Exelon 2015 Annual Report Download - page 369

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
decommissioning work according to an established schedule and constructed a dry cask storage facility on the land and has loaded the SNF from
the SNF pools onto the dry cask storage facility at Zion Station. Rent payable under the Lease Agreement is $1.00 per year, although the Lease
Agreement requires ZionSolutions to pay property taxes associated with Zion Station and penalty rents may accrue if there are unexcused delays
in the progress of decommissioning work at Zion Station or the construction of the dry cask SNF storage facility. To reduce the risk of default by
ZionSolutions, EnergySolutions provided a $200 million letter of credit to be used to fund decommissioning costs in the event the NDT assets are
insufficient. EnergySolutions and its parent company have also provided a performance guarantee and EnergySolutions has entered into other
agreements that will provide rights and remedies for Generation and the NRC in the case of other specified events of default, including a special
purpose easement for disposal capacity at the EnergySolutions site in Clive, Utah, for all LLRW volume of Zion Station.
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 Generation’s and 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, 2015 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, 2015 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
6.1% to 6.3% (as compared to a historical 5-year annual average pre-tax return of approximately 7%).
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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