instead, DOE used estimated monthly billing procedures 14 and collected the fees at the start of each month, it would be collecting the fees an average of 3 months sooner. For example, estimated charges for electricity generated in January would be collected January 1, rather than April 30, or 4 months sooner; similarly, February charges would be collected 3 months sooner; and March, 2 months sooner. Considering the time value of money, the collection of $80 million in fees an average of 3 months sooner would be worth, at a 10-percent annual interest rate, an additional $8 million annually to NWF. If a longer payment period is allowed, the benefits to NWF will be less. For example, if DOE required payment of the fees 30-days after the end of each month, as is the practice utilities use to charge residential customers for electricity, it would on average collect the revenues 1 month sooner. Assuming the same amount of monthly collections and rate of interest, collecting the fees at this time would be worth an additional $2.7 million annually to NWF. We identified two primary implementing obstacles to or concerns about the use of monthly billing procedures. First, it would require DOE to amend its contracts with the utilities through a new rulemaking procedure because the standard contract now provides for automatic payments without a DOE invoice on a quarterly basis. Second, considering the time value of money, monthly payments would add to utilities' costs because they would have to pay sooner. Given this second point, DOE may have difficulty getting utilities to agree to amend the payment provisions of their contracts. In discussing this matter with representatives of investor-owned nuclear-electric utilities, we were told that the utilities would oppose such an amendment given the additional cost which would be passed on to utility customers. Nonetheless, DOE could seek to negotiate with the utilities such an amendment at an opportune time in the future. DOE's standard contract with the utilities recognizes that its provisions were developed in light of uncertainties necessarily associated with such long-term contracts. Accordingly, it contains a provision for amending the contracts that allows DOE to initiate renegotiation of contract terms. 14If the estimated value of goods or services a federal agency provides an individual or organization outside the government is $50,000 or more, the Department of Treasury Fiscal Requirements Manual (section 8020.10) urges the agency to prepare estimated bills for not less than 75 percent of the estimated value of the goods or services. In July 1983 the Energy Information Administration estimated that the average monthly amounts owed the NWF during fiscal year 1984 for the utility generating the most electricity would be nearly $2.5 million and $22,000 for the utility generating the least. How much of an administrative burden it would be to collect fees on a monthly basis (either at the start of the month using estimated monthly billing procedures or 30 days after the end of each month) is unclear. In commenting on a draft of this report, DOE suggested we note that an additional administrative burden for utilities and DOE would result from collecting fees at the start of the month due to the need to reconcile estimated and actual fee payments. On the other hand, another DOE comment suggested we acknowledge a November 1983 OCRWM analysis that, in part, notes that alteration of the existing payments schedule to reflect monthly collections would pose minimal administrative hardships on DOE because its processing system is rapidly being computerized and will be able to accommodate a wide variety of changes, including a shift to monthly fee collections. That analysis also noted that while utilities would be faced with increased costs in making a fee schedule change, they already provide comprehensive reactor operating statistics to NRC on a monthly basis. Commercial owners of previously discharged spent fuel Current fee collection procedures Section 302(a)(3) of NWPA requires DOE to collect a "one-time" fee from owners of spent fuel discharged from commercial power reactors before April 7, 1983. While this fee must be equivalent to the 1-mill per kilowatt-hour fee for newly generated electricity, the act requires DOE to establish the one-time fee based on the weight of the "heavy metal" in the spent fuel. DOE's standard contract established a complex four-tier pricing schedule whereby the one-time fee ranges from $80 to $184 per kilogram of spent fuel. DOE estimates that commercial owners of previously discharged spent fuel, mostly utilities, owe NWF a total of $2.3 billion in one-time fees. DOE has not collected any of these fees. Under DOE's standard contract, utilities have 2 years from the date of their contract with DOE to select one of three deferred payment options: Option 1: Option 2: Payment over 40 quarters (10 years) consisting of Lump-sum payment anytime before delivering the spent fuel to the federal government. Interest Option 3: will be computed from April 7, 1983, and compounded quarterly to the date of payment based on the 13-week Treasury bill rate in effect for each assigned quarter. Full payment before June 30, 1985, or 2 years DOE does not expect to know what payment options will actually be selected until June 1985. DOE believes that until then it is not possible to predict with any certainty when the $2.3 billion and any related interest revenues would be paid. Accordingly, DOE's fiscal year 1985 budget request does not include any collections of the one-time fee in its NWF revenue projections for fiscal years 1983 through 1987. (See p. 37.) To obtain a preliminary indication of what options might be selected in June 1985, DOE in February 1984 asked utilities for an expression of their intent. Accounting for the $2.3 billion owed NWF, the results of DOE's survey showed that of 43 utilities responding, 4 indicated a preference for option 1 ($306 million); 8 for option 2 ($231 million); 16 for option 3 ($722 million); and 15 utilities did not indicate a preference ($1,045 million). OCRWM budget officials stress that the results of this informal survey are not binding on the utilities. As of September 1984, DOE was in the process of once again contacting the utilities and public utility commissions to gain a better indication of their intentions. Under DOE's standard contract, utilities will have no further financial obligation to DOE for the disposal of previously discharged spent fuel upon payment of the one-time fee and any interest and penalties on unpaid or underpaid amounts. In contrast to the 1-mill per kilowatt-hour fee for newly generated electricity, which is subject to annual adjustments, the one-time fee is not subject to adjustment. Accelerating payment In commenting on a draft of this report, DOE stated that it prefers payment option 3 and will encourage utilities to employ this option, although its funding strategy will be flexible enough to accommodate any mix of options finally selected by the utilities. DOE told us that the entire purpose of the interest-free option 3 was to encourage accelerated payments and, based on preliminary input from the utilities, significant lump-sum payments will result by June 30, 1985. In considering DOE's comments on this section, and after further review of DOE's criteria for deferred payments, we noted that DOE's adoption of an interest-free option appears inconsistent with the criteria. DOE's criteria for deferred payments contained in its Accounting and Procedures Handbook state that "all deferred payments are subject to interest charges." The accounting criteria also indicate that deferred payment should be used only on a case-by-case basis. It specifically states: "Deferral of payments is to [be] avoided. Companies Allowing deferred payment options and not collecting interest on one of the payment options appears inconsistent with DOE's criteria, especially given the fact that some utilities had already collected fees from their ratepayers for the disposal of spent fuel in anticipation of NWPA or the enactment of comparable legislation.15 We recognize, however, that the act provided DOE little time (180 days from enactment) to establish procedures for the collection and payment of the one-time fees. While the payment obligation for the one-time fee became effective on April 7, 1983, and DOE had finalized the payment procedures and the methodology for calculating the fee on April 18, 1983, DOE needed more time to determine and verify the actual fees each utility owed and to provide utilities the time to make arrangements to collect and pay the fees. To provide additional economic incentive for utilities to make full payment promptly, in a draft of this report we suggested that DOE consider seeking an amendment to its contract which would apply a rate of interest to deferred payments commensurate with the cost of commercial borrowings, such as the yields on outstanding utility bonds, rather than an interest charge based on yields of Treasury securities, which are generally less than commercial securities of the same maturity. 16 If the utilities still choose to defer payment and pay a higher interest rate, we noted that NWF will benefit from the increased interest revenues. To illustrate this effect, we estimated that NWF would realize the additional 15 For example, according to its 1983 annual report to stockholders, one utility had already collected from its customers the full amount--about $113 million--of its one-time fee liability to the Nuclear Waste Fund. 16 The interest rates on Treasury securities are generally lower than commercial securities of the same maturity because there is less risk associated with the federal government's borrowings. amounts of interest revenues shown in the following table, if the interest rate was based on commercial rates such as the prime rate and average yields of utility bonds (11 and 13.3 percent, respectively, on November 30, 1983) rather than yields of Treasury bills and notes (9 and 11.5 percent, respectively, on November 30, 1983), assuming all utilities chose the same option. bassumes over the 40-quarter period, the average fee outstanding will be $1.15 billion ($2.3 billion divided by 2) times 1.8 percent (13.3 percent minus 11.5 percent). C$2.3 billion times 2 percent (difference between the prime interest rate which was 11 percent as of November 30, 1983, and the yield on Treasury bills on that same date which was about 9 percent). d$2.3 billion times 13.3 percent. At this juncture--utilities have until June 30, 1985, to select one of the three payment options--it may be too late for DOE to attempt to retroactively apply commercial interest rates to all three options. DOE could, however, at least explore the feasibility and benefits to NWF of prospectively applying commercial rates to the payment options. In commenting on the use of commercial, rather than Treasury, interest rates, DOE said that a specific rulemaking to amend the contracts, and possibly a change in the act, would be required before commercial rates could be applied. While we agree that a specific rulemaking would be required to amend the contracts, DOE did not explain why the act would need to be changed. NWPA does not address how or when DOE should collect the one-time fee; rather NWPA delegated to DOE the authority to establish procedures |