Standby Support for Certain Nuclear Plant Delays

Note: EPA no longer updates this information, but it may be useful as a reference or resource.

[Federal Register: August 11, 2006 (Volume 71, Number 155)]
[Rules and Regulations]
[Page 46305-46333]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11au06-17]
[[Page 46306]]

-----------------------------------------------------------------------

DEPARTMENT OF ENERGY
10 CFR Part 950
RIN 1901-AB17

AGENCY: Department of Energy.
ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Department of Energy (Department) is adopting, with
changes, the interim final rule published on May 15, 2006. This interim
final rule established a new part to implement section 638 of the
Energy Policy Act of 2005, which authorizes the Secretary of Energy to
enter into Standby Support Contracts with sponsors of advanced nuclear
power facilities to provide risk insurance for certain delays
attributed to the regulatory process or litigation.

DATES: Effective Date: This final rule will become effective on
September 11, 2006, except for Sec. Sec. 950.10(b), 950.12(a) and
950.23 which contain information collection requirements that have not
been approved by the Office of Management and Budget (OMB). The
Department of Energy will publish a document in the Federal Register
announcing the effective date of those sections.

FOR FURTHER INFORMATION CONTACT: Kenneth Chuck Wade, Project Manager,
Office of Nuclear Energy, NE-30, U.S. Department of Energy, 1000
Independence Avenue, SW, Washington DC 20585, (301) 903-6509; or Marvin
Shaw, Attorney-Advisor, U.S. Department of Energy, Office of the
General Counsel, GC-52, 1000 Independence Avenue, SW., Washington, DC
20585, (202) 586-2906.

SUPPLEMENTARY INFORMATION:
I. Section 638 of the Energy Policy Act of 2005
II. Rulemaking History
III. Final Rule
A. Overview of the Rule
B. Section-by-Section Analysis
C. Cost Analysis of Standby Support Program
IV. Regulatory Review Requirements
A. Review Under Executive Order 12866
B. Review Under Executive Order 12988
C. Review Under Executive Order 13132
D. Review Under Executive Order 13175
E. Review Under the Regulatory Flexibility Act
F. Review Under the Paperwork Reduction Act
G. Review Under the National Environmental Policy Act
H. Review Under the Unfunded Mandates Reform Act
I. Review Under Executive Order 13211
J. Review Under the Treasury and General Government
Appropriations Act 1999
K. Review Under the Treasury and General Government
Appropriations Act 2001
L. Congressional Notification
V. Approval of the Office of Secretary

I. Section 638 of the Energy Policy Act of 2005

On August 8, 2005, President Bush signed into law the Energy Policy
Act of 2005 (the Act) (Pub. L. 109-58, 119 Stat. 594). Section 638 of
the Act addresses the President's proposal to reduce uncertainty in the
licensing of advanced nuclear facilities. (42 U.S.C. 16014). The
purpose of section 638 is to facilitate the construction and full power
operation of new advanced nuclear facilities by providing risk
insurance for such projects. Such insurance is intended to reduce
certain regulatory and litigation risks for sponsors that are beyond
their control in order to encourage investment in the construction of
new advanced nuclear facilities. By providing insurance to cover
certain of these risks, the Federal government can reduce the financial
risk to project sponsors that invest in advanced nuclear facilities,
which the Administration and Congress believe are necessary to promote
a more diverse and secure supply of energy for the Nation.
Section 638 contains a number of provisions to establish the
Standby Support Program (the ``Program''). These provisions are related
to (1) the Secretary's authority to enter into contracts and details
related to such contracts, (2) the establishment of funding accounts,
(3) the funding of these accounts, (4) the types of regulatory and
litigation delays Congress determined were to be covered by the
Program, (5) the types of delays that Congress determined were to be
excluded from coverage, (6) the maximum amount of coverage available
for up to six advanced nuclear facilities with a distinction made for
the initial two reactors and the subsequent four reactors, (7) the
types of costs to be covered by the Program, (8) the requirements for a
sponsor of an advanced nuclear facility, and (9) reporting requirements
by the Nuclear Regulatory Commission (``Commission'').
Section 638(g) requires the Department to issue regulations to
carry out section 638. This section directs the Secretary to issue an
interim final rule within 270 days after enactment of the Act and to
adopt final regulations within one year after enactment.

II. Rulemaking History

Prior to developing and issuing this final rule, the Department
held a public workshop and published two Federal Register notices: a
Notice of Inquiry (NOI) (70 FR 71107, November 25, 2005) and an interim
final rule (71 FR 28200, May 15, 2006).
The NOI discussed the major topics related to section 638,
including the types of sponsors and facilities covered, the Secretary's
contracting authority, appropriations and funding accounts, covered and
excluded delays, covered costs and requirements, and disagreements and
dispute resolution. The NOI included a general request for comments and
identified certain topics on which the Department specifically
requested comments. Among other matters, the Department sought comment
about how the statute could be implemented most effectively to achieve
the objective of reducing the risks associated with certain delays in
the advanced nuclear facility licensing process and thereby facilitate
the expeditious construction and operation of new advanced nuclear
facilities.
On December 15, 2005, the Department sponsored a public workshop to
allow the public to provide oral comments about section 638 and the
NOI. Over 60 people attended the public workshop. A transcript of the
proceedings is posted at http://www.nuclear.gov. The Department received nine
written comments on the NOI, including comments from the Commission, a
nuclear energy trade association, several utilities and other potential
sponsors, an economic consulting firm, and a public advocacy group. In
addition to responding to the questions posed in the NOI, the
commenters provided their general views on implementing section 638.
On May 6, 2006, the Department issued an interim final rule that
established a new part 950 in Title 10 of the Code of Federal
Regulations (CFR), Standby Support for Certain Nuclear Plant Delays.
The rule includes five subparts that set forth the procedures,
requirements and limitations for the award and administration of
Standby Support Contracts that indemnify a project sponsor of certain
costs that may be incurred due to a delay in full power operation of
the sponsor's advanced nuclear facility.
Subpart A set forth the purpose, scope and applicability, and
definitions of the regulation. Subpart B set forth provisions
addressing the Standby Support Contract process, including the process
whereby a sponsor and the Program Administrator\1\ enter into a

[[Page 46307]]

Conditional Agreement prior to a Standby Support Contract, obligations
of a sponsor prior to entering into a Conditional Agreement, the
provisions of that Conditional Agreement, conditions precedent that
must be satisfied prior to entering into a Standby Support Contract,
funding issues related to the Standby Support Program, reconciliation
of costs, and termination of a Conditional Agreement. Subpart B also
addressed the provisions for each Standby Support Contract. These
include general contract terms, such as the contract's purpose, the
advanced nuclear facility that is the subject of the contract, the
sponsor's contribution, the maximum aggregate compensation, the term of
the contract, cancellation provisions, termination by sponsor,
assignment, claims administration, and dispute resolution; and specific
contract terms that implement section 638's provisions related to
covered events, exclusions, covered delay, and covered costs. Subpart C
set forth the claims administration process, including the submission
of claims and payment of covered costs under a Standby Support
Contract. Subpart D set forth provisions related to dispute resolution,
including disputes involving covered events and disputes involving
covered costs. In each case, subpart D provided a two-step process,
first requiring non-binding mediation and then binding arbitration, if
the parties cannot reach agreement. Subpart E set forth miscellaneous
provisions about the Department's authority to monitor and audit a
sponsor's activities and the public disclosure of information provided
by a sponsor to the Department.
---------------------------------------------------------------------------

\1\ In this notice of final rulemaking, the Department
distinguishes among the terms ``Program Administrator,'' ``Claims
Administrator,'' and ``Department.'' ``Program Administrator'' is
used to identify situations in which a Department representative
executes a Conditional Agreement or a Standby Support Contract;
``Claim Administrator'' is used to identify situations in which a
Department representative administers the claims process; and
``Department'' is used to identify general statements of policy and
situations involving more general matters such as funding and
appropriations.
---------------------------------------------------------------------------

The Department received four written comments addressing the
interim final rule, including comments from a nuclear industry trade
association, two utilities, and a public advocacy group. In telephone
communications and a meeting, interested persons provided verbal
communications to Department representatives that addressed the same
issues raised in written comments on the interim final rule. The
Department responds to all the relevant comments in section III of the
preamble to this final rule.

III. Final Rule

A. Overview

In today's final rule, the Department has largely adopted the
provisions set forth in the interim final rule. The revised 10 CFR part
950 adopted by this final rule will become effective thirty days after
the final rule's publication in the Federal Register. The changes
between the interim final rule and the final rule will not have any
effect, given that the Department anticipates that no sponsor will
apply for a combined license until after the final rule takes effect
later in 2006. In addition to some editorial and other non-substantive
changes that modify and clarify the interim final rule, particularly in
subparts C and D, the Department is making the following changes including:
? In section 950.3, the definition for ``litigation'' has
been modified to include ``local courts;'' (See also 950.14(a)(4))
? In section 950.3, the definition for ``pre-operational
hearing'' has been modified to state ``any Commission hearing, that is
provided for in 10 CFR part 52, after issuance of the combined license
that is provided for in 10 CFR part 52;'' (See also 950.14(a)(3))
? In section 950.11(b), the following clarifying sentence
has been added: ``A sponsor may elect to allocate 100 percent of the
coverage to either the Program Account or the Grant Account.''
? In section 950.11(c)(1), the following clarifying sentence
has been added with respect to funding: ``Covered costs paid through
the Program Account are backed by the full faith and credit of the
United States;''
? In section 950.11(e), the provision addressing the process
by which the anticipated contributions are specified in the Conditional
Agreement has been clarified;
? In section 950.12(c), the provision on limitations to
entering into a Standby Support Contract has been modified;
? In section 950.12(d), the following section has been added
with respect to abandonment of a project and cancellation by the
Department: ``(1) If the Program Administrator cancels a Standby
Support Contract for abandonment pursuant to 950.13(f)(1), the Program
Administrator may re-execute a Standby Support Contract with a sponsor
other than a sponsor or that sponsor's assignee with whom the
Department had a cancelled contract, provided that any such replacement
Standby Support Contract is executed in accordance with the terms and
conditions set forth in this part, and shall be deemed to be one of the
subsequent four reactors under this part. (2) Not more than two Standby
Support Contracts may be re-executed in situations involving
abandonment and cancellation by the Program Administrator.''
? In section 950.13(f), the following has been added with
respect to cancellation of a Standby Support Contract: ``(1) If the
sponsor abandons construction, and the abandonment is not caused by a
covered event or force majeure, the Program Administrator may cancel
the Standby Support Contract by giving written notice thereof to the
sponsor and the parties have no further rights or obligations under the
contract.''
? In section 950.13(h), the following has been added with
respect to assignment of payments: ``The Program Administrator shall
permit the assignment of payment of covered costs with prior written
notice to the Department.''
? In section 950.13(k), the following has been added with
respect to reestimation under the Federal Credit Reform Act (FCRA) of
1990: ``The sponsor is neither responsible for any increase in loan
costs, nor entitled to recoup fees for any decrease in loan costs,
resulting from the re-estimation conducted pursuant to FCRA.''
? In section 950.14(b), certain types of excluded events
have been deleted.
? In section 950.14, an additional section, 950.14(e), has
been added to address adjustments to the inspections, tests, analysis
and acceptance criteria (ITAAC) schedule.
? In section 950.20, the following has been added with
respect to exclusions: ``the Department is required to establish an
exclusion in accordance with 950.14(b).''
? Sections 950.21, 950.22, and 950.24 have been modified to
add information reporting requirements and to clarify the Department's
role in establishing an exclusion.
? Subpart D has been revised to specify that dispute resolution will
be administered by the Civilian Board of Contract Appeals.
The preamble first provides a section-by-section response to the
specific comments on the interim final rule and explains modifications
from the interim final rule to the final rule. The preamble then
provides a detailed discussion of the Standby Support Program's
estimated costs.
B. Section-by-Section Analysis

Section 950.1--Purpose

In section 950.1 of the interim final rule, the Department stated
that ``The

[[Page 46308]]

purpose of this part is to facilitate the construction and full power
operation of new advanced nuclear facilities by providing risk
insurance for certain delays attributed to the Nuclear Regulatory
Commission regulatory process or to litigation.''
The public advocacy group commented that the Department should
avoid using taxpayer funds to provide an expensive subsidy to the
nuclear industry. Industry commenters stated that they believe the
program should provide broad coverage and financial certainty.
The Department notes that Congress specifically authorized the
Standby Support Program and provided explicit direction on calculating
the premium for the insurance and allocating this premium between
appropriated funds and funds from sponsors or other non-Federal
sources. The Department has sought to ensure that, in implementing this
authorization and direction, it put in place a Program that facilitates
the construction and full power operation of new advanced nuclear
facilities, protects taxpayer funds, reflects both the magnitude of the
risk presented and the protection provided against that risk, and
avoids undermining the safety of constructing advanced nuclear
facilities. The Department continues to believe that the regulations
developed by the Department are appropriate and necessary to effectuate
section 638's objectives.
Multiple Incentive Programs
The Department requested comment on whether sponsors should be
eligible to participate in multiple Federal Government loan guarantee
or other programs intended to incentivize the construction and
operation of nuclear facilities and, if so, whether clarification is
needed on issues such as the amounts an entity can receive under more
than one Federal program.
In response to the interim final rule, industry commenters stated
that participation in the different programs established under the Act
should not limit a project sponsor's eligibility for any of these
programs, or the amounts that a sponsor can receive under them.
Industry commenters stated that the objective of these incentives is to
facilitate and encourage the construction and full power operation of
new advanced nuclear facilities and that the programs are
complementary, not exclusive. For example, commenters stated that the
cost of any loan guarantee should be adjusted downward to reflect the
reduced risk of default on the underlying debt obligation as a result
of the Standby Support Program. The public advocacy group stated that
the nuclear industry includes some of the country's wealthiest
companies and should not be eligible for numerous subsidies for the
same plant.
The Department has determined that the Act does not prohibit a
sponsor from acquiring for a specific facility more than one, or even
all, of the various forms of incentives provided under the Act.
Therefore, in this final rule, the Department is not prohibiting a
sponsor from being eligible for all of the incentive programs for which
the Act makes it eligible.
Section 950.3--Definitions
Advanced nuclear facility. In the notice of interim final
rulemaking, the Department took the definition of ``advanced nuclear
facility'' verbatim from the Act. The Department further noted that
there are likely no reactor designs that have been approved after
December 31, 1993 that are ``substantially similar'' to designs that
were certified before that date for which potential project sponsors
have suggested interest. Nevertheless, the Department reserved the
right to make a final determination if a project sponsor chooses a
design that the Department has not anticipated.
The Department received two comments addressing this issue. The
public advocacy group stated that companies should not be encouraged to
apply for design certification at the same time as a combined license.
In contrast, the industry trade association generally agreed with the
definition in the interim final rule, yet requested that the Department
clarify the use of the word ``approved,'' particularly with respect to
what constitutes design approval. Industry further stated that under
the Commission's rules in 10 CFR part 52, Commission design approval
may be obtained in two ways. The design may be certified in a
rulemaking proceeding, or the design may be approved in the combined
licensing proceeding itself. The trade association stated that the Act
does not address these two paths to design approval, and requested that
the final rule state explicitly that either path to design approval is
acceptable under the rule.
The Department agrees with the trade association's comment that the
pathway for approval is subject to the Commission's rules under 10 CFR
part 52, and that design approval may be obtained by either path.
Nevertheless, the Department has determined that there is no reason to
amplify or alter the statutorily specified definition. Consistent with
section 638, the definition at section 950.3 states that an advanced
nuclear facility must be approved by the Commission and makes no
distinction as to when or how such approval is issued other then what
is stated in section 638 (i.e., ``the approval is made after December
31, 1993.'') Although the Department agrees that sponsors should be
encouraged to obtain design approval prior to filing a combined license
application with the Commission, thereby expediting the combined
license review process, such a stringent requirement is not mandated by
the Act and is not necessary to support the purposes of the Standby
Support Program.
Covered Event--Litigation. Section 638(c)(1)(B) refers to
``litigation that delays the commencement of full-power operations * *
* '' In the interim final rule, the Department defined litigation to
include only adjudication in State, federal, or tribal courts,
including appeals of Commission decisions related to the combined
license to such courts, and excluding administrative litigation that
occurs at the Commission related to the combined license process. (See
also section 950.14(a)(4) which addresses covered events.)
The Department received divergent comments on the definition of
litigation. The public advocacy group expressed concern that the
definition for litigation was overly expansive, claiming that it should
cover only frivolous lawsuits; on the other hand, industry commenters
believed it was not expansive enough. The public advocacy group
disagreed with including in the definition appeals of Commission
decisions to the courts and in including litigation involving safety or
security issues. The industry commenters requested that administrative
litigation that occurs at the Commission related to the combined
license should not be excluded from the definition. The industry trade
association stated that Congress did not intend to condition the
coverage based on the type of litigation causing the delay or when such
delay occurs. Further, the industry commenters objected to the
Department's interpretation that only litigation resulting in a court
order enjoining the sponsor's actions would be eligible as a covered delay.
As explained in the interim final rule, the Department has broad
authority to interpret the terms in section 638, including the terms
``litigation'' and ``pre-operational hearing.'' After reviewing the
comments in light of section 638, the Department has determined that it
is appropriate to adopt the definition in the interim final, except for
minor changes as discussed below.

[[Page 46309]]

Section 638(c) sets forth three types of events for coverage, which
Congress terms ``Inclusions.'' These are (1) ITAAC-related delays, (2)
pre-operational hearings, and (3) litigation. Based on this statutory
delineation, the Department has determined that most of the requested
changes to the definition set forth in the interim rule would be
inappropriate and inconsistent with section 638. With respect to the
public advocacy groups' request to include only frivolous lawsuits and
to exclude appeals of Commission decisions to the courts, the
Department has determined that such an interpretation would be
inconsistent with the reference in section 638(c)(1)(B), without
qualifications, to litigation that delays commencement of full power
operation of the advanced nuclear facility. Obviously, litigation that
is not ``frivolous'' has the potential to delay full operation of a
facility. Moreover, what constitutes a ``frivolous'' lawsuit can itself
be a question involving substantial uncertainty and the Department
believes it would be counter to the purposes of section 638 to import
this uncertainty into the Standby Support Program.
With respect to industry's specific requests, the Department has
determined that most of them would likewise be inconsistent with the
reference in section 638(c)(1)(B). Even if one assumes that the term
``litigation'' is ambiguous, the Department has determined that as a
matter of policy, industry's suggested expansions of the term
litigation are inappropriate, except for including litigation in local
courts. Industry requested that the Department expand the definition of
``litigation'' to include any administrative litigation that occurs at
the Commission related to the combined licensing process, and
arbitration proceedings and orders. The Department reaffirms its
previous determination that since section 638(c)(1)(A) covers the risk
of pre-operational hearings and Commission review of ITAACs, the
reference in section 638(c)(1)(B) to litigation should be interpreted
to mean litigation outside the context of the Commission proceeding on
the combined license. For the Department to adopt the industry's
recommendation to interpret the term ``litigation'' even more broadly
would effectively nullify these distinctions and undermine
Congressional intent. The industry's recommended broad interpretation
also likely would increase the risk that a covered event would occur
and the insurance be triggered, thereby increasing (perhaps
substantially) the premium for the risk insurance. The Department has
determined that the better approach is to define each covered delay
clearly and distinctly recognizing section 638's structure which
delineates only certain delays that are eligible for cost recovery by
categories, i.e., ITAAC-related delays, pre-operational hearings, and
litigation.
With respect to the exclusionary language for administrative
litigation at the Commission that is in the definition of litigation,
this language is intended to clearly distinguish between proceedings
that are conducted before the Commission from litigation that is
conducted before a court of law. The Department could remove the
exclusion language from the definition of litigation, but the effect
would be the same. That is, a sponsor could be covered for delays
associated with litigation that occurs in a court of law outside the
context of the Commission, e.g., in state, federal, tribal or local
courts. This definition of litigation precludes coverage for any form
of proceeding that occurs before the Commission, whether or not the
exclusion is expressly stated in the definition. Accordingly, the
Department has determined that it would be inappropriate and
unnecessary to remove the exclusion for other administrative litigation
at the Commission.
Furthermore, the Department notes that by defining litigation to
include only litigation in the courts, it is also excluding
administrative litigation at federal or state agencies other than the
Commission. As explained above, the Department interprets the Act to
provide coverage for specific events. Even though proceedings at other
federal or state agencies may be referred to as ``administrative
litigation'' and may affect the sponsor's ability to construct or
operate an advanced nuclear facility, the Department does not believe
the language of the Act is properly interpreted to include those
proceedings within the definition of litigation. Such an interpretation
requested by the commenters would significantly expand the definition
of litigation beyond the Act's objectives. As a consequence, it would
also increase the cost of the risk insurance program. The Department
notes, however, that such administrative proceedings may lead to court
litigation and, as such, coverage for delays may be possible under the
Standby Support Contract.
Similarly, the Department has determined that it would be
inappropriate to expand the term litigation to cover ``arbitration''
which is defined as ``a method of dispute resolution involving one or
more neutral third parties who are usually agreed to by the disputing
parties and whose decision is binding.'' Black's Law Dictionary Eighth
Edition (2004). It is generally understood that such dispute resolution
is outside of litigation and the court system. The Department's
exclusion of arbitration from the definition of litigation is not
intended to discourage parties from alternative forms of dispute
resolution. Rather, the Department recognizes the value of arbitration,
either to avoid litigation or as a mechanism to end litigation in court
(in which case the arbitration would be encompassed by the litigation
giving rise to the arbitration and thus, as a practical matter, would
be covered), but believes that it is an overly broad view of the term
litigation not within the coverage of section 638. The Department also
notes that making the term more expansive would result in increased
cost of the risk insurance and the program.
Covered events--Pre-operational Hearings. In the interim final
rule, the Department defined pre-operational hearing to mean ``a
hearing held pursuant to the Commission's regulation in 10 CFR
52.103.'' In the preamble of the interim final rule, the Department
stated that it would be inappropriate and unnecessary to broaden the
term to include all hearings taking place prior to operation or fuel load.
The industry trade association expressed its view that Congress did
not intend to limit this coverage to only the hearing provided for in
10 CFR 52.103, but to any other hearings the Commission holds with
respect to the part 52 licensing procedure and any Commission appeals
or remands associated with the hearing. The industry trade association
provided the example of hearings that may be requested, pursuant to 10
CFR 52.97, in the event a sponsor makes modifications, additions, or
deletions to the combined license. It further stated that such a
limitation would be contrary to Congress's intent to provide protection
from delays resulting from the untested licensing process, and to
remove this regulatory uncertainty as a barrier to the development of
new nuclear power plants.
Based on further review, the Department has determined that it is
appropriate to provide coverage for other types of Commission pre-
operational hearings that occur after issuance of a combined license
that are directly related to the part 52 proceeding on the combined
license and are so referenced in the regulation. For

[[Page 46310]]

example, the Department notes that under part 52, the Commission
addresses the situation where, prior to fuel load or initial
operations, a party may petition to modify the terms or conditions of
the combined license and in so doing may invoke procedures for a non-
mandatory hearing. Thus, an expansion of the definition of pre-
operational hearing to include such hearings is consistent with the
language in section 638(c)(1). It is also consistent with the
distinction in that section to provide coverage for two separate
events: pre-operational hearings by the Commission and litigation.
Based on these considerations, the Department has revised the
definition for pre-operational hearing to state ``any hearing held by
the Commission after issuance of the combined license that is provided
for by part 52.''
However, the Department has determined that the Act's language
should not be interpreted so broadly as to categorically include in the
definition of pre-operational hearings any and all Commission appeals
or remands associated with the hearing. The Act defines a covered delay
as ``the conduct of pre-operational hearings by the Commission.'' Like
the term litigation, the term pre-operational hearing is subject to
interpretation. The Department has determined that as a matter of
policy, the industry's suggested expansion of this definition is
inappropriate. The Department recognizes that the outcome of a
Commission hearing may result in additional proceedings, such as
appeals and remands, which may in turn cause a delay in construction or
operations. A similar outcome is also possible in the context of
litigation. Nevertheless, the Department does not believe it is
appropriate or necessary to define the terms pre-operational hearings
or litigation to necessarily include those additional proceedings.
Rather, the Department believes that it is appropriate to determine
through the claims administration process whether based on the facts of
the case any ensuing proceedings are part of, or the same as, the pre-
operational hearing or litigation that is a covered event. The
Department notes that such additional proceedings may fall within the
category of an excluded event, e.g., events within the control of the
sponsor.
Full power operation. In the interim final rule, the Department
defined ``full power operation'' to mean the point at which the sponsor
first synchronizes the advanced nuclear facility to the electrical
grid. This is typically at a power level in the range of 10 to 25 percent.
Industry commenters stated that definition fails to recognize
adequately that full-scale commercial operation could be delayed by
judicial or administrative proceedings even after a new plant has
reached 10-25 percent power levels. Industry commenters argued that
what they viewed as by narrowly defining the term, the Department is
attempting to shift that risk back to sponsors and their investors and
lenders, which they viewed as impermissible. The industry trade
association recommended that the definition of ``full-power operation''
include two triggers: (1) Power output level at or near 100 percent of
its nameplate capacity and (2) the completion and resolution of any
pending or ongoing hearings or litigation.
As explained in the interim final, the Department has determined
that it has broad authority to interpret the terms in section 638,
especially undefined terms such as ``full power operation.'' The
Department concludes that the definition of full power operation in the
interim final rule is appropriate, given that initial synchronization
to the electric grid provides a clear, unambiguous point in time at
which a new nuclear facility would have the ability to generate
revenue. The Department views the industry's recommendation for power
output at or near 100 percent as far too open-ended, given that a
sponsor could make a business or operational decision to operate a
facility at a level of less than 100 percent for a very long time or
even permanently; there is no good reason why such a situation should
result in long-term or permanent coverage for the reactor under the
Program. The Department agrees that the sponsor should be eligible to
submit claims for covered events prior to the resolution of pending or
ongoing hearings or litigation, so long as full power operation has not
commenced. Accordingly, the resolution of any pending or ongoing
hearings or litigation is confined to those events that happen prior to
first grid synchronization. Based on this analysis, the Department has
determined that it would be inappropriate to modify the definition for
full power operation.
Incremental Costs. In the interim final rule, the Department
specified that ``incremental costs'' mean the incremental difference
between: (1) The fair market price of power purchased to meet the
contractual supply agreements that would have been met by the advanced
nuclear facility but for a covered delay; and (2) the contractual price
of power from the advanced nuclear facility subject to the delay.
The Department received two comments addressing this issue. The
industry trade association commented that the concept of incremental
costs is applicable to new nuclear power plants constructed as merchant
power generators. However, it stated that a nuclear plant built by a
regulated utility as part of its rate base may not have a contract to
sell the output from the facility because the plant's output becomes
part of general system supply. The trade association commented that if
the nuclear plant start is delayed, a regulated utility may have to
purchase power from the market to cover needs, or it may be able to
supply that shortfall from general system supply. If it does purchase
power, the provisions related to fair market price at section
950.25(2)(i) would apply. However, if the utility does not purchase
replacement power from the market, the commenter requested that the
regulations provide an alternative means to calculate the fair market
price for covering demand from within its system.
The public advocacy group stated that the term ``fair market price
of power'' needs further clarification within the regulations.
Specifically, it requested that the Department make a distinction
between ``merchant power plants,'' which are only selling into the
``market,'' and power plants that are in a utility's ``rate base'' and
selling to retail customers under state regulation.
The Department has determined that it is neither necessary nor
appropriate to create an alternative cost recovery mechanism for a
sponsor that does not contract for replacement power from the market.
Section 638 provided clear directions for mitigating a sponsor's delay
cost for debt and contractual supply agreements. By allowing a sponsor
to mitigate its cost of delay through one or both mechanisms, the
Department believes that cost mitigation has been addressed for the
scenarios highlighted by industry. In addition, the Department believes
that the definition of ``fair market price'' stated in the interim
final rule is sufficient and addresses potential gaming scenarios,
given that the determination of the fair market price is the lower of
two options: (A) The actual cost of the short-term supply contract for
replacement power, purchased by the sponsor, during the period of
delay, or (B) for each day of replacement power by its day-ahead
weighted average index price in $/MWh at the hub geographically nearest
to the advanced nuclear facility as posted on the previous day by the
Intercontinental

[[Page 46311]]

Exchange (ICE) or an alternate electronic marketplace deemed reliable
by the Department.
Sponsor. In the interim final rule, the Department defined
``sponsor'' to mean any person that has ``applied for'' a combined
license and such application by the person has been docketed by the
Commission. The Department believed that such a definition was
necessary to ensure that an application was sufficient for docketing by
the Commission.
The nuclear trade association requested that the term sponsor be
expanded to address situations in which several entities apply for a
combined license. Specifically, it requested that the term ``sponsor''
be defined in section 950.3 of the regulation to mean

``a person or persons whose application for a combined license
for an advanced nuclear facility has been docketed by the
Commission. Multiple applicants involved in the same advanced
nuclear facility are considered a single sponsor. Where multiple
applicants are involved, the applicant for authority to operate the
advanced nuclear facility is designated the lead sponsor and acts as
the sponsor for purposes of these regulations. The lead sponsor is
responsible to the Department for providing information, making or
receiving notices, and administering claims on behalf of the
applicants. Applicants having an ownership share in the advanced
nuclear facility share in the benefits and obligations of the
Standby Support Agreement in pro rata proportion to their NRC
licensed ownership in the advanced nuclear facility.''

The Department generally agrees with the goal of the comment that
multiple sponsors should define their relationships and obligations.
Nevertheless, the Department believes that it is inappropriate and
unnecessary to specify by regulation such an arrangement, particularly
since the term ``sponsor'' is expressly defined in section 638, and a
sponsor or sponsors that have made such arrangements would qualify for
coverage under the existing definition. The Department further notes
that if such a definition were imposed by regulation, it would reduce
the flexibility among potential sponsors. Accordingly, the Department
has decided not to amend the definition for ``sponsor'' in section 950.3.

Subpart B--Standby Support Contract Process

Sections 950.10--Conditional Agreement

Section 638(b) authorizes the Secretary to enter into Standby
Support Contracts with sponsors of advanced nuclear facilities. That
subsection requires that sufficient funding be placed in designated
Departmental accounts before a Standby Support Contract may be
executed. In the interim final rule, the Department adopted a two-step
process in which a Conditional Agreement can, for the qualifying
sponsors, be converted into a Standby Support Contract at a later date,
if the sponsor meets certain conditions and budgetary resources are
provided. The Department noted that it has significant discretion to
establish the procedures needed to manage the Standby Support Program,
provided that they are consistent with section 638.
Industry commenters generally agreed with the two-step approach. In
contrast, the public advocacy group asserted it was unnecessary and
inappropriate. The Department continues to believe that such a two-step
implementation process is appropriate because it allows the Department
and potential sponsors to manage the difficult timing issues inherent
in the federal appropriations process and business concerns in planning
and financing a multi-billion dollar advanced nuclear facility.
In section 950.10(b)(1)-(5), the Department requires a sponsor to
provide certain information to be eligible to enter into a Conditional
Agreement. This includes an electronic copy of its complete combined
license application docketed by the Commission, a summary schedule of
the project, a detailed business plan, the sponsor's estimate of the
amount and timing of payments for debt service and the estimated dollar
amount to be allocated to the sponsor's covered costs.
The nuclear trade association stated that it was inappropriate for
the Department to request what it termed project specific background
information, claiming that this information had little or no bearing on
calculating the budget score under FCRA.
The Department has determined that to ensure appropriate regulatory
oversight of the Standby Support Program, it is necessary for the
Department to request the information set forth in section
950.10(b)(1)-(5). Insurers of large construction projects typically
obtain such information to establish due diligence. Absent such
oversight, the Department would not be adequately fulfilling its
responsibilities for overseeing a program with such potentially large
payouts, particularly its responsibility to facilitate the full power
operation of advanced nuclear facilities and to protect taxpayer funds.
In addition, this information, along with other information, will
assist the Department in determining the necessary amount of funding
for a potential Standby Support Contract with the sponsor. Lastly, the
Department believes that this information will assist the Department in
refining estimated cash flows payouts in the event a claim is submitted
and in estimating the full power operation schedules.
National Environmental Policy Act (NEPA)
In section 950.10(c), the Department set forth the bases upon which
it will determine whether to enter into a Conditional Agreement. In the
interim final rule, the Department noted that it will determine whether
the Conditional Agreement may be issued consistent with applicable
statutes or regulations, including the National Environmental Policy
Act (NEPA). The Department anticipates that its environmental review
under NEPA for the Conditional Agreement or Standby Support Contract
would acknowledge or be based upon the NEPA review conducted by the
Commission in relation to its review and approval of the sponsor's
combined license application.
The industry commented that it generally supported the Department's
position about NEPA review in the interim final rule. Nevertheless, it
expressed concern that the Commission's NEPA review is likely to occur
during the Commission's review of the combined license application, and
therefore it is unlikely that a Commission NEPA review would have
occurred at the time of the Conditional Agreement. Accordingly, it
urges the Department to make a determination that entering into a
Conditional Agreement is not a major federal action and does not
trigger NEPA.
The Department believes that it is unlikely that a Commission NEPA
review would have occurred at the time a Conditional Agreement is
issued, and generally agrees that entering into a Conditional Agreement
would not be a major federal action. The Department notes that prior to
issuance of a combined license, which is a prerequisite for the
Department to execute a Standby Support Contract, the Commission would
have to complete its NEPA review of the proposed advanced nuclear facility.

Section 950.11 Terms and Conditions of the Conditional Agreement

In the interim final rule, the Department stated that a sponsor
should know its funding needs prior to execution of the Standby Support
Contract, and included sections 950.11 (b), (c) and (d) in the
regulations to reflect the need for specificity, transparency and
accuracy on funding of Standby Support Contracts prior to

[[Page 46312]]

execution. In particular, section 950.11(b) required each Conditional
Agreement to include a provision specifying the amount of coverage to
be allocated under the Program Account and Grant Accounts.
Industry commenters stated that the rule should explicitly indicate
that a sponsor is not obligated to allocate coverage between the
Program Account and Grant Account and may elect to allocate 100 percent
of the coverage to either the Program Account or Grant Account.
The Department believes that the interim final rule permitted such
an allocation of coverage, but agrees with the commenter that it would
be appropriate to expressly state this in the regulatory text.
Accordingly, the Department today amends section 950.11(b) to state
that ``a sponsor may elect to allocate 100 percent of the coverage to
either the Program Account or the Grant Account.'' The Department notes
that industry made an identical comment with respect to 950.11(c)(1).
950.11(c) Funding
In section 950.11(c) of the interim final rule, the Department
specified that each Conditional Agreement contain a provision that the
Program Account or the Grant Account be funded in advance of the
Department entering into a Standby Support Contract. After explaining
the funding of these accounts under FCRA, the Department further
explained in the preamble that it was within the Department's
discretion to interpret section 638 as authorizing and providing that
Standby Support Contracts are backed by the full faith and credit of
the United States, even though section 638 did not include that precise
phrase.
The industry group requested that the regulatory text include an
unequivocal statement that payment of costs covered under the Program
Account is backed by the full faith and credit of the United States. It
argued that such a statement in the regulation was necessary for
financing purposes.
The Department has modified section 950.11(c) to state that
``Covered costs paid through the Program Account are backed by the full
faith and credit of the United States.'' The Department notes that it
is making this modification to facilitate financing of advanced nuclear
facilities, even though such an express statement is not actually required.
Also in section 950.11(c), the Department specifically addressed
how the Standby Support Contracts will be funded. Among other things,
that section states ``[u]nder no circumstances will the amount of the
coverage for payments of principal and (sic) interest under a Standby
Support Contract exceed 80 percent of the total of the financing
guaranteed under that Contract.''
The industry trade association objected to the provision
prohibiting payments to exceed 80 percent of the total financing. It
expressed its view that this provision reflects the Office of
Management and Budget (OMB) guidance in OMB Circular A-129, but that
this guidance is merely ``discretionary.'' The commenter further stated
that the Department's inclusion of this provision reflected ``chronic
confusion in the May 15 Rule over whether the Standby Support Program
Account is delay insurance or a loan guarantee program.''
The commenter is correct that this provision reflects the policy
set forth in OMB Circular A-129, which provides guidance for all
government programs covered by FCRA. The same policy that informed the
80 percent threshold in OMB Circular A-129 also informs the
Department's determination and judgment that this threshold is
appropriate for the Standby Support Program. Moreover, as noted in the
preamble to the interim final rule, the Department views the coverage
provided through the Program Account to be a loan guarantee for
purposes of FCRA and thus backed by the full faith and credit of the
United States; and therefore governed by the terms of Circular A-129.
Insofar as the Department uses this analysis to explain why it is
appropriate and permissible to extend the full faith and credit of the
United States even though those words are not used in section 638, the
Department believes it should be consistent with other policies
applicable to implementing loan guarantee authorities, where appropriate.
950.11(d) Reconciliation
In section 950.11(d), the Department specified that ``Each
Conditional Agreement shall include a provision that the sponsor shall
provide no later than ninety (90) days prior to execution of a Standby
Support Contract sufficient information for the Program Administrator
to recalculate the loan costs and the incremental costs associated with
the advanced nuclear facility, taking into account whether the
sponsor's advanced nuclear facility is one of the initial two reactors
or the subsequent four reactors.''
The industry trade association objected to this provision, claiming
that the concept of re-calculating the loan cost was inappropriate. It
requested that the Department and OMB establish a procedure through
which the loan cost and insurance premium are fixed at the time of the
Conditional Agreement consistent with FCRA. The commenter further
recommended that any increase in loan cost come from permanent
indefinite budget authority.
The Department has determined that cost reassessment is consistent
with other programs that employ a two-step process for approval. The
Department further notes that the government would be remiss in its
duty to taxpayers if it did not reassess the costs, given that several
years typically will elapse between signing a Conditional Agreement and
a Standby Support Contract. Failure to make such a reassessment would
not be consistent with FCRA and sound financial management practices.
The Department further notes that the permanent indefinite budget
authority is available only for reestimates of the loan cost covered by
an existing Standby Support Contract, not for changes in cost prior to
the execution of the Standby Support Contract. Once the Standby Support
Contract has been executed, any re-estimation costs would be covered
from the Treasury's permanent indefinite budget authority consistent
with FCRA.
Limitations
In section 950.11(e) of the interim final rule, the Department
specified situations in which the Conditional Agreement should no
longer remain in effect. Specifically, if the amount of appropriated
funds is not sufficient to fund the statutorily required costs, the
sponsor was given the option to either (1) not execute a Standby
Support Contract or (2) provide additional contributions to fund the
total amount of coverage in either the Program Account, Grant Account,
or both accounts as specified in the Conditional Agreement. The
Department believed that these provisions take into account the change
in circumstances that may occur between the time of the Conditional
Agreement and the Standby Support Contract. The provision also provided
a sponsor the option either to enter into a contract or forego that
opportunity.
The industry trade association commented that in addition to the
two options set forth in section 950.11(e), the sponsor should be given
two more options: First, to hold open its right to execute a Standby
Support Contract until such time as appropriated funds become
available, either through the normal appropriations process or through
reprogramming. Second, the trade association requested that a

[[Page 46313]]

sponsor should be entitled to elect a reduced level of coverage.
The Department has determined that the first option would reduce
flexibility in executing a Standby Support Contract and administering
the Standby Support Program. The Department believes that it would be
counter to the goal of facilitating full power operation of advanced
nuclear facilities to permit a sponsor to hold a contract while waiting
for funds that Congress may never appropriate, particularly since a
different sponsor may be willing to pay the cost and initiate
construction of an advanced nuclear facility.
The Department has determined that the second option is consistent
with the goal of facilitating full power operation, and that this goal
can be achieved at a lower cost to the government. The Department has
modified section 950.11(e)(2) to provide the sponsor with the option to
elect a reduced level of coverage based on the amounts deposited in the
Program Account and Grant Account. However, to protect the Department
from any potential claims by a sponsor for the maximum amount of
coverage available under section 638, the Department has also added
language to this section to make it clear that the Department is not
responsible or liable for any claims by the sponsor for additional
coverage.
950.11(f) Termination of Conditional Agreement
In section 950.11(f) of the interim final rule, the Department set
forth five situations in which a Conditional Agreement remains in
effect until a certain event. For instance, 950.11(f)(4) stated that
event was when ``The Program Administrator has entered into Standby
Support Contracts that cover three different reactor designs, and the
Conditional Agreement is for an advanced nuclear facility of a
different reactor design than those covered under existing Standby
Support Contracts; and 950.11(f)(5) stated ``The Program Administrator
has entered into six Standby Support Contracts.''
The industry trade association stated that it generally had no
objection to section 950.11(f), but that the situations under clauses
(4) and (5) should accommodate the circumstances where an existing
Standby Support Contract is terminated or cancelled. The commenter
requested that these two provisions be modified with the phrase ``such
Standby Support Contracts have expired in accordance with the stated
term thereof pursuant to 10 CFR 950.13(e).''
The Department has concluded that it would be inappropriate to add
this language to the regulations as suggested by the commenters.
Nevertheless, as discussed further in relation to section 950.12(d)
there are limited circumstances under which the Department would
consider re-executing a Standby Support Contract; in such
circumstances, not more than two Standby Support Contracts may be re-
executed by the Program Administrator in situations involving
abandonment and cancellation. In addition, in those limited
circumstances and conditions, a sponsor or sponsors would be in a
position to initiate the process under these regulations of executing a
Conditional Agreement and becoming eligible for a Standby Support Contract.

Sections 950.12, 950.13 and 950.14--Standby Support Contract

In the interim final rule, the Department noted that it is
sufficient to include the critical contract terms in a regulation
rather than provide a sample contract. The Department stated that a
sample contract was not necessary, given that a sponsor could
appropriately evaluate the potential contract's effect on risk
allocation and financing during the pre-contract discussions set forth
in sections 950.10 and 950.11.
The industry trade association agreed with the Department that it
is not necessary to provide a sample contract in the regulation;
nevertheless, it requested that the Department expeditiously develop a
standardized contract with formal stakeholder input. One utility
favored including a contract in the regulation.
The Department has determined that it is not necessary to include a
Standby Support Contract in the regulation for the reasons set forth in
the interim final rule. After completing the rulemaking, the Department
intends to develop a Standby Support Contract form consistent with 10
CFR part 950 and will consider whether to provide for public input.

Section 950.12--Standby Support Contract Conditions

Conditions Precedent
In section 950.12(a) of the interim final rule, the Department set
forth nine conditions precedent that a sponsor must fulfill to be
eligible to enter into a Standby Support Contract. Among these
conditions that a sponsor must fulfill are ``[d]ocumented coverage of
required insurance for the project'' (950.12(a)(5)), and ``a detailed
systems-level construction schedule that includes a schedule
identifying projected dates of construction, testing and full power
operation of the advanced nuclear facility and which the Department
will evaluate and approve.'' (950.12(a)(8)).
The industry trade association agreed that seven of the nine
conditions precedent were appropriate. It nevertheless requested that
the Department delete condition (5) related to documentation of
required insurance coverage, claiming that such documentation is not
relevant to Standby Support for covered delays. Similarly, the trade
association requested that the Department delete condition (8) related
to the systems-level construction schedule, claiming that this
information is unnecessary to the Standby Support Program. It claimed
that the Department's request for this information ``represents an
unnecessary interjection of the Department into the construction
process'' given that the construction schedule will be determined
between sponsors, their contractors, and their lenders. The industry
further requested that the Department should not evaluate or approve
the construction schedule.
The Department has determined that to protect taxpayer funds and to
ensure an appropriate level of regulatory oversight for a program with
such potentially large payouts, it is appropriate to obtain the
insurance information set forth in condition (5) and the construction
schedule set forth in condition (8). The Department notes that both
types of information are readily available to a sponsor, given that the
sponsor must have this information to obtain financing from a lender
and a combined license from the Commission. With respect to the
construction schedule, this information has direct relevance to the
timing of possible claims, e.g., projected timing of full-power
operation. Consequently, this information is necessary for the
effective administration of the Standby Support Contract even if, and
particularly because, it is subject to change. Nevertheless, the
Department agrees that it is not necessary for the Department to
approve the construction schedule and thus has deleted this term in
section 950.12(a). Further, the Department has revised condition (5) to
state ``[d]ocumented coverage of insurance required for the project by
the Commission and lenders.''
Funding and Limitations
In section 950.12(b) of the interim final rule, the Department
specified that no later than thirty days prior to execution of the
Standby Support Contract, funds in an amount sufficient to fully cover
the loan costs or incremental costs as specified in the

[[Page 46314]]

Conditional Agreement shall be deposited in the Program Account or the
Grant Account. The purpose of this provision is to ensure that the
administration and funding of the Standby Support Program occurs in an
efficient and orderly manner.
The industry trade association objected to the requirement that the
funds need to be deposited 30 days in advance of the contract's
execution. It requested that a sponsor be able to meet this condition
simultaneous with closing on the financing.
The Department is required by section 638 to deposit the necessary
funds in the Program Account or Grant Account before a contract is
executed. While the Department appreciates the fact that a sponsor's
financing arrangements may be complicated and a simultaneous closing
would be desirable, the Department requires a certain amount of time
prior to contract execution to ensure compliance with the requirements
of the Act and coordination of the Department's administrative
functions. Accordingly, the 30 day time period specified in the interim
final rule is appropriate and necessary.
Cancellation by Abandonment
In its comments, the trade industry recommended the Department
allow for Standby Support Contracts to ``roll over'' as an added
incentive to advanced nuclear facility construction. In section 950.12
of the final rule, the Department has added a provision to address the
situation where a sponsor may abandon a project and the Department may
determine it is appropriate and consistent with the goal of the Standby
Support Program to re-execute a contract. In accordance with this goal,
any new contract under this provision would be deemed to replace a
previously executed contract and therefore not exceed the mandate to
facilitate the construction and operation of six new advanced nuclear
reactor facilities.
Specifically, section 950.12(d) provides for the re-execution of a
Standby Support Contract under certain conditions of abandonment
pursuant to section 950.13(f)(1). The Department anticipates that
situations involving abandonment are likely to be rare or non-existent
given that a sponsor will have expended millions of dollars and cleared
most of the regulatory and litigation hurdles once it has executed a
Standby Support Contract and commenced construction. The Department has
included language indicating that cancellation of a Standby Support
Contract as a result of a sponsor's abandonment permits the Program
Administrator to re-execute not more than two new Standby Support
Contracts, provided that the new contract is executed in accordance
with the terms and conditions of part 950 and such contracts are deemed
to be one of the subsequent four reactors under part 950. That is, any
new contract under this provision would be deemed to replace one of the
subsequent four reactors, and thus would be eligible for coverage in
the amounts provided for such reactors.

Section 950.13--Standby Support Contract: General Provisions

In section 950.13 of the interim final rule, the Department
specified that each Standby Support Contract include provisions
addressing basic contract terms, including the contract's purpose,
covered facility, sponsor contribution, maximum aggregate compensation,
the term, cancellation, termination by a sponsor, assignment, claims
administration, and dispute resolution.
The industry group stated that it had no objection to most of these
provisions, but nevertheless provided comment on four of these
provisions: the cancellation provisions in (f), termination in (g),
assignment in (h), and re-estimation in (k).
Cancellation
In section 950.13(f)(2), the Department set forth the bases upon
which a Standby Support contract can be cancelled by stating that if a
sponsor does not require continuing coverage under the contract that
the sponsor may cancel the contract by giving written notice to the
Program Administrator.
Industry commenters stated that they had no objection to section
950.13(f)(2); however, they commented that the Standby Support coverage
should explicitly provide that in the event of cancellation by the
Department, the sponsor, or as agreed by the parties, the Standby
Support coverage should ``roll over'' both in terms of (1) making
available the full 100 percent coverage to the first of the second four
reactors in the event the contract that was cancelled was one of the
first two contracts and (ii) making available a Standby Support
Contract to the next project sponsor with a Conditional Agreement in
the queue. (The commenter was of the mistaken belief that a potential
sponsor that entered into a Conditional Agreement would have a higher
priority in a ``queue;'' in fact, the Department is not creating a
``queue'' under the regulations.)
The Department has determined that Section 638(d) should be
interpreted as not permitting a process that would allow a sponsor to
cancel its contracts thereby allowing the contracts to ``roll over'' to
a sponsor with an existing contract. This process could potentially
create a total of six ``premium'' contracts (i.e., contracts with
coverage up to $500 million) going beyond the Act's cost and coverage
limitation for the initial two reactors and subsequent four reactors.
In addition, the purpose of risk insurance is to provide an incentive
for sponsors to construct and operate new advanced nuclear power
facilities. Once the Department and a sponsor have entered into a
Standby Support Contract, the Department believes that it has provided
the appropriate level of incentive and the proper amount of coverage.
Accordingly, no additional coverage is needed, because a sponsor had
decided to construct a new advanced nuclear facility.
However, the Department has determined that there could be
situations where a sponsor is unwilling or unable to continue with the
construction of a new nuclear plant and the Department may have to
terminate the contract. In those instances, it may be prudent for the
Department to re-execute a contract and it would be consistent with
section 638 and its objectives for the Department to do so. Section
950.13(f) is modified to provide for the situation in which the Program
Administrator may cancel a contract for abandonment of the project by
the sponsor, where such abandonment is not caused by a covered event or
force majeure.
Termination by Sponsor
Under section 950.13(g), if a sponsor elects to terminate a Standby
Support Contract, the sponsor or any related party is prohibited from
entering into another Standby Support Contract. The Department stated
that such a provision is necessary to prohibit potential sponsors from
``gaming'' the Standby Support Program. Specifically, a sponsor could
be on the verge of full power operation of an advanced nuclear
facility, without the need to make any claims on the Standby Support
Program. Absent this provision, the sponsor could terminate its initial
Standby Support Contract and then enter into a new contract for a
different facility.
The industry trade association objected to this provision, claiming
that it is overbroad and may, among other things, penalize sponsors who
own partial interests in different projects. The industry requested
that the Department either delete 950.13(g) or limit the prohibition to
situations in which a ``sponsor elects to terminate its

[[Page 46315]]

Standby Support Contract unless the sponsor has suspended, cancelled or
terminated construction of the reactor covered by such contract.''
The Department has determined that it would be appropriate to
modify section 950.13(g) to include the commenters requested limitation
as modified; i.e., ``sponsor elects to terminate its Standby Support
Contract unless the sponsor has cancelled or terminated construction of
the reactor covered by such contract.'' The Department did not include
a provision where the sponsor may merely ``suspend'' construction as
that situation does not avoid possible ``gaming'' of the system by a
sponsor. By adding the additional language as stated, the Department
believes that the regulations provide the appropriate balance between
preventing a sponsor from ``gaming'' the Program, while allowing a
sponsor to cancel or terminate a no longer viable Standby Support
Contract. The Department notes that the Department and taxpayer funds
are sufficiently protected, in a situation in which the entire reactor
project is terminated.
Assignment
In section 950.13(h) of the interim final rule, the Department
required each Standby Support Contract to include a provision
specifying the assignment of a sponsor's rights and obligations under
the Standby Support Contract. Specifically, this provision stated that
the sponsor is permitted to assign the rights under the contract with
the Secretary's prior approval. The sponsor must obtain this approval,
in writing, prior to assigning such rights.
The industry trade association commented that the assignment
provision should address two types of assignment: (1) Assignment of
payments, and (2) assignment of the Standby Support Contract. As for
the assignment of payments, it recommended that each Standby Support
Contract allow the assignment of covered costs to the lenders of the
project with notice, but without prior Department consent. The
commenter claimed that assignment of payment is a necessary condition
of debt financing. As for the assignment of the contract itself,
including the rights and obligations under the contract, the industry
trade association commented that the Standby Support Contract should be
assignable without the requirement of prior Department consent to any
license transferee approved by the Commission.
The Department has determined that the assignment of payments,
without the Department's prior consent, is appropriate and consistent
with standard financing arrangements for construction projects. The
final rule is modified to permit an assignment of payments with prior
notice to the Department to facilitate contract administration.
However, the Department has determined that to ensure proper regulatory
oversight, it is necessary for the Department to retain the provision
requiring prior approval of any rights and obligations under the
Standby Support Contract. The Department anticipates that it will
consent to any license transferee approved by the Commission, but is
not prepared at this point to abdicate to the Commission this
responsibility under a program administered by the Department.
Reestimation
In section 950.13(k) of the interim final rule, the Department
required each Standby Support Contract to include a provision
specifying that consistent with FCRA, the sponsor provide all needed
documentation to allow the Department to annually re-estimate the loan
cost (as defined by FCRA) needed in the financing account under 2
U.S.C. 661a(7) funded by the Program Account.
The industry trade association did not object to the Department re-
estimating the loan cost of the Standby Support Contract on an annual
basis consistent with FCRA once the contract has been executed.
However, the commenter requested that this provision should expressly
state that any increase in loan cost resulting from the re-estimation
shall be covered from the permanent indefinite budget authority that is
available for this purpose. Under FCRA, any increase in loan costs
resulting from the re-estimation would be covered by the Treasury
general fund through permanent indefinite budget authority; similarly,
any decrease in loan costs resulting from re-estimation would be paid
to the Treasury general fund. To address any uncertainty, however, this
section is modified to state that any changes in loan costs resulting
from the re-estimation are neither the responsibility of, nor an
entitlement to the sponsor.

Section 950.14--Covered Events, Exclusions, Covered Delay, and Covered
Costs

In section 950.14 of the interim final rule, the Department set
forth provisions related to situations in which the Secretary will pay
``covered costs.'' Among the situations expressly set forth in section
638(c)(1) are: (A) ``the failure of the Commission to comply with
schedules for review and approval of inspections, tests, analyses, and
acceptance criteria [ITAAC]
established under the combined license or
the conduct of preoperational hearings by the Commission. * * *'' or
(B) ``litigation that delays the commencement of full-power operations.
* * *''
Covered Events
In section 950.14(a) of the interim final rule, the Department
explained that it is necessary to add the term ``covered event'' to
reflect that not all events appearing to fall under section 638(c)(1)
will warrant compensation. Compensation is dependent on whether a
covered event in fact leads to a delay in full power operation. For
instance, there may be a delay in the Commission staff's meeting the
ITAAC review schedule for an individual ITAAC, but the delay does not
actually cause a delay in full power operation, because other factors
may have caused the delay. In addition, there may be a delay in meeting
the ITAAC review schedule but the ITAAC-related delay may have no
actual effect on a facility obtaining full power operation. The same
may be true for delays attributable to a pre-operational hearing or
litigation. A discussion relating to the pre-operational hearing and
litigation are addressed in the definition section of this preamble.
ITAAC Delays.
In section 950.14(a)(1) of the interim final rule, the Department
required each Standby Support Contract to include a provision setting
forth a two-tier level of review for assessing whether an ITAAC-related
delay should be considered a covered event.
In its comments, the industry trade association agreed with the
two-tier approach for assessing whether an ITAAC-related delay should
be considered a covered event. It further commented that the final rule
should outline a process for the adjustment of the ITAAC review
schedule, to which both parties must agree. The commenter then stated
the ITAAC review schedule should not be changed without express
approval by both the sponsor and the Department. In addition, it stated
that the last agreed-upon ITAAC review schedule would remain in place
and be used to determine covered events, until an updated schedule was
established.
The Department agrees with the comment about the ITAAC review
schedules. An additional section has been added to section 950.14
(950.14(e)) to address the process for adjustments to the ITAAC schedule.

[[Page 46316]]

Exclusions--Burden of Proof
Section 638(c)(2) expressly precludes the Secretary from paying
costs resulting from three general causes: ``(A) the failure of the
sponsor to take any action required by law or regulation; (B) events
within the control of the sponsor; or (C) normal business risks.''
In section 950.14(b)(2) of the interim final rule, the Department
set forth a non-exhaustive set of example exclusions, including
situations involving the sponsor's failure to take action required by
law or regulation, situations within the control of a sponsor, and
normal business risks.
In addition to comments about specific exclusions listed in
950.14(b), the industry trade association provided general comments
about causation and burden of proof. Specifically, the trade
association stated that consistent with insurance law, it should be the
responsibility of the Department to establish whether an exclusion is
applicable to a given situation. It further recommended a specific
regulatory provision to address causation. The commenter stated that
clear standards and proper allocation will simplify contract
administration, facilitate claims determinations, and minimize disputes.
The Department generally agrees with the comment recommending that
the regulation more precisely address causation and burden of proof.
With respect to establishing an exclusion, the industry trade
association is correct that an insurer is typically responsible for
establishing an exclusion. (See 7 Couch on Insurance 101:63 (3rd ed.
2005) which states ``[i]n keeping with the general rules of proof, any
causation required to bring a loss within positive coverage terms of
the [insurance]
policy generally must be shown by the insured or person
seeking coverage, while the insurer bears the burden of showing any
causation necessary to bring the case within an exclusion for
coverage.'') In recognition of this general standard applicable to
insurance contracts, the Department is modifying section 950.20 as a
matter of policy to provide that ``[a]
sponsor is required to establish
that there is a covered event, a covered delay and a covered cost; the
Department is required to establish an exclusion in accordance with
950.14(b).''
Further, sections 950.21, 950.22 and 950.24 are also modified to
clarify the Department's role in establishing an exclusion. The
modifications in these sections clarify that the Department's role in
establishing an exclusion is conditioned on the sponsor's cooperation
in providing information to the Department. To insure the Department's
ability to establish an exclusion is not unreasonably hampered by the
sponsor, the Department is modifying section 950.22 to require the
sponsor to provide to the Department information in its possession that
is relevant to the Department's claim of an exclusion. For example, in
the case where the Department claims a delay is an exclusion because it
was ``within the sponsor's control,'' the Department may require the
sponsor--the party likely in possession of the best available
information--to provide relevant information to the Department in
support of its claim for exclusion. Failure of a sponsor to provide the
necessary and relevant information to the Department would be grounds
for denial of the sponsor's claim for coverage. In addition, the
Department is modifying section 950.21(b) to add a clause requiring the
sponsor to certify their claim for covered costs, as well as certify
the absence of an exclusion.
Exclusions
In section 950.14(b) of the interim final rule, the Department sets
forth the statutory exclusions and provides examples of excluded events
as requested by commenters in response to the NOI and public workshop.
The Department has modified this section to clarify that the Standby
Support Contracts shall include the statutory exclusions and, within
those exclusions, provide example types of events that may constitute
an exclusion. The industry trade association had no objection to most
of the examples listed, but objected to certain provisions, including
clauses (1)(ii), 1(iii) and (2)(iii) that state, respectively:
(1)''The failure of the sponsor to take any action required by law,
regulation, or ordinance, but not limited to * * * (ii) The sponsor's
re-performance of any inspections, tests, analyses or re-demonstration
that acceptance criteria have been met due to Commission non-acceptance
of the sponsor's submitted results of inspections, tests, analyses, and
demonstration of acceptance criteria; [or]
(iii) Delays attributable to the sponsor's actions to redress any
deficiencies in inspections, tests, analyses or acceptance criteria as
a result of a Commission disapproval of fuel loading.''
The commenter stated that leaving these items as examples of
excluded events could result in excluding coverage where the sponsor's
actions may result from the Commission's failure to comply with the
ITAAC schedule or other fault of the Commission, such as an inspector's
non acceptance of ITAAC or an unwarranted Commission determination of
deficiency. The commenter requested that the Department remove these
items from the regulation, because they should be left to the claims
administration process and not be a categorical exclusion.
The Department has determined that most of the examples provided of
excluded types of events are appropriate as stated in the rule and that
providing such examples is not an improper incursion into the claims
administration process. The Department agrees with the comment that the
claims administration process is the appropriate venue to assess the
specific facts of a sponsor's claim of a covered event and the Claims
Administrator's determination of an exclusion. The examples provided in
the regulation are meant to provide guidance for the parties in that
process; the judgment of the Claims Administrator on a particular claim
necessarily will be based on the facts that underlie the claim.
The examples provided in subsection 950.14(b)(1) and (2) are
consistent with the language and intent of the Act. The intent of
section 638 is to provide coverage to a sponsor for specified events in
the untested regulatory process that are not the result of the
sponsor's failure to comply with laws and regulations or are beyond the
sponsor's control. If a sponsor has not met its ITAAC, as determined by
the Commission, and needs additional time to satisfy the Commission's
expectations, then that delay is not covered under section 683 and no
further inquiry is needed into whether or not the Commission's finding
was ``warranted.'' Although not a stated example in the rule, the same
reasoning would apply to any delay associated with a sponsor's need to
redress some noncompliance with a law or regulation as determined by a
court. Accordingly, the Department will not modify the rule to delete
the examples provided of the type of events that may be exclusions.
The industry trade association also objected to the type of event
in clause (3)(iv) which provides an exclusion for ``[n]ormal business
risks, including but not limited to * * * (iv) Acts or decisions,
including the failure to act or decide, of any person, group,
organization, or government body (excluding those acts or decisions or
failure to act or decide by the Commission that are covered events).''
The trade association requested that this clause be deleted, claiming
that it was overly broad.
This clause is patterned after provisions in standard insurance

[[Page 46317]]

contracts covering the construction of large facilities. The Department
continues to believe that it is necessary to continue its reference to
acts or decisions by other government bodies like State and local
governments, since such actions would be normal business risks faced by
an entity constructing a large facility and go beyond the intended
coverage under section 638 for Commission-related delays, even though
they may be within coverage for litigation-related delays. To
reiterate, however, this event is identified as an example of an event
that would constitute a normal business risk to provide guidance to the
parties. The ultimate determination of whether an event constitutes an
exclusion in the context of a Standby Support Contract will be
addressed through the claims administration process. Nevertheless, upon
further review, the Department has determined that by including
reference to ``any person, group or organization,'' the clause was overly
broad. Accordingly, this provision is modified to delete that reference.
The industry trade association also objected to clause (3)(viii)
which includes an exclusion for ``unrealistic and overly ambitious
schedules set by the sponsor.'' It claimed that this exclusion was
unnecessary and unwarranted, since it reasoned that this phrase is not
referring to ITAAC schedules since those are approved by the Commission
or Department. Further, it stated that any construction schedule would
be determined by the sponsor and its contractors or lenders. The
commenter concluded that whether a schedule is unrealistic or overly
ambitious is not relevant to whether a covered event occurs.
The Department has determined that the exclusion for unrealistic or
overly ambitious schedules is not appropriate. Any covered events
attributable to ITAAC schedules are already covered under section
950.14(a)(1) and (2). Further, section 950.14(b)(2)(i) more
appropriately addresses project planning and construction problems that
are events within the control of the sponsor. In reconsidering the
exclusion in 950.14(b)(3)(viii), the Department has determined that the
phrase ``unrealistic and overly ambitious schedules set by the
sponsor'' is ambiguous and would be difficult to apply. Accordingly,
the Department has deleted this provision.
Lastly, the industry trade association took exception to the
Department's covered event exclusion in (b)(2)(v) for litigation-
related delays in those situations where a sponsor decides not to
continue construction or attain full power operation unless such action
is required by a court order. The industry trade association noted that
in many cases litigation may cause numerous and substantial delays
without a court order mandating the work stoppage. The industry trade
association argues that the Department improperly categorically
excluded such delays, and should allow the claims process to be used to
determine whether or not the delay is covered.
The Department agrees that the exclusion language in the interim
rule may be misinterpreted, and modified the rule to eliminate this
type of exclusion and avoid unnecessary confusion. Nevertheless, the
Department stresses that elimination of this provision does not relieve
the sponsor of its substantial burden to prove that any litigation-
related delay is a covered delay, and that the Department will look
critically at a sponsor's claim that litigation without an order to
stop activities was the cause of delay. The Department acknowledges
that, even in the absence of a court order directly prohibiting
construction or operational activities, pending litigation or court
decisions may cause a sponsor to delay or suspend its activities thus
delaying full power operation. However, depending on the nature of the
litigation or court order, the decision whether to continue activities
at risk or halt activities pending the outcome of the litigation is
often a business decision largely within the sponsor's control. The
Department does not believe it is appropriate to shift the burden or
risk entailed in that decision to the standby support insurance
program. Otherwise, the Department would create the perverse incentive
for a sponsor to halt or delay activities unnecessarily because the
costs of that delay would be covered by the insurance contract. On the
other hand, the Department recognizes that in some cases, e.g., where
the sponsor would breach a fiduciary duty if construction or operation
activities are continued or there is an adverse decision against the
Commission, a halt in the sponsor's construction or operations may be
necessary and beyond the sponsor's control. As suggested by the
commenters, the Department believes the appropriate forum to determine
whether or not a litigation-related delay is a covered delay is the
claims administration process.
Due Diligence
Section 638(e) specifies that any Standby Support Contract requires
``the sponsor to use due diligence to shorten, and to end, the delay
covered by the contract.'' Section 950.14(c)(2) requires each Standby
Support Contract to include a provision to require the sponsor to use
due diligence to mitigate, shorten, and end covered delay under the
contract and to demonstrate that to the Program Administrator.
Similarly, section 950.23(b)(2)(iii) requires a sponsor to use due
diligence to mitigate, shorten and end the covered delay and the
associated costs.
The industry trade association commented that the due diligence
requirement is consistent with a party's obligation under general
principles of contract law to mitigate damages. Nevertheless, the
commenter objected that a sponsor must demonstrate due diligence to the
Program Administrator in demonstrating a covered delay. Rather, the
commenter requested that due diligence only be considered when
determining whether covered costs should be limited. This led the
commenter to request deletion of the phrase ``demonstrated this to the
Program Administrator.''
Upon further review, the Department has modified this section to
delete the phrase ``demonstrated this to the Program Administrator.''
Removal of this phrase does not relieve the sponsor of its obligation
under section 638 and part 950 to use due diligence to mitigate,
shorten and end a covered delay. This requirement remains in the rule,
and the sponsor's actions in that regard will be reviewed by the Claims
Administrator in reaching a claim determination on covered costs
pursuant to section 950.24. This allocation of responsibility is
consistent with the plain language of section 638 that ``the sponsor
[is]
to use due diligence to shorten, and to end, the delay covered by
the contract.''
Covered Costs
Section 638(d) provides for the coverage of costs that result from
a delay during construction and in gaining approval for full power
operation, specifically (A) principal or interest and (B) incremental
cost of purchasing power to meet contractual agreements. In the interim
final rule, the Department determined that it is appropriate to limit
the concept of covered costs to those expressly set forth in paragraph
(d)(5). Accordingly, under the Program Account, the Department will
indemnify sponsors for the cost of principal or interest on the debt
obligation for the period or duration of covered delay, less 180 days
for one of the subsequent four reactors.
The public advocacy group agreed with the Department's
determination to limit covered costs to the express terms of section
638. In contrast, industry

[[Page 46318]]

commenters requested that the Department expand coverage to operating
and maintenance costs and other costs associated with delay in
commercial operation, including costs of demobilization and
remobilization, idle time costs incurred in respect of equipment and
labor, increased general and administrative costs, and escalation costs
for the completion of construction. The industry group even commented
that additional costs associated with redesign or alterations should be
covered, to the extent that litigation or changes in regulation
resulted in a redesign.
The Department has determined that, consistent with its broad
authority to interpret the terms ``covered costs'' and ``including'' in
section 638(d)(5), it will limit these terms to the items specifically
set forth in the statute. As the Department concluded in the interim
final rule, it would be inappropriate to expand these terms,
particularly given the statute's plain language and the fact that
providing expanded coverage to a myriad of other costs might serve as a
disincentive to a sponsor to complete a project in a timely fashion.
The commenters provided no new information or justification to support
a potentially dramatic expansion of coverage, which would have the
effect of making the Standby Support Program significantly more
expensive, without increasing the likelihood of meeting the statutory
objectives of section 638, i.e., the expeditious licensing,
construction and full power operation of new nuclear facilities.

Subpart C--Claims Administration Process

Subpart C of the regulation sets forth the procedures and
conditions to be followed by a sponsor for the submission of claims and
the payment of covered costs under a Standby Support Contract.
The industry trade association generally supported the requirement
that a sponsor has the burden of making a good-faith showing of a
covered event, covered delay and covered cost. Further, it generally
supported the two-step process for claims administration. The trade
association made several suggestions related to the wording of Subpart
C, including replacing the term ``appropriate'' with cross-references
to other sections of the rule, suggesting timing changes such as that
the Claims Administrator must ``make a determination on the covered
event within 30 days,'' and several other recommendations that do not
substantively enhance the rule and may serve to limit the Claims
Administrator's ability to effectively administer the claims in a
timely fashion.
The Department has determined that it is appropriate to retain most
of the wording in subpart C of the interim final rule, which is based
in large part on the Department of Treasury's Terrorism Risk Insurance
Program at 31 CFR Part 50 (69 FR 39296, June 29, 2004). The Department
notes that several of the requested changes would result in increased
ambiguity or would not provide greater clarity, and thus would not
serve the Department's goal of an efficient and effective claims
administration process. For instance, the commenter requested deleting
the phrase ``including an assessment of the sponsor's due diligence in
mitigating or ending covered costs,'' in section 950.24(a)(2) as
potentially duplicative or confusing even though this requirement is
expressly set forth in section 638. Accordingly, the Department has
determined that, aside from comments addressed in the next section, it
would be inappropriate to adopt the industry group's other
recommendations related to the claims process.

Burden of Proof on Claims

As discussed in connection with section 950.20, the Department
agrees with the comment from the industry trade association that a
sponsor bears the burden of proof on a covered event, a covered delay
and a covered cost, and the Department bears the burden of proof of an
exclusion from a covered event and whether a purported covered delay is
the result of, or was contributed to, by the exclusion. The rule is
modified in sections 950.20 through 950.24 to codify this expectation.

Determinations by the Claims Administrator

The industry trade association suggested several sections needed
clarification based on their interpretation of the phrase
``appropriate'' in describing the Claims Administrator's determinations
regarding covered events and covered costs. It noted that this language
suggested the Claims Administrator could render a decision based on
subjective factors outside the terms and conditions of the Standby
Support Contract or the rule. This is a misinterpretation of the
regulation's language. Nevertheless, to avoid the misinterpretation
that the Claims Administrator would make determinations based solely on
subjective judgment, subpart C of part 950 is modified in several
places (e.g., 950.24 (a) and (d)) to replace the word ``appropriate''
with ``allowable'' to indicate the objective nature of the Claims
Administrator's cost determinations based on the terms and conditions
of the contract.

Timing of Covered Event Determinations and Payments

The industry trade association commented that notification of a
covered event should be submitted ``no later than'' 30 days after the
end of the covered event, and requested that ``the Department be
willing to accept notice and begin paying claims as covered losses are
incurred, while a covered event is ongoing.'' The rule is modified to
allow notification of a covered event ``no later than'' 30 days after
the end of the covered event. This change appropriately provides
flexibility to the sponsor to submit notification of a covered event to
the Claims Administrator at a time the sponsor deems appropriate,
particularly where a covered event may be protracted. However, the
Department does not believe it is appropriate to change the timing of
the claims process for payment of covered costs. Sections 950.23 and
950.24 address the process and timing of claims for covered costs, and
are premised on the fact that covered costs are not expected to be
incurred until the time the sponsor was scheduled to attain full power
operations. In other words, a covered event that occurs early in
construction (e.g., in the first year of a five year construction
schedule) would not be coincident in time with the obligation of the
sponsor to pay covered costs such as principal or interest, as those
costs would not be incurred until much later in time (e.g., in the
fifth year after construction is complete).
The industry trade association also objected to what it viewed as
an open-ended process in section 950.22(c) for the Claims Administrator
to render a determination on a covered event with the option for the
Administrator to determine that the claim ``requires further
information.'' The Department believes it is important to provide this
flexibility to the Claims Administrator and serves to facilitate a
resolution of any issues between the Claims Administrator and the
sponsor without resort to alternative dispute resolution. Consequently,
the Department is not modifying the rule to address this objection.

[[Page 46319]]

Subpart D--Dispute Resolution Process

Covered Events and Covered Costs Dispute Resolution
In the interim final rule, the Department stated that claims should
be resolved as effectively and efficiently as possible. Subpart D
provides a two step dispute resolution process for resolving claims
that first calls for mediation and then a Summary Binding Decision.
The industry trade association generally agreed with the concept of
dispute resolution through a binding arbitration process as an
appropriate and expeditious method of resolving disputes under the
Standby Support Contract. However, the trade association objected to
the use of the DOE Board of Contract Appeals (DOE Board) as the final
arbiter of disputes, claiming that the Board is not independent from
the Department, it does not have experience with insurance-type
contracts, and it is not an appropriate venue for complex or novel
cases such as a Standby Support Contract. Rather, industry preferred an
independent, third-party arbitration process such as the American
Arbitration Association (AAA) and its rules for commercial arbitration
and expedited proceedings, which it claimed is familiar to industry and
without which the industry stated a sponsor would be reluctant to agree
to binding arbitration without the right of appeal to a court.
In response to the industry trade association's concern over lack
of neutrality, that concern should be obviated with the establishment
of the Civilian Board of Contract Appeals (Civilian Board) (Section 847
of the National Defense Authorization Act of Fiscal Year 2006, 41
U.S.C. 438). Effective January 6, 2007, Congress is establishing in the
General Services Administration a board of contract appeals to be known
as the Civilian Board of Contract Appeals (Civilian Board). The new
Civilian Board will include any full time member of several other
agency board of contract appeals in addition to the disbanded DOE
Board. Thus, any concern that the Civilian Board is not independent of
the Department is unfounded. The Civilian Board will provide a wide
range of expertise from various agencies and departments throughout the
government. It will also assume jurisdiction over any category of laws
or disputes over which an agency board of contract appeals has
jurisdiction. The Department believes that the Civilian Board will have
the independence, expertise, and requisite procedures to ensure a fair
and expeditious process for the resolution of disputes in the context
of Standby Support Contracts. Moreover, the Standby Support Contracts
will be new not only to the Department and the Civilian Board, but also
to industry, the AAA, and any arbitrator. Accordingly, the existing
rules of the AAA for commercial arbitration of complex cases are not
any better suited to adjudication of claims under a Standby Support
Contract than the similar procedures successfully employed by the
Civilian Board to fairly and expeditiously resolve contract disputes
involving the commercial sector and the federal government. The
Department is confident that the Civilian Board and the dispute
resolution procedures it follows are well suited to resolve any issues
arising under the Standby Support Contracts; commenters have not
demonstrated otherwise.
In response to the industry trade association's comment, the rule
is modified in sections 950.31, 950.33 and 950.36 to clarify that the
parties will jointly select the mediator that will preside over
mediation of disputes.

C. Cost Analysis of the Standby Support Program

Industry commenters stated that it was critical for the Department
inform potential sponsors about the cost of the insurance coverage.
These commenters stated the nuclear industry cannot provide a reasoned
determination of the value of the Program and the rule without knowing
what the insurance contracts will cost. Accordingly, they requested the
Department to establish a two-step calculation which they characterized
as workable and credible to investors. Under the first step, the
Department would establish a standard premium for the insurance
contracts based on, and comparable to the premium charged by other
government agencies and the private sector for comparable sovereign
risk insurance. Under the second step, the Department would then
establish a standard ``loan cost'' for the insurance contracts
calculated under FCRA. To the extent the loan cost is higher than the
premium amount, the Department would cover the difference through
appropriations. The industry then stated that the Department ``appears
to be moving in the opposite direction: There is no standard insurance
premium, and the expected sponsor payment appears to be subject to a
case-by-case, contract-by-contract determination dependent largely on
the Department's success in obtaining appropriations.''
Although the Department understands the desire of industry
commenters for certainty and relatively low contributions from
industry, the Department cannot provide a definitive, standard premium
for the six Standby Support Contracts available under section 638, or
to commit to any specified amount of government appropriations that
would be applied toward funding the Standby Support Contracts. The
statutory language of section 638 provides the legal framework within
which the Department must operate in establishing the regulations and
contracts for the Standby Support Program. That framework requires the
Department to calculate the loan costs for each Standby Support
Contract consistent with FCRA, and to deposit amounts equivalent to
that loan cost into the Program Account as a precondition to execution
of a Standby Support Contract. Section 638 dictates that loan costs in
the Program Account are the same as the cost of a loan guarantee under
FCRA. While section 638 provides the possibility for government funding
of a Standby Support Contract through appropriations, it does not
allocate any amount of government appropriations to the contracts and
it does not change existing law that prohibits the Department from
obligating funds where funds are not appropriated for that purpose.
Given this statutory framework, the premium for coverage of
principal or interest costs must be calculated in accordance with FCRA
methodology, and the sponsor must provide the portion of the premium
for which funds have not been appropriated. Thus, the Department cannot
adopt the approach advanced by industry commenters. The Department,
however, has revised the rule to give sponsors the ability to adjust
coverage in accordance with the amount of the premium they are willing
to pay. Specifically, section 950.11 permits a sponsor to specify in
the Conditional Agreement, the amount of premium, (that is, its
contributions to the Program Account and Grant Account) it anticipates
paying when the Standby Support Contract is executed. Notwithstanding
this provision, section 950.12 of the interim final rule required the
sponsor to pay a premium equal to the difference between the amount of
appropriated funds and the amount necessary to fully fund the Program
Account and Grant Account. In the final rule, the Department has
revised section 950.12 to permit a sponsor to pay the anticipated
premium, with the option to pay additional amounts; provided that, if
the combination of appropriated funds and payments from the sponsor is
not sufficient to fully fund the Program

[[Page 46320]]

Account and Grant Account, the amount of coverage under the Standby
Support Contract will be reduced to reflect the amount of funding
deposited in the Accounts should the sponsor elect to enter into the
Standby Support Contract.
In addition, in an effort to provide information now to potential
sponsors about anticipated costs for the Standby Support Contracts, the
Department is providing a description of the methodology it expects to
follow in calculating the loan costs in accordance with FCRA, including
four hypothetical examples of estimated loan costs. The hypothetical
examples are a representative, but not comprehensive, sample of the
project type, financing structure, coverage amount, or other factors
that will inform the Department's loan cost estimates for particular
projects. For each project, the Department will use the project-
specific information provided by the project sponsor to develop an
initial estimate at the time of the Conditional Agreement. Prior to
entering into a Standby Support Contract, the loan cost estimate will
be reevaluated and will determine the loan cost required by the Program
Account in order to execute the Standby Support Contract. Loan costs
are likely to change as the Department refines the assumptions used in
the preliminary analysis and considers the extent to which other risks
need to be taken into account. In particular, the preliminary analysis
does not fully consider situations that may arise if the Commission
does not adopt a realistic schedule for its actions or where there is
an adverse decision that does not necessarily result in a stay, but
nevertheless may provide a legitimate basis for a sponsor to delay
actions. These discussions are detailed in this preamble in the
Regulatory Review Requirements section on Executive Order 12866
(Section IV.A).
For each type of covered event (e.g., Commission delay and
litigation delay), the Department's Program Account cost estimates will
be based on three primary factors: first, the timing and amount of the
debt service covered by the Standby Support Contract; second, the
likelihood that a covered delay occurs; and third, the length of the
covered delays. These factors are likely to vary across projects as
they will likely have different financing structures--for example,
investor-owned utilities, public utilities, cooperatives, or
partnerships reflecting some combination would likely seek capital
through different mechanisms. The risk of a covered event occurring and
the length of the covered event will vary by the type of advanced nuclear
facility, management experience, location, and a host of other factors.
Based on these factors, the Department will estimate cashflows to
and from the government over the expected period of Standby Support
Contract coverage and determine the present value of these expected
cashflows, in accordance with FCRA, to determine the required loan cost.
In evaluating hypothetical examples for a 1,100 MWe reactor, the
Department chose debt-to-equity financing structures of 80:20 and
50:50, which correspond to estimated all-in costs of $2.8 billion and
$2.5 billion, respectively. The hypothetical examples adopt typical
industry debt-to-equity financing structures and assume that the
sponsor elects 100% of coverage through the Program Account. The
Department notes that it is not possible at this time to provide the
actual costs in the rule, given that more specific estimates of loan
costs for individual projects can only be provided in conjunction with
the issuance of a Conditional Agreement, based on the specifics of the
project and coverage. Moreover, final loan costs must account for the
actual terms of the debt to be guaranteed, and will be determined just
prior to the execution of a Standby Support Contract, which is a time
several years in the future.
The Department has determined that it would be inappropriate to
adopt two specific industry recommendations. First, the Department has
determined that it would be inappropriate to rely on the premium
charged by other government agencies and the private sector for
sovereign risk insurance such as OPIC. As explained in the interim
final rule, sovereign risk insurance is significantly different than
the Standby Support Program, given that the sovereign risk insurance
pool is highly diversified both geographically and among projects.
Further, with respect to the calculation methodology, the interim final
rule's preamble discussion stated that ``the cost estimate for the
Program Account will be calculated consistent with FCRA.'' In
reaffirming this approach, the Department emphasizes that section
638(b)(2) expressly references FCRA. The industry's recommended
approach is especially untenable given that OMB requires the FCRA
analysis to be done consistent with OMB guidance in Circular A-11, and
that any Department decision related to loan costs must ultimately be
approved by OMB.
Second, the Department cannot specify in advance the premium to be
paid by the sponsor that will result in full coverage, especially if
the premium is set at an amount less than the amount that must be
deposited into the Program Account and Grant Account. The Department
notes that section 638 prohibits the Department from executing a
Standby Support Contract until the Program Account and Grant Account,
if applicable, are funded. Accordingly, it is impossible to provide
commenters the cost certainty they desire at this time. In addition,
the Department cannot commit to deposit Federal funds in the Program
Account or Grant Account in the absence of appropriations for that purpose.

IV. Regulatory Review Requirements

A. Review Under Executive Order 12866

The Department has determined that today's regulatory action is a
``significant regulatory action'' under Executive Order 12866,
``Regulatory Planning and Review'' (58 FR 51735, October 4, 1993), as
amended by Executive Order 13258 (67 FR 9385, February 26, 2002).
Accordingly, the Department submitted this final to the Office of
Information and Regulatory Affairs of the Office of Management and
Budget, which has completed its review under E.O. 12866.
This discussion assesses the potential costs and benefits of this
rule. This regulation affects only those entities that voluntarily
elect to apply for standby support and are selected to receive such
standby support assistance. It imposes no direct costs on non-
participants. The economic impact of this regulatory action is
difficult to estimate because the exact nature and size of the projects
to be assisted will not be known until specific project applicants come
forward and because of the difficulty in predicting the scope,
frequency or timing of the events that would be subject to payment of
standby support. The Department has completed its analysis of the
annual effect of the rule on the economy and determined that the rule
likely would not have an overall effect on the economy that exceeds
$100 million in any one year, and will therefore not be treated as an
economically significant rulemaking.
In addition to the general effect on the economy, the Department
notes that the rulemaking's direct costs are the amount of funds needed
in the Program Account for the Federal government to extend Standby
Support. For purposes of review under E.O. 12866, this final rule
provides four hypothetical examples that demonstrate the general
methodology used to determine an estimate of the subsidy cost for the
Standby Support Program.

[[Page 46321]]

In the interim final rule, the Department noted the analysis on the
Commission's ITAAC process from the Secretary of Energy Advisory Board,
the Nuclear Energy Task Force (NETF) in July 2004 to ``assess the
issues and determine the key factors that must be addressed if the
Federal government and industry are to commit to the financing,
construction, and deployment of new nuclear power generation plants to
meet the nation's electric power demands in the 21st Century.'' NETF
determined that the ITAAC process and the possibility of a hearing on
satisfaction of the ITAAC ``may'' create regulatory disruption after
substantial funds have been expended. Achieving the purpose of the
revised regulatory process will be thwarted if the Commission does not
keep the ITAAC process focused narrowly on those issues that must be
subject to post-construction verification. NETF concluded that this new
regulatory process which has not been tested in practice, poses a
significant risk factor to generating companies. Similarly, the
Department funded a report which defined critical risks and investment
issues. (Business Case for New Nuclear Power Plants: Bringing Public
and Private Resources Together for Nuclear Energy, July 2002, available
at http://www.nuclear.gov/home/bc/businesscase.html). Its conclusions
were similar to NETF's recommendations in that one of the critical
risks with the construction of new nuclear power plants is the
regulatory risk associated with the ITAAC process.
Congress passed section 638 after issuance of the NETF report. In
so doing, Congress provided direction to the Department on the type of
delays and costs that are to be covered under the Standby Support
Program to facilitate construction and operation of advanced nuclear
facilities. The Department is following the direction provided by
Congress to structure the regulations governing the Standby Support
Program.
The Department anticipates that the Standby Support Program will
facilitate the construction of new nuclear facilities by decreasing the
regulatory and litigation risks related to the combined license
process. The program establishes a maximum of $500 million in insurance
as the limit for each of the first two reactors covered and $250
million for each of the subsequent four reactors. Section 638 also
establishes that the covered costs for principal or interest on the
debt obligation of the advanced nuclear facility (i.e., loan costs) are
to be calculated the same as the cost of a loan guarantee under FCRA
and are to be deposited in the Program Account prior to contract
execution. Under FCRA, the amount of budget authority necessary to
support a Federal credit instrument depends upon the subsidy cost
(i.e., the net present value of the estimated cash flow of payments by
the government to cover the expected value of the principal or interest
on any debt obligation of the owner of an advanced nuclear facility
during covered delay). This subsidy cost reflects the loan costs in the
Program Account, which in turn equates to the ``cost of a loan
guarantee'' under section 502(5)(C) of FCRA. Under the Standby Support
Program and FCRA, the Federal government is not authorized to extend
credit assistance unless it has sufficient funds in the Program Account
either in the form of budget authority or fees charged by the program
to offset any potential losses. The funds deposited in the Program
Account needed for the Standby Support Program will be contributed by
private industry through a risk premium, in whole or in part, depending
on appropriations. Loan costs may not be paid from the proceeds of debt
guaranteed or funded by the Federal government.
Since the passage of the Act, the Department has conducted both
qualitative and quantitative research to support four hypothetical
examples that demonstrate the general methodology used to determine an
estimate for the subsidy cost for the Standby Support Program. The
qualitative research included interviewing experts at private firms and
government agencies and determining the similarities and differences
with their programs and the standby support insurance program. In
particular, the Department met with or interviewed personnel at the
Commission, OPIC, U.S. Export Import Bank, U.S. Department of
Agriculture, and commercial insurers. The additional research included
analyzing the Commission's case history and researching other federal
agency loan programs. The following provides a discussion of the key
assumptions used, risks considered, and the four hypothetical cost
estimates developed by the Department.
Financial Assumptions of the Cost Estimate
The following information summarizes the key assumptions used in
the Department's four hypothetical examples.
The Department reviewed other government insurance or loan programs
to determine their cost structure and applicability to the Standby
Support Program. Following its review, the Department concluded that
the other government programs provide some valuable information but are
sufficiently different from Standby Support that they cannot provide a
direct basis for comparison. For example, the premiums of the OPIC
insurance program are pooled together and if a default occurs, that
pool is used to pay out the damages. This arrangement differs in
critical ways from the Standby Support program. The USDA's Rural
Utility Service Programs make and guarantee loans but the costs depend
substantially on the credit quality of the borrowers. Moreover, the
government has rights to the collateral pledged as part of the loan.
The Standby Support Program does not compare to these other
programs in that: (1) The other programs insure many entities or
individuals; and (2) the other programs evaluate applications and
assess costs in part based on factors different than those present in
this program. In the Standby Support Program, there are a limited
number of applicants to pool premiums and the risks include actions by
the Commission and litigation.
For financing, the Department assumed two different financing
structures: 50:50 debt to equity (50:50 D/E) and 80:20 debt to equity
(80:20 D/E). These two financial structures have been indicated by
industry as the two most probable financing structures for new nuclear
reactors. For each of these D/E structures, two scenarios were
generated, one assuming level debt payments (constant principal and
interest), the other assuming level principal payments (constant
principal). The estimated all-in costs for a 1,100 MWe reactor were
$2.5 billion and $2.8 billion for D/E financing structures of 50:50 and
80:20, respectively. The debt was assumed to have a 20 year
amortization period. Exhibit 1, below, provides a summary of the
financing assumptions used.

[[Page 46322]]

Exhibit 1.--Financing Assumptions for 50:50 D/E and 80:20 D/E Structures
----------------------------------------------------------------------------------------------------------------
Repayment Options Level Debt Payments (Prin. + Int.) Level Principal Payments
----------------------------------------------------------------------------------------------------------------
Debt-to-Equity Financing
Assumptions 50:50 D/E 80:20 D/E 50:50 D/E 80:20 D/E
----------------------------------------------------------------------------------------------------------------
Total All-in Costs.............. $2.5 Billion...... $2.8 Billion...... $2.5 Billion...... $2.8 Billion
Construction Period............. 5 Years after COL. 5 Years after COL. 5 Years after COL. 5 Years after COL
Debt Characteristics:
Amortization Period......... 20 Years.......... 20 Years.......... 20 Years.......... 20 Years
Interest Capitalization Yes............... Yes............... Yes............... Yes
during Construction.
Interest Rate............... 7%................ 8%................ 7%................ 8%
----------------------------------------------------------------------------------------------------------------

Non-Financial Risks Affecting the Cost Estimate
When developing cost estimates, the Department will need to assess
the non-financial risks of the Standby Support Program, which can be
grouped into three categories: (1) Delays from Commission regulatory
review (i.e., untimely review of ITAAC or conduct of pre-operational
hearings); (2) delays from NRC-related litigation; and (3) delays from
external events (non-NRC). This division groups the risks similarly,
based on those risks that are within the Commission's control and those
that are outside the Commission's control. The Department also assumed
that the design certification and early site permit process have
finality, meaning that virtually all issues have been resolved and
risks of litigation after combined construction and operating license
issuance (i.e., when Standby Support Contracts are in effect) is less
than before issuance (i.e., when Standby Support Contracts are not in
effect). The Department also assumed that ITAAC schedules will be set
either by guidance from the Commission, or by agreement of the
Department and sponsor, that the schedule for determination letters
will be based on completed ITAAC packages, and that the sponsor would
be permitted and expected to load fuel once all the ITAAC letters have
been approved. The following provides additional background information,
gathered by the Department, that helps to inform cost estimates.
Covered Costs From ITAAC and Pre-Operational Hearings
ITAAC Review. The Department is aware that it is difficult to
predict the Commission's ability to conduct the ITAAC review process in
a timely fashion, particularly since the Commission's new regulatory
process under part 52 has not been tested and there are presently no
schedules set by the Commission for ITAAC review. Nevertheless, in
conducting its analysis the Department considered several sources of
current and historical information including a review of the
Commission's licensing process under part 52, a review of the
Commission's ability to meet schedules in other proceedings, and
interviews with the Commission staff. To estimate the frequency that an
ITAAC review would not be completed on time and would cause a delay in
full power operation, the Department conducted a two-step analysis
based on the information gathered from its research.
The Department started out by trying to understand when ITAAC
submissions would occur during the construction period. The
Department's qualitative research indicated that 20 percent of ITAACs
are expected to be submitted in the first four years of construction
while the remaining 80 percent of ITAACs are expected to be submitted
in the last year of construction. Nuclear professionals indicated that
these first 20 percent of the ITAACs are for discrete, lower risk items
that are likely not on the critical path for full power operation (in
contrast to the last year ITAAC that are for entire systems more
critical to full power operation). Hence, construction would most
likely continue even if there was a delay in reviewing an ITAAC in the
earlier years. As a result, the Department concluded that Commission
review of the first 20 percent of ITAACs, whether on time or not, would
have a negligible effect on the commencement of full power operation.
In addition, the Department reviewed the other 80 percent of the
ITAAC to estimate the frequency and length of delay, and an estimated
cost. To conduct this analysis, the Department evaluated the
Commission's ability to meet schedules with respect to license renewals
for existing nuclear facilities under 10 CFR part 54, its reviews of
early site permits (ESPs) under part 52, and its design certification
of the Westinghouse AP1000 nuclear power plant.
Under the license renewal process a licensee may apply to the
Commission to renew its license as early as 20 years before expiration
of its current license. The renewal process ensures that important
systems, structures and components will continue to perform their
intended functions during the 20-year period of extended operation.\2\
To date, the Commission has successfully renewed the licenses for 43
reactors within schedule, with only minor deviations from established
milestone dates (e.g., a few instances where schedule dates were missed
by a day or two, and only 2 instances out of 40 where the delay was for
more than 5 days).\3\ The Department recognizes that in such cases,
these are operating reactors and therefore may not necessarily be
representative of newly constructed reactors.
---------------------------------------------------------------------------

\2\ The process and requirements are codified in 10 CFR part 54
(http://www.nrc.gov/reading-rm/doc-collections/cfr/part054/index.html.
\3\ Reactor license renewal schedules are available on the
Commission's Web site at:
http://www.nrc.gov/reactors/operating/licensing/renewal/applications.html
Under part 52, the Commission can issue an early site permit (ESP)
that addresses site safety issues, environmental protection issues, and
emergency plans, independent of the review of a specific nuclear plant
design or specific combined license application. An ESP is a partial
construction permit, and is therefore subject to all procedural
requirements in 10 CFR Part 2 applicable to construction permits. The
permit is valid for 10 to 20 years and can be renewed for an additional
10 to 20 years. The Commission is currently reviewing three early site
permit applications and to date the Commission has met all schedules
for the three applications it has received.\4\
---------------------------------------------------------------------------

\4\ Reactor license renewal schedules are available on the
Commission's Web site at: http://www.nrc.gov/reactors/new-licensing/esp.html.

---------------------------------------------------------------------------

Third, the Commission review and design certification of
Westinghouse's AP1000 nuclear power plant was issued on time.
Fourth, the Commission has stated that in order to meet estimated
work activities, 350 new employees have been added in FY 2006. This new
hiring of

[[Page 46323]]

staff provides some additional confidence that the Commission may be
able to meet schedules for licensing reviews.
In addition to this research, the Department interviewed the
Commission staff to better understand ITAAC review periods, and where
delays related to ITAAC issues would result in a covered delay. The
Commission's staff indicated that a 90 day review period would be a
reasonable estimate for an average time period. Commission staff also
noted the expectation that at the time a complete ITAAC is submitted,
the Commission's field team would have already begun conducting ongoing
inspections of the item under review and would have collected data that
will make the final review efficient. Based on these interviews, the
Department developed average delay estimates. Commission staff
indicated that even though it is difficult to predict the
implementation of an untested regulatory process, the Department's
conclusions were generally reasonable based on the Commission's
planning for the review process. The Department assumed that the longer
the delay the greater the likelihood that the delay would affect full
power operation and result in a covered cost.
Pre-operational Hearings. Lacking definitive data, the Department
estimated that pre-operational hearings resulting in a Commission stay
of construction or initial fuel load and causing a delay in full power
operation are comparable to delays from untimely ITAAC review. Since
the risk factors are similar, the Department evaluated the probability
of delays due to both of these factors combined.
Covered Costs for Delays From Litigation
The Department reviewed historical information on litigation
brought against the Commission, instances where a court ordered a stay
or injunction, and the part 52 licensing process in general. First, the
Department considered the likelihood of a delay occurring from
litigation in which there was an adverse ruling against the Commission
or there was a court order enjoining reactor construction or operation.
Next, the Department estimated the expected length of a delay in full
power operation in such a case.
The Department researched the history of judicial stays of
Commission operating license authorizations. The Department's research
uncovered three cases since 1973 in which the issuance of an operating
license was stayed. The first case involved the Perry Nuclear Power
Plant in Ohio in which the stay was for 40 days.\5\ The second case
involved the Limerick Nuclear Power Plant, which was stayed for 6
days.\6\ The third case involved the Diablo Canyon Nuclear Power Plant,
which was stayed for 75 days.\7\ To the Commission staff's best
knowledge, this information is correct and there are no other examples
of judicial stays regarding the issuance of a new nuclear power plant
operating license.\8\ Given that about 123 operating licenses have been
issued by the Commission, the Department estimates that the probability
of a stay relative to the number of operating licenses issued is less
than 3 percent. The Department recognizes, however, that for proposed
new facilities, there may be specific facts and circumstances that
could affect this possibility.
---------------------------------------------------------------------------

\5\ State of Ohio v. NRC, 812 F.2d 288 (6th Cir. 1986).
\6\ Limerick Ecology Action v. NRC, No. 85-3431 (3d Cir. 1985)
(unpublished order).
\7\ San Luis Obispo Mothers for Peace v. NRC, No. 84-1410 (D.C.
Cir) (unpublished order).
\8\ Commission Response to Congress, July 2005.
---------------------------------------------------------------------------

The Department also analyzed the history of judicial stays on new
operating licenses as compared broadly to the history of all court
cases in which the Commission was a party or there was an adverse
decision for the Commission. The Department's research found, from 1973
through early 2006, the Commission was a party in 206 court cases
involving regulatory or licensing matters. Of these 206 cases, the
Department found approximately 39 cases in which the court ruled
against the Commission. Of the 39 cases, only three cases resulted in a
stay or injunction of operations (described above). While this suggests
a very high success rate for litigation involving the Commission, the
Department also recognizes that there may be some unforeseen factors
that could affect the litigation risk given the new review process, and
new technologies involved.
The Commission's more recent experience in court cases has been
more successful. For the period starting in 1990, or around the time
the Energy Policy Act of 1992 was enacted, the Commission was directed
to streamline the nuclear reactor licensing process to alleviate long
delays and obstacles in the process. The Department believes the
Commission's more recent litigation history may be more indicative of
future litigation. This is consistent with the Department's expectation
that litigation risks that would be covered under a Standby Support
Contract are reduced because coverage is initiated after issuance of
the combined license, when decisions on early site permits or design
certifications may already have been settled and are final. The
Department recognizes that this more recent experience directly applies
to license renewals rather than new construction; however, it indicates
that the Commission has strengthened its review process. Since 1990,
the Commission has been a party in 44 court cases. Of those 44 cases,
only 2 cases were decided against the Commission and no cases resulted
in a stay or injunction.
Another factor in estimating the cost of litigation is how long a
delay caused by a stay or injunction would remain in effect. As noted
earlier, the data available to analyze this is very limited in nature,
only 3 cases, and only one of the cases is relevant to the analysis.
The State of Ohio requested a stay against the Perry Nuclear Power
Plant, challenging the adequacy of the evacuation plan and its
formulation without adequate State participation. The Court of Appeals
granted the State's request for a stay on the operating license of the
plant that lasted for 45 days. While the stay itself was for 45 days,
the Department used a more conservative estimate of 10 months for the
effect of the stay--which covered the time of the stay as well as
certain other activities necessary before the reactor could begin
operations. The Department believes that a delay covered by a Standby
Support Contract would occur in a similar manner. The Department
recognizes that in specific cases, however, greater delays would be
possible, e.g., where a State or other entity provides early indication
of its intent to challenge the operation of a reactor, or where a delay
did not result in a stay but had such potential. In view of the absence
of a statistically significant number of relevant judicial stay cases,
the Department cannot conclusively predict the length of delay.
The four hypothetical examples are intended to provide the public
with some indication of possible costs, under a specific set of
assumptions and conditions, with a specified coverage level, debt
financing structure, and interest rates. The examples also reflect
specific assumptions regarding the non-financial risks of the Standby
Support Program, which were described earlier: (1) delays from
Commission regulatory review (i.e., untimely review of ITAAC or conduct
of pre-operational hearings); (2) delays from NRC-related litigation;
and (3) delays from external events (non-NRC). Both the financial and
non-financial risk factors will likely differ for each project, so the
costs below may not reflect the subsidy cost associated with a
particular Standby Support contract. For the examples provided

[[Page 46324]]

below, dollar amounts are stated in millions.

----------------------------------------------------------------------------------------------------------------
Face value of Maximum Interest rate Hypothetical
Repayment options Debt structure debt coverage (percent) subsidy cost
----------------------------------------------------------------------------------------------------------------
Level Debt Payments (Prin. + 50:50 D/E........ $1,250 $500 7.0 $14
Int). 80:20 D/E........ 2,250 500 8.0 21
Level Principal Payments..... 50:50 D/E........ 1,250 500 7.0 17
80:20 D/E........ 2,250 500 8.0 27
----------------------------------------------------------------------------------------------------------------

While the Department has not prepared nor presented hypothetical
subsidy costs for the $250 million Standby Support Contracts, the
Department believes that the subsidy costs would likely be roughly half
of the subsidy costs compared to a $500 million Standby Support
Contract for the same project. The actual subsidy costs for any
particular Standby Support Contract will vary based on the specific
risks associated with the project and timing of such contract.

B. Review Under Executive Order 12988

With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform'' (61 FR 4779, February 7, 1996) imposes on
Federal agencies the general duty to adhere to the following
requirements: Eliminate drafting errors and needless ambiguity, write
regulations to minimize litigation, provide a clear legal standard for
affected conduct rather than a general standard, and promote
simplification and burden reduction. Section 3(b) requires Federal
agencies to make every reasonable effort to ensure that a regulation,
among other things: Clearly specifies the preemptive effect, if any,
adequately defines key terms, and addresses other important issues
affecting the clarity and general draftsmanship under guidelines issued
by the Attorney General. Section 3(c) of Executive Order 12988 requires
Executive agencies to review regulations in light of applicable
standards in section 3(a) and section 3(b) to determine whether they
are met or it is unreasonable to meet one or more of them. The
Department has completed the required review and determined that, to
the extent permitted by law; this final rule meets the relevant
standards of Executive Order 12988.

C. Review Under Executive Order 13132

Executive Order 13132 (64 FR 43255, August 10, 1999), imposes
certain requirements on agencies formulating and implementing policies
or regulations that preempt State law or that have federalism
implications. Agencies are required to examine the constitutional and
statutory authority supporting any action that would limit the
policymaking discretion of the States and carefully assess the
necessity for such actions.
Today's regulatory action has been determined not to be a ``policy
that has federalism implications,'' that is, it does not have
substantial direct effects on the states, on the relationship between
the national government and the states, nor on the distribution of
power and responsibility among the various levels of government under
Executive Order 13132 (64 FR 43255, August 10, 1999). Accordingly, no
``federalism summary impact statement'' was prepared or subjected to
review under the Executive Order by the Director of the Office of
Management and Budget.

D. Review Under Executive Order 13175

Under Executive Order 13175 (59 FR 22951, November 6, 2000) on
``Consultation and Coordination with Indian Tribal Governments,'' the
Department may not issue a discretionary rule that has ``tribal
implications'' and imposes substantial direct compliance costs on
Indian tribal governments. The Department has determined that this
final rule does not have such effects and concluded that Executive
Order 13175 does not apply to this rule.

E. Reviews Under the Regulatory Flexibility Act

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.)
requires that an agency prepare an initial regulatory flexibility
analysis for any regulation which a general notice of proposed
rulemaking is required, unless the agency certifies that the rule, if
promulgated, will not have a significant economic impact on a
substantial number of small entities (5 U.S.C. 605(b)). Given that no
general notice of proposed rulemaking is required, no regulatory
flexibility analysis is required.

F. Review Under the Paperwork Reduction Act

Section 950.10(b) contains information collection requirements
pertaining to eligibility; section 950.12(a) contains information
collection requirements pertaining to fulfillment of conditions
precedent to a Standby Support Contract; and section 950.23 contains
information collection requirements pertaining to submission of claims
for payment of covered costs under a Standby Support Contract. As
indicated in the DATES section of this notice, these provisions will
not become effective until the Office of Management and Budget (OMB)
has approved them pursuant to the Paperwork Reduction Act of 1995 (44
U.S.C. 3501 et seq.) and the procedures implementing that Act, 5 CFR
1320.1 et seq. The Department has issued a notice seeking public
comment under the Paperwork Reduction Act on the information collection
requirements in these sections of today's rule. (71 FR 41788, July 24,
2006) After considering any public comments received in response to
that notice, the Department will submit the proposed collection of
information to OMB for approval pursuant to 44 U.S.C. 3507. An agency
may not conduct, and a person is not required to respond to a
collection of information, unless it displays a currently valid OMB
control number. After OMB approves the information collection
requirements, the Department will publish a notice in the Federal
Register that announces the effective date and displays the OMB control
number for these sections of the rule.

G. Review Under the National Environmental Policy Act

The Department has concluded that promulgation of these regulations
fall into the class of actions that does not individually or
cumulatively have a significant impact on the human environment as set
forth in the Department regulations implementing the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
Specifically, the rule is covered under the categorical exclusion in
paragraph A6 of Appendix A to subpart D, 10 CFR part 1021, which
applies to the

[[Page 46325]]

establishment of procedural rulemakings. Accordingly, neither an
environmental assessment nor an environmental impact statement is required.

H. Review Under the Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to prepare a written assessment of the
effects of any Federal mandate in a proposed or final agency regulation
that may result in the expenditure by states, tribal, or local
governments, on the aggregate, or by the private sector, of $100
million in any one year. The Act also requires a Federal agency to
develop an effective process to permit timely input by elected
officials of state, tribal, or local governments on a proposed
``significant intergovernmental mandate,'' and requires an agency plan
for giving notice and opportunity to provide timely input to
potentially affected small governments before establishing any
requirements that might significantly or uniquely affect small
governments. The Department has determined that the rule published
today does not contain any Federal mandates affecting states, tribal,
or local governments, so these requirements do not apply.

I. Review Under Executive Order 13211

Executive Order 13211 (Actions Concerning Regulations That
Significantly Affect Energy, Supply, Distribution, or Use), 66 FR 28355
(May 22, 2001) requires preparation and submission to OMB of a
Statement of Energy Effects for significant regulatory actions under
Executive Order 12866 that are likely to have a significant adverse
effect on the supply, distribution, or use of energy. The Department
has determined that the rule published today does not have a
significant adverse effect on the supply, distribution, or use of
energy and thus the requirement to prepare a Statement of Energy
Effects does not apply.

J. Review Under the Treasury and General Government Appropriations Act,
1999

Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a
``Family Policymaking Assessment'' for any rule that may affect family
well-being. This rule has no impact on the autonomy or integrity of the
family as an institution. Accordingly, The Department has concluded
that it is not necessary to prepare a Family Policymaking Assessment.

K. Review Under the Treasury and General Government Appropriations Act,
2001

The Treasury and General Government Appropriations Act, 2001 (44
U.S.C. 3516, note) provides for agencies to review most dissemination
of information to the public under guidelines established by each
agency pursuant to general guidelines issued by OMB. OMB's guidelines
were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were
published at 67 FR 62446 (Oct. 7, 2002). The Department has reviewed
today's final rule under the OMB and Department of Energy guidelines,
and has concluded that it is consistent with applicable policies in
those guidelines.

L. Congressional Notification

As required by 5 U.S.C. 801, the Department will submit to Congress
a report regarding the issuance of today's final rule prior to the
effective date set forth at the outset of this rulemaking.

V. Approval of the Office of the Secretary

The Secretary of Energy has approved publication of this final rule.

List of Subjects in 10 CFR Part 950

Government contracts, Nuclear safety.

Issued in Washington, DC on August 4, 2006.
Dennis R. Spurgeon,
Assistant Secretary, Office of Nuclear Energy.

? Accordingly, the interim final rule published at 71 FR 28200 on May 15,
2006 which added a new part 950 to Title 10 of the Code of Federal
Regulations, is adopted as a final rule with the following changes.

? 1. Part 950 is revised to read as follows:

PART 950--STANDBY SUPPORT FOR CERTAIN NUCLEAR PLANT DELAYS

Subpart A General Provisions

Sec.
950.1 Purpose.
950.2 Scope and applicability.
950.3 Definitions.

Subpart B--Standby Support Contract Process

950.10 Conditional agreement.
950.11 Terms and conditions of the Conditional Agreement.
950.12 Standby Support Contract Conditions.
950.13 Standby Support Contract: General provisions.
950.14 Standby Support Contract: Covered events, exclusions, covered
delay, and covered cost provisions.

Subpart C--Claims Administration Process

950.20 General provisions.
950.21 Notification of covered event.
950.22 Covered event determination.
950.23 Claims process for payment of covered costs.
950.24 Claims determination for covered costs.
950.25 Calculation of covered costs.
950.26 Adjustments to claim for payment of covered costs.
950.27 Conditions for payment of covered costs.
950.28 Payment of covered costs.
Subpart D--Dispute Resolution Process
950.30 General.
950.31 Covered event dispute resolution.
950.32 Final determination on covered events.
950.33 Covered costs dispute resolution.
950.34 Final claim determination.
950.35 Payment of final claim determination.
950.36 Other contract matters in dispute.
950.37 Final agreement or final decision.
Subpart E--Audit and Investigations and Other Provisions
950.40 General.
950.41 Monitoring/Auditing.
950.42 Disclosure.

Authority: 42 U.S.C. 2201, 42 U.S.C. 7101 et seq., and 42 U.S.C. 16014

Subpart A--General Provisions

Sec. 950.1 Purpose.

The purpose of this part is to facilitate the construction and full
power operation of new advanced nuclear facilities by providing risk
insurance for certain delays attributed to the Nuclear Regulatory
Commission regulatory process or to litigation.

Sec. 950.2 Scope and applicability.

This part sets forth the policies and procedures for the award and
administration of Standby Support Contracts between the Department and
sponsors of new advanced nuclear facilities.

Sec. 950.3 Definitions.

For the purposes of this part:
Act means the Energy Policy Act of 2005.
Advanced nuclear facility means any nuclear facility the reactor
design for which is approved after December 31, 1993, by the Nuclear
Regulatory Commission (and such design or a substantially similar
design of comparable capacity was not approved on or before that date).
Available indemnification means $500 million with respect to the
initial two reactors and $250 million with respect to the subsequent
four reactors.

[[Page 46326]]

Claims administrator means the official in the Department of Energy
responsible for the administration of the Standby Support Contracts,
including the responsibility to approve or disapprove claims submitted
by a sponsor for payment of covered costs under the Standby Support
Contract.
Combined license means a combined construction and operating
license (COL) for an advanced nuclear facility issued by the Commission.
Commencement of construction means the point in time when a sponsor
initiates the pouring of safety-related concrete for the reactor building.
Commission means the Nuclear Regulatory Commission (NRC).
Conditional Agreement means a contractual agreement between the
Department and a sponsor under which the Department will execute a
Standby Support Contract with the sponsor if and only if the sponsor is
one of the first six sponsors to satisfy the conditions precedent to
execution of a Standby Support Contract, and if funding and other
applicable contractual, statutory and regulatory requirements are satisfied.
Construction means the construction activities related to the
advanced nuclear facility encompassed in the time period after
commencement of construction and before the initiation of fuel load for
the advanced nuclear facility.
Covered cost means:
(1) Principal or interest on any debt obligation financing an
advanced nuclear facility (but excluding charges due to a borrower's
failure to meet a debt obligation unrelated to the delay); and
(2) Incremental costs that are incurred as a result of covered delay.
Covered delay means a delay in the attainment of full power
operation of an advanced nuclear facility caused by a covered event, as
defined by this section.
Covered event means an event that may result in a covered delay due to:
(1) The failure of the Commission to comply with schedules for
review and approval of inspections, tests, analyses and acceptance
criteria established under the combined license;
(2) The conduct of pre-operational hearings by the Commission for
the advanced nuclear facility; or
(3) Litigation that delays the commencement of full power
operations of the advanced nuclear facility.
Department means the United States Department of Energy.
Full power operation means the point at which the sponsor first
synchronizes the advanced nuclear facility to the electrical grid.
Grant account means the account established by the Secretary that
receives appropriations or non-Federal funds in an amount sufficient to
cover the amount of incremental costs for which indemnification is
available under a Standby Support Contract.
Incremental costs means the incremental difference between:
(1) The fair market price of power purchased to meet the
contractual supply agreements that would have been met by the advanced
nuclear facility but for a covered delay; and
(2) The contractual price of power from the advanced nuclear
facility subject to the delay.
Initial two reactors means the first two reactors covered by
Standby Support Contracts that receive a combined license and commence
construction.
Litigation means adjudication in Federal, State, local or tribal
courts, including appeals of Commission decisions related to the
combined license process to such courts, but excluding administrative
litigation that occurs at the Commission related to the combined
license process.
Loan cost means the net present value of the estimated cash flows of:
(1) Payments by the government to cover defaults and delinquencies,
interest subsidies, or other payments; and
(2) Payments to the government including origination and other
fees, penalties and recoveries, as outlined under the Federal Credit
Reform Act of 1990.
Pre-operational hearing means any Commission hearing that is
provided for in 10 CFR part 52, after issuance of the combined license.
Program account means the account established by the Secretary that
receives appropriations or loan guarantee fees in an amount sufficient
to cover the loan costs.
Program administrator means the Department official authorized by
the Secretary to represent the Department in the administration and
management of the Standby Support Program, including negotiating with
and entering into a Conditional Agreement or a Standby Support Contract
with a sponsor.
Related party means the sponsor's parent company, a subsidiary of
the sponsor, or a subsidiary of the parent company of the sponsor.
Secretary means the Secretary of Energy or a designee.
Sponsor means a person whose application for a combined license for
an advanced nuclear facility has been docketed by the Commission.
Standby Support Contract means the contract that, when entered into
by a sponsor and the Program Administrator pursuant to section 638 of
the Energy Policy Act of 2005 after satisfaction of the conditions in
Sec. 950.12 and any other applicable contractual, statutory and
regulatory requirements, establishes the obligation of the Department
to compensate covered costs in the event of a covered delay subject to
the terms and conditions specified in the Standby Support Contract.
Standby Support Program means the program established by section
638 of the Act as administered by the Department of Energy.
Subsequent four reactors means the next four reactors covered by
Standby Support Contracts, after the initial two reactors, which
receive a combined license and commence construction.
System-level construction schedule means an electronic critical
path method schedule identifying the dates and durations of plant
systems installation (but excluding details of components or parts
installation), sequences and interrelationships, and milestone dates
from commencement of construction through full power operation, using
software acceptable to the Department.

Subpart B--Standby Support Contract Process

Sec. 950.10 Conditional agreement.

(a) Purpose. The Department and a sponsor may enter into a
Conditional Agreement. The Department will enter into a Standby Support
Contract with the first six sponsors to satisfy the specified
conditions precedent for a Standby Support Contract if and only if all
funding and other contractual, statutory and regulatory requirements
have been satisfied.
(b) Eligibility. A sponsor is eligible to enter into a Conditional
Agreement with the Program Administrator after the sponsor has submitted
to the Department the following information but before the sponsor
receives approval of the combined license application from the Commission:
(1) An electronic copy of the combined license application docketed
by the Commission pursuant to 10 CFR part 52, and if applicable, an
electronic copy of the design certification or early site permit, or
environmental report referenced or included with the sponsor's combined
license application;
(2) A summary schedule identifying the projected dates of
construction, testing, and full power operation;
(3) A detailed business plan that includes intended financing for the

[[Page 46327]]

project including the credit structure and all sources and uses of
funds for the project, the most recent private credit rating or other
similar credit analysis for project related covered financing, and the
projected cash flows for all debt obligations of the advanced nuclear
facility which would be covered under the Standby Support Contract;
(4) The sponsor's estimate of the amount and timing of the Standby
Support payments for debt service under covered delays; and
(5) The estimated dollar amount to be allocated to the sponsor's
covered costs for principal or interest on the debt obligation of the
advanced nuclear facility and for incremental costs, including whether
these amounts would be different if the advanced nuclear facility is
one of the initial two reactors or one of the subsequent four reactors.
(c) The Program Administrator shall enter into a Conditional
Agreement with a sponsor upon a determination by the Department that
the sponsor is eligible for a Conditional Agreement, the information
provided by the sponsor under paragraph (b) of this section is accurate
and complete, and the Conditional Agreement is consistent with
applicable laws and regulations.

Sec. 950.11 Terms and conditions of the Conditional Agreement.

(a) General. Each Conditional Agreement shall include a provision
specifying that the Program Administrator and the sponsor will enter
into a Standby Support Contract provided that the sponsor is one of the
first six sponsors to fulfill the conditions precedent specified in
Sec. 950.12, subject to certain funding requirements and limitations
specified in Sec. 950.12 and any other applicable contractual,
statutory and regulatory requirements.
(b) Allocation of Coverage. Each Conditional Agreement shall
include a provision specifying the amount of coverage to be allocated
under the Standby Support Contract to cover principal or interest costs
and to cover incremental costs, including a provision on whether the
allocation shall be different if the advanced nuclear facility is one
of the initial two reactors or one of the subsequent four reactors,
subject to paragraphs (c) and (d) of this section. A sponsor may elect
to allocate 100 percent of the coverage to either the Program Account
or the Grant Account.
(c) Funding. Each Conditional Agreement shall contain a provision
that the Program Account or Grant Account shall be funded in advance of
execution of the Standby Support Contract and in the following manner,
subject to the conditions of paragraphs (d) and (e) of this section.
Under no circumstances will the amount of the coverage for payments of
principal or interest under a Standby Support Contract exceed 80
percent of the total of the financing guaranteed under that Contract.
(1) The Program Account shall receive funds appropriated to the
Department, loan guarantee fees, or a combination of appropriated funds
and loan guarantee fees that are in an amount equal to the loan costs
associated with the amount of principal or interest covered by the
available indemnification. Loan costs may not be paid from the proceeds
of debt guaranteed or funded by the Federal government. The parties
shall specify in the Conditional Agreement the anticipated amount or
anticipated percentage of the total funding in the Program Account to
be contributed by appropriated funds to the Department, by the sponsor,
by a non-federal source, or by a combination of these funding sources.
Covered costs paid through the Program Account are backed by the full
faith and credit of the United States.
(2) The Grant Account shall receive funds appropriated to the
Department, funds from a sponsor, funds from a non-Federal source, or a
combination of appropriated funds and funds from the sponsor or other
non-Federal source, in an amount equal to the incremental costs. The
parties shall specify in the Conditional Agreement the anticipated
amount or anticipated percentage of the total funding in the Grant
Account to be contributed by appropriated funds to the Department, by
the sponsor, by a non-Federal source, or by a combination of these
funding sources.
(d) Reconciliation. Each Conditional Agreement shall include a
provision that the sponsor shall provide no later than ninety (90) days
prior to execution of a Standby Support Contract sufficient information
for the Program Administrator to recalculate the loan costs and the
incremental costs associated with the advanced nuclear facility, taking
into account whether the sponsor's advanced nuclear facility is one of
the initial two reactors or the subsequent four reactors.
(e) Limitations. Each Conditional Agreement shall contain a
provision that limits the Department's contribution of Federal funding
to the Program Account or the Grant Account to only those amounts, if
any, that are appropriated to the Department in advance of the Standby
Support Contract for the purpose of funding the Program Account or
Grant Account. In the event the amount of appropriated funds to the
Department for deposit in the Program Account or Grant Account is not
sufficient to result in an amount equal to the full amount of the loan
costs or incremental costs resulting from the allocation of coverage
under the Conditional Agreement pursuant to 950.11(b), the sponsor
shall no later than sixty (60) days prior to execution of the Standby
Support Contract:
(1) Notify the Department that it shall not execute a Standby
Support Contract; or
(2) Notify the Department that it shall provide the anticipated
contributions to the Program Account or Grant Account as specified in
the Conditional Agreement pursuant to 950.11(c)(1). The sponsor shall
have the option to provide additional funds to the Program Account or
Grant Account up to the amount equal to the full amount of loan costs
or incremental costs. In the event the sponsor does not provide
sufficient additional funds to fund the Program Account or the Grant
Account in an amount equal to the full amount of loan costs or
incremental costs, then the amounts of coverage available under the
Standby Support Contract shall be reduced to reflect the amounts
deposited in the Program Account or Grant Account. If the sponsor
elects less than the full amount of coverage available under the law,
then the sponsor shall not have recourse against, and the Department is
not liable for, any claims for an amount of covered costs in excess of
that reduced amount of coverage or the amount deposited in the Grant
Account upon execution of the Standby Support Contract, notwithstanding
any other provision of law.
(f) Termination of Conditional Agreements. Each Conditional
Agreement shall include a provision that the Conditional Agreement
remains in effect until such time as:
(1) The sponsor enters into a Standby Support Contract with the
Program Administrator;
(2) The sponsor has commenced construction on an advanced nuclear
facility and has not entered into a Standby Support Contract with the
Program Administrator within thirty (30) days after commencement of
construction;
(3) The sponsor notifies the Program Administrator in writing that
it wishes to terminate the Conditional Agreement, thereby extinguishing
any rights or obligations it may have under the Conditional Agreement;
(4) The Program Administrator has entered into Standby Support
Contracts that cover three different reactor designs, and the
Conditional Agreement is for an advanced nuclear facility of a

[[Page 46328]]

different reactor design than those covered under existing Standby
Support Contracts; or
(5) The Program Administrator has entered into six Standby Support
Contracts.

Sec. 950.12 Standby Support Contract Conditions.

(a) Conditions Precedent. If Program Administrator has not entered
into six Standby Support Contracts, the Program Administrator shall
enter into a Standby Support Contract with the sponsor, consistent with
applicable statutes and regulations and subject to the conditions set
forth in paragraphs (b) and (c) of this section, upon a determination
by the Department that all the conditions precedent to a Standby
Support Contract have been fulfilled, including that the sponsor has:
(1) A Conditional Agreement with the Department, consistent with
this subpart;
(2) A combined license issued by the Commission;
(3) Documentation that it possesses all Federal, State, or local
permits required by law to commence construction;
(4) Documentation that it has commenced construction of the
advanced nuclear facility;
(5) Documented coverage of insurance required for the project by
the Commission and lenders;
(6) Paid any required fees into the Program Account and the Grant
Account, as set forth in the Conditional Agreement and paragraph (b) of
this section;
(7) Provided to the Program Administrator, no later than ninety
(90) days prior to execution of the contract, the sponsor's detailed
schedule for completing the inspections, tests, analyses and acceptance
criteria in the combined license and informing the Commission that the
acceptance criteria have been met; and the sponsor's proposed schedule
for review of such inspections, tests, analyses and acceptance criteria
by the Commission, consistent with Sec. 950.14(a) of this part and
which the Department will evaluate and approve; and
(8) Provided to the Program Administrator, no later than ninety
(90) days prior to execution of the contract, a detailed systems-level
construction schedule that includes a schedule identifying projected
dates of construction, testing and full power operation of the advanced
nuclear facility.
(9) Provided to the Program Administrator, no later than ninety
(90) days prior to the execution of the contract, a detailed and up-to-
date plan of financing for the project including the credit structure
and all sources and uses of funds for the project, and the projected
cash flows for all debt obligations of the advanced nuclear facility.
(b) Funding. No later than thirty (30) days prior to execution of
the contract, and consistent with section 638(b)(2)(C), funds in
amounts determined pursuant to Sec. 950.11(e) have been made available
and shall be deposited in the Program Account or the Grant Account
respectively.
(c) Limitations. The Department shall not enter into a Standby
Support Contract, if:
(1) Program Account. The contract provides coverage of principal or
interest costs for which the loan costs exceed the amount of funds
deposited in the Program Account; or
(2) Grant Account. The contract provides coverage of incremental
costs that exceed the amount of funds deposited in the Grant Account.
(d) Cancellation by Abandonment.
(1) If the Program Administrator cancels a Standby Support Contract
for abandonment pursuant to 950.13(f)(1), the Program Administrator may
re-execute a Standby Support Contract with a sponsor other than a
sponsor or that sponsor's assignee with whom the Department had a
cancelled contract, provided that such replacement Standby Support
Contract is executed in accordance with the terms and conditions set
forth in this part, and shall be deemed to be one of the subsequent
four reactors under this part.
(2) Not more than two Standby Support Contracts may be re-executed
in situations involving abandonment and cancellation by the Program
Administrator.

Sec. 950.13 Standby Support Contract: General provisions.

(a) Purpose. Each Standby Support Contract shall include a
provision setting forth an agreement between the parties in which the
Department shall provide compensation for covered costs incurred by a
sponsor for covered events that result in a covered delay of full power
operation of an advanced nuclear facility.
(b) Covered facility. Each Standby Support Contract shall include a
provision of coverage only for an advanced nuclear facility which is
not a federal entity. Each Standby Support Contract shall also include
a provision to specify the advanced nuclear facility to be covered,
along with the reactor design, and the location of the advanced nuclear
facility.
(c) Sponsor contribution. Each Standby Support Contract shall
include a provision to specify the amount that a sponsor has
contributed to funding each type of account.
(d) Maximum compensation. Each Standby Support Contract shall
include a provision to specify that the Program Administrator shall not
pay compensation under the contract:
(1) In an aggregate amount that exceeds the amount of coverage up
to $500 million each for the initial two reactors or up to $250 million
each for the subsequent four reactors;
(2) In an amount for principal or interest costs for which the loan
costs exceed the amount deposited in the Program Account; and
(3) In an amount for incremental costs that exceed the amount
deposited in the Grant Account.
(e) Term. Each Standby Support Contract shall include a provision
to specify the date at which the contract commences as well as the term
of the contract. The contract shall enter into force on the date it has
been signed by both the sponsor and the Program Administrator. Subject
to the cancellation provisions set forth in paragraph (f) of this
section, the contract shall terminate when all claims have been paid up
to the full amounts to be covered under the Standby Support Contract,
or all disputes involving claims under the contract have been resolved
in accordance with subpart D of this part.
(f) Cancellation provisions. Each Standby Support Contract shall
provide for cancellation in the following circumstances:
(1) If the sponsor abandons construction, and the abandonment is
not caused by a covered event or force majeure, the Program
Administrator may cancel the Standby Support Contract by giving written
notice thereof to the sponsor and the parties have no further rights or
obligations under the contract.
(2) If the sponsor does not require continuing coverage under the
contract, the sponsor may cancel the Standby Support Contract by giving
written notice thereof to the Program Administrator and the parties
have no further rights or obligations under the contract.
(3) For such other cause as agreed to by the parties.
(g) Termination by sponsor. Each Standby Support Contract shall
include a provision that prohibits a sponsor or any related party from
executing another Standby Support Contract, if the sponsor elects to
terminate its original existing Standby Support Contract,

[[Page 46329]]

unless the sponsor has cancelled or terminated construction of the
reactor covered by its original existing Standby Support Contract.
(h) Assignment. Each Standby Support Contract shall include a
provision on assignment of a sponsor's rights and obligations under the
contract and assignment of payment of covered costs. The Program
Administrator shall permit the assignment of payment of covered costs
with prior written notice to the Department. The Program Administrator
shall permit assignment of rights and obligations under the contract
with the Department's prior approval. The sponsor may not assign its
rights and obligations under the contract without the prior written
approval of the Program Administrator and any attempt to do so is null
and void.
(i) Claims administration. Each Standby Support Contract shall
include a provision to specify a mechanism for administering claims
pursuant to the procedures set forth in subpart C of this part.
(j) Dispute resolution. Consistent with the Administrative Dispute
Resolution Act, each Standby Support Contract shall include a provision
to specify a mechanism for resolving disputes pursuant to the
procedures set forth in subpart D of this part.
(k) Re-estimation. Consistent with the Federal Credit Reform Act
(FCRA) of 1990, the sponsor shall provide all needed documentation as
required in Sec. 950.12 to allow the Department to annually re-
estimate the loan cost needed in the financing account as that term is
used in 2 U.S.C. 661a(7) and funded by the Program Account. ``The
sponsor is neither responsible for any increase in loan costs, nor
entitled to recoup fees for any decrease in loan costs, resulting from
the re-estimation conducted pursuant to FCRA.

Sec. 950.14 Standby Support Contract: Covered events, exclusions,
covered delay and covered cost provisions.

(a) Covered events. Subject to the exclusions set forth in
paragraph (b) of this section, each Standby Support Contract shall
include a provision setting forth the type of events that are covered
events under the contract. The type of events shall include:
(1) The Commission's failure to review the sponsor's inspections,
tests, analyses and acceptance criteria in accordance with the
Commission's rules, guidance, audit procedures, or formal opinions, in
the case where the Commission has in place any rules, guidance, audit
procedures or formal opinions setting schedules for its review of
inspections, tests, analyses, and acceptance criteria under a combined
license or the sponsor's combined license;
(2) The Commission's failure to review the sponsor's inspections,
tests, analyses, and acceptance criteria on the schedule for such
review proposed by the sponsor, subject to the Department's review and
approval of such schedule, including review of any informal guidance or
opinion of the Commission that has been provided to the sponsor or the
Department, in the case where the Commission has not provided any
rules, guidance, audit procedures or formal Commission opinions setting
schedules for review of inspections, tests, analyses and acceptance
criteria under a combined license, or under the sponsor's combined license;
(3) The conduct of pre-operational Commission hearings, that are
provided for in 10 CFR part 52, after issuance of the combined license;
and
(4) Litigation in State, Federal, local, or tribal courts,
including appeals of Commission decisions related to an application for
a combined license to such courts., and excluding administrative
litigation that occurs at the Commission related to the combined license.
(b) Exclusions. Each Standby Support Contract shall include a
provision setting forth the exclusions from covered costs under the
contract, and for which any associated delay in the attainment of full
power operations is not a covered delay. The exclusions are:
(1) The failure of the sponsor to take any action required by law,
regulation, or ordinance, including but not limited to the following
types of events:
(i) The sponsor's failure to comply with environmental laws or
regulations such as those related to pollution abatement or human
health and the environment;
(ii) The sponsor's re-performance of any inspections, tests,
analyses or re-demonstration that acceptance criteria have been met due
to Commission non-acceptance of the sponsor's submitted results of
inspections, tests, analyses, and demonstration of acceptance criteria;
(iii) Delays attributable to the sponsor's actions to redress any
deficiencies in inspections, tests, analyses or acceptance criteria as
a result of a Commission disapproval of fuel loading; or
(2) Events within the control of the sponsor, including but not
limited to delays attributable to the following types of events:
(i) Project planning and construction problems;
(ii) Labor-management disputes;
(iii) The sponsor's failure to perform inspections, tests, analyses
and to demonstrate acceptance criteria are met or failure to inform the
Commission of the successful completion of inspections, tests, analyses
and demonstration of meeting acceptance criteria in accordance with its
schedule; or
(iv) The lack of adequate funding for construction and testing of
the advanced nuclear facility.
(3) Normal business risks, including but not limited to the
following types of events:
(i) Delays attributable to force majeure events such as a strike or
the failure of power or other utility services supplied to the
location, or natural events such as severe weather, earthquake,
landslide, mudslide, volcanic eruption, other earth movement, or flood;
(ii) Government action meaning the seizure or destruction of
property by order of governmental authority;
(iii) War or military action;
(iv) Acts or decisions, including the failure to act or decide, of
any government body (excluding those acts or decisions or failure to
act or decide by the Commission that are covered events);
(v) Supplier or subcontractor delays in performance;
(vi) Litigation, whether initiated by the sponsor or another party,
that is not a covered event under paragraph (a) of this section; or
(vii) Failure to timely obtain regulatory permits or approvals that
are not covered events under paragraph (a) of this section.
(c) Covered delay. Each Standby Support Contract shall include a
provision for the payment of covered costs, in accordance with the
procedures in subpart C of this part for the payment of covered costs,
if a covered event(s) is determined to be the cause of delay in
attainment of full power operation, provided that:
(1) Under Standby Support Contracts for the subsequent four
reactors, covered delay may occur only after the initial 180-day period
of delay, and
(2) The sponsor has used due diligence to mitigate, shorten, and
end, the covered delay and associated costs covered by the Standby
Support Contract.
(d) Covered costs. Each Standby Support Contract shall include a
provision to specify the type of costs for which the Department shall
provide payment to a sponsor for covered delay in accordance with the
procedures set forth in subparts C and D of this part. The types of
costs shall be limited to

[[Page 46330]]

either or both, dependent upon the terms of the contract:
(1) The principal or interest on which the loan costs for the
Program Account was calculated; and
(2) The incremental costs on which funding for the Grant Account
was calculated.
(e) ITAAC Schedule. Each Standby Support Contract shall provide for
adjustments to the ITAAC review schedule when the parties deem
necessary, in the case where the Commission has not provided any rules,
guidance, audit procedures or formal Commission opinions setting
schedules for review of inspections, tests, analyses and acceptance
criteria under a combined license, upon review and approval by the
Department and the sponsor. Adjustments to the ITAAC review schedule
must be in writing, expressly approved by the Department and the
sponsor, and remain in effective for determining covered events unless
and until a subsequently issued ITAAC review schedule is approved by
the parties.

Subpart C--Claims Administration Process

Sec. 950.20 General provisions.

The parties shall include provisions in the Standby Support
Contract to specify the procedures and conditions set forth in this
subpart for the submission of claims and the payment of covered costs
under the Standby Support Contract. A sponsor is required to establish
that there is a covered event, a covered delay and a covered cost; the
Department is required to establish an exclusion in accordance with
Sec. 950.14(b).

Sec. 950.21 Notification of covered event.

(a) A sponsor shall submit in writing to the Claims Administrator a
notification that a covered event has occurred that has delayed the
schedule for construction or testing and that may cause covered delay.
The sponsor shall submit the notification to the Claims Administrator
no later than thirty (30) days of the end of the covered event and
contain the following information:
(1) A description and explanation of the covered event, including
supporting documentation of the event;
(2) The duration of the delay in the schedule for construction,
testing and full power operation, and the schedule for inspections,
tests, analyses and acceptance criteria, if applicable;
(3) The sponsor's projection of the duration of covered delay;
(4) A revised schedule for construction, testing and full power
operation, including the dates of system level construction or testing
that had been conducted prior to the event; and
(5) A revised inspections, tests, analyses, and acceptance criteria
schedule, if applicable, including the dates of Commission review of
inspections, tests, analyses, and acceptance criteria that had been
conducted prior to the event.
(b) An authorized representative of the sponsor shall sign the
notification of a covered event, certify the notification is made in
good faith and the covered event is not an exclusion as specified in
Sec. 950.14(b), and represent that the supporting information is
accurate and complete to the sponsor's knowledge and belief.

Sec. 950.22 Covered event determination.

(a) Completeness review. Upon notification of a covered event from
the sponsor, the Claims Administrator shall review the notification for
completeness within thirty (30) days of receipt. If the notification is
not complete, the Claims Administrator shall return the notification
within thirty (30) days of receipt and specify the incomplete
information for submission by the sponsor to the Claims Administrator
in time for a determination by the Claims Administrator in accordance
with paragraph (c) of this section.
(b) Covered Event Determination. The Claims Administrator shall
review the notification and supporting information to determine whether
there is agreement by the Claims Administrator with the sponsor's
representation of the event as a covered event (Covered Event
Determination) based on a review of the contract conditions for covered
events and exclusions.
(1) If the Claims Administrator believes the event is an exclusion
as set forth in Sec. 950.14(b), the Claims Administrator shall request
within 30 days of receipt of the notification of a covered event
information in the sponsor's possession that is relevant to the
exclusion. The sponsor shall provide the requested information to the
Administrator within 20 days of receipt of the Administrator's request.
(2) The sponsor's failure to provide the requested information in a
complete or timely manner constitutes a basis for the Claims
Administrator to disagree with the sponsor's covered event notification
as provided in paragraph (c) of this section, and to deny a claim for
covered costs related to the exclusion as provided in Sec. 950.24 of
this part.
(c) Timing. The Claims Administrator shall notify the sponsor
within sixty (60) days of receipt of the notification whether the
Administrator agrees with the sponsor's representation, disagrees with
the representation, requires further information, or is an exclusion.
If the sponsor disagrees with the Covered Event Determination, the
parties shall resolve the dispute in accordance with the procedures set
forth in subpart D of this part.

Sec. 950.23 Claims process for payment of covered costs.

(a) General. No more than 120 days of when a sponsor was scheduled
to attain full power operation and expects it will incur covered costs,
the sponsor may make a claim upon the Department for the payment of its
covered costs under the Standby Support Contract. The sponsor shall
file a Certification of Covered Costs and thereafter such Supplementary
Certifications of Covered Costs as may be necessary to receive payment
under the Standby Support Contract for covered costs.
(b) Certification of Covered Costs. The Certification of Covered
Costs shall include the following:
(1) A Claim Report, including the information specified in
paragraph (c) of this section;
(2) A certification by the sponsor that:
(i) The covered costs listed on the Claim Report filed pursuant to
this section are losses to be incurred by the sponsor;
(ii) The claims for the covered costs were processed in accordance
with appropriate business practices and the procedures specified in
this subpart; and
(iii) The sponsor has used due diligence to mitigate, shorten, and
end, the covered delay and associated costs covered by the Standby
Support Contract.
(c) Claim Report. For purposes of this part, a ``Claim Report'' is
a report of information about a sponsor's underlying claims that, in
the aggregate, constitute the sponsor's covered costs. The Claim Report
shall include, but is not limited to:
(1) Detailed information substantiating the duration of the covered
delay;
(2) Detailed information about the covered costs associated with
covered delay, including as applicable:
(i) The amount of payment for principal or interest during the
covered delay, including the relevant dates of payment, amounts of
payment and any other information deemed relevant by the Department,
and the name of the holder of the debt, if the debt obligation is held
by a Federal agency; or
(ii) The underlying payment during the covered delay related to the
incremental cost of purchasing power to

[[Page 46331]]

meet contractual agreements, including any documentation deemed
relevant by the Department to calculate the fair market price of power.
(d) Supplementary Certification of Covered Cost. If the total
amount of the covered costs due to a sponsor under the Standby Support
Contract has not been determined at the time the Certification of
Covered Costs has been filed, the sponsor shall file monthly, or on a
schedule otherwise determined by the Claims Administrator,
Supplementary Certifications of Covered Costs updating the amount of
the covered costs owed to the sponsor. Supplementary Certifications of
Covered Costs shall include a Claim Report and a certification as
described in this section.
(e) Supplementary information. In addition to the information
required in paragraphs (b) and (c) of this section, the Claims
Administrator may request such additional supporting documentation as
required to ascertain the allowable covered costs sustained by a sponsor.

Sec. 950.24 Claims determination for covered costs.

(a) No later than thirty (30) days from the sponsor's submission of
a Certification of Covered Costs, the Claims Administrator shall issue
a Claim Determination identifying those claimed costs deemed to be
allowable based on an evaluation of:
(1) The duration of covered delay, taking into account contributory
or concurrent delays resulting from exclusions from coverage as
established by the Claims Administrator in accordance with Sec. 950.22;
(2) The covered costs associated with covered delay, including an
assessment of the sponsor's due diligence in mitigating or ending
covered costs, as set forth in Sec. 950.23;
(3) Any adjustments to the covered costs, as set forth in Sec.
950.26; and
(4) Other information as necessary and appropriate.
(b) The Claim Determination shall state the Claims Administrator's
determination that the claim shall be paid in full, paid in an adjusted
amount as deemed allowable by the Claims Administrator, or rejected in full.
(c) Should the Claims Administrator conclude that the sponsor has
not supplied the required information in the Certification of Covered
Costs or any supporting documentation sufficient to allow reasonable
verification of the duration of the covered delay or covered costs, the
Claims Administrator shall so inform the sponsor and specify the nature
of additional documentation requested, in time for the sponsor to
supply supplemental documentation and for the Claims Administrator to
issue the Claim Determination.
(d) Should the Claims Administrator find that any claimed covered
costs are not allowable or otherwise should be considered excluded
costs under the Standby Support Contract, the Claims Administrator
shall identify such costs and state the reason(s) for that decision in
writing. A determination by the Claims Administrator that an event is
an exclusion or that the sponsor has not provided complete or timely
information relevant to the exclusion as specified in Sec. 950.22
shall provide a basis for the Claims Administrator to find covered
costs are not allowable. If the parties cannot agree on the covered
costs, they shall resolve the dispute in accordance with the
requirements in subpart D of this part.

Sec. 950.25 Calculation of covered costs.

(a) The Claims Administrator shall calculate the allowable amount
of the covered costs claimed in the Certification of Covered Costs as
follows:
(1) Costs covered through Program Account. The principal or
interest on any debt obligation financing the advanced nuclear facility
for the duration of covered delay to the extent the debt obligation was
included in the calculation of the loan cost; and
(2) Costs covered by Grant Account. The incremental costs
calculated for the duration of the covered delay. In calculating the
incremental cost of power, the Claims Administrator shall consider:
(i) Fair Market Price. The fair market price may be determined by
the lower of the two options: The actual cost of the short-term supply
contract for replacement power, purchased by the sponsor, during the
period of delay, or for each day of replacement power by its day-ahead
weighted average index price in $/MWh at the hub geographically nearest
to the advanced nuclear facility as posted on the previous day by the
Intercontinental Exchange (ICE) or an alternate electronic marketplace
deemed reliable by the Department. The daily MWh assumed to be covered
is no more than its nameplate capacity multiplied by 24 hours;
multiplied by the capacity-weighted U.S. average capacity factor in the
previous calendar year, including in the calculation any and all
commercial nuclear power units that operated in the United States for
any part of the previous calendar year; and multiplied by the average
of the ratios of the net generation to the grid for calculating
payments to the Nuclear Waste Fund to the nameplate capacity for each
nuclear unit included. In addition, the Claims Administrator may
consider ``fair market price'' from other published indices or prices
at regional trading hubs and bilateral contracts for similar delivered
firm power products and the costs incurred, including acquisition
costs, to move the power to the contract-specified point of delivery,
as well as the provisions of the covered contract regarding replacement
power costs for delivery default; and
(ii) Contractual price of power. The contractual price of power
shall be determined as the daily weighted average price in equivalent
$/MWh under a contractual supply agreement(s) for delivery of firm
power that the sponsor entered into prior to any covered event. The
daily MWh assumed to be covered is no more than the advanced nuclear
facility's nameplate capacity multiplied by 24 hours; multiplied by the
capacity-weighted U.S. average capacity factor in the previous calendar
year, including in the calculation any and all commercial nuclear power
units that operated in the United States for any part of the previous
calendar year; and multiplied by the average of the ratios of the net
generation to the grid for calculating payments to the Nuclear Waste
Fund to the nameplate capacity for each nuclear unit included.

Sec. 950.26 Adjustments to claim for payment of covered costs.

(a) Aggregate amount of covered costs. The sponsor's aggregate
amount of covered costs shall be reduced by any amounts that are
determined to be either excluded or not covered.
(b) Amount of Department share of covered costs. The Department
share of covered costs shall be adjusted as follows:
(1) No excess recoveries. The share of covered costs paid by the
Department to a sponsor shall not be greater than the limitations set
forth in Sec. 950.27(d).
(2) Reduction of amount payable. The share of covered costs paid by
the Department shall be reduced by the appropriate amount consistent
with the following:
(i) Excluded claims. The Department shall ensure that no payment
shall be made for costs resulting from events that are not covered
under the contract as specified in Sec. 950.14; and
(ii) Sponsor due diligence. Each sponsor shall ensure and
demonstrate that it uses due diligence to mitigate, shorten, and to end
the covered delay and associated costs covered by the Standby Support
Contract.

[[Page 46332]]

Sec. 950.27 Conditions for payment of covered costs.

(a) General. The Department shall pay the covered costs associated
with a Standby Support Contract in accordance with the Claim
Determination issued by the Claims Administrator under Sec. 950.24 or
the Final Claim Determination under Sec. 950.34, provided that:
(1) Neither the sponsor's claim for covered costs nor any other
document submitted to support the underlying claim is fraudulent,
collusive, made in bad faith, dishonest or otherwise designed to
circumvent the purposes of the Act and regulations;
(2) The losses submitted for payment are within the scope of
coverage issued by the Department under the terms and conditions of the
Standby Support Contract as specified in subpart B of this part; and
(3) The procedures specified in this subpart have been followed and
all conditions for payment have been met.
(b) Adjustments to Payments. In the event of fraud or
miscalculation, the Department may subsequently adjust, including an
adjustment obligating the sponsor to repay any payment made under
paragraph (a) of this section.
(c) Suspension of payment for covered costs. If the Department paid
or is paying covered costs under paragraph (a) of this section, and
subsequently makes a determination that a sponsor has failed to meet
any of the requirements for payment specified in paragraph (a) of this
section for a particular covered cost, the Department may suspend
payment of covered costs pending investigation and audit of the
sponsor's covered costs.
(d) Amount payable. The Department's share of compensation for the
initial two reactors is 100 percent of the covered costs of covered
delay but not more than the coverage in the contract or $500 million
per contract, whichever is less; and for the subsequent four reactors,
not more than 50 percent of the covered costs of the covered delay but
not more than the coverage in the contract or $250 million per
contract, whichever is less. The Department's share of compensation for
the subsequent four reactors is further limited in that the payment is
for covered costs of a covered delay that occurs after the initial 180-
day period of covered delay.

Sec. 950.28 Payment of covered costs.

(a) General. The Department shall pay to a sponsor covered costs in
accordance with this subpart and the terms of the Standby Support
Contract. Payment shall be made in such installments and on such
conditions as the Department determines appropriate. Any overpayments
by the Department of the covered costs shall be offset from future
payments to the sponsor or returned by the sponsor to the Department
within forty-five (45) days. If there is a dispute, then the Department
shall pay the undisputed costs and defer payment of the disputed
portion upon resolution of the dispute in accordance with the
procedures in subpart D of this part. If the covered costs include
principal or interest owed on a loan made or guaranteed by a Federal
agency, the Department shall instead pay that Federal agency the
covered costs, rather than the sponsor.
(b) Timing of Payment. The sponsor may receive payment of covered
costs when:
(1) The Department has approved payment of the covered cost as
specified in this subpart; and
(2) The sponsor has incurred and is obligated to pay the costs for
which payment is requested.
(c) Payment process. The covered costs shall be paid to the sponsor
designated on the Certification of Covered Costs required by Sec.
950.23, or to the sponsor's assignee as permitted by Sec. 950.13(h). A
sponsor that requests payment of the covered costs must receive payment
through electronic funds transfer.

Subpart D--Dispute Resolution Process

Sec. 950.30 General.

The parties, i.e., the sponsor and the Department, shall include
provisions in the Standby Support Contract that specify the procedures
set forth in this subpart for the resolution of disputes under a
Standby Support Contract. Sections 950.31 and 950.32 address disputes
involving covered events; Sec. Sec. 950.33 and 950.34 address disputes
involving covered costs; and Sec. Sec. 950.36 and 950.37 address
disputes involving other contract matters.

Sec. 950.31 Covered event dispute resolution.

(a) If a sponsor disagrees with the Covered Event Determination
rendered in accordance with Sec. 950.22 and cannot resolve the dispute
informally with the Claims Administrator, then the disagreement is
subject to resolution as follows:
(1) A sponsor shall, within thirty (30) days of receipt of the
Covered Event Determination, deliver to the Claims Administrator
written notice of a sponsor's rebuttal which sets forth reasons for its
disagreement, including any expert opinion obtained by the sponsor.
(2) After submission of the sponsor's rebuttal to the Claims
Administrator, the parties shall have fifteen (15) days during which
time they must informally and in good faith participate in mediation to
attempt to resolve the disagreement before instituting the process
under paragraph (b) of this section. If the parties reach agreement
through mediation, the agreement shall constitute a Final Determination
on Covered Events.
(3) The parties shall jointly select the mediator(s). The parties
shall share equally the cost of the mediation.
(b) If the parties cannot resolve the disagreement through
mediation under the timeframe established under paragraph (a)(2) of
this section and the sponsor elects to continue pursuing the claim, the
sponsor shall within ten (10) days submit any remaining issues in
controversy to the Civilian Board of Contract Appeals (Civilian Board)
or its successor, for resolution by an Administrative Judge of the
Civilian Board utilizing the Civilian Board's Summary Binding Decision
procedure. The parties shall abide by the procedures of the Civilian
Board for Summary Binding Decision. The parties agree that the decision
of the Civilian Board constitutes a Final Determination on Covered Events.

Sec. 950.32 Final determination on covered events.

(a) If the parties reach a Final Determination on Covered Events
through mediation, or Summary Binding Decision as set forth in this
subpart, the Final Determination on Covered Events is a final
settlement of the issue, made by the sponsor and the Program
Administrator. The sponsor, and the Department, may rely on, and
neither may challenge, the Final Determination on Covered Events in any
future Certification of Covered Costs related to the covered event that
was the subject of that Initial Determination.
(b) The parties agree that no appeal shall be taken or further
review sought, and that the Final Determination on Covered Events is final,
conclusive, non-appealable and may not be set aside, except for fraud.

Sec. 950.33 Covered costs dispute resolution.

(a) If a sponsor disagrees with the Claim Determination rendered in
accordance with Sec. 950.24 and cannot resolve the dispute informally
with the Claims Administrator, then the parties agree that any dispute
must be resolved as follows:

[[Page 46333]]

(1) A sponsor shall, within thirty (30) days of receipt of the
Claim Determination, deliver to the Claims Administrator in writing
notice of and reasons for its disagreement (Sponsor's Rebuttal),
including any expert opinion obtained by the sponsor.
(2) After submission of the sponsor's rebuttal to the Claims
Administrator, the parties have fifteen (15) days to informally and in
good faith participate in mediation to resolve the disagreement before
instituting the process under paragraph (b) of this section. If the
parties reach agreement through mediation, the agreement shall
constitute a Final Claim Determination.
(3) The parties shall jointly select the mediator(s). The parties
shall share equally the cost of the mediator(s).
(b) If the parties cannot resolve the disagreement through
mediation under the timeframe established under paragraph (a)(2) of
this section, any remaining issues in controversy shall be submitted by
the sponsor within ten (10) days to the Civilian Board or its
successor, for resolution by an Administrative Judge of the Civilian
Board utilizing the Board's Summary Binding Decision procedure. The
parties shall abide by the procedures of the Civilian Board for Summary
Binding Decision. The parties agree that the decision of the Civilian
Board shall constitute a Final Claim Determination.

Sec. 950.34 Final claim determination.

(a) If the parties reach a Final Claim Determination through
mediation, or Summary Binding Decision as set forth in this subpart,
the Final Claim Determination is a final settlement of the issue, made
by the sponsor and the Program Administrator.
(b) The parties agree that no appeal shall be taken or further
review sought and that the Final Claim Determination is final,
conclusive, non-appealable, and may not be set aside, except for fraud.

Sec. 950.35 Payment of final claim determination.

Once a Final Claim Determination is reached by the methods set
forth in this subpart, the parties intend that such a Final Claim
Determination shall constitute a final settlement of the claim and the
sponsor may immediately present to the Department a Final Claim
Determination for payment.

Sec. 950.36 Other contract matters in dispute.

(a) If the parties disagree over terms or conditions of the Standby
Support Contract other than disagreements related to covered events or
covered costs, then the parties shall engage in informal dispute
resolution as follows:
(1) The parties shall engage in good faith efforts to resolve the
dispute after written notification by one party to the other that there
is a contract matter in dispute.
(2) If the parties cannot reach a resolution of the matter in
disagreement within thirty (30) days of the written notification of the
matter in dispute, then the parties shall have fifteen (15) days during
which time they must informally and in good faith participate in
mediation to attempt to resolve the disagreement before instituting the
process under paragraph (b) of this section. If the parties reach
agreement through mediation, the agreement shall constitute a Final
Agreement on the matter in dispute.
(3) The parties shall jointly select the mediator(s). The parties
shall share equally the cost of the mediation.
(b) If the parties cannot resolve the disagreement through
mediation under the timeframe established in paragraph (a)(2) of this
section and either party elects to continue pursuing the disagreement,
that party shall within ten (10) days submit any remaining issues in
controversy to the Civilian Board or its successor, for resolution by
an Administrative Judge of the Civilian Board utilizing the Civilian
Board's Summary Binding Decision procedure. The parties shall abide by
the procedures of the Civilian Board for Summary Binding Decision. The
parties shall agree that the decision of the Civilian Board constitutes
a Final Decision on the matter in dispute.

Sec. 950.37 Final agreement or final decision.

(a) If the parties reach a Final Agreement on a contract matter in
dispute through mediation, or a Final Decision on a contract matter in
dispute through a Summary Binding Decision as set forth in this
subpart, the Final Agreement or Final Decision is a final settlement of
the contract matter in dispute, made by the sponsor and the Program
Administrator.
(b) The parties agree that no appeal shall be taken or further
review sought, and that the Final Agreement or Final Decision is final,
conclusive, non-appealable and may not be set aside, except for fraud.

Subpart E--Audit and Investigations and Other Provisions

Sec. 950.40 General.

The parties shall include a provision in the Standby Support
Contract that specifies the procedures in this subpart for the
monitoring, auditing and disclosure of information under a Standby
Support Contract.

Sec. 950.41 Monitoring/Auditing.

The Department has the right to audit any and all costs associated
with the Standby Support Contracts. Auditors who are employees of the
United States government, who are designated by the Secretary of Energy
or by the Comptroller General of the United States, shall have access
to, and the right to examine, at the sponsor's site or elsewhere, any
pertinent documents and records of a sponsor at reasonable times under
reasonable circumstances. The Secretary may direct the sponsor to
submit to an audit by a public accountant or equivalent acceptable to
the Secretary.

Sec. 950.42 Disclosure.

Information received from a sponsor by the Department may be
available to the public subject to the provision of 5 U.S.C. 552, 18
U.S.C. 1905 and 10 CFR part 1004; provided that:
(a) Subject to the requirements of law, information such as trade
secrets, commercial and financial information that a sponsor submits to
the Department in writing shall not be disclosed without prior notice
to the sponsor in accordance with Department regulations concerning the
public disclosure of information. Any submitter asserting that the
information is privileged or confidential should appropriately identify
and mark such information.
(b) Upon a showing satisfactory to the Program Administrator that
any information or portion thereof obtained under this regulation
would, if made public, divulge trade secrets or other proprietary
information, the Department may not disclose such information.

[FR Doc. 06-6818 Filed 8-10-06; 8:45 am]
BILLING CODE 6450-01-P

Notices For
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994

Standby Support for Certain Nuclear Plant Delays

Local Navigation