Discussion
of Issues
Issue 1:
What are the current total estimated costs to
decommission Florida Power and Light Company’s Turkey Point Nuclear Units 3 and
4, and St. Lucie Nuclear Units 1 and 2, valued in 2015 dollars terms?
Recommendation:
Staff recommends the Commission find that the total
current estimated cost valued in 2015 dollars for decommissioning Turkey Point
Nuclear Units 3 and 4 is $1,777,304,990, and $1,806,479,491 for St. Lucie
Nuclear Units 1 and 2. (Higgins)
Staff Analysis:
In accord with Rule 25-6.04365, F.A.C., FPL filed an
updated site-specific decommissioning cost study on December 14, 2015. The
purpose of this study is to recognize developments and changes impacting
decommissioning cost estimates of the company’s nuclear units, and to also
consider such factors as additional information, improvements in technology,
and regulatory changes that have transpired since FPL’s last nuclear
decommissioning study and review in 2010.
Operating License
FPL’s Turkey Point Nuclear
Generating Station (Turkey Point) began service in 1972 with the commissioning
of Unit No. 3, while Unit No. 4 achieved operational status one year later in
1973. The St. Lucie Nuclear Power Plant (St. Lucie) began service in 1976 with
Unit 1, while Unit 2 began service approximately seven years later in 1983. All
four units were originally licensed by the NRC to operate for a maximum of
forty years. From 2000-2001, FPL filed applications with the NRC for twenty-year
operating license extensions for all four units. In 2002, the NRC approved
FPL’s license extension request for TP3 and TP4, while approving extensions for
SL1 and SL2 in 2003. Accordingly, all four units’ investment amounts will
continue to be included in rate base until expiration of their respective
extended operating licenses/retirement. The operating license expiration dates
for TP3 and TP4 are July 2032 and April 2033, respectively. The operating license
expiration dates for SL1 and SL2 are March 2036 and April 2043, respectively.
The current cost study assumes that each unit will operate throughout its
extended license period.
Decommissioning Methods
The NRC accepts the following
three decommissioning methods: prompt removal/dismantling (DECON), mothballing
with delayed dismantling (SAFSTOR), and entombment (ENTOMB). Consistent with the 2010 study, the current study
continues to utilize a combination of DECON and SAFSTOR decommissioning
methods. FPL selected DECON for the Turkey Point units because this method
provides the lowest cost and employs those individuals familiar with the
nuclear facility to support the dismantling effort. Further, DECON eliminates a
potential long-term safety hazard and relieves the company of the long-term
obligation and liability for continuing maintenance of the property. For the
St. Lucie units, due to the timing difference in operating license expiration
dates, SAFSTOR is utilized for SL1 with an approximate seven-year dormancy
period, followed by prompt dismantlement (DECON) of both SL1 and SL2
concurrently. This allows for a one-time mobilization of contractor personnel
and equipment by mothballing SL1 until the expiration of SL2’s license.
The company currently projects
SNF to remain at each plant site after the majority of nuclear facilities have been removed. Staff notes that
in order for a nuclear plant to be considered fully-decommissioned, no on-site
SNF may be present. The company is projecting that the final fuel assemblies
will be removed from Turkey Point by 2072, and by 2073 for St. Lucie.
Towards the end of the
decommissioning process, or at least two years prior to the expected license
termination dates of approximately 2072 for Turkey Point, and 2073 for St.
Lucie, FPL is required to submit to the NRC a License Termination Plan (LTP). Once
the physical decommissioning process (including removal of SNF and storage
facilities) is complete, the NRC will determine if site remediation has been
performed in accordance with the LTP; and if envisioned by the LTP, the site
will be released (by the NRC) for unrestricted use. Staff
notes that FPL’s current decommissioning study assumes site remediation to the
level of unrestricted use.
At this point, the nuclear license will be terminated thus concluding NRC
oversight.
Decommissioning Cost Estimates
The major decommissioning cost
drivers/centers in FPL’s 2015 study are: program management (staffing/labor),
high and low-level radioactive waste management and disposal, site security, and
removal-related activities (engineering, demolition, and support equipment).
Consequently, these cost drivers also reflect the greatest dollar value changes
from the 2010 study. These specific cost drivers are discussed individually
further in staff’s recommendation.
As with previous decommissioning
cost studies, FPL commissioned TLG Services Inc. (TLG) to develop its current
decommissioning cost estimates. The cost estimates are based on a number of
assumptions, including regulatory requirements, low-level waste disposal
practices, high-level radioactive waste management options, project
contingencies, and site restoration requirements. The estimates include a five
and one-half year cooling period (in fuel pool) for the SNF when plant
operations cease and the reactors are permanently de-fueled. Once cooled, the SNF
will be transferred to an on-site independent spent fuel storage installation
(ISFSI) for interim storage. The decommissioning cost estimates include the dismantling of facilities, site
structures, ISFSI, and site restoration.
TLG utilizes a unit factor method
for estimating decommissioning activity costs.[17]
These factors incorporate site-specific costs, the most current worker
productivity in decommissioning activities, and lessons learned from other
decommissioning projects. Unit factors for concrete removal, steel removal, and
cutting costs were developed and valued using local labor rates. The
activity-dependent costs were estimated with item quantities developed from
plant drawings and inventory documents. Staff notes that unit factors are not
used for non-repetitive tasks, such as removal of a steam generator or
segmentation of the reactor pressure vessel. For estimating equipment, consumable,
and sorbent costs, the company relied upon information published by R.S. Means[18] (adjusted
for the geographic/regional locations of the nuclear plants), and
McMaster-Carr.
The total estimated cost to
decommission Turkey Point has increased by approximately 28.2 percent from the
2010 study. The
total estimated costs to decommission St. Lucie increased by 22.2 percent
during the same timeframe. Tables presenting the cost comparisons by major
category using the selected methods of decommissioning from 2010 to 2015 are
presented below. Staff notes that the two vintages of cost figures shown below
are unadjusted (nominal) and presented as they were in the year of study, or
2010 dollars and 2015 dollars, respectively.
|
Table
1-1
Turkey
Point Decommissioning Cost Comparison 2010-2015
|
|
Plant Turkey Point
Units 3 and 4
|
2010 Study
($1000s)
|
2015 Study
($1000s)
|
Percent Difference
|
Annual
Percent Difference
|
|
License Termination
|
932,988
|
1,204,251
|
29.1
|
5.2
|
|
Spent Fuel Management
|
374,006
|
478,765
|
28.0
|
5.1
|
|
Site Restoration
|
79,223
|
94,289
|
19.0
|
3.5
|
|
Total*
|
1,386,216
|
1,777,305
|
28.2
|
5.1
|
|
Source:
FPL’s 2010 and 2015 Decommissioning Studies
Table
1-2
St.
Lucie Decommissioning Cost Comparison 2010-2015
|
|
Plant St. Lucie
Units 1 and 2
|
2010 Study
($1000s)
|
2015 Study
($1000s)
|
Percent Difference
|
Annual
Percent Difference
|
|
License Termination
|
1,052,235
|
1,208,237
|
14.8
|
2.8
|
|
Spent Fuel Management
|
331,105
|
486,705
|
47.0
|
8.0
|
|
Site Restoration
|
95,414
|
111,537
|
16.9
|
3.2
|
|
Total*
|
1,478,754
|
1,806,479
|
22.2
|
4.1
|
|
Source: FPL’s 2010 and 2015
Decommissioning Studies
*May not add due to
rounding
|
|
On an individual unit basis, the
current estimated costs in 2015 dollars for the decommissioning of FPL’s
nuclear plants are as follows: TP3 equals $844,719,728, TP4 equals
$932,585,262, SL1 equals $934,648,631, and SL2 equals $871,830,860. Staff notes
that due to SL2 being jointly-owned with the Orlando Utilities Commission and
Florida Municipal Power Agency (Joint Owners), FPL is responsible for
approximately 85.1percent of the unit’s total decommissioning cost. The joint
owners fund the remaining amount. Staff further notes that the joint owners
maintain separate (from FPL) external sinking funds for satisfying both their
decommissioning cost obligations and the NRC’s financial assurance rule. The
funding level status of the joint owners’ NDTs as of December 31, 2014 are
sufficiently above the NRC’s required minimum.
As discussed above, all costs are
ultimately classified as those relating to the activities of License
Termination, Spent Fuel Management, or Site Restoration. However, these major
cost classifications are comprised of individual cost elements. Below, staff analyzes
estimated cost variances between FPL’s current and 2010 study by these
individual elements.
Program Management
Program management is the largest
single element of the overall decommissioning cost estimate. The program management cost element primarily
captures costs relating to the staffing (both plant personnel and contractors)
and organization during the decommissioning process. This includes overall
project oversight as well as management of day-to-day activities. Program
management costs increased by approximately 17.1 percent, or $83.7 million for
Turkey Point, and 14.0 percent, or $69.2 million for St. Lucie from the
company’s prior study in 2010. Primarily
driving the higher costs are general increases in wages and benefits over the
five-year study period.
Security
Due to insight gained from recent
and active decommissioning projects, for example the decommissioning of Vermont
Yankee, TLG adjusted its cost model to increase the number of on-site security
personnel throughout the decommissioning process. The current study assumes
that a 24-hour security organization will be present with possible
modifications made as the decommissioning process progresses (i.e. reduced
security forces once all SNF has been removed from the plant sites). Security
costs increased by approximately $91.9 million, or 65.9 percent for Turkey
Point, and by $71.2 million, or by 64.6 percent for St. Lucie. As well as the
increased number of onsite personnel, a general increase in wages and benefits
also contributed to the higher cost of security.
Spent Fuel Management (Direct
Expenditures)[22]
The Nuclear Waste Policy Act of
1982 (NWPA) committed the DOE to accept and dispose of SNF and high-level
radioactive waste (HLRW). The acceptance and disposal of SNF and HLRW by the DOE was to begin by January 31, 1998, as
stipulated under its Standard Disposal Contract with waste generators. With
respect to a final SNF repository, the DOE submitted its license application to
the NRC on June 3, 2008, seeking authorization to construct a storage facility located
at Yucca Mountain, Nevada. The NRC formally docketed the DOE’s license
application on September 8, 2008, triggering a three-year deadline, with a
possible one-year extension, set by Congress for the NRC to decide whether to
authorize construction. The application review was
suspended in 2011, which generated legal action in the United States Federal
Court of Appeals. In August 2013, the US
Court of Appeals for the District of Columbia Circuit issued a Writ of Mandamus
ordering the NRC to comply with federal law and resume its review of DOE's
Yucca Mountain repository license application.
As part of its resumed review, the NRC has now issued all volumes of its formal
Safety Evaluation Report (SER) of the project.
Staff notes that further actions and formal proceedings must occur before a
licensing decision can be made and that substantial uncertainty remains as to
the operational prospects of the Yucca Mountain repository.
Separate and apart from the Yucca Mountain project and
NRC reviews, the DOE has “begun implementing a consent-based siting process to
establish an integrated waste management system to transport, store, and
dispose of commercial spent nuclear fuel and high level defense radioactive
waste.”
Staff understands the purpose of this policy direction and approach, which is
in an early and investigative state, is to ultimately establish a number of
high-level nuclear waste sites specializing in specific classes of waste.
However, to date, no national final repository has been identified and fully
licensed to receive commercial SNF.
The NRC requires that licensees
establish a program to manage and provide funding for the caretaking of all
spent fuel at the reactor site until title of the fuel is transferred to the
DOE.
Accordingly, FPL has incorporated costs relating to the storage and management
of SNF generated at the Turkey Point and St. Lucie sites into its current
study. However due to the non-performance by the DOE of terms contained in the
Standard Disposal Contract with FPL, litigation was brought by the company.
Ultimately, in 2009, FPL entered into a settlement agreement with the federal
government for damages incurred relating to SNF storage and management.
As part of the settlement agreement, the company receives annual payments to
cover the costs incurred for managing and storing SNF that it would otherwise
not have incurred if the original terms of its Standard Disposal Contract with
the DOE had been met. FPL is currently projecting that SNF management costs
incurred before years 2059 at Turkey Point and 2063 at St. Lucie, are eligible
for reimbursement. Staff notes that the company’s expenditures for storing and
managing SNF that have already been reimbursed by the federal government
through 2014 equal $233,328,195.
For the purposes of the current
study, FPL assumes a DOE repository for disposing of commercial SNF will be operational
and available in 2030. This date assumes a decision to select a repository site
is made within the next two to four years, five years to complete licensing,
and eight years for construction. Assumptions relating to FPL’s spent fuel management plan in its
current decommissioning study include: (1) 2031 Turkey Point and 2032 St. Lucie
start dates for transfer of SNF to a federal facility; (2) pickup based on the
oldest fuel receiving priority by the DOE; and (3) a maximum acceptance capacity
of 3,000 metric tons of uranium per year at a geologic repository. Accounting
for the aforementioned assumptions, transfer of all SNF from Turkey Point to
the DOE would be completed by the end of 2072. Transfer of all SNF from St.
Lucie to the DOE would be completed by 2073.
Total estimated direct costs for spent fuel management
increased 32 percent, or $69.7 million, for Turkey Point and 30 percent, or $65.4
million, for St. Lucie from FPL’s
prior study. The increase is primarily due to the current
cost estimate containing more comprehensive assumptions for contractor
mobilization, physical transfer of SNF to the DOE, and performing required
survey and safety validations.
Low-level radioactive waste disposal
The contaminated and activated
material generated in the decontamination and dismantling of a nuclear reactor
is classified as low-level radioactive waste (LLRW). LLRWs are classified based
on levels of radioactivity (lowest-to-highest) as either Class A, B, C, or
Greater than Class C (GTCC). Staff notes the majority of LLRW assumed for
disposal in FPL’s analysis, in terms of both volume and mass, is Class A waste.
For LLRW disposal cost estimation
and planning purposes, the company has a Life of Plant Agreement with EnergySolutions (Energy Solutions) to dispose
of Class A nuclear waste at Energy Solutions’ facility in Clive, Utah. Energy Solutions’ facility does not have a
license to dispose of Class B or C radioactive waste, which is more highly
radioactive than Class A. For purposes
of the current cost estimate, disposal costs for Class A waste are based on
FPL’s agreement with Energy Solutions.
On November 10, 2011, Waste
Control Specialists (WCS) opened the Texas Low-Level Radioactive Waste Disposal
Compact Facility in Andrews County, Texas. This facility is licensed to dispose
of Class A, B, and C low-level radioactive wastes. For
purposes of FPL’s 2015 study, Classes B and C waste are assumed to be shipped and
disposed of at the WCS facility with costs based upon published rates for non-Texas
Compact generators.
The current cost estimate also assumes that certain amounts of radioactive
metallic material will be conditioned and processed as to allow for
non-controlled disposal. Metal conditioning is assumed to be performed by
Energy Solutions in Oak Ridge, Tennessee.
The total estimated cost of low-level radioactive waste disposal increased
32 percent for Turkey Point, and 15 percent for St. Lucie, or by $37.6 and
$23.1 million respectively, from FPL’s 2010 study. The increase is primarily due to shifting the
cost basis for disposing of Class B and Class C waste from the previously
assumed Barnwell Low-Level Radioactive Waste Disposal Facility in South
Carolina to the WCS facility in Texas. [30]
The greater estimated cost increase at Turkey Point relative to St. Lucie
was due to the addition of 5,220 cubic yards of contaminated soil/earthen
material at Turkey Point. This specific soil was generated from past projects
at Turkey Point and had not been accounted for in prior studies due to the
material’s low level of radioisotopes. However, FPL elected to utilize this
material as engineering fill in the construction of a Low-Level Waste Storage
Facility expansion/laydown area. The company claims that for conservatism, the
soil along with the waste storage facility, were added to the scope of the
Turkey Point decommissioning cost estimate.
Removal
Removal costs primarily capture
costs related to the disassembly of plant components and placed in a central
area or zone for processing/disposal, controlled removal of contaminated and
activated concrete, remediation of any hazardous waste, excavation of soil, and
demolition of site structures. Removal costs increased by approximately 21.8
percent, or $32.6 million for Turkey Point, and 18.1 percent, or $33.1 million
for St. Lucie from the company’s prior study in 2010. Approximately half of the
increase in projected removal costs are attributed to changes in heavy
equipment assumed necessary to complete the decommissioning projects.
Contingency Allowance
The practice of
budgeting a cost contingency allowance is common in large-scale construction
and demolition projects. Such project cost
estimates generally include a baseline cost estimate, which is formulated based
on ideal conditions, and a contingency allowance. A contingency allowance is a
specific provision for unforeseeable elements and associated costs within the
defined project scope. For large, complex, and long-running projects such as nuclear
plant decommissioning, unforeseeable events are likely to occur; therefore, a
contingency allowance is necessary.
For each of FPL’s four nuclear
units, TLG applied specific contingency allowances to the individual units’
decommissioning cost estimates on a line item basis to produce a weighted
average contingency value. These
specific line item contingency allowances are based on guidelines developed by the Atomic Industrial
Forum (now Nuclear Energy Institute) in its report "Guidelines for
Producing Commercial Nuclear Power Plant Decommissioning Cost Estimates,”
AIF/NESP-036. Dividing the sum (dollar
value) of the line item contingency allowances by the total decommissioning
cost for each unit respectively results in the company’s proposed weighted
average contingency percentages. The contingency values for all four nuclear units
have marginally increased from FPL’s prior study as displayed in the table
below:
|
Table
1-3
|
|
Weighted
Average Contingency Factors
|
|
Nuclear Unit
|
2010 Study
|
2015 Study
|
|
TP3
|
17.39%
|
17.46%
|
|
TP4
|
17.36%
|
17.41%
|
|
SL1
|
17.07%
|
17.37%
|
|
SL2
|
17.92%
|
18.04%
|
Source: FPL’s
2010 and 2015 Decommissioning Studies
Staff believes the contingency
provisions presented in FPL’s 2015 decommissioning study, which are based on
industry standards and guidelines, as discussed above are reasonable.[33]
Site Characterization and License
Termination Surveys
Characterization and site survey cost
estimates have increased substantially from the prior study.[34] Site characterization
and survey costs increased 107.4 percent, or $19.3 million, at Turkey Point,
and 77.9 percent, or $18.9 million at St. Lucie. The primary driver of the cost
increase is the inclusion of new remedial action surveys that were not included
in the 2010 study for either nuclear plant. Other elements include increased
labor and material costs.
Other Factors
Transportation, regulatory fees,
and energy cost estimates have increased since the 2010 cost study. The increase in transportation cost estimates
are due to a combination of higher tariffs, fuel surcharges and a greater
amount of assumed shipments. Costs for insurance (Nuclear Liability and Nuclear
Property insurance), Emergency Planning Fees, Nuclear License Fees, and NRC
reviews and inspections fees have all increased since the 2010 study. Partially
mitigating the overall increase in decommissioning costs are lower costs for
off-site waste processing (cost of conditioning metals/material for non-LLRW
disposal). The reduction in off-site waste processing costs is due to reduced
contractual rates with Energy Solutions for this service.
Conclusion
Staff believes the company, in
estimating current decommissioning costs for Turkey Point and St. Lucie as
discussed above, appropriately recognized and reflected factors including
new/updated information, improvements in technology, and regulatory changes
that have transpired during the last five years. Thus, based on information
contained in FPL’s 2015 Decommissioning Study and associated data request responses,
staff recommends the Commission find that the total current estimated cost
valued in 2015 dollars for decommissioning TP 3 and TP4 is $1,777,304,990, and
$1,806,479,491 for SL1 and SL2.
Issue 2:
What are the appropriate annual accruals, in equal
dollar amounts, necessary to recover the future decommissioning costs of Florida
Power and Light’s Turkey Point Nuclear Units 3 and 4, and St. Lucie Nuclear
Units 1 and 2?
Recommendation:
Staff recommends a continuation of the suspension of
the accrual for nuclear decommissioning as approved by the Commission in Order
No. PSC-11-0381-PAA-EI. The appropriate jurisdictional annual accrual amount
necessary to recover future decommissioning costs over the remaining life of
each nuclear power plant is currently zero. Additionally, staff recommends the
assumptions included in FPL’s 2015 decommissioning study to determine the
annual accrual are reasonable. (Archer, D.
Buys, Yeazel)
Staff Analysis:
The
annual accrual amounts recommended by staff are based upon information provided
by FPL in its site-specific cost study and in its responses to staff’s data
requests. The base level costs included in the study are in 2015 dollars. Once
the cost of decommissioning a nuclear unit is determined in current dollars,
this cost is escalated to future dollars. The determination of the annual
accrual amounts then resembles an annuity calculation. The question becomes how
much money needs to be collected from customers in equal monthly payments,
earning at a given rate, to equal decommissioning costs in future dollars at a
future date. The appropriate escalation rates and fund earnings rate will be
discussed in detail later in this issue.
To qualify for tax deductibility
of contributions made to a qualified decommissioning fund, the amounts must be
consistent with the purpose of IRC Section 468A, the principles and provisions
of Federal Tax Regulations under the Code section, and be based on reasonable
assumptions.[35] The company can generally satisfy its burden
of proof by demonstrating that the amounts are calculated based on the
assumptions used by the Commission in its most recent order.[36] The
Commission’s order must be based on reasonable assumptions concerning: (i) the
after tax rate of return to be earned by the amounts collected for
decommissioning; (ii) the total estimated cost of decommissioning the nuclear
power plant; and (iii) the frequency of contributions to the nuclear
decommissioning fund for a tax year.[37]
Staff believes the assumptions proposed by FPL are reasonable, and therefore,
should be deemed appropriate for establishing amounts in the nuclear
decommissioning study. FPL’s annual accruals and contributions to FPL’s
qualified and non-qualified trust funds were suspended in 2005, and FPL’s 2015
Decommissioning Study confirms that the trust continues to be adequately funded
without additional accruals. Therefore, a specific ruling to allow FPL to
obtain IRS approval pursuant to IRC Section 468A is not required in this
docket.
Base Costs of
Decommissioning
FPL provided the estimated cost
in current (December 31, 2015) dollars to decommission each of its nuclear
units. The estimated cost to decommission each nuclear unit is shown in Table 2-1.
Table 2-1
Decommission Costs per
Plant
|
Nuclear Unit
|
2015 Dollars
|
|
TP3
|
844,720,000
|
|
TP4
|
932,585,000
|
|
SL1
|
934,649,000
|
|
SL2
|
871,831,000
|
|
Total
|
3,583,785,000
|
Source:
FPL’s 2015 Decommissioning Study
FPL divides the analysis
performed for the decommissioning process into five general components. The
components are labor, materials, transportation, burial, and other. TLG
provided FPL with estimates of the base costs for each activity. These cost
estimates were determined through site-specific cost studies and include a
contingency allowance. The cost studies reflect weighted average contingency
allowances of 17.46 percent for TP3, 17.41 percent for TP4, 17.37 percent for
SL1, and 18.04 percent for SL2.
According to FPL, the primary
reasons for the net increase in decommissioning costs from 2010 to 2015 are due
to actual data ascertained from recent ongoing decommissioning experience in
the industry. The largest increases of costs were in security, program
management, and spent fuel management. FPL indicated that it has no evidence to
suggest that the rate of increase experienced over the last five years would
continue prospectively, but instead, believes that these increases are due to
the heightened level of current decommissioning activity which has
significantly expanded its knowledge base regarding actual costs for certain
specific activities compared to what was known in 2010.
Cost Escalation Rates
The next issue that must be
addressed is the determination of the appropriate escalation rates to use to
convert the current decommissioning cost to the future decommissioning cost for
each nuclear unit. The analysis performed by FPL divides the decommissioning
process into five major cost components. These stages are labor, materials and
equipment, shipping, burial, and other. The base level costs are in 2015
dollars. The 2015 current dollar estimates are escalated to future dollar
estimates at the respective license termination date for each nuclear unit
using separate inflation forecasts for the major cost components. FPL relied
upon “The U.S. Economy, The 30-Year Outlook, August 2015,” published by Global
Insight as the source for their specific inflation measures, except for the
burial escalation rate. FPL’s burial cost escalation is based on company-specific
data/historical experience and CPI.
The methodology used by FPL in
the 2015 decommissioning study to determine the assumed escalation rates is consistent
with the methodology used in the 2010 study. While FPL used a methodology
consistent with the 2010 decommissioning cost study, the escalation rates do
differ. The differences between the escalation rates used in the prior
decommissioning study can be attributed to the change in the projections of the
rates of inflation. The indicated escalation rate used to convert the current
decommissioning cost to a future decommissioning cost for each nuclear unit is
included in Table 2-2.
Table 2-2
Escalation Rate
Comparison
|
Nuclear Unit
|
2010 Study
|
2015 Study[38]
|
|
TP3
|
2.95%
|
3.23%
|
|
TP4
|
2.95%
|
3.20%
|
|
SL1
|
2.84%
|
3.11%
|
|
SL2
|
2.97%
|
3.21%
|
Source:
FPL’s 2010 and 2015 Decommissioning Studies
Future Cost to
Decommission
FPL’s estimate of the total cost
to decommission each nuclear unit in future dollars was based on present
operating license termination dates, the current dollar base costs to
decommission each nuclear unit as provided by TLG’s site-specific study, the
contingency allowances, and the escalation rates. The estimated costs in future
dollars to decommission each nuclear unit at its respective license termination
date are listed in Table 2-3.
Table 2-3
Future Cost to Decommission 2015 Study
|
Nuclear Unit
|
Dollars
|
|
TP3
|
1,909,345,000
|
|
TP4
|
2,125,111,000
|
|
SL1
|
2,556,058,000
|
|
SL2
|
2,552,581,000
|
|
Total
|
9,143,095,000
|
Source: Responses to Staff’s Second
Data Request, No. 6.
Funding Period
The funding period is that period
over which revenues are collected from ratepayers for purposes of
decommissioning the nuclear units. Funding periods are assumed to expire on the
last day of the month preceding the month in which the operating license for
the unit is due to expire. The operating license expiration dates for the nuclear
units are listed in Table 2-4.
Table 2-4
NRC Operating License
Expiration Dates
|
Nuclear Unit
|
Expiration Date
|
|
TP3
|
July 19, 2032
|
|
TP4
|
April 10, 2033
|
|
SL1
|
March 1, 2036
|
|
SL2
|
April 6, 2043
|
Source: FPL’s 2015
Decommissioning Study
Years of Fund
Expenditures
The years in which the
accumulated decommissioning funds will be expended are listed in Table 2-5.
Table 2-5
Years of Fund
Expenditures
|
Nuclear Unit
|
Period
|
|
TP3
|
2032-2073
|
|
TP4
|
2033-2073
|
|
SL1
|
2036-2074
|
|
SL2
|
2043-2074
|
Source: FPL’s 2015 Decommissioning Study
Fund Earnings Rate
The fund earnings rate is an
important assumption in the determination of the appropriate annual accrual
amount. The amount of the annual accrual moves inversely to the fund earnings
rate. In other words, the higher the assumed fund earnings rate, the lower the
indicated annual accrual and vice versa. In its 2015 study, FPL used an assumed
fund earnings rate of 3.7 percent for all four of its nuclear units. FPL’s
assumed rate is based on the CPI rate of 2.4 percent, plus a projected real
long-term, after tax and net of fees, earnings rate (or spread) of 1.3 percent.
This is the same approach FPL
used in the 2005 and 2010 decommissioning studies where the assumed earnings
rate is compared to the CPI to assure that the overall return remains above CPI
to maintain the purchase power of the accruals until actual decommissioning. In
FPL’s 2005 decommissioning study, in which the Commission took no action due to
a settlement between Office of Public Counsel (OPC) and the company, FPL used
an assumed fund earnings rate of 5.0 percent (CPI of 2.6 percent plus a spread
of 2.4 percent). In FPL’s 2010 study, the assumed fund earnings rate was 3.9
percent (CPI of 2.0 percent plus a spread of 1.9 percent). FPL explained that the
lower rate in the 2015 study is due to softened post-recession long-term return
expectations in light of uncertainty in the sustainability of long-term global
economic growth and a lower base of interest rates. This assumption is based on
an estimate of the expected nominal return of 3.7 percent over the life of
FPL’s nuclear decommissioning trust (NDT) fund.
The decrease in the long-term
fund earnings rate reaffirms the importance of maintaining adequate funding and
the value of the periodic review of these studies as required by Rule
25-6.04365, F.A.C. The assumed fund earnings rate of 3.7 percent compared to a
CPI of 2.4 percent reflects the projection of continued adequacy of the funds.
This projection assumes an investment strategy where the funds are moved from
an initial mix of 40 percent equities, 48.5 percent fixed income and 11.5 percent
alternatives to one that reduces exposure to alternative strategies by the end
of 2025. From 2026 to 2055 the NDT will consist of 100 percent fixed income and
from 2056 to 2074 the fund will consist of 50 percent fixed income and 50
percent cash.
As demonstrated by the range of
earned returns shown in Table 2-6, total fund returns have experienced some
volatility from year to year. However, since 2010, the NDT has increased 5.1 percent,
and since inception, the overall return has remained above CPI. FPL has
projected long-term CPI at 2.4 percent, and based on the actual returns since
inception, staff believes FPL’s forecasted fund earnings rate of 3.7 percent is
reasonable for the purpose of determining the appropriate annual accrual
amount.
Table 2-6
NDT Time Weighted
Returns
|
FPL
|
Fund Return
|
CPI
|
Spread
|
|
1 Year
|
-1.1%
|
0.9%
|
-0.2%
|
|
2 Years
|
3.0%
|
0.8%
|
2.2%
|
|
3 Years
|
6.1%
|
1.0%
|
5.1%
|
|
5 Years
|
6.2%
|
1.6%
|
4.6%
|
|
10 Years
|
5.0%
|
1.9%
|
3.1%
|
|
Inception
|
6.8%
|
2.7%
|
4.1%
|
Source: Responses to Staff’s First Data Request,
No. 53.
The fundamental purpose of the
Commission’s review of the decommissioning study is to make sure there will be
adequate funding on hand at the time the nuclear units are decommissioned. The
assumed fund earnings rate should be conservative enough to avoid a situation
whereby future customers are burdened by inadequate funding for
decommissioning. However, an assumed fund earnings rate that is too
conservative inappropriately burdens current customers with expenses to be
incurred in the future. As such, a certain amount of judgment is necessary to
determine a fair balance between generations of customers.
For the reasons outlined above,
staff believes FPL’s assumed fund earnings rate of 3.7 percent is reasonable
and should be used in the determination of the annual accrual amounts.
Minimum Fund Earnings
Rate
Separate from the issue of the
assumed fund earnings rate is the issue of whether the Commission should impose
a minimum fund earnings rate. In Order No. 21928, the Commission determined
that a minimum fund earnings rate equivalent to the level of inflation over
each five-year review period would be appropriate.[39]
The Commission reaffirmed this approach in the 1994 and 1998 FPL Nuclear
Decommissioning Studies. In those orders
the Commission stated:
Rather than
attempting to set a prospective minimum fund earnings rate which may or may not
be reasonable under future economic conditions, we will require that the
companies set aside funds sufficient to meet the Commission’s best estimate of
the decommissioning liability and require the companies to maintain the
purchasing power as well as the principal amount of these contributions. The
companies’ investment performance will be evaluated along with all other
decommissioning activities every five years. If it is found that the companies’
investment earnings, net of taxes and all other administrative costs charged to
the trust fund, did not meet or exceed the CPI average for the period, then we
will consider ordering the utility to cover this shortfall with additional
monies to keep the trust fund whole with respect to inflation. We therefore
find a minimum fund earnings rate equivalent to the level of inflation over
each five-year review period would be appropriate.
FPL believes a minimum funds
earnings rate should not be imposed and the current approach, as approved by
the Commission, should remain in effect. The company explained that economic
and financial market conditions can vary widely over time and are difficult, if
not impossible, to predict. FPL also indicated that it is reasonable that the company
be accountable for taking appropriate steps intended to preserve the principal
value and the purchasing power of contributions collected from its customers.
Staff concurs with FPL and believes this approach is reasonable and recommends
that it remain in effect.
Conclusion
The current annual expense
accrual requirements for FPL’s nuclear unit decommissioning costs presented in
the 2015 FPL Nuclear Decommission Study support a zero accrual and funding
requirement as of December 31, 2015. Based on the current dollar cost to
decommission each nuclear unit as determined in TLG’s site-specific study, the
unit-specific escalation rates recommended above, and the assumed fund earnings
rates of 3.7 percent, staff believes FPL’s request to continue the suspension
of the accrual is reasonable.
Consistent with prior Commission
practice and Rule 25-6.04365, F.A.C., the assumptions presented in FPL’s nuclear
decommissioning study should be reviewed and updated as appropriate at least
once every five years, which may change the accrual requirement prospectively.
As such, staff recommends a
continuation of the suspension of the accrual for nuclear decommissioning as
approved by the Commission in Order No. PSC-11-0381-PAA-EI. Accordingly, the
appropriate jurisdictional annual accrual amounts necessary to recover future
decommissioning costs over the remaining life of each nuclear power plant are
currently zero. Additionally, staff recommends that the assumptions included in
FPL’s 2015 decommissioning study to determine the annual accrual are reasonable.
Issue 3:
Should the amortization expense associated with the
unrecovered value of End-of-Life Materials and Supplies inventories that will
exist at the nuclear site following shut down be revised?
Recommendation:
Yes. Staff recommends that the Commission recognize
the revised annual amortization expense associated with End-of-Life Materials
and Supplies inventories for FPL of $1.973 million (system), based on the proposed January 1, 2017
effective date of new customer rates in the company’s current rate case
proceeding, Docket No. 160021-EI. FPL should address the amortization of End-of-Life
Materials and Supplies inventories in its subsequent decommissioning studies so
the related annual accruals can be revised, if warranted. (Wu)
Staff Analysis:
The end of life materials
and supplies (EOL M&S) inventories of a nuclear powered electrical plant consist
of spare replacement parts and supplies[41]
needing to be kept in inventory to ensure safe and reliable operations of the
nuclear plant. These inventories are unique and will have little value other
than scrap when the associated nuclear units are decommissioned. Recognized
that a level of EOL M&S inventories will remain at the end of life of each
nuclear plant, the Commission authorized FPL to amortize the cost of
unrecovered EOL M&S inventories over the remaining life span of each
nuclear plant to ratably allocate costs to those receiving the benefit of the
nuclear fuel generated electric power.
Further, the Commission required FPL, for administrative ease, to address the
amortization status of EOL M&S inventories in the company’s subsequent
updated nuclear decommissioning cost studies so the related annual amortization
expense could be revised, if necessary.
In accordance with Order No.
PSC-02-0055-PAA-EI, effective May 2002, FPL began recording the annual
amortization expense associated with the EOL M&S inventories as a debit to
nuclear maintenance expense with a credit to an unfunded Account 228 reserve.
FPL’s current level of annual amortization expense was required in its 2010
study and approved by the Commission with Order No. PSC-11-0381-PAA-EI. Because
the Commission previously found that the recovery of the costs associated with
the EOL M&S inventories should be considered as a base rate component,
it ordered that changes in amortization of the EOL M&S inventory-related
expenses shall be considered in conjunction with changes in other base rate
costs and revenue requirement determinations at the time of FPL’s base rate
proceeding. Consequently, FPL’s authorized annual amortization determined in
its 2010 study became effective in January 2013, consistent with the
Stipulation and Settlement Agreement approved by the Commission with Order No.
PSC-13-0023-S-El.
In a decommissioning study, a
company’s required EOL M&S-related annual amortization is determined by
dividing the remaining net unrecovered cost associated with the EOL M&S
inventories by the remaining amortization period. The remaining net unrecovered
cost is the difference between the estimated cost of EOL M&S inventories
and the actual reserve balance accrued at a point in time. The remaining
amortization period is usually assumed to be from the considered point in time
to the end of operating license of the last nuclear unit at a nuclear site. In
its 2015 study, FPL estimated the remaining net unrecovered cost associated
with the EOL M&S inventories, as of December 31, 2015, to be approximately
$19.13 million at St. Lucie (SL)[44] and
$21.51 million at Turkey Point (TP).
In its 2015 decommissioning
study, FPL proposed that any change in amortization accruals relating to EOL
M&S inventories should be addressed in FPL's next base rate proceeding.
Thus, the company updated its analysis associated with the EOL M&S inventories
to align with the effective date of FPL’s 2016 base rate case.[45] FPL’s
estimate of remaining net unrecovered cost of EOL M&S inventories, as of
January 1, 2017, is approximately $18.66 million at SL and $20.57
million at TP. The resulting EOL M&S annual amortization expense is
estimated to be $1.97 million ($0.71 million for SL and $1.26 million for TP),
an increase of approximately $0.57 million annually from the current level.
Details of the estimated EOL M&S inventories, reserve balances, remaining
amounts to be recovered, and annual amortization amounts, as of January 1, 2017,
are presented in Table 3-1.
|
Table
3-1
|
|
EOL
M&S-Associated Amortization Expenses
($1000s)
|
|
|
Plant
Unit
|
EOL M&S
Inventories as of 1/1/2017
|
Reserve
Balance as of 1/1/2017
|
Remaining
Amounts to be Recovered
|
Current
Amortization
|
Revised
Amortization
|
Change in
Amortization[46]
|
|
TP4*
|
36,435
|
15,865
|
20,570
|
938
|
1,263
|
325
|
|
SL2**
|
24,892
|
6,228
|
18,664
|
470
|
710
|
240
|
|
Total
|
61,327
|
22,093
|
39,234
|
1,408
|
1,973
|
565
|
Notes: * TP4 is the last unit to be
decommissioned at Turkey Point nuclear site.
** SL2 is the last unit to be
decommissioned at St. Lucie nuclear site.
Data
Source: FPL's responses to Staff's First Data Request, No. 46; FPL's Responses
to Staff's Second Data Request, No. 6; FPL 2015 Decommissioning Study,
Assumptions and Schedule E; and Order No. PSC-11-0381-PAA-EI, Pages 19-20.
Based on review of information
contained in FPL’s 2015 Decommissioning Study and associated data request
responses as well as prior Commission orders, staff believes that the revised
amortization amounts presented in Table 3-1 are appropriate. Staff also
believes that the updated EOL M&S amortization, $1.973 million, should be
addressed in conjunction with changes in other base rate costs and revenue
requirement determinations in FPL’s current base rate proceeding, Docket No.
160021-EI.
Conclusion
Staff recommends that the
Commission approve the revised annual amortization expense associated with EOL
M&S inventories for FPL of $1.973 million (system), effective with the date
of new customer rates in FPL's current rate case proceeding, Docket No.
160021-EI. This represents an increase of approximately $0.57 million over the
2010 authorized amortization amount. The amortization of EOL M&S
inventories should be included in subsequent decommissioning studies so the
related annual accruals can be revised, if warranted.
Issue 4:
Should the amortization expense associated with the
cost of the Last Core of nuclear fuel be revised?
Recommendation:
Yes. Staff recommends that the Commission recognize
the revised annual amortization expense associated with the cost of the Last
Core of nuclear fuel at FPL nuclear units of $11.073 million (system), based on
the proposed January 1, 2017, effective date of new customer rates in FPL’s
current rate case proceeding, Docket No. 160021-EI. FPL should address the
costs associated with the Last Core in subsequent decommissioning studies so
the related annual accruals can be revised, if warranted. (Wu)
Staff Analysis:
Last Core is the unburned
nuclear fuel that will remain in the fuel assemblies at the end of the last
operating cycle of each nuclear unit when it ceases operation. According to
FPL, no feasible solution currently exists to allow the company to burn all the
nuclear fuel by the time each nuclear unit ceases operation, or, to move the
unburned fuel remaining at any nuclear unit at the time of unit shutdown to
another unit.
Recognizing that the Last Core is associated with the final shut down of a
nuclear unit and equates to an unrecovered cost at the end of each nuclear
unit's life, the Commission authorized FPL to amortize the cost of the Last
Core over the remaining life span of each nuclear unit to ratably allocate
costs to those receiving the benefit of the nuclear generated power.
Further, the Commission required FPL, for administrative ease, to address the
amortization status of the Last Core expense in the company’s subsequent
updated nuclear decommissioning cost studies so the related annual amortization
expense could be revised, if necessary.
In accordance with Order No.
PSC-02-0055-PAA-EI, effective May 2002, FPL began recording the annual
amortization expense associated with the Last Core as a debit to nuclear
maintenance expense with a credit to an unfunded Account 228 reserve. Similar
to its EOL M&S, FPL’s current level of annual amortization expense was
required in its 2010 study and approved by the Commission with Order No.
PSC-11-0381-PAA-EI. Because the Commission previously found that the recovery
of the cost associated with the Last Core should be considered as a base rate
component, it
ordered that changes in amortization of the Last Core-related expense shall be
considered in conjunction with changes in other base rate costs and revenue
requirement determinations at the time of FPL’s base rate proceeding.
Consequently, FPL’s authorized annual amortization determined in its 2010 study
became effective in January 2013, consistent with the Stipulation and
Settlement Agreement approved by the Commission in Order No. PSC-13-0023-S-El.
In a decommissioning study, a
company’s required Last Core-related annual amortization is determined by
dividing the difference between the estimated EOL value of the Last Core of
nuclear fuel and the cumulative amortization balance at a point in time, by the
remaining amortization period which is usually assumed to be at the end of
operating license of the nuclear unit. In its 2015 study, FPL estimated the
remaining net unrecovered cost associated with each nuclear unit at both of its
St. Lucie and Turkey Point nuclear plants, as of December 31, 2015, resulting in a total of approximately $229.3 million.
In its 2015 decommissioning
study, FPL proposed that any change in amortization accruals relating to the
Last Core expense should be addressed in FPL's next base rate proceeding. Thus,
the company updated its analysis associated with its EOL nuclear fuel-related expense
to align with the effective date of FPL’s 2016 base rate case. FPL’s
estimate of remaining net unrecovered cost associated with the Last Core, as of
January 1, 2017, is approximately $217.6 million in total. The resulting annual
amortization expense is estimated to be $11.1 million, a decrease of $0.7
million annually from the current level. Details of the estimated Last
Core-related costs, reserve balances, remaining amounts to be recovered, and
annual amortization amounts, as of January 1, 2017, are presented in Table 4-1.
|
Table
4-1
|
|
Last Core-Associated Amortization
Expenses
($1000s)
|
|
|
Plant
Unit
|
Last Core Costs as
of 1/1/2017
|
Reserve
Balance as of 1/1/2017
|
Remaining
Amounts to be Recovered
|
Current
Amortization
|
Revised Amortization
|
Change in
Amortization
|
|
TP3
|
67,500
|
28,093
|
39,407
|
3,032
|
2,536
|
(496)
|
|
TP4
|
62,700
|
24,165
|
38,535
|
3,117
|
2,365
|
(752)
|
|
SL1
|
89,300
|
27,841
|
61,459
|
2, 933
|
3,200
|
267
|
|
SL2
|
98,700
|
20,550
|
78,150
|
2,672
|
2,972
|
300
|
|
Total
|
318,200
|
100,649
|
217,551
|
11,754
|
11,073
|
(681)
|
Data
Source: FPL's responses to Staff's First Data Request, No. 52; FPL's Responses
to Staff's Second Data Request, No. 6; FPL 2015 Decommissioning Study, Schedule
F; and Order No. PSC-11-0381-PAA-EI, Pages 21-22.
Based on review of information
contained in FPL’s 2015 Decommissioning Study and associated data request
responses as well as prior Commission orders, staff believes that the revised
amortization amounts presented in Table 4-1 are appropriate. Staff also believes
that the updated Last Core amortization, $11.073 million, should be addressed
in conjunction with changes in other base rate costs and revenue requirement
determinations in FPL’s current base rate proceeding, Docket No. 160021-EI.
Conclusion
Staff recommends that the
Commission approve the revised annual amortization expense associated with the
cost of the Last Core for FPL of $11.073 million (system), effective with the
date of new customer rates in FPL's current rate case proceeding, Docket No.
160021-EI. This represents a decrease of approximately $0.68 million from the
2010 authorized amortization amount. The amortization of the Last Core-related
costs should be included in subsequent decommissioning studies so the related
annual accruals can be revised, if warranted.
Issue
5:
What
should be the effective date for adjusting the annual decommissioning accrual
amounts for TP3, TP4, SL1, SL2, amortization of nuclear EOL M&S
inventories, and amortization of the costs associated with the Last Core?
Recommendation:
If the staff recommendations in Issues 1 and 2 are approved,
there is no change to the current approved zero decommissioning accrual. Therefore, an effective date for adjusting
the annual decommissioning accrual is moot. If the staff recommendations in
Issues 3 and 4 are approved, the revised annual amortization amounts relating
to EOL M&S inventories (Issue 3) and the Last Core (Issue 4) should be
effective at the time new base rates are approved. (Higgins, Wu)
Staff Analysis:
By Order No.
PSC-11-0381-PAA-EI, issued September 12, 2011, Petition for approval of 2010
nuclear decommissioning study, by Florida Power & Light Company, the
Commission found that FPL’s currently-approved zero annual decommissioning
accrual did not warrant revision at that time. A review of FPL’s 2015 study indicates
that while decommissioning base cost estimates have increased since 2010,
assumptions relating to escalation rates and trust fund earnings, as discussed
in Issue 2, suggest that FPL’s currently approved zero annual decommissioning
accrual does not require revision at this time.
As previously discussed in Issues 3 and 4, FPL’s current
decommissioning study indicates revisions to the amortization of nuclear EOL
M&S inventories and amortization of the costs associated with the Last Core
are warranted. FPL’s position and request is that any change in accrual amounts
should be addressed in its next base rate proceeding. Staff notes the
Commission is currently reviewing FPL’s base rates in Docket No. 160021-EI.
Given that the Commission found in the 1998 FPL Nuclear Decommissioning Study
review that the amortization expenses associated with the Last Core and EOL
M&S should be considered base rate obligations, staff agrees with the
company’s assessment.
Conclusion
If the staff recommendations in Issues
1 and 2 are approved, there should be no change to the currently-approved zero
annual decommissioning accrual.
Therefore, the Commission need not establish an effective date at this
time. If the staff recommendations in Issues 3 and 4 are approved, the revised
annual amortization amounts relating to EOL M&S inventories and the Last
Core should be effective at the time new base rates are approved.
Issue 6:
When should FPL file its next nuclear
decommissioning study?
Recommendation:
FPL’s next decommissioning cost study for the Turkey
Point Nuclear Generating Station and the St. Lucie Nuclear Power Plant should
be filed no later than December 14, 2020. (Higgins)
Staff Analysis:
Rule 25-6.04365, F.A.C.,
requires a utility that owns a nuclear generating plant under Commission
jurisdiction to file a site-specific nuclear decommissioning cost study update
at least once every five years from the submission date of the previous study unless
otherwise required by the Commission.
Given that FPL’s current study was filed on December 14, 2015, its next
study should be filed no later than Monday, December 14, 2020.
Conclusion
FPL’s next decommissioning cost
study for the Turkey Point Nuclear Generating Station and the St. Lucie Nuclear
Power Plant should be filed no later than December 14, 2020.
Issue 7: Should this docket be closed?
Recommendation:
If no person whose substantial interests are
affected by the Commission’s Proposed Agency Action files a protest within 21
days of the issuance of the order, this docket should be closed upon the
issuance of a Consummating Order. (Mapp)
Staff Analysis:
If no person whose substantial interests are
affected by the Commission’s Proposed Agency Action files a timely request for
hearing within 21 days of the issuance of the order, no further action will be
required and this docket should be closed upon the issuance of a consummating
order.
