Decommissioning Trust Funds

PURPOSE: This rule is promulgated pursuant to section 393.292, RSMo to—1) govern the review and authorization of changes to the rates and charges contained in the tariff(s) of an electric corporation as a result of a change in the level or annual accrual of funding necessary for its nuclear power plant decommissioning trust fund, 2) govern the procedure for the submission, examination, hearing, and approval for the tariff changes, and 3) ensure that the amounts collected from ratepayers and paid into the trust funds will be neither greater nor lesser than the amounts necessary to carry out the purposes of the trust. Additional requirements pertaining to this subject matter are also found at 4 CSR 240-3.185. (1) As used in this rule, decommissioning means those activities undertaken in connection with a nuclear generating unit’s retirement from service to ensure that the final removal, disposal, entombment, or other disposition of the unit and of any radioactive components and materials associated with the unit, are accomplished in compliance with all applicable laws, and to ensure that the final disposition does not pose any undue threat to the public health and safety. Decommissioning includes the removal and disposal of the structures, systems, and components of a nuclear generating unit at the time of decommissioning. (2) As used in this rule, decommissioning costs means all reasonable costs and expenses incurred in connection with decommissioning, including all expenses to be incurred in connection with the preparation for decommissioning, including, but not limited to, engineering and other planning expenses; and to be incurred after the actual decommissioning occurs, including, but not limited to, physical security and radiation monitoring expenses, less proceeds of insurance, salvage or resale of machinery, construction equipment, or apparatus the cost of which was charged as a decommissioning expense. (3) As used in this rule, utility(ies) means all electrical corporations subject to the jurisdiction of the Missouri Public Service Commission (commission) that own, in whole or in part, or operate nuclear generating units in Missouri or elsewhere and that have costs of these units reflected in the rates charged to Missouri ratepayers. (4) Every three (3) years, utilities with decommissioning trust funds shall perform and file with the commission cost studies detailing the utilities’ latest cost estimates for decommissioning their nuclear generating unit(s) along with the funding levels necessary to defray these decommissioning costs. These studies shall be filed along with appropriate tariff(s) effectuating the change in rates necessary to accomplish the funding required. In addition, the commission, at any time for just cause, may require a utility to file an updated decommissioning cost study, funding requirement, and associated tariff(s). (5) Each utility shall establish a tax-qualified externally managed trust fund for the purpose of collecting funds to pay for decommissioning costs. The tax-qualified trust shall be established and maintained in accordance with the provisions of the Internal Revenue Code. If the utility has collected funds in excess of the Internal Revenue Service’s (IRS) tax-qualified amount, a nontax-qualified externally managed trust fund shall be established and maintained for all these funds. These trust funds shall be administered pursuant to the following requirements: (A) Each utility shall submit a copy of the decommissioning trust agreement and any other agreement entered into between the utility, trustee, and investment manager(s) for approval by the commission. The listing of trustee fees shall be contained in or attached to the trust agreement itself. Any change in the trust agreement, trustee, or investment manager(s) also shall be submitted to the commission for approval; (B) The commission shall have the authority to require each utility to change the trustee or investment manager(s) of a decommissioning trust for good cause shown. The commission shall be informed of any significant disputes between the utility, the trustee, or investment manager(s); (C) Each utility shall maintain separate tax qualified trusts for each nuclear generating unit. All decommissioning trusts shall be maintained to show the amounts contributed annually by Missouri jurisdictional customers. Amounts to be contributed annually for Missouri jurisdictional customers shall be computed based on the jurisdictional allocator used in the company’s last general rate proceeding unless otherwise ordered by the commission; (D) The decommissioning trust shall be funded through no less than quarterly payments by the utility. The tax-qualified trust shall be funded with the lesser of the utility’s decommissioning costs reflected in its cost of service or the maximum amount allowable by the IRS. All funds in excess of the IRS’s ruling amount shall be placed in a nonqualified trust; (E) The trustee or investment manager(s) shall invest the tax-qualified trust assets and nontax-qualified trust assets only in assets that are prudent investments for assets held in trust and in a manner designed to maximize the after-tax return on funds invested, consistent with the conservation of the principal, subject to the limitations specified as follows: 1. The trustee and investment manager(s) shall not invest any portion of the tax-qualified or nontax-qualified trust’s funds in the securities or assets of the following: A. Any owner or operator of a nuclear power plant; B. Any index fund, mutual fund, or pooled fund in which more than fifteen percent (15%) of the assets are issued by owners or operators of nuclear power plants; C. Any affiliated company of the utility; or D. The trustee or investment manager’s(s’) company or affiliated companies (This limitation does not include time or demand deposits offered through the trustee or investment manager’s(s’) affiliated banking operations.); 2. The nontax-qualified trust shall be subject to the prohibitions against self-dealing applicable to the tax qualified trust as specified in the Internal Revenue Code; and 3. A utility’s total book value of investments in equity securities in all of its decommissioning trusts shall not exceed sixty-five percent (65%) of the trust funds’ book value; and (F) All income earned by a trust’s funds shall become a part of that trust’s funds. AND INSURANCE (6) The utility shall take every reasonable action to provide reasonable assurance that adequate funds are available at the nuclear generating unit’s termination of operation, so that decommissioning can be carried out in a safe and timely manner, and that lack of funds does not result in delays that may cause undue health and safety hazards. (7) The utility shall maintain its nuclear generating unit(s) in a manner calculated to minimize the utility’s total cost of maintenance and decommissioning, consistent with the prudent operation of the unit. (8) At the time a tariff(s) is filed by a utility, which proposes any change in rates due to changes in the estimate of decommissioning cost or the funding level of its nuclear decommissioning trust fund(s), the utility shall file the following minimum information in support of the need for changes in its tariff rates: (A) An updated decommissioning cost study which estimates the cost of decommissioning and the funding levels necessary to defray these costs. This study shall contain the following information: 1. Detailed quantities and unit prices in current dollars for each system of the nuclear generating unit to be decommissioned; 2. A detailed breakdown between radioactive contaminated systems and those systems which are not contaminated by radioactivity; 3. Funding levels which are computed on a levelized basis and which accrue future decommissioning costs over the remaining licensed life of the nuclear generating unit. The utility shall include the earnings rate and inflation rate assumed in the cost study as compared to those assumed in any previous study; 4. A detailed description of any facilities that were added to or deleted from the cost study filed in the previous case; 5. The beginning date for the expenditure of funds for decommissioning assumed in the study shall be no later than the expiration date of the unit’s current Nuclear Regulatory Commission (NRC) license; and 6. The study shall consider and evaluate all reasonable practices or procedures which would reduce the ultimate cost of decommissioning; and (B) A summary description of the reasons (for example, changes in regulation, technology, or economics) that brought on the need to change the decommissioning cost estimate. (9) Upon the filing of the appropriate tariff(s) as set forth in this rule, the commission shall establish a schedule of proceedings which shall be limited in scope to the following issues: (A) The extent of any change in the level or annual accrual of funding necessary for the utility’s decommissioning trust fund; and (B) The changes in rates which would reflect any change in the funding level or accrual rate. (10) For a fund intended to be tax qualified, after receipt of any commission order modifying the annual decommissioning funding requirements, the affected utility shall apply for an adjusted IRS ruling in a timely manner, seeking deductibility of the new annual decommissioning cost accruals consistent with the effective dates given in the order. Pending final IRS approval, the utility shall be authorized to continue funding at the level which existed prior to the commission order provided that the utility will take all appropriate action to preserve the tax deduction of the amounts subsequently approved in the IRS ruling. (11) Distributions may be made from a nuclear decommissioning trust fund only to satisfy the liabilities of the utility for nuclear decommissioning costs relating to the nuclear generating unit for which the decommissioning fund was established and to pay administrative costs, income taxes, and other incidental expenses of the trust fund. The utility shall not use proceeds of the trust for the purpose of filing for an updated tax ruling or to qualify the trust. (12) Each utility shall file with the commission the detailed plan required by the Nuclear Regulatory Commission (NRC) for the decommissioning of its nuclear generating unit when that plan is filed with the NRC. Before any distribution of decommissioning trust funds are made for the decommissioning of its nuclear generating unit, the utility must notify and obtain commission approval of its intent to make this distribution. (13) The utility or the trustee shall file reports quarterly to the commission. The reports shall contain the following information: (A) A total of all jurisdictional balances of the trust fund(s) based on a carrying cost (book) value; (B) A total of all jurisdictional balances of the trust fund(s) based on a market value; (C) A Missouri jurisdictional balance of the trust fund(s) based on a carrying cost (book) value; (D) A Missouri jurisdictional balance of the trust fund(s) based on a market value; (E) A summary of the trust account including the utility’s contributions, incomes, expenses, and a weighted average after-tax return for the quarter; (F) A portfolio summary per asset class by amount and percentage; (G) A detailed report of daily transactions; and (H) Any other information the commission orders the utility or trustee to provide. (14) The utility or the trustee shall file reports annually to the commission that contain the following information: (A) An asset maturity schedule; (B) A summary of the trust’s portfolio of investments including a listing of each security detailing the carrying cost, current market value, maturity date, estimated annual income, and the yield to maturity; (C) A copy of all correspondence including income tax returns and tax exempt rulings concerning the trust with the Internal Revenue Service (IRS) or any state revenue agency; and (D) Any other information the commission orders the utility or trust to provide. (15) The utility shall conduct the decommissioning of its nuclear generating unit in accordance with NRC requirements and must not knowingly allow any procedure that would unreasonably endanger human life or the environment. (16) Upon termination of the trust, the utility shall file with the commission the appropriate tariff(s) to reflect the termination of payments into the decommissioning trust fund, as well as refund or credit any over collection of these funds. (17) Upon proper application and after due notice and hearing, the commission may waive any provision of this rule for good cause shown. (18) The commission may adopt further amendments as it deems necessary for the sound management of the trust fund(s), consistent with the purpose of this rule. AUTHORITY: sections 386.250 and 393.292, RSMo 2016.* This rule originally filed as 4 CSR 240-20.070. Original rule filed Nov. 27, 1989, effective March 26, 1990. Amended: Filed May 4, 1993, effective Dec. 9, 1993. Amended: Filed Aug. 16, 2002, effective April 30, 2003. Amended: Filed Nov. 7, 2018, effective July 30, 2019. Moved to 20 CSR 4240-20.070, effective Aug. 28, 2019. *Original authority: 386.250, RSMo 1939, amended 1963, 1967, 1977, 1980, 1987, 1988, 1991, 1993, 1995, 1996 and 393.292, RSMo 1989.