Despite Industry-wide Improvement, Some Owners of Nuclear Power Plants Are Not Accumulating Sufficient Decommissioning Funds

Using our most likely economic assumptions, the combined value of the  nuclear power plant owners’ decommissioning trust funds was about 47  percent higher at the end of 2000 than necessary to ensure accumulation of  sufficient funds by the time the plants’ licenses expire. This situation  contrasts favorably with the findings in our 1999 report, which indicated  that the industry was about 3 percent below where it needed to be at the  end of 1997 to ensure that enough funds would be available. When we individually analyzed the owners’  trust funds, we found that 33 owners for several different plants had not  accumulated funds at a rate that would be sufficient for eventual  decommissioning. Specifically, the owners had accumulated  about $26.9 billion—about $8.6 billion more than we estimate they needed  at that point to ensure sufficient funds. By contrast, 20 owners with  ownership interests in 31 plants recently contributed less to their trust  funds than we estimate they needed to put them on track to meet their  decommissioning obligations. NRC’s Analysis Did Not Effectively Determine Whether Each Owner Was Accumulating Sufficient Decommissioning Funds

NRC’s analysis of the 2001 biennial decommissioning status reports was  not effective in identifying owners that might not be accumulating funds at  sufficient rates to pay for decommissioning costs when their plants are  permanently shut down. Although the NRC reported in 2001 that all owners  appeared to be on track to have sufficient funds for decommissioning, our  analysis indicated that several owners might not be able to meet financial  obligations for decommissioning. Second, for the plants with more than one owner, NRC  did not separately assess the status of each co-owner’s trust funds relative  to the co-owner’s contractual obligation to fund a certain portion of  decommissioning. However, as we demonstrated with our industry-wide  analysis, such an assessment for determining whether owners are  accumulating sufficient funds can produce misleading results because  owners with more than sufficient funds can appear to balance out owners  with less than sufficient funds, even though funds are generally not  transferable among owners. Moreover, it aggregated the owners’ trust funds plant- wide instead of assessing whether each individual owner was on track to  accumulate sufficient funds to pay for its share of decommissioning costs. Comments from the Nuclear Regulatory Commission

The following are GAO’s comments on NRC’s letter dated October 3, 2003. However, we believe that NRC should take a more proactive  approach in developing an effective method for ensuring that sufficient  funds will be available for decommissioning. For example, NRC relied on the owners’  future funding plans, or on rate-setting authority decisions, in  concluding that the owners were on track to fully fund  decommissioning. In addition, as a practical matter, owners have  contractual agreements to pay for their share of decommissioning, and  the trust funds are generally not transferable among owners. In  addition, based on our analysis using the actual contributions the  owners recently made to their trust funds, we found that 28 owners  with ownership shares in 44 plants contributed less than the amounts  we estimate they will need to contribute over the remaining life of their  plants to meet their decommissioning obligations.
Why GAO Did This Study

Following the shutdown of a nuclear power plant a significant radioactive waste hazard remains until the waste is removed and the plant site decommissioned. In 1999, GAO reported that the combined value of the owners' decommissioning funds was insufficient to ensure enough funds would be available for decommissioning. GAO was asked to update its 1999 report and to evaluate the Nuclear Regulatory Commission's (NRC) analysis of the owners' funds and its process for acting on reports that show insufficient funds.

What GAO Found

Although the collective status of the owners' decommissioning fund accounts has improved considerably since GAO's last report, some individual owners are not on track to accumulate sufficient funds for decommissioning. Based on our analysis and most likely economic assumptions, the combined value of the nuclear power plant owners' decommissioning fund accounts in 2000--about $26.9 billion--was about 47 percent greater than needed at that point to ensure that sufficient funds will be available to cover the approximately $33 billion in estimated decommissioning costs when the plants are permanently shutdown. This value contrasts with GAO's prior finding that 1997 account balances were collectively 3 percent below what was needed. However, overall industry results can be misleading. Because funds are generally not transferable from funds that have more than sufficient reserves to those with insufficient reserves, each individual owner must ensure that enough funds are available for decommissioning its particular plants. We found that 33 owners with ownership interests in a total of 42 plants had accumulated fewer funds than needed through 2000 to be on track to pay for eventual decommissioning. In addition, 20 owners with ownership interests in a total of 31 plants recently contributed less to their trust funds than we estimate they needed to put them on track to meet their decommissioning obligations. NRC's analysis of the owners' 2001 biennial reports was not effective in identifying owners that might not be accumulating sufficient funds to cover their eventual decommissioning costs. In reviewing the 2001 reports, NRC reported that all owners appeared to be on track to have sufficient funds for decommissioning. In reaching this conclusion, NRC relied on the owners' future plans for fully funding their decommissioning obligations. However, based on the owners' recent actual contributions, and using a different method, GAO found that several owners could be at risk of not meeting their financial obligations for decommissioning when these plants stop operating. In addition, for plants with more than one owner, NRC did not separately assess the status of each co-owner's trust funds against each co-owner's contractual obligation to fund decommissioning. Instead, NRC assessed whether the combined value of the trust funds for the plant as a whole was reasonable. Such an assessment for determining whether owners are accumulating sufficient funds can produce misleading results because owners with more than sufficient funds can appear to balance out owners with less than sufficient funds even, though funds are generally not transferable among owners. Moreover, NRC has not established criteria for taking action if it determines that an owner is not accumulating sufficient funds.