Allegheny Power 2010 Annual Report Download - page 129

114
Parent Annual
Subsidiary Company Company Commitment Facility Fee Maturity
(In millions)
OES Capital, Incorporated OE $125 1.08 % March 30, 2011
Centerior Funding Corporation CEI 125 1.00 March 30, 2011
Met-Ed Funding LLC Met-Ed 75 0.51 June 17, 2011
Penelec Funding LLC Penelec 70 0.51 June 17, 2011
$395
14. COMMITMENTS, GUARANTEES AND CONTINGENCIES
(A) NUCLEAR INSURANCE
The Price-Anderson Act limits the public liability which can be assessed with respect to a nuclear power plant to $12.6
billion (assuming 104 units licensed to operate) for a single nuclear incident, which amount is covered by: (i) private
insurance amounting to $375 million; and (ii) $12.2 billion provided by an industry retrospective rating plan required by
the NRC pursuant thereto. Under such retrospective rating plan, in the event of a nuclear incident at any unit in the
United States resulting in losses in excess of private insurance, up to $118 million (but not more than $18 million per unit
per year in the event of more than one incident) must be contributed for each nuclear unit licensed to operate in the
country by the licensees thereof to cover liabilities arising out of the incident. Based on their present nuclear ownership
and leasehold interests, FirstEnergy’s maximum potential assessment under these provisions would be $470 million (OE-
$40 million, NGC-$408 million, and TE-$22 million) per incident but not more than $70 million (OE-$6 million, NGC-$61
million, and TE-$3 million) in any one year for each incident.
In addition to the public liability insurance provided pursuant to the Price-Anderson Act, FirstEnergy has also obtained
insurance coverage in limited amounts for economic loss and property damage arising out of nuclear incidents.
FirstEnergy is a member of NEIL which provides coverage (NEIL I) for the extra expense of replacement power incurred
due to prolonged accidental outages of nuclear units. Under NEIL I, FirstEnergy’s subsidiaries have policies, renewable
yearly, corresponding to their respective nuclear interests, which provide an aggregate indemnity of up to approximately
$1.4 billion (OE-$120 million, NGC-$1.22 billion, TE-$64 million) for replacement power costs incurred during an outage
after an initial 26-week waiting period. Members of NEIL I pay annual premiums and are subject to assessments if losses
exceed the accumulated funds available to the insurer. FirstEnergy’s present maximum aggregate assessment for
incidents at any covered nuclear facility occurring during a policy year would be approximately $9 million (OE-$1 million,
NGC-$8 million, and TE-less than $1 million).
FirstEnergy is insured as to its respective nuclear interests under property damage insurance provided by NEIL to the
operating company for each plant. Under these arrangements, up to $2.8 billion of coverage for decontamination costs,
decommissioning costs, debris removal and repair and/or replacement of property is provided. FirstEnergy pays annual
premiums for this coverage and is liable for retrospective assessments of up to approximately $61 million (OE-$5 million,
NGC-$52 million, TE-$2 million, Met Ed, Penelec, and JCP&L-less than $1 million each) during a policy year.
FirstEnergy intends to maintain insurance against nuclear risks as described above as long as it is available. To the
extent that replacement power, property damage, decontamination, decommissioning, repair and replacement costs and
other such costs arising from a nuclear incident at any of FirstEnergy’s plants exceed the policy limits of the insurance in
effect with respect to that plant, to the extent a nuclear incident is determined not to be covered by FirstEnergy’s
insurance policies, or to the extent such insurance becomes unavailable in the future, FirstEnergy would remain at risk
for such costs.
The NRC requires nuclear power plant licensees to obtain minimum property insurance coverage of $1.1 billion or the
amount generally available from private sources, whichever is less. The proceeds of this insurance are required to be
used first to ensure that the licensed reactor is in a safe and stable condition and can be maintained in that condition to
prevent any significant risk to the public health and safety. Within 30 days of stabilization, the licensee is required to
prepare and submit to the NRC a cleanup plan for approval. The plan is required to identify all cleanup operations
necessary to decontaminate the reactor sufficiently to permit the resumption of operations or to commence
decommissioning. Any property insurance proceeds not already expended to place the reactor in a safe and stable
condition must be used first to complete those decontamination operations that are ordered by the NRC. FirstEnergy is
unable to predict what effect these requirements may have on the availability of insurance proceeds.