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Selling Off Your Nuclear? Here's What the NRC Has in Store

Fortnightly Magazine - June 15 1997

and safety. In the current economic environment, if new business arrangements, competition, or economic constraints result in any impairment of safety, it is imperative that our assessment mechanisms detect such problems early.

The commission has asked the staff to examine measures to identify plants where economic stress may be impacting safety. The NRC has approved for public comment a paper entitled, Establishing and Maintaining a Safety Conscious Work Environment. The paper includes as 'evidence of an emerging adverse trend' the following example: 'cost-cutting measures at the expense of safety considerations.'

Comments from the NRC staff have also indicated that the

commission intends to rely on intensified inspection programs and early detection of trends to assure safe operations in a competitive setting.


Decommissioning Costs

Decommissioning costs could raise difficult and interesting issues in the transfer of nuclear assets.

On one hand, the act of funding for future decommissioning costs does not involve recovery of a variable plant cost incurred with the production of units of output. The need to undertake the decommissioning process is fixed in place at the time a nuclear plant first becomes active. While perhaps not literally true, it can generally be said that the scope of the decommissioning task changes little as the plant's life continues.

Nevertheless, the scale of decommissioning costs is enormous. Current actual costs of plants such as Trojan, Rancho Seco, Connecticut Yankee, and Fort St. Vrain indicate that decommissioning expense lies in the $400-million range. NRC regulations currently require licensees to set aside a certain minimum amount [10 C.F.R. § 50.75(c)]. That minimum is far below the actual cost the industry has experienced. NRC staff has acknowledged that its current regulatory requirement is low. It intends to pursue rulemaking to increase the required minimum.

Moreover, decommissioning costs will play a key role in how competitive markets shake out. Decommissions funding involves taking that level of cost incurred at the outset of the plant's productive life and spreading it out over each unit of output produced during that life. In the traditional setting of regulated monopoly, utilities recovered this cost from their customers. The need to recover these costs in a competitive market where prices are based on marginal costs could render some nuclear assets uneconomic. Decommissioning costs that have this effect represent but one class of costs described as "stranded."

While the matter has not escaped its share of controversy, it would seem that, as part of the restructuring process, stranded cost recovery for decommissioning costs must be put in place. This recovery would involve identifying the amount of the stranded costs, which would likely include decommissioning costs not yet recovered at the time of the shift to a competitive market. A non-bypassable charge, such as a charge for wires to deliver the power purchased in the competitive mode, is then put in place for a fixed period. These stranded costs are recovered from the system customers who would have been responsible for them in the regulated mode.

Interest is increasing in various plans to securitize these stranded costs. That is, the revenue stream