UNITED STATES OF AMERICA LBP-03-11
> NUCLEAR REGULATORY COMMISSION

>

ATOMIC SAFETY AND LICENSING BOARD

>

Before Administrative Judges:
G. Paul Bollwerk, III, Chairman
> Dr. Jerry R. Kline
Dr. Peter S. Lam

MEMORANDUM AND ORDER

(Denying Request for Evidentiary Hearing and Terminating Proceeding)

Pending before the Licensing Board in this 10 C.F.R. Part 2, Subpart K proceeding are various party submissions addressing the issue of whether to designate the sole admitted contention of 10 C.F.R. 2.714 intervenors San Luis Obispo Mothers for Peace, et al., (collectively SLOMFP) for an evidentiary hearing in accordance with 10 C.F.R. 2.1115. With its Technical Contention 2 (TC-2), lead intervenor SLOMFP and the participating 10 C.F.R. 2.715(c) interested governmental entities challenge the December 2001 application of Pacific Gas and Electric Company (PG&E) for a 10C.F.R. Part 72license to construct and operate an independent spent fuel storage installation (ISFSI) at its Diablo Canyon Power Plant (DCPP) facility near San Luis Obispo, California. Interested governmental participants San Luis Obispo County, California (SLOC), the Avila Beach Community Services District (ABCSD), and the California Public Utilities Commission (CPUC) argue that further exploration of the issues in an evidentiary hearing is warranted. In contrast, SLOMFP, the California Energy Commission (CEC), PG&E, and the NRC staff contend that there is no need for an adjudicatory hearing, although they disagree about the merits disposition that should be rendered.

Also pending before the Board is a motion by SLOC, ABCSD, CEC, and CPUC requesting that the Board take official notice of certain facts appearing in a May 14, 2003 Washington Post news article regarding the financial condition of wholesale power unit National Energy Group (NEG), which like PG&E is a wholly-owned subsidiary of holding company PG&E Corporation. SLOMFP supports the motion, while PG&E and the staff oppose it.

For the reasons set forth below, the Licensing Board (1) denies the motion to take official notice of certain facts; and (2) finds that (a) SLOC, ABCSD, and CPUC have failed to show there is a genuine and substantial dispute of fact or law that only can be satisfactorily resolved by a further evidentiary hearing, and (b) based on the record before us, relative to the financial assurance challenge posited by SLOMFP contention TC-2 regarding its current request for bankruptcy reorganization under Chapter 11 of the United States Bankruptcy Code, PG&E has met its burden to demonstrate in accordance with 10C.F.R. 72.22(e) that it has the financial qualifications to carry out the activities outlined in its pending Part 72 application. Further, because all matters in controversy before the Board in connection with the requested application have been resolved in favor of license issuance without the need for further evidentiary presentations, in accordance with 10C.F.R. 2.764(a) we authorize the grant of the requested license, effective immediately upon the completion of all NRC staff license review activities and the requisite findings that all requirements necessary to issue the requested Part72 ISFSI license have been met,^[1] and terminate this proceeding.

I. BACKGROUND

A. Procedural Matters

The focus of this 10 C.F.R. Part 2, Subpart K proceeding is the December 21, 2001 application for a twenty-year 10 C.F.R. Part 72 license that would permit PG&E to construct and operate an aboveground dry cask storage facility at its DCPP site near San Luis Obispo, California. Following a September 2002 initial prehearing conference regarding the standing of, and admissibility of contentions proffered by, various 10 C.F.R. 2.714 petitioners and the participation of 10 C.F.R. 2.715(c) interested governmental entities, see Tr. at 1-419, in a December 2002 decision the Board granted standing to SLOMFP, the Santa Lucia Chapter of the Sierra Club, San Luis Obispo Cancer Action Now, the Central Coast Peace and Environmental Council, Peg Pinard, and the Avila Valley Advisory Council, with SLOMFP designated as the lead section2.714 intervenor, see LBP-02-23, 56 NRC 413, 462 (2002). The Board also granted the requests for interested governmental participant status of SLOC, CEC, ABCSD, and the Port San Luis Harbor District (PSLHD).^[2] See id.

The sole contention admitted by the Board, SLOMFP contention TC-2 entitled PG&E's Financial Qualifications Not Demonstrated, provides, PG&E has failed to demonstrate that it meets the financial qualifications requirements of 10 C.F.R. 72.22(e). See id. at 441. In the proffered basis for this contention, SLOMFP cited a number of circumstances surrounding PG&E's pending contested bankruptcy, including (1) the fact that under PG&E's proposed reorganization plan PG&E would no longer own or operate DCPP or the ISFSI, but would transfer those functions to a new generating company, Electric Generation LLC (Gen), rendering PG&E's ability to recover operating costs from the rate base irrelevant; and (2) the pendency of a billion-dollar lawsuit by the California Attorney General against PG&E's parent company, PG&E Corporation, that could have serious the consequences for PG&E's financial qualifications.^[3] In admitting the contention, the Board found that

SLOMFP has raised relevant and material concerns regarding the impact of PG&E's bankruptcy on its continuing ability to undertake the new activity of constructing, operating, and decommissioning an ISFSI by reason of its access to continued funding as a regulated entity or through credit markets.

See id. at 442. We also noted in our December 2002 ruling that any matters relative to either the California Attorney General's unresolved lawsuit against PG&E Corporation for alleged fraud or the financial qualifications of any entities that might in the future construct or operate the ISFSI were not litigable under this contention. See id. at 442-43.

After granting the timely requests of PG&E and the staff to invoke the Subpart K hybrid hearing procedures pursuant to 10 C.F.R. 2.1109, the Board established a timetable for utilizing those procedures, which provided for an abbreviated discovery period. See LBP-02-25, 56 NRC 467, 476, 478 (2002). On February 13, 2003, the Board granted both a request by the CPUC to participate in the proceedings under 10 C.F.R. 2.715(c), see Request of [CPUC] to Participate as of Right Under 2.715(c) (Jan. 28, 2003), as well as a motion by CEC, SLOC, CPUC, and ABCSD to provide joint responses to discovery, see Motion by [CEC, SLOC, ABCSD, CPUC] to Provide Joint Responses to Discovery (Jan. 28, 2003). See Licensing Board Order (Granting Motion to Participate as 10 C.F.R. 2.715(c) Interested Governmental Entity) (Feb. 13, 2003) at 1-2 (unpublished). The Board thereafter conducted 10 C.F.R. 2.715(a) limited appearance sessions for members of the public on March 23-24, 2003, in San Luis Obispo, California.

On April 11, 2003, the parties and interested governmental participants provided the Board with written summaries of the facts, data, and arguments on which they intended to rely at an oral argument, during which the parties and interested governmental participants would discuss whether an evidentiary hearing regarding the admitted contention was merited. See Summary of Facts, Data, and Arguments on which the [IGP^[4] ] Intend to Rely at the Subpart K Oral Argument (Apr.11, 2003) [hereinafter IGP Summary]; Summary of Facts, Data, and Arguments on which the [CEC] Intends to Rely at the Subpart K Oral Argument (Apr. 11, 2003) [hereinafter CEC Summary]; Summary of Facts, Data, and Arguments on which [PG&E] Will Rely at the SubpartK Oral Argument (Apr. 11, 2003) [hereinafter PG&E Summary]; NRC Staff Brief and Summary of Relevant Facts, Data and Argument upon which the Staff Proposes to Rely at Oral Argument on Technical Contention 2 (Apr. 11, 2003) [hereinafter Staff Summary]. Rather than submitting an initial summary, SLOMFP notified the Board and other parties of its intention to file a response to the other parties' summaries. See Notice by [SLOMFP] of Intent to File Response Pleading (Apr. 11, 2003) [hereinafter SLOMFP Notice]. Pursuant to the Board's timetable set forth in LBP-02-25, the parties timely filed their responses to the other parties' written summaries on April 28, 2003. See Response by [SLOMFP] to Briefs and Factual Summaries Regarding PG&E's Financial Qualifications to Build and Operate Diablo Canyon ISFSI (Apr. 28, 2003) [hereinafter SLOMFP Response]; Response of [PG&E] to the Initial Written Summaries of the [IGP] and the [CEC] (Apr. 28, 2003) [hereinafter PG&E Response]; NRC Staff Brief in Response to Initial Written Summaries of Relevant Facts, Data and Argument upon which the Opposing Parties Propose to Rely at Oral Argument on Technical Contention TC-2 (Apr. 28, 2003) [hereinafter Staff Response]; [CEC] Response to [PG&E] and [NRC] Staff (Apr. 28, 2003) [hereinafter CEC Response]; [IGP] Response to [PG&E] and the [NRC] Staff (Apr. 28, 2003) [hereinafter IGP Response].

The IGP, along with the CEC, thereafter requested that the Board take official notice of facts appearing in a Washington Post news article regarding a PG&E affiliate's financial qualifications. See Motion by the [IGP and CEC] Requesting the [Board] to Take Official Notice under 10 C.F.R. 2.743(i)(1) (May 15, 2003) [hereinafter IGP/CEC Official Notice Motion]. Then, on May19, 2003, during a day-long oral argument held in San Luis Obispo, California, the parties and interested governmental entities presented to the Board their positions on whether there were disputed factual or legal issues relative to SLOMFP contention TC-2 that merited further consideration in an evidentiary hearing. See Tr. at 452-617. Thereafter, pursuant to Board authorization granted during the oral argument, see Tr. at 462, on May 27, 2003, both PG&E and the staff filed responses opposing the IGP's official notice motion. See Response of [PG&E] to Motion by the [IGP] Requesting Official Notice (May 27, 2003) [hereinafter PG&E Official Notice Response]; Reply of NRC Staff to [IGP] Motion that Board Take Official Notice of a Newspaper Blurb Regarding Financial Difficulties of PG&E's [NEG] (May 27, 2003) [hereinafter Staff Official Notice Response].

II. ANALYSIS

A. Standards Governing 10 C.F.R. 2.1115 Determination Regarding the Need for an Evidentiary Hearing to Resolve An Admitted Issue

The Subpart K procedures governing this proceeding were established in response to a congressional mandate found in the Nuclear Waste Policy Act of 1982 (NWPA), 42 U.S.C. 10101 et seq. In licensing proceedings involving the expansion of spent nuclear fuel storage at civilian nuclear power reactor sites, the NWPA provides that parties to the proceeding are to be afforded an opportunity to present facts, data, and arguments, by way of written summaries, sworn testimony, and oral argument. See 42 U.S.C. 10154(a)-(b). Section 2.1115(a) of 10C.F.R., which incorporates additional NWPA directives, provides that based on the oral argument and written submissions, the presiding officer shall [d]esignate any disputed issues of fact, together with any remaining issues of law, for resolution in an adjudicatory hearing, and [d]ispose of any issues of law or fact not designated for resolution in an adjudicatory hearing. To designate an issue for hearing, there must be:

a genuine and substantial dispute of fact which can only be resolved with sufficient accuracy by the introduction of evidence in an adjudicatory hearing; and ... [t]he decision of the Commission is likely to depend in whole or in part on the resolution of that dispute.

Id. 2.1115(b)(1)-(2). In addition, notwithstanding the agency's rules of practice that place the ultimate burden of proof of any substantive matter at issue (i.e., the admitted SLOMFP contention) on the applicant, the party seeking adjudication in a Subpart K proceeding bears the burden of demonstrating the existence of disputed material facts requiring an evidentiary hearing. See 50 Fed. Reg. 41,662, 41,667 (Oct. 15, 1985).

Also worth noting in this context is the Commission's explanation regarding the matter of the resolution of factual questions in the context of a Subpart K proceeding:

The short of the matter is that the NWPA and our rule implementing it (Subpart K) contemplate merits rulings by licensing boards based on the parties' written submissions and oral arguments, except where a board expressly finds that accuracy demands a full-scale evidentiary hearing. Subpart K's abbreviated hearing approach is in harmony with other NRC rules, such as Subparts L and M, that authorize informal adjudicatory decision-making without the panoply of full trial-type processes. See 10 C.F.R. 2.1201 et seq. (Subpart L); 10 C.F.R. 2.1301 et seq. (Subpart M).

Licensing boards are fully capable of making fair and reasonable merits decisions on technical issues after receiving written submissions and hearing oral arguments. The Commission is a technically oriented administrative agency, an orientation that is reflected in the make-up of its licensing boards. Most licensing boards have two, and all have at least one, technically trained member. In Subpart K cases, licensing boards are expected to assess the appropriate evidentiary weight to be given competing experts' technical judgments, as reflected in their reports and affidavits. The inquiry is similar to that performed by presiding officers in materials licensing cases, where fact disputes normally are decided on the papers, with no live evidentiary hearing. See, e.g., Hydro Resources, Inc., CLI-01-4, 53 NRC at 45; Curators of the University of Missouri, CLI-95-01, 41 NRC 71, 118-20 (1995). The NRC's administrative judges, in other words, and the Commission itself, are accustomed to resolving technical disputes without resort to in-person testimony.

There may, of course, be issues, such as those involving witness credibility, that cannot be resolved absent face-to-face observation and assessment of the witness. Or there may be issues involving expert or other testimony where key questions require follow-up and dialogue to be answered with sufficient accuracy. In these kinds of cases, Subpart K contemplates further evidentiary hearings. Many issues, however, particularly those involving competing technical or expert presentations, frequently are amenable to resolution by a licensing board based on its evaluation of the thoroughness, sophistication, accuracy, and persuasiveness of the parties' submissions.

Carolina Power & Light Co. (Shearon Harris Nuclear Power Plant), CLI-01-11, 53 NRC 370, 385-90 (2001), petitions for review denied, 47 Fed. Appx. 1 (2002) (per curiam).

With this background in mind,^[5] we turn to the participants' written submissions and oral argument presentations.

B. Positions of Parties and Section 2.715(c) Participants Regarding Need for Further Evidentiary Hearing on SLOMFP Contention TC-2

1. SLOMFP Position

SLOMFP argues that because no material dispute exists, no evidentiary hearing is warranted. See Tr. at 464. Given the procedural and substantive posture of the instant licensing proceeding, SLOMFP asserts the Board cannot find that PG&E satisfies the financial assurance requirements of 10 C.F.R. 72.22(e). See id.

SLOMFP contends that rather than making a predictive finding that PG&E will have sufficient funds to operate the proposed ISFSI safely for the entire term of the license as required by section 72.22(e)(2), see id. at 466, the staff has made a reasonable assurance finding only for current and near-term expenditures related to the ISFSI,' SLOMFP Response at 3 n.2 (quoting Staff Summary, Affidavit of Michael A. Dusaniwskyj at 4 (Apr. 11, 2003)). Accordingly, SLOMFP argues that because the staff has failed to make the required safety finding that PG&E is in compliance with section 72.22(e), absent a waiver of that regulation the Board has no basis upon which to approve the issuance of the requested license. See Tr. at465.

SLOMFP further asserts that notwithstanding PG&E's reliance on electric rates and/or operating revenue as sources of funding for the ISFSI, PG&E has failed substantively to demonstrate its financial qualifications. See SLOMFP Response at 2-3. With respect to PG&E's ability to recoup funds from the rate base, SLOMFP points out that PG&E concedes that its ability to do so depends on the outcome of the pending bankruptcy case. See id. at 3. Moreover, SLOMFP contends that PG&E attempts to show it will have access to the rate base only while the bankruptcy case is pending, rather than over the license term of the ISFSI as required by section 72.22(e)(2). See id. According to SLOMFP, if the PG&E reorganization plan is approved by the bankruptcy court, then PG&E will rely on its successors' ability to generate operating revenues or on cash it has on hand. See id. at 4. Again, SLOMFP challenges PG&E's apparent willingness to provide assurances of adequate funding for the facility through cash on hand or operating revenues only for a limited period of time during the bankruptcy. See id.

SLOMFP further argues that if the Board were to approve the issuance of the ISFSI license, and PG&E were to commence construction in 2005 as planned using cash reserves, and the bankruptcy court were then to approve the PG&E reorganization plan, and the CPUC subsequently were to deny PG&E rate recovery, PG&E would be forced to rely on operating revenues for covering the costs of the ISFSI. See id. at 5. If each of these contingencies occurs, because neither PG&E nor the staff represents that such revenues will be sufficient to ensure safe operation of the facility, SLOMFP argues that the issue of PG&E's financial qualifications will have fallen through the cracks of the regulatory system to the public's detriment. Id.

In addition, SLOMFP questions PG&E's ability adequately to support decommissioning of the ISFSI. See id. at 6. In SLOMFP's view, PG&E has failed sufficiently to resolve concerns raised by the CPUC relative to (1) PG&E's recently missed $10 million payment into the DCPP decommissioning fund; (2) the potential effects of reorganization on the fund; and (3) possible reluctance on the part of the CPUC to permit the transfer of the decommissioning fund to a non-CPUC regulated entity. See id. at 6-7.

2. CEC Position

The CEC agrees with SLOMFP that an evidentiary hearing is not warranted in this proceeding. See Tr. at 473. In making that assertion, however, the CEC requests that the Board condition approval of the PG&E license on the bankruptcy court's adoption of the CPUC reorganization plan -- under which PG&E would remain the licensee of DCPP and the ISFSI -- rather than the PG&E plan. See CEC Summary at 14.

The CEC's position is based in part on its concern about the adequacy of the staff's finding of PG&E's financial assurance. In particular, given staff statements that (1) the staff considered the information submitted in the PG&E application describing the utility's bankruptcy plan; and (2) the staff's consideration of the application was based on PG&E's current status as a CPUC-regulated entity with access to ratepayer functions, which in the CEC's view are contradictory in nature, the CEC asserts it remains unclear on what basis the staff relied in reaching its determination. See CEC Summary at 11, 12. The CEC further argues that while the pending bankruptcy creates uncertainty with respect to the future control of the ISFSI and future sources of funding, additional uncertainty as to the identity and financial qualifications of the eventual licensee would be created in the event the bankruptcy court approves the PG&E reorganization plan. See id. at 12; Tr. at 598, 600. On the one hand, according to the CEC, PG&E can demonstrate its financial qualifications only through access to the rate base and ratepayer funding. On the other hand, the CEC maintains, the CPUC plan is the only viable reorganization plan that ensures PG&E will retain access to electric rate revenues. As a consequence, the CEC concludes, the Board must condition Part 72 license issuance on the licensee remaining a CPUC-regulated entity. See Tr. at 13-14; see also CEC Response at 3.

3. IGP Position^[6]

The IGP contend the Board should find, as a matter of law, that the impact of bankruptcy on PG&E's ability to construct, operate, and decommission the proposed ISFSI precludes PG&E from demonstrating its financial qualifications in satisfaction of section72.22(e). See IGP Summary at 43. In the alternative, the IGP request that the Board hold an evidentiary hearing to compel further testimony from the staff. See id.

With respect to PG&E's ability to fund the construction and operation of the ISFSI, relying on the sworn declaration of CPUC Public Utilities Regulatory Analyst Truman L. Burns, see id. Appendix (Sworn Testimony of Truman L. Burns (Apr. 10, 2003)), the IGP assert that even during the pendency of the bankruptcy, PG&E may not have access to continued funding from electric rates as a CPUC-regulated utility. See id. at 27. According to the IGP, there is a substantial likelihood that because PG&E is in bankruptcy and anticipates that its successor will not be regulated by the CPUC, the CPUC would not permit PG&E to pay for ISFSI construction costs through rate recovery. Id. at 20 n.30. The IGP further maintain that after it emerges from bankruptcy, PG&E will not be able to demonstrate financial assurance for ISFSI construction and operation because it cannot know whether it will be a CPUC-regulated entity post-bankruptcy. See id. at 28-29, 31. In addition, according to the IGP, PG&E cannot establish its ability to meet the section 72.22(e) requirements without relying on inadmissible evidence, i.e., the financial details concerning PG&E's successor under its bankruptcy plan. See id. at 29-30. Further, in response to PG&E's references to its large income figures versus the relatively small ISFSI-related costs, the IGP argue that PG&E's [g]eneralized blather about big numbers of dollars does not demonstrate its ability to cover ISFSI expenses over the twenty-year license term. IGP Response at 6.

In challenging PG&E's ability adequately to fund the ISFSI decommissioning, the IGP point to PG&E's failure to make a $10 million payment into the decommissioning trust fund in 2000 to suggest that PG&E may not maintain the decommissioning funding levels authorized by the CPUC on an ongoing basis. See IGP Summary at 34. The IGP also argue that PG&E erroneously relies on CPUC-authorized rates to fund decommissioning, considering that under the PG&E reorganization plan, its successor would not be a CPUC-regulated entity. See id. at34-35. Another possible consequence of reorganization as proposed by PG&E, according to the IGP, is PG&E's inability to use monies collected for decommissioning of DCPP to decommission the ISFSI, which would force PG&E to fund decommissioning through other monies in the trust fund (i.e., operating revenues). See id. at 35. Further impacting PG&E's financial assurance demonstration, the IGP contend, is the unresolved issue of whether PG&E can transfer its beneficial interest in the decommissioning trust fund through the bankruptcy court without CPUC approval. See id. at 36. Finally, the IGP argue that PG&E cannot make its required showing under section 72.22(e) relative to decommissioning without relying on evidence the Board has deemed irrelevant or outside the scope of the proceeding, that is, information regarding the details of the financial qualifications of PG&E's successor under its bankruptcy plan. See id. at 36-37.

Alternatively, the IGP posit that there remain genuine and substantial factual disputes that can be resolved only by the introduction of evidence in an adjudicatory hearing. See id. at38. For instance, the IGP assert that to the extent PG&E's written summary introduces more detailed information concerning expected revenues and its continuing ability to fund the construction and operation of the ISFSI, that information must be subjected to cross-examination at a hearing, because it would not have been previously evaluated by the IGP's experts. See id. at 39, 41. A second unresolved factual issue, according to the IGP, is the extent to which the staff considered what they label as inadmissible information in making its conclusory financial assurance determination. See id. at 39-40; Tr. at 481-82. The IGP contend that absent a hearing, this factual issue cannot be resolved because of the staff's marked unwillingness to provide specific answers to the IGP's questions on this point during discovery. Id. at 40; see also Tr. at 482. With respect to decommissioning, the IGP argue that the issue of at what rate the post-bankruptcy ISFSI licensee would continue contributing to the decommissioning fund if it were no longer a CPUC-regulated entity cannot be resolved by the Board without expert opinions presented at a hearing. See IGP Summary at 42. Finally, the IGP aver that the decision of the Commission is likely to depend on the resolution of these factual matters. See id. at 41, 42.

At the oral argument, the CPUC additionally took the position that under normal circumstances, the proposed ISFSI -- probably a useful and reasonable project -- would likely be paid for through rates. Tr. at 489. PG&E's pending bankruptcy and proposed post-bankruptcy corporate structure, however, creates an anomalous situation in which the CPUC may not approve the use of funds collected from ratepayers to cover the ISFSI's construction costs. See id. at 490. Based on what appears to be two irreconcilable positions taken by PG&E before the bankruptcy court, on the one hand, and the Commission, on the other, the CPUC asserts that the Board should postpone making any decision on the ISFSI license application until after the bankruptcy proceeding is concluded. See id. at 492-93.

The ABCSD expressed a similar concern regarding what it viewed as PG&E's inconsistent positions and also suggested that the Board delay the proceeding pending the resolution of the bankruptcy proceeding. See id. at 501. If, however, the Board chose to proceed, the ABCSD, in agreement with the other IGP, argued that an adjudicatory hearing was necessary. See id. at501-02.

4. PG&E Position

PG&E asserts that the Board can dismiss contention TC-2 without holding an evidentiary hearing because the contention does not raise factual issues that are either substantial or central to the Commission's decision. See PG&E Summary at 6-7.

Relying for support on the affidavits of PG&E Lead Budget Coordinator Robert L. Kapus and PG&E Business and Financial Planning Director Walter L. Campbell, see id. exhs. A & B (Affidavit of Robert L. Kapus (Apr. 8, 2003) and of Walter L. Campbell (Apr. 9, 2003); see also PG&E Response exh. A (Supplemental Affidavit of Walter L. Campbell (Apr. 25, 2003)), PG&E estimates (in 2001 dollars) that it will cost $63 million to construct the ISFSI, $69 million to operate a 50-cask facility for the initial license term (from the present until 2025),^[7] and $12.5 million to decommission the ISFSI.^[8] See PG&E Summary at 8. PG&E asserts that it will obtain the necessary funds to cover the construction and operating costs of the facility from either electric rates or electric operating revenues, without resorting to borrowing money to pay ISFSI expenses. See id. at9-10. Because the costs associated with the ISFSI represent reasonable and prudent DCPP operating expenses and are in the public interest, PG&E expects to cover those costs through traditional cost-of-service rates, as it is presently entitled to pursuant to an April 4, 2002 CPUC order. See id. at 10. PG&E further argues that its substantial operating revenues -- over $10 billion for the 12-month period ending December 31, 2002 -- would be more than adequate to cover the expenses associated with the ISFSI, which would be incurred in phases. See id. In addition, PG&E maintains that the $3 billion it currently possesses as cash on hand would be sufficient to cover ongoing costs associated with the development, construction, operation, and decommissioning of the ISFSI while PG&E remains in bankruptcy, although much of that cash is designated to repay PG&E's creditors and could only be used with bankruptcy court approval. See id. at11-12. Moreover, in the event the CPUC disallows the recovery of ISFSI costs through rates, PG&E avers that any expenses would be sufficiently covered by cash on hand or electric operating revenues. See id. at 12. Thus, PG&E argues, not only is PG&E currently able to pay the necessary costs associated with the ISFSI pending resolution of the bankruptcy proceeding, but there is also reasonable assurance that it will continue to be able to pay those costs following the outcome of the case and the company's emergence from bankruptcy (in whatever form). See id. at 14. Notwithstanding the IGP's argument that there exists a substantial likelihood that the CPUC will disallow rate recovery of ISFSI construction costs while PG&E remains in bankruptcy, PG&E asserts that the IGP's argument fails to establish a genuine and substantial issue. See PG&E Response at 11-12.

In response to IGP allegations regarding the uncertainty of PG&E's future ability to recover costs related to the ISFSI, PG&E contends that NRC regulations do not require PG&E to provide financial projections of revenues for the full twenty-year ISFSI license term. See id. at18. Rather, the reasonable financial assurance required by section 72.22(e) is provided primarily by PG&E's current status as a rate-regulated entity and secondarily by the company's financial position as demonstrated in its most recent annual report. See Tr. at 558, 559. Moreover, PG&E argues, inquiries concerning the uncertain financial qualifications of a possible future non-utility licensee are speculative and premature at this juncture. See PG&E Summary at 19.

Relative to covering the costs of decommissioning, PG&E asserts that its ongoing contributions to the DCPP decommissioning fund (collected through electric rates) specifically include monies for decommissioning the proposed ISFSI. See id. at 21-22. In this regard, PG&E intends to demonstrate financial assurance for decommissioning by using the external sinking fund method, pursuant to 10 C.F.R. 72.30(c)(5). See id. at 22. While PG&E proposes to deposit ISFSI decommissioning monies into the decommissioning fund established for DCPP, the ISFSI funds would be distinguished and segregated from the DCPP funds. See id. Responding to claims in connection with the uncertain outcome of the bankruptcy proceeding's effect on PG&E's financial assurance of decommissioning, although acknowledging the basis for financial assurance may change following the bankruptcy court's decision, PG&E argues it would be premature for the Board to address that change at the present time. See id. at 23. Relative to the $10 million missed DCPP decommissioning fund payment, PG&E explains that this missed contribution resulted from the company's cash flow problems during the 2000 California energy crisis, and although it is not now feasible simply to deposit the $10 million into the fund because of tax implications, the issue is being dealt with in the CPUC ratemaking process. See PG&E Response at 15.

PG&E additionally contends that, contrary to the suggestion of the IGP, it does not rely on inadmissible information contained in the Part 50 license transfer application to demonstrate its financial qualifications with respect to the ISFSI application. See PG&E Response at 14.

5. Staff Position

As does PG&E, the staff argues that SLOMFP contention TC-2 raises no genuine and substantial dispute with respect to a material issue that would warrant an evidentiary hearing. See Staff Summary at 7. Relying on PG&E representations that ISFSI costs would be covered by revenues generated from electric rates or external financing (if needed), the staff indicates it has concluded PG&E has met the financial requirements of section 72.22(e) for construction, operation, and decommissioning of the proposed ISFSI. See id. at 8. Rather than offering any genuine dispute, according to the staff, the other parties merely attempt to second guess this staff determination of financial assurance. See id. In defense of its review, which it supports with the affidavit of NRC economist Michael A. Dusaniwskyj, see id. unnumbered attach. (Affidavit of Michael A. Dusaniwskyj (Apr. 11, 2003)), the staff observes that the finding was made by staff economists after a review of the information provided by PG&E and, based on their educational training and work-related experience, in their judgment PG&E had demonstrated its financial qualifications. See id. While the staff acknowledges it was aware of the ongoing bankruptcy proceeding and the potential consequences of that proceeding while it was conducting its review, the staff asserts that so long as PG&E is the applicant for the ISFSI license, there is reasonable assurance based on PG&E's ability to recover costs through electric generation and rate recovery. See id. at 9.

Responding to the IGP argument that PG&E cannot demonstrate it will have revenues sufficient to construct, operate, and decommission the ISFSI over the proposed twenty-year license term, the staff contends the regulations do not require PG&E to make such a demonstration. See Staff Response at 6; Tr. at 516-17. Instead, the regulations require the staff to find reasonable assurance of financial qualification, which can be based on plausible assump