NRC’s primary mission is to protect the public health and safety, and the environment, from the effects of radiation from nuclear plants, materials, and waste facilities. Because decommissioning a nuclear power plant is a safety issue, NRC has authority to ensure that owners are financially qualified to decommission these plants. Of the 125 nuclear power plants that have been licensed to operate in the United States since 1959, 3 have been completely decommissioned. Of the remaining 122 plants, 104 currently have operating licenses (although 1 has not operated since 1985), 11 plants are in safe storage (SAFSTOR) awaiting active decommissioning, and 7 plants are being decommissioned. At the time of our analysis, 43 plants were co-owned by different owners. NRC regulations limit commercial nuclear power plant licenses to an initial 40 years of operation but also permit such licenses to be renewed for additional 20 years if NRC determines that the plant can be operated safely over the extended period. NRC has approved license renewals for 16 plants (as of August 20, 2003). In 1988, NRC began requiring owners to (1) certify that sufficient financial resources would be available when needed to decommission their nuclear power plants and (2) require them to make specific financial provisions for decommissioning. In 1998, NRC revised its rules to require plant owners to report to the NRC by March 31, 1999, and at least once every 2 years thereafter on the status of decommissioning funding for each plant or proportional share of a plant they own. Under NRC requirements, the owners can choose from one or more methods, including the following, to provide decommissioning financial assurance: prepayment of cash or liquid assets into an account segregated from the owner’s assets and outside the owner’s administrative control; establishment of an external sinking fund maintained through periodic deposit of funds into an account segregated from the owner’s assets and outside the owner’s administrative control; use of a surety method (i.e., surety bond, letter of credit, or line of credit payable to a decommissioning trust account), insurance, or other method that guarantees that decommissioning costs will be paid; and for federal licensees, a statement of intent that decommissioning funds will be supplied when necessary. In September 1998, NRC amended its regulations to restrict the use of the external sinking fund method in deregulated electricity markets. Prior to this time, essentially all nuclear plant owners chose this method for accumulating decommissioning funds. However, under the amended regulations, owners may rely on periodic deposits only to the extent that those deposits are guaranteed through regulated rates charged to consumers. In conjunction with its amended regulations, NRC issued internal guidance, describing the process for reviewing the adequacy of a prospective owner’s financial qualifications to safely operate and maintain its plant(s) and the owner’s proposed method(s) for ensuring the availability of funds to eventually decommission the plant(s). The guidance outlines a method for evaluating the owner’s financial plans for fully funding decommissioning costs. In addition, the guidance states that, except under certain conditions, the NRC reviewer should, when plants have multiple owners, separately evaluate each co-owner’s funding schedule for meeting its share of the plant’s decommissioning costs. Using our most likely economic assumptions, the combined value of the nuclear power plant owners’ decommissioning trust funds was about 47 percent higher at the end of 2000 than necessary to ensure accumulation of sufficient funds by the time the plants’ licenses expire. This situation contrasts favorably with the findings in our 1999 report, which indicated that the industry was about 3 percent below where it needed to be at the end of 1997 to ensure that enough funds would be available. However, because owners are not allowed to transfer funds from a trust fund with sufficient reserves to one without sufficient reserves, overall industry sufficiency can be misleading. When we individually analyzed the owners’ trust funds, we found that 33 owners for several different plants had not accumulated funds at a rate that would be sufficient for eventual decommissioning. Through 2000, the owners of 122 operating and retired nuclear power plants collectively had accumulated about 47 percent more funds than would have been sufficient for eventually decommissioning, using our most likely economic assumptions. Specifically, the owners had accumulated about $26.9 billion—about $8.6 billion more than we estimate they needed at that point to ensure sufficient funds. This situation contrasts with the findings in our 1999 report, which indicated that the industry had accumulated about 3 percent less than the amount we estimated it should have accumulated by the end of 1997. Using alternative economic assumptions changes these results. For example, under higher decommissioning costs and other more pessimistic assumptions, the analysis shows that the combined value of the owners’ accounts would be only about 0.2 percent above the amount we estimate the industry should have collected by the end of 2000. (See app. II for our results using more optimistic assumptions.) The collective improvement in the status of the owners’ trust funds (under most likely assumptions) since our last report is due to three main factors. First, all or parts of the estimated decommissioning costs were prepaid for 15 plants when they were sold to new owners. For example, the seller prepaid $396 million when the Pilgrim 1 nuclear plant was sold in 1998 for the plant’s scheduled decommissioning in 2012. Second, for 16 other plants, NRC approved 20-year license renewals, which will provide additional time for the owners to make contributions and for the earnings to accumulate on the decommissioning fund balances. Third, owners earned a higher rate of return on their trust fund accounts than we projected in our 1999 report. For example, the average return on the trust funds of owners who responded to our survey was about 8.5 percent (after-tax nominal return) per year, from 1998 through 2000, instead of the approximately 6.25 percent per year we had assumed. The higher return was a result of the stronger than expected performance of financial markets in the late 1990s. Since that time, however, the economy has slowed and financial markets—equities in particular—have generally performed poorly. In contrast to the encouraging industry-wide results, when we analyzed the owners’ trust fund accounts individually, we found that several owners were not accumulating funds at rates that would be sufficient to pay for decommissioning if continued until their plants are retired. Each owner has a trust fund for each plant that it owns in whole or in part. For example, the Exelon Generation Company owns all or part of 20 different plants. For this analysis, we assessed the status of 222 trust funds for 122 plants owned in whole or part by 99 owners. As shown in table 1, using our most likely assumptions, 33 owners of all or parts of 42 different plants (50 trust funds) had accumulated less funds than needed through 2000 to be on track to pay for eventual decommissioning (see app. II for details). Thirteen of these plants were shut down before sufficient funds had been accumulated for decommissioning. Although the remaining 78 owners of all or parts of 93 plants (172 trust funds) had accumulated more funds than we estimate they needed to have at the end of 2000, funds are generally not transferable from owners who have more than sufficient reserves to other owners who have insufficient reserves. Under our most likely assumptions, the owners whom we estimate to be behind will have to increase the rates at which they accumulate funds to meet their eventual decommissioning financial obligations. For our analysis, we compared the trust fund balance that individual owners had accumulated for each plant by the end of 2000 with a “benchmark” amount of funds that we estimate they should have accumulated by that date. In setting the benchmark, we assumed that the owners would contribute increasing (but constant present-value) amounts annually to cover eventual decommissioning costs. For example, at the end of 2000, an owner’s decommissioning fund for a plant that had operated one-half of a 40-year license period (begun in 1980) should contain one-half of the present value of the estimated cost to decommission the owner’s share of that plant in 2020. Although this benchmark is not the only way an owner could accrue enough funds to pay future decommissioning costs, it provides both a common standard for comparisons among owners and, from an equity perspective among ratepayers in different years, a financially reasonable growing current- dollar funding stream over time. Appendix I describes our methodology in more detail. The status of each owner’s fund balance at the end of 2000 is not, by itself, the only indicator of whether an owner will have enough funds for decommissioning. Whether the owner will accumulate the necessary funds also depends on the rate at which the owner contributes funds over the remaining operating life of the plant; by increasing their contribution rates, owners whose trust fund balances were below the benchmark level could still accumulate the needed funds. Consequently, for the owners who provided contributions information to us, we also analyzed whether their recent contribution rates would put them on track to meet their decommissioning obligations. For this second analysis, we compared the average of the amounts contributed in 1999 and 2000 (cost-adjusted to 2000) with a benchmark amount equivalent to the average yearly present value of the amounts the owners would have to accumulate each year over the remaining life of their share of the plants to have enough decommissioning funds. As table 2 shows, 28 owners with ownership shares in 44 different plants (50 trust funds) contributed less than the amounts we estimate they will need to meet their decommissioning obligations, under our most likely assumptions. We compared the owners in table 1 with those in table 2 to see whether owners who are behind in balances were making up their shortfalls with recent increases in contributions. Of the 33 owners who we estimate had less than the benchmark balances through 2000, 26 owners of all or parts of 38 plants provided contributions information.