Exelon 2014 Annual Report Download - page 234

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
NRC Minimum Funding Requirements
NRC regulations require that licensees of nuclear generating facilities demonstrate reasonable assurance that funds will be available
in specified minimum amounts to decommission the facility at the end of its life. The estimated decommissioning obligations as
calculated using the NRC methodology differ from the ARO recorded on Exelon’s Consolidated Balance Sheets primarily due to
differences in the type of costs included in the estimates, the basis for estimating such costs, and assumptions regarding the
decommissioning alternatives to be used, potential license renewals, decommissioning cost escalation, and the growth rate in the
NDT funds. Under NRC regulations, if the minimum funding requirements calculated under the NRC methodology are less than the
future value of the NDT funds, also calculated under the NRC methodology, then the NRC requires either further funding or other
financial guarantees.
Key assumptions used in the minimum funding calculation using the NRC methodology at December 31, 2014 include:
(1) consideration of costs only for the removal of radiological contamination at each unit; (2) the option on a unit-by-unit basis to use
generic, non-site specific cost estimates; (3) consideration of only one decommissioning scenario for each unit; (4) the plants cease
operation at the end of their current license lives (with no assumed license renewals for those units that have not already received
renewals and with an assumed end-of-operations date of 2019 for Oyster Creek); (5) the assumption of current nominal dollar cost
estimates that are neither escalated through the anticipated period of decommissioning, nor discounted using the CARFR; and
(6) assumed annual after-tax returns on the NDT funds of 2% (3% for the former PECO units, as specified by the PAPUC).
In contrast, the key criteria and assumptions used by Generation to determine the ARO and to forecast the target growth in the NDT
funds at December 31, 2014 include: (1) the use of site specific cost estimates that are updated at least once every five years;
(2) the inclusion in the ARO estimate of all legally unavoidable costs required to decommission the unit (e.g., radiological
decommissioning and full site restoration for certain units, on-site spent fuel maintenance and storage subsequent to ceasing
operations and until DOE acceptance, and disposal of certain low-level radioactive waste); (3) the consideration of multiple scenarios
where decommissioning activities are completed under three possible scenarios ranging from 10 to 70 years after the cessation of
plant operations; (4) the assumption plants cease operating at the end of an extended license life (assuming 20-year license renewal
extensions, except Oyster Creek with an assumed end-of-operations date of 2019); (5) the measurement of the obligation at the
present value of the future estimated costs and an annual average accretion of the ARO of approximately 5% through a period of
approximately 30 years after the end of the extended lives of the units; and (6) an estimated targeted annual pre-tax return on the
NDT funds of 6% to 6.3% (as compared to a historical 5-year annual average pre-tax return of approximately 9%).
Generation is required to provide to the NRC a biennial report by unit (annually for units that have been retired or are within five
years of the current approved license life), based on values as of December 31, addressing Generation’s ability to meet the NRC
minimum funding levels. Depending on the value of the trust funds, Generation may be required to take steps, such as providing
financial guarantees through letters of credit or parent company guarantees or make additional contributions to the trusts, which
could be significant, to ensure that the trusts are adequately funded and that NRC minimum funding requirements are met. As a
result, Exelon’s and Generation’s cash flows and financial position may be significantly adversely affected.
On April 1, 2013, Generation submitted its NRC-required biennial decommissioning funding status report as of December 31,
2012. As of December 31, 2012, Generation provided adequate funding assurance for all of its units, including Limerick Unit 1,
where Generation had in place a $115 million parent guarantee to cover the NRC minimum funding assurance requirements. On
October 2, 2013, the NRC issued summary findings from the NRC Staff’s review of the 2013 decommissioning funding status reports
for all 104 operating reactors, including the Generation operating units. Based on that review, the NRC Staff determined that
Generation provided decommissioning funding assurance under the NRC regulations for all of its operating units, including Limerick
Unit 1. On March 26, 2014, in accordance with a NRC requirement with respect to units involved in a merger or acquisition, CENG
submitted its NRC-required decommissioning funding status report as of December 31, 2013 and no additional financial assurance
was required.
On March 31, 2014, Generation submitted its NRC required annual decommissioning funding report as of December 31, 2013 for
reactors that have been shut down except for Zion Station which is included on a separate report to the NRC submitted by
EnergySolutions (see Zion Station Decommissioning above). This submittal also included the required updated financial tests for the
Limerick Unit 1 parent guarantee. There was no change to the amount of the parent guarantee, or the funding status of these
reactors. Adequate decommissioning funding assurance is in place for all reactors owned by Generation. During 2014, the operating
license for Limerick Unit 1 was extended by 20 years. As a result of this extension, and the subsequent funding assurance
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