July 27, 2018

NRC Fees and Fee Reform

Jerry Bonanno and Darani Reddick

The US Nuclear Regulatory Commission (NRC) is a fee-based agency. That is, it collects fees for the services it performs associated with the licensing and oversight of commercial nuclear reactors and materials. This article provides an overview of the NRC’s fee-collection authority and suggests recommendations for reforming the NRC’s fee structure.

NRC’s Fee Structure

The NRC’s fee structure is comprised of both (1) fees for services and special projects (hourly fees) (see 10 C.F.R. pt. 170) and (2) annual fees assessed to reactor, fuel cycle, and materials licensees (see 10 C.F.R. pt. 171). The statutory basis for the NRC’s fees structure is provided primarily in the Independent Offices Appropriations Act of 1952 (IOAA) (31 U.S.C. 9701) and the Omnibus Budget Reconciliation Act of 1990 (OBRA-90) (42 U.S.C. 2214).

The IOAA provided the NRC, as well as other federal agencies, the authority to “prescribe regulations establishing the charge for a service or thing of value provided by the agency” (31 U.S.C. 9701(b)). In 1968, the NRC first promulgated regulations at 10 C.F.R. Part 170 imposing a fee for services associated with construction permits and operating licenses issued under 10 C.F.R. Part 50 and specific by-product, source, and special nuclear material licenses issued under 10 C.F.R. Parts 30, 40, and 70 (License Fees for Facilities Licenses and Materials Licenses, 33 Fed. Reg. 10,923 (Aug. 1, 1968)).  

Later, in 1986, the NRC promulgated regulations at 10 C.F.R. Part 171, which required the collection of annual fees from power reactor licensees, in addition to the hourly fees imposed under Part 170 (pursuant to the IOAA) (Annual Fee for Power Reactor Operating Licenses and Conforming Amendment: Final Rule, 51 Fed. Reg. 33,224 (Sept. 18, 1986)). The statutory basis for the original Part 171 rulemaking was provided in the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985, which required the NRC to assess and collect annual fees from licensees on a fiscal year (FY) basis in an amount up to 33 percent of the commission’s estimated budget (see 51 Fed. Reg. at 33,224).

OBRA-90 required the NRC to recover 100 percent of its budget authority through fees collected from licensees. This amount was subsequently scaled down over a five-year schedule. Currently, the NRC is required to recover approximately 90 percent of its budget authority through fees collected from licensees. Because the hourly fees assessed pursuant to 10 C.F.R. Part 170 do not equal 90 percent of the NRC’s budget authority, the agency uses the annual fees assessed pursuant to 10 C.F.R. Part 171 to collect the remainder necessary to satisfy the 90 percent requirement.

For example, in its FY 2018 fee rule, the NRC determined that the total amount to be recovered through Part 170 and 171 fees is $789,300,000. The NRC calculated this amount by subtracting several excluded fee items (e.g., amounts appropriated for Waste Incidental to Reprocessing (WIR), generic homeland security activities, Inspector General services for the Defense Nuclear Facilities Safety Board, advanced reactor regulatory infrastructure activities, and international activities) from its total budget authority of $922,000,000. This left a balance of $878,200,000. The 90 percent fee recovery rate was then applied, which yielded approximately $790,400,000 in recoverable fees. After accounting for Part 171 billing adjustments, the NRC arrived at a total recovery amount for FY 2018 of $789,300,000.

The NRC’s estimate of fee for services to be collected pursuant to Part 170 in FY 2018 is $280,800,000. Thus, the NRC must collect the remaining $508,500,000 via annual fees imposed pursuant to Part 171 (Revision of Fee Schedules; Fee Recovery for Fiscal Year 2018, 83 Fed. Reg. 29,622, 29,622-23 (June 25, 2018)).

The Need for NRC Fee Reform

The current electricity market conditions highlight the need for fair and equitable NRC fees. To some degree, the NRC’s approach to budgeting is hamstrung by OBRA-90’s requirement that the agency recover approximately 90 percent of its budget authority through fees. This structure creates an artificiality in NRC budgeting that negatively impacts its licensees. Several reforms could be undertaken to address these issues.

First, legislation could be enacted to eliminate the fee-recovery requirement (or, at the very least, reduce it significantly from the current 90 percent). The NRC could retain the authority to charge both fees for services and annual fees, but doing away with the 90 percent recovery mandate would remove the artificial linkage that currently exists between hourly and annual fees such that the NRC would not be required to recoup through annual fees monies that are not collected through hourly fees.

Ideally, the annual fee would be capped or fixed, with upward adjustments available to reflect inflation, and downward adjustments available to reflect decreases in NRC’s budget authority. Fixing the annual fee would also detach that fee from the number of operating reactors so that, if operating reactors shut down but NRC’s fee-recoverable budget authority does not decrease, the remaining operating reactors’ annual fee will not increase simply because there are fewer operating reactors.

Although removing the 90 percent recoverable requirement could necessitate part of the NRC’s budget authority to be funded through the US Government General Fund, it would promote NRC efficiency in two ways: (1) the NRC would collect hourly fees only for direct licensing and oversight work actually performed, and (2) the NRC would have to clearly justify the appropriated funds needed to cover the budget authority that is not recouped through fees.

Another potential area for NRC fee reform is to alter the calculation of hourly fees to more accurately reflect the work being performed. Instead of charging one flat hourly rate ($275/hour for FY 2018), the hourly charge could vary according to the required employee skill level necessary to perform the work (i.e., senior NRC staff earning a higher salary would charge higher annual fees than junior NRC staff earning a lower salary). The hourly charge could also vary according to the location where the work is being performed, similar to locality adjustments for federal government employee salaries.[1]

Yet another potential fee reform is to eliminate hourly charges associated with baseline inspection and oversight activities. Instead, licensees would be charged for activities associated with heightened inspection and oversight. Such an approach could increase nuclear plant performance by further incentivizing licensees to operate without incident.

Next Steps

NRC fee reform is not a new concept, but because some reforms require legislation, it has not been easily accomplished. That is not to say that it is impossible. For example, a bipartisan bill is currently pending before the Senate that would amend OBRA-90 to revise how the NRC charges and preserves budgeted funds. The Nuclear Energy Innovation and Modernization Act (S. 512) seeks to address many of the aforementioned challenges by eliminating the mandate to recover 90 percent of NRC’s budget authority through fees.[2] S. 512 would replace that framework with a new structure under which the NRC would collect from licensees the fees necessary to fund its regulatory program as determined by the agency’s actual workload, rather than by a percentage constraint. Taxpayers would fund the NRC’s budget only to the extent provided by law as appropriated items.

There is also a bipartisan bill in the House that would address NRC fee equity and transparency. The Nuclear Utilization of Keynote Energy Act (H.R. 1320) would amend OBRA-90 to include additional activities that would not be considered fee-recoverable, and would ultimately repeal the section of OBRA-90 applicable to the NRC. The NRC would still be required to charge hourly and annual fees, but the amount of the annual fee that could be charged to an operating reactor would be capped, and, to the maximum extent practicable, would have to be based on the actual cost of providing the regulatory services.

As for fee reform that does not require legislation, the NRC must first continue to improve the clarity and transparency of its budgeting and fee process. Licensees must clearly understand the work for which they are being charged, whether that be through hourly fees, or whether it is encompassed in the generic annual fee. And, the NRC must strive for efficiency to avoid unnecessary fee charges to licensees.

Endnotes

[1] For example, the National Marine Fisheries Service charges hourly inspection fees that vary for location, time of day and week, and required skills.

[2] S. Rep. No. 115-86, at 4 (2017).

Jerry Bonanno and Darani Reddick

Published: July 27, 2018

Jerry Bonanno serves as Associate General Counsel for the Nuclear Energy Institute (NEI). The views expressed in this article are solely those of the author and do not necessarily represent the positions of the Nuclear Energy Institute or the nuclear industry.

Darani Reddick is a Regulatory Affairs Manager and Assistant General Counsel at Exelon Generation Co., LLC. The views expressed in this article are solely those of the author and do not represent the views of Exelon Generation.