Federal Register / Vol. 62, No. 160 / Tuesday, August 19, 1997 / Rules and Regulations 44071

(i) Collect 1 chick box paper for each

10 boxes of chicks placed in a house

and place the chick papers immediately

into large plastic bags and seal the bags.

(ii) Place the plastic bags containing

the chick box papers in a clean box and

transport them within 48 hours to a

laboratory. The plastic bags do not

require refrigeration.

(Approved by the Office of Management and

Budget under control number 0579–0007)

Done in Washington, DC, this 13th day of

August 1997.

Terry L. Medley,

Administrator, Animal and Plant Health

Inspection Service.

[FR Doc. 97–21902 Filed 8–18–97; 8:45 am]

BILLING CODE 3410–34–U

NUCLEAR REGULATORY

COMMISSION

10 CFR Part 50

Final Policy Statement on the

Restructuring and Economic

Deregulation of the Electric Utility

Industry

AGENCY: Nuclear Regulatory

Commission.

ACTION: Final Policy Statement.

SUMMARY: The U.S. Nuclear Regulatory

Commission (NRC) is issuing this final

statement of policy regarding its

expectations for, and intended approach

to, its power reactor licensees as the

electric utility industry moves from an

environment of rate regulation toward

greater competition. The NRC has

concerns about the possible effects that

rate deregulation and disaggregation

resulting from various restructuring

actions involving power reactor

licensees could have on the protection

of public health and safety.

EFFECTIVE DATE: This policy statement

becomes effective on October 20, 1997.

FOR FURTHER INFORMATION CONTACT:

Robert S. Wood, Office of Nuclear

Reactor Regulation, U.S. Nuclear

Regulatory Commission, Washington,

DC 20555–0001, telephone (301) 415–

1255, e-mail RSW1@nrc.gov.

SUPPLEMENTARY INFORMATION:

I. Background

On September 23, 1996, the NRC

issued a draft policy statement for

public comment (61 FR 49711). The

purpose of the draft policy statement

was to provide a discussion of the

NRC’s concerns regarding the potential

safety impacts on NRC power reactor

licensees which could result from the

economic deregulation and

restructuring of the electric utility

industry and the means by which NRC

intends to address those concerns.

Because of the interest expressed by

several commenters, the NRC extended

the public comment period to February

9, 1997.

II. Summary of and Response to

Comments

The NRC received 32 public

comments on the draft policy statement:

14 from electric utility licensees or their

representatives, 8 from State public

utility commissions (PUCs) or other

State agencies, 5 from public interest

groups, 4 from private consultants and

individuals, and 1 from a labor union.

The following list provides the names

and comment numbers referenced in

this notice:

1. Nuclear Information and Resource

Service—comment extension request

only

2. Public Service Commission of Wisconsin

3. Engineering Applied Sciences, Inc.

4. TU Electric

5. Public Service Electric & Gas Company

6. Minnesota Department of Public Service

7. Spiegel & McDiarmid on behalf of 5

publicly-owned systems

8. IPALCO Enterprises, Inc., Citizens Action

Coalition of Indiana, Inc., and Public

Citizen, Inc.

9. Wisconsin Emergency Management,

Bureau of Technological Hazards

10. Illinois Department of Nuclear Safety

11. International Brotherhood of Electrical

Workers

12. Consolidated Edison Company of New

York, Inc.

13. Centerior Energy

14. GPU Nuclear

15. Commonwealth Edison Company

16. Vermont Department of Public Service

17. Marilyn Elie

18. GE Stockholders’ Alliance for a

Sustainable Nuclear-Free Future

19. Women Speak Out for Peace and Justice

20. New England Power Company

21. Nuclear Information and Resource

Service

22. New Jersey Division of the Ratepayer

Advocate

23. Southern California Edison Company

24. Entergy Operations, Inc.

25. Nuclear Energy Institute

26. Arizona Public Service Company

27. Massachusetts Office of the Attorney

General

28. Winston and Strawn on behalf of the

Utility Decommissioning Group

29. Dave Crawford and Diane Peterson

30. National Rural Electric Cooperative

Association

31. Schlissel Technical Consulting, Inc.

32. National Association of Regulatory Utility

Commissioners

General Comments

Most commenters viewed the

issuance of the draft policy statement as

timely and appeared to understand the

reasons for the NRC’s concerns. Some

directly supported the NRC’s overall

approach, particularly the five actions

listed in Section III. Commenter 14, for

example, stated that these five actions

should provide sufficient focus for NRC

actions. Commenter 5 believes that the

NRC’s current authority is sufficient to

cope with any safety issues raised by

rate deregulation. Commenter 31 shares

the NRC’s concerns but indicated that

the draft policy statement did not

address the key issue, namely, whether

economic deregulation of nuclear power

is compatible with the protection of

public health and safety.

Other comments, particularly from

electric utility licensees and their

representatives, suggested that some

NRC concerns are overstated. For

example, Commenter 4 recommended

elimination of language in the policy

statement that implies that deregulation

is inevitable. Other commenters

suggested that the policy statement

should recognize that change will occur

at different rates and, therefore, the NRC

should individually evaluate

restructuring as it affects each nuclear

plant. In any case, restructuring will not

occur so rapidly or secretly that the NRC

will not know about it. Others stated

that many services will remain

regulated and that the PUCs will act

responsibly. Further, there is no basis

for the NRC to conclude that licensees

will be unable to provide adequate

financial assurance for safe operations

and decommissioning. The National

Association of Regulatory Utility

Commissioners (NARUC) stated that in

view of the experimental nature of many

State actions, the NRC should approach

deregulation cautiously. Finally, several

commenters asked the NRC to avoid

actions that would serve as

impediments to deregulation.

Commenters representing public

interest groups generally thought that

the draft policy statement did not go far

enough in addressing safety concerns

related to deregulation. These

commenters stated that the NRC should

take immediate action with respect to

on-line maintenance practices, extended

refueling cycles and downtime during

refueling, and up-front funding of

decommissioning, among other issues.

Some suggested that the policy

statement specifically include

discussion of possible negative safety

risks from economic deregulation, such

as cutting corners and deferring capital

investments. These commenters also

urged the NRC to expand its inspection

and compliance resources to counter the

adverse safety impacts that these

commenters believe will result from

deregulation.
44072 Federal Register / Vol. 62, No. 160 / Tuesday, August 19, 1997 / Rules and Regulations

NRC’s Response to General Comments

Regarding the issue of whether the

policy statement should address the

compatibility between economic

deregulation and the protection of

public health and safety, the NRC

believes that economic deregulation

does not preclude adequate protection

of public health and safety. However,

due to the increased uncertainty

engendered by state-by-state

deregulation of the electric power

industry, the NRC is concerned about

the possible impact on the protection of

public health and safety. Thus, in the

draft policy statement, the NRC

expressed its general concerns about the

possible effects of deregulation,

realizing that such concerns can be

either vitiated or exacerbated depending

on specific deregulation approaches that

are implemented. In this respect, the

NRC recognizes that deregulation will

occur at different times, in different

degrees, and in some jurisdictions,

perhaps not at all, and the final policy

statement more explicitly recognizes

these facts. With respect to the concerns

expressed by public interest groups

about the impact of certain potential

safety practices, such as on-line

maintenance and outage duration, the

NRC has addressed, and will continue

to address, these issues as safety issues.

This policy statement is not meant to be

a substitute for regulatory remedies to

specific safety problems.

Sufficiency of Current Regulatory

Framework and Incentives for Safe

Operation

Although most commenters indicated

that the NRC’s current regulatory

framework is adequate to protect public

health and safety, others disagreed.

Commenter 21, for example, cited the

experience with the Millstone facility

and indicated that it is ‘‘of increasing

concern that NRC cannot accurately

determine the extent and scope that

economics plays in the reductions of

reactor safety margins and the deferral

of safety significant issues.’’ This

commenter concluded that the policy

statement has not adequately addressed

safety hazards brought about by

managerial malpractice in response to

economic pressures. Other commenters

stated that the NRC must continue to

ensure that its own inspection and

oversight programs identify when a

licensee is failing to devote sufficient

resources to ensuring safe operations,

specifically as a result of deficiencies

resulting from economic pressure. When

necessary, the NRC should seek

additional inspection and compliance

resources from Congress. Commenter 9

stated that the emphasis and focus on

emergency planning may lessen.

Commenter 10 suggested that the NRC’s

shift to performance-based and riskinformed regulations may potentially

threaten established safety margins.

This commenter urged the NRC to

establish current, vigorous probabilistic

risk assessments (PRAs) to identify the

risks, which would be used in all

appropriate areas of plant operation as

a cornerstone to maintaining costeffective safety margins in a changing

environment.

Many commenters did not view

deregulation as necessarily a

disincentive to safe operation. They

cited the incentive to operate safely and

use preventive maintenance due to the

premium placed on unit availability.

Another commenter expressed the belief

that near-term economic incentives exist

for expenditures to maintain reliable

operation. However, this incentive

decreases as a plant ages and thus is of

greater concern later in a plant’s life.

Commenter 23 suggested that the policy

statement be modified to support a

licensee’s use of the 10 CFR 50.59

review process to determine that

establishment of an Independent System

Operator (ISO) does not involve an

unreviewed safety question.

Other commenters indicated that

disincentives to safe operation should

be dealt with by limiting reactor

operating cycles to 18 months and

requiring at least 250 hours for refueling

outages. These commenters also

opposed on-line maintenance.

Another commenter expressed

concern that deregulation would be a

disincentive to continuing cooperation

among nuclear generators, such as early

reporting of safety and operationally

significant events and continuation of

the Institute of Nuclear Power

Operations (INPO). Additionally, the

pressure on the NRC to reduce costs to

licensees will increase, as will pressure

to reduce use of the ‘‘watch list.’’ This

commenter cited the analogy of the

resultant events at the Federal Aviation

Administration (FAA) when the airlines

were deregulated and urged the NRC to

avoid the FAA’s mistakes. This

commenter also suggested that incentive

regulation of nuclear plants may become

an alternative to full deregulation and

that the NRC should study incentive

programs used at Diablo Canyon and

Pilgrim.

NRC’s Response to Comments on

Sufficiency of Current Regulatory

Framework and Incentives for Safe

Operation

The NRC shares many of the concerns

expressed by commenters about the

potential impact of economic

deregulation on specific safety programs

and practices. As discussed in the

NRC’s response to general comments,

the NRC will continue to evaluate

specific safety concerns or 10 CFR 50.59

review processes as part of its safety

oversight programs. For example, online maintenance and increased fuel

burnup are being considered through

the NRC’s safety review and inspection

oversight programs. Reductions in

manpower and training costs, and other

reductions in operation and

maintenance (O&M) and capital

additions budgets are of continuing

concern to the NRC. The NRC is

considering changes to the Senior

Management Meeting process that

would include consideration of

economic trends. However, because the

safety concerns that commenters

expressed exist, in many cases,

independently of economic

deregulation, the NRC believes that

these issues have been and are more

appropriately considered in other NRC

programs. Also independently of

economic deregulation, the NRC is

striving to make its regulatory program

as efficient and effective as possible—

through use of risk analysis and other

techniques—so that the resources of the

agency and of licensees are devoted to

the most safety-significant matters.

The NRC has extensively reviewed

State performance incentive programs

and does not believe significant

additional review is warranted at this

time. (See footnote 2 in the Policy

Statement below.)

Financial Qualifications

Commenters expressed varied

opinions. Although some viewed the

NRC’s current financial qualifications

regulatory framework as sufficient,

others believed that additional measures

may be necessary. Commenter 20

indicated that the critical question for

the NRC is whether, in the absence of

independent financial assurances to the

NRC from its licensees, rate regulators

have committed to provide licensees

with sufficient financial resources.

Commenter 2 stated that if recovery of

stranded costs is not allowed or is

severely restricted, a large number of

premature shutdowns may occur,

further straining licensees’ financial

qualifications and diminishing their

ability to decommission safely. In this

vein, Commenter 15 urged that the NRC

aggressively affirm that stranded capital

costs must be recovered by utilities.

Commenter 16 indicated that those

nuclear plant licensees that are no

longer rate regulated should have

sufficient buffering funds to proceed
Federal Register / Vol. 62, No. 160 / Tuesday, August 19, 1997 / Rules and Regulations 44073

safely from operations to

decommissioning. Commenter 8 stated

that the NRC should shut down the

plants of licensees with questionable

financial ability to sustain safe

operations in a competitive

environment and should require them to

decommission their facilities. Operating

costs that cannot be recovered

competitively should be borne by the

licensee, not the ratepayer or the

taxpayer. Commenter 22 believes that

the NRC should institute ongoing

financial qualifications reviews every 2

to 5 years for all power reactor

licensees, including those that still meet

the NRC’s definition of ‘‘electric

utility.’’ Commenter 31 recommends

that the NRC examine whether mergers

and joint operating agreements would

dilute or weaken units and utilities that

are performing well by spreading or

diverting existing management

attention, personnel, and other

resources over a larger number of units.

Other commenters appeared quite

optimistic that additional financial

qualifications reviews would be

unnecessary. Commenter 15 suggested

that the NRC should avoid conflicts

with other agencies having jurisdiction

over financial qualifications and should

not condition license transfers.

Commenter 25 and others indicated that

holding companies should not be

subject to 10 CFR 50.80 license transfer

reviews. At most, the NRC should use

a ‘‘negative consent’’ approach to

formation of holding companies. This

commenter also recommended that the

NRC provide more explicit guidance on

the ‘‘no significant hazards’’ criteria that

are used with license amendments.

Commenter 23 asked that the NRC

adopt clear criteria for approval of

license transfer requests and use clear,

unambiguous standards for license

transfers to non-utility licensees such as

those offered in the Draft Standard

Review Plan (SRP) on Financial

Qualifications and Decommissioning

Funding Assurance (61 FR 68309,

December 27, 1996). The regulations in

10 CFR 50.33(f) for non-utility licensees

should be modified and should include

standards for extended, unplanned

outages, such as minimum amounts for

retained earnings, insurance, and

contractual arrangements.

Commenter 22 suggested that

‘‘securitization’’ may be an

advantageous method of reducing

stranded cost charges to customers.

Consequently, the NRC should endorse

securitization as permissible from a

regulatory, legal, and public policy

perspective.

Finally, two commenters urged the

NRC to factor in Price-Anderson

obligations in its deliberations on

financial qualifications.

NRC’s Response to Comments on

Financial Qualifications

The NRC remains concerned about

the impacts of deregulation on its power

reactor licensees’ financial

qualifications. The NRC’s existing

regulatory framework under 10 CFR

50.33(f) requires financial qualifications

reviews for those licensees that no

longer meet the definition of ‘‘electric

utility’’ at the operating license (OL)

stage. Paragraph 4 of 10 CFR 50.33(f)

also provides that the NRC may seek

additional or more detailed information

respecting an applicant’s or a licensee’s

financial arrangements and status of

funds if the Commission considers this

information appropriate. The NRC will

evaluate additional rulemaking, separate

from the proposed rulemaking on

financial assurance requirements for

decommissioning, to determine whether

enhancements to its financial

qualifications requirements are

necessary in anticipation that some

power reactor licensees will no longer

be ‘‘electric utilities.’’ However, the

NRC continues to believe that its

primary tool for evaluating and ensuring

safe operations at its licensed facilities

is through its inspection and

enforcement programs. In its previous

experience, the NRC has found that

there is only an indirect relationship

between financial qualifications and

operational safety, but it is continuing to

study this issue. Although enhanced

financial qualifications reviews may

provide the NRC with valuable

additional insights on a licensee’s

general qualifications to operate its

facilities safely, it is not clear that

enhanced financial qualifications

programs by themselves would prove to

be a sufficient indicator of general

ability to operate a facility safely.

With respect to the issue of

decommissioning and stranded costs,

many states are considering

securitization as a non-bypassable

charge mechanism to fund the recovery

of decommissioning, and other stranded

costs. The NRC believes that

securitization has the potential to

provide an acceptable method of

decommissioning funding assurance,

although other mechanisms that involve

non-bypassable charges may provide

comparable levels of assurance and

should not be excluded from

consideration by State authorities.

With respect to transfers of a license

under 10 CFR 50.80, the NRC must

review and approve in writing all such

transfers, if such transfers meet the

appropriate NRC standards. The NRC

does not believe that Section 184 of the

Atomic Energy Act of 1954, as amended,

allows the NRC to approve transfers by

‘‘negative consent.’’

The NRC will continue to use its

current method of evaluating a

licensee’s cash flow under 10 CFR

140.21 to determine a licensee’s ability

to pay deferred premiums under the

Price-Anderson Act.

Decommissioning Funding Assurance

The consensus appeared to be that the

NRC should work closely with State

regulators to provide for assurance of

decommissioning funding. Commenter

13 recommended that the policy

statement include a call for the

continued recovery of decommissioning

costs through regulated rates and tariffs

in all jurisdictions. Similarly,

Commenter 16 suggested that the NRC

maintain awareness of State

decommissioning proceedings, monitor

funding adequacy based on the

estimates produced in State

proceedings, and work with the host

State to ensure that adequate amounts

are provided in decommissioning trust

funds. Another commenter stated that

additional decommissioning funding

assurance should be required on an ad

hoc basis and that the NRC should not

require accelerated decommissioning

funding.

Many State and licensee commenters

asked the NRC to accept non-bypassable

charges or other mechanisms, such as

dedicated revenue streams, as proof of

decommissioning funding assurance.

Similarly, those licensees whose States

require such mechanisms should be

considered ‘‘electric utilities’’ under the

NRC’s regulations. Many commenters

also suggested that the NRC take a more

proactive role with the Congress, the

Executive Branch, and others in order to

increase assurance of decommissioning

funds.

Most public interest group

commenters advocated that the NRC

end ‘‘fund-as-you-go’’ decommissioning

by requiring full, up-front

decommissioning for unfunded

balances. These commenters also asked

that any stranded cost recovery be

applied to external decommissioning

trusts and that investors bear the greater

share in funding any decommissioning

shortfall. Other comments sought the

elimination of internal

decommissioning funding and asked

that decommissioning be funded at a

level that would permit a third party to

complete decommissioning.

Other specific comments in the

decommissioning area included (1) a

recommendation that the NRC add an

explicit statement to the policy
44074 Federal Register / Vol. 62, No. 160 / Tuesday, August 19, 1997 / Rules and Regulations

statement that would inform licensees

of the NRC’s right to assess the timing

and liquidity of decommissioning funds

(Commenter 3); (2) a recommendation

for an increase in decommissioning

reporting requirements and assurance

that funds are not diverted to nondecommissioning uses; (3) recognition

that if charges are placed on current

electricity customers while competition

increases, consumers will avoid nuclear

power and will, therefore, avoid

contributing to decommissioning

funding; and (4) recognition that

decommissioning is not a stranded cost,

because stranded costs are known and

measurable costs that have already been

incurred, whereas decommissioning

costs are not fully known and have yet

to be incurred.

NRC’s Response to Comments on

Decommissioning Funding Assurance

Many of these comments parallel

comments received on the Advance

Notice of Proposed Rulemaking (ANPR)

(61 FR 15427, April 8, 1996) that sought

comment on restructuring issues as they

may relate to decommissioning funding

assurance. The NRC is developing a

proposed rule that considers most of

these comments. With respect to the

specific comment that the policy

statement should indicate that NRC

retains the right to assess the timing and

liquidity of decommissioning funds, the

NRC agrees and will add such a

statement. Because of the long history of

effective rate regulatory oversight and

recovery of safety-related expenses

through rates, in the 1988

decommissioning rule (53 FR 24018,

June 27, 1988), the NRC deferred to the

PUCs and the Federal Energy Regulatory

Commission (FERC) on the timing and

liquidity of decommissioning trust fund

deposits. However, the NRC has the

authority to assess the timing and

liquidity of such deposits by its

licensees, and intends to exercise this

authority with those licensees who lose

rate regulatory oversight. Similarly, 10

CFR 50.82 specifies a schedule for

decommissioning trust fund

withdrawals and the NRC will thus

continue to assess the timing of such

withdrawals.

Regulatory Interface

Most commenters support NRC’s

working closely with State and Federal

rate regulators, although some public

interest groups stated that such an effort

would offer scant protection to the

public (Commenter 17). Many thought

that the focus of this cooperation should

be on the assurance of recovery of

decommissioning costs. Some

commenters believe that the NRC

should take a more proactive role and

that the NRC can play a special role in

educating rate regulators. Commenter 22

proposed that the NRC maintain a

dialogue with all classes of ratepayers,

perhaps through the National

Association of State Utility Consumer

Advocates. Other suggested venues for

NRC-State regulatory interface included

the National Governors Association, the

National Conference of State

Legislatures, the American Legislative

Exchange, and similar groups

(Commenter 25). Commenter 15

suggested that the NRC and NARUC

convene a joint conference on stranded

capital cost recovery. As previously

mentioned, several commenters

indicated that the NRC should act to

educate Congress and seek legislation in

areas relevant to plant safety and

restructuring, for example, a national

excise tax to fund decommissioning.

Finally, Commenter 22 suggested that

the NRC review the States’ plans for cost

recovery to ensure that, once recovered

through rates, these revenues are

employed for the purpose for which

they were collected.

NRC’s Response to Comments on

Regulatory Interface

The NRC believes that the policy

statement adequately covered the NRC’s

intent to work closely with rate

regulators and others as deregulation

proceeds. The NRC will consider

expanding contacts to include the other

groups identified. Although the NRC

will testify before Congress when asked

to speak on its views on deregulation as

related to protecting public health and

safety, the NRC is evaluating whether it

should make specific recommendations

on mechanisms to handle

decommissioning costs and operational

costs. The NRC recognizes that Federal

legislation might be of benefit in

resolving these issues. However, the

NRC also recognizes the vital role that

States have played and will continue to

play in resolving these issues and is

fully prepared to work with the States

through either State or federally

sponsored initiatives.

Joint Ownership

Virtually all who commented in this

area believe that the NRC should not

impose joint and several liability on coowners of nuclear plants. Rather, each

co-owner should be limited to its pro

rata share of operating and

decommissioning expenses. The NRC

should not look to one owner to ‘‘bail

out’’ another owner. Commenter 28

suggested that any effort to alter the

current legal and financial relationship

among co-owners would retroactively

alter, and likely jeopardize, the business

arrangements that underpin coownership. Several of those who

commented on this issue also pointed to

the bankruptcy laws as one way of

ensuring that co-owners pay their pro

rata share, although Commenter 22

suggested that recent NRC experience

with bankrupt licensees may not hold

true in the future. No one directly

commented on the issue of non-owner

operators, although 3 comments

addressed this issue peripherally.

NRC’s Response to Comments on Joint

Ownership

The NRC recognizes that co-owners

and co-licensees generally divide costs

and output from their facilities by using

a contractually-defined, pro rata share

standard. The NRC has implicitly

accepted this practice in the past and

believes that it should continue to be

the operative practice, but reserves the

right, in highly unusual situations

where adequate protection of public

health and safety would be

compromised if such action were not

taken, to consider imposing joint and

several liability on co-owners of more

than de minimis shares when one or

more co-owners have defaulted. The

NRC is addressing the issue of nonowner operators separately.

Antitrust

Most commenters viewed NRC

antitrust reviews as redundant to those

performed by other agencies, especially

in view of FERC Order 888, and

recommended that the NRC act to

eliminate this redundancy. Commenter

22 suggested that the NRC develop a

memorandum of understanding with

FERC and the Securities and Exchange

Commission (SEC) that would allow the

NRC to rely on the judgments of these

agencies about market power that do not

raise issues unique to the NRC’s

mandate. Another commenter

recommended working with the

Department of Justice to develop a list

of guidelines and criteria to evaluate

requests for ownership changes.

NRC’s Response to Comments on

Antitrust

The NRC is statutorily required under

the Atomic Energy Act of 1954, as

amended (AEA), in connection with an

application for a license to construct or

operate a facility under section 103, to

evaluate an applicant’s or a licensee’s

activities under the NRC license to

determine that these activities do not

create or maintain a situation

inconsistent with the antitrust laws of

the United States. However, the NRC

has begun to work with FERC, SEC, and
Federal Register / Vol. 62, No. 160 / Tuesday, August 19, 1997 / Rules and Regulations 44075

1Section 50.2 defines ‘‘electric utility’’ as ‘‘any

entity that generates or distributes electricity and

which recovers the cost of this electricity, either

directly or indirectly, through rates established by

the entity itself or by a separate regulatory

authority. Investor-owned utilities, including

generation and distribution subsidiaries, public

utility districts, municipalities, rural electric

cooperatives, and State and Federal agencies,

including associations of any of the foregoing, are

included within the meaning of ‘electric utility.’ ’’

2See Possible Safety Impacts of Economic

Performance Incentives: Final Policy Statement, (56

FR 33945, July 24, 1991), for the NRC’s concerns

relating to State economic performance incentive

standards and programs. The NRC understands that

States instituted many of these programs as a means

of encouraging electric utilities to lower electric

rates to consumers. As States deregulate electric

utilities under their jurisdictions, these economic

performance incentive programs ultimately may be

replaced by full market competition.

the Department of Justice to develop

methods by which the NRC can

minimize duplication of effort on

antitrust issues, while carrying out its

statutory responsibilities. The NRC will

also consider seeking legislation to

eliminate its review to the extent that its

review duplicates the efforts of other

federal agencies.

Other Issues

Several commenters made

observations not directly addressed in

the draft policy statement. Commenter 5

stated that nuclear plant operators in the

Northeast United States are subsidizing

dirtier coal generation from Western

U.S. generators. Accordingly, the NRC

should articulate its views on the need

for nuclear power and its value for fuel

diversity and environmental protection.

Commenter 16 recommended that the

NRC urge the Department of Energy to

proceed with interim spent fuel storage

to reduce uncertainty and costs facing

nuclear plant operators.

NRC’s Response to Comments on Other

Issues

The NRC does not have a role in

advocating the positions stated in these

comments.

Policy Statement

I. Basis

This policy statement recognizes the

changes that are occurring in the electric

utility industry and the importance

these changes may have for the NRC and

its licensees. The NRC’s principal

mission is to regulate the nation’s

civilian use of byproduct, source, and

special nuclear materials to ensure

adequate protection of public health and

safety, to promote the common defense

and security, and to protect the

environment. As part of carrying out

this mission, the NRC must monitor

licensee activities and any changes in

licensee activities, as well as external

factors that may affect the ability of

individual licensees to safely operate

and decommission licensed power

production facilities.

II. Background

The electric utility industry is

entering a period of economic

deregulation and restructuring that is

intended to lead to increased

competition in the industry. Increasing

competition may force integrated power

systems to separate (or ‘‘disaggregate’’)

their systems into functional areas.

Thus, some licensees may divest

electrical generation assets from

transmission and distribution assets by

forming separate subsidiaries or even

separate companies for generation.

Disaggregation may involve utility

restructuring, mergers, and corporate

spinoffs that lead to changes in owners

or operators of licensed power reactors

and may cause some licensees,

including owners, to cease being an

‘‘electric utility’’ as defined in 10 CFR

50.2.1 Such changes may affect the

licensing basis under which the NRC

originally found a licensee to be

financially qualified, either as an

‘‘electric utility’’ or otherwise, to

construct, operate, or own its power

plant, as well as to accumulate adequate

funds to ensure decommissioning at the

end of reactor life. (See discussion

below.)

Rate regulators have typically allowed

an electric utility to recover prudently

incurred costs of generating,

transmitting, and distributing electric

services. Consequently, in 1984, the

NRC eliminated financial qualifications

reviews at the OL stage for those

licensees that met the definition of

‘‘electric utility’’ in 10 CFR 50.2 (49 FR

35747, September 12, 1984). The NRC

based this decision on the assumption

that ‘‘the rate process assures that funds

needed for safe operation will be made

available to regulated electric utilities’’

(49 FR 35747, at 35750). However, the

NRC recognized that financial

qualifications reviews for OL applicants

might be appropriate in particular cases

in which, for example, ‘‘the local public

utility commission will not allow the

total cost of operating the facility to be

recovered through rates’’ (49 FR 35747,

at 35751). The Commission also has

expressed concern about various State

proposals to implement economic

performance incentive programs.2

In its 1988 decommissioning rule, the

NRC again distinguished between

electric utilities and other licensees by

allowing ‘‘electric utilities’’ to

accumulate funds for decommissioning

over the remaining terms of their

operating licenses. NRC regulations

require its other licensees (with the

added exception of State and Federal

government licensees of certain

facilities) to provide funding assurance

for the full estimated cost of

decommissioning, either through full

up-front funding or by some allowable

guarantee or surety mechanism.

A discussion of the NRC review

process is contained in two draft

Standard Review Plans (SRPs) that the

NRC issued for comment: NUREG–1577,

‘‘Standard Review Plan on Power

Reactor Licensee Financial

Qualifications and Decommissioning

Funding Assurance’’ (January 1997);

and NUREG–1574, ‘‘Standard Review

Plan on Antitrust’’ (January 1997). In

addition, the NRC issued an

Administrative Letter on June 21, 1996,

that informed power reactor licensees of

their ongoing responsibility to inform

and obtain advance approval from the

NRC for any changes that would

constitute a transfer of the license,

directly or indirectly, through transfer of

control of the NRC license to any person

pursuant to 10 CFR 50.80. This

administrative letter also reminded

addressees of their responsibility to

ensure that information regarding a

licensee’s financial qualifications and

decommissioning funding assurance

that may have a significant implication

for public health and safety is promptly

reported to the NRC.

III. Specific Policies

The NRC is concerned about the

potential impact of utility restructuring

on public health and safety. The NRC

has not found a consistent relationship

between a licensee’s financial health

and general indicators of safety such as

the NRC’s Systematic Assessment of

Licensee Performance. The NRC has

traditionally relied on its inspection

process to indicate when safety

performance has begun to show adverse

trends. On the basis of inspection

program results, the NRC can take

appropriate action, including,

ultimately, plant shutdown, to protect

public health and safety. However, if a

plant is permanently shut down, that

plant’s licensee(s) may no longer have

access to adequate revenues or other

sources of funds for decommissioning

the facility. If rate deregulation and

organizational divestiture occur

concurrently with the shutdown of a

nuclear plant either by NRC action or by

a licensee’s economic decision, that

licensee may not be able to provide

adequate assurance of decommissioning

funds. Thus, the NRC believes that its

concerns about deregulation and

restructuring lie in the areas of

adequacy of decommissioning funds
44076 Federal Register / Vol. 62, No. 160 / Tuesday, August 19, 1997 / Rules and Regulations

and the potential effect that economic

deregulation may have on operational

safety.

As the electric utility industry moves

from an environment of substantial

economic regulation to one of increased

competition, the NRC is concerned

about the pace of restructuring and rate

deregulation. Approval of organizational

and rate deregulation changes may

occur rapidly. The pace and degree of

such changes could affect the factual

underpinnings of the NRC’s previous

conclusions that power reactor licensees

have access to adequate funds for

operations and can reliably accumulate

adequate funds for decommissioning

over the operating lives of their

facilities. For example, rate deregulation

could create situations in which a

licensee that previously met the NRC’s

definition of an ‘‘electric utility’’ under

10 CFR 50.2 may, at some point, no

longer qualify for such status. At that

point, the NRC will require licensees to

submit proof pursuant to 10 CFR

50.33(f)(4) that they remain financially

qualified and will require them to meet

the more stringent decommissioning

funding assurance requirements of 10

CFR 50.75 that are applicable to nonelectric utilities.

Although new and unique

restructuring proposals will necessarily

involve case-by-case reviews by the

NRC, the NRC staff will advise the

Commission of such proposals so that

the Commission will have the option of

exercising direct oversight of such

reviews to maintain consistent NRC

policy toward new entities. As patterns

of restructuring begin to emerge, the

NRC will consider standardizing its

framework further to streamline, where

possible, its case-by-case review

process. The NRC has considered, and

will continue to consider mergers and

the outright sales of facilities, or

portions of facilities, to require NRC

notification and prior approval in

accordance with 10 CFR 50.80 in order

to ensure that the transferee or licensee

is appropriately qualified. For example,

in certain merger situations, the NRC

determines whether the surviving

organization will remain an ‘‘electric

utility’’ as defined in 10 CFR 50.2. If a

license applicant or a licensee fails to

meet this definition, the NRC will seek

additional assurance of financial

qualifications to operate and

decommission the facility pursuant to

10 CFR 50.33(f) and 50.75 and as

discussed in more detail in its SRP on

these subjects. The NRC has also

advised licensees that the formation of

holding companies requires notification

and approval pursuant to 10 CFR 50.80.

In consideration of these concerns,

the NRC will evaluate deregulation and

restructuring activities as they evolve.

Recognizing that the electric utility

industry is likely to undergo great

change, as restructuring progresses, the

NRC will continue to evaluate the need

for regulatory or policy changes to meet

the effects of deregulation. The NRC

will take all appropriate actions to carry

out its mission to protect the health and

safety of the public and, to the extent of

its statutory mandate, to ensure

consistency with Federal antitrust laws.

The NRC intends to implement

policies and take action as described in

this policy statement to ensure that its

power reactor licensees remain

financially qualified to ensure

continued safe operations and

decommissioning. In summary, the NRC

will—

• Continue to conduct its financial

qualifications, decommissioning

funding and antitrust reviews as

described in the SRPs developed in

concert with this policy statement;

• Identify all owners, indirect as well

as direct, of nuclear power plants;

• Establish and maintain working

relationships with State and Federal rate

regulators; and

• Reevaluate its regulations for their

adequacy to address changes resulting

from rate deregulation.

A. Adequacy of Current Regulatory

Framework

The NRC believes that its regulatory

framework is generally sufficient, at this

time, to address the restructurings and

reorganizations that will likely arise as

a result of electric utility deregulation.

Absent changes to the NRC’s regulatory

scheme, the NRC’s review process will

follow the current framework. The NRC

believes that its financial qualifications

requirements are sufficiently broad as to

provide an adequate framework to

adequately review new or unique

situations that are not explicitly covered

in 10 CFR 50.33(f) and appendix C to

part 50, for financial qualifications, and

in 10 CFR 50.75 for decommissioning

funding assurance. However, in order to

remove any ambiguities in its

regulations and to address those

situations that may not be adequately

covered under current regulations, the

NRC is considering rulemaking to revise

its decommissioning funding assurance

requirements, as described in Section

III.E. The NRC is evaluating whether

modification to its financial

qualifications regulations are warranted.

B. NRC Responsibilities Vis-a-Vis State

and Federal Economic Regulators

The NRC has recognized the primary

role that State and Federal economic

regulators have served, and in many

cases will continue to serve, in setting

rates that include appropriate levels of

funding for safe operation and

decommissioning. For example, the

preamble to the 1988 decommissioning

rule contained the following statement:

‘‘The rule, and the NRC’s

implementation of it, does not deal with

financial ratemaking issues such as rate

of fund collection, procedures for fund

collection, cost to ratepayers, taxation

effects, equitability between early and

late ratepayers, accounting procedures,

ratepayer versus stockholder

considerations, responsiveness to

change and other similar concerns

* * *. These matters are outside NRC’s

jurisdiction and are the responsibility of

the State PUCs and (the Federal Energy

Regulatory Commission) FERC’’ (53 FR

24018, June 27, 1988, at 24038).

Notwithstanding the primary role of

economic regulators in rate matters, the

NRC has authority under the AEA to

take actions that may affect a licensee’s

financial situation when these actions

are warranted to protect public health

and safety. To date, the NRC has found

no significant instances in which State

or Federal rate regulation has led to

disallowance of funds for safety-related

operational and decommissioning

expenses. Some rate regulators may

have chosen to reduce allowable profit

margins through rate disallowances, or

licensees have for other reasons

encountered financial difficulty.

In order for the NRC to make its safety

views known and to encourage rate

regulators to continue their practice of

allowing adequate expenditures for

nuclear plant safety as electric utilities

face deregulation, the NRC has taken a

number of actions to increase

cooperation with State and Federal rate

and financial regulators to promote

dialogue and minimize the possibility of

rate deregulation or other actions that

would have an adverse effect on safety.

The NRC intends to continue to work

and consult with the State PUCs,

individually or through NARUC, and

with FERC and other Federal agencies to

coordinate activities and exchange

information. However, the Commission

also reserves the flexibility to take

appropriate steps in order to assure a

licensee’s adequate accumulation of

decommissioning funds.

C. Co-Owner Division of Responsibility

Many of the NRC’s power reactor

licensees own their plants jointly with
Federal Register / Vol. 62, No. 160 / Tuesday, August 19, 1997 / Rules and Regulations 44077

3The NRC has had experience with three

licensees who have had much greater than de

minimis shares of nuclear power plants and who

filed under Chapter 11 of the U.S. Bankruptcy Code:

Public Service Company of New Hampshire

(PSNH), a co-owner and operator of the Seabrook

plant; El Paso Electric Company (EPEC), a co-owner

of the Palo Verde plant; and Cajun Electric Power

Cooperative (Cajun), a co-owner of the River Bend

plant. Both PSNH and EPEC continued their pro

rata contributions for the operating and

decommissioning expenses for their plants and

successfully emerged from bankruptcy. Cajun

remains in bankruptcy.

other, unrelated organizations. Although

some co-owners may only be authorized

to have an ownership interest in the

nuclear facility and its nuclear material,

and not to operate it, the NRC views all

co-owners as co-licensees who are

responsible for complying with the

terms of their licenses. See Public

Service Company of Indiana, Inc.

(Marble Hill Nuclear Generating Station,

Units 1 and 2), ALAB–459, 7 NRC 179,

200–201 (1978). The NRC is concerned

about the effects on the availability of

operating and decommissioning funds,

and about the division of responsibility

for operating and decommissioning

funds, when co-owners file for

bankruptcy or otherwise encounter

financial difficulty.3 The NRC

recognizes that co-owners and colicensees generally divide costs and

output from their facilities using a

contractually defined, pro rata share

standard. The NRC has implicitly

accepted this practice in the past and

believes that it should continue to be

the operative practice, but reserves the

right, in highly unusual situations

where adequate protection of public

health and safety would be

compromised if such action were not

taken, to consider imposing joint and

several liability on co-owners of more

than de minimis shares when one or

more co-owners have defaulted.

D. Financial Qualifications Reviews

The NRC believes that the existing

regulatory framework contained in 10

CFR 50.33(f) and in the guidance in 10

CFR Part 50, Appendix C, is generally

sufficient at this time to provide

reasonable assurance of the financial

qualifications of both electric utility and

non-electric utility applicants and

licensees under the various ownership

arrangements of which the staff is

currently aware. Licensees that remain

‘‘electric utilities’’ will not be subject to

NRC financial qualifications review,

other than to determine that such

licensees, in fact, remain ‘‘electric

utilities.’’ However, the NRC is

evaluating the need to develop

additional requirements to ensure

against potential dilution of the

capability for safe operation and

decommissioning that could arise from

rate deregulation and restructuring.

Section 184 of the AEA and 10 CFR

50.80 provide that no license shall be

transferred, directly or indirectly,

through transfer of control of the

license, unless the Commission

consents in writing. The NRC will

continue to review transfers to

determine their potential impact on the

licensee’s ability both to maintain

adequate technical qualifications and

organizational control and authority

over the facility and to provide adequate

funds for safe operation and

decommissioning. Such consent is

clearly required when a corporate entity

seeks to transfer a license it holds to a

different corporate entity. See Long

Island Lighting Co. (Shoreham Nuclear

Power Station, Unit 1) CLI–92–4, 35

NRC 69 (1992). The NRC staff has

advised licensees that agency consent

must be sought and obtained under 10

CFR 50.80 for the formation of a new

holding company over an existing

licensee. Other types of transactions,

including where non-licensee

organizations are proposed to have some

degree of involvement in the

management or operation of the plant,

have been considered by the staff on a

case-by-case basis to determine whether

10 CFR 50.80 consent is required. The

NRC is evaluating what types of

transfers or restructurings should be

subject to 10 CFR 50.80 review. The

NRC staff will inform the Commission

of unique or unusual licensee

restructuring actions.

E. Decommissioning Funding Assurance

Reviews

The NRC believes that the existing

decommissioning funding assurance

provisions in 10 CFR 50.75 generally

provide an adequate regulatory basis for

existing and possible new licensees to

provide reasonable assurance of

decommissioning funds. However, to

examine this and other issues related to

decommissioning funding assurance in

anticipation of rate deregulation, the

NRC published an ANPR (61 FR 15427,

April 8, 1996). The NRC is considering

a proposed rulemaking developed in

response to the comments received on

the ANPR. In addition, the NRC wishes

to emphasize that it retains the right to

assess the timing of decommissioning

trust fund deposits and withdrawals and

the liquidity of decommissioning funds

for those licensees that no longer have

rate regulatory oversight and insofar as

such timing would potentially impact

the protection of public health and

safety.

F. Antitrust Reviews

The NRC is statutorily required under

the AEA, in connection with an

application for a license to construct or

operate a facility under section 103, to

evaluate an applicant’s or a licensee’s

activities under the NRC license to

determine whether these activities

create or maintain a situation

inconsistent with the antitrust laws of

the United States. However, the NRC

will explore with FERC, SEC, and the

Department of Justice methods by which

the NRC can minimize duplication of

effort on antitrust issues, while

maintaining its statutory

responsibilities. The NRC will consider

seeking legislation eliminating its

review mandate to the extent that NRC

reviews are duplicated by other

agencies.

The NRC anticipates that competitive

reviews over the next 5 to 10 years will

arise primarily from changes in control

of licensed facilities. The regulatory

review addressing transfer of control of

licenses under 10 CFR 50.80 will be

used to determine whether new owners

or operators will be subject to an NRC

review with respect to antitrust matters.

Small Business Regulatory Enforcement

Fairness Act

In accordance with the Small

Business Regulatory Enforcement Act of

1996, the NRC has determined that this

action is not a ‘‘major rule’’ and has

verified this determination with the

Office of Information and Regulatory

Affairs, Office of Management and

Budget.

Electronic Access

The NRC electronic Bulletin Board

System (BBS) on FedWorld may be

accessed by using a personal computer,

a modem, and one of the commonly

available communications software

packages, or directly by way of Internet.

Background documents on the final

policy statement are also available, as

practical, for downloading and viewing

on the bulletin board.

If using a personal computer and

modem, the NRC subsystem on

FedWorld can be accessed directly by

dialing the toll-free number (800) 303–

9672. Communication software

parameters should be set as follows:

Parity to none, data bits to 8, and stop

bits to 1 (N,8,1). Using ANSI or VT–100

terminal emulation, the NRC subsystem

can then be accessed by selecting the

‘‘Rules Menu’’ option from the ‘‘NRC

Main Menu.’’ Many NRC subsystems

and databases also have a ‘‘Help/

Information Center’’ option that is

tailored to the particular subsystem.
44078 Federal Register / Vol. 62, No. 160 / Tuesday, August 19, 1997 / Rules and Regulations

The NRC subsystem on FedWorld can

also be accessed by a direct-dial

telephone number for the main

FedWorld BBS, (703) 321–3339, or by

using Telnet via Internet: fedworld.gov.

If using (703) 321–3339 to contact

FedWorld, the NRC subsystem will be

accessed from the main FedWorld menu

by selecting the ‘‘Regulatory,

Government Administration and State

Systems,’’ then selecting ‘‘Regulatory

Information Mail.’’ At that point, a

menu will be displayed that has an

option ‘‘U.S. Nuclear Regulatory

Commission,’’ which will take you to

the NRC on-line main menu. The NRC

On-line area also can be accessed

directly by typing ‘‘/go nrc’’ at a

FedWorld command line. If you access

NRC from FedWorld’s main menu, you

may return to FedWorld by selecting the

‘‘Return to FedWorld’’ option from the

NRC on-line main menu. However, if

you access NRC at FedWorld by using

NRC’s toll-free number, you will have

full access to all NRC systems, but you

will not have access to the main

FedWorld system.

If you contact FedWorld using Telnet,

you will see the NRC area and menus,

including the Rules menu. Although

you will be able to download

documents and leave messages, you will

not be able to write comments or upload

files (comments). If you contact

FedWorld using FTP, all files can be

accessed and downloaded but uploads

are not allowed; all you will see is a list

of files without descriptions (normal

Gopher look). An index file listing all

files within a subdirectory, with

descriptions, is available. There is a 15-

minute time limit for FTP access.

Although FedWorld can also be

accessed through the World Wide Web,

like FTP, that mode only provides

access for downloading files and does

not display the NRC Rules menu.

For more information on NRC bulletin

boards call Mr. Arthur Davis, Systems

Integration and Development Branch,

NRC, Washington, DC 20555–0001,

telephone (301) 415–5780; e-mail

AXD3@nrc.gov.

Dated at Rockville, Maryland, this 13th day

of August, 1997.

For the Nuclear Regulatory Commission.

John C. Hoyle,

Secretary of the Commission.

[FR Doc. 97–21879 Filed 8–18–97; 8:45 am]

BILLING CODE 7590–01–U

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 71

[Airspace Docket No. 97–AGL–2]

Removal of Class D Airspace;

Glenview, IL

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Final rule.

SUMMARY: This action removes Class D

airspace at Glenview, IL. This airspace

is removed due to the closing of the Air

Traffic Control Tower at Glenview Coast

Guard Air Field (CGAF), Glenview, IL.

The intended effect of this action is to

provide an accurate description of

controlled airspace for Glenview, IL.

EFFECTIVE DATE: 0901 UTC, September

18, 1997.

FOR FURTHER INFORMATION CONTACT:

Michelle Behm, Air Traffic Division,

Airspace Branch, AGL–520, Federal

Aviation Administration, 2300 East

Devon Avenue, Des Plaines, Illinois

60018, telephone (847) 294–7568.

SUPPLEMENTARY INFORMATION: .

History

On Monday, January 27, 1997, the

FAA proposed to amend part 71 of the

Federal Aviation Regulations (14 CFR

part 71) to remove Class D airspace at

Glenview, IL (62 FR 3840). The proposal

was intended to provide an accurate

description of controlled airspace for

Glenview, IL. Interested parties were

invited to participate in this rulemaking

proceeding by submitting written

comments on the proposal to the FAA.

No comments objecting to the proposal

were received. Class D airspace

designations are published in paragraph

5000 of FAA Order 7400.9D, dated

September 4, 1996, and effective

September 16, 1996, which is

incorporated by reference in 14 CFR

71.1. The Class D airspace designation

listed in this document will be

published subsequently in the Order.

The Rule

This amendment to part 71 of the

Federal Aviation Regulations (14 CFR

part 71) removes Class D airspace at

Glenview, IL. This airspace is removed

due to the closing of the Air Traffic

Control Tower at Glenview CGAF,

Glenview, IL. The intended effect of this

action is to provide an accurate

description of controlled airspace for

Glenview, IL.

The FAA has determined that this

regulation only involves an established

body of technical regulations for which

frequent and routine amendments are

necessary to keep them operationally

current. Therefore, this regulation—(1)

Is not a ‘‘significant regulatory action’’

under Executive Order 12866; (2) is not

a ‘‘significant rule’’ under DOT

Regulatory Policies and Procedures (44

FR 11034; February 26, 1979); and (3)

does not warrant preparation of a

Regulatory Evaluation as the anticipated

impact is so minimal. Since this is a

routine matter that will only affect air

traffic procedures and air navigation, it

is certified that this rule will not have

a significant economic impact on a

substantial number of small entities

under the criteria of the Regulatory

Flexibility Act.

List of Subjects in 14 CFR Part 71

Airspace, Incorporation by reference,

Navigation (air).

Adoption of the Amendment

In consideration of the foregoing, the

Federal Aviation Administration

amends 14 CFR part 71 as follows:

PART 71—[AMENDED]

1. The authority citation for part 71

continues to read as follows:

Authority: 49 U.S.C. 106(g), 40103, 40113,

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–

1963 Comp., p. 389.

§ 71.1 [Amended]

2. The incorporation by reference in

14 CFR 71.1 of the Federal Aviation

Administration Order 7400.9D, Airspace

Designations and Reporting Points,

dated September 4, 1996, and effective

September 16, 1996, is amended as

follows:

Paragraph 5000 Class D Airspace

* * * * *

AGLIL D Glenview, IL [Removed]

* * * * *

Issued in Des Plaines, Illinois on July 16,

1997.

Maureen Woods,

Manager, Air Traffic Division.

[FR Doc. 97–21863 Filed 8–18–97; 8:45 am]

BILLING CODE 4910–13–M

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 71

[Airspace Docket No. 97–AGL–12]

Establishment of Class E Airspace;

Ely, MN

AGENCY: Federal Aviation

Administration (FAA), DOT.