Dominion Power 2003 Annual Report Download - page 89

87.Dominion 2003
Other Before being acquired by Dominion, Louis Dreyfus
was one of numerous defendants in a lawsuit consolidated and
pending in the 93rd Judicial District Court in Hildalgo County,
Texas. The lawsuit alleges that gas wells and related pipeline
facilities operated by Louis Dreyfus and facilities operated by
other defendants caused an underground hydrocarbon plume in
McAllen, Texas. The plaintiffs claim that they have suffered dam-
ages, including property damage and lost profits, as a result of
the alleged plume. Although the results of litigation are inherently
unpredictable, Dominion does not expect the ultimate outcome of
the case to have a material adverse impact on its results of opera-
tions, cash flows or financial position.
Dominion has determined that it is associated with 20 former
manufactured gas plant sites. Studies conducted by other utilities
at their former manufactured gas plants have indicated that their
sites contain coal tar and other potentially harmful materials.
None of the 20 former sites with which Dominion is associated is
under investigation by any state or federal environmental agency,
and no investigation or action is currently anticipated. At this
time, it is not known to what degree these sites may contain envi-
ronmental contamination. Dominion is not able to estimate the
cost, if any, that may be required for the possible remediation of
these sites.
Nuclear Operations
Nuclear Decommissioning — Minimum Financial Assurance
The NRC requires nuclear power plant owners to annually
update minimum financial assurance amounts for the future
decommissioning of its nuclear facilities. Dominion’s 2003 NRC
minimum financial assurance amount, aggregated for the nuclear
units, was $2.5 billion and has been satisfied by a combination
of surety bonds and the funds being collected and deposited in
the trusts. Dominion executed a guarantee, effective March 31,
2003, to replace the surety bonds.
Nuclear Insurance The Price-Anderson Act provides the
public up to $10.9 billion of protection per nuclear incident via
obligations required of owners of nuclear power plants. The
Price-Anderson Act Amendment of 1988 allows for an inflation-
ary provision adjustment every five years. Dominion has pur-
chased $300 million of coverage from the commercial insurance
pools with the remainder provided through a mandatory industry
risk-sharing program. In the event of a nuclear incident at any
licensed nuclear reactor in the United States, Dominion could be
assessed up to $100.6 million for each of its seven licensed
reactors not to exceed $10 million per year per reactor. There is
no limit to the number of incidents for which this retrospective
premium can be assessed.
The Price-Anderson Act was first enacted in 1957 and has
been renewed three times
— in 1967, 1975 and 1998. The Price-
Anderson Act expired on August 31, 2002, but operating nuclear
reactors continue to be covered by the law. Congress is currently
holding hearings to reauthorize the legislation. The expiration of
the Price-Anderson Act has no impact on existing nuclear license
holders.
Dominion’s current level of property insurance coverage
($2.55 billion for North Anna, $2.55 billion for Surry, and $2.75
for Millstone) exceeds the NRC’s minimum requirement for
nuclear power plant licensees of $1.06 billion per reactor site and
includes coverage for premature decommissioning and functional
total loss. The NRC requires that the proceeds from this insurance
be used first to return the reactor to and maintain it in a safe and
stable condition and second to decontaminate the reactor and
station site in accordance with a plan approved by the NRC.
Dominion’s nuclear property insurance is provided by the
Nuclear Electric Insurance Limited (NEIL), a mutual insurance
company, and is subject to retrospective premium assessments in
any policy year in which losses exceed the funds available to the
insurance company. The maximum assessment for the current pol-
icy period is $72 million. Based on the severity of the incident,
the board of directors of Dominion’s nuclear insurer has the dis-
cretion to lower or eliminate the maximum retrospective premium
assessment. Dominion has the financial responsibility for any
losses that exceed the limits or for which insurance proceeds are
not available because they must first be used for stabilization and
decontamination.
Dominion purchases insurance from NEIL to cover the cost of
replacement power during the prolonged outage of a nuclear unit
due to direct physical damage of the unit. Under this program,
Dominion is subject to a retrospective premium assessment for
any policy year in which losses exceed funds available to NEIL.
The current policy period’s maximum assessment is $29 million.
Old Dominion Electric Cooperative, a part owner of North
Anna Power Station, and Massachusetts Municipal Wholesale
Electric Company and Central Vermont Public Service Corpora-
tion, part owners of Millstone’s Unit 3, are responsible for their
share of the nuclear decommissioning obligation and insurance
premiums on applicable units, including any retrospective pre-
mium assessments and any losses not covered by insurance.
Spent Nuclear Fuel Under provisions of the Nuclear Waste
Policy Act of 1982, Dominion has entered into contracts with the
Department of Energy (DOE) for the disposal of spent nuclear
fuel. The DOE failed to begin accepting the spent fuel on January
31, 1998, the date provided by the Nuclear Waste Policy Act and
by Dominion’s contracts with the DOE. In January 2004, Domin-
ion and certain of its direct and indirect subsidiaries filed law-
suits in the United States Court of Federal Claims against the
DOE in connection with its failure to commence accepting spent
nuclear fuel. Dominion will continue to safely manage its spent
fuel until it is accepted by the DOE.
Litigation
Virginia Power and DTI are defendants in a class action lawsuit
pending in the U.S. District Court in Richmond, Virginia. The
plaintiffs claim that Virginia Power and DTI strung fiber-optic
cable across their land, along a Virginia Power electric