<DOC>
[107th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:71505.wais]
NATIONAL ENERGY POLICY: NUCLEAR ENERGY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENERGY AND AIR QUALITY
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MARCH 27, 2001
__________
Serial No. 107-10
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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_______________________________________________________________________
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COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Energy and Air Quality
JOE BARTON, Texas, Chairman
CHRISTOPHER COX, California RICK BOUCHER, Virginia
STEVE LARGENT, Oklahoma RALPH M. HALL, Texas
Vice Chairman TOM SAWYER, Ohio
RICHARD BURR, North Carolina ALBERT R. WYNN, Maryland
ED WHITFIELD, Kentucky MICHAEL F. DOYLE, Pennsylvania
GREG GANSKE, Iowa CHRISTOPHER JOHN, Louisiana
CHARLIE NORWOOD, Georgia HENRY A. WAXMAN, California
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
HEATHER WILSON, New Mexico BART GORDON, Tennessee
JOHN SHADEGG, Arizona BOBBY L. RUSH, Illinois
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York THOMAS M. BARRETT, Wisconsin
ROY BLUNT, Missouri BILL LUTHER, Minnesota
ED BRYANT, Tennessee JOHN D. DINGELL, Michigan
GEORGE RADANOVICH, California (Ex Officio)
MARY BONO, California
GREG WALDEN, Oregon
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Aurilio, Anna, Legislative Director, U.S. PIRG............... 89
Domenici, Hon. Pete V., a United States Senator from the
State of New Mexico........................................ 51
Hutchinson, C. Randy, Senior Vice President, Business
Development, Entergy Nuclear............................... 61
Hutzler, Mary J., Director, Office of Integrated Analysis and
Forecasting, Energy Information Administration............. 26
Longenecker, John R., Longenecker & Associates, Inc.,
Management Consultants..................................... 81
Magwood, William D., Director, Office of Nuclear Energy,
Science and Technology, U.S. Department of Energy.......... 20
Sproat, Edward F., III, Vice President of International
Programs, Exelon Corporation............................... 77
Tollison, Alfred C., Jr., Executive Vice President, Institute
of Nuclear Power Operations................................ 70
Travers, William D., Executive Director for Operations, U.S.
Nuclear Regulatory Commission.............................. 13
Additional material submitted for the record:
Longenecker, John R., Longenecker & Associates, Inc.,
Management Consultants, responses for the record........... 139
Sproat, Edward F., III, Vice President of International
Programs, Exelon Corporation, responses for the record..... 136
(iii)
NATIONAL ENERGY POLICY: NUCLEAR ENERGY
----------
TUESDAY, MARCH 27, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Energy and Air Quality,
Washington, DC.
The subcommittee met, pursuant to notice, at 1 p.m., in
room 2123, Rayburn House Office Building, Hon. Joe Barton
(chairman) presiding.
Members present: Representatives Barton, Cox, Largent,
Burr, Whitfield, Ganske, Norwood, Shimkus, Wilson, Shadegg,
Pickering, Bryant, Walden, Tauzin (ex officio), Boucher,
Markey, Strickland, Barrett, and Luther.
Staff present: Dwight Cates, professional staff; Yong Choe,
legislative clerk; and Rick Kessler, minority counsel.
Mr. Barton. The subcommittee will come to order.
Today the Energy and Air Quality Subcommittee of the Energy
and Commerce Committee will have another in its continuing
series of hearings on our energy policy options for the United
States. Today we are going to focus on nuclear energy, which
currently provides one-fifth of our electricity and is our
second-largest fuel source.
We all know how few nuclear plants have been built
recently, i.e. none. But that may soon change. Natural gas
prices are expected to remain high for the foreseeable future,
especially with the current difficulties in gaining access to
new resources and building infrastructure to market natural
gas.
As this happens, other generation becomes more cost
competitive. Our current generation of nuclear plants have
shown increases in efficiency and safety, along with decreases
in cost, as some of our witnesses will explain later.
Today witnesses will discuss several different parts in the
nuclear industry with a focus on the future. I want to commend
Chairman Meserve of the Nuclear Regulatory Commission for all
of his leadership efforts. Unfortunately, he cannot be here
today. I have heard good things about his leadership and
continue to work with him and the Commission and believe his
interaction with this subcommittee has been very, very
cooperative.
I do want to thank Dr. Travers, who is here today for the
NRC, and I also want to thank our friends from the Department
of Energy and the Energy Information Agency for being here.
Commercial witnesses on our second panel include Entergy, a
utility that has decided to make nuclear energy a part of its
strategy for the future. Another witness can talk about one of
the next generation technologies that might make up future
nuclear plant orders--the Pebble Bed Modular Reactor.
It is important to note that there are other competing
technologies, some of which have already been approved by the
NRC. In general, future plants will be easier to permit because
of the uniformity, less expensive because of their next
generation technology, and more efficient as a power generator.
Later in this Congress, this subcommittee will begin to
explore the vitally important issue of the nuclear fuel cycle
concerning our Nation's mining, conversion, and enrichment
capability. I welcome any statements for the record that those
entities might offer.
Mr. John Longenecker is here today to speak on those issues
as a whole as the focus today is somewhat more on the
regulatory side.
Finally, the incredibly important issue of nuclear waste
policy will be dealt with by this subcommittee later in this
Congress. We all await news of the scientific work that is
being currently done at Yucca Mountain and the site
recommendation that is due to the Secretary of Energy later
this year.
This subcommittee, on a bi-partisan basis, reported
legislation last year dealing with the budget issue,
environmental standards, interim storage, transportation, and
on the waste storage issue. We will discuss this same issue
again later this year and hopefully successfully resolve it,
put a bill on the President's desk that he can sign.
A problem with spent fuel cited at more than 100 sites
throughout our nation is getting worse, not better. The Federal
Government must live up to its obligations to take that waste
out of its distributed locations and get it safely in one
proper repository. If a Federal solution is not found soon,
some plants will be forced to close, not because of problems
with the plants but because of laws dealing with the waste that
they generate.
That would mean that our electric reliability would be
threatened. We have seen first-hand in California the effect on
the economy and livelihood of consumers what happens when
dysfunction occurs in the electricity markets. In the first
half of this year, we will hold a hearing specifically on
nuclear waste, Yucca Mountain, and the Federal Government's
progress toward that decision deadline.
We will also look at the hearing record to draft a
comprehensive national energy policy that almost certainly will
include a revitalization and nuclear option. We should identify
changes in laws and regulations that promote retention of the
nuclear option and even its expansion.
The Price-Anderson Act is up for reauthorization during
this Congress, and we must address liability and disaster
preparedness issues to send the signal that new next generation
nuclear plants are welcome in this country. Nuclear will and
must be a part of a balanced policy.
For those who want a reliable electricity source from
plants with growing efficiency in a fuel source of domestic
supply, I say, ``Look at nuclear.'' For those who don't like
dams or natural gas pipelines, I say, ``Look at nuclear.'' And
for those concerned about emissions from coal plants, I say,
``Look at nuclear.'' You kind of get the message in this.
In my opinion, after all of the hearings in this and
previous Congresses, one cannot possibly discuss a balanced
energy portfolio without taking a fresh and unbiased look at
nuclear power. I look forward to the testimony of the witnesses
today and the questions that the subcommittee is going to ask.
I would now like to recognize the ranking minority member,
a distinguished gentleman from Virginia, Congressman Boucher.
Mr. Boucher. Thank you very much, Mr. Chairman. Today we
will learn about the current contribution of nuclear power to
our national energy portfolio, its future potential, and what
steps, if any, we might take in order to ensure that nuclear
energy has a place in a balanced energy portfolio for the
future.
In that light, I am very pleased to note that our
subcommittee will hear testimony later this afternoon from the
Senator from New Mexico, Mr. Domenici. As chairman of both the
Senate Budget Committee and also the Energy and Water
Appropriations Subcommittee, Senator Domenici is uniquely well-
positioned to comment on energy policy, and I look forward very
much to his testimony and to having the benefit of his
insights.
After coal, nuclear plants are our Nation's second-largest
source of electricity and generate approximately 20 percent of
our total electricity output. But there is increasing
uncertainty about the future role that nuclear energy will play
in our Nation's energy mix.
Although the Energy Information Administration identifies a
total of 259 nuclear units that were ordered since the 1950's,
all of those orders occurred before 1978. No new orders for
commercial nuclear power plants were placed during all of the
Reagan, Bush, or Clinton Administrations.
Similarly, no new construction permits have been issued
since the end of the Carter Administration. Furthermore, the
total number of cancellations by utilities of ordered units
stands at 124. The uncertainty surrounding the role of nuclear
energy may be due, in part, to the fact that nuclear power
production has proven to be highly capital-intensive.
Siting is also a problem for nuclear power plants. Despite
a commendable safety record during the course of the past
decade, the public's negative perception of nuclear power has
not changed significantly during the past 20 years.
Another matter of concern is the current state and
uncertain future of our Nation's domestic nuclear fuel
production capability, in view of the privatization of the U.S.
Uranium Enrichment Corporation. The problems attending its
privatization were clearly delineated by a recent decision of
the United States District Court for the District of Columbia,
and its ongoing problems have been the source of numerous
inquiries by this subcommittee and its individual members,
particularly Mr. Strickland and Mr. Whitfield.
Finally, there is the question of nuclear waste disposal.
Chairman Barton, the ranking member on the full committee, Mr.
Dingell, and other members of this committee have demonstrated
a bipartisan and serious commitment to ensuring that waste from
our Nation's nuclear power plants will be disposed of
permanently in an environmentally safe and scientifically sound
manner.
But that goal may be slipping away from us because of the
diversion of ratepayer money from the nuclear waste fund for
other purposes--an event that is threatening to derail the
repository program which is paid for through the nuclear waste
fund. And that fund was created under the 1992 Act to pay for
the DOE repository program.
While more than $15 billion has been paid into the fund,
only about $6 billion has been appropriated for the repository
program. Data provided to the subcommittee by the DOE in recent
years indicates that unless the balance in the waste fund is
restored, the repository program will face significant funding
shortfalls beginning in 2003, which in turn could jeopardize
prospects for opening the repository by 2010.
Moreover, if damages from utility lawsuits are determined
to be awarded from the waste fund, and not from some other
governmental source, the funding shortage will be significantly
exacerbated. The only way that we can truly remedy this
situation is to restore the nuclear waste fund to its off-
budget status, as this committee voted to do by a margin of 40
to six during the last Congress.
Surely, in a time of great surplus, we can afford to take
this simple but essential step. And I look forward to working
with my colleagues here, as well as in the other body, to
accomplish this goal.
Mr. Chairman, despite these challenges, I note that during
our testimony today we will have witnesses from two electric
utilities who are optimistic about the prospects for nuclear
energy in the future. And I think that is a positive
development.
In order to assure access to affordable, safe, and reliable
energy, we must develop a balanced energy portfolio and, in my
view, nuclear power should be part of that mix. The Federal
Government already helps the nuclear industry by limiting its
liability under the Price-Anderson Act.
And among the items which should be on the agenda of this
subcommittee is the reauthorization of the Price-Anderson
legislation during the course of this Congress. And we should
ensure that a permanent nuclear waste repository will open by
the end of this decade.
These efforts, taken together, may or may not prove
sufficient. Some utilities and their shareholders foresee a
future for nuclear industry. Their advice concerning the steps
this committee should take to address the several problems that
confront the industry will be most welcome, and I want to
commend you, Mr. Chairman, for assembling this afternoon an
excellent conversation on this subject with knowledgeable
witnesses who I am sure will provide outstanding guidance.
Mr. Barton. I thank the gentleman from Virginia.
We now welcome the gentleman from Kentucky, Mr. Whitfield,
for an opening statement.
Mr. Whitfield. Thank you, Mr. Chairman. As many people
know, the Paducah Gaseous Diffusion Plant will soon become the
only uranium enrichment facility in operation in the United
States. We also have one remaining converter of natural uranium
in this country, and that conversion plant is located in
Metropolis, Illinois.
Just last week, the Nuclear Regulatory Commission approved
the high assay upgrade license at the Paducah plant to allow
the plant to enrich uranium to the 4 or 5 percent level needed
to power nuclear reactors. As has been stated, nuclear power
supplies about 22 percent of our Nation's electricity, but
nuclear power plants obviously cannot operate without enriched
uranium.
As I stated earlier, there will soon be only one enrichment
facility in this country, and over half of our domestic supply
of uranium comes from Russia. But the Russian supply has been
interrupted five times in 5 years, and many people fear it will
soon become too costly to produce enriched uranium in the U.S.
because it is cheaper to import from foreign sources.
The electricity crisis in California has taught us many
lessons, and one is that it reminds us, once again, we can ill
afford to rely on only one form of power generation in America,
and particularly as demand continues to exceed supply. Nuclear
energy is a key component to providing for our power needs now
and in the future as the existing plants obtain relicensure to
operate for another 20 years, and hopefully we will have new
power plants coming online.
As we go through this hearing, there are a number of issues
we must focus on, but I want all of us to remember the
importance of protecting our domestic capability to enrich
uranium in the U.S., and I look forward to the testimony of our
panels. And I yield back the balance of my time.
Mr. Barton. We thank the gentleman from Kentucky.
We now recognize the gentleman from Massachusetts for an
opening statement.
Mr. Markey. Thank you, Mr. Chairman, very much. And I thank
you for calling today's hearing. It is very, very timely.
Tomorrow is the 22nd anniversary of the Three Mile Island
nuclear accident, and April 26 will mark the 15th anniversary
of the Chernobyl nuclear accident. Now these two events--Three
Mile Island and Chernobyl--stand as a stark warning to us about
the enormous risks and dangers inherent in nuclear reactor
operations.
The nuclear industry supporters like to say that more
people have died from other forms of electricity generation
than from nuclear power. But when there is an accident in a
coal mine, they don't give warnings to pregnant women and
children to evacuate all of Central Pennsylvania. When there is
an explosion of a natural gas pipeline, they don't force
100,000 people to flee the area and to throw away all fresh
vegetables and fruit across Europe.
While offsite exposures at Three Mile Island were low, we
now know that we came close, very close, to a catastrophe. At
Chernobyl, at already know that at least 31 people have died,
140 people suffered severe radiation sickness and impairment,
and hundreds of thousands more were exposed to significant
levels of radiation.
Of course, the full human cost of the Chernobyl disaster is
still unknown, as those who have been exposed face the dread
prospect of thyroid cancers and other radiation-induced
illnesses.
And what of nuclear waste? When are we ever going to solve
that issue? If the nuclear industry is so clean, why is the
nuclear utility industry trying to weaken groundwater
protection standards--weaken--for the Yucca Mountain waste
repository? If it is so clean, why is the nuclear industry
trying to take away the EPA's power to establish these
standards and give it to the NRC?
If it is so safe, why is the nuclear industry seeking to
retain taxpayer-subsidized Price-Anderson insurance? If it is
so safe, why is the industry so insistent on retaining the
provisions of Price-Anderson that indemnify the DOE contractors
transporting spent fuel from any liability in the case of an
accident? The Mobil-Chernobyl provision.
And if nuclear power is so economically viable, why is the
industry seeking taxpayer financed Federal subsidies in the
form of special tax breaks, special R&D subsidies, and even a
Federal subsidy to help defray future licensing costs? If it is
so economic, why do we provide government subsidized
irradiation services for years, a subsidy that we will revive
if we were to bail out the U.S. Enrichment Corporation as some
now desire?
If it is so economic, why do the utilities come in for
bailouts of their so-called stranded nuclear investments? Just
over the last 5 years, bailouts that disguise the true costs of
nuclear power by shifting acquisition and construction costs
from nuclear utility shareholders to captive utility consumers.
I look forward to obtaining the answers to these questions
in the course of the day, so that I can really find out whether
or not this is a technology which is economical, is safe, and
is clean.
I thank you, Mr. Chairman.
Mr. Barton. I thank the gentleman.
The gentlelady from New Mexico, Congressman Wilson, is
recognized for an opening statement.
Ms. Wilson. Thank you, Mr. Chairman. I appreciate your
holding this hearing because nuclear energy has to be part of
any comprehensive national energy policy. We have 104 nuclear
generating plants in the United States providing some 20
percent of the power that we rely on for electricity.
And over the last decade, power produced by nuclear plants
has increased by 30 percent, roughly the equivalent of building
23 new nuclear power plants, while by every measure safety has
improved markedly during the same period. The cost to produce
nuclear power is less than 2 cents per kilowatt hour, which
compares with coal at over 2 cents and natural gas at about 3.5
cents per kilowatt hour.
Yet, with the demand for electricity growing every year, no
nuclear power plants are projected to come online by 2020, and
nuclear power is projected to decline to only 11 percent of the
Nation's electricity generation by 2020. I am here to say today
that things are changing.
Since the incident at Three Mile Island, expanding reliance
on nuclear power has been a non-starter in America. It has been
in the ``too hard'' column. In the context of rolling blackouts
in California, high prices, growing demand for power, and
continued environmental protection and global warming concerns,
America is taking a second look at nuclear power. And we
should.
On this committee we are often charged with assessing risks
and benefits, balancing competing interests--in this case, the
need to protect the environment and public health with the need
to make sure that America's energy needs are met.
We are trying to craft an energy policy for America that
will reduce the dependence on foreign oil, make sure adequate
power is available at a reasonable price, protect the public
health, promote conservation, and minimize impact on the
environment. Every source of energy has risks and benefits.
Where there are risks we should seek to mitigate those risks,
whether by investing in research and clean coal technology or
improving the safety designs of nuclear reactors. But we cannot
take one energy source off the table as we have in the last 20
years.
One of the barriers to increasing nuclear power capacity is
the capital cost of plants, and there is new and emerging power
designs, some of them being tested in South Africa, that
promise the possibility of making the capital cost competitive
with other kinds of technologies.
We have challenges to address--opening Yucca Mountain,
reauthorizing Price-Anderson, regulatory streamlining. It is
time to take on those challenges and take nuclear power out of
the ``too hard'' category.
Thank you, Mr. Chairman.
Mr. Barton. We thank the gentlelady.
We recognize Congressman Strickland for an opening
statement.
Mr. Strickland. Thank you, Mr. Chairman. I am pleased that
we are holding this hearing today because I believe, as I have
stated at previous subcommittee meetings, that we face an
urgent problem in this country; that is, the demise of a
reliable domestic nuclear fuel supply.
Last year, on June 20, the United States Enrichment
Corporation announced it would cease production at the
Portsmouth, Ohio, gaseous diffusion plant in my district. This
decision by USEC leaves one gaseous diffusion plant in this
country located in my friend Mr. Whitfield's district in
Paducah, Kentucky.
This decision is alarming, Mr. Chairman, because the
Portsmouth facility is the only plant with the capability of
enriching uranium to the desired commercial assay. I understand
this past Saturday the Paducah plant was able to enrich a
little over 4 percent assay. I think that is good news. But it
is important to note that reactors presently use nearly 5
percent assay, and the trend is toward higher assay fuel.
Portsmouth is the only plant licensed to enrich up to 10
percent assay. As you know, over 20 percent of electricity in
this country comes from nuclear generation. Currently, the U.S.
depends on imports from Russia for over 50 percent of its
nuclear fuel, and we understand that USEC is proposing to
import even more fuel from Russia's commercial vendors, which
would place U.S. nuclear power plants in an OPEC-like
dependency on Russia.
Given this existing dependency on Russian material, it
seems absolutely reasonable to request that the Portsmouth
plant is placed in a warm standby mode until we know for sure
that the Paducah plant is capable of enriching uranium to
commercial-grade over a reasonable period of time.
Mr. Chairman, I have reviewed a number of reports which
have been released by GAO, the NRC, and DOE in the last few
months, and a particular report by the NRC predicts that the
Paducah plant may cease to be economically viable after the
year 2003. If the NRC is correct, and Paducah is not viable
after 2003, do we want to become dependent upon Russia for
nearly 80 percent of our nuclear fuel supply?
I say again, we have an urgent problem on our hands, one
that must be addressed within the next few weeks or the next
few months. Certainly, we don't have years. And I hope today's
hearing will shed some light on what it is that we can do as a
Congress, or what the administration and the Congress can do
together, to make sure that our Nation's energy supply is
secure.
Thank you, and I look forward to our witnesses.
Mr. Barton. We thank the gentleman from Ohio.
The distinguished full committee chairman, Mr. Tauzin, is
recognized for an opening statement.
Chairman Tauzin. Thank you, Mr. Chairman. Mr. Barton, thank
you for holding the hearing today for examining the critical
role that the Nation's energy infrastructure plays in the life
of our country, and the fact that nuclear now supplies as much
as 20 percent of the Nation's electricity cannot be forgotten.
Interestingly enough, over the past decade, the same
nuclear reactors that provide our country with 20 percent of
our electricity have increased their output and efficiency by
30 percent, and that's pretty remarkable considering that we
haven't licensed a new nuclear plant for many years.
Recently I have noticed, however, initial stages of
resurgence in nuclear power and the interest of building new
nuclear plants. The current energy crisis we are in requires us
to understand that natural gas and coal should not be the only
fuel sources for developing our future electric generation
capacity.
Likewise, nuclear reactors have become a hot item in
restructured markets. Six reactors have changed hands in the
last 24 months. Several electric utilities have outlined
aggressive plans to invest and to extend the life of existing
plants because they are still reliable and provide a
competitive stream of electricity.
Witnesses today will reveal that some utilities are
contemplating the construction of new nuclear plants, and that
is good news for maintaining the diversity of fuels that our
country requires.
I want to make it clear, however, that it is not Congress
or the administration which will determine how many nuclear
reactors should be in operation. Ultimately, the fate of
nuclear power will be determined by the private sector, and
energy markets will determine whether new and existing nuclear
plants are an economical source of generating capacity.
But the actions we take here in Congress can directly
affect the future outlook for maintaining a mix of fuels that
obviously should include nuclear energy.
Here are the few issues that I think we need to consider,
Mr. Chairman. First, the compensation liability provisions of
the Price-Anderson Act are set to expire in the year 2002. It
is important that Congress reauthorize Price-Anderson, because
without it there will be no real opportunity to construct or to
operate new nuclear facilities.
Second, the NRC must regulate reactors to ensure they are
safe. The NRC must administer its authority in a consistent and
even-handed manner that does not discourage companies from
future investments in nuclear power.
Third, the NRC must be prepared to renew as many as 30
reactor licenses that are set to expire in a few years. They
recently renewed licenses to extend the life of five reactors
in the states of Maryland and South Carolina, but, obviously,
with 30 requiring action the NRC must be prepared to manage
dozens of renewal requests in the near future.
Fourth, it has been 20 years since they issued a new
license to construct a nuclear reactor, and we should all be
concerned that the NRC may be a little rusty in responding to
any future requests.
Fifth, Congress and the administration must work harder to
sell the long-term disposal of spent nuclear fuel, and this is
not just a problem for the nuclear industry but also a big
problem for the Department of Energy. In the long run, it is
not safe to store spent nuclear fuel in dozens of locations
around the country at facilities designed only for short-term
storage. Continued uncertainty here will only discourage future
development of nuclear power.
The nuclear industry, the administration, and Congress must
focus our attention on the future viability of our domestic
fuel industry as the gentleman just spoke to. We must make sure
that the country can produce nuclear fuel to feed our future
energy needs and to maintain our national security interest.
That is just a short list, Mr. Chairman, and I am sure this
hearing and other hearings will develop more. But I want to
thank you for identifying these issues and making this inquiry
a major part of the fuel and energy review that your committee
is undertaking in advance of producing with the administration
a new energy policy for this country.
Nuclear is, and will be, a major component of that policy.
This hearing is, therefore, critically important.
I thank you and yield back the balance of my time.
Mr. Barton. We thank the distinguished full committee
chairman.
The gentleman from Georgia, Mr. Norwood, is recognized for
an opening statement.
Mr. Norwood. Thank you, Mr. Chairman. I am sorry I was a
minute late. I was trying to time it so I could follow Mr.
Markey, and, doggone it, I missed it by one. I particularly
thought he would enjoy my opening statement.
I thank you very much for conducting this hearing today on
nuclear energy and its role in the national energy policy of
our country. I am glad to be here today discussing this
subject, because I believe that everyone's goal of enacting
coherent, comprehensive energy policy is contingent upon
developing and maintaining a sound nuclear energy policy.
Nuclear power plants generate approximately one-fifth of
the electricity consumed in the United States, second only to
that of coal. Given the relatively stable price of nuclear
fuel, nuclear power is the lowest cost power in the nation,
averaging below 2 cents per kilowatt hour, well below the 3 to
4 cents per kilowatt hour cost of natural gas.
Nuclear power generation enjoys significant environmental
advantages encompassing the largest source of emission-free
generation of electricity in the United States. Nuclear power
doesn't hurt the ozone or cause smog. Electricity generated
from the 103 U.S. nuclear plants account for roughly two-thirds
of the emission-free electricity, far exceeding hydropower's
contribution of approximately 29 percent.
Innovation with the research and development of sound
science has proved that disposal and storage of spent nuclear
fuel can be done in a safe and an environmental-friendly
manner. We are now very close to selecting Yucca Mountain as a
permanent repository for spent nuclear fuel. However, many,
many years have passed since the last permit was issued to
construct a nuclear plant in this country. Given the evidence
in support of nuclear power generation, I fail to understand
why.
I have said it before, but I would like to say it again
here today, Mr. Chairman. Electricity is the lifeline of our
economy and is of paramount importance to the entire public
interest. Electricity disruption and unreliability on a
national scale in my view would be catastrophic. If you don't
believe me, just ask our friends out in California.
The United States cannot afford to allow politics to
continue to dictate something contrary to good science and good
public policy.
Thanks to our competent chairman and his leadership, this
subcommittee has now held three hearings on the current crisis
in California. Although a number of factors have contributed to
the problems there, at the end of the day it is still a problem
of supply and demand. Demand for electricity in the United
States is projected to continue rapid and expansive growth.
Nuclear energy is reliable, competitively priced, and
emission-free. No other generation source of electricity can
provide significant amounts of low-cost and reliable power
while enhancing air quality.
Mr. Chairman, I appreciate the substance of these hearings,
but, more importantly, the open and methodical process in which
they have been held. It is a pleasure to work with this
subcommittee as we seek to craft what will be a real and
comprehensive energy policy.
Mr. Barton. I thank the gentleman from Georgia, and let me
say I look forward to working with him on health policy when I
have a chance to get to the Health Subcommittee.
Mr. Norwood. I will take care of it for you. Don't worry.
Mr. Barton. I know you will take care of it.
The gentleman from Oregon, Mr. Walden, is recognized for an
opening statement.
Mr. Walden. Thank you, Mr. Chairman. I will forego an
opening statement at this time.
Mr. Barton. Seeing no other members present, the Chair
would ask unanimous consent that all members of the
subcommittee not present have the requisite number of days to
put their statement in the opening record at the appropriate
point. Hearing no objection, so ordered.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Greg Ganske, a Representative in Congress
from the State of Iowa
Mr. Chairman: I welcome Senator Domenici to the committee today and
look forward to his thoughts on the future of nuclear energy. I am
aware that nationwide nuclear power plants produce approximately twenty
percent of the electricity consumed in the United States. However, my
state of Iowa has only one nuclear facility in operation, the Duane
Arnold nuclear power plant in Palo. Even with only one facility in my
state, I am acutely aware of the need to establish a permanent
repository for spent fuel. The Nuclear Waste Policy Act of 1982
required that a site be established no later than January 31, 1998. Of
course we all know that this has not taken place.
This has caused local facilities to build more on-site storage
facilities, which is not the best public policy option. The current
goal of the Department of Energy for opening of the permanent site is
now 2010 . . . twelve years past the original deadline.
Mr. Chairman I am very aware that this committee has not been a
part of the problem, and has indeed been a part of the attempted
solution. However, I hope that this is the year that we can finally
give some certainty to the future on this issue and get legislation
completely through the process and adopted into law to address this
matter.
I am among those Members who are concerned about the level of
carbon dioxide emissions worldwide and the impact that those emissions
are having on the earth's temperature. Based only on emissions factors,
obviously nuclear power presents a more favorable alternative. However,
I feel we must resolve the questions regarding long term waste disposal
before we consider expansion in the industry. Our cumulative experience
in attempting to create a national permanent waste repository over the
last two decades . . . has not been very encouraging. Thank you Mr.
Chairman and I yield back my remaining time.
______
Prepared Statement of Hon. John Shimkus, a Representative in Congress
from the State of Illinois
Good afternoon, Mr. Chairman and to all whom have shown up this
afternoon. I am looking forward to this hearing today.
I would very much like to thank the Chairman for holding this
hearing today. As many of you here today know, I am from Illinois,
which is home to more nuclear power plants than anywhere else in the
country. So my opinion maybe a little biased.
As we will hear from most of the witnesses today, nuclear is making
a comeback. Only a few short years ago, the general public perception
was that nuclear energy was at death's door. To paraphrase Mark Twain,
the reports of nuclear's death have been greatly exaggerated. Not only
have they been exaggerated, but nuclear energy is close to becoming our
energy leader for the future.
Nuclear is cheap and nuclear is emission-free. Over the last ten
years nuclear energy has also become safer and more efficient. The 103
plants that currently operate today produce more power than 110 plants
did just 6 years ago.
When talking about nuclear energy in a national energy policy, one
thing is clear. If a cleaner environment and more affordable and
reliable energy is the goal of a national energy policy, then nuclear
energy must play a more pronounced role.
A couple of weeks ago, many here heard me talk about all the
positives of coal, another fuel that is plentiful in Illinois. I
believe that coal, and nuclear and natural gas and hydro and all the
other fuels need to part of a balanced national energy policy. Like any
good retirement portfolio, we need to have a national energy policy
that is diversified and uses all of our resources.
The only real downside to nuclear energy is figuring out what to do
with the waste. Yesterday, I visited Yucca Mountain with my colleague
from Illinois, Mark Kirk. What I saw and heard there has solidified my
belief that Yucca Mountain is a suitable place for a permanent
repository. The only thing that is holding it back is politics, because
the science is there. I would encourage my fellow members, whether you
are for or against Yucca Mountain, to visit there and hear what the
scientist have to say. I'm sure you find it as educational as I did.
In closing Mr. Chairman, I would like to give you one statistic.
Currently, France generates 80% of their energy from nuclear power. If
the US did that, we would be 10% below the emission levels outlined in
the Kyoto Protocol.
Thank you.
______
Prepared Statement of Hon. Ed Bryant, a Representative in Congress from
the State of Tennessee
Mr. Chairman, thank you for holding today's hearing on nuclear
energy. For too long, nuclear energy has had an image problem, despite
its many advantages. When many Americans think about nuclear energy,
they envision the bumbling Homer Simpson asleep at the control panel
while the Springfield Nuclear Power Plant is on the verge of a
meltdown. While the antics of Homer Simpson make for great comedy, the
misrepresentation of nuclear power is no laughing matter.
It's not often that I would find anything to compliment the French
on, but France, by generating 80 percent of its electricity with
nuclear power, has reduced its air pollution by a factor of five.
However, nuclear power's future in the U.S. remains questionable
because of the negative images of Three-Mile Island and Chernobyl,
despite its advantages as a source of electricity free of harmful
emissions.
In reality nuclear energy is quite safe. Comprehensive and highly
reliable automated safety procedures at nuclear plants operating in the
U.S. keep the communities they are located in safe. The public stigma
surrounding nuclear plants is one of several obstacles the nuclear
power industry must overcome.
Other obstacles include high initial construction costs, operating
and maintenance expenses, long lead times, and regulatory uncertainty
for new plants, which restricts the utilization of this generation
option.
We must streamline the regulatory process for nuclear power plants
in the U.S.
In addition, we must address unanswered questions about how to
dispose of low-level nuclear waste and spent fuel from nuclear power
plants. Currently, spent fuel is being stored on-site at nuclear power
plants across the nation.
Our nation's 103 nuclear power plants are valuable assets to the
companies that own and operate them, as well as to the consumers that
buy the electricity they produce. Nuclear power represents a vital
hedge between the volatility of the natural gas market because of their
predictable and stable operating costs. Unlike coal-fired plants,
nuclear plants do not have to deal with constantly escalating
environmental requirements and clean air standards that drive up
production costs.
From the rolling blackouts in California to our nation's dependence
on foreign oil, the recent convergence of energy disasters is a wake-up
call to this Congress to develop a National Energy Policy.
In terms of environmental benefits, cost, and efficiency, nuclear
energy should be a major part of a comprehensive National Energy
Policy.
I look forward to hearing the testimony of the experts on today's
panel, and once again I thank the Chairman for addressing this issue.
______
Prepared Statement of Hon. Bill Luther, a Representative in Congress
from the State of Minnesota
Thank you Mr. Chairman for holding today's hearing on nuclear
energy. I am particularly pleased that you have included a public
interest advocate to discuss some of the very real problems of long
lasting radioactive wastes for which there currently is no safe viable
solution. I am also hopeful that as we continue this series of hearings
on domestic energy markets, we begin to focus more on renewable and
alternative energy sources. Any national energy policy not weighed
heavily toward developing new technologies will not result in long term
solutions to today's growing energy crisis. Thank you and I yield back
the balance of my time.
Mr. Barton. We would now like to welcome our first panel
today. We have, representing the Nuclear Regulatory Commission,
Dr. William Travers, who is the Executive Director for
Operations for the NRC. We have Mr. William Magwood, who is the
Director of the Office of Nuclear Energy, Science and
Technology, from the Department of Energy. And we have Ms. Mary
Hutzler, who we had last week I believe, who is the Director
for the Office of Integrated Analysis and Forecasting from the
Energy Information Administration.
We will start with Dr. Travers, and go to Mr. Magwood, and
then Ms. Hutzler.
At approximately 2 p.m., we expect that Senator Domenici is
going to be here to testify on a nuclear reform bill that he
has just put into play in the Senate. So we may have to break
to let him testify when he arrives.
Your statement is in the record in its entirety. We would
recognize you for 7 minutes, Dr. Travers, to elaborate on it.
STATEMENTS OF WILLIAM D. TRAVERS, EXECUTIVE DIRECTOR FOR
OPERATIONS, U.S. NUCLEAR REGULATORY COMMISSION; WILLIAM D.
MAGWOOD, DIRECTOR, OFFICE OF NUCLEAR ENERGY, SCIENCE AND
TECHNOLOGY, U.S. DEPARTMENT OF ENERGY; AND MARY J. HUTZLER,
DIRECTOR, OFFICE OF INTEGRATED ANALYSIS AND FORECASTING, ENERGY
INFORMATION ADMINISTRATION
Mr. Travers. Thank you, Mr. Chairman, members of the
subcommittee. I am pleased to testify today on behalf of the
Nuclear Regulatory Commission regarding the NRC's perspective
on how nuclear energy fits into the national energy policy.
As the subcommittee knows, the Commission's statutory
mandate is to ensure the adequate protection of public health
and safety, the common defense and security, and the
environment, in the application of nuclear technology for
civilian use.
Although the Commission's primary focus is on safety, it
nonetheless recognizes that the quality, predictability, and
timeliness of its regulatory actions bear on licensee decisions
related to construction and operation of nuclear power plants.
The Commission also recognizes that its decisions and actions
as a regulator influence the public's perception of the NRC and
ultimately the public's perception of the safety of nuclear
technology.
Currently, there are 104 nuclear power plants licensed by
the Commission to operate in 31 different states. As a group,
they are operating at high levels of safety and reliability.
These plants have produced approximately 20 percent of our
Nation's electricity over the past several years, and in 2000
they produced a record 755,000 gigawatt hours of electricity.
The Nation's nuclear generators have worked over the past
10 years to improve nuclear power plant performance,
reliability, and efficiency, while ensuring operational safety.
The improved performance they have achieved is equivalent to
placing 23 new large plants online. The Commission has focused
on ensuring that safety has not been compromised as a result of
these industry efforts.
The nuclear industry has undergone a period of remarkable
change. As electricity restructuring proceeds, the Commission
is witnessing the start of the consolidation of nuclear
generating capacity among a smaller group of operating
companies and the development of a market for nuclear power
plants as capital assets. As a result, the Commission has seen
a significant increase in the number of requests for approval
of license transfers. These requests increased from a
historical average of about 2 to 3 per year to 20 to 25 in the
past 2 years. The NRC has completed a number of improvements to
its license transfer review process, and in calendar 2000 we
reviewed and approved transfers in periods ranging from about 4
to about 8 months. The Commission intends to strive to continue
to perform at this level of proficiency even in the face of
continued high demand.
Another result of the new economic conditions is an
increasing interest in license renewals beyond the original 40-
year term. That term, which was established by the Atomic
Energy Act, did not reflect an engineering or a scientific
limitation, but rather was based on financial and antitrust
concerns. The Commission now has the technical bases and the
experience on which to base judgments about the potential
useful life and safe operation of facilities.
The Commission has already reviewed the licenses of five
units at two sites for an additional 20 years, and I am happy
to report that the reviews of these licenses were completed on
or ahead of schedule. Applications from an additional five
units at three sites are currently under review, and many more
are anticipated in the coming years.
In recent years, the Commission has approved numerous
license amendments that permit its licensees to make small
power uprates. Collectively, these uprates supply the
electricity equivalent to that of two large power plants. The
Commission has received applications for several more
substantial uprates and anticipates others within the near
term.
The Commission has responded to numerous requests to
approve spent fuel cask designs for onsite dry storage. These
actions, which are expected to increase as other nuclear power
plants require additional fuel storage, are providing an
interim approach pending implementation of a program for the
long-term disposition of spent fuel.
Certain matters also need to be resolved in order to make
progress on a geologic repository. The Energy Policy Act of
1992 requires the EPA to promulgate general standards while the
Commission has the obligation to implement those standards. As
you know, the Commission has concerns about certain aspects of
EPA's proposed approach and is currently working with EPA to
resolve these issues.
The Commission also is in a period of dynamic change as the
agency moves toward a more risk-informed and performance-based
regulatory paradigm. Perhaps the most visible aspect of this
effort is the new reactor oversight process. The new process
was developed to focus inspection effort on those areas
involving greatest risk while simultaneously providing a more
objective and transparent process. The Commission continues to
work with its stakeholders to assess the effectiveness of this
new process, and to date the feedback received from both the
industry and the public, in general, is favorable.
In this period of increasing demand for electricity,
serious industry interest in new construction of nuclear power
plants in the United States has recently emerged. As you know,
the Commission has already certified three advanced reactor
designs. In addition to these, there are new nuclear power
plant technologies such as the Pebble Bed Modular Reactor which
some believe can provide enhanced benefits. The Commission
recently directed the staff to assess its capabilities--the
capabilities that would be necessary to review an application
for a new reactor.
In order to confirm the safety of new reactor technologies,
the Commission believes that a strong nuclear research program
should be maintained. A comprehensive evaluation of the
Commission's research program is underway with assistance from
outside experts. With the benefit of these insights, the
Commission expects to undertake steps to strengthen our
research program over the coming months.
Linked to these technical and regulatory assessments, the
Commission is reviewing its human capital to assure the
appropriate professional staff is available for the Commission
to fulfill its safety mission. In some offices, nearly 25
percent of the staff are eligible to retire today. In fact, the
Commission has six times as many staff over the age of 60 as it
has staff under the age of 30. While the numbers of individuals
with technical skills critical to the achievement of the
Commission's safety mission is rapidly declining, the
educational system is not replacing them. The Commission staff
has taken steps to address this situation. However, the
maintenance of a technically competent staff will require
substantial effort for an extended period.
Finally, Mr. Chairman, the Commission will continue to be
active in concentrating its staff's efforts on its statutory
responsibilities. Those statutory mandates notwithstanding, the
Commission is mindful of the need to reduce unnecessary burden,
so as not to inappropriately inhibit any renewed interest in
nuclear power, to maintain open communications with all of its
stakeholders, and to continue to encourage its highly qualified
staff to strive for increased efficiency and effectiveness.
Mr. Chairman, that completes my oral statement, and, of
course, I will be happy to answer questions.
[The prepared statement of William D. Travers follows:]
Prepared Statement of William D. Travers, Executive Director for
Operations
INTRODUCTION
Mr. Chairman, members of the Subcommittee, I am pleased to submit
this testimony on behalf of the U.S. Nuclear Regulatory Commission
(NRC) regarding the NRC's perspective on how nuclear energy fits into
the U.S. National Energy Policy. As the Subcommittee knows, the
Commission's mission is to ensure the adequate protection of public
health and safety, the common defense and security, and the environment
in the application of nuclear technology for civilian use. The
Commission does not have a promotional role--the agency's role is to
ensure the safe application of nuclear technology if society elects to
pursue the nuclear energy option. The Commission recognizes, however,
that its regulatory system should not establish inappropriate
impediments to the application of nuclear technology. Many of the
Commission's initiatives over the past several years have sought to
maintain or enhance safety while simultaneously improving the
efficiency and effectiveness of our regulatory system. The Commission
also recognizes that its decisions and actions as a regulator influence
the public's perception of the NRC and ultimately the public's
perception of the safety of nuclear technology. For this reason, the
Commission's primary performance goals also include increasing public
confidence.
The Commission's primary focus is on safety. The Commission
nonetheless recognizes that the quality, predictability, and timeliness
of its regulatory actions bear on licensee decisions related to
construction and operation of nuclear power plants.Background
Currently there are 104 nuclear power plants licensed by the
Commission to operate in the United States in 31 different states. As a
group, they are operating at high levels of safety and reliability.
These plants have produced approximately 20% of our nation's
electricity for the past several years and are operated by about 40
different companies. In 2000, these nuclear power plants produced a
record 755-thousand gigawatt-hours of electricity.
Improved Licensee Efficiencies (Increased Capacity Factors)
The nation's nuclear electricity generators have worked over the
past 10 years to improve nuclear power plant performance, reliability,
and efficiency. According to the Nuclear Energy Institute, the improved
performance of the U.S. nuclear power plants since 1990 is equivalent
to placing 23 new 1000-MWe power plants on line. The average capacity
factor <SUP>1</SUP> for U.S. light water reactors was 86 percent in
1999, up from 63 percent just 10 years ago. The Commission has focused
on ensuring that safety has not been compromised as a result of these
industry efforts. The Commission will continue to carry out its
regulatory responsibilities in an effective and efficient manner so as
not to impede industry initiatives inappropriately.
---------------------------------------------------------------------------
\1\ Capacity factor is the ratio of electricity generated, for the
period of time considered, to the amount of energy that could have been
generated at continuous full-power operation during the same period.
U.S. Commercial Nuclear Power Reactor Average Capacity Factor and Net Generation
----------------------------------------------------------------------------------------------------------------
Net Generation of Electricity
Number of Reactors Average Annual ---------------------------------------
Licensed to Capacity Factor Thousands of Percent of Total
Operate (Percent) Gigawatthours U.S.
----------------------------------------------------------------------------------------------------------------
1989............................ 109 63 528 19.0
1990............................ 111 68 576 20.5
1991............................ 111 71 613 21.7
1992............................ 110 71 620 22.2
1993............................ 109 73 611 21.2
1994............................ 109 75 640 22.1
1995............................ 109 79 674 22.5
1996............................ 110 77 670 21.9
1997............................ 104 74 628 20.1
1998............................ 104 78 673 22.6
1999............................ 104 86 727 19.8
----------------------------------------------------------------------------------------------------------------
Electric Industry Restructuring
As the Subcommittee is aware, the nuclear industry has undergone a
period of remarkable change. The industry is in a period of transition
in several dimensions, probably experiencing more rapid change than in
any other period in the history of civilian nuclear power. As
deregulation of electricity generation proceeds, the Commission is
seeing significant restructuring among the licensees and the start of
the consolidation of nuclear generating capacity among a smaller group
of operating companies. In part, this change is due to an industry that
has achieved gains in both economic and safety performance over the
past decade and thus has been able to take advantage of the
opportunities presented by industry restructuring. The Commission has
established a regulatory system that is technically sound, that is
fair, predictable, and reaches decisions with reasonable dispatch.
INITIATIVES IN THE AREA OF CURRENT REACTOR REGULATION
License Transfers
One of the more immediate results of the economic deregulation of
the electric power industry has been the development of a market for
nuclear power plants as capital assets themselves. As a result, the
Commission has seen a significant increase in the number of requests
for approval of license transfers. These requests increased from a
historical average of about two or three per year, to 20-25 in the past
two years.
The Commission has assured that our reviews of license transfer
applications, which focus on adequate protection of public health and
safety, are conducted efficiently. These reviews sometimes require a
significant expenditure of talent and energy by our staff to ensure a
high quality and timely result. Our legislative proposal to eliminate
foreign ownership review could help to further streamline the process.
To date, the Commission believes that it has been timely in these
transfers. For example, in CY 2000, the staff has reviewed and approved
transfers in periods ranging from four to eight months, depending on
the complexity of the applications. The Commission will strive to
continue to perform at this level of proficiency even in the face of
continued demand.
License Renewals
Another result of the new economic conditions is an increasing
interest in license renewal that would allow plants to operate beyond
the original 40-year term. That term, which was established in the
Atomic Energy Act (AEA), did not reflect a limitation that was
determined by engineering or scientific considerations, but rather was
based on financial and antitrust concerns. The Commission now has the
technical bases and experience on which to base judgments about the
potential useful life and safe operation of facilities and is
addressing the question of extensions beyond the original 40-year term.
The focus of the Commission's review of applications is on
maintaining plant safety, with the primary concern directed at the
effects of aging on important systems, structures, and components.
Applicants must demonstrate that they have identified and can manage
the effects of aging so as to maintain an acceptable level of safety
during the period of extended operation.
The Commission has now renewed the licenses of plants at two sites
for an additional 20 years: Calvert Cliffs in Maryland, and Oconee in
South Carolina, comprising a total of five units. The thorough reviews
of these applications were completed ahead of schedule, which is
indicative of the care exercised by licensees in the preparation of the
applications and the planning and dedication of the Commission staff.
Applications for units from three additional sites--Hatch in Georgia,
ANO-1 in Arkansas, and Turkey Point in Florida--are currently under
review. As indicated by our licensees, many more applications for
renewal are anticipated in the coming years.
Although the Commission has met the projected schedules for the
first reviews, it would like the renewal process to become as effective
and efficient as possible. The extent to which the Commission is able
to sustain or improve on our performance depends on the rate at which
applications are actually received, the quality of the applications,
and the ability to staff the review effort. The Commission recognizes
the importance of license renewal and is committed to providing high-
priority attention to this effort. As you know, the Commission
encourages early notification by licensees, in advance of their
intentions to seek renewals, in order to allow adequate planning so as
not to create unmanageable demands on staff resources.
Reactor Plant Power Uprates
In recent years, the Commission has approved numerous license
amendments that permit its licensees to make relatively small power
uprates (approximately 2-7 percent increases in the output of a
facility). Collectively, these uprates supplied the electricity
equivalent to that from two large power plants (approximately 2,000
MWe). The Commission has received applications for several substantial
uprates, and anticipates more within the near term. In addition, some
nuclear generators have requested Commission safety review of
increasing fuel burnup, thereby extending the operating cycle between
refueling outages and thus increasing nuclear plant capacity factors.
Such approvals are granted only after a thorough evaluation by
Commission staff to ensure that safe operation and shutdown can be
achieved at the higher power and increased fuel burnup.
High Level Waste Storage/Disposal (Spent Fuel Storage)
In the past several years, the Commission has responded to numerous
requests to approve spent fuel cask designs and independent spent fuel
storage installations for onsite dry storage of spent fuel. These
actions have provided an interim approach pending implementation of a
program for the long-term disposition of spent fuel. The ability of the
Commission to review and approve these requests has provided the needed
additional onsite storage of spent nuclear fuel, thereby avoiding plant
shutdowns as spent fuel pools reach their capacity. The Commission
anticipates that the current lack of a final disposal site will result
in a large increase in on-site dry storage capacity during this decade.
The Commission is currently reviewing an application for an
Independent Spent Fuel Storage Installation on the reservation of the
Skull Valley Band of Goshute Indians in Utah.
Certain matters also need to be resolved in order to make progress
on a deep geologic repository for disposal of spent nuclear fuel. The
Energy Policy Act of 1992 requires the Environmental Protection Agency
(EPA) to promulgate general standards to govern the site, while the
Commission has the obligation to implement those standards through its
licensing and regulatory process. The Commission has concerns about
certain aspects of EPA's proposed approach and is working with EPA to
resolve these issues.
Risk-Informing the Commission's Regulatory Framework
The Commission also is in a period of dynamic change as the Agency
moves from a prescriptive, deterministic approach towards a more risk-
informed and performance-based regulatory paradigm. Improved
probabilistic risk assessment techniques combined with over four
decades of accumulated experience with operating nuclear power reactors
have led the Commission to recognize that some regulations may not
serve their intended safety purpose and may not be necessary to provide
adequate protection of public health and safety. Where that is the
case, the Commission has determined it should revise or eliminate the
requirements. On the other hand, the Commission is prepared to
strengthen our regulatory system where risk considerations reveal the
need.
Perhaps the most visible aspect of the Commission's efforts to
risk-inform its regulatory framework is the new reactor oversight
process. The process was initiated on a pilot basis in 1999 and fully
implemented in April 2000. The new process was developed to focus
inspection effort on those areas involving greater risk to the plant
and thus to workers and the public, while simultaneously providing a
more objective and transparent process. While the Commission continues
to work with its stakeholders to assess the effectiveness of the
revised oversight process, the feedback received from industry and the
public is favorable.
FUTURE ACTIVITIES
Scheduling and Organizational Assumptions Associated with New Reactor
Designs
While improved performance of operating nuclear power plants has
resulted in significant increases in electrical output, significant
increased demands for electricity will need to be addressed by
construction of new generating capacity of some type. Serious industry
interest in new construction of nuclear power plants in the U.S. has
only recently emerged. As you know, the Commission has already
certified three new reactor designs pursuant to 10 CFR Part 52. These
designs include General Electric's advanced boiling water reactor,
Westinghouse's AP-600 and Combustion Engineering's System 80+. Because
the Commission has certified these designs, a new plant order may
include one of these approved designs. However, the staff is also
conducting a preliminary review associated with other new designs.
In addition to the three already certified advanced reactor
designs, there are new nuclear power plant technologies, such as the
Pebble Bed Modular Reactor, which some believe can provide enhanced
safety, improved efficiency, lower costs, as well as other benefits. To
ensure that the Commission staff is prepared to evaluate any
applications to introduce these advanced nuclear reactors, the
Commission recently directed the staff to assess the technical,
licensing, and inspection capabilities that would be necessary to
review an application for an early site permit, a license application,
or construction permit for a new reactor unit. This will include the
capability to review the designs for generation III+ or generation IV
light water reactors including the Westinghouse AP-1000, the Pebble Bed
Modular Reactor, and the International Reactor Innovative and Secure
(IRIS) designs. In addition to assessing its capability to review the
new designs, the Commission will also examine its regulations relating
to license applications, such as 10 CFR Parts 50 and 52, in order to
identify whether any enhancements are necessary.
In order to confirm the safety of new reactor designs and
technology, the Commission believes that a strong nuclear research
program should be maintained. A comprehensive evaluation of the
Commission's research program is underway with assistance from a group
of outside experts and from the Advisory Committee on Reactor
Safeguards. With the benefit of these insights, the Commission expects
to undertake measures to strengthen our research program over the
coming months.
Human Capital
Linked to these technical and regulatory assessments, the
Commission is reviewing its human capital to assure that the
appropriate professional staff is available for the Commission to
fulfill its traditional safety mission, as well as any new regulatory
responsibilities in the area of licensing new reactor designs.
In some important offices within the Commission, nearly 25 percent
of the staff are eligible to retire today. In fact, the Commission has
six times as many staff over the age of 60 as it has staff under 30.
And, as with many Federal agencies, it is becoming increasingly
difficult for the Commission to hire personnel with the knowledge,
skills, and abilities to conduct the safety reviews, licensing,
research, and oversight actions that are essential to our safety
mission. Moreover, the number of individuals with the technical skills
critical to the achievement of the Commission's safety mission is
rapidly declining in the Nation and the educational system is not
replacing them. The Commission's staff has taken steps to address this
situation, and as a result, is now seeking systematically to identify
future staffing needs and to develop strategies to address the gaps. It
is apparent, however, that the maintenance of a technically competent
staff will require substantial effort for an extended time.
As the Commission is currently challenged to meet its existing
workload with available resources, additional resources would be
necessary to respond to increased workload which could result from some
of the initiatives discussed in this testimony.
IMPLICATIONS OF A NATIONAL ENERGY POLICY
The Commission has a stake in a national energy policy and has
identified areas where new legislation would be helpful to eliminate
artificial restrictions and to reduce the uncertainty in the licensing
process. These changes would maintain safety while increasing
flexibility in decision-making. Although those changes would have
little or no immediate impact on electrical supply, they would help
establish the context for consideration of nuclear power by the private
sector without any compromise of public health and safety or protection
of the environment.
Legislation will be needed to extend the Price-Anderson Act.
The Act, which expires on August 1, 2002, establishes a
framework that provides assurance that adequate funds are
available in the event of a nuclear accident and sets out the
process for consideration of nuclear claims. Without the
framework provided by the Act, private-sector participation in
nuclear power would be discouraged by the risk of large
liabilities.
Several other legislative changes would be helpful. For
example, Reorganization Plan No. 3 of 1970 could be revised to
provide the Commission with the sole responsibility to
establish all generally applicable standards related to Atomic
Energy Act (AEA) materials, thereby avoiding dual regulation of
such matters by other agencies. Along these same lines, the
Nuclear Waste Policy Act of 1982 could be amended to provide
the Commission with the sole authority to establish standards
for high-level radioactive waste disposal. These changes would
serve to provide full protection of public health and safety,
provide consistency, and avoid needless and duplicative
regulatory burden.
Commission antitrust reviews could also be eliminated. As a
result of the growth of Federal antitrust law since the passage
of the AEA, the Commission's antitrust reviews are redundant of
the reviews of other agencies. The requirement for Commission
review of such matters, which are distant from the Commission's
central expertise, should be eliminated.
Elimination of the ban on foreign ownership of U.S. nuclear
plants would be an enhancement since many of the entities that
are involved in electrical generation have foreign
participants, thereby making the ban on foreign ownership
increasingly anachronistic. The Commission has authority to
deny a license that would be inimical to the common defense and
security, and thus an outright ban on all foreign ownership is
unnecessary.
With the strong Congressional interest in examining energy policy,
the Commission is optimistic that there will be a legislative vehicle
for making these changes and thereby for updating the AEA.
SUMMARY
The Commission has long been, and will continue to be, active in
concentrating its staffs' efforts on ensuring the adequate protection
of public health and safety, the common defense and security, and the
environment in the application of nuclear technology for civilian use.
Those statutory mandates notwithstanding, the Commission is mindful of
the need to: 1) reduce unnecessary burdens, so as not to
inappropriately inhibit any renewed interest in nuclear power; (2)
maintain open communications with all its stakeholders, in order to
seek to ensure the full, fair, and timely consideration of issues that
are brought to our attention; and (3) continue to encourage its highly
qualified staff to strive for increased efficiency and effectiveness,
both in our dealings with all the Commission's stakeholders and
internally within the agency.
I look forward to working with the Committee, and I welcome your
comments and questions.
Mr. Norwood [presiding]. Thank you very much, Dr. Travers.
Mr. Magwood, we would be pleased to hear from you now.
STATEMENT OF WILLIAM D. MAGWOOD
Mr. Magwood. Thank you, Mr. Chairman. My name is Bill
Magwood. I am the Director of DOE's Office of Nuclear Energy,
Science and Technology. It is a great pleasure to appear before
you today.
As you know, for the last several years DOE has been
working to coordinate with NRC, the industry, and others to try
to understand what the issues facing nuclear power will be in
the near term and also in the longer term, and to find ways,
both in terms of research and institutionally, to remediate
those problems. We have made some progress, but, clearly, there
is a lot that we need still to do.
Over the last year or so, it has been very clear and very
public that there are some utilities in this country that are
looking very seriously to nuclear option for the first time in
many years. We have been very pleased to see that level of
interest, and you are going to hear from some of those
utilities today.
Probably more important than any other single factor to
make industry more comfortable with the idea of building new
nuclear power plants in this country has been the tremendous
progress the NRC has made, and I give great credit to NRC, in
proving itself to be a reliable and consistent regulator.
Without that, utilities wouldn't be here today talking to you.
In fact, I know from conversations with many utility
executives that NRC's performance in license renewal is the
single most important factor they point to when asked why they
believe nuclear has a future in the United States--because the
NRC has done such a good job.
That said, the industry itself deserves a great deal of
credit. If you go back to just 1990, just a little over 10
years ago, nuclear power plants in this country were operating
at only about 70 percent availability, which was a pretty
miserable record when compared to other energy sources and
compared to other nuclear power plants in the world.
Today, U.S. nuclear power plants are among the best in the
world. We are operating our plants at an average of about 90
percent availability. That is an astonishing improvement in
performance. A great deal of that credit is due to the
management of the utility companies who, during the 1990's,
understood that great management is the way to get to high
levels of safety and also high levels of economy and
performance. I think that they have done a great job in moving
toward that objective.
At the same time, the business structure of the nuclear
industry has been changing over the last several years, and I
believe this will probably prove to be more important than any
other single factor in making a future for nuclear energy. The
utility industry itself has been consolidating over the last 2
or 3 years, and as has been well reported in the papers, there
have been a number of mergers, as well as acquisitions of
nuclear power plants.
What this has done is that it has served to centralize more
nuclear power plants under the management of some of the best
managed utilities in the country. I think this will lead to
even more economy and more effectiveness in the future, and an
even greater benefit to the Nation.
In the longer-term, the consolidation of the nuclear
industry will result in formation of large electric utilities
with a long-term interest in nuclear power, which will be a
very important factor in utility considerations about the
future of nuclear power.
DOE also has been very active in this area. We have been
supporting research for the last several years to make sure
that existing nuclear power plants operate reliably and
effectively as they operate for the long term. We have been
supporting advanced research and development, looking at new
types of nuclear power plants. Our Nuclear Energy Research
Initiative has been very successful in that regard.
We are also coordinating with other countries. Just last
year, we launched an initiative known as ``Generation IV'' to
look at ways of reforming nuclear power and--aimed at
addressing barriers to long-term use of nuclear energy--making
it more effective than it is today through the use of advanced
technologies. Not to wait for the long term, we are also been
working with industry to find ways to make deployment of new
nuclear power plant technology occur as quickly as possible.
We are working in all of these areas. Our statement covers
all of this in more detail, and I look forward to talking with
the committee about that over the course of the hearing.
Thank you.
[The prepared statement of William D. Magwood follows:]
Prepared Statement of William D. Magwood, IV, Director, Office of
Nuclear Energy, Science and Technology, U.S. Department of Energy
Mr. Chairman and Members of the Subcommittee, I am William D.
Magwood, IV, Director of the Department of Energy's Office of Nuclear
Energy, Science and Technology. My office is charged to apply the
science, engineering, and art of nuclear technology to address a wide
range of civilian requirements. We support research and provide
radioisotopes to find new treatments for cancer. We provide the
advanced power systems without which the United States cannot explore
the solar system. We develop new, advanced technologies to deal with
spent nuclear fuel. But our core and most important mission especially
in these days of energy supply concern is the development of advanced
nuclear energy technologies to satisfy the energy needs of the United
States in a clean, safe, and cost-effective manner.
Our program has undergone a dramatic transformation in the last
three years. With the completion of the advanced light water reactor
program in fiscal year 1998, we saw our nuclear energy research budget
essentially fall to zero. With a great deal of planning and hard work;
advice from our independent advisory committee, the Nuclear Energy
Research Advisory Committee (NERAC) and its many subcommittees and task
forces; and effective and focused support from the Congress, we have
turned the program around. Our office is now focused on three key
missions:
<bullet> Supporting R&D that enhances nuclear powers viability as part
of the U.S. energy portfolio.
<bullet> The support for irreplaceable U.S. nuclear R&D infrastructure,
both in the Government and in U.S. universities; and
<bullet> Support for students and programs to develop the human capital
required to preserve a viable future for nuclear technology in
the United States.
While I will touch on all of these key missions in my statement
today, I will primarily focus on the first one to provide you with
information regarding our technology activities and how they impact the
future of nuclear energy in the United States.
recent developments: a path to a viable future for u.s. nuclear energy
First, however, I would like to provide you with some context for
our efforts. Just a few years ago, many analysts were predicting the
end of nuclear energy in the United States. Many predicted that in the
face of electric industry competition large numbers of nuclear power
plants would be shut down before the end of their 40-year licenses and
the amount of energy generated by U.S. plants would slowly erode. Many
believed that nuclear couldn't compete that U.S. utilities would turn
away from their plants, largely forego license renewals, and invest in
alternative sources of electric generation.
Reality has proven these forecasts to be incorrect. For the most
part, it was always clear that the picture would be brighter than the
worse predictions foresaw. But few, even those of us who watch nuclear
industry developments closest, would have predicted the turn-around
that is occurring today. This reversal of nuclear fortunes has
reinforced the Departments re-energized nuclear R&D activities. We
perceive three key reasons for this change in the United States:
1) Performance of nuclear utilities. Little more than a decade ago,
U.S. nuclear power plants were generating electricity only about 70% of
the time. Today, the average is approaching 90%. U.S. nuclear plants
rank high when compared with the nuclear plants of other countries and
compare very favorably with other sources of generation in the United
States. In fact, the average nuclear plant in the U.S. produces
electricity at only about two cents per kilowatt-hour--far below the
average U.S. market price and about the same as the most efficient
natural gas-fired power plants. Moreover, our colleagues at the Energy
Information Administration (EIA) have just reported that U.S. nuclear
power plants broke another record, producing more electricity in the
year 2000 than ever before--despite the closure of eight less efficient
units over the last decade.
2) Consolidation of the nuclear utility industry. Because of the
performance of U.S. plants, they have become attractive targets for
acquisition. We are now seeing the formation of large nuclear utilities
in the United States that more closely resemble the large nuclear-
focused power companies in countries like Japan. Instead of many
utilities owning one or two plants, we expect that there will soon be
far fewer nuclear utilities, with each owning a dozen or more plants.
The highly successful Exelon Corporation is a prototype of what appears
to be taking shape in this country. This development not only provides
for considerable efficiencies of scale in parts, training, and other
aspects of operation, but it has two other benefits of possibly greater
import. First, consolidation exploits a realization that swept through
the industry less than a decade ago: that the safest plants were the
most cost-competitive plants and that good management was the key to
both. As the best operators of nuclear plants acquire more plants, the
performance of nuclear plants is likely to increase. Second, as in
other countries which plan to build new plants, large utilities with
majority nuclear generation have a long-term interest in nuclear power
well beyond that of utilities that operate one plant as part of a
larger system.
3) Successful management at the Nuclear Regulatory Commission. Not
long ago, many utility executives cited the unpredictability of
regulation in the U.S. as a primary barrier to the construction of new
plants in the U.S. and an obstacle to utilities seeking license
renewals to operate their nuclear power plants for an additional 20
years. NRC has since that time shown itself to be a fair and effective
regulator of the nuclear industry. Its process to approve the renewal
of the operating license for the Calvert Cliffs plant and later for the
three-unit Oconee plant was a tremendous success for both the
Commission and the industry. Completed years earlier and millions less
expensively than most analysts predicted, these first license renewals
proved that the industry could rely on the NRC for fair, stable,
effective, and predictable regulation. Thirty-three nuclear power
plants are entering the renewal process now and informal contacts with
utility executives now indicate that the overwhelming majority if not
all of U.S. nuclear power plant owners are planning to apply for
license renewals for their nuclear units.
Maintaining a strong option to build new nuclear power plants to
meet near and long-term energy needs is not an end unto itself for the
United States. Nuclear power plants provide important benefits that are
not found with other energy options. Nuclear plants do not emit
pollutants such as nitrogen oxides, sulfur oxides, mercury, or
particulates that affect human health. Nor do nuclear plants emit
carbon dioxide. These plants have proven to be highly reliable in all
weather conditions, cost-effective in operation, and act as crucial
anchors to the national electric grid.
That said, like all sources of energy, nuclear power has issues
with which we must deal. Utilities must be certain that the high costs
for construction that characterize many plants completed in the late
1980s and early 1990s are not repeated. The United States must
successfully resolve the nuclear waste issue. And any remaining public
concern over the safety of nuclear plants must be fully addressed. As I
conclude my remarks, I will discuss the challenges ahead including some
of the barriers that must still be overcome to enable the United States
to maintain a strong nuclear energy option for the future.
With this backdrop, I would like to highlight what the Department
is doing in the nuclear energy arena. We are active in three areas that
affect the future of nuclear energy:
<bullet> We are supporting cooperative research with the utility
industry to develop advanced technologies to enable existing
nuclear power plants to operate reliably and cost-effectively
into the long-term;
<bullet> We are pursuing technology and institutional activities to
clear the way for near-term deployment of nuclear power plants
in the United States; and
<bullet> We are leading a world-wide effort to develop standard, next-
generation nuclear energy technologies that could enable
nuclear power to fully meet the promise our predecessors saw in
the 1950s and 1960s.
technology for current plants: building on success
To discuss the prospects for new nuclear power plants in the United
States, it is essential that existing U.S. plants be successful both in
terms of safety performance and in terms of economic competitiveness.
The industry has made impressive strides to meet this condition,
particularly over the last decade. The Department assisted in making
some of this performance possible through its past programs to develop
high-burnup nuclear fuel (which has enabled utilities to reduce their
fuel costs by half, saving some $200 million each year) and to reduce
occupational radiation exposures by 67% since 1985.
Now we enter a new phase. As U.S. plants receive license renewals,
they must be prepared to operate for an additional 20 years--a total of
60 years--far longer than nuclear plants have been operated to date.
While NRCs license renewals confirm that safety will not be impacted as
these plants operate for the long term, it is less clear what long-term
operation means for reliability and cost-effectiveness. The application
of advanced technologies can also continue the process of enhancing
safety.
The Departments Nuclear Energy Plant Optimization (NEPO) program
plays a vital role in ensuring that current nuclear plants can continue
to deliver reliable and economic energy supplies up to and beyond their
initial 40-year license period by resolving open issues related to
plant aging, and by applying new technologies to improve plant
economics, reliability, and availability. The NEPO program is cost-
shared with industry through the Electric Power Research Institute
(EPRI) and is conducted in close cooperation with the Nuclear
Regulatory Commission. The research conducted under the NEPO program is
identified, prioritized, and selected with broad input from utilities,
national laboratories, the Departments Nuclear Energy Research Advisory
Committee (NERAC), and other stakeholders. With dozens of projects
underway, this program demonstrates the Departments ability to lead
without massive funding: about 60 percent of NEPO funding is provided
by industry and the suite of projects focuses on areas that industry
would not have pursued on its own projects that look at the long-term
and focus on the need for a stable, reliable, non-polluting electricity
source for the United States.
NEAR-TERM DEPLOYMENT: ADVANCED STATE-OF-THE-ART NUCLEAR ENERGY
TECHNOLOGY FOR THIS DECADE
Third generation nuclear power plants have been very successful in
several countries. Advanced plants based on U.S. technology have been
and are being constructed in Japan, South Korea, and Taiwan and are
expected to be selected by other countries in the coming years. We
believe that small but important enhancements to these plants (which
have been referred to as ``Gen III+'' designs) could help make them
state-of-the-art and deployable in the United States by 2010. As part
of its Nuclear Energy Technologies activities, the Office of Nuclear
Energy, Science and Technology is working cooperatively with both the
U.S. Nuclear Regulatory Commission and the domestic commercial nuclear
industry in several activities focused on supporting the potential
near-term deployment of new nuclear generating capacity in the U.S. in
the next five to ten years.
Working with both the public and private sectors, we are reviewing
the current regulatory requirements associated with designing,
licensing, siting and constructing new nuclear-based electricity
generating facilities to identify areas where changes in the regulatory
requirements could be beneficial to both public and private sectors.
Working with the Nuclear Regulatory Commission, we are developing a new
regulatory framework for advanced gas reactor technologies that
recognizes the inherent differences between the light water technology-
based regulations that currently govern the regulatory requirements.
Working with the nuclear utility industry, we will be developing a
demonstration program for early site permitting of potential new
generation facilities whether it be new plants on new sites or, more
likely, at sites upon which current nuclear plants are operating.
This latter activity holds particular interest for us. We believe
that many of the difficult issues associated with siting new facilities
of any kind can be avoided in the case of new nuclear plants in the
United States. Many operating U.S. nuclear plant sites were designed
with four or six reactors in mind and currently host far fewer. This
provides a tremendous opportunity for expansion in this country and we,
working with industry, will examine the issues closely.
Finally, through NERAC, we are working with industry to develop a
report identifying technical, regulatory, and institutional issues
which must be addressed and a delineation of those the actions
necessary to successfully deploy new nuclear reactor facilities in the
U.S. by 2010. The report on near-term deployment opportunities will be
available in September 2001.
NERI AND I-NERI: A PEER-REVIEWED PATH TO ADVANCED NUCLEAR R&D
The Departments Nuclear Energy Research Initiative (NERI), a
competitive, peer-reviewed research and development selection process
to fund researcher-initiated R&D proposals from universities, national
laboratories, and industry, has reinvigorated the Nations nuclear
energy R&D organizations. Focused on research to address the potential
long-term barriers to expanded use of nuclear power--economics, safety,
proliferation resistance, and waste minimization--the NERI program is
yielding innovative scientific and engineering R&D in nuclear fission
and reactor technology. Initiated in FY 1999, there are currently 55
projects underway with an additional 15 projects expected to be
selected for award in FY 2001. This program signaled the return of the
United States to nuclear R&D, but a return that reflected important
lessons learned and a new appreciation for harnessing outside expertise
to focus the research. NERI has, despite its limited funding, gone a
long way to reinvigorate nuclear R&D in this country.
In FY 2001, the Department is launching the International Nuclear
Energy Research Initiative, or I-NERI, to sponsor innovative scientific
and engineering research and development conducted by joint teams of
U.S. and foreign researchers. Established as a cost-shared R&D program,
the primary program objectives of the I-NERI are to:
<bullet> Develop advanced concepts and scientific breakthroughs in
nuclear fission and reactor technology to address and overcome
the principal technical and scientific obstacles to the
expanded use of nuclear energy worldwide;
<bullet> Promote bilateral and multilateral collaboration with
international agencies and research organizations to improve
the development of nuclear energy; and
<bullet> Promote and maintain the U.S. nuclear science and engineering
infrastructure to meet future technical challenges.
We are in the final stages of signing I-NERI agreements with France
and South Korea. We are negotiating agreements with Japan and South
Africa, which we hope to conclude this year. We also expect to conclude
I-NERI agreements with the Nuclear Energy Agency of the Organization
for Economic Cooperation and Development and with Euratom. When
implemented, these agreements will magnify modest U.S. investments in
R&D many times over with great benefit to both the United States and
our research partners.
GENERATION IV: REALIZING THE ORIGINAL PROMISE OF NUCLEAR ENERGY
The Department initiated the Generation IV Nuclear Energy Systems
Project (or more simply, the ``Gen IV Project'') in January 2000, by
convening a meeting of senior policy officials from interested
countries. Representatives of nine countries participated in this
initial discussion and considered the long-term interest of the
countries in the application of nuclear energy, the international
interest in advanced nuclear technologies, the barriers that might
prevent the future expansion of nuclear energy, and the interest of the
representatives in exploring potential multilateral research projects
to explore and develop new technologies. These representatives agreed
to a Joint Statement regarding the importance of the nuclear energy
option to the future and to a process to explore further cooperative
activities.
As a result of this meeting, and subsequent meetings, the
participants are currently exploring the formal creation of a
Generation IV International Forum (GIF) to pursue multilateral
coordination and cooperation with the goal of identifying and
developing Gen IV technologies that could address the factors impacting
the expansion of nuclear energy internationally: economic
competitiveness of building and operating nuclear energy systems;
remaining concerns regarding nuclear safety and proliferation; and the
challenge of minimizing and dealing successfully with nuclear wastes.
The Technology Roadmap
A specially chartered subcommittee of the U.S. Governments Nuclear
Energy Research Advisory Committee (NERAC) is providing guidance to the
Department of Energy's (DOE) efforts to create a Generation IV
Technology Roadmap--a document which will identify and set research and
development paths for the most promising technologies. Professor Neil
Todreas of MIT and Dr. Sol Levy, a world-respected pioneer in
commercial nuclear power who is a retired manager from General
Electric, co-chair this ambitious effort and have brought together a
highly experienced team to oversee the Roadmap effort.
We believe that to be successful, future nuclear energy
technologies must be broadly acceptable--that is, meet the needs of
many nations and not only those of the United States. As a result,
consistent with the requirements of the United States, the Department
is pursuing the Gen IV Project as an international effort through the
GIF. Together, approximately 150 senior, experienced engineers and
scientists from at least 10 countries will work together to create the
Gen IV Technology Roadmap. We have found that U.S. leadership has been
essential to this process and that without the Departments initiative,
this type of effort would not have been possible. This Roadmap is
scheduled to be completed by the end of FY 2002 and will:
<bullet> Draw upon a wide range of experts from government, national
laboratories, industry, and academia;
<bullet> Set ambitious technology goals for next-generation systems;
<bullet> Identify the most promising concepts for advanced nuclear
energy systems to meet future energy needs; and
<bullet> Identify the R&D activities needed to develop these concepts
and make them ready for commercial deployment.
What are Generation IV Nuclear Energy Systems?
The international community has deployed over 400 nuclear reactors
to produce power, with new projects underway in several countries. Most
operating plants are based on the experience gained from the first
generation of nuclear plants that were built and operated in the late
1950's and early 1960's. These demonstrations of the practicality of
nuclear power enabled second generation plants to be built all over the
world, including over 100 in the United States. The lessons learned
from the second generation plants led directly to the development and
deployment of third generation (i.e., advanced light water) nuclear
plants beginning in the 1990's.
The next generation, Generation IV nuclear energy systems, would
take the next step in the evolution of nuclear power plant design.
Finding new approaches--some of which have been postulated in NERI
projects--to make nuclear power more cost-effective while further
enhancing safety and proliferation-resistance will enable nuclear
energy to fulfill the role envisioned in the early days of the
development of atomic fission.
To develop these new technologies, ambitious but achievable
technology goals are required against which technology concepts can
compete and toward which research activities can strive. NERAC
developed initial draft technology goals for Gen IV systems earlier
this year and while they continue to be refined, they have been largely
accepted by the international research community. The Gen IV goals
reflect the need for future nuclear energy systems to build upon the
worlds experience with nuclear technology and develop systems that can
be fully competitive with any other form of energy production. These
goals represent new thinking in the nuclear community, a recognition
that nuclear energy must fully support all our economic, environmental,
and societal ambitions. We expect that these goals will be finalized
before the end of this Spring and become a standing testament to the
determination of the world nuclear technology energy community that
nuclear energy must continue its development and meet its initial
promise as a widely used source of energy, providing benefit to all the
worlds peoples.
CHALLENGES AHEAD: MUCH WORK REMAINS
Despite the United States long experience with nuclear power and
the promising outlook for near-term deployment of new nuclear power
facilities, there remain important challenges to expanding the
successful application of nuclear technology. These, in addition to the
activities discussed above, are the focus of the Departments efforts.
Foremost, we must continue the hard but essential work of dealing
with disposal of spent nuclear fuel. In this connection, the
Departments Office of Civilian Radioactive Waste Management continues
the scientific work and step-wise process for a Secretarial decision on
whether or not the Yucca Mountain site should be recommended to the
President. Congressional support for this process is essential.
Next, we must recognize and deal with the nuclear energy research
facility infrastructure within both the Departments national
laboratories and the Nations university nuclear engineering programs.
Over the last eight years, the Department lost four irreplaceable
research reactors and terminated a major project to build a replacement
facility. Working with the NERAC, we completed a Nuclear Science and
Technology Infrastructure Roadmap last year which raised a large number
of questions for the Department to address in determining the future
course of DOE facilities and their ability to support expanded needs
for research.
Without such capacity, enhancing our nuclear R&D activities will
become increasingly difficult. As a result, we and our colleagues at
the Nuclear Regulatory Commission are looking overseas to countries
such as Russia to request access to research facilities. As Congress
requested last year, we are completing a program plan on Advanced
Accelerator Applications, exploring the potential of a new type of
research facility to meet U.S. needs in the 21st Century. We will soon
issue a report to Congress on the analysis we have completed to date.
Finally, we are very concerned about the state of the Nations
nuclear technology education infrastructure. Through our University
Fuel Assistance and Support program, the Department provides direct
financial support to the Nations 28 remaining university nuclear
engineering programs and associated university research reactors. This
assistance has shown positive effects in recent years the decline in
students appears to be moderating. But funding is very limited and many
important university-based research facilities are in financial
trouble. Worse, the number of U.S. students earning degrees in nuclear-
related fields is far lower than the annual need.
We look forward to working with Congress to consider these issues.
We support the Vice Presidents interagency task force which is
developing a much-needed, comprehensive strategy to the Nations energy
needs. Together, Congress and the Bush Administration will work to plan
for our country's energy future and together we will address the issues
that face us.
Mr. Barton. Thank you, Mr. Magwood.
We will now hear from Ms. Hutzler for 7 minutes.
STATEMENT OF MARY J. HUTZLER
Ms. Hutzler. Mr. Chairman, members of the subcommittee, I
appreciate the opportunity to appear before you today to
discuss the current and future use of nuclear power in the
United States.
The Energy Information Administration is an autonomous
statistical and analytical agency within the Department of
Energy. We are charged with providing objective, timely, and
relevant data, analysis, and projections for the use of the
Department of Energy, other government agencies, the U.S.
Congress, and the public.
The projections in my testimony are from the Annual Energy
Outlook 2001, which provides projections and analysis of
domestic energy consumption, supply, and prices. Our
projections are used by government agencies, the private
sector, and academia for their energy analyses. Our projections
are not meant to be exact predictions of the future. They
represent a likely energy future, given technological and
demographic trends, current laws and regulations, and consumer
behavior.
Today, nuclear power is the second largest supplier of U.S.
electricity generation accounting for 20 percent of total
generation. The United States currently has 104 operable
nuclear units, totaling 97.5 gigawatts of capacity. Electricity
generation from nuclear power increased in 2000 to 754 billion
kilowatt hours, 30 percent higher than 10 years ago.
The average capacity factor for U.S. nuclear power plants
in 2000 was the highest in history at 89 percent, 35 percent
higher than just 10 years ago.
Increased performance has been achieved through improved
operations resulting in shorter and fewer outages. Nearly all
nuclear plants now operate for 18 months between refuelings, 6
months longer than the average refueling cycle during the
1970's and 1980's.
In 1999, production costs--the costs of fuel and operations
and maintenance--for nuclear plants average 1.9 cents per
kilowatt hour, about the same as coal plants and about two-
thirds that of natural gas steam plants. Safety improvements
initiated during the late 1980's and in the 1990's had caused
nuclear costs to increase and had lowered its output.
Generation from nuclear power plants is expected to rise
slightly over the next several years, due to increased
production at existing reactors. It is expected that recent
trends and improved performance will be maintained, resulting
in average capacity factors for operating plants of 90 percent.
However, the long-term projection is for a decline in total
generation from nuclear power as some existing nuclear reactors
are retired and replaced by other mainly gas-fired generating
units. Our projections indicate that nuclear power will provide
11 percent of the electricity generation in 2020, less than
coal or natural gas.
Within the forecast, nuclear units are projected to retire
when their operation is no longer economic relative to
replacement capacity. Due to the uncertainty surrounding future
aging-related costs, several cases were developed to analyze
the effects on electricity supply due to differing assumptions
about the costs of maintaining nuclear reactors which are
depicted in this chart.
In the Reference Case, 33 units are projected to retire,
while 27 units are projected to operate beyond their initial
40-year license period. Currently, five units have received
approval from the NRC to extend their licenses for an
additional 20 years. Another five units have submitted
applications, and 28 units have scheduled future submissions
through 2004.
In our low nuclear case where it is assumed that aging-
related costs would begin earlier and at slightly higher costs
than the Reference Case, a total of 18 additional units are
projected to be retired through 2020 relative to the Reference
Case.
In the high nuclear case where aging-related costs are
assumed to be 25 percent lower than the Reference Case, 11
units are projected to retire through 2020. That is about 9
percent of current capacity.
Since no new orders for nuclear capacity have been made in
the United States since 1978, projections of the cost of
building nuclear capacity are highly uncertain. In the
Reference Case, the cost of a new nuclear unit is based on the
advanced passive reactor design, the AP600, which has been
approved by the NRC as part of its standardized design
certification.
The initial overnight capital cost, in 1999 dollars, of the
AP600, is assumed to be about $1,700 per kilowatt, compared to
about $1,000 to $1,200 per kilowatt for a coal-fired unit, and
$400 to $500 per kilowatt for a gas-fired combined cycle unit.
Contingency factors are applied for delays during
construction due to unforseen problems such as weather or labor
issues and for the tendency to underestimate costs for new
technologies. As new capacity is built and experience is
gained, capital costs decline. The average generating cost of
nuclear is higher than coal or natural gas, which results in no
new nuclear construction coming online by 2020 in our Reference
Case.
However, if capital costs of nuclear were to fall to around
$1,000 per kilowatt, nuclear could become a viable economic
choice, particularly if natural gas prices were to remain at
their current high levels.
In summary, the nuclear industry has made significant
strides in improving the performance and lowering the operating
costs of our existing nuclear plants. As a result, nuclear
power today provides roughly one-fifth of our Nation's
electricity generation. Operating performance achievements at
individual nuclear units is expected to remain high. The total
output from nuclear plants is expected to decline by about 20
percent between now and 2020, as some units are expected to be
retired.
The ability to relicense existing nuclear plants will
extend the operating lives of many of our current reactors.
However, achieving new orders for nuclear plants, based solely
on economics, is unlikely due to the higher construction costs
of the currently demonstrated technology relative to its fossil
counterparts, as well as uncertainties related to costs,
safety, and waste.
Thank you, Mr. Chairman, and members of the subcommittee. I
will be happy to answer any questions you may have.
[The prepared statement of Mary J. Hutzler follows:]
Prepared Statement of Mary J. Hutzler, Energy Information
Administration, Department of Energy
Mr. Chairman and Members of the Committee: I appreciate the
opportunity to appear before you today to discuss current and future
prospects for nuclear power in the United States.
The Energy Information Administration (EIA) is an autonomous
statistical and analytical agency within the Department of Energy. We
are charged with providing objective, timely, and relevant data,
analysis, and projections for the use of the Department of Energy,
other Government agencies, the U.S. Congress, and the public. We do not
take positions on policy issues, but we do produce data and analysis
reports that are meant to help policy makers determine energy policy.
Because we have an element of statutory independence with respect to
the analyses that we publish, our views are strictly those of EIA. We
do not speak for the Department, nor for any particular point of view
with respect to energy policy, and our views should not be construed as
representing those of the Department or the Administration. However,
EIA's baseline projections on energy trends are widely used by
Government agencies, the private sector, and academia for their own
energy analyses.
The Committee has requested information about current and future
utilization of nuclear power for electricity generation, statutory and
regulatory provisions that impact the use of nuclear power, the
prospects for using nuclear power to meet future generation needs, and
the role of nuclear power in a comprehensive national energy policy.
EIA collects and interprets data on the current energy situation, and
produces both short-term and long-term energy projections. The
projections in this testimony are from our Annual Energy Outlook 2001,
released late last year. The Annual Energy Outlook provides projections
and analysis of domestic energy consumption, supply, and prices through
2020. These projections are not meant to be exact predictions of the
future, but represent a likely energy future, given technological and
demographic trends, current laws and regulations, and consumer behavior
as derived from known data. EIA recognizes that projections of energy
markets are highly uncertain and subject to many random events that
cannot be foreseen, such as weather, political disruptions, strikes,
and technological breakthroughs. In addition, long-term trends in
technology development, demographics, economic growth, and energy
resources may evolve along a different path than assumed in the Annual
Energy Outlook. Many of these uncertainties are explored through
alternative cases.
THE CURRENT SITUATION
Supply, Demand and Prices
The United States currently has 104 operable nuclear units,
totaling 97.5 gigawatts of capacity. Electricity generation from
nuclear power increased in 2000 to 754 billion kilowatthours, and the
average capacity factor for U.S. nuclear power plants in 2000 was the
highest in history at 89% (Figure 1). Through 1990, the average annual
capacity factor was less than 70%. Increased performance has been
achieved through improved operations resulting in shorter and fewer
outages. During 1999, the average time required to refuel a nuclear
reactor was 42 days, and nearly all nuclear plants operate for 18
months between refuelings. During the 1970's and 80's the average
refueling cycle was more typically 12 months, resulting in more
frequent outages. The industry's median unplanned capacity loss factor
was just two percent in 1999.
In 1999, the production costs (expenditures for fuel and operations
and maintenance) at nuclear power plants averaged 1.9 cents per
kilowatthour (kwh), roughly the same as the operating costs of coal-
fired power plants, and about two-thirds the operating costs of oil and
natural gas-fired steam plants.
Fuel costs are a small part of the operating costs of a nuclear
power plant. In 1999, U.S. utilities purchased a total of 47.9 million
pounds of U3O8e (equivalent) at an average price of $11.63 per pound
U3O8e. Foreign sources supplied 76 percent of the deliveries, mainly
from Canada, Australia and Russia. Nuclear operators tend to purchase
uranium on long-term contracts and the prices are not particularly
volatile. Utilities loaded fuel assemblies containing 58.8 million
pounds U3O8e into reactors during 1999, and had inventories of 58.2
million pounds at year-end. U.S. suppliers had 68.8 million tons of
uranium inventories at year-end 1999. EIA estimates of U.S. uranium
reserves total 1,182 million pounds, although the estimated costs of
mining and milling the uranium are higher than current market prices.
During 1999, a total of 4.5 million pounds U3O8e of uranium were
produced by mining, and there were nine commercially operating uranium
mines in the United States. Once the uranium is purchased, it must then
be enriched (increasing the concentration of the fissionable isotope)
before it can be used as nuclear fuel. U.S. facilities provided 46
percent of U.S. utilities enrichment services in 1999, and foreign
enrichment plants the remaining 54 percent. Enrichment services are
also primarily obtained through long-term service contracts.
Legislative and Regulatory Challenges
The Nuclear Regulatory Commission (NRC) oversees the licensing and
operation of nuclear power plants. The typical operating license for a
nuclear plant was issued for 40 years. With the first wave of current
plants brought online in the 1970s, many of these units could be facing
retirement in the near future. However, the NRC has provided a process
for nuclear plant owners to apply for renewal of their operating
licenses, adding another 20 years to the licensed lifetime. In March of
2000, Baltimore Gas and Electric's two Calvert Cliffs units were the
first nuclear reactors to receive license renewal, extending their
license expiration dates to 2034 and 2036, respectively. Also in 2000,
three units at Oconee received license renewal approval, and five other
units have applications submitted. Future submittals have been
scheduled for roughly 40 percent of current plants through 2004. The
NRC has created a streamlined process to review applications, and the
total time from application submitted to approval has been just under
two years. The cost to the owner of pursuing a license renewal has been
estimated at between $10 million and $20 million per reactor, and
requires detailed descriptions of expected aging effects and how they
will be addressed to maintain safe operation. The renewal approval does
not require the company to undertake potential capital expenditures to
keep the plant running the additional time, which could be
substantially more than the cost of obtaining the license. So the
eventual retirement date of any plant will likely be based on the
economics of its operation rather than the actual date on the license.
To date, the longest a commercial nuclear plant in the United States
has operated is 33 years.
Nuclear waste disposal is a challenge that is faced primarily when
the plant is shut down and waiting to be decommissioned. Low level
waste (LLW) disposal is the responsibility of the states where the
waste is generated. Interstate compacts have been created to jointly
develop sites for disposal; however, no new sites have been opened even
though the Low Level Radioactive Waste Policy Act stated that disposal
facilities could refuse to accept waste from outside their compacts
beginning in 1992. Currently, only three low-level waste sites exist:
one in Hanford, Washington, which only accepts waste from states in the
Northwest Compact in which it resides, and the neighboring Rocky
Mountain Compact; one in Clive, Utah, which is only licensed to accept
the lowest level--Class A--waste, and one in South Carolina, which is
still accepting all classes of LLW from all states except North
Carolina. States that do not have access to disposal facilities are
likely to require the waste generators to store their waste on-site
until new disposal sites are available. South Carolina has recently
joined a compact with Connecticut and New Jersey, and has enacted a
state law to phase out acceptance of non-compact waste by 2008. The
site in Utah, operated by Envirocare, has applied for a license to
accept the higher classes of waste, and has no plans to limit
acceptance of the waste. Low-level waste disposal issues are important
because they affect the cost and timing of decommissioning nuclear
power plants.
The Department of Energy is working on siting a repository for
spent nuclear fuel and high-level waste. The proposed waste site at
Yucca Mountain, NV is still undergoing site characterization, to
determine if the site is suitable and should be recommended for
development. The soonest this proposed facility could begin accepting
the waste is 2010. The initial storage of the spent fuel assemblies,
once removed from a reactor, is in steel lined pools at the reactor
site. However, these are quickly being filled to capacity at most
reactors. For temporary storage, dry cask containers have been
developed and licensed by the NRC to store the used fuel assemblies.
Some of these storage containers should be suitable for transporting
the waste once the final repository is sited. The lack of a final
repository is not likely to force any operating nuclear reactors to
shut down early, but will require the owners to purchase, and receive
approval to install, the temporary storage containers on-site.
Finally, the Price-Anderson Act expires in 2002 and could create
barriers to new construction if it is not extended in its current form.
The Price-Anderson Act was enacted into law in 1957, as part of the
Atomic Energy Act, to meet two objectives: to remove any deterrents to
private sector participation in nuclear energy due to the threat of
large liability claims in the event of a catastrophic nuclear accident,
and to ensure that adequate funds are available to the public if such
an accident were to occur. The Act limits liability to third parties in
the event of a nuclear accident to $9.43 billion. It also provides for
a series of retroactive assessments paid by all nuclear utilities if
the total liability exceeds the amount of primary coverage. If the Act
is not extended, coverage for existing units would continue as provided
by the Act, but any new nuclear units would not be covered. The Price-
Anderson Act has been extended three times since 1957, and current
legislation has been proposed in the Senate that includes the extension
of the Act through 2012.
THE OUTLOOK
The Annual Energy Outlook 2001 (AEO2001) reference case projects
U.S. energy supply, demand and prices through 2020. It assumes a
continuation of current laws and regulations, and provides alternative
scenarios to deal with uncertainty in the assumptions. It is expected
that recent trends in improved performance will be maintained,
resulting in average capacity factors for operating plants of 90
percent by the last years of the forecast. The long-term projection,
however, is for a decline in total generation from nuclear power as
some existing nuclear reactors are retired and replaced by other,
mainly gas-fired, generating units (Figure 2).
Electricity demand is projected to grow at an annual average rate
of 1.8 percent between now and 2020. To meet this demand, and to
replace retirements of older generating units, EIA projects 413
gigawatts of new generating capacity will be needed (including
cogeneration capacity). Of this new capacity, 92 percent is projected
to be combined-cycle or combustion turbine technology fueled by natural
gas. About five percent of the new capacity is expected to be coal-
fired, and the remaining three percent renewable technologies. The
projected operating cost of a new nuclear reactor (including capital
recovery) is about 6 cents per kilowatthour, higher than that for coal
or combined-cycle capacity which are roughly 4 cents per kilowatthour
(Figure 3). Gas-fired units are favored particularly in restructured
electricity markets due to their lower capital costs, higher
efficiencies, shorter construction times, and better load following
characteristics.
Within the EIA forecast, nuclear units are forecast to retire when
their operation is no longer economic relative to replacement capacity.
The forecast incorporates future aging-related costs that could be
incurred as plants consider operating beyond 40 years. In the reference
case, nuclear plants are assumed to incur additional capital costs of
$14 per kilowatt (kw) per year after 40 years, and increase to $25/kw
per year after 50 years. These costs are reduced significantly for
individual units if they have already incurred major capital
investments related to plant upgrades. The aging related costs are
similar in magnitude to annual capital additions assumed for existing
fossil plants ($4-5/kw for gas plants, $10/kw for oil/gas steam units
and $16/kw for coal plants, on average). In the reference case, 27
percent of current capacity is forecast to retire by 2020, mainly after
2010. Of this retiring capacity, one nuclear plant is projected to
retire before the end of its 40 year life, 30 units are forecast to
retire at the end of their current license expiration and 2 units are
projected to retire ten years after their current license expiration
(implying a license renewal was received). Another 25 units have
original licenses that expire by 2020, but are forecast to receive
license renewal and extend their operation beyond 2020.
Because the U.S. nuclear industry has no experience operating
reactors beyond 40 years (the oldest operating reactor today is just
over 30 years old), future operating costs and capital investments
required are unknown. Due to the uncertainties surrounding future
aging-related costs, several cases were developed to further analyze
the effects on electricity supply due to differing assumptions
regarding the costs of future operation (Figure 4). These results
provide a range of possible futures for existing nuclear power. In the
low nuclear case it was assumed that aging related costs would begin
earlier, with capital additions of $5/kw per year starting at age 30. A
total of 18 additional units were projected to be retired through 2020
relative to the reference case. Additional fossil-fired capacity was
projected to be built to replace the retiring nuclear capacity, and the
carbon emissions from electric generators increased by two percent (16
million metric tons carbon equivalent) above the reference case in
2020. In the high nuclear case, aging related costs were assumed to be
lower by 25 percent, resulting in more plants projected to operate
beyond their initial license life. In the high nuclear case only 11
units were projected to retire through 2020 ( 9 percent of current
capacity). About 14 gigawatts of fossil-fired capacity (roughly 47
units at 300 megawatts each) would no longer be required, relative to
the reference case, and carbon emissions from electric generators would
be reduced by two percent (16 million metric tons carbon equivalent) by
2020.
There are additional uncertainties affecting other generating
industries that could change the competitiveness of nuclear power.
Current natural gas prices are much higher than normal in response to
low levels of gas storage, unusually cold weather and supply issues.
The AEO2001 forecasts that this situation will reverse over the next
few years, as increased drilling and production occurs, and that gas
prices will return to more typical levels by 2004. Therefore, forecasts
of the cost of new gas-fired capacity later in the forecast are based
on gas prices below the current levels. More existing nuclear power
plants would be economic if current gas prices remained throughout the
forecast period, resulting in fewer retirements. However, it is
expected that this tight supply situation for natural gas will
dissipate before 2010, when the retirement decisions for nuclear units
start being made.
The electric generation sector may also face restrictions on the
emissions of various pollutants in the future. Since the AEO2001
forecast incorporates current laws and regulations, it requires the
electric sector to meet sulfur dioxide and nitrogen oxide restrictions
as specified in the Clean Air Act. The summer season cap on nitrogen
oxide (for 22 states) will be imposed in 2004 by the Environmental
Protection Agency (EPA). Because these reductions are being met by
existing fossil plants by adding the necessary control equipment, their
operation and costs are not greatly affected. If additional emissions
were targeted in the future for reduction, such as carbon dioxide, a
large number of coal plants would be retired and replaced mainly by
gas-fired technology, leading to higher natural gas prices. This
situation would provide an economic incentive to continue operating
more of the existing nuclear power plants.
For example, the EIA recently performed an analysis of strategies
for reducing multiple emissions at power plants, at the request of
then-Representative David M. McIntosh, Chairman of the Subcommittee on
National Economic Growth, Natural Resources, and Regulatory Affairs of
the House Government Reform Committee. In this report, EIA was asked to
provide an analysis of proposals to reduce sulfur dioxide
(SO<INF>2</INF>) and nitrogen oxide (NO<INF>X</INF>) by 75 percent from
1997 levels, and carbon dioxide (CO<INF>2</INF>) to either 1990 levels
or 7 percent below 1990 levels, similar to the general requirements of
the Kyoto protocol, but restricted to emissions by electric generators.
In order to comply with the CO<INF>2</INF> cap, the industry was
projected to dramatically shift away from coal to natural gas, and to a
lesser extent, renewables. This analysis also showed fewer nuclear
retirements (9 percent of current capacity) by 2020, as the higher
natural gas prices (as much as 63 percent higher than the reference
case in 2010) and CO<INF>2</INF> allowance prices made it economical to
continue operating more of the existing capacity. This scenario assumed
the AEO2001 reference case aging-related costs for nuclear plants,
however, the nuclear capacity forecast was similar to the high nuclear
case due to the emissions targets and higher natural gas prices. At the
request of the Subcommittee, this analysis assumed that no new nuclear
power plants would be built throughout the forecast period.
Projections of the cost of building new nuclear capacity is
difficult, due to the length of time since a new unit has been ordered
in the United States, and the lack of experience in building new
designs. The AEO2001 reference case bases the cost of a new nuclear
unit on the advanced passive reactor design (AP600), which has been
approved by the NRC as part of its standardized design certification.
This design has evolved from the current operating designs, but also
includes passive safety features and is based on a smaller size (600
megawatts). The initial overnight capital cost (in 1999 dollars) of the
AP600 is assumed to be $1730 per kilowatt, compared to $1020 to $1220/
kw for a coal-fired unit and $420 to $530/kw for a gas-fired combined
cycle unit. Contingency factors are applied to the costs of all new
capacity, and are made up of two components--a project contingency
factor, which is applied throughout the forecast to account for delays
during construction due to unforseen problems such as weather or labor
issues, and a technological optimism factor, which is only applied to
the first four units built of a new design to account for the tendency
to underestimate costs for new technologies. Capital costs decline over
time as new capacity is built and experience is gained. However,
because the initial cost for the advanced nuclear technology is much
higher than other available technologies, it is not economic to build
nuclear units in the reference case.
The Department of Energy's Office of Nuclear Energy has developed
long-term cost goals for these evolutionary designs that are lower than
current estimates. An alternative nuclear cost case was developed
assuming the cost of the new nuclear technology was $1500/kw initially,
falling to $1200/kw by 2015, with a ten percent project contingency
factor applied to these costs. In addition, cases were considered
assuming both 3 and 4 year construction times. In these cases the
nuclear technology was closer to being competitive with coal and gas-
fired capacity (Figure 5); one new unit was projected to be built in
the last years of the forecast under the assumption of a 3 year lead
time. (Nuclear units were not economic under a four year lead time
assumption.)
Worldwide, work has been developing on a more revolutionary new
commercial nuclear power technology, known as the pebble bed modular
reactor. South Africa's state-owned utility has been working on the
technology since 1993, but it has recently gained the interest of
foreign energy policymakers as well as potential investors. One U.S.
based company, PECO Energy, has joined with British Nuclear Fuels
Corporation in making financial commitments to the venture. PECO's
parent company, Exelon Corporation, has begun discussions with the NRC
about building PBMRs in the United States. The economics are expected
to improve for this technology because of the plant's small, modular
design (110 megawatts each). The design incorporates passive safety
features and would have higher thermal efficiency than existing nuclear
plants, requiring less fuel and producing less waste. The estimates of
construction costs ($1000/kw) would be very competitive with new coal-
fired technologies available in the United States, if they could be
attained. The construction costs would still be almost double that of a
new gas combined-cycle unit ($530/kw). Ultimately, this design is still
untested, and its future will be determined in large part by the
success or failure of the South African demonstration project,
scheduled for completion in 2005.
CONCLUSION
While nuclear power today provides roughly one-fifth of the
nation's electricity generation, that share is expected to drop over
the next two decades as some existing units are retired and replaced by
other generating technologies. Coal will remain a large supplier of
electricity, and natural gas is expected to greatly increase its
proportion of electricity generation. While operating performance at
individual nuclear units is expected to remain high, total output from
nuclear plants is expected to decline by about twenty percent between
now and 2020, as units are removed from service.
The ability to relicense existing nuclear plants for an additional
twenty years of operation could extend the operating lives of current
reactors, and delay retirements. However, achieving new orders for
nuclear plants based solely on economics is unlikely at this time due
to the high construction costs of the technology, as well as
uncertainties related to costs, safety and waste. The challenge of
waste disposal is faced by existing nuclear power plants as they
continue to store high level waste on-site, waiting for site approval
and construction of the permanent waste repository required by the
Nuclear Waste Policy Act.
Thank you, Mr. Chairman and members of the Subcommittee. I will be
happy to answer any questions you may have.
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Mr. Barton. Thank you.
The Chair would--is Mr. Tauzin in the room? We will
recognize him first if he is here. Okay.
The Chair would recognize himself, then, for 5 minutes to
start the questioning period. Dr. Travers or Mr. Magwood, can
either of you gentlemen tell me how many billions of dollars
have been paid into the nuclear waste fund since its creation
in the 1980's?
Mr. Magwood. I don't think I know the up-to-date number,
but I think it is in the order of $12 billion.
Mr. Barton. Okay. Ms. Hutzler, can you tell me?
Ms. Hutzler. No, I don't have that number.
Mr. Barton. You don't have it either?
Ms. Hutzler. No.
Mr. Barton. Well, I want to know how many dollars have been
paid in, how many dollars have been paid out, where the money
has gone to, and how many dollars are officially still in the
fund. That would seem to be a baseline piece of information
that we would need. So do you think you all can handle that?
Mr. Magwood?
Mr. Magwood. I was looking through my notes. I do have a
calculation provided by the Office of Civilian Reactor Waste
Management. I can give you the numbers they have. They indicate
that there is total cumulative fees of about $10.6 billion,
with a total income, which includes defense fees, of $15.5
billion.
The disbursements to the program for expenditures have been
totaling about $5.6 billion, and the balance in the fund
currently is $9.976 billion.
[The following was received for the record:]
In response to your question, I would like to provide the following
information supplied by the Department's Office of Civilian Radioactive
Waste Management, which manages the Nuclear Waste Fund. The Nuclear
Waste Fund is a special account established in the U.S. Treasury by the
Nuclear Waste Policy Act.
As of December 31, 2000, the balance of the Nuclear Waste Fund was
$9.976 billion. Receipts of the Fund, derived primarily from fees paid
by the owners and generators of civilian spent nuclear fuel, totaled
$10.673 billion. Receipts resulting from return on Treasury security
investments totaled $4.9 billion. Therefore, cumulative receipts of the
Fund totaled $15.573 billion.
Since enactment of the Nuclear Waste Policy Act, disbursements from
the Fund totaled $5.597 billion. These disbursements cover the costs
for numerous expenditures. Over half has been spent on the
characterization of Yucca Mountain, Nevada. These expenditures have
covered extensive scientific and technical work required to gather the
information needed to support a decision on whether Yucca Mountain is
suitable for use as a repository. Aside from expenditures related to
the characterization of the Yucca Mountain site, additional funds have
been spent on statutorily mandated activities to identify other
candidate repository sites, to support work toward siting a second
repository, and to develop a monitored retrievable storage facility.
All of these activities were later terminated. Also, funds have been
expended to pay for regulatory and scientific oversight, financial and
technical assistance, and payments-equal-to-taxes.
All expenditures from the Fund are limited to funds appropriated by
Congress.
Mr. Barton. Okay. Well, doublecheck that. And especially on
the disbursements we would like to know where the money has
gone, because one of the key elements in a nuclear waste bill
later this year is going to be paying to construct the site.
And last year the committee passed a funding resolution in
the House bill that actually used the nuclear waste fund for
what it was supposed to be used for, and my intention is to
move a bill that does that this year also. But in order to do
that, I want to know what the numbers are.
Okay. I would like to ask Dr. Travers--and, again, perhaps
Mr. Magwood--later in the hearing today we are going to hear
from a private industry representative who is going to talk
about the Pebble Bed Modular Reactor, which is a much smaller
reactor.
Now, my understanding of the projections that the EIA has
made, you all are basing those projections on the new
lightwater reactor, which is a much larger reactor. In my
conversations with industry representatives, I have not seen
much interest in purchasing the new large lightwater reactor,
but I have seen a lot of interest in purchasing the smaller
reactor if it is certified by the NRC.
So what steps is DOE and the NRC taking to look at this
different technology, this smaller, more passive safety of
Pebble Bed Reactor?
Mr. Travers. Mr. Chairman, thank you. The NRC, for its
part, is engaged in a dialog with Exelon, and I think you are
going to hear from representatives of that company a little bit
later.
We are, in the most technical sense, involved in a pre-
application review of specific key issues related to that
design. Exelon, of course, is reviewing whether or not to go
forward with development of a detailed technical design for
this facility, and whether or not to submit an application to
the Nuclear Regulatory Commission.
We currently have a planning wedge in our budget for
carrying out a review of a combined operating license for a
PBMR beginning in either fiscal 2002 or fiscal 2003. But the
activities that are currently being undertaken are those that
are directed at identifying key issues for this rather new
technology, a technology that has not been one that has been
licensed, at least for large-scale production, in the United
States.
We are involved and engaged with Exelon in identifying the
key issues that would put us in the best position to move out
quickly should we receive an application from that company to
license this technology. And there are some unique elements to
that.
The Commission has actually directed the NRC staff to begin
a reexamination of its capabilities for things such as
construction inspection program for licensing the reactor
technologies, and we have undertaken, specific to your request,
an examination of our current regulations that would allow for
licensing of new and innovative technologies.
We believe we fundamentally have the infrastructure in
place and the requirements in place that will provide our basis
for moving forward. But there are unique elements to this
design that, as I mentioned earlier, heretofore have not been
examined by the NRC.
So there are some specific technical issues that are on
somewhat of a cutting edge, and certainly the experience in the
NRC staff is somewhat limited in these areas. But there is
quite a lot.
Mr. Barton. Do you see any statutory restriction in
reviewing the new technology?
Mr. Travers. No, sir.
Mr. Barton. Okay. So there is no need for new statutes to
review different types of nuclear reactor technology?
Mr. Travers. No, sir.
Mr. Barton. Okay. Ms. Hutzler, this will be my last
question. The EIA 2000 analysis and 2001 analysis shows that
about 27 percent of the existing nuclear power plants are going
to shut down. Given the increased operating efficiencies and
fuel cycle efficiencies, why is that built into your
assumption?
Ms. Hutzler. It is based on economics. What we do is we
look at aging-related costs to keep these units operating. We
do that for fossil units as well. My written testimony
indicated the costs that we have for these units. For the
fossil units, we assume that the costs are added on in each
year. The nuclear units are added on later in the time horizon.
But for each unit, we take a look at the costs and whether
it is economic to continue operating or whether a replacement
unit should be built.
Mr. Barton. Well, were any of those closures a result of an
operating permit expiring? Is your analysis based on the
theoretical economics of continuing to operate the plant?
Ms. Hutzler. It is the latter.
Mr. Barton. The latter.
Ms. Hutzler. Continued economics.
Mr. Barton. Okay. My time has expired.
The gentleman from Virginia is recognized for 5 minutes.
Mr. Boucher. Thank you, Mr. Chairman.
Dr. Travers, I notice that the NRC is proposing that the
authority of the EPA to have oversight and enforcement
capabilities with regard to the cleanup of decommissioned
nuclear plants be repealed. Can you give us some rationale for
that? What is the thinking of the NRC with regard to how the
public policy is better served if EPA does not have this
enforcement and review authority?
Mr. Travers. Thank you for the question. The Commission has
been generally interested in issues where dual regulation or
concurrent jurisdiction are at issue. And, of course, when you
enter into this sort of situation, the issues that arise from
it are the predictability of government actions necessary, in
this case, for decommissioning facilities.
The NRC has promulgated what we have called a license
termination rule, which establishes a single all-pathway
standard for judging whether or not a nuclear facility--nuclear
power, fuel facility, what have you--can be released after a
decommissioning and decontamination period.
We have run into a parallel jurisdictional issue with EPA
wherein very often, or at least on occasion when the NRC has
completed its assessment of the adequacy of the decommissioning
efforts, the Environmental Protection Agency, under its
authorities I think in CERCLA, have raised issues that we feel
technically in the main are not justified.
So what we have urged in terms of legislative initiatives
is a situation where the Congress reexamines whether or not the
NRC should be looked to as the principal establishment--
principal organization responsible for establishing those sorts
of standards, and thereby increasing the predictability of the
Federal process associated with the release and decommissioning
of nuclear facilities.
Mr. Boucher. Let us suppose Congress approves your
recommendation. What effect would that have on the liability
under Superfund of the owners of nuclear power plants?
Mr. Travers. I am really not sure. I would have to answer
that one for the record.
[The following was received for the record:]
The Commission has established, by regulation, radiological
criteria for the termination of licenses that fall under the
Commission's regulatory authority. These regulations provide a clear
and consistent basis for determining the adequacy of remediation of
residual radioactivity resulting from the possession of Atomic Energy
Act material. The NRC legislative proposal would establish that NRC's
cleanup standards are adequately protective for purposes of the
Comprehensive Environmental Response, Compensation, and Liability Act
(Superfund), and that those NRC standards govern the cleanup of sites
and material licensed by the Commission, or by an Agreement State. In
order for NRC licensees to remediate their sites, NRC regulations
require that funds be set aside during the license term to ensure that
sufficient money is available for the cleanup of residual atomic energy
act materials.
To provide some background on this matter, the NRC has the
statutory responsibility for the protection of public health and safety
related to the possession and use of source, byproduct, and special
nuclear material under the Atomic Energy Act of 1954, as amended, and
must ensure safeand timely decommissioning of the nuclear facilities
that it licenses. The EPA has responsibilities under CERCLA with
respect to cleanup activities at contaminated sites containing
hazardous substances, which can include sites subject to NRC
regulation. Since September 8, 1983, EPA has generally deferred listing
on the CERCLA National Priorities List (NPL) those sites that are
subject to NRC's licensing authority, in recognition that NRC's actions
are believed to be consistent with the CERCLA requirement to protect
human health and the environment. However, as EPA indicated in the
Federal Register notice announcing the policy of CERCLA deferral to
NRC, if EPA ``determines that sites which it has not listed as a matter
of policy are not being properly responded to, the Agency will consider
listing those sites on the NPL'' (see 48 FR 40658).
Since the initiation of the 1983 deferral policy, EPA has taken
action at very few formerly or currently licensed NRC sites. These EPA
response actions at NRC licensed sites were conducted in joint
cooperation, to address contamination that is not within NRC's
regulatory authority, including non-radiological chemical contamination
or contamination outside the facility boundary.
In the rare cases where the regulatory efforts of the NRC or an
Agreement State would not accomplish results that are satisfactory to
the NRC or an Agreement State, the Commission or, where applicable, the
Agreement State, could request the application of Superfund to effect
adequate cleanups. Superfund would apply only in this situation. That
is, Superfund would not apply to NRC or Agreement State licensees
unless NRC or an Agreement State asks for its application.
The Commission's proposal would end uncertainties facing former NRC
licensees regarding the future views of EPA with respect to
acceptability of cleanup efforts that the NRC has found to be adequate,
and would resolve an outstanding issue that has not been resolved
regarding dual regulation.
Mr. Boucher. Well, I would invite you to do that, because
if we are going to consider seriously your recommendation, I
think that is a key consideration for us.
Mr. Travers. Sure.
Mr. Boucher. I notice also that you are recommending that
Congress amend the Atomic Energy Act and eliminate the
restrictions that exist in current law on the ability of
foreign entities to own nuclear power plants in the U.S. What
is your rationale for that?
Mr. Travers. Our rationale, sir, is that when these
restrictions were--at least we believe when these restrictions
were first put into the Act, nuclear technology was in its
incipient stage. And it was not a technology that, in large
measure, was known and being implemented around the world. Of
course, today that situation has largely changed.
And so that, combined with the fact that many of the
organizational restructuring efforts that we see involve
foreign entities, and the fact that the Commission has with its
capability the ability and responsibility to determine if there
is an inimicable problem with a particular entity--for example,
a country like Iraq, if you will--we could still exercise our
authority under the Act, we believe, even without this
prohibitive sort of exclusionary language that currently exists
in the Atomic Energy Act.
Mr. Boucher. Well, would you be making the determination
with regard to whether there was some kind of national security
risk with a particular foreign entity having ownership of a
facility in the U.S.?
Mr. Travers. The answer, I believe, is that the NRC could
in fact do that with consultation among Federal agencies that
would provide----
Mr. Boucher. Is that consultative requirement built into
your statutory proposal?
Mr. Travers. I would have to answer that one for the
record, sir. I am not sure.
[The following was received for the record:]
The NRC's legislative proposal does not include an express
requirement for the Commission to consult among Federal agencies before
implementing the requirement that a license may not be issued to any
person if, in the Commission's opinion, such issuance would be inimical
to the common defense and security or to the health and safety of the
public (the latter requirement is contained in the last sentence of
both sections 103 d. and 104 d. of the Atomic Energy Act, and it
remains unchanged). However, there are informal mechanisms through
which the NRC may obtain the views of the Executive Branch. In
practice, the Commission has obtained the views of other Federal
agencies on issues of mutual concern, including those related to the
protection of the common defense and security. These informal
mechanisms would be available for use in making a determination
implementing the restriction against issuance of a license to a new
owner, as to whether issuance would be inimical to the common defense
and security.
Mr. Boucher. I would ask you to do that.
Mr. Travers. Sure.
Mr. Boucher. Last year, largely at your request, Congress
changed the method by which you collect user fees, but there
was a provision adopted simultaneously that says that the
utilities do not have to pay for certain kinds of programs that
are carried out by the NRC--your international programs, for
example.
Mr. Travers. Yes.
Mr. Boucher. What effect is that provision having in terms
of the overall level of fee collection? Is it diminishing the
level of fee collection? And if it is diminishing the level of
fee collection, are you finding that you have adequate revenues
with which to carry forward your essential programs?
Mr. Travers. Yes. In fact, it is, and----
Mr. Boucher. It is what?
Mr. Travers. It is reducing the collections.
Mr. Boucher. Okay.
Mr. Travers. Because as I understand the stipulation, 2
percent going forward additive for the next 5 years, equating
to 10 percent ultimately, of fees that are currently obtained
from our licensees would be money that would be collected from
the general fund instead.
And as you indicated, activities such as international
activities that we feel are sort of a generic benefit to our
licensees but not a direct one, are the sorts of activities
that we had in mind in proposing this.
And in the main, the answer as far as, do we have enough
monies to support our fundamental mission objectives, the
answer is that, generally--I mean, the answer is yes, and we
are moving forward in the development of our budget to support
and determine, really, what sorts of resources would be
required should projects currently not anticipated, like
advanced reactors, come before the Commission.
The expectation is that if many of these projects did come
before the Commission in the near term, we would need to budget
additional resources for that, because what we have today is
very much in play in activities such as license renewal and
other activities.
Mr. Boucher. All right. Thank you, Dr. Travers. That is a
complete answer.
Mr. Barton. The gentleman's time has expired.
The gentleman from Kentucky, Mr. Whitfield, is recognized
for 5 minutes.
Mr. Whitfield. Thank you, Mr. Chairman.
Mr. Magwood, I know that your Office of Nuclear Energy does
not have responsibility anymore for the DUF-6 conversion
project, but I also know you are quite knowledgeable about it.
And I think you all have received five bids on March 1, and
supposedly the Department of Energy will award a contract
sometime in August to build a facility at Paducah and at
Portsmouth.
And I was curious, do you have any idea or thoughts on what
the appropriation level should be for fiscal year 2002 to keep
that project on track?
Mr. Magwood. As you pointed out with the transfer of this
program to DOE's Office of Environmental Management, my office
is no longer responsible for the program, so it would be
difficult to give you a very precise answer. Let me say that I
do know that industry has begun to express its interest in this
project more formally and has asked for additional time to
formulate bid packages. My understanding is that the schedule
for the program is being reset based on the request made by
industry.
As you know, this is a complex technological task that we
have asked industry to take on. Until the project schedule is
redefined, it is very difficult to know what the appropriation
for next year should be.
I do know that a number has been established by the Office
of Environmental Management, working with the Office of
Management and Budget, and that will be in the President's
budget request. However, I think that that number may have been
affected by the fact that industry has asked for more time to
prepare its bids.
Mr. Whitfield. Okay. Now, let me ask you, this is a
hypothetical question. But Mr. Strickland and others talk
frequently, as I do, about the necessity for the capability to
produce enriched uranium domestically.
And, hypothetically, let us say that, as you know, USEC has
in negotiations with TENEX tried to amend their suspension
agreement to bring in commercial grade SWU from Russia.
Obviously, one of the reasons they want to do that is it would
help them financially. And let us say that they do not receive
approval to do that.
And then, second of all, they are the exclusive agent for
the Russian agreement on highly enriched uranium, and there are
other utilities that have expressed an interest in also
becoming an executive agent, so that USEC would not be the sole
exclusive agent. And let us say that that was approved and that
USEC was no longer the exclusive agent.
Then, let us suppose, USEC had real financial difficulty
and maybe would not be able to operate their plant. And as I
said, all of this is hypothetical. But if that happened and we
would not have any ability to enrich uranium domestically, what
would you recommend we do?
Mr. Magwood. That is an interesting hypothetical. I think
that the way that we are going to address this over the next
several weeks and into the future--that is, the issue of what
to do with the enrichment business in the United States, which
is very important as I think several opening statements
reflected--is to recognize that it has both an energy aspect to
it and also a national security aspect to it.
That said, the administration is examining these issues in
the context of both the Vice President's energy review, which
is underway, and also under the various national security
reviews that are being pursued.
And until those reviews are complete, it is very difficult
to know or to answer your question. There is simply a great
deal of analysis, and policy review that needs to be completed,
but I can promise you that it is something that is very, very
high on the Secretary's list of issues.
He has, in fact, formed a new senior-level task force
within the Department that brings together all of the
components of the Department, including the National Nuclear
Security Administration--to try to deal with this adequately.
So as I say, I can't really answer your hypothetical at this
point, but I do know that policy is being established and
hopefully very soon we will be able to address that.
Mr. Whitfield. Thank you.
Mr. Barton. The gentleman's time has expired.
Seeing no other members on the minority side, we are going
to let Mr. Strickland ask questions for 10 minutes, so that we
will only have one round of questions for this panel, and he
had expressed an interest in a second round. So we are going to
recognize him for 10 minutes.
Mr. Strickland. Thank you, Mr. Chairman.
Mr. Whitfield, thank you for that question. It is a
question that absolutely needs to be answered.
Mr. Travers, if the research on the Pebble Bed Reactor
progresses to the point of it becoming viable, and it needs an
8-percent assay in order to operate, and we are shutting down
Portsmouth, which is currently licensed to enrich to 10
percent, where will we get the fuel that we may need at some
future time for such a reactor?
Mr. Travers. Well, Congressman, as you know, in
relationship to the remaining enrichment facility that will be
operating shortly in the U.S., that capacity has been recently
increased from 2.75 to 5.5 percent. It is my understanding that
for PBMR the enrichments are on the order of 8 percent or so.
Exactly where that will come from I can't say, but I think
the expectation----
Mr. Strickland. Thank you.
Mr. Travers. [continuing] is that it could come from
abroad, or potentially even from the reactivation of Portsmouth
or the licensing of a new facility.
Mr. Strickland. I think the truth is that once Portsmouth
is put on cold standby, we are talking about at least 1\1/2\ to
2 years and multiple millions of dollars to bring it back on
stream. This is a fuel we may need in the future, and we are
proceeding to close this facility. It just does not make sense.
Mr. Magwood, could you explain why DOE is proposing to
maintain Portsmouth on cold standby? As a part of your answer,
could you tell me, did DOE expect to find itself facing these
circumstances? And what are the consequences if we do not place
Portsmouth on cold standby?
Mr. Magwood. To answer your second question first, it is
very clear we did not expect to be in this position.
Mr. Strickland. That you did not expect.
Mr. Magwood. Did not expect it. The government as a whole,
not just the Department, had a very clear understanding that
the Portsmouth and Paducah plants would operate until at least
2004. Because of the financial issues that USEC has
encountered, USEC has decided to cease enrichment operation at
Portsmouth considerably earlier.
As a result, the government was unprepared, quite frankly,
for the decision that was made, and had to react very, very
quickly.
Mr. Strickland. If I could just interrupt. I could say the
government was not prepared because the government did not
listen to very clear warnings about what was likely to happen.
What are the consequences if we do not place Portsmouth on cold
standby?
Mr. Magwood. The consequences of not placing Portsmouth on
cold standby are that the plant would be placed in I guess what
has been called a cold iron mode, which is to say that you
would allow the plant to be shut down in a way that would not
make it likely ever to be brought back into operation, or you
would go immediately to D&D, decontamination and decommission
mode.
Mr. Strickland. Can you tell me what the one-time costs are
for--annual costs for placing Portsmouth on cold standby? How
long will it take to restart the Portsmouth plant in the event
that it is necessary for our national needs in the future?
Mr. Magwood. The annual cost projected for cold standby,
including the cost of removing any uranium deposits in the
plant systems, is about $65 million a year. If that condition
is maintained adequately, and it can be maintained that way for
probably about 5 to 6 years without significant degradation of
the plant, we would be able to bring the plant back up in about
1\1/2\ to 2 years.
Mr. Strickland. How much would it cost to bring the plant
back into operation, if necessary?
Mr. Magwood. I don't know that off hand. I would have to
answer that for the record.
Mr. Strickland. As you know, Secretary Abraham announced
his plan for cold standby in Columbus, Ohio, on March 1. How
does the administration plan to fund that initiative? Will this
committee be required to review a reprogramming request? When
can we expect to receive such a request?
Mr. Magwood. The Department has been working very closely
with the Office of Management and Budget to formulate a plan to
meet the financial requirements of the cold standby approach.
We have not presented that as yet. It is currently under review
by the administration.
It is my belief that it will be forthcoming very soon. In
fact, I am hopeful that it will be forthcoming within the next
couple of weeks. But it is a very complicated matter. It is a
very expensive issue to be dealing with at this point in the
fiscal year. So finding the resources has not been an easy
matter, but we are trying to do that now.
The Office of Environmental Management has the lead role to
work with the Department to try to find those resources, and
they are doing that now.
Mr. Strickland. So are you telling me that we could expect
perhaps within 2 weeks to have such a reprogramming request
before the Congress?
Mr. Magwood. I am certainly hopeful of that. I think that
if all of the approvals are completed, it can show up in that
timeframe.
Mr. Strickland. As you know, Mr. Magwood, USEC has received
approval from the NRC to produce enriched uranium at 5.5 at
Paducah. However, recent reports in the press indicate that
USEC's maximum economic output at the Paducah plant is only
about 4.5 million SWU per year when compared with the
requirement of 10 million SWU to fulfill their contracts, both
to the domestic and the foreign utilities.
Aside from safety, for which the NRC has already conducted
a review, are you confident that the Paducah plant will be able
to reliably and economically enrich uranium up to 8 million SWU
per year at the 5.5 level assay?
Mr. Magwood. I can't personally give you that guarantee. I
don't know that the Department is in a position to give that
guarantee. While we are very concerned about the energy
security issues, it is clearly a commercial matter for which
USEC is responsible. If NRC approves that upgrade from a safety
perspective, we would certainly have to defer to USEC as to
whether it is economic to do that.
Mr. Strickland. So DOE does not have an answer as to
whether or not this country is going to be supplied with a
reliable economic domestic supply of enriched uranium to meet
our Nation's needs? Is that what you are saying?
Mr. Magwood. I am saying that DOE doesn't have a role in
making the economic decisions for USEC. But we are concerned
about potential long-term and the near-term energy security
issues facing this country. As I have stated, the Vice
President is conducting a very thorough review that includes
this issue.
Mr. Strickland. Mr. Travers, the NRC staff came to my
office a few days ago, and they provided me with this document,
and it laid out the timetable for closing the Portsmouth
facility and for their hope that the Paducah would achieve a
certain level of enrichment.
I was somewhat stunned, and I will tell you why I was
stunned. We have got a facility that is currently finishing a
fuel for our nuclear utilities. Paducah has been given
permission to upgrade to 5 percent. We are in the process of
closing our facility, making it inoperable for at least any
reasonable expectation of coming back into production.
And yet we have not yet seen whether or not the Paducah
facility can do what I believe you and the NRC is required to
determine under the law, and that is that they are a reliable,
economic, domestic supplier of fuel.
The document that was brought to my office indicates that
USEC will begin to generate at 4 percent product during late
March and early April, and then USEC will generate near 5
percent product for a few days in mid-April at Paducah. And
then USEC will ramp down power and assay to near 1 percent in
early May.
Isn't it reasonable to assume that something that is so
critical to the energy security of this nation would require
more than a few days' demonstration on the part of the Paducah
facility? We are closing the plant that can provide the fuel
before we know for sure.
Can you sit here today and tell me that you are absolutely
sure that the Paducah facility will be able to meet our
domestic needs in a reliable and an economic fashion after the
Portsmouth facility is closed?
Mr. Travers. Well, Congressman, I think, as you know,
Chairman Meserve and the NRC have given these concerns that
have been expressed by you and other stakeholders some very
serious consideration. And, in fact, the reliable and economic
responsibilities that you relate to, as contained in Section
193(F)(2)(b), we believe, after consultation with the general
counsel of the NRC, is principally directed at the possibility
of foreign----
Mr. Strickland. Can I interrupt just a moment, sir? And I
am sorry. But you say ``is principally.'' Does that----
Mr. Travers. It is, we believe, focused on this element,
the potential for domestic--or, I am sorry, foreign entities
becoming--gaining control and undermining the U.S. enrichment
capability, as opposed to and separate from an obligation that
we, frankly, would find difficult to exercise given our public
health and safety responsibilities.
We think, rather, the objectives of the reliable and
economic capacity of the country--rather than being an NRC
responsibility fundamentally should be exercised in the
Congress and in other organizations of government, the
Enrichment Oversight Committee. And as I think Mr. Magwood
pointed out, these discussions are taking place.
Our role, as we have evaluated it, is a rather focused one
in the arena of assuring that the operations associated with
the enrichment facilities, or facility in this case, are
conducted in a manner that is safe. And so while we have looked
at this, and while we have looked at the possibility of
exercising your suggestion that we limit our authorization at
Paducah based on some linkage to the Portsmouth facility, we
really have found that to be separate and a matter that should
be considered separate. And so we----
Mr. Barton. Okay. The gentleman's time has expired,
actually, and that answer took about 4 minutes, that one
answer. So if you have additional questions, put them in
writing, and we will certainly get them expeditiously. I know
how important this is.
Mr. Strickland. Mr. Chairman, I want to thank you for your
terrific patience, and I want to thank you for this hearing.
And I will follow your suggestion.
Mr. Barton. You know, it brings back memories of my efforts
on a project down in Texas in my district called the Super
Collidor Project. It is a different level of intensity when it
is in your district, and you are to be commended for being well
informed and on point on the questions. But, unfortunately, we
have got about 7 or 8 other members that need to ask questions.
The gentlelady from New Mexico is recognized for 5 minutes.
Ms. Wilson. Thank you, Mr. Chairman.
Mr. Travers, in your testimony, or at least in the summary
of it, you said that serious industry interest in new
construction of nuclear power plants in the U.S. has only
recently emerged. Could you expand on that statement and who
you think is out there toying with the idea of--what is going
to happen here?
Mr. Travers. One reason for stating that is if you look
historically at orders for new nuclear power plants we haven't,
at the NRC, received an application for a new order for a
commercial generating station since before Three Mile Island.
Some might find that surprising. But before March 1979 was the
last instance where the NRC received an application for a new
nuclear power generation plant.
That having been said, we have over the last few years
received applications that imply an interest in the development
of new nuclear technology. In that regard, I am referring to
design certifications which have been forwarded to the
Commission, and, in fact, approved. These design certifications
for three different plants----
Ms. Wilson. Thank you.
Mr. Travers. [continuing] the advanced boiling water
reactor, and others--are available to be referenced without
further regulatory or without substantial further regulatory
review.
Ms. Wilson. Thank you.
Mr. Travers. So they are available.
Ms. Wilson. I wondered whether it was those design
certifications or whether you were aware of any potential
applications that----
Mr. Travers. And I am.
Ms. Wilson. [continuing] you haven't received but that
might be coming.
Mr. Travers. And I am. And so I will finish very briefly by
saying that what we are now experiencing is some more direct
interest in the possibility of actually building a new nuclear
power plant or at least licensing a site. And three instances
come to mind--the Pebble Bed Modular Reactor that we have some
ongoing discussion in a preapplication sense with Exelon; the
advanced passive 1,000 reactor, which is a Westinghouse design,
which has--which there is an expressed interest for at least
certification of the design if not for building a plant; and,
third, for the possibility of licensing a site.
Again, this is an early site permit potential. What we are
looking at here is an NRC review that would allow a utility to
have all of the environmental review and approvals associated
with the siting requirements for a new nuclear plant, completed
and available for reference for----
Ms. Wilson. Okay.
Mr. Travers. [continuing] between 10 and 20 years.
Ms. Wilson. Thank you.
Mr. Magwood, in your testimony, you talked about your work
on advanced U.S. nuclear plant designs similar to those that
have been constructed in Japan, South Korea, and Taiwan. In
your opinion, where is the most promising technology for
reducing the capital cost of nuclear plants?
Mr. Magwood. That is a very good question. I think that
there are many different paths we can pursue. We have talked
about the potential for the Pebble Bed Reactor to present a new
option. The Department has also been investigating gas turbine
modular heating reactors, which is a technology using some
similar aspects but a little different twist.
Also, with respect to the advanced light water reactors,
there is huge potential that we have discussed with utilities
and with the vendors to find smarter ways of building those
technologies using advanced information system technology, for
example, to reduce the cost of actually putting the plant
together at a site, and also using smart equipment, which can
reduce the operating cost, which is another component.
So there is different pathways, and I think that they are
all going to have to be explored over the next several years to
see what should be pursued, if not everything at the same time.
It depends on what the utilities see as the economic model for
building new nuclear power plants.
Ms. Wilson. Do you have within the Department an R&D road
map for critical technologies to reduce the cost and improve
the safety of nuclear plants? Or, I mean, maybe another way of
putting that is, what do you need in your office, which I think
is critical to this whole question, what do you need to
accelerate the development of the fourth generation of nuclear
power?
Mr. Magwood. Yes. We have started--due largely to the
leadership that came from Congress--the Generation IV
technology road map, working not just with entities in the U.S.
but with many other countries as well.
There are now--and this may be a surprise to some people--
about 150 engineers and scientists all over the world working
on the Generation IV technology road map with a goal to finish
the road map next fall. This roadmap will provide a sense of
what high priority technology research should be pursued by the
U.S. and other countries and what the R&D plans should be to
pursue those technologies.
And once that is completed, we will need to decide whether
the Department should take an active role in developing those
technologies using our national laboratories and other
resources. That is something we are pursuing right now very
aggressively, and hopefully about a year from now we will know
a lot more.
Mr. Largent [presiding]. The gentlelady's time has expired.
The gentleman from Georgia is recognized for 5 minutes.
Mr. Norwood. Thank you, Mr. Chairman. I have a couple of
questions that I will submit in writing and expect detailed
answers, and would point out that if I were having problems in
my district with Plant Vogtle there wouldn't be enough hours in
the day for me to ask questions. So with that in mind, I will
yield the balance of my time to Mr. Strickland.
Mr. Strickland. Thank you, my friend. I want you to know
when I was meeting with the dentist earlier today I was saying
really good things about you. So----
Mr. Norwood. Why do you think I yielded my time?
Mr. Strickland. Mr. Travers, I am going to try to be
terribly unemotional, and I want to read a part of Section 3116
to you, and it says this. I am quoting, ``No license or
certificate of compliance may be issued to the United States
Enrichment Corporation or its successors under this section or
Sections 53, 63, or 1701, if the Commission determines that the
issuance of such a license or certificate of compliance would
be inimical to, a) the common defense and security of the
United States, or''--not and, but or ``the maintenance of a
reliable and economic domestic source of enrichment services.''
Now, you are telling me and the NRC apparently has made the
termination that they are going to either ignore that or assume
that it is not relevant to your responsibilities. The NRC
general counsel apparently has concluded that the requirement
to make the determination regarding reliable and economic
domestic supply is, ``principally directed to the possibility
of foreign entities being in control and undermining domestic
enrichment capabilities in the privatized USEC.''
Your general counsel has apparently advised the NRC that it
may change its previous policies and interpretations of the
Privatization Act so that the NRC will not have to render a
determination on whether USEC's certificate amendment will
result in USEC being a reliable and economic supplier of
enrichment services.
Now, my question: can you please explain to me what new
facts or laws justify the agency making this stark change?
Mr. Travers. Not being a lawyer, I am a little bit at a
disadvantage, Congressman, but I think--and perhaps we have,
and if we haven't we should--provide you with the legal
analysis that has been done in this matter.
I am relying on that, frankly, and the Commission has
relied upon it, and it really is the basis for Chairman
Meserve's letter to you and Congressman Dingell that indicates
that a very serious look has been done to examine the
Commission's responsibilities under the Act. And that as you
have indicated, that a determination is that it is principally
related to this possibility of----
Mr. Strickland. Well, what about the part that is not
``principally''? I mean, it seems clear to me that you have got
an obligation to make a determination regarding reliable and
economic domestic source of enrichment industries.
I will tell you what really bothers me here, sir. You
received a 1997 memo and a 2000 memo. They both reference the
same law, but they draw remarkably different conclusions about
NRC's legal obligations. Is that true or not?
Mr. Travers. I am not sure, but I guess I would point out
there is a practical problem that I think we face.
Mr. Strickland. There is a practical problem that we face.
Mr. Travers. Yes, sir. And it is simply that given our
principal focus on public health and safety, once we have
looked at facilities and whether they are operating safely, the
principal regulatory tools that we have at our disposal--
issuances of orders, for example, to shut facilities down, or
to have utilities take specific actions----
Mr. Strickland. Yes, sir. Can I interrupt just a moment?
Mr. Travers. Yes, sir.
Mr. Strickland. Is it possible that this Congress gave you
additional statutory responsibilities other than those that you
have historically been responsible for?
Mr. Travers. Again, I am relying upon the general counsel's
analysis of what the responsibilities of the agency are, and I
believe the Commission has relied upon that as well.
Mr. Strickland. This is what concerns me. Many months ago,
we started raising some of these issues about NRC's
responsibility. We talked about it with NRC staff here in this
committee. I had them in my office.
And I think we raised some very legitimate issues regarding
your responsibility as an agency, and it seems to me that this
second memo is an attempt to cutoff our questions, attempt to
reinterpret your responsibilities in the light of the issues
that I and others were raising with your agency, and that is
terribly troubling to me.
Was public notice or comment made available prior to the
NRC's change of policy in this regard?
Mr. Travers. As far as I know, there was no public notice
given prior to the general counsel's legal analysis being
provided to the Commission.
Mr. Strickland. And your general counsel apparently says
that this change could, in fact, lead to litigation.
Mr. Largent. The gentleman's time has expired. Thank you.
Mr. Strickland. I thank the Chair, and I thank my friend
from Georgia.
Mr. Largent. The gentleman from Wisconsin, Mr. Barrett, is
recognized for questions.
Mr. Barrett. Thank you, Mr. Chairman. And given that Mr.
Strickland has obviously got serious concerns here, I would be
more than happy to yield my time to Mr. Strickland.
Mr. Strickland. I thank my friend. You know, I don't want
to be unfair to others and dominate this. We will submit
questions. But I would just like to point out to the Chair that
we have an agency of the Federal Government charged with a huge
responsibility to protect the energy security of this nation,
and I believe they are being negligent and wilfully so, and I
would hope that this committee would take that very, very
seriously.
Mr. Largent. I thank the gentleman.
The Chair recognizes himself for 5 minutes. I think I am
next in order here.
And we are--just to give you a heads up, we are expecting
Senator Domenici to be here at any time. When he comes, we will
complete the questions, let him testify, and then move forward.
Mr. Magwood, I had a question for you. In light of the
concerns that have been expressed in testimony before this
committee today about the scarcity of fuel in the future, why
doesn't the United States reprocess spent nuclear fuel?
Mr. Magwood. I think the most obvious answer to that
question is that it isn't economic to do so. We have worked
very closely with other countries and discussing this issue
over the years--Japan, France, others. They have had to make
very large investments in plant and in people and in technology
to begin reprocessing spent fuel.
And I think that the primary reason U.S. industry hasn't
pursued this aggressively is because it is just not economic.
That is not to say it won't be economic at some point in the
long-term future, but right now it certainly isn't.
The former administration had a very aggressive policy
regarding the proliferation aspects of reprocessing. The
current administration hasn't spoken to the issue but it may be
something they look at in the context of the Vice President's
energy review. But the issue really hasn't been raised at this
point.
Mr. Largent. So you believe that if or when it becomes
economically feasible that this country would begin
reprocessing spent fuel?
Mr. Magwood. I believe----
Mr. Largent. That is the only impediment?
Mr. Magwood. I believe that if it becomes economic, then
the industry will make a case to the government to begin
looking at it, and then it will be up to the government at that
time to respond to it from a policy perspective.
Mr. Largent. Okay. Dr. Travers, I had a question for you.
We have conflicting testimony. Senator Domenici is here, and we
will recognize him in just a moment. But in his testimony I was
reading with interest, in the fourth paragraph it says,
``Safety has been a vital focus of the NRC, as evidenced by a
constant decrease in the number of emergency shutdowns or
scrams in our domestic plants. In 1985, there were 2.4 scrams
per reactor. Last year there were just .03.''
But in contrast to that testimony, testimony submitted by
Anna Aurilio with the Public Interest Research Group in the
next panel, she says, ``There is a consistent pattern and
history of lax NRC enforcement and oversight ranging from fire
prevention to worker fatigue. The agency has focused on
increasing the industry's profitability, not protecting humans
and the environment.''
Would you like to respond to that testimony?
Mr. Travers. Thank you, Mr. Chairman. I think we have a
serious disagreement on views on this subject. The NRC has
been, and continues to be, an effective regulator with a bent
and a passion, really, for the assurance of safety in all of
the civilian use of radioactive materials. And I think that has
been borne out over time.
It is somewhat difficult sometimes to differentiate where
the NRC plays a role in the assurance of safety or the good
record in performance of the nuclear industry and where it is
attributable in the main to the industry. We like to think,
based on the activities that we have in place, that we have
been a factor in the increasing level of performance, and, in
fact, the increasing level of safety over time that the nuclear
power industry has exhibited.
The Commission, for its part, has laid out policies that
include expectations that for the next generations of advanced
reactors, for example, they expect those designs to provide a
higher level of safety than the current ones do today. We
believe those are acceptable, but, nevertheless, the Commission
has put in place an expectation that as we move forward
potentially to develop new power reactor designs and projects
that they ought to be safer than the current generation of
nuclear power plants.
Mr. Largent. So you would say that workers are safer today,
that neighbors to nuclear facilities are safer today than they
ever have been?
Mr. Travers. I would say that that is a fair statement.
Mr. Largent. Okay. With that, I would like to recognize
Congresswoman Wilson from New Mexico to introduce our esteemed
colleague from the Senate, Mr. Domenici.
Ms. Wilson. Thank you, Mr. Chairman.
I am very fortunate, as a New Mexican in the House, to have
a senior Senator who is not only one of the most powerful
members of the Senate but one of the most capable as well, and
who has taught a young Member of Congress in the House how to
be a better legislator.
And since I wasn't much on committees and being a
legislator before I showed up here, I needed a lot of work, and
I wanted to publicly thank him for his stewardship, but also to
share with the members of this committee and with the members
of the audience that while most of us know him as the chairman
of the Budget Committee, he knows more about the budget than
just about anybody in this town.
He has been one of the most stalwart advocates of a
comprehensive energy policy for a long, long time, and when it
wasn't popular to do so was encouraging people from all
different parts of the political spectrum to reconsider nuclear
energy. He has introduced the nuclear energy supply bill in the
Senate, and he is a self-acknowledged sucker for big science
projects.
Ladies and gentlemen, it is my pleasure to introduce
Senator Pete Domenici.
Mr. Domenici. Thank you.
Mr. Largent. Senator, you are recognized for 5 minutes, and
we look forward to your testimony. Thank you for visiting us.
STATEMENT OF HON. PETE V. DOMENICI, A UNITED STATES SENATOR
FROM THE STATE OF NEW MEXICO
Mr. Domenici. Thank you very much. First, I apologize for
being late. I should have been earlier on the agenda, but I
could not help that. We couldn't complete our luncheon where we
were discussing the budget today.
In any event, members of the Committee, and Mr. Chairman in
particular, I came mostly to tell you that I have come to the
conclusion that every now and then a crisis is good. It is not
great, but good.
And what I see now is that the energy crisis that is before
us is good, because it is going to make America evaluate our
energy supplies and the conservation practices that we are
going to undertake in order to assure the American people that
they are going to have sufficient energy in the future to turn
the lights on in their houses, to turn the power on in their
plants, to let streetlights in the city light up, and offices
across this land have sufficient electricity to make sure
everybody can see and do their work.
In a nutshell, my hope is we come out of this crisis in
much better shape with reference to our future. I, for one,
have known, and it didn't take me very long to understand that
energy and the availability of it at a reasonable price, or as
reasonable a price as possible, is America's life blood.
Without it, we have no future, no future whatsoever with
reference to prosperity, with reference to growth, with
reference to jobs.
I have been for at least 4 years strongly advocating a
return by the United States of America to prowess in the area
of nuclear power at every level, build it back into our
universities as a major area and field of study, build it back
into our energy department. A department that, believe it or
not, existed, Mr. Chairman, for more than 1 decade without
wanting to claim that nuclear power was part of the energy
department of the greatest Nation on earth--a rather incredible
phenomenon that existed for quite some time.
I am proud to tell you that I have had a little bit to do
with putting nuclear energy back into the energy department.
This gentleman was hired to head up, after a dearth of years,
that part of the Department that does nuclear power research.
It is a budding part of the Department, but it is moving
out and causing universities to start rekindling nuclear
activities on their campuses with their bright students, and
the world is leaving us sort of behind. In Japan, in the next
few months, there will be two new starts of two brand-new
nuclear reactors because they are bound and determined to have
a diversity of energy supply.
Now the United States comes to a period when we are
extremely short of energy for the future--in particular,
electricity. And, obviously, we will continue to need crude oil
more and more unless something happens in the automobile area
that isn't on the horizon today.
But the truth of the matter is that we are also bumping up
against something else, that the world wants to prosper and
America wants the world to prosper. We want rich countries to
be made out of the poor countries of the world. The only way to
do that is an abundant supply of energy, and so what we are
coming right stark up to is, what do we do about air quality?
And what do we do about the pollution? And what do we do about
the Greenhouse effect?
And, Mr. Chairman, I am here to tell you that for a great
nation to turn its face away from nuclear power, in light of
this kind of a world situation, I don't know the word, but I am
going to say it is borderline lunacy, because a few people have
us frightened to death about what we are going to do with the
waste.
We are about--now we are not going to--but we were about to
abandon this perfectly clean fuel that is probably on average
safer than any other way to generate electricity, contrary to
what we are told. And we have one little problem left, and that
is, what do we do with the waste? There are some who would like
you all to believe it is not a small problem, that it is
sufficient that you should abandon the option.
Well, I don't know whether any of you have gone to France
and asked them to take you to the place wherein their nuclear
waste from reactors lies. But if you are going to do that, tell
them in advance, ``Don't tell us when we arrive there. Just
arrive there and let us guess.'' Because you will walk into a
couple of buildings that look like school buildings, like big
gymnasiums.
And you walk out about 100 feet and they will punch you and
say, ``Look down.'' And when you look down, the former fuel
rods from their nuclear power are underneath you. They are in a
solid compound with glass, with concrete on top of it, so there
is no radiation in that building. You can walk anywhere. You
can serve food there.
And they will have that for up to 50 years while they
figure out what to do with it permanently. But they are not
worried because they will figure out what to do with it
permanently. And here we sit pondering what in the world are we
going to do about this kind of energy supply for the future.
Now, in the U.S. Senate, I introduced a bill. I won't ask
anybody to introduce it here, but I ask that if you are
seriously considering the diversity required in the American
energy mix in the future that you might take a look at it. As a
matter of fact, it has one very exciting section that they are
working on in the Department that is called ``Transmutation of
Waste.''
Now, if you keep it open for those who are totally anti-
nuclear, they will line up to tell you that is a bad thing. But
I am here to tell you, if it works it is a good thing.
Transmutation is a science, currently proved on a model size
that takes high level waste and converts it into a much lower
level waste that you can deal with very easily, and the other
byproducts are not such that we can't handle them. It is an
expensive one, but we put it in the mix for the future.
Now, there are other things to speak of, but I won't do
that now. I will be glad to answer questions. And I just came
over because I knew this committee, led by this subcommittee,
are going to do some really important things in the next few
months to establish where we are going with an American energy
crisis that may be our most severe crisis.
And I wanted to urge you in my own way not to be frightened
away by those who focus on one little piece of the nuclear
energy cycle, but, rather, to look at the whole picture and the
risks that you avoid when you look at the whole picture versus
the risks you take.
And, frankly, I would assume that if that were the case and
you were unburdened by anything else, you would say, ``Let us
move ahead to further perfect nuclear power because it is the
right thing to do for the future.''
My last observation is, I heard the Nuclear Regulatory
Commission man saying that we were doing better at safety, and
yet producing at a higher capacity. That is true.
Since 1990, the capacity has been going up, and the safety
records have improved because the Nuclear Regulatory Commission
has started to really regulate instead of playing games. They
don't play games with the power plants anymore and having them
do a bunch of things that are irrelevant just to waste their
time.
And as a consequence, they have produced the equivalent of
20 new 1,000-megawatt power plants in the generating capacity
of existing American nuclear power plants just by getting the
capacity up from the 1970's to the 1990's per plant. No new
plants, nothing new, just doing it better.
I would hope that this day would go down that I am
testifying here that an event is occurring in our land wherein
a nuclear power plant is being bought commercially, as a
commercial transaction, one utility company buying it from
another and making it part of a new inventory of the company
that bought it which wants diversity and assurance. They are
going to pay for it, just like you would pay for buying a
natural gas power plant, and as a matter of fact they will
lower their rates by doing it. That is very exciting.
Thank you very much.
[The prepared statement of Hon. Pete V. Domenici follows:]
Prepared Statement of Hon. Pete V. Domenici, a U.S. Senator from the
State of New Mexico
Mr. Chairman, thank you for the invitation to testify before your
Subcommittee on Energy and Air Quality. I compliment you on the choice
of subject for this hearing, the role of nuclear energy in national
energy policy--this issue is of critical importance to our nation's
energy and economic security.
Nuclear energy now provides about 22 percent of our electricity
from 103 nuclear reactors. The operating costs of nuclear energy are
among the lowest of any source. The Utility Data Institute recently
reported production costs for nuclear at 1.83 cents per kilowatt-hour,
with coal at 2.08 cents per kilowatt-hour.
Through careful optimization of operating efficiencies, the output
of nuclear plants has risen dramatically since the 1980's; nuclear
plants operated with an amazing 87 percent capacity factor in 2000.
Since 1990, with no new nuclear plants, the output of our plants has
still increased by over 20 percent. That's equivalent to gaining the
output of about 20 new nuclear plants without building any.
Safety has been a vital focus, as evidenced by a constant decrease
in the number of emergency shutdowns, or ``scrams,'' in our domestic
plants. In 1985, there were 2.4 scrams per reactor, last year there
were just 0.03. While some use the Three Mile Island accident to
highlight their concerns with nuclear energy, the fact remains that our
safety systems worked at Three Mile Island and no members of the public
were endangered.
Another example of the exemplary safety of nuclear reactors, when
properly designed and managed, lies with our nuclear navy. They now
operate about 90 nuclear powered ships, and over the years, they've
operated about 250 reactors in all. In that time, they've accumulated
5,400 reactor-years of operation, over twice the number of reactor-
years in our civilian sector. In all that time, they have never had a
significant incident with their reactors. They are welcomed into over
150 major foreign ports in over 50 countries.
Nuclear energy and coal are our major producers of our
electricity--those two sources provide over 70 percent. In both cases,
their use presents significant risks. Together, they illustrate a
fundamental point, that absolutely every source of energy presents both
benefits and risks. It's our responsibility to ensure that citizens are
presented with accurate information on benefits and risks, information
that is free from any political biases. And where risk areas are noted,
it's our responsibility to devise programs that mitigate or avoid the
risks. Solutions, through careful research, for clean coal and for
nuclear waste storage address key risk areas for these two electricity
sources.
Interest in our nuclear plants is increasing along with
dramatically increased confidence in their ability to contribute to our
energy needs. Interest in re-licensing plants, to extend their lifetime
beyond the originally planned 40 years, has greatly expanded. The NRC
has now approved re-licensing for 5 reactors, and over 30 other
reactors have begun the renewal process. Industry experts now expect
virtually all operating plants to apply for license extension.
Nuclear energy is essentially emission free. We avoided the
emission of 167 million tons of carbon last year or more than 2 billion
tons since the 1970's. In 1999, nuclear power plants provided about
half of the total carbon reductions achieved by U.S. industry under the
federal voluntary reporting program. The inescapable fact is that
nuclear energy is making an immense contribution to the environmental
health of our nation.
But unfortunately, when it comes to nuclear energy, we're living on
our past global leadership. Most of the technologies that drive the
world's nuclear energy systems originated here. Much of our early
leadership derived from our requirements for a nuclear navy; that work
enabled many of the civilian aspects of nuclear power.
Our reactor designs are found around the world. The reprocessing
technology used in some countries originated here. The fuel designs in
use around the world largely were developed here. This nation provided
the global leadership to start the age of nuclear energy.
Now, our leadership is seriously at risk. No nuclear plant has been
ordered in the United States in over 20 years. To some extent, this was
driven by decreases in energy demand following the early oil price
shocks and from public fears about Three Mile Island and Chernobyl. But
we also have allowed complex environmental reviews and regulatory
stalemates to extend approval and construction times and to seriously
undercut prospects for any additional plants.
As a nation, we cannot afford to lose the nuclear energy option
until we are ready to specify with confidence how we are going to
replace 22 percent of our electricity with some other source offering
comparable safety, reliability, low cost, and environmental attributes.
We risk our nation's future prosperity if we lose the nuclear option
through inaction. Instead, we need concrete action to secure the
nuclear option for future generations. We must not subject the nation
to the risk of inadequate energy supplies.
In closing, Mr. Chairman, There is no single ``silver bullet'' that
will address our nation's thirst for clean, reliable, reasonably
priced, energy sources. Energy is far too important to our economic and
military strength to rely on any small subset of the available options.
In my view, it is critically important to our nation that nuclear
energy be treated as a strong, viable option for our nation's
electricity needs now and into the distant future. This would ensure
that future generations continue to enjoy clean, safe, reliable
electricity and the many benefits that this energy source provides.
Mr. Largent. Thank you, Senator.
I will recognize the gentleman from Massachusetts, Mr.
Markey, for 5 minutes.
Mr. Markey. Thank you.
Senator, if you were looking at the nuclear power industry
and obstacles which existed to the construction of a plant, let
us say in New Mexico, what would you say would be the largest
obstacle to a utility in New Mexico just ordering a nuclear
power plant right now, and constructing one over the next 5 or
6 years?
Mr. Domenici. Well, I want to say to my good friend,
Representative Markey, 5 years ago I would have told you the
obstacles were so many and so numerous that I couldn't answer
the question. I would say impossible.
I think it is still highly improbable as of this particular
moment that you will do it, but I think we are getting very,
very close. And the obstacles that are going to remain are
public opinion. Thus, I guess that the next power plants will
be built close to the existing power plants, so you couldn't
pick New Mexico, but I don't mind you picking it. We just don't
have one.
But if we had one, my guess would be that if somebody
wanted to build one they would build it close to that, and that
would be one of the things you would look at in the country, I
would think. Doesn't have to be the case.
Second, we have to have a new way of licensing. I think
that has evolved, so there is a bit of modularness to the
licensing. Then you would have a standard accepted design. If
you chose to build that design, you wouldn't have to spend an
inordinate amount of time going through that licensing process.
But you would still have seismic and other considerations with
each site.
And last would be whether you could finance it, and it
would appear to me that--5 years ago I would have said it is
impossible. Today I think the company that just bought one, and
that is the fourth one bought and sold recently, they got it
financed.
Mr. Markey. There has been a bit of a change in the way in
which the industry itself used nuclear power. Back 2, 3, 4
years ago, they were calling it ``stranded investment.'' All of
these nuclear power plants were called ``stranded investment.''
And they wanted to be compensated by the ratepayers in the
states as a condition of moving to a deregulated marketplace.
And now, as you are pointing out, there are companies that
are purchasing these nuclear power plants, really at bargain
basement rates, and they are generating nuclear power at 90
percent efficiency. And so the industry itself--in other words,
I guess my question is, do you believe that the industry itself
had a misperception heading into the late--really into the mid
and late 1990's in terms of how efficient and affordable
nuclear power was?
Because we have already changed the laws here. The nuclear
licensing laws have been changed by the Congress in the past
decade that streamlines that process. So do you think that--in
other words, is it more of a private sector issue now, where
they are going to have to just engage this in the states, take
on public opinion, make the decision they are going to go to
the markets and just try to build, or is there something else
here that you think that Congress should do as a matter of
public policy?
Mr. Domenici. Well, Representative Markey, I have a bill
that contains about 25 provisions, so I think there are some
things we ought to do as a nation.
But I am not suggesting that the industry--if this bill
never happened, and we continue in a crisis mode--I am not
suggesting that industry might not find a solution as you are
suggesting. But I don't think they were wrong 5 years ago. The
market would not have provided for the buying and selling of
nuclear plants 5, 7, 10 years ago, because we weren't in a
crisis situation on energy, plus there has become a much
broader base of acceptance, believe it or not.
Until you get the antis focusing in on one facility, the
general public in the United States accepts nuclear power
today. So, you know, that hasn't been the case all of the time.
Mr. Markey. Can I just say ,in conclusion, Mr. Chairman,
that I want to agree with Congresswoman Wilson that you are a
great Senator and a great American.
Mr. Domenici. Thank you.
Mr. Markey. And we thank you for coming over here.
Mr. Domenici. Thank you very much.
Mr. Largent. I thank the gentleman. The gentleman yields
back.
I recognize the gentleman from Illinois, Mr. Shimkus, for 5
minutes of questions.
Mr. Shimkus. Thank you, Mr. Chairman.
Senator, and other people on the panel, welcome. Senator, a
quick question, and it really kind of ties to a question that
we had to the panelists earlier about the nuclear waste fund
and the money that has been put in by industry, the amount that
has been used for Yucca Mountain, and the balance, the unused
portion.
Budgetarily, that is--you know, has it with Treasury--the
Treasury Department is the steward of that, and it is not
really dollars. It has been spent. And there is--very similar,
like Social Security trust fund, where it has just been, you
know, paperwork shuffled. Senator, can you speak to the nuclear
waste fund and the budgeting aspect of that?
Mr. Domenici. Well, I would be glad to. I don't remember
the numbers. I do know that the trust fund has been sitting
there, like many trust funds. If the question has to do with
why do we use it in the totality of a budget, then I would just
say to you that my recollection is there are about 140 trust
funds within the budget of the United States--some little tiny
ones, some very big ones.
And if we chose to take them all off budget and say we are
going to just run them on their own without relationship to a
macro budget of the country, then we would have very little
left in the budget. So we have left it in, and its reserves
have been accounted for in the totality of the budget, thus
making it easier to balance budgets and the like.
Of late, it doesn't seem to matter very much, Mr. Chairman.
The surplus has grown so fast that they have left all of that
subject to reconsideration.
Mr. Shimkus. Thank you.
And I have a question for Mr. Travers. And there is really
a dispute, and I know that times have changed also based upon
the environment, that the Energy Information Administration
forecast 27 percent increase--actually, forecast that 20
percent of the existing nuclear generating capacity will retire
by the year 2020 and be replaced by gas-fired generation.
Now, that may be prior to the gas spikes. I don't know when
that report was filed, but that may have been past the doubling
of the natural gas prices that we have had over the last couple
of months.
But the Nuclear Energy Institute forecasts that most of the
existing nuclear reactor operators will seek to renew their
licenses, continue in operations for 20 years, long after 2020.
There seems to be some degree of disagreement between EIA and
NEI's forecast on the future of nuclear energy. What is the
NRC's forecast for license renewals and future generating
capacity of the existing nuclear fleet?
Mr. Travers. Thank you. We have formal indications from
about 40 percent of the operating units that they will, in
fact, seek renewed period of licensed operation. And we really
have to rely on the industry beyond that. The expectation, as
you have indicated, from organizations like NEI is that 80
percent or more may seek license renewal.
Given that we rely on utilities to give us an indication of
what their planning is, that is really our best source of
information. I am not familiar with the assumptions that may
underlie the EIA's projections, but our current sort of
budgeting assumptions are that 80 percent or more of the
currently operating facilities will, in fact, seek renewal. And
I recognize that recently NEI has suggested that most, perhaps
more than--many more than 80 percent will.
Mr. Shimkus. You don't see anything that would prohibit
right now industry from requesting renewals of the current
facilities?
Mr. Travers. I certainly don't see anything that would
limit it in terms of our regulatory review process. It is one
that we think has been efficient thus far. It is one that we
are seeking to improve and factor in the experience of the
initial application reviews as we move forward, with a focus on
safety and the plant aging issues that dominate as you allow
these plants to operate in a period of continued operation
beyond 40 years.
Mr. Shimkus. And, Senator, just to finish, I was at Yucca
Mountain yesterday.
Mr. Domenici. Oh, you were?
Mr. Shimkus. And so if in France you can walk over the
spent nuclear waste, do you think we can safely put it inside a
big mountain?
Mr. Domenici. Well, you see, the difference between the two
philosophies is very, very big, in that we somehow are thinking
that we are going to put high-level waste from our reactors in
the ground, and then close it up and leave it there forever.
When I walked on top of the spent fuel rods in France, they
never intended to leave them there forever. They intended to
leave them there temporarily, so that they are completely
different. Their product will be treated differently in terms
of how it is encapsulated, incarcerated, and everything else,
in that gymnasium in France versus putting it in the ground
forever.
But I think you were really asking me whether I thought
Yucca Mountain would ever work, would we ever do it. And I
don't know, because I think so long as you have two differing
opinions as widespread as the Nuclear Regulatory Commission on
what are adequate safety guidelines versus the Environmental
Protection Agency's guidelines, and they are so far apart, I
don't believe you can build a facility under the environmental
protection guidelines. I don't think it can be built.
So that is the hangup right now, as I understand it, in the
country.
Mr. Largent. The gentleman's time has expired.
Mr. Shimkus. Thank you, Mr. Chairman.
Mr. Largent. Senator Domenici, I just wanted you to know
that our committee staff has done a review, an initial review
of your bill, and it has several positive ideas in the bill
that I think would help develop our nuclear energy.
However, there were a few concerns, including nine new
reports to Congress, two new Assistant Secretaries at DOE, two
new named officers within the DOE, increased funding for nine
research grant and cooperative agreement programs, and two new
expert panels. And my concern is that we are going to need a
new nuclear reactor just to turn on the lights of all of those
new positions created.
And the question that I had for you was, do all those
positions have to be in New Mexico?
Mr. Domenici. No.
Mr. Largent. I want to recognize the gentleman from
Arizona, Mr. Shadegg, for 5 minutes of questions.
Mr. Domenici. We want them there very badly, but----
Mr. Shadegg. Senator, let me ask you, last week we received
testimony here in this committee, both on Tuesday and Thursday,
on the California energy crisis, which is severe. And one of
the witnesses explained that until--that current California law
provides that no nuclear plant can be constructed in California
until the issue of nuclear waste storage is resolved.
Mr. Domenici. Yes.
Mr. Shadegg. I appreciate the analysis that you just gave
my colleague, Mr. Shimkus, about the dichotomy. I guess I am
looking, since I view you as a leader in this issue, for your
guidance on how we resolve the dichotomy between those two and
where we can go in this nation because I completely agree with
you that we need a mix of energy sources.
I think to continue to rely solely, as far as we can see
into the future, on natural gas is a--is not a wise policy. The
Arizona--my home state, as you know, has a fairly large nuclear
power plant which is operating well, and we are pleased with
it.
I tend to agree with your statement about the acceptance of
nuclear power by the American public. But I do think they want
some resolution of this issue of waste. And if you could give
us guidance on that I would appreciate it.
Mr. Domenici. Frankly, I want to tell you about your state.
I went to the Palo Verde plant, and, you know, that was much
questioned for a long time. It isn't being questioned now. If
anybody wants to find out what piece of geography in the U.S.
is yielding more megawatts of electricity per unit of ground,
just go to the Palo Verde plant.
There are three power plants there, 1,000 megawatts each I
think, which is a huge thing. If you want to see an example of
American construction and engineering prowess, if you are like
me when you see something that is put together with that kind
of talent, you are just very proud to be there and see it. That
is the way I felt.
And then, to see all of these workers well paid, none of
them, from what I could tell, the least bit worried about their
workplace, they felt probably as safe or safer than they would
in your natural gas fields or mine producing natural gas out
there at the well head. Probably they felt safer in this place.
But I don't have an answer. If California is going to
insist that we close the nuclear energy cycle before you build
one in California, then I think they are going to have to wait
a long time--and maybe that is how they would like it--because
I think we have a political problem with the State of Nevada
that is serious with reference to the state fighting the
Federal Government.
And you see if transportation is an issue, then what we
should do is have a temporary facility as close as possible to
the permanent facility, so you don't move everything twice.
That is why it was pretty smart to say, if you are going to put
it in the ground, wherever, in Nevada, why don't you put the
temporary facility for 30, 40, 50 years, close to it?
We can get neither of those approved, so we are going to
look to another policy. And I don't think we are without
options. I think there are some that will be worked on, but I
don't know when that will occur.
Mr. Shadegg. Let me ask you a different question, then. The
Generation IV technology appears to at least to a certain
degree address this waste issue by the--I guess the
encapsulating of the fuel and glass, and the question of
moisture no longer being able to reach the fuel.
Do you see that as a long-term solution? And are there
things that your bill does to specifically promote Generation
VI capability?
Mr. Domenici. Well, Generation IV also is a passively safe
plant, so that for those who envision meltdowns, you can't have
a meltdown with a Generation IV nuclear generator. Just by
definition, it is built so that can't happen.
I have just been recently told by companies that own
American nuclear power production, none of which are Generation
IV, that they are not giving up on next generation of
lightwater reactors. They are not certain you have to go all
the way to Generation IV. There are a couple of new models by
big American companies that would improve the lightwater
reactors so dramatically that rather than waiting around for
Generation IV to be ready, if they were looking to build now,
they would build one of the improved lightwater reactors.
On the other hand, one of the most exciting things
happening about energy is the Generation IV, and one of those
is going to be built in South Africa. They are modular. They
are small. That is a very exciting idea. I don't remember. Are
they going to be 100 megawatts each? That is, you know, one-
tenth the size of what we have licensed for nuclear power. And
then you just build more of them under an expanding permit with
the exact same replica.
And it has all of the other exciting features that you have
described with reference to waste, so I think the world needs
to move with as much rapidity as possible in that direction. If
we are worried about Greenhouse gases and the ambient air
qualities, we clearly should be helping with that. And I think
our Nuclear Regulatory Commission is going to be helpful, Mr.
Chairman, with the Generation IV that is being built in South
Africa.
Mr. Shadegg. My time has expired.
Mr. Largent. The gentleman's time has expired.
Mr. Shadegg. I thank the gentleman for his testimony.
Mr. Largent. There is a sadistic side of me that wants to
unleash my friend, Mr. Strickland, for 5 more minutes, but I am
going to resist that temptation and excuse our panel. Thank
you, Dr. Travers, Mr. Magwood, Ms. Hutzler, and Senator
Domenici, for shedding some light and your experiences with us.
Thank you. Thank you very much.
We will call the next panel forward.
Mr. Norwood [presiding]. We welcome our panel this
afternoon. Thank you for taking your time to come and be with
us. The first person we would like to hear from is Mr. Randy
Hutchinson. He is Senior Vice President, Business Development,
for Entergy Nuclear in Jackson, Mississippi.
Mr. Hutchinson, we are pleased you are here, and we would
like to hear from you for 5 minutes, please.
STATEMENTS OF C. RANDY HUTCHINSON, SENIOR VICE PRESIDENT,
BUSINESS DEVELOPMENT, ENTERGY NUCLEAR; ALFRED C. TOLLISON, JR.,
EXECUTIVE VICE PRESIDENT, INSTITUTE OF NUCLEAR POWER
OPERATIONS; EDWARD F. SPROAT III, VICE PRESIDENT OF
INTERNATIONAL PROGRAMS, EXELON CORPORATION; JOHN R.
LONGENECKER, LONGENECKER & ASSOCIATES, INC., MANAGEMENT
CONSULTANTS; AND ANNA AURILIO, LEGISLATIVE DIRECTOR, U.S. PIRG
Mr. Hutchinson. Thank you. Thank you, Mr. Norwood, Chairman
Barton, Ranking Member Boucher, and other distinguished members
of the Energy and Air Quality Subcommittee. It is a pleasure to
appear before you today.
I am here on behalf of the Entergy Corporation and the
Nuclear Energy Institute. Entergy is a large nuclear utility
with more than 2.5 million customers. We operate in Arkansas,
Mississippi, Louisiana, and Texas, with more than 30,000
megawatts in generating capacity.
We are also a large national nuclear operator. We have
extensive nuclear operations in the mid-south and in the
northeast, primarily in the Massachusetts and New York areas. I
want to speak to the resurgence or renewed interest or
renaissance that we are seeing in our industry today with
nuclear power.
I think that is primarily for three reasons. First, the
performance of the Nation's nuclear plants has improved
dramatically. You have heard discussion about the improvement
in safety performance, capacity factors, or the availability
factors of the plants in the industry have improved from around
65 percent in the 1980's to about 90 percent today.
And as you heard previously, that is the equivalent of
adding about 23 1,000-megawatt generating plants to the grid.
That is enough to meet about 30 percent of the growth in demand
that has occurred during that time period.
Also, I think another factor that relates to increased
performance from the reactors is we have seen a consolidation
in the industry resulting in fewer but larger nuclear operators
in this country today. They bring far greater management
expertise and focus to nuclear operations.
Five years ago, there were 46 operators operating the
Nation's 103--or 104 we have heard today--nuclear plants.
Today, 34 operators operate the same number, and I think we
will continue to see that consolidation in our industry. It is
kind of like we--we view it as kind of like buying a mutual
fund. You can benefit from highly focused nuclear management
expertise, and the sharing of nuclear talent and expertise
across your fleet.
The second reason I think is that we are seeing that
renaissance relates to the--that nuclear power is not cost-
competitive driven by two factors; one, to improve performance,
that has helped reduce nuclear production costs, but also the
rise we have seen in natural gas prices recently.
Today, nuclear production costs are lower than any other
source of generation that we have in the country, lower than
coal, gas, oil. And nuclear power provides a hedge against
large price swings that we see in the market in the gas and oil
industry.
And then, the third reason I think we have seen renaissance
in the nuclear area is that the environmental benefits of
nuclear energy are being recognized. Nuclear does not produce
any Greenhouse gases or any combustion pollutants. I think the
bottom line is, in our view, that the Nation's 103 nuclear
plants today are producing about 22 percent of the electric
power that is being consumed in this country in a safe, low-
cost, and in an environmental-friendly manner.
What is the future for nuclear power? Well, I think we are
likely to see this volatility in the oil and gas market in the
future. Since nuclear is now providing about 20 percent of the
electricity consumed in this country today, we are likely to
see nuclear power around for a long time. I think that should
be the case. And there are some things in place to help ensure
this.
The Nuclear Regulatory Commission has established a license
renewal process to provide a mechanism for extending the life
of an operating nuclear power plant today for an additional 20
years beyond its 40-year licensed life. Several plants have
either already done this or are in the process of doing it. We
are doing this with our plants. We have one that is nearing the
completion of a license renewal process.
And the owners of at least two-thirds and perhaps more of
the operating plants in the country have indicated, some
formally and some informally to the Nuclear Regulatory
Commission, that they intend to apply for a life extension for
their plants.
So this is an area where I think you can help. It is
critically important, in our view, that the Nuclear Regulatory
process remained in place, adequately funded, and it continues
to function in the effective and timely manner that it has so
far to act on these license renewal applications as they come
along in the future.
To the question of, ``Will new plants be built?'' we think
so eventually. I think several factors are giving us some
optimism in this area. One is that there are standard
lightwater reactor designs that have already been approved
and--reviewed and approved by the Nuclear Regulatory Commission
and are on the shelf so to speak.
You have heard some discussion on the advanced reactor
technologies here that is being looked at and considered by
some utilities in our industry. And the NRC has also developed
and has in place a new licensing process, a streamlined process
for licensing new plants. That process is yet untested in that
nobody has used it, but it is there.
And then, finally, an industry task force is in place that
has been formed, and it is working to identify and try to
address issues that are--have to be resolved. Some of these
issues are likely to be industry needs confidence that the
regulatory process is going to be timely, effective,
dependable.
I think the industry--we are going to have to get
comfortable and have some confidence and certainty in the fact
that a new plant can be built in--with a time to market in 36-
to 42-month timeframe and at a cost of something on the order
of $1,000 a kilowatt hour that will compete with $3 and $4 gas.
And, finally, we also all look forward to the Department of
Energy's recommendation of the Yucca Mountain fuel repository
and the President's approval hopefully later this year.
Thank you.
[The prepared statement of C. Randy Hutchinson follows:]
Prepared Statement of C. Randy Hutchinson, Senior Vice President,
Business Development, Entergy Nuclear, Inc.
Chairman Barton, Ranking Member Boucher and distinguished members
of the Energy and Air Quality Subcommittee, my name is Randy
Hutchinson. I am the Senior Vice President for Nuclear Business
Development for Entergy Nuclear. My staff buys nuclear power plants.
Entergy's customers--2.5 million in Arkansas, Mississippi,
Louisiana and Texas--have long benefited from a diverse electric
generating portfolio. Our company has more than 30,000 megawatts of
power using a range of fuels--29% from natural gas, 26% from nuclear,
17% from coal, 3% from oil and 26% from purchased power--an almost
ideal balanced mix of fuels. As a result, Entergy's electric customers
are not as subject to the volatility of foreign oil and gas prices. And
Entergy will maintain this balanced fuel mix as the company grows.
Entergy Nuclear is headquartered in Jackson, Miss. Entergy Nuclear
Southwest has operated five reactors at four locations in Arkansas,
Mississippi and Louisiana going back about two decades.
Entergy Nuclear Northeast in White Plains, N.Y., is our new
regional headquarters for that region. We own and operate the Pilgrim
Nuclear Power Station in Plymouth, Mass., the Indian Point 3 plant in
Westchester County, N.Y. and the James A. Fitzpatrick plant in Oswego
County, N. Y. We have agreed to purchase the Indian Point 1 and 2
plants from Con Edison and expect to close that transaction in mid-
2001. Indian Point 1 has been in safe storage for 20 years, waiting for
decommissioning of the other two operating units.
Entergy Nuclear, the fastest growing nuclear operator in the
nation, is now the second largest with nine operating units. And we are
aggressively competing for additional nuclear units wherever they are
for sale. Nuclear power is a principal growth strategy of our
corporation. Indeed nuclear energy is our core competency.
Entergy has built its success on the foundation of a strong safety
culture. When you have invested billions of dollars in nuclear assets
as Entergy has, believe me, you are serious about safety at all times
and at all levels. We know a reliable, top performing plant is also a
safe plant. Our operating experience of 25 years shows they go
together.
In our view, we are seeing a renaissance of nuclear power for three
principal reasons:
<bullet> Operators of nuclear power plants have made significant
improvements in the performance of their plants. Capacity
factors were around 65% in the 1980s, meaning nuclear plants
were producing about 65% of the power they could produce in a
year. Last year, the industry average capacity factor hit 89
percent. Our plants in Entergy were in the low to mid 90
percent range. Safety performance has also improved as shown by
INPO's performance indicators.
<bullet> Secondly, nuclear power is now the lowest cost power in the
nation. Production costs at a nuclear plant are below 2 cents a
kilowatt-hour, compared to 3-4 cents at a natural gas-fired
plant
<bullet> Thirdly, nuclear does not emit the global warming gases and
other pollutants that other energy sources do.
Why is nuclear seeing this renaissance now?
We are seeing a confluence of forces. Natural gas prices have risen
dramatically. Historically gas has been available for prices in the $2-
3 per million BTUs range but those prices in the past year have risen
to the $4-6 range nationally and even hit $50 and more in California
recently.
At the same time, the nation's economy has continued to grow,
increasing the demand for electric power across the nation. Higher
fossil fuel prices and growing demand has been a powerful combination
of forces.
It is also becoming much clearer to many that nuclear power is the
lowest cost power in the nation. The cost of nuclear fuel has long been
relatively stable, not subject to oil and gas price increases. Nuclear
is also being recognized for its environmental advantages. Nuclear
plants do not emit the global warming gases and other pollutants that
power plants running on other types of fuel do.
California today is seeing the perfect storm. Three colliding
fronts. There is too little supply and transmission capacity. No new
power plants have been built in California in a decade. State
deregulation law forced utilities to sell their plants and buy only in
the day ahead market. Long-term power supply contracts were prohibited,
a prescription for disaster. Then natural gas prices rose from $2-4 per
million BTUs to $50 and up. California could really use the Rancho Seco
nuclear plant, shut down a decade ago amid much controversy.
Deregulation is allowing and accelerating the consolidation of
nuclear power industry that was already occurring and probably would
have occurred anyway. Utilities with only one or two nuclear power
plants have been realizing that it would be increasingly difficult to
remain competitive without the resources and capabilities of larger
operators.
We at Entergy Nuclear recognized the advantages of operating a
fleet of nuclear plants three or four years ago and decided to pursue a
nuclear growth strategy. We have now become the nation's fastest
growing nuclear operator, and truly a national operator with two fleets
of plants--in the South and in the Northeast.
Consolidation in the nuclear industry is bringing several
advantages.
You can bring a very focused management to plant operations.
Economics of scale through purchasing can be achieved. You can spread
financial risk over several plants, much like spreading risk when you
buy a mutual fund. You can pool talent and expertise in financial,
technical and management areas.
You can respond quickly to a problem at one plant with highly
qualified expertise. You can bring the best practices from all plants
to each plant. And you grow to understand better what the regulatory
authorities want and require.
You can easily see why consolidation is occurring. It is rapidly
providing our country with higher levels of safety and reliable
performance at lower costs.
Entergy Nuclear bought the first nuclear plant sold by a utility
when we purchased the Pilgrim Nuclear Station from Boston Edison in
July 1999. There have been 13 acquisitions of nuclear plants since
then, less than two years. Entergy has been the fastest growing, having
almost doubled our five-reactor fleet in the South with four plants
bought or under contract in the Northeast.
Five years ago, 46 operators were running the nation's 103 nuclear
plants. Today 24 operators are. Eventually there probably will be 5-8
principal nuclear operators.
The average nuclear plant operating today is only about 18 years
old, far from the expiration of its original 40-year operating license
period. But as some of the earliest plants approach their license
periods, we in the industry have realized their useful lives are
actually much longer. As computer systems, instrumentation and other
technology has advanced, these whole systems have been replaced in
today's nuclear plants. In many ways, today's operating plants are
virtually new. Many were originally designed with a 60-year life in
mind, but were licensed for 40 years to provide an extra margin of
safety.
As a result, we are convinced the useful operating life of today's
plants can safely be extended through a rigorous license renewal
process for up to an additional 20 years. Several plants are in the
relicensing process at present, including one of ours, Arkansas Nuclear
One unit 1.
To further demonstrate our commitment to nuclear power, Entergy
Nuclear last fall purchased a decommissioning services firm, TLG
Services in Bridgewater, Conn., to get world-class technical and
scientific engineering expertise in the planning and cost estimating of
decommissioning. And we are now offering complete nuclear life cycle
management services to the U. S. industry.
Will new nuclear plants be built? Yes, we think so. But only if and
when we can bring some certainty to the industry. And you, as our
nation's policymakers, can help to establish that certainty. New
nuclear capacity can and will be built when it makes sense to take the
financial risk. The industry must see:
<bullet> Certainty in the costs of a new plant
<bullet> Certainty in the regulatory permitting process, and
<bullet> Certainty in the time required to build.
Much work has already been done to design and obtain regulatory
approval of new advanced reactor designs that are simpler than today's
operating plants. Simpler generally means safer. It also means more
competitive in both construction and operating costs.
Much has also been accomplished by the industry and the NRC in
developing a streamlined license process. So that you can depend on
actually operating the plant once built. A new licensing process must
be thorough, and result in the issuance of both a construction permit
and an operating license. When today's operating plants were built, a
construction permit was issued after much review and another review was
required before an operating license could be issued, often resulting
in years of additional delay and accumulating costs. As a result, as
much as 20 percent of the total cost of today's plants was actually
interest costs that had grown while the plant was waiting to go into
operation.
With advanced, simpler reactor designs, an improved construction
and operating license process, the time and resulting cost of a new
nuclear plant would be better known. That would translate to less
financial risk, an imperative in today's deregulated power marketplace.
It can be done and is well on the way to reality. Your support as
policymakers is critical.
In our view, a new nuclear plant will be built when one can
reasonably depend on the cost of that capacity will be in the $1,000
per kilowatt range. And that cost will be determined by the above
circumstances.
We at Entergy and others in the industry have been working together
with the NRC to find solutions and bring certainty. We expect several
nuclear operators will announce early site locations later this year to
begin the process of keeping the nuclear option open in this country.
The used nuclear fuel problem is, in our view, a political problem,
not a technical one. A decade of science has brought us very close to
the selection of a permanent storage facility at Yucca Mountain. The
nation's electric consumers have been paying one mill per kilowatt-hour
produced at all nuclear plants into a Nuclear Waste Fund that now
totals $16 billion. The used fuel solution has been paid for. We are
confident the Department of Energy will complete its study and
recommend moving forward with the Yucca Mountain facility and the
President will agree later this year.
Entergy is committed to nuclear energy. We firmly believe nuclear
will continue to be a safe, reliable and lower cost source of power for
our country. Nationally, nuclear energy is the second-largest source of
U.S. electricity, producing one-fifth of all electricity at record
levels of safety and efficiency and at production costs lower than coal
and natural gas plants.
No other source of electricity can provide large amounts of power
reliably and reasonable costs while enhancing our air quality.
Nuclear energy will continue to help meet our nation's public
policy goals for energy security, economic growth and environmental
protection. You and your colleagues can make it happen. I assure you,
nuclear will respond with safe, reliable and low cost energy. Today,
and in the future.
With your help, nuclear power can continue to be a critical part of
our nation's energy supply.
I hope you find this information helpful. Thank you for inviting me
today.
GENERAL DISCUSSION OF ENERGY POLICY AND NUCLEAR ENERGY
Nationally, nuclear energy is the second-largest source of U.S.
electricity, producing one-fifth of all electricity at record levels of
safety and efficiency and at production costs lower than coal and
natural gas plants.
I would like to thank Chairman Barton and this subcommittee for
focusing on the importance of national energy policy and the value of
America's nuclear power plants to our nation's energy supply and
environmental protection.
From an energy policy perspective--the nation is at a crossroad.
The greatest source and constant driver of growth in the United States
for the past century has been electricity. Without vast and steadily
increasing supplies of power, this nation could not have become the
economic marvel that it is. Many of the country's most significant
advances--technological and societal--would not have been possible
without a constant flow of reliable, affordable electricity.
The Nation Needs a Comprehensive National Energy Policy
As the ``new'' economy converges with traditional economic
infrastructure needs, electricity will continue to be the driver of our
economic engine, whether to power the Internet or the nation's assembly
lines. As its cornerstone, any national energy policy must increase
domestic electricity supply in order to meet this new demand, expected
to increase at least 42 percent by 2020.<SUP>1</SUP>
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To meet future electricity demand and maintain U.S. energy
security, a comprehensive national energy policy must:
<bullet> Encourage investment in new power plant construction.
<bullet> Continue regulatory modernization, including regulatory
stability for operating nuclear plants and licensing of new
plants.
<bullet> Ensure sufficient funding for research, development and swift
application of new nuclear energy technologies is consistent
with nuclear energy's future role in meeting U.S. energy needs.
<bullet> Eliminate discrimination and ensure nuclear energy receives
the same treatment as other electricity generating technologies
in the marketplace.
<bullet> Educate the nation about the excellent safety record of
nuclear energy and inject sound science and intellectual
honesty into the national energy debate so consumers may make
informed energy choices.
<bullet> Maintain U.S. leadership and infrastructure to train the next
generation of scientists, engineers and technicians required to
design, build and operate nuclear power plants.
Our nation cannot meet the demands of our growing population and
economy without increased power generation through the construction of
new power plants. We need to maintain the proportion of non-emitting
baseload capacity through the construction of new emission-free plants.
This will maintain a diverse energy portfolio for the nation and
continue the price stability nuclear energy offers.
Nuclear Energy: Significant Role in the Nation's Electricity Portfolio
To achieve these short and long-term objectives requires an energy
policy that supports and encourages a continuing significant role for
nuclear power. More than ever, the nation relies on nuclear energy to
meet the country's soaring demand for power. There is no longer any
question that nuclear energy currently plays--and will continue to
play--a critical role in providing electricity to the nation. Today,
the nation's 103 nuclear plants produce about 20 percent of our
electricity.
More importantly, as plants have increased in efficiency over the
last decade, nuclear power's role in meeting consumer demand has grown
by nearly 20 percent. Clearly, nuclear energy is absolutely essential
to the integrity of the U.S. electricity grid and to our clean air
goals.
Nuclear electricity is generated without producing greenhouse gases
or other air pollutants, thus providing Americans with tremendous
environmental benefits. Without nuclear energy, the United States could
not meet air quality standards established by the Clean Air Act or
international commitments to reduce greenhouse gases, including carbon
dioxide. The reduction of air pollutants or the avoidance of emissions
imparts significant health benefits to people across the nation, by
reducing respiratory illness, for example.
Nuclear power plants are the nation's greatest emission-free source
of electricity--producing nearly two-thirds of all emission-free power.
And, as public demand for clean air and a healthy environment increases
in the future, nuclear energy is going to become even more important.
The Emerging Energy Crisis
In analyzing recent events in California, as well as looking at
increased consumer heating and electricity bills elsewhere, the nation
appears to be in the midst of an emerging energy crisis. There may be
debate about the exact variables at the root of problems in California,
but there is no debate that rolling blackouts in one of the nation's
fastest growing states--the world's sixth largest economy--represent a
serious problem.
There is also no doubt that soaring heating and cooling bills for
lower income families--including retirees--pose a serious threat to the
health and safety of a large number of Americans. And, with population
growth and economic expansion expected to increase the need for new
electricity generation capacity by more than 393,000 megawatts by
2020,<SUP>2</SUP> events in California may only be the beginning of a
widespread energy shortage.
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A few words from Silicon Valley--one of American's great economic
success stories--may illuminate not just the crisis, but what two of
the world's most forward-thinking executives see as one potential
solution.
Nuclear Energy: A Time-Tested Solution
That nuclear energy is again figuring prominently on policymakers'
and business leaders' agendas is no coincidence. Indeed, this is not
the first time the nation has looked to nuclear energy as a solution to
its energy woes. Looking back at recent history to the last energy
crisis in the United States, nuclear energy provided the most
significant and lasting response.
At the time of the first oil embargo in 1973, about 20 percent of
U.S. electricity supply came from power plants that used oil for fuel.
In some parts of the nation--the Northeast, for example--the percentage
of oil-fired electric generation was considerably higher. Just five
percent of U.S. electricity was produced at nuclear power plants.
In the subsequent decades, 89 new nuclear reactors began operating,
effectively replacing oil as a fuel source for electricity, and making
nuclear energy one of the most successful energy security programs.
Today, nuclear power reactors continue to provide a reliable hedge
against volatile fuel prices and energy supply disruptions, protecting
American businesses and homes from wildly fluctuating energy costs and
providing a reliable supply of electricity. Nuclear energy answered the
call then, and the industry is answering that call now.
It must be remembered that nuclear's role in avoiding emissions
also has significant implications for domestic economic development. If
a state is not complying with Clean Air Act regulations, it will be
constrained when it comes to building new conventional power plants as
well as other industrial and manufacturing facilities.
Without nuclear energy, there will be difficult choices on the
horizon as we try to balance economic development, electricity needs
and environmental goals. New power plants will not come on line in the
future without serious consideration of their environmental impact.
Again, California's woes clearly show that energy, the environment and
economic development are inextricably linked. Nuclear energy is the
only expandable form of electricity generation that meets all three
criteria.
Status of U.S. Nuclear Energy: Power for Today and Tomorrow
The United States has the largest commercial nuclear power industry
in the world. The 103 nuclear power reactors generate enough
electricity to serve 67 million Americans, or the equivalent of the
nuclear electricity needs of France and Japan combined. The industry's
safety record is unparalleled among the world's energy providers, and
nuclear power plant efficiency and production have improved steadily
during the last decade and today are at record levels. In 2000, nuclear
power plants in 31 states produced a record amount of electricity--754
billion kilowatt-hours.
The industry's safety record has laid the foundation for this
strong operational performance. Safety and excellence are at the very
core of the industry, and safety is essential to its continued success
in the competitive electricity market. As the industry moves forward,
safety and low-cost power will continue to go hand-in-hand.
The increase in electricity generation at U.S. nuclear power plants
during the 1990s was equivalent to adding twenty-three 1,000-megawatt
power plants to our nation's electricity grid. That's enough to meet
30% of all new electricity demand during that time. This dramatic
increase in electricity production by nuclear power plants is one the
most successful energy efficiency programs of the last decade. Safe,
outstanding performance at nuclear power plants, especially during the
transition to competitive electricity markets, is one reason why a
growing number of policymakers, financial analysts and the public are
rediscovering the benefits of nuclear energy.
Outstanding operational performance is also a major reason why
Entergy and other energy companies are extending the operating licenses
at existing reactors for an additional 20 years. In 1997, some energy
forecasters were predicting that dozens of nuclear power plants would
shut down prematurely and that many more would shut down at the end of
their 40-year licenses, issued by the Nuclear Regulatory Commission.
However, many of those same analysts today have reassessed the
situation and now predict only a handful of plants may close prior to
the expiration of their licenses. They now recognize that the vast
majority of plants will extend their operating licenses beyond the
initial 40-year period.
And, it is also why the industry is looking at innovative
partnerships for building advanced reactor designs that will be
necessary to meet the future demands of a power-hungry digital economy
and improve our air quality. The Energy Information Administration, in
its 2001 annual energy outlook, forecasts higher nuclear power
production.
``In 2020, nuclear generation is projected to be 34 percent
higher than forecast last year, due to lower estimated costs
for extending the life of current reactors and higher projected
natural gas prices.''
Energy Information Administration
Energy Outlook, 2001
Even with this two-fold production and environmental advantage,
nuclear power plants are the lowest cost electricity generators. In
2000, the average production cost of electricity generated by nuclear
power plants was 1.83 cents per kilowatt-hour, making nuclear power the
most affordable electricity in the United States.
Nuclear Energy's Long History of Protecting our Air Quality
The environmental value of nuclear energy was recognized early by
policy makers. In Shippingport, Pa., over 50 years ago, nuclear
energy's clean air value tipped the scales in favor of construction of
the first demonstration nuclear power plant.
Beginning in the 1940s, Pittsburgh began instituting strict smoke
control programs as part of urban redevelopment plans--well ahead of
the rest of the nation. At the time, Duquesne Light Company was
petitioning to build a coal-fired plant on the Allegheny River. They
were encountering a great deal of resistance from the area's citizens,
who were fearful of air pollution from the plant. The main reason that
Duquesne chose to bid on the nuclear project was because it offered
power without pollution.
That benefit is being rediscovered today, and promises to be of
prime importance in the future. Energy and the environment are
increasingly being linked both locally and globally. Yet, nuclear
energy's clean air benefits--its ability to avoid the emission of
harmful air pollutants while producing vast amounts of electricity--is
still undervalued.
In the process of generating electricity, nuclear plants produce no
carbon dioxide, sulfur oxide or nitrogen oxides. Between 1970 and 1990,
the increased use of nuclear energy alone eliminated more nitrogen
oxide emissions than direct industry action taken to comply with the
Clean Air Act. Nuclear energy, by avoiding additional emissions as
electricity output grows, acts as a vital partner in Clean Air Act
compliance.
To meet more stringent Clean Air Act requirements and effectively
manage carbon risk in the future, the United States must increase its
percentage of non-emitting sources of electricity--such as nuclear
energy, solar, hydro and wind--above the current baseline of 30
percent. Of these electricity production technologies, nuclear energy
generates two-thirds of all emission-free electricity today, and is the
only expandable, large-scale electricity source that avoids emissions
and can meet the baseload energy demands of a growing, modern economy.
Industry Planning is Already Underway for New Nuclear Energy Plants
Although the average age of U.S. nuclear plants is only 18 years,
we must begin planning now to enhance these services through increases
in production capacity, improved efficiency, and license renewal.
That's why the industry is working now to set the stage for
construction of new advanced-designed nuclear plants that will have
more automatic safety systems and will be even more reliable and
economical.
The industry is working together to lay the groundwork for new
plants.Three advanced designs have already achieved certification by
the NRC, having gone through extensive, multi-year safety reviews. Of
the three designs, two have been built and are setting world-class
performance records in Japan, while others are being built in Korea and
Taiwan.
Additionally, two more advanced designs are undergoing NRC review.
One involves a review of changes to an existing approved design,
uprating it from 600 to 1,000 megawatts. The other is a new reactor--
known as the Pebble Bed Modular Reactor--now in preliminary review by
the NRC.
The NRC's licensing process for new nuclear plants will ensure that
safety, design and site-related issues are resolved before large
capital investments are made. A new licensing process will allow the
NRC to issue a single license to construct and operate a new nuclear
plant.
Industry executives have come together--contributing personnel,
funding and guidance--to develop a plan that will mark out a clear path
for new nuclear plant orders. This plan for the future considers safety
standards and objectives; NRC licensing requirements; policy and
legislative implications; capital investment needs and changing
business conditions.
Nuclear Energy: Balancing the Nation's Energy Needs
Our nation cannot meet the demands of our growing population and
economy without increased power generation through the construction of
new power plants. We need to increase the proportion of non-emitting
baseload capacity through the construction of new emission-free plants.
This will maintain both a diverse energy portfolio for the nation, and
the price stability that nuclear energy offers. In order to do this,
comprehensive national energy policy must
<bullet> Encourage investment in new power plant construction.
<bullet> Continue regulatory modernization, including regulatory
stability for operating nuclear plants and licensing of new
plants.
<bullet> Ensure sufficient funding for research, development and swift
application of new nuclear energy technologies is consistent
with nuclear energy's future role in meeting U.S. energy needs.
<bullet> Eliminate discrimination and ensure nuclear energy receives
the same treatment as other electricity generating technologies
in the marketplace.
<bullet> Educate the nation about the excellent safety record of
nuclear energy and inject sound science and intellectual
honesty into the national energy debate so that consumers may
make informed energy choices.
<bullet> Maintain U.S. leadership and infrastructure to train the next
generation of scientists, engineers and technicians required to
design, build and operate nuclear power plants.
In a competitive marketplace, the nuclear energy industry has the
primary responsibility for ensuring the viability of nuclear
technology. However, the industry values the important role that can be
played by the federal government in preparing the way for new nuclear
power plants.
Protecting our air quality and our environment, as well as
improving our energy security, are among the reasons why two-thirds of
Americans favor nuclear energy as one way to generate electricity.
One reason for the steady support for nuclear energy is that the
public views nuclear energy as a fuel of the future and believes it is
important for future generations. Americans consider solar and nuclear
energy as primary sources of energy for the future. In addition, there
is broad support for the continued operation of nuclear power plants
(76 percent) as well as for maintaining the option to build more
nuclear power plants in the future (73 percent).<SUP>3</SUP>
---------------------------------------------------------------------------
\3\ Nuclear Energy 2000: Public Support Remains Strong, Ann
Stouffer Bisconti, Ph.D., Perspectives on Public Opinion, April 2000.
---------------------------------------------------------------------------
And, a January survey by Bisconti Research Inc., shows an increase
in those who favor building more nuclear power plants. Fifty-one
percent of those polled said that the United States should
``definitely'' build more nuclear power plants in the future--compared
with 42 percent in October 1999.
The increase in favorability for building new nuclear plants was
largest in the West, where those in favor increased from 33 percent in
October 1999 to 52 percent in the January survey. Clearly, the
California crisis is impressing upon the public the need for new
electricity supplies.
Used Nuclear Fuel: Sound Science Supports Yucca Mountain
Federal legislation mandates a centralized geologic repository. The
Nuclear Waste Policy Act of 1982 and its 1987 amendments require or
authorize the U.S. Department of Energy to locate, build and operate a
deep, mined geologic repository for used nuclear fuel. To pay for the
permanent repository, the Nuclear Waste Policy Act established the
Nuclear Waste Fund. Since 1982, electricity consumers have paid into
the fund which now totals more than $16 billion.
Based on scientific information gathered from several sites,
Congress in 1987 selected Yucca Mountain as the location for further
study to determine if the desert ridge is a suitable location for the
federally operated underground repository. And, the industry fully
expects that the Energy Department will forward a science-based
decision on Yucca Mountain to the President later this year.
A decade of science has been completed and will lead to a draft
report this spring. A decision document is expected to be finalized in
the fall, following hearings that will take place in Nevada. It is
important that DOE and the Administration move ahead on schedule with
the site recommendation process, leading to a decision by the President
on site suitability late this year. This decision allows DOE to prepare
documents to submit to the NRC to license a disposal facility.
Most used fuel is stored in steel-lined, water-filled vaults at
nuclear power plants. However, Entergy Nuclear and other nuclear power
plant owners are absorbing the cost of on-site storage of spent nuclear
fuel, despite the fact that they have already paid the government to
perform this service. Other electric companies must build additional
storage facilities for used nuclear fuel at nuclear power plant sites
until a federal repository is operating.
Less than six percent of commercial reactor fuel is stored in
additional ``dry'' storage facilities today, but by 2010, approximately
30 percent of used fuel will be stored in these costly storage
containers. Steps must be taken now to avoid a forced shutdown of any
nuclear power plant due to a lack of used fuel storage,
Universal Application of Nuclear Technology Saves and Protects Lives
For five decades, the United States has been the global leader in
the use of nuclear technology to benefit society. America's high-tech
digital economy and high standard of living simply would not be
possible without the use of nuclear energy. In addition, nuclear
technology is used in scores of consumer products--both necessities and
conveniences that enhance our daily lives.
Among the necessities is nuclear energy, which provides one-fifth
of our nation's electricity and is our largest supply of emission-free
electricity, and nuclear medicine, which is used in one of every three
medical diagnoses and treatments. Ten million Americans are diagnosed
and treated every year using nuclear medicine. Radioactive isotopes
also are essential to the biomedical research that seeks causes and
cures for diseases such as AIDS, cancer and Alzheimer's disease.
Nuclear technology also is used agricultural applications,
industrial manufacturing and environmental protection. The use of
nuclear technologies in the field of agriculture improves crop
varieties, controls pests and preserves food. The use of irradiation in
food safety continues to grow in the United States and has been used
for decades in Europe. In fact, food irradiation has been approved to
control food loss and to improve sanitation for more than 100 kinds of
food in 41 countries. These uses of nuclear technology make significant
contributions to our quality of life.
The associated economic benefit of the use of nuclear technology
and nuclear materials on the economy is significant, accounting for
more than $400 billion in revenues (6 percent of the gross domestic
product) and 4.4 million jobs.
Conclusion: Nuclear Energy Powers America's Future
One of the most prominent environmental protection programs in the
industrial sector during the last three decades has been America's
increased reliance on nuclear energy to power economic growth. No other
source of electricity can provide large amounts of power while
enhancing our air quality.
Policymakers should maximize nuclear energy's potential to improve
our air quality while providing low-cost electricity to fuel our
economy. Continued research and development funding, streamlined
business regulation, implementation of a federal waste management
program, and equal access to business incentives will ensure that
nuclear energy will continue to help meet our nation's public policy
goals for energy security, economic growth and environmental
protection.
Mr. Norwood. Thank you very much, Mr. Hutchinson. We
appreciate your time and testimony.
I would like to introduce to the committee now Mr. A.C.
Tollison, Jr., the Executive Vice President, Institute of
Nuclear Power Operations, from Atlanta, Georgia.
Welcome, Mr. Tollison, and please take 5 minutes.
STATEMENT OF ALFRED C. TOLLISON, JR.
Mr. Tollison. Thank you, Mr. Chairman, and good afternoon.
My name is Fred Tollison, Executive Vice President of the
Institute of Nuclear Power Operations, INPO, in Atlanta. I have
been with INPO for 13 years and have worked in the nuclear
power industry for 30 years. I was plant manager of the
Brunswick station in North Carolina for 5 years.
I am here to discuss safety and reliability in the nuclear
power industry. In fact, last year, U.S. nuclear power plants
performed at record levels of safety and reliability. I will
begin with INPO's activities and INPO's role in the nuclear
industry.
The Institute's mission is to promote the highest levels of
safety and reliability to promote excellence in the operation
of nuclear power plants. INPO was formed in 1979 as a non-
profit, independent, technical organization. Each of the 34
companies that operate nuclear plants in this country is a
member of INPO.
Our key technical programs are, first, periodic, in-depth
inspections of each nuclear plant. Second, training programs at
each plant are accredited by the independent National Nuclear
Accrediting Board. Third, INPO analyses plant operating
experience and passes along lessons learned to the industry.
And, fourth, INPO provides industry assistance, including plant
visits, seminars, and workshops.
Significant process has been achieved by the U.S. nuclear
industry, in part through participation in these programs.
Indicators that measure the performance of nuclear plants best
demonstrated this progress. Since the mid-'80's, INPO has
tracked a series of 10 performance indicators. Aggressive goals
were established at 5-year intervals, and the year 2000 marks
the end of the third such period.
The basic principal of performance indicators is that
nuclear plants with good performance, as measured by these
indicators, are generally recognized as well-managed plants.
Such plants are more reliable and typically have higher margins
of safety.
Let me show you now the industry's progress using a few
selected indicators to your right. Unit capability factor is a
measure of the plant's ability to stay online and produce
electricity. In 2000, the median was 91.1 percent, the best
performance ever for this indicator, and for the second year in
a row it exceeded the year 2000 goal.
Unplanned automatic scrams show the number of automatic
reactor shutdowns per year. A low number indicates care and
operations, good maintenance, and good training. The 2000
median value was zero for the third straight year, continuing
to exceed the year 2000 goal.
Safety assistance performance monitors the availability of
standby or redundant safety systems to provide backup
electricity and cooling water to the reactor if needed. The
2000 performance of 96 percent represents a high state of
readiness for these systems. 2000 was a very successful year
for the U.S. nuclear industry, the best ever in terms of safety
and reliability. The industry met or exceeded the year 2000
goals in all 10 performance indicators.
So what does this say about the future of the industry?
U.S. nuclear plants are performing at record levels of safety
and reliability. Nuclear plant owners are vigorously pursuing
license renewal, and the industry is consolidating rapidly to
improve efficiency. These actions indicate that nuclear power
is being recognized as a valuable, reliable source of energy
today and for the future.
Without question, the industry will face new challenges as
it makes the transition to the competitive marketplace. INPO is
helping the industry focus on the issues that will be important
in the near future to maintain and improve on safety and
reliability.
In conclusion, nuclear energy is an essential domestic
resource, and proper management is important for today and for
future generations. It is not an overstatement to say that a
foundation is being put in place for a renaissance in nuclear
power. But this foundation requires absolutely that we remain
accident-free. This requires vigilance and commitment not just
to the higher standards we have today but to continuous
improvement.
With vigilance and with commitment to safety by the
industry, supported by INPO, and with oversight by a strong and
fair regulator--the Nuclear Regulatory Commission--nuclear
power has a bright future in helping fulfill our Nation's
energy needs.
Thank you.
[The prepared statement of Alfred C. Tollison, Jr.
follows:]
Prepared Statement of Alfred C. Tollison, Jr., Executive Vice
President, Institute of Nuclear Power Operations
Good afternoon. My name is Alfred C. Tollison, Jr., executive vice
president of the Institute of Nuclear Power Operations in Atlanta,
Georgia. I have been asked to discuss the safety and performance of the
commercial nuclear power industry today and the trends we see for the
future. I will begin my remarks with a brief explanation of INPO's
structure and activities and what INPO's role is in the nuclear
industry.
THE INSTITUTE OF NUCLEAR POWER OPERATIONS
The Institute was formed by the U.S. nuclear utility industry in
late 1979 in response to the accident at Three Mile Island Nuclear
Station. INPO's mission is to promote the highest levels of safety and
reliability--to promote excellence--in the operation of nuclear
electric generating plants, including applying the lessons learned from
the President's Commission on the Accident at Three Mile Island (the
Kemeny Commission). The nuclear utility industry leaders established
INPO as an independent organization--independent from governmental
agencies and independent from any individual member.
INPO is a nonprofit, independent technical organization with a
staff of about 350 and a 2001 budget of $59 million. The bulk of this
budget is dedicated to travel and employee compensation. Each of the 34
utilities in the United States with operational nuclear plants is a
member of the Institute. To augment its professional staff, INPO
utilizes the expertise of loaned employees from members and
participants. This program is designed to provide a continuing source
of personnel with recent nuclear plant experience to supplement the
INPO staff. It also provides loaned personnel with an opportunity to
gain broader experience in the industry.
The Institute's organization is similar in many ways to a typical
U.S. corporation. A Board of Directors, elected by INPO's members,
oversees the operations and activities of the Institute.The president
and chief executive officer of the Institute is elected by and reports
to the Board of Directors. The current president and CEO is Dr. James
T. Rhodes. He also serves as Chairman of the Board.
In addition to the Board of Directors, an Advisory Council of
professionals from outside the industry reviews Institute activities
and provides advice on broad objectives and methods to the Board of
Directors. The Advisory Council is composed of distinguished
professionals including prominent educators, scientists, industrialists
and health specialists.
To ensure that INPO programs benefit from the best technical advice
the industry has to offer, an Executive Review Group reviews INPO
programs and products in the various technical areas on a continuing
basis. The members of the Executive Review Group are experienced
executives--typically the chief nuclear officers--who are currently
active in nuclear plant operations or management. An Academy Council
provides advice in the areas of training and accreditation, and an
Industry Communications Council provides advice on effective
communication of INPO programs and activities.
Non-U.S. nuclear utility organizations from 13 countries
participate in the Institute's International Program. Ten nuclear steam
system suppliers and architect-engineering and construction firms
worldwide involved in nuclear work also participate in INPO through the
Supplier Program.
The key technical activities of the Institute can be divided into
four cornerstone programs, which I will address in more detail later.
They are:
1. Evaluations--Periodic evaluations are conducted of each operating
nuclear electric plant in this country.
2. Training and Accreditation--Training programs for key personnel at
each plant are accredited by the independent National Nuclear
Accrediting Board.
3. Events Analysis and Information Exchange--INPO analyzes operating
experience and feeds back lessons learned to the industry.
4. Assistance--This includes plant visits, courses, seminars, and
workshops.
In addition, there is a detailed infrastructure to carry out each
of these cornerstone programs. The Institutional Plan for the Institute
of Nuclear Power Operations, updated last year, and our 2000 Annual
Report provide additional details about the Institute's programs and
are attached to this testimony (attachments A and B).
All interactions between INPO and its members are held strictly
confidential. This is vital to the success of INPO's mission. Utilities
are voluntary members of INPO and are under no regulatory obligation to
provide information to INPO--or to be members. Experience shows that
utilities are more willing to set challenging goals and to strive for
excellence if they know they will not be criticized publicly if they
fall somewhat short of these challenging goals. Over the years, U.S.
courts and administrative agencies have consistently upheld this
position.
INPO CORNERSTONE PROGRAMS
We believe the Institute's cornerstone programs have directly
contributed to the industry's progress.
Evaluations
The evaluation program cornerstone is a direct response to a
recommendation of the Kemeny Commission that--``the industry must--set
and police its own standards of excellence to ensure the effective
management and safe operation of nuclear electric generating plants.''
A comprehensive program has been established for conducting, on a
periodic basis, independent evaluations of the operating nuclear plants
and supporting corporate organizations of all U.S. nuclear utilities.
These evaluations are performance-based and are designed to ensure that
each utility is striving to meet the industry's high standards in key
areas.
Teams of qualified and experienced personnel conduct these
evaluations, focusing on plant safety and reliability. The evaluation
teams are augmented by senior reactor operators, other peer evaluators
from operating units similar to those at the station being evaluated,
and host utility peer evaluators. The scope of the evaluation includes
traditional functional categories such as operations, maintenance, and
engineering that generally correspond to the nuclear station
organization. The areas evaluated include organizational effectiveness,
operations, maintenance, engineering, radiological protection,
chemistry, and training.
In addition, the teams evaluate cross-functional performance
areas--processes and behaviors that cross organizational boundaries and
that address organizational integration and interfaces. The cross-
functional evaluation includes areas such as safety culture, self-
assessment and corrective action (learning organization), operating
experience, human performance, and training.
The performance of operations and training personnel during
simulator exercises is included as part of each evaluation. Also
included, where practicable, are observations of plant startups,
shutdowns, and major planned evolutions. Evaluations of each operating
nuclear station are conducted at an average interval of 21 months.
Results from more than 875 plant evaluations INPO has conducted to
date show substantial improvements in the conduct of plant operations,
enhanced maintenance practices and improvements in equipment and human
performance.
Training and Accreditation
Another excellent example of the industry's response to the Kemeny
Commission is in its commitment to improved training through INPO. This
commitment has resulted in considerable improvements in both the safety
and reliability of the nation's nuclear power plants.
Under the training and accreditation cornerstone, the Institute
assists its member utilities in developing, implementing and
maintaining high quality, comprehensive training in a wide range of
areas. INPO also evaluates the results of utility training programs
through the ongoing operating plant evaluation program and analyzes
industry events to identify needed training improvements.
INPO manages an industrywide accreditation program for utility
training programs through the National Academy for Nuclear Training.
Established in 1985, the National Academy for Nuclear Training provides
a framework for the following three essential elements in the
industry's program to strengthen nuclear utility training:
<bullet> training activities, resources and facilities at nuclear
utilities
<bullet> the National Nuclear Accrediting Board
<bullet> INPO's training-related activities
The National Nuclear Accrediting Board is an independent body
established to ensure that nuclear utility training programs meet the
standards of the National Academy for Nuclear Training. The Board is
composed of eminent American scholars and executives from the following
four groups:
<bullet> industrial training experts from fields outside the nuclear
industry
<bullet> members of the postsecondary education community
<bullet> individuals nominated by the NRC
<bullet> senior utility executives
As an example of the National Nuclear Accrediting Board's
independence, the Board's charter requires that the majority of each
panel be from outside the utility industry when considering each
accreditation action.
The need for the work INPO is doing in training was recognized by
the Kemeny Commission when it recommended the establishment of
``agency-accredited training institutions'' for nuclear plant
operators. As a condition of membership, each of INPO's 34 member
utilities has committed to achieve and maintain accreditation for 12
key positions involved in nuclear power operations. These positions
include shift managers; licensed and nonlicensed operators; maintenance
supervisors, craftsmen, and technicians; chemistry and radiological
protection technicians; and engineers.
By the end of 1990, all U.S. nuclear power stations had achieved
initial accreditation of all applicable training programs.
Accreditation is maintained on an ongoing basis and is formally renewed
for each training program every four years.
INPO conducts courses and seminars in support of the National
Academy for Nuclear Training. These courses and seminars help personnel
better manage nuclear technology, more effectively address leadership
challenges, and improve their personal performance. Examples of courses
conducted include the Chief Executive Officer Seminar, Reactor
Technology Course for Utility Executives, Senior Nuclear Plant
Management Course, Control Room Teamwork Development Course, and
professional development seminars for shift managers, maintenance
supervisors, engineering supervisors, radiation protection and
chemistry supervisors, and training supervisors.
Events Analysis and Information Exchange
The exchange of industry operating experience is another direct
result of a Kemeny Commission recommendation which called for a
``systematic gathering, review and analysis of operating experience at
all nuclear power plants.'' Through this cornerstone program, each
nuclear station provides data on events to the Institute's technical
staff. At INPO, these industry events are reviewed for significance.
Following this analysis, the Institute disseminates applicable lessons
learned throughout the industry. As a follow-up, INPO evaluation teams
check to see that nuclear stations have implemented all the applicable
recommendations.
The Institute has reviewed more than 100,000 events since its
inception and provided 482 recommendations to member utilities and
international participants through 85 Significant Operating Experience
Reports. More than 99 percent of the 482 recommendations (lessons
learned) issued to date have been implemented industrywide.
Nuclear Network<SUP>'</SUP> is an Internet-based electronic
communications system available to all U.S. members and international
participants. The system allows rapid transmittal, storage and
retrieval of nuclear plant information, and it provides a means for
questioning other members and participants about their experiences in
solving nuclear operations problems.
The Institute collects and analyzes data and information related to
nuclear plant performance. Members provide data on quantitative
performance indicators on a quarterly basis. This plant data is then
consolidated for trending and analysis purposes. Industrywide data,
plus trends developed from the data, is provided to member and
participant utilities for a number of key operating plant performance
indicators. These include the performance indicators used by the World
Association of Nuclear Operators (WANO) for worldwide nuclear plant
performance comparisons. Members use this data in setting specific
performance goals and in monitoring and assessing performance of their
nuclear plants. INPO uses performance goals from individual utilities
to help establish industrywide performance goals for plants in the
United States.
Assistance
The assistance cornerstone has also contributed to the industry's
improvements by fostering comparison and the exchange of performance
information and successful methods. Visits to member utilities by INPO
personnel in response to requests by the utilities are one of the most
important modes of assistance. To date, INPO has conducted more than
3,500 assistance visits.
Several categories of documents (such as guidelines and good
practices) are designed and developed to assist member utilities in
their efforts to achieve excellence in operation, maintenance,
training, and support of nuclear plants. These documents are now in
widespread use at every U.S. nuclear station and at many utilities
worldwide.
Another element of the assistance cornerstone is workshops. INPO
sponsors workshops that afford the Institute, international
participants and U.S. member utilities an opportunity for face-to-face
information exchange. Typically, all U.S. nuclear utilities are
represented at these workshops that routinely address topics such as
operations, operating experience and maintenance. International
speakers are featured at most INPO workshops to promote the worldwide
sharing of information. INPO has sponsored 178 workshops with a
cumulative attendance of more than 20,000 personnel. In addition, INPO
has sponsored more than 330 working meetings and seminars with a
cumulative attendance of more than 5,300 personnel.
INPO'S INTERNATIONAL PROGRAM, WANO-AC
As INPO developed and expanded its activities, an International
Participant Program was formed in 1981 to promote the widespread
application of INPO standards of excellence and ensure that INPO
programs benefit from good practices and lessons learned worldwide. To
accomplish this, the International Participant Program, which is
observing its twentieth anniversary this year, facilitates the exchange
of operating experience and technical information with participating
international nuclear utilities and utility organizations in other
countries.
There are currently 13 countries participating in the program.
These include Belgium, Brazil, Canada, France, Germany, Japan, Korea,
Mexico, Slovenia, South Africa, Spain, Taiwan and the United Kingdom.
It is important to note that following the Chernobyl accident, the
International Participant Program was instrumental in the formation of
WANO. The mission of WANO is to maximize the safety and reliability of
the operation of nuclear power plants by exchanging information and
encouraging communication, comparison, and emulation among its members.
WANO is organized through regional centers and includes every
operating nuclear electric plant in the world. INPO represents all U.S.
utilities as a member of the WANO-Atlanta Center.
INPO'S RELATIONSHIP WITH U.S. GOVERNMENT AGENCIES
INPO coordinates its activities with federal government agencies as
appropriate. The Institute maintains a formal Memorandum of Agreement
with the Nuclear Regulatory Commission (NRC) and with the Department of
Energy (DOE). These agreements reflect the desire of both organizations
for a continuing, cooperative relationship in the exchange of
experience, information and data related to the safety of nuclear power
plants.
Although nuclear plant safety and protection of the public are
fundamental goals of both INPO and the NRC, their roles, while
complementary, are different. INPO was not created to supplant the
regulatory role of the NRC, but to provide the means whereby the
industry itself could, acting collectively, make its nuclear operations
safer. It was recognized that in establishing and meeting its goals and
objectives, INPO would have to work closely with the NRC, while at the
same time not becoming or appearing to become an extension of or an
advisor to the NRC or an advocacy agent for the utilities.
INPO provides assistance to DOE to support improvement of
operational safety at DOE nuclear facilities. INPO conducts a limited
number of assistance visits to DOE nuclear facilities, provides DOE
with copies of selected INPO documents and domestic operating
experience reports, and allows DOE personnel to attend industrywide
workshops and conferences. A limited number of DOE personnel are given
access to Nuclear Network and selected information available on INPO's
member Web site.
Additionally, certain aspects of INPO's international program are
coordinated with the Department of State.
PERFORMANCE IMPROVEMENTS
In part through participation in INPO's cornerstone programs, a
great deal of progress has been achieved by the U.S. nuclear industry.
This progress may be best exemplified by a set of performance
indicators that reflect the considerable progress in the areas of
operations, training and maintenance.
In the mid-1980s, INPO began an initiative to develop additional
methods for measuring and comparing the performance of nuclear plants.
A series of 10 nuclear plant performance indicators was selected, and
utilities have been reporting their performance. These indicators have
been adopted by WANO and are now used worldwide. Aggressive goals are
established at five-year intervals. The year 2000 marks the end of the
third five-year period.
The basic principle inherent in the performance indicator program
is that nuclear plants with good performance, as measured by the
overall set of performance indicators, are generally recognized as
well-managed plants. Such plants are generally more reliable and can be
expected to have higher margins of safety.
Year 2000 was successful overall for the U.S. nuclear industry--the
best ever in terms of safety and reliability. For the first time, the
industry met or exceeded the five-year goals in all categories.
Additionally, performance in every indicator was as good as or better
than the previous year's performance. The 2000 results continue the
remarkable record of progress that was started in 1980.
I won't discuss each performance indicator in detail today.
Instead, I will illustrate the industry's progress using a few selected
indicators, which are included in the INPO 2000 Annual Report I
mentioned earlier.
Unit Capability Factor is a measure of the plant's ability to stay
on line and produce electricity. A high unit capability factor
indicates effective plant programs and practices to minimize unplanned
outages and to optimize planned outages. In 1980, the industry median
was 62.7 percent. In 2000, the median was 91.1 percent. This represents
the best performance ever for this indicator; and for the second year
in a row, it exceeds the 2000 goal.
Unplanned Automatic Scrams shows the number of automatic shutdowns
for approximately one year of operation. A low number indicates care in
operations, good maintenance, and good training. The median number has
been reduced from 7.3 percent in 1980 to zero in 2000. In fact, the
median value has been zero for three straight years and continues to
exceed the 2000 goal.
Safety System Performance monitors the availability of three
important standby redundant safety systems to mitigate off-normal
events. The industry's goal is to encourage a high state of readiness,
with at least 85 percent of these systems meeting specific 2000 goals
for availability in excess of 97 percent. The 85 percent target allows
for normal year-to-year variations in individual system performance.
The 2000 performance of 96 percent is an increase over 1999 and
continues to exceed the 2000 goal.
Collective Radiation Exposure examines the effectiveness of
personnel radiation exposure controls for boiling water reactors and
pressurized water reactors. Low exposure indicates strong management
attention to radiological protection. Worker exposure has been reduced
significantly over the past 20 years. The 2000 median value of 150 man-
rem per unit for boiling water reactors is the best performance ever
and exceeds the 2000 goal for the fourth straight year. This is a
striking improvement over the 1980 figure of 859 man-rem per unit.
Likewise, the pressurized water reactor value of 82 man-rem per unit
exceeds the 2000 goal for the third straight year, also a significant
improvement over the 1980 figure of 417 man-rem.
Not shown in the material provided, the INPO Performance Indicator
Index is an excellent illustration of the industry's overall progress
since 1985. This Index is a weighted composite of the individual
indicators on a scale of 0-100. In 1985, the aggregate Index value for
the industry was 43. In 2000, the value was 94--an all-time high.
TRENDS IN THE INDUSTRY
In short, the industry has made excellent overall progress in
safety and reliability since 1980 and is committed to seeing these
improvements continue.
U.S. nuclear plants are performing at historically high levels from
a safety and reliability standpoint. Owners are vigorously pursuing
license renewal. Also, with the advent of deregulation, the industry is
consolidating rapidly to further improve efficiency. All this indicates
that nuclear power is being recognized as a valuable, reliable source
of energy for the future. The business community is now recognizing
what the nuclear industry has spent 20 years demonstrating: These
plants can be operated safely and efficiently; and, if properly
maintained, there is no reason they can't continue this performance
well beyond their original 40-year licenses.
Unquestionably, the industry will face--and is already facing--new
challenges as it deals with deregulation and life extension issues.
Long-term industry success will require vigilance and commitment, not
just to the higher standards we have today, but to continuous
improvement. INPO is helping the industry focus on the key issues that
will be important in the near future--issues like human performance,
equipment performance, and self-assessment and corrective action. New
training needs will also emerge as we prepare a new generation of
nuclear professionals to operate and maintain our nuclear fleet.
The U.S. industry will continue to set challenging goals for
itself. Already, new 2005 goals have been established for the
performance indicator program. Taking into account the dramatic
improvement of the industry as a whole during the past two decades,
these new goals focus more on plants that are performing below the
industry median. In concert with these changes, INPO is also adapting
its programs to further help these outlier plants improve their
performance.
CONCLUSION
In conclusion, nuclear energy is a God-given resource; and its
proper management is vitally important, not only today, but for future
generations. I don't believe it's an overstatement to say that a
foundation is being put in place for a renaissance in nuclear power.
But this foundation requires absolutely that we remain accident-
free. This requires vigilance and commitment, not just to the higher
standards we have today, but to continuous improvement. With vigilance
and with commitment to safety by the industry, supported by INPO, and
with oversight by a strong and fair regulator, I believe nuclear power
has a bright future in helping fulfill our nation's energy needs.
At the 1989 INPO CEO Conference, on the observance of INPO's tenth
anniversary, then-U.S. Secretary of Energy Admiral James D. Watkins
said, and I quote:
In the past 10 years, INPO has done an outstanding job in helping
the nuclear industry improve its performance. Ten years from now, on
the twentieth anniversary of INPO, I sincerely hope that we can all
celebrate the absence, during the 1990s, of a single significant
incident at a nuclear reactor. If we do, we will be well on our way to
reestablishing nuclear power as a safe and viable source of energy, not
only for America, but for the world.
Thanks to the nuclear industry's continued pursuit of excellence in
plant safety and reliability, I believe we are seeing the realization
of Admiral Watkins' vision just as he predicted.
Thank you for the opportunity to share INPO's perspective. Subject
to your questions, this concludes my testimony.
Mr. Norwood. Thank you, Mr. Tollison.
And for the committee, I would like to introduce to you Mr.
Ward Sproat, Vice President of International Programs, Exelon
Corporation, Kennett Square, Pennsylvania.
Welcome, Mr. Sproat.
STATEMENT OF EDWARD F. SPROAT III
Mr. Sproat. Mr. Chairman, thank you. And thank you, members
of the committee.
For those of you who are not familiar with Exelon, we are
the largest nuclear generator in the U.S. with approximately 20
percent of the nuclear generating capacity under our operation
and control. We have approximately 37,000 megawatts of electric
generating capacity in the U.S. of diversified fuel sources,
and we have another 8,500 megawatts under either construction
or development.
There have been some references made to the Pebble Bed
Modular Reactor here today, and I would like to give you a
brief overview of that project and explain why Exelon is
involved with that project, and what our decisionmaking process
is regarding that technology moving forward.
Right now, we have committed up to $7.5 million of our own
money to be involved with the preliminary design of the Pebble
Bed Modular Reactor technology in South Africa. The other
parties that are partners in that venture at this point in time
are British Nuclear Fuels Limited, BNFL, of the UK; SCOM, which
is the national electric utility of the Republic of South
Africa; and the Industrial Development Corporation of South
Africa.
The four partners are funding the preliminary design of
that technology which will be completed--the preliminary design
will be completed sometime in the next 2 to 3 months. At the
end of June, there will be produced a detailed feasibility
study of the technology which will be the basis for the
decision by the partners to move forward with the project or
not.
If we make a decision to move forward with the project, the
plan is to build, with the appropriate approvals from the
government of South Africa, a full-size demonstration plant in
South Africa, probably starting in late 2002, and that
construction period would probably take approximately 3 years
with another year of startup testing.
Let me make it very clear that Exelon's involvement in this
project is not because we want to be a nuclear reactor
supplier. We want to be a nuclear power producer using this
technology here in the U.S. And let me just talk about why we
are interested in this technology and why we believe it is a
good fit in the future.
Our company was formed of the merger of Commonwealth Edison
in Illinois and Philadelphia Electric in Pennsylvania. Both of
those states are at the forefront of the electric market
deregulation in this country, and as a result we have gotten a
pretty unique perspective on what the unregulated or the
deregulated wholesale marketplace looks like in this country.
And we believe that this small modular reactor technology
has got some unique aspects to it that very well fit the unique
dynamics of a regional wholesale power marketplace, and we
don't believe, based on our current evaluations, that the
currently available other nuclear alternatives can compete
successfully in that deregulated marketplace.
Let me just talk briefly about what some of those unique
aspects of that deregulated marketplace are. No. 1 is the
technology needs to be brought online quickly--a 36- to 48-
month lead time at max--because if a demand--supply/demand gap
develops in a regional marketplace, your competitors will beat
you to market with combined cycle gas turbine technology. And
if you can't bring a nuclear plant on in a relatively quick
period of time, you are going to lose your opportunity.
Obviously, the economics have to be able to compete with
gas-fired combined-cycle gas turbines at about 3 to 3.5 cents a
kilowatt hour for your all-in costs. Also, adding a large
1,100- or 1,200-megawatt electric power plant to a deregulated
marketplace will probably throw off the supply/demand to the
point where the marginal--while the prices in that market will
be depressed to the marginal costs of the lowest cost producer.
And, finally, the PBMR, we believe, is a very
environmentally sound alternative in terms of not emitting any
air pollutants and Greenhouse gases. So we intend to find out
whether the PBMR can, in fact, compete and meet those criteria
that we believe are necessary to compete in the deregulated
marketplace in the future.
The PBMR itself is a high-temperature gas-cooled reactor,
has a helium gas turbine directly connected to the reactor, has
an overall thermal efficiency of about 40 to 42 percent, and
provides, as was mentioned to earlier by one of the members,
provides--the fuel is a very unique design, which is in a
ceramic form which does not--is not soluble in water, which is
one of the concerns of a deep geological repository for spent
fuel.
We do expect some regulatory hurdles, though, with trying
to get this technology licensed of a non-technical nature.
Specifically, we don't know how long the licensing process is
going to take. We do believe that in an ideal situation we
should be able to get this technology licensed in about 26 to
28 months.
However, given the uniqueness of the technology itself,
given the fact that the 10 CFR 50, Part 52 licensing process,
which is the expedited licensing process, has never been tested
before by anybody in this country, that there is going to be a
steep learning curve for both ourselves and the Nuclear
Regulatory Commission in utilizing that licensing process for
the first time.
So we do believe that that licensing process will--is
somewhat indeterminant in terms of the amount of time it is
going to take.
Also, because of the small modular nature of these
reactors, there are some unique regulatory impediments that we
are going to have to overcome. Essentially, some of the
requirements for financial protection, in terms of $80 million
retroactive premium per reactor that is currently required.
That means an 1,100-megawatt reactor would have the same
premium as a 100-megawatt reactor for the PBMR, and we think
that is going to be a significant problem for us. And there are
several others as outlined in my testimony.
Mr. Norwood. Of course, your testimony, Mr. Sproat, will be
in the record. And we are very grateful for the time that you
have been able to come and share with us.
Mr. Sproat. Thank you, Mr. Chairman.
[The prepared statement of Edward F. Sproat III follows:]
Prepared Statement of Edward F. Sproat III, Vice President--
International Projects, Exelon Generation Company
Mr. Chairman and Members of the Subcommittee: I appreciate the
invitation to appear before the Subcommittee to discuss the views of
Exelon Generation Company regarding our interests in building new
nuclear power plants in the United States and the potential barriers we
currently face in our efforts to do so. My name is Edward F. Sproat and
I am the Vice President of International Projects for Exelon Generation
Company. Exelon Generation is a wholly owned subsidiary of Exelon
Corporation, which was formed last year by the merger of Unicom
Corporation of Chicago and PECO Energy Company of Philadelphia. Exelon
Generation currently owns and operates approximately 37,000 megawatts
of diversified electrical generation with another 8,500 megawatts under
construction or development. We are the largest nuclear generation
operator in the country with approximately 20% of the nation's nuclear
generation capacity. Both Unicom and PECO Energy were pioneers in the
commercialization of civilian nuclear power with each company building
its first nuclear plant in the early 1960's. As a result, our new
company has both a deep respect for and a keen understanding of nuclear
power and we have been able to make it the foundation of our successful
generation business.
Exelon's Involvement in the Pebble Bed Modular Reactor Project
You may have recently heard or read about the Pebble Bed Modular
Reactor, or PBMR, that is currently being developed in the Republic of
South Africa. Exelon is investing approximately $7.5 million in this
project to complete the preliminary design so that a feasibility study
of the technology and its economics can be completed. Our other
partners in this venture are ESKOM, the national electric utility of
the Republic of South Africa; the Industrial Development Corporation of
South Africa; and British Nuclear Fuels Limited (BNFL) of the United
Kingdom. The study is due to be completed early this summer. If the
technology is deemed ready for commercialization, and if the economics
prove to be competitive against other forms of generation, the partners
with the appropriate approvals of the South African government will
proceed to build a demonstration plant in South Africa near Cape Town.
Construction of that plant will take approximately thirty-six months,
followed by a twelve month testing period.
If Exelon's review of the feasibility study is favorable, we do not
intend to wait for the completion of the demonstration plant in South
Africa to begin the licensing process to build a number of PBMR's in
this country. We would intend to submit a license application for early
site permitting in 2002, followed by an application for a combined
construction and operating license in 2003 after the detailed design is
completed in South Africa. We believe that the licensing process, under
the best of circumstances, could be completed in twenty-six months; but
in reality, the time required is unknown as there are a number of
technical and legal issues that will need to be resolved. I will come
back to the legal issues in a moment.
Reasons for Exelon's Interest in the PBMR
Both Illinois and Pennsylvania are at the forefront of the
deregulation of the electric utility industry. As a result, Exelon has
been able to learn about the market dynamics of the deregulated
marketplace very quickly. To be able to compete in the deregulated
wholesale power markets, which have distinctly unique regional
characteristics, new generation sources must be able to meet several
criteria. Specifically, new plants must be able to be permitted and
brought on-line quickly, in thirty-six to forty-eight months at the
most, and they must be able to compete with gas-fired combined cycle
power plants on a total cost basis in the 3 to 3.5 cents per kilowatt-
hour range. They must be small enough so that as their capacity is
added to the market, an oversupply situation is not created in the
region that drives prices down below the producers' marginal costs.
They must also meet the environmental constraints of the region. We
don't believe that the currently available designs of light water
reactor nuclear power plants can meet all of these criteria. We believe
that the PBMR is the only reactor currently under development that may
be able to meet the needs of this deregulated marketplace in the next
five years. We intend to find out if it can.
Description of the PBMR
The PBMR is a small nuclear power plant that would produce
approximately 125 megawatts of electricity per module with four of
these modules being able to fit on a football field. Each module has a
high temperature gas-cooled reactor that heats helium under pressure to
approximately 900 degrees Celsius, which turns a gas turbine connected
to a generator. The helium then returns to the reactor. This direct
cycle allows higher efficiencies than existing nuclear plants and also
significantly reduces the amount of water required for plant cooling
over other power plants. The coupling of a gas turbine directly to the
helium reactor has only recently been made possible through advances in
gas turbine technology
The reactor core is comprised of about three hundred thousand fuel
spheres that are approximately the size of billiard balls. Each sphere
contain approximately 14,000 coated particles of 9% enriched Uranium
235, each 0.5 millimeters in diameter. The coating on each particle is
designed to contain the radioactive gases produced by nuclear fission
and can withstand extremely high temperatures. As a result of the
reactor and fuel designs, the fuel cannot melt under any conditions, a
significant safety improvement over existing reactor technology. The
reactor and fuel designs have been demonstrated through years of
testing in Germany where the Pebble Bed Reactor was invented in the
early 1970's. The South Africans are utilizing the German fuel and
reactor technology for the PBMR and would be the suppliers of the fuel
to be used in our reactors. The ceramic nature of this fuel also make
it insoluble in water which is significant in that it can't leach into
ground water when stored underground in a spent fuel repository.
Regulatory Hurdles
As I mentioned before, the expected length of the process that we
will face to license the first set of PBMR's is difficult to determine.
While the technical issues will be complex, there are legal hurdles
that appear to be more difficult to resolve. Specifically, there are a
number of regulations that were promulgated when it was anticipated
that only regulated electric utilities would build nuclear plants.
These regulations never foresaw the dawn of a deregulated power
generation market and are now obsolete. If Exelon proceeds with
building PBMR's, they will be merchant nuclear power plants that will
not be in a regulated utility rate structure. The financial risk of the
plant will rest on the shareholder, not the ratepayer.
The financial burden imposed on small, modular plants by these
inappropriate regulations clearly has the potential to make the
economics untenable. Some of the key regulations which need to be
addressed include the financial protection requirements of 10 CFR Part
140, the decommissioning funding requirements of 10 CFR Part 50.75, the
antitrust review requirements of 10CFR Part 50.33a, the annual fees on
a per reactor basis in 10 CFR Part 171, and the large emergency
planning zone requirements in 10 CFR Part 50.54(m).
In addition to the above regulations, the licensing process which
we would follow under 10 CFR Part 52 to obtain a combined construction
and operating license for these plants has never been utilized. As a
result, we expect that there will be a steep learning curve for both
the U.S. Nuclear Regulatory Commission staff and ourselves on how to
execute this process with resultant high costs and delays. We will also
need to work with the NRC staff to develop the technical licensing
framework for the PBMR as the existing regulations are written for
light water reactors. Regulations will need to be developed for gas
reactors, also at additional costs and potential delay.
Potential Role for Public Funding
Exelon believes strongly that the development of the design and the
cost to commercialize and build the PBMR should be borne by the PBMR
partners. It is anticipated that the partners will invest upwards of
$600 million of their own money to make the PBMR commercially viable
with Exelon investing a significant additional amount to license and
build the first PBMR's. There are, however, a number of first of a kind
costs that Exelon will bear as the first licensee for this new
technology that will flow directly to government agencies such as the
NRC in the form of licensing fees and the national laboratories as
consultants to the NRC. As stated earlier, we expect that the costs of
licensing this technology will be higher than normal because of the
unproven nature of the 10CFR Part 52 licensing process and the need to
create a gas reactor licensing framework. The technical expertise
needed to review the PBMR application does not currently exist either
in the NRC or in the national labs and will need to be developed. We
believe it is appropriate for some level of government funding to be
provided to fund the work of government agencies in these areas.
Summary
In conclusion, as the shortage of electricity supplies in several
areas of the country looms large with the approach of summer, we must
find ways to cut through the morass of archaic legal and procedural
impediments to building new environmentally benign sources of
electricity. This is an issue of urgent national priority.
Nuclear power has earned the right to be counted among this
country's most viable options as a future power source. It has achieved
an outstanding safety record and serves as a stable and abundant
domestic source of electricity which emits no air pollutants or
greenhouse gases. If we're able to make the PBMR commercially viable
and cost competitive, we will have at least one potential solution to
our future energy needs.
Mr. Norwood. Is it Longenecker?
Mr. Longenecker. It is Longenecker.
Mr. Norwood. I would like to introduce John R. Longenecker
to the committee, Longenecker & Associates, Management
Consultants from Del Mar, California. Thank you for taking your
time to be here, and please take 5 minutes.
STATEMENT OF JOHN R. LONGENECKER
Mr. Longenecker. Mr. Chairman, thank you.
I want to thank you for the opportunity to address the
subcommittee on the issues involved with the----
Mr. Norwood. Pull the mike just a little closer.
Mr. Longenecker. [continuing] on the issues involved with
the U.S. nuclear fuel cycle. Living in California, I understand
very well the importance of secure energy supplies, and the
reliable, economic supply of nuclear fuel is certainly
essential to the future energy security of the United States.
Today, however, that supply is endangered. U.S. nuclear
fuel cycle companies are being challenged by a range of factors
that include excess capacity because there were fewer reactors
built than the fuel cycle companies planned originally. Also,
the sale of Russian highly enriched uranium, U.S. HEU blending,
and sale of inventories including those of USECs challenge
these industries.
With respect to uranium enrichment, Mr. Chairman, a very
severe situation exists in the United States, where USEC is
operating uneconomic, 50-year old plants, has no proven
technology to replace them, and relies on Russian HEU blending
and resale to meet more than half of all of its commercial
customer needs.
Constructing new, cost-competitive, enrichment capacity in
the United States as soon as possible is critical to the future
of all parts of the U.S. nuclear fuel cycle and must be a top
priority. There is a very strong linkage between a healthy
uranium enrichment business and the health of the uranium
conversion and fuel fabrication industries in this country.
Now, the Russian highly enriched uranium agreement is
certainly a key market factor. We all realize that maintaining
political and financial stability for the Russian HEU agreement
is essential for the fulfillment of our international policy
objectives.
However, the U.S. Government should carefully consider
several aspects of that agreement, including the assignment of
the role of the executive agent of the Federal Government on
behalf of the--to the United States Enrichment Corporation as
its sole agent. Second, how the billion dollar trading profits
that have already accrued and will continue to accrue from that
agreement should be allocated. And, third, whether it is in the
best interest of the United States to allow USEC to broker
additional supplies of enriched uranium from Russian commercial
enrichment plants.
Now, it is my firm belief that government subsidies for
non-competitive companies and trade sanctions against foreign
competitors will not build a sustainable basis for the
continued use of nuclear power in the United States. It is
particularly alarming that the anti-dumping action brought by
USEC against its European competitors who have deployed low-
cost technology over the past few decades could increase fuel
cost to U.S. ratepayers by $650 million to $1.2 billion per
year.
This suit has also created uncertainty about the assurance
of supply under existing import contracts to many U.S.
utilities.
Mr. Chairman, I strongly believe that the United States
must define a comprehensive strategy to maintain viable,
competitive, nuclear fuel supplies for this country for the
decades ahead. The roles in implementing a long-term strategy
to keep the U.S. nuclear industry competitive must be clear and
must include substantial participation by both the government
and private sector with the private sector taking the lead.
Once the private sector has proposed its solution the
government can then determine whether and how to support it.
Now, thus far, Mr. Chairman, I have spoken only to the
front end of the fuel cycle. As part of its overall nuclear
fuel cycle strategy, I believe the government must place top
priority on assuring that a permanent disposal mechanism for
used fuel is implemented as soon as possible. Later this year,
the Department of Energy will issue its site recommendation for
the Yucca Mountain project, and this recommendation must be
acted on promptly and a path forward defined and funded as soon
as possible.
Mr. Chairman, in summary, if the government and private
sector evaluate the nuclear fuel supply situation in the United
States and decide that reliance on non-U.S. sources is
acceptable due to the high costs and risks involved in
developing or maintaining our own domestic industry, that is
okay.
However, an immediate public policy debate is warranted on
how best to assure that that doesn't happen by sheer neglect.
We need a competitively priced nuclear fuel supply source in
the United States or abroad to provide reliable low-cost
electricity to our nations.
I thank you, and I would be pleased to respond to your
questions.
[The prepared statement of John R. Longenecker follows:]
Prepared Statement of John R. Longenecker, Longenecker & Associates,
Inc., Management Consultants
Mr. Chairman, thank you for this opportunity to address the
Subcommittee on Energy and Air Quality on the issues involved with the
US nuclear fuel cycle. I have been involved with nuclear energy and
nuclear fuel cycle issues for more than 28 years, and previously
managed DOE's uranium enrichment business as Deputy Assistant Secretary
of DOE, and later as the first Transition Manager of USEC.
Today, parts of the nation, including my home state of California,
are experiencing electricity shortages, with rolling blackouts that
disrupt business and productivity in some of the nation's key high-tech
industrial regions. Nuclear power currently represents about 20% of
electrical power consumed in the US, and any uncertainty regarding the
reliable and economic supply of fuel to US nuclear power plants could
pose a serious threat to our nation.
My key conclusions regarding the US nuclear fuel cycle industry are
as follows:
1. A reliable, economic supply of nuclear fuel is essential to the
future energy security of the United States. That supply in
endangered.
2. US nuclear fuel cycle companies are being challenged by a range of
factors including the sale of Russian HEU, US HEU, and USEC's
inventories of natural and enriched uranium.
3. A very severe situation exists in the uranium enrichment business,
where the US is operating 50-year-old plants, has no proven
technology to replace them, and relies on Russian HEU blending
to meet more than half of all customer deliveries. Constructing
new, cost competitive enrichment capacity in the United States
as soon as possible is critical to the future of all parts of
the US nuclear fuel cycle industry.
4. Maintaining political and financial stability for the Russian HEU
Agreement is essential for the fulfillment of international
policy objectives.
However, the US government should carefully consider (a) the
assignment of the role of Executive Agent on behalf of the US
government, (b) how the billion dollar trading profits from
brokering Russian enriched uranium should be allocated, and (c)
whether it is in the best interests of the United States to
allow USEC to broker additional supplies of enriched uranium
from Russian commercial enrichment plants.
5. Government subsidies for non-competitive companies and trade
sanctions against foreign competitors do not build a
sustainable basis for the continued use of nuclear power in the
United States. It is particularly alarming that the antidumping
action brought by USEC against its European competitors could
increase fuel costs to US ratepayers by $650 million to $1.2
billion per year, and has created uncertainty about assurance
of supply under existing import contracts.
6. The United States must define a comprehensive strategy to maintain
viable, competitive nuclear fuel supplies for this country for
the decades ahead. The roles in implementing a long-term
strategy to keep the US nuclear industry competitive must be
clear, and must include substantial participation by both the
government and private sector, with the private sector taking
the lead.
BACKGROUND
The nuclear fuel cycle market is restructuring and consolidating.
This restructuring has had some painful effects, exacerbated by the
sale of Russian Highly Enriched Uranium, US HEU, and USEC's inventories
of natural and enriched uranium.
Maintaining political and financial stability for the Russian HEU
Agreement is essential for the fulfillment of international policy
objectives. The US government's goal must be to assure that the
Agreement's supply contract stabilizes delivery arrangements for the
next 15 years.
The viability of the Agreement must not be jeopardized if newly
negotiated pricing terms or conditions in the contract fail to assure
the continuity of deliveries.
However, the Russian HEU contract is only one part of the equation.
The United States must have an overarching objective to define a
comprehensive strategy to maintain viable, competitive nuclear fuel
supplies for this country for the decades ahead. Short term fixes and
band-aid approaches must be avoided.
Today's highly competitive market is no surprise to anyone who has
followed the nuclear fuel markets over the past 20 years. We have known
for more than a decade that due to the construction of fewer nuclear
power plants than originally projected and HEU blending, nuclear fuel
supply exceeds demand in every sector. We have also known for more than
25 years that US gaseous diffusion uranium enrichment technology would
become economically obsolete and would need to be replaced. However,
today the US lacks any plan to address the key nuclear fuel cycle
issues both in the near term and in the long term.
In the context of assuring reasonable nuclear fuel supply at
competitive prices, I believe that the US must assure that it is not
totally reliant on non-US sources for its fuel. However, in order to
survive, US fuel supply companies themselves must be competitive.
Government subsidies for non-competitive companies and trade sanctions
against foreign competitors do not build a sustainable basis for the
continued use of nuclear power in the United States.
For example, the antidumping action brought by USEC against its
European competitors in late 2000, has created significant market
uncertainties, and could increase fuel costs to US ratepayers by $650
million to $1.2 billion per year.
In the final analysis, US citizens end up paying the bill for such
actions, either though higher taxes or higher electricity rates. The US
nuclear fuel businesses must be able to compete head-to-head in the
world nuclear fuel market.
To develop a comprehensive nuclear fuel cycle strategy will require
collaboration among the Congress, the Administration, industry, labor,
state governments, and other constituencies. The ultimate goal must be
to have a competitive, stable, viable nuclear fuel supply for this
country. Reliability of supply and price are crucial elements in this
plan. More specifically, we must assure that nuclear fuel prices do not
suffer a shock similar to that experienced with natural gas prices
recently. Fuel prices must be stable and predictable if the nation is
to rely on nuclear power as part of its supply mix for the future.
The roles in implementing a long-term strategy to keep the US
nuclear industry competitive must be clear, and must include
substantial participation by both the government and private sector.
The nuclear power industry must not and will not rely on the government
to implement a solution. The private sector should take the lead.
However, the government also has a key role to play. This role should
be defined after the private sector plan is defined.
A key policy debate revolves around the Russian HEU Agreement. At
present the Russian HEU contract is under re-negotiation and will
expire on December 31, 2001. The contract has already generated
substantial profits for the exclusive US Executive Agent, USEC. Under
USEC's proposed ``market based'' revision to the supply contract with
Tenex, the Russian Executive Agent, trading profits are estimated to be
$1 billion or more over the next 10 years. USEC has also sought
Administration approval to import and resell an additional one million
SWU per year from Russian commercial enrichment facilities.
Since this is a government-to-government agreement, and the
Executive Agent is selected by the US government, there needs to be an
open dialogue regarding whether and how profits generated by this
government created franchise are allocated to promote the long-term
viability of the nuclear fuel cycle industry.
More specifically, should this billion-dollar benefit accrue solely
to USEC, for use at its discretion, or should the US government have
some say in how the trading profits from this government-to-government
agreement are utilized?
As part of this dialogue, consideration should be given to
establishing a second Executive Agent that would purchase a portion of
the low enriched uranium derived from HEU now being blended in Russia.
Such action could increase the assurance of continuity of the Russian
HEU Agreement, allow USEC to take advantage of its low marginal costs
by increasing production at Paducah and thereby enhance its near term
profits and viability by lowering its average GDP production costs.
URANIUM ENRICHMENT
Today, USEC is the only North American supplier of uranium
enrichment services, and the long-term future of this business is
highly uncertain. USEC is the high cost supplier in the market, and
enrichment operations at the GDPs in the future will operate at a loss.
USEC utilized only about 29% of its nameplate GDP capacity in 2000 (see
Table 1), and over the next year will supply a majority of its
customers needs from Russian and US HEU blending. This situation led to
the decision to close the Portsmouth GDP in 2001, and at some point in
the future will lead to the closure of the Paducah GDP. Trading profits
from the Russian HEU agreement and sale of natural and enriched uranium
inventories provide essentially all of USEC's cash ($150-200 million
per year) that is used to pay for dividends, capital upgrades, R&D, and
sales, general and administrative costs.
USEC is finding it more profitable to operate as a trader of
blended HEU rather than as a primary producer. This approach appears to
lead inevitably to USEC exiting the market as a primary producer. As a
result, constructing replacement enrichment capacity in the US should
be the key focus for the next few years.
Table 1--Worldwide capacity, sales and production of separative work
----------------------------------------------------------------------------------------------------------------
Nominal
Production Estimated 2000 Percent of Estimated
Capacity (MSWU/ Sales (MSWU/ Total 2000 Capacity
year) year) Sales Utilization
----------------------------------------------------------------------------------------------------------------
USEC (2 GDPs)................................... 18.5 11.0 32% *29%
COGEMA.......................................... 10.8 7.1 20% 66%
TENEX........................................... 14.0 8.5 24% 61%
URENCO.......................................... 4.8 4.8 14% 100%
Other........................................... 3.4 3.4 10% 100%
---------------------------------------------------------------
Total........................................... 51.5 34.8 100% 56%
----------------------------------------------------------------------------------------------------------------
* 5.5 million SWU supplied by Russian HEU
A reality of the uranium enrichment industry is that prices have
been declining since 1985. This decline was driven by the deployment
and gradual improvement of centrifuge technology, primarily in Europe.
The continuing decrease in prices should have been no surprise to
anyone, since the Department of Energy (see Figure 1) Office of Uranium
Enrichment, the predecessor to USEC, predicted this trend in 1984.
DOE committed to Congress and to its customers in 1985 to deploy
AVLIS technology to meet this challenge. As shown in Figure 1, DOE was
reasonably accurate in its price projections. Also as predicted by DOE,
Urenco added new enrichment capacity to the market with production
costs well below those of the US gaseous diffusion plants.
However, after an investment of about $1.5 billion, DOE did not
deploy AVLIS, instead transferring all rights to the technology to
USEC. In 1994, USEC announced plans to deploy AVLIS, and proceeded to
price aggressively in the market, only to cancel those plans in 1999
when it faced financial problems. USEC's credit rating was downgraded
to below investment grade (junk bond status) within 18 months of
privatization.
USEC's continued reliance on GDP technology in 2001 is not driven
by the competitiveness of GDP technology, but rather by its lack of a
proven technology to replace the GDPs. The high costs of GDP operation
have been recognized for years. In fact, the US Atomic Energy
Commission announced in the mid-1970s that its three GDPs were soon to
be economically obsolete. Thus, 25 years later we should not be
surprised that the Portsmouth GDP is closing, and that the closure and
replacement of the Paducah GDP is a reality that must be planned for.
What is surprising, and in fact astounding to many in the world, is
that despite the expenditure of more than $7 billion dollars of US
government funds on centrifuge and AVLIS technology development and
deployment over the past 40 years, the United States today is still
operating economically obsolete 50-year old gaseous diffusion plants.
In 1994, USEC announced its plans to have an AVLIS plant operating by
2002. If USEC had succeeded in this plan, it would have very different
future prospects than it has today.
The solution to the future competitiveness of the US uranium
enrichment industry was and still is the deployment of new, cost
competitive enrichment capacity. Low cost technologies have been
developed and deployed by non-US enrichment companies over the past
three decades, while the US has failed to follow through on past
commitments to deploy new low cost enrichment technologies. It is
ironic that the same companies who followed through with the investment
in advanced technologies and new enrichment capacity over the past
decades, now face trade sanctions in the US. In addition, US utilities
face supply uncertainties due to these possible sanctions.
However, even with proven technologies, there are risks inherent in
building any new enrichment capacity in the US. These include market
risks, regulatory risks, and actions by governments such as trade
restrictions. Assuming that these risks can be managed, Urenco and
Russian centrifuge technologies are the low cost proven production
options, and absent trade restrictions, are poised to dominate the
market for the foreseeable future. The question is whether the US will
cede this business to foreign suppliers.
The US DOE has proposed a revival of its centrifuge technology
program, but after being out of the centrifuge R&D arena for the last
15 years, the US has no proven advanced gas centrifuge (AGC) design,
limited design infrastructure, and no production infrastructure.
Although the US has a strong history in AGC development, the time,
costs and risks involved with developing a competitive design, proving
it, and deploying may be much less financially attractive than simply
relying on proven designs and equipment.
One path forward could be a private sector initiative to construct
an enrichment plant using proven technology, while the US government
pursues advanced technologies for the long term, either centrifuge or
laser, in an attempt to define an option that is substantially cheaper
than today's centrifuge plants. However, if the government decides to
pursue such an option, it must be soundly based to assure that the end
result will be a substantial economic advantage. If there is not a high
probability of such an advantage, government funds should not be spent.
The workers in the uranium enrichment industry have done a great
job keeping the US competitive for decades. However, with 50 year-old
GDP technology, they can only do so much. Furthermore, workers know
that there is no long-term future in working at economically obsolete
facilities. They need to know the path forward, or they will soon be
forced to move to other industries with the obvious loss of technical
expertise and skills.
Although it sometimes gets masked by rhetoric, the uranium
enrichment business is all about producing SWUs cheaper than you sell
them. If the US keeps this focus, it will have an economically viable
production base at the end of the decade.
URANIUM
Natural uranium is a critical element of the nuclear fuel cycle.
For the past several years, world production of uranium has been
substantially less than world demand.
The difference between production and consumption was made up from
HEU blending, enrichment of depleted uranium tails and inventory sales.
The largest single inventory seller was USEC, who sold about $100
million worth of inventories that it obtained from DOE prior to
privatization, in its fiscal year 2000 to raise cash for its
operations.
The countries with rich ore deposits today dominate the world
uranium market. Providing a measure of supply security to US utilities,
Canada, with its vast low cost reserves, is the world's largest
producer of uranium. As shown in Table 2, Australia was second, and
former Soviet Union countries were the third largest producer of
uranium in 1999.
US production was a small portion of world requirements, a
situation that is unlikely to change substantially even as prices
recover, due to relatively low uranium ore grades and high mining
costs.
A summary of 1999 uranium production follows:
Table 2--1999 Uranium Production
------------------------------------------------------------------------
Production % Of
World Production
------------------------------------------------------------------------
Canada.............................................. 27
Australia........................................... 19
Former Soviet Union................................. 18
Central Africa...................................... 10
Southern Africa..................................... 12
United States....................................... 6
Other............................................... 8
------------------------------------------------------------------------
World uranium prices in the spot market hit an historic low in real
terms in 2000, at about $7/lb before recovering to the current level of
about $8.20/lb. Prices have been strongly impacted by Russian HEU
blending and inventory sales. At present, about one third of world
uranium requirements are met from inventory sales and HEU blending.
Although most uranium is delivered to utilities under long-term
contracts at prices higher than spot market prices, inventory sales
have lowered even long-term prices.
Shown below in Table 3 are the spot prices for uranium over the
past decade. At present, spot uranium prices in the US market are about
$8.20/lb, with long-term prices at about $9.75/lb. Outside the US
market, which restricts the importation of Russian uranium, spot prices
are substantially less at about $6.75/lb.
Overall, the uranium market is expected to be challenging over the
next five years as USEC and other inventory sales and Russian HEU
blending continues. As these inventories are depleted, primary producer
sales will increase and prices should recover.
Table 3--Spot U<INF>3</INF>O<INF>8</INF> Price Trends 1990-2000--In Restricted Market
------------------------------------------------------------------------
Price/lb U<INF>3</INF>O<INF>8</INF> US
$
------------------------------------------------------------------------
1990.................................................. 9.73
1991.................................................. 8.73
1992.................................................. 8.55
1993.................................................. 10.10
1994.................................................. 9.37
1995.................................................. 11.36
1996.................................................. 15.50
1997.................................................. 12.09
1998.................................................. 10.42
1999.................................................. 10.20
2000.................................................. 8.37
------------------------------------------------------------------------
CONVERSION
The conversion of uranium concentrates into uranium hexafluoride
(UF<INF>6</INF>) for enrichment by GDP or centrifuge is commonly called
conversion. Although conversion represents a small portion of total
nuclear fuel cycle costs, it is an essential component. Worldwide
consumption in 2000 was about 52 M kg/year, as compared to installed
production of 63.2 M kg/year.
The principal suppliers of conversion services now include
ConverDyn in the US, Cameco in Canada, BNFL in the UK, Cogema in
France, and Minatom in Russia. Over the past decade, the worldwide
conversion capacity decreased with the closing of the Sequoyah Fuels
facility in Oklahoma, reducing the number of conversion suppliers in
North America from three to two. In addition, BNFL announced recently
that it would withdraw from the business in 2006, with Cameco assuming
ownership of its operations. Capacities of these plants are shown
below.
Table 5--Worldwide Uranium Conversion Capacity
------------------------------------------------------------------------
Plant
Capacity
MTU/year
------------------------------------------------------------------------
United States...................... ConverDyn............. 14,000
Canada............................. Cameco................ 12,500
China.............................. CNNC.................. 1,000
France............................. Comurhex.............. 14,350
Japan.............................. PNC................... 50
South Africa....................... AEC................... 1,000
United Kingdom..................... British Nuclear Fuels, 6,000
Ltd..
Russia............................. Minatom............... 14,000
India.............................. DAE................... 295
Total.............................. ...................... *63,195
------------------------------------------------------------------------
*(consumption 52,000)
Due to excess supplies and aggressive selling of
inventories by entities including USEC, conversion prices
decreased to about $5.75/kg in 1996, and to about $2.50/kg in
2000. However, recently conversion prices have recovered, and
now stand at about $4/kg for spot sales and $4.50/kg for long-
term contracts.
In the future, as inventories are depleted, the conversion
industry should stabilize. However, even though US customers
can take some comfort from having two North American suppliers,
further industry consolidation is possible.
Disposal of Used Fuel
As part of its overall nuclear fuel cycle strategy, the
government must place top priority on assuring that a permanent
disposal mechanism for used fuel is implemented as soon as
possible. Later this year, DOE will issue its site
recommendation for the Yucca Mountain Project. This
recommendation must be acted on promptly, and a path forward
defined and funded as quickly as possible.
Without some certainty on the disposal mechanism for used
fuel, no additional nuclear power plants will be built in the
United States.
Summary
In summary, now is the time for action to address the
critical issues in the supply of nuclear fuel cycle to US power
plants in a manner that is technically and financially sound.
Due to a range of factors, the future of US nuclear fuel supply
is in doubt. The situation is somewhat more secure for uranium
and conversion services due to the existence of competitive
supply sources in Canada, but the long-term prospects of USEC,
the only North American supplier of enrichment services, are
highly uncertain.
The current US situation results from market factors,
resource limitations, and in some instances from management
misjudgments. However, the reasons why we arrived at this
dysfunctional state are not as important as where we go from
here to address the problems.
If the government and private sector evaluate the nuclear
fuel supply situation and decide that reliance on non-US
sources is acceptable due to the high costs and risks involved
in developing or maintaining a competitive US industry, that's
okay.
However, an immediate public policy debate is warranted on
how best to assure the flow of competitively priced nuclear
fuel to provide reliable low cost electricity to our nation.
Thank you for your attention.
[GRAPHIC] [TIFF OMITTED] T1505.030
Mr. Norwood. Thank you, sir, for your time and generosity.
I would like to now introduce to the committee Ms. Anna
Aurilio, Legislative Director for U.S. PIRG in Washington, DC.
Ms. Aurilio?
STATEMENT OF ANNA AURILIO
Ms. Aurilio. Thank you, Mr. Chairman. Thanks for the
opportunity to speak this afternoon.
My name is Anna Aurilio. I am the Legislative Director for
the state Public Interest Research Groups. We are non-profit,
non-partisan, consumer and environmental advocacy groups active
across the country.
We have a long history of working on--working to shift the
country away from polluting energy sources such as fossil and
nuclear and toward energy efficiency and clean renewable energy
sources. Today I am going to focus primarily on our concerns
with nuclear power.
We believe that nuclear power is unsafe, uneconomic,
generates waste for which there are no sound solutions, and
should not be promoted as a future energy source. First of all,
nuclear power is unsafe. All aspects of the nuclear fuel cycle
pose tremendous risk to human beings and the environment.
For example, uranium mining has caused illness and death in
workers. There is a new type of uranium mining now being used
in some areas called in situ leaching. I can't think of an
easier way to contaminate precious and scarce groundwater
supplies out in the west.
Nuclear fuel from reactors after it comes out of a reactor
is perhaps the most lethal material that we have ever generated
on this earth. Just a few seconds of exposure can cause death.
Commercial nuclear power in this country has generated by
radioactivity 95 percent of the waste that future generations
will have to deal with.
Now, nuclear power plants are very complex. And, thus, the
threat of an accident is certainly something that people should
be concerned about. Obviously, two of the most tragic examples
were the accident at the Chernobyl nuclear reactor and at Three
Mile Island here in this country.
We are very concerned about the safety of the reactors
operating in this country, and we are astonished that the
industry and the Nuclear Regulatory Commission, instead of
taking another look at aging issues because reactors are
deteriorating with age more quickly than expected, particularly
reactor pressure vessels and steam generator tubes are
deteriorating more quickly than expected--and I have talked to
some of the scientists that did some of the initial
calculations.
We are astonished that the agency and the industry are
pushing to relax safety standards instead of trying to figure
out how best to protect the public.
Let me give you an example of something that happened in--
last year as an example of why the Nuclear Regulatory
Commission has standards and requirements that are just too
lax. In the early 1990's, the Commission proposed standards for
steam generator tubes. They were never implemented. Instead,
the industry has voluntary self-regulation for the most part.
In February 2000, the Indian Point Nuclear Generating
Station located just 24 miles from New York City had an
accident where a steam generator tube blew and released
radioactive steam. Now, the company was supposed to have
replaced these tubes, which is quite expensive, in 1993 but
never did thanks to NRC's lax oversight. Again, a reactor this
close to such a large population on the Hudson River poses a
severe threat. Regulations should be increased and enforced,
not loosened.
The second issue I would like to cover is that even though
capacity factors may be going up, nuclear power is still
unreliable. I was very amused to see on the NEI website a press
release saying that increased capacity could fuel California's
energy shortage, and yet, on February 3 of this year, the San
Onofre Nuclear Generating System had a breaker fire that has
caused it to be down for the past several weeks.
In fact, it is loss of this generation that is in part,
because it is unexpected, due to the rolling--causing the
rolling blackouts that California has currently been
experiencing.
Nuclear power is uneconomic. I was pleased to see that the
Energy Information Administration has got some more realistic
examples of nuclear generating costs. It is incredible to us
that the industry seems to shamelessly revise history and
pretend that it has transformed itself into a cost-effective
energy source, and yet it continues to ask for taxpayer and
ratepayer handouts.
Just a couple of things to raise the uneconomic nature of
nuclear power. In 1986, DOE looked at initial estimates of
costs for 75 reactors. It was $45 billion. The final cost to
construct those reactors was $145 billion.
I guess I will conclude right now, because I am sure you
will have questions.
[The prepared statement of Anna Aurilio follows:]
Prepared Statement of Anna Aurilio, Legislative Director, U.S. Public
Interest Research Group
Good afternoon, my name is Anna Aurilio and I'm the Legislative
Director of the U.S. Public Interest Research Group, or U.S. PIRG. U.S.
PIRG is the national office for the State PIRGs, which are
environmental, good government and consumer advocacy groups active
around the country. Thank you for the opportunity to speak today.
The state PIRGs have a long history of working for a clean
affordable energy future. Our goal is shift from polluting and
dangerous sources of energy such as nuclear and fossil energy to
increased energy efficiency and clean renewable energy sources.
Today I will be addressing nuclear energy issues. Nuclear power is
unsafe, unreliable, uneconomic and generates long-lived radioactive
wastes for which there is no safe solution. It should be phased out as
soon as possible and should not be encouraged as a future energy
source.
Since the late 1970's, the PIRGs have worked to protect the public
from unsafe, expensive nuclear reactors. PIRGs successfully opposed the
construction of several nuclear power plants because of cost, safety
and nuclear waste concerns. For example, in 1982, litigation by
MASSPIRG helped cancel the proposed Pilgrim 2 nuclear power plant. In
1983, NJPIRG helped cancel the proposed Hope Creek nuclear power plant.
CoPIRG worked for the creation of the Office of Consumer Counsel (OCC)
in 1984. The OCC was key in protecting ratepayers from being burdened
with ``stranded costs'' in the St. Vrain nuclear power plant case.
During reauthorization of the Price-Anderson Act, the PIRGs
successfully advocated for lower taxpayer liability in case of a
nuclear accident. From 1993 through 1995, PIRG helped shift more than
$500 million in nuclear and fossil R &D spending to efficiency and
renewable programs. During that time, we helped convince Congress to
eliminate funding for two extremely expensive advanced reactor
programs, the gas-cooled reactor and the Advanced Liquid Metal Reactor,
saving taxpayers at least $5.6 billion.
NUCLEAR POWER IS UNSAFE.
Nuclear power poses an unacceptable threat to humans and the
environment. All aspects of the nuclear fuel cycle pose a risk to
humans and the environment. Uranium mining and enrichment has caused
sickness and death in workers and has generated tons of mining and
enrichment wastes, which continue to threaten nearby communities.
Current uranium mining practices include ``in-situ'' leaching, which
pollutes precious aquifers in the arid West. Irradiated fuel from
nuclear reactors is perhaps the most toxic material generated by
humans. Unshielded, it delivers a lethal dose of radiation within
seconds. According to the Department of Energy, 95% of the radioactive
waste (by radioactivity) in this country has been generated by
commercial nuclear reactors.
Nuclear power plants are very complex and contain enormous amounts
of potential energy in the fuel at the core of the reactor. The most
tragic example of the dangers posed by this technology is the 1986
accident at the Chernobyl reactor in the Ukraine. The explosion and
core meltdown at Chernobyl released radiation that generated a plume
encompassing the entire Northern Hemisphere <SUP>1</SUP>. Here in the
U.S., in addition to the partial core meltdown at Three Mile Island in
1979 which forced the evacuation of nearly one hundred fifty thousand
people, there have been four other nuclear accidents in the U.S.
involving at least partial core meltdown.<SUP>2</SUP>
---------------------------------------------------------------------------
\1\ OECD Nuclear Energy Agency report ``Chernobyl Ten Years On,
Radiological and Health Impact'', November, 1995.
\2\ Public Citizen website http://www.citizen.org/Press/pr-
cmep84.htm
---------------------------------------------------------------------------
The potential consequences of a serious accident are staggering. A
1982 study by the Sandia National Laboratories found that a serious
accident at a U.S. nuclear reactor could cause hundreds to thousands of
deaths in the near term.<SUP>3</SUP> In 1985, in response to a question
posed by Representative Markey, an NRC commissioner responded that
there was a 45% chance of a severe nuclear accident in the following
twenty years.
---------------------------------------------------------------------------
\3\ Union of Concerned Scientists, Nuclear Plant Safety: Will the
Luck Run Out? December 15, 1998
---------------------------------------------------------------------------
We are therefore very concerned about the safety of nuclear
reactors currently operating in this country. We are astonished that
the industry and the regulatory agency have been lobbying for a
relaxation of safety standards and oversight and limiting the public's
access to these processes. We are concerned that utility deregulation
and new ownership of reactors may increase risks of accidents because
of increased pressure to run the plants closer to the margin. This risk
is heightened by the fact that the 103 operating reactors around the
country are deteriorating with age more quickly than expected. Even
Vice President Cheney acknowledged the aging problem on the television
show ``Hardball'' (March 21): ``[T]oday nuclear power--produces 20
percent of our electricity, but that's going to go down over time--
because some of these plants are wearing out.''
current regulation is inadequate to protect public health and safety.
For example, one aging-related problem is reactor embrittlement.
Cracks in the reactor vessel caused by constant neutron bombardment
could lead to a meltdown. When problems were found, the Nuclear
Regulatory Commission (NRC) simply changed the safety margins and
allowed the utilities to recalculate their compliance. Steam generators
are also susceptible to premature degradation. The failure of as few as
ten tubes can lead to a reactor meltdown, yet the NRC has inadequate
steam generator tube standards. For example, the Indian Point 2 nuclear
power plant is located 24 miles north of New York City, along the
Hudson River. It had been scheduled for steam generator tube
replacement in 1993, yet this never happened thanks to increasingly lax
NRC requirements. On February 2, 2000, a tube ruptured, releasing
radioactive steam.
There is a consistent pattern and history of lax NRC enforcement
and oversight ranging from fire prevention to worker fatigue. The
agency is focused on increasing the industry's profitability, not
protecting humans and the environment. In fact a recent letter to this
subcommittee from the NRC's Chairman Meserve reveals an agenda focused
on, among other things: wresting control of certain radioactive
materials regulation from the Environmental Protection Agency (EPA);
limiting the scope of NEPA (National Environmental Policy Act) review
for new power plants; and promoting new nuclear power plant siting.
None of these changes will lead to increased public health and safety.
In fact, the NRC has been battling with the EPA for years over
radiation standards. NRC's proposed standards are consistently less
protective than the EPA's.
nuclear power is unreliable.
Complex and often mis-managed nuclear power plants are subject to
frequent fires, leaks and other accidents. For example, the Nuclear
Energy Institute's website boasts that ``Increased Nuclear Output Would
Satisfy California's Residential Demand.'' <SUP>4</SUP> It fails to
mention a February 3 fire at the San Onofre Nuclear Generating Station
that has shut the plant for weeks and is a key factor in current
rolling blackouts in California.
---------------------------------------------------------------------------
\4\ http://www.nei.org/doc.asp?docid=724
---------------------------------------------------------------------------
NUCLEAR POWER IS UNECONOMIC.
Nuclear power would not exist in this country today if it weren't
for enormous subsidies paid for by ratepayers and taxpayers. Originally
touted as being ``too cheap to meter'', nuclear power plants are still
too expensive for America. The nuclear industry has received the vast
majority of energy research and development funding, a special
taxpayer-backed insurance policy known as the Price Anderson Act,
unjustified electric rates from state regulators, enormous and
unwarranted bailouts in state deregulation plans, taxpayer-funded
cleanup of uranium enrichment sites plus a giveaway of the Uranium
Enrichment Corporation, and an ultimately taxpayer-funded nuclear waste
dump. Many of the issues I raise here are described in more detail in
the Green Scissors report (www.greenscissors.org) released by U.S.
PIRG, Taxpayers for Common Sense and Friends of the Earth.
It is incredible that the nuclear industry shamelessly revises
history to pretend that it has transformed itself into a cost effective
energy source. Yet the industry continues to ask for more handouts.
TAXPAYER DOLLARS SHOULD NOT BE USED FOR MORE NUCLEAR RESEARCH AND
DEVELOPMENT FUNDING.
According to the Congressional Research Service, nuclear research
and development has gotten more than 60%, or $66 billion in energy
research and development funding from 1948-1998. Led by Representative
Markey and others, Congress wisely killed funding for the gas-cooled
reactor and the breeder reactor, saving taxpayers at least $5.6
billion.
Now proposals to revive research programs to develop these
uneconomic and dangerous reactors are creeping into the Department of
Energy's budget. Supporters of the gas-cooled reactor proposed for
South Africa may tout its cost. They do not highlight the fact that the
design cuts costs by not building containment. The breeder reactor
supporters ignore the dismal failure of France's breeder reactor
program and the chance of a reactor explosion if the coolant (usually
highly reactive sodium) leaks.
PHASE OUT THE PRICE ANDERSON ACT.
The industry is also lobbying for an extension of the Price
Anderson Act, which is due to expire in 2002. This law, passed in 1957
and amended in 1988 provides a taxpayer funded insurance for the
nuclear industry in the event of an accident. We believe that this
insurance program is an unwarranted taxpayer subsidy to the nuclear
industry that has no parallel in any other industry. During
reauthorization of the Price Anderson Act, PIRG and others successfully
fought for lower taxpayer liability in the event of an accident.
The American public is being barraged by misleading NEI ads touting
the safety and positive economics of nuclear power. Yet the February 28
letter from NRC Commissioner Meserve to Chairman Barton states,
``[W]ithout the framework provided by the Act, private-sector
participation in nuclear power would be discouraged by the risk of
large liabilities.'' The Federal Trade Commission has said that NEI's
``advertising campaign touting nuclear power as environmentally clean
was without substantiation.'' Several reactors are extending their
operating licenses through a process which cuts out the public and
essentially rubber-stamps the renewal application. If these plants are
safe and economical enough to get a license extension, they shouldn't
need a taxpayer-backed insurance plan.
PROTECT CITIZENS FROM UNJUSTIFIED RATE INCREASES AND BAILOUTS AT THE
STATE LEVEL.
We realize that this committee does not have jurisdiction over
state deregulation and rate-making. However, in analyzing current
electricity problems, it is important to recognize the magnitude of the
ratepayer subsidies enjoyed by this industry and the role these
subsidies have played in blocking competition and propping up
economically marginal nuclear power plants.
In the 1980's, the PIRGs successfully blocked unjustified rate
increases for nuclear power mismanagement. As states across the country
restructured their electricity markets, the promise to consumers was
that these changes would provide competition among electricity
providers. Instead, utilities lobbied, and for the most part received,
an unjustified ratepayer-funded bailout of their uneconomic
investments, usually nuclear power plants. The PIRGs, free market, and
other consumer and environmental groups in several states fought back
against these requests for ``stranded cost'' recovery. We argued that
these bailouts were unjustified and unfair to consumers and would
hamper efforts to shift towards clean energy. According to a report
released in 1998 with the Safe Energy Communication Council entitled
``Ratepayer Robbery'' we estimated these bailouts could total more than
$112 billion for just eleven states. There is strong evidence that
without these bailouts, almost half of the nuclear power plants would
have shut down. Instead, aging plants have been given a new lease on
life, are in some cases, still shielded from market forces. Some have
been sold at rock-bottom prices to new owners who have every incentive
to run them close to the margin.
curb taxpayer costs for nuclear waste and index the fee to inflation.
The nuclear industry is the only industry that we are aware of
which has a government program to guarantee disposal of lethal waste.
We agree with the industry that the DOE has mismanaged the program.
However, our solution is stop spending money on the program and insure
that enough money is collected now to adequately cover future costs of
a sound waste disposal program. A 1998 financial review commissioned by
the State of Nevada concluded that the funding shortfall for the
program would range from $12 to $17 billion in 1996 dollars. We urge
that the Nuclear Waste Fund Fee be indexed to inflation so that there
will be adequate funds to cover the ultimate cost of nuclear waste
disposition.
THERE IS NO CURRENT SOUND SOLUTION FOR THE NUCLEAR WASTE PROBLEM.
Nuclear waste is one of the most dangerous substances created by
humans. This waste remains dangerous for at least a quarter of a
million years (based on the decay of Pu-239). One would expect that
policies for dealing with this lethal material would be based on sound
science and protecting public health. Instead nuclear waste policies in
this country have been based on political expediency. The incredible
problems faced by citizens living near former DOE weapons sites, such
as Hanford, Washington should be a lesson to those who want to ignore
science and public health.
We believe that the current project should be stopped, as the
proposed dump site at Yucca Mountain cannot meet current standards for
containing the waste. In 1998, PIRG and more than one hundred
environmental, consumer and safe energy organizations petitioned then-
Energy Secretary Richardson to disqualify Yucca Mountain because it
would not meet current standards for containing the waste. Instead, DOE
is in the process of weakening the current site guidelines, a clear
case of changing the rules when science gives the answer that is not
wanted.
We are pleased that President Clinton vetoed dangerous nuclear
waste legislation last year. This legislation would have interfered
with EPA's ability to set radiation standards and would have
prematurely moved nuclear waste to Yucca Mountain, unnecessarily
risking the lives of millions of Americans who live along the transport
routes. We are concerned that there are ongoing efforts by both the
Department of Energy and Nuclear Regulatory Commission to weaken
radiation standards for the site. We are also concerned that EPA's
ongoing review will lead to a standard that will not adequately protect
Nevadans who live near the site.
We urge this committee to re-examine nuclear waste policy and
develop a public, fair process based on sound science and protecting
the public for deciding the ultimate fate of this extremely dangerous
material. No country in the world has a permanent solution to this
problem. The U.S. should reject its current mismanaged program that
relies on changing the rules when the science isn't favorable to the
industry's solution. Instead, we should show leadership by developing a
solution focused on sound science and protecting the public.
CONCLUSION
Nuclear power is unsafe, uneconomic, unreliable and generates waste
for which there is no sound solution. It is a failed technology of the
past and would not exist were it not for enormous and unjustified
government subsidies and policies. The U.S. should do everything it can
to protect the health and safety of the public as well as our
pocketbooks. Nuclear power should be phased out as quickly as possible
and replaced by energy efficiency and clean renewable energy.
Mr. Norwood. Thank you, Ms. Aurilio. We appreciate your
being here and your time.
Let me start the questions simply by maybe trying to set
the record straight. I am sorry my friend, Mr. Markey, is not
here, but he brought up the question of stranded cost in terms
of deregulation of electricity.
And I think it is fair for the record to note that though
the economics have gotten much better, not all power plants are
the same, and the one we happen to have was built under Jimmy
Carter's 21 percent interest rate. So it is a little different
scenario when you had to spend that much, and were forced to
build the plant, incidentally.
Mr. Hutchinson and others, let me follow up on a question
Mr. Largent asked to the earlier panel, particularly the
gentleman from DOE. And the question was, why don't we
reprocess spent nuclear fuel in this country? And he gave a
very short answer. He simply said, ``Well, that is too
expensive.'' Do you agree with that? Is that the correct answer
to the question Mr. Largent posed to him?
Mr. Hutchinson. It is not economical in this country at
this time. That doesn't mean it might not be at some time in
the future. That is why I think----
Mr. Norwood. Is it economical in France?
Mr. Hutchinson. I don't know.
Mr. Norwood. I mean, I danced on those rods that Senator
Domenici--well, is it economical in Britain?
Mr. Hutchinson. Well, I know there is discussion going on
in Britain today as to whether they will continue to reprocess
fuel due to economics. But, clearly, it is not economical in
this country, but that doesn't mean it might not be at some
time in the future, which is why I think, you know, R&D in this
area is important, to preserve that option.
Mr. Norwood. Well, should we move forward with mixed oxide
plants reprocessing in this country?
Mr. Hutchinson. I don't think we ought to eliminate any
possible source of energy.
Mr. Norwood. Why I am confused is that I am told by the
Brits 5 years ago that they did not use any of their tax
dollars for their energy department in Britain, because they
made so much money reprocessing fuel for Japan. Does anybody
want to comment on that? Anybody want to say that is incorrect?
Mr. Hutchinson. I am not----
Mr. Norwood. If you know it is, I need to know. You know
these British. They may have tricked me.
Mr. Longenecker. Mr. Chairman, could I try an answer to
that, please?
Mr. Norwood. Yes, Mr. Longenecker.
Mr. Longenecker. Back in the early days when Mr. Barton and
I first met about 20 years ago, in the Department of Energy,
you will recall at that time uranium prices were about $40 a
pound and projected to go at this time to maybe $70 to $100 a
pound. Reprocessing spent fuel and separating out the reusable
uranium and plutonium at $70 a pound uranium would make
economic sense.
At that time, the French and British were processing
industries, were planned, and we began an industry here in the
United States. Today uranium prices are about $8 a pound, and
that is due to a number of finds of very rich reserves in
Canada and Australia, and other factors.
Uranium is a finite resource, and so we have to think about
the mined uranium and plutonium that is in that spent fuel.
Mixed oxide makes sense in this country today because it is a
good way of getting rid of the excess plutonium that we have
around the country that is very expensive to store.
I think proceeding with mixed oxide technology now builds
the technology base, and later we have the option, if uranium
reserves are finite and the Nation and the world continues to
rely on nuclear, to go get that and reprocess it. So I think
that the question as to whether you permanently dispose of
material in Yucca Mountain or whether you preserve the option
to retrieve it later is a very important one.
Mr. Norwood. Ms. Aurilio, I only have a minute, and I do
have a question I particularly wanted to ask you. If nuclear
power, which, of course, does not emit any Greenhouse gases is
phased out, with what would you propose we replace the 20
percent of the Nation's power supply that we would lose?
Ms. Aurilio. I believe that the future of this country is
going to lie in becoming more energy efficient, and we have
been perplexed as to why the Bush Administration seems to be
ignoring energy efficiency, which can save consumers money,
avoid pollution----
Mr. Norwood. So you think if we are all more efficient we
can do away with the 20 percent of energy that nuclear power
presents?
Ms. Aurilio. It is certainly conceivable. And then the
other piece of it in terms----
Mr. Norwood. Now, you are going to be ready to prove that,
aren't you?
Ms. Aurilio. In terms of new generating capacity, wind
energy is actually quite economical, and I want to just draw a
contrast. This week in Germany, farmers in Germany are
blockading the streets because they don't want the reprocessed
fuel to be driven through their farmlands and potentially
contaminate their farmlands, while in Iowa farmers are getting
$2,000 a year per wind turbine to put wind turbines on their
farms. They still farm----
Mr. Norwood. Let me interrupt to ask you the last part of
this question before the time runs out. If you believe that
renewables could perhaps replace that 20 percent, I know you
wouldn't sit here and tell me that unless you knew what the
cost of that would be to the nation.
Don't count hydropower, hydroelectric power. Just what
would it cost this Nation's economy to switch from nuclear to
renewables to pick up that 20 percent? I don't know if
conservation is going to get the job done. They are working on
it in California.
Ms. Aurilio. Yes. I actually think that it has to be a mix
of conservation and renewables.
Mr. Norwood. Tell me what the cost is.
Ms. Aurilio. Right now, wind energy plants are at about 4
to 6 cents a kilowatt hour, and some are as low as 3 cents per
kilowatt hour. So I actually think that trying to revive the
nuclear industry will bankrupt this country, whereas going
toward energy efficiency, conservation, and renewable energy is
the way of the future.
Mr. Norwood. So renewables, if we go that way, it will
bankrupt this country.
Ms. Aurilio. No, that is not what I said at all, sir.
Mr. Norwood. Well, say it again, then.
Ms. Aurilio. I said wind energy right now is going at 4 to
6 cents a kilowatt hour.
Mr. Norwood. Yes.
Ms. Aurilio. The best wind sites are actually as low as 3
cents a kilowatt hour. I heard the person from Energy
Information Administration actually say that the costs of new
nuclear power plants were at least 6 cents a kilowatt hour, so
I would say that wind is actually cheaper. And by her charts,
it is cheaper than new nuclear energy.
Mr. Norwood. So you would think we would get out there and
build some windmills right now.
Ms. Aurilio. In fact, in Iowa, as I said, they are building
windmills. In Colorado, wind came in at less than the cost of a
new gas-fired power plant, and the utility is building
windmills.
Mr. Norwood. Well, the private investment, the magnitude of
that, is gigantic. There is no question about it. And it has
got to be questionable, in my mind, if we did away--let us just
say tomorrow we closed all nuclear power plants which shuts off
20 percent of the electricity to this country and replaced it
immediately with wind. Somebody better be very, very right when
they make a statement like that. Otherwise, it is going to
cause this country a great deal of trouble.
With that, I yield back the balance of my time. And, Mr.
Strickland, you are up.
Mr. Strickland. Thank you, Mr. Chairman.
Mr. Longenecker, I have a question regarding new
technology. I think you indicated USEC has an aging expensive
technology. Given USEC's financial condition, do you foresee
USEC employing a new uranium enrichment technology in the next
few years?
Mr. Longenecker. No.
Mr. Strickland. That being the case, what alternatives are
there for us as a government, and what do you think the likely
outcome will be, using your best judgment?
Mr. Longenecker. Well, as I said, this is a good job for
the private sector. There are a lot of good technologies out
there. There are a lot of very highly qualified nuclear
companies in the United States and in the world. And in my
estimate, because that is our job is to follow this industry,
we project that you could build in the United States a new
uranium enrichment plant using proven European technology in
about 5 years with NRC licensing.
Russian technology would take slightly longer, and, you
know, there are some--within a decade, you might also be able
to implement some other options that are currently being worked
on in research and development. But I would say there are a
number of options that can be implemented within a decade, and
the company that does it needs to have a strong financial
background and access to the technology, neither of which USEC
has at this time.
Mr. Strickland. What role do you think the government
should most appropriately play in the development of a new
technology, if any?
Mr. Longenecker. The difficulty that I have in defining
that is I think you need to wait for the private sector
solution to come forward. If someone wants to build a plant in
the United States, they may do it with no government support
whatsoever. And I think it behooves us to wait until that
private sector solution has been developed.
If you think about it, in 10 years, if it is a government
solution--what worries me about the government trying to do
this was 10 years is five Congresses and three Presidential
elections and 10 annual budgets. And as you well know, the
United States in the 20 years that I have been involved in this
industry has spent $7 billion, as I say in my testimony, on
centrifuge and laser, and we have no new capacity to show for
it.
So if this is a critical time, then I would put my money on
the private sector this time around, and let them define what
government support they need.
Mr. Strickland. Mr. Sproat, I would like to ask you about
your involvement or your company's involvement in the Pebble
Bed technology. And the question I have, have you looked at the
implications of the fuel that you are going to need, or I
understand that you are going to need for this technology?
Is the fact that we perhaps will not have the enrichment
capacity at a level that you would need a hindrance or a
detriment in your decision to move forward and to invest in
this technology?
Mr. Sproat. I think, Mr. Strickland, the answer to that is
we are clearly looking at that. With this technology, there are
a number of unresolved issues, the economics being one of them,
at this stage of the game. And it would certainly be a factor
in our decision. However, as Mr. Longenecker said, that we
believe there may be some private sector solutions to the
enrichment issue.
I think as you pointed out earlier today, that we are going
to require, if we proceed with the project, 8 to 9 percent
enrichment in that fuel. And right now we have no currently
available domestic sources for that. And that first fuel would
probably come from South Africa with an enriched feed stock
from Russia.
Mr. Strickland. Isn't it true, though, that you could get
that fuel from the current plant in Ohio, if necessary?
Mr. Sproat. I believe so. It would need to be relicensed, I
believe, for the higher enrichment levels. Let us put it this
way, we would certainly prefer to have a domestic source of
enriched feed stock for this plant.
Mr. Strickland. Yes. And if I am not misled, I believe the
Portsmouth plant is currently licensed to enrich up to 10
percent.
Mr. Sproat. It may be. I am just not sure.
Mr. Strickland. In terms of the utility industry or
industries, is there concern--and if there is concern, how
great is that concern--that we are not paying sufficient
attention to making sure that we have a domestic, economic,
reliable source of enriched uranium?
Mr. Sproat. There is a very large concern to that effect.
The large nuclear generating utilities don't want to be in a
position where they are held hostage to a single supplier, and
where we don't have some alternatives. And we also want to make
sure we have an economically competitive source of enriched
feed stock for the fuel, so that is a major concern of ours
right now.
Mr. Strickland. Thank you.
Thank you, Mr. Chairman.
Mr. Barton. Thank you, Congressman.
The Chair would recognize himself. My first question to the
panelists that tend to be generally supportive of nuclear
power--what action, if any, does this Congress and the Federal
Government need to take in this session to make the nuclear
option a real option?
Mr. Hutchinson. As I have said in my remarks, we look
forward to the study being completed at Yucca Mountain. That
recommendation will be made----
Mr. Barton. So a high-level waste bill that the President
signs.
Mr. Hutchinson. We would support and favor repeal of the
PUCA Act. There are a handful of utilities that that impacts.
My utility is one of those.
Mr. Barton. That is kind of utility generic as opposed to
nuclear power specific. Anything else?
Mr. Hutchinson. We certainly want to know that the
regulatory processes going forward are dependable, timely, sort
of thing, so we need to be sure that that is----
Mr. Barton. So there are some things that the NRC, in terms
of their process----
Mr. Hutchinson. Well, the NRC is looking at that process
and is, you know, I think doing an admirable job at this point
of identifying areas that they can improve in. The license
renewal is an example of that. In our view, it has gone very
well.
Mr. Barton. Mr. Tollison or Mr. Sproat or Mr. Longenecker,
other than a high-level waste bill, is there any other specific
legislative action that is specific to the nuclear industry
that you would recommend?
Mr. Tollison. Well, we do need renewal of the Price-
Anderson Act. That is----
Mr. Barton. Reauthorization of Price-Anderson.
Mr. Tollison. [continuing] very important. And the sooner
and the better.
Mr. Barton. Okay. Mr. Sproat or Mr. Longenecker?
Mr. Sproat. Mr. Chairman, I would say that one of the
issues that Dr. Travers referred to earlier regarding the loss
of technical expertise within the NRC and the national labs I
think is a very key issue in terms of making sure--
particularly, say, if we bring in new advanced nuclear
technologies, making sure that we have people in the Federal
Government who have the capabilities to review those
technologies and are qualified to review them I think is very
key.
I also think that a couple of the issues are brought out in
my testimony regarding the fact that a number--the regulatory
framework in this country was written in anticipation of a
regulated utility industry building nuclear power plants, and
we are clearly moving away from that into a deregulated
marketplace where there will be merchant nuclear power plants.
And some of the key top-level regulatory guidance or regulatory
requirements need to be looked at and revised to recognize that
changing marketplace.
Mr. Barton. My next question, assuming a perfect world--you
always hear in marketing a perfect world, and assume a perfect
world; you never get it, but in all of the classes I took in
business school the first assumption was perfect world and
perfect knowledge.
Where would nuclear power be economical to consider as an
option, again, if you take all of the political and
environmental issues off the table? New nuclear power plants at
3 cents a kilowatt hour, 4 cents, 5, 6, at the generation,
where is it a real economic option compared to coal or natural
gas?
Mr. Sproat. Well, if I could answer that, just to give you
a benchmark. As we are evaluating the Pebble Bed Modular
Reactor, we are evaluating against gas-fired combined-cycle gas
turbine plants that assume long-term gas prices of about $3.50
per million BTU. And we think that if we can produce a power
plant that has all-in costs at between 3 and 3.5 cents a
kilowatt hour, we will not only be able to compete but we will
be able to earn a significant return for our shareholders.
Mr. Barton. ``All-in'' means construction and operations.
Mr. Sproat. And operating and decommissioning funding and
spent fuel disposal.
Mr. Barton. Okay. Does everybody tend to agree with that?
Mr. Longenecker?
Mr. Longenecker. Mr. Chairman, as you know, living in
California where we are paying about 20 cents a kilowatt hour
in San Diego, and finding it very difficult to----
Mr. Barton. When you can get it.
Mr. Longenecker. [continuing] when we can get it, and
finding it very difficult to find wholesale sources at 6 cents,
a much higher threshold would apply.
Mr. Barton. You know in California there is a state law.
You couldn't build in a nuclear power plant in California, even
if it was economical, until we get a solution to the waste
issue.
Mr. Longenecker. Yes, sir. But I was addressing your
question of if another plant could be----
Mr. Barton. In a perfect world, perfect----
Mr. Longenecker. Yes. Let me also add on your legislative
question, on December 31 of this year, Mr. Chairman, the
Russian highly enriched uranium agreement expires.
And I think it does warrant, as I said in my overview
remarks, some look by Congress on who the executive agent
should be, whether that continues to remain with USEC or
whether it should be allocated, some of that, to another
executive agent, because the stability of that agreement,
keeping that material off the market and putting it to use in
nuclear power plants is a very, very important aspect of
international policy for this country.
Mr. Barton. Okay. Mr. Sproat, on the Pebble Bed Reactor,
what is the main advantage to your company of considering that?
Is it the size of it, the modularity of it, the passive safety
design of it? I mean, what is the--what is it that attracts
your company to looking at that design as compared to some of
the designs that the NRC--the next generation that they have
already certified?
Mr. Sproat. I think, Mr. Chairman, you summarized some of
the key characteristics. It is--because of its small size, it
can be built--once we have it--have the design certified by the
NRC, we believe it can be built in approximately 24 months per
unit as opposed to between 5 to 7 years per unit for a
conventional size nuclear power plant.
Small capital investment required. Each unit would probably
require between $110 to $125 million per unit as opposed to
several billion dollars per unit. So the capital risk is much
lower. And with that lower capital cost, we do believe it has
the potential--and this is a key issue for us that we have not
resolved yet--is that if we can bring it in in that 3 to 3.5
cents per kilowatt hour, the economics will make it----
Mr. Barton. Of the next generation designs that the NRC has
already certified, none of them are that size? They are all
bigger?
Mr. Sproat. All of them are larger. They would take longer
to build. They require a larger capital investment. And the
lowest price we believe we can get for an all-in cost out of
that technology is somewhere in the neighborhood of about 6 to
7 cents a kilowatt hour.
Mr. Barton. How do you answer the question about the
enrichment of the fuel for the Pebble Bed Reactor? It is a lot
higher enrichment----
Mr. Sproat. Right.
Mr. Barton. [continuing] required than what is commercially
available right now, I am told, on the market.
Mr. Sproat. That is correct.
Mr. Barton. How do you answer that question?
Mr. Sproat. Well, I think our--right now, as I said, we
don't have a domestic source for that enrichment. We would like
to get one, and we are exploring a couple of different options.
Mr. Barton. I mean, is it technically feasible----
Mr. Sproat. It is absolutely technically feasible.
Mr. Barton. [continuing] and within all the various
national security protocols?
Mr. Sproat. Yes.
Mr. Barton. To get that highly enriched----
Mr. Sproat. It is technically feasible, as well as, you
know, there--we haven't explored, but another possible option
is downblending of military fuel into a lower----
Mr. Barton. And who would actually--I am told you would
actually have to build an enrichment plant to do that. Is that
true or not true? And if it is true, who would build it? Would
that be a private sector company, or would it be----
Mr. Sproat. We are exploring some options that are
primarily focused on the private sector.
Mr. Barton. Okay.
Mr. Sproat. But I am really not prepared to talk about
that.
Mr. Barton. My time has expired, but I want to ask Ms.
Aurilio a question. I looked at your bio and it is pretty
impressive. You have got a physics degree from Amherst, and you
have got an environmental engineering degree from MIT. So that
is--that impresses me, since I am an engineer with an MBA and a
registered professional engineer.
So I am going to assume that you are more than just another
pretty face coming before this subcommittee, that you actually
have a brain and you are very committed to what you believe in,
and you have spoken very eloquently.
Now, in the answer to Congressman Norwood's question, you
talked about Three Mile Island and Chernobyl. What was the
containment structure at Chernobyl?
Ms. Aurilio. The containment structure at Chernobyl was
inadequate to contain the accident and----
Mr. Barton. Isn't it true that there was no containment
structure?
Ms. Aurilio. And it was inadequate, and that is exactly
what the problem with the PBMR is.
Mr. Barton. The second question--wait a minute. They didn't
have one. Do we have any reactor in the United States in the
commercial power generation that doesn't have a containment
structure?
Ms. Aurilio. No, we don't.
Mr. Barton. Okay.
Ms. Aurilio. But the PBMR is saying that they are going to
cut capital costs by not having a containment structure.
Mr. Barton. Well, now, I didn't ask that. I am just--you
are a physicist and you are an environmental engineer, and you
put Chernobyl on the table. So you have an--at least I have an
obligation, if we are going to have a record on Chernobyl, let
us have a record. There was no containment structure at
Chernobyl.
What was the design of the reactor at Chernobyl? Was it a
lightwater reactor? Was it a high pressure reactor? Or was it a
design that we have not even built since the research stage in
this country, something called a hot graphite reactor?
Ms. Aurilio. It was a graphite moderated reactor, known as
the RBMK.
Mr. Barton. Right. Now, isn't that inherently one of the
least safe reactors? Do we have any of those types of designs
even being thought about in this country?
Ms. Aurilio. We don't, but the PBMR----
Mr. Barton. All right.
Ms. Aurilio. [continuing] would also be graphite moderated.
Mr. Barton. So isn't it a little unfair--it is no
requirement that people that testify be fair. I mean, just to
be honest about it. The whole point of this is to develop a
record, but it is at least somewhat disingenuous to say the
word ``Chernobyl'' as if that would even be a possibility.
It is a different design, a very poor design. It was poorly
manufactured. There was no containment. The operators weren't
very well trained. Totally different than what we are talking
about. Wouldn't you agree with that?
Now, you can still be against nuclear power. You are not
unique in that. But somebody with your background, as smart as
you are, should try to be a little less disingenuous. Is that a
fair statement, or is that an unfair statement on my part?
Ms. Aurilio. With all due respect, Mr. Chairman, I believe
nuclear fission reactors are inherently unsafe.
Mr. Barton. I understand that.
Ms. Aurilio. The Chernobyl reactor is a different design
than U.S. reactors are, but we have played around with a lot of
different designs in this country. And we have some grave
safety concerns about the proposed PBMR reactor.
Mr. Barton. No. Have you had a chance--you and your group--
to look at this Pebble Bed? Because I am told that just the
inherent design of it, it is much more passively safe, that
it--you know, whereas the Chernobyl reactor was very passively
unsafe.
So isn't what Mr. Sproat and his group doing at least
moving in the right direction, if you assume that nuclear
power--and you don't--but if you assume that nuclear power
should be an option at some point, would you at least agree in
your group that they are moving in the right direction in terms
of safety?
Ms. Aurilio. I believe that the PBMR will not turn out to
be a safe or economical reactor. We are still studying up on
the reactor. We have grave concerns that as currently designed
it, too, has no containment.
Mr. Barton. But in concept----
Ms. Aurilio. But if you would let me finish, because what I
have been seeing in the literature is that the containment
would be the fuel itself. And we have grave concerns because
right now the company, BNFL, which is one of the partners which
would be involved also in making the fuel, we believe, they
have been accused by both Germany and Japan of falsifying data
for manufacturing fuel for reactors in Germany and Japan.
So we have very, very big concerns as to why you would want
to build a reactor that lacks containment. And Commissioner
Merrifield of the NRC did express some questions about that
recently as well. And then why you would want to rely on
manufacturing, which, as you know, it is never 100 percent
perfect----
Mr. Barton. I understand that. But at least it is a good
idea----
Ms. Aurilio. [continuing] to contain radioactivity.
Mr. Barton. [continuing] to build it. I mean, your group's
position that we can get there with conservation and renewable,
you know, the renewable exclusive of hydro is .2 of a quad, .2
of 1 percent of a quad. In other words, compared to the hundred
quads that this country used, it is just orders of magnitude
below what you would need to replace the existing power supply.
So if you are acting or attempting to act responsible, you
know, nuclear power, if we can get these next generation
technologies that are much safer and much more fail-safe, so
that if things go wrong the system automatically shuts itself
down, which is my understanding of this Pebble Bed Reactor--and
I could be totally wrong on that--that is at least a step in
the right direction. That is my only point.
I am not trying to convert you. You know, that would be
stupid on my part. It would be unfair on my part. But give the
industry credit and the private sector credit for at least
attempting to listen to the concerns that we both share.
Ms. Aurilio. But if it is so safe, then why do they need
Price-Anderson coverage for these reactors as well?
Mr. Barton. That is a decision that was made before I was
even born, quite frankly.
Ms. Aurilio. It doesn't cover these types of reactor
designs. I mean, in reauthorization, if it is so safe and
economical, perhaps the industry could pay for it itself, then,
pay for insurance coverage----
Mr. Barton. We may give you or your associates a chance to
testify on that at the appropriate time. That is a valid
question.
I am going to go to Mr.--let us see, we have already--Mr.
Strickland has asked questions. We are going to go to Mr.
Shimkus. Isn't that right? Yes.
Mr. Shimkus. Thank you. But, Mr. Strickland, you wanted to
make a comment to the chairman on your plant, and I want to
give you that opportunity.
Mr. Strickland. Yes. And then I promise the chairman I will
be finished for the day.
Mr. Barton. No, it is okay.
Mr. Strickland. Two things just for the record, Mr.
Chairman. If the information that I have is accurate, and I
believe it is, the answer to your question, where would we get
the fuel with the higher assay, we currently have a plant that
is licensed to enrich uranium up to 10 percent. And within the
next 2\1/2\ months, we are going to be placing that facility in
an inoperable condition. So we can do it now, but 2\1/2\ months
from now we will not be able to do it.
And the second thing for the record, I have a report that
was sent to the Congress from the Department of Energy entitled
``Report to Congress on Maintenance of Viable Domestic Uranium
Conversion and Enrichment Industries,'' and I was wondering if
we could enter that into the record.
Mr. Barton. Without objection, so ordered.
[The information referred to follows:]
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Mr. Strickland. Thank you, Mr. Chairman.
And thank you, my colleague.
Mr. Barton. Mr. Shimkus?
Mr. Shimkus. Thank you.
Let me--Mr. Sproat, and others may comment on it, you
identified a concern of mine that refers to, in essence, a
brain drain out of the NRC, especially with new technology that
may come online, especially with, as I mentioned to the
previous panel, the relicensing aspects of a lot of plants in
the future. Can you just reiterate that? And then I will let
any of the other panelists talk about that.
Mr. Sproat. One of the things that we are--as we are
looking at the various issues we will face with trying to
license the Pebble Bed Modular Reactor--and just for the record
we will have a containment. The design requirements may be
different, but there would be a containment building.
It is very clear that the gas reactor expertise that
existed in the national labs and the NRC back in the 1960's and
1970's and early 1980's has pretty much dissipated. And as a
result, we are facing the possibility of coming into the
government with an application for this technology, if we
decide to do that, where they will be really technically
deficient in being able to review that technology.
And the NRC management recognizes this. In our discussions
with them, they believe they need to get their staffs educated.
And one of the things we are discussing with both the
Department of Energy and the NRC is to have an independent
third-party such as MIT or some other university develop the
appropriate courses to give to the various government employees
to get them educated in the technology, so that they could
learn more about it prior to the actual licensing effort
starting.
Mr. Shimkus. Would anyone else want to add if they have a
concern on the NRC? Mr. Tollison?
Mr. Tollison. The concern about the demographics of the NRC
staff that Mr. Travers introduced is shared somewhat by the
industry. In other words, the average age of the nuclear
professionals in the industry is in the high forties, so over
the next several years a lot of people will be--a lot of very
qualified people will be coming into the retirement age zone.
And so there are several initiatives underway to revitalize
the pipeline of new people coming into the industry to operate
the existing fleet until the end of life, and that end of life,
as you have heard today, in many plants will extend an
additional 20 years. In fact, as we speak, there is a workshop
going on in Florida right now that includes the universities
and the utilities and the public relations people to discuss
the best strategy and approaches for revitalizing the pipeline.
And the NRC, in part, will be the beneficiary of that,
because that would create a supply of young graduates who are--
who have an education that would support regulating and
licensing current plants and future plants.
Mr. Shimkus. Thank you.
Let me go to Ms. Aurilio. On your submitted testimony, on
page 5, you have a quotation attributed to the Federal Trade
Commission that says, ``NEI's advertising campaign touting
nuclear power as environmentally clean was without
substantiation.'' Could you give me a source for that?
Ms. Aurilio. Yes. I will have to get it to you in writing.
Mr. Shimkus. Because as far as we understand, the Federal
Trade Commission has made no such statement. So if you could
substantiate that, we would appreciate it, just for
clarification.
The other thing, in the testimony you--actually, in the
submitted testimony, you mentioned specific standards that are
not--that will not be met at Yucca Mountain. What are those
standards?
Ms. Aurilio. What I talked about in my testimony, what you
might be referring to, is that we are concerned that the
Nuclear Regulatory Commission is trying to take control over
setting the standards, which Congress gave EPA. Is that what
you are referring to?
Mr. Shimkus. But you are not referring to any specific
standards that are set right now that science makes
determinations that you believe Yucca is not going to be able
to make----
Ms. Aurilio. There are Department of Energy guidelines as
to the suitability of Yucca Mountain. In 1998, PIRG and many
other groups petitioned Department of Energy to withdraw Yucca
Mountain as a nuclear waste dump site, because we felt it would
not meet the current guidelines. But the most----
Mr. Shimkus. And what are the current guidelines?
Ms. Aurilio. The guideline of most concern--I don't have
the cite off the top of my head, but the guideline of most
concern would be that there would not be significant
radioactive waste migration along the paths of most likely
leakage from the mountain. And we felt that given the existing
data that we had at that time that the mountain would not meet
that criteria.
Mr. Shimkus. And I would respectfully submit that we don't
know any of that right now. And the issue is, if you want to
establish some standards which are going to require--or you
want the DOE or the NRC or the EPA to meet, we ought to know
what those standards are.
Ms. Aurilio. But DOE had some standards at the time, and
their now revising it downward is the problem. And it said
there should be no significant----
Mr. Shimkus. So you would accept the previous standards.
Ms. Aurilio. There is different stages of the----
Mr. Shimkus. What standards would you accept? I guess that
is the question.
Ms. Aurilio. There is different stages of the process. What
we said in 1998 was, given the science that currently existed--
for example, there was new evidence to indicate that plutonium,
which is relatively insoluble, could actually migrate pretty
quickly offsite because it could attach itself to other
particles. So that would be of concern.
There was enough information, given new scientific data,
that there could be considerable migration off the site of
radioactive waste. That did not meet DOE's current guidelines.
In terms of what we would want to see out of a final
repository for nuclear waste--and, again, our premise is there
is no sound solution yet that has been found. We would want the
waste to be isolated for human beings and the environment for
the hazardous lifetime of the waste.
Mr. Shimkus. I think we will be very pleased with Yucca
Mountain and its meeting not just NRC standards but whatever
comes out as far as the EPA standards. Having visited there
yesterday, I am very supportive.
And I would just ask a final question, Mr. Chairman, if I
may.
Mr. Barton. You have got as much time as you----
Mr. Shimkus. In the issue of doesn't Yucca Mountain--back
to the industry folks. Doesn't Yucca Mountain also present a
possible asset for us in the future? If we have high-level
nuclear waste stored, and we don't have the ability, it is not
economically feasible at this time to reprocess that.
But could you not make an argument that there is an asset
there stored and buried that at times can be pulled out and
reprocessed once the ability to reprocess becomes economically
feasible?
Mr. Sproat. If I could, I will try and answer that.
Absolutely that is the case. I think one of the fallacies in
the discussions on Yucca Mountain so far is the broad
assumption that we are going to put it in the ground and it is
gone forever. Clearly----
Mr. Shimkus. And Senator Domenici mentioned that, and I was
surprised that he said just close it up. And I don't expect it
to be closed----
Mr. Sproat. Well, that is the current game plan that DOE is
offering. However, I think the reality is is that nobody can
say with certainly exactly how the repository will perform over
10,000 years.
But you can certainly start to put waste in that repository
and leave it in a retrievable form and see how the repository
operates over the next 50 years, 100 years, 150 years, and gain
much greater certainty about what the long-term performance of
the repository will be before you close off that option of
making it--of closing off the repository and not making that
fuel retrievable for whatever purpose; say, if the repository
is not operating in the correct way, or you wanted to take that
fuel out and start reprocessing it for economic reasons.
Mr. Shimkus. Thank you, Mr. Chairman. I will yield back my
time.
Mr. Barton. Thank you.
Mr. Strickland, did you have one final question or any
comment?
Mr. Strickland. No, thank you, Mr. Chairman.
Mr. Barton. Okay. I have just a few wrap-up questions. Mr.
Sproat, at what time do you expect the developer of the Pebble
Bed Reactor to bring forward an application for certification
to the NRC?
Mr. Sproat. The current project schedule is that the
partners will make their decision by the end of this year as to
whether or not----
Mr. Barton. ``The partners'' being?
Mr. Sproat. Being Exelon, BNFL, SCOM in South Africa, and
IDC in South Africa. We will make our decision about whether to
proceed with the final design and the construction of the
demonstration plant in South Africa. We will make that decision
by the end of the year.
The government of South Africa also needs to make a
decision about approving the construction of that demonstration
reactor, and we expect that to occur first quarter of 2002.
Once that decision is made, at that point in time, then, we
would intend to begin the preparation of a combined
construction operating license application for a set of PBMRs
in this country--not one, but a string of several, number yet
to be determined, and location yet to be determined.
And we would expect to submit that application for the
combined construction operating license probably in the second
half of 2003, and we would probably precede that with an early
site permitting application for a site or several sites
sometime in late 2002.
Mr. Barton. And the site or several sites, would they
likely be sites of existing nuclear power plants?
Mr. Sproat. They would most likely be sites of existing
nuclear power plants because the site--we already have a site
characterized. The transmission capability to get the power out
would already be there.
Mr. Barton. Okay. Now, the other three witnesses that are
supportive of the nuclear option, is it your general agreement
that the next generation of nuclear reactors, if any, that are
ordered are going to be of the smaller variety as opposed to
the large, 500 or larger megawatt variety that are currently
certified?
Mr. Hutchinson. I don't think I would necessarily agree
with that.
Mr. Barton. You wouldn't agree with that.
Mr. Hutchinson. No. I think you could see--there is a
possibility you could see an existing design that is already
approved on the shelf, built----
Mr. Barton. And some of those are being built overseas.
Mr. Hutchinson. Right.
Mr. Barton. And are in operation, so you would have some
certainty in operation.
Mr. Hutchinson. Built in Japan--right, and in Korea, in
some of those places. It will be driven by what the industry
can finally get comfortable with it, the time to market
question, and construction costs. And I think given that those
have times and costs that compete with combined cycle gas
turbines, whatever that turns out to be, that you--then, that
is where you will see----
Mr. Barton. Okay. Mr. Tollison?
Mr. Tollison. Our focus at INPO is on the safety and
reliability of the existing fleet, and my only comment on your
question would be I think the success of the demonstration
reactor down in Cape Town would be a big factor in how we
eventually go----
Mr. Barton. Okay.
Mr. Tollison. [continuing] as an industry.
Mr. Barton. Mr. Longenecker?
Mr. Longenecker. Mr. Chairman, I would say that the size of
the reactor that is going to be ordered is highly dependent on
the company that is building it, what their supply mix is. All
of the arguments about small being, you know, modular, simple,
cheap, and you can add to it, is true. When you build a large
one, you do have the concern when it is out of service you have
lost a large chunk of your capacity.
But for companies that have a very substantial generating
capacity where this does not represent a significant portion of
it, the large plants like the Japanese are looking at, economy
of scale is still true. And I think probably you will see a mix
of them depending, again, on the company that is ordering them
and their specific needs and reliability concerns.
Mr. Barton. Okay. My final question, I am going to go back
to the gentlelady from PIRG. Let us assume that I totally agree
with you, that I have just been blown away, I understand the
logic, I have had a Damascus Road experience, and I am totally
a true believer now, that you have so impressed me--and your
group--that I just can't wait to help you. Okay? Now that is a
big assumption, but let us assume that.
You said something to Mr. Shimkus that kind of set me back.
You know, let us say that next week I put in a bill to close
down all of the existing nuclear reactors. In a time-certain,
we are going to pay off the stranded costs, we are going to
figure out a way to build windmills and import power from
Canada and take up the slack for the existing plants.
You still have all this high-level waste scattered out all
over the country. And I come to your group and I say, ``Solve
that problem. I will guarantee you no future problem.'' I am a
true believer now, you know, but help me solve the existing
waste problem. What is your solution?
Ms. Aurilio. Well, I wish I had a solution, and I wish that
the industry had had a solution before they built the reactors.
In fact, some of the earlier scientists who developed nuclear
energy, like Enrico Fermi and Robert Oppenheimer, even said,
``Don't build these commercial plants until you have solve the
waste problem.''
Mr. Barton. No, but that cat is out of the bag.
Ms. Aurilio. I agree. I agree.
Mr. Barton. Cloning has occurred. Okay? We can't debate
whether there should be cloning. It has occurred.
Ms. Aurilio. Yes.
Mr. Barton. So what do we do to solve the----
Ms. Aurilio. And I think the scenario that you set up in
terms of phasing out these plants as quickly as possible is
something that gives the public a good starting point.
Mr. Barton. You are still not answering my question. You
are too smart. You know, I am going----
Ms. Aurilio. I am giving you a starting point.
Mr. Barton. No, no. I want a--you don't have to give it to
me today, obviously. But it is not valid to just say there is
no solution. Okay?
Ms. Aurilio. I can tell you about a process that we could
use to come to a solution.
Mr. Barton. Man made the problem; man can solve the
problem. Now you can have it spread out in 102 locations or 50
locations or one location or somewhere in between. You can put
in an interim basis, a permanent basis, you can reprocess it,
you can shoot it to the moon, you can put it under the ocean.
But you can't just say there is no solution. That is not
viable. This Congress can't just throw up its hands and say,
``The PIRG says there is no solution. So we are not even going
to worry about it.''
Ms. Aurilio. So our solution is to minimize the amount of
waste that ultimately has to be dealt with, which is your
starting point, and then starting out with a fair and honest
process, which I don't believe the history of nuclear waste
policymaking in this country has been, and involving the public
at every step of the way to make a decision, because this is
some of the most dangerous material we have ever created.
I don't think any country in the world has a permanent
solution to this problem, and the solutions that we have seen
coming out of the industry rely on changing the goalposts every
time the science shows us.
Mr. Barton. Yes. You are a very good testifier. Okay? You
are very good at not answering the question and getting your
political commentary on the record. And, again, that is
acceptable. But we can't be for no solution. Mr. Boucher and
Mr. Waxman, Mr. Markey, right on down the road, on the Democrat
side, can't be for no solution, nor can myself and Mr. Largent,
Mr. Pickering, Mr. Burr, Mr. Norwood, all the way down to Mr.
Radanovich and Ms. Bono. We can't be for no solution. Okay? We
can't study it for another 20 years.
Ms. Aurilio. Why not?
Mr. Barton. Because it is there.
Ms. Aurilio. It is there, and it is going to stay there,
and they are going to generate more of it.
Mr. Barton. We have the technology. So your solution is
just to study it for 20 more years.
Ms. Aurilio. My solution is to make sure that we protect
the public and the environment and future generations, and the
things that I have seen coming out of the industry so far don't
do that. They change the goalposts every time that science
shows them it is not going to contain the waste.
Mr. Barton. Well, you know, it is a funny thing but in a
different era, a different issue, you know, when we find bad
actors or we find something that is a potential problem, we
don't leave it spread out. We put it together.
There is a jail in Ellis County, in Waksahatchee, all the
bad guys and girls in Ellis County go to that jail. If they are
really bad guys, they go to Huntsville. And if it is a Federal
problem and they are really, really bad guys, they go to a
Federal--we concentrate where we can control it, watch it,
monitor it, do all of the good things that your group supports.
There is no other issue that I am aware of in this country
where the solution is, a) not to do anything, or b) leave it
spread out. I don't want a convicted felon in my backyard in a
bird cage. I want it in Ellis County or Huntsville or the
Federal penitentiary.
Now, you can be against Yucca Mountain. You can be against
the process. That is totally acceptable. But at some point in
time, to be responsible--and I am not just talking to you. I am
talking to the whole group that you represent--needs to come
forward with some solution.
And the likelihood is--I wasn't here for Senator Domenici.
I didn't get to hear his testimony. But the likelihood is we
are going to put a high-level nuclear waste bill on the
President's desk sometime in this calendar year. So if your
group has got potential solutions, come forward.
And, you know, I think on a bipartisan basis we are going
to be very open to all of the potential safeguards and
transportation issues and local impact issues, and all of that.
But just to say, ``Don't do anything,'' you know, that dog
won't hunt anymore. It is pretty well gone.
Ms. Aurilio. I don't think that is what I was saying. I was
saying minimize the amount of the waste and then come up with a
fair and public process, which so far has not existed, for
making the decision.
Mr. Barton. Okay. That is fair enough.
I want to thank the panel. The Chair would ask unanimous
consent that the statement of the Uranium Producers of America
on this issue be made a part of the official record. Is there
objection? Hearing none, so ordered.
Gentlemen and lady, we want to thank you. We may have
questions for the record. We would ask that you put them back
in. We do plan to move legislation in the very--in this
Congress on this issue.
This hearing is adjourned.
[Whereupon, at 4:28 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Responses for the Record of Edward F. Sproat III, Vice President of
International Programs, Exelon Corporation
Question 1. Do you believe it is important for the nuclear utility
industry to have a domestic source of uranium enrichment services? If
not, why not? What about conversion services?
Response. One of the primary advantages of nuclear fuel has been
the presence of a reliable and competitive nuclear fuel market. If
nuclear power is to continue to be competitive with other electric
generation technologies, nuclear fuel supply--both enrichment and
conversion--must remain both reliable and competitive.
Clearly, a domestic source of enrichment services can furnish a
high degree of reliability. At the same time, reliability is not merely
dependent upon the geographic location of the enrichment service
provider. Enrichment companies must also be financially viable and able
to provide assurances of their long-term viability. Today, the market
for enrichment services is truly global in nature, and many foreign
suppliers of enrichment services have proven to be highly reliable.
It is equally important for the nuclear industry to have a fair and
competitive source of supply for enrichment services. Effective risk
management dictates that nuclear plant operators diversify their
sources of fuel supplies, particularly in the face of increasing
competition and consolidation. Regardless of the price, no company will
want to rely on a single source to meet 100 percent of their fuel
enrichment needs.
In our view, as long as the nuclear fuel markets are reliable and
competitive, a domestic enrichment capability--while perhaps
preferable--is not essential. As the nuclear industry seeks to compete
in an increasingly deregulated and competitive electric industry, it is
difficult to justify subsidizing enrichment service providers using
inefficient and obsolete technology merely because they are located in
the United States. We believe as a matter of policy that the interests
of consumers would be better served if USEC were subject to the rigors
of a competitive market for enrichment services rather than given
continued protection as a monopoly service provider.
Question 2. In the past there has been a glut in nuclear fuel
available to the US, but that appears to be changing rapidly, with US
dependence on a single plant providing less than half of US
requirements, and the remaining supply coming from Russia. Does the
nuclear utility industry have any concerns about the reliability of
nuclear fuel supplies in the future in view of the fact that there have
been 5 interruptions in shipments of nuclear fuel from Russia in the
past 5 years?
Response. We do have concerns about the wisdom of depending on a
limited number of suppliers for an essential service. While the
disruptions in Russian supply to date have had little actual impact, it
is not clear what impact future disruptions might have following the
closure of USEC's Portsmouth facility. If Cogema and Urenco were forced
from the US market as a result of USEC's trade actions, the
consequences of any disruption in either Russian or USEC supply would
be magnified.
Question 3. What are your views on the anti-dumping case brought by
USEC? How do you reconcile USEC efforts to raise SWU prices with the
need to make the Paducah plant viable as a domestic source of
enrichment services? Wouldn't a domestic enrichment plant be consistent
with the view that we need a domestic supply?
Response. USEC has brought antidumping and countervailing duty
actions against enrichment service providers in Europe, which now
supply about 20 percent of the U.S. market. The purpose of the
antidumping and countervailing duty laws is to counteract sales of
dumped or subsidized goods, not services. Though enrichment suppliers
such as USEC and the European enrichers contract with the utilities for
the service of enriching uranium owned by the utilities, USEC is asking
the Commerce Department and the International Trade Commission to treat
the enrichment services contracts as contracts for the sale of low-
enriched uranium (LEU). However, as described in a letter submitted to
the Commerce Department by the Ad Hoc Utilities Group, the trade laws
do not cover sales of services, such as uranium enrichment contracts.
The imposition of punitive duties on sales of services would be both
contrary to U. S. law and internationally unprecedented.
Contrary to USEC's recent claims, the imposition of duties has the
potential to significantly impact ratepayers and the future
competitiveness of nuclear power. USEC is seeking duties of 39 to 73
percent. Since the value of LEU used by utilities is $1.7 billion per
year (on the basis of current market prices), the resulting increase in
utility fuel costs ranges from $650 million to $1.2 billion annually.
USEC attempts to minimize the potential impact of its trade action
by understating the relative cost of enrichment. With NEI's definition
of production costs as a basis, fuel represents roughly one third of
production costs and enrichment represents roughly one half of fuel
cost, so enrichment actually represents roughly 17 percent of nuclear
production costs---not 10 percent as claimed by USEC. But even this
analysis understates the potential impact of USEC's trade action,
because U.S. Customs assesses duties on the value of imported
products--in this case LEU. Given that LEU represents roughly 80
percent of the total value of nuclear fuel, roughly 27 percent of
nuclear production costs are subject to higher costs from duties.
Through its trade actions, USEC seeks to impose prohibitive duties
on its only competition in the U.S. market. If USEC is successful,
proven and reliable suppliers may be effectively excluded from
participating in the U.S. market, thereby eliminating vital competition
in the supply of this critical service, on which the nuclear generators
depend.
USEC's efforts to raise SWU prices are necessary only from their
own perspective. In Exelon's view, as long as the nuclear fuel markets
are reliable and competitive, a domestic enrichment capability--while
perhaps preferable--is not essential.
Question 4. While I know your industry benefits from low SWU prices
in the short-term, has the industry reached a consensus on what you
would do if we lose all domestic supply and Russian shipments were
interrupted for a protracted period of time?
Response. Exelon cannot speak for the nuclear utility industry, but
we are not aware of any such consensus. We believe that simultaneous
loss of domestic supply and interruption of Russian shipments is an
unlikely scenario. In this extremely unlikely case, it is probable that
certain actions would be taken by the U. S. government to assure that
there was an adequate supply of enrichment services beyond that
available from other foreign suppliers. Many of the contracts currently
held by USEC are backed by US government performance guarantees that
were extended by the USEC privatization act. Government Actions could
include allowing Russia to sell low enriched uranium directly into the
U.S. market by modifying the Suspension Agreement currently in place,
restarting the Portsmouth GDP under DOE control, or both.
Question 5. In a matter of a few months, the restrictions on the
ownership of USEC stock will permit investors to hold more than 10% of
its stock. There has been some concern that efforts to maximize share
price could result in the liquidation of USEC's assets. Could you
explain what provisions the nuclear utility industry has in place to
assure deliveries of nuclear fuel in such a circumstance if the Paducah
plant were also closed as part of such liquidation?
Response. Maximization of USEC's share price is not likely to lead
to liquidation of the company. Liquidation is likely if the share price
or market valuation is less than the value of USEC's inventories.
Exelon cannot speak for the nuclear utility industry. Although an
entity in control of USEC could make the decision to cease operating
the Paducah facility, there are still contracts with USEC that require
fulfillment. If the contracts were not abided by, the new entity would
face protracted legal actions from the customers.
In the event that the Paducah plant were closed and USEC ceased to
function as an entity, it is possible that the U. S. government could
take over operation of the facility until an alternative could be
established to provide for enrichment demand no met by supplies
available from foreign suppliers.
Question 6. Are utilities such as yours considering the deployment
of advanced uranium enrichment technologies?
Response. Exelon is considering many alternatives with respect to
its nuclear fuel supply.
DOE recently communicated to Congress that the United States needs
an advanced enrichment technology development program to sustain its
uranium enrichment industry in the long-term. While research on several
domestic technology initiatives is ongoing, it is unlikely that these
research initiatives will result in the commercialization of an
advanced technology prior to the retirement of USEC's remaining gaseous
diffusion plant. The best means of assuring an uninterrupted transition
to a competitive domestic source of enrichment is through the
construction of a new plant by the private sector using existing
centrifuge technology. The United States should encourage private
sector initiatives in this regard.
Question 7. Do utilities such as yourselves believe that USEC
should remain as the exclusive executive agent for the brokering of the
blended down highly enriched uranium from Russia. If not, what role to
you see for nuclear power plant operators such as your company?
Response. No. Exelon does not believe that USEC should remain as
the exclusive executive agent for brokering the blended down Russian
HEU. Exelon believes that an alternate executive agent or agents would
provide competition that would be beneficial to the U.S. market as well
as Russia.
USEC has suggested that the appointment of additional executive
agents for Russian HEU would cause USEC to shut down its remaining
domestic production facility. However, we believe that the appointment
of additional executive agents would forestall the retirement of USEC's
remaining production facility, not accelerate it.
Given that USEC's sales have been relatively constant, use of the
Russian HEU material has directly displaced domestic production.
Effective risk management dictates that utilities diversify their
sources of fuel supplies, particularly in the face of increasing
competition and consolidation. For this reason alone, it is unrealistic
for USEC to expect to maintain greater than 70 percent of the U.S.
enrichment market. Given the increasing pressures on utilities to
manage risks, USEC's continuation as the sole executive agent at a time
when the volume of its sales may be dropping due to utility
diversification can only have the effect of reducing domestic output.
Additional executive agents would reduce USEC's access to Russian
supplies and prompt USEC to increase its domestic output.
More importantly, the deeply discounted prices USEC is seeking in
its recently proposed HEU Agreement amendment threaten to introduce
greater revenue uncertainties for the Russians. The most critical
element to the HEU Agreement's future stability is the revenue received
by Russia. Russia must be paid fair prices, which can best be assured
through the bidding of multiple executive agents. This would also
ensure that an alternative exists in the event one agent is unable to
perform for financial or other reasons. Given the importance of this
supply to U.S. nuclear generators and their customers, it is essential
that immediate steps be taken to ensure its future reliability.
Question 8. If the utilities served as an executive agent for the
Russian HEU deal as a way to reduce their fuel costs by eliminating
USEC as a middleman, would you be willing to direct those savings into
maintaining operations at Paducah until new technology was deployed?
Response. As the nuclear generators seek to compete in an
increasingly deregulated and competitive electric industry, it is
difficult to justify subsidizing a particular enrichment service
provider merely because it is located in the United States. It is also
not clear to us that operations at Paducah require a subsidy.
Question 9. I know you disagree with the Energy Information
Agency's view that construction of new nuclear power plants in the U.S.
for the foreseeable future is unlikely. What would it cost to build a
nuclear power plant using the best and proven technology available
today?
Response. Current ``extensions'' of Light Water reactor plants
(AP600, AP100, ABWR, etc.) are estimated to cost between 3.5 and 5.1
cents/kWh to build and operate. These estimates may be optimistic, as
no one has licensed or built such a plant and we expect that the
licensing and construction of these plants will take between six and
eight years each.
For reasons outlined in my written testimony, Exelon believes that
a small, modular reactor such as the Pebble Bed Modular Reactor (PBMR)
is best suited for operation in a deregulated marketplace. Preliminary
studies estimate that the PBMR could be built and operated for a total
cost of 3.2 to 3.8 cents/kWh and constructed in less than 24 months
once the design has been certified by the Nuclear Regulatory
Commission.
______
Responses for the Record of John R. Longenecker, Longenecker &
Associates, Inc., Management Consultants
Question 1. How much SWU does the US use each year, and how much of
this is imported from Russia at present?
Response. In the year 2000, US nuclear power plants consumed 10.4
million SWU. Of this total demand, about 53% was supplied by Russian
HEU blending.
Question 2. If we all agree that it is in our best interest to
dismantle Russia's nuclear arsenal and bring in 5.5 million SWU per
year from that source, do you believe the federal government should
subsidize that arrangement in the interest of national security?
Response. No. I believe that the objectives of the US-Russian HEU
agreement can be achieved without subsidy by the US government. Under
the current Russian HEU contract, USEC realizes trading profits of
about $100 million per year. As the agreement is renegotiated to
provide for future deliveries, market-based arrangements with multiple
executive agents could provide continuity of supply without subsidy.
Since the HEU deal is a government-to-government agreement, I believe
that the most significant US government role is to facilitate the
smooth continuation of the contract to whatever extent that it can.
Question 3. In your opinion, how long can USEC operate the Paducah
plant and still turn a profit based on their existing and anticipated
contracts with the nuclear utilities?
Response. The answer to your question depends on the average price
of SWU in the market. Today USEC is the high cost producer in the world
market based on its failure to follow through on its earlier
commitments to deploy new lower cost enrichment capacity. In the
future, the production costs at Paducah are likely to exceed the cost
of buying Russian SWU, and the costs of any of the other primary
enrichment producers. Realizing this, USEC is attempting to increase
prices to US customers by its trade action against European suppliers
of enrichment services.
A better alternative is for the US to build new, cost competitive
domestic enrichment capacity as soon as possible. The high costs of
production from the Paducah GDP, and its economic obsolescence should
stimulate a market response to build cost competitive capacity either
in the US or abroad. I strongly support building new enrichment
capacity in the US, but realize that regulatory and other conditions
would have to be conducive for this to occur.
While new enrichment capacity is being constructed, I assume that
the US will continue to need production from Paducah due to limits on
Russian imports, and the limited supply capability in Europe.
Question 4. Since the Russians have interrupted SWU deliveries on
five occasions in the last five years, can we consider the Russian SWU
a reliable source?
Response. Reliability is certainly a major issue in nuclear fuel
supply. Although there are concerns regarding future changes in Russian
policy, infrastructure failures and the like, overall, I believe that
the Russian supply of blended HEU will continue to be reliable. The US
currently is dependent on Russian SWU, but the Russians also depend
strongly on the funds provided by the US for those SWU.
However, future short-term disruptions are possible, and I believe
that the key is for the US to factor potential problems into
negotiations on the Russian HEU deal, and also to find a way to bridge
any short-term disruptions.
Question 5. Do you agree with the DOE assessments that although the
Russian HEU agreement is a very important proliferation agreement, it
should not be considered a secure source of energy supply for our
nation's nuclear power plants due to a number of unresolved issues in
the Agreement's implementation? What contingencies should be in place
to provide enrichment services domestically, and does the government
have a role in paying for a portion of this energy security as part of
enabling the non-proliferation benefits of selling the imported uranium
supplied under the HEU Agreement with Russia?
Response. Reliability of supply issues exist, and the first
priority of the US government should be to stabilize the Russian HEU
agreement. One way of doing so would be to name a second executive
agent. This can be done at no cost to the government. Having multiple
executive agents would offer greater assurance of continuity of
deliveries by providing greater financial incentives to the Russians
through competition.
The trading profits from selling Russian HEU to utilities are
derived from an exclusive franchise granted by the US government.
Congress should examine whether this exclusive franchise should
continue to reside with USEC, and what benefit the country will derive
from the billion dollars in trading profits that the executive agent is
likely to realize over the next decade.
USEC appears to have enough inventories to bridge a supply
disruption of at least 6 months. However, additional US government
actions could also be taken, although they would require government
funding. For example, DOE could make its surplus US HEU inventories
available for blending in the event of a Russian supply disruption.
Plans could be put in place that would allow the blending of HEU in US
based facilities to begin with a short lead-time.
Another alternative, although quite expensive, is for DOE to create
a strategic stockpile of enriched uranium. This could be done by
accelerating the rate of Russian HEU blending, down blending US HEU, or
by operating the Portsmouth GDP for some period of time after June
2001. If such a stockpile is created, DOE should agree to keep the
material off the market, and only make it available in case of
disruption.
Question 6. Do you believe is it important to have a domestic
source of enrichment services?
Response. Yes, this is vitally important to our national energy
security. The US government should act to assure that it facilitates
and does not inhibit private sector efforts to construct new cost
competitive enrichment capacity in the US as soon as possible. I
believe that this can be done by the private sector in 5 to 6 years.
The private sector should pick the technology to be deployed, and in
the near term this likely would involve non-US technology.
Continued development of US technology by DOE, possibly for long-
term deployment, may be justified. However, the near term priority must
be on constructing new enrichment capacity to replace the economically
obsolete US GDP capacity.
Question 7. The GAO in a December 2000 report questioned the
benefits of proceeding forward with the proposal to import an
additional 1 million SWU of enriched uranium from Russia that is
produced in their commercial uranium enrichment plants. in addition to
the 5.5 million SWU per year brought in under the non-proliferation
agreement. What happens to the economics of the Paducah plant if
Russian commercial SWU is brought into the US and production is cut,
say from 5 to 4 million SWU/year?
Response. In round numbers, assuming the availability of low cost
power for production at Paducah of 5 million SWU per year, unit costs
of production, excluding R&D, administrative, dividends and interest
costs, would be about $95/SWU. If production at Paducah were 4 million
SWU per year, unit costs of production would increase to about $105/
SWU. Allocating USEC's R&D, administrative, dividend and interest costs
to arrive at a breakeven price adds roughly another $15 to these
numbers. As I stated before, USEC's production costs are above those of
any of the major primary enrichment suppliers, and this points out the
need for new, low cost enrichment capacity in the US.
Since the US likely will require the operation of the Paducah plant
to meet domestic fuel needs, absent a decision to lift restrictions on
the commercial sale of Russian SWU in the US, our country needs new
competitive enrichment capacity as soon as possible. This should be the
main US priority.
Question 8. Do you believe that USEC has a viable business model to
sustain it for the long run as a domestic nuclear fuel producer? If
not, what should be done to assure that there will be a domestic
uranium enrichment industry over the next 3-5 years? What steps should
Congress take to encourage this, if any?
Response. In my opinion, USEC does not have a viable business
strategy to sustain it for the long term. USEC is increasingly becoming
a trader of blended Russian HEU. In fact, it realizes trading profits
of approximately $100 million per year from this Executive Agency, and
will meet about 75% of its 2001 deliveries to US utilities using
Russian SWU.
Since USEC lacks a proven low cost enrichment technology, its
future strategy appears to rely mainly on obtaining import restrictions
on its European competitors to obtain an effective monopoly position in
the US market, and on generating trading profits from the brokering of
Russian HEU. To assure that there is a viable US industry in the
future, I would suggest that Congress provide support, as needed to
private sector plans as they evolve to build new uranium enrichment
capacity in this country.
Question 9. Won't the trade action by USEC extend the life of the
domestic industry for a few more years, if successful?
Response. The United States needs a reliable, diverse, economic
supply of enrichment services to sustain a competitive nuclear power
option and to ensure future energy security. USEC's initiatives
including its antidumping action against European enrichment suppliers,
work against these objectives and are creating significant
uncertainties and unnecessary financial costs for nuclear operators and
customers
Today, although USEC supplies almost 70% of the US market, it seeks
import duties of up to 73% on its lower cost European competitors,
price reductions for Russian supplied SWU from HEU, and increased
Russian SWU imports as a means of survival.
If USEC won its trade case, it would effectively be granted a
monopoly on the US enrichment market, and could raise prices by the
maximum allowed by the duties imposed on European enrichers. It is
clear that imposition of duties would increase the cost of enrichment
services from European suppliers, possibly excluding them from the US
market, and would allow USEC to increase its prices to US utilities
accordingly.
Even if USEC acted as a ``benevolent monopolist'', and did not
raise prices to the maximum extent possible, US utilities would still
end up paying hundreds of millions of dollars per year in higher
nuclear fuel costs. Clearly, the financial impacts of such action would
be significant both to US electricity customers and to the US economy
as a whole. Furthermore, these hundreds of millions of dollars would
accrue solely to USEC and its shareholders, providing USEC a financial
windfall from successful litigation rather than from efficient,
competitive operations.
In addition, there is no certainty that USEC would use its windfall
from the trade sanctions to construct new enrichment capacity in the
US. Specifically, USEC has no proven advanced technology, and its
credit rating has been downgraded to junk bond status, making it
unlikely that it could obtain financing to deploy any new enrichment
technology that it might acquire. The stark reality is that under
USEC's plan, US utilities and electricity customers could pay USEC
billions in increased fuel costs over the next decade and still have
just one 60-year-old GDP operating in this country.
In summary, unfounded trade sanctions on foreign uranium enrichment
services suppliers will not assure a sustainable uranium enrichment
industry in the United States. Trade sanctions would be bad for our
nation's economy, and may serve as a distraction from the critical task
of building new competitive US enrichment capacity. Rather than
pursuing trade actions, the US should be focusing on implementing a
credible plan for building new, low cost enrichment capacity in the US
so that we can compete in global markets.