluded event, e.g., events within the control of the 
sponsor.
    Full power operation. In the interim final rule, the Department 
defined ``full power operation'' to mean the point at which the sponsor 
first synchronizes the advanced nuclear facility to the electrical 
grid. This is typically at a power level in the range of 10 to 25 
percent.
    Industry commenters stated that definition fails to recognize 
adequately that full-scale commercial operation could be delayed by 
judicial or administrative proceedings even after a new plant has 
reached 10-25 percent power levels. Industry commenters argued that 
what they viewed as by narrowly defining the term, the Department is 
attempting to shift that risk back to sponsors and their investors and 
lenders, which they viewed as impermissible. The industry trade 
association recommended that the definition of ``full-power operation'' 
include two triggers: (1) Power output level at or near 100 percent of 
its nameplate capacity and (2) the completion and resolution of any 
pending or ongoing hearings or litigation.
    As explained in the interim final, the Department has determined 
that it has broad authority to interpret the terms in section 638, 
especially undefined terms such as ``full power operation.'' The 
Department concludes that the definition of full power operation in the 
interim final rule is appropriate, given that initial synchronization 
to the electric grid provides a clear, unambiguous point in time at 
which a new nuclear facility would have the ability to generate 
revenue. The Department views the industry's recommendation for power 
output at or near 100 percent as far too open-ended, given that a 
sponsor could make a business or operational decision to operate a 
facility at a level of less than 100 percent for a very long time or 
even permanently; there is no good reason why such a situation should 
result in long-term or permanent coverage for the reactor under the 
Program. The Department agrees that the sponsor should be eligible to 
submit claims for covered events prior to the resolution of pending or 
ongoing hearings or litigation, so long as full power operation has not 
commenced. Accordingly, the resolution of any pending or ongoing 
hearings or litigation is confined to those events that happen prior to 
first grid synchronization. Based on this analysis, the Department has 
determined that it would be inappropriate to modify the definition for 
full power operation.
    Incremental Costs. In the interim final rule, the Department 
specified that ``incremental costs'' mean 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.
    The Department received two comments addressing this issue. The 
industry trade association commented that the concept of incremental 
costs is applicable to new nuclear power plants constructed as merchant 
power generators. However, it stated that a nuclear plant built by a 
regulated utility as part of its rate base may not have a contract to 
sell the output from the facility because the plant's output becomes 
part of general system supply. The trade association commented that if 
the nuclear plant start is delayed, a regulated utility may have to 
purchase power from the market to cover needs, or it may be able to 
supply that shortfall from general system supply. If it does purchase 
power, the provisions related to fair market price at section 
950.25(2)(i) would apply. However, if the utility does not purchase 
replacement power from the market, the commenter requested that the 
regulations provide an alternative means to calculate the fair market 
price for covering demand from within its system.
    The public advocacy group stated that the term ``fair market price 
of power'' needs further clarification within the regulations. 
Specifically, it requested that the Department make a distinction 
between ``merchant power plants,'' which are only selling into the 
``market,'' and power plants that are in a utility's ``rate base'' and 
selling to retail customers under state regulation.
    The Department has determined that it is neither necessary nor 
appropriate to create an alternative cost recovery mechanism for a 
sponsor that does not contract for replacement power from the market. 
Section 638 provided clear directions for mitigating a sponsor's delay 
cost for debt and contractual supply agreements. By allowing a sponsor 
to mitigate its cost of delay through one or both mechanisms, the 
Department believes that cost mitigation has been addressed for the 
scenarios highlighted by industry. In addition, the Department believes 
that the definition of ``fair market price'' stated in the interim 
final rule is sufficient and addresses potential gaming scenarios, 
given that the determination of the fair market price is the lower of 
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 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

[[Page 46311]]

Exchange (ICE) or an alternate electronic marketplace deemed reliable 
by the Department.
    Sponsor. In the interim final rule, the Department defined 
``sponsor'' to mean any person that has ``applied for'' a combined 
license and such application by the person has been docketed by the 
Commission. The Department believed that such a definition was 
necessary to ensure that an application was sufficient for docketing by 
the Commission.
    The nuclear trade association requested that the term sponsor be 
expanded to address situations in which several entities apply for a 
combined license. Specifically, it requested that the term ``sponsor'' 
be defined in section 950.3 of the regulation to mean

    ``a person or persons whose application for a combined license 
for an advanced nuclear facility has been docketed by the 
Commission. Multiple applicants involved in the same advanced 
nuclear facility are considered a single sponsor. Where multiple 
applicants are involved, the applicant for authority to operate the 
advanced nuclear facility is designated the lead sponsor and acts as 
the sponsor for purposes of these regulations. The lead sponsor is 
responsible to the Department for providing information, making or 
receiving notices, and administering claims on behalf of the 
applicants. Applicants having an ownership share in the advanced 
nuclear facility share in the benefits and obligations of the 
Standby Support Agreement in pro rata proportion to their NRC 
licensed ownership in the advanced nuclear facility.''

    The Department generally agrees with the goal of the comment that 
multiple sponsors should define their relationships and obligations. 
Nevertheless, the Department believes that it is inappropriate and 
unnecessary to specify by regulation such an arrangement, particularly 
since the term ``sponsor'' is expressly defined in section 638, and a 
sponsor or sponsors that have made such arrangements would qualify for 
coverage under the existing definition. The Department further notes 
that if such a definition were imposed by regulation, it would reduce 
the flexibility among potential sponsors. Accordingly, the Department 
has decided not to amend the definition for ``sponsor'' in section 
950.3.

Subpart B--Standby Support Contract Process

Sections 950.10--Conditional Agreement

    Section 638(b) authorizes the Secretary to enter into Standby 
Support Contracts with sponsors of advanced nuclear facilities. That 
subsection requires that sufficient funding be placed in designated 
Departmental accounts before a Standby Support Contract may be 
executed. In the interim final rule, the Department adopted a two-step 
process in which a Conditional Agreement can, for the qualifying 
sponsors, be converted into a Standby Support Contract at a later date, 
if the sponsor meets certain conditions and budgetary resources are 
provided. The Department noted that it has significant discretion to 
establish the procedures needed to manage the Standby Support Program, 
provided that they are consistent with section 638.
    Industry commenters generally agreed with the two-step approach. In 
contrast, the public advocacy group asserted it was unnecessary and 
inappropriate. The Department continues to believe that such a two-step 
implementation process is appropriate because it allows the Department 
and potential sponsors to manage the difficult timing issues inherent 
in the federal appropriations process and business concerns in planning 
and financing a multi-billion dollar advanced nuclear facility.
    In section 950.10(b)(1)-(5), the Department requires a sponsor to 
provide certain information to be eligible to enter into a Conditional 
Agreement. This includes an electronic copy of its complete combined 
license application docketed by the Commission, a summary schedule of 
the project, a detailed business plan, the sponsor's estimate of the 
amount and timing of payments for debt service and the estimated dollar 
amount to be allocated to the sponsor's covered costs.
    The nuclear trade association stated that it was inappropriate for 
the Department to request what it termed project specific background 
information, claiming that this information had little or no bearing on 
calculating the budget score under FCRA.
    The Department has determined that to ensure appropriate regulatory 
oversight of the Standby Support Program, it is necessary for the 
Department to request the information set forth in section 
950.10(b)(1)-(5). Insurers of large construction projects typically 
obtain such information to establish due diligence. Absent such 
oversight, the Department would not be adequately fulfilling its 
responsibilities for overseeing a program with such potentially large 
payouts, particularly its responsibility to facilitate the full power 
operation of advanced nuclear facilities and to protect taxpayer funds. 
In addition, this information, along with other information, will 
assist the Department in determining the necessary amount of funding 
for a potential Standby Support Contract with the sponsor. Lastly, the 
Department believes that this information will assist the Department in 
refining estimated cash flows payouts in the event a claim is submitted 
and in estimating the full power operation schedules.
National Environmental Policy Act (NEPA)
    In section 950.10(c), the Department set forth the bases upon which 
it will determine whether to enter into a Conditional Agreement. In the 
interim final rule, the Department noted that it will determine whether 
the Conditional Agreement may be issued 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.
    The industry commented that it generally supported the Department's 
position about NEPA review in the interim final rule. Nevertheless, it 
expressed concern that the Commission's NEPA review is likely to occur 
during the Commission's review of the combined license application, and 
therefore it is unlikely that a Commission NEPA review would have 
occurred at the time of the Conditional Agreement. Accordingly, it 
urges the Department to make a determination that entering into a 
Conditional Agreement is not a major federal action and does not 
trigger NEPA.
    The Department believes that it is unlikely that a Commission NEPA 
review would have occurred at the time a Conditional Agreement is 
issued, and generally agrees that entering into a Conditional Agreement 
would not be a major federal action. The Department notes that prior to 
issuance of a combined license, which is a prerequisite for the 
Department to execute a Standby Support Contract, the Commission would 
have to complete its NEPA review of the proposed advanced nuclear 
facility.

Section 950.11 Terms and Conditions of the Conditional Agreement

    In the interim final rule, the Department stated that a sponsor 
should know its funding needs prior to execution of the Standby Support 
Contract, and included sections 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

[[Page 46312]]

execution. In particular, section 950.11(b) required each Conditional 
Agreement to include a provision specifying the amount of coverage to 
be allocated under the Program Account and Grant Accounts.
    Industry commenters stated that the rule should explicitly indicate 
that a sponsor is not obligated to allocate coverage between the 
Program Account and Grant Account and may elect to allocate 100 percent 
of the coverage to either the Program Account or Grant Account.
    The Department believes that the interim final rule permitted such 
an allocation of coverage, but agrees with the commenter that it would 
be appropriate to expressly state this in the regulatory text. 
Accordingly, the Department today amends section 950.11(b) to state 
that ``a sponsor may elect to allocate 100 percent of the coverage to 
either the Program Account or the Grant Account.'' The Department notes 
that industry made an identical comment with respect to 950.11(c)(1).
950.11(c) Funding
    In section 950.11(c) of the interim final rule, the Department 
specified that each Conditional Agreement contain a provision that the 
Program Account or the Grant Account be funded in advance of the 
Department entering into a Standby Support Contract. After explaining 
the funding of these accounts under FCRA, the Department further 
explained in the preamble that it was within the Department's 
discretion to interpret section 638 as authorizing and providing that 
Standby Support Contracts are backed by the full faith and credit of 
the United States, even though section 638 did not include that precise 
phrase.
    The industry group requested that the regulatory text include an 
unequivocal statement that payment of costs covered under the Program 
Account is backed by the full faith and credit of the United States. It 
argued that such a statement in the regulation was necessary for 
financing purposes.
    The Department has modified section 950.11(c) to state that 
``Covered costs paid through the Program Account are backed by the full 
faith and credit of the United States.'' The Department notes that it 
is making this modification to facilitate financing of advanced nuclear 
facilities, even though such an express statement is not actually 
required.
    Also in section 950.11(c), the Department specifically addressed 
how the Standby Support Contracts will be funded. Among other things, 
that section states ``[u]nder no circumstances will the amount of the 
coverage for payments of principal and (sic) interest under a Standby 
Support Contract exceed 80 percent of the total of the financing 
guaranteed under that Contract.''
    The industry trade association objected to the provision 
prohibiting payments to exceed 80 percent of the total financing. It 
expressed its view that this provision reflects the Office of 
Management and Budget (OMB) guidance in OMB Circular A-129, but that 
this guidance is merely ``discretionary.'' The commenter further stated 
that the Department's inclusion of this provision reflected ``chronic 
confusion in the May 15 Rule over whether the Standby Support Program 
Account is delay insurance or a loan guarantee program.''
    The commenter is correct that this provision reflects the policy 
set forth in OMB Circular A-129, which provides guidance for all 
government programs covered by FCRA. The same policy that informed the 
80 percent threshold in OMB Circular A-129 also informs the 
Department's determination and judgment that this threshold is 
appropriate for the Standby Support Program. Moreover, as noted in the 
preamble to the interim final rule, the Department views the coverage 
provided through the Program Account to be a loan guarantee for 
purposes of FCRA and thus backed by the full faith and credit of the 
United States; and therefore governed by the terms of Circular A-129. 
Insofar as the Department uses this analysis to explain why it is 
appropriate and permissible to extend the full faith and credit of the 
United States even though those words are not used in section 638, the 
Department believes it should be consistent with other policies 
applicable to implementing loan guarantee authorities, where 
appropriate.
950.11(d) Reconciliation
    In section 950.11(d), the Department specified that ``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.''
    The industry trade association objected to this provision, claiming 
that the concept of re-calculating the loan cost was inappropriate. It 
requested that the Department and OMB establish a procedure through 
which the loan cost and insurance premium are fixed at the time of the 
Conditional Agreement consistent with FCRA. The commenter further 
recommended that any increase in loan cost come from permanent 
indefinite budget authority.
    The Department has determined that cost reassessment is consistent 
with other programs that employ a two-step process for approval. The 
Department further notes that the government would be remiss in its 
duty to taxpayers if it did not reassess the costs, given that several 
years typically will elapse between signing a Conditional Agreement and 
a Standby Support Contract. Failure to make such a reassessment would 
not be consistent with FCRA and sound financial management practices. 
The Department further notes that the permanent indefinite budget 
authority is available only for reestimates of the loan cost covered by 
an existing Standby Support Contract, not for changes in cost prior to 
the execution of the Standby Support Contract. Once the Standby Support 
Contract has been executed, any re-estimation costs would be covered 
from the Treasury's permanent indefinite budget authority consistent 
with FCRA.
Limitations
    In section 950.11(e) of the interim final rule, the Department 
specified situations in which the Conditional Agreement should no 
longer remain in effect. Specifically, if the amount of appropriated 
funds is not sufficient to fund the statutorily required costs, the 
sponsor was given 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 believed 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 provided 
a sponsor the option either to enter into a contract or forego that 
opportunity.
    The industry trade association commented that in addition to the 
two options set forth in section 950.11(e), the sponsor should be given 
two more options: First, to hold open its right to execute a Standby 
Support Contract until such time as appropriated funds become 
available, either through the normal appropriations process or through 
reprogramming. Second, the trade association requested that a

[[Page 46313]]

sponsor should be entitled to elect a reduced level of coverage.
    The Department has determined that the first option would reduce 
flexibility in executing a Standby Support Contract and administering 
the Standby Support Program. The Department believes that it would be 
counter to the goal of facilitating full power operation of advanced 
nuclear facilities to permit a sponsor to hold a contract while waiting 
for funds that Congress may never appropriate, particularly since a 
different sponsor may be willing to pay the cost and initiate 
construction of an advanced nuclear facility.
    The Department has determined that the second option is consistent 
with the goal of facilitating full power operation, and that this goal 
can be achieved at a lower cost to the government. The Department has 
modified section 950.11(e)(2) to provide the sponsor with the option to 
elect a reduced level of coverage based on the amounts deposited in the 
Program Account and Grant Account. However, to protect the Department 
from any potential claims by a sponsor for the maximum amount of 
coverage available under section 638, the Department has also added 
language to this section to make it clear that the Department is not 
responsible or liable for any claims by the sponsor for additional 
coverage.
950.11(f) Termination of Conditional Agreement
    In section 950.11(f) of the interim final rule, the Department set 
forth five situations in which a Conditional Agreement remains in 
effect until a certain event. For instance, 950.11(f)(4) stated that 
event was when ``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; and 950.11(f)(5) stated ``The Program Administrator 
has entered into six Standby Support Contracts.''
    The industry trade association stated that it generally had no 
objection to section 950.11(f), but that the situations under clauses 
(4) and (5) should accommodate the circumstances where an existing 
Standby Support Contract is terminated or cancelled. The commenter 
requested that these two provisions be modified with the phrase ``such 
Standby Support Contracts have expired in accordance with the stated 
term thereof pursuant to 10 CFR 950.13(e).''
    The Department has concluded that it would be inappropriate to add 
this language to the regulations as suggested by the commenters. 
Nevertheless, as discussed further in relation to section 950.12(d) 
there are limited circumstances under which the Department would 
consider re-executing a Standby Support Contract; in such 
circumstances, not more than two Standby Support Contracts may be re-
executed by the Program Administrator in situations involving 
abandonment and cancellation. In addition, in those limited 
circumstances and conditions, a sponsor or sponsors would be in a 
position to initiate the process under these regulations of executing a 
Conditional Agreement and becoming eligible for a Standby Support 
Contract.

Sections 950.12, 950.13 and 950.14--Standby Support Contract

    In the interim final rule, the Department noted that it is 
sufficient to include the critical contract terms in a regulation 
rather than provide a sample contract. The Department stated that a 
sample contract was not necessary, given that a sponsor could 
appropriately evaluate the potential contract's effect on risk 
allocation and financing during the pre-contract discussions set forth 
in sections 950.10 and 950.11.
    The industry trade association agreed with the Department that it 
is not necessary to provide a sample contract in the regulation; 
nevertheless, it requested that the Department expeditiously develop a 
standardized contract with formal stakeholder input. One utility 
favored including a contract in the regulation.
    The Department has determined that it is not necessary to include a 
Standby Support Contract in the regulation for the reasons set forth in 
the interim final rule. After completing the rulemaking, the Department 
intends to develop a Standby Support Contract form consistent with 10 
CFR part 950 and will consider whether to provide for public input.

Section 950.12--Standby Support Contract Conditions

Conditions Precedent
    In section 950.12(a) of the interim final rule, the Department set 
forth nine conditions precedent that a sponsor must fulfill to be 
eligible to enter into a Standby Support Contract. Among these 
conditions that a sponsor must fulfill are ``[d]ocumented coverage of 
required insurance for the project'' (950.12(a)(5)), and ``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.'' (950.12(a)(8)).
    The industry trade association agreed that seven of the nine 
conditions precedent were appropriate. It nevertheless requested that 
the Department delete condition (5) related to documentation of 
required insurance coverage, claiming that such documentation is not 
relevant to Standby Support for covered delays. Similarly, the trade 
association requested that the Department delete condition (8) related 
to the systems-level construction schedule, claiming that this 
information is unnecessary to the Standby Support Program. It claimed 
that the Department's request for this information ``represents an 
unnecessary interjection of the Department into the construction 
process'' given that the construction schedule will be determined 
between sponsors, their contractors, and their lenders. The industry 
further requested that the Department should not evaluate or approve 
the construction schedule.
    The Department has determined that to protect taxpayer funds and to 
ensure an appropriate level of regulatory oversight for a program with 
such potentially large payouts, it is appropriate to obtain the 
insurance information set forth in condition (5) and the construction 
schedule set forth in condition (8). The Department notes that both 
types of information are readily available to a sponsor, given that the 
sponsor must have this information to obtain financing from a lender 
and a combined license from the Commission. With respect to the 
construction schedule, this information has direct relevance to the 
timing of possible claims, e.g., projected timing of full-power 
operation. Consequently, this information is necessary for the 
effective administration of the Standby Support Contract even if, and 
particularly because, it is subject to change. Nevertheless, the 
Department agrees that it is not necessary for the Department to 
approve the construction schedule and thus has deleted this term in 
section 950.12(a). Further, the Department has revised condition (5) to 
state ``[d]ocumented coverage of insurance required for the project by 
the Commission and lenders.''
Funding and Limitations
    In section 950.12(b) of the interim final rule, the Department 
specified 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

[[Page 46314]]

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.
    The industry trade association objected to the requirement that the 
funds need to be deposited 30 days in advance of the contract's 
execution. It requested that a sponsor be able to meet this condition 
simultaneous with closing on the financing.
    The Department is required by section 638 to deposit the necessary 
funds in the Program Account or Grant Account before a contract is 
executed. While the Department appreciates the fact that a sponsor's 
financing arrangements may be complicated and a simultaneous closing 
would be desirable, the Department requires a certain amount of time 
prior to contract execution to ensure compliance with the requirements 
of the Act and coordination of the Department's administrative 
functions. Accordingly, the 30 day time period specified in the interim 
final rule is appropriate and necessary.
Cancellation by Abandonment
    In its comments, the trade industry recommended the Department 
allow for Standby Support Contracts to ``roll over'' as an added 
incentive to advanced nuclear facility construction. In section 950.12 
of the final rule, the Department has added a provision to address the 
situation where a sponsor may abandon a project and the Department may 
determine it is appropriate and consistent with the goal of the Standby 
Support Program to re-execute a contract. In accordance with this goal, 
any new contract under this provision would be deemed to replace a 
previously executed contract and therefore not exceed the mandate to 
facilitate the construction and operation of six new advanced nuclear 
reactor facilities.
    Specifically, section 950.12(d) provides for the re-execution of a 
Standby Support Contract under certain conditions of abandonment 
pursuant to section 950.13(f)(1). The Department anticipates that 
situations involving abandonment are likely to be rare or non-existent 
given that a sponsor will have expended millions of dollars and cleared 
most of the regulatory and litigation hurdles once it has executed a 
Standby Support Contract and commenced construction. The Department has 
included language indicating that cancellation of a Standby Support 
Contract as a result of a sponsor's abandonment permits the Program 
Administrator to re-execute not more than two new Standby Support 
Contracts, provided that the new contract is executed in accordance 
with the terms and conditions of part 950 and such contracts are deemed 
to be one of the subsequent four reactors under part 950. That is, any 
new contract under this provision would be deemed to replace one of the 
subsequent four reactors, and thus would be eligible for coverage in 
the amounts provided for such reactors.

Section 950.13--Standby Support Contract: General Provisions

    In section 950.13 of the interim final rule, the Department 
specified 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.
    The industry group stated that it had no objection to most of these 
provisions, but nevertheless provided comment on four of these 
provisions: the cancellation provisions in (f), termination in (g), 
assignment in (h), and re-estimation in (k).
Cancellation
    In section 950.13(f)(2), the Department set forth the bases upon 
which a Standby Support contract can be cancelled by stating that if a 
sponsor does not require continuing coverage under the contract that 
the sponsor may cancel the contract by giving written notice to the 
Program Administrator.
    Industry commenters stated that they had no objection to section 
950.13(f)(2); however, they commented that the Standby Support coverage 
should explicitly provide that in the event of cancellation by the 
Department, the sponsor, or as agreed by the parties, the Standby 
Support coverage should ``roll over'' both in terms of (1) making 
available the full 100 percent coverage to the first of the second four 
reactors in the event the contract that was cancelled was one of the 
first two contracts and (ii) making available a Standby Support 
Contract to the next project sponsor with a Conditional Agreement in 
the queue. (The commenter was of the mistaken belief that a potential 
sponsor that entered into a Conditional Agreement would have a higher 
priority in a ``queue;'' in fact, the Department is not creating a 
``queue'' under the regulations.)
    The Department has determined that Section 638(d) should be 
interpreted as not permitting a process that would allow a sponsor to 
cancel its contracts thereby allowing the contracts to ``roll over'' to 
a sponsor with an existing contract. This process could potentially 
create a total of six ``premium'' contracts (i.e., contracts with 
coverage up to $500 million) going beyond the Act's cost and coverage 
limitation for the initial two reactors and subsequent four reactors. 
In addition, the purpose of risk insurance is to provide an incentive 
for sponsors to construct and operate new advanced nuclear power 
facilities. Once the Department and a sponsor have entered into a 
Standby Support Contract, the Department believes that it has provided 
the appropriate level of incentive and the proper amount of coverage. 
Accordingly, no additional coverage is needed, because a sponsor had 
decided to construct a new advanced nuclear facility.
    However, the Department has determined that there could be 
situations where a sponsor is unwilling or unable to continue with the 
construction of a new nuclear plant and the Department may have to 
terminate the contract. In those instances, it may be prudent for the 
Department to re-execute a contract and it would be consistent with 
section 638 and its objectives for the Department to do so. Section 
950.13(f) is modified to provide for the situation in which the Program 
Administrator may cancel a contract for abandonment of the project by 
the sponsor, where such abandonment is not caused by a covered event or 
force majeure.
Termination by Sponsor
    Under section 950.13(g), if a sponsor elects to terminate a Standby 
Support Contract, the sponsor or any related party is prohibited from 
entering into another Standby Support Contract. The Department stated 
that 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.
    The industry trade association objected to this provision, claiming 
that it is overbroad and may, among other things, penalize sponsors who 
own partial interests in different projects. The industry requested 
that the Department either delete 950.13(g) or limit the prohibition to 
situations in which a ``sponsor elects to terminate its

[[Page 46315]]

Standby Support Contract unless the sponsor has suspended, cancelled or 
terminated construction of the reactor covered by such contract.''
    The Department has determined that it would be appropriate to 
modify section 950.13(g) to include the commenters requested limitation 
as modified; i.e., ``sponsor elects to terminate its Standby Support 
Contract unless the sponsor has cancelled or terminated construction of 
the reactor covered by such contract.'' The Department did not include 
a provision where the sponsor may merely ``suspend'' construction as 
that situation does not avoid possible ``gaming'' of the system by a 
sponsor. By adding the additional language as stated, the Department 
believes that the regulations provide the appropriate balance between 
preventing a sponsor from ``gaming'' the Program, while allowing a 
sponsor to cancel or terminate a no longer viable Standby Support 
Contract. The Department notes that the Department and taxpayer funds 
are sufficiently protected, in a situation in which the entire reactor 
project is terminated.
Assignment
    In section 950.13(h) of the interim final rule, the Department 
required each Standby Support Contract to include a provision 
specifying the assignment of a sponsor's rights and obligations under 
the Standby Support Contract. Specifically, this provision stated 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 industry trade association commented that the assignment 
provision should address two types of assignment: (1) Assignment of 
payments, and (2) assignment of the Standby Support Contract. As for 
the assignment of payments, it recommended that each Standby Support 
Contract allow the assignment of covered costs to the lenders of the 
project with notice, but without prior Department consent. The 
commenter claimed that assignment of payment is a necessary condition 
of debt financing. As for the assignment of the contract itself, 
including the rights and obligations under the contract, the industry 
trade association commented that the Standby Support Contract should be 
assignable without the requirement of prior Department consent to any 
license transferee approved by the Commission.
    The Department has determined that the assignment of payments, 
without the Department's prior consent, is appropriate and consistent 
with standard financing arrangements for construction projects. The 
final rule is modified to permit an assignment of payments with prior 
notice to the Department to facilitate contract administration. 
However, the Department has determined that to ensure proper regulatory 
oversight, it is necessary for the Department to retain the provision 
requiring prior approval of any rights and obligations under the 
Standby Support Contract. The Department anticipates that it will 
consent to any license transferee approved by the Commission, but is 
not prepared at this point to abdicate to the Commission this 
responsibility under a program administered by the Department.
Reestimation
    In section 950.13(k) of the interim final rule, the Department 
required each Standby Support Contract to include a provision 
specifying that consistent with FCRA, the sponsor provide all needed 
documentation to allow the Department to annually re-estimate the loan 
cost (as defined by FCRA) needed in the financing account under 2 
U.S.C. 661a(7) funded by the Program Account.
    The industry trade association did not object to the Department re-
estimating the loan cost of the Standby Support Contract on an annual 
basis consistent with FCRA once the contract has been executed. 
However, the commenter requested that this provision should expressly 
state that any increase in loan cost resulting from the re-estimation 
shall be covered from the permanent indefinite budget authority that is 
available for this purpose. Under FCRA, any increase in loan costs 
resulting from the re-estimation would be covered by the Treasury 
general fund through permanent indefinite budget authority; similarly, 
any decrease in loan costs resulting from re-estimation would be paid 
to the Treasury general fund. To address any uncertainty, however, this 
section is modified to state that any changes in loan costs resulting 
from the re-estimation are neither the responsibility of, nor an 
entitlement to the sponsor.

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

    In section 950.14 of the interim final rule, the Department set 
forth provisions related to situations in which the Secretary will pay 
``covered costs.'' Among the situations expressly set forth in section 
638(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
    In section 950.14(a) of the interim final rule, the Department 
explained that 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 a pre-operational hearing or 
litigation. A discussion relating to the pre-operational hearing and 
litigation are addressed in the definition section of this preamble.
ITAAC Delays.
    In section 950.14(a)(1) of the interim final rule, the Department 
required 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.
    In its comments, the industry trade association agreed with the 
two-tier approach for assessing whether an ITAAC-related delay should 
be considered a covered event. It further commented that the final rule 
should outline a process for the adjustment of the ITAAC review 
schedule, to which both parties must agree. The commenter then stated 
the ITAAC review schedule should not be changed without express 
approval by both the sponsor and the Department. In addition, it stated 
that the last agreed-upon ITAAC review schedule would remain in place 
and be used to determine covered events, until an updated schedule was 
established.
    The Department agrees with the comment about the ITAAC review 
schedules. An additional section has been added to section 950.14 
(950.14(e)) to address the process for adjustments to the ITAAC 
schedule.

[[Page 46316]]

Exclusions--Burden of Proof
    Section 638(c)(2) expressly precludes the Secretary from paying 
costs resulting from three general causes: ``(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 section 950.14(b)(2) of the interim final rule, the Department 
set forth a non-exhaustive set of example exclusions, including 
situations involving the sponsor's failure to take action required by 
law or regulation, situations within the control of a sponsor, and 
normal business risks.
    In addition to comments about specific exclusions listed in 
950.14(b), the industry trade association provided general comments 
about causation and burden of proof. Specifically, the trade 
association stated that consistent with insurance law, it should be the 
responsibility of the Department to establish whether an exclusion is 
applicable to a given situation. It further recommended a specific 
regulatory provision to address causation. The commenter stated that 
clear standards and proper allocation will simplify contract 
administration, facilitate claims determinations, and minimize 
disputes.
    The Department generally agrees with the comment recommending that 
the regulation more precisely address causation and burden of proof. 
With respect to establishing an exclusion, the industry trade 
association is correct that an insurer is typically responsible for 
establishing an exclusion. (See 7 Couch on Insurance 101:63 (3rd ed. 
2005) which states ``[i]n keeping with the general rules of proof, any 
causation required to bring a loss within positive coverage terms of 
the [insurance] policy generally must be shown by the insured or person 
seeking coverage, while the insurer bears the burden of showing any 
causation necessary to bring the case within an exclusion for 
coverage.'') In recognition of this general standard applicable to 
insurance contracts, the Department is modifying section 950.20 as a 
matter of policy to provide that ``[a] sponsor is required to establish 
that there is a covered event, a covered delay and a covered cost; the 
Department is required to establish an exclusion in accordance with 
950.14(b).''
    Further, sections 950.21, 950.22 and 950.24 are also modified to 
clarify the Department's role in establishing an exclusion. The 
modifications in these sections clarify that the Department's role in 
establishing an exclusion is conditioned on the sponsor's cooperation 
in providing information to the Department. To insure the Department's 
ability to establish an exclusion is not unreasonably hampered by the 
sponsor, the Department is modifying section 950.22 to require the 
sponsor to provide to the Department information in its possession that 
is relevant to the Department's claim of an exclusion. For example, in 
the case where the Department claims a delay is an exclusion because it 
was ``within the sponsor's control,'' the Department may require the 
sponsor--the party likely in possession of the best available 
information--to provide relevant information to the Department in 
support of its claim for exclusion. Failure of a sponsor to provide the 
necessary and relevant information to the Department would be grounds 
for denial of the sponsor's claim for coverage. In addition, the 
Department is modifying section 950.21(b) to add a clause requiring the 
sponsor to certify their claim for covered costs, as well as certify 
the absence of an exclusion.
Exclusions
    In section 950.14(b) of the interim final rule, the Department sets 
forth the statutory exclusions and provides examples of excluded events 
as requested by commenters in response to the NOI and public workshop. 
The Department has modified this section to clarify that the Standby 
Support Contracts shall include the statutory exclusions and, within 
those exclusions, provide example types of events that may constitute 
an exclusion. The industry trade association had no objection to most 
of the examples listed, but objected to certain provisions, including 
clauses (1)(ii), 1(iii) and (2)(iii) that state, respectively:
    (1)''The failure of the sponsor to take any action required by law, 
regulation, or ordinance, but not limited to * * * (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; [or]
    (iii) Delays attributable to the sponsor's actions to redress any 
deficiencies in inspections, tests, analyses or acceptance criteria as 
a result of a Commission disapproval of fuel loading.''
    The commenter stated that leaving these items as examples of 
excluded events could result in excluding coverage where the sponsor's 
actions may result from the Commission's failure to comply with the 
ITAAC schedule or other fault of the Commission, such as an inspector's 
non acceptance of ITAAC or an unwarranted Commission determination of 
deficiency. The commenter requested that the Department remove these 
items from the regulation, because they should be left to the claims 
administration process and not be a categorical exclusion.
    The Department has determined that most of the examples provided of 
excluded types of events are appropriate as stated in the rule and that 
providing such examples is not an improper incursion into the claims 
administration process. The Department agrees with the comment that the 
claims administration process is the appropriate venue to assess the 
specific facts of a sponsor's claim of a covered event and the Claims 
Administrator's determination of an exclusion. The examples provided in 
the regulation are meant to provide guidance for the parties in that 
process; the judgment of the Claims Administrator on a particular claim 
necessarily will be based on the facts that underlie the claim.
    The examples provided in subsection 950.14(b)(1) and (2) are 
consistent with the language and intent of the Act. The intent of 
section 638 is to provide coverage to a sponsor for specified events in 
the untested regulatory process that are not the result of the 
sponsor's failure to comply with laws and regulations or are beyond the 
sponsor's control. If a sponsor has not met its ITAAC, as determined by 
the Commission, and needs additional time to satisfy the Commission's 
expectations, then that delay is not covered under section 683 and no 
further inquiry is needed into whether or not the Commission's finding 
was ``warranted.'' Although not a stated example in the rule, the same 
reasoning would apply to any delay associated with a sponsor's need to 
redress some noncompliance with a law or regulation as determined by a 
court. Accordingly, the Department will not modify the rule to delete 
the examples provided of the type of events that may be exclusions.
    The industry trade association also objected to the type of event 
in clause (3)(iv) which provides an exclusion for ``[n]ormal business 
risks, including but not limited to * * * (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).'' 
The trade association requested that this clause be deleted, claiming 
that it was overly broad.
    This clause is patterned after provisions in standard insurance

[[Page 46317]]

contracts covering the construction of large facilities. The Department 
continues to believe that it is necessary to continue its reference to 
acts or decisions by other government bodies like State and local 
governments, since such actions would be normal business risks faced by 
an entity constructing a large facility and go beyond the intended 
coverage under section 638 for Commission-related delays, even though 
they may be within coverage for litigation-related delays. To 
reiterate, however, this event is identified as an example of an event 
that would constitute a normal business risk to provide guidance to the 
parties. The ultimate determination of whether an event constitutes an 
exclusion in the context of a Standby Support Contract will be 
addressed through the claims administration process. Nevertheless, upon 
further review, the Department has determined that by including 
reference to ``any person, group or organization,'' the clause was 
overly broad. Accordingly, this provision is modified to delete that 
reference.
    The industry trade association also objected to clause (3)(viii) 
which includes an exclusion for ``unrealistic and overly ambitious 
schedules set by the sponsor.'' It claimed that this exclusion was 
unnecessary and unwarranted, since it reasoned that this phrase is not 
referring to ITAAC schedules since those are approved by the Commission 
or Department. Further, it stated that any construction schedule would 
be determined by the sponsor and its contractors or lenders. The 
commenter concluded that whether a schedule is unrealistic or overly 
ambitious is not relevant to whether a covered event occurs.
    The Department has determined that the exclusion for unrealistic or 
overly ambitious schedules is not appropriate. Any covered events 
attributable to ITAAC schedules are already covered under section 
950.14(a)(1) and (2). Further, section 950.14(b)(2)(i) more 
appropriately addresses project planning and construction problems that 
are events within the control of the sponsor. In reconsidering the 
exclusion in 950.14(b)(3)(viii), the Department has determined that the 
phrase ``unrealistic and overly ambitious schedules set by the 
sponsor'' is ambiguous and would be difficult to apply. Accordingly, 
the Department has deleted this provision.
    Lastly, the industry trade association took exception to the 
Department's covered event exclusion in (b)(2)(v) for litigation-
related delays in those situations where a sponsor decides not to 
continue construction or attain full power operation unless such action 
is required by a court order. The industry trade association noted that 
in many cases litigation may cause numerous and substantial delays 
without a court order mandating the work stoppage. The industry trade 
association argues that the Department improperly categorically 
excluded such delays, and should allow the claims process to be used to 
determine whether or not the delay is covered.
    The Department agrees that the exclusion language in the interim 
rule may be misinterpreted, and modified the rule to eliminate this 
type of exclusion and avoid unnecessary confusion. Nevertheless, the 
Department stresses that elimination of this provision does not relieve 
the sponsor of its substantial burden to prove that any litigation-
related delay is a covered delay, and that the Department will look 
critically at a sponsor's claim that litigation without an order to 
stop activities was the cause of delay. The Department acknowledges 
that, even in the absence of a court order directly prohibiting 
construction or operational activities, pending litigation or court 
decisions may cause a sponsor to delay or suspend its activities thus 
delaying full power operation. However, depending on the nature of the 
litigation or court order, the decision whether to continue activities 
at risk or halt activities pending the outcome of the litigation is 
often a business decision largely within the sponsor's control. The 
Department does not believe it is appropriate to shift the burden or 
risk entailed in that decision to the standby support insurance 
program. Otherwise, the Department would create the perverse incentive 
for a sponsor to halt or delay activities unnecessarily because the 
costs of that delay would be covered by the insurance contract. On the 
other hand, the Department recognizes that in some cases, e.g., where 
the sponsor would breach a fiduciary duty if construction or operation 
activities are continued or there is an adverse decision against the 
Commission, a halt in the sponsor's construction or operations may be 
necessary and beyond the sponsor's control. As suggested by the 
commenters, the Department believes the appropriate forum to determine 
whether or not a litigation-related delay is a covered delay is the 
claims administration process.
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.'' 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 and to demonstrate that to the Program Administrator. 
Similarly, section 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 industry trade association commented that the due diligence 
requirement is consistent with a party's obligation under general 
principles of contract law to mitigate damages. Nevertheless, the 
commenter objected that a sponsor must demonstrate due diligence to the 
Program Administrator in demonstrating a covered delay. Rather, the 
commenter requested that due diligence only be considered when 
determining whether covered costs should be limited. This led the 
commenter to request deletion of the phrase ``demonstrated this to the 
Program Administrator.''
    Upon further review, the Department has modified this section to 
delete the phrase ``demonstrated this to the Program Administrator.'' 
Removal of this phrase does not relieve the sponsor of its obligation 
under section 638 and part 950 to use due diligence to mitigate, 
shorten and end a covered delay. This requirement remains in the rule, 
and the sponsor's actions in that regard will be reviewed by the Claims 
Administrator in reaching a claim determination on covered costs 
pursuant to section 950.24. This allocation of responsibility is 
consistent with the plain language of section 638 that ``the sponsor 
[is] to use due diligence to shorten, and to end, the delay covered by 
the contract.''
Covered Costs
    Section 638(d) 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 interim 
final rule, the Department determined that it is appropriate to limit 
the concept of covered costs to those expressly set forth in paragraph 
(d)(5). Accordingly, 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.
    The public advocacy group agreed with the Department's 
determination to limit covered costs to the express terms of section 
638. In contrast, industry

[[Page 46318]]

commenters requested that the Department expand coverage to operating 
and maintenance costs and other costs associated with delay in 
commercial operation, including costs of demobilization and 
remobilization, idle time costs incurred in respect of equipment and 
labor, increased general and administrative costs, and escalation costs 
for the completion of construction. The industry group even commented 
that additional costs associated with redesign or alterations should be 
covered, to the extent that litigation or changes in regulation 
resulted in a redesign.
    The Department has determined that, consistent with its broad 
authority to interpret the terms ``covered costs'' and ``including'' in 
section 638(d)(5), it will limit these terms to the items specifically 
set forth in the statute. As the Department concluded in the interim 
final rule, it would be inappropriate to expand these terms, 
particularly given the statute's plain language and the fact that 
providing expanded coverage to a myriad of other costs might serve as a 
disincentive to a sponsor to complete a project in a timely fashion. 
The commenters provided no new information or justification to support 
a potentially dramatic expansion of coverage, which would have the 
effect of making the Standby Support Program significantly more 
expensive, without increasing the likelihood of meeting the statutory 
objectives of section 638, i.e., the expeditious licensing, 
construction and full power operation of new nuclear facilities.

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.
    The industry trade association generally supported the requirement 
that a sponsor has the burden of making a good-faith showing of a 
covered event, covered delay and covered cost. Further, it generally 
supported the two-step process for claims administration. The trade 
association made several suggestions related to the wording of Subpart 
C, including replacing the term ``appropriate'' with cross-references 
to other sections of the rule, suggesting timing changes such as that 
the Claims Administrator must ``make a determination on the covered 
event within 30 days,'' and several other recommendations that do not 
substantively enhance the rule and may serve to limit the Claims 
Administrator's ability to effectively administer the claims in a 
timely fashion.
    The Department has determined that it is appropriate to retain most 
of the wording in subpart C of the interim final rule, which is based 
in large part on the Department of Treasury's Terrorism Risk Insurance 
Program at 31 CFR Part 50 (69 FR 39296, June 29, 2004). The Department 
notes that several of the requested changes would result in increased 
ambiguity or would not provide greater clarity, and thus would not 
serve the Department's goal of an efficient and effective claims 
administration process. For instance, the commenter requested deleting 
the phrase ``including an assessment of the sponsor's due diligence in 
mitigating or ending covered costs,'' in section 950.24(a)(2) as 
potentially duplicative or confusing even though this requirement is 
expressly set forth in section 638. Accordingly, the Department has 
determined that, aside from comments addressed in the next section, it 
would be inappropriate to adopt the industry group's other 
recommendations related to the claims process.

Burden of Proof on Claims

    As discussed in connection with section 950.20, the Department 
agrees with the comment from the industry trade association that a 
sponsor bears the burden of proof on a covered event, a covered delay 
and a covered cost, and the Department bears the burden of proof of an 
exclusion from a covered event and whether a purported covered delay is 
the result of, or was contributed to, by the exclusion. The rule is 
modified in sections 950.20 through 950.24 to codify this expectation.

Determinations by the Claims Administrator

    The industry trade association suggested several sections needed 
clarification based on their interpretation of the phrase 
``appropriate'' in describing the Claims Administrator's determinations 
regarding covered events and covered costs. It noted that this language 
suggested the Claims Administrator could render a decision based on 
subjective factors outside the terms and conditions of the Standby 
Support Contract or the rule. This is a misinterpretation of the 
regulation's language. Nevertheless, to avoid the misinterpretation 
that the Claims Administrator would make determinations based solely on 
subjective judgment, subpart C of part 950 is modified in several 
places (e.g., 950.24 (a) and (d)) to replace the word ``appropriate'' 
with ``allowable'' to indicate the objective nature of the Claims 
Administrator's cost determinations based on the terms and conditions 
of the contract.

Timing of Covered Event Determinations and Payments

    The industry trade association commented that notification of a 
covered event should be submitted ``no later than'' 30 days after the 
end of the covered event, and requested that ``the Department be 
willing to accept notice and begin paying claims as covered losses are 
incurred, while a covered event is ongoing.'' The rule is modified to 
allow notification of a covered event ``no later than'' 30 days after 
the end of the covered event. This change appropriately provides 
flexibility to the sponsor to submit notification of a covered event to 
the Claims Administrator at a time the sponsor deems appropriate, 
particularly where a covered event may be protracted. However, the 
Department does not believe it is appropriate to change the timing of 
the claims process for payment of covered costs. Sections 950.23 and 
950.24 address the process and timing of claims for covered costs, and 
are premised on the fact that covered costs are not expected to be 
incurred until the time the sponsor was scheduled to attain full power 
operations. In other words, a covered event that occurs early in 
construction (e.g., in the first year of a five year construction 
schedule) would not be coincident in time with the obligation of the 
sponsor to pay covered costs such as principal or interest, as those 
costs would not be incurred until much later in time (e.g., in the 
fifth year after construction is complete).
    The industry trade association also objected to what it viewed as 
an open-ended process in section 950.22(c) for the Claims Administrator 
to render a determination on a covered event with the option for the 
Administrator to determine that the claim ``requires further 
information.'' The Department believes it is important to provide this 
flexibility to the Claims Administrator and serves to facilitate a 
resolution of any issues between the Claims Administrator and the 
sponsor without resort to alternative dispute resolution. Consequently, 
the Department is not modifying the rule to address this objection.

[[Page 46319]]

Subpart D--Dispute Resolution Process

Covered Events and Covered Costs Dispute Resolution
    In the interim final rule, the Department stated that claims should 
be resolved as effectively and efficiently as possible. Subpart D 
provides a two step dispute resolution process for resolving claims 
that first calls for mediation and then a Summary Binding Decision.
    The industry trade association generally agreed with the concept of 
dispute resolution through a binding arbitration process as an 
appropriate and expeditious method of resolving disputes under the 
Standby Support Contract. However, the trade association objected to 
the use of the DOE Board of Contract Appeals (DOE Board) as the final 
arbiter of disputes, claiming that the Board is not independent from 
the Department, it does not have experience with insurance-type 
contracts, and it is not an appropriate venue for complex or novel 
cases such as a Standby Support Contract. Rather, industry preferred an 
independent, third-party arbitration process such as the American 
Arbitration Association (AAA) and its rules for commercial arbitration 
and expedited proceedings, which it claimed is familiar to industry and 
without which the industry stated a sponsor would be reluctant to agree 
to binding arbitration without the right of appeal to a court.
    In response to the industry trade association's concern over lack 
of neutrality, that concern should be obviated with the establishment 
of the Civilian Board of Contract Appeals (Civilian Board) (Section 847 
of the National Defense Authorization Act of Fiscal Year 2006, 41 
U.S.C. 438). Effective January 6, 2007, Congress is establishing in the 
General Services Administration a board of contract appeals to be known 
as the Civilian Board of Contract Appeals (Civilian Board). The new 
Civilian Board will include any full time member of several other 
agency board of contract appeals in addition to the disbanded DOE 
Board. Thus, any concern that the Civilian Board is not independent of 
the Department is unfounded. The Civilian Board will provide a wide 
range of expertise from various agencies and departments throughout the 
government. It will also assume jurisdiction over any category of laws 
or disputes over which an agency board of contract appeals has 
jurisdiction. The Department believes that the Civilian Board will have 
the independence, expertise, and requisite procedures to ensure a fair 
and expeditious process for the resolution of disputes in the context 
of Standby Support Contracts. Moreover, the Standby Support Contracts 
will be new not only to the Department and the Civilian Board, but also 
to industry, the AAA, and any arbitrator. Accordingly, the existing 
rules of the AAA for commercial arbitration of complex cases are not 
any better suited to adjudication of claims under a Standby Support 
Contract than the similar procedures successfully employed by the 
Civilian Board to fairly and expeditiously resolve contract disputes 
involving the commercial sector and the federal government. The 
Department is confident that the Civilian Board and the dispute 
resolution procedures it follows are well suited to resolve any issues 
arising under the Standby Support Contracts; commenters have not 
demonstrated otherwise.
    In response to the industry trade association's comment, the rule 
is modified in sections 950.31, 950.33 and 950.36 to clarify that the 
parties will jointly select the mediator that will preside over 
mediation of disputes.

C. Cost Analysis of the Standby Support Program

    Industry commenters stated that it was critical for the Department 
inform potential sponsors about the cost of the insurance coverage. 
These commenters stated the nuclear industry cannot provide a reasoned 
determination of the value of the Program and the rule without knowing 
what the insurance contracts will cost. Accordingly, they requested the 
Department to establish a two-step calculation which they characterized 
as workable and credible to investors. Under the first step, the 
Department would establish a standard premium for the insurance 
contracts based on, and comparable to the premium charged by other 
government agencies and the private sector for comparable sovereign 
risk insurance. Under the second step, the Department would then 
establish a standard ``loan cost'' for the insurance contracts 
calculated under FCRA. To the extent the loan cost is higher than the 
premium amount, the Department would cover the difference through 
appropriations. The industry then stated that the Department ``appears 
to be moving in the opposite direction: There is no standard insurance 
premium, and the expected sponsor payment appears to be subject to a 
case-by-case, contract-by-contract determination dependent largely on 
the Department's success in obtaining appropriations.''
    Although the Department understands the desire of industry 
commenters for certainty and relatively low contributions from 
industry, the Department cannot provide a definitive, standard premium 
for the six Standby Support Contracts available under section 638, or 
to commit to any specified amount of government appropriations that 
would be applied toward funding the Standby Support Contracts. The 
statutory language of section 638 provides the legal framework within 
which the Department must operate in establishing the regulations and 
contracts for the Standby Support Program. That framework requires the 
Department to calculate the loan costs for each Standby Support 
Contract consistent with FCRA, and to deposit amounts equivalent to 
that loan cost into the Program Account as a precondition to execution 
of a Standby Support Contract. Section 638 dictates that loan costs in 
the Program Account are the same as the cost of a loan guarantee under 
FCRA. While section 638 provides the possibility for government funding 
of a Standby Support Contract through appropriations, it does not 
allocate any amount of government appropriations to the contracts and 
it does not change existing law that prohibits the Department from 
obligating funds where funds are not appropriated for that purpose.
    Given this statutory framework, the premium for coverage of 
principal or interest costs must be calculated in accordance with FCRA 
methodology, and the sponsor must provide the portion of the premium 
for which funds have not been appropriated. Thus, the Department cannot 
adopt the approach advanced by industry commenters. The Department, 
however, has revised the rule to give sponsors the ability to adjust 
coverage in accordance with the amount of the premium they are willing 
to pay. Specifically, section 950.11 permits a sponsor to specify in 
the Conditional Agreement, the amount of premium, (that is, its 
contributions to the Program Account and Grant Account) it anticipates 
paying when the Standby Support Contract is executed. Notwithstanding 
this provision, section 950.12 of the interim final rule required the 
sponsor to pay a premium equal to the difference between the amount of 
appropriated funds and the amount necessary to fully fund the Program 
Account and Grant Account. In the final rule, the Department has 
revised section 950.12 to permit a sponsor to pay the anticipated 
premium, with the option to pay additional amounts; provided that, if 
the combination of appropriated funds and payments from the sponsor is 
not sufficient to fully fund the Program

[[Page 46320]]

Account and Grant Account, the amount of coverage under the Standby 
Support Contract will be reduced to reflect the amount of funding 
deposited in the Accounts should the sponsor elect to enter into the 
Standby Support Contract.
    In addition, in an effort to provide information now to potential 
sponsors about anticipated costs for the Standby Support Contracts, the 
Department is providing a description of the methodology it expects to 
follow in calculating the loan costs in accordance with FCRA, including 
four hypothetical examples of estimated loan costs. The hypothetical 
examples are a representative, but not comprehensive, sample of the 
project type, financing structure, coverage amount, or other factors 
that will inform the Department's loan cost estimates for particular 
projects. For each project, the Department will use the project-
specific information provided by the project sponsor to develop an 
initial estimate at the time of the Conditional Agreement. Prior to 
entering into a Standby Support Contract, the loan cost estimate will 
be reevaluated and will determine the loan cost required by the Program 
Account in order to execute the Standby Support Contract. Loan costs 
are likely to change as the Department refines the assumptions used in 
the preliminary analysis and considers the extent to which other risks 
need to be taken into account. In particular, the preliminary analysis 
does not fully consider situations that may arise if the Commission 
does not adopt a realistic schedule for its actions or where there is 
an adverse decision that does not necessarily result in a stay, but 
nevertheless may provide a legitimate basis for a sponsor to delay 
actions. These discussions are detailed in this preamble in the 
Regulatory Review Requirements section on Executive Order 12866 
(Section IV.A).
    For each type of covered event (e.g., Commission delay and 
litigation delay), the Department's Program Account cost estimates will 
be based on three primary factors: first, the timing and amount of the 
debt service covered by the Standby Support Contract; second, the 
likelihood that a covered delay occurs; and third, the length of the 
covered delays. These factors are likely to vary across projects as 
they will likely have different financing structures--for example, 
investor-owned utilities, public utilities, cooperatives, or 
partnerships reflecting some combination would likely seek capital 
through different mechanisms. The risk of a covered event occurring and 
the length of the covered event will vary by the type of advanced 
nuclear facility, management experience, location, and a host of other 
factors.
    Based on these factors, the Department will estimate cashflows to 
and from the government over the expected period of Standby Support 
Contract coverage and determine the present value of these expected 
cashflows, in accordance with FCRA, to determine the required loan 
cost.
    In evaluating hypothetical examples for a 1,100 MWe reactor, the 
Department chose debt-to-equity financing structures of 80:20 and 
50:50, which correspond to estimated all-in costs of $2.8 billion and 
$2.5 billion, respectively. The hypothetical examples adopt typical 
industry debt-to-equity financing structures and assume that the 
sponsor elects 100% of coverage through the Program Account. The 
Department notes that it is not possible at this time to provide the 
actual costs in the rule, given that more specific estimates of loan 
costs for individual projects can only be provided in conjunction with 
the issuance of a Conditional Agreement, based on the specifics of the 
project and coverage. Moreover, final loan costs must account for the 
actual terms of the debt to be guaranteed, and will be determined just 
prior to the execution of a Standby Support Contract, which is a time 
several years in the future.
    The Department has determined that it would be inappropriate to 
adopt two specific industry recommendations. First, the Department has 
determined that it would be inappropriate to rely on the premium 
charged by other government agencies and the private sector for 
sovereign risk insurance such as OPIC. As explained in the interim 
final rule, sovereign risk insurance is significantly different than 
the Standby Support Program, given that the sovereign risk insurance 
pool is highly diversified both geographically and among projects. 
Further, with respect to the calculation methodology, the interim final 
rule's preamble discussion stated that ``the cost estimate for the 
Program Account will be calculated consistent with FCRA.'' In 
reaffirming this approach, the Department emphasizes that section 
638(b)(2) expressly references FCRA. The industry's recommended 
approach is especially untenable given that OMB requires the FCRA 
analysis to be done consistent with OMB guidance in Circular A-11, and 
that any Department decision related to loan costs must ultimately be 
approved by OMB.
    Second, the Department cannot specify in advance the premium to be 
paid by the sponsor that will result in full coverage, especially if 
the premium is set at an amount less than the amount that must be 
deposited into the Program Account and Grant Account. The Department 
notes that section 638 prohibits the Department from executing a 
Standby Support Contract until the Program Account and Grant Account, 
if applicable, are funded. Accordingly, it is impossible to provide 
commenters the cost certainty they desire at this time. In addition, 
the Department cannot commit to deposit Federal funds in the Program 
Account or Grant Account in the absence of appropriations for that 
purpose.

IV. Regulatory Review Requirements

A. Review Under Executive Order 12866

    The Department has determined that today's regulatory action is a 
``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 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 
difficult to estimate because the exact nature and size of the projects 
to be assisted will not be known until specific project applicants come 
forward and because of the difficulty in predicting the scope, 
frequency or timing of the events that would be subject to payment of 
standby support. The Department has completed its analysis of the 
annual effect of the rule on the economy and determined that the rule 
likely would not have an overall effect on the economy that exceeds 
$100 million in any one year, and will therefore not be treated as an 
economically significant rulemaking.
    In addition to the general effect on the economy, the Department 
notes that the rulemaking's direct costs are the amount of funds needed 
in the Program Account for the Federal government to extend Standby 
Support. For purposes of review under E.O. 12866, this final rule 
provides four hypothetical examples that demonstrate the general 
methodology used to determine an estimate of the subsidy cost for the 
Standby Support Program.

[[Page 46321]]

    In the interim final rule, the Department noted the analysis on the 
Commission's ITAAC process from the Secretary of Energy Advisory Board, 
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, July 2002, available 
at http://www.nuclear.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.
    Congress passed section 638 after issuance of the NETF report. In 
so doing, Congress provided direction to the Department on the type of 
delays and costs that are to be covered under the Standby Support 
Program to facilitate construction and operation of advanced nuclear 
facilities. The Department is following the direction provided by 
Congress to structure the regulations governing the Standby Support 
Program.
    The Department anticipates that the Standby Support Program will 
facilitate the construction of new nuclear facilities by decreasing the 
regulatory and litigation 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. Section 638 also 
establishes that the covered costs for principal or interest on the 
debt obligation of the advanced nuclear facility (i.e., loan costs) are 
to be calculated the same as the cost of a loan guarantee under FCRA 
and are to be deposited in the Program Account prior to contract 
execution. Under 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 reflects the loan costs in the 
Program Account, which in turn 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 funds deposited in the Program 
Account needed for the Standby Support Program will be contributed by 
private industry through a risk premium, in whole or in part, depending 
on appropriations. Loan costs may not be paid from the proceeds of debt 
guaranteed or funded by the Federal government.
    Since the passage of the Act, the Department has conducted both 
qualitative and quantitative research to support four hypothetical 
examples that demonstrate the general methodology used to determine an 
estimate for the subsidy cost for the Standby Support Program. The 
qualitative research included interviewing experts at private firms and 
government agencies and determining the similarities and differences 
with their programs and the standby support insurance program. In 
particular, the Department met with or interviewed personnel at the 
Commission, OPIC, U.S. Export Import Bank, U.S. Department of 
Agriculture, and commercial insurers. The additional research included 
analyzing the Commission's case history and researching other federal 
agency loan programs. The following provides a discussion of the key 
assumptions used, risks considered, and the four hypothetical cost 
estimates developed by the Department.
Financial Assumptions of the Cost Estimate
    The following information summarizes the key assumptions used in 
the Department's four hypothetical examples.
    The Department reviewed other government insurance or loan programs 
to determine their cost structure and applicability to the Standby 
Support Program. Following its review, the Department concluded that 
the other government programs provide some valuable information but are 
sufficiently different from Standby Support that they cannot provide a 
direct basis for comparison. For example, the premiums of the OPIC 
insurance program are pooled together and if a default occurs, that 
pool is used to pay out the damages. This arrangement differs in 
critical ways from the Standby Support program. The USDA's Rural 
Utility Service Programs make and guarantee loans but the costs depend 
substantially on the credit quality of the borrowers. Moreover, the 
government has rights to the collateral pledged as part of the loan.
    The Standby Support Program does not compare to these other 
programs in that: (1) The other programs insure many entities or 
individuals; and (2) the other programs evaluate applications and 
assess costs in part based on factors different than those present in 
this program. In the Standby Support Program, there are a limited 
number of applicants to pool premiums and the risks include actions by 
the Commission and litigation.
    For financing, the Department assumed two different financing 
structures: 50:50 debt to equity (50:50 D/E) and 80:20 debt to equity 
(80:20 D/E). These two financial structures have been indicated by 
industry as the two most probable financing structures for new nuclear 
reactors. For each of these D/E structures, two scenarios were 
generated, one assuming level debt payments (constant principal and 
interest), the other assuming level principal payments (constant 
principal). The estimated all-in costs for a 1,100 MWe reactor were 
$2.5 billion and $2.8 billion for D/E financing structures of 50:50 and 
80:20, respectively. The debt was assumed to have a 20 year 
amortization period. Exhibit 1, below, provides a summary of the 
financing assumptions used.

[[Page 46322]]



                    Exhibit 1.--Financing Assumptions for 50:50 D/E and 80:20 D/E Structures
----------------------------------------------------------------------------------------------------------------
        Repayment Options           Level Debt Payments (Prin. + Int.)           Level Principal Payments
----------------------------------------------------------------------------------------------------------------
    Debt-to-Equity Financing
           Assumptions                 50:50 D/E           80:20 D/E           50:50 D/E           80:20 D/E
----------------------------------------------------------------------------------------------------------------
Total All-in Costs..............  $2.5 Billion......  $2.8 Billion......  $2.5 Billion......  $2.8 Billion
Construction Period.............  5 Years after COL.  5 Years after COL.  5 Years after COL.  5 Years after COL
Debt Characteristics:
    Amortization Period.........  20 Years..........  20 Years..........  20 Years..........  20 Years
    Interest Capitalization       Yes...............  Yes...............  Yes...............  Yes
     during Construction.
    Interest Rate...............  7%................  8%................  7%................  8%
----------------------------------------------------------------------------------------------------------------

Non-Financial Risks Affecting the Cost Estimate
    When developing cost estimates, the Department will need to assess 
the non-financial risks of the Standby Support Program, which can be 
grouped into three categories: (1) Delays from Commission regulatory 
review (i.e., untimely review of ITAAC or conduct of pre-operational 
hearings); (2) delays from NRC-related litigation; and (3) delays from 
external events (non-NRC). This division groups the risks similarly, 
based on those risks that are within the Commission's control and those 
that are outside the Commission's control. The Department also assumed 
that the design certification and early site permit process have 
finality, meaning that virtually all issues have been resolved and 
risks of litigation after combined construction and operating license 
issuance (i.e., when Standby Support Contracts are in effect) is less 
than before issuance (i.e., when Standby Support Contracts are not in 
effect). The Department also assumed that ITAAC schedules will be set 
either by guidance from the Commission, or by agreement of the 
Department and sponsor, that the schedule for determination letters 
will be based on completed ITAAC packages, and that the sponsor would 
be permitted and expected to load fuel once all the ITAAC letters have 
been approved. The following provides additional background 
information, gathered by the Department, that helps to inform cost 
estimates.
Covered Costs From ITAAC and Pre-Operational Hearings
    ITAAC Review. The Department is aware that it is difficult to 
predict the Commission's ability to conduct the ITAAC review process in 
a timely fashion, particularly since the Commission's new regulatory 
process under part 52 has not been tested and there are presently no 
schedules set by the Commission for ITAAC review. Nevertheless, in 
conducting its analysis the Department considered several sources of 
current and historical information including a review of the 
Commission's licensing process under part 52, a review of the 
Commission's ability to meet schedules in other proceedings, and 
interviews with the Commission staff. To estimate the frequency that an 
ITAAC review would not be completed on time and would cause a delay in 
full power operation, the Department conducted a two-step analysis 
based on the information gathered from its research.
    The Department started out by trying to understand when ITAAC 
submissions would occur during the construction period. The 
Department's qualitative research indicated that 20 percent of ITAACs 
are expected to be submitted in the first four years of construction 
while the remaining 80 percent of ITAACs are expected to be submitted 
in the last year of construction. Nuclear professionals indicated that 
these first 20 percent of the ITAACs are for discrete, lower risk items 
that are likely not on the critical path for full power operation (in 
contrast to the last year ITAAC that are for entire systems more 
critical to full power operation). Hence, construction would most 
likely continue even if there was a delay in reviewing an ITAAC in the 
earlier years. As a result, the Department concluded that Commission 
review of the first 20 percent of ITAACs, whether on time or not, would 
have a negligible effect on the commencement of full power operation.
    In addition, the Department reviewed the other 80 percent of the 
ITAAC to estimate the frequency and length of delay, and an estimated 
cost. To conduct this analysis, the Department evaluated the 
Commission's ability to meet schedules with respect to license renewals 
for existing nuclear facilities under 10 CFR part 54, its reviews of 
early site permits (ESPs) under part 52, and its design certification 
of the Westinghouse AP1000 nuclear power plant.
    Under the license renewal process a licensee may apply to the 
Commission to renew its license as early as 20 years before expiration 
of its current license. The renewal process ensures that important 
systems, structures and components will continue to perform their 
intended functions during the 20-year period of extended operation.\2\ 
To date, the Commission has successfully renewed the licenses for 43 
reactors within schedule, with only minor deviations from established 
milestone dates (e.g., a few instances where schedule dates were missed 
by a day or two, and only 2 instances out of 40 where the delay was for 
more than 5 days).\3\ The Department recognizes that in such cases, 
these are operating reactors and therefore may not necessarily be 
representative of newly constructed reactors.
---------------------------------------------------------------------------

    \2\ The process and requirements are codified in 10 CFR part 54 
(http://www.nrc.gov/reading-rm/doc-collections/cfr/part054/index.html.
    \3\ Reactor license renewal schedules are available on the 
Commission's Web site at: http://www.nrc.gov/reactors/operating/licensing/renewal/applications.html
---------------------------------------------------------------------------

    Under part 52, the Commission can issue an early site permit (ESP) 
that addresses site safety issues, environmental protection issues, and 
emergency plans, independent of the review of a specific nuclear plant 
design or specific combined license application. An ESP is a partial 
construction permit, and is therefore subject to all procedural 
requirements in 10 CFR Part 2 applicable to construction permits. The 
permit is valid for 10 to 20 years and can be renewed for an additional 
10 to 20 years. The Commission is currently reviewing three early site 
permit applications and to date the Commission has met all schedules 
for the three applications it has received.\4\
---------------------------------------------------------------------------

    \4\ Reactor license renewal schedules are available on the 
Commission's Web site at: http://www.nrc.gov/reactors/new-licensing/esp.html.
---------------------------------------------------------------------------

    Third, the Commission review and design certification of 
Westinghouse's AP1000 nuclear power plant was issued on time.
    Fourth, the Commission has stated that in order to meet estimated 
work activities, 350 new employees have been added in FY 2006. This new 
hiring of

[[Page 46323]]

staff provides some additional confidence that the Commission may be 
able to meet schedules for licensing reviews.
    In addition to this research, the Department interviewed the 
Commission staff to better understand ITAAC review periods, and where 
delays related to ITAAC issues would result in a covered delay. The 
Commission's staff indicated that a 90 day review period would be a 
reasonable estimate for an average time period. Commission staff also 
noted the expectation that at the time a complete ITAAC is submitted, 
the Commission's field team would have already begun conducting ongoing 
inspections of the item under review and would have collected data that 
will make the final review efficient. Based on these interviews, the 
Department developed average delay estimates. Commission staff 
indicated that even though it is difficult to predict the 
implementation of an untested regulatory process, the Department's 
conclusions were generally reasonable based on the Commission's 
planning for the review process. The Department assumed that the longer 
the delay the greater the likelihood that the delay would affect full 
power operation and result in a covered cost.
    Pre-operational Hearings. Lacking definitive data, the Department 
estimated that pre-operational hearings resulting in a Commission stay 
of construction or initial fuel load and causing a delay in full power 
operation are comparable to delays from untimely ITAAC review. Since 
the risk factors are similar, the Department evaluated the probability 
of delays due to both of these factors combined.
Covered Costs for Delays From Litigation
    The Department reviewed historical information on litigation 
brought against the Commission, instances where a court ordered a stay 
or injunction, and the part 52 licensing process in general. First, the 
Department considered the likelihood of a delay occurring from 
litigation in which there was an adverse ruling against the Commission 
or there was a court order enjoining reactor construction or operation. 
Next, the Department estimated the expected length of a delay in full 
power operation in such a case.
    The Department researched the history of judicial stays of 
Commission operating license authorizations. The Department's research 
uncovered three cases since 1973 in which the issuance of an operating 
license was stayed. The first case involved the Perry Nuclear Power 
Plant in Ohio in which the stay was for 40 days.\5\ The second case 
involved the Limerick Nuclear Power Plant, which was stayed for 6 
days.\6\ The third case involved the Diablo Canyon Nuclear Power Plant, 
which was stayed for 75 days.\7\ To the Commission staff's best 
knowledge, this information is correct and there are no other examples 
of judicial stays regarding the issuance of a new nuclear power plant 
operating license.\8\ Given that about 123 operating licenses have been 
issued by the Commission, the Department estimates that the probability 
of a stay relative to the number of operating licenses issued is less 
than 3 percent. The Department recognizes, however, that for proposed 
new facilities, there may be specific facts and circumstances that 
could affect this possibility.
---------------------------------------------------------------------------

    \5\ State of Ohio v. NRC, 812 F.2d 288 (6th Cir. 1986).
    \6\ Limerick Ecology Action v. NRC, No. 85-3431 (3d Cir. 1985) 
(unpublished order).
    \7\ San Luis Obispo Mothers for Peace v. NRC, No. 84-1410 (D.C. 
Cir) (unpublished order).
    \8\ Commission Response to Congress, July 2005.
---------------------------------------------------------------------------

    The Department also analyzed the history of judicial stays on new 
operating licenses as compared broadly to the history of all court 
cases in which the Commission was a party or there was an adverse 
decision for the Commission. The Department's research found, from 1973 
through early 2006, the Commission was a party in 206 court cases 
involving regulatory or licensing matters. Of these 206 cases, the 
Department found approximately 39 cases in which the court ruled 
against the Commission. Of the 39 cases, only three cases resulted in a 
stay or injunction of operations (described above). While this suggests 
a very high success rate for litigation involving the Commission, the 
Department also recognizes that there may be some unforeseen factors 
that could affect the litigation risk given the new review process, and 
new technologies involved.
    The Commission's more recent experience in court cases has been 
more successful. For the period starting in 1990, or around the time 
the Energy Policy Act of 1992 was enacted, the Commission was directed 
to streamline the nuclear reactor licensing process to alleviate long 
delays and obstacles in the process. The Department believes the 
Commission's more recent litigation history may be more indicative of 
future litigation. This is consistent with the Department's expectation 
that litigation risks that would be covered under a Standby Support 
Contract are reduced because coverage is initiated after issuance of 
the combined license, when decisions on early site permits or design 
certifications may already have been settled and are final. The 
Department recognizes that this more recent experience directly applies 
to license renewals rather than new construction; however, it indicates 
that the Commission has strengthened its review process. Since 1990, 
the Commission has been a party in 44 court cases. Of those 44 cases, 
only 2 cases were decided against the Commission and no cases resulted 
in a stay or injunction.
    Another factor in estimating the cost of litigation is how long a 
delay caused by a stay or injunction would remain in effect. As noted 
earlier, the data available to analyze this is very limited in nature, 
only 3 cases, and only one of the cases is relevant to the analysis. 
The State of Ohio requested a stay against the Perry Nuclear Power 
Plant, challenging the adequacy of the evacuation plan and its 
formulation without adequate State participation. The Court of Appeals 
granted the State's request for a stay on the operating license of the 
plant that lasted for 45 days. While the stay itself was for 45 days, 
the Department used a more conservative estimate of 10 months for the 
effect of the stay--which covered the time of the stay as well as 
certain other activities necessary before the reactor could begin 
operations. The Department believes that a delay covered by a Standby 
Support Contract would occur in a similar manner. The Department 
recognizes that in specific cases, however, greater delays would be 
possible, e.g., where a State or other entity provides early indication 
of its intent to challenge the operation of a reactor, or where a delay 
did not result in a stay but had such potential. In view of the absence 
of a statistically significant number of relevant judicial stay cases, 
the Department cannot conclusively predict the length of delay.
    The four hypothetical examples are intended to provide the public 
with some indication of possible costs, under a specific set of 
assumptions and conditions, with a specified coverage level, debt 
financing structure, and interest rates. The examples also reflect 
specific assumptions regarding the non-financial risks of the Standby 
Support Program, which were described earlier: (1) delays from 
Commission regulatory review (i.e., untimely review of ITAAC or conduct 
of pre-operational hearings); (2) delays from NRC-related litigation; 
and (3) delays from external events (non-NRC). Both the financial and 
non-financial risk factors will likely differ for each project, so the 
costs below may not reflect the subsidy cost associated with a 
particular Standby Support contract. For the examples provided

[[Page 46324]]

below, dollar amounts are stated in millions.

----------------------------------------------------------------------------------------------------------------
                                                   Face value of      Maximum      Interest rate   Hypothetical
      Repayment options          Debt structure        debt          coverage        (percent)     subsidy cost
----------------------------------------------------------------------------------------------------------------
Level Debt Payments (Prin. +   50:50 D/E........          $1,250            $500             7.0             $14
 Int).                         80:20 D/E........           2,250             500             8.0              21
Level Principal Payments.....  50:50 D/E........           1,250             500             7.0              17
                               80:20 D/E........           2,250             500             8.0              27
----------------------------------------------------------------------------------------------------------------

    While the Department has not prepared nor presented hypothetical 
subsidy costs for the $250 million Standby Support Contracts, the 
Department believes that the subsidy costs would likely be roughly half 
of the subsidy costs compared to a $500 million Standby Support 
Contract for the same project. The actual subsidy costs for any 
particular Standby Support Contract will vary based on the specific 
risks associated with the project and timing of such contract.

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 
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; section 950.12(a) contains information 
collection requirements pertaining to fulfillment of conditions 
precedent to a Standby Support Contract; and section 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, 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. The Department has issued a notice seeking public 
comment under the Paperwork Reduction Act on the information collection 
requirements in these sections of today's rule. (71 FR 41788, July 24, 
2006) 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

[[Page 46325]]

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 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 final rule prior to the 
effective date set forth at the outset of this rulemaking.

V. Approval of the Office of the Secretary

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

List of Subjects in 10 CFR Part 950

    Government contracts, Nuclear safety.

    Issued in Washington, DC on August 4, 2006.
Dennis R. Spurgeon,
Assistant Secretary, Office of Nuclear Energy.

0
Accordingly, the interim final rule published at 71 FR 28200 on May 15, 
2006 which added a new part 950 to Title 10 of the Code of Federal 
Regulations, is adopted as a final rule with the following changes.
0
1. Part 950 is revised 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 the 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.

[[Page 46326]]

    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.
    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, local 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 any Commission hearing that is 
provided for in 10 CFR part 52, after issuance of the combined license.
    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 license 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

[[Page 46327]]

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. A sponsor may elect 
to allocate 100 percent of the coverage to either the Program Account 
or the Grant Account.
    (c) Funding. Each Conditional Agreement shall contain a provision 
that the Program Account or Grant Account shall be funded in advance of 
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 or 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, loan guarantee fees, 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. Loan costs may not be paid from the proceeds 
of debt guaranteed or funded by the Federal government. 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, 
by a non-federal source, or by a combination of these funding sources. 
Covered costs paid through the Program Account are backed by the full 
faith and credit of the United States.
    (2) The Grant Account shall receive funds appropriated to the 
Department, funds from a sponsor, funds from a non-Federal source, 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, by a non-Federal source, or by a combination of these 
funding sources.
    (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 resulting from the allocation of coverage 
under the Conditional Agreement pursuant to 950.11(b), 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 the anticipated 
contributions to the Program Account or Grant Account as specified in 
the Conditional Agreement pursuant to 950.11(c)(1). The sponsor shall 
have the option to provide additional funds to the Program Account or 
Grant Account up to the amount equal to the full amount of loan costs 
or incremental costs. In the event the sponsor does not provide 
sufficient additional funds to fund the Program Account or the Grant 
Account in an amount equal to the full amount of loan costs or 
incremental costs, then the amounts of coverage available under the 
Standby Support Contract shall be reduced to reflect the amounts 
deposited in the Program Account or Grant Account. If the sponsor 
elects less than the full amount of coverage available under the law, 
then the sponsor shall not have recourse against, and the Department is 
not liable for, any claims for an amount of covered costs in excess of 
that reduced amount of coverage or the amount deposited in the Grant 
Account upon execution of the Standby Support Contract, notwithstanding 
any other provision of law.
    (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

[[Page 46328]]

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 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 insurance required for the project by 
the Commission and lenders;
    (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) of this part 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.
    (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 
amounts determined pursuant to Sec.  950.11(e) 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. The contract provides coverage of principal or 
interest costs for which the loan costs exceed the amount of funds 
deposited in the Program Account; or
    (2) Grant Account. The contract provides coverage of incremental 
costs that exceed the amount of funds deposited in the Grant Account.
    (d) Cancellation by Abandonment.
    (1) If the Program Administrator cancels a Standby Support Contract 
for abandonment pursuant to 950.13(f)(1), the Program Administrator may 
re-execute a Standby Support Contract with a sponsor other than a 
sponsor or that sponsor's assignee with whom the Department had a 
cancelled contract, provided that such replacement Standby Support 
Contract is executed in accordance with the terms and conditions set 
forth in this part, and shall be deemed to be one of the subsequent 
four reactors under this part.
    (2) Not more than two Standby Support Contracts may be re-executed 
in situations involving abandonment and cancellation by the Program 
Administrator.


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 compensation. Each Standby Support Contract shall 
include a provision to specify that the Program Administrator shall not 
pay compensation under the contract:
    (1) 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;
    (2) In an amount for principal or interest costs for which the loan 
costs exceed the amount deposited in the Program Account; and
    (3) In an amount for incremental costs that exceed the amount 
deposited in the Grant Account.
    (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 original existing Standby Support Contract,

[[Page 46329]]

unless the sponsor has cancelled or terminated construction of the 
reactor covered by its original existing 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 and assignment of payment of covered costs. The Program 
Administrator shall permit the assignment of payment of covered costs 
with prior written notice to the Department. The Program Administrator 
shall permit assignment of rights and obligations under the contract 
with the Department's prior approval. The sponsor may not assign its 
rights and obligations 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) of 1990, 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. ``The 
sponsor is neither responsible for any increase in loan costs, nor 
entitled to recoup fees for any decrease in loan costs, resulting from 
the re-estimation conducted pursuant to FCRA.


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 pre-operational Commission hearings, that are 
provided for in 10 CFR part 52, after issuance of the combined license; 
and
    (4) Litigation in State, Federal, local, 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 exclusions from covered costs under the 
contract, and for which any associated delay in the attainment of full 
power operations is not a covered delay. The exclusions are:
    (1) The failure of the sponsor to take any action required by law, 
regulation, or ordinance, including but not limited to the following 
types of events:
    (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, 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 the following types of events:
    (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; or
    (iv) The lack of adequate funding for construction and testing of 
the advanced nuclear facility.
    (3) Normal business risks, including but not limited to the 
following types of events:
    (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 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; or
    (vii) Failure to timely obtain regulatory permits or approvals that 
are not covered events under paragraph (a) of this section.
    (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.
    (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

[[Page 46330]]

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.
    (e) ITAAC Schedule. Each Standby Support Contract shall provide for 
adjustments to the ITAAC review schedule when the parties deem 
necessary, 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, upon review and approval by the 
Department and the sponsor. Adjustments to the ITAAC review schedule 
must be in writing, expressly approved by the Department and the 
sponsor, and remain in effective for determining covered events unless 
and until a subsequently issued ITAAC review schedule is approved by 
the parties.

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 cost; the 
Department is required to establish an exclusion in accordance with 
Sec.  950.14(b).


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 the notification to the Claims Administrator 
no later than 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 the covered event is not an exclusion as specified in 
Sec.  950.14(b), 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 exclusions.
    (1) If the Claims Administrator believes the event is an exclusion 
as set forth in Sec.  950.14(b), the Claims Administrator shall request 
within 30 days of receipt of the notification of a covered event 
information in the sponsor's possession that is relevant to the 
exclusion. The sponsor shall provide the requested information to the 
Administrator within 20 days of receipt of the Administrator's request.
    (2) The sponsor's failure to provide the requested information in a 
complete or timely manner constitutes a basis for the Claims 
Administrator to disagree with the sponsor's covered event notification 
as provided in paragraph (c) of this section, and to deny a claim for 
covered costs related to the exclusion as provided in Sec.  950.24 of 
this part.
    (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, requires further information, or is an exclusion. 
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 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

[[Page 46331]]

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 allowable 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 
allowable based on an evaluation of:
    (1) The duration of covered delay, taking into account contributory 
or concurrent delays resulting from exclusions from coverage as 
established by the Claims Administrator in accordance with Sec.  
950.22;
    (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 allowable 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 allowable 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. A determination by the Claims Administrator that an event is 
an exclusion or that the sponsor has not provided complete or timely 
information relevant to the exclusion as specified in Sec.  950.22 
shall provide a basis for the Claims Administrator to find covered 
costs are not allowable. 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 allowable amount 
of the covered costs claimed in the Certification of Covered Costs as 
follows:
    (1) Costs covered through Program Account. 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 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.

[[Page 46332]]

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 covered costs in 
accordance with this subpart and the terms of the Standby Support 
Contract. 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, or to the sponsor's assignee as permitted by Sec.  950.13(h). 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. Sections 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 mediator(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 Civilian Board of Contract Appeals (Civilian Board) 
or its successor, for resolution by an Administrative Judge of the 
Civilian Board utilizing the Civilian Board's Summary Binding Decision 
procedure. The parties shall abide by the procedures of the Civilian 
Board for Summary Binding Decision. The parties agree that the decision 
of the Civilian Board constitutes a Final Determination on Covered 
Events.


Sec.  950.32  Final determination on covered events.

    (a) If the parties reach a Final Determination on Covered Events 
through mediation, or Summary 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:

[[Page 46333]]

    (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 Civilian Board or its 
successor, for resolution by an Administrative Judge of the Civilian 
Board utilizing the Board's Summary Binding Decision procedure. The 
parties shall abide by the procedures of the Civilian Board for Summary 
Binding Decision. The parties agree that the decision of the Civilian 
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 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 mediator(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 Civilian Board or its successor, for resolution by 
an Administrative Judge of the Civilian Board utilizing the Civilian 
Board's Summary Binding Decision procedure. The parties shall abide by 
the procedures of the Civilian Board for Summary Binding Decision. The 
parties shall agree that the decision of the Civilian 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 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 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. 06-6818 Filed 8-10-06; 8:45 am]
BILLING CODE 6450-01-P