,.

March 11, 1987

For:

From:

Subject:

Purpose:

Discussion:

POLICY ISSUE SECY-87-66

(NEGATIVE CONSENT)

The Commissioners

Victor Stello, Jr.

Executive Director for Operations

PARTIAL EXEMPTIONS FROM 10 CFR PART 171, ANNUAL FEE

FOR POWER REACTOR OPERATING LICENSES

To inform the Commission of my proposed partial exemptions

from the annual fee for the Yankee (Rowe) Nuclear Power

Station, the Big Rock Point Plant, and the La Crosse

Boiling Water Reactor.

On September 18, 1986, the Commission adopt~ a final

new rule, 10 CFR Part 171, Annual Fee for Power Reactor

Operating Licenses (51 FR 33224). The rule, which became

effective October 20, 1986, provides that an annual fee

shall be paid by the licensed owner for each power reactor

holding an operating license. The rule implements the

Consolidated Omnibus Budget Reconciliation Act of 1985

(P.L. 99-272), which requires the Commission to collect

annual charges not to exceed 33 percent of its FY 1987

budgeted costs. As published in the final rule, the fee

was to be $950 thousand per reactor. This was based on a

FY 87 budget of $405 million. With the approved budget of

$401 million, the fee is now $940 thousand per license.

As discussed in the Resolution of Comments on the Proposed

Rule, it was not the intent of the Commission to promulgate

a fee schedule that would have the effect of imposing fees

at such a level that the owners of the handful of small,

older reactors would find it in their best economic

interest to shut their reactors down. Thus, the rule also

contained a provision (171.11) for exemption from" the

annual fee, which states:

liThe Corrmission may, upon application, grant an exemption,

in part, from the annual fee required pursuant to this

part. An exemption under this provision may be granted by

Contact:

C. J. Holloway, LFMB

49-27225
,.

._11_

The Commissioners 2

the Commission taking into consideration the following

factors:

a. Age of the reactor;

b. Size of the reactor;

c. Number of customers in rate base;

d. Net increase in KWh cost for each customer

directly related to the annual fee assessed

under this part; and

e. Any other relevant matter which the licensee believes

justifies the reduction of the annual fee."

This paper addresses those applications for exemptions

that have been received from licensees for the three small,

older reactors; these are provided in Enclosures 1 through

3. As the first step in the process, each application was

evaluated using the criteria of Part 171.11 to determine

whether a reduction was appropriate. The factors considered for each plant are summarized at Enclosure 4.

'"

For these plants, the staff notes that the annual fee, on

top of other fees already required by Part 170, provides a

significant increase in power production costs. Because of

the smaller generating capacity, the impact on individual

customers is greater than for the same fee applied to large

plants, and the ability to absorb such costs by the utility

is similarly limited. The staff concludes that these three

plants meet the criteria of Section 171.11; that imposition of the full annual fee would be a disproportionate burden

for these plants; and, therefore, that a reduction should

be granted for Big Rock Point, La Crosse and for Yankee.

As the second step in the process, the staff tried various

approaches to determine an equitable method of adjusting

the affected plant fees. Those approaches are summarized

at Enclosure 5. The approaches considered included a fee

based on: (1) thermal megawatt power rating (We note that

this form of adjustment is considered when a plant is

determined to meet the criteria establTSned by Section

171.11. All remaining plants which do not qualify for an

exempti on"COntinue to be subject to the annual fee assessed

by the rule.); (2) relative impact of the fee on

requestors; (3) comparison of mill rate increases; and (4)

licensed operating life. The results using these

approaches were relatively close in dollar amounts.

Nevertheless, the amounts were averaged resulting in the

following adjusted fees:
•••e

,------,--------- __II' •••••

The Commissioners 3

La Crosse Boiling Water Reactor $ 56,000

Big Rock Point 81,000

Yankee 183,000

Recommendation: That the Commission:

Note that it is my intention to grant partial exemptions

from the Part 171 annual fee requirements for La Crosse,

Big Rock Point and Yankee, as reflected in the above cited

adjusted fees within 10 working days of the date of this

paper unless otherwise instructed by the Conmtss ton,

/y~,_v;~/

£-~d);,- Vlctor Stella, ~. Executive Director

for Operations

Enclosures:

1. Letter dated October 21,1986

from A. R. Soucy (Yankee Atomic

Electric Company) to V. Stella (NRC)

2. Letter dated October 28, 1986 from

J. W. Taylor (Dairyland Power Cooperative)

to Director, NRR

3. Letter dated November 7, 1986 from

K. W. Berry (Consumers Power Company)

to Executive Director for Operations

4. Summary Sheets (3)

5. Computation of Proposed Adjusted

Annual Fee

SECY NOTE: In the absence of instructions to the contrary,

SECY will notify the staff on Thursday, March 26,

1987 that the Commission by negative consent,

assents to the action proposed in this paper.

DISTRIBUTION:

Commissioners

OGC (H Street)

01

OCA

OIA

OPA

REGION I

REGION III

EDO

OGC (MNBB)

ACRS

ASLBP

ASLAP

SECY
••• __1__

__

ENCLOSURE 1

Ltr dated October 21, 1986 from A. R. Soucy (Yankee Atomic

Electric Company) to V. Stello (NRC)
, HU ••• • In' • ;--..-..-~..-.. _~.... . - ..----- :~~=~~~~:-:-::- -..__...... , .. -"'--'. -..-- ,-' -~.

YANKEE ATOMIC ELECTRIC COMPANY

~~)

1671 WO'C"."'" ,.... n ] ''''"''''P'O~ Mo"OChu,""' 0170'

TelephoMI 617 ~72·B100

Enclosure 1

A R. SOUCy

,.£ &!ov-t ......:;

eMI[' """'.NC.'''l o'''Ct_

october 21, 1986

FYR 86-102

Mr. Victor Stello, Jr.

Executive Director for Operat;ons

u.s. Nuclear Regulatory Commiovion

Washington, D. C. 20555

Dear Mr. Stello:

Enclosed is an original end four copies of Yankee Atomic

Electric Company's applicatiofl for partial exemption from the

10 C.F.R. Part 171 annual fee. See Annual Fee for Power Reactor

Operating Licenses and Conforllll n0mencSment, 51 Fed. Reg. 33224

(September 18, 1986). The bases for Yankee's request for a partial

exemption are set forth in the enclosed application. As we mention

in the application, Yankee would be pleased to meet w~th the Staff

regarding the application. Also, if any adcSitional information

is needed in connection with the application please feel free

to call me.

Finally, one additional copy of Yankee's application for

exemption is enclosed as well. please have that copy marked anG

datecS received by the Commission ancS returned to our messenger.

very truly yours,

CI7.A - ..·~ A. R. Soucy --------

Treasurer

•

~RS/kg

Enclosures
J"S 1.1•

...._11.__

__.,_,.. _

,.

UN!TED STATES OF k~ERICA

NUCLEAR REGULATORY COP~!SSION

(Yankee Plant)

In The Matter of

YANKEE ATOMIC ELECTRIC COMPANY

)

)

)

)

)

)

---------------)

Docket No. 50-29

License No. DPR-3

APPLICATION FOR PARTIAL EXEP.PTION

Pursuant to 10 CFR Section 171.11, Yankee Atomic Electrlc Company ("Yankee") hereby applies for a partial exe~ptic~

from the requirements of Section 171.15 of the Cornmissj.~n·s rules

ana regulations.

Suu~ortinc Statement

In support of this application, Yankee submits the following:

1. Yankee is a Massachusetts corporation organized in

1954 and is an "electric utility" as defined in 10 CFR Section 2.4(5). Yankee i5 the holder of NRC License No. OPR-3,

dated July 19, 1960.

2. Sections 171.:: and 171.15 were recently acc~~e= by

the Commission, and Section 171.15 imposes an annual license

surcharge on power reactor licensees, which for fiscal 1987 is

$950,000. This surcharge is in addition to the Comrr"ission's

Part 170 license fees, which are use related. See Annual Fee for
11

__I' __ _ 

Power Reactor Operating Licenses and Conforming Amendment, 51

Fed. Reg. 33,224 (September 18, 1986) (Final Rule).l

Section 171.11 provides for exemptions from that annual fee. The

exemption provision states as follows:

An exemption under this provision may be

granted by the Commission taking into consideration the following factors:

(a) Age of the reactor:

(b) Size of the reactor:

(c) Number of customers in rate base:

(d) Net increase in KWh cost for each customer

directly related to the annual fee assessed under this part: and

(e) Any other relevant matter which the licensee believes justifies the recuction

of the annual fee.

These criteria are addressed in the paragraphs that

follow.

3. The Yankee plant is a 175 net M~e pressurized water

reactor that began operating on November 10, 1960. Yankee is the

oldest operating commercial nuclear power plant in the United

S~ates. Yankee's ope=atin; license expires in 11 years, and its

current power contracts expire in only 5 years.

2

Yankee is seeking jucicial r ev i ev of t~e final- rule i::r.p~5in;

the Part 171 license fee, and sub=issi=~ c= =r.is exe=~~ic~

applica~ion is no~ intended ~o waive any of Yankee's - objections to the rule.

~I Pursuant to the power contracts referred to in the text,

Yankee_sells all of its energy p:od~ction to 10 New England

utilities, each of which sDonsorec Yankee's construction in

the 1950's and are today Yankee's sole share~olders.

Those

sponsoring utilities, in turn, resell energy puichased from

(Footnote 2 Continued on Next Page

- 2 -

3
• ··~ ...-=-~."I ............"'!"!o .. _~_'L... ~:_... _ ...... _.~_ .~ __• __ •• .,_ • __• __

...

4. Aside from being the oldest commercial reactor,

Yankee i s one of thE' sIT/QUest cOffi.i,ercia} nuc Je e r pcve r plants In

the United States.

5. A surcharge of $950,000 in license fees will increase ~ankee's power costs by nearly 1 mill per kilowatt hour

(KWH) (a charge comparable to the entire cost of waste disposal,

as presently assessed by DOE). Please note that this s~=charge

is on top of our current Part 170 license fees of more than

$200,000 per year.

6. An increase of this magnitude is unreasonable for

such a small reactor. The impact on ~ankee power costs will be

" approximately six times as great as it ~ill be for a typical

large, current vintage plant.

7. The decision to renew the Yankee power contracts in

1991 will be based on econo~ics, which for a small plant like

Yankee are at best ~arginal. Current Yankee ~rocuction

costs are .

nearly 4 cents/K~~, whereas many plants in New England have pro-

(Footnote 2 Continued from Previous Page)

Yankee to their own ~holesa:e a~c reta:1 r-arkets. Ya~kee ~as

no o:her customers.

In this connection, it should also be noted that Yankee is

often referrec to as a "single asset" utility. Yankee was

formed for the exc1usive purpose of constructing and

operating New Eng:anc's first nuclear plant. Unlike other

utilities, Yankee will not construct any future generating

facilities, nuclear or otherwise. Once the Yankee plant is

removed from service and oecommissioned, ~ankee Atomic will

cease to operate as a utility company.

- 3 -
• __

--

.._----------- lIPS r ••

duction costs of less than three cents. An increase of $950,000

in license fees on a small plant lik~ iank~e ~~:: wide~ this gap

still further. The intent of the Section 171.~1 exemption provision is to avoid such adverse impacts on the operators of small,

older reactors.

3

See 51 Fed. Reg. at 33,227, col. 2.

8. The sensitivity of a small reactor to increased

expenses is clear in a recent analysis of 1985 nuclear utility

operating and maintenance (O&M) costs (Attachme~t A). The study

shows that despite an excellent capacity fac~c: (80\), and tight

budget controls, Yankee's O&~ costs are close to the highest in

the incustry.

9. Fl;rthermore, because 0: ;-c:

-..- size,

w

Ya:1Kee poses

less 0: a potential hazard than most o~her co~~ercial p:ants

(inventory of fission product is pro~ortiona2 to size). Moreover, Yankee is loca~ed in a very remote area, w~ich reduces ~he

hazard to the public still further.

1/ Section 171.11 also refers to "[nlumber of customers in rate

base" and "Inlet increase in 'KWh cost for each custo~er

direotly rela~ec ~o the a~n~a: :ee assessee under this part."

Yankee ~as no retail cus~omers: as notec, all 0: its enercv produc~ion is sold to the 10 New Enclanc ctili~ie5 ~hat o~n

Yankee as energy supply for their respective systems. And,

as indicated above, Yankee estiffiates that the Part 171

license fee will increase Yankee's cost per kilowatt hour by

approximately 1 mill, which is about 6 times greate~ than the

increase that will be experienced by more ~ecent vintage

plants.

- 4 -
..._,-----------------------

10. The requested exemption is also justified

in view cf the fac~ t~at ~a~y of the generic costs underlying the

Part 171 annual fee are not relevant to Yankee Atomic. See generally, 51 Fed. Reg. 24,078, 24,079 (1986) (Proposed Rule). This

--=-----

includes costs associated with the followin~

NRC research directed to future plant designs (id.

at 24,079, col. 3) (as explained previously, Yankee

is a single-asset utility and will not construct

any generating plant, nuclear or otherwise, in the

future);

NRC research directed toward verified thermal hydraulic computer coces (id. at col. 2), development

of probabilistic risk assessment (PRA) technology

(id. at co~. 3) and earth scie~ces research (id. at 2~080, col. 1) (since its inception, Yankee his

independently develo?ed substantial in-house,

state-o:-the-art ana~ytical capabilities for p2ant

engineering and oesign, including NRC-a?provec thermal

hydraulic codes, fuel performance models and methods to

assess seismological risk -- examples of reports

which describe these capabilities are YAEC 123',

YAEC 127'P, YAEC 1300 and Y~~C 1331); indeed,

Yankee was licensed as an Ato~ic Enercv Act

section lO,(b) power reactor demonstration project

for, among other things, research and development

of power reac~or ~echnolocy. See 1 A.E.C. 26

(1957); • ---

~~c research and regulation directed to large,

contemporary plants and advanced future designs

(id. 2~,079 at c~l. 2 and 24,080 at col. 3), ~,

plant siting c~it£ria, construction quality

assurance anc venc~r to?ical reports related to

standard designs;

Review of applications for licenses to operate

nuclear power reactors (id. at 24,080, col. 3);

Specialized inspection and enforcement measures

(id. at 24,081, col. 1) (Yankee Atomic has an

excellent overall record of high performance and

reliability and receives consistently high SALP

ratings, !!! Attachment B).

- 5 -
••• " 7 .'.If

11. The different status of small, older generation

plants has been reco9;.izec in other regulatory contexts as well,

~, the Co~~ission's property insurance and backfitting rules

(10 C.F.R. §§ SO.S4(w) and 50.109). Simply put, because kilowatt

hour production for small, older generation plants is an oreer of

magnitude lower than that of more recent plants, the different

cost-benefit relationship of various expenses, including the new

Part 171 fees, must be recognized.

12. Therefore, Yankee submits that a surcharge of

S950,OOO on top of our current license fees (approximately

S200,OOO per year) is unreasonable for the small Yankee plant,

" which is locatec :n a rura~ area and has an excellent safety,

regulatory and enfo~cement

record. Yankee requests that the

Part 17~ fee i~posed en it not exceed S50,OOO. ~e feel that this

amount should be more than adequate to recognize the benefit to

Yankee of the va~ious costs that are to be recovered through the

Pa=~ 271 fees.

13. In addition, repeating the exemption application

process each year would be costly and time consuming for the

Staff as well as Yankee. For that reaso~, the partial exe=;ticr.

requested here should be made permanent. The facts that support

this application will not change in any ~ay that would undermine

the validity of the exe~ption.

- 6 -
--,---=-----------_._-_.-.

14. Finally, Yankee would welcome the opportunity to

meet at the Staff's convenience to discuss this application; if

additional information is needed in connection with the application, please contact the undersigned.

Conclusion

Based upon the foregoing, Yankee respectfully requests

that it be granted a permanent, partial exemption from the requirements of 10 CFR Section 171.15. It is Yankee's position

that the surcharge levied on top of our Part 170 license fees

should not exceed $50,000.

Respectfully submitted,

" YANK~E ATO~~C ELEC~R!C COY~ANY

BYC·I?~ A. R. Soucy c:s

T:easu:e: a:l::

Ch:e: Financial Office:

1671 W=rcester Read

Framingham, Massachusetts 01701

Telephone: 617-872-8100

Dated: October~, 1986

- 7 -
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n!i wasIhe case In 19M. Nc·hra..kn i'lhllc rower UI~tricl'~ (NI'I'D)n1O)I('r,

wilh CO~I'" of "4

Afi? millvKW' lIn 1985,~hrdulcd "n Otll:tRC f'nm Srl'-

lcmhcr 14'R·' to I\ur.u<;l 1',"5 to ,r"lnee t'IC r«lrculnllon IliIIC"'. DtlrinR I!'C

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roenerAtcd eluling mll!>lof I',M nncl1985 btt.llu!ic of refudinK, rnRinerri,,!

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pl:'t", had cnSI<; in 19M of~S1r,.2·19 millVKWII. and "50 lillie ~enernliCJn In

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September 191M 10 eMlyJuly 19R5 forreplacement of recirculation pipinr.

n "Iilily !'polcc!'m:m said. In 1984,thc units' production CO~l" were 20.574

rnill!>lKWII; in ItlRS, 39.4"9 millslKWJI.

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deelricily of nflY nuclc:tr p'anl in IhcU.S. BUI in 19R5, the plant "·a..out of

service for 21 weeks for rcfuclinR and 250majol NRC-manlbled cbi~n

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Iowa Ekctric Lighl &. "ower Co.'s DuaneAmold had an outJ~c du,il1~

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millv'J{WII compared with 1985cosUof 39.449millVKW11.

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bc8c:msc of orclntional finc luning.During 1984,• ~llOkesm:tJ1 !laid. the

uiiliiywilijilclt,1 a itdc~i&n modificalion of the rnoi"lure VpMator rehc:tter

Rntl dcaned lhe scxondary foedwalcr trains,whichconlrihulcd 10 bellerI'<:r·

formnncc. Gin",,'s nel 19R5 cap.,cily factorwas 81.16%comJ13red with

78.7% in 19M,II1C ~po1cesman said, addinglh31 a reduclion in trip out.'r.e

lime dnring 1985also :tdM.d to lhe planl's pcrform:1I1ce.

-Did: MORgrtlf, WtJJ1Jingron: Cl,orlt.f Thurjto". Ntl4' rork

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ATTACHMENT B

EXCERPT FRO~ SYSTEMATIC ASSESSMENT OF LICENSEE

PERFOR~A~CE (SALF) REPORT NO. 50-29/85-99

B. Facility Performance

Functional Area Last Period This Period Re-cent Trend

(t-\ay 1- 1982) (September 1, 1983

August 31, 1983 January 31, 1985)

A. Plant Operations 1 1 Eonsistent

B. Radiological Controls Z Z Consistent

C. Maintenance 1 1 Consistent

D. Survei llanee 1 1 Consist ert

E. Fire Prote::tion and

Housek.eeping 1 1 Censister,,,-

" F. E~e~gen::y Preparedness 1 1 Consister.t

G. Security a~c Sa hi:;!l"'ds Z 2 ~r.:?!"ovir.g

H. RefiJeiir.; 1 1 Ccnsis~e!':~

I. Des~gn Ccr.trcl/Quality

Ass:.:!"ance Z Z Improvin;

J. Licensing Activities 1 1 Consistent

9A de:1ir.ing tren: has been noted in the are! of personnel Idherer.:e to Fire

Protection procedures.
ENCLOSURE 2

Ltr dated October 28, 1986 from J. W. Taylor (Dairyland Power Cooperative) to Director, NRR
•

mDAIRYLAND

L.j-f[[J[!!JI:;Iif COOPERATIVE. PO BOX 817 • 2615 EAST AVE so

JAMES W. TAYLOR

General Manager

Oc~ber 28, 1986

Dir-ector', Nuclear Reac~r Regulation

U. S. Nuclear Regula~ry Commission

Washington, D.C. 20555

RE: Dairyland Power Cooperative

La Crosse Boiling Water Reactor' (LACBWR)

Provisional Operating License Number DPR-45

Application for Exemption from Annual

Fees Imposed Under 10 CFR Part 171

Dear Sir:

Enclosure 2

• LA CROSSE. WISCONSIN 54602-0817

(608) 788-4000

Pursuant to 10 CFR Part 171.11, Dairyland Power Cooperative (DPC), hereby

respectfully request.s that. t.he Nuclear Regulatory Commission (the "Commission")

exempt the La Crosse Boiling Water Reac~r (LACBWR), owned and operated

by DPC, from t.he annual fee imposed under 10 CFR Part 171 on nuclear power

reac~rs. For the reasons 8et forth below, DPC believes that it is entitled to

this exemption under the criteria set forth in 10 CFR Part 171.11 and that it

would be in the public interest to grant this exemption request.

10 CFR Part 171, which became effective on October' 20, 1986, imposes

an annual fee of .950,000 on each power reac~r licensed to operate as of

October 1, 1986, in addition to the licensin. fees alread;y bein. imposed under

10 CFR Part 170. In adopting this new rule, the Commission specifically

indicated that it was "not the intent of the Commission to promul,ate a fee

schedule that could have the effect of imposing fees at such a level that the

owners of the handful of small, older reactors would find it in their best

economic interest to shut their reac~rs down." The Commission indicated

that it would consider exemption requests submitted in connection with such

reactors and take the following fac~rs Into consideration in reviewing such

exemption request.s:

a. Age of the reac~r.

b. Size of the reactor.

c. Number of euatomera in rate base.

d. Net increase in kWh cost for each customer directly related to the

annual fee assessed under this Part.

e. Any ot.her relevant matter which the licensee believes justifies the

reduction of the annual fee. 10 CFR Part 171.11.
Director, Nuclear Reactor Regulation

Page 2

October 28, 1986

The Commission also indicated that it would grant exemption relief under

Part 171.1l if the licensee could demonstrate on the basis of these factors

that NRC's regulatory costs for the plant in question are reduced and that

the benefits bestowed on the licensee are below that of other plant reactors.

This exemption request will address each of the factors set forth in Part

171.11, and demonstrate (1) that DPC is entitled to favorable consideration

under all of these factors, and (2) that the fee requirements of Part. 171

should be waived in full with respect to LACBWR or alternatively reduced to

an annual fee of no more than .55,000.

a. Me 01 the Reactor - LACBWR has been in operation for 17 years.

It is one of the four oldest nuclear power reactors subject to the

provisions of Part 171. LACBWR was originally built as a

demonstration nuclear plant for the Atomic Bnergy Commission

(AEC) under the Cooperative Power Reactor Development Program.

LACBWR went on line in November 1969, and in 1973 title to

LACBWR was transferred from the AEC to DPC. LACBWR is a mature

plant with a proven record of operating experience and the

Commission is no longer incurring the types of "start-\.i'p"

regulatory costs associated with new reactor designs and systems.

Moreover, LACBWR is an Allis-Chalmers BWR and DPC receives

little, if any, direct benefit from the "generic" regulatory costs

associated with Commission-sponsored research activities involving

advanced reactor designs and PWR's and BWR's designed by

manufacturers of the reactors utilized by other nuclear utilities.

These research costs constitute more than half of the regulatory

costs that the Commission is attempting to recover under Part 171.

In addition, because DPC has made significant upgrades to LACBWR

over the past ten years in order to meet current regulatory

requirements, it is not expected that extensive modifications, like

those required in the past, will be undertaken for the remainder of

plant life which might require intensive internal review actions by

the NRC.

b. Size 01 the Reactor - LACBWR is the smallest nuclear power reactor

subject to the provisions of Part 171. The vast majority of u.s.

power reactors range in size from 500 to 1200 MW electric. At a

rated capacity of 50 MW electric and 165 MW thermal, LACBWR is less

t.han 10% of the size of approximately 90% of all other U.s. power

reactors and it is less than 70% of the size of the next largest

reactor subject to the new fee schedule. Charging the same fee for

LACBWR that is charged to reactors that generate more than 20 times

as much power as LACBWR imposes an unfair and disproportionate

burden on DPC. vis-a-vis other nuclear utilities. The flat fee does

not accurately reflect the lower regulatory costs attributable to the

smaller physical size of LACBWR and the reduced number and complexity

of systems and components in the plant. Again, there are few, if

any, benefits bestowed upon DPC from generic NRC regulatory

programs that benefit all other nuclear utilities because they involve

General Electric, Westinghouse, Babcock & Wilcox, and Combustion

Engineering reactors which are an order of magnitude larger in size

and more complex than LACBWR.

1-
Director, Nuclear Reactor Rearulation

Page 3

October 28, 1986

c. Number of Customers in Rate Balle - DPC's service area includes

parts of four states in the upper north central retrion of the u.s.

(i.e. Wisconsin, Minnesota, Iowa and Illinois). DPC, as a

areneration and transmission cooperative, provides electric service to

29 distribution cooperatives which are members of DPC and which in

turn provide electric service to 170,000 customers in this rearion.

DPC's customer base is considerably smaller than the customer base

served by other nuclear utilities, particularly those servinar major

metropolitan areas, and also considerably less diversified. DPC's

customer base is primarily rural in character and has already been

under severe economic strain due to the problems besettinar the

u.s. farm economy in recent years. DPC's system has essentially

been in a zero arrowth mode over the past several years. These

new fees would further aggravate the financial problems confrontinar

DPC's member cooperatives and their customers. The additional

fees imposed under Part 171 would also place a disproportionate

share of the Commission's rearulatory costs on DPC's relatively small

customer base that receives the benefit of only 50 MW M power

production from nuclear enerary compared with the customer bases

of other nuclear utilities which (1) are much lararer, (2) receive the

benefit of much more power from nuclear enerary, and (3) are in a

much better position to absorb the additional costs associated with

these fees.

d. Net Increase in kWh eo.t. - LACBWR currently has the hiarhest unit

power costs of any base load plant on the DPC system. Durinar

1985, the total production costs for power arenerated at LACBWR

were in excess of $0.054 per kWh compared to total production costs

of less than $0.023 per kWh from DPC's most efficient coal-fired

unit and average revenues of .0.046 per kWh from DPe'. member

cooperatives. The addition of a $950,000 annual fee under Part

171 would result in approximately a 5.4% increase in LACBWR's unit

production costs, or 3 mills more per kWh, which would further

increase the cost differential between LACBWR costs, the averaare

costs of its coal-fired units and average system revenues. The

increase in cost per kWh at LACBWR will be approximately 15-20

times greater than the increase that will be experienced at other

nuclear utilities operatinar lararer reactors where total production

costs are already much higher. An increase of this maarnitude will

have a significant adverse impact on DPC's member cooperatives

and customers. LACBWR contributes less than 8.5% of DPC's

installed base load arenerating capacity, but it does reduce DPC's

dependence on coal as the primary fuel source for base load plants.

However, the proposed ten-fold cost increase for rearulatory services

under Part 171, versus the average fees paid under 10 CFR

Part 170 in recent years, will -- unless waived or substantially

reduced by the Commission -- drastically impact the economics

associated with the operation of LACBWR.

(

I J
Director, Nuclear Reactor Re~ulation

Page 4

October 28, 1986

e. other Relevant Mattera - As noted previously, LACBWR was

constructed by the AEC under the Cooperative Power Reactor

Development Proaram - a ~overnment-spon80red pro~ram desianed

to stimulate the development of the nuclear power industry and

encourage widespread participation in this development by

demonat.ratina that small-scale nuclear power plants could be

economically operated. DPC participated in LACBWR at the ur~in~

of the AEC and became subject to licensina pursuant to the

contractual arran~ements with the AEC transferring ownership of

the plant and operational responsibilities tor the plant to DPC. The

imposition of unduly burdensome and disproportionate fees on

LACBWR at this juncture could have an adverse impact on the

willin~ness of other utilities to participate in similar

~overnment-spon80redenergy projects in the future. In addition,

LACBWR is unique in many respects. It is the only nuclear power

reactor in the United States that is entirely owned and operated by

a rural electric ~eneration and transmission cooperative. The

continued operation of LACBWR enables DPC to lessen iftl dependence

on coal-fired ~eneratin~ capacity and maintain a more diversified

fuel am tor its base load plants. However, the impact of the new

fees on the economics associated with continued operation ot

LACBWR could ultimately force DPC to increase its dependence on

coal-fired capacity. Such a development would not be in the best

interest of DPC's member cooperatives or the consuming public.

To DPC's knowledge, every other fee imposed upon nuclear utilities

by regulatory agencies, other ~overnment entities, and private

trade associations and industry ~roups to administer their programs

and recover their costs is based upon the number and size of the

reactors involved, the ~ross revenues or total power production of

the utility involved, or the total production of the nuclear power

plants involved (e.~. the DOE High Level Waste Fund, char~es

imposed by the Wisconsin Public Service Commission, EEl, EPRI,

INPO, etc.). Yet, the new rule would impose the same $950,000 fee on

LACBWR that is imposed on a typical large reactor such as the 1250

MWe Grand Gulf reactor. Based on the relative size of these two

reactors, DPC should only be required to pay 4% of the amount paid

tor a lar~er reactor or $38,000. DPC recognizes that the NRC's

goal is to recover $96 million this year under 10 CFR Part 171.

This $96 million amounts to approximately $1,111 per MWe of

installed nuclear generating capacity in the United States. At 50

MWe, the tee imposed on LACBWR would only be around $55,000 if

reactor size were the criteria utilized to assess fees. Absent this

exemption, DPC will, therefore, be required to pay over 17 times

the amount that it would otherwise be required to pay under the

~eneral1y-accepted fee criteria utilized throughout the ~overnment

and industry.
'·'I~_r__._. 

_

Director, Nuclear Reactor Re~ulations

Page 5

October 28, 1986

In summary, DPC believes that its situation is unique in many respects,

in light of LACBWR's size, DPC's status as a rural electric cooperative, the

size and character of the DPC system and customer base, and the ori~ins of

DPC's participation in the nuclear industry. DPC believes that it is entitled

to favorable consideration under all five factors set forth in 10 CFR Part

171.11. DPC should simply not be subjected to the same annual fee imposed

on other much larger utilities that operate nuclear plants ~enerating far more

power than LACBWR and servin~ much larger and more diverse customer

bases which receive far more benefits from nuclear power and which are far

more capable of abscr-bing the fees imposed under Part 171.

For all the foregoing reasons, DPC therefore respectfully requests that

the Commission ~rant DPC a permanent exemption from the annual fees

imposed under 10 CFR Part 171 and waive these fees altogether insofar as

they apply to DPC or, in the alternative, reduce these fees to no more than

$55,000 per year.

DPC also respectfully requests that DPC not be required to i1iake the

first quarterly installment of any payment due under the new rule with

respect to LACBWR until ten (10) days after the issuance of a final decision

by the Commission on this exemption request.

Sincerely,

JWT/RES/cls

STATE OF WISCONSIN }

}

COUNTY OF LA CROSSE }

Personally came before me this .:2. Y day of r;)-~ , 1986, the

named James W. Taylor to me known to be the person who executed the

foregoing instrument and acknowledged the same.

Ann4!::J·

Notary Public

La Crosse County, Wisconsin

My Commission Expires 02/21/88

above
-------_._----------

ENCLOSURE 3

Ltr dated November 7, 1986 from K. W. Berry (Consumers

Power Company) to Executive Director for Operations
Consumer~

Power

flllWflUNIi

M'''''IiAII-S PROIiRlSS

Genera' Oft_: '145 Wall 'arna" Road. JacltlOfl. MI .8201 • (5171 788.1836

November 7, 1986

'.

Executive Director for Operations

US Nuclear Regulatory Commission

Washington, DC 20555

DOCKET 50-155 - LICENSE DPR-6 - BIG ROCK POINT PLANT -

10CFR171 ANNUAL FEE EXEMPTION REQUEST

Enclosure 3

Kenneth W Berry

/);,rC'Io,

NIIC'lrtJ' uC'rrui,.,

Pursuant to 10CFRI71.11, for the reasons set forth herein, Consumers Power

Company requests an exemption from the annual fee requirements of 10CFR171.15

for Big lock Point. As stated in the Federal Register notice which published

the new fee rule, the NRC recognizes the problem that some licensees of

smaller reactors may have in paying substantially increased fees and therefore

has provided for fee exemptions.

In support of this request, Consumers Power Company submits the following:

1. Big Rock Point is the holder of NRC License No. DPR-6, dated May I, 1964.

The plant is the oldest operating General Electric boiling water reactor

and one of the oldest operating commercial nuclear generating plants in

the United States. Big Rock Point's operatittg license expires on May 31,

2000. This leaves less than 14 years of plant operation remaining.

Because of Big Rock Point's age, many of the generic costs underlying the

new fee rule are not relevant to Big Rock Point.

2. In addition to being one of the oldest commercial reactors, Big Rock

Point is the second smallest operating commercial nuclear generating

pl8Dt in the United States. Big Rock Point's output is 69 MWe net. This

output is more than one order of magnitude less than the average modern

vintage commercial generating plant.

3. A IBrcharge of $950,000 in annual license fees would incrementally

increase Big Rock Point's cost of electrical production by approximately

2.5 aills per kilowatt-hour. This surcharge would be in addition to our

current average 10CFR170 fees of approximately $130,000 per year. An

8611100286 861107 ~DR ADOCK 05000155

PDR

OCI086-0176-NL02
Executive Director for Operations

Big Rock Point Plant

10CFR171 Annual Fee Exemption Request

November 7, 1986

2

increase of this magnitude is unreasonable for a generating plant of this

emaIl size. The impact of this surcharge would be approximately 12 times

as great as it will be for a typical modern vintage plant. Even without

increased license fees, recent industry analyses have shown Big Rock

Point's operating costs on a kilowatt-hour basis to be among the highest

in the industry.

4. Because our current electric rates do not reflect tbe Dew fee, it could

not be passed on to our customers without filing a new rate case with the

Michigan Public Service Commission. At the present time, the regulatory

climate within the state is volatile, and the outcome of any new rate

case filing would be unpredictable. This is due in part to Consumers

Power Company's recent financial problems and the visibility these

problems have created in the state regulatory arena. Also, intervenors

in a fuel and purchased power cost recovery proceeding are presently

contending that Big Rock Point should not be allowed to remain in the

rate base due to bigh operating and,maintenance costs of the facility.

5. Big Rock Point's small size and rural location is less of a potential

hazard to public health and safety than most other commerci~ nuclear

generating plants. Plant age, size and location have also been recognized by the NRC in other regulatory contexts. These include the emergency planning zone, insurance and backfitting rules.

6. Over the last several years, Big Rock Point performance has been above

average in SALP ratings, capacity factor and availability. This has

resulted in less NRC regulatory effort being spent on Big Rock Point.

Because Big Rock Point's kilowatt-hour output is small and the plant is old,

the cost-benefit of the new fee should be recognized. As stated in the

Federal Register notice which published the new rule, it is not the intent of

the NRC to promulgate a fee schedule at such a level that smaller, older

reactors would find it in their best economic interest to shut down. We feel

that the majority of the regulatory costs and benefit gains associated with

Big Rock Point would reasonably be collected under the existing 10CFR170 fee

structure.

In conclusion, Consumers Power Company contends that because of the tenuous

economic viability of Big Rock Point, any increase in licensing fees is

'unreasonable and overly burdensome. We request that an exemption be granted

that requires Big Rock Point to pay not more than $27,000 in annual licensing

fees under 10CFR171. This amount is based on the fact that Big Rock Point is

69/850 the size of the average plant and has only 14/40 years of operation

left [(69/850) x (14/40) x ($950,000) • $27,000]. The average plant size was

calculated from NOREG 0020, June 1986 data [85,190 Mwe/100 plants • 850

average MWe/plant]. We believe that establishing an annual fee on the basis

of plant size and age is appropriate justification.

OCI086-0176-NL02
r

, .

Executive Directnr for Operations

Big Rock Point Plant -

10CFR171 Annual Fee Exemption Request

November 7, 1986

--------------------

3

To reduce the administrative costs of filing an annual exemption request, we

also request the exemption be made permanent. Pursuant to ~1RC Invoice F0085

dated November 19, 1986, a full quarterly installment of $237,500 will be

remitted for Big Rock Point. Subsequent to NRC action on this exemption

request, and if the exemption is granted, a refund of the difference is hereby

requested.

Kenneth WBerry

Director, Nuclear Licensing \

CC Director, Nuclear Reactor Regulation

Administrator, Region III, USNRC

NRC Resident Inspector - Big Rock Point

OCI086-0176-NL02
•

ENCLOSURE 4

Summary Sheets (3)
•

t Enclosure 4

YANKEE NUCLEAR POWER STATION

YANKEE ATOMIC ELECTRIC COMPANY

DOCKET NO. 50-029

FACILITY OPERATING LICENSE NO. DPR-3

Age of Reactor

Yankee is the oldest commercial operating reactor at 26 years old. (License

issued July 19, 1960, expiration date is November 4, 1997).

Size of Reactor

Yankee is about one-fifth thp. size of the average plant at 600 MW thermal,

175 MW electrical.

Number of customers in rate base

Net increase in Kwh cost for each customer directly related to the annual

fee assessed.

Yankee was formed for the exclusive purpose of constructing and operating New

England's first nuclear plant. Yankee has no retail customers; the energy

production is sold to the 10 New England utilities that own Yankee. The

annual fee will increase costs per Kilowatt hour by approximately 1 mill,

which is about six times greater than the increase that will be experienced by

more recent vintage plants.

Other relevant matters

Smaller plants are more sensitive to increasing costs, as evidenced by the

relatively high operating and maintenance costs even with good plant capacity factors. Such sensitivity has been acknowledged in other regulatory

contexts, such as the insurance rule and backfitting.

SALP ratings have been consistently high, thus, special inspections and

reviews of operating experience costs are lower.

Yankee poses less of a potential hazard than most other plants because of its

simpler design, diversity of heat removal systems, design margins, small core

size and the remote siting.

Because of the older design, many of the generic activities covered by the

rule are not applicable, such as thermal-hydraulics codes and earth science

research.
•

BIG ROCK POINT PLANT

CONSUMERS POWER COMPANY

DOCKET NO. 50-155

FACILITY OPERATING LICENSE NO. DPR-6

Age of Reactor

Big Rock Point is the oldest operating General Electric boiling water reactor

and one of the oldest commercial operating reactors at 22 years old. (License

issued May 1, 1964, expiration date is May 31, 2000).

Size of Reactor

Big Rock Point is the second smallest commercial operating plant with an output

of 69 MW electrical. This output is less than one-tenth the size of the

average modern plant.

Number of customers in the Big Rock Point rate base

20,600 at 85% Capacity Factor.

Net increase in KWh cost for each customer directly related to the annual

fee assessed

The annual fee will increase costs per kilowatt hour by approximately 2.5

mills, which is about 12 times greater than the increase that will be

experienced by more recent vintage plants.

Other relevant matters

Smaller plants are more sensitive to increasing costs, as evidenced by the

relatively high operating and maintenance costs even wi'th good plant capacity

factors. Even without increased license fees, recent industry analyses have

shown Big Rock Point's operating costs on a kilowatt-hour basis to be among

the highest in the industry.

Because of the older design, many of the generic activities covered by the

rule are not applicable, such as thermal-hydraulics codes and earth science

research.

Big Rock Point's small size and rural location is less of a potential hazard

than other plants because of its simpler design, design margins, small core

size, and the remote siting.

SALP ratings have been above average over the last several years.

Current electric rates do not reflect the new fee. A new rate case with the

Michigan Public Service Commission would have to be undertaken. The current

state regulatory climate is volatile due in part to Consumers Power Company's

recent financial problems.
------------------------- - ..

'.

LA CROSSE BOILING WATER REACTOR

DAIRYLAND POWER COOPERATIVE

DOCKET NO. 50-409

PROVISIONAL OPERATING LICENSE NO. DPR-45

Age of Reactor

La Crosse Boiling Water Reactor (LACBWR) is one of the four oldest commercial

operating reactors subject to the provisions of Part 171. The unit began

commercial operation in November 1969.

Size of Reactor

LACBWR is the smallest commercial nuclear power unit in the U.S. Its net

generating capacity is 50 MWe.

Number of Customers in Rate Base

Dairyland Power Cooperative (DPC), owner and operator (licensee) is a generation and transmission cooperative whose 29 distribution cooperative ~ovides service

to 170,000 customers in the DPC region. This customer base is considerably less

than that of other nuclear utilities, and is primarily of a rural nature.

Net Increase in KWh Cost

LACBWR currently has the highest unit power cost of any base load plant in the

DPC system. The annual fee required by Part 171 will increase the cost of

production by approximately 3 mills per KWh. The increase would be 15-20 times

greater for La Crosse than the increase that will be experienced at other (larger)

reactors.

Other Relevant Matters

LACBWR was constructed for the AEC to demonstrate the economic feasibility of

small nuclear power generating plants. At the urging of the AEC, DPC took

ownership of LACBWR and assumed operational responsibility under a licensing

agreement with AEC. The unit provides diversification to avoid complete dependency by DPC on coal. The economics are such that unless substantial

relief from the fee required by Part 171 is provided, DPC could be forced to

become entirely dependent on coal.

The sensitivity of small plants to increasing operational costs has historically been recognized, in that most if not all other fees imposed by regulatory

agencies, other government entities and private trades associations and industry

groups to administer their programs and recover costs are based upon generating

capacities of the plants.

As a very small nuclear unit, LACBWR poses less of a potential hazard than

other nuclear units because of its small core size, simpler design, and overdesigned safety margins, and thus has historically required less requlatory

attention than larger nuclear units.
"

•

ENCLOSURE 5

Computation of Proposed Adjusted Annual Fee
"

---------------------,--

•

Enclosure 5

COMPUTATION OF PROPOSED ADJUSTED ANNUAL FEE TO BE , ASSESSED USING THE AVERAGE OF TWO METHODS SHOWN BELOwlJ

La Crosse Big Rock Point Yankee Rowe

Methods Used to Determine

Adjusted Fee:

l. Thermal Megawatt 165 ~lWt 240 MWt 600 MWt

Rating Ratio 2671 MWt 2671 MWt 2671 MWt

Plant/Average P1ant2/ $58,000 $84,000 $211,000

2. Comparable impact of $55,000 $78,000 $156,000

Annual Fee on Plant

Kilowatt hour costs3/

3. Proposed Adjusted Annual $56,000 $81 ,000 $183,000

Fee - Average of methods

1 and 2

(% of Unadjusted Annual Fee) (6%) (9%) (19%) ..

Other Items For Comparison:

Increase in mill ratei/ 3 mi 11 s 2.5 mi 11 s 1 mi 11

per KWh per K\;h per KWh

Remaining years of 16/40 16/40 14/40

operation 40% 40% 35%

Licensee suggested fee not to exceed not to exceed not to exceed

$55,000 $27,000 $50,000

lIonce the determination is made that a partial exemption, in the form of an adjusted fee, is appropriate and after applying the factors in 10 CFR 171.11, several possible

methods may be used to determine the adjusted fee either singly or in combination.

Using these two methods, the resultant dollar amounts were averaged to arrive at the

adjusted annual fee for each plant. The adjusted fee under Part 171 is collected in

addition to fees collected under 10 CFR 170.

2/Under this method, the adjusted fee is determined by multiplying the unadjusted - annual fee ($940,000) by the thermal megawatt rating of the plant divided by

the average thermal megawatt rating of the 101 licensed plants (2671 Mwt).

3/Under this method, the unadjusted annual fee ($940,000) is adjusted such that

- the incremental kilowatt-hour costs for the plant are similar to the incremental

costs for larger modern plants. Incremental kilowatt-hour costs for each of

the three plants are presented at Enclosure 4.

lIThe amount of increase if the 10 CFR 171 annual fee of $950,000 were to be used.