In a Federal Register Notice published September 5, 2023, the NRC amended its regulations to be effective October 5, 2023, to adjust for inflation the maximum total and annual deferred premium amounts for the “secondary layer” of offsite liability coverage, as required by the Price-Anderson Act, as amended, Section 170 of the Atomic Energy Act (42 USC 2210) (Price-Anderson).
Price-Anderson mandates the inflation adjustment every five years. Because of inflation in the overall economy, there will be a substantial increase in the maximum deferred premium of almost 25% compared to the current amount.
In a related development, American Nuclear Insurers (ANI) recently informed the NRC of an increase in the maximum amount of insurance that is available to satisfy the “primary layer” required under Price-Anderson effective January 1, 2023. The last time ANI increased the available coverage in 2016, the NRC issued an immediately effective order requiring licensees to match that amount. The maximum limit of coverage available to licensees will increase to $500 million effective January 1, 2024, a $50 million increase over the current $450 million maximum limit of coverage.
When initially enacted, Price-Anderson sought to facilitate the private use of nuclear energy by assuring adequate financial protection in the event of catastrophic release of radioactive material. Accordingly, Price-Anderson and NRC’s implementing regulations require large commercial power reactors (i.e., reactors with a rated capacity greater than 100 MWe) to maintain two layers of financial protection. The primary layer comes from third-party liability coverage provided by ANI, which is set by statute at the maximum commercially available.
The secondary layer, also required by statute and the subject of the inflation adjustment, is provided through a deferred premium plan administered by ANI. This plan offers additional private liability insurance in the unlikely event that damages for offsite liability exceed the amount provided by the primary layer. Under this layer, the licensees for each reactor are obligated to pay their respective pro rata shares of the public liability for claims and costs above the primary coverage, with the amount that ANI may assess capped at maximum retrospective premium per reactor. The deferred premiums are paid at an annual capped rate per reactor to limit the potential financial burden on reactor owners following a significant accident and thereby potentially slow damage payments to the public.
After applying the inflation adjustments, the maximum deferred premium will be increased from $131.056 million to $158.026 million per operating reactor, per incident. The maximum annual assessment will be increased from $20.496 million to $24.714 million per operating reactor, per incident. These changes reflect a 24.44% increase in the Consumer Price Index between March 2019 and April 2023. Under Section 170.o.(1)(E) of the Atomic Energy Act, the maximum deferred premium is subject to a 5% assessment for administrative costs. Thus, the total exposure for each operating unit will be approximately $165.9 million.
Because Price-Anderson requires these adjustments and details how the adjustments are to be made, the NRC issues the inflation adjustments as final rules without prior public notice or opportunity for public comment under the “good cause” exception in the Administrative Procedure Act (5 USC 553(b)(B)).
The total secondary layer protection available as of October 2023 will be approximately $15.012 billion, with 95 reactors expected to be participating.
Morgan Lewis routinely advises nuclear industry participants on issues involving Price-Anderson and nuclear insurance in general and will continue to track developments on these topics.