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[Federal Register Volume 66, Number 124 (Wednesday, June 27, 2001)]
[Notices]
[Pages 34293-34310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16104]

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NUCLEAR REGULATORY COMMISSION

Preliminary Impact Assessment of Nuclear Industry Consolidation 
onNRC Oversight: Request for Comments

AGENCY: Nuclear Regulatory Commission (NRC).

ACTION: Request for comments.

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SUMMARY: Economic deregulation of the electric utility industry has 
resulted in consolidation and restructuring of the nuclear power 
industry. The transformation of the once strictly regulated industry 
has led to separation of the generation, transmission and distribution 
sectors, corporate mergers and asset transfers, acquisitions by 
outright purchase, and a general transition to a nationwide competitive 
market. There have also been numerous nuclear power plant license 
transfer applications, which the NRC staff must review and approve 
before a license can be transferred to a new entity.
    The NRC staff has identified and performed a preliminary assessment 
of the impacts of nuclear industry consolidation on the NRC and whether 
the NRC needs to change its regulations, policies, processes, guidance, 
or organizational structure to continue to meet its strategic public 
health and safety goals. The initial object of this effort is to 
identify impacts that need to be considered further.
    The NRC staff has identified a number of consolidation and a few 
deregulation-related impacts on NRC oversight of the nuclear industry, 
grouped them by category, and performed preliminary impact assessments. 
The individual assessments follow this notice.
    The NRC staff requests comments and suggestions from stakeholders 
on the identified issues and the preliminary impact assessments. The 
NRC staff will consider all comments received. A public workshop will 
be held at NRC Headquarters in the October/November 2001 timeframe to 
discuss the regulatory oversight issues attendant to industry 
consolidation, the staff's preliminary impact assessments, and the 
comments received from the stakeholders. Notice of this workshop will 
be published at a later date. Commenters should indicate their interest 
in attending and participating in this workshop.
    The product of this effort will be staff recommendations of impacts 
that the Commission needs to consider further.

DATES: The comment period ends August 27, 2001. Comments received after 
this date will be considered if it is practical to do so, but the staff 
guarantees consideration only of comments received on or before this 
date.

ADDRESSES: Mail written comments to Chief, Rules and Directives Branch, 
Division of Administrative Services, Office of Administration, U.S. 
Nuclear Regulatory Commission, Washington, DC 20555-0001. Comments may 
also be sent by completing the online comment form at http://www.nrc.gov/NRC/REACTOR/CONSOLIMPACT/index.html.
    Deliver comments to Room 6D59, Two White Flint North, 11545 
Rockville Pike, Rockville, Maryland, between 7:30 a.m. and 4:15 p.m. on 
Federal workdays.
    For further information contact Herbert N. Berkow, Mail Stop O 8 H-
12, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory 
Commission, Washington, DC 20555; telephone (301) 415-1485 and e-mail 
at [email protected].

    Dated at Rockville, Maryland, this 20th day of June 2001.
    For the Nuclear Regulatory Commission.
Herbert N. Berkow,
Director, Project Directorate II, Division of Licensing Project 
Management, Office of Nuclear Reactor Regulation.

Industry Consolidation Preliminary Impact Assessments

Categorization of Industry Consolidation Issues

Category 1 Plant Operational Safety

Issue 1.a Possible Cost-cutting Initiatives
Issue 1.b Technology-related Issues
Issue 1.c Spent Fuel Storage and Transportation
Issue 1.d Low-Level Radioactive Waste Management
Issue 1.e Emergency Preparedness
Issue 1.f Reliable Off-site Power

Category 2 Licensing

Issue 2.a License Transfer Process
Issue 2.b New License Applications, Site Approvals, and 
Reactivations of Deferred Plants
Issue 2.c License Renewal
Issue 2.d NRC Organizational Structure

Category 3 Inspection, Enforcement, and Assessment

Issue 3.a NRC Reactor Oversight Process
Issue 3.b Other NRC Inspection Programs
Issue 3.c NRC Enforcement Program
Issue 3.d NRC Allegation Program

Category 4 Decommissioning

Category 5 External Regulatory Interfaces

Category 6 Fuel Cycle Facilities

Category 7 Financial

Issue 7.a Foreign Ownership
Issue 7.b License Fee Structure
Issue 7.c Insurance
Issue 7.d Joint and Several Regulatory Responsibility
Issue 7.e Bankruptcy Protection
Issue 7.f Financial Qualifications

Category 8 Non-NRC Regulatory Considerations

Issue 8.a Grid Stability/Reliability
Issue 8.b Antitrust Considerations

Issue Category: 1. Plant Operational Safety

Issue: 1.a Possible Cost-Cutting Initiatives

Discussion
    In a more consolidated, economically deregulated market, the 
nuclear power industry will be faced with new pressures to operate more 
efficiently. Cost controls could result in shorter outages (and thus 
longer run times), increased use of on-line maintenance, power uprate 
amendments, increased use of risk-informed technology and decisions and 
other changes that would result in lower costs and increased 
productivity.

[[Page 34294]]

    Consolidated licensees will also seek to achieve economies of 
scale, which is a major potential benefit of consolidation. This will 
likely be manifested in organizational changes, both at the plant and 
corporate levels, to combine duplicative functions, optimize staff 
size, standardize best practices, and centralize functions. 
Organizational and operational philosophies may also be influenced by 
the prerequisites of economic deregulation, which often require 
existing utilities to separate power generation from transmission and 
distribution functions. Consolidation and economic deregulation will 
likely result in increased efforts by licensees to seek reductions in 
unnecessary regulatory burden. Licensees may also seek reductions in 
licensing fees beyond that relief already provided by Congress.
Preliminary Impact Assessment
    Licensee efforts to operate more efficiently may result in net 
positive safety impacts. There is evidence, both domestic and foreign, 
to demonstrate that well run, efficiently operated plants are also the 
safest plants. Nevertheless, if carried to excess, cost-cutting 
measures to achieve short-term economic gains could result in longer-
term adverse safety performance impacts.
    Licensees are responsible to ensure that safety and regulatory 
compliance are not compromised by the industry goals to maximize 
operational efficiency and performance effectiveness. The NRC must stay 
focused on operational safety and have the capability to assess and 
react to industry activities in response to economic pressures that 
appear to have an adverse impact on safety. Augmented staff expertise 
beyond currently existing capabilities may be needed to effectively 
implement oversight responsibilities in the changing industry 
environment. The staff must assure that its safety assessment processes 
have adequate flexibility to detect and respond to adverse safety 
performance trends that result from competition-driven licensee 
actions. At the same time, the staff will have to remain sensitive to 
reducing unnecessary regulatory burden.
Recommended Followup
    Continued staff monitoring of experience and feedback from current 
oversight processes should provide early identification of issues 
related to economics-driven licensee actions that need to be addressed. 
This, in turn, will define any needed staff reaction. No other special 
followup effort is recommended at this time.

Issue Category: 1. Plant Operational Safety

Issue Title: 1.b  Technology-Related Issues

Discussion
    While technology and process advances have continued to be 
developed and introduced to the design and operation of licensed 
nuclear facilities, industry consolidation and economic deregulation 
may provide additional incentives for such advances.
    The NRC research-sponsored effort encompasses a variety of broad 
technological areas which may be involved in future developments 
related to industry consolidation and economic deregulation. The 
following are examples of such technological areas which the staff may 
have to deal with in the future.
    1. Fuel integrity must be addressed in an integrated fashion 
considering longer operating cycles, ultra-high fuel burnups, new 
cladding materials, power uprates, and changes to operational 
conditions such as may result from load following. A stronger, 
consolidated industry may see advantages to moving to a simpler 
performance-based assessment rather than the present design-based 
method.
    2. Human and organizational factors affected by industry 
consolidation and deregulation may need to be considered to address 
reduced staffing, modified maintenance strategies, and possible 
increased use of contractors.
    3. Introduction of new technologies, such as advanced information 
technologies, evolution of digital instrumentation and control systems 
in existing facilities, and development of new reactor concepts may 
require new regulatory approaches. These types of issues are also 
pertinent to Issue 2.b.
    The staff has on-going, or planned activities which will enable it 
to accommodate the technology-related issues arising from industry 
consolidation and deregulation. The following are examples of such 
activities:
    1. Development of risk-based performance indicators (RBPIs) could 
provide an additional tool with which to assess plant safety 
performance on a plant-specific as well as industry-wide basis. The 
RBPIs, if successfully developed, would provide broader coverage of 
risk than the current performance indicators and would allow a more 
detailed assessment of the root causes of problems, whether or not they 
are related to consolidation or deregulation. Also, plant-specific 
thresholds based upon risk could be established.
    2. Risk information is routinely used to assist in regulatory 
decisions regarding such issues as equipment and plant aging, fuel 
burnup and power uprates. The synergetic effects of such changes on the 
overall safety of operating plants may require re-evaluation of 
existing probabilistic risk assessments.
    3. Advanced information technologies are likely to be employed in 
emergency preparedness programs (Issue 1.e). Areas of potential 
interest are possible consolidation-related impacts on the 
communications infrastructure and integrity of data used for making 
decisions during emergencies.
    4. There is an increased focus on results-based regulatory 
decision-making. The staff has developed high-level guidelines for 
performance-based activities to facilitate implementation of such 
approaches while ensuring that adequate safety margins are maintained. 
Broader use of performance-based approaches may allow more direct 
observation of the effects of consolidation.
Preliminary Impact Assessment
    The technology-related aspects of many of the potential issues that 
may arise from industry consolidation and deregulation require that 
more experience and operational information be incorporated into the 
staff's evaluations. While the staff is alert to possible safety 
concerns, the expectation is that the changes will also bring about 
safety improvements. However, impact assessments are premature at this 
point. The work being conducted by the staff on issues relevant to 
industry consolidation and deregulation provides confidence that 
technical challenges can and will be met effectively.
    The generic issues program has dealt with a number of issues where 
safety considerations similar to those occurring with industry 
consolidation were addressed. A process exists for new information from 
industry consolidation to be fed back into the program and potentially 
trigger a re-evaluation of specific issues, if appropriate. So far, 
resolved issues in this area have not had to be re-evaluated, 
suggesting that the safety assessments conducted previously remain 
valid.
Recommended Followup
    As experience with industry consolidation is limited at this time, 
the emphasis should be on monitoring operational information and being 
alert

[[Page 34295]]

to indications of an unexpected nature. NRC should continue to monitor 
the changes occurring within the nuclear industry and take these 
changes into account when considering modifications to its research 
activities.

Issue Category: 1. Plant Operational Safety

Issue: 1.c  Spent Fuel Storage and Transportation

Discussion
    U.S. nuclear power plants were not designed to store all the spent 
nuclear fuel generated throughout their operating lives. To date, 
utilities have been coping with the lack of spent fuel storage capacity 
by expanding the capacity of spent fuel pools through redesign 
(reracking) and by constructing independent spent fuel storage 
installations (ISFSIs) for at-reactor, above ground, dry storage. Prior 
to the increase in industry consolidation activities, Private Fuel 
Storage L.L.C, a company owned by eight U.S. utilities, applied for a 
license to receive, handle, transfer, and store spent nuclear fuel from 
commercial nuclear power plants at a privately owned ISFSI. This away-
from-reactor ISFSI will be able to store as much as 40,000 MTU of spent 
fuel at one location. The purpose of the proposed facility is to 
satisfy the need for an interim storage facility that would serve as a 
safe, efficient, and economical alternative to continued spent fuel 
storage at reactor sites. NRC is aware of a potential application for a 
second away-from-reactor ISFSI (i.e., the Owl Creek site). As a result 
of industry consolidation and the good performance record of operating 
plants, it is expected that essentially all currently operating plants 
will seek license renewal. Since the availability of a permanent spent 
fuel repository is uncertain, there will likely be a need for 
additional temporary spent fuel storage as plants operate for extended 
lifetimes. At this point in time, it is premature to predict whether 
nuclear industry consolidation could increase the need to consolidate 
spent fuel storage either at selected reactor site ISFSIs or at new 
away-from-reactor ISFSIs. Further, there is no basis to say that 
consolidation will affect the amount of spent nuclear fuel that will 
need to be transported to or from reactor sites.
Preliminary Impact Assessment
    The NRC has been able to successfully address applications for new 
ISFSI licenses and new spent fuel storage cask designs, as well as 
applications to amend existing licenses and cask certifications. 
Consolidation could result in an increased number of amendments to 
existing ISFSI licenses (to increase storage capacity), applications 
for new site-specific ISFSI licenses, applications for away-from-
reactor ISFSIs, applications to amend existing Part 71 and 72 quality 
assurance programs, and amendments to existing certified cask designs 
(to permit storage of additional types of spent fuel and fuel with 
higher burnup). The staff currently interfaces with the licensees and 
industry groups (e.g., NEI) on a periodic basis to identify future 
submittals and thus aid in assessing future resource needs.
    Existing Part 71 and 72 regulations, policies, and guidance are 
sufficient to support nuclear industry consolidation.
Recommended Followup
    At this time, it appears that current ISFSI licensing and spent 
fuel storage cask certification regulations, policies, and procedures 
are sufficient to accommodate situations resulting from industry 
consolidation. Staff will continue to work with industry to obtain 
advance notice of future applications and thus predict future casework 
levels that may be generated by consolidations. Furthermore, there may 
be some unique, unanticipated circumstances that require changes to 
spent fuel storage or transportation policies or regulations. For 
either of these situations, the staff will utilize the PBPM process to 
address resource impacts or significant policy matters and make 
appropriate recommendations to NRC management.

Issue Category: 1. Plant Operational Safety

Issue: 1.d  Low-Level Radioactive Waste Management

Discussion
    Nuclear industry consolidation can affect how individual licensees 
address management of low-level wastes. Regulations applicable to waste 
management include operational radiation health and safety requirements 
applicable to all waste generator licensees and requirements for 
commercial facilities licensed to dispose of low-level radioactive 
wastes. The Low-Level Radioactive Waste Policy Amendments Act of 1985 
provides a process for siting new low-level waste disposal facilities. 
Regulations are also in place for transportation of low-level 
radioactive wastes. Policy guidance for implementing these regulations 
has been prepared and issued as standard format and content guides, 
standard review plans, and branch technical positions.
    Nuclear industry consolidation has the potential to strengthen low-
level waste management programs within licensee organizations by 
consolidating management of waste disposal activities. The Envirocare 
disposal facility in Utah currently negotiates disposal charges on a 
case-by-case basis. Therefore, consolidation may also reduce disposal 
costs through the negotiation of larger volume contracts. Additional 
cost savings could also be implemented through the potential use of 
licensees' own low-level waste volume reduction and processing systems 
that may become economical for a larger number of plants, rather than 
contracting for this service. The construction and use of new volume 
reduction and waste processing systems would generally be implemented 
through 10 CFR 50.59, without the need for a license amendment. 
Incineration, however, would require licensing pursuant to 10 CFR 
20.2004. Due to the controversial nature of incineration issues, 
intervention on any such license amendment applications would be 
likely.
    Most nuclear power plants have developed on-site storage facilities 
as a contingency in the event of short-term interruptions in disposal 
site availability, as has occurred in the past. Industry consolidation 
could allow more optimal use of these storage facilities. However, 
because nuclear power plants generally are not licensed to accept 
wastes from off-site, license amendments would be required to implement 
optimized storage programs among several nuclear power plant sites. 
Indeed, the staff recently issued a license amendment to TVA that 
allows them to store low-level waste from the Watts Bar facility at 
Sequoyah. There would also be a need for transportation of wastes from 
the point of generation to the centralized storage facility. Due to the 
controversial nature of waste management and transportation issues, 
intervention on any license amendment applications is a likelihood. 
Centralization of storage facilities could require that licensees 
increase tracking of the origin of the wastes to ensure that State and 
compact waste generator reporting requirements are met.
    There do not appear to be consolidation efforts among the low-level 
waste disposal licensees at this time. Programs at low-level waste 
facilities are driven primarily by external impacts (e.g., decisions 
related to the closure of the Barnwell low-level waste site) rather 
than by consolidation. Currently, all low-level waste disposal site 
facilities are located in and licensed by Agreement States, and there 
are no

[[Page 34296]]

new applications projected to be submitted to the NRC.
Preliminary Impact Assessment
    Regulations and policies addressing low-level waste management and 
transportation are sufficiently flexible to address license amendments 
to consolidate on-site storage operations or to use advanced volume-
reduction technology. Industry consolidation should have no impact on 
the availability of low-level waste disposal sites or programs for 
handling and processing mixed wastes. There does not appear to be a 
need to revisit the Low-Level Radioactive Waste Policy Amendments Act 
of 1985 based solely on industry consolidation impacts, although the 
lack of progress in opening new low-level waste disposal sites, as 
documented by the General Accounting Office, may require amendment of 
that statute. DOE and State projections of low-level waste generation 
may be affected by nuclear power plant license renewals that occur from 
industry consolidation.
Recommended Followup
    At this time, it appears that current low-level waste management 
regulations and policies are sufficiently flexible to accommodate 
situations resulting from industry consolidation. Therefore, industry 
consolidation appears to have no significant impact in the waste 
management area and no further effort is recommended. However, the NRC 
needs to consider the effects of license renewals when providing 
feedback on DOE and State projections of low-level waste generation.

Issue Category: 1. Plant Operational Safety

Issue: 1.e  Emergency Preparedness

Discussion
    Emergency preparedness (EP) programs, both on-site and off-site, 
are sensitive to the impacts of industry consolidation because of the 
dependence on relationships with State and local governments and 
facilities where the plants are located. Outcomes of industry 
consolidation have included centralization of staffs, functions, and 
facilities remote from individual site locations and the 
standardization of licensee EP programs and procedures. These outcomes 
can have both positive and negative impacts. Consolidation can 
strengthen licensees' programs or, conversely, create problems and 
deficiencies throughout multiple plant organizations or facilities. 
There are NRC staff resource implications and challenges to assure that 
regulations and policies continue to be satisfied and that the NRC's 
safety assessment processes provide sufficient focus on any proposed 
changes. Changes that impact offsite emergency preparedness are 
coordinated with the Federal Emergency Management Agency (FEMA) as well 
as affected State and local authorities.
Preliminary Impact Assessment
    The NRC must be alert to potential safety impacts of EP program 
changes resulting from consolidation. Industry consolidation already 
has resulted in some centralized Emergency Operations Facilities 
(EOFs), with the corporate headquarters serving as the location for and 
source of personnel to staff the EOF. Shared Emergency News Centers are 
another result of consolidation, with licensee corporate personnel 
staffing these facilities. Efficiencies can result when one EOF is 
capable of effectively serving multiple nuclear sites.
    Some concerns associated with centralized emergency preparedness 
facilities remote from the site area include the potential loss of 
expertise local to the facility and maintenance of local contacts with 
first responders. Corporate personnel may face challenges in 
maintaining knowledge of the plant(s), local organizations, and 
procedures. However, centralized, shared facilities and staffs can 
strengthen EP programs. Some communications capabilities have improved 
and the perception for the need for locating close to the site has been 
reduced in some locations. Consolidation of EOFs affecting multiple 
States and/or local authorities can present challenges in accommodating 
differences among these offsite entities and meeting the needs of local 
constituencies. A major factor in the location of the EOF is ensuring 
the capability for effective communication and response among the 
licensee, the State and local emergency response organizations, FEMA, 
and NRC relative to protective action decision-making and 
implementation of protective actions.
    Another area of potential impact is the incentive for increased use 
of standardized emergency response procedures across multiple reactor 
facilities. Standardized procedures have positive and negative aspects. 
They can result in a better procedure and the ability to cross-utilize 
staff at multiple facilities. However, a licensee may be more reluctant 
to modify standardized procedures for needed changes, due to the number 
of facilities affected by procedure changes and potentially increased 
training needs.
    NRC has reviewed industry requests for consolidation of emergency 
response facilities (ERFs), changes in emergency plans and procedures, 
Emergency Action Levels (EALs), and emergency organizations as a result 
of consolidation. The NRC evaluates proposals for centralized EP 
staffs, programs and facilities and, indeed, has approved such 
proposals in the past. Commission-level approval is required for 
centralized EOFs and EOFs located more than 25-miles from a nuclear 
power plant site. The NRC coordinates with FEMA and States when 
emergency planning changes are contemplated that affect offsite 
preparedness.
Recommended Followup
    Given the ongoing industry consolidation, the potential exists that 
owners of multiple facilities will continue to seek consolidation of EP 
program functions and organizations. The staff recommends that NRC 
staff resource implications and challenges be assessed and trended to 
assure that regulations and policies continue to be satisfied and that 
the NRC's safety assessment processes provide sufficient focus on 
emergency preparedness.

Issue Category: 1. Plant Operational Safety

Issue: 1.f  Reliable Off-Site Power

Discussion
    As described in Issue 8.a., the primary concerns that arise with 
respect to off-site power reliability are a result of economic 
deregulation rather than industry consolidation. Stability and 
reliability of off-site power is a significant safety consideration in 
the regulation of nuclear power plants. The primary reason is that off-
site power is the preferred source of electrical supply to operate 
decay heat removal systems. Hence, although highly reliable on-site 
emergency diesel generators will be available to assure capability to 
safely shut down the plant and provide for transfer of decay heat to 
the ultimate heat sink temporarily, a reliable off-site power supply is 
important for long-term safety. The NRC has a significant interest in 
monitoring challenges to the operation and management of the electric 
power grid so that appropriate actions can be taken to address concerns 
regarding reliability of off-site power.
    From the perspective of plant operational safety, the potential 
challenges to the reliability of off-site power affect the use of 
probabilistic risk analyses in safety related decision-making. 
Increasingly, both licensees and the NRC staff use PRAs for risk-
informed decision-making. Regulatory

[[Page 34297]]

Guide 1.174, ``An Approach for Using Probabilistic Risk Assessment in 
Risk-Informed Decisions on Plant-Specific Changes to the Licensing 
Basis'', provides the guidance needed for making licensing decisions 
using risk insights that may derive from the impacts of changes due to 
economic deregulation. New information based on grid experience after 
economic deregulation may have to be considered in estimating the 
frequency of initiating events where off-site power plays a role. Most 
of the information needed is likely to be readily available from the 
grid operators. This information is likely to be a part of submittals 
made by licensees in support of licensing actions.
    In recognition of the importance of assuring the stability and 
reliability of off-site power the industry, as well as the NRC, has 
implemented programs and other initiatives to address this challenge. 
The NRC issued Regulatory Issue Summary 2000-24 on the subject in 
December 2000. NEI and INPO sponsored a workshop on offsite power 
reliability in April 2001, in which NRC staff participated. In 1999, 
INPO issued SOER 99-1, which provides guidelines for good practices in 
support of grid reliability and is currently conducting an audit of 
licensees to determine the degree of conformance to these good 
practices.
Preliminary Impact Assessment
    Reliability of off-site power lately has been receiving 
considerable attention. The external stakeholders include other 
government agencies with regulatory responsibilities. Communication 
channels have been established with various stakeholders and are 
improving as experience is gained. The Institute for Nuclear Power 
Operations has developed the Equipment Performance and Information 
Exchange (EPIX) system, which should enable information needed to 
update PRAs to be easier to obtain.
    Relative to operational safety matters, the body of regulations 
currently in force provides for safe operation, shutdown, and decay 
heat removal from nuclear power plants. The established lines of 
communication with industry and other stakeholders, especially those 
concerned with economic deregulation, are expected to provide timely 
information if safety issues arise. In addition, the NRC has in place 
the needed infrastructure (such as a Memorandum of Understanding with 
the Electric Power Research Institute) to obtain and assess 
information, affecting off-site power reliability.
Recommended Followup
    The NRC should continue its ongoing efforts to monitor developments 
relative to grid operation. The monitoring should include keeping 
abreast of actions taken by other government agencies which may affect 
grid reliability, as well as nuclear power industry initiatives 
relative to assurance of grid reliability.

Issue Category: 2. Licensing

Issue: 2.a  License Transfer Process

Discussion
    The NRC responsibilities for the transfer of a license are set 
forth in 10 CFR 50.80, ``Transfer of Licenses.'' From 1998 through the 
present, the staff has received license transfer applications for about 
80 nuclear power reactor units. Most of the reviews for these 
applications have been completed except for a few that were submitted 
recently. Applications for transfer of a license include information on 
the identity and technical and financial qualifications of the proposed 
transferee, as well as any additional information that the Commission 
requires, such as radioactive material safeguards protection, and 
certain information related to the purpose of the transfer and the 
nature of the transaction necessitating the transfer. The NRC must 
obtain, review, and assess all relevant organizational and financial 
information associated with each license transfer to determine whether 
the proposed transferee is qualified and the transfer is otherwise 
consistent with the law and NRC regulations. Transfer of the license is 
by issuance of an order and, where necessary, a conforming amendment.
    A concern has been raised by some external stakeholders that once a 
licensee has decided to sell its nuclear plants that licensee may no 
longer have the incentive to invest in safety or maintenance 
improvements, or take necessary corrective action to address identified 
problems, pending transfer of responsibility and liability to the 
license transferee. The stakeholders' proposed resolution to this 
concern is that the NRC staff consider such indications in its license 
transfer reviews and make the correction of physical or performance 
problems a condition of transfer approval.
Preliminary Impact Assessment
    The staff believes that the current license transfer process is 
effective. It appears likely that license transfer applications will 
continue to be submitted, and completed transfers will continue to be 
reviewed for lessons learned to improve the effectiveness of the 
process.
    The concern that a licensee planning to sell its plant might no 
longer place a high priority on safety initiatives is accommodated by 
the staff's oversight process, as discussed in Issue 3.a. The NRC 
closely monitors the transfer process to ensure that NRC regulations 
and license requirements are met regardless of any pending sale. 
Further, the new license holder has a strong incentive to assure that 
the plant will meet NRC requirements upon completion of the transfer. 
Finally, it should be noted that the staff has had considerable 
experience with the license transfer process and has not seen any 
evidence to validate this concern.
Recommended Followup
    No special followup effort is recommended at this time.

Issue Category: 2. Licensing

Issue: 2.b  New License Applications, Site Approvals, and Reactivations 
of Deferred Plants

Discussion
    A consolidated nuclear power industry consisting of larger, 
financially strong nuclear operators is more likely to consider new 
plant applications, standard design applications, power uprates, 
reactivation of deferred plants, and site approval applications. There 
already is industry consideration of new reactor design applications 
(such as the pebble-bed-type standard design) within the next few 
years.
    With larger, more stable licensees, the costs associated with new 
nuclear power plant planning and construction can be more readily 
supported. These new units likely would serve as merchant power plants 
for the owner. New construction may also involve multiple corporations 
pooling their resources to build new facilities.
    The NRC has been monitoring industry activities in this area. The 
Commission has stated in COMSECY-00-0026 (REVISED FY 2000-2005 
STRATEGIC PLAN) that the staff has an important ongoing initiative to 
improve the regulatory infrastructure associated with new plant 
construction (10 CFR Part 52) and that improving this infrastructure 
should serve to improve the efficiency, effectiveness, predictability, 
and consistency of the combined license review process.
Preliminary Impact Assessment
    The staff will need to assure that the necessary staff resources, 
expertise, organizational infrastructure, review

[[Page 34298]]

processes, and guidance are available to support future activities in 
this area. In addition, current regulations and processes may need to 
be reviewed. New guidance may be needed on the scope of the review, as 
well as for antitrust and foreign ownership issues. Additional 
resources may need to be reassigned to support future staff action in 
this area. The Commission has directed the staff in COMJSM-00-0003, 
``Staff Readiness for New Nuclear Plant Construction and the Pebble Bed 
Reactor,'' to assess existing capabilities and identify needed 
enhancements to process an early site permit application, a license 
application, and construction of a new nuclear power plant. It also 
directed the staff to assess and identify needed enhancements to the 
regulatory infrastructure supporting applicable regulations, with 
emphasis on identification of regulatory issues and potential process 
improvements. In response to this directive, the staff has established 
a temporary Future Licensing Organization (FLO) within the Office of 
Nuclear Reactor Regulation. A principal function of the FLO is to 
coordinate an interoffice effort to assess the needed technical, 
licensing, and inspection capabilities to ensure that the agency can 
effectively carry out its future licensing activities.
Recommended Followup
    Renewed interest in new license applications is attributable, at 
least in part, to industry consolidation. The Commission and staff have 
had meetings with industry representatives who are formulating plans 
for possible site and plant license application submittals in the next 
few years. The staff already has initiatives underway to prepare for 
such submittals. These ongoing initiatives appear to be sufficient and 
should be responsive to industry developments and evolving plans. 
Because industry's interest in pursuing new licenses only recently 
materialized, the current FY2002 budget estimate does not provide 
sufficient resources to accommodate emerging work for potential new 
license applications. The FLO is developing updated budget assumptions 
and resource needs. No specific additional followup effort is 
recommended at this time.

Issue Category: 2. Licensing

Issue: 2.c  License Renewal

Discussion
    The number of future license renewal applications is expected to 
increase as a result of consolidation. Some reactors that were not 
considered to be candidates for license renewal could be reevaluated as 
a result of consolidation. With larger, more financially stable nuclear 
power plant owners, increased competition in power generation, and 
because of cost benefits, there will be increased incentive to extend 
the licenses of currently operating nuclear power plants. License 
renewal is seen by licensees as a cost-effective means of adding 
capacity. It is anticipated that virtually all of the currently 
operating plants will seek license renewal.
    The license renewal process for power reactors relies on a review 
of the licensing basis and plant design, scoping, and screening of 
structures and components that need to be subjected to an aging 
management review and evaluation of time-limited aging analyses.
Preliminary Impact Assessment
    The staff recognizes the potential resource impacts of the receipt 
of an increased number of license renewal applications, some of which 
may not have been in the planning assumptions. The NRC has published 
Regulatory Issue Summary 2000-20, which encourages licensees to inform 
the staff as soon as possible of their plans for license renewal. The 
staff uses the PBPM process to budget for applications for which the 
staff has been notified of submittal dates and to respond to emergent 
work. However, license renewal is a voluntary initiative and the 
decision to renew an operating license is largely a business decision 
over which the NRC has no control. In addition, a greater number of 
renewal applications could result in already established submittal 
dates being changed as consolidated licensees re-evaluate and re-
prioritize their license renewal plans.
Recommended Followup
    No special followup effort is recommended at this time. As 
consolidation progresses, the NRC should stay engaged with the industry 
as to changing license renewal plans and schedules and modify resource 
planning assumptions accordingly.

Issue Category: 2. Licensing

Issue: 2.d  NRC Organizational Structure

Discussion
    Traditionally, licensees have operated within limited geographical 
service areas and have had to interface with just one regional office 
and one headquarters project directorate. As a result of consolidation, 
some licensees may have to interact with as many as four regional 
offices and headquarters project directorates. This is likely to 
introduce management challenges, both for the staff and the licensees, 
especially with respect to consistent, coordinated, efficient, and 
effective regulatory oversight.
    The Commission stated in COMSECY-00-0026 (REVISED FY 2000-2005 
STRATEGIC PLAN) that the staff needs to assure that NRC stakeholders 
recognize the importance the Commission places on regional consistency 
and coordination. With deregulation proceeding in the electric industry 
and with continuing applications for license transfers, the NRC will 
see an increase in the number of cross-regional licensees. While 
consistency and coordination between and among headquarters and the 
regions have been high priorities for the NRC, the increase in cross-
regional licensees represents a growing challenge in these areas 
warranting greater management oversight.
Preliminary Impact Assessment
    The industry is currently in a state of transition and significant 
consolidation is relatively recent. Thus, it is premature to identify 
potential challenges to the current NRC organization, or to consider 
alternative organizational structures.
    With respect to the question of whether the existing regional 
boundaries and currently assigned licensee oversight responsibilities 
will facilitate efficient and effective regulation of those licensees 
that own and operate reactor facilities in multiple regions, the key is 
effective NRC management oversight to assure consistency in 
implementing its programs. Measures that have been developed to assure 
consistent application of oversight processes include various periodic 
meetings with regional and headquarters management to discuss program 
implementation issues, conducting annual self-assessments, development 
of metrics for inspection procedures, program office audits of regional 
inspection reports, and obtaining industry stakeholder feedback. 
Consistent application of the Significance Determination Process among 
regions will be particularly important. Increased communications, both 
formal and informal, among the respective regional staffs are necessary 
to share insights when programs and processes are transferred from one 
licensee to another. Increased communications and coordination among 
regional staffs may also result in a broader look at a particular 
performance issue.

[[Page 34299]]

Recommended Followup
    Within the next few years, the regional and headquarters staffs 
will gain significant experience in regulating and otherwise 
interacting with consolidated licensees. This experience should be 
monitored so that a meaningful assessment of the impacts of 
consolidation on the NRC organization can be made at the appropriate 
time.
    The recommended followup effort is to establish a consistent, 
agency-wide process to monitor and document relevant staff experience 
and stakeholder feedback and to establish meaningful assessment 
criteria for evaluating this experience and feedback. A principal 
objective of this effort should be an assessment of the impact of 
industry consolidation on both the efficiency and effectiveness of the 
agency's current organizational structure. Since there already are 
several cross-regional, consolidated licensees, this effort should be 
started in the near-term.

Issue Category: 3. Inspection, Enforcement, and Assessment

Issue: 3.a  NRC Reactor Oversight Process

Discussion
    In evaluating the potential impact of industry consolidation on 
effective implementation of the reactor oversight process (ROP), a 
number of issues need to be considered. One of the principal 
considerations is whether the ROP will provide the NRC with assurance 
that licensees are maintaining public health and safety in a 
consolidated/deregulated environment. The ROP is performance-based, 
meaning the level of NRC engagement is a function of licensee 
performance. It is also structured to be ``indicative'' rather than 
``diagnostic'', meaning the inspection and assessment processes within 
the ROP are designed to provide an indication of licensee problems, 
e.g., performance indicators (PIs) and associated thresholds, rather 
than to determine the specific root causes for issues of lesser 
significance. This raises the question of whether the ROP enables the 
NRC to address adverse performance trends that might result from 
consolidation-related cost-cutting initiatives, which could be driven 
by financial pressures, or non-conservative changes to corporate 
policies, programs, and procedures, before they evolve into significant 
safety issues.
    Industry consolidation could result in staffing reductions as 
licensees seek to increase their efficiency of operations by 
eliminating redundant functions and standardizing ``best practices''. 
If the staffing reductions are substantive, not targeted appropriately, 
and/or not managed well, problem identification and resolution 
functions could be impacted as key staff leave the company. Licensee 
efforts to increase operational efficiency could also result in changes 
to corporate policies, programs, and procedures. If these changes are 
non-conservative, the effectiveness of problem identification and 
resolution activities could be adversely affected. For example, a 
licensee could adopt a corrective action program with higher thresholds 
for initiating a root cause evaluation. This could result in more 
significant problems developing, as the root causes for lower level 
issues are not addressed. It is important to note that, while these 
postulated scenarios may be possible, experience to date with 
consolidated licensees has demonstrated that the opposite is true. 
Changes associated with the integration of individual facilities into a 
consolidated entities have generally been well managed and produced 
positive performance results.
    The current situation in California, where the Southern California 
Edison and Pacific Gas and Electric companies are facing substantial 
financial difficulties, has generated a number of questions regarding 
the NRC's role in ensuring public health and safety. The NRC conducted 
focused inspections at these facilities in response to this situation. 
These inspections revealed that there was no adverse impact on safety 
as a result of the financial difficulties. Nevertheless, significant 
financial pressures on a licensee could result in decisions to reduce 
the workforce, revise the scope of and/or delay planned maintenance and 
modification activities, shorten or delay plant outages, terminate 
licensing classes or training initiatives, etc. While these decisions 
would likely result in performance problems, it is not clear how 
significant those problems would be and in what time frame they would 
emerge. Assuming that some licensee decisions would have short-term and 
substantive effects on performance and given that the NRC focus is on 
safety performance, a critical question is whether the NRC's safety 
assessment processes are structured to ensure that the NRC will be made 
aware of these performance issues in sufficient time to engage the 
licensee with the appropriate focus. For those licensee decisions that 
provide short-term financial relief but have a longer-term impact on 
performance, the question is how significant the associated performance 
issues would be when they first surface.
    Another issue warranting consideration is whether the existing 
regional boundaries and currently assigned licensee oversight 
responsibilities will facilitate effective regulation, within the 
context of the ROP, for those licensees that own and operate reactor 
facilities in multiple regions (see Issue 2.d). Licensees that cross 
regional boundaries may present management challenges for the NRC with 
respect to consistency, coordination, and efficiency of oversight.
Preliminary Impact Assessment
    There are two scenarios which need to be considered in evaluating 
what impact industry consolidation might have on the effectiveness of 
the ROP. The first scenario relates to longer-term manifestation of 
licensee performance problems stemming from consolidation-related 
activities, and the second scenario involves safety performance 
problems deriving from licensee actions in response to financial 
pressures.
    Regarding the first scenario, one of the primary considerations is 
whether the ROP is conducive to identifying adverse performance trends 
that might result from consolidation-related activities such as cost-
cutting initiatives and non-conservative changes to corporate policies, 
programs, and procedures. The NRC must be able to engage a licensee to 
ensure the underlying performance deficiencies are appropriately 
addressed before these deficiencies evolve into significant safety 
issues that challenge public health and safety. Licensee performance 
issues, particularly those relating to human performance and the 
corrective action program, should become evident at a lower level of 
significance. This affords the licensee the opportunity to correct the 
issues before more significant NRC action is necessary due to elevated 
safety performance problems. As noted earlier, by design, the ROP is 
``indicative'' rather than ``diagnostic'', which means that as 
inspection findings and PIs become more safety significant, the ROP 
increases focus on why a particular performance problem has occurred. 
Thus, if a consolidation-related, cost-cutting initiative or non-
conservative changes in corporate policies, programs, and procedures 
result in a performance issue, that issue would likely surface 
initially as a finding of lesser safety significance. The licensee 
should then determine the extent of the condition and implement 
appropriate corrective action. Assuming that consolidation-related 
activities continue to create performance problems because the licensee 
has not addressed the root

[[Page 34300]]

causes for the issues of lesser significance, those problems should 
develop into more safety-significant issues. The NRC would then detect 
this adverse performance trend and engage appropriately. This is not to 
say that licensee performance problems could not initially be evident 
at a higher level of significance, but this should be the exception if 
the licensee is aggressively addressing its lower level issues.
    The corporate structure, ownership, and location of a particular 
plant should not impact the effectiveness of the ROP. While industry 
consolidation may offer efficiencies for the licensee, the assessment 
process under the ROP is based on performance results and not on how 
licensees gain efficiencies. Inspection activities under the baseline 
and supplemental inspection programs are sufficiently defined in terms 
of scope and objectives, that ownership or geographic location is not a 
factor in effective implementation of the inspection program. 
Similarly, the use of risk information to determine the safety 
significance of inspection findings by applying the Significance 
Determination Process (SDP) is independent of plant ownership or 
licensee size.
    In assessing overall licensee performance, the ROP uses PI 
information in conjunction with the significance of inspection 
findings. The degree of regulatory engagement is dictated by the 
results of this assessment through the Agency Action Matrix. Each 
licensee is expected to submit quarterly PI information to the NRC for 
each plant owned by that licensee. If a licensee, for some reason, 
elects not to submit PI data for a specific plant, then the ROP has 
provisions for additional inspection activities to obtain the 
information captured by the PIs in order to fully assess licensee 
performance. As the ROP is further refined, each licensee will be 
expected to implement associated changes, e.g., revisions to the PI 
reporting criteria, at each of its facilities.
    Regarding the second scenario, there is a concern among some 
stakeholders that a licensee, when faced with financial pressures, 
including potential bankruptcy, could make decisions that might have 
significant short- or long-term effects. With respect to substantial 
short-term effects, the question is whether the NRC's regulatory 
oversight framework, given its performance-based, indicative nature in 
contrast to a more diagnostic approach, could preclude the NRC from 
increasing the level of licensee oversight in a timely manner to assure 
that operational safety is being maintained. Rather than having a 
short-term impact, some licensee decisions to dramatically improve 
financial viability could generate performance issues that do not 
surface until several months after the decisions are implemented. These 
performance issues could be safety-significant, depending upon the 
activities affected by the financially-based decisions. While the NRC's 
limited experience with licensees facing financial pressures has not 
validated these concerns, it may be prudent for the NRC to adopt a 
preemptive approach by initiating a targeted inspection module to 
assess licensee response to financial pressures.
Recommended Followup
    The ROP is expected to be transparent to industry consolidation. 
However, the NRC currently has limited experience with the effects of 
industry consolidation on effective implementation of the ROP. With 
additional experience, changes that may be needed to the ROP should 
become evident. The annual self-assessment process built into the ROP 
should serve as a vehicle to evaluate any needed changes. The NRC staff 
should continue to monitor consolidation activities and use the ROP 
self-assessment process to periodically evaluate the effectiveness of 
the ROP in light of the changing industry environment.
    Further study should be initiated by the NRC to determine if an 
inspection module or ``contingency plan'' (similar to the ``strike 
contingency plans'' generated by some of the regional offices) needs to 
be developed to facilitate NRC evaluation of a licensee facing 
financial difficulties. This will help ensure that an enhanced level of 
NRC oversight is provided, if appropriate, in a timely manner to assure 
operational safety is being maintained, and that the longer-term 
performance impacts of licensee actions have been appropriately 
evaluated.

Issue Category: 3. Inspection, Enforcement, and Assessment

Issue: 3.b  Other NRC Inspection Programs

Discussion
    The NRC is in the process of developing revisions to the fuel cycle 
facility oversight process, including inspection, performance 
assessment, and enforcement. This process affects ten fuel cycle 
facilities: two gaseous diffusion plants, two highly enriched uranium 
fuel fabrication facilities, five low-enriched uranium fuel fabrication 
facilities, and one uranium hexaflouride production facility (See Issue 
Category 6). These facilities possess large quantities of materials 
that are potentially hazardous (radioactive, toxic, and/or flammable) 
to the workers, public, and environment. Similar to the reactor 
oversight process (ROP), the overarching objective in revising the fuel 
cycle facility oversight process is to establish a process that is more 
risk-informed and performance-based to focus on the more significant 
risks at fuel cycle facilities. The intent is to provide an objective 
and reliable basis for determining if a fuel cycle facility is safe and 
secure and to provide early indications of declining safety and 
safeguards performance.
    The staff has interacted with external stakeholders through several 
public meetings and exchanges of documents. A work plan for revision of 
the fuel cycle facility oversight process, which lists the priority, 
sequence, and schedules for completing the oversight program revisions 
has been issued for stakeholder comment.
    The NRC is also in the process of making the inspection program for 
independent spent fuel storage installations (ISFSIs) more risk-
informed and performance-based. This is being accomplished in a phased 
approach. The short-term phase involves risk prioritizing the existing 
inspection procedures using available risk/consequence information and 
an expert panel approach, and applying inspection resources 
commensurate with risk and the performance history of the licensee. The 
longer-term phase is conceptualized to more closely align with the 
risk-informed inspection approach of the ROP. This would involve 
completing a probabilistic risk assessment (PRA) for ISFSIs and then 
using the PRA results to develop an inspection program, which is based 
on performance indicators and a significance determination process, 
similar to the ROP.
Preliminary Impact Assessment
    Given that the fuel cycle facility oversight process is being 
revised using a framework similar to the ROP, it is reasonable to 
expect that the new oversight process will be able to accommodate 
potential impacts of consolidation (refer to Section 3.a. for a 
discussion of the impacts of industry consolidation on the ROP). In 
addition, the extensive outreach effort initiated by the NRC to 
exchange information and obtain stakeholder feedback provides an 
opportunity to discuss any expected impacts from the consolidation of 
fuel cycle facilities on the new oversight process. Similarly, since 
the ISFSI inspection program is being revised using a framework similar 
to the ROP,

[[Page 34301]]

it is reasonable to expect that the new program will be able to 
accommodate potential impacts of consolidation.
Recommended Followup
    No additional staff action beyond that recommended under Issue 6 is 
recommended at this time.

Issue Category: 3. Inspection, Enforcement, and Assessment

Issue: 3.c  NRC Enforcement Program

Discussion
    The NRC derives its enforcement authority from the Atomic Energy 
Act of 1954, as amended, and the Energy Reorganization Act of 1974, as 
amended. The NRC exercises its statutory authority to impose 
enforcement sanctions in accordance with its enforcement policy 
described in NUREG-1600, ``General Statement of Policy and Procedures 
for NRC Enforcement Actions''. Enforcement actions have been used as a 
deterrent to emphasize the importance of compliance with NRC 
requirements and to encourage prompt identification and prompt, 
comprehensive correction of violations of those requirements. 
Compliance with NRC requirements plays an important role in giving the 
NRC confidence that safety is being maintained. In the context of risk-
informed regulation, compliance also plays an important role in 
ensuring that key assumptions used in underlying risk and engineering 
analyses remain valid.
    With the development of the reactor oversight process (ROP), where 
the significance of individual non-compliance findings is evaluated 
using more objective criteria and the regulatory response to these 
findings is more predictable, the enforcement program was revised to 
better integrate with the ROP. This revision to the enforcement program 
consisted of categorizing violations into two groups. The first group 
consists of those violations that can be evaluated under the 
Significance Determination Process (SDP), with appropriate NRC action 
determined by the Agency Action Matrix. Issue 3.a. discusses the 
potential impacts of industry consolidation on the ROP. The second 
group includes violations related to willfulness, including 
discrimination; violations involving actual safety consequences, such 
as an overexposure to the public or plant personnel or a substantial 
release of radioactive materials; and violations that may impact the 
NRC's ability to oversee licensed activities. This issue discussion 
focuses on the impact of industry consolidation on the enforcement 
program as it pertains to violations in the second group.
    As noted in other issue discussions, licensee efforts to increase 
efficiency of operations could result in changes to corporate policies, 
programs, and procedures. Since consolidation results in more reactor 
facilities under a single licensee's control, corporate-wide changes 
affect more reactor facilities and more employees. Depending upon how a 
licensee manages these changes, there could be an increased number of 
allegations, although there has been no evidence of such a trend in the 
industry consolidation that has taken place to date. Similarly, efforts 
to increase operational efficiency or actions in response to financial 
pressures could result in staffing reductions which could lead to more 
discrimination complaints. Increased numbers of allegations would 
translate to an increased enforcement workload, assuming that the NRC 
substantiates some percentage of these allegations, in whole or in 
part, based on the results of its investigations.
    On the other hand, it is equally likely that consolidation may 
result in a reduced volume of enforcement actions because of stronger 
licensees and better managed regulatory programs. Staff experience to 
date with consolidated licensees has not shown any noticeable increases 
or decreases in discrimination complaints or other allegations or in 
related enforcement actions.
    While measures and processes have been established to assure 
consistent application of the enforcement program among the regions, 
e.g., audits, enforcement panels, counterparts meetings, etc., those 
inconsistencies in implementing the enforcement program that may exist 
will be more apparent to cross-regional licensees. These 
inconsistencies may involve different thresholds for issuing non-cited 
violations, distinguishing between minor and Severity Level IV 
violations, and reaching conclusions on alleged discrimination. This 
may necessitate more oversight from the Office of Enforcement to ensure 
similar issues are treated consistently among the regions.
    Another area potentially impacted by consolidation relates to the 
possible employment by a licensee of an individual who was terminated 
at one facility, based on poor performance or wrongdoing (whether or 
not the individual had been issued an NRC order prohibiting his 
involvement in licensed activities), at another facility if the second 
employer is unaware of the performance or wrongdoing problem at the 
first facility. This would be less likely to occur in a consolidated 
industry with fewer licensees.
Preliminary Impact Assessment
    The impact of industry consolidation on the NRC's enforcement 
program relates to implementation issues vice policy issues. It appears 
that the NRC can address these implementation issues within the context 
of the existing enforcement program framework/infrastructure. The 
Office of Enforcement may decide to increase its audit activities in an 
effort to minimize inconsistencies among the regions in implementing 
the enforcement program. More coordination and communication between 
the regions and program office can help assure that the same thresholds 
are applied for determining if discrimination violations occurred, as 
well as distinguishing between cited and non-cited violations and 
between minor and Severity Level IV violations. Regarding the potential 
increase in enforcement workload stemming from a greater number of 
technical allegations and discrimination complaints, this situation 
will need to be monitored to determine if additional resources are 
warranted.
Recommended Followup
    Experience with the effects of industry consolidation on effective 
implementation of the enforcement program is limited. The NRC should 
continue to monitor the enforcement workload associated with 
discrimination complaints and technical-related allegations to 
determine if industry consolidation activities are influencing this 
workload and make resource decisions based on the monitoring results. 
The Office of Enforcement should maintain its oversight activities of 
regional enforcement program implementation to minimize 
inconsistencies.

Issue Category: 3.  Inspection, Enforcement, and Assessment

Issue: 3.d  NRC Allegation Program

Discussion
    The allegation program was established to provide a mechanism for 
individuals to identify safety and regulatory issues directly to the 
NRC. An allegation is defined as a ``declaration, statement, or 
assertion of impropriety or inadequacy associated with NRC-regulated 
activities, the validity of which has not been established.'' The 
allegation program is structured to provide a comprehensive response to 
an alleger's concerns in a timely manner. It includes provisions to 
protect the identity of the alleger; to

[[Page 34302]]

provide timely resolution of the issues specific to an allegation; and 
to communicate the staff's understanding of those issues, status of the 
staff's review efforts, and ultimate resolution of the issues in a 
timely manner. Industry consolidation could potentially impact these 
and other aspects of the allegation program.
    As discussed in Issue 3.c., licensee efforts to increase efficiency 
of operations could result in changes to corporate policies, programs, 
and procedures. Since consolidation results in more reactor facilities 
under a single licensee's control, corporate-wide changes would affect 
more reactor facilities and more employees. The impact of these changes 
could result in larger numbers of allegations. Similarly, corporate 
cultural initiatives such as maintaining a safety conscious work 
environment (SCWE), could have a bigger impact on safety given the 
increased number of affected reactor sites. Additional NRC inspection 
may be necessary to evaluate whether a SCWE exists or was adversely 
affected by changes in corporate policies, programs, or procedures. In 
addition, reductions in licensee staff could result in an increased 
number of discrimination allegations.
    As is the case with enforcement actions (Issue 3.c), it is equally 
likely that consolidation may result in a reduced number of allegations 
because of stronger licensee management and more effective regulatory 
programs. However, staff experience to date with consolidated licensees 
has not shown any noticeable increase or decrease in allegations.
    Under the current program, the NRC may elect to refer a particular 
allegation to the licensee for evaluation with the licensee reporting 
back to the NRC on the results of its review, or decide to conduct an 
independent inspection to determine the validity of the allegation. If 
a consolidated licensee crosses regional boundaries, absent some 
coordinating efforts on the part of the NRC, one regional office could 
decide to follow up an allegation with inspection to protect the 
alleger's identity, while another regional office could decide to refer 
a similar allegation from another employee to the licensee for 
followup. With different approaches to following up on similar 
allegations, NRC staff in the respective regions may reach a different 
conclusion on the validity and disposition of the allegation issues, 
although this is unlikely. These and other potential inconsistencies in 
implementing the allegation program would be more apparent to cross-
regional licensees.
    The roles and responsibilities of NRC staff in implementing the 
allegation program are another area potentially impacted by 
consolidated licensees that cross regional boundaries. If the NRC 
receives an allegation concerning a programmatic issue which cross-cuts 
regional boundaries because it pertains to activities at multiple sites 
in different regions, there must be a standard method for determining 
which NRC organization would take the lead for followup.
Preliminary Impact Assessment
    While industry consolidation may impact some aspects of the NRC's 
allegation program, as described above, the impact relates to 
implementation issues vice policy issues. It appears that the NRC can 
address these implementation issues within the context of the existing 
NRC allegation program framework/infrastructure. For example, NRC 
follow-up action to address similar allegations received in different 
regions, stemming from corporate-wide changes to policies, programs, 
and procedures, may require coordination of efforts among regional 
offices to ensure consistency and alleger identity protection. 
Allegations involving programmatic issues which cross-cut regional 
boundaries, i.e., pertain to activities at multiple sites in different 
regions, can be effectively addressed by defining which internal NRC 
organization has the lead responsibility for follow-up. The potential 
increased number of allegations, including those involving 
discrimination complaints, as well as increased inspection activities 
to validate corporate cultural issues, e.g., SCWE, may require 
additional resources dedicated to the allegation program.
Recommended Followup
    While experience to date with the effects of industry consolidation 
on effective implementation of the allegation program is limited, there 
appears to be the need for developing guidance to assure consistent 
treatment of similar allegations received in different regions, and to 
define which organization should take the lead in addressing 
programmatic issues that cross-cut regional boundaries. In addition, 
the NRC should continue to monitor the number of allegations received 
to determine if industry consolidation activities are influencing this 
workload, through an increased or decreased number of allegations, and 
make resource decisions based on the results of this monitoring.

Issue Category: 4.  Decommissioning

Discussion
    Nuclear industry consolidation can affect individual licensee 
decommissioning planning, financial assurance, and schedules for 
dismantling power reactor and fuel cycle facilities. Regulations 
applicable to decommissioning include radioactivity cleanup criteria 
for unrestricted and restricted release, financial assurance that funds 
will be available to decommission the site, decommissioning planning, 
and procedures for submitting applications requesting license 
termination. Decommissioning policy guidance for implementing the above 
regulations has been prepared and issued as standard format and content 
guides and standard review plans.
    The potential impacts from nuclear industry consolidation on 
decommissioning planning, scheduling, and funding can vary. The most 
likely outcome is that industry consolidation will strengthen licensee 
business conditions to encourage license renewal or avoid early license 
termination. For example, strengthened business conditions from 
consolidation have allowed power reactor licensees to continue 
operations at some plants (e.g., Oyster Creek) that were previously 
being considered for decommissioning. Consolidation has and will likely 
continue to result in an increased interest in license renewal. Actions 
that extend the operation of nuclear power plants will, in general, 
increase the available time to fund decommissioning if sinking funds 
are used.
    Consolidation may also result in decommissioning schedule stretch-
outs to accommodate consolidated company-wide decommissioning programs. 
Licensees may seek process and funding alternatives not specifically 
addressed or allowed in current regulations, and possibly request an 
increased number of exemptions. Licensees may also seek financial 
assurance rule changes to allow stretch-outs in the time required to 
fully fund decommissioning trusts, on the basis that consolidated 
decommissioning schedules can reduce the need for full funding if plant 
dismantlement will take place further in the future. Adverse impacts of 
delaying decommissioning include uncertainties in the availability of 
future low-level waste disposal sites that could result in higher 
decommissioning costs and the possible lack of licensed disposal 
facilities at the time decommissioning activities take place.
    Nuclear power plant licensees that are no longer rate-regulated are 
required by

[[Page 34303]]

the NRC's regulations to provide means of assuring any estimated 
unfunded decommissioning cost through some surety, insurance, or 
equivalent method. The staff evaluates such changes either through 
license transfer applications pursuant to 10 CFR 50.80 or through 
biennial reports on decommissioning funding status required to be 
submitted by licensees.
Preliminary Impact Assessment
    License termination regulations apply to planned and premature 
decommissioning activities. Because regulations allow nuclear power 
plant licensees 60 years after permanently ceasing operations to 
complete decommissioning, there is substantial flexibility already 
allowed for consolidated utilities to delay decommissioning to take 
advantage of operational efficiencies. NRC staff has been able to 
successfully address cases involving immediate dismantlement, partial 
dismantlement, and delayed decommissioning alternatives.
    Fuel cycle facility license termination regulations do not allow 
delayed decommissioning because studies have shown that delaying 
decommissioning of these facilities does not have a financial or 
radiological safety benefit. Thus, fuel cycle facility shutdowns due to 
industry consolidation efforts do not appear to introduce unique 
circumstances that require new license termination processes.
    Power reactor decommissioning financial assurance regulations allow 
the use of sinking funds where licensees are either rate-regulated or 
can recover costs through the rate base (currently all States allow 
recovery of decommissioning costs through various rate base mechanisms; 
otherwise, full funding or guarantee of full funding would be required 
under NRC regulations). In premature decommissioning cases, full 
funding may not be available at the time of shutdown. However, 
experience with actual cases has not identified unresolvable funding 
issues. Reviews of power reactor licensee ownership changes include 
consideration of decommissioning funding. No decommissioning regulation 
or policy changes, other than the rulemaking to standardize trust fund 
provisions currently underway, appear necessary at this time to reflect 
industry consolidation impacts.
    Fuel cycle licensee decommissioning financial assurance regulations 
should not be affected by industry consolidation because the 
regulations ensure that full funding would be available if a licensee 
is unable to complete decommissioning, for example due to bankruptcy or 
premature shutdown.
Recommended Followup
    At this time, it appears that current decommissioning regulations 
and policies are sufficiently flexible to accommodate situations 
resulting from industry consolidation. Therefore, industry 
consolidation appears to have no significant impact in the 
decommissioning area and no further effort is recommended. Some unique, 
unanticipated circumstances may arise in the future that result in 
requests for exemptions or require changes in decommissioning 
regulations or policies. For these situations, staff will continue to 
identify significant policy matters and make appropriate 
recommendations to NRC management.

Issue Category: 5.  External Regulatory Interfaces

Discussion
    The Commission issued the ``Final Policy Statement on the 
Restructuring and Economic Deregulation of the Electric Utility 
Industry'', 62 Fed. Reg. 44071 on August 19, 1997. The policy statement 
established the NRC's expectations for, and intended approach to, power 
reactor licensees as the electric utility industry moved from an 
environment of rate regulation toward greater competition. In its 
policy statement, the Commission anticipated changes, including 
consolidation, in the electric utility industry. The policy statement 
states:

    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\
---------------------------------------------------------------------------

    \1\ Section 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.''

    In its policy statement, the Commission 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. The NRC took 
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 policy further elaborated on NRC's intent 
to continue to work and consult with the State public utility 
commissions, individually or through the National Association of 
Regulatory Utility Commissioners (NARUC), and with the Federal Energy 
Regulatory Commission (FERC) and other federal agencies to coordinate 
activities and exchange information. This increased level of 
interaction and consultation has also been beneficial to the NRC in 
industry consolidation efforts.
    Several regulatory agencies at the federal and State level have 
jurisdiction over, or interest in, nuclear industry consolidation. 
Issues concerning nuclear industry consolidation and license transfers 
(see Issue 2.a.) involve a number of entities besides the NRC, 
including, as appropriate, State public utility commissions, the 
Department of Justice (DOJ), FERC, the Securities and Exchange 
Commission (SEC), and the Federal Trade Commission (FTC).
    Traditionally, State public utility commissions have had 
jurisdiction over electric utilities with the general responsibility to 
assure safe, reasonable and adequate service at rates which are just 
and reasonable to customers and the utilities. DOJ is responsible for 
maintaining competitive markets by enforcing federal antitrust laws. 
Among other things, FERC has responsibility for regulating the 
transmission and sale of wholesale electricity. SEC administers federal 
securities laws that seek to provide protection for investors and to 
ensure that securities markets are fair and honest. The role of the FTC 
is to maintain the competitive enterprise and to prevent the free 
enterprise system from being fettered by monopoly or restraints on 
trade or corrupted by unfair or deceptive trade practices. The NRC has 
worked with FERC, SEC and DOJ to develop methods by which the NRC can 
minimize the duplication of effort on antitrust reviews and still carry 
out its statutory responsibilities. For example, NRC recently amended 
its regulations to clarify that it will no longer require owners of 
operating nuclear power plants to include

[[Page 34304]]

antitrust information in license transfer applications, eliminating 
duplication of a review performed by other federal and State agencies. 
However, NRC continues to require antitrust information for new license 
applications (see Issue 8.b.). NRC is supporting legislation to 
eliminate its antitrust review mandate. Other such jurisdictional 
issues (i.e., antitrust and merger reviews by multiple jurisdictions) 
between regulatory authorities may emerge as a result of further 
industry consolidation.
    In addition, industry consolidation may affect NRC's interfaces 
with other federal and or State agencies having collateral 
jurisdiction, responsibility or interest in nuclear licensees. 
Potential consolidation issues discussed elsewhere in this document 
have external regulatory interface elements. These issues include: 
high-level radioactive waste and low-level radioactive waste management 
(see Issue 1.d.--Department of Energy (DOE), Environmental Protection 
Agency (EPA) and State agencies), spent fuel storage and transportation 
(see Issue 1.c.--DOE, Department of Transportation and State agencies), 
decommissioning (see Issue 4.--EPA and State agencies) emergency 
preparedness (see Issue 1.e.--Federal Emergency Management Agency and 
the associated State agencies) and grid stability and reliability (see 
Issues 1.f. and 8.a.--DOE and FERC).
    Nuclear industry consolidation may also have additional impacts on 
NRC's interactions with external regulatory agencies. For example, new 
license applications (see Issue 2.b.) and license renewals (see Issue 
2.c.) require consultation or interaction with a number of federal, 
State and local governmental agencies in the preparation of the 
environmental impact statement. In the event of bankruptcy (see Issue 
7.e.), to ensure that NRC's interests and responsibilities and a 
licensee's obligations with respect to public health and safety are 
properly recognized, NRC would ask DOJ to intervene on behalf of the 
NRC in any bankruptcy proceeding.
Preliminary Impact Assessment
    As identified in the Commission's policy statement, the NRC took a 
number of actions to increase cooperation with State and federal rate 
and financial regulators to minimize the possibility that rate 
deregulation or other actions would have an adverse effect on safety. 
This open dialogue with these regulators has been helpful in minimizing 
potential adverse effects on nuclear safety as a result of electric 
utility industry deregulation and restructuring by assuring appropriate 
levels of funding for safe nuclear power plant operation and 
decommissioning. As electric utility industry consolidation continues, 
a reassessment may be needed of its impact on NRC's interfaces with 
other regulatory bodies at the federal and State levels in approving 
license transfers.
Recommended Followup
    There does not appear to be a need for any additional near-term 
action to address the potential impacts of industry consolidation on 
NRC's external regulatory interfaces. However, NRC interaction and 
dialogue with other federal and State regulatory authorities, including 
national associations representing these authorities, as well as 
foreign regulatory authorities, should continue in order to identify 
emerging policy issues related to new trends in industry consolidation. 
In addition, NRC should continue to consult with its stakeholders to 
identify emerging policy issues that could affect NRC's interfaces with 
other State and federal regulatory bodies in approving license 
transfers.

Issue Category: 6.  Fuel Cycle Facilities

Discussion
    Industry consolidation activities are occurring throughout the 
entire fuel cycle as global market conditions become more competitive 
and force companies to eliminate excess capacity and less economically 
beneficial operations. Consolidation of fuel cycle facilities has 
occurred in the past, as most recently experienced in the Westinghouse 
and ABB merger, which is resulting in the closure of the former ABB 
fuel fabrication operation (CE Nuclear Power) in Hematite, MO. Other 
significant past consolidations include Westinghouse and BNFL, 
Framatome's purchase of the B&W fuel operation, and the reorganization 
of GE with its Japanese shareholders to create Global Nuclear Fuels 
(GNF).
    Even in light of this recent flurry of consolidations within the 
nuclear fuel cycle, this consolidation trend appears to be continuing. 
The staff is currently reviewing an application for the transfer of 
ownership and control of a materials license as a result of the planned 
merger of the world-wide nuclear businesses of Siemens AG (Siemens) and 
Framatome S.A. (Framatome). Also, information from licensees indicates 
that the Honeywell facility will be acquired by General Electric; and 
the fact that the United States Enrichment Corporation (USEC) is 
planning on closing portions of the enrichment cascade at the 
Portsmouth Gaseous Diffusion Plant and turning them over to the 
Department of Energy within the next year, coupled with the expiration 
of USEC stock ownership restrictions in July 2001, may make them a 
target for acquisition. In addition, due to low uranium market prices, 
uranium mining and milling companies throughout the world are 
discussing consolidation, which may lead to further consolidation or 
possible closure of U.S. fuel cycle facilities that are not fiscally 
viable under increased global competition. New construction may also 
involve multiple corporations pooling their resources to build new fuel 
facilities, as evidenced by Duke, Cogema, and Stone & Webster's plan to 
build a mixed oxide (MOX) fuel fabrication facility at the Savannah 
River site.
    All commercial nuclear fuel facilities in the United States are 
required to be licensed or certified by the NRC. Existing domestic fuel 
facilities are divided into three groups: those that involve the 
processing of uranium ore into uranium hexaflouride (UF6); 
those that enrich the UF6 in the \235\ U isotope; and those 
that fabricate enriched uranium into nuclear reactor fuel. The NRC 
issues and maintains licenses or certificates for fuel facility 
operators to authorize their possession and use of source, special 
nuclear, and byproduct material in accordance with the requirements 
promulgated in 10 CFR Parts 40, 70, 73, 74, and 76 upon NRC approval of 
the license or certificate applications. Certain facilities are also 
subject to Agreement State regulation for source and byproduct 
materials.
    The potential impacts from further fuel cycle industry 
consolidation will depend on the licensee and the objectives of the 
consolidation. In cases where a consolidated facility can operate in a 
more profitable environment, license renewal applications may be 
submitted to the NRC. Recent inquiries during the ongoing Siemens/
Framatome merger indicate that the consolidated company may want to 
license both facilities under one license, thereby avoiding an 
additional license fee. Staff is currently preparing a Commission paper 
that describes the NRC fee methodology and associated constraints on 
agency action in order to reduce unnecessary burden, while making 
regulatory improvements, especially for a declining licensee 
population. In other cases, the economics of the newly formed 
conglomerate may lead to facilities closing down, as in the case of the 
Westinghouse/CE Hematite merger, which would require decommissioning on 
an earlier schedule than previously forecasted.

[[Page 34305]]

    In addition, the staff is currently considering whether to realign 
the fuel cycle inspection program partly because of the trend in 
industry consolidation, but also to attain improved efficiency and 
effectiveness. This may involve a range of options, including 
consolidation of the program in a region, consolidation within NMSS, or 
maintenance of the status quo.
Preliminary Impact Assessment
    The NRC has addressed fuel cycle consolidations in the past, and in 
all cases the existing regulations and NRC staff resources have been 
sufficient to ensure the safety of the facilities involved in the 
mergers. However, due to the consolidation and decommissioning of fuel 
cycle facilities, there is now only one domestic source of uranium ore 
conversion to UF6 (Honeywell), and within the next fiscal 
year there will only be one domestic source of UF6 
enrichment (Paducah Gaseous Diffusion Plant). If either of these plants 
were to close, there could be significant impact on the three remaining 
civilian nuclear fuel fabricators, and likewise on the entire nuclear 
industry due to domestic fuel unavailability.
    Although the fuel fabrication field has become fairly narrow, with 
only a handful of fuel cycle facilities now in operation, further 
consolidation of companies is not out of the question. The 
international conglomerates BNFL and Cogema have been aggressively 
acquiring a wide range of fuel cycle operations around the world, which 
would seem to indicate that they intend to become the predominant 
companies in the marketplace. Although foreign ownership and transfer 
of companies is not uncommon in the fuel cycle, complete reliance on 
foreign sources for nuclear fuel may need to be addressed. This may 
have national security implications, as noted by Congress and by the 
FY2001 Energy and Water Appropriations Act, which required DOE to 
assess the implications for uranium conversion and enrichment.
    There are other impacts of fuel cycle facility industry 
consolidation on NRC oversight and regulation of the industry. For 
example, although the Commission approved staff plans to proceed with a 
rulemaking to establish a stand-alone, risk-informed, and performance-
based rule for uranium recovery in August 2000, because the number of 
facilities to which the rule would apply has reduced significantly 
since the staff originally made the recommendation, and the potential 
future for uranium recovery is bleak over the next several years, the 
Commission has directed the staff to develop guidance rather than 
rulemaking.
Recommended Followup
    Many of the impact assessments discussed in other areas are 
applicable to licensed fuel cycle facilities as well as licensed 
reactor sites. NRC experience in handling past and pending 
consolidations within the fuel cycle industry has demonstrated that the 
existing regulations, guidance, and processes have been able to handle 
the various consolidation efforts. No obvious impacts from industry 
consolidation were identified that could affect the staff's future 
ability to regulate fuel cycle facilities. However, two followup 
efforts are recommended. Staff should consider options to consolidate 
the fuel cycle inspection program, in parallel with efforts to revise 
the oversight process and the ongoing Phase II Byproduct Materals 
Review. Staff should also stay aware of pending competition-related 
business decisions by licensees such as those to shut down portions of 
operations and outsource that work, similar to what is currently 
happening at Global Nuclear Fuels-Americas, which is shutting down its 
uranium recovery circuit and is planning on sending their waste for 
processing by other facilities. This is to enable the staff to plan for 
the necessary resources to process the licensing actions that may 
follow such decisions.

Issue Category: 7.  Financial

Issue: 7.a  Foreign Ownership

Discussion
    This issue addresses potential unique concerns associated with 
foreign ownership of reactor facilities that might occur as a result of 
industry consolidation.
    The Atomic Energy Act of 1954, as amended, and the NRC's 
regulations in 10 CFR 50.38 provide that any person who is a citizen, 
national, or an agent of a foreign country, or any corporation, or 
other entity which the Commission knows or has reason to believe is 
owned, controlled, or dominated by an alien, a foreign corporation, or 
a foreign government, shall be ineligible to apply for and obtain a 
license. The NRC staff evaluates license transfer applications that 
involve foreign ownership considerations by using the Final Standard 
Review Plan (SRP) on Foreign Ownership, Control, or Domination, which 
was issued on September 28, 1999. In addition, the NRC is required to 
make a finding that the approval and issuance of a licensing action, 
including license transfers, would not be inimical to the common 
defense and security of the United States.
    Ownership of domestic operating nuclear power plants has been 
explored by several foreign utilities. One joint venture, AmerGen, was 
formed to buy domestic nuclear power plants. This venture was 
structured as a joint partnership with a U.S. utility owning 50% and a 
foreign entity owning 50%.\2\ Based on a ``negation action plan'' 
developed pursuant to the SRP to mitigate foreign ownership, control, 
or domination, the NRC found that the foreign partner did not control 
or dominate the safety-related decision making related to the plant. 
Based on this assessment, the NRC was able to approve AmerGen's 
purchase of Three Mile Island, Unit 1, as well as subsequent license 
transfers involving AmerGen. The NRC has similarly analyzed proposals 
by other entities with some degree of foreign involvement. As industry 
consolidation progresses, it is anticipated that there will be 
additional situations in which foreign organizations seek to acquire 
domestic nuclear power plants and domestic utility organizations. 
However, the Atomic Energy Act significantly inhibits any foreign 
acquisitions and the NRC's review will be performed within these 
constraints as reflected in the Commission's regulations and the SRP. 
Since 1999, the Commission has developed and submitted proposed 
legislation that would remove restrictions on foreign ownership. 
Senator Domenici has introduced in the current session of Congress, S. 
472, ``Nuclear Energy Electricity Assurance Act of 2001,'' which, among 
other things would eliminate the foreign ownership restrictions for 
nuclear power plants.
---------------------------------------------------------------------------

    \2\ Other than 100 percent ownership by a foreign entity of a 
U.S. nuclear reactor, there is no pre-established limit above which 
foreign ownership would be absolutely prohibited.
---------------------------------------------------------------------------

Preliminary Impact Assessment
    Industry consolidation is not likely to have an impact on the 
complexity of the NRC's process for evaluating foreign ownership, 
control, or domination. An applicant for several plant licenses would 
be required to meet the same standards as a single-plant applicant to 
address any foreign ownership, control, or domination issues in a 
negation action plan pursuant to the SRP. For example, AmerGen has 
bought three U.S. nuclear plants so far and has bid on several others. 
The NRC's review of AmerGen's additional acquisitions essentially 
followed the same template laid out in AmerGen's initial acquisition. A 
suitable negation action

[[Page 34306]]

plan would also likely allow the NRC to make its required findings.
    At this time, it appears that current financial regulations and 
policies are sufficiently flexible to accommodate situations associated 
with foreign ownership resulting from industry consolidation, within 
the provisions of current law.
Recommended Followup
    No further effort is recommended at this time.

Issue Category: 7.  Financial

Issue: 7.b  License Fee Structure

Discussion
    Since FY 1991, the NRC has been required by the Omnibus Budget 
Reconciliation Act of 1990 to recover approximately 100 percent \3\ of 
its budget, less any amount appropriated to the Commission from the 
Nuclear Waste Fund and the General Fund, by assessing fees. 
Additionally, in recent Appropriations Acts, Congress has permitted NRC 
to perform certain limited activities that are not subject to fee 
recovery.
---------------------------------------------------------------------------

    \3\ In order to address fairness and equity concerns related to 
charging NRC licensees for agency expenses that do not provide a 
benefit to the licensee, the FY 2001 Energy and Water Development 
Appropriations Act requires that 98 percent of the NRC's new budget 
authority, less the appropriations from the Nuclear Waste Fund and 
from the General Fund, be collected from fees in FY 2001, decreasing 
by 2 percent per year to 90 percent by FY 2005.
---------------------------------------------------------------------------

    The NRC assesses two types of fees to recover its budget authority. 
First, license and inspection fees, established in 10 CFR Part 170 
under Title V of the Independent Offices Appropriation Act of 1952, 
recover NRC's costs for special services rendered to an individual 
licensee or applicant. These services include things like inspections 
and review of applications for the issuance of licenses (new, amended, 
or renewal). Second, annual fees, established in 10 CFR Part 171 under 
the authority of the Omnibus Budget Reconciliation Act of 1990, recover 
generic and other regulatory costs not recovered through 10 CFR Part 
170 fees. The generic and other regulatory costs are allocated to 
classes of licensees on an annual basis.
    Continued consolidation is expected to result in fewer owners 
having more licenses under their domain. It does not appear that 
industry consolidation will have an effect on the total number of 
licenses held by the industry.
Preliminary Impact Assessment
    NRC's assessment of fees is based on the filing of a request for 
NRC review and approval, or the existence of an NRC license or approval 
for individual facilities or licenses. There does not appear to be a 
need to change NRC's fee structure at this time due to industry 
consolidation.
Recommended Followup
    Since there is no significant impact, no further effort is 
recommended at this time.

Issue Category: 7.  Financial

Issue: 7.c  Insurance

Discussion
    This issue is concerned with whether industry consolidation will 
affect the availability and maintenance of insurance and indemnity for 
both off-site and on-site coverage.
    The Atomic Energy Act of 1954, as amended, and the NRC's 
regulations at 10 CFR Part 140 require licensees to provide financial 
protection for the off-site consequences of accidents at nuclear power 
plants. Insurance and indemnity programs have been developed to provide 
coverage for third-party liability claims that may arise from any 
accidents that may occur. Coverage includes $200 million of primary 
insurance from commercial insurers. In addition, each power reactor 
licensee is required to provide secondary financial protection through 
an agreement to pay a retrospective premium that would, if necessary, 
be assessed against each power reactor licensee up to a maximum of $88 
million per reactor per accident, with an annual cap of $10 million per 
reactor. The total available financial protection currently available 
is about $9 billion per accident.
    In an August 1998 report to Congress, the NRC recommended that 
consideration be given to doubling the current retrospective premium 
from $10 million to $20 million annually (as well as raising the $200 
million primary level of private insurance). The NRC was concerned that 
the 1998 forecast of a significant number of early plant shutdowns 
would decrease contributions to the retrospective pool. However, in his 
May 2001 Congressional testimony related to renewal of the Price-
Anderson Act, Chairman Meserve reversed the 1998 recommendation in 
light of the much more optimistic current industry projections for 
license renewal.
    In addition to Price-Anderson, 10 CFR 50.54(w) requires power 
reactor licensees to provide on-site property damage insurance of $1.06 
billion per unit. The NRC imposed this requirement after the Three Mile 
Island, Unit 2, accident in order to ensure that licensees had 
sufficient funds to stabilize and clean up a reactor site after an 
accident. The insurers and insured in the industry adopted a 
retrospective premium methodology (similar to Price-Anderson) to reduce 
the up-front premiums associated with on-site insurance. The insurers 
have performed their own assessments of license transfer applicants' 
ability to pay retrospective premium assessments. The NRC's policy has 
been to accept, although not necessarily endorse, the use of 
retrospective premiums for on-site insurance since it was developed in 
the early 1980s.
Preliminary Impact Assessment
    With respect to Price-Anderson liability coverage, each reactor 
that a licensee owns will expose it to a potential retrospective 
premium assessment of $10 million per year. For example, in the event 
of a major accident, a licensee with 20 reactors could be required to 
pay retrospective premiums of $200 million annually for about 9 years. 
If a major accident forced the shutdown of a class of reactors for 
safety reasons, a consolidated licensee could lose a portion of its 
primary source of revenue for paying its retrospective premiums.
    With respect to on-site insurance, licensees are also exposed to 
potential retrospective premium payments. These payments would be in 
addition to the retrospective premium payments required to be made 
under the Price-Anderson system and could impose additional financial 
stress on some licensees. Licensees with several plants will likely 
have access to a greater revenue stream than licensees with fewer 
plants. Nevertheless, the impact of being required to pay retrospective 
premiums for many units could be significant if a licensee was 
otherwise financially stressed.
    The NRC has programs in place to evaluate a licensee's or license 
applicant's ability to pay retrospective premiums for both liability 
and on-site insurance. With respect to license transfers, this 
evaluation is part of the safety evaluation that the staff prepares to 
support approval (or denial) of license transfer applications. In 
addition, licensees are required pursuant to 10 CFR 140.21 to 
demonstrate annually that they are able to pay retrospective premiums 
for their reactors that may be assessed under the Price-Anderson 
system.
    However, for those licensees not involved in license transfers, 
there is no requirement similar to that under 10 CFR 140.21 for 
licensees to demonstrate annually their ability to pay on-site

[[Page 34307]]

insurance premiums. With industry consolidation, the potential burden 
of such retrospective payments on licensees, especially when coupled 
with Price-Anderson retrospective payments, could be significant.
Recommended Followup
    Since a potentially significant impact has been identified, 
consideration should be given to developing a rulemaking to establish 
an annual requirement to demonstrate the licensee's ability to pay on-
site retrospective insurance premiums specified in 10 CFR 50.54(w), in 
parallel with those in 10 CFR 140.21.

Issue Category: 7.  Financial

Issue: 7.d  Joint and Several Regulatory Responsibility

Discussion
    The NRC views all co-owners as co-licensees who are responsible for 
complying with the terms of their licenses. 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 it should continue to 
be the operative practice. Most power reactor owners and operators 
believe that each co-owner should be limited to its pro rata share of 
operating costs and decommissioning expenses and that the NRC should 
not look to one owner to ``bail out'' another owner by imposing joint 
and several liability on the co-owners. Joint and several liability 
refers to the legal doctrine of holding all or any one of the co-owners 
financially responsible for the default of any co-owner.
    The Commission addressed the issue of joint and several liability 
by nuclear power reactor licensees in its ``Final Policy Statement on 
the Restructuring and Economic Deregulation of the Electric Utility 
Industry'' 62 FR 44071 (August 19, 1997). The Commission stated that it

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.

    On July 25, 2000, the Commission denied a petition for rulemaking 
to amend the regulations to preclude the imposition of joint and 
several liability. 65 FR 46661 (July 31, 2000). The Commission 
emphasized its already articulated policy not to impose operating and 
decommissioning costs on co-owners in a manner inconsistent with their 
agreed-upon shares, except in highly unusual circumstances when 
required by public health and safety considerations, and that it would 
not seek more than pro rata shares from co-owners with de minimis 
ownership. The Commission stated, however, that granting the petition 
would unnecessarily limit the Commission's flexibility when highly 
unusual circumstances affecting the public health and safety would 
require action by the Commission. The Commission also noted that the 
term ``joint and several liability'' may have connotations for contract 
law that it did not intend to convey and that the term ``joint and 
several regulatory responsibility'' more accurately reflects the 
Commission's intent. Thus, the Commission stated that it will use the 
term ``joint and several regulatory responsibility'' in lieu of ``joint 
and several liability.'' Id. at 46663. The Commission's policy on joint 
and several regulatory responsibility applies only to nuclear power 
reactor licensees.
Preliminary Impact Assessment
    In its recent denial of the petition for rulemaking, the Commission 
addressed this issue in the midst of the trend toward industry 
consolidation. It, therefore, is unlikely that the issue warrants 
reconsideration in the near future. Indeed, the trend toward 
consolidation arguably makes it even more important to maintain the 
Commission's position.
Recommended Followup
    Since there is no significant impact, no further effort is 
recommended.

Issue Category: 7.  Financial

Issue: 7.e  Bankruptcy Protection

Discussion
    This issue addresses whether industry consolidation raises unique 
concerns with respect to licensee bankruptcy. The provisions in 10 CFR 
50.54(cc) require a licensee to notify the NRC when a voluntary or 
involuntary petition for bankruptcy is filed under Title 11 of the 
United States Code against it or its parent or affiliate. Notifications 
of petitions for bankruptcy are required for fuel cycle facilities 
under 10 CFR 40.41(f)(1) and 70.32(a)(9)(i) and for spent fuel storage 
licenses under 10 CFR 72.44(b)(6)(i). The NRC needs information with 
respect to bankruptcy filings against its licensees in order to 
determine whether additional action is warranted. Specifically, the NRC 
must be able to participate in bankruptcy proceedings when necessary to 
ensure the adequate protection of the public health and safety.
Preliminary Impact Assessment
    Industry consolidation, in and of itself, is not expected to 
increase or decrease the frequency of bankruptcy filings by licensees. 
However a bankruptcy filing (either under Chapter 7 or Chapter 11 of 
the U.S. Bankruptcy Code) by a licensee with several plants could have 
more wide-ranging effects than a licensee with only one or a few 
plants. It is likely that the NRC's reactor oversight process will 
detect declining plant performance caused by financial stress, 
including bankruptcy. However, a bankrupt licensee with several plants, 
each of which could possibly require increased NRC oversight, could 
place additional burdens on the NRC oversight process.
    Additionally, a bankrupt licensee with few assets other than its 
nuclear plants might have difficulty in obtaining necessary funds to 
operate and decommission its nuclear plants even with, as is likely 
based on previous experience, positive actions by a bankruptcy court. 
(Presumably, a licensee that only owns nuclear assets would file for 
bankruptcy protection only because the revenues received from its power 
sales in an unregulated market were insufficient to cover its overall 
production costs. In such a situation, a bankruptcy court could do 
little to improve a licensee's cost structure beyond relieving it of 
some portion of its debt burden.) In a worst case situation, the NRC 
could be required to shut down the nuclear plants of a bankrupt 
licensee if sufficient operating funds were unavailable.
    Licensees with only nuclear assets would almost certainly not be 
subject to rate regulation. As such, these licensees are required under 
NRC regulations to have decommissioning costs prepaid or otherwise 
guaranteed in an amount either based on NRC-stipulated generic formulas 
or on site-specific estimates, if greater than the formula amounts. 
Although unlikely, if the cost estimates did not reflect the full cost 
to decommission because of unforeseen difficulties in the 
decommissioning process, the bankruptcy of a licensee could have 
adverse impacts on the timing and completion of decommissioning.
Recommended Followup
    The NRC will continue to monitor licensees' financial health using 
the reports filed under 10 CFR 50.71(b) and financial trade press 
resources to determine whether any bankruptcy

[[Page 34308]]

filings appear to be imminent. As in the past, if a licensee files for 
bankruptcy protection, the NRC will work to ensure that health and 
safety interests are adequately represented in bankruptcy proceedings. 
No additional action appears to be necessary at this time.

Issue Category: 7.  Financial

Issue: 7.f  Financial Qualifications

Discussion
    The provisions of 10 CFR 50.33(f) require that power reactor 
licensees demonstrate that they are financially qualified to construct 
and operate their nuclear plants safely. Licensees that are ``electric 
utilities'' are exempt from demonstrating financial qualifications at 
the operating license stage pursuant to 50.33(f). Currently, the 
provisions of Sec. 50.33(f) require licensees or applicants to 
demonstrate financial qualifications, in essence, by showing that 
projected revenues exceed expenses over the first five years following 
the licensing action. Additionally, applicants for the transfer of the 
Three Mile Island, Unit 1, Pilgrim, Clinton, and other plants recently 
sold have provided parent company guarantees of additional operating 
expenses. NUREG-1577, Rev. 1, provides additional information on how 
licensees and applicants may demonstrate financial qualifications for 
initial licensing and license transfers. The issue is whether industry 
consolidation will affect the ability of applicants and licensees to 
demonstrate financial qualifications.
Preliminary Impact Assessment
    As industry consolidation proceeds, licensees with a large number 
of reactor units may be vulnerable to financial stress if a significant 
number of their units are shut down at one time or are otherwise unable 
to operate over sustained periods at costs less than revenues received 
for output from the plants. This situation could be exacerbated for 
licensees that are no longer diversified companies with substantial 
non-nuclear assets (e.g., transmission lines, distribution networks, 
non-nuclear generating units) to provide offsetting revenues. On the 
other hand, industry consolidation may actually reduce some financial 
risk by spreading out risk among several units--that is, it is unlikely 
that several nuclear units would be shut down at the same time. The 
remaining operating units could provide sufficient funds to cover 
expenses for the shutdown plants. Of course, if a consolidated licensee 
had reactors predominantly of one design, and that design was found to 
have sufficient safety concerns to cause an extended shutdown of all 
the units of that design, the financial stress would likely increase 
significantly.
    Once a plant is permanently shut down and enters decommissioning 
status, financial qualification for operations is no longer a health 
and safety issue. Rather, the issue then concerns the adequacy of 
decommissioning funds. However, the ability to provide safety 
expenditures during the transition period between a permanent shutdown 
and decommissioning could be affected if the licensee is financially 
stressed. It is not clear, at present, whether industry consolidation 
would positively or negatively affect access to funds during such a 
transition period. However, this issue has been raised in license 
transfer cases by petitioners to intervene.
    In 1997, in SECY-97-253, the staff proposed to conduct a 
rulemaking, among other things, to require sufficient financial 
resources in certain reactor license transfer cases to assure funding 
for the transition from cessation of operations to the beginning of 
decommissioning, but the Commission did not approve the proposal. In 
SECY-98-153, the Commission again considered the issues related to 
reactor financial qualifications in light of industry restructuring and 
decided to delay that rulemaking in its SRM dated December 9, 1998. The 
current standard review plan (SRP), based on the current rules, 
requires only that the non-utility license transfer applicant comply 
with the same financial qualifications standards as for a non-utility 
operating license applicant: it must submit estimates of annual 
operating costs for each of the first 5 years of operation of the 
facility and indicate a source of funds to cover the operating costs.
    However, the current de facto situation is different. One entity, 
Amergen, has ``voluntarily'' set up a $200 million reserve for the 
plants it has or is planning to acquire. Within the $200 million it has 
apparently established specific funds for specific reactors, and it has 
pointed to those funds in State Public Utility Commission proceedings 
as ``assurance that at least that amount will be available specifically 
to assure for the transition from cessation of operation of Vermont 
Yankee to the beginning of its decommissioning.'' (Nucleonics Week, 
Volume 41, Number 23, June 8, 2000, at page 5.) The Commission, in its 
recent license transfer decisions has specifically acknowledged the 
staff practice of capturing these ``voluntary'' offers in license 
conditions.
Recommended Followup
    The potential impacts of industry consolidation on licensees' 
financial qualifications are uncertain at present. There doesn't appear 
to be a need for any immediate response, but the NRC should continue to 
evaluate its financial qualification requirements for the transition 
period between permanent plant shutdown and decommissioning to 
determine whether any changes are needed to 10 CFR 50.33(f).

Issue Category: 8.  Non-NRC Regulatory Considerations

Issue: 8.a  Grid Stability/Reliability

Discussion
    As discussed in Issue 1.f, reliability of off-site power and grid 
stability are safety-significant issues. There is a large and diverse 
combination of situations possible when the issues of nuclear industry 
consolidation, economic deregulation, and separation of generation and 
transmission functions are considered simultaneously. A consolidation 
of companies may occur with or without economic deregulation. The 
parties involved in a deregulated electrical industry could include 
companies generating electricity, regulated entities such as an 
Independent System Operator in charge of transmission and distribution, 
and regulatory agencies such as the Federal Energy Regulatory 
Commission which may have significant impacts on the market environment 
in which nuclear power plants operate. Given the complex range of 
possibilities coming into play in a market environment, the effects on 
grid stability/reliability cannot be predicted with any confidence. It 
is prudent to monitor grid stability around nuclear power plants and 
anticipate scenarios that may require NRC actions.
    Deregulation and restructuring of the electric power industry 
prompted the NRC to conduct studies and initiate interaction with 
entities such as the National Electricity Reliability Council. A 
Commission paper was issued on May 11, 1999, on ``Effects of Electric 
Power Industry Deregulation on Electric Grid Reliability and Reactor 
Safety'' (SECY-99-129). A study was commissioned at the University of 
Wisconsin to examine how deregulation has worked in other industries 
relative to safety. The staff also responded to grid-related events 
that have occurred at some plants by getting stakeholders such as the 
Nuclear Energy Institute and Institute of Nuclear Power Operations 
involved in discussions regarding industry-sponsored initiatives, and 
the adequacy

[[Page 34309]]

of the existing regulatory requirements, such as those in General 
Design Criterion 17. On the basis of the insights gained so far, it 
appears that grid reliability issues are primarily a consequence of 
economic deregulation rather than industry consolidation. This was 
demonstrated by the California experience of the 2000-2001 time period.
Preliminary Impact Assessment
    Experience in other industries has shown that the transition phase 
from a regulated to a de-regulated activity is often accompanied by 
unanticipated difficulties. This may be the case with the impacts of 
deregulation on electrical grid performance. Prior to consolidation and 
economic deregulation, licensees of nuclear power plants were 
``utilities'' who controlled both the generating plants and the 
distribution grid. With consolidation and economic deregulation, these 
two functions are generally within separate corporate entities. Thus, 
NRC licensees may no longer have direct control of the grid; and NRC 
regulations which addressed grid reliability by the licensee would not 
apply to the grid operator.
    At this time, operational experience appears to indicate that grid 
stability/reliability will be strained without additional capacity in 
transmission and generation. In a deregulated market, if sufficient 
economic incentives are not provided for maintaining adequate reserve 
capacity, cost control will lead to a decrease in reserve capacity with 
corresponding problems during peak periods, power system disturbances, 
etc. The heavy cost burden of maintaining sufficient spinning reserve 
that does not produce revenue may or may not be transferrable to the 
consumer.
    Reductions in system reserve margins and unregulated fluctuations 
may increase the likelihood of trips that can challenge safety systems 
in ways not considered in the plant's probabilistic risk assessment 
(PRA). Grid stability/reliability responsibility may move from the 
licensees to independent grid operators. The frequency and voltage 
level under degraded grid conditions may present safety concerns 
relative to supporting safety system operations. Licensees must assure 
that they have adequate procedures to monitor grid reliability and 
stability, and deal with their effects on plant operations.
    Experience has shown that nuclear power plants that perform well 
tend to be low cost producers, thus offering strong economic incentives 
for the licensee to keep operations proceeding smoothly. As a 
consequence, licensees are likely to pay close attention to conditions 
outside the immediate confines of the plant. This may increase the 
likelihood that grid disturbances will be noticed by licensees and that 
they will anticipate potential problems. Additionally, if a licensee 
operates plants at multiple sites which feed power into a grid, there 
would be an incentive to assure grid stability on a company-wide basis. 
This is likely to lead consolidated licensees to coordinate activities 
among their sites to improve grid stability. For example, on-line 
maintenance performed at each of the sites may be coordinated to reduce 
the probability that more than one plant might trip off-line.
    The NRC has sufficient regulatory and inspection mechanisms in 
place to identify and respond to nuclear safety concerns that may 
develop as a result of grid-related stability and reliability issues. 
As experience is gained with the deregulated industry, changes to the 
regulatory framework may be required. The NRC has informed the industry 
stakeholders of its concerns and has observed that organizations such 
as Nuclear Energy Institute and the Institute for Nuclear Power 
Operations are responding with their own initiatives to address the 
concerns. Any proposals to change the regulatory framework will be 
based on information from the NRC's monitoring activity as well as 
assessments of operational experience.
Recommended Followup
    The NRC has established communication channels with industry 
stakeholders and other government and non-governmental institutions to 
obtain accurate and timely information. The recommended followup is to 
monitor the developments unfolding in different parts of the country 
and continue the current efforts to assimilate information.

Issue Category: 8.  Non-NRC Regulatory Considerations

Issue: 8.b  Antitrust Considerations

Discussion
    On June 18, 1999, the Commission issued a Memorandum and Order in 
the Wolf Creek license transfer proceeding dismissing a petition to 
intervene on antitrust grounds. Kansas Gas and Electric Co. (Wolf Creek 
Generating Station, Unit 1), CLI-99-19, 49 NRC 441 (1999) (Wolf Creek). 
In Wolf Creek, the Commission ``concluded that the Atomic Energy act 
does not require or even authorize antitrust reviews of post-operating 
license transfer applications, and that such reviews are inadvisable 
from a policy perspective.'' The Commission directed the staff to 
initiate a rulemaking to clarify the Commission's regulations to remove 
any ambiguities and ensure that the rules clearly reflect the views set 
out in the Wolf Creek decision. On August 18, 2000, the final rule 
became effective. The Commission stated that ``because the Commission 
is not authorized to conduct antitrust reviews of post-operating 
license transfer applications, or at least is not required to conduct 
this type of review and has decided that it no longer will conduct 
them, no antitrust information is required as part of a post-operating 
license transfer application. Because the previous regulations did not 
clearly specify which types of applications are not subject to 
antitrust review, these clarifying amendments bring the regulations 
into conformance with the Commission's limited statutory authority to 
conduct antitrust reviews.'' 65 Fed. Reg. 44649 (July 19, 2000).
    The Wolf Creek decision and the clarifying rule, which apply only 
to post-operating license transfers, eliminate antitrust reviews for 
transfers of facility operating licenses which occur after the issuance 
of the initial operating license for the facility. They do not affect 
the Commission's continuing statutory obligation to conduct antitrust 
reviews of applications for new facility operating licenses. The 
Commission has repeatedly sought legislation to eliminate all 
Commission antitrust reviews, but such legislation has not been 
enacted. Therefore, antitrust reviews for new facilities must continue 
to be conducted.
Preliminary Impact Assessment
    The Commission's decision in the Wolf Creek case, and the final 
rule affirming that decision, reflect the Commission's conclusion that 
the trend toward increased consolidation and deregulation in the 
nuclear power industry warranted a close look at the limited antitrust 
authority conferred upon the Commission by the Atomic Energy Act. The 
result was the Commission's conclusion that the Act does not require 
antitrust reviews for post-operating license transfers and, even if 
they are authorized, they no longer will be conducted as a matter of 
sound policy. Although that result applies only to operating license 
transfers occurring after the initial operating license has been 
issued, the Commission's policy reasons for eliminating those reviews 
which it was not required to conduct under the Atomic Energy Act apply 
equally to antitrust reviews of initial operating license applications 
for new facilities. It

[[Page 34310]]

is, therefore, likely that the Commission will continue to seek 
legislation to eliminate all Commission antitrust reviews because such 
reviews duplicate responsibilities of other agencies that have more 
expertise in this area. Until and unless such legislation is enacted, 
however, antitrust reviews for new facilities must continue to be 
conducted. In a consolidated and deregulated industry, and where 
licensees are not electric utilities, those reviews could be more 
complex for an applicant that already owns a number of nuclear (and 
other electric generating) facilities. If so, the antitrust reviews 
conducted by the staff may require more resources than have been used 
for such reviews in the past.
Recommended Followup
    No further effort is recommended at this time, except that 
projected resource needs for new applications should account for more 
complex antitrust reviews.

[FR Doc. 01-16104 Filed 6-26-01; 8:45 am]
BILLING CODE 7590-01-P
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