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News Digest

Fortnightly Magazine - November 1 1998

Federal Agencies

NOX EMISSIONS. Generating heavy criticism from industry, on September 24 the Environmental Protection Agency released its long-awaited final rules on nitrogen oxide emissions, outlining a plan to reduce NOx by 28 percent by year 2007 in some 22 states and the District of Columbia, with state implementation plans due by September 1999 and controls in place by 2003, to be carried out through a "cap and trade" program to buy and sell NOx emissions credits.

In its analysis of cost-effectiveness, the EPA identified NOx control costs for fossil-fired steam electric generating units producing power for sale using several different control levels, settling on a level of 0.15 lb/MMbtu, yielding an average cost of $1,503 per ton, well under the threshold of $2,000 that it deemed cost effective. The rules set up a separate control category for boilers and turbines that generate electricity for private internal use. Download the rule at http://www.epa.bov/ttn/oarpg, pending publication in Federal Register.

NUCLEAR PLANT DECOMMISSIONING. Rejecting a framework proposed by the Nuclear Energy Institute, which appeared more lenient, the Nuclear Regulatory Commission issued final rules to reconcile the safety of funds for nuclear plant decommissioning, with the prospect that nuclear plants may face shutdown or a failure to recover costs under industry restructuring and competition.

The rules restrict use of a sinking fund method for "electric utilities," defined as those licensees who can still recover decommissioning costs through regulated rates or other mandatory charges even after competition. The rules force nonqualifying licensees to offer prepayment or up-front assurance to guarantee funding, But the NRC acknowledged "there are likely to be limits on the availability of surety mechanisms" (e.g., letters of credit, lines of credit, surety bonds, etc.). By contrast, the NEI framework would have allowed "nonutility" licensees to qualify for the sinking fund method on satisfying a set of financial criteria, but the NRC said that proposal would carry "greater risk." Other issues in the rule:

• Accelerated Methods. Rejects idea of accelerated funding for all plants over a defined period (to cover the possibility of premature shutdown at some plants), calling plan too arbitrary and prone to wide variations in impacts on licensees.

• Power Sales Contracts. Rejects use of power sales contracts for financial assurance, noting that contracts, plagued by contingencies and litigation, are not equivalent to a government-mandated revenue stream.

• Insurance Pool. Rejects concept of captive, government-managed insurance pool to pay unfunded decommissioning costs, noting that pool members would compete and could shift costs to competitors through pool administration. "An insurance pool would offer no incentive to licensees to reduce the magnitude of their potential claims on the pool."

• Site-specific Issues. Defers decision on using site-specific cost estimates until NRC can collect more data.

• Securitization Ideas. NRC appears to reject proposal to use securitization of a licensee's interest in the payment stream of non-bypassable regulatory surcharges as a vehicle for funding assurance. It says that the proposal to use securitization implies somehow that non-securitized transition surcharges will prove insufficient: "This ¼ seems at odds with the plain meaning of the definition of nonbypassable surcharges."