[Federal Register Volume 66, Number 124 (Wednesday, June 27, 2001)]
[Notices]
[Pages 34293-34310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16104]
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NUCLEAR REGULATORY COMMISSION
Preliminary Impact Assessment of Nuclear Industry Consolidation
onNRC Oversight: Request for Comments
AGENCY: Nuclear Regulatory Commission (NRC).
ACTION: Request for comments.
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SUMMARY: Economic deregulation of the electric utility industry has
resulted in consolidation and restructuring of the nuclear power
industry. The transformation of the once strictly regulated industry
has led to separation of the generation, transmission and distribution
sectors, corporate mergers and asset transfers, acquisitions by
outright purchase, and a general transition to a nationwide competitive
market. There have also been numerous nuclear power plant license
transfer applications, which the NRC staff must review and approve
before a license can be transferred to a new entity.
The NRC staff has identified and performed a preliminary assessment
of the impacts of nuclear industry consolidation on the NRC and whether
the NRC needs to change its regulations, policies, processes, guidance,
or organizational structure to continue to meet its strategic public
health and safety goals. The initial object of this effort is to
identify impacts that need to be considered further.
The NRC staff has identified a number of consolidation and a few
deregulation-related impacts on NRC oversight of the nuclear industry,
grouped them by category, and performed preliminary impact assessments.
The individual assessments follow this notice.
The NRC staff requests comments and suggestions from stakeholders
on the identified issues and the preliminary impact assessments. The
NRC staff will consider all comments received. A public workshop will
be held at NRC Headquarters in the October/November 2001 timeframe to
discuss the regulatory oversight issues attendant to industry
consolidation, the staff's preliminary impact assessments, and the
comments received from the stakeholders. Notice of this workshop will
be published at a later date. Commenters should indicate their interest
in attending and participating in this workshop.
The product of this effort will be staff recommendations of impacts
that the Commission needs to consider further.
DATES: The comment period ends August 27, 2001. Comments received after
this date will be considered if it is practical to do so, but the staff
guarantees consideration only of comments received on or before this
date.
ADDRESSES: Mail written comments to Chief, Rules and Directives Branch,
Division of Administrative Services, Office of Administration, U.S.
Nuclear Regulatory Commission, Washington, DC 20555-0001. Comments may
also be sent by completing the online comment form at http://www.nrc.gov/NRC/REACTOR/CONSOLIMPACT/index.html.
Deliver comments to Room 6D59, Two White Flint North, 11545
Rockville Pike, Rockville, Maryland, between 7:30 a.m. and 4:15 p.m. on
Federal workdays.
For further information contact Herbert N. Berkow, Mail Stop O 8 H-
12, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory
Commission, Washington, DC 20555; telephone (301) 415-1485 and e-mail
at [email protected].
Dated at Rockville, Maryland, this 20th day of June 2001.
For the Nuclear Regulatory Commission.
Herbert N. Berkow,
Director, Project Directorate II, Division of Licensing Project
Management, Office of Nuclear Reactor Regulation.
Industry Consolidation Preliminary Impact Assessments
Categorization of Industry Consolidation Issues
Category 1 Plant Operational Safety
Issue 1.a Possible Cost-cutting Initiatives
Issue 1.b Technology-related Issues
Issue 1.c Spent Fuel Storage and Transportation
Issue 1.d Low-Level Radioactive Waste Management
Issue 1.e Emergency Preparedness
Issue 1.f Reliable Off-site Power
Category 2 Licensing
Issue 2.a License Transfer Process
Issue 2.b New License Applications, Site Approvals, and
Reactivations of Deferred Plants
Issue 2.c License Renewal
Issue 2.d NRC Organizational Structure
Category 3 Inspection, Enforcement, and Assessment
Issue 3.a NRC Reactor Oversight Process
Issue 3.b Other NRC Inspection Programs
Issue 3.c NRC Enforcement Program
Issue 3.d NRC Allegation Program
Category 4 Decommissioning
Category 5 External Regulatory Interfaces
Category 6 Fuel Cycle Facilities
Category 7 Financial
Issue 7.a Foreign Ownership
Issue 7.b License Fee Structure
Issue 7.c Insurance
Issue 7.d Joint and Several Regulatory Responsibility
Issue 7.e Bankruptcy Protection
Issue 7.f Financial Qualifications
Category 8 Non-NRC Regulatory Considerations
Issue 8.a Grid Stability/Reliability
Issue 8.b Antitrust Considerations
Issue Category: 1. Plant Operational Safety
Issue: 1.a Possible Cost-Cutting Initiatives
Discussion
In a more consolidated, economically deregulated market, the
nuclear power industry will be faced with new pressures to operate more
efficiently. Cost controls could result in shorter outages (and thus
longer run times), increased use of on-line maintenance, power uprate
amendments, increased use of risk-informed technology and decisions and
other changes that would result in lower costs and increased
productivity.
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Consolidated licensees will also seek to achieve economies of
scale, which is a major potential benefit of consolidation. This will
likely be manifested in organizational changes, both at the plant and
corporate levels, to combine duplicative functions, optimize staff
size, standardize best practices, and centralize functions.
Organizational and operational philosophies may also be influenced by
the prerequisites of economic deregulation, which often require
existing utilities to separate power generation from transmission and
distribution functions. Consolidation and economic deregulation will
likely result in increased efforts by licensees to seek reductions in
unnecessary regulatory burden. Licensees may also seek reductions in
licensing fees beyond that relief already provided by Congress.
Preliminary Impact Assessment
Licensee efforts to operate more efficiently may result in net
positive safety impacts. There is evidence, both domestic and foreign,
to demonstrate that well run, efficiently operated plants are also the
safest plants. Nevertheless, if carried to excess, cost-cutting
measures to achieve short-term economic gains could result in longer-
term adverse safety performance impacts.
Licensees are responsible to ensure that safety and regulatory
compliance are not compromised by the industry goals to maximize
operational efficiency and performance effectiveness. The NRC must stay
focused on operational safety and have the capability to assess and
react to industry activities in response to economic pressures that
appear to have an adverse impact on safety. Augmented staff expertise
beyond currently existing capabilities may be needed to effectively
implement oversight responsibilities in the changing industry
environment. The staff must assure that its safety assessment processes
have adequate flexibility to detect and respond to adverse safety
performance trends that result from competition-driven licensee
actions. At the same time, the staff will have to remain sensitive to
reducing unnecessary regulatory burden.
Recommended Followup
Continued staff monitoring of experience and feedback from current
oversight processes should provide early identification of issues
related to economics-driven licensee actions that need to be addressed.
This, in turn, will define any needed staff reaction. No other special
followup effort is recommended at this time.
Issue Category: 1. Plant Operational Safety
Issue Title: 1.b Technology-Related Issues
Discussion
While technology and process advances have continued to be
developed and introduced to the design and operation of licensed
nuclear facilities, industry consolidation and economic deregulation
may provide additional incentives for such advances.
The NRC research-sponsored effort encompasses a variety of broad
technological areas which may be involved in future developments
related to industry consolidation and economic deregulation. The
following are examples of such technological areas which the staff may
have to deal with in the future.
1. Fuel integrity must be addressed in an integrated fashion
considering longer operating cycles, ultra-high fuel burnups, new
cladding materials, power uprates, and changes to operational
conditions such as may result from load following. A stronger,
consolidated industry may see advantages to moving to a simpler
performance-based assessment rather than the present design-based
method.
2. Human and organizational factors affected by industry
consolidation and deregulation may need to be considered to address
reduced staffing, modified maintenance strategies, and possible
increased use of contractors.
3. Introduction of new technologies, such as advanced information
technologies, evolution of digital instrumentation and control systems
in existing facilities, and development of new reactor concepts may
require new regulatory approaches. These types of issues are also
pertinent to Issue 2.b.
The staff has on-going, or planned activities which will enable it
to accommodate the technology-related issues arising from industry
consolidation and deregulation. The following are examples of such
activities:
1. Development of risk-based performance indicators (RBPIs) could
provide an additional tool with which to assess plant safety
performance on a plant-specific as well as industry-wide basis. The
RBPIs, if successfully developed, would provide broader coverage of
risk than the current performance indicators and would allow a more
detailed assessment of the root causes of problems, whether or not they
are related to consolidation or deregulation. Also, plant-specific
thresholds based upon risk could be established.
2. Risk information is routinely used to assist in regulatory
decisions regarding such issues as equipment and plant aging, fuel
burnup and power uprates. The synergetic effects of such changes on the
overall safety of operating plants may require re-evaluation of
existing probabilistic risk assessments.
3. Advanced information technologies are likely to be employed in
emergency preparedness programs (Issue 1.e). Areas of potential
interest are possible consolidation-related impacts on the
communications infrastructure and integrity of data used for making
decisions during emergencies.
4. There is an increased focus on results-based regulatory
decision-making. The staff has developed high-level guidelines for
performance-based activities to facilitate implementation of such
approaches while ensuring that adequate safety margins are maintained.
Broader use of performance-based approaches may allow more direct
observation of the effects of consolidation.
Preliminary Impact Assessment
The technology-related aspects of many of the potential issues that
may arise from industry consolidation and deregulation require that
more experience and operational information be incorporated into the
staff's evaluations. While the staff is alert to possible safety
concerns, the expectation is that the changes will also bring about
safety improvements. However, impact assessments are premature at this
point. The work being conducted by the staff on issues relevant to
industry consolidation and deregulation provides confidence that
technical challenges can and will be met effectively.
The generic issues program has dealt with a number of issues where
safety considerations similar to those occurring with industry
consolidation were addressed. A process exists for new information from
industry consolidation to be fed back into the program and potentially
trigger a re-evaluation of specific issues, if appropriate. So far,
resolved issues in this area have not had to be re-evaluated,
suggesting that the safety assessments conducted previously remain
valid.
Recommended Followup
As experience with industry consolidation is limited at this time,
the emphasis should be on monitoring operational information and being
alert
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to indications of an unexpected nature. NRC should continue to monitor
the changes occurring within the nuclear industry and take these
changes into account when considering modifications to its research
activities.
Issue Category: 1. Plant Operational Safety
Issue: 1.c Spent Fuel Storage and Transportation
Discussion
U.S. nuclear power plants were not designed to store all the spent
nuclear fuel generated throughout their operating lives. To date,
utilities have been coping with the lack of spent fuel storage capacity
by expanding the capacity of spent fuel pools through redesign
(reracking) and by constructing independent spent fuel storage
installations (ISFSIs) for at-reactor, above ground, dry storage. Prior
to the increase in industry consolidation activities, Private Fuel
Storage L.L.C, a company owned by eight U.S. utilities, applied for a
license to receive, handle, transfer, and store spent nuclear fuel from
commercial nuclear power plants at a privately owned ISFSI. This away-
from-reactor ISFSI will be able to store as much as 40,000 MTU of spent
fuel at one location. The purpose of the proposed facility is to
satisfy the need for an interim storage facility that would serve as a
safe, efficient, and economical alternative to continued spent fuel
storage at reactor sites. NRC is aware of a potential application for a
second away-from-reactor ISFSI (i.e., the Owl Creek site). As a result
of industry consolidation and the good performance record of operating
plants, it is expected that essentially all currently operating plants
will seek license renewal. Since the availability of a permanent spent
fuel repository is uncertain, there will likely be a need for
additional temporary spent fuel storage as plants operate for extended
lifetimes. At this point in time, it is premature to predict whether
nuclear industry consolidation could increase the need to consolidate
spent fuel storage either at selected reactor site ISFSIs or at new
away-from-reactor ISFSIs. Further, there is no basis to say that
consolidation will affect the amount of spent nuclear fuel that will
need to be transported to or from reactor sites.
Preliminary Impact Assessment
The NRC has been able to successfully address applications for new
ISFSI licenses and new spent fuel storage cask designs, as well as
applications to amend existing licenses and cask certifications.
Consolidation could result in an increased number of amendments to
existing ISFSI licenses (to increase storage capacity), applications
for new site-specific ISFSI licenses, applications for away-from-
reactor ISFSIs, applications to amend existing Part 71 and 72 quality
assurance programs, and amendments to existing certified cask designs
(to permit storage of additional types of spent fuel and fuel with
higher burnup). The staff currently interfaces with the licensees and
industry groups (e.g., NEI) on a periodic basis to identify future
submittals and thus aid in assessing future resource needs.
Existing Part 71 and 72 regulations, policies, and guidance are
sufficient to support nuclear industry consolidation.
Recommended Followup
At this time, it appears that current ISFSI licensing and spent
fuel storage cask certification regulations, policies, and procedures
are sufficient to accommodate situations resulting from industry
consolidation. Staff will continue to work with industry to obtain
advance notice of future applications and thus predict future casework
levels that may be generated by consolidations. Furthermore, there may
be some unique, unanticipated circumstances that require changes to
spent fuel storage or transportation policies or regulations. For
either of these situations, the staff will utilize the PBPM process to
address resource impacts or significant policy matters and make
appropriate recommendations to NRC management.
Issue Category: 1. Plant Operational Safety
Issue: 1.d Low-Level Radioactive Waste Management
Discussion
Nuclear industry consolidation can affect how individual licensees
address management of low-level wastes. Regulations applicable to waste
management include operational radiation health and safety requirements
applicable to all waste generator licensees and requirements for
commercial facilities licensed to dispose of low-level radioactive
wastes. The Low-Level Radioactive Waste Policy Amendments Act of 1985
provides a process for siting new low-level waste disposal facilities.
Regulations are also in place for transportation of low-level
radioactive wastes. Policy guidance for implementing these regulations
has been prepared and issued as standard format and content guides,
standard review plans, and branch technical positions.
Nuclear industry consolidation has the potential to strengthen low-
level waste management programs within licensee organizations by
consolidating management of waste disposal activities. The Envirocare
disposal facility in Utah currently negotiates disposal charges on a
case-by-case basis. Therefore, consolidation may also reduce disposal
costs through the negotiation of larger volume contracts. Additional
cost savings could also be implemented through the potential use of
licensees' own low-level waste volume reduction and processing systems
that may become economical for a larger number of plants, rather than
contracting for this service. The construction and use of new volume
reduction and waste processing systems would generally be implemented
through 10 CFR 50.59, without the need for a license amendment.
Incineration, however, would require licensing pursuant to 10 CFR
20.2004. Due to the controversial nature of incineration issues,
intervention on any such license amendment applications would be
likely.
Most nuclear power plants have developed on-site storage facilities
as a contingency in the event of short-term interruptions in disposal
site availability, as has occurred in the past. Industry consolidation
could allow more optimal use of these storage facilities. However,
because nuclear power plants generally are not licensed to accept
wastes from off-site, license amendments would be required to implement
optimized storage programs among several nuclear power plant sites.
Indeed, the staff recently issued a license amendment to TVA that
allows them to store low-level waste from the Watts Bar facility at
Sequoyah. There would also be a need for transportation of wastes from
the point of generation to the centralized storage facility. Due to the
controversial nature of waste management and transportation issues,
intervention on any license amendment applications is a likelihood.
Centralization of storage facilities could require that licensees
increase tracking of the origin of the wastes to ensure that State and
compact waste generator reporting requirements are met.
There do not appear to be consolidation efforts among the low-level
waste disposal licensees at this time. Programs at low-level waste
facilities are driven primarily by external impacts (e.g., decisions
related to the closure of the Barnwell low-level waste site) rather
than by consolidation. Currently, all low-level waste disposal site
facilities are located in and licensed by Agreement States, and there
are no
[[Page 34296]]
new applications projected to be submitted to the NRC.
Preliminary Impact Assessment
Regulations and policies addressing low-level waste management and
transportation are sufficiently flexible to address license amendments
to consolidate on-site storage operations or to use advanced volume-
reduction technology. Industry consolidation should have no impact on
the availability of low-level waste disposal sites or programs for
handling and processing mixed wastes. There does not appear to be a
need to revisit the Low-Level Radioactive Waste Policy Amendments Act
of 1985 based solely on industry consolidation impacts, although the
lack of progress in opening new low-level waste disposal sites, as
documented by the General Accounting Office, may require amendment of
that statute. DOE and State projections of low-level waste generation
may be affected by nuclear power plant license renewals that occur from
industry consolidation.
Recommended Followup
At this time, it appears that current low-level waste management
regulations and policies are sufficiently flexible to accommodate
situations resulting from industry consolidation. Therefore, industry
consolidation appears to have no significant impact in the waste
management area and no further effort is recommended. However, the NRC
needs to consider the effects of license renewals when providing
feedback on DOE and State projections of low-level waste generation.
Issue Category: 1. Plant Operational Safety
Issue: 1.e Emergency Preparedness
Discussion
Emergency preparedness (EP) programs, both on-site and off-site,
are sensitive to the impacts of industry consolidation because of the
dependence on relationships with State and local governments and
facilities where the plants are located. Outcomes of industry
consolidation have included centralization of staffs, functions, and
facilities remote from individual site locations and the
standardization of licensee EP programs and procedures. These outcomes
can have both positive and negative impacts. Consolidation can
strengthen licensees' programs or, conversely, create problems and
deficiencies throughout multiple plant organizations or facilities.
There are NRC staff resource implications and challenges to assure that
regulations and policies continue to be satisfied and that the NRC's
safety assessment processes provide sufficient focus on any proposed
changes. Changes that impact offsite emergency preparedness are
coordinated with the Federal Emergency Management Agency (FEMA) as well
as affected State and local authorities.
Preliminary Impact Assessment
The NRC must be alert to potential safety impacts of EP program
changes resulting from consolidation. Industry consolidation already
has resulted in some centralized Emergency Operations Facilities
(EOFs), with the corporate headquarters serving as the location for and
source of personnel to staff the EOF. Shared Emergency News Centers are
another result of consolidation, with licensee corporate personnel
staffing these facilities. Efficiencies can result when one EOF is
capable of effectively serving multiple nuclear sites.
Some concerns associated with centralized emergency preparedness
facilities remote from the site area include the potential loss of
expertise local to the facility and maintenance of local contacts with
first responders. Corporate personnel may face challenges in
maintaining knowledge of the plant(s), local organizations, and
procedures. However, centralized, shared facilities and staffs can
strengthen EP programs. Some communications capabilities have improved
and the perception for the need for locating close to the site has been
reduced in some locations. Consolidation of EOFs affecting multiple
States and/or local authorities can present challenges in accommodating
differences among these offsite entities and meeting the needs of local
constituencies. A major factor in the location of the EOF is ensuring
the capability for effective communication and response among the
licensee, the State and local emergency response organizations, FEMA,
and NRC relative to protective action decision-making and
implementation of protective actions.
Another area of potential impact is the incentive for increased use
of standardized emergency response procedures across multiple reactor
facilities. Standardized procedures have positive and negative aspects.
They can result in a better procedure and the ability to cross-utilize
staff at multiple facilities. However, a licensee may be more reluctant
to modify standardized procedures for needed changes, due to the number
of facilities affected by procedure changes and potentially increased
training needs.
NRC has reviewed industry requests for consolidation of emergency
response facilities (ERFs), changes in emergency plans and procedures,
Emergency Action Levels (EALs), and emergency organizations as a result
of consolidation. The NRC evaluates proposals for centralized EP
staffs, programs and facilities and, indeed, has approved such
proposals in the past. Commission-level approval is required for
centralized EOFs and EOFs located more than 25-miles from a nuclear
power plant site. The NRC coordinates with FEMA and States when
emergency planning changes are contemplated that affect offsite
preparedness.
Recommended Followup
Given the ongoing industry consolidation, the potential exists that
owners of multiple facilities will continue to seek consolidation of EP
program functions and organizations. The staff recommends that NRC
staff resource implications and challenges be assessed and trended to
assure that regulations and policies continue to be satisfied and that
the NRC's safety assessment processes provide sufficient focus on
emergency preparedness.
Issue Category: 1. Plant Operational Safety
Issue: 1.f Reliable Off-Site Power
Discussion
As described in Issue 8.a., the primary concerns that arise with
respect to off-site power reliability are a result of economic
deregulation rather than industry consolidation. Stability and
reliability of off-site power is a significant safety consideration in
the regulation of nuclear power plants. The primary reason is that off-
site power is the preferred source of electrical supply to operate
decay heat removal systems. Hence, although highly reliable on-site
emergency diesel generators will be available to assure capability to
safely shut down the plant and provide for transfer of decay heat to
the ultimate heat sink temporarily, a reliable off-site power supply is
important for long-term safety. The NRC has a significant interest in
monitoring challenges to the operation and management of the electric
power grid so that appropriate actions can be taken to address concerns
regarding reliability of off-site power.
From the perspective of plant operational safety, the potential
challenges to the reliability of off-site power affect the use of
probabilistic risk analyses in safety related decision-making.
Increasingly, both licensees and the NRC staff use PRAs for risk-
informed decision-making. Regulatory
[[Page 34297]]
Guide 1.174, ``An Approach for Using Probabilistic Risk Assessment in
Risk-Informed Decisions on Plant-Specific Changes to the Licensing
Basis'', provides the guidance needed for making licensing decisions
using risk insights that may derive from the impacts of changes due to
economic deregulation. New information based on grid experience after
economic deregulation may have to be considered in estimating the
frequency of initiating events where off-site power plays a role. Most
of the information needed is likely to be readily available from the
grid operators. This information is likely to be a part of submittals
made by licensees in support of licensing actions.
In recognition of the importance of assuring the stability and
reliability of off-site power the industry, as well as the NRC, has
implemented programs and other initiatives to address this challenge.
The NRC issued Regulatory Issue Summary 2000-24 on the subject in
December 2000. NEI and INPO sponsored a workshop on offsite power
reliability in April 2001, in which NRC staff participated. In 1999,
INPO issued SOER 99-1, which provides guidelines for good practices in
support of grid reliability and is currently conducting an audit of
licensees to determine the degree of conformance to these good
practices.
Preliminary Impact Assessment
Reliability of off-site power lately has been receiving
considerable attention. The external stakeholders include other
government agencies with regulatory responsibilities. Communication
channels have been established with various stakeholders and are
improving as experience is gained. The Institute for Nuclear Power
Operations has developed the Equipment Performance and Information
Exchange (EPIX) system, which should enable information needed to
update PRAs to be easier to obtain.
Relative to operational safety matters, the body of regulations
currently in force provides for safe operation, shutdown, and decay
heat removal from nuclear power plants. The established lines of
communication with industry and other stakeholders, especially those
concerned with economic deregulation, are expected to provide timely
information if safety issues arise. In addition, the NRC has in place
the needed infrastructure (such as a Memorandum of Understanding with
the Electric Power Research Institute) to obtain and assess
information, affecting off-site power reliability.
Recommended Followup
The NRC should continue its ongoing efforts to monitor developments
relative to grid operation. The monitoring should include keeping
abreast of actions taken by other government agencies which may affect
grid reliability, as well as nuclear power industry initiatives
relative to assurance of grid reliability.
Issue Category: 2. Licensing
Issue: 2.a License Transfer Process
Discussion
The NRC responsibilities for the transfer of a license are set
forth in 10 CFR 50.80, ``Transfer of Licenses.'' From 1998 through the
present, the staff has received license transfer applications for about
80 nuclear power reactor units. Most of the reviews for these
applications have been completed except for a few that were submitted
recently. Applications for transfer of a license include information on
the identity and technical and financial qualifications of the proposed
transferee, as well as any additional information that the Commission
requires, such as radioactive material safeguards protection, and
certain information related to the purpose of the transfer and the
nature of the transaction necessitating the transfer. The NRC must
obtain, review, and assess all relevant organizational and financial
information associated with each license transfer to determine whether
the proposed transferee is qualified and the transfer is otherwise
consistent with the law and NRC regulations. Transfer of the license is
by issuance of an order and, where necessary, a conforming amendment.
A concern has been raised by some external stakeholders that once a
licensee has decided to sell its nuclear plants that licensee may no
longer have the incentive to invest in safety or maintenance
improvements, or take necessary corrective action to address identified
problems, pending transfer of responsibility and liability to the
license transferee. The stakeholders' proposed resolution to this
concern is that the NRC staff consider such indications in its license
transfer reviews and make the correction of physical or performance
problems a condition of transfer approval.
Preliminary Impact Assessment
The staff believes that the current license transfer process is
effective. It appears likely that license transfer applications will
continue to be submitted, and completed transfers will continue to be
reviewed for lessons learned to improve the effectiveness of the
process.
The concern that a licensee planning to sell its plant might no
longer place a high priority on safety initiatives is accommodated by
the staff's oversight process, as discussed in Issue 3.a. The NRC
closely monitors the transfer process to ensure that NRC regulations
and license requirements are met regardless of any pending sale.
Further, the new license holder has a strong incentive to assure that
the plant will meet NRC requirements upon completion of the transfer.
Finally, it should be noted that the staff has had considerable
experience with the license transfer process and has not seen any
evidence to validate this concern.
Recommended Followup
No special followup effort is recommended at this time.
Issue Category: 2. Licensing
Issue: 2.b New License Applications, Site Approvals, and Reactivations
of Deferred Plants
Discussion
A consolidated nuclear power industry consisting of larger,
financially strong nuclear operators is more likely to consider new
plant applications, standard design applications, power uprates,
reactivation of deferred plants, and site approval applications. There
already is industry consideration of new reactor design applications
(such as the pebble-bed-type standard design) within the next few
years.
With larger, more stable licensees, the costs associated with new
nuclear power plant planning and construction can be more readily
supported. These new units likely would serve as merchant power plants
for the owner. New construction may also involve multiple corporations
pooling their resources to build new facilities.
The NRC has been monitoring industry activities in this area. The
Commission has stated in COMSECY-00-0026 (REVISED FY 2000-2005
STRATEGIC PLAN) that the staff has an important ongoing initiative to
improve the regulatory infrastructure associated with new plant
construction (10 CFR Part 52) and that improving this infrastructure
should serve to improve the efficiency, effectiveness, predictability,
and consistency of the combined license review process.
Preliminary Impact Assessment
The staff will need to assure that the necessary staff resources,
expertise, organizational infrastructure, review
[[Page 34298]]
processes, and guidance are available to support future activities in
this area. In addition, current regulations and processes may need to
be reviewed. New guidance may be needed on the scope of the review, as
well as for antitrust and foreign ownership issues. Additional
resources may need to be reassigned to support future staff action in
this area. The Commission has directed the staff in COMJSM-00-0003,
``Staff Readiness for New Nuclear Plant Construction and the Pebble Bed
Reactor,'' to assess existing capabilities and identify needed
enhancements to process an early site permit application, a license
application, and construction of a new nuclear power plant. It also
directed the staff to assess and identify needed enhancements to the
regulatory infrastructure supporting applicable regulations, with
emphasis on identification of regulatory issues and potential process
improvements. In response to this directive, the staff has established
a temporary Future Licensing Organization (FLO) within the Office of
Nuclear Reactor Regulation. A principal function of the FLO is to
coordinate an interoffice effort to assess the needed technical,
licensing, and inspection capabilities to ensure that the agency can
effectively carry out its future licensing activities.
Recommended Followup
Renewed interest in new license applications is attributable, at
least in part, to industry consolidation. The Commission and staff have
had meetings with industry representatives who are formulating plans
for possible site and plant license application submittals in the next
few years. The staff already has initiatives underway to prepare for
such submittals. These ongoing initiatives appear to be sufficient and
should be responsive to industry developments and evolving plans.
Because industry's interest in pursuing new licenses only recently
materialized, the current FY2002 budget estimate does not provide
sufficient resources to accommodate emerging work for potential new
license applications. The FLO is developing updated budget assumptions
and resource needs. No specific additional followup effort is
recommended at this time.
Issue Category: 2. Licensing
Issue: 2.c License Renewal
Discussion
The number of future license renewal applications is expected to
increase as a result of consolidation. Some reactors that were not
considered to be candidates for license renewal could be reevaluated as
a result of consolidation. With larger, more financially stable nuclear
power plant owners, increased competition in power generation, and
because of cost benefits, there will be increased incentive to extend
the licenses of currently operating nuclear power plants. License
renewal is seen by licensees as a cost-effective means of adding
capacity. It is anticipated that virtually all of the currently
operating plants will seek license renewal.
The license renewal process for power reactors relies on a review
of the licensing basis and plant design, scoping, and screening of
structures and components that need to be subjected to an aging
management review and evaluation of time-limited aging analyses.
Preliminary Impact Assessment
The staff recognizes the potential resource impacts of the receipt
of an increased number of license renewal applications, some of which
may not have been in the planning assumptions. The NRC has published
Regulatory Issue Summary 2000-20, which encourages licensees to inform
the staff as soon as possible of their plans for license renewal. The
staff uses the PBPM process to budget for applications for which the
staff has been notified of submittal dates and to respond to emergent
work. However, license renewal is a voluntary initiative and the
decision to renew an operating license is largely a business decision
over which the NRC has no control. In addition, a greater number of
renewal applications could result in already established submittal
dates being changed as consolidated licensees re-evaluate and re-
prioritize their license renewal plans.
Recommended Followup
No special followup effort is recommended at this time. As
consolidation progresses, the NRC should stay engaged with the industry
as to changing license renewal plans and schedules and modify resource
planning assumptions accordingly.
Issue Category: 2. Licensing
Issue: 2.d NRC Organizational Structure
Discussion
Traditionally, licensees have operated within limited geographical
service areas and have had to interface with just one regional office
and one headquarters project directorate. As a result of consolidation,
some licensees may have to interact with as many as four regional
offices and headquarters project directorates. This is likely to
introduce management challenges, both for the staff and the licensees,
especially with respect to consistent, coordinated, efficient, and
effective regulatory oversight.
The Commission stated in COMSECY-00-0026 (REVISED FY 2000-2005
STRATEGIC PLAN) that the staff needs to assure that NRC stakeholders
recognize the importance the Commission places on regional consistency
and coordination. With deregulation proceeding in the electric industry
and with continuing applications for license transfers, the NRC will
see an increase in the number of cross-regional licensees. While
consistency and coordination between and among headquarters and the
regions have been high priorities for the NRC, the increase in cross-
regional licensees represents a growing challenge in these areas
warranting greater management oversight.
Preliminary Impact Assessment
The industry is currently in a state of transition and significant
consolidation is relatively recent. Thus, it is premature to identify
potential challenges to the current NRC organization, or to consider
alternative organizational structures.
With respect to the question of whether the existing regional
boundaries and currently assigned licensee oversight responsibilities
will facilitate efficient and effective regulation of those licensees
that own and operate reactor facilities in multiple regions, the key is
effective NRC management oversight to assure consistency in
implementing its programs. Measures that have been developed to assure
consistent application of oversight processes include various periodic
meetings with regional and headquarters management to discuss program
implementation issues, conducting annual self-assessments, development
of metrics for inspection procedures, program office audits of regional
inspection reports, and obtaining industry stakeholder feedback.
Consistent application of the Significance Determination Process among
regions will be particularly important. Increased communications, both
formal and informal, among the respective regional staffs are necessary
to share insights when programs and processes are transferred from one
licensee to another. Increased communications and coordination among
regional staffs may also result in a broader look at a particular
performance issue.
[[Page 34299]]
Recommended Followup
Within the next few years, the regional and headquarters staffs
will gain significant experience in regulating and otherwise
interacting with consolidated licensees. This experience should be
monitored so that a meaningful assessment of the impacts of
consolidation on the NRC organization can be made at the appropriate
time.
The recommended followup effort is to establish a consistent,
agency-wide process to monitor and document relevant staff experience
and stakeholder feedback and to establish meaningful assessment
criteria for evaluating this experience and feedback. A principal
objective of this effort should be an assessment of the impact of
industry consolidation on both the efficiency and effectiveness of the
agency's current organizational structure. Since there already are
several cross-regional, consolidated licensees, this effort should be
started in the near-term.
Issue Category: 3. Inspection, Enforcement, and Assessment
Issue: 3.a NRC Reactor Oversight Process
Discussion
In evaluating the potential impact of industry consolidation on
effective implementation of the reactor oversight process (ROP), a
number of issues need to be considered. One of the principal
considerations is whether the ROP will provide the NRC with assurance
that licensees are maintaining public health and safety in a
consolidated/deregulated environment. The ROP is performance-based,
meaning the level of NRC engagement is a function of licensee
performance. It is also structured to be ``indicative'' rather than
``diagnostic'', meaning the inspection and assessment processes within
the ROP are designed to provide an indication of licensee problems,
e.g., performance indicators (PIs) and associated thresholds, rather
than to determine the specific root causes for issues of lesser
significance. This raises the question of whether the ROP enables the
NRC to address adverse performance trends that might result from
consolidation-related cost-cutting initiatives, which could be driven
by financial pressures, or non-conservative changes to corporate
policies, programs, and procedures, before they evolve into significant
safety issues.
Industry consolidation could result in staffing reductions as
licensees seek to increase their efficiency of operations by
eliminating redundant functions and standardizing ``best practices''.
If the staffing reductions are substantive, not targeted appropriately,
and/or not managed well, problem identification and resolution
functions could be impacted as key staff leave the company. Licensee
efforts to increase operational efficiency could also result in changes
to corporate policies, programs, and procedures. If these changes are
non-conservative, the effectiveness of problem identification and
resolution activities could be adversely affected. For example, a
licensee could adopt a corrective action program with higher thresholds
for initiating a root cause evaluation. This could result in more
significant problems developing, as the root causes for lower level
issues are not addressed. It is important to note that, while these
postulated scenarios may be possible, experience to date with
consolidated licensees has demonstrated that the opposite is true.
Changes associated with the integration of individual facilities into a
consolidated entities have generally been well managed and produced
positive performance results.
The current situation in California, where the Southern California
Edison and Pacific Gas and Electric companies are facing substantial
financial difficulties, has generated a number of questions regarding
the NRC's role in ensuring public health and safety. The NRC conducted
focused inspections at these facilities in response to this situation.
These inspections revealed that there was no adverse impact on safety
as a result of the financial difficulties. Nevertheless, significant
financial pressures on a licensee could result in decisions to reduce
the workforce, revise the scope of and/or delay planned maintenance and
modification activities, shorten or delay plant outages, terminate
licensing classes or training initiatives, etc. While these decisions
would likely result in performance problems, it is not clear how
significant those problems would be and in what time frame they would
emerge. Assuming that some licensee decisions would have short-term and
substantive effects on performance and given that the NRC focus is on
safety performance, a critical question is whether the NRC's safety
assessment processes are structured to ensure that the NRC will be made
aware of these performance issues in sufficient time to engage the
licensee with the appropriate focus. For those licensee decisions that
provide short-term financial relief but have a longer-term impact on
performance, the question is how significant the associated performance
issues would be when they first surface.
Another issue warranting consideration is whether the existing
regional boundaries and currently assigned licensee oversight
responsibilities will facilitate effective regulation, within the
context of the ROP, for those licensees that own and operate reactor
facilities in multiple regions (see Issue 2.d). Licensees that cross
regional boundaries may present management challenges for the NRC with
respect to consistency, coordination, and efficiency of oversight.
Preliminary Impact Assessment
There are two scenarios which need to be considered in evaluating
what impact industry consolidation might have on the effectiveness of
the ROP. The first scenario relates to longer-term manifestation of
licensee performance problems stemming from consolidation-related
activities, and the second scenario involves safety performance
problems deriving from licensee actions in response to financial
pressures.
Regarding the first scenario, one of the primary considerations is
whether the ROP is conducive to identifying adverse performance trends
that might result from consolidation-related activities such as cost-
cutting initiatives and non-conservative changes to corporate policies,
programs, and procedures. The NRC must be able to engage a licensee to
ensure the underlying performance deficiencies are appropriately
addressed before these deficiencies evolve into significant safety
issues that challenge public health and safety. Licensee performance
issues, particularly those relating to human performance and the
corrective action program, should become evident at a lower level of
significance. This affords the licensee the opportunity to correct the
issues before more significant NRC action is necessary due to elevated
safety performance problems. As noted earlier, by design, the ROP is
``indicative'' rather than ``diagnostic'', which means that as
inspection findings and PIs become more safety significant, the ROP
increases focus on why a particular performance problem has occurred.
Thus, if a consolidation-related, cost-cutting initiative or non-
conservative changes in corporate policies, programs, and procedures
result in a performance issue, that issue would likely surface
initially as a finding of lesser safety significance. The licensee
should then determine the extent of the condition and implement
appropriate corrective action. Assuming that consolidation-related
activities continue to create performance problems because the licensee
has not addressed the root
[[Page 34300]]
causes for the issues of lesser significance, those problems should
develop into more safety-significant issues. The NRC would then detect
this adverse performance trend and engage appropriately. This is not to
say that licensee performance problems could not initially be evident
at a higher level of significance, but this should be the exception if
the licensee is aggressively addressing its lower level issues.
The corporate structure, ownership, and location of a particular
plant should not impact the effectiveness of the ROP. While industry
consolidation may offer efficiencies for the licensee, the assessment
process under the ROP is based on performance results and not on how
licensees gain efficiencies. Inspection activities under the baseline
and supplemental inspection programs are sufficiently defined in terms
of scope and objectives, that ownership or geographic location is not a
factor in effective implementation of the inspection program.
Similarly, the use of risk information to determine the safety
significance of inspection findings by applying the Significance
Determination Process (SDP) is independent of plant ownership or
licensee size.
In assessing overall licensee performance, the ROP uses PI
information in conjunction with the significance of inspection
findings. The degree of regulatory engagement is dictated by the
results of this assessment through the Agency Action Matrix. Each
licensee is expected to submit quarterly PI information to the NRC for
each plant owned by that licensee. If a licensee, for some reason,
elects not to submit PI data for a specific plant, then the ROP has
provisions for additional inspection activities to obtain the
information captured by the PIs in order to fully assess licensee
performance. As the ROP is further refined, each licensee will be
expected to implement associated changes, e.g., revisions to the PI
reporting criteria, at each of its facilities.
Regarding the second scenario, there is a concern among some
stakeholders that a licensee, when faced with financial pressures,
including potential bankruptcy, could make decisions that might have
significant short- or long-term effects. With respect to substantial
short-term effects, the question is whether the NRC's regulatory
oversight framework, given its performance-based, indicative nature in
contrast to a more diagnostic approach, could preclude the NRC from
increasing the level of licensee oversight in a timely manner to assure
that operational safety is being maintained. Rather than having a
short-term impact, some licensee decisions to dramatically improve
financial viability could generate performance issues that do not
surface until several months after the decisions are implemented. These
performance issues could be safety-significant, depending upon the
activities affected by the financially-based decisions. While the NRC's
limited experience with licensees facing financial pressures has not
validated these concerns, it may be prudent for the NRC to adopt a
preemptive approach by initiating a targeted inspection module to
assess licensee response to financial pressures.
Recommended Followup
The ROP is expected to be transparent to industry consolidation.
However, the NRC currently has limited experience with the effects of
industry consolidation on effective implementation of the ROP. With
additional experience, changes that may be needed to the ROP should
become evident. The annual self-assessment process built into the ROP
should serve as a vehicle to evaluate any needed changes. The NRC staff
should continue to monitor consolidation activities and use the ROP
self-assessment process to periodically evaluate the effectiveness of
the ROP in light of the changing industry environment.
Further study should be initiated by the NRC to determine if an
inspection module or ``contingency plan'' (similar to the ``strike
contingency plans'' generated by some of the regional offices) needs to
be developed to facilitate NRC evaluation of a licensee facing
financial difficulties. This will help ensure that an enhanced level of
NRC oversight is provided, if appropriate, in a timely manner to assure
operational safety is being maintained, and that the longer-term
performance impacts of licensee actions have been appropriately
evaluated.
Issue Category: 3. Inspection, Enforcement, and Assessment
Issue: 3.b Other NRC Inspection Programs
Discussion
The NRC is in the process of developing revisions to the fuel cycle
facility oversight process, including inspection, performance
assessment, and enforcement. This process affects ten fuel cycle
facilities: two gaseous diffusion plants, two highly enriched uranium
fuel fabrication facilities, five low-enriched uranium fuel fabrication
facilities, and one uranium hexaflouride production facility (See Issue
Category 6). These facilities possess large quantities of materials
that are potentially hazardous (radioactive, toxic, and/or flammable)
to the workers, public, and environment. Similar to the reactor
oversight process (ROP), the overarching objective in revising the fuel
cycle facility oversight process is to establish a process that is more
risk-informed and performance-based to focus on the more significant
risks at fuel cycle facilities. The intent is to provide an objective
and reliable basis for determining if a fuel cycle facility is safe and
secure and to provide early indications of declining safety and
safeguards performance.
The staff has interacted with external stakeholders through several
public meetings and exchanges of documents. A work plan for revision of
the fuel cycle facility oversight process, which lists the priority,
sequence, and schedules for completing the oversight program revisions
has been issued for stakeholder comment.
The NRC is also in the process of making the inspection program for
independent spent fuel storage installations (ISFSIs) more risk-
informed and performance-based. This is being accomplished in a phased
approach. The short-term phase involves risk prioritizing the existing
inspection procedures using available risk/consequence information and
an expert panel approach, and applying inspection resources
commensurate with risk and the performance history of the licensee. The
longer-term phase is conceptualized to more closely align with the
risk-informed inspection approach of the ROP. This would involve
completing a probabilistic risk assessment (PRA) for ISFSIs and then
using the PRA results to develop an inspection program, which is based
on performance indicators and a significance determination process,
similar to the ROP.
Preliminary Impact Assessment
Given that the fuel cycle facility oversight process is being
revised using a framework similar to the ROP, it is reasonable to
expect that the new oversight process will be able to accommodate
potential impacts of consolidation (refer to Section 3.a. for a
discussion of the impacts of industry consolidation on the ROP). In
addition, the extensive outreach effort initiated by the NRC to
exchange information and obtain stakeholder feedback provides an
opportunity to discuss any expected impacts from the consolidation of
fuel cycle facilities on the new oversight process. Similarly, since
the ISFSI inspection program is being revised using a framework similar
to the ROP,
[[Page 34301]]
it is reasonable to expect that the new program will be able to
accommodate potential impacts of consolidation.
Recommended Followup
No additional staff action beyond that recommended under Issue 6 is
recommended at this time.
Issue Category: 3. Inspection, Enforcement, and Assessment
Issue: 3.c NRC Enforcement Program
Discussion
The NRC derives its enforcement authority from the Atomic Energy
Act of 1954, as amended, and the Energy Reorganization Act of 1974, as
amended. The NRC exercises its statutory authority to impose
enforcement sanctions in accordance with its enforcement policy
described in NUREG-1600, ``General Statement of Policy and Procedures
for NRC Enforcement Actions''. Enforcement actions have been used as a
deterrent to emphasize the importance of compliance with NRC
requirements and to encourage prompt identification and prompt,
comprehensive correction of violations of those requirements.
Compliance with NRC requirements plays an important role in giving the
NRC confidence that safety is being maintained. In the context of risk-
informed regulation, compliance also plays an important role in
ensuring that key assumptions used in underlying risk and engineering
analyses remain valid.
With the development of the reactor oversight process (ROP), where
the significance of individual non-compliance findings is evaluated
using more objective criteria and the regulatory response to these
findings is more predictable, the enforcement program was revised to
better integrate with the ROP. This revision to the enforcement program
consisted of categorizing violations into two groups. The first group
consists of those violations that can be evaluated under the
Significance Determination Process (SDP), with appropriate NRC action
determined by the Agency Action Matrix. Issue 3.a. discusses the
potential impacts of industry consolidation on the ROP. The second
group includes violations related to willfulness, including
discrimination; violations involving actual safety consequences, such
as an overexposure to the public or plant personnel or a substantial
release of radioactive materials; and violations that may impact the
NRC's ability to oversee licensed activities. This issue discussion
focuses on the impact of industry consolidation on the enforcement
program as it pertains to violations in the second group.
As noted in other issue discussions, licensee efforts to increase
efficiency of operations could result in changes to corporate policies,
programs, and procedures. Since consolidation results in more reactor
facilities under a single licensee's control, corporate-wide changes
affect more reactor facilities and more employees. Depending upon how a
licensee manages these changes, there could be an increased number of
allegations, although there has been no evidence of such a trend in the
industry consolidation that has taken place to date. Similarly, efforts
to increase operational efficiency or actions in response to financial
pressures could result in staffing reductions which could lead to more
discrimination complaints. Increased numbers of allegations would
translate to an increased enforcement workload, assuming that the NRC
substantiates some percentage of these allegations, in whole or in
part, based on the results of its investigations.
On the other hand, it is equally likely that consolidation may
result in a reduced volume of enforcement actions because of stronger
licensees and better managed regulatory programs. Staff experience to
date with consolidated licensees has not shown any noticeable increases
or decreases in discrimination complaints or other allegations or in
related enforcement actions.
While measures and processes have been established to assure
consistent application of the enforcement program among the regions,
e.g., audits, enforcement panels, counterparts meetings, etc., those
inconsistencies in implementing the enforcement program that may exist
will be more apparent to cross-regional licensees. These
inconsistencies may involve different thresholds for issuing non-cited
violations, distinguishing between minor and Severity Level IV
violations, and reaching conclusions on alleged discrimination. This
may necessitate more oversight from the Office of Enforcement to ensure
similar issues are treated consistently among the regions.
Another area potentially impacted by consolidation relates to the
possible employment by a licensee of an individual who was terminated
at one facility, based on poor performance or wrongdoing (whether or
not the individual had been issued an NRC order prohibiting his
involvement in licensed activities), at another facility if the second
employer is unaware of the performance or wrongdoing problem at the
first facility. This would be less likely to occur in a consolidated
industry with fewer licensees.
Preliminary Impact Assessment
The impact of industry consolidation on the NRC's enforcement
program relates to implementation issues vice policy issues. It appears
that the NRC can address these implementation issues within the context
of the existing enforcement program framework/infrastructure. The
Office of Enforcement may decide to increase its audit activities in an
effort to minimize inconsistencies among the regions in implementing
the enforcement program. More coordination and communication between
the regions and program office can help assure that the same thresholds
are applied for determining if discrimination violations occurred, as
well as distinguishing between cited and non-cited violations and
between minor and Severity Level IV violations. Regarding the potential
increase in enforcement workload stemming from a greater number of
technical allegations and discrimination complaints, this situation
will need to be monitored to determine if additional resources are
warranted.
Recommended Followup
Experience with the effects of industry consolidation on effective
implementation of the enforcement program is limited. The NRC should
continue to monitor the enforcement workload associated with
discrimination complaints and technical-related allegations to
determine if industry consolidation activities are influencing this
workload and make resource decisions based on the monitoring results.
The Office of Enforcement should maintain its oversight activities of
regional enforcement program implementation to minimize
inconsistencies.
Issue Category: 3. Inspection, Enforcement, and Assessment
Issue: 3.d NRC Allegation Program
Discussion
The allegation program was established to provide a mechanism for
individuals to identify safety and regulatory issues directly to the
NRC. An allegation is defined as a ``declaration, statement, or
assertion of impropriety or inadequacy associated with NRC-regulated
activities, the validity of which has not been established.'' The
allegation program is structured to provide a comprehensive response to
an alleger's concerns in a timely manner. It includes provisions to
protect the identity of the alleger; to
[[Page 34302]]
provide timely resolution of the issues specific to an allegation; and
to communicate the staff's understanding of those issues, status of the
staff's review efforts, and ultimate resolution of the issues in a
timely manner. Industry consolidation could potentially impact these
and other aspects of the allegation program.
As discussed in Issue 3.c., licensee efforts to increase efficiency
of operations could result in changes to corporate policies, programs,
and procedures. Since consolidation results in more reactor facilities
under a single licensee's control, corporate-wide changes would affect
more reactor facilities and more employees. The impact of these changes
could result in larger numbers of allegations. Similarly, corporate
cultural initiatives such as maintaining a safety conscious work
environment (SCWE), could have a bigger impact on safety given the
increased number of affected reactor sites. Additional NRC inspection
may be necessary to evaluate whether a SCWE exists or was adversely
affected by changes in corporate policies, programs, or procedures. In
addition, reductions in licensee staff could result in an increased
number of discrimination allegations.
As is the case with enforcement actions (Issue 3.c), it is equally
likely that consolidation may result in a reduced number of allegations
because of stronger licensee management and more effective regulatory
programs. However, staff experience to date with consolidated licensees
has not shown any noticeable increase or decrease in allegations.
Under the current program, the NRC may elect to refer a particular
allegation to the licensee for evaluation with the licensee reporting
back to the NRC on the results of its review, or decide to conduct an
independent inspection to determine the validity of the allegation. If
a consolidated licensee crosses regional boundaries, absent some
coordinating efforts on the part of the NRC, one regional office could
decide to follow up an allegation with inspection to protect the
alleger's identity, while another regional office could decide to refer
a similar allegation from another employee to the licensee for
followup. With different approaches to following up on similar
allegations, NRC staff in the respective regions may reach a different
conclusion on the validity and disposition of the allegation issues,
although this is unlikely. These and other potential inconsistencies in
implementing the allegation program would be more apparent to cross-
regional licensees.
The roles and responsibilities of NRC staff in implementing the
allegation program are another area potentially impacted by
consolidated licensees that cross regional boundaries. If the NRC
receives an allegation concerning a programmatic issue which cross-cuts
regional boundaries because it pertains to activities at multiple sites
in different regions, there must be a standard method for determining
which NRC organization would take the lead for followup.
Preliminary Impact Assessment
While industry consolidation may impact some aspects of the NRC's
allegation program, as described above, the impact relates to
implementation issues vice policy issues. It appears that the NRC can
address these implementation issues within the context of the existing
NRC allegation program framework/infrastructure. For example, NRC
follow-up action to address similar allegations received in different
regions, stemming from corporate-wide changes to policies, programs,
and procedures, may require coordination of efforts among regional
offices to ensure consistency and alleger identity protection.
Allegations involving programmatic issues which cross-cut regional
boundaries, i.e., pertain to activities at multiple sites in different
regions, can be effectively addressed by defining which internal NRC
organization has the lead responsibility for follow-up. The potential
increased number of allegations, including those involving
discrimination complaints, as well as increased inspection activities
to validate corporate cultural issues, e.g., SCWE, may require
additional resources dedicated to the allegation program.
Recommended Followup
While experience to date with the effects of industry consolidation
on effective implementation of the allegation program is limited, there
appears to be the need for developing guidance to assure consistent
treatment of similar allegations received in different regions, and to
define which organization should take the lead in addressing
programmatic issues that cross-cut regional boundaries. In addition,
the NRC should continue to monitor the number of allegations received
to determine if industry consolidation activities are influencing this
workload, through an increased or decreased number of allegations, and
make resource decisions based on the results of this monitoring.
Issue Category: 4. Decommissioning
Discussion
Nuclear industry consolidation can affect individual licensee
decommissioning planning, financial assurance, and schedules for
dismantling power reactor and fuel cycle facilities. Regulations
applicable to decommissioning include radioactivity cleanup criteria
for unrestricted and restricted release, financial assurance that funds
will be available to decommission the site, decommissioning planning,
and procedures for submitting applications requesting license
termination. Decommissioning policy guidance for implementing the above
regulations has been prepared and issued as standard format and content
guides and standard review plans.
The potential impacts from nuclear industry consolidation on
decommissioning planning, scheduling, and funding can vary. The most
likely outcome is that industry consolidation will strengthen licensee
business conditions to encourage license renewal or avoid early license
termination. For example, strengthened business conditions from
consolidation have allowed power reactor licensees to continue
operations at some plants (e.g., Oyster Creek) that were previously
being considered for decommissioning. Consolidation has and will likely
continue to result in an increased interest in license renewal. Actions
that extend the operation of nuclear power plants will, in general,
increase the available time to fund decommissioning if sinking funds
are used.
Consolidation may also result in decommissioning schedule stretch-
outs to accommodate consolidated company-wide decommissioning programs.
Licensees may seek process and funding alternatives not specifically
addressed or allowed in current regulations, and possibly request an
increased number of exemptions. Licensees may also seek financial
assurance rule changes to allow stretch-outs in the time required to
fully fund decommissioning trusts, on the basis that consolidated
decommissioning schedules can reduce the need for full funding if plant
dismantlement will take place further in the future. Adverse impacts of
delaying decommissioning include uncertainties in the availability of
future low-level waste disposal sites that could result in higher
decommissioning costs and the possible lack of licensed disposal
facilities at the time decommissioning activities take place.
Nuclear power plant licensees that are no longer rate-regulated are
required by
[[Page 34303]]
the NRC's regulations to provide means of assuring any estimated
unfunded decommissioning cost through some surety, insurance, or
equivalent method. The staff evaluates such changes either through
license transfer applications pursuant to 10 CFR 50.80 or through
biennial reports on decommissioning funding status required to be
submitted by licensees.
Preliminary Impact Assessment
License termination regulations apply to planned and premature
decommissioning activities. Because regulations allow nuclear power
plant licensees 60 years after permanently ceasing operations to
complete decommissioning, there is substantial flexibility already
allowed for consolidated utilities to delay decommissioning to take
advantage of operational efficiencies. NRC staff has been able to
successfully address cases involving immediate dismantlement, partial
dismantlement, and delayed decommissioning alternatives.
Fuel cycle facility license termination regulations do not allow
delayed decommissioning because studies have shown that delaying
decommissioning of these facilities does not have a financial or
radiological safety benefit. Thus, fuel cycle facility shutdowns due to
industry consolidation efforts do not appear to introduce unique
circumstances that require new license termination processes.
Power reactor decommissioning financial assurance regulations allow
the use of sinking funds where licensees are either rate-regulated or
can recover costs through the rate base (currently all States allow
recovery of decommissioning costs through various rate base mechanisms;
otherwise, full funding or guarantee of full funding would be required
under NRC regulations). In premature decommissioning cases, full
funding may not be available at the time of shutdown. However,
experience with actual cases has not identified unresolvable funding
issues. Reviews of power reactor licensee ownership changes include
consideration of decommissioning funding. No decommissioning regulation
or policy changes, other than the rulemaking to standardize trust fund
provisions currently underway, appear necessary at this time to reflect
industry consolidation impacts.
Fuel cycle licensee decommissioning financial assurance regulations
should not be affected by industry consolidation because the
regulations ensure that full funding would be available if a licensee
is unable to complete decommissioning, for example due to bankruptcy or
premature shutdown.
Recommended Followup
At this time, it appears that current decommissioning regulations
and policies are sufficiently flexible to accommodate situations
resulting from industry consolidation. Therefore, industry
consolidation appears to have no significant impact in the
decommissioning area and no further effort is recommended. Some unique,
unanticipated circumstances may arise in the future that result in
requests for exemptions or require changes in decommissioning
regulations or policies. For these situations, staff will continue to
identify significant policy matters and make appropriate
recommendations to NRC management.
Issue Category: 5. External Regulatory Interfaces
Discussion
The Commission issued the ``Final Policy Statement on the
Restructuring and Economic Deregulation of the Electric Utility
Industry'', 62 Fed. Reg. 44071 on August 19, 1997. The policy statement
established the NRC's expectations for, and intended approach to, power
reactor licensees as the electric utility industry moved from an
environment of rate regulation toward greater competition. In its
policy statement, the Commission anticipated changes, including
consolidation, in the electric utility industry. The policy statement
states:
The electric utility industry is entering a period of economic
deregulation and restructuring that is intended to lead to increased
competition in the industry. Increasing competition may force
integrated power systems to separate (or `disaggregate') their
systems into functional areas. Thus, some licensees may divest
electrical generation assets from transmission and distribution
assets by forming separate subsidiaries or even separate companies
for generation. Disaggregation may involve utility restructuring,
mergers, and corporate spinoffs that lead to changes in owners or
operators of licensed power reactors and may cause some licensees,
including owners, to cease being an `electric utility' as defined in
10 CFR 50.2.\1\
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\1\ Section 50.2 defines ``electric utility'' as ``any entity
that generates or distributes electricity and which recovers the
cost of this electricity, either directly or indirectly, through
rates established by the entity itself or by a separate regulatory
authority. Investor-owned utilities, including generation and
distribution subsidiaries, public utility districts, municipalities,
rural electric cooperatives, and State and federal agencies,
including associations of any of the foregoing, are included within
the meaning of ``electric utility.''
In its policy statement, the Commission recognized the primary role
that State and federal economic regulators have served, and in many
cases will continue to serve, in setting rates that include appropriate
levels of funding for safe operation and decommissioning. The NRC took
a number of actions to increase cooperation with State and federal rate
and financial regulators to promote dialogue and minimize the
possibility of rate deregulation or other actions that would have an
adverse effect on safety. The policy further elaborated on NRC's intent
to continue to work and consult with the State public utility
commissions, individually or through the National Association of
Regulatory Utility Commissioners (NARUC), and with the Federal Energy
Regulatory Commission (FERC) and other federal agencies to coordinate
activities and exchange information. This increased level of
interaction and consultation has also been beneficial to the NRC in
industry consolidation efforts.
Several regulatory agencies at the federal and State level have
jurisdiction over, or interest in, nuclear industry consolidation.
Issues concerning nuclear industry consolidation and license transfers
(see Issue 2.a.) involve a number of entities besides the NRC,
including, as appropriate, State public utility commissions, the
Department of Justice (DOJ), FERC, the Securities and Exchange
Commission (SEC), and the Federal Trade Commission (FTC).
Traditionally, State public utility commissions have had
jurisdiction over electric utilities with the general responsibility to
assure safe, reasonable and adequate service at rates which are just
and reasonable to customers and the utilities. DOJ is responsible for
maintaining competitive markets by enforcing federal antitrust laws.
Among other things, FERC has responsibility for regulating the
transmission and sale of wholesale electricity. SEC administers federal
securities laws that seek to provide protection for investors and to
ensure that securities markets are fair and honest. The role of the FTC
is to maintain the competitive enterprise and to prevent the free
enterprise system from being fettered by monopoly or restraints on
trade or corrupted by unfair or deceptive trade practices. The NRC has
worked with FERC, SEC and DOJ to develop methods by which the NRC can
minimize the duplication of effort on antitrust reviews and still carry
out its statutory responsibilities. For example, NRC recently amended
its regulations to clarify that it will no longer require owners of
operating nuclear power plants to include
[[Page 34304]]
antitrust information in license transfer applications, eliminating
duplication of a review performed by other federal and State agencies.
However, NRC continues to require antitrust information for new license
applications (see Issue 8.b.). NRC is supporting legislation to
eliminate its antitrust review mandate. Other such jurisdictional
issues (i.e., antitrust and merger reviews by multiple jurisdictions)
between regulatory authorities may emerge as a result of further
industry consolidation.
In addition, industry consolidation may affect NRC's interfaces
with other federal and or State agencies having collateral
jurisdiction, responsibility or interest in nuclear licensees.
Potential consolidation issues discussed elsewhere in this document
have external regulatory interface elements. These issues include:
high-level radioactive waste and low-level radioactive waste management
(see Issue 1.d.--Department of Energy (DOE), Environmental Protection
Agency (EPA) and State agencies), spent fuel storage and transportation
(see Issue 1.c.--DOE, Department of Transportation and State agencies),
decommissioning (see Issue 4.--EPA and State agencies) emergency
preparedness (see Issue 1.e.--Federal Emergency Management Agency and
the associated State agencies) and grid stability and reliability (see
Issues 1.f. and 8.a.--DOE and FERC).
Nuclear industry consolidation may also have additional impacts on
NRC's interactions with external regulatory agencies. For example, new
license applications (see Issue 2.b.) and license renewals (see Issue
2.c.) require consultation or interaction with a number of federal,
State and local governmental agencies in the preparation of the
environmental impact statement. In the event of bankruptcy (see Issue
7.e.), to ensure that NRC's interests and responsibilities and a
licensee's obligations with respect to public health and safety are
properly recognized, NRC would ask DOJ to intervene on behalf of the
NRC in any bankruptcy proceeding.
Preliminary Impact Assessment
As identified in the Commission's policy statement, the NRC took a
number of actions to increase cooperation with State and federal rate
and financial regulators to minimize the possibility that rate
deregulation or other actions would have an adverse effect on safety.
This open dialogue with these regulators has been helpful in minimizing
potential adverse effects on nuclear safety as a result of electric
utility industry deregulation and restructuring by assuring appropriate
levels of funding for safe nuclear power plant operation and
decommissioning. As electric utility industry consolidation continues,
a reassessment may be needed of its impact on NRC's interfaces with
other regulatory bodies at the federal and State levels in approving
license transfers.
Recommended Followup
There does not appear to be a need for any additional near-term
action to address the potential impacts of industry consolidation on
NRC's external regulatory interfaces. However, NRC interaction and
dialogue with other federal and State regulatory authorities, including
national associations representing these authorities, as well as
foreign regulatory authorities, should continue in order to identify
emerging policy issues related to new trends in industry consolidation.
In addition, NRC should continue to consult with its stakeholders to
identify emerging policy issues that could affect NRC's interfaces with
other State and federal regulatory bodies in approving license
transfers.
Issue Category: 6. Fuel Cycle Facilities
Discussion
Industry consolidation activities are occurring throughout the
entire fuel cycle as global market conditions become more competitive
and force companies to eliminate excess capacity and less economically
beneficial operations. Consolidation of fuel cycle facilities has
occurred in the past, as most recently experienced in the Westinghouse
and ABB merger, which is resulting in the closure of the former ABB
fuel fabrication operation (CE Nuclear Power) in Hematite, MO. Other
significant past consolidations include Westinghouse and BNFL,
Framatome's purchase of the B&W fuel operation, and the reorganization
of GE with its Japanese shareholders to create Global Nuclear Fuels
(GNF).
Even in light of this recent flurry of consolidations within the
nuclear fuel cycle, this consolidation trend appears to be continuing.
The staff is currently reviewing an application for the transfer of
ownership and control of a materials license as a result of the planned
merger of the world-wide nuclear businesses of Siemens AG (Siemens) and
Framatome S.A. (Framatome). Also, information from licensees indicates
that the Honeywell facility will be acquired by General Electric; and
the fact that the United States Enrichment Corporation (USEC) is
planning on closing portions of the enrichment cascade at the
Portsmouth Gaseous Diffusion Plant and turning them over to the
Department of Energy within the next year, coupled with the expiration
of USEC stock ownership restrictions in July 2001, may make them a
target for acquisition. In addition, due to low uranium market prices,
uranium mining and milling companies throughout the world are
discussing consolidation, which may lead to further consolidation or
possible closure of U.S. fuel cycle facilities that are not fiscally
viable under increased global competition. New construction may also
involve multiple corporations pooling their resources to build new fuel
facilities, as evidenced by Duke, Cogema, and Stone & Webster's plan to
build a mixed oxide (MOX) fuel fabrication facility at the Savannah
River site.
All commercial nuclear fuel facilities in the United States are
required to be licensed or certified by the NRC. Existing domestic fuel
facilities are divided into three groups: those that involve the
processing of uranium ore into uranium hexaflouride (UF6);
those that enrich the UF6 in the \235\ U isotope; and those
that fabricate enriched uranium into nuclear reactor fuel. The NRC
issues and maintains licenses or certificates for fuel facility
operators to authorize their possession and use of source, special
nuclear, and byproduct material in accordance with the requirements
promulgated in 10 CFR Parts 40, 70, 73, 74, and 76 upon NRC approval of
the license or certificate applications. Certain facilities are also
subject to Agreement State regulation for source and byproduct
materials.
The potential impacts from further fuel cycle industry
consolidation will depend on the licensee and the objectives of the
consolidation. In cases where a consolidated facility can operate in a
more profitable environment, license renewal applications may be
submitted to the NRC. Recent inquiries during the ongoing Siemens/
Framatome merger indicate that the consolidated company may want to
license both facilities under one license, thereby avoiding an
additional license fee. Staff is currently preparing a Commission paper
that describes the NRC fee methodology and associated constraints on
agency action in order to reduce unnecessary burden, while making
regulatory improvements, especially for a declining licensee
population. In other cases, the economics of the newly formed
conglomerate may lead to facilities closing down, as in the case of the
Westinghouse/CE Hematite merger, which would require decommissioning on
an earlier schedule than previously forecasted.
[[Page 34305]]
In addition, the staff is currently considering whether to realign
the fuel cycle inspection program partly because of the trend in
industry consolidation, but also to attain improved efficiency and
effectiveness. This may involve a range of options, including
consolidation of the program in a region, consolidation within NMSS, or
maintenance of the status quo.
Preliminary Impact Assessment
The NRC has addressed fuel cycle consolidations in the past, and in
all cases the existing regulations and NRC staff resources have been
sufficient to ensure the safety of the facilities involved in the
mergers. However, due to the consolidation and decommissioning of fuel
cycle facilities, there is now only one domestic source of uranium ore
conversion to UF6 (Honeywell), and within the next fiscal
year there will only be one domestic source of UF6
enrichment (Paducah Gaseous Diffusion Plant). If either of these plants
were to close, there could be significant impact on the three remaining
civilian nuclear fuel fabricators, and likewise on the entire nuclear
industry due to domestic fuel unavailability.
Although the fuel fabrication field has become fairly narrow, with
only a handful of fuel cycle facilities now in operation, further
consolidation of companies is not out of the question. The
international conglomerates BNFL and Cogema have been aggressively
acquiring a wide range of fuel cycle operations around the world, which
would seem to indicate that they intend to become the predominant
companies in the marketplace. Although foreign ownership and transfer
of companies is not uncommon in the fuel cycle, complete reliance on
foreign sources for nuclear fuel may need to be addressed. This may
have national security implications, as noted by Congress and by the
FY2001 Energy and Water Appropriations Act, which required DOE to
assess the implications for uranium conversion and enrichment.
There are other impacts of fuel cycle facility industry
consolidation on NRC oversight and regulation of the industry. For
example, although the Commission approved staff plans to proceed with a
rulemaking to establish a stand-alone, risk-informed, and performance-
based rule for uranium recovery in August 2000, because the number of
facilities to which the rule would apply has reduced significantly
since the staff originally made the recommendation, and the potential
future for uranium recovery is bleak over the next several years, the
Commission has directed the staff to develop guidance rather than
rulemaking.
Recommended Followup
Many of the impact assessments discussed in other areas are
applicable to licensed fuel cycle facilities as well as licensed
reactor sites. NRC experience in handling past and pending
consolidations within the fuel cycle industry has demonstrated that the
existing regulations, guidance, and processes have been able to handle
the various consolidation efforts. No obvious impacts from industry
consolidation were identified that could affect the staff's future
ability to regulate fuel cycle facilities. However, two followup
efforts are recommended. Staff should consider options to consolidate
the fuel cycle inspection program, in parallel with efforts to revise
the oversight process and the ongoing Phase II Byproduct Materals
Review. Staff should also stay aware of pending competition-related
business decisions by licensees such as those to shut down portions of
operations and outsource that work, similar to what is currently
happening at Global Nuclear Fuels-Americas, which is shutting down its
uranium recovery circuit and is planning on sending their waste for
processing by other facilities. This is to enable the staff to plan for
the necessary resources to process the licensing actions that may
follow such decisions.
Issue Category: 7. Financial
Issue: 7.a Foreign Ownership
Discussion
This issue addresses potential unique concerns associated with
foreign ownership of reactor facilities that might occur as a result of
industry consolidation.
The Atomic Energy Act of 1954, as amended, and the NRC's
regulations in 10 CFR 50.38 provide that any person who is a citizen,
national, or an agent of a foreign country, or any corporation, or
other entity which the Commission knows or has reason to believe is
owned, controlled, or dominated by an alien, a foreign corporation, or
a foreign government, shall be ineligible to apply for and obtain a
license. The NRC staff evaluates license transfer applications that
involve foreign ownership considerations by using the Final Standard
Review Plan (SRP) on Foreign Ownership, Control, or Domination, which
was issued on September 28, 1999. In addition, the NRC is required to
make a finding that the approval and issuance of a licensing action,
including license transfers, would not be inimical to the common
defense and security of the United States.
Ownership of domestic operating nuclear power plants has been
explored by several foreign utilities. One joint venture, AmerGen, was
formed to buy domestic nuclear power plants. This venture was
structured as a joint partnership with a U.S. utility owning 50% and a
foreign entity owning 50%.\2\ Based on a ``negation action plan''
developed pursuant to the SRP to mitigate foreign ownership, control,
or domination, the NRC found that the foreign partner did not control
or dominate the safety-related decision making related to the plant.
Based on this assessment, the NRC was able to approve AmerGen's
purchase of Three Mile Island, Unit 1, as well as subsequent license
transfers involving AmerGen. The NRC has similarly analyzed proposals
by other entities with some degree of foreign involvement. As industry
consolidation progresses, it is anticipated that there will be
additional situations in which foreign organizations seek to acquire
domestic nuclear power plants and domestic utility organizations.
However, the Atomic Energy Act significantly inhibits any foreign
acquisitions and the NRC's review will be performed within these
constraints as reflected in the Commission's regulations and the SRP.
Since 1999, the Commission has developed and submitted proposed
legislation that would remove restrictions on foreign ownership.
Senator Domenici has introduced in the current session of Congress, S.
472, ``Nuclear Energy Electricity Assurance Act of 2001,'' which, among
other things would eliminate the foreign ownership restrictions for
nuclear power plants.
---------------------------------------------------------------------------
\2\ Other than 100 percent ownership by a foreign entity of a
U.S. nuclear reactor, there is no pre-established limit above which
foreign ownership would be absolutely prohibited.
---------------------------------------------------------------------------
Preliminary Impact Assessment
Industry consolidation is not likely to have an impact on the
complexity of the NRC's process for evaluating foreign ownership,
control, or domination. An applicant for several plant licenses would
be required to meet the same standards as a single-plant applicant to
address any foreign ownership, control, or domination issues in a
negation action plan pursuant to the SRP. For example, AmerGen has
bought three U.S. nuclear plants so far and has bid on several others.
The NRC's review of AmerGen's additional acquisitions essentially
followed the same template laid out in AmerGen's initial acquisition. A
suitable negation action
[[Page 34306]]
plan would also likely allow the NRC to make its required findings.
At this time, it appears that current financial regulations and
policies are sufficiently flexible to accommodate situations associated
with foreign ownership resulting from industry consolidation, within
the provisions of current law.
Recommended Followup
No further effort is recommended at this time.
Issue Category: 7. Financial
Issue: 7.b License Fee Structure
Discussion
Since FY 1991, the NRC has been required by the Omnibus Budget
Reconciliation Act of 1990 to recover approximately 100 percent \3\ of
its budget, less any amount appropriated to the Commission from the
Nuclear Waste Fund and the General Fund, by assessing fees.
Additionally, in recent Appropriations Acts, Congress has permitted NRC
to perform certain limited activities that are not subject to fee
recovery.
---------------------------------------------------------------------------
\3\ In order to address fairness and equity concerns related to
charging NRC licensees for agency expenses that do not provide a
benefit to the licensee, the FY 2001 Energy and Water Development
Appropriations Act requires that 98 percent of the NRC's new budget
authority, less the appropriations from the Nuclear Waste Fund and
from the General Fund, be collected from fees in FY 2001, decreasing
by 2 percent per year to 90 percent by FY 2005.
---------------------------------------------------------------------------
The NRC assesses two types of fees to recover its budget authority.
First, license and inspection fees, established in 10 CFR Part 170
under Title V of the Independent Offices Appropriation Act of 1952,
recover NRC's costs for special services rendered to an individual
licensee or applicant. These services include things like inspections
and review of applications for the issuance of licenses (new, amended,
or renewal). Second, annual fees, established in 10 CFR Part 171 under
the authority of the Omnibus Budget Reconciliation Act of 1990, recover
generic and other regulatory costs not recovered through 10 CFR Part
170 fees. The generic and other regulatory costs are allocated to
classes of licensees on an annual basis.
Continued consolidation is expected to result in fewer owners
having more licenses under their domain. It does not appear that
industry consolidation will have an effect on the total number of
licenses held by the industry.
Preliminary Impact Assessment
NRC's assessment of fees is based on the filing of a request for
NRC review and approval, or the existence of an NRC license or approval
for individual facilities or licenses. There does not appear to be a
need to change NRC's fee structure at this time due to industry
consolidation.
Recommended Followup
Since there is no significant impact, no further effort is
recommended at this time.
Issue Category: 7. Financial
Issue: 7.c Insurance
Discussion
This issue is concerned with whether industry consolidation will
affect the availability and maintenance of insurance and indemnity for
both off-site and on-site coverage.
The Atomic Energy Act of 1954, as amended, and the NRC's
regulations at 10 CFR Part 140 require licensees to provide financial
protection for the off-site consequences of accidents at nuclear power
plants. Insurance and indemnity programs have been developed to provide
coverage for third-party liability claims that may arise from any
accidents that may occur. Coverage includes $200 million of primary
insurance from commercial insurers. In addition, each power reactor
licensee is required to provide secondary financial protection through
an agreement to pay a retrospective premium that would, if necessary,
be assessed against each power reactor licensee up to a maximum of $88
million per reactor per accident, with an annual cap of $10 million per
reactor. The total available financial protection currently available
is about $9 billion per accident.
In an August 1998 report to Congress, the NRC recommended that
consideration be given to doubling the current retrospective premium
from $10 million to $20 million annually (as well as raising the $200
million primary level of private insurance). The NRC was concerned that
the 1998 forecast of a significant number of early plant shutdowns
would decrease contributions to the retrospective pool. However, in his
May 2001 Congressional testimony related to renewal of the Price-
Anderson Act, Chairman Meserve reversed the 1998 recommendation in
light of the much more optimistic current industry projections for
license renewal.
In addition to Price-Anderson, 10 CFR 50.54(w) requires power
reactor licensees to provide on-site property damage insurance of $1.06
billion per unit. The NRC imposed this requirement after the Three Mile
Island, Unit 2, accident in order to ensure that licensees had
sufficient funds to stabilize and clean up a reactor site after an
accident. The insurers and insured in the industry adopted a
retrospective premium methodology (similar to Price-Anderson) to reduce
the up-front premiums associated with on-site insurance. The insurers
have performed their own assessments of license transfer applicants'
ability to pay retrospective premium assessments. The NRC's policy has
been to accept, although not necessarily endorse, the use of
retrospective premiums for on-site insurance since it was developed in
the early 1980s.
Preliminary Impact Assessment
With respect to Price-Anderson liability coverage, each reactor
that a licensee owns will expose it to a potential retrospective
premium assessment of $10 million per year. For example, in the event
of a major accident, a licensee with 20 reactors could be required to
pay retrospective premiums of $200 million annually for about 9 years.
If a major accident forced the shutdown of a class of reactors for
safety reasons, a consolidated licensee could lose a portion of its
primary source of revenue for paying its retrospective premiums.
With respect to on-site insurance, licensees are also exposed to
potential retrospective premium payments. These payments would be in
addition to the retrospective premium payments required to be made
under the Price-Anderson system and could impose additional financial
stress on some licensees. Licensees with several plants will likely
have access to a greater revenue stream than licensees with fewer
plants. Nevertheless, the impact of being required to pay retrospective
premiums for many units could be significant if a licensee was
otherwise financially stressed.
The NRC has programs in place to evaluate a licensee's or license
applicant's ability to pay retrospective premiums for both liability
and on-site insurance. With respect to license transfers, this
evaluation is part of the safety evaluation that the staff prepares to
support approval (or denial) of license transfer applications. In
addition, licensees are required pursuant to 10 CFR 140.21 to
demonstrate annually that they are able to pay retrospective premiums
for their reactors that may be assessed under the Price-Anderson
system.
However, for those licensees not involved in license transfers,
there is no requirement similar to that under 10 CFR 140.21 for
licensees to demonstrate annually their ability to pay on-site
[[Page 34307]]
insurance premiums. With industry consolidation, the potential burden
of such retrospective payments on licensees, especially when coupled
with Price-Anderson retrospective payments, could be significant.
Recommended Followup
Since a potentially significant impact has been identified,
consideration should be given to developing a rulemaking to establish
an annual requirement to demonstrate the licensee's ability to pay on-
site retrospective insurance premiums specified in 10 CFR 50.54(w), in
parallel with those in 10 CFR 140.21.
Issue Category: 7. Financial
Issue: 7.d Joint and Several Regulatory Responsibility
Discussion
The NRC views all co-owners as co-licensees who are responsible for
complying with the terms of their licenses. Co-owners and co-licensees
generally divide costs and output from their facilities by using a
contractually-defined, pro rata share standard. The NRC has implicitly
accepted this practice in the past and believes it should continue to
be the operative practice. Most power reactor owners and operators
believe that each co-owner should be limited to its pro rata share of
operating costs and decommissioning expenses and that the NRC should
not look to one owner to ``bail out'' another owner by imposing joint
and several liability on the co-owners. Joint and several liability
refers to the legal doctrine of holding all or any one of the co-owners
financially responsible for the default of any co-owner.
The Commission addressed the issue of joint and several liability
by nuclear power reactor licensees in its ``Final Policy Statement on
the Restructuring and Economic Deregulation of the Electric Utility
Industry'' 62 FR 44071 (August 19, 1997). The Commission stated that it
reserves the right, in highly unusual situations where adequate
protection of public health and safety would be compromised if such
action were not taken, to consider imposing joint and several
liability on co-owners of more than de minimis shares when one or
more co-owners have defaulted.
On July 25, 2000, the Commission denied a petition for rulemaking
to amend the regulations to preclude the imposition of joint and
several liability. 65 FR 46661 (July 31, 2000). The Commission
emphasized its already articulated policy not to impose operating and
decommissioning costs on co-owners in a manner inconsistent with their
agreed-upon shares, except in highly unusual circumstances when
required by public health and safety considerations, and that it would
not seek more than pro rata shares from co-owners with de minimis
ownership. The Commission stated, however, that granting the petition
would unnecessarily limit the Commission's flexibility when highly
unusual circumstances affecting the public health and safety would
require action by the Commission. The Commission also noted that the
term ``joint and several liability'' may have connotations for contract
law that it did not intend to convey and that the term ``joint and
several regulatory responsibility'' more accurately reflects the
Commission's intent. Thus, the Commission stated that it will use the
term ``joint and several regulatory responsibility'' in lieu of ``joint
and several liability.'' Id. at 46663. The Commission's policy on joint
and several regulatory responsibility applies only to nuclear power
reactor licensees.
Preliminary Impact Assessment
In its recent denial of the petition for rulemaking, the Commission
addressed this issue in the midst of the trend toward industry
consolidation. It, therefore, is unlikely that the issue warrants
reconsideration in the near future. Indeed, the trend toward
consolidation arguably makes it even more important to maintain the
Commission's position.
Recommended Followup
Since there is no significant impact, no further effort is
recommended.
Issue Category: 7. Financial
Issue: 7.e Bankruptcy Protection
Discussion
This issue addresses whether industry consolidation raises unique
concerns with respect to licensee bankruptcy. The provisions in 10 CFR
50.54(cc) require a licensee to notify the NRC when a voluntary or
involuntary petition for bankruptcy is filed under Title 11 of the
United States Code against it or its parent or affiliate. Notifications
of petitions for bankruptcy are required for fuel cycle facilities
under 10 CFR 40.41(f)(1) and 70.32(a)(9)(i) and for spent fuel storage
licenses under 10 CFR 72.44(b)(6)(i). The NRC needs information with
respect to bankruptcy filings against its licensees in order to
determine whether additional action is warranted. Specifically, the NRC
must be able to participate in bankruptcy proceedings when necessary to
ensure the adequate protection of the public health and safety.
Preliminary Impact Assessment
Industry consolidation, in and of itself, is not expected to
increase or decrease the frequency of bankruptcy filings by licensees.
However a bankruptcy filing (either under Chapter 7 or Chapter 11 of
the U.S. Bankruptcy Code) by a licensee with several plants could have
more wide-ranging effects than a licensee with only one or a few
plants. It is likely that the NRC's reactor oversight process will
detect declining plant performance caused by financial stress,
including bankruptcy. However, a bankrupt licensee with several plants,
each of which could possibly require increased NRC oversight, could
place additional burdens on the NRC oversight process.
Additionally, a bankrupt licensee with few assets other than its
nuclear plants might have difficulty in obtaining necessary funds to
operate and decommission its nuclear plants even with, as is likely
based on previous experience, positive actions by a bankruptcy court.
(Presumably, a licensee that only owns nuclear assets would file for
bankruptcy protection only because the revenues received from its power
sales in an unregulated market were insufficient to cover its overall
production costs. In such a situation, a bankruptcy court could do
little to improve a licensee's cost structure beyond relieving it of
some portion of its debt burden.) In a worst case situation, the NRC
could be required to shut down the nuclear plants of a bankrupt
licensee if sufficient operating funds were unavailable.
Licensees with only nuclear assets would almost certainly not be
subject to rate regulation. As such, these licensees are required under
NRC regulations to have decommissioning costs prepaid or otherwise
guaranteed in an amount either based on NRC-stipulated generic formulas
or on site-specific estimates, if greater than the formula amounts.
Although unlikely, if the cost estimates did not reflect the full cost
to decommission because of unforeseen difficulties in the
decommissioning process, the bankruptcy of a licensee could have
adverse impacts on the timing and completion of decommissioning.
Recommended Followup
The NRC will continue to monitor licensees' financial health using
the reports filed under 10 CFR 50.71(b) and financial trade press
resources to determine whether any bankruptcy
[[Page 34308]]
filings appear to be imminent. As in the past, if a licensee files for
bankruptcy protection, the NRC will work to ensure that health and
safety interests are adequately represented in bankruptcy proceedings.
No additional action appears to be necessary at this time.
Issue Category: 7. Financial
Issue: 7.f Financial Qualifications
Discussion
The provisions of 10 CFR 50.33(f) require that power reactor
licensees demonstrate that they are financially qualified to construct
and operate their nuclear plants safely. Licensees that are ``electric
utilities'' are exempt from demonstrating financial qualifications at
the operating license stage pursuant to 50.33(f). Currently, the
provisions of Sec. 50.33(f) require licensees or applicants to
demonstrate financial qualifications, in essence, by showing that
projected revenues exceed expenses over the first five years following
the licensing action. Additionally, applicants for the transfer of the
Three Mile Island, Unit 1, Pilgrim, Clinton, and other plants recently
sold have provided parent company guarantees of additional operating
expenses. NUREG-1577, Rev. 1, provides additional information on how
licensees and applicants may demonstrate financial qualifications for
initial licensing and license transfers. The issue is whether industry
consolidation will affect the ability of applicants and licensees to
demonstrate financial qualifications.
Preliminary Impact Assessment
As industry consolidation proceeds, licensees with a large number
of reactor units may be vulnerable to financial stress if a significant
number of their units are shut down at one time or are otherwise unable
to operate over sustained periods at costs less than revenues received
for output from the plants. This situation could be exacerbated for
licensees that are no longer diversified companies with substantial
non-nuclear assets (e.g., transmission lines, distribution networks,
non-nuclear generating units) to provide offsetting revenues. On the
other hand, industry consolidation may actually reduce some financial
risk by spreading out risk among several units--that is, it is unlikely
that several nuclear units would be shut down at the same time. The
remaining operating units could provide sufficient funds to cover
expenses for the shutdown plants. Of course, if a consolidated licensee
had reactors predominantly of one design, and that design was found to
have sufficient safety concerns to cause an extended shutdown of all
the units of that design, the financial stress would likely increase
significantly.
Once a plant is permanently shut down and enters decommissioning
status, financial qualification for operations is no longer a health
and safety issue. Rather, the issue then concerns the adequacy of
decommissioning funds. However, the ability to provide safety
expenditures during the transition period between a permanent shutdown
and decommissioning could be affected if the licensee is financially
stressed. It is not clear, at present, whether industry consolidation
would positively or negatively affect access to funds during such a
transition period. However, this issue has been raised in license
transfer cases by petitioners to intervene.
In 1997, in SECY-97-253, the staff proposed to conduct a
rulemaking, among other things, to require sufficient financial
resources in certain reactor license transfer cases to assure funding
for the transition from cessation of operations to the beginning of
decommissioning, but the Commission did not approve the proposal. In
SECY-98-153, the Commission again considered the issues related to
reactor financial qualifications in light of industry restructuring and
decided to delay that rulemaking in its SRM dated December 9, 1998. The
current standard review plan (SRP), based on the current rules,
requires only that the non-utility license transfer applicant comply
with the same financial qualifications standards as for a non-utility
operating license applicant: it must submit estimates of annual
operating costs for each of the first 5 years of operation of the
facility and indicate a source of funds to cover the operating costs.
However, the current de facto situation is different. One entity,
Amergen, has ``voluntarily'' set up a $200 million reserve for the
plants it has or is planning to acquire. Within the $200 million it has
apparently established specific funds for specific reactors, and it has
pointed to those funds in State Public Utility Commission proceedings
as ``assurance that at least that amount will be available specifically
to assure for the transition from cessation of operation of Vermont
Yankee to the beginning of its decommissioning.'' (Nucleonics Week,
Volume 41, Number 23, June 8, 2000, at page 5.) The Commission, in its
recent license transfer decisions has specifically acknowledged the
staff practice of capturing these ``voluntary'' offers in license
conditions.
Recommended Followup
The potential impacts of industry consolidation on licensees'
financial qualifications are uncertain at present. There doesn't appear
to be a need for any immediate response, but the NRC should continue to
evaluate its financial qualification requirements for the transition
period between permanent plant shutdown and decommissioning to
determine whether any changes are needed to 10 CFR 50.33(f).
Issue Category: 8. Non-NRC Regulatory Considerations
Issue: 8.a Grid Stability/Reliability
Discussion
As discussed in Issue 1.f, reliability of off-site power and grid
stability are safety-significant issues. There is a large and diverse
combination of situations possible when the issues of nuclear industry
consolidation, economic deregulation, and separation of generation and
transmission functions are considered simultaneously. A consolidation
of companies may occur with or without economic deregulation. The
parties involved in a deregulated electrical industry could include
companies generating electricity, regulated entities such as an
Independent System Operator in charge of transmission and distribution,
and regulatory agencies such as the Federal Energy Regulatory
Commission which may have significant impacts on the market environment
in which nuclear power plants operate. Given the complex range of
possibilities coming into play in a market environment, the effects on
grid stability/reliability cannot be predicted with any confidence. It
is prudent to monitor grid stability around nuclear power plants and
anticipate scenarios that may require NRC actions.
Deregulation and restructuring of the electric power industry
prompted the NRC to conduct studies and initiate interaction with
entities such as the National Electricity Reliability Council. A
Commission paper was issued on May 11, 1999, on ``Effects of Electric
Power Industry Deregulation on Electric Grid Reliability and Reactor
Safety'' (SECY-99-129). A study was commissioned at the University of
Wisconsin to examine how deregulation has worked in other industries
relative to safety. The staff also responded to grid-related events
that have occurred at some plants by getting stakeholders such as the
Nuclear Energy Institute and Institute of Nuclear Power Operations
involved in discussions regarding industry-sponsored initiatives, and
the adequacy
[[Page 34309]]
of the existing regulatory requirements, such as those in General
Design Criterion 17. On the basis of the insights gained so far, it
appears that grid reliability issues are primarily a consequence of
economic deregulation rather than industry consolidation. This was
demonstrated by the California experience of the 2000-2001 time period.
Preliminary Impact Assessment
Experience in other industries has shown that the transition phase
from a regulated to a de-regulated activity is often accompanied by
unanticipated difficulties. This may be the case with the impacts of
deregulation on electrical grid performance. Prior to consolidation and
economic deregulation, licensees of nuclear power plants were
``utilities'' who controlled both the generating plants and the
distribution grid. With consolidation and economic deregulation, these
two functions are generally within separate corporate entities. Thus,
NRC licensees may no longer have direct control of the grid; and NRC
regulations which addressed grid reliability by the licensee would not
apply to the grid operator.
At this time, operational experience appears to indicate that grid
stability/reliability will be strained without additional capacity in
transmission and generation. In a deregulated market, if sufficient
economic incentives are not provided for maintaining adequate reserve
capacity, cost control will lead to a decrease in reserve capacity with
corresponding problems during peak periods, power system disturbances,
etc. The heavy cost burden of maintaining sufficient spinning reserve
that does not produce revenue may or may not be transferrable to the
consumer.
Reductions in system reserve margins and unregulated fluctuations
may increase the likelihood of trips that can challenge safety systems
in ways not considered in the plant's probabilistic risk assessment
(PRA). Grid stability/reliability responsibility may move from the
licensees to independent grid operators. The frequency and voltage
level under degraded grid conditions may present safety concerns
relative to supporting safety system operations. Licensees must assure
that they have adequate procedures to monitor grid reliability and
stability, and deal with their effects on plant operations.
Experience has shown that nuclear power plants that perform well
tend to be low cost producers, thus offering strong economic incentives
for the licensee to keep operations proceeding smoothly. As a
consequence, licensees are likely to pay close attention to conditions
outside the immediate confines of the plant. This may increase the
likelihood that grid disturbances will be noticed by licensees and that
they will anticipate potential problems. Additionally, if a licensee
operates plants at multiple sites which feed power into a grid, there
would be an incentive to assure grid stability on a company-wide basis.
This is likely to lead consolidated licensees to coordinate activities
among their sites to improve grid stability. For example, on-line
maintenance performed at each of the sites may be coordinated to reduce
the probability that more than one plant might trip off-line.
The NRC has sufficient regulatory and inspection mechanisms in
place to identify and respond to nuclear safety concerns that may
develop as a result of grid-related stability and reliability issues.
As experience is gained with the deregulated industry, changes to the
regulatory framework may be required. The NRC has informed the industry
stakeholders of its concerns and has observed that organizations such
as Nuclear Energy Institute and the Institute for Nuclear Power
Operations are responding with their own initiatives to address the
concerns. Any proposals to change the regulatory framework will be
based on information from the NRC's monitoring activity as well as
assessments of operational experience.
Recommended Followup
The NRC has established communication channels with industry
stakeholders and other government and non-governmental institutions to
obtain accurate and timely information. The recommended followup is to
monitor the developments unfolding in different parts of the country
and continue the current efforts to assimilate information.
Issue Category: 8. Non-NRC Regulatory Considerations
Issue: 8.b Antitrust Considerations
Discussion
On June 18, 1999, the Commission issued a Memorandum and Order in
the Wolf Creek license transfer proceeding dismissing a petition to
intervene on antitrust grounds. Kansas Gas and Electric Co. (Wolf Creek
Generating Station, Unit 1), CLI-99-19, 49 NRC 441 (1999) (Wolf Creek).
In Wolf Creek, the Commission ``concluded that the Atomic Energy act
does not require or even authorize antitrust reviews of post-operating
license transfer applications, and that such reviews are inadvisable
from a policy perspective.'' The Commission directed the staff to
initiate a rulemaking to clarify the Commission's regulations to remove
any ambiguities and ensure that the rules clearly reflect the views set
out in the Wolf Creek decision. On August 18, 2000, the final rule
became effective. The Commission stated that ``because the Commission
is not authorized to conduct antitrust reviews of post-operating
license transfer applications, or at least is not required to conduct
this type of review and has decided that it no longer will conduct
them, no antitrust information is required as part of a post-operating
license transfer application. Because the previous regulations did not
clearly specify which types of applications are not subject to
antitrust review, these clarifying amendments bring the regulations
into conformance with the Commission's limited statutory authority to
conduct antitrust reviews.'' 65 Fed. Reg. 44649 (July 19, 2000).
The Wolf Creek decision and the clarifying rule, which apply only
to post-operating license transfers, eliminate antitrust reviews for
transfers of facility operating licenses which occur after the issuance
of the initial operating license for the facility. They do not affect
the Commission's continuing statutory obligation to conduct antitrust
reviews of applications for new facility operating licenses. The
Commission has repeatedly sought legislation to eliminate all
Commission antitrust reviews, but such legislation has not been
enacted. Therefore, antitrust reviews for new facilities must continue
to be conducted.
Preliminary Impact Assessment
The Commission's decision in the Wolf Creek case, and the final
rule affirming that decision, reflect the Commission's conclusion that
the trend toward increased consolidation and deregulation in the
nuclear power industry warranted a close look at the limited antitrust
authority conferred upon the Commission by the Atomic Energy Act. The
result was the Commission's conclusion that the Act does not require
antitrust reviews for post-operating license transfers and, even if
they are authorized, they no longer will be conducted as a matter of
sound policy. Although that result applies only to operating license
transfers occurring after the initial operating license has been
issued, the Commission's policy reasons for eliminating those reviews
which it was not required to conduct under the Atomic Energy Act apply
equally to antitrust reviews of initial operating license applications
for new facilities. It
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is, therefore, likely that the Commission will continue to seek
legislation to eliminate all Commission antitrust reviews because such
reviews duplicate responsibilities of other agencies that have more
expertise in this area. Until and unless such legislation is enacted,
however, antitrust reviews for new facilities must continue to be
conducted. In a consolidated and deregulated industry, and where
licensees are not electric utilities, those reviews could be more
complex for an applicant that already owns a number of nuclear (and
other electric generating) facilities. If so, the antitrust reviews
conducted by the staff may require more resources than have been used
for such reviews in the past.
Recommended Followup
No further effort is recommended at this time, except that
projected resource needs for new applications should account for more
complex antitrust reviews.
[FR Doc. 01-16104 Filed 6-26-01; 8:45 am]
BILLING CODE 7590-01-P