NRC could revisit financial criteria for merchant nuclear plants

In a recently-released policy paper, the Nuclear Regulatory Commission (NRC) staff has recommended that the commission reconsider financial guidelines that might hinder nuclear plant development by merchant generators.

“Policy Options for Merchant (non-electric utility) Plant Financial Qualifications,” is the title of the analysis issued Nov. 22 by Executive Director for Operations Mark A. Satorius. Satorius runs day-to-day operations at NRC and reports to the five-member commission.

The 33-page document, made public Dec. 12, suggests the current system makes it extremely hard for non-utility generators to build new plants.

The conventional wisdom these days is that regulated utilities, which can finance nuclear infrastructure through a rate base, are about the only entities that can build new reactors.

The domestic industry is seeing its first significant new construction in 30 years. Four new reactors are under construction by groups led by regulated utility subsidiaries of Southern (NYSE:SO) and SCANA (NYSE:SCG). A long unfinished reactor is also being completed by the Tennessee Valley Authority (TVA), which is owned by the federal government.

Merchant nukes ‘difficult if not impossible’ currently

In 2012 Nuclear Innovation North America, LLC (NINA) and the Nuclear Energy Institute (NEI) filed letters on the subject with NRC. “These stakeholders said it is difficult, if not impossible, for merchant plant COL [construction and operating license] applicants to secure project funding to meet financial qualifications requirements in advance of initial license issuance because of perceptions from the financial community that the licensing process is uncertain.”

NINA is a venture, which includes NRG Energy (NYSE:NRG), created in an unsuccessful effort to develop two new reactor units at the South Texas Project.

The advent of deregulation has created a class of merchant plant licensees that are not regulated by a state public service commission with a rate-payer financial base, the NRC staff notes.

“Industry has asserted that, in many, if not all, merchant plant cases, financiers will not commit project funding without an NRC license in hand. However, current NRC regulations have specific requirements that must be met in order to demonstrate that initial license applicants have reasonable assurance of financial qualifications as a condition precedent to receipt of a license,” the staff said.

Demonstration of financial qualification before issuance of a license is required by current NRC regulations but is not required, per se, by the Atomic Energy Act (AEA).

Historically, NRC has had concerns that industry restructuring and the loss of “natural monopoly” status by electric utility generators, might affect whether power reactor licensees would continue to be able to provide necessary funds for to safely operate and decommission their nuclear plants.

While the staff has not denied an applicant an initial license or license transfer because of financial qualifications deficiencies, the staff has asked questions about the financial information submitted in their applications. There have been previous instances in which the staff required license transfer applicants to provide additional financial support before the transfer request was approved, according to the staff report.

“Commission history and precedent has consistently shown an ongoing concern for the potential of degraded safety in the face of degraded financial qualifications. However, this history also consistently indicates a Commission belief that any nexus between safety and the NRC’s review of financial qualifications is indirect,” according to the report.

“Continuing the status quo does not, per se, preclude all merchant plant applications,” the staff said in the analysis. “While some have asserted that it is impossible for merchant applicants to obtain sufficient funding before a license is issued, and thus impossible to meet the current regulations, at the time the current merchant plants were docketed, they all had identified some sources of funds,” the staff wrote.

The staff recommends a rulemaking to clear things up.

“In the 57 years since the initial promulgation of the financial qualifications demonstration rules, there does not appear to have been a clear demonstration of a direct relationship between the financial qualifications demonstration and plant safety,” the NRC staff said.

“The current regulatory framework distinguishes between electric utilities and merchant plants. Current regulations impose a significantly heavier burden on merchant plants to demonstrate financial qualifications,” according to the staff document.

There is little information to indicate that merchant plants are more likely than regulated electric utilities to end up in NRC’s poor performing category, according to the staff.

In November 2012 NEI submitted a letter to NRC Chairman Allison Macfarlane requesting NRC guidance to clarify the application of financial qualifications for new nuclear development by merchant generators.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at