United States Nuclear Regulatory Commission - Protecting People and the Environment

Licensee Responsibilities Related to Financial Qualifications

                                 UNITED STATES
                         NUCLEAR REGULATORY COMMISSION
                     OFFICE OF NUCLEAR REACTOR REGULATION
                         WASHINGTON, D.C.  20555-0001
                                       
                                 June 21, 1996


NRC ADMINISTRATIVE LETTER 96-02:  LICENSEE RESPONSIBILITIES RELATED TO
                                  FINANCIAL QUALIFICATIONS


Addressees

All holders of operating licenses or construction permits for nuclear power
reactors.

Purpose

The U.S. Nuclear Regulatory Commission (NRC) is issuing this administrative
letter to remind addressees of their ongoing responsibility to inform, and
obtain advance approval from the NRC for any changes that would constitute a
transfer of the license, directly or indirectly, through transfer of control
of the NRC license to any person pursuant to Section 50.80 of Title 10 of the
Code of Federal Regulations (10 CFR 50.80), "Transfer of licenses."  Addition-
ally, this administrative letter reminds addressees of their responsibility to
assure that information regarding licensee financial qualifications and decom-
missioning funding assurance that may have a significant implication for
public health and safety is promptly reported to the NRC.  Lastly, this
administrative letter points out the desirability of providing the NRC advance
notice of any plans for such changes so that staff review resources can be
allocated and NRC decisions are not unnecessarily delayed.  This administra-
tive letter does not transmit or imply any new or changed requirement or staff
positions.  The submittal of advance notice of your planning in this area is
strictly voluntary; therefore, no specific action or written response is
required.

Background

The electric utility industry is entering a period of economic deregulation
and restructuring which will lead to increased competition in the industry. 
Increasing competition may force integrated power systems to separate (or
"disaggregate") their systems into functional areas.  Thus, some licensees may
divest electrical generation assets from transmission and distribution assets
by forming separate companies or separate subsidiaries for electrical
generation within larger holding companies.  Disaggregation may involve
utility restructuring, mergers, and corporate spinoffs that lead to changes in
owners or operators of licensed power reactors and other material changes.

The NRC concern is that the remaining licensed entities have access to 
adequate funds, such that funds are available for safe reactor operation and
decommissioning.  The NRC has distinguished between an "electric utility" and
other licensees in this regard.  As defined in 10 CFR 50.2, an "electric 



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utility" is an entity that generates or distributes electricity for which the
costs are recovered by rates set by the entity or by a separate regulatory
authority.  Rate regulators allow an electric utility to recover prudently
incurred costs of generating, transmitting, and distributing electric
services.  Corporate restructuring that changes the "electric utility" status
of a power reactor licensee or otherwise alters the basis under which a
licensee received an operating license for a power reactor should be brought
to NRC attention in a timely fashion.  
  
Discussion

This administrative letter reminds all power reactor licensees of their
ongoing obligation to seek and obtain prior written consent from the NRC for
any changes that would constitute transfer of the NRC license, directly or
indirectly, through transfer of control of the license pursuant to 10 CFR
50.80 and Section 184 of the Atomic Energy Act as amended.  In addition,
licensees should assure that information regarding their financial
qualifications and decommissioning funding assurance that may have a
significant implication for public health and safety is promptly reported to
the NRC.

The NRC has considered mergers, the formation of holding companies, and the
outright sales of facilities, or portions of facilities, to require NRC
notification and prior approval in accordance with 10 CFR 50.80 so as to
ensure that the transferee is appropriately qualified.  For example, the NRC
determines whether the surviving organization will remain an "electric
utility" as defined in 10 CFR 50.2.  For sales of interests in power reactors,
the NRC reviews are similar to those for mergers or formation of holding
companies.  

While some restructuring plans occur with little warning, many are anticipated
well in advance of the desired implementation date.  Licensees should consider
providing advance notification of such plans to the NRC so that the staff can
schedule the appropriate resources for review.  Because the number of staff 
reviews in this area are expected to increase significantly in the future,
licensees that wait until shortly before a decision is needed may find the    
staff unable to meet their desired schedule.

To address changes that may result from economic deregulation, the NRC issued,
on April 8, 1996, an Advance Notice of Proposed Rulemaking (61 FR 15427) that
seeks comment on deregulation issues as they may affect NRC decommissioning
funding assurance requirements.  The NRC has also developed an Action Plan
that outlines additional steps the NRC intends to take to respond to economic
deregulation of its power reactor licensees.  Until these actions are com-
plete, our current regulations are governing.  However, you should be aware
that the NRC staff will consult with the Commission when any new or unusual
restructurings alter your original licensing basis.  



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                                                              Page 3 of 3


This administrative letter requires no specific action or written response. 
If you have any questions about this letter, please contact one of the persons
listed below or the appropriate Office of Nuclear Reactor Regulation (NRR)
project manager.


                                          signed by

                                    Brian K. Grimes, Acting Director
                                    Division of Reactor Program Management
                                    Office of Nuclear Reactor Regulation

Contacts:  Robert Wood, NRR
           (301) 415-1255 
           Internet:rsw@nrc.gov

           Bill Lambe, NRR
           (301) 415-1277
           Internet:wml@nrc.gov




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