INTRODUCTION OF THE ``NUCLEAR DECOMMISSIONING FUNDS CLARIFICATION ACT''
-- HON. JERRY WELLER (Extensions of Remarks - June 09, 1999)
HON. JERRY WELLER
IN THE HOUSE OF REPRESENTATIVES
TUESDAY, JUNE 8, 1999
- Mr. WELLER. Mr. Speaker, I am pleased to join with my colleague, BEN
CARDIN, to introduce ``The Nuclear Decommissioning Funds Clarification
Act.'' The need for this legislation results from the emergence of a
competitive electricity market out of a regulated environment. Because of this
structural change, the tax treatment of nuclear decommissioning funds is not
clear under current law.
- Understanding that decommissioning a nuclear power plant represents a
uniquely large and signficant financial undertaking for a utility, in 1984
Congress enacted ``Code section 468A'' which was designed to have public
service commissions authorize that certain costs could be charged by an
electric utility company to its customers to dedicate to a nuclear
decommissioning fund (Fund).
- In 1986, the Code was further amended to allow an electric utility company
with a direct ownership interest in a nuclear power plant to elect to deduct
contributions made to a nuclear decommissioning fund, subject to certain
limitations. The Fund must be a segregated trust used exclusively for the
payment of decommissioning (shutting down) costs of nuclear power plants.
Decommissioning the nation's 110 nuclear power plants represents a large
financial commitment--so large that nuclear plant owners accumulate the
necessary funding over the plant's 40-year operating life.
- As a result of Federal and state laws enacted since 1992, 21 states have
approved plans to introduce competition, and all states are considering
deregulation. Fifty-four nuclear power plants are located in 15 of the states
that have undergone restructuring, more than half the nation's 103 operating
plants. Under current law, deductible contributions made to a nuclear
decommissioning fund (Fund) are based on limitations reflected in
cost-of-service ratemaking. In a competitive market, companies will no longer
operate in a regulated, cost-of-service environment and will not be able to
deduct contributions to decommissioning funds. Therefore, it is appropriate to
clarify the deductibility of nuclear decommissioning costs under market-based
rates and to codify the definition of ``nuclear decommissioning costs'' that
limit contributions to a Fund.
- In addition, restructuring has brought regulatory and market forces to
bear upon continued ownership of nuclear power plants. As more companies move
away from the nuclear generation--either by chioce or state mandate--companies
such as illinois Power in my home state are planning transfers and sales of
nuclear power plants. These new business activities have triggered unforeseen
tax consequences that, if not corrected, could force the early shutdown of
nuclear units that cannot be sold. Hence, a number of nuclear power plants may
be forced to shut down before their licenses expire, resulting in the loss of
jobs and a reduction of energy supply.
- Decommissioning nuclear power plants is an important health and safety
issue. it is essential that monies are available to safely decommission the
plant when it is retired. It is
[Page: E1179]also necessary, in many cases because of
restructuring laws passed by states, to clarify the tax treatment for nuclear
power plants that transfer ownership. I urge my colleagues to join with me in
supporting this important bill.