Dominion Power 2001 Annual Report Download - page 69

Nuclear Operations
Dominion has a total of seven licensed nuclear reactors at its
Surry and North Anna plants in Virginia and its Millstone plant
in Connecticut. Surry and North Anna serve native load in
Dominion’s regulated electric utility operations. Millstone is
a nonregulated merchant plant. See Notes 5 and 17 regarding
the acquisition of Millstone and other information regarding
jointly-owned utility plants.
Decommissioning represents the decontamination and
removal of radioactive contaminants from a nuclear power
plant, once operations have ceased, in accordance with
standards established by the NRC. Through July 2007, amounts
are being collected from ratepayers and placed in external
trusts and invested to fund the expected costs of decommission-
ing the Surry and North Anna units. As part of its acquisition of
Millstone, Dominion acquired the decommissioning trusts for
the three units that were fully funded to the regulatory mini-
mum as of the acquisition date. Currently, Dominion believes
that the amounts available in the trusts and their expected earn-
ings will be sufficient to cover expected decommissioning costs
for the Millstone units, without any additional contributions to
the trusts.
Accounting for Decommissioning
Utility Nuclear Plants — In accordance with the accounting
policy recognized by regulatory authorities having jurisdiction
over its electric utility operations, Dominion recognizes an
expense for the future cost of decommissioning in amounts
equal to amounts collected from ratepayers and earnings on
trust investments dedicated to funding the decommissioning of
Dominion’s utility nuclear plants. On the consolidated balance
sheets, the external trusts are reported at fair value with the
accumulated provision for decommissioning included in accu-
mulated depreciation. Net realized and unrealized earnings on
the trust investments, as well as the offsetting expense for
decommissioning, are recorded as a component of other income
(loss) as permitted by regulatory authorities.
The balance of investments held in external trusts for Surry
and North Anna decommissioning as well as the accumulated
provision for decommissioning at December 31, 2001 and 2000,
was $858 million and $851 million, respectively.
Note 16 Dominion collected $36 million from ratepayers in each of
the years 2001, 2000 and 1999 and expensed like amounts as a
component of depreciation. Dominion recognized net realized
gains of $32 million, $20 million and $17 million for 2001,
2000, and 1999. Dominion recognized net unrealized losses of
$61 million and $23 million, for 2001 and 2000, respectively;
and net unrealized gains in 1999 of $60 million. Dominion rec-
ognized offsetting increases or decreases to its provision for
decommissioning in amounts equal to net realized and unreal-
ized gains or losses for each period.
Merchant Nuclear Plant — The external trusts that hold
investments dedicated to funding the decommissioning of
Dominion’s merchant nuclear plant are classified as “available
for sale” and reported in the consolidated balance sheets at fair
value. See Note 14. The balance of investments held in external
trusts for Millstone decommissioning at December 31, 2001 was
$839 million.
The accumulated provision for decommissioning, which is
included in accumulated depreciation in the consolidated bal-
ance sheets, was recorded upon the acquisition of Millstone at
its estimated fair value using discounted cash flows of expected
costs to perform the decommissioning activities. The balance of
the accumulated provision for Millstone decommissioning was
$660 million at December 31, 2001.
The accretion of the provision for decommissioning is
expensed as a component of depreciation and was $30 million
for the year ended December 31, 2001. Dominion realized
net gains on trust investments of $15 million in 2001 and
recorded such gains in other income.
Expected Costs for Decommissioning
The total estimated cost to decommission Dominion’s seven
nuclear units is $3.4 billion based upon site-specific studies com-
pleted in 1998 and 1999. Dominion expects to perform new
cost studies in 2002. For all units except Millstone Unit 1, the
current cost estimates assume decommissioning activities will
begin shortly after cessation of operations, which will occur
when operating licenses expire. Millstone Unit 1 is not in service
and will be monitored until decommissioning activities begin for
the remaining Millstone units. The current operating licenses
expire in the years detailed in the table below. However,
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