Introduction

Recommendations

Introduction

Fairewinds Associates, Inc first notified the Vermont State Legislature of its concerns regarding the decommissioning fund for the Entergy Nuclear Vermont Yankee Nuclear Power Plant. Our initial decommissioning reports are:

• Decommissioning The Vermont Yankee Nuclear Power Plant: An Analysis Of Vermont Yankee's Decommissioning Fund And Its Projected Decommissioning Costs, 11-2007
• Decommissioning Vermont Yankee Stage 2 Analysis of the Vermont Yankee Decommissioning Fund: The Decommissioning Fund Gap, 12-2007

Other more recent Fairewinds Associates' reports are posted on the Joint Fiscal Office (JFO) website. http://www.leg.state.vt.us/jfo/

Recommendations

1. An updated and independent decommissioning analysis of the Vermont Yankee nuclear plant should be completed prior to any Legislative discussion of Vermont Yankee decommissioning costs.
2. The allocation of the Decommissioning Fund Stocks should be determined.
3. A new wholly independent contractor should be chosen to perform a new and updated decommissioning analysis.
4. Texas Compact Contract and By-Laws require significant review and adjustment in order to fully protect Vermont.

The aforementioned recommendations are based upon the following seven concerns:

Concern 1 Entergy's Vermont Yankee decommissioning analysis is technically and economically outdated.

While the Decommissioning Cost Analysis for the Vermont Yankee Nuclear Power Plant, TLG Services, Inc. January 2007 (Document E11-1559-002, Rev 0) is the decommissioning document of record for Entergy Nuclear Vermont Yankee (ENVY); it is technically and economically outdated. Created in 2006 and submitted to the Vermont Department of Public Service in January 2007, the TLG decommissioning analysis is more than 4-years-old and thus does not reflect current economic analysis or current technical changes.

Concern 2 VY's numerous decommissioning estimates are extraordinarily divergent.

Fairewinds Associates, Inc recommends a new decommissioning cost analysis by an independent firm that is not a wholly owned subsidiary of Entergy like TLG Services is. Previous analysis by Fairewinds Associates, Inc that was presented to the House Natural Resources Committee during the 2010 legislative session has identified an extraordinary variation in decommissioning cost estimates among the various the Entergy TLG decommissioning reports created in 1991, 1996, 2001 and 2006.

Fairewinds Associates detailed this issue in two reports that are available on the Joint Fiscal Office Website.

• July 14, 2010 Report to the Joint Fiscal Committee entitled: Summation for 2009 to 2010 Legislative Year For the Joint Fiscal Committee Reliability Oversight, and
• A Comparison of TLG Services Projected Decommissioning Costs for Vermont Yankee April 2, 2010 Testimony.

The Table below briefly summarizes these two reports and shows the wide disparity in Entergy's estimates.

Summary of VY Decommissioning
Projections from al four studies

Note that the above table escalates costs at 4% per year in order to accurately compare all four studies in 2012 dollars. Unlike the 1991, 1996, and 2001 studies, the 2006 TLG report combined both Independent Spent Fuel Storage Installation (ISFSI) and decommissioning costs. In writing this table, Fairewinds attempted to separate those two aspects, however the TLG report is written in such a way as to make cost separation very difficult.

Not only are the previous four TLG studies divergent, other experts have provided wildly differing opinions in testimony before the Vermont Public Service Board during a 2-week hearing process in 2009.

According to the May 19, 2009 Associated Press article, TLG's Entergy expert William Cloutier said that decommissioning costs for Vermont Yankee might exceed $900,000,000.

Yet only two-months after Entergy employee Cloutier stated that costs might in fact almost reach $1 Billion, the Department of Public Service engineer Uldis Vanags testified to the Public Service Board that the decommissioning costs for VY would be less than $560,000,000. Mr. Vanags, a health physicist who participated in the decommissioning of Maine Yankee, testified before the Vermont Public Service Board that the decommissioning costs at VY would be less than those at Maine Yankee ($560,000,000) because VY is:

The DPS and Entergy testimonies to the Vermont Public Service Board estimate that decommissioning costs could be as low as $550,000,000 and could also almost reach $1 Billion. Such an extraordinarily large range of cost estimates is not conducive to accurate public policy decisions. Mr. Vanags, who has a background in health physics, failed to take into account the significant engineering differences between a Boiling Water Reactor (BWR) like Vermont Yankee (VY) and a Pressurized Water Reactor (PWR) like Maine Yankee. Nuclear Regulatory Commission (NRC) calculations indicate that BWR reactors like VY usually cost at least 40% more to decommission than a PWR because the radioactive steam runs throughout the entire plant engineering system therefore making the plant more radioactive than a PWR and requiring more clean up at the end of plant life. Moreover, as you will note, Mr. Vanag's testimony was based upon the untruthful assertion by Entergy that VY had no underground piping carrying radiation (radionuclides).

The 40-year-old Oyster Creek nuclear power plant in New Jersey is a Boiling Water Reactor (BWR) like Vermont Yankee that is also leaking tritium. Owned by Exelon, Oyster Creek announced December 9, 2010 that it will shutdown in 2019 following 50-years of operation. Unlike VY, Oyster Creek has a decommissioning fund has already accumulated $750,000,000, according to the New York Times and the Asbury Park Press. In spite of $750 Million put aside, the news reports claim that the plant may still not have enough money to dismantle the plant without putting it in SAFSTOR for as long as 60-years. According to the latest figures at the end of November 2010, the VY Decommissioning fund contained $465,000,000, which is almost $300,000,000 less than has already been accrued at Oyster Creek. The estimated costs for decommissioning and dismantling Oyster Creek is similar to the 2001 TLG estimate for VY, and shows a wide disparity when compared with the 2006 TLG estimate.

Concern 3 Major incorrect assumption factored into Entergy Nuclear Vermont Yankee's decommissioning costs by TLG Services.

In addition to being based upon an analysis created more than four years ago, ENVY's TLG analysis contained an incorrect assumption that dramatically increased decommissioning cost estimates on paper. Although former vice-president of ENVY Jay Thayer publicly renounced this key financial error in a hearing before the Vermont Senate Finance Committee, the financial inaccuracies in the report itself have never been corrected, and have never been identified or audited by any Vermont agency or commission.

Specifically, ENVY and TLG Services attempted to draw down the Vermont Yankee decommissioning fund by applying the cost of the Interim Spent Fuel Storage Installation (ISFSI) to Vermont Yankee's Decommissioning Fund. Nuclear Regulatory Commission Statute prohibits applying the cost of spent fuel to the plant's decommissioning fund, yet Entergy and TLG Services attempted to subtract these Department of Energy costs from Vermont Yankee's decommissioning fund. In April of 2009, 27-months after the TLG report was submitted, Entergy retracted its effort to strip the fund of these unauthorized costs. All spent (used) fuel storage costs are borne by the Department of Energy since it has failed to produce the federal waste repository upon which nuclear power plant operation and licensure is based.

Background on TLG and VY Decommissioning Scenarios: Prior to the 2006 decommissioning costs analysis by TLG Services, the cost for storing spent fuel (ISFSI) was never included in any estimates. TLG Engineering created its 1991, 1996, and 2001 reports when it was an independent Engineering Services firm prior to its acquisition by Entergy. It was only in the 2006 decommissioning cost analysis, prepared after TLG became a wholly-owned Entergy subsidiary, that it attempted to tap into the VY decommissioning fund for Entergy's fuel storage costs.

In Fairewinds Associates review of other nuclear power plant NRC licensee records there was no evidence of any other attempts by nuclear corporations to raid decommissioning funds in order to subsidize the spent fuel storage (ISFSI) costs. Fairewinds was also unable to find evidence of TLG recommending such methodology at any other nuclear power plant. The 2007 TLG report appears to be the first and only attempt by a nuclear power plant licensee to tap the decommissioning fund to subsidize its interim spent fuel storage.

It has been established law for many years that the costs associated with interim spent fuel storage (ISFSI) should be charged to the Department of Energy and not deducted from any nuclear power plant's Decommissioning Fund. In testimony provided to the Vermont Public Service Board in 2001, Department of Public Service State Nuclear Engineer William Sherman noted that interim spent fuel storage costs were being collected by utilities litigating against the Department of Energy. Mr. Sherman noted that it was likely that the decommissioning fund could support the cost to decommission Vermont Yankee, but his analysis specifically excluded the cost of interim spent fuel storage. Interim spent fuel storage was a separate item in Mr. Sherman's testimony in 2001, and it was the position of DPS that these costs would be recovered from the Department of Energy (DOE) and not deducted from VY's Decommissioning Fund. According to Mr. Sherman's 2001 prefiled testimony^[2]:

Vermont's DPS and Mr. Sherman were not the only organization to recognize that the Decommissioning fund could not be used by Entergy to fund the storage of spent nuclear fuel. In Update of the Tax and Regulatory Considerations for Nuclear Decommissioning Trusts^[3] a legal presentation the nuclear law firm Winston & Strawn made to the industry, it stressed the fact using any decommissioning fund for interim spent fuel storage was specifically excluded. In its presentation Winston & Strawn acknowledged,

Despite the evidence that interim spent fuel storage (ISFSI) should not be funded via any decommissioning fund monies, TLG Services and ENVY deliberately chose to wrongfully add more than $200,000,000 in costs into its 2007 Decommissioning Report filed with the Vermont Department of Public Service in January 2007.

Fairewinds Associates, Inc first alerted the State Legislature and the Auditors office of the faulty calculations in the 2007 TLG study in November and December 2007 in its two initial decommissioning reports written for the State Legislature. Yet this Entergy TLG Services decommissioning estimate continues to be the only one available and its inaccurate financial calculations are being misapplied in analyzing both the state of the fund and the timeframe for decommissioning VY. When the cost of interim spent fuel storage (ISFSI) is included in estimates for VY's decommissioning, hundreds of millions of dollars of additional expense are incurred by Vermonters via an attempted deduction from the decommissioning fund. The net effect of this deduction of the interim spent fuel storage (ISFSI) fees by Entergy from the VY decommissioning fund is the proposal that decommissioning and dismantling VY will have to wait at least 60-years until adequate funds are available.

However, between January 2007 and March 2009, neither the Department of Public Service nor Entergy attempted to revise this erroneous assumption leaving the public and legislature believing that VY had inadequate decommissioning funds to decommission Vermont Yankee unless it waited for 60-years for the fund to grow. Entergy finally reversed its attempt to wrongfully apply VY decommissioning funds to interim spent fuel storage (ISFSI), and stated so in its April 14, 2009 testimony by then executive vice president Jay Thayer to Senator Ann Cummings' Senate Finance Committee (Transcript Attached, Attachment 3).

For more than two years, between 2007 and 2009, Entergy applied economic criteria to the Vermont Yankee decommissioning fund in a manner not allowed by federal statute. Had this assumption by Entergy been allowed to stand, it would have delayed VY's decommissioning by six decades. Fairewinds Associates, Inc has found no evidence that the Vermont Department of Public Service objected to this arrangement. Now, fully four years later, even though stripping interim spent fuel storage costs (ISFSI) from VY's decommissioning fund is no longer under consideration, the 2007 TLG study which has those wrongfully calculated financials, is still being used as the baseline for determining the cost and time duration of decommissioning and dismantling Vermont Yankee.

Concern 4 Apparent Conflict of Interest Among Entergy, ENVY and TLG Services

In 2001, Entergy acquired TLG Engineering. In 2002, Entergy acquired Vermont Yankee. The 2007 TLG VY decommissioning report is the first report in which both VY and TLG were wholly owned Entergy subsidiaries. The resultant Entergy ownership of both the Vermont Yankee nuclear power plant and the formerly independent TLG is an apparent conflict of interest that could potentially lead to a financial analysis that is not in the best interest of the State of V ermont.

The evidence reviewed by Fairewinds Associates, Inc shows that two changes made in the 2007 TLG report differ from the 2001 TLG report and are not substantiated in the broader nationwide industry work of TLG Services. Moreover, the inclusion by Entergy's TLG Services of these new changes in its 2007 VY Decommissioning Study is not in the best interest of the State of Vermont.

1. First, the unexplained precipitous decline in 2006 decommissioning estimate compared to the 2001 TLG report, with interim spent fuel storage (ISFSI) fees wrongfully deducted, is an a clear example of the latest report's lack of verifiable objectivity. The 2001 report estimated decommissioning costs at approximately $850,000,000, which then suddenly dropped to $650,000,000 in 2007.
2. Second, the inclusion of interim spent fuel storage (ISFSI) funding without any indication that it was a dramatic change from the previous TLG estimates simply are not substantiated in other TLG Services decommissioning estimates nationwide. The 2007 TLG analysis wrongfully included approximately $250,000,000 in charges to the Decommissioning fund for interim spent fuel storage (ISFSI), which is a violation of federal statute. The Department of Energy (DOE) is responsible for the cost of spent fuel storage, not each nuclear power plant's decommissioning fund.

TLG Services inclusion of these two significant changes without a detailed discussion of why they were made, their impact on cost, and without any reference documents could be indicative that the 2007 TLG Report was written to benefit Entergy and does not adequately reflect the financial interests of the State of Vermont.

Concern 5 Missing Decommissioning Cash Flow Analysis in TLG Report

The estimated cash flow analysis TLG Services presented to the PSB in 2009 regarding Vermont Yankee is completely inaccurate. Therefore, the State has no analysis of the decommissioning and dismantling costs for Vermont Yankee based upon an accurate economic fund balance projection.

None of the TLG studies compare the yearly expenditures to decommission Vermont Yankee against the amount of money available each year in the decommissioning fund. Fairewinds Associates believes that the first such Cash Flow Analysis was developed in its November 2007 report to the Legislature.^[4]

The November 2007 cash flow analysis created by Fairewinds Associates clearly showed that with interim spent fuel storage (ISFSI) factored into the VY Decommissioning costs, it appears to be impossible to decommission Vermont Yankee in less than 60 years. During the 2009 Public Service Board hearings, TLG created and submitted its own Cash Flow Analysis on behalf of Entergy (Exhibit EN- TLG-3, admitted May 18, 2009, docket 7440). The testimony by TLG Services showed that decommissioning the plant (including dismantling) and funding the interim spent fuel storage (ISFSI) cannot, in most of the scenarios they presented, be completed in less than 60-years. Fairewinds Associates notes that Entergy renounced the interim spent fuel storage (ISFSI) costs in the April 14, 2009 testimony to the Senate Finance Committee, yet TLG Services included these costs in their May 18, 2009 testimony to the Vermont Public Service Board.

Since TLG used its 2007 report as its base case, all of the cash flow analyses it presented to the PSB wrongfully assumed funding of spent fuel storage (ISFSI). While Entergy ultimately rejected this assumption in 2009, that change is not reflected in any Decommissioning documents of record.

Concern 6 Decommissioning Fund Investments

After three years of review, the Vermont State Auditor's Office finally issued an audit report regarding the Vermont Yankee Decommissioning Fund. This report was of particular interest to our firm since Fairewinds Associates, Inc first notified the Vermont State Legislature and the State Auditor's office of concerns regarding the fund. While the Auditor's report appears to be accurate in the areas the Auditor chose to evaluate, it is deficient in evaluating two critical areas.

A Trust Banker in Vermont contacted Fairewinds Associates, Inc and expressed considerable concern regarding the sudden drop in the fund's value during the 2007 to 2008 banking crisis and an insufficient evaluation of the fund's individual equities by any Vermont State Agency or by the Auditor's office.

Unfortunately the Auditor's Office did not evaluate the individual holdings to determine if their asset allocation caused the volatility experienced in 2007 and 2008. More importantly, the State needs to determine if this same volatility is currently present as Vermont Yankee is prepared for decommissioning.

Concern 7 Shipping Vermont's nuclear waste to Texas for regular waste disposal, decommissioning, and final dismantlement.

Vermont and Texas are currently members of a Congressionally approved two-state Interstate Compact that allows (and requires) Vermont Yankee to ship all of its radioactive waste (other than irradiated fuel) to Texas, once the Texas site is fully operational. The federally mandated interstate compacts were formed with the goal in mind of having several specific large-sized nuclear waste disposal sites rather than numerous nuclear waste dumps sited in almost every state in the US and by extension, maybe at each individual nuclear power plant site. Congress established the federal waste compacts in order to avoid the federal Constitutional Interstate Commerce Clause that prevents interference in interstate commerce of goods and services including nuclear waste. Thus the individual nuclear waste compacts strictly limit nuclear waste shipments to the states that are members of each specific compact. As initially configured, the Texas/Vermont Radioactive Compact Commission included only nuclear waste generated in Vermont and Texas. However, the gubernatorial appointed commission voted on January 4, 2011 to open up to out-of-compact radioactive waste generators by a vote of 5-2. The two Vermont commissioners, who were appointed by Governor Jim Douglas, voted in support of this move that opens the WCS Texas Waste Disposal Site to 36 more states.

Vermonters should be concerned about the Texas Compact for several key reasons:

1. The Texas Compact has no staff and no operating funds. A volunteer staffer who recently moved to Colorado processes most of the information. As of 12-2010, the commissioners, who draw no salary, are only paid travel expenses.
2. The Compact has no legal staff to advise it regarding the ramifications of decisions that are currently being made as well as to assure that current decisions meet Vermont Statute.
3. Fairewinds believes the Texas-Vermont Compact should develop a paid staff to oversee the activities of its contractor, Waste Control Specialists.

Waste Control Specialists (WCS) the company that anticipates receiving final approval to run the Texas/Vermont nuclear waste dump, has staff and funding and thus creates most of the public information. After receiving a disposal license with more than 90-unresolved-conditions, WSC approached the Compact Commission to change its bylaws to set up a system that would accept radioactive waste from additional nuclear waste generators in addition to nuclear waste from Texas and Vermont. Although barrels of radioactive waste have begun being shipped to Texas, the site itself will not officially open until the end of 2011. The Texas Compact Commission voted affirmatively on January 4, 2011 to facilitate the import radioactive nuclear waste generated outside of the compact to the Texas facility. At present there are eight Compact Commissioners, six from Texas and two from Vermont appointed by each state's governor. In the January 4, 2011 vote, three Texas Commissioners and both Vermont representatives voted to support allowing additional States to dispose their nuclear waste in Texas. Voting was 5 to 2 in favor of having other States gain access to the WCS nuclear dump space, with Vermont voting with the majority, and two Texas Commissioners remaining opposed to allowing other States to use the facility.

By voting to publish the proposed import rule in December 2010 in the Federal Register and approve the import rule in January 2011, the Vermont Commissioners have taken a major, potentially irreversible step that Fairewinds Associates believes risks Vermont's disposal capacity. In the years to come there is no guarantee that Vermont's two commissioners will have any sympathetic Texas commissioners to help limit incoming out-of compact waste, therefore limiting Vermont's access to adequate nuclear waste storage. While the provisions in the rule allegedly preserve capacity for Vermont Yankee and Vermont's other nuclear waste generators, like hospitals, these numbers are very speculative because they are based upon 5-year estimated figures provided by the waste dump host WCS. Indeed, Vermont may ultimately find itself dependent upon WCS achieving expanded storage capacity, which is by no means assured. In fact, WCS is still awaiting approval of a 4,000-page amendment to its original license as one of many outstanding conditions that must be met prior to its creation of permanent on site waste storage.

Litigation on the existing site still continues as this report is being written. The Sierra Club appealed in State Court the denial by the Texas Commission on Environmental Quality (TCEQ) for a contested case hearing. Fairewinds Associates therefore notes the potential uncertainty of expanding the current site when the original license for which WCS applied is not yet functional. Fairewinds Associates believes that the Compact commission should be assured of viable disposal capacity for Texas and Vermont prior to setting up procedures to bring in out-of- compact waste. Furthermore, the Compact rules say no foreign waste may be imported to the Texas site, but some radioactive waste processors in Tennessee have begun to take title to European wastes they are processing. Processors in Tennessee are planning to import waste from Italy and Germany and from all over Europe via a German nuclear broker, and it appears that Texas is now the likely final resting place for this waste. Fairewinds Associates' concern remains one of adequate space for Vermont's nuclear waste generators due to the permitted radiation value of the waste being imported.

Texas Commissioner Robert Gregory expressed his concern over the organization of the Texas waste compact as quoted in Vermont Digger (12/1/10).

Fairewinds believes that opening the Texas site to the rest of the nation's and possibly international nuclear waste may not be in the best interests of Vermont for the following reasons:

1. The TCEQ License limits Low Level Radioactive Waste (LLRW) disposal at WCS to 2,310,000 cubic feet of radioactive waste. Vermont is allocated 20% (~462,000 cubic feet) of the total amount Texas disposes over the operational period of the disposal site. Decommissioning Vermont Yankee may create more than this amount of waste. If a decommissioning approach is used at Vermont Yankee that similar to the one currently being applied to decommission the Zion Illinois nuclear plant in Illinois, the net effect is that decommissioning costs may drop significantly while the radioactive waste volume (amount of space needed) would become notably larger. Until Vermont Yankee is fully dismantled, it is unknown if Vermont may have any reserve space to give away to other States.
2. The Texas Commission on Environmental Quality (TCEQ) License limits Low Level Radioactive Waste (LLRW) storage at Waste Control Specialists (WCS) nuclear dump to 3,900,000 curies.

2.1	Prior to July 2008, the Barnwell, SC LLRW storage site accepted waste from all over the U.S., but now it only accepts waste from the Atlantic Compact States of Connecticut, New Jersey, and South Carolina.
2.2	The only other site open to accepting waste from throughout the U.S. is the Energy Solutions site, located in Clive, UT, but Energy Solutions is only licensed by the State of Utah for Class A waste.
2.3	Thus, WCS is now the only offsite facility available for storage of Class B and C waste, and that radioactivity limit could be exceeded in just a few years by the Class B and C waste that is being generated by Vermont and Texas facilities without added the waste from all the other States with no place to put their radioactive waste.
2.4	"Radioactive Waste: In general, radioactive waste classes are based on the waste's origin, not on the physical and chemical properties of the waste that could determine its safe management. Other categories of radioactive waste not listed here include mixed waste and NARM wastes (Naturally-Occurring and Accelerator-Produced Radioactive Materials). One common factor for all categories of nuclear waste is the presence of at least some amount of long-lived radionuclides.[5]

2.4.1.1.	On average, Class A is the least hazardous while GTCC is the most hazardous.
2.4.1.2.	Class A On average the least radioactive of the four LLW classes. Primarily contaminated with "short-lived" radionuclides. (average concentration: 0.1 curies/cubic foot)
2.4.1.3.	Class B May be contaminated with a greater amount of "short-lived" radionuclides than Class A. (average concentration: 2 curies/cubic foot)
2.4.1.4.	Class C May be contaminated with greater amounts of long-lived and short-lived radionuclides than Class A or B. (average concentration: 7 curies/cubic foot)
2.4.1.5.	GTCC Most radioactive of the low-level classes. (average concentration: 300 to 2,500 curies/cubic foot) (The 300 figure is based on the 1985 inventory. The higher figure represents anticipated inventory in 2020, including some decommissioning wastes.)"




3. Dr. Arjun Makhijani, nuclear engineer and president of the Institute for Energy and Environmental Research (IEER), evaluated the amounts of Class B and C Low Level Radioactive Waste (LLRW) sent for disposal from nuclear generators located in states that have no disposal path. He applied past data as posted on the Department Of Energy's (DOE) Manifest Information Management System (MIMS) website that allows computation of data for specific sites, volumes and radioactivity as well as specific compacts.

Fairewinds Associates asked for months: Why rush to allow other States to use land that Vermont may need to dismantle Vermont Yankee? If Vermont Yankee did not use it's allotted space after the plant is decommissioned, then it would be appropriate to allow other States access to the Texas facility. Or if WCS is licensed for much more additional land and a compact agreement was forged assuring that Vermont would have more than adequate waste disposal space, it might be possible to sign such an agreement as long as it also indemnifies Vermont from nuclear waste litigation forged by other states or parties against WCS. However, it remains Fairewinds' opinion that until a decommissioning approach is chosen and an accurate assessment of waste is calculated that includes soil contamination from the recent AOG leak, it was extremely unwise to allow other States to use land that may be required to decommission and dismantle Vermont Yankee.