,.

March 11, 1987

For:

From:

Subject:

Purpose:

Discussion:

POLICY ISSUESECY-87-66

(NEGATIVE CONSENT)

The Commissioners

Victor Stello, Jr.Executive Director for Operations

PARTIAL EXEMPTIONS FROM 10 CFR PART 171, ANNUAL FEEFOR POWER REACTOR OPERATING LICENSES

To inform the Commission of my proposed partial exemptionsfrom the annual fee for the Yankee (Rowe) Nuclear PowerStation, the Big Rock Point Plant, and the La CrosseBoiling Water Reactor.

On September 18, 1986, the Commission adopt~ a finalnew rule, 10 CFR Part 171, Annual Fee for Power ReactorOperating Licenses (51 FR 33224). The rule, which becameeffective October 20, 1986, provides that an annual feeshall be paid by the licensed owner for each power reactorholding an operating license. The rule implements theConsolidated Omnibus Budget Reconciliation Act of 1985(P.L. 99-272), which requires the Commission to collectannual charges not to exceed 33 percent of its FY 1987budgeted costs. As published in the final rule, the feewas to be $950 thousand per reactor. This was based on aFY 87 budget of $405 million. With the approved budget of$401 million, the fee is now $940 thousand per license.

As discussed in the Resolution of Comments on the ProposedRule, it was not the intent of the Commission to promulgatea fee schedule that would have the effect of imposing feesat such a level that the owners of the handful of small,older reactors would find it in their best economicinterest to shut their reactors down. Thus, the rule alsocontained a provision (171.11) for exemption from" theannual fee, which states:

liThe Corrmission may, upon application, grant an exemption,in part, from the annual fee required pursuant to thispart. An exemption under this provision may be granted by

Contact:C. J. Holloway, LFMB49-27225

,."._11''- _

The Commissioners 2

the Commission taking into consideration the followingfactors:

a. Age of the reactor;b. Size of the reactor;c. Number of customers in rate base;d. Net increase in KWh cost for each customer

directly related to the annual fee assessedunder this part; and

e. Any other relevant matter which the licensee believesjustifies the reduction of the annual fee."

This paper addresses those applications for exemptionsthat have been received from licensees for the three small,older reactors; these are provided in Enclosures 1 through3. As the first step in the process, each application wasevaluated using the criteria of Part 171.11 to determinewhether a reduction was appropriate. The factors con­sidered for each plant are summarized at Enclosure 4.

'"For these plants, the staff notes that the annual fee, ontop of other fees already required by Part 170, provides asignificant increase in power production costs. Because ofthe smaller generating capacity, the impact on individualcustomers is greater than for the same fee applied to largeplants, and the ability to absorb such costs by the utilityis similarly limited. The staff concludes that these threeplants meet the criteria of Section 171.11; that impositionof the full annual fee would be a disproportionate burdenfor these plants; and, therefore, that a reduction shouldbe granted for Big Rock Point, La Crosse and for Yankee.

As the second step in the process, the staff tried variousapproaches to determine an equitable method of adjustingthe affected plant fees. Those approaches are summarizedat Enclosure 5. The approaches considered included a feebased on: (1) thermal megawatt power rating (We note thatthis form of adjustment is considered~ when a plant isdetermined to meet the criteria establTSned by Section171.11. All remaining plants which do not qualify for anexempti on"COntinue to be subject to the annual fee assessedby the rule.); (2) relative impact of the fee onrequestors; (3) comparison of mill rate increases; and (4)licensed operating life. The results using theseapproaches were relatively close in dollar amounts.Nevertheless, the amounts were averaged resulting in thefollowing adjusted fees:

•••e,------,---------__II' •••••

The Commissioners 3

La Crosse Boiling Water Reactor $ 56,000

Big Rock Point 81,000

Yankee 183,000

Recommendation: That the Commission:

Note that it is my intention to grant partial exemptions

from the Part 171 annual fee requirements for La Crosse,

Big Rock Point and Yankee, as reflected in the above cited

adjusted fees within 10 working days of the date of this

paper unless otherwise instructed by the Conmtss ton,

/y~,_v;~/£-~d);,-

Vlctor Stella, ~.Executive Director

for Operations

Enclosures:1. Letter dated October 21,1986

from A. R. Soucy (Yankee AtomicElectric Company) to V. Stella (NRC)

2. Letter dated October 28, 1986 fromJ. W. Taylor (Dairyland Power Cooperative)

to Director, NRR3. Letter dated November 7, 1986 from

K. W. Berry (Consumers Power Company)

to Executive Director for Operations

4. Summary Sheets (3)5. Computation of Proposed Adjusted

Annual Fee

SECY NOTE: In the absence of instructions to the contrary,

SECY will notify the staff on Thursday, March 26,

1987 that the Commission by negative consent,

assents to the action proposed in this paper.

DISTRIBUTION:CommissionersOGC (H Street)01OCAOIAOPAREGION IREGION III

EDOOGC (MNBB)ACRSASLBPASLAPSECY

•••__1__••__1

_

ENCLOSURE 1

Ltr dated October 21, 1986 from A. R. Soucy (Yankee Atomic

Electric Company) to V. Stello (NRC)

•••, HU•In'•;--..-..

-~..-.._~.... . - ..-----:~~=~~~~:-:-::-- .. __...... , .. ~ -"'--'. -..-- ,-' -~.

YANKEE ATOMIC ELECTRIC COMPANY

~~) 1671 WO'C"."'" ,.... n ] ''''"''''P'O~ Mo"OChu,""' 0170'

TelephoMI 617 ~72·B100

Enclosure 1

A R. SOUCy

,.£ &!ov-t ......:;

eMI[' """'.NC.'''l o'''Ct_october 21, 1986

FYR 86-102

Mr. Victor Stello, Jr.

Executive Director for Operat;ons

u.s. Nuclear Regulatory Commiovion

Washington, D. C. 20555

Dear Mr. Stello:

Enclosed is an original end four copies of Yankee Atomic

Electric Company's applicatiofl for partial exemption from the

10 C.F.R. Part 171 annual fee. See Annual Fee for Power Reactor

Operating Licenses and Conforllll n0mencSment, 51 Fed. Reg. 33224

(September 18, 1986). The bases for Yankee's request for a partial

exemption are set forth in the enclosed application. As we mention

in the application, Yankee would be pleased to meet w~th the Staff

regarding the application. Also, if any adcSitional information

is needed in connection with the application please feel free

to call me.

Finally, one additional copy of Yankee's application for

exemption is enclosed as well. please have that copy marked anG

datecS received by the Commission ancS returned to our messenger.

very truly yours,

-CI7.A ..·~A. R. Soucy --------

Treasurer

•~RS/kg

Enclosures

J"S 1.1•...._11.__'__.,_,.. _

,.

UN!TED STATES OF k~ERICA

NUCLEAR REGULATORY COP~!SSION

(Yankee Plant)

In The Matter of

YANKEE ATOMIC ELECTRIC COMPANY

))))))

---------------)

Docket No. 50-29

License No. DPR-3

APPLICATION FOR PARTIAL EXEP.PTION

Pursuant to 10 CFR Section 171.11, Yankee Atomic Elec-

trlc Company ("Yankee") hereby applies for a partial exe~ptic~

from the requirements of Section 171.15 of the Cornmissj.~n·s rules

ana regulations.

Suu~ortinc Statement

In support of this application, Yankee submits the fol-

lowing:

1. Yankee is a Massachusetts corporation organized in

1954 and is an "electric utility" as defined in 10 CFR Sec­

tion 2.4(5). Yankee i5 the holder of NRC License No. OPR-3,

dated July 19, 1960.

2. Sections 171.:: and 171.15 were recently acc~~e= by

the Commission, and Section 171.15 imposes an annual license

surcharge on power reactor licensees, which for fiscal 1987 is

$950,000. This surcharge is in addition to the Comrr"ission's

Part 170 license fees, which are use related. See Annual Fee for

11

__I' __ __

Power Reactor Operating Licenses and Conforming Amendment, 51

Fed. Reg. 33,224 (September 18, 1986) (Final Rule).l

Section 171.11 provides for exemptions from that annual fee. The

exemption provision states as follows:

An exemption under this provision may be

granted by the Commission taking into consid­

eration the following factors:

(a) Age of the reactor:

(b) Size of the reactor:

(c) Number of customers in rate base:

(d) Net increase in KWh cost for each customer

directly related to the annual fee as­

sessed under this part: and

(e) Any other relevant matter which the li­

censee believes justifies the recuction

of the annual fee.

These criteria are addressed in the paragraphs that

follow.

3. The Yankee plant is a 175 net M~e pressurized water

reactor that began operating on November 10, 1960. Yankee is the

oldest operating commercial nuclear power plant in the United

S~ates. Yankee's ope=atin; license expires in 11 years, and its

current power contracts expire in only 5 years. 2

Yankee is seeking jucicial r ev i ev of t~e final- rule i::r.p~5in;

the Part 171 license fee, and sub=issi=~ c= =r.is exe=~~ic~

applica~ion is no~ intended ~o waive any of Yankee's ­

objections to the rule.

~I Pursuant to the power contracts referred to in the text,

Yankee_sells all of its energy p:od~ction to 10 New England

utilities, each of which sDonsorec Yankee's construction in

the 1950's and are today Yankee's sole share~olders. Those

sponsoring utilities, in turn, resell energy puichased from

(Footnote 2 Continued on Next Page

- 2 -

3

• ··~ ...-=-~."I............"'!"!o .. _~_'L...~:_

... _ ...... _.~_.~ __• __ •• .,_ • __• __

...

4. Aside from being the oldest commercial reactor,

Yankee i s one of thE' sIT/QUest cOffi.i,ercia} nuc Je e r pcve r plants In

the United States.

5. A surcharge of $950,000 in license fees will in-

crease ~ankee'spower costs by nearly 1 mill per kilowatt hour

(KWH) (a charge comparable to the entire cost of waste disposal,

as presently assessed by DOE). Please note that this s~=charge

is on top of our current Part 170 license fees of more than

$200,000 per year.

6. An increase of this magnitude is unreasonable for

such a small reactor. The impact on ~ankee power costs will be"

approximately six times as great as it ~ill be for a typical

large, current vintage plant.

7. The decision to renew the Yankee power contracts in

1991 will be based on econo~ics,which for a small plant like

Yankee are at best ~arginal.Current Yankee ~rocuctio

n costs are.

nearly 4 cents/K~~,whereas many plants in New England have pro-

(Footnote 2 Continued from Previous Page)

Yankee to their own ~holesa:ea~c reta:1 r-arkets. Ya~kee ~as

no o:her customers.

In this connection, it should also be noted that Yankee is

often referrec to as a "single asset" utility. Yankee was

formed for the exc1usive purpose of constructing and

operating New Eng:anc's first nuclear plant. Unlike other

utilities, Yankee will not construct any future generating

facilities, nuclear or otherwise. Once the Yankee plant is

removed from service and oecommissioned, ~ankee Atomic will

cease to operate as a utility company.

- 3 -

•--.._-----------__lIPS r ••

duction costs of less than three cents. An increase of $950,000

in license fees on a small plant lik~ iank~e ~~:: wide~ this gap

still further. The intent of the Section 171.~1 exemption provi-

sion is to avoid such adverse impacts on the operators of small,

older reactors.

3

See 51 Fed. Reg. at 33,227, col. 2.

8. The sensitivity of a small reactor to increased

expenses is clear in a recent analysis of 1985 nuclear utility

operating and maintenance (O&M) costs (Attachme~t A). The study

shows that despite an excellent capacity fac~c: (80\), and tight

budget controls, Yankee's O&~ costs are close to the highest in

the incustry.

9. Fl;rthermore, because 0: ;-c:-..- size,w

Ya:1Kee poses

less 0: a potential hazard than most o~her co~~ercial p:ants

(inventory of fission product is pro~ortiona2to size). More-

over, Yankee is loca~ed in a very remote area, w~ich reduces ~he

hazard to the public still further.

1/ Section 171.11 also refers to "[nlumber of customers in rate

base" and "Inlet increase in 'KWh cost for each custo~er

direotly rela~ec ~o the a~n~a: :ee assessee under this part."

Yankee ~as no retail cus~omers: as notec, all 0: its enercv

produc~ion is sold to the 10 New Enclanc ctili~ie5 ~hat o~n

Yankee as energy supply for their respective systems. And,

as indicated above, Yankee estiffiates that the Part 171

license fee will increase Yankee's cost per kilowatt hour by

approximately 1 mill, which is about 6 times greate~ than the

increase that will be experienced by more ~ecent vintage

plants.

- 4 -

..._,-----------------------

10. The requested exemption is also justified

in view cf the fac~ t~at ~a~y of the generic costs underlying the

Part 171 annual fee are not relevant to Yankee Atomic. See gen-

erally, 51 Fed. Reg. 24,078, 24,079 (1986) (Proposed Rule). This

--=-----includes costs associated with the followin~

NRC research directed to future plant designs (id.

at 24,079, col. 3) (as explained previously, Yankee

is a single-asset utility and will not construct

any generating plant, nuclear or otherwise, in the

future);

NRC research directed toward verified thermal hy­

draulic computer coces (id. at col. 2), development

of probabilistic risk assessment (PRA) technology

(id. at co~. 3) and earth scie~ces research (id. at

2~080, col. 1) (since its inception, Yankee his

independently develo?ed substantial in-house,

state-o:-the-art ana~ytical capabilities for p2ant

engineering and oesign, including NRC-a?provec thermal

hydraulic codes, fuel performance models and methods to

assess seismological risk -- examples of reports

which describe these capabilities are YAEC 123',

YAEC 127'P, YAEC 1300 and Y~~C 1331); indeed,

Yankee was licensed as an Ato~ic Enercv Act

section lO,(b) power reactor demonstration project

for, among other things, research and development

of power reac~or ~echnolocy. See 1 A.E.C. 26

(1957); • ---

~~c research and regulation directed to large,

contemporary plants and advanced future designs

(id. 2~,079 at c~l. 2 and 24,080 at col. 3), ~,

plant siting c~it£ria, construction quality

assurance anc venc~r to?ical reports related to

standard designs;

Review of applications for licenses to operate

nuclear power reactors (id. at 24,080, col. 3);

Specialized inspection and enforcement measures

(id. at 24,081, col. 1) (Yankee Atomic has an

excellent overall record of high performance and

reliability and receives consistently high SALP

ratings, !!! Attachment B).

- 5 -

••• " 7 .'.If

11. The different status of small, older generation

plants has been reco9;.izec in other regulatory contexts as well,

~, the Co~~ission's property insurance and backfitting rules

(10 C.F.R. §§ SO.S4(w) and 50.109). Simply put, because kilowatt

hour production for small, older generation plants is an oreer of

magnitude lower than that of more recent plants, the different

cost-benefit relationship of various expenses, including the new

Part 171 fees, must be recognized.

12. Therefore, Yankee submits that a surcharge of

S950,OOO on top of our current license fees (approximately

S200,OOO per year) is unreasonable for the small Yankee plant,

"

which is locatec :n a rura~ area and has an excellent safety,

regulatory and enfo~cement record. Yankee requests that the

Part 17~ fee i~posed en it not exceed S50,OOO. ~e feel that this

amount should be more than adequate to recognize the benefit to

Yankee of the va~ious costs that are to be recovered through the

Pa=~ 271 fees.

13. In addition, repeating the exemption application

process each year would be costly and time consuming for the

Staff as well as Yankee. For that reaso~, the partial exe=;ticr.

requested here should be made permanent. The facts that support

this application will not change in any ~ay that would undermine

the validity of the exe~ption.

- 6 -

--,---=-----------_._-_.-.

14. Finally, Yankee would welcome the opportunity to

meet at the Staff's convenience to discuss this application; if

additional information is needed in connection with the applica-

tion, please contact the undersigned.

Conclusion

Based upon the foregoing, Yankee respectfully requests

that it be granted a permanent, partial exemption from the re-

quirements of 10 CFR Section 171.15. It is Yankee's position

that the surcharge levied on top of our Part 170 license fees

should not exceed $50,000.

Respectfully submitted,

"YANK~E ATO~~C ELEC~R!C COY~ANY

BYC·I?~A. R. Soucy c:sT:easu:e: a:l::Ch:e: Financial Office:

1671 W=rcester ReadFramingham, Massachusetts 01701

Telephone: 617-872-8100

Dated: October~, 1986

- 7 -

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ATTACHMENT B

EXCERPT FRO~ SYSTEMATIC ASSESSMENT OF LICENSEEPERFOR~A~CE (SALF) REPORT NO. 50-29/85-99

B. Facility Performance

Functional Area Last Period This Period Re-cent Trend(t-\ay 1- 1982) (September 1, 1983August 31, 1983 January 31, 1985)

A. Plant Operations 1 1 Eonsistent

B. Radiological Controls Z Z Consistent

C. Maintenance 1 1 Consistent

D. Surve i llanee 1 1 Consi st ert

E. Fire Prote::tion andHousek.eeping 1 1 Censi ster,,,-

"F. E~e~gen::y Preparedness 1 1 Consister.t

G. Security a~c Sa hi:;! l"'ds Z 2 ~r.:?!"ovir.g

H. RefiJeiir.; 1 1 Ccnsis~e!':~

I. Des~gn Ccr.trcl/QualityAss:.:!"ance Z Z Improvin;

J. Licensing Activities 1 1 Consistent

9A de:1ir.ing tren: has been noted in the are! of personnel Idherer.:e to FireProtection procedures.

ENCLOSURE 2

Ltr dated October 28, 1986 from J. W. Taylor(Dairyland Power Cooperative) to Director, NRR

•

mDAIRYLANDL.j-f[[J[!!JI:;Iif COOPERATIVE. PO BOX 817 • 2615 EAST AVE so

JAMES W. TAYLORGeneral Manager

Oc~ber 28, 1986

Dir-ector', Nuclear Reac~r RegulationU. S. Nuclear Regula~ry CommissionWashington, D.C. 20555

RE: Dairyland Power CooperativeLa Crosse Boiling Water Reactor' (LACBWR)Provisional Operating License Number DPR-45Application for Exemption from AnnualFees Imposed Under 10 CFR Part 171

Dear Sir:

Enclosure 2

• LA CROSSE. WISCONSIN 54602-0817

(608) 788-4000

Pursuant to 10 CFR Part 171.11, Dairyland Power Cooperative (DPC), herebyrespectfully request.s that. t.he Nuclear Regulatory Commission (the "Commission")exempt the La Crosse Boiling Water Reac~r (LACBWR), owned and operatedby DPC, from t.he annual fee imposed under 10 CFR Part 171 on nuclear powerreac~rs. For the reasons 8et forth below, DPC believes that it is entitled tothis exemption under the criteria set forth in 10 CFR Part 171.11 and that itwould be in the public interest to grant this exemption request.

10 CFR Part 171, which became effective on October' 20, 1986, imposesan annual fee of .950,000 on each power reac~r licensed to operate as ofOctober 1, 1986, in addition to the licensin. fees alread;y bein. imposed under10 CFR Part 170. In adopting this new rule, the Commission specificallyindicated that it was "not the intent of the Commission to promul,ate a feeschedule that could have the effect of imposing fees at such a level that theowners of the handful of small, older reactors would find it in their besteconomic interest to shut their reac~rs down." The Commission indicatedthat it would consider exemption requests submitted in connection with suchreactors and take the following fac~rs Into consideration in reviewing suchexemption request.s:

a. Age of the reac~r.

b. Size of the reactor.c. Number of euatomera in rate base.d. Net increase in kWh cost for each customer directly related to the

annual fee assessed under this Part.e. Any ot.her relevant matter which the licensee believes justifies the

reduction of the annual fee. 10 CFR Part 171.11.

Director, Nuclear Reactor RegulationPage 2October 28, 1986

The Commission also indicated that it would grant exemption relief underPart 171.1l if the licensee could demonstrate on the basis of these factorsthat NRC's regulatory costs for the plant in question are reduced and thatthe benefits bestowed on the licensee are below that of other plant reactors.This exemption request will address each of the factors set forth in Part171.11, and demonstrate (1) that DPC is entitled to favorable considerationunder all of these factors, and (2) that the fee requirements of Part. 171should be waived in full with respect to LACBWR or alternatively reduced toan annual fee of no more than .55,000.

a. Me 01 the Reactor - LACBWR has been in operation for 17 years.It is one of the four oldest nuclear power reactors subject to theprovisions of Part 171. LACBWR was originally built as ademonstration nuclear plant for the Atomic Bnergy Commission(AEC) under the Cooperative Power Reactor Development Program.LACBWR went on line in November 1969, and in 1973 title toLACBWR was transferred from the AEC to DPC. LACBWR is a matureplant with a proven record of operating experience and theCommission is no longer incurring the types of "start-\.i'p"regulatory costs associated with new reactor designs and systems.Moreover, LACBWR is an Allis-Chalmers BWR and DPC receiveslittle, if any, direct benefit from the "generic" regulatory costsassociated with Commission-sponsored research activities involvingadvanced reactor designs and PWR's and BWR's designed bymanufacturers of the reactors utilized by other nuclear utilities.These research costs constitute more than half of the regulatorycosts that the Commission is attempting to recover under Part 171.In addition, because DPC has made significant upgrades to LACBWRover the past ten years in order to meet current regulatoryrequirements, it is not expected that extensive modifications, likethose required in the past, will be undertaken for the remainder ofplant life which might require intensive internal review actions bythe NRC.

b. Size 01 the Reactor - LACBWR is the smallest nuclear power reactorsubject to the provisions of Part 171. The vast majority of u.s.power reactors range in size from 500 to 1200 MW electric. At arated capacity of 50 MW electric and 165 MW thermal, LACBWR is lesst.han 10% of the size of approximately 90% of all other U.s. powerreactors and it is less than 70% of the size of the next largestreactor subject to the new fee schedule. Charging the same fee forLACBWR that is charged to reactors that generate more than 20 timesas much power as LACBWR imposes an unfair and disproportionateburden on DPC. vis-a-vis other nuclear utilities. The flat fee doesnot accurately reflect the lower regulatory costs attributable to thesmaller physical size of LACBWR and the reduced number and complexityof systems and components in the plant. Again, there are few, ifany, benefits bestowed upon DPC from generic NRC regulatoryprograms that benefit all other nuclear utilities because they involveGeneral Electric, Westinghouse, Babcock & Wilcox, and CombustionEngineering reactors which are an order of magnitude larger in sizeand more complex than LACBWR.

1-

Director, Nuclear Reactor RearulationPage 3October 28, 1986

c. Number of Customers in Rate Balle - DPC's service area includesparts of four states in the upper north central retrion of the u.s.(i.e. Wisconsin, Minnesota, Iowa and Illinois). DPC, as aareneration and transmission cooperative, provides electric service to29 distribution cooperatives which are members of DPC and which inturn provide electric service to 170,000 customers in this rearion.DPC's customer base is considerably smaller than the customer baseserved by other nuclear utilities, particularly those servinar majormetropolitan areas, and also considerably less diversified. DPC'scustomer base is primarily rural in character and has already beenunder severe economic strain due to the problems besettinar theu.s. farm economy in recent years. DPC's system has essentiallybeen in a zero arrowth mode over the past several years. Thesenew fees would further aggravate the financial problems confrontinarDPC's member cooperatives and their customers. The additionalfees imposed under Part 171 would also place a disproportionateshare of the Commission's rearulatory costs on DPC's relatively smallcustomer base that receives the benefit of only 50 MW M powerproduction from nuclear enerary compared with the customer basesof other nuclear utilities which (1) are much lararer, (2) receive thebenefit of much more power from nuclear enerary, and (3) are in amuch better position to absorb the additional costs associated withthese fees.

d. Net Increase in kWh eo.t. - LACBWR currently has the hiarhest unitpower costs of any base load plant on the DPC system. Durinar1985, the total production costs for power arenerated at LACBWRwere in excess of $0.054 per kWh compared to total production costsof less than $0.023 per kWh from DPC's most efficient coal-firedunit and average revenues of .0.046 per kWh from DPe'. membercooperatives. The addition of a $950,000 annual fee under Part171 would result in approximately a 5.4% increase in LACBWR's unitproduction costs, or 3 mills more per kWh, which would furtherincrease the cost differential between LACBWR costs, the averaarecosts of its coal-fired units and average system revenues. Theincrease in cost per kWh at LACBWR will be approximately 15-20times greater than the increase that will be experienced at othernuclear utilities operatinar lararer reactors where total productioncosts are already much higher. An increase of this maarnitude willhave a significant adverse impact on DPC's member cooperativesand customers. LACBWR contributes less than 8.5% of DPC'sinstalled base load arenerating capacity, but it does reduce DPC'sdependence on coal as the primary fuel source for base load plants.However, the proposed ten-fold cost increase for rearulatory servicesunder Part 171, versus the average fees paid under 10 CFRPart 170 in recent years, will -- unless waived or substantiallyreduced by the Commission -- drastically impact the economicsassociated with the operation of LACBWR.

(I J

Director, Nuclear Reactor Re~ulation

Page 4October 28, 1986

e. other Relevant Mattera - As noted previously, LACBWR wasconstructed by the AEC under the Cooperative Power ReactorDevelopment Proaram - a ~overnment-spon80red pro~ram desianedto stimulate the development of the nuclear power industry andencourage widespread participation in this development bydemonat.ratina that small-scale nuclear power plants could beeconomically operated. DPC participated in LACBWR at the ur~in~

of the AEC and became subject to licensina pursuant to thecontractual arran~ements with the AEC transferring ownership ofthe plant and operational responsibilities tor the plant to DPC. Theimposition of unduly burdensome and disproportionate fees onLACBWR at this juncture could have an adverse impact on thewillin~ness of other utilities to participate in similar~overnment-spon80redenergy projects in the future. In addition,LACBWR is unique in many respects. It is the only nuclear powerreactor in the United States that is entirely owned and operated bya rural electric ~eneration and transmission cooperative. Thecontinued operation of LACBWR enables DPC to lessen iftl dependenceon coal-fired ~eneratin~ capacity and maintain a more diversifiedfuel am tor its base load plants. However, the impact of the newfees on the economics associated with continued operation otLACBWR could ultimately force DPC to increase its dependence oncoal-fired capacity. Such a development would not be in the bestinterest of DPC's member cooperatives or the consuming public.

To DPC's knowledge, every other fee imposed upon nuclear utilitiesby regulatory agencies, other ~overnment entities, and privatetrade associations and industry ~roups to administer their programsand recover their costs is based upon the number and size of thereactors involved, the ~ross revenues or total power production ofthe utility involved, or the total production of the nuclear powerplants involved (e.~. the DOE High Level Waste Fund, char~es

imposed by the Wisconsin Public Service Commission, EEl, EPRI,INPO, etc.). Yet, the new rule would impose the same $950,000 fee onLACBWR that is imposed on a typical large reactor such as the 1250MWe Grand Gulf reactor. Based on the relative size of these tworeactors, DPC should only be required to pay 4% of the amount paidtor a lar~er reactor or $38,000. DPC recognizes that the NRC'sgoal is to recover $96 million this year under 10 CFR Part 171.This $96 million amounts to approximately $1,111 per MWe ofinstalled nuclear generating capacity in the United States. At 50MWe, the tee imposed on LACBWR would only be around $55,000 ifreactor size were the criteria utilized to assess fees. Absent thisexemption, DPC will, therefore, be required to pay over 17 timesthe amount that it would otherwise be required to pay under the~eneral1y-accepted fee criteria utilized throughout the ~overnment

and industry.

'·'I~_r__._. . _

Director, Nuclear Reactor Re~ulations

Page 5October 28, 1986

In summary, DPC believes that its situation is unique in many respects,

in light of LACBWR's size, DPC's status as a rural electric cooperative, the

size and character of the DPC system and customer base, and the ori~ins of

DPC's participation in the nuclear industry. DPC believes that it is entitled

to favorable consideration under all five factors set forth in 10 CFR Part

171.11. DPC should simply not be subjected to the same annual fee imposed

on other much larger utilities that operate nuclear plants ~enerating far more

power than LACBWR and servin~ much larger and more diverse customer

bases which receive far more benefits from nuclear power and which are far

more capable of abscr-bing the fees imposed under Part 171.

For all the foregoing reasons, DPC therefore respectfully requests that

the Commission ~rant DPC a permanent exemption from the annual fees

imposed under 10 CFR Part 171 and waive these fees altogether insofar as

they apply to DPC or, in the alternative, reduce these fees to no more than

$55,000 per year.

DPC also respectfully requests that DPC not be required to i1iake the

first quarterly installment of any payment due under the new rule with

respect to LACBWR until ten (10) days after the issuance of a final decision

by the Commission on this exemption request.

Sincerely,

JWT/RES/cls

STATE OF WISCONSIN }}

COUNTY OF LA CROSSE }

Personally came before me this .:2. Y day of r;)-~ , 1986, the

named James W. Taylor to me known to be the person who executed the

foregoing instrument and acknowledged the same.

Ann4!::J·~Notary PublicLa Crosse County, Wisconsin

My Commission Expires 02/21/88

above

-------_._----------

ENCLOSURE 3

Ltr dated November 7, 1986 from K. W. Berry (ConsumersPower Company) to Executive Director for Operations

Consumer~

PowerflllWflUNIi

M'''''IiAII-S PROIiRlSSGenera' Oft_: '145 Wall 'arna" Road. JacltlOfl. MI .8201 • (5171 788.1836

November 7, 1986

'.

Executive Director for OperationsUS Nuclear Regulatory CommissionWashington, DC 20555

DOCKET 50-155 - LICENSE DPR-6 - BIG ROCK POINT PLANT ­

10CFR171 ANNUAL FEE EXEMPTION REQUEST

Enclosure 3

Kenneth W Berry/);,rC'Io,

NIIC'lrtJ' uC'rrui,.,

Pursuant to 10CFRI71.11, for the reasons set forth herein, Consumers Power

Company requests an exemption from the annual fee requirements of 10CFR171.15

for Big lock Point. As stated in the Federal Register notice which published

the new fee rule, the NRC recognizes the problem that some licensees of

smaller reactors may have in paying substantially increased fees and therefore

has provided for fee exemptions.

In support of this request, Consumers Power Company submits the following:

1. Big Rock Point is the holder of NRC License No. DPR-6, dated May I, 1964.

The plant is the oldest operating General Electric boiling water reactor

and one of the oldest operating commercial nuclear generating plants in

the United States. Big Rock Point's operatittg license expires on May 31,

2000. This leaves less than 14 years of plant operation remaining.

Because of Big Rock Point's age, many of the generic costs underlying the

new fee rule are not relevant to Big Rock Point.

2. In addition to being one of the oldest commercial reactors, Big Rock

Point is the second smallest operating commercial nuclear generating

pl8Dt in the United States. Big Rock Point's output is 69 MWe net. This

output is more than one order of magnitude less than the average modern

vintage commercial generating plant.

3. A IBrcharge of $950,000 in annual license fees would incrementally

increase Big Rock Point's cost of electrical production by approximately

2.5 aills per kilowatt-hour. This surcharge would be in addition to our

current average 10CFR170 fees of approximately $130,000 per year. An

8611100286 861107~DR ADOCK 05000155

PDR

OCI086-0176-NL02

Executive Director for OperationsBig Rock Point Plant10CFR171 Annual Fee Exemption RequestNovember 7, 1986

2

increase of this magnitude is unreasonable for a generating plant of thisemaIl size. The impact of this surcharge would be approximately 12 timesas great as it will be for a typical modern vintage plant. Even withoutincreased license fees, recent industry analyses have shown Big RockPoint's operating costs on a kilowatt-hour basis to be among the highestin the industry.

4. Because our current electric rates do not reflect tbe Dew fee, it couldnot be passed on to our customers without filing a new rate case with theMichigan Public Service Commission. At the present time, the regulatoryclimate within the state is volatile, and the outcome of any new ratecase filing would be unpredictable. This is due in part to ConsumersPower Company's recent financial problems and the visibility theseproblems have created in the state regulatory arena. Also, intervenorsin a fuel and purchased power cost recovery proceeding are presentlycontending that Big Rock Point should not be allowed to remain in therate base due to bigh operating and,maintenance costs of the facility.

5. Big Rock Point's small size and rural location is less of a potentialhazard to public health and safety than most other commerci~ nucleargenerating plants. Plant age, size and location have also been recog­nized by the NRC in other regulatory contexts. These include the emer­gency planning zone, insurance and backfitting rules.

6. Over the last several years, Big Rock Point performance has been aboveaverage in SALP ratings, capacity factor and availability. This hasresulted in less NRC regulatory effort being spent on Big Rock Point.

Because Big Rock Point's kilowatt-hour output is small and the plant is old,the cost-benefit of the new fee should be recognized. As stated in theFederal Register notice which published the new rule, it is not the intent ofthe NRC to promulgate a fee schedule at such a level that smaller, olderreactors would find it in their best economic interest to shut down. We feelthat the majority of the regulatory costs and benefit gains associated withBig Rock Point would reasonably be collected under the existing 10CFR170 feestructure.

In conclusion, Consumers Power Company contends that because of the tenuouseconomic viability of Big Rock Point, any increase in licensing fees is

'unreasonable and overly burdensome. We request that an exemption be grantedthat requires Big Rock Point to pay not more than $27,000 in annual licensingfees under 10CFR171. This amount is based on the fact that Big Rock Point is69/850 the size of the average plant and has only 14/40 years of operationleft [(69/850) x (14/40) x ($950,000) • $27,000]. The average plant size wascalculated from NOREG 0020, June 1986 data [85,190 Mwe/100 plants • 850average MWe/plant]. We believe that establishing an annual fee on the basisof plant size and age is appropriate justification.

OCI086-0176-NL02

r

, .

Executive Directnr for OperationsBig Rock Point Plant -10CFR171 Annual Fee Exemption RequestNovember 7, 1986

--------------------

3

To reduce the administrative costs of filing an annual exemption request, wealso request the exemption be made permanent. Pursuant to ~1RC Invoice F0085dated November 19, 1986, a full quarterly installment of $237,500 will beremitted for Big Rock Point. Subsequent to NRC action on this exemptionrequest, and if the exemption is granted, a refund of the difference is herebyrequested.

Kenneth WBerryDirector, Nuclear Licensing

\

CC Director, Nuclear Reactor RegulationAdministrator, Region III, USNRCNRC Resident Inspector - Big Rock Point

OCI086-0176-NL02

•

ENCLOSURE 4

Summary Sheets (3)

•

t Enclosure 4

YANKEE NUCLEAR POWER STATION

YANKEE ATOMIC ELECTRIC COMPANY

DOCKET NO. 50-029

FACILITY OPERATING LICENSE NO. DPR-3

Age of Reactor

Yankee is the oldest commercial operating reactor at 26 years old. (Licenseissued July 19, 1960, expiration date is November 4, 1997).

Size of Reactor

Yankee is about one-fifth thp. size of the average plant at 600 MW thermal,175 MW electrical.

Number of customers in rate base

Net increase in Kwh cost for each customer directly related to the annualfee assessed.

Yankee was formed for the exclusive purpose of constructing and operating NewEngland's first nuclear plant. Yankee has no retail customers; the energyproduction is sold to the 10 New England utilities that own Yankee. Theannual fee will increase costs per Kilowatt hour by approximately 1 mill,which is about six times greater than the increase that will be experienced bymore recent vintage plants.

Other relevant matters

Smaller plants are more sensitive to increasing costs, as evidenced by therelatively high operating and maintenance costs even with good plantcapacity factors. Such sensitivity has been acknowledged in other regulatorycontexts, such as the insurance rule and backfitting.

SALP ratings have been consistently high, thus, special inspections andreviews of operating experience costs are lower.

Yankee poses less of a potential hazard than most other plants because of itssimpler design, diversity of heat removal systems, design margins, small coresize and the remote siting.

Because of the older design, many of the generic activities covered by therule are not applicable, such as thermal-hydraulics codes and earth scienceresearch.

•

BIG ROCK POINT PLANT

CONSUMERS POWER COMPANY

DOCKET NO. 50-155

FACILITY OPERATING LICENSE NO. DPR-6

Age of Reactor

Big Rock Point is the oldest operating General Electric boiling water reactor

and one of the oldest commercial operating reactors at 22 years old. (License

issued May 1, 1964, expiration date is May 31, 2000).

Size of Reactor

Big Rock Point is the second smallest commercial operating plant with an output

of 69 MW electrical. This output is less than one-tenth the size of the

average modern plant.

Number of customers in the Big Rock Point rate base

20,600 at 85% Capacity Factor.

Net increase in KWh cost for each customer directly related to the annual

fee assessed

The annual fee will increase costs per kilowatt hour by approximately 2.5

mills, which is about 12 times greater than the increase that will be

experienced by more recent vintage plants.

Other relevant matters

Smaller plants are more sensitive to increasing costs, as evidenced by the

relatively high operating and maintenance costs even wi'th good plant capacity

factors. Even without increased license fees, recent industry analyses have

shown Big Rock Point's operating costs on a kilowatt-hour basis to be among

the highest in the industry.

Because of the older design, many of the generic activities covered by the

rule are not applicable, such as thermal-hydraulics codes and earth science

research.

Big Rock Point's small size and rural location is less of a potential hazard

than other plants because of its simpler design, design margins, small core

size, and the remote siting.

SALP ratings have been above average over the last several years.

Current electric rates do not reflect the new fee. A new rate case with the

Michigan Public Service Commission would have to be undertaken. The current

state regulatory climate is volatile due in part to Consumers Power Company's

recent financial problems.

--------------------------..

'.

LA CROSSE BOILING WATER REACTOR

DAIRYLAND POWER COOPERATIVE

DOCKET NO. 50-409

PROVISIONAL OPERATING LICENSE NO. DPR-45

Age of Reactor

La Crosse Boiling Water Reactor (LACBWR) is one of the four oldest commercialoperating reactors subject to the provisions of Part 171. The unit begancommercial operation in November 1969.

Size of Reactor

LACBWR is the smallest commercial nuclear power unit in the U.S. Its netgenerating capacity is 50 MWe.

Number of Customers in Rate Base

Dairyland Power Cooperative (DPC), owner and operator (licensee) is a generationand transmission cooperative whose 29 distribution cooperative ~ovides serviceto 170,000 customers in the DPC region. This customer base is considerably lessthan that of other nuclear utilities, and is primarily of a rural nature.

Net Increase in KWh Cost

LACBWR currently has the highest unit power cost of any base load plant in theDPC system. The annual fee required by Part 171 will increase the cost ofproduction by approximately 3 mills per KWh. The increase would be 15-20 timesgreater for La Crosse than the increase that will be experienced at other (larger)reactors.

Other Relevant Matters

LACBWR was constructed for the AEC to demonstrate the economic feasibility ofsmall nuclear power generating plants. At the urging of the AEC, DPC tookownership of LACBWR and assumed operational responsibility under a licensingagreement with AEC. The unit provides diversification to avoid completedependency by DPC on coal. The economics are such that unless substantialrelief from the fee required by Part 171 is provided, DPC could be forced tobecome entirely dependent on coal.

The sensitivity of small plants to increasing operational costs has historicallybeen recognized, in that most if not all other fees imposed by regulatoryagencies, other government entities and private trades associations and industrygroups to administer their programs and recover costs are based upon generatingcapacities of the plants.

As a very small nuclear unit, LACBWR poses less of a potential hazard thanother nuclear units because of its small core size, simpler design, and over­designed safety margins, and thus has historically required less requlatoryattention than larger nuclear units.

"•

ENCLOSURE 5

Computation of Proposed Adjusted Annual Fee

"

---------------------,--

•

Enclosure 5

COMPUTATION OF PROPOSED ADJUSTED ANNUAL FEE TO BE ,ASSESSED USING THE AVERAGE OF TWO METHODS SHOWN BELOwlJ

La Crosse Big Rock Point Yankee Rowe

Methods Used to DetermineAdjusted Fee:

l. Thermal Megawatt 165 ~lWt 240 MWt 600 MWtRating Ratio 2671 MWt 2671 MWt 2671 MWtPlant/Average P1ant2/ $58,000 $84,000 $211,000

2. Comparable impact of $55,000 $78,000 $156,000Annual Fee on PlantKilowatt hour costs3/

3. Proposed Adjusted Annual $56,000 $81 ,000 $183,000Fee - Average of methods1 and 2(% of Unadjusted Annual Fee) (6%) (9%) (19%)..

Other Items For Comparison:

Increase in mill ratei/ 3 mi 11 s 2.5 mi 11 s 1 mi 11per KWh per K\;h per KWh

Remaining years of 16/40 16/40 14/40operation 40% 40% 35%

Licensee suggested fee not to exceed not to exceed not to exceed$55,000 $27,000 $50,000

lIonce the determination is made that a partial exemption, in the form of an adjustedfee, is appropriate and after applying the factors in 10 CFR 171.11, several possiblemethods may be used to determine the adjusted fee either singly or in combination.Using these two methods, the resultant dollar amounts were averaged to arrive at theadjusted annual fee for each plant. The adjusted fee under Part 171 is collected inaddition to fees collected under 10 CFR 170.

2/Under this method, the adjusted fee is determined by multiplying the unadjusted- annual fee ($940,000) by the thermal megawatt rating of the plant divided by

the average thermal megawatt rating of the 101 licensed plants (2671 Mwt).3/Under this method, the unadjusted annual fee ($940,000) is adjusted such that- the incremental kilowatt-hour costs for the plant are similar to the incremental

costs for larger modern plants. Incremental kilowatt-hour costs for each ofthe three plants are presented at Enclosure 4.

lIThe amount of increase if the 10 CFR 171 annual fee of $950,000 were to be used.