NUCLEAR 

REGULATION 

NRC’s Oversight of 

Nuclear Power 

Reactors’ 

Decommissioning 

Funds Could Be 

Further Strengthened 

Report to the Honorable Edward J. 

Markey, House of Representatives 

April 2012 

GAO-12-258 

United States Government Accountability Office

GAO 
United States Government Accountability Office

Highlights of GAO-12-258, a report to the 

Honorable Edward J. Markey, House of 

Representatives 

April 2012 

NUCLEAR REGULATION

NRC’s Oversight of Nuclear Power Reactors’ 

Decommissioning Funds Could Be Further 

Strengthened

Why GAO Did This Study

About 20 percent of U.S. electricity is 

generated by 104 nuclear reactors. 

NRC, which regulates reactors, requires 

their owners (licensees) to reduce 

radioactive contamination after reactors 

permanently shut down. This process, 

called decommissioning, costs 

hundreds of millions of dollars per 

reactor. NRC requires licensees to

provide reasonable assurance that they 

will have adequate funds to

decommission, in part, by accumulating 

funds that are greater than or equal to 

NRC’s decommissioning funding 

formula. GAO and NRC’s OIG have 

identified concerns about NRC’s 

oversight of decommissioning funds. 

GAO was asked by Representative 

Markey in his former capacity as 

Chairman of the House Subcommittee 

on Energy and Environment to (1) 

describe how NRC ensures that 

licensees provide reasonable 

assurance of adequate 

decommissioning funds and (2) identify 

any improvements or weaknesses in 

NRC’s oversight of this area. GAO 

analyzed NRC’s formula and reviews of 

licensee information and interviewed 

NRC officials, licensees, and others. 

What GAO Recommends

GAO recommends, among other 

things, that NRC define what it means 

by the “bulk” of the funds needed for 

decommissioning and consider 

reviewing a sample of licensees’ 

investments to determine if they

comply with standards. NRC agreed to 

consider reviewing a sample of 

investments, but disagreed that

defining bulk is needed because of the 

comprehensiveness of NRC’s 

regulatory system. GAO continues to 

believe that this definition is needed.

What GAO Found

The Nuclear Regulatory Commission (NRC) periodically reviews licensees’ 

decommissioning funds and related licensee data to determine if licensees have 

provided reasonable assurance that they will accumulate adequate funds for 

decommissioning. For example, licensees must submit estimates to NRC of 

decommissioning costs throughout the life of the reactor and submit fund status 

reports at least every 2 years while the reactor is operating. Licensees typically 

accumulate such funds over time through trust fund investments. The minimum 

amount of funds considered adequate is established by NRC’s decommissioning 

funding formula, which is based on information collected more than 30 years ago.

NRC has taken actions to strengthen its oversight of licensees’ decommissioning 

funds by (1) creating guidance and other documents related to criteria for 

reviewing licensees’ 2-year reports and by using its enforcement process when 

deficiencies are identified, (2) conducting reviews at licensee offices to verify that 

fund balances licensees reported in their 2-year reports match their year-end 

bank statements in response to a 2006 NRC Office of the Inspector General

(OIG) recommendation, (3) reevaluating the decommissioning funding formula to 

determine if it should be updated, and (4) improving decommissioning planning. 

However, several weaknesses may limit NRC’s ability to ensure that licensees

have provided reasonable assurance. Specifically:

• NRC’s formula may not reliably estimate adequate decommissioning costs. 

According to NRC, the formula was intended to estimate the “bulk” of the 

decommissioning funds needed, but the term “bulk” is undefined, making it 

unclear how NRC can determine if the formula is performing as intended. In 

addition, GAO compared NRC’s formula estimates for 12 reactors with these 

reactors’ more detailed site-specific cost estimates calculated for the same 

period. GAO found that for 5 of the 12 reactors, the NRC formula captured 57 

to 76 percent of the costs reflected in each reactor’s site-specific estimate; 

the other 7 captured 84 to 103 percent.

• The results of more than one-third of the fund balance reviews that NRC staff 

performed from April 2008 to October 2010 to verify that the amounts in the 

2-year reports match year-end bank statements were not always clearly or 

consistently documented. As an example of inconsistent results, some 

reviewers provided general information, such as “no problem,” while others 

provided more detail about both the balance in the year-end bank statement 

and the 2-year report. As of October 2011, NRC did not have written 

procedures describing the steps that staff should take for conducting these 

reviews, which likely contributed to NRC staff not always documenting the 

results of the reviews clearly or consistently. 

• NRC has not reviewed licensees’ compliance with the investment standards 

the agency has set for decommissioning trust funds. These standards

specify, among other things, that fund investments may not be made in any 

reactor licensee or in a mutual fund in which 50 percent or more of the fund 

is invested in the nuclear power industry. As a result, NRC cannot confirm 

that licensees are avoiding conditions described in the standards that may 

impair fund growth. Without awareness of the nature of licensees’ 

investments, NRC cannot determine whether it needs to take action to 

enforce the standards.

View GAO-12-258. For more information, 

contact Frank Rusco, 202-512-3841, 

ruscof@gao.gov. 
Page i GAO-12-258 Nuclear Regulation 

Letter 1 

Background 4

NRC Methods to Ensure That Licensees Provide Reasonable 

Assurance of Adequate Decommissioning Funds 6

NRC Has Strengthened Its Oversight of Decommissioning Funds, 

but Several Weaknesses Remain 10

Conclusions 18

Recommendations for Executive Action 19

Agency Comments and Our Evaluation 20

Appendix I Scope and Methodology 23 

Appendix II GAO Assessment of NRC’s Decommissioning Funding Formula 26 

Appendix III Comments from the Nuclear Regulatory Commission 33 

Appendix IV GAO Contact and Staff Acknowledgments 36

Tables 

Table 1: Comparison of NRC and Site-Specific Formula Estimates 

for Decommissioning Costs at 12 Operating Nuclear 

Reactors 14

Table 2: Comparison of NRC’s Decommissioning Funding Formula 

with Characteristics of a High-Quality Cost-Estimating 

Formula 26

Figure 

Figure 1: NRC Form Used to Collect Information during On-site 

Fund Balance Reviews 16

Contents 
Page ii GAO-12-258 Nuclear Regulation 

Abbreviations 

DECON immediate decontamination and dismantlement 

DFS decommissioning funding status 

FERC Federal Energy Regulatory Commission 

NRC Nuclear Regulatory Commission 

OIG Office of the Inspector General 

SAFSTOR safe storage 

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Page 1 GAO-12-258 Nuclear Regulation 

United States Government Accountability Office

Washington, DC 20548 

April 5, 2012 

The Honorable Edward J. Markey 

House of Representatives 

Dear Mr. Markey: 

About 20 percent of the nation’s electricity is generated by 104 nuclear 

reactors located at 65 power plants across the country. The Nuclear 

Regulatory Commission (NRC), which licenses and regulates reactors, 

requires that radioactive contamination be reduced to a level that allows 

NRC to terminate the reactor license and release the property for other 

use after a reactor shuts down permanently. This cleanup process—

known as decommissioning—costs hundreds of millions of dollars per 

reactor, and NRC is responsible for ensuring that reactor owners 

(licensees) provide reasonable assurance that they will have adequate 

funds to decommission their reactors.1

 According to NRC guidance, such 

assurance is meant to avoid funding shortfalls that could delay 

decommissioning and pose risks to public health and safety and the 

environment. NRC’s primary mission is to protect the public health, 

safety, and the environment from the effects of radiation from nuclear 

power plants and other facilities. 

NRC requires licensees to provide this assurance throughout the life of a 

reactor: from licensing, through its period of operations—which is usually 

40 years or longer2

—and through decommissioning, which NRC requires 

licensees to complete within 60 years after a reactor permanently shuts 

down unless additional time is necessary to protect public health and 

safety.3

 Licensees provide such assurance, in part, by accumulating an 

amount of funds that is greater than or equal to an amount determined by 

a decommissioning funding formula developed by NRC. NRC considers 

the formula estimates to be the minimum amount needed by licensees to 

 

1

In addition to the 104 operating reactors, 10 reactors have been fully decommissioned 

and 13 reactors are currently being decommissioned. 

2

NRC issues licenses for reactors to operate for up to 40 years and allows these licenses 

to be renewed for additional 20-year periods, depending on the outcome of safety and 

environmental reviews, among other things. 

3

10 C.F.R. § 50.82. 

 
 

Page 2 GAO-12-258 Nuclear Regulation 

decommission their reactors. Licensees are required to demonstrate that 

there is reasonable assurance that they will have adequate funds to 

decommission their reactors by the time they plan to shut down the 

reactors permanently. Licensees demonstrate that they are accumulating 

adequate funds by submitting decommissioning funding status (DFS) 

reports. The DFS reports, which licensees must submit to NRC at least 

every 2 years, include, among other things, the estimated amount of 

funds needed for decommissioning and the decommissioning funds 

accumulated to date as of the end of the previous calendar year. 

Developments since 2000 have called into question the strength of NRC’s 

oversight of decommissioning funding assurance and the likelihood that 

licensees will have adequate funds for decommissioning. Specifically, the 

NRC Office of the Inspector General (OIG) reported in 2000 that the NRC 

decommissioning funding formula may be outdated and, in a follow-up 

report in 2006, found that as a result there is increased vulnerability to 

decommissioning funding shortfalls and potential adverse impacts on the 

reliability of NRC’s assessment of licensee financial assurance and the 

amount of funds needed for decommissioning.4

 In December 2001, we 

reported, among other things, that NRC’s evaluation of licensees’ funding 

arrangements was not rigorous enough to ensure that decommissioning 

funds would be adequate and that a lack of information about the extent 

of radiological contamination at some power plants can increase the risk 

that licensees could incur unplanned cleanup expenses.5

 In October 

2003, we reported that NRC had not established criteria for taking action 

if it determines that a licensee is not accumulating adequate funds.6

 In 

addition, in its 2006 follow-up report, the NRC OIG found that NRC relies 

on licensees’ reports of decommissioning fund balances without verifying 

these balances. Furthermore, in NRC’s 2009 review of licensee DFS 

reports, the agency found that licensees for 27 out of 104 operating 

reactors had a combined shortfall of more than $2.4 billion in their 

 

4

NRC, Office of the Inspector General, Review of NRC’s Decommissioning Fund Program 

OIG/99A-16 (Rockville, MD: Feb. 1, 2000), and Follow-up Audit of the Nuclear Regulatory 

Commission’s Decommissioning Fund Program, OIG-06-A-07 (Rockville, MD: 

Feb. 6, 2006). 

5

GAO, Nuclear Regulation: NRC’s Assurances of Decommissioning Funding During Utility 

Restructuring Could Be Improved, GAO-02-48 (Washington, D.C.: Dec. 3, 2001). 

6

GAO, Nuclear Regulation: NRC Needs More Effective Analysis to Ensure Accumulation 

of Funds to Decommission Nuclear Power Plants, GAO-04-32 (Washington, D.C.: 

Oct. 30, 2003). 
 

Page 3 GAO-12-258 Nuclear Regulation 

decommissioning funds, in part, because of the financial market decline 

that began in 2007. In addition, NRC acknowledged in a 2011 

decommissioning funding workshop that licensees may face greater costs 

during decommissioning than accounted for under the NRC 

decommissioning funding formula. 

In this context, you asked us to follow up on our previous work on 

decommissioning funding assurance in your former capacity as Chairman 

of the House Subcommittee on Energy and Environment. Our objectives 

were to (1) describe how NRC ensures that licensees provide reasonable 

assurance of adequate decommissioning funds and (2) identify any 

improvements or weaknesses in NRC’s oversight of this area. 

To describe how NRC ensures that licensees provide reasonable 

assurance of adequate decommissioning funds, we reviewed 

decommissioning regulations and guidance and interviewed relevant 

NRC officials. To identify any improvements or weaknesses in NRC’s 

oversight of decommissioning funding assurance, we analyzed NRC’s 

decommissioning funding formula and the agency’s reviews of licensee 

DFS reports. As part of our analysis of NRC’s decommissioning funding 

formula, we compared NRC formula-generated cost estimates with 

licensee-generated site-specific cost estimates for 12 reactors for which 

we were able to obtain both estimates calculated in the same year. We 

also compared NRC’s formula and the process the agency used to create 

the formula with GAO’s cost-estimating guide, a compilation of costestimating best practices drawn from across industry and government.7

 In 

addition, we interviewed relevant officials to ensure our understanding of 

how the formula was developed and how it is used. As part of our 

analysis of NRC’s reviews of licensee DFS reports, we examined data 

from licensees’ 2011 DFS reports for operating reactors and currently 

decommissioning reactors, relevant NRC regulations and guidance, and 

reports by GAO and the NRC OIG on decommissioning funding 

assurance. We also visited nuclear power plants; interviewed NRC 

officials, licensees, and decommissioning fund stakeholders; and 

attended a decommissioning workshop to better understand issues 

related to the DFS reports and decommissioning in general. For our site 

 

7

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: Mar. 2, 2009). 
 

Page 4 GAO-12-258 Nuclear Regulation 

visits, we selected a nonprobability sample of five nuclear power plants.8

We selected these sites to include fully decommissioned, currently 

decommissioning, and operating reactors, among other things. We also 

interviewed NRC officials from the Office of Nuclear Reactor Regulation 

and the NRC OIG to better understand the agency’s oversight of 

decommissioning funds. A more detailed description of our scope and 

methodology is in appendix I. 

We conducted this performance audit from February 2011 to April 2012, 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

Decommissioning begins when a licensee has filed documentation with 

NRC to permanently shut down a reactor and the fuel has been removed. 

NRC requires decommissioning to be completed within 60 years after a 

reactor permanently shuts down unless additional time is necessary to 

protect public health and safety.9

 Licensees choose from two 

decommissioning methods: immediate decontamination and 

dismantlement (DECON) or safe storage (SAFSTOR).10 The DECON 

method calls for the licensee to remove the radioactively contaminated 

equipment, structures, and parts of the reactor for shipment to a low-level 

radioactive waste disposal site or for temporary storage. This process 

generally takes 5 or more years. Under the SAFSTOR method, the 

reactor is left for up to 60 years in a state that allows the radioactive 

components to decay while the reactor is maintained and monitored. 

Once radioactivity has decreased, the reactor is then dismantled in a way 

 

8

Because this was a nonprobability sample, we could not generalize the information 

collected from these visits to all reactors but were able to use the information to better 

understand issues related to data in the DFS reports and decommissioning issues in 

general. 

9

10 C.F.R. § 50.82. 

10A third method, known as ENTOMB, is recognized by NRC, but licensees have not 

requested this option. This method consists of encasing the radioactive material at the 

plant in long-lived material like concrete. 

Background 
 

Page 5 GAO-12-258 Nuclear Regulation 

similar to the DECON process. After all of the radioactive material has 

been removed, and NRC has terminated the reactor’s license, the site 

can be used for other purposes. Licensees can begin decommissioning a 

reactor while another reactor at the site is operating. Currently, 36 nuclear 

power plants have more than one reactor at the site, and six of those 

plants have one reactor that is in the process of decommissioning. 

In addition to decommissioning, licensees are also responsible for other 

postshutdown activities. These activities include the management of 

spent nuclear fuel—a type of high-level radioactive waste—until it can be 

transferred to the Department of Energy, which is responsible for 

providing permanent disposal.11 Site restoration is another such activity, 

which includes the cleanup of nonradiological contaminants, such as 

acids and heavy metals, to restore the power plant site to a condition that 

is safe for public use. However, these activities do not fall within the 

scope of NRC’s definition of decommissioning or under NRC’s 

decommissioning oversight authority, and licensees must pay for these 

costs with funds that are separate from their decommissioning funds. 

 

11The Nuclear Waste Policy Act of 1982, as amended, directs the Department of Energy 

to study Yucca Mountain, in Nevada, as the site for the disposal of spent nuclear fuel. The 

Department of Energy submitted a license application for the repository in June 2008 but 

in March 2010 moved to withdraw it. Without access to a permanent repository for this 

waste, licensees may need to store the fuel on-site. The costs for construction and 

demolition of on-site spent fuel storage facilities are not included in decommissioning. For 

additional information about Yucca Mountain, see: GAO, Commercial Nuclear Waste: 

Effects of a Termination of the Yucca Mountain Repository Program and Lessons

Learned, GAO-11-229 (Washington, D.C.: Apr. 8, 2011); DOE Nuclear Waste: Better 

Information Needed on Waste Storage at DOE Sites as a Result of Yucca Mountain 

Shutdown, GAO-11-230 (Washington, D.C.: Mar. 23, 2011); and Yucca Mountain: 

Information on Alternative Uses of the Site and Related Challenges, GAO-11-847

(Washington, D.C.: Sept. 16, 2011).
 

Page 6 GAO-12-258 Nuclear Regulation 

NRC periodically reviews licensees’ decommissioning funds and related 

licensee data to determine if licensees have provided reasonable 

assurance that they will accumulate adequate funds for decommissioning. 

According to NRC guidance, the amount of funds that is considered 

adequate is established by NRC’s decommissioning formula, which 

represents the bulk of the funds needed to decommission a specific 

reactor and is not an estimate of the actual cost.12 The formula estimates 

decommissioning costs by reactor type—pressurized water reactor or 

boiling water reactor—and the reactor’s capacity to generate electricity. 

The formula is based on two studies, published in 1978 and 1980, that 

provided information on the technology available at the time, safety 

considerations, and the probable costs for decommissioning the two 

types of reactors. NRC codified its decommissioning funding formula in 

1988.13 According to this regulation, the three cost factors identified in the 

formula—labor, energy, and low-level radioactive waste disposal14—are 

adjusted annually to reflect the effects of inflation. To estimate costs in 

current year dollars, the labor and energy cost factors are adjusted from 

the prior year using data from the U.S. Department of Labor’s Bureau of 

Labor Statistics, while the waste disposal cost factor is adjusted based on 

actual disposal cost data published by NRC. 

As part of NRC’s oversight of decommissioning funds, the agency 

requires licensees to provide decommissioning cost estimates and other 

information to NRC throughout the life cycle of a nuclear reactor: 

 Initial decommissioning estimate and financial method. Beginning in 

July 1990, NRC has required licensees to report that they had (1) 

estimated the amount needed for decommissioning, typically using 

NRC’s decommissioning funding formula, and (2) developed a plan 

for accumulating these funds by the projected time of permanent 

shutdown.15 Since that date, license applicants have been required to 

 

12NRC, Assuring the Availability of Funds for Decommissioning Nuclear Reactors, 

Regulatory Guide 1.159, Revision 2 (Rockville, MD: October 2011). 

1310 C.F.R. § 50.75. 

14NRC’s decommissioning funding formula accounts only for the waste generated 

specifically during decommissioning and not for waste generated during reactor 

operations. 

1510 C.F.R. § 50.33(k). 

NRC Methods to 

Ensure That Licensees 

Provide Reasonable 

Assurance of Adequate 

Decommissioning 

Funds 
 

Page 7 GAO-12-258 Nuclear Regulation 

submit this information as part of their license application.16 NRC 

regulations allow licensees to use one or more methods as part of 

their plan to accumulate funds, such as prepayment of the entire 

estimated decommissioning amount, a trust fund that is separate from 

other licensee assets and accrues earnings based on investments, 

parent company guarantees, or letters of credit. The most common 

financial method is a trust fund that is allowed to grow over the life of 

the reactor and during the decommissioning process. Once licensees 

contribute funds to a decommissioning trust fund, funds generally 

cannot be withdrawn for other purposes. 

 DFS reports. NRC requires licensees to submit DFS reports at least 

every 2 years while a reactor is operating, and every year once a 

reactor is within 5 years of permanent shutdown through license 

termination.17 Licensees may report the amount of funds estimated to 

be needed for decommissioning using the decommissioning funding 

formula or a licensee-generated site-specific cost estimate if it is 

greater than the formula amount. According to NRC guidance, NRC 

staff compare two things in reviewing these reports: (1) the licensee’s 

accumulated funds plus amounts provided by any other methods in 

the licensee’s plans to accumulate funds as described above and (2) 

the amount estimated to be needed for decommissioning, which is the 

greater of an NRC-generated formula estimate or the licenseegenerated site specific cost estimate.18 If the licensee’s balance is 

greater than or equal to the estimated amount needed for 

decommissioning, an NRC reviewer makes a determination of 

reasonable assurance. If the balance is less than the estimated 

amount needed for decommissioning, the reviewer projects the 

licensee’s accumulated funds through the decommissioning period to 

account for any anticipated growth. If the projected amount plus 

amounts provided by other methods is less than the estimated 

amount needed for decommissioning and a second reviewer verifies 

this finding, then NRC may request additional information from the 

 

16Nearly all of the 104 operating reactors were licensed before July 1990. 

17NRC required licensees to submit their first DFS reports by March 1999. Licensees must 

also submit DFS reports every year for reactors that are involved in mergers or 

acquisitions or that have permanently shut down before the end of their licensed life. 

18NRC, Procedures for NRC’s Independent Analysis of Decommissioning Funding 

Assurance for Operating Nuclear Power Reactors, LIC-205, Revision 4 (Rockville, MD: 

December 27, 2010). 
 

Page 8 GAO-12-258 Nuclear Regulation 

licensee and repeat the process. According to agency guidance, 

licensees are expected to make adjustments to correct shortfalls in 2 

or 5 years,19 depending on the type of licensee, from when the DFS 

report in question is submitted.20 An NRC official told us that the 

agency determines on a case-by-case basis if additional actions 

should be taken to assure the agency that the licensee will have 

adequate decommissioning funds when needed. 

 Preliminary decommissioning cost estimate. About 5 years prior to a 

reactor’s projected permanent shutdown, NRC requires licensees to 

submit a preliminary decommissioning cost estimate that is more 

detailed than NRC’s decommissioning funding formula.21 This cost 

estimate provides NRC with an up-to-date estimate of expected 

decommissioning costs and an assessment of the major factors that 

could affect such costs, as well as the licensee’s plans for adjusting 

decommissioning funding levels if necessary. Major factors include, 

but are not limited to, the potential for contamination of the site and 

the decommissioning method the licensee plans to use. NRC 

guidance calls for staff to compare the preliminary cost estimate with 

the decommissioning cost estimate generated by the NRC formula.22

The licensee’s preliminary cost estimate is deemed acceptable if it is 

equal to or greater than the formula amount. If it is less than the 

formula amount, NRC informs the licensee that additional information 

is needed to assure the agency that the licensee will accumulate 

adequate funds for decommissioning. 

 Site-specific cost estimate. NRC requires licensees to submit a sitespecific cost estimate prior to or within 2 years following permanent 

shutdown;23 licensees may also develop such estimates earlier at 

their discretion. The intent of this cost estimate is to provide NRC with 

a more detailed assessment that incorporates the cost impacts of site-

 

19NRC, Regulatory Guide 1.159. 

20Licensees that own non-rate-regulated reactors are expected to correct shortfalls in 2 

years, and licensees that own rate-regulated reactors, called public utility licensees, are 

expected to do so in 5 years. 

2110 C.F.R. § 50.75(f)(3). 

22NRC, Standard Review Plan for Decommissioning Cost Estimates for Nuclear Power 

Reactors, NUREG-1713 (Rockville, MD: December 2004). 

2310 C.F.R. § 50.82(a)(4)(i). 
 

Page 9 GAO-12-258 Nuclear Regulation 

specific factors. Site-specific factors include, but are not limited to, an 

estimate of the volume of radioactive waste and a summary of costs 

estimated for each major decommissioning activity. According to NRC 

guidance, the site-specific estimate may be significantly greater than 

the minimum amount based on the NRC formula.24 If the site-specific 

estimate and formula amount differ, NRC requires licensees to 

provide information on the basis for the difference. If NRC determines 

that the information provided is insufficient, an agency official told us 

that the agency decides, on a case-by-case basis, how many 

information requests it will make and whether it will consider taking 

additional actions to assure the agency that the licensee will have 

adequate decommissioning funds when needed. 

 License termination plan with updated site-specific cost estimate. 

Toward the end of decommissioning and at least 2 years before 

termination of the reactor’s license, NRC requires licensees to submit 

a license termination plan.25 In this plan, licensees must estimate the 

remaining costs of decommissioning. NRC guidance calls for agency 

staff to review this report to independently verify that a reactor can be 

decommissioned safely and the license terminated.26 As part of this 

review, staff are to compare the estimated remaining costs of 

decommissioning with the licensee’s funds available for 

decommissioning. If the available decommissioning funds are less 

than the estimated remaining costs, the plan must indicate the means 

the licensee will use for ensuring adequate funds to complete 

decommissioning. 

Licensees who choose to invest their decommissioning trust funds are 

generally required to do so in accordance with standards set by NRC. 

NRC defers to the Federal Energy Regulatory Commission (FERC) for 

investment standards for reactors that are owned by public utilities, which 

constitute about half of the 104 operating reactors.27 FERC requires the 

 

24NUREG-1713. 

2510 C.F.R. § 50.82(a)(9)(i). 

26NRC, Standard Review Plan for Evaluating Nuclear Power License Termination Plans, 

NUREG-1700 (Rockville, MD: April 2003). 

27FERC regulates the interstate transmission of electricity. The agency does not regulate 

reactors, but does oversee public utility financial reporting in accordance with a uniform 

system of accounts. See 18 C.F.R. § 101. 
 

Page 10 GAO-12-258 Nuclear Regulation 

utilities it regulates to invest their decommissioning funds in accordance 

with several standards.28 These standards state, among other things, that 

the fund must be independent of the public utility, its subsidiaries, 

affiliates, or associates; the public utility may not serve as its own 

investment fund manager; and the investment manager must exercise the 

standard of care that a prudent investor would use in the same 

circumstances. Public utilities are required to submit annual 

decommissioning fund statements to FERC that summarize the public 

utility decommissioning fund balances and investments, among other 

things. 

For reactors that are not owned by public utilities, NRC regulations set 

investment standards specifying, for example, that the funds must be held 

by an independent trustee who adheres to a standard of care required by 

state or federal law or, in the absence of any such standard, to a prudent 

investor standard as defined by FERC; investments may not be made in 

any reactor licensee or in a mutual fund in which 50 percent or more of 

the fund is invested in the nuclear power industry; and no more than 10 

percent of the funds can be indirectly invested in securities of any entity 

owning or operating a reactor. 

In response, in part, to GAO’s and the NRC OIG’s recommendations, 

NRC has taken actions to strengthen its oversight of licensees’ 

decommissioning funds, including creating guidance for reviewing DFS 

reports, reevaluating the decommissioning funding formula, and requiring 

licensees currently decommissioning their reactors to report to NRC the 

actual costs of decommissioning. However, remaining weaknesses in 

NRC’s oversight may limit the agency’s ability to ensure that licensees 

have provided reasonable assurance that they will have adequate funds 

to decommission their reactors. 

NRC has taken steps to identify and resolve decommissioning funding 

shortfalls by creating guidance and other documentation related to criteria 

for reviewing DFS reports and by using its enforcement process when 

 

2818 C.F.R. §§ 35.32, 35.33. 

NRC Has 

Strengthened Its 

Oversight of 

Decommissioning 

Funds, but Several 

Weaknesses Remain 

NRC Has Taken Actions to 

Strengthen Its Oversight 
 

Page 11 GAO-12-258 Nuclear Regulation 

deficiencies are identified.29 In 2003, we recommended that NRC 

establish criteria for taking action when it determines that a licensee is not 

accumulating sufficient funds. Since then, NRC has developed guidance 

for reviewing DFS reports that includes criteria for when staff should 

request additional information from licensees to address shortfalls.30 NRC 

has updated this guidance several times based on lessons learned from 

its DFS report reviews. NRC also documented the approach staff are to 

use to request additional information from licensees when the agency 

identified decommissioning shortfalls in 2009 through its DFS reviews. In 

addition, NRC has used its enforcement process in three cases to 

address DFS reporting deficiencies since 2009. Agency officials said that 

such actions were effective in getting the licensees to resolve the issues 

identified, in part because NRC’s enforcement process provides publicly 

available information in the event that an apparent violation is identified. 

In addition, in response to an NRC OIG recommendation, NRC has 

conducted reviews at licensee offices to verify that the amounts licensees 

reported to NRC in DFS reports as fund balances match the amounts 

stated in licensees’ year-end bank statements. The NRC OIG 

recommended in 2006 that the agency require verification of 

decommissioning fund balances in order to better ensure that licensees 

are providing reasonable assurance that they will have the necessary 

funds. NRC documents indicate that from April 2008 through October 

2010, NRC officials performed 136 reviews at 35 locations. NRC officials 

told us that during these reviews they verified that the decommissioning 

fund balances reported in the bank statements matched the balances 

reported in the DFS reports, with one exception,31 and that they did not 

find any cases where a licensee overreported its fund balance. 

Furthermore, in response to an NRC OIG recommendation, NRC began 

reevaluating its decommissioning funding formula in 2009 to determine if it 

should be updated because of changes in decommissioning technology 

and the cost of management and disposal of low-level radioactive waste. 

 

29According to NRC officials, the enforcement process entails a review of the nature of the 

deficiency by NRC staff, requests for additional information to address the deficiency, and 

a final determination if an enforcement action is warranted. 

30NRC, LIC-205, Revision 4. 

31NRC officials told us that during one of these reviews, they found that one licensee 

underreported its decommissioning trust fund balance. 
 

Page 12 GAO-12-258 Nuclear Regulation 

The NRC OIG recommended in 2000 that the agency consider reassessing 

the reasonableness of the formula, in part because it was outdated, and 

reiterated this recommendation in 2006. NRC has not updated its 

decommissioning funding formula since it was codified in 1988. NRC 

officials told us that they plan to make a recommendation to agency 

management in late 2012 about whether an update is warranted based on 

its evaluation. In commenting on a draft of this report, NRC officials told us 

that, as part of evaluating the formula, they expect to estimate the lower 

and upper bounds of the cost of decommissioning based on licenseegenerated cost estimates and historical decommissioning costs—thereby 

creating a range of expected decommissioning costs—and then see how 

an updated formula fits into this range. 

Moreover, NRC amended its decommissioning funding regulations in 

June 2011 to improve decommissioning planning and reduce the 

likelihood that any currently operating power plant will become a legacy 

site—a facility with a licensee that cannot complete complex 

decommissioning work for technical or financial reasons.32 The regulatory 

changes as a result of the amendments will, among other things, require 

licensees of the reactors currently undergoing decommissioning to report 

to NRC the actual costs being incurred during decommissioning, 

specifically, to report annual decommissioning expenditures.33 NRC wants 

these data to assess the adequacy of decommissioning funding after 

permanent shutdown. These data could be used to determine if the 

agency’s decommissioning formula estimates the bulk of the funds that 

licensees will likely need to decommission their reactors. The 

amendments become effective in December 2012, and licensee reporting 

of these data is required by March 31, 2013. 

 

32Decommissioning Planning, 76 Fed. Reg. 35512 (June 17, 2011). 

33The amendments also clarified NRC’s existing requirements that licensees operate in a 

manner that minimizes the introduction of radioactivity into the site and made some 

regulatory changes, including requiring licensees to monitor and record radiological 

contamination, including subsurface soil and groundwater, if there is a history of spills or 

leaks to the subsurface at the site. For additional information about subsurface leaks at 

nuclear power plants, see GAO, Nuclear Regulatory Commission: Oversight of 

Underground Piping Systems Commensurate with Risk, but Proactive Measures Could 

Help Address Future Leaks, GAO-11-563 (Washington, D.C.: June 3, 2011). 
 

Page 13 GAO-12-258 Nuclear Regulation 

Even with the actions NRC took to strengthen its oversight, the agency’s 

ability to ensure that licensees provide reasonable assurance that they will 

have adequate funds at the time of decommissioning may be limited by 

several remaining weaknesses in its oversight. Specifically, NRC has not (1) 

clearly defined what the agency means by the “bulk” of the funds licensees 

will likely need to decommission and the decommissioning funding formula 

may not reliably estimate adequate decommissioning costs, (2) always 

clearly or consistently documented its fund balance review results and may 

discontinue these reviews, and (3) reviewed licensees’ compliance with 

investment standards.

NRC has not defined what it means by the bulk of the funds licensees will 

likely need to decommission a reactor. When we compared 

decommissioning funding formula estimates provided by NRC for 12 

reactors with licensees’ site-specific cost estimates calculated for the 

same reactors, we found that the NRC formula captured from 57 to 103 

percent of the costs reflected in each reactor’s site-specific estimate, with 

5 of the 12 capturing 76 percent or less (see table 1). Even though the 

formula estimates captured more than 50 percent of the licensee’s sitespecific cost estimates for each of the 12 reactors, the wide range of 

differences between formula and site-specific cost estimates raises a 

question about whether or not the formula can reasonably be said to have 

captured the bulk of decommissioning costs. 

In addition, for 8 of the 12 reactors, the licensees calculated their sitespecific cost estimates less than 7 years before the license was originally 

due to expire, and their estimates were as much as $362 million more 

than the formula estimates at that time.34 It is true that NRC expects that 

its formula estimate may be less than licensees’ site-specific cost 

estimates. However, licensees whose formula estimate is significantly 

less than the site-specific estimate when calculated near the end of their 

reactors’ operating lives would have fewer years to accumulate a 

significant amount of decommissioning funds. Overall, 9 of the 12 

reactors have had their licenses renewed, which gives these licensees 

more time to accumulate the decommissioning funds they will likely need. 

However, without changes to the NRC formula, it is possible that the NRC 

 

34Similarly, the NRC OIG compared the agency’s decommissioning funding formula 

estimates for 34 reactors with site-specific cost estimates and found that the site-specific 

estimates exceeded the formula estimates by as much as $312 million. 

Several Weaknesses May 

Limit the Adequacy of 

NRC’s Oversight of 

Decommissioning Funds 

NRC Has Not Defined the 

“Bulk” of Costs Needed, and 

the Agency’s Decommissioning 

Funding Formula May Not 

Reliably Estimate Adequate 

Costs 
 

Page 14 GAO-12-258 Nuclear Regulation 

formula estimates could be significantly less than the licensees’ sitespecific cost estimates several years from their new shutdown date. 

Table 1: Comparison of NRC and Site-Specific Formula Estimates for Decommissioning Costs at 12 Operating Nuclear Reactors 

Dollars in millions 

Reactor 

Year of 

original 

license 

expiration 

License renewal 

statusa

NRC 

decommissioning 

funding formula 

estimate for 

decommissioning 

costs 

Year of NRC 

funding 

formula 

estimate

Site-specific cost 

estimate for 

decommissioning 

costsb 

Year of 

site 

specific 

cost 

estimate

Percentage of 

site-specific 

cost estimate 

represented by 

NRC estimate

1 2015 Decision pending on 

license renewal with 

2035 expiration 

$474.22 2010 $836.45 2010 57

2 2017 Decision pending on 

license renewal with 

2037 expiration 

447.33 2010 525.48 2010 85

3 2026 — 616.28 2010 710.54 2010 87

4 2014 License renewed 

with 2034 expiration 

345.50 2008 537.98 2008 64

5 2013 License renewed 

with 2033 expiration 

345.50 2008 487.99 2008 71

6 2014 License renewed 

with 2034 expiration 

384.74 2008 504.12 2008 76

7 2026 License renewed 

with 2046 expiration 

554.16 2008 725.26 2008 76

8 2014 License renewed 

with 2034 expiration 

503.37 2008 499.00 2008 101

9 2014 License renewed 

with 2034 expiration 

520.90 2008 506.08 2008 103

10 2012 License renewed 

with 2032 expiration 

478.16 2006 468.84 2006 102

11 2020 License renewed 

with 2040 expiration 

354.70 2002 420.14 2002 84

12 2016 License renewed 

with 2036 expiration 

$354.70 2002 $390.13 2002 91

Source: GAO analysis of NRC and licensee data. 

a

Licensees for 11 of the 12 reactors submitted applications to NRC to renew the reactor license and 

continue operating beyond the original license expiration date. 

b

Site-specific cost estimates do not include costs not covered by NRC’s decommissioning funding 

formula. 

Furthermore, NRC’s decommissioning funding formula may not provide a 

reliable estimate of adequate decommissioning costs for several reasons. 

We compared NRC’s formula and the process the agency used to create 
 

Page 15 GAO-12-258 Nuclear Regulation 

the formula with GAO’s cost-estimating guide, which compiles costestimating best practices drawn from across industry and government 

and, in doing so, identified several issues that raise additional questions 

about the quality of the formula.35 For example, NRC’s decommissioning 

funding formula substantially met two characteristics of a high-quality 

formula, but only partially met the other two. Specifically, NRC’s 

supporting documentation for the formula was not thorough enough for us 

to understand and replicate its derivation. According to our costestimating guide, without thorough documentation, NRC cannot reliably 

explain its rationale for the cost elements that support the formula and 

formula-generated cost estimates. In addition, NRC did not perform a risk 

analysis on the formula, which would convey a level of confidence in the 

likelihood of the formula’s ability to estimate the most likely minimum cost 

of decommissioning. Without performing a risk analysis on the formula, 

NRC cannot be assured of the accuracy of the formula because 

management may not be able to determine a defensible level of 

contingency reserves that is necessary to cover increased costs such as 

underestimated labor and waste disposal costs. See appendix II for our 

detailed assessment of the formula in comparison with the four 

characteristics identified in our cost-estimating guide. 

The results of more than one-third of the 136 fund balance reviews that 

NRC staff performed from April 2008 to October 2010 to verify the 

amounts in DFS reports were not always clearly or consistently 

documented. Specifically, the results of 49 reviews were not clear 

because the reviewer either did not check “yes” or “no” or checked both 

boxes on the one-page form NRC staff used to collect information when 

indicating whether the original licensee documents were verified to show 

that the amounts in year-end bank statements matched the amounts in 

DFS reports (see fig. 1). In other cases, the results were not consistently 

documented, with some reviewers providing general information on their 

forms, such as writing “no problem,” while others provided more detailed 

information, such as providing both the balance in the year-end bank 

statement and in the DFS report. 

 

35According to GAO’s cost-estimating guide, a high-quality cost-estimating formula is 

credible, well documented, comprehensive, and accurate. 

NRC Fund Balance Review 

Results Were Not Always 

Clearly or Consistently 

Documented, and NRC May 

Discontinue These Reviews 
 

Page 16 GAO-12-258 Nuclear Regulation 

Figure 1: NRC Form Used to Collect Information during On-site Fund Balance 

Reviews 
 

Page 17 GAO-12-258 Nuclear Regulation 

As of October 2011, NRC did not have written procedures describing the 

steps that staff should take in analyzing licensee documentation and 

documenting review results on the one-page form, which likely contributed 

to NRC staff not always documenting the results of the reviews clearly or 

consistently. We have previously reported that written procedures help 

ensure consistency within an organization.36 Under Standards for Internal 

Control in the Federal Government, federal agencies are to clearly 

document internal control—the policies, procedures, techniques, and 

mechanisms that enforce management’s directives—and the 

documentation is to be readily available for examination.37

In addition, NRC officials told us that management was considering 

recommending that the agency discontinue the reviews. If NRC 

discontinues these reviews, the agency will no longer have a mechanism 

for verifying the accuracy of licensee fund balances in their DFS reports 

and will no longer address the 2006 NRC OIG recommendation to verify 

licensee balances to better ensure that licensees are providing 

reasonable assurance that they will have the necessary funds for 

decommissioning. NRC officials told us that the reasons they may 

discontinue the reviews are a lack of findings and budget constraints. 

However, according to our analysis of the results of the 136 reviews, it is 

unclear whether NRC’s conclusion of a lack of findings is accurate. In 

addition, an NRC official told us that these reviews could be incorporated 

into the DFS review process, thereby eliminating the cost of travel to a 

licensee’s office, potentially mitigating budget constraint concerns. 

NRC has not reviewed licensees’ compliance with the investment 

standards the agency has set for decommissioning funds. NRC does not 

require licensees to file statements showing how their decommissioning 

funds are invested, and NRC’s DFS review process does not include an 

evaluation to ensure that licensees comply with these investment 

standards. As a result, NRC cannot confirm that licensees are avoiding 

conditions described in the standards, such as investing in other 

licensees. According to two stakeholders involved in decommissioning 

fund management and investment consulting, a small but growing 

 

36GAO, Bureau of Prisons: Written Policies on Lateral Transfers and Assessment of 

Temporary Assignments Needed, GAO-09-141 (Washington, D.C.: Feb. 25, 2009). 

37GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). 

NRC Has Not Reviewed 

Licensees’ Compliance with 

Investment Standards 
 

Page 18 GAO-12-258 Nuclear Regulation 

number of licensees are considering investing in hedge funds as a way of 

improving returns on their investments and managing market volatility. As 

we have stated in the past, hedge funds pose a number of risks and 

challenges beyond those posed by traditional investments.38 NRC officials 

told us that their staff resources are limited and that they lack the financial 

expertise to evaluate compliance with investment restrictions. For public 

utility licensees, NRC officials stated that they coordinate informally with 

FERC in cases where potential funding shortfalls or problems arise. 

FERC officials told us that they review licensee compliance with the 

standards only if a problem with a licensee’s decommissioning trust fund 

is brought to the agency’s attention, which would mean that most 

licensees’ compliance with the standards would not be reviewed. Without 

awareness of the nature of licensees’ investments, NRC cannot 

determine whether it needs to take action to enforce the standards. 

NRC ensures that licensees have provided reasonable assurance that 

they will have adequate funds to decommission their reactors by 

periodically reviewing licensees’ decommissioning funds and related 

licensee data. Consistent with its mission to protect the public and 

environment from the effects of radiation, NRC has taken steps to 

strengthen its oversight of licensees’ decommissioning trust funds. NRC, 

for example, amended its decommissioning funding regulations to 

improve decommissioning planning and reduce the likelihood that any 

currently operating power plant will become a legacy site. In addition, 

NRC began reevaluating its decommissioning funding formula in 2009 to 

determine if it should be updated because of changes in 

decommissioning technology and the cost and management of low-level 

radioactive waste. NRC officials plan to make a recommendation to 

management in late 2012 about whether an update is warranted based 

on this evaluation. 

However, weaknesses remain in NRC’s oversight of decommissioning 

funds that could leave the public and environment vulnerable. For 

example, NRC has not defined what it means by the bulk of funds that the 

decommissioning funding formula is supposed to estimate, and we found 

a wide-range of differences between NRC’s decommissioning funding 

 

38GAO, Defined Benefit Pension Plans: Plans Face Challenges When Investing in Hedge 

Funds and Private Equity, GAO-11-901SP (Washington, D.C.; Aug. 31, 2011). 

Conclusions 
 

Page 19 GAO-12-258 Nuclear Regulation 

formula estimates and some licensees’ site-specific cost estimates. This 

raises questions about the reliability of the formula as an estimate of the 

minimum amount needed for decommissioning. In addition, the agency 

did not have thorough documentation that would enable us to understand 

and replicate the derivation of its formula and did not perform a risk 

analysis on the formula, raising questions about the quality of the cost 

estimates used to create the decommissioning formula. Without a 

definition of what NRC means by the bulk of decommissioning costs and 

without high-quality estimates of these costs, it is unclear how NRC can 

determine if the formula is performing as intended or that licensees will 

have adequate decommissioning funds when necessary. In addition, 

NRC does not have written procedures describing the steps that staff 

should take in their reviews analyzing licensee documentation and 

verifying that the amounts licensees report to NRC in their DFS reports 

match the amounts reported on their year-end bank statements, a fact 

that likely contributed to the results of the reviews not always being 

clearly or consistently documented. However, NRC may discontinue 

these reviews, which the agency undertook in response to a 2006 NRC 

OIG recommendation. Without conducting these reviews, NRC will not 

have an accountability mechanism for ensuring that the amounts reported 

in DFS reports match the amounts shown in licensees’ year-end bank 

statements. Finally, NRC has not reviewed licensees’ compliance with the 

investment standards it has set for decommissioning funds. Therefore, 

the agency cannot confirm that licensees are avoiding conditions 

described in the standards that could put decommissioning funds at risk. 

Without awareness of the nature of licensees’ investments, NRC cannot 

determine whether it needs to take action to enforce decommissioning 

investment standards. 

To further strengthen NRC’s oversight of decommissioning funding 

assurance, we recommend that the NRC Commissioners take the 

following five actions: 

 Ensure reliability as part of the agency’s process of reevaluating its 

decommissioning funding formula, by 

 defining what the agency means by the “bulk” of the funds that 

licensees will likely need to decommission their reactors and 

 using the cost-estimating characteristics as a guide for a highquality cost-estimating formula in the event that NRC chooses to 

update the formula. 

Recommendations for 

Executive Action 
 

Page 20 GAO-12-258 Nuclear Regulation 

 Better ensure that licensees are providing reasonable assurance that 

they will have the necessary funds and improve the consistency of 

information the agency collects by 

 documenting procedures describing the steps that staff should 

take in their reviews analyzing licensee documentation and 

verifying that the amounts licensees report to NRC in their DFS 

reports match the balances on their year-end bank statements 

and 

 continuing these reviews of fund balances in a way that is most 

efficient and effective for the agency. 

 Consider reviewing a sample of licensees’ investments to determine if 

licensees are complying with decommissioning investment standards 

and determine whether action should be taken to enforce these 

standards. 

We provided a draft of this report to NRC for review and comment. NRC 

provided written comments, which are presented in appendix III, and 

technical comments, which we incorporated in the report as appropriate. 

NRC agreed with three of our recommendations, disagreed with one 

recommendation, and partially agreed with another recommendation. 

Specifically, NRC agreed with our recommendations that the agency (1) 

document procedures describing the steps that staff should take in their 

reviews analyzing licensee documentation and verifying that the amounts 

licensees report to NRC in their DFS reports match the balances on their 

year-end bank statements; (2) continue these reviews of fund balances in 

a way that is most efficient and effective for the agency; and (3) consider 

reviewing a sample of licensees’ investments to determine if licensees 

are complying with decommissioning investment standards and 

determine whether action should be taken to enforce these standards. 

However, NRC disagreed with our recommendation that, when the 

agency reevaluates its decommissioning funding formula, it define what it 

means by the “bulk” of the funds that licensees will likely need to 

decommission their reactors. In its comments, NRC stated that, in view of 

the comprehensiveness of the agency’s regulatory system, a precise 

definition of the meaning of “bulk” is not necessary to ensure that 

licensees adequately plan for decommissioning costs. We did not 

recommend that NRC provide a precise definition but we continue to 

believe that a definition is necessary. As we noted in our draft report, 

Agency Comments 

and Our Evaluation 
 

Page 21 GAO-12-258 Nuclear Regulation 

without a definition of what the agency means by bulk it is unclear how 

NRC can determine if the formula is performing as intended or if 

licensees will have adequate decommissioning funds when necessary, 

especially given the wide range of differences we identified when we 

compared formula-based and site-specific cost estimates. NRC 

suggested that we revise our recommendation to state that NRC’s 

reevaluation of the formula consider the relationship between the formula 

amount and the range of expected decommissioning costs. This 

approach could be appropriate, as long as NRC states what the 

relationship between the formula and the range should be. According to 

NRC officials, the agency has not yet developed this range of expected 

decommissioning costs. Officials explained that, as part of its process of 

reevaluating the formula, the agency expects to estimate the lower and 

upper bounds of the range of expected decommissioning costs based on 

licensee-generated cost estimates and historical decommissioning costs 

and will determine how an updated decommissioning funding formula fits 

into this range. We believe such an analysis could help the agency better 

define the bulk of funds licensees should accumulate to ensure adequate 

funds for decommissioning. In response to this comment, we modified 

the report to include information about the range of expected 

decommissioning costs NRC plans to develop, but did not revise the 

recommendation. 

Finally, NRC partially agreed with our recommendation that the agency use 

the cost-estimating characteristics as a guide for a high-quality costestimating formula in the event that NRC chooses to update the formula as 

part of ensuring reliability during the process of evaluating its 

decommissioning funding formula. NRC agreed that the decommissioning 

funding formula should provide a credible and well-documented basis for 

establishing the minimum amount of funding needed to plan for the costs of 

decommissioning a reactor, but disagreed that the formula is the 

appropriate tool for achieving the characteristics of comprehensiveness 

and accuracy in estimating decommissioning costs. NRC commented that 

the formula was not intended to provide a cost estimate but rather provide 

a reference level for licensees as a planning tool early in a reactor’s life. 

We disagree that the formula is not a cost estimate. As we noted in our 

draft report, NRC considers the formula to be the minimum amount needed 

by licensees to decommission their reactors; we believe that this meets the 

definition of a cost estimate. NRC further commented that the agency 

believes that it achieves the characteristics of comprehensiveness and 

accuracy by requiring a licensee to provide an updated, plant-specific cost 

estimate late in a plant’s life. We recognize that the plant-specific cost 

estimate that NRC requires can draw on additional information to help 
 

Page 22 GAO-12-258 Nuclear Regulation 

achieve characteristics of a high-quality cost estimating formula. However, 

this requirement does not address the quality of the formula. The formula 

needs to be appropriately accurate and comprehensive for its intended 

purpose. As we noted in our draft report, licensees typically use the formula 

to meet NRC’s requirement to report an initial decommissioning cost 

estimate in their license application, and NRC uses the formula to 

determine if there is reasonable assurance that licensees will have 

adequate decommissioning funds as part of the DFS report review 

process. We recognize that NRC is in the process of reevaluating its more 

than 30-year old formula to determine if the formula should be updated to 

reflect changes in decommissioning technology and costs. We believe that 

an updated formula that reflects these changes and has the characteristics 

of a high-quality cost-estimating formula could help to ensure that NRC’s 

decommissioning funding formula is appropriately accurate and 

comprehensive. 

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Chairman of NRC, 

appropriate congressional committees, and other interested parties. The 

report also will be available at no charge on the GAO website at 

http://www.gao.gov. 

If you or your staff members have any questions about this report, please 

contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff that made major contributions to 

this report are listed in appendix IV. 

Sincerely yours, 

Frank Rusco 

Director 

Natural Resources and Environment 
Appendix I: Scope and Methodology 

Page 23 GAO-12-258 Nuclear Regulation 

To describe how the Nuclear Regulatory Commission (NRC) ensures that 

reactor owners (licensees) provide reasonable assurance of adequate 

decommissioning funds, we reviewed relevant regulations, including 

Reporting and Record Keeping for Decommissioning Planning,

1

 and 

guidance documents, such as Procedures for NRC’s Independent 

Analysis of Decommissioning Funding Assurance for Operating Nuclear 

Power Reactors.

2

 We also reviewed GAO and NRC Office of the 

Inspector General (OIG) reports on decommissioning funding assurance 

and interviewed NRC officials from the Office of Nuclear Reactor 

Regulation and OIG to better understand the agency’s oversight of 

decommissioning funds. 

To identify any improvements or weaknesses in NRC’s oversight of 

decommissioning funding assurance, we analyzed NRC’s decommissioning 

funding formula and the agency’s reviews of licensee decommissioning 

funding status (DFS) reports. To analyze NRC’s decommissioning funding 

formula, we compared NRC formula-generated cost estimates with licenseegenerated site-specific cost estimates for 12 nuclear reactors for which we 

were able to obtain both types of estimates that were calculated in the same 

year. We also compared NRC’s formula and the process the agency used to 

develop the formula with GAO-identified best practices for cost estimating,3

and reviewed documents used to create the formula. To ensure our 

understanding of how the formula was developed and how it is used, we 

interviewed NRC officials and staff of the Pacific Northwest National 

Laboratory (the contractor NRC used to create the formula). To analyze 

NRC’s reviews of licensee DFS reports, we analyzed data from reactor 

licensees’ 2011 DFS reports for each of the operating reactors and for 

currently decommissioning reactors. These reports reflect estimated 

decommissioning costs and actual decommissioning fund balances as of 

December 31, 2010, among other things. We assessed the reliability of the 

data we used by interviewing NRC officials to identify steps the agency uses 

to verify the data, and several licensees to identify steps they take to ensure 

that the data they provide are reliable. In our assessment of the data, we 

 

1

10 C.F.R. § 50.75. 

2

NRC, Procedures for NRC’s Independent Analysis of Decommissioning Funding 

Assurance for Operating Nuclear Power Reactors, LIC-205, Revision 4 (Rockville, MD: 

Dec. 27, 2010). 

3

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009). 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 24 GAO-12-258 Nuclear Regulation 

determined these data were sufficiently reliable for our purpose of identifying 

the number of licensees who had not reported specific data in the 2011 DFS 

reports. We also reviewed the results of NRC’s in-licensee-office 

comparisons of licensees’ DFS reports and year-end bank statements from 

April 2008 through October 2010. 

We also analyzed relevant Federal Energy Regulatory Commission 

(FERC) regulations governing decommissioning trust funds, because 

FERC oversees public utility financial reporting and about half of the 104 

operating reactors are owned by public utilities.4

 

To better understand issues related to decommissioning nuclear power 

reactors in general, we interviewed officials from other federal agencies 

(such as from FERC and the Department of Energy), a decommissioning 

cost estimator, nongovernmental organizations, nuclear power industry 

groups, licensees of nuclear power reactors, and decommissioning fund 

stakeholders—a fund trustee and two investment advisors—who have 

knowledge of nuclear reactor decommissioning or are involved with it. We 

identified the trustee through licensee interviews and one investment 

advisor through a March 2011 NRC public decommissioning workshop 

that we attended. We also attended the 23rd annual NRC Regulatory 

Information Conference held in March 2011. In addition, we visited five 

nuclear power plants—Haddam Neck (Connecticut Yankee) in 

Connecticut, Indian Point in New York, Peach Bottom Atomic Power 

Station and Three Mile Island Nuclear Station in Pennsylvania, and 

Enrico Fermi Atomic Power Plant in Michigan—interviewed licensee 

officials there, and toured the facilities. The five sites we visited were a 

nonprobability sample that we selected to include a mix of fully 

decommissioned, currently decommissioning, and operating reactors. 

Because we used a nonprobability sample, the information obtained from 

these site visits is not generalizable to other reactors. To select these 

sites, we considered sites that were a mixture of types of reactors, types 

of ownership, and types of decommissioning methods used, as well as 

reactors that are operating, currently decommissioning, or fully 

decommissioned. In addition to these criteria, we considered sites that 

were close to GAO headquarters in Washington, D.C., for cost-saving 

purposes. The exception was the Enrico Fermi Atomic Power Plant in 

Michigan. We visited this site because it has the closest currently 

 

4

18 C.F.R. §§ 35.32, 35.33. 
Appendix I: Scope and Methodology 

Page 25 GAO-12-258 Nuclear Regulation 

decommissioning reactor using the immediate decontamination and 

dismantlement (DECON) method. We also interviewed relevant state 

agency officials (e.g., the Pennsylvania Public Utility Commission and 

Michigan Department of Environmental Quality) in the states where we 

conducted our site visits to better understand their roles in the 

decommissioning process. 

We conducted this performance audit from February 2011 to April 2012, 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 
Appendix II: GAO Assessment of NRC’s 

Decommissioning Funding Formula 

Page 26 GAO-12-258 Nuclear Regulation 

Table 2 shows our comparison of NRC’s decommissioning funding 

formula compared with our cost-estimating guide’s four characteristics of 

a high-quality cost-estimating formula. 

Table 2: Comparison of NRC’s Decommissioning Funding Formula with Characteristics of a High-Quality Cost-Estimating 

Formula 

Characteristic Explanation Overall assessmenta Best practice Individual assessment 

Credible An estimate is credible if any 

limitations of the analysis 

because of uncertainty or bias 

surrounding data or assumptions 

are discussed. Major 

assumptions may be varied, and 

other outcomes are recomputed 

to determine how sensitive they 

are to changes in the 

assumptions. A risk and 

uncertainty analysis is performed 

to determine the level of risk 

associated with the estimate. The 

estimate’s cost elements are 

crosschecked, and an 

independent cost estimate 

conducted by a group outside the 

acquiring organization is 

developed to determine whether 

other estimating methods 

produce similar results. 

Characteristic 

substantially met 

The cost-estimating 

formula includes a 

sensitivity analysis that 

identifies a range of 

possible costs based on 

varying major 

assumptions, parameters, 

and data inputs. 

Practice met: 

NRC performed 

sensitivity analyses on a 

number of key 

assumptions in the 

studies used to create 

the formula. 

A risk and uncertainty 

analysis was conducted 

that quantified the 

imperfectly understood 

risks and identified the 

effects of changing key 

cost driver assumptions 

and factors. 

Practice minimally met: 

NRC did not conduct a 

risk and uncertainty 

analysis on the formula. 

Instead, NRC applied a 

25 percent contingency 

factor to all the cost 

estimates used to derive 

the formula. NRC 

explained that the 25 

percent contingency 

factor is based on 

Department of Energy 

cost-estimating guidance 

for large construction 

projects. However, 

according to that 

guidance, the 25 percent 

contingency is for small 

construction projects. 

 

 

Appendix II: GAO Assessment of NRC’s 

Decommissioning Funding Formula 
Appendix II: GAO Assessment of NRC’s 

Decommissioning Funding Formula 

Page 27 GAO-12-258 Nuclear Regulation 

Characteristic Explanation Overall assessmenta Best practice Individual assessment 

Major cost elements were 

cross-checked to see 

whether results were 

similar. 

Practice partially met: 

The studies supporting the 

formula were developed to 

provide information on the 

available technology, 

safety conditions, and 

probable costs of 

decommissioning a large 

nuclear power reactor. 

However, experience at 

that time was limited to the 

decommissioning of 

reactors smaller than 

those in use today, and 

extrapolations of costs 

from the smaller to larger 

reactors are considered to 

be generally 

unreasonable. 

An independent cost 

estimate was conducted 

by a group outside the 

acquiring organization to 

determine whether other 

estimating methods 

produce similar results. 

Practice substantially 

met: 

NRC initiated two 

independent cost 

estimates to determine 

decommissioning costs 

for one nuclear power 

reactor. However, the 

formula continues to 

reflect the original 

decommissioning studies 

performed in the late 

1970s and early 1980s. 

Well 

documented 

An estimate is well documented if 

it contains detailed information, 

including source data and 

significance; clearly detailed 

calculations and results; and 

explanations of why particular 

methods and references were 

chosen. In addition, data can be 

traced to their source documents. 

Characteristic 

substantially met 

The documentation should 

capture the source data 

used, the reliability of the 

data, and how the data 

were normalized. 

Practice partially met: 

The majority estimates for 

costs came from 

published studies that 

provided detailed 

estimates outlining the 

contents and units of the 

data, but some of the 

estimates were derived 

from engineering 

judgment. Engineering 

judgment can be useful in 

the absence of data, but 

data were available for 

the costs in question. 

Disadvantages 

associated with 

engineering judgment 

include lack of objectivity. 
Appendix II: GAO Assessment of NRC’s 

Decommissioning Funding Formula 

Page 28 GAO-12-258 Nuclear Regulation 

Characteristic Explanation Overall assessmenta Best practice Individual assessment 

 The documentation 

describes in detail the 

calculations performed and 

the estimating 

methodology used to 

derive each work 

breakdown structure 

element’s cost.b

Practice partially met: 

The documentation 

outlines the calculations 

performed and the 

detailed cost estimates 

used to derive the 

formula. However, some 

elements were 

developed using 

engineering judgment, 

and there is no evidence 

of quantitative historical 

data to enable the 

engineering judgment 

estimates to be adjusted 

for optimism and bias. 

 The documentation 

describes step by step 

how the cost-estimating 

formula was developed so 

that a cost analyst 

unfamiliar with the 

program could understand 

what was done and 

replicate it. 

Practice partially met: 

NRC provided ample 

documentation of the basis 

of the formula. However, 

the documentation did not 

clearly describe the stepby-step derivation process 

of the formula. As a result, 

we could not determine the 

mathematical derivation of 

the formula, and we were 

unable to consistently 

replicate the calculation of 

labor and energy factors 

NRC developed. 

 The documentation 

discusses the technical 

baseline description and 

the data in the baseline 

are consistent with the 

cost-estimating formula. 

Practice met: 

Key documents and 

subsequent studies outline 

a technical baseline 

description consistent with 

the formula. 

 The documentation 

provides evidence that the 

cost-estimating formula 

was reviewed and 

accepted by management. 

Practice substantially met: 

NRC has reviewed and 

accepted the main studies 

used to support the 

derivation and updates of 

the formula by publishing 

them. However, one 

aspect of this best practice 

is that management 

discussed the risk analysis 

during the review of the 

formula, and NRC did not 

conduct a risk analysis. 
Appendix II: GAO Assessment of NRC’s 

Decommissioning Funding Formula 

Page 29 GAO-12-258 Nuclear Regulation 

Characteristic Explanation Overall assessmenta Best practice Individual assessment 

Comprehensive An estimate is comprehensive if it 

has enough detail to ensure that 

cost elements are neither omitted 

nor double-counted. All costinfluencing ground rules and 

assumptions are detailed in the 

estimate’s documentation. 

Characteristic partially 

met 

The cost-estimating 

formula includes the efforts 

for radiological cleanup. 

Practice partially met: 

The formula represents a 

detailed cost estimate of 

reference reactors 

assuming immediate 

dismantlement based on 

the best available 

information at that time, 

which included off-site 

disposal of the low-level 

waste generated during 

decommissioning. 

However, circumstances 

have changed with regard 

to the cost and 

management of this lowlevel waste, and the 

availability of disposal 

sites, and these costs are 

not accounted for in the 

formula. 

 The cost-estimating 

formula completely defines 

the program, reflects the 

current schedule, and is 

technically reasonable. 

Practice partially met: 

The formula is based on 

the best information 

available 30 years ago, 

and the formula has not 

been updated since 1988. 

However, as NRC has 

noted, decommissioning 

technology and practices 

in use today are 

significantly different than 

assumed in the original 

studies on which the 

formula is based. As a 

result, NRC is currently 

reevaluating the formula. 

 The cost-estimating 

formula work breakdown 

structure is productoriented, traceable to the 

statement of 

work/objective, and at an 

appropriate level of detail 

to ensure that cost 

elements are neither 

omitted nor doublecounted. 

Practice partially met: 

The formula is a linear 

formula for estimating 

decommissioning costs as 

a function of the powergenerating capacity of the 

reactor. However, there is 

no standardized, productoriented work breakdown 

structure associated with 

the formula. Establishing a 

product-oriented work 

breakdown structure allows 

a program to track cost and 

schedule by defined 

deliverables.
Appendix II: GAO Assessment of NRC’s 

Decommissioning Funding Formula 

Page 30 GAO-12-258 Nuclear Regulation 

Characteristic Explanation Overall assessmenta Best practice Individual assessment 

 The cost-estimating 

formula documents all 

cost-influencing ground 

rules and assumptions. 

Practice partially met: 

The main reports and 

studies on which the 

formula is based 

document all costinfluencing ground rules 

and assumptions. 

However, risks 

associated with some 

key assumptions were 

not accounted for in the 

formula. In addition, the 

formula assumes that all 

reactors will use the 

immediate 

decontamination and 

dismantlement (DECON) 

method of 

decommissioning—

which calls for the 

removal of radioactively 

contaminated equipment, 

structures, and parts of 

the reactor—which is no 

longer representative of 

what reactors use. 

Accurate An estimate is accurate if it is 

unbiased, the work is not overly 

conservative or overly optimistic, 

and is based on an assessment 

of most likely costs. Few, if any, 

mathematical mistakes are 

present and those that are minor. 

Characteristic partially 

met 

The cost-estimating 

formula results are 

unbiased, not overly 

conservative or optimistic, 

and are based on an 

assessment of most likely 

costs. 

Practice minimally met: 

According to NRC, the 

formula represents a 

detailed estimate based 

on the best available 

information at the time 

the formula was created. 

However, NRC has not 

performed a risk 

analysis, and therefore 

cannot convey a level of 

confidence that the 

formula will achieve the 

most likely cost of 

decommissioning. In 

addition, NRC does not 

require licensee’s to 

provide actual costs of 

decommissioning. 

 

 

 

 

 
Appendix II: GAO Assessment of NRC’s 

Decommissioning Funding Formula 

Page 31 GAO-12-258 Nuclear Regulation 

Characteristic Explanation Overall assessmenta Best practice Individual assessment 

 The cost-estimating 

formula has been adjusted 

properly for inflation. 

Practice substantially met: 

NRC developed an 

additional formula for 

adjusting the 

decommissioning funding 

formula estimate to 

account for inflation. 

However, one component 

of the inflation formula is 

labor costs, and because 

NRC does not maintain 

nuclear labor cost data, the 

agency relies on data from 

the U.S. Bureau of Labor 

Statistics. 

 The cost-estimating 

formula contains few, if 

any, minor mistakes. 

Practice substantially 

met: 

The derivation of the 

formula is generally 

sound. However, some 

of the values in the 

formula were rounded off 

in a way that was not 

thoroughly explained. 

 The cost-estimating 

formula is regularly 

updated to reflect 

significant changes in the 

decommissioning process, 

such as when schedules 

or other assumptions 

change, and actual costs 

so that it is always 

reflecting current status. 

Practice minimally met: 

Two types of large 

nuclear reactors and 

different 

decommissioning 

methods were studied in 

the creation of the 

decommissioning 

funding formula. 

However, the formula 

has not been updated 

since it was put into 

regulations in 1988, and 

the agency does not 

require the collection of 

actual decommissioning 

costs from licensees, so 

the formula does not 

account for factors that 

may raise the final cost 

of decommissioning. 

 Variances between 

planned and actual costs 

are documented, 

explained, and reviewed. 

Practice not met: 

Variances between the 

formula estimates and 

actual costs have not 

been documented, 

reviewed, or explained. 
Appendix II: GAO Assessment of NRC’s 

Decommissioning Funding Formula 

Page 32 GAO-12-258 Nuclear Regulation 

Characteristic Explanation Overall assessmenta Best practice Individual assessment 

 The cost-estimating 

formula is based on a 

historical record of cost 

estimating and actual 

experiences from other 

comparable programs. 

Practice partially met: 

The formula represents a 

detailed estimate based 

on the best available 

information at the time it 

was created. However, 

the formula has not been 

updated since it was put 

into regulations in 1988, 

and the agency does not 

require the collection of 

actual decommissioning 

costs from licensees. 

Source: GAO assessment of NRC’s decommissioning funding formula based on GAO-identified cost-estimating best practices. 

Notes: We analyzed the cost-estimating practices used by NRC for the decommissioning funding 

formula, as stated in 10 C.F.R. § 50.75. 

a

The ratings we used in this analysis are as follows: “Not met” means that NRC provided no evidence 

that satisfies any of the best practices; “Minimally met” means that NRC provided evidence that 

satisfies a small portion of the best practices; “partially met” means that NRC provided evidence that 

satisfies about half of the best practices; “substantially met” means that NRC provided evidence that 

satisfies a large portion of the best practices; and “met” means that NRC provided complete evidence 

that satisfies all of the best practices. 

b

A work breakdown structure provides a basic framework for defining in detail the work necessary to 

accomplish a program’s objectives, and deconstructs a program’s end product into successive levels 

with smaller specific elements until the work is subdivided to a level suitable for management control. 
Appendix III: Comments from the Nuclear 

Regulatory Commission 

Page 33 GAO-12-258 Nuclear Regulation 

Appendix III: Comments from the Nuclear 

Regulatory Commission 
Appendix III: Comments from the Nuclear 

Regulatory Commission 

Page 34 GAO-12-258 Nuclear Regulation 
Appendix III: Comments from the Nuclear 

Regulatory Commission 

Page 35 GAO-12-258 Nuclear Regulation 
Appendix IV: GAO Contact and Staff 

Acknowledgments 

Page 36 GAO-12-258 Nuclear Regulation 

Frank Rusco, (202) 512-3841 or ruscof@gao.gov

In addition to the individual named above, Karen Jones, Assistant 

Director; Karen Richey, Assistant Director; Josey Ballenger; Bernice 

Dawson; Jennifer Echard; Jonathan Kucskar; Robin Marion; Katya 

Melkote; Cynthia Norris; Michelle K. Treistman; and Vanessa V. Welker 

made significant contributions to this report. Mehrzad Nadji and Anne 

Rhodes-Kline also made important contributions to this report. 

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(361255)
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