The U.S. nuclear fleet is well positioned to meet the financial obligations of decommissioning, and Fitch Ratings does not expect decommissioning to be a rating issue. The decommissioning risk is largely alleviated by regulations requiring nuclear plant owners to establish a nuclear decommissioning trust fund (NTF) for each unit and to demonstrate reasonable assurance that funds will be available to decommission each facility at the end of its life.
The NTFs are typically invested in debt and equity securities expected to appreciate over the typical 40-year license term (60-year terms for units granted life extension) plus the decommissioning period, which can run up to an additional 60 years. The extended investment horizon alleviates the capital market risk and provides additional comfort that the NTF will be sufficient to meet the decommissioning obligation.
In the most recent NTF status report (as of Dec. 31, 2014) filed with the nuclear Regulatory Commission (NRC) the minimum funding requirement was met by 101 of the 104 operating units. Three units reported shortfalls – Braidwood Units 1 and 2 and Byron Unit 2 – and were subsequently granted 20-year license extensions that, once included in the funding analysis, cured the shortfall. Nuclear owners are required to report the decommissioning funding status to the NRC biennially.
Premature closure due to economic or operating challenges is a potential risk that could lead to a funding shortfall, particularly for competitive generation companies (CGCs) that have no recourse to ratepayers. Fitch believes the risk is largely offset by the extended decommissioning options available to nuclear plant owners, including safe store (SAFSTOR), which can last up to 60 years. However, community opposition to an extended decommissioning period could heighten the early closure risk and financial exposure.