By: King of Parker Senate Sponsor-Fraser H.B. No. 1386

(In the Senate - Received from the House April 27, 2007; May 1, 2007, read first time and referred to Committee on Business and Commerce; May 19, 2007, reported adversely, with favorable Committee Substitute by the following vote: Yeas 6, Nays 0; May 19, 2007, sent to printer.)

COMMITTEE SUBSTITUTE FOR H.B. No. 1386 By: Fraser

A BILL TO BE ENTITLED

AN ACT

relating to regulation of the decommissioning costs of certain nuclear-powered commercial electric generation 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-POWERED ELECTRIC GENERATION UNIT DECOMMISSIONING COSTS. (a) In 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.

(4) "Power generation company" means a power generation company as that term is defined in Section 31.002(10), that is licensed by the Nuclear Regulatory Commission to operate a nuclear generating unit, and includes its parent and affiliates.

(b) This section applies only to a nuclear generating unit that:

(1) is constructed in this state after January 1, 2007 and before December 31, 2020; and

(2) is owned by a power generation company.

(c) A power generation company shall have the responsibility to fund:

(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.

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

(d) The 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.

(e) 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. 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.

(f) The 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.

(g) 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 (e) or (f). 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.

(h) 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.

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

(1) sufficient funds are remitted to a nuclear decommissioning trust on an annual basis to cover the cost of decommissioning a nuclear generating unit at the end of its operating license period in accordance with applicable state and federal laws and regulations;

(2) the periodic cost studies and reviews described in Subsections (e) and (f) 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.

Sec. 39.207. NUCLEAR DECOMMISSIONING FUNDING ASSURANCE. (a) In this section, "decommissioning", "nuclear decommissioning trust", "nuclear generating unit", and "power generation company" have the same meaning as defined in Section 39.206.

(b) In addition to the obligations set forth in Section 39.206, upon petition by a power generation company subject to this section, to the extent that it is necessary in order to develop nuclear-powered electric generation in this state, the commission shall consider mechanisms to allow a power generation company to provide assurances to satisfy the Nuclear Regulatory Commission's decommissioning requirements. The mechanisms may include:

(1) prepayment by the power generation company of a portion of the amount necessary to assure decommissioning;

(2) surety, insurance or other financial guarantees;

(3) parental or other corporate guarantees;

(4) assurances through contractual obligations;

(5) the accelerated payment of amounts required under Section 39.206;

(6) periodic reporting of financial information associated with a nuclear generating unit; and,

(7) a customer recourse mechanism whereby electric customers provide assurance of decommissioning, pursuant to Subsections (e) and (f).

(c) A proceeding under Subsection (b) shall be concluded within 180 days of filing. An order adopted under Subsection (b) shall be competitively neutral and minimize the decommissioning risk to electric customers, consistent with the development of nuclear power in this state.

(d) 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.

(e) Prior to allowing a power generation company to utilize the mechanism in Subsection (b)(7), the commission shall determine the creditworthiness of the power generation company and may, as a condition of granting a petition to utilize the mechanism in Subsection (b)(7), require a percentage of the cost of decommissioning a nuclear generating unit at the end of its operating license period to be paid into a nuclear decommissioning trust before the nuclear generating unit commences its initial fuel load and begins commercial operation.

(f) In considering a petition seeking electric customer recourse under Subsection (b)(7), the commission shall:

(1) require electric customers to be at risk for nuclear decommissioning expense to the minimum extent necessary in order to allow for the development of a nuclear generating unit;

(2) adopt a payment period for a power generation company subject to this subsection that is designed to achieve full funding of the decommissioning trust in a reasonable and expeditious manner, as necessary to allow for the development of a nuclear generating unit; and

(g) The commission shall determine the manner in which any shortfall in the actual cost of decommissioning a nuclear generating unit shall be recovered. In making the determination, the commission shall look first to a power generation company subject to this section. To the extent that no recourse exists to the power generation company or any other entity subject to this section, electric customers may be responsible for funding any shortfall in the cost of decommissioning the nuclear generating unit if the nuclear generating unit is being decommissioned and the balance of the nuclear decommissioning trust is not sufficient to fund the cost of decommissioning.

(h) If electric customers 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 or operator 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.

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

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