Nuclear Regulation:

Better Oversight Needed to Ensure Accumulation of Funds to Decommission Nuclear Power Plants

RCED-99-75: Published: May 3, 1999. Publicly Released: May 6, 1999.

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James E. Wells, Jr
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Pursuant to a congressional request, GAO provided information on the potential cost to decommission nuclear power plants and the implications of competition within the electricity industry, focusing on whether: (1) there is adequate assurance that the Nuclear Regulatory Commission's (NRC) licensees are accumulating sufficient funds for decommissioning; and (2) NRC is adequately addressing the effects of electricity deregulation on the funds that will eventually be needed for decommissioning.

GAO noted that: (1) although the estimated cost to decommission a nuclear power plant is on the order of $300 million to $400 million in today's dollars, NRC does not know if licensees are accumulating sufficient funds for this future expense; (2) GAO's analysis showed that, under likely assumptions, 36 of 76 licensees had not accumulated sufficient decommissioning funds through 1997; (3) however, all but 15 of these 36 licensees appeared to be making up their funding shortfalls with recent increases in the rates that they are accumulating decommissioning funds; (4) using more pessimistic and optimistic assumptions would increase or decrease the number of underfunded licensees, respectively; (5) although utility commissions have permitted licensees to continue charging their customers for the costs of decommissioning prematurely-retired plants, this financial safeguard could be affected by states' efforts to deregulate the electricity industry; (6) to address the movement toward deregulating the electricity industry, in November 1998 NRC began requiring its licensees to provide additional financial assurances if the Federal Energy Regulatory Commission or state utility commissions will no longer guarantee, through the regulation of electricity rates, the collection of sufficient funds for decommissioning; (7) however, one additional form of financial assurance--the early payment of decommissioning costs--may not be practicable or affordable; (8) also, NRC considered requiring licensees to accelerate decommissioning funding as a hedge against the premature retirement of plants but rejected the concept because of possible adverse effects on licensees' finances; (9) on the other hand, NRC's alternative methods to the collection of decommissioning funds earlier essentially rely on the continued financial health of the licensee or its parent company; (10) thus, the effectiveness of NRC's 1998 regulatory changes will likely depend on how vigorously NRC monitors the financial health of its licensees; (11) in this regard, licensees must now provide financial reports every 2 years to NRC so it can monitor financial assurances for decommissioning; and (12) however, NRC did not establish thresholds for clearly identifying acceptable levels of financial assurances or establish criteria for identifying and responding to unacceptable levels of assurances.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: NRC does not agree because it believes that all of its licensees are on track to provide necessary funds for decommissioning commensurate with NRC funding assurance regulations. NRC said that it has taken extensive action to ensure that adequate funds for decommissioning nuclear power plants are available when needed. It initiated a comprehensive reevaluation of its policies and regulations which resulted in a final policy statement on the financial assurance requirements for decommissioning nuclear power reactors in 1998 and a final standard review plan on power reactor licensee financial qualifications and decommissioning funding assurance in 1999. While the standard review plan cited examples of information that NRC would verify, review methodologies, and thresholds for identifying acceptable, questionable, and unacceptable indications of financial assurances, the plan did not show criteria for actions NRC would take as a result of its reviews.

    Recommendation: After NRC reviews licensees' initial reports on decommissioning financial assurances, the Chairman, NRC, should provide licensees and the interested public with information on the: (1) objectives, scope, and methodologies of NRC's reviews of the reports; (2) thresholds for identifying, on the basis of these reviews, acceptable, questionable, and unacceptable indications of financial assurances; and (3) criteria for the actions to be taken on the results of these reviews.

    Agency Affected: Nuclear Regulatory Commission


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