Testimony On The Reasonableness Of The SONGS 2&3 Nuclear Decommissioning Activities And Costs Incurred During

Transcription

1 Application No.: Exhibit No.: Witnesses: A.1-0-XXX SCE-0 Lou Bosch (U -E) Testimony On The Reasonableness Of The SONGS & Nuclear Decommissioning Activities And Costs Incurred During PUBLIC VERSION Before the Public Utilities Commission of the State of California Rosemead, California March 1, 01

2 SCE-0: Testimony On The Reasonableness Of The SONGS & Nuclear Decommissioning Activities And Costs Incurred During Table Of Contents Section Page Witness I. INTRODUCTION...1 L. Bosch II. OVERVIEW OF SCE s DECOMMISSIONING AGENT ORGANIZATION... A. Introduction... B. SCE s Decommissioning Agent Organization Vice President Decommissioning.... Decommissioning Oversight.... Site Engineering.... Nuclear Regulatory Affairs and Nuclear Oversight.... Site Operations and Maintenance... a) Operations... b) Maintenance and Work Control... c) Emergency Preparedness... d) Radiation Protection and Waste, Chemistry, and Environmental... e) Security... III. COMPARISON OF RECORDED COSTS TO THE 01 SONGS & DCE...1 IV. MAJOR PROJECTS COMPLETED DURING A. Introduction...1 B. Major Projects Completed During Select Decommissioning General Contractor (DGC)...1 a) Description of Decommissioning Activity...1 -i-

3 SCE-0: Testimony On The Reasonableness Of The SONGS & Nuclear Decommissioning Activities And Costs Incurred During Table Of Contents (Continued) Section Page Witness (1) Development of the RFP...1 () Planned bid review process...1 () Selection Results...1 () Peer Review...1 b) Summary of Costs and Variance Explanation...1. Spent Fuel Pool Islanding...0 a) Description of Decommissioning Activity...0 b) Summary of Costs and Variance Explanation...0. Transition Modifications Phase...1 a) Records Reduction...1 (1) Description of Decommissioning Activity...1 () Summary of Costs and Variance Explanation... b) Large Organism Exclusion Device (LOED) Modification... (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation... c) Simplification and Streamlining Project... (1) Description of Decommissioning Activity... -ii-

4 SCE-0: Testimony On The Reasonableness Of The SONGS & Nuclear Decommissioning Activities And Costs Incurred During Table Of Contents (Continued) Section Page Witness () Summary of Costs and Variance Explanation... d) Special Purpose Vehicle - Implementation... (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation... V. TOTAL UNDISTRIBUTED ACTIVITIES DURING THE REVIEW PERIOD... A. Introduction... B. Undistributed Labor - Overview Description of Decommissioning Activity...0. Summary of Costs and Variance Explanation...0 C. Undistributed Decommissioning General Contractor Staff Overview Description of DGC Activities.... Summary of Costs and Variance Explanation... D. Undistributed Non-Labor Overview Fees, Permits, and Leases... a) Environmental Permits and Fees... (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation... b) Emergency Preparedness Fees... -iii-

5 SCE-0: Testimony On The Reasonableness Of The SONGS & Nuclear Decommissioning Activities And Costs Incurred During Table Of Contents (Continued) Section Page Witness (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation... c) Association Fees and Expenses... (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation... d) NRC Fees... (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation.... Plant Operations...0 a) Contracted Services...1 (1) Description of Decommissioning Activity...1 () Summary of Costs and Variance Explanation... b) Utility Staff Health Physics Supplies... (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation... c) Decommissioning Advisor... -iv-

6 SCE-0: Testimony On The Reasonableness Of The SONGS & Nuclear Decommissioning Activities And Costs Incurred During Table Of Contents (Continued) Section Page Witness (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation... d) Security-Related Expenses... (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation.... Other Non-Labor... a) Insurance... (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation... b) Severance... (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation... c) Community Engagement Panel...0 (1) Description of Decommissioning Activity...0 () Summary of Costs and Variance Explanation...0 d) Energy...1 -v-

7 SCE-0: Testimony On The Reasonableness Of The SONGS & Nuclear Decommissioning Activities And Costs Incurred During Table Of Contents (Continued) Section Page Witness (1) Description of Decommissioning Activity...1 () Summary of Costs and Variance Explanation...1 e) Utilities (Water, Gas, and Phone)...1 (1) Description of Decommissioning Activity...1 () Summary of Costs and Variance Explanation... f) Third Party Legal... (1) Description of Decommissioning Activity... () Summary of Costs and Variance Explanation... E. Service Level Agreements Description of Decommissioning Activity.... Summary of Costs and Variance Explanation... VI. CONCLUSION... Appendix A Costs by DCE Line Item for Major Projects Completed and Undistributed Activities Appendix B Report of the Independent Observer Appendix C Witness Qualifications Appendix D Declaration of Todd R. Adler Regarding the Confidentiality of Certain Data -vi-

8 SCE-0: Testimony On The Reasonableness Of The SONGS & Nuclear Decommissioning Activities And Costs Incurred During List Of Figures Figure Page Figure II-1 SCE s Decommissioning Agent Organization... Figure IV- DGC Selection Timeline DCE Versus Actual...1 Figure IV- Large Organism Exclusion Device (LOED)... Figure IV- LOED Barriers... -vii-

9 SCE-0: Testimony On The Reasonableness Of The SONGS & Nuclear Decommissioning Activities And Costs Incurred During List Of Tables Table Page Table I-1 Yearly Comparison Of Recorded Costs To The 01 SONGS & DCE (0% Share, Millions of 01 $)... Table III- Summary Comparison Of Recorded Costs To The 01 SONGS & DCE (0% Share, Millions of 01 $)...1 Table IV- Comparison Of Recorded Costs For Major Projects Completed During To The 01 SONGS & DCE (0% Share, Millions of 01 $)...1 Table IV- Comparison Of Recorded Costs For Transition Modification Projects Completed In To The 01 SONGS & DCE (0% Share, Millions of 01 $)...1 Table V- Comparison Of Recorded Undistributed Costs To The 01 SONGS & DCE (0% Share, Millions of 01 $)... Table V- Comparison Of Recorded Costs For Utility Staff & Security Force To The 01 SONGS & DCE (0% Share, Millions of 01 $)...1 Table V- Comparison Of Recorded Costs For Fees, Permits, And Leases To The 01 SONGS & DCE (0% Share, Millions of 01 $)... Table V- Comparison Of Recorded Costs For Plant Operations To The 01 SONGS & DCE (0% Share, Millions of 01 $)...1 Table V Recorded Costs for Contracted Services (0% Share, Millions of 01 $)... Table V- Comparison Of Recorded Costs For Other Non-Labor To The 01 SONGS & DCE (0% Share, Millions of 01 $)... -viii-

10 I. INTRODUCTION The purpose of this testimony is to demonstrate the reasonableness of San Onofre Nuclear Generating Station Unit Nos. & (SONGS &) decommissioning costs recorded for all completed major projects 1 and total undistributed activities during the period January 1, 01 and December 1, 01 (01-01). SCE recorded $. million (0% share, 01 $) for the major projects completed during 01-01, and $. million (0% share, 01 $) for undistributed costs. SCE requests that the Commission find the combined costs of $.1 million (0% share, 01 $) to be reasonable. In A , SCE and San Diego Gas & Electric Company (SDG&E) submitted the proposed Milestone Framework, jointly developed by SCE, SDG&E, ORA, TURN, and UCAN, for the California Public Utilities Commission s (CPUC) review and approval. The Milestone Framework provides the timing and scope of recorded costs that will be considered for review in each NDCTP. With respect to this proceeding, the Milestone Framework provides for the review of all completed major projects (as defined in the Milestone Framework) and all undistributed costs recorded during Recorded costs for major projects completed during include all costs incurred since the project was initiated. 1

11 Table I-1 summarizes the costs compared to the 01 SONGS & Decommissioning Cost Estimate (01 SONGS & DCE) approved in Decision (D.) : Table I-1 Yearly Comparison Of Recorded Costs To The 01 SONGS & DCE (0% Share, Millions of 01 $) Description 01 DCE (01 $) Year Recorded (01 $) Variance 1 01 $. Major Projects Completed In $ $. $. $.0 01 $1. 01 $ Undistributed Costs $. $. $ 1.1 Total Costs $.0 $.1 $.1 Chapter II describes the SONGS Decommissioning Agent Organization (DAO). Chapter III compares the total recorded costs to the 01 SONGS & DCE. Chapter IV provides detailed information regarding the major projects completed in and variance explanations of recorded costs against the 01 SONGS & DCE. Chapter V provides detailed information regarding the undistributed costs recorded during 01-01, as well as variance explanations. Chapter VI concludes SCE s testimony.

12 II. OVERVIEW OF SCE s DECOMMISSIONING AGENT ORGANIZATION A. Introduction SCE, as the decommissioning agent, is responsible for completing SONGS decommissioning, overseeing the Decommissioning General Contractor (DGC), obtaining the related state and federal permitting, and conducting the site closure processes. In 01-01, SCE continued to perform planning and other significant preparatory activities associated with SONGS & decommissioning, operate and maintain certain plant systems to meet license requirements, and ensure the safe possession of spent nuclear fuel. As such, and as prudent, SCE aligned its work force and support to the work planned during the review period. As discussed in Policy testimony Exhibit SCE-01, the Decommissioning Agreement requires major decisions to be made by the Participants collectively, requiring unanimous decision making. During 01-01, SCE provided oversight for a number of activities, such as: (1) expanding the Independent Spent Fuel Storage Installation (ISFSI); () planning for the transfer of fuel from the spent fuel pools to the dry storage in the ISFSI; () selecting the DGC to complete major portions of the decommissioning project; () implementing various transition projects such as the large organism exclusion device (LOED) and records reduction projects to comply with regulatory requirements and other obligations, () obtaining necessary approvals of various NRC license amendments, exemptions, and other required submittals; and () transitioning SONGS management systems to the DGC. A brief discussion of each group and their respective areas of responsibility is discussed further below. During 01-01, SCE continued to perform its core responsibilities, including: (1) operating and maintaining plant systems that support spent fuel pool operations; () implementing updated NRC requirements specified in the Decommissioning Quality Assurance Program, the Permanently Defueled Emergency Plan, and the Defueled Technical Specifications; () preparing, obtaining, and executing various NRC license amendments, exemptions, and other required submittals to reflect that SONGS & is permanently retired and being decommissioned; () maintaining a security force level in

13 1 accordance with NRC requirements; () ensuring Contractor activities are performed safely and within scope; and () providing oversight of decommissioning activities. SCE also continued decommissioning planning related to the demolition and dismantlement (D&D) of SONGS including assessing future staffing requirements, and engaged in various external stakeholder communication activities that include: (1) community outreach; () discussions with the Department of the Navy (Navy) and the California State Lands Commission (CSLC) regarding the requirements for the SONGS easement and leases; () discussions with the CSLC and California Coastal Commission (CCC) regarding the Environmental Impact Report (EIR) and Coastal Development Permit (CDP); and () CPUC regulatory activities for decommissioning. B. SCE s Decommissioning Agent Organization Figure II-1 below depicts SCE s Decommissioning Agent Organization (DAO) during A brief discussion of each group and their respective areas of responsibility during is 1 provided below. Figure II-1 SCE s Decommissioning Agent Organization Vice President Decommissioning The SONGS Vice President of Decommissioning and Chief Nuclear Officer (CNO) has overall responsibility for the safe, efficient, and compliant decommissioning of SONGS. The CNO engages during the course of his work with the NRC, community organizations, outside stakeholders, and the Participants. During 01-01, the Vice President and CNO directly reviewed and oversaw the

14 activities completed by each of the organizations responsible for decommissioning and dismantlement projects. The Vice President and CNO also provided direction for site administration functions that include DGC scope control, environmental decommissioning strategy, decommissioning finance, decommissioning counsel, external communications, and strategic planning issues. The DGC scope control function included contract compliance, document control, and transition and scope validation. The environmental decommissioning strategy function included environmental review, permitting, and Mesa remediation activities. The decommissioning counsel function provided legal support and advice to the organization. The decommissioning finance function provided general direction and oversight in budgetary and financial reporting matters. The external communications function included community outreach, local public affairs activities, and media relations. The strategic planning function includes interaction with SONGS Participants and stakeholder engagement, such as the Community Engagement Panel (CEP).. Decommissioning Oversight In 01-01, the Decommissioning Oversight (DO) group continued to plan SONGS transition from an operating facility to decommissioning. DO coordinated and monitored the performance of major projects, such as the ISFSI expansion, cold & dark project, spent fuel pool island (SFPI) project, nuclear fuel inspection, cyber security, and other decommissioning transition projects such as installation of a large organism exclusion device (LOED) on the SONGS & conduits, and backlog reduction of nuclear records. The DO monitored costs and schedules, and implemented project controls to achieve positive results for these projects. DO provided project management oversight and was accountable for: (1) developing project scope, cost, and schedule; () controlling project scope, cost, and schedule, and identifying adjustments throughout the project life cycle; () negotiating contracts with vendors for various tasks and projects; () tracking the status of purchase and change orders for the projects; () interfacing with operations, radiation protection & chemistry, maintenance & work control, and security for various projects; and () modifying procedures to reflect changing plant conditions.

15 When activities performed by DO were directly related to a specific distributed activity, DO personnel recorded their time to the specific distributed account.. Site Engineering Site engineering includes civil, mechanical, electrical/instrumentation & control, and plant support. These engineering groups provided: (1) engineering analyses and solutions; () technical expertise in regulatory and licensing issues; and () quality assurance and control programs to maintain SONGS in a safe condition and comply with the NRC licenses and other regulatory requirements. The SONGS engineering staff members have the education, experience, and skills commensurate with their level of responsibility, and their qualifications provide reasonable assurance that decisions and actions during decommissioning will not create a hazard to the health and safety of the public. In particular, site engineers provided engineering expertise for such projects as: (1) SONGS cyber security program required to comply with NRC regulations regarding the security and protection of digital assets, including those used with the safe storage of spent nuclear fuel; () cold & dark project; () spent fuel pool island project; and () the Updated Final Safety Analysis Report for a decommissioned site. Site engineering also supported SONGS nuclear fuel and fire protection programs. When activities performed by site engineering were directly related to a specific distributed project, site engineering personnel recorded their time to the specific distributed account.. Nuclear Regulatory Affairs and Nuclear Oversight Nuclear Regulatory Affairs (NRA) interfaces with the NRC regarding SONGS compliance with regulatory requirements, and provides information regarding decommissioning. During 01-01, the group s responsibilities included addressing NRC requests for information and submitting various periodic reports to the NRC. Examples of reports submitted by this group include the: (1) annual radiological effluent release report; () annual radiological environmental report; and () annual decommissioning funding status report. The group also developed strategies for addressing regulatory issues for decommissioning, such as the scope and timing of license amendments and exemption requests. NRA activities kept SONGS in compliance with the conditions and commitments arising from SONGS & licenses. NRA was responsible for critical activities directly related to

16 SONGS safety and security. NRA also provided central management for NRC activities related to SONGS, and coordinated and advised on NRC matters. Nuclear Oversight is responsible for executing SONGS decommissioning quality assurance program (DQAP) in compliance with C.F.R. 0, Appendix B, and other appropriate regulations and standards. During 01-01, the organization performed audits, assessments, and inspections, and provided appropriate oversight so that quality-affecting activities at SONGS are performed in accordance with procedures. Nuclear Oversight personnel also maintained an independent, NRC-required quality assurance and safety function for SONGS.. Site Operations and Maintenance The site plant manager is responsible for plant operations, maintenance and work control, performance improvement/corrective action program, emergency preparedness, radiation protection and waste, chemistry and environmental, and security. a) Operations Operations is responsible for operating, inspecting, and testing the remaining inservice plant equipment within the requirements of the NRC license, defueled technical specifications, and operating instructions. During 01-01, with SONGS & in a permanent shutdown condition, the primary function of the operations group was to safely maintain spent nuclear fuel in the pools and the ISFSI. Operations must also handle plant equipment to support maintenance activities to keep SONGS in a safe and secure condition. Operations personnel were required to take training programs to stay current on operating instructions and procedures that relate to a plant in a shutdown condition. Within the operations group, certified fuel handlers kept the spent fuel pools operating properly, operated the plant systems that supported spent fuel pool island cooling, and performed periodic testing of plant equipment to determine the equipment was operating within design parameters. In particular, certified fuel handlers provided required oversight for spent fuel sipping and visual inspections that commenced in 01 and was completed in 01. The examination of fuel assemblies is required by the NRC prior to moving the fuel to dry storage. Spent fuel sipping is a nondestructive, time-intensive examination to determine whether a spent fuel assembly shows evidence of

17 cladding damage. The inspections allowed SCE to determine whether fuel assemblies are damaged and need to be stored in a fuel can for damaged fuel. Also within the operations group, fire protection is responsible for carrying out activities of fire protection, including such things as fire prevention, detection, control, confinement suppression, extinguishment, inspection, testing, maintenance, and training pursuant to the NRC regulation for the Fire Protection Program C.F.R. 0.(f), and NRC Reg. Guide 1. Fire Protection Program for Nuclear Power Plans during Decommissioning and Permanent Shutdown which is used as guidance to implement this NRC Regulation. The records management group within operations was responsible for receiving, indexing, controlling, distributing, maintaining, and storing SONGS documents and records in accordance with SONGS quality assurance program and document-retention policy. SONGS records management was responsible for the SONGS records reduction project. b) Maintenance and Work Control Maintenance and Work Control performed preventive and corrective maintenance on all electrical systems; mechanical systems; instrumentation and controls systems; and other plant systems still in operation. In addition, this group calibrates and maintains all portable and fixed radiation instrumentation required by the radiation protection program. Maintenance works closely with operations in scheduling work activities. Maintenance is also responsible for retiring systems that are no longer needed and removing hazardous materials from them, as decommissioning progresses. c) Emergency Preparedness Emergency preparedness planning functions continue to be required by federal regulations as long as nuclear fuel is stored on-site. NRC regulations dictate requirements for the emergency preparedness program, including periodic drills to verify its effectiveness. The SONGS Emergency Plan delineates the SONGS program for protecting the health and safety of workers and the public in the event of a radiological emergency. During 01-01, the emergency preparedness group was responsible for participation in the Emergency Planning Alternate Years Integrated Drill, which

18 includes participation of the Counties of San Diego and Orange, Marine Corps Base Camp Pendleton and the State of California s Office of Emergency Services. d) Radiation Protection and Waste, Chemistry, and Environmental This group was responsible for: (1) developing and maintaining station radiation protection programs; () developing and maintaining programs and policies for chemistry and radiological effluent controls; and () developing and maintaining environmental protection programs, as required by federal, state, and local regulatory requirements. Radiation Protection is responsible for providing station radiation protection support to operational, maintenance, and decommissioning activities. Radiation Protection includes support of low level radioactive waste (LLRW) packaging and shipping, personnel radiation protection, a comprehensive respiratory protection program, and an as low as reasonably achievable (ALARA) program. The group maintains a staff necessary for safely collecting, sorting, packaging, shipping and disposal of LLRW resulting from the decommissioning of SONGS &. Radiation Protection personnel assess and monitor areas within the site to identify radiological conditions. This information is provided to SONGS employees and contractors so that they utilize proper protective clothing and equipment and avoid/minimize radiation exposure. In addition, radiation personnel are responsible for ensuring that all personnel radiation records are properly recorded in individual histories, and that records are properly maintained as required by regulation. Although SONGS is in a permanent shutdown condition, the chemistry program still provides plant chemistry control for SONGS & spent fuel pools, and radiological effluent monitoring and control for the SONGS site. These activities are necessary during decommissioning to maintain the reliability and integrity of plant systems necessary to maintain the spent fuel pools. Environmental Protection is responsible for reviewing and approving required reports to regulatory agencies, preparing applications for required permits, supporting the radiological environmental monitoring program through a sample collection program, and preparing regulatory reports for national pollutant discharge elimination system (NPDES) permit and hazardous material and waste.

19 e) Security As long as nuclear fuel continues to remain on-site, and in accordance with NRC regulations ( C.F.R..1 and C.F.R. 0.), SONGS must continue to maintain a security force to protect against radiological sabotage. The SONGS security force is comprised of highly skilled, trained, and certified officers that can detect and deter threats. In addition, SONGS will continue to assess and upgrade security equipment, facilities, and procedural requirements as appropriate to ensure that the SONGS security force is able to continue to provide a high level of protection for SONGS and the safe and secure storage of SONGS spent nuclear fuel. SONGS security is responsible for: (1) nuclear security operations; () access authorization and fitness for duty; and () security training and support. Nuclear security operations guards against a design basis threat of radiological sabotage. To perform this function, the group monitors security equipment, alarm systems, detection and surveillance equipment, and communication systems. Nuclear security operations utilizes various levels of defense and protection systems, technologies, programs, and equipment, to implement the physical protection program. The effectiveness of the security force response is tested by NRC-required force-on-force exercises. The nuclear security operations function will be required at SONGS as long as spent fuel is stored on-site. Security Training is responsible for training and certification of the SONGS security officers. This group manages and oversees the following activities: (1) firearms inventory and maintenance; () security lock and alarm training; () drills and exercises; and () coordination of security support for the installation, repair, maintenance and operation of physical security devices, equipment, and barriers. In 01, security training implemented a new simulation training program to augment live firearms training. The SONGS Access Authorization and Fitness for Duty group is responsible for providing access to the owner controlled area, screening individuals for unescorted access to the SONGS protected area, protecting safeguards information, and administering the Fitness for Duty program. To ensure timely completion of decommissioning activities, it is critical that SONGS

20 maintains sufficient staff to ensure the timely processing of new workers and compliance with fitness for duty regulations. As explained above, the activities performed by SCE were reasonable because they were necessary to: (1) comply with existing technical specifications; () prepare the facility for decommissioning; () protect the health and safety of the workers and the public; () retire plant systems to minimize or eliminate unnecessary costs; and () keep the public and stakeholders informed about decommissioning progress.

21 III. COMPARISON OF RECORDED COSTS TO THE 01 SONGS & DCE SCE recorded $.1 million (0% share, 01 $) for major projects and undistributed activities completed during The 01 SONGS & DCE forecasted $.0 million (0% share, 01 $) for these activities, which resulted in a variance of $.1 million or % more than the estimate. Table III- below provides a summary comparing the recorded costs to the 01 SONGS & DCE. Table III- Summary Comparison Of Recorded Costs To The 01 SONGS & DCE (0% Share, Millions of 01 $) Description 01 DCE (01 $) Recorded (01 $) Variance 1 Select Decommissioning General Contractor $ 0. $ 1. $ 1.0 Spent Fuel Pool Islanding 1.. (.0) Transition Modifications - Phase Total Major Projects Completed In $ 1. $. $.0 Labor-Staffing $. $. $ (0.) Decommissioning General Contractor Staff... Non-Labor.0. (1.) Service Level Agreements Total Undistributed $. $. $ Total Costs $.0 $.1 $ As SCE commenced or continued the actual planning and performance of certain decommissioning activities in 01-01, SCE encountered circumstances that required it to deviate from the DCE schedule. SCE did not perform each decommissioning activity precisely in accordance with the estimate and schedule in the 01 SONGS & DCE, and SCE revised schedules so decommissioning would proceed safely and efficiently, and comply with all applicable regulatory requirements. It is important to note, however, that not all schedule deviations change the estimated cost Recorded costs for major projects completed during include all costs incurred since the project was initiated. Undistributed costs include only recorded costs. 1

22 for a particular activity. SCE describes instances of schedule deviations and any cost variances in Chapters IV and V below. D directed SCE to provide explanations for variances exceeding ten-percent. The 01 SONGS & DCE forecasted $1. million for distributed completed project costs in Therefore, the decision would generally require SCE to provide variance explanations for distributed activities exceeding $1. million at the bottom line. However, to provide additional detail regarding recorded distributed completed costs, SCE is providing explanations for variances exceeding $1.0 million. In addition, SCE is providing explanations for variances for any recorded costs that are more than the DCE forecast for that expense category. 1

23 IV. MAJOR PROJECTS COMPLETED DURING A. Introduction This testimony section discusses SONGS & costs for major projects completed during The 01 SONGS & DCE forecasted $1. million (0% share, 01 $) for these projects. SCE recorded $. million (0% share, 01 $) for these projects, which resulted in a variance of $.0 million more than estimated. This variance is primarily due to the DGC selection project and Transition Project Modifications which is offset by an underrun in the spent fuel pool islanding. Table IV- provides a summary of the costs, and SCE discusses the variances in greater detail below. Table IV- Comparison Of Recorded Costs For Major Projects Completed During To The 01 SONGS & DCE (0% Share, Millions of 01 $) Description 01 DCE (01 $) Recorded (01 $) Variance 1 Select Decommissioning General Contractor $ 0. $ 1. $ 1.0 Spent Fuel Pool Islanding 1.. (.0) Transition Modifications - Phase Total Major Projects Completed In $ 1. $. $ B. Major Projects Completed During Select Decommissioning General Contractor (DGC) a) Description of Decommissioning Activity Early in the decommissioning planning process, SCE determined that a DGC should be used to perform the major decontamination and dismantling (D&D) activities for SONGS & decommissioning. This decommissioning model provides for oversight of the DGC s activities by SCE as the Decommissioning Agent. Engaging a DGC would allow SCE to deal directly with one decommissioning contractor responsible for major decommissioning activities rather than multiple contractors responsible for various, potentially overlapping aspects of these activities. As the 1

24 Decommissioning Agent and an NRC licensee, SCE has overall responsibility for the safe, compliant, and cost-effective decommissioning of SONGS, including oversight of the DGC. (1) Development of the RFP The DGC selection project began in April 01 with the help of CHMHill to prepare a SONGS DGC Strategic Assessment Plan that: (1) identified the major issues for SCE to address in connection with procuring a DGC for SONGS; and () developed preliminary plans for SCE to initiate a DGC procurement process. The DGC Strategic Assessment Plan identified lessons learned from other facilities that had utilized a DGC so that those lessons could be applied to SONGS decommissioning. SCE incorporated the DGC Assessment Plan into its planning strategy for procuring the DGC for SONGS decommissioning. SCE managed the DGC procurement process as a project to ensure the DGC contract met SCE s planned scope, schedule, budget, and quality expectations for decommissioning. SCE managed the project in three stages and utilized project controls to ensure transparency and fairness. The planning strategy and project stages incorporated lessons learned from other facilities that had utilized a DGC to optimize the selection of a DGC for SONGS decommissioning. First, SCE developed DGC solicitation documents and identified qualified bidders. In September 01, SCE released a Request for Information (RFI) to approximately sixty contractors. The RFI responses allowed the team to gauge the industry to determine decommissioning capabilities. In the third quarter of 01, SCE developed, approved, and implemented a project-specific Zone of Silence process to last the duration of the sourcing event (pre-contract execution). During this time, communication between the contractors/bidders and SCE personnel was restricted and structured. The Zone of Silence is defined as, The period, generally between the time that a bidder received an RFI and the Award to the successful bidder, when bidders and Edison personnel may not conduct private, individual discussions about the bid. The purpose of the Zone of Silence is to ensure the integrity of the bid process, provide adequate documentation for any future internal or external audits of the sourcing process, guard against any impropriety, and help ensure that the sourcing process is fair to all participants. A leadershipapproved Zone of Silence document was distributed to all bidders, team members, and plant staff. Meetings were held to review, discuss, and educate key personnel on the Zone of Silence document. 1

25 In parallel, SCE began to develop the Request for Proposal (RFP), instructions and selection criteria for the RFP, and the draft DGC contract that would be included in the RFP. SCE also engaged independent consultants to review the RFP prior to issuing it in order to incorporate best practices. Next, in August 01, SCE released the RFP to the potential bidders, and planned to negotiate and award the DGC contract in 01. The DGC bids were received in January 01. SCE planned to evaluate and select the DGC from RFP bidders based on their technical capabilities and commercial terms, amongst other factors. The bid evaluation process was forecasted to take five months. The technical evaluations examined the technical merits and capabilities of each team. The commercial evaluations evaluated terms, conditions, and actual costs. The overall goal was to select a DGC that provided the best predictable cost, schedule, and highest quality. SCE established a cross-functional team of technical and commercial specialists consisting of industry experts, plant personnel, procurement representatives, attorneys, risk assessment analysts, engineers, cost estimators, and other functions who would complete separate evaluations. () Planned bid review process SCE utilized a down-selection process using gates beginning in the first quarter of 01 to help determine if a bidder continued to be a viable candidate for contract consideration. The gates provided the maximum leverage to SCE by not down-selecting to one bidder and instead allowing each bidder to remain in the process as long as the specific gate criteria had been met. This process also leveraged the best terms and conditions for SCE during negotiations. The five gates to the bid evaluation and selection process were: Gate 1 Technical Evaluation: Each bidder s proposal was evaluated by a technical team and awarded a score out of 0 points based on a technical evaluation guide. To pass Gate 1, the bidder must have achieved a minimum score of points. Gate Commercial Evaluation Risk Profile, Financial Performance, & Assurance: To pass Gate, the bidder had to prove to be financially solvent and able to financially demonstrate they have the assets, means, and methods to provide the required level of financial security. 1

26 Gate Commercial Evaluation Terms and Conditions: To pass Gate, the bidder had to demonstrate a willingness to enter into a commercially reasonable contract that did not inappropriately shift the risk of contract performance from the bidder to SCE. The bidder had to demonstrate that it was able to be reasonable and that any proposed changes to the proposed terms and conditions were based on legitimate business needs (and not simply an effort to transfer risk). Gate Commercial Evaluation Total Ownership Cost: SCE analyzed all of the bidder s proposals to determine all the cost elements contained within their respective proposals. To pass through Gate, the bidder had to be willing to perform and stand behind their work on a fixed price basis. If a bidder was able to satisfy to SCE that the bidder s fixed price bid was reasonable based on the cost elements that were used by the bidder in calculation of the bidder s fixed price and passed an analysis of these cost elements by SCE, then the bidder moved on to Gate. Gate Commercial Evaluation Best and Final: Gate identified the bidder that provided the best overall value. SCE engaged in this process and interacted with the remaining bidder(s) until a final bidder emerged as offering the best overall value. Gate consisted of a series of best and final negotiations that were conducted face to face. The bidder that passed through Gate was recommended as the potential supplier to the Chief Procurement Officer (CPO) and the Chief Nuclear Officer (CNO) and other executive management as the preferred choice. A bidder had to pass through Gate 1 prior to getting to Gate. If a bidder failed, at any time, to advance past a gate, SCE would eliminate that bidder from consideration and the bidder was not allowed to advance or participate in any further discussions and/or negotiations. If all the bidders made it through each of the first four Gates, all three bidders would participate in Gate (commercial best and final negotiations). () Selection Results SCE negotiated with each of the three selected bidders regarding the terms and conditions of the DGC contract. The Participants also participated directly in these negotiations. The DGC contract, including the terms and conditions, technical specifications, and non-technical requirements, provided the scope of the decommissioning activities to be completed by the DGC. The DGC contract was awarded to a joint venture of AECOM and EnergySolutions on December 0, 01, with an effective date of January, 01. 1

27 () Peer Review SCE obtained an independent peer review after Gate 1 and Gate, and engaged an independent observer for Gate of this down-selection process. The independent peer review was conducted by several industry experts. The independent observer/evaluator was the Accion Group, a Commission-approved consultant for reviewing contract procurement and negotiation processes. The results of Gates 1- were reviewed and approved by the Participants. b) Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $0. million (0% share, 01 $) for the Select DGC Project. SCE recorded $1. million (0% share, 01 $) for this major project, resulting in a variance of $1.0 million more than estimated. The 01 SONGS & DCE included costs based on SCE s typical procurement process for selecting a vendor and negotiating contract terms and conditions. SCE included these costs based upon the information known at the time the DCE was prepared. To confirm that SCE s procurement process was appropriate for this type of solicitation, SCE engaged CHMHill through a competitive bidding process to develop a SONGS DGC Strategic Assessment Plan that identified current market best practices, and to obtain market intelligence surrounding the contractors capable of performing a large-scale decommissioning project. Subsequently, to incorporate the lessons learned identified by CHMHill, SCE developed a more comprehensive process than was anticipated in the 01 SONGS & DCE. Accordingly, SCE utilized a team of experts to thoroughly develop the RFP, and developed a document library and on-site work facility for the bidders to facilitate contractor due diligence. SCE also determined it was vitally important to maintain multiple viable bidders to ensure a competitive bidding environment during the entirety of the procurement process. SCE believed this would lead to the selection of the most qualified vendor, and produce optimal contract terms and value on behalf of customers. See Appendix A, Row 1 for distributed costs by DCE line number. See also A Exhibit SCE-0, page 1. 1

28 Due to the complexity of the bids and negotiating process, the effort needed to evaluate the bids, and the more extensive time to review the RFPs, selecting the DGC took longer than anticipated and required more resources. For example, the decision to maintain three viable bidders through the entire negotiation process essentially tripled the work load. The work also required a larger staff (approximately full-time employees) to review the bids and conduct negotiations than included in the 01 DCE (approximately part-time employees). In addition, the independent peer review process initiated by SCE, which involved multiple teams of and reviews by subject matter experts at all stages of the selection process, resulted in higher costs than included in the 01 DCE. The 01 DCE did not include costs for negotiating with multiple bidders or for independent peer review. This fair, transparent, and rigorous procurement process allowed SCE to execute a well-developed DGC contract capable of being implemented. It was reasonable for SCE to implement this more extensive process and incur these costs, as it resulted in a lower overall contract price and better terms than SCE would have been able to achieve otherwise. extensive process that SCE implemented: Figure IV- below compares the timeline included in the 01 DCE to the more Figure IV- DGC Selection Timeline DCE Versus Actual 1 1 This figure reflects the robust process SCE used for this important solicitation. The Commission should determine that the process SCE utilized was reasonable. 1

29 Spent Fuel Pool Islanding a) Description of Decommissioning Activity The purpose of the Spent Fuel Pool Island (SFPI) Project is to replace the existing SONGS Units & spent fuel pool cooling systems. One SFPI system was installed in each SONGS unit. The SFPI system will be required until all fuel is removed from the spent fuel pools and transferred to the ISFSI. When the plant was operating, the SONGS & nuclear steam cycle generated a tremendous amount of thermal energy that was eventually transferred to the Pacific Ocean, via major plant cooling systems designed for that purpose. Now that the plant has been shut down, the only source of heat is the spent fuel stored in the SONGS & spent fuel pools, which requires a less extensive cooling system. Accordingly, SCE installed the stand-alone cooling systems that transitioned the pools into SFPIs which used air cooled chillers. This allowed SCE to retire the original plant-cooling systems, and isolate the pools from the Pacific Ocean. Many environmental stakeholders and regulatory agencies have expressed a desire for plants to retire their cooling systems that utilize ocean water. Retiring the existing spent fuel pool cooling system was essential to minimizing SONGS reliance on component cooling and ocean cooling systems. Both the California Coastal Commission (CCC) and the NRC approved the project. b) Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $1. million (0% share, 01 $) for the Spent Fuel Pool Islanding Project. SCE recorded $. million (0% share, 01 $) for this major project, resulting in a variance of $.0 million less than estimated. The primary reason for the under run is that SCE utilized a competitive bidding process for the design, procurement, and installation of the work. The competitive process led to the selection of the most qualified vendor, and produced optimal value on behalf of customers. Also, as the design of the system progressed, some of the Each SFPI consists of a stand-alone air cooling and water filtration system. See Appendix A, Rows - for distributed costs by DCE line number. 0

30 components were designed to the seismic requirements of the Uniform Building Code rather than the plant s seismic design criteria, which was the assumption in the DCE, thus resulting in cost savings. In addition, some of the scope identified in the DCE, such as the implementation of security mods for the spent fuel pools, was not required to be implemented.. Transition Modifications Phase During 01-01, SCE completed four Transition Modifications, shown below in Table IV-: (1) Records Reduction; () Large Organism Exclusion Device (LOED) Modification; () Simplification and Streamlining Project; and () Special Purpose Vehicle - Implementation. Transition Modifications are projects required to transition from an operating nuclear plant to one in decommissioning or to meet regulatory requirements. Table IV- Comparison Of Recorded Costs For Transition Modification Projects Completed In To The 01 SONGS & DCE (0% Share, Millions of 01 $) Description 01 DCE (01 $) Recorded (01 $) Variance 1 Records Reduction $ - $ 1. $ 1. Large Organism Exclusion Device Modification Simplification & Streamlining Project Special Purpose Vehicle - Implementation Total Transition Modifications - Phase $ - $.0 $ a) Records Reduction (1) Description of Decommissioning Activity Due to the permanent retirement of SONGS, many records were no longer required to maintain regulatory compliance. As a result, the records reduction project was put into place to eliminate all unnecessary nuclear records. This project included a detailed review of all of the SONGS records to catalog, index, and scan required records into an online database that was created for SONGS. SFPI piping had to meet NRC seismic requirements, and the SFPI chillers and pump equipment had to meet Uniform Building Code requirements. 1

31 The Records Reduction project began in October 01 and was completed in October 01. SCE engaged a vendor to review and process SONGS records. The vendor reviewed all applicable site procedures and required regulations to develop an extensive Compliance Matrix to govern the disposition of records. After the matrix was complete, the vendor inventoried all records. The vendor then scanned, indexed, and cataloged required records, and eliminated unnecessary records, in accordance with NRC regulations. This effort was subject to quality control validation. The project also included reviewing,00 boxes of SONGS records that were stored at SCE s Corporate Records Center (CRC). After a careful review of these records, SCE determined that most of the records were no longer necessary since SONGS was being decommissioned and were therefore eliminated. The boxes of SONGS records stored at the CRC were reduced to fewer than 1,000 boxes. () Summary of Costs and Variance Explanation The 01 SONGS & DCE did not include a line item nor an estimate for the Records Reduction project. SCE recorded $1. million (0% share, 01 $) for this major project, resulting in a variance of $1. million more than estimated. The DCE did not include a specific line item for this scope, assuming that the work would be accomplished by utility staff. However, given the large number of records that required review, SCE decided to retain the services of a specialty vendor due to the lack of SCE staff resources to complete this labor-intensive project. The project and associated costs were reasonable, as it was a prudent document control practice for SCE to reduce records that were no longer necessary. SCE has since reduced its records staff, further reducing costs. b) Large Organism Exclusion Device (LOED) Modification (1) Description of Decommissioning Activity The LOED project was required by the State Water Resources Control Board (SWRCB) to comply with the Statewide Water Quality Control Policy on the Use of Coastal and See Appendix A, Row for distributed costs by DCE line number.

32 Estuarine Water for Power Plant Cooling, and was required to be completed by December 01. The LOED project involved installation of physical barriers over the SONGS & offshore intake structures to minimize the potential for large marine animals, such as sea turtles, harbor seals, and sea lions, to enter the SONGS & intake conduits. At the time the 01 SONGS & DCE was prepared, SCE believed these requirements did not apply to permanently shut down plants; therefore, the 01 DCE did not include any costs for the required LOED modification. Contrary to SCE s position, and even after appeal, the SWRCB required the installation of the LOED because water is still being drawn into the plant. SCE put the contract out to bid and selected Manson Construction to perform the work. The LOED barriers, are net-like products designed in a -inch by -inch grid pattern that were fitted on the primary and auxiliary intake structures of SONGS &, as shown in Figure IV- 1 and Figure IV-. Figure IV- Large Organism Exclusion Device (LOED)

33 Figure IV- LOED Barriers 1 The installation of the LOED began on July 0, 01. The LOED installation was performed by teams of divers from Harbor Offshore, Inc. The final installation of all the LOED barriers was completed safely on August, 01. Oversight of the LOED project was provided by SCE and MBC Applied Environmental Services (MBC), an experienced biological consulting firm on the Pacific Coast that conducts integrated studies of the marine environment. MBC developed the SONGS LOED Installation Marine Resources Protection and Monitoring Plan. This plan discussed the potential impacts on marine mammals, fishes, and sea turtles in the vicinity of the LOED work zones, and provided monitoring to minimize that potential during the installation of the LOED. After the LOED field work was completed, reports were prepared for submittal to the SWRCB in order to demonstrate compliance with the Statewide Water Quality Control Policy on the Use of Coastal and Estuarine Water for Power Plant Cooling. Since the completion of the LOED, a 0-day inspection was

34 conducted followed a one-year inspection to examine the netting tension and fouling. The LOED inspections provide the basis to determine how often SONGS conducts future inspections. () Summary of Costs and Variance Explanation The 01 SONGS & DCE did not include a line item nor an estimate for the LOED Project. SCE recorded $1. million (0% share, 01 $) for this major project, resulting in a variance of $1. million more than estimated. This variance occurred because at the time the DCE was prepared, SCE believed the relevant state environmental policy requirements did not apply to permanently shut down plants; therefore, the 01 DCE did not include any costs for the required LOED modifications. The Commission should find the recorded costs reasonable because they were expended to comply with regulatory requirements and SCE utilized a competitive procurement process for the performance of the work. c) Simplification and Streamlining Project (1) Description of Decommissioning Activity In addition to the need to reduce SONGS records due to the permanent retirement of SONGS &, many of the corporate and SONGS policies, procedures, and technologies also were no longer required. SCE established a team to identify existing policies, procedures, and IT systems (i.e. software applications) that were no longer required or that could be streamlined. The team defined its objective as letting go of things that SONGS didn t need. This included identifying, when appropriate, simpler, less-costly applications (e.g. MS Excel, Word, and SharePoint) suitable for SONGS going-forward needs. The simplification effort would also prepare SONGS for the transition of various functions (e.g., chemistry, radiation protection, fire protection, training, maintenance) to the DGC. To complete this effort, the team initiated a site-wide review of non-sap software applications used at the station. The review included every SONGS division, and identified See Appendix A, Row 1 for distributed costs by DCE line number.

35 approximately 0 applications or programs that were no longer needed and could be retired. Most of the identified applications approximately % were related to plant operations. The team implemented several innovative work-simplification strategies. For example, the team created a new action request (AR) system that allowed the site to transition from SAP to a less sophisticated and less expensive application. The site no longer required the extensive features offered by SAP. The new AR system also took the place of the Nuclear Notifications system, which also was an SAP-based system. In addition, the team developed a new SONGS computer-based training system, given that the Institute of Nuclear Power Operations (INPO) computer-based training was no longer available after SCE cancelled its INPO membership. () Summary of Costs and Variance Explanation The 01 SONGS & DCE did not include a line item nor an estimate for the Simplification & Streamlining Project. SCE recorded $1. million (0% share, 01 $) for this major project, resulting in a variance of $1. million more than estimated. 1 SCE s efforts to simplify work practices and reduce unnecessary applications will allow SCE to reduce costs associated with adhering to these practices and maintaining licenses. SCE developed streamlined work practices and applications that will still allow SCE to effectively and safely fulfill its regulatory requirements and oversight of the DGC. The Commission should find that costs incurred to streamline and simplify were prudent and reasonable. d) Special Purpose Vehicle - Implementation (1) Description of Decommissioning Activity On April, 01, SCE and the Participants, SDG&E, the City of Anaheim (Anaheim), and the City of Riverside (Riverside), entered into a Decommissioning Agreement to govern the parties respective rights and obligations for SONGS & decommissioning. The Decommissioning Agreement designates SCE as the initial Decommissioning Agent. Under Section., the Participants requested and SCE agreed to evaluate various decommissioning 1 See Appendix A, Row 1 for distributed costs by DCE line number.

36 governance strategies that would include possibly outsourcing various functions provided by SCE and identifying a successor decommissioning agent. As part of the studies contemplated under Section., SCE and the Participants engaged PricewaterhouseCoopers (PwC) in May 01 to analyze the feasibility and benefits of transferring decommissioning responsibility to a successor decommissioning agent and outsourcing various administrative support functions (e.g. IT, supply management, financial, etc.). PwC concluded that, although there could be some benefits to transitioning to a special purpose vehicle (SPV) governance structure with outsourcing of some administrative support functions, there are distinct disadvantages to using alternative approaches that the Participants would need to address. 1 The Participants decided not to go forward with implementation of an SPV. Nevertheless, the Participants determined that various features could be implemented to realize the advantages of establishing a business structure similar to an SPV and outsourcing. This included engaging key decommissioning executives that would form a SONGS leadership team and developing service level agreements (SLAs) that would provide features similar to the outsourcing of administrative and general (A&G) services. During 01, the Participants used information initially developed by PwC to create a structure that would involve developing a series of SLAs that would identify the scope of work and associated costs for services provided by SCE corporate. The costs had historically been allocated as A&G. The SLAs would provide greater transparency and certainty of costs for the benefit of Participant oversight and project cost control. () Summary of Costs and Variance Explanation The 01 SONGS & DCE did not include a line item nor an estimate for the Special Purpose Vehicle - Implementation project. SCE recorded $0. million (0% share, 01 $) for this major project, resulting in a variance of $0. million more than estimated. 1 1 See A , Exhibit SCE-0, page. 1 See Appendix A, Row 1 for distributed costs by DCE line number.

37 The variance is due to the fact that the DCE did not include costs to identify and recruit key decommissioning executives or to develop and implement the SLAs. First as an operating plant, very few on-site personnel had any recent experience with major construction-related projects. The hiring of key decommissioning executives allowed for a leadership team experienced in major construction projects to be put in place, ultimately leading to enhanced oversight of the DGC and a more efficient decommissioning process. Second, the SLAs provide increased cost certainty and transparency for the decommissioning project and minimize distracting disputes among Participants. For these reasons, the Commission should determine that the SPV - Implementation costs are reasonable.

38 1 1 1 A. Introduction V. TOTAL UNDISTRIBUTED ACTIVITIES DURING THE REVIEW PERIOD Undistributed costs are typically time dependent, recurring, unavoidable costs (e.g., insurance, NRC fees, utility staff, security, energy costs, etc.) associated with activities necessary to insure compliance with regulatory, plant operations & maintenance, permit, and contractual requirements. Undistributed costs are not directly attributable to a specific project or project scope. For cost reporting, undistributed costs are aggregated into the following categories labor staffing, decommissioning general contractor staff, non-labor, and SLAs. Labor staffing costs were separated into two sub-categories: (1) utility staff; and () security force. The non-labor undistributed costs have been further separated into the following sub-categories: (1) fees, permits, and leases; () plant operations; and () other non-labor costs. This testimony section compares the total undistributed costs recorded during to the 01 SONGS & DCE, as shown in Table V- below. Table V- Comparison Of Recorded Undistributed Costs To The 01 SONGS & DCE (0% Share, Millions of 01 $) Description 01 DCE (01 $) Recorded (01 $) Variance 1 Undistributed -- January 01 - December 01 Labor-Staffing Utility Staff $. $ 1.1 $ (1.) Security Force.. (1.) Subtotal $. $. $ (0.) Decommissioning General Contractor Staff $. $. $. Non-Labor Fees, Permits, And Leases $. $ 1. $ (1.) Plant Operations Other Non-Labor. 1. (1.) 1 Subtotal $.0 $. $ (1.) 1 1 Service Level Agreements $ - $ 1. $ Total Undistributed $. $. $ 1.1

39 B. Undistributed Labor - Overview 1. Description of Decommissioning Activity SCE recorded costs for the SONGS utility staff and security force as undistributed labor. The SONGS utility staff performed various decommissioning activities relating to state and federal regulatory requirements, external communications with stakeholders, and strategic planning and analysis. 1 The utility staff s activities and the associated costs were reasonable as the work was necessary for complying with existing technical specifications; ensuring the health and safety of the workers and the public; planning and preparing the facility for decommissioning; retiring plant systems to minimize or eliminate costs; and keeping the public and stakeholders informed on decommissioning progress. The security force protected SONGS in accordance with NRC regulations ( C.F.R. and C.F.R. 0.). The security force has been sized to meet the current design basis threat assessment, pursuant to C.F.R..1. Chapter II above provides additional detail regarding the work performed by utility staff and the security force in Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for utility staff and security force. SCE recorded $. (0% share, 01 $) million for this labor, resulting in an overall variance of $0. million less than the estimate. 1 Table V- provides a summary of the costs, and SCE discusses the variances in greater detail below: 1 When activities performed by utility staff or security force are directly related to a specific distributed project, they record their time to the specific distributed activity. 1 See Appendix A, Rows 1- for utility staff and Rows - for security force undistributed costs by DCE line number. 0

40 Table V- Comparison Of Recorded Costs For Utility Staff & Security Force To The 01 SONGS & DCE (0% Share, Millions of 01 $) Description Undistributed - Labor-Staffing 01 DCE (01 $) Recorded (01 $) Variance 1 Utility Staff $. $ 1.1 $ (1.) Security Force.. (1.) Total $. $. $ (0.) The utility staff and security force variances are primarily due to the number of employees at SONGS being lower than assumed in the DCE. SCE, as the decommissioning agent, is ultimately responsible for ensuring the station s full compliance with all regulations. SONGS utility staff and security force support the decommissioning activities of the station and ensure continued oversight of decommissioning and the ISFSI. SONGS utility staff are responsible for managing all decommissioning project activities being performed at SONGS, maintaining licensing documents, submitting routine regulatory reports, and addressing regulatory issues. SCE continues to monitor staffing levels and has maintained them at appropriate levels to fulfill these obligations. SONGS must continue to maintain a security force to protect against radiological sabotage. The security force is sized in accordance with NRC requirements for the current design basis threat assessment. The SONGS security force is comprised of highly skilled, trained, and certified officers that can detect and deter threats. SCE will not be able to make additional significant security force reductions until the spent fuel is moved to the ISFSI. For these reasons, the Commission should determine that the utility staff and security force costs are reasonable. C. Undistributed Decommissioning General Contractor Staff Overview Early in the decommissioning planning process, SCE determined that a DGC should be used for SONGS decommissioning. Under this model, the DGC is contractually responsible for completing major decommissioning activities, and SCE maintains oversight of the contractor. SCE awarded the 1

41 DGC contract to SONGS DecommissioningSolutions (SDS), a joint venture of AECOM and EnergySolutions. 1. Description of DGC Activities The DGC staff began arriving on-site January, 01 and began the identification of key personnel, the training and badging of employees, and other significant mobilization efforts. SDS staff includes organizations such as Project Management, Quality Assurance, Safety & Health, Radiation Protection, Regulatory & Environmental, Training, etc. Mobilization efforts included the development of a baseline schedule, which SCE used to create an integrated timeline and work plan outlining the anticipated dates to begin transitioning SONGS management programs to SDS. SCE determined that it was beneficial to transition most management programs to SDS to allow for more efficient processing of decommissioning work. This would also mitigate SCE s risk for delaying SDS performance. For example, radiation protection (RP) is one of the programs being transitioned. If this program was not transitioned and SCE remained responsible for it, SDS could be delayed in entering a radioactive area to perform D&D work if SCE did not have an RP tech available to perform the radiation survey. Under this scenario, SCE would run the risk of delaying a decommissioning activity and incurring a change order by failing to timely fulfill its RP obligations. With the responsibility transitioned, SDS is solely responsible for any delay caused by an issue with its administration of the RP program, reducing the risk of costly change orders. In addition, the transitioning of these programs allows SCE to place a proper focus on oversight of the DGC. The most important thing for SCE to do for decommissioning is to administer the SDS contract (cost, schedule, performance), not be involved in the day-to-day D&D activities. The SDS contract requires each DGC management program to be submitted to SCE for review and approval before each SONGS program is transitioned to SDS. SCE developed a Program and Plan Review & Acceptance Guideline which set forth the processes and expectations for the review and approval of the DGC submittals of management programs. Throughout the transition and approval process, the DGC interfaced with six discreet SCE transition groups that included: (1) Program Owners; () Program Sponsors; () Authorized Representatives; () Contract Compliance Representatives; ()

42 Transition Team Members; and () Oversight Managers. These six groups were responsible for the following : (1) Program Owners were responsible for accepting DGC submittals of management programs; () Program Sponsors acted as the executive leadership for SCE s acceptance of the DGC submittals; () Authorized Representatives were the only personnel that could make decisions regarding commitments or to set policy on behalf of SCE; () Contract Compliance Representatives ensured SCE participants in SCE/DGC meetings did not introduce positions contrary to contractual requirements; () Transition Team Members scheduled and facilitated meetings between SCE and the DGC and maintained the document repository, among other things; and () Oversight Managers reviewed and accepted DGC submittals, and acted as DGC contract Subject-Matter-Experts (SMEs). During 01, the following management programs transitioned from SCE to the DGC: (1) Nuclear Safety Culture; () Occupational Safety & Health; () Engineering; () Radiation Protection; () Maintenance; () Corrective Action; () Training; () Business Systems; () Waste; () Industrial Security; () Nuclear Oversight; (1) Site Support Services; (1) Utilities; (1) Facilities; (1) Fire Protection; (1) Chemistry; (1) Work Control; (1) Emergency Preparedness; (1) Nuclear Regulatory Affairs; (0) Operations; and (1) Environmental.. Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for decommissioning general contractor staff, SCE incurred $. million (0% share, 01 $), resulting in an overall variance of $. million more than the estimate. 1 However, a simple 01 DCE to recorded costs comparison is not appropriate. The two comparisons that the Commission should be making are: (1) the 01 DCE to the SDS contract; and () the SDS contract to the recorded costs. These comparisons will allow the Commission to determine whether the recorded costs are reasonable. 1 See Appendix A, Rows 1- for undistributed costs by DCE line number.

43 With respect to the first comparison, the 01 SONGS & DCE forecasted costs of $.0 million (0% share, 01 $) for DGC staff. The SDS contract includes million (0% share, 01 $) for SDS staff, an underrun of million. staff total With respect to the second comparison, the SDS contract payment milestones for SDS million (0% share, 01 $). SCE paid $. million (0% share, 01 $) for SDS staff per the completed milestones for this scope, leaving milestone payments. million for upcoming SDS staff The SDS contract milestone payment schedule provides for payment upon completion of work. During 01, SDS achieved several milestones (e.g. initial mobilization, selection of key project personnel, transition programs) by their respective completion dates, consequently SCE was contractually obligated to pay for milestones that were completed. Because the SDS contract term for DGC staff was less than the 01 DCE for this cost category and because SCE paid what it was required to under the SDS contract, the Commission should find the $. million (0% share, 01 $) in recorded costs reasonable. D. Undistributed Non-Labor Overview SCE grouped undistributed non-labor costs as follows: (1) fees, permits, and leases; () plant operations; and () other non-labor costs. These costs consist of various recurring or unavoidable fees, and other payments that SCE makes to meet various regulatory, plant operations & maintenance, permit, and contractual requirements during decommissioning. 1. Fees, Permits, and Leases SCE further groups the undistributed costs for fees, permits, and leases as follows: (1) environmental permits and fees; () emergency preparedness fees; () association fees and expenses; () NRC fees; and () site lease and easement expenses. Table V- provides a summary of the costs, and SCE discusses the variances in greater detail below.

44 Table V- Comparison Of Recorded Costs For Fees, Permits, And Leases To The 01 SONGS & DCE (0% Share, Millions of 01 $) Undistributed - Non-Labor - Fees, Permits, And Leases Description 01 DCE (01 $) Recorded (01 $) Variance 1 Environmental Permits and Fees $.0 $ 0. $ (.) Emergency Preparedness Fees.. (.) Association Fees and Expenses. 0. (.1) NRC Fees. 1. (.) Site Lease and Easement Expenses..0 (0.) Total $. $ 1. $ (1.) 1 1 a) Environmental Permits and Fees (1) Description of Decommissioning Activity The 01 SONGS & DCE forecasted expenses relating to various environmental-related matters such as: (1) the SWRCB NPDES and Storm Water permits; 1 () hazardous and mixed waste disposal; 1 () State of California Environmental Protection Agency (EPA) fees; 0 and () air pollution control district permits. 1 These environmental matters relate to ongoing requirements. The NPDES permit is required for certain waste discharges (such as diluted wastewater) into ocean waters. A storm water permit is required for the managing and testing of storm water at the plant prior to discharge. The permit requires the site to develop and implement a storm water pollution prevention plan that contains a site map showing the site perimeter, existing buildings, parking lots, roadways, storm water collection and discharge points, general site topography, 1 NPDES CA0, Waste Discharge Requirements; Storm Water Permits are obtained on a case-by-case basis as part of the Storm Water Management Plan when greater than an acre of land is disturbed for construction activity. 1 County of San Diego Department of Environmental Health Facility Permit DEH 00-HUPFP-. 0 EPA-ID # CAD00001, Hazardous Waste Facility. 1 County of San Diego, Air Pollution Control District, permits for generators on-site. 0 C.F.R. 1..

45 and drainage patterns across the site. San Diego County Department of Environmental Health requires fees for the storage of hazardous wastes, inspection of underground storage tanks, and maintaining ground water monitoring wells. State of California EPA fees are for storage, transportation, and inspection of hazardous/mixed wastes. Air Pollution Control District permits are required for operation of diesel generators and monitoring of possible airborne asbestos during building demolition. These permits and fees are required annually to support systems still in operation and for decommissioning activities. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $.0 million (0% share, 01 $) for environmental permits and fees. SCE recorded $0. million (0% share, 01 $) for these undistributed costs, resulting in a variance of $. million less than estimated. The variance in the environmental permits and fees is primarily due to a reduction to the annual NPDES Permit fees. Due to a reduction in the quantity of discharges from the plant associated with the permanent shutdown, SCE was able to negotiate with the SWRCB a reduction to the annual NPDES permit fees from $1.1 million per year to $0. million per year. In addition to the reduction in the NPDES fees, the other environmental fees (e.g., hazardous waste, pollution fees) were significantly less than the 01 SONGS & DCE estimated. The 01 SONGS & DCE was prepared before the impact of decommissioning on the fees assessed by various local and state agencies was known. The $0. million recorded to this category was necessary to comply with state and federal environmental regulations, and the Commission should determine that the costs are reasonable. Mixed wastes contains both hazardous wastes (oil, gasoline, paint, etc.) and radioactive waste. See Appendix A, Row for undistributed costs by DCE line number.

46 b) Emergency Preparedness Fees (1) Description of Decommissioning Activity In December 01, SCE agreed to a memorandum of understanding (MOU) with Orange County and San Diego County, and the cities of Dana Point, San Juan Capistrano, and San Clemente (referred to as the local jurisdictions ) who previously received funding through the California Office of Emergency Services (OES). The MOU provides annual funding from SCE to the local jurisdictions for continued collaborative and cooperative management of radiological emergency preparedness, planning, response, and recovery activities for SONGS. The parties agreed that the local jurisdictions should continue assuring interagency coordination for emergency planning, training, and exercises between SCE and local governmental agencies during the decommissioning process and in relation to spent fuel stored on-site. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for emergency preparedness fees. SCE recorded $. million (0% share, 01 $) for emergency preparedness fees, resulting in a variance of $. million less than estimated. The recorded costs relate to the MOU services provided to SCE. The variance occurred because the DCE was based on amounts charged by the Federal Emergency Management Agency (FEMA) and OES when the plant was operating. SCE received an exemption from the NRC in June 01 that revised its emergency preparedness requirements to reflect SONGS shutdown status. As a result, FEMA and OES services were no longer required and no FEMA fees were paid in 01 or 01. In their place SCE paid fees in accordance with the MOU which was substantially less than the estimated amounts included in the 01 DCE. See Appendix A, Row for undistributed costs by DCE line number. During plant operations, SCE was charged emergency preparedness fees by FEMA and OES to support emergency planning activities at the federal, state, and local levels. Prior to the NRC s acceptance of SCE s Permanently Defueled Emergency Plan (PDEP) on June, 01, FEMA and OES were required to oversee offsite emergency activities, in accordance with C.F.R. 0 and California Government Code., respectively. Following the NRC s acceptance of the PDEP, FEMA and OES services were no longer necessary.

47 The emergency preparedness fees SCE recorded should be deemed reasonable since SCE was successful in reducing the cost of fees required by federal and state agencies. It is reasonable to pay local agencies for emergency preparedness activities. c) Association Fees and Expenses (1) Description of Decommissioning Activity SCE is a Nuclear Energy Institute (NEI) member due to NEI s ongoing efforts to develop vital nuclear industry policies, standards, and guidance for decommissioning. For example, NEI is an active participant in addressing the long-term storage of spent nuclear fuel. SCE also has access to NEI member activities (for those members who have completed or are actively in decommissioning), including reports, task forces, and workshops regarding decommissioning. Due to its members contributions, NEI is also a valuable resource that the public can utilize for obtaining information regarding decommissioning. This category also includes costs for the nuclear oversight board (NOB), which provides offsite independent overview of selected SONGS decommissioning activities. The NOB is composed of no less than two persons who are independent review specialists and collectively have the experience and competence required to perform a technical review. The NOB maintains written records of its reviews and recommendations. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for association fees and expenses. SCE recorded $0. million (0% share, 01 $) for this cost category, resulting in a variance of $.1 million less than estimated. The recorded costs were primarily associated with NEI ($0. million) and NOB ($0. million) fees. SCE remains an NEI member to receive the benefits related to spent nuclear fuel management and decommissioning. NEI fees were reduced during the review period to reflect SCE s shutdown status. The NOB provides valuable independent review of SCE s See Appendix A, Row for undistributed costs by DCE line number.

48 decommissioning activities. The 01 DCE also included an estimate for INPO fees, however, SCE did not incur INPO fees during because SCE cancelled its membership in 01. SONGS involvement in these activities therefore should be deemed reasonable. d) NRC Fees (1) Description of Decommissioning Activity Federal regulations mandate that the NRC recover most of its operating funds through fees assessed to licensees and applicants. SONGS & incurs two types of NRC fees: (1) annual fees, and () inspection fees (paid quarterly). C.F.R..1 (Annual Fees for Reactor Licenses and Spent Fuel Storage Licenses) requires each facility holding a CFR 0 or power reactor license in decommissioning to pay annual NRC fees for each license held during the federal fiscal year in which the fee is due. C.F.R..1 (Inspection Fees) identifies fees assessed to recover the cost for each inspection, including plant or licensee-specific performance review and assessments, evaluations, and incident investigations. Costs for inspections include preparation time, time on-site, documentation time, and follow-up activities and any associated contractual service costs. The assessed fees are based on the number of hours worked by each inspector assigned to the plant work. The hours are billed at an hourly rate established in C.F.R..0. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for NRC fees. SCE recorded $1. million (0% share, 01 $) for NRC fees, resulting in a variance of $. million less than estimated. The NRC fees are lower than estimated primarily due to the reduction in the NRC s C.F.R..1 Annual Fees for Reactor and Spent Fuel Storage Licenses. The annual NRC Reactor and Spent Fuel Storage License Fees have been trending lower over the review period as compared to the DCE. In addition, SCE s Part.1 NRC Inspection Fees are lower than estimated in the 01 SONGS & DCE. This is due to several factors. First, the NRC s Omnibus Budget Reconciliation Act of, Section. See Appendix A, Rows, -1 for undistributed costs by DCE line number.

49 hourly inspection fees are lower during than was estimated in the DCE, and second the DCE assumed two NRC resident inspectors would continue to be on-site. After SONGS was permanently shut down, the activities that the NRC inspectors performed during SONGS operating days diminished, and subsequently, in 01 the NRC resident inspectors were no longer on-site on a continuous basis. The DCE estimate includes hourly and weekly costs for two NRC resident inspectors. The recorded costs do not include costs for resident inspectors and only include costs for the inspections performed during the year. For these reasons, the C.F.R..1 NRC Inspection Fees are significantly lower than was estimated in the DCE. In addition, SONGS NRC inspections fluctuate year-to-year depending on the sites activities. As noted above, the recorded NRC fees are statutorily required and established. SCE must pay them and has no control over their amounts, so the Commission should find them reasonable.. Plant Operations The 01 SONGS & DCE forecasted $1. million (0% share, 01 $) for Plant Operations. SCE recorded $1.0 million (0% share, 01 $) for Plant Operations, resulting in a variance of $. million more than estimated. SCE further groups the undistributed costs for plant operations in the following DCE categories: (1) contracted services; () utility staff health physics supplies; () decommissioning advisor; () security-related expenses; () spent fuel maintenance; () DGC health physics supplies; () dry active waste (DAW) disposal; and () tools and equipment. Table V- identifies these costs. 0

50 Table V- Comparison Of Recorded Costs For Plant Operations To The 01 SONGS & DCE (0% Share, Millions of 01 $) Undistributed - Non-Labor - Plant Operations Description 01 DCE (01 $) Recorded (01 $) Variance 1 Contracted Services $. $. $ 1.1 Utility Staff Health Physics Supplies..0 (.) Decommissioning Advisor. 1.1 (1.) Security-Related Expenses (1.1) Spent Fuel Maintenance (1.0) DGC Health Physics Supplies (1.0) Dry Active Waste Disposal (0.) Tools And Equipment (0.1) Total $ 1. $ 1.0 $. 1 1 The variance in this category is primarily attributable to contracted services, utility staff health physics supplies, and decommissioning advisor. SCE discusses these variances below. 0 a) Contracted Services (1) Description of Decommissioning Activity Contracted Services are shorter-term supplemental resources, specialty contractors and consultants, third-party services, materials, and supplies that are provided on an asneeded basis to support SONGS. SCE must meet several NRC regulatory requirements, 1 and maintain and operate SONGS to support spent nuclear fuel in the spent fuel pools and ISFSI. SCE also must meet contractual obligations and provide support services (such as engineering, regulatory, financial, and custodial services) for the plant and the general facility, as well as provide basic office services, to complete decommissioning planning and implement decommissioning. SCE utilizes Contracted Services for these purposes. 0 SCE is not providing variance explanations for cost categories with variances $1.0 million. For the cost categories here, all variances $1.0 million are underruns relative to the DCE. 1 See Exhibit SCE-01 Policy, Section I.F., Nuclear Regulatory Commission Decommissioning Regulations Overview. The general facility includes SONGS office buildings, roads, parking lots, fencing, lighting, and all the services necessary to maintain the site in a condition suitable for all the activities that are needed to decommissioning the plant. 1

51 SCE has grouped these expenses into the following sub-categories: (1) site operations and maintenance; () site management support services; and () other engineering activities for decommissioning. SCE discusses these categories in further detail below. Table V- identifies these costs. Table V Recorded Costs for Contracted Services (0% Share, Millions of 01 $) Category Recorded 1 Site Operations And Maintenance $ 1. Site Management Support Services. Other Engineering Activities 0. Total Contracted Services Costs $ Site Operations and Maintenance: This category of Contracted Services contains non-labor costs related to plant and general facility operations and maintenance. As previously noted, SCE is required by NRC regulations to operate and maintain the spent fuel in a safe condition. This includes, for example, maintaining mechanical and electrical equipment, instrumentation and controls, and the SONGS card reader system; performing equipment surveillances to monitor plant system conditions; performing fire protection testing and maintenance; maintaining emergency preparedness equipment; repairing the cask crane and seawall walkway, and operating the remaining plant systems. The SONGS facilities also require routine maintenance and upkeep since they still provide office space for the employees operating and maintaining plant spent fuel systems and completing the planning for decommissioning. Several facilities will continue to be used for future decommissioning activities so continued maintenance will be required. This also includes maintaining the roads, parking lots, walkways, fencing, elevators, and lighting to meet applicable requirements, to keep the SONGS work environment habitable and safe for workers, and facilitate efficient decommissioning. In 01-01, SCE used supplemental workers and third-party contractors to

52 perform these site operations and maintenance activities. SCE also needed to procure, rent, or maintain equipment and materials to perform these important activities. Finally, consistent with its core SONGS decommissioning objective of safety, SCE procures various industrial safety equipment to protect the health and welfare of its employees and supplemental workers. This includes: (1) personal protective equipment such as safety harnesses, hardhats, safety glasses and gloves; () industrial safety equipment such as barriers and guard rails; and () fire protection equipment such as fire detectors and extinguishers. Site Management Support Services: This category of Contracted Services contains non-labor expenses for supplemental workers, third-party contractors, vendors, and firms for various support services such as: (1) nuclear oversight, safety culture and performance improvement, nuclear regulatory affairs, and site management and administration; () CPUC regulatory affairs; and () decommissioning finance. SCE utilized supplemental workers for nuclear regulatory affairs to support NRC filings to ensure SCE was appropriately complying with regulatory requirements. These workers were directly responsible for supporting SONGS post-shutdown emergency preparedness plan. SCE also utilized supplemental workers to support CPUC regulatory filings required for SONGS decommissioning cost-reporting activities. These workers assisted preparing submittals to the CPUC, including advice letters requesting authorization of disbursements from the SONGS & nuclear decommissioning trusts, reasonableness review testimony, intervenor data request responses, and other regulatory matters. SCE utilized supplemental workers and third-party contractors to perform various testing services to comply with federal and state environmental regulations. Safety, compliance, and protecting the environment are all important decommissioning objectives. The testing services are See Chapter II for more information on the SONGS Decommissioning Agent Organization and work performed by the Nuclear Regulatory Affairs, Nuclear Oversight, Employee Concerns, Emergency Preparedness, and the Safety, Human Performance, and Performance Improvement groups.

53 an important component to protect the environment and the radiological health and safety of workers and the public. Other Engineering Activities: This category of Contracted Services contains non-labor expenses for other activities, including engineering and project management services for decommissioning planning and initial decommissioning activities. SCE required third-party vendors and contractors to provide decommissioning/large project experience to support these efforts. These vendors and contractors provided an independent and strategic review of SCE s decision-making. SCE also required outside engineering services to supplement the SONGS engineering division staff, validate engineering work, and revise procedures. Site engineering activities are often supported by engineering software applications that include costs for software license renewals. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for Contracted Services. SCE recorded $. million (0% share, 01 $) for Contracted Services, resulting in a variance of $1.1 million more than estimated. The 01 DCE assumed Contracted Services would involve only office supplies, computers, and related equipment for utility staff use, based upon an assumed cost of $,00 per year per employee. As noted above, SCE utilized this category more broadly for tracking and recording expenses for Contracted Services for site operations and maintenance; site management support services; and other engineering activities. Therefore, there was a variance because the 01 DCE did not include forecasts for the broader group of services and activities that were recorded to this category. These expenses are necessary and reasonable because the site must be maintained for the safe keeping of spent nuclear fuel and decommissioning of the plant. It was prudent for SCE to engage vendors and contractors experienced in decommissioning and large projects to assist and/or perform vital functions for site operations, management, and administration at SONGS. See Appendix A, Rows - for undistributed costs by DCE line number.

54 In addition, it was prudent and reasonable for SCE to renew engineering software licenses, perform security computer maintenance, and use supplemental staff to continue various decommissioning planning and initial activities. These activities and associated expenses related to these categories are necessary for continued effective and safe execution of decommissioning and operation activities. For these reasons, the Commission should find these expenses reasonable. b) Utility Staff Health Physics Supplies (1) Description of Decommissioning Activity SONGS employees must utilize proper health physics (HP) supplies to perform radiological work (both for maintaining plant systems and other decommissioning work). SONGS employees use health physics supplies to: (1) comply with regulations governing radiation exposure control; () maintain chemistry control of systems supporting the spent fuel pools; () support removing, packaging, and shipping of hazardous waste from the site in accordance with federal, state, and county regulations; () conducted various environmental testing services, such as groundwater sampling for SONGS & to comply with NRC regulations. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for utility staff health physics supplies. SCE recorded $.0 million (0% share, 01 $), resulting in a variance of $. million less than estimated. This variance is primarily due to the fact SCE performed less work in contaminated areas than assumed in the DCE, therefore it spent less on these supplies. c) Decommissioning Advisor (1) Description of Decommissioning Activity The SONGS Decommissioning Advisor (SDA) is a subject matter expert in D&D, engineering, licensing, and regulatory affairs for decommissioning. The SDA, which is a position required under the Decommissioning Agreement and who is selected by unanimous approval of the Participants, is also knowledgeable in environmental issues, spent fuel storage, project management, See Appendix A, Rows -1 for undistributed costs by DCE line number.

55 and low level waste management, and is capable of supporting both the preparation and the review of regulatory submittals. SCE utilized a knowledgeable engineering firm, MPR Associates, as the SDA during SCE engaged this firm to provide objective and independent advice to support decommissioning planning and oversight efforts. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for the SDA. SCE recorded $1.1 million (0% share, 01 $) for the SDA, resulting in a variance of $1. million less than estimated. It is beneficial to utilize outside resources to provide specialized, experienced industry perspectives regarding SONGS decommissioning activities. The Commission should find these costs reasonable. d) Security-Related Expenses (1) Description of Decommissioning Activity SCE s security force protects SONGS in accordance with NRC regulations ( C.F.R. and C.F.R. 0.). The security force is supplied uniforms and equipment (e.g., radios, cell phones, pagers, firearms, ammunition) to perform their duties. It also must maintain a high skill level, which requires security personnel to complete rigorous training; participate in NRC annual Security Access Control Inspections; and complete NRC inspections of SONGS security training programs and equipment. Finally, the security organization is responsible for completing background investigations on new employees or contractors seeking to gain access to the SONGS site. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $1. million (0% share, 01 $) for security-related expenses. SCE recorded $0. million (0% share, 01 $) for security-related expenses, resulting in a variance of $1.1 million less than estimated. The variance is due to the fact that there were fewer SONGS security officers than estimated in the DCE. The 01 DCE assumes See Appendix A, Row for undistributed costs by DCE line number. See Appendix A, Rows - for undistributed costs by DCE line number.

56 security-related expenses on a per security officer basis. As a result, actual security-related expenses for security force uniforms, equipment, background investigations, badges, ammunition, training, and various other costs are significantly lower than estimated in the DCE. SCE must maintain a security force to protect against radiological sabotage and therefore will continue to incur security-related expenses. The Commission should find these costs reasonable.. Other Non-Labor The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for other non-labor expenses. SCE recorded $1. million (0% share, 01 $) for other non-labor expenses, resulting in a variance of $1. million less than estimated. SCE groups other non-labor costs into the following categories: (1) insurance; () severance; () community engagement panel; () property tax; () energy; () utilities (water, gas, and phone); () third party legal; and () information technology. These costs consist of various recurring or unavoidable fees and other payments that SCE is required to make for decommissioning. Table V- provides a summary of the costs, and SCE discusses the variances in greater detail below. Table V- Comparison Of Recorded Costs For Other Non-Labor To The 01 SONGS & DCE (0% Share, Millions of 01 $) Undistributed - Non-Labor - Other Non-Labor Description 01 DCE (01 $) Recorded (01 $) Variance 1 Insurance $. $ 1. $ (.) Severance -.. Community Engagement Panel. 1.0 (.) Property Tax. - (.) Energy.. (.) Utilities (Water, gas, phone). 0. (1.) Third Party Legal Information Technology Total $. $ 1. $ (1.) SCE is not providing variance explanations for cost categories with variances $1.0 million, or where $0 were incurred.

57 a) Insurance (1) Description of Decommissioning Activity NRC regulations require SCE to maintain minimum levels of nuclear liability and property insurance for SONGS &. SCE is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurance company owned by entities with nuclear facilities. NEIL provides insurance for nuclear property damage up to specified amounts, and SCE carries such property damage insurance. Nuclear liability insurance is provided by an association of subscribing insurance companies acting through American Nuclear Insurers (ANI) under the ANI Facility Form policy. If the primary policy is insufficient, there is a Secondary Financial Protection mechanism under which the nuclear industry shares the additional liability. The ANI Facility Form coverage includes broad liability protection for offsite injury or property damage caused by nuclear material at San Onofre, or while in transit to or from San Onofre. The ANI Facility Form excludes on-site property damage to the nuclear facility itself and on-site cleanup costs. SCE maintains separate NEIL property damage coverage for such events. ANI also excludes claims of on-site workers, but SCE maintains an ANI Master Worker Form policy that provides coverage for non-licensee workers. SCE also maintains a workers compensation policy covering SCE s workers at SONGS. SCE s policies cover all of SONGS, and expenses are allocated between SONGS 1 and SONGS &. The insurance expenses forecasted in the 01 SONGS & DCE are based on information SCE provided to EnergySolutions and include nuclear property and liability, and non-nuclear liability. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for insurance. SCE recorded $1. million (0% share, 01 $) for this expense category, resulting in a variance of $. million less than estimated. The variance for nuclear liability insurance is primarily See Appendix A, Rows 1- for undistributed costs by DCE line number.

58 attributable to SONGS receipt of an insurance dividend/refund from NEIL in 01 and 01, which was not accounted for in the DCE. It is prudent for SCE to carry this insurance because it protects customers from unexpected costs due to losses. Therefore, the Commission should find the expenses incurred for this insurance to be reasonable. b) Severance (1) Description of Decommissioning Activity The SCE severance plan provides assistance benefits to employees who become unemployed through no fault of their own as a result of the permanent retirement of SONGS. The employee assistance benefits are similar to the benefits provided to other SCE employees whose jobs have been eliminated due to other business needs throughout the past several years. SCE has benchmarked its severance benefits and found that they are consistent with the severance benefits offered by industry peers and other companies of a similar size. The employee assistance benefits for severed SCE workers include: (1) a lump sum cash payment based on years of service; () outplacement services; and () educational reimbursement. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $0.0 million (0% share, 01 $) for severance during SCE recorded $. million (0% share, 01 $) for severance, resulting in a variance of $. million more than estimated. 0 During 01-01, SCE continued to reduce utility staff and security force positions no longer required, and as a result incurred severance costs. The severance expenses are reasonable because they are required under the Decommissioning Act, which provides in part, Decommissioning nuclear facilities causes electric utility employees to become unemployed through no fault of their own, and these employees are entitled to reasonable job protection the costs of which 0 See Appendix A, Row for undistributed costs by DCE line number.

59 are properly includable in the costs of decommissioning. 1 For these reasons, the Commission should find these costs reasonable. c) Community Engagement Panel (1) Description of Decommissioning Activity SONGS & decommissioning will be a long and complex process requiring the balancing of many interests. It is important throughout this process that SCE be a trusted partner to the communities surrounding SONGS. Accordingly, engagement is a key core value and objective for SONGS & decommissioning. The SONGS Community Engagement Panel (CEP), established by SCE and the other SONGS Participants, is intended to serve as a conduit of information to the public and other stakeholders regarding decommissioning. The CEP seeks to educate and explain SONGS & decommissioning matters of interest to the local public. CEP meetings have been held quarterly and have provided information on SONGS decommissioning plans, spent fuel management, emergency planning, security, and the environmental review process for decommissioning. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for CEP-related costs. SCE recorded $1.0 million (0% share, 01 $) for CEP-related costs, resulting in a variance of $. million less than estimated. The variance is due to SCE s successful efforts to minimize administrative expenses and select cost-effective meeting locations. The DCE assumed significantly more for travel and guest speakers than SCE incurred. In addition, the DCE estimated approximately $. million for labor related to the CEP, but SCE recorded these labor costs to Utility Staff instead. The expenses are reasonable because it is important for SCE to keep the local community informed about decommissioning activities. Therefore, the Commission should find these expenses reasonable. 1 Pub. Utilities Code (g). See Appendix A, Row for undistributed costs by DCE line number. 0

60 d) Energy (1) Description of Decommissioning Activity SCE purchases energy to power the site, including for the spent fuel pool island and other supporting plant systems, lighting, and other electrical equipment. () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for energy. SCE recorded $. million (0% share, 01 $) for energy, resulting in a variance of $. million less than estimated. The variance is primarily due to a $1. million (0% share, 01 $) energy refund received from SDG&E during 01. The reason for the refund is that prior to the permanent retirement of SONGS &, SCE was able to use the generation from SONGS & or purchase energy at wholesale rates for site energy requirements. SCE paid SDG&E for energy supplied to SONGS at wholesale rates through December 01. In December 01, SDG&E began billing SCE at retail rates under its Commission-approved tariff. The December bill also retroactively billed SCE at retail rates for energy supplied since October 01. In December 01, SCE received a refund for the wholesale energy purchased from SDG&E between October 01 and December 01. The energy is necessary to complete plant activities and decommissioning, and the associated costs are therefore reasonable. e) Utilities (Water, Gas, and Phone) (1) Description of Decommissioning Activity The 01 SONGS & DCE includes costs for utilities (water, gas, and phone). See Appendix A, Rows 0- for undistributed costs by DCE line number. 1

61 () Summary of Costs and Variance Explanation The 01 SONGS & DCE forecasted $. million (0% share, 01 $) for utilities (water, gas, and phone). SCE recorded $0. million (0% share, 01 $) for the utilities, resulting in a variance of $1. million less than estimated. The variance occurred because the 01 DCE estimate for utilities is based on a cost per person per year. SCE s staff during was less than estimated in the DCE. In addition, SONGS does not use natural gas and has its own internal telephone system. Therefore, SCE does not incur costs for these utilities. The recorded costs during include costs for monthly water usage, as well as payments to the South Coast Water District Joint Regional Water Supply System for O&M projects needed to maintain the water supply system, of which SONGS is a member. The water utility expenses, which are based upon approved rates, are reasonable because SONGS requires this basic utility to complete plant activities. f) Third Party Legal (1) Description of Decommissioning Activity SCE retains outside counsel as necessary to handle certain matters requiring specific expertise or additional resources. SCE engaged outside legal services to support various matters before the NRC, the CCC, CSLC, and other government agencies. These matters included: DGC Solicitation Issues ($,000) This matter involved an independent review of SCE s DGC solicitation process to confirm that the process was implemented appropriately and fairly, on behalf of the SCE s and SDG&E s customers. Accion Group, LLC served as the independent observer / evaluator (IO/IE) and reviewed SCE s solicitation process, including final negotiations during 01. The costs associated with this work were not recorded until 01. Accion is a Commission-approved IO/IE, and determined that the DGC solicitation process was appropriate and fairly executed. See Appendix A, Rows - for undistributed costs by DCE line number. Appendix B, Report of the Independent Observer, November, 01, p..

62 General Environmental Issues ($0,000) These matters involved legal work completed during regarding SONGS environmental issues with various federal and state agencies, including the Navy, NRC, CSLC, and CCC. SDS Contract Issues ($1,000) This matter involved legal work relating to implementing the DGC contract. The work included ensuring that the transitioning of various programs from SCE to SDS during 01 complied with the SDS contract. General NRC Decommissioning and Licensing Issues ($,000) This matter involved legal work for decommissioning licensing proceedings before the NRC (NRC decommissioning submissions, license amendment requests, NRC decommissioning rulemaking proceeding, etc.). ISFSI Lawsuit ($,000) This matter involved legal work in connection with a lawsuit filed November 01 against the CCC and SCE regarding the CCC s approval of a CDP for the ISFSI. In May 01, SCE submitted a motion to dismiss the complaint on jurisdictional grounds, which was denied by the Court in November 01. The legal work in 01 involved SCE s submitting its answer to the complaint, preparing the administrative record and legal briefs, preparing for trial, and ultimately negotiating a settlement agreement providing for the dismissal of the complaint. Public Records Act Request Response ($0,000) CEP members have on several occasions received Public Records Act (PRA) requests resulting from their participation on the CEP. SCE has agreed in the CEP Charter to indemnify CEP members for responding to discovery requests. SCE engaged outside legal counsel to represent the CEP members in their responses to these PRA requests. 0 1 () Summary of Costs and Variance Explanation The 01 SONGS & DCE did not include a line item nor an estimate for third party legal fees. SCE recorded $0. million (0% share, 01 $) for third party legal fees, resulting in a variance of $0. million more than estimated. This variance occurred because SCE recorded expenses for outside legal services as direct costs. The DCE did not forecast these services as direct costs, but instead assumed See Appendix A, Rows - for undistributed costs by DCE line item.

63 that the costs would be included in overheads. The services provided by outside legal counsel are required to perform normal business functions as well as tasks required by the NRC, and state and local agencies and are therefore reasonable. E. Service Level Agreements 1. Description of Decommissioning Activity Beginning in 01, SONGS implemented annual intra-company SLAs with SCE corporate service providers (e.g., HR, IT, Real Estate, Supply Management, Treasurer s, Environmental, and Controller s). Each SLA describes the specific A&G functions and services SCE corporate provides to SONGS that support and sustain the D&D activities. The SLAs meet the terms and obligations included in the Decommissioning Agreement between SCE and the Participants.. Summary of Costs and Variance Explanation The 01 DCE included an A&G adder (.0%) that was applied to the costs of each DCE line item to cover the costs of SCE departments supporting SONGS decommissioning. To maintain the integrity of the values referenced from the 01 DCE in the variance explanations provided elsewhere in this testimony (i.e., all other cost categories), SCE kept the % A&G adder with each DCE line item in Table III- above. This results in the value for the SLA line being shown as zero dollars in the 01 DCE column. Rather than comparing the SLA/A&G recorded costs to zero, it is more appropriate to compare it to the corresponding % A&G adder from the 01. The number SCE calculated for the corresponding % A&G adder included in the 01 DCE for the period is $1.0 million (0% share, 01 $). SCE recorded $1. million (0% share, 01 $) for services provided during under the SLAs, resulting in a variance of $0. million. 0 The SLAs provide greater transparency Corporate support is provided by SCE from organizations other than SONGS (e.g., legal, treasurer s, finance, IT, supply chain). Section.1.. of the SONGS Decommissioning Agreement, dated April, 01. In line 1 of Table V-, the 01 DCE identifies $0 for the SLA/A&G line. 0 See Appendix A, Rows - for undistributed costs by DCE line item.

64 and certainty of costs for the benefit of Participant oversight and project cost control. The Commission should find the recorded costs for the SLAs reasonable because they more accurately reflect the anticipated costs for these corporate support functions.

65 VI. CONCLUSION The Commission should find the recorded expenses of $.1 million (0% share, 01 $) described above reasonable. Given SCE s thorough and detailed explanation of the major projects completed in and undistributed activities during 01-01, SCE has met its burden to demonstrate that these recorded costs are reasonable, and has provided an appropriate basis for the Commission to evaluate the reasonableness of the decommissioning costs. The Commission, therefore, should find the SONGS & decommissioning activities and costs presented in this testimony reasonable.

66 Appendix A Costs by DCE Line Item for Major Projects Completed and Undistributed Activities

67 Appendix A Southern California Edison 01 NDCTP - SONGS Units & Cost Reasonableness 01 And 01 Completed Projects And Undistributed Expenditures (0% share, 01 $ in millions) [A] [B] [C=B-A] DCE No. Category Description 01 DCE (01 $) Recorded (01 $) Variance 1 LT--D- Select Decommissioning General Contractor Select Decomm General Contractor $ 0 $ 1 $ 1 0 LT--D- 0 Spent Fuel Pool Islanding Implement Spent Fuel Pool Security Mods $ 1 $ - $ (1 ) LT--D- Spent Fuel Pool Islanding Design Spent Fuel Security System Modifications 0 - (0 ) LT--D- Spent Fuel Pool Islanding Design Spent Fuel Pool Support System Modifications 0 - (0 ) LT--D- Spent Fuel Pool Islanding Install Spent Fuel Pool System Modifications - U ( ) LT--D- Spent Fuel Pool Islanding Install Spent Fuel Pool System Modifications - U ( ) LT--D- Spent Fuel Pool Islanding Spent Fuel Pool System Modification Training 0 - (0 ) Spent Fuel Pool Islanding Subtotal $ 1. $. $ (.0) LT--D-RecB (1) Transition Modifications - Phase Records Reduction () $ - $ 1 $ 1 1 LT--D-LOED 1 LT--D-S&S 1 LT-D-SPV (1) (1) (1) Transition Modifications - Phase Large Organism Exclusion Device Modification Transition Modifications - Phase Simplification & Streamlining Project Transition Modifications - Phase Special Purpose Vehicle - Implementation () Transition Modifications - Phase Subtotal $ - $.0 $ Major Projects Completed In Subtotal $ 1. $. $ LT-U-1 01 Undistributed - Labor-Staffing Utility Staff $ 0 $ 1 $ ( ) 0 SNF-U- 01 Undistributed - Labor-Staffing Utility Staff 1 ( 0) 1 SR-U- 01 Undistributed - Labor-Staffing Utility Staff 1 (0 ) Utility Staff Subtotal $. $ 1.1 $ (1.) LT-U-1 0 Undistributed - Labor-Staffing Security Force $ $ $ (1 1) SNF-U- 0 Undistributed - Labor-Staffing Security Force 1 (1 ) SR-U- 0 Undistributed - Labor-Staffing Security Force Security Force Subtotal $. $. $ (1.) Undistributed - Labor Staffing Subtotal $. $. $ (0.) 0 1 LT-U-1 Undistributed - DCG Staff Decommissioning General Contractor Staff $ $ $ 1 SR-U- 0 Undistributed - DCG Staff Decommissioning General Contractor Staff 0 (0 ) Undistributed - Decommissioning General Contractor Staff Subtotal $. $. $. LT-U-1 Undistributed - Non-Labor Environmental Permits and Fees $ 0 $ 0 $ ( ) SNF-U- 0 Undistributed - Non-Labor Emergency Preparedness Fees ( ) LT-U-1 1 Undistributed - Non-Labor Association Fees and Expenses 0 ( 1) LT-U-1 0 Undistributed - Non-Labor NRC Decommissioning Fees $ 0 $ 0 $ ( ) 0 SNF-U- 0 Undistributed - Non-Labor NRC Spent Fuel Fees NRC Fees Subtotal $. $ 1. $ (.) LT-U-1 0 Undistributed - Non-Labor Site Lease and Easement Expenses $ 0 $ 1 0 $ 0 SR-U- 0 Undistributed - Non-Labor Site Lease and Easement Expenses 0 (0 ) Site Lease and Easement Expenses Subtotal $. $.0 $ (0.) Fees, Permits, And Leases Subtotal $. $ 1. $ (1.) Page 1 Of

68 Appendix A Southern California Edison 01 NDCTP - SONGS Units & Cost Reasonableness 01 And 01 Completed Projects And Undistributed Expenditures (0% share, 01 $ in millions) [A] [B] [C=B-A] DCE No. Category Description 01 DCE (01 $) Recorded (01 $) Variance LT-U-1 0 Undistributed - Non-Labor Contracted Services () $ $ 1 0 $ 0 0 SNF-U- Undistributed - Non-Labor Contracted Services () 1 1 SR-U- 0 Undistributed - Non-Labor Contracted Services () LT-U-1 1 Undistributed - Non-Labor Craft Worker Training 1 - (1 ) SNF-U- 1 Undistributed - Non-Labor Craft Worker Training - (1 0) SR-U- 0 Undistributed - Non-Labor Craft Worker Training 0 - (0 ) SR-U-Inv Adj (1) Undistributed - Non-Labor Vendor Invoice Adjustment - (0 ) (0 ) SR-U-Bank (1) Undistributed - Non-Labor Bank Fees And Interest - (0 1) (0 1) Contracted Services Subtotal $. $. $ 1.1 LT-U-1 0 Undistributed - Non-Labor Utility Staff Health Physics Supplies $ 1 $ 0 $ (1 0) 0 SNF-U- 0 Undistributed - Non-Labor Utility Staff Health Physics Supplies 0 1 (1 ) 1 Utility Staff Health Physics Supplies Subtotal $. $.0 $ (.) LT-U-1 Undistributed - Non-Labor Decommissioning Advisor $ $ 1 1 $ (1 ) LT-U-1 0 Undistributed - Non-Labor Security Related Expenses $ 0 $ 0 1 $ (0 1) SNF-U- 0 Undistributed - Non-Labor Security Related Expenses 0 0 (0 ) SR-U- 0 Undistributed - Non-Labor Security Related Expenses 0 0 (0 ) Security Related Expenses Subtotal $ 1. $ 0. $ (1.1) 0 SNF-U- Undistributed - Non-Labor Spent Fuel Maintenance $ $ - $ (1 0) 1 LT-U-1 1 Undistributed - Non-Labor DGC Health Physics Supplies 0 0 (1 0) LT-U-1 0 Undistributed - Non-Labor DAW Disposal $ 0 $ 0 0 $ (0 ) SNF-U- 1 Undistributed - Non-Labor DAW Disposal (0 1) Dry Active Waste Disposal Subtotal $ 0. $ 0.0 $ (0.) LT-U-1 1 Undistributed - Non-Labor Tools and Equipment $ 01 $ 0 0 $ (0 1) Plant Operations Subtotal $ 1. $ 1.0 $. 0 1 LT-U-1 0 Undistributed - Non-Labor Insurance $ 1 $ 1 $ ( ) SNF-U- 0 Undistributed - Non-Labor Insurance 0 0 (1 ) LT-U-1 1 Undistributed - Non-Labor Workers Compensation Insurance 0 0 (0 ) Insurance Subtotal $. $ 1. $ (.) SR-U- Undistributed - Non-Labor Severance $ - $ $ LT-U-1 1 Undistributed - Non-Labor Community Engagement Panel 1 0 ( ) LT-U-1 1 Undistributed - Non-Labor Property Tax - ( ) 0 LT-U-1 Undistributed - Non-Labor Energy $ $ $ (1 ) 1 SNF-U- 1 Undistributed - Non-Labor Energy 1 1 (0 ) Energy Subtotal $. $. $ (.) Page Of

69 Appendix A Southern California Edison 01 NDCTP - SONGS Units & Cost Reasonableness 01 And 01 Completed Projects And Undistributed Expenditures (0% share, 01 $ in millions) [A] [B] [C=B-A] DCE No. Category Description 01 DCE (01 $) Recorded (01 $) Variance LT-U-1 1 Undistributed - Non-Labor Utilities (Water, gas, phone) $ 0 $ 0 $ (0 ) SNF-U- 1 Undistributed - Non-Labor Utilities (Water, gas, phone) 1 0 (1 ) SR-U- 1 Undistributed - Non-Labor Utilities (Water, gas, phone) (0 0) Utilities (Water, gas, phone) Subtotal $. $ 0. $ (1.) LT-U-Legal (1) Undistributed - Non-Labor Third Party Legal () $ - $ 0 $ 0 0 SNF-U-Legal (1) Undistributed - Non-Labor Third Party Legal () SR-U-Legal (1) Undistributed - Non-Labor Third Party Legal () - (0 ) (0 ) Third Party Legal Subtotal $ - $ 0. $ 0. LT-U-1 0 Undistributed - Non-Labor Non-Process Computers $ 0 $ 0 $ 0 LT-U-1 1 Undistributed - Non-Labor Telecommunications (0 ) LT-U-1 Undistributed - Non-Labor Personal Computers 01 - (0 1) SNF-U- Undistributed - Non-Labor Personal Computers 00 - (0 0) SNF-U- 0 Undistributed - Non-Labor Information Technology Information Technology Subtotal $ 0. $ 0. $ Other Non-Labor Costs Subtotal $. $ 1. $ (1.) Undistributed - Non-Labor Costs Subtotal $.0 $. $ (1.) LT-U-SLA (1) Undistributed - SLA Service Level Agreements $ - $ 0 $ 0 SNF-U-SLA (1) Undistributed - SLA Service Level Agreements - SR-U-SLA (1) Undistributed - SLA Service Level Agreements Undistributed - SLA Subtotal $ - $ 1. $ Undistributed Subtotal $. $. $ Total Costs $.0 $.1 $.1 General Notes: (A) Totals may not reconcile due to rounding (B) Amounts with $0 0 or $(0 0) indicate that costs are included in the category but round to $0 when rounded to the nearest hundred thousand $ - indicates that no costs are included in the category Notes: (1) These projects were not included in the DCE An alternative "DCE No " has been created to be a unique identifier for each project () The Records Reduction project is the same as the Records Backlog project in Advice Letter -E () The Special Purpose Vehicle - Implementation project is the same as the Special Purpose Vehicle Support project in Advice Letter -E () The Contracted Services DCE line item is the same as Materials and Services in Advice Letter -E () The Third Party Legal DCE line item is the same as the Legal line item in Advice Letter -E Page Of

70 Appendix B Report of the Independent Observer

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