H.B. No. 1386

AN ACT

relating to regulation of the decommissioning costs of certain nuclear-powered commercial electric generating units.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter E, Chapter 39, Utilities Code, is amended by adding Section 39.206 to read as follows:

Sec. 39.206. NUCLEAR GENERATING UNIT DECOMMISSIONING COST PLAN. (a) For purposes of this section:

(1) "Decommissioning" includes decommissioning and decontamination of a nuclear generating unit consistent with federal Nuclear Regulatory Commission requirements.

(2) "Nuclear decommissioning trust" means an external and irrevocable trust created for the purpose of funding decommissioning obligations for a nuclear generating unit, consistent with federal Nuclear Regulatory Commission requirements.

(3) "Nuclear generating unit" means an electric generating facility that uses nuclear energy to generate electricity for sale and is licensed by the Nuclear Regulatory Commission and was under construction in this state after January 1, 2007, but before January 1, 2015.

(4) "Power generation company" has the meaning assigned by Section 31.002.

(5) "Retail electric customer" means a retail electric customer:

(A) in a geographic area of this state in which retail customer choice has been implemented; or

(B) of a municipally owned utility or electric cooperative that has an agreement to purchase power from a nuclear generating unit.

(b) This section applies only to the first six nuclear generation units under construction by January 1, 2015, owned in whole or in part by a power generation company that elects to utilize the decommissioning mechanism set forth in this section.

(c) Nothing in this section shall be construed to require a power generation company to use a commission approved method to provide funds for decommissioning, if the power generation company can otherwise satisfy the decommissioning financial assurance requirements of the federal Nuclear Regulatory Commission.

(d) A power generation company that owns a nuclear generating unit shall fund out of operating revenues on an annual basis:

(1) the costs associated with funding the decommissioning obligations for the nuclear generating unit; or

(2) the power generation company's portion of the decommissioning costs for the nuclear generating unit in proportion to the company's ownership interest in the nuclear generating unit if the unit is owned by more than one person.

(e) The obligation to fund a nuclear decommissioning trust fund is not dischargeable in bankruptcy.

(f) A power generation company shall establish a nuclear decommissioning trust for a nuclear generating unit it owns or for the proportionate share of a nuclear generating unit of which it owns a part. The funding obligations for the trust must begin before the nuclear generating unit commences its initial fuel load and begins commercial operation to generate power for sale. The terms of the trust must be consistent with trust terms and conditions the federal Nuclear Regulatory Commission requires for providing financial assurance for decommissioning.

(g) The commission by order shall establish for a nuclear generating unit the amount of annual decommissioning funding necessary to meet the decommissioning obligations for the nuclear generating unit over the unit's operating license period as established by the federal Nuclear Regulatory Commission or over a shorter period of time at the election of the power generation company. The power generation company shall perform a study on the cost of decommissioning to establish the decommissioning obligations before the nuclear generating unit begins commercial operation to generate power for sale. The study shall be performed by the power generation company at least once in each three-year period during the unit's operating license period using the most current reasonably available information on the cost of decommissioning. The commission shall conduct a proceeding at least once in each three-year period to review the study and other current reasonably available information on the cost of decommissioning and determine the reasonableness of the study.

(h) A power generation company shall file an annual report to provide the status of the decommissioning trust fund and to update the commission as to its ability to fund the decommissioning trust fund. In determining the amount of the annual decommissioning funding under this subsection, at least once in each three-year period, the commission shall conduct a proceeding to review the balance of each nuclear decommissioning trust and the projected amount of annual decommissioning funding for the associated nuclear generating unit. On the conclusion of the review proceeding, the commission by order shall revise the amount of annual funding for the nuclear generating unit in order to ensure that the nuclear decommissioning trust fund is adequately funded.

(i) A power generation company shall remit the appropriate amount of annual decommissioning funding to the nuclear decommissioning trust created for its proportionate ownership position in a nuclear generating unit in accordance with the commission's funding order issued under Subsection (g) or (h). The commission shall take appropriate actions to ensure proper funding of the nuclear decommissioning trust, including possibly terminating the power generation company's registration to operate, if the company violates this subsection.

(j) A power generation company that owns a nuclear generating unit is the funds administrator of the nuclear decommissioning trust for the associated nuclear generating unit. The company, as funds administrator, shall invest the trust funds in accordance with guidelines established by commission rule and consistent with the federal Nuclear Regulatory Commission guidelines so that the decommissioning funds, plus the amounts earned from investment of the funds, will be available at the time of decommissioning. The commission shall adopt rules to define the company's specific duties as funds administrator and requirements regarding prudent management and investment of nuclear decommissioning trust funds.

(k) The commission shall adopt rules necessary to ensure that:

(1) a power generation company remits sufficient funds to a nuclear decommissioning trust on an annual basis, including projected earnings to approximate the amount remaining to be accumulated to cover the cost of decommissioning a nuclear generating unit at the end of its operating license period divided by the remaining years of the license and in accordance with applicable state and federal laws and regulations or over a shorter period of time at the election of the power generation company;

(2) the periodic cost studies and reviews described in Subsections (g) and (h) include all current reasonably available information as determined necessary and appropriate by the commission;

(3) all funds remitted to a nuclear decommissioning trust are prudently managed and spent for their intended purpose;

(4) the funds remitted to a nuclear decommissioning trust and the amounts earned from investing the funds, will be available for, and restricted to the purpose of decommissioning of the associated nuclear generating unit, including if the trust or nuclear generating unit is transferred to another person; and

(5) before a power generation company is allowed to take advantage of the mechanisms in this section, the company meets creditworthiness standards established by the commission to minimize the risk that retail electric customers will be responsible for funding any shortfall in the cost of decommissioning a nuclear generating unit.

(l) In addition to the nuclear decommissioning trust required by Subsection (f), for purposes of Subsection (k), the power generation company and its parent and affiliates shall provide financial assurances that funds will be available to satisfy up to 16 years of annual decommissioning funding in the event the power generation company defaults on its obligation to make annual funding to the decommissioning trust. Within 180 days after the effective date of this section, the commission by rule shall establish the acceptable forms of financial assurance, which shall include, but not be limited to, parent guarantees and support agreements, letters of credit, surety or insurance, and such other requirements necessary to ensure compliance with this section. In establishing the acceptable forms of assurance, and the eligibility requirements for each form of assurance, the commission shall consider the relative risk factors and creditworthiness attributes of potential applicant financial characteristics in order to minimize exposure of retail electric customers to default by power generation companies under this section. The power generation company may choose the manner of financial assurance for which it is eligible under the commission's rules.

(m) In the event the financial assurances provided by Subsection (k) are insufficient to meet the annual funding requirements of the decommissioning trust, the retail electric customers shall be responsible for funding any shortfall in the cost of decommissioning the nuclear generating unit.

(n) The commission shall determine the manner in which any shortfall in the cost of decommissioning a nuclear generating unit shall be recovered from retail electric customers in the state, consistent with law.

(o) For retail electric customers of a municipally owned utility or an electric cooperative that has an agreement to purchase power from a nuclear generating unit, the amount of the shortfall in the cost of decommissioning the nuclear generating unit that the customers are responsible for is limited to a portion of that shortfall that bears the same proportion to the total shortfall as the amount of electric power generated by the nuclear generating unit and purchased by the municipally owned utility or electric cooperative bears to the total amount of power the nuclear generating unit generated.

(p) If retail electric customers in this state become responsible for the costs of decommissioning a nuclear generating unit and incur costs under this section and the nuclear generating unit is operational, as a condition of operating the generating unit, the power generation company or any new owner shall repay the costs the electric customers incurred in the manner determined by the commission. The commission may authorize the repayment to occur over a period established by the commission.

(q) The commission shall, in conjunction with the Nuclear Regulatory Commission, investigate the development of a mechanism whereby the State of Texas could ensure that funds for decommissioning will be obtained when necessary in the same manner as if the State of Texas were the licensee under federal law. The commission shall file legislative recommendations regarding any changes in law that may be necessary to carry out the purposes of this subsection prior to January 15, 2009, which may be combined with the report required by Section 31.003.

(r) The commission by rule shall ensure that:

(1) money for decommissioning a nuclear generating unit is prudently collected, managed, and spent for its intended purposes; and

(2) decommissioning money that remains unspent after decommissioning of the nuclear generating unit is complete is returned to the power generation company and the retail electric customers based on the proportionate amount of money the power generation company and retail electric customers paid into the fund.

SECTION 2. This Act takes effect September 1, 2007.

______________________________ ______________________________

President of the Senate Speaker of the House

I certify that H.B. No. 1386 was passed by the House on April 26, 2007, by the following vote: Yeas 136, Nays 6, 1 present, not voting; that the House refused to concur in Senate amendments to H.B. No. 1386 on May 25, 2007, and requested the appointment of a conference committee to consider the differences between the two houses; and that the House adopted the conference committee report on H.B. No. 1386 on May 28, 2007, by the following vote: Yeas 134, Nays 8, 4 present, not voting.

______________________________ Chief Clerk of the House

I certify that H.B. No. 1386 was passed by the Senate, with amendments, on May 22, 2007, by the following vote: Yeas 29, Nays 1; at the request of the House, the Senate appointed a conference committee to consider the differences between the two houses; and that the Senate adopted the conference committee report on H.B. No. 1386 on May 28, 2007, by the following vote: Yeas 30, Nays 0.

______________________________ Secretary of the Senate APPROVED: __________________

Date

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Governor