Nuclear Regulation:

NRC's Oversight of Nuclear Power Reactors' Decommissioning Funds Could Be Further Strengthened

GAO-12-258: Published: Apr 5, 2012. Publicly Released: May 7, 2012.

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What GAO Found

The Nuclear Regulatory Commission (NRC) periodically reviews licensees’ decommissioning funds and related licensee data to determine if licensees have provided reasonable assurance that they will accumulate adequate funds for decommissioning. For example, licensees must submit estimates to NRC of decommissioning costs throughout the life of the reactor and submit fund status reports at least every 2 years while the reactor is operating. Licensees typically accumulate such funds over time through trust fund investments. The minimum amount of funds considered adequate is established by NRC’s decommissioning funding formula, which is based on information collected more than 30 years ago.

NRC has taken actions to strengthen its oversight of licensees’ decommissioning funds by (1) creating guidance and other documents related to criteria for reviewing licensees’ 2-year reports and by using its enforcement process when deficiencies are identified, (2) conducting reviews at licensee offices to verify that fund balances licensees reported in their 2-year reports match their year-end bank statements in response to a 2006 NRC Office of the Inspector General (OIG) recommendation, (3) reevaluating the decommissioning funding formula to determine if it should be updated, and (4) improving decommissioning planning. However, several weaknesses may limit NRC’s ability to ensure that licensees have provided reasonable assurance. Specifically:

  • NRC’s formula may not reliably estimate adequate decommissioning costs. According to NRC, the formula was intended to estimate the “bulk” of the decommissioning funds needed, but the term “bulk” is undefined, making it unclear how NRC can determine if the formula is performing as intended. In addition, GAO compared NRC’s formula estimates for 12 reactors with these reactors’ more detailed site-specific cost estimates calculated for the same period. GAO found that for 5 of the 12 reactors, the NRC formula captured 57 to 76 percent of the costs reflected in each reactor’s site-specific estimate; the other 7 captured 84 to 103 percent.

  • The results of more than one-third of the fund balance reviews that NRC staff performed from April 2008 to October 2010 to verify that the amounts in the 2-year reports match year-end bank statements were not always clearly or consistently documented. As an example of inconsistent results, some reviewers provided general information, such as “no problem,” while others provided more detail about both the balance in the year-end bank statement and the 2-year report. As of October 2011, NRC did not have written procedures describing the steps that staff should take for conducting these reviews, which likely contributed to NRC staff not always documenting the results of the reviews clearly or consistently.

  • NRC has not reviewed licensees’ compliance with the investment standards the agency has set for decommissioning trust funds. These standards specify, among other things, that fund investments may not be made in any reactor licensee or in a mutual fund in which 50 percent or more of the fund is invested in the nuclear power industry. As a result, NRC cannot confirm that licensees are avoiding conditions described in the standards that may impair fund growth. Without awareness of the nature of licensees’ investments, NRC cannot determine whether it needs to take action to enforce the standards.

Why GAO Did This Study

About 20 percent of U.S. electricity is generated by 104 nuclear reactors. NRC, which regulates reactors, requires their owners (licensees) to reduce radioactive contamination after reactors permanently shut down. This process, called decommissioning, costs hundreds of millions of dollars per reactor. NRC requires licensees to provide reasonable assurance that they will have adequate funds to decommission, in part, by accumulating funds that are greater than or equal to NRC’s decommissioning funding formula. GAO and NRC’s OIG have identified concerns about NRC’s oversight of decommissioning funds. GAO was asked by Representative Markey in his former capacity as Chairman of the House Subcommittee on Energy and Environment to (1) describe how NRC ensures that licensees provide reasonable assurance of adequate decommissioning funds and (2) identify any improvements or weaknesses in NRC’s oversight of this area. GAO analyzed NRC’s formula and reviews of licensee information and interviewed NRC officials, licensees, and others.

What GAO Recommends

GAO recommends, among other things, that NRC define what it means by the “bulk” of the funds needed for decommissioning and consider reviewing a sample of licensees’ investments to determine if they comply with standards. NRC agreed to consider reviewing a sample of investments, but disagreed that defining bulk is needed because of the comprehensiveness of NRC’s regulatory system. GAO continues to believe that this definition is needed.

For more information, contact Frank Rusco, 202-512-3841, ruscof@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: NRC officials told us in March 2014 that the agency would not be revising the decommissioning funding formula or its adjustment factors, and considered this recommendation to be closed. According to the officials, this conclusion was developed after reviewing an evaluation of the formula conducted by a National Laboratory, and comments from stakeholders and the public. In addition, NRC determined that the minimum funding formula represents the low end of the range of decommissioning costs in most cases, and thus represents the "bulk" of decommissioning costs.

    Recommendation: To further strengthen NRC's oversight of decommissioning funding assurance, the NRC Commissioners should ensure reliability as part of the agency's process of reevaluating its decommissioning funding formula, by defining what the agency means by the 'bulk" of the funds that licensees will likely need to decommission their reactors.

    Agency Affected: Nuclear Regulatory Commission

  2. Status: Open

    Comments: In March 2014, NRC officials told us that, NRC staff recommended against revising the decommissioning funding formula and its adjustment factors. According to the officials, this recommendation was developed after reviewing an evaluation of the formula conducted by a National Laboratory, and comments from stakeholders and the public. NRC Commissioners agreed with the NRC staff recommendation that they should not update the decommissioning funding formula. We will follow up with NRC in 2016 to see if this has changed.

    Recommendation: To further strengthen NRC's oversight of decommissioning funding assurance, the NRC Commissioners should ensure reliability as part of the agency's process of reevaluating its decommissioning funding formula, by using the cost-estimating characteristics as a guide for a high-quality cost-estimating formula in the event that NRC chooses to update the formula.

    Agency Affected: Nuclear Regulatory Commission

  3. Status: Open

    Comments: In March 2015, NRC officials told us that NRC had updated its procedures describing steps that staff should take in conducting their independent reviews of licensee documentation regarding decommissioning funding assurance. Specifically, in January 2015, NRC revised its procedures to incorporate enhancements to the staff's review process of decommissioning funding status (DFS) reports, such as cash flow analysis, and lessons-learned from previous DFS reviews performed between 2011 and 2013. However, NRC does not require licensees to provide their year-end bank statements. Furthermore, in February 2015, NRC discontinued a spot-check program begun in 2008 in which NRC staff previously verified that licensees' reported amounts of accumulated decommissioning funds matched trust fund statements. NRC staff reported finding no significant inconsistencies in fund balances in the past and therefore recommended that the program be discontinued, except on an as-needed basis.

    Recommendation: To further strengthen NRC's oversight of decommissioning funding assurance, the NRC Commissioners should better ensure that licensees are providing reasonable assurance that they will have the necessary funds and improve the consistency of information the agency collects by documenting procedures describing the steps that staff should take in their reviews analyzing licensee documentation and verifying that the amounts licensees report to NRC in their decommissioning funding status (DFS) reports match the balances on their year-end bank statements.

    Agency Affected: Nuclear Regulatory Commission

  4. Status: Open

    Comments: NRC officials told us in 2013 that NRC anticipated that it would coordinate with licensees and their respective financial institutions, where the decommissioning trust fund records are kept, and continue to review the fund balances in a manner that is most efficient for NRC and the licensee. However, in February 2015, NRC discontinued a spot-check program begun in 2008 in which NRC staff had previously verified that licensees reported amounts of accumulated decommissioning funds matched trust fund statements. NRC staff reported finding no significant inconsistencies in fund balances in the past and therefore recommended that the program be discontinued, except on an as-needed basis.

    Recommendation: To further strengthen NRC's oversight of decommissioning funding assurance, the NRC Commissioners should better ensure that licensees are providing reasonable assurance that they will have the necessary funds and improve the consistency of information the agency collects by continuing these reviews of fund balances in a way that is most efficient and effective for the agency.

    Agency Affected: Nuclear Regulatory Commission

  5. Status: Closed - Implemented

    Comments: In March 2015, NRC officials told us that in response to our recommendation to review samples of licensees' decommissioning trust funds for compliance with investment standards, NRC considered whether additional action should be taken to assure compliance with NRC's investment standards. NRC subsequently determined that (1) its oversight is sound and (2) federal banking regulatory agencies examine trust departments every two to three years, and the investment restrictions and applicable laws are within the scope of those examinations. Consequently, NRC stated that it does not intend to change the agency's process for overseeing investment restrictions.

    Recommendation: To further strengthen NRC's oversight of decommissioning funding assurance, the NRC Commissioners should consider reviewing a sample of licensees' investments to determine if licensees are complying with decommissioning investment standards and determine whether action should be taken to enforce thesestandards.

    Agency Affected: Nuclear Regulatory Commission

 

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