Dominion Power 2002 Annual Report Download - page 75

The balance of investments held in external trusts for Surry
and North Anna decommissioning as well as the accumulated
provision for decommissioning at December 31, 2002 and
2001, was $838 million and $858 million, respectively.
Dominion collected $36 million from ratepayers in each of
the years ended 2002, 2001 and 2000 and expensed like
amounts as a component of depreciation. Dominion recognized
net realized gains and interest income of $11 million, $32 mil-
lion and $20 million for 2002, 2001 and 2000, respectively.
Dominion recognized net unrealized losses of $67 million,
$61 million and $23 million, for 2002, 2001 and 2000, respec-
tively. Dominion recognized offsetting increases or decreases
to its provision for decommissioning in amounts equal to net
realized and unrealized gains or losses for each period.
Merchant Nuclear Plant—The external trusts that hold
investments dedicated to funding the decommissioning of
Dominion’s merchant nuclear plant are classified as available for
sale and reported in the Consolidated Balance Sheets at fair
value. See Note 14. The balance of investments held in external
trusts for Millstone decommissioning at December 31, 2002
and 2001 was $761 million and $839 million, respectively.
The accumulated provision for decommissioning, which is
included in accumulated depreciation in the Consolidated Bal-
ance Sheets, was recorded upon the acquisition of Millstone at
its estimated fair value using discounted cash flows of expected
costs to perform the decommissioning activities. The balance
of the accumulated provision for Millstone decommissioning
was $700 million and $660 million at December 31, 2002 and
2001, respectively.
The accretion of the provision for decommissioning is
expensed as a component of depreciation and was $40 million
and $30 million for the years ended December 31, 2002 and
2001, respectively. Dominion realized net gains and interest
income on trust investments of $21 million and $37 million in
2002 and 2001, respectively, and recorded such gains in other
income. Dominion recorded unrealized losses on the decom-
missioning trusts of $99 million in 2002 in other comprehen-
sive income. Unrealized losses on the decommissioning trust in
2001 were less than $1 million.
See Note 4 for a discussion of the adoption of SFAS
No. 143 which will affect Dominion’s accounting for nuclear
decommissioning costs.
Expected Costs for Decommissioning
The total estimated current cost to decommission Dominion’s
seven nuclear units is $3.1 billion based on site-specific studies
completed in 2002. Dominion expects to perform new cost
studies in 2006. For all units except Millstone Unit 1, the cur-
rent cost estimates assume decommissioning activities will begin
shortly after cessation of operations, which will occur when
operating licenses expire. Millstone Unit 1 is not in service and
will be monitored until decommissioning activities begin for the
remaining Millstone units. The current operating licenses expire
in the years detailed in the following table. However, Dominion
filed a request with the NRC in 2001 for a 20-year life extension
for the Surry and North Anna units and expects to file a similar
request for the Millstone units in 2004. Dominion expects to
decommission the Surry and North Anna units during the
period 2032 to 2045 and the Millstone units during the period
2050 to 2055.
73
Dominion ’02 Annual Report
Surry North Anna Millstone
Unit 1 Unit 2 Unit 1 Unit 2 Unit 1 Unit 2 Unit 3 Total
(millions)
NRC license expiration year 2012 2013 2018 2020 (1) 2015 2025
Current cost estimate (2002 dollars) $375 $368 $391 $363 $552 $522 $554 $3,125
Funds in external trusts at December 31, 2002 235 230 192 181 262 252 247 1,599
2002 contributions to external trusts 11 11 7 7 ——— 36
(1) Unit 1 ceased operations in 1998 before Dominion’s acquisition of Millstone.
The NRC requires nuclear power plant owners to annually
update minimum financial assurance amounts for the future
decommissioning of the nuclear facilities. Dominion’s 2002
NRC minimum financial assurance amount, aggregated for the
nuclear units, was $2.1 billion and has been satisfied by a combi-
nation of surety bonds and the funds being collected and
deposited in the external trusts. Beginning in March 2003,
Dominion expects to substitute a guarantee to replace the surety
bonds currently being utilized.
Insurance
The Price-Anderson Act limits the public liability of a nuclear
plant owner to $9.5 billion for a single nuclear incident. The
Price-Anderson Act Amendment of 1988 allows for an inflation-
ary provision adjustment every five years. Dominion has pur-
chased $200 million of coverage from commercial insurance
pools with the remainder provided through a mandatory indus-
try 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 $88 million for each of its seven licensed
reactors, not to exceed $10 million per year per reactor. There is