Regulation, Reality and the Rule of Law: Issues for a Nuclear Renaissance

1. Regulation, Reality and the Rule of Law: Issues for a Nuclear Renaissance Peter A. Bradford Washington & Lee University June 23, 2007

2. Actual v. Perceived Relative Risk During TMI Accident

3. Per Google Per Reality “Nuclear Power” + “Revival”: Rhetoric v. Reality

4. With Few New Units (Paul Joskow, MIT)

5. Talk Will Cover • Laws and regulatory frameworks for safety and energy policy matters. • Five issues chosen to illustrate the ongoing struggle of legal processes to come to terms with nuclear aspirations, nuclear fears and some semblance of reality; • Ask questions during. Please ask questions during.

6. Primary Federal Legal Structure for Nuclear Regulation (Safety) • Atomic Energy Act of 1954 as amended • Fundamental organizational framework and statutory standards; • Licensing process • Energy Reorganization Act of 1974 • Nuclear Nonproliferation Act of 1978 • Nuclear Waste Policy Act of 1982

7. Role of Congress • Laws • Oversight/Confirmation • Budgets • Financial Support, aka incentives or subsidies

8. Federal Legal Structure for Electric Regulation • Federal Power Act – 1934, often amended • National Environmental Policy Act – 1969 – Requiring evaluation of alternatives to major federal decisions • Public Utility Regulatory Policies Act – 1978 – Introduced competition in electric generation; • Energy Policy Act, 1992 – Increased competition; • Energy Policy Act, 2005 – Financial support for new nuclear plants.

9. State Legal Structure • Utility commissions • Energy planning offices • Legislatures

10. Treaties • Nonproliferation Treaty • Convention on Civil Liability for Nuclear Power Accidents • Megatons to Megawatts

11. Regulatory Framework • International Atomic Energy Agency (IAEA) • Nuclear Regulatory Commission (NRC) • Formerly Atomic Energy Commission (AEC) • State utility regulatory commissions (PUC, PSC, PSB) • Environmental Protection Agency (EPA)

12. Functions of the NRC

13. The Atomic Energy Act of 1954 • Allowed private companies to own and operate nuclear facilities • Licensing by AEC • Standards “adequate protection” or “no unacceptable risk” • Duty both to promote and to regulate

14. 1957 Amendments to the AEA • Price-Anderson liability limits; • Preemption of states from health and safety regulation; • Right of the public to extensive hearings and information access in reactor licensing proceedings.

15. 1974 Energy Reorganization Act • Broke up the Atomic Energy Commission; • Terminated the Joint Committee on Atomic Energy • Revived effective Congressional oversight of nuclear regulation.

16. Issue #1: The New Licensing Process • The Mythology: The old licensing process was a major factor in the collapse of nuclear power in the U.S. • It has now been repaired by changes in law and regulatory policy, paving the way for the renaissance.

17. The Operating Experience Gap • By 1970, the U.S. industry had 4.2 GW operating and 72 GW on order. • And the AEC was forecasting 1000 plants (GW) by the year 2000. • The smallest plant on order was more than twice the size of the largest plant in operation. • Absence of standardization, in contrast to France and Japan.

18. Issue #1: The U.S. Licensing Process, cont’d. • The Reality: • The U.S. licensing process led to the building of more nuclear plants than the next four countries combined as of 1980 (and issued construction permits for twice as many as were built); • AEC/NRC never turned down a power plant application; • U.S. total still almost equals France and Japan combined. • Plants were built while hearings continued. • The real villains in the cost escalation story: • Operating experience (including Three Mile Island) • Slowing of demand growth leading utilities to slow construction • Falling fossil fuel prices

19. NRC “TMI Action Plan” Illustrating the Regulatory Reaction to Adverse Experience • Significant modifications of requirements as to • Operator training; • Control room design and instrumentation; • Emergency preparedness; • Single administrator in emergencies (so no transcript).

20. Issue #1: The Reformed U.S. Licensing Process, cont’d. • Today’s licensing process • Combines CP & OL • Drastically limits scope of public involvement • Areva plant in Finland • First advanced (EPR) plant built in a liberalized electricity market; • License issued in February, 2005; • By December 2006 project was 18 months behind and approximately $1 billion over budget

21. The 15 Wedges (Scientific American, 9/06)

22. Issue #2: Resource Selection • A state responsibility, conditioned by PURPA and the 1982 California Supreme Court decision; • Cost recovery is through markets, not rate base; • No new nuclear plants have been bid; • Deregulation is not what has happened; • Cost caps and competitive bidding screens; • Some states prohibit new nuclear plants.

23. A Market Oddity • Power from existing units “costs” about 1.5 cents/kwh in markets that pay 5+ cents; • But power from new plants may cost 8-11 cents/kwh (per recent Keystone Center report).

24. U.S. Nuclear Output and Nuclear Capacity, 1973-2005: Productivity Improvement in the Face of Competition Gigawatt-hours

25. Setting Regulated Rates the Old Fashioned Way RR = E + r(I - D) RR = Required Revenue E = Operating Expenses r = Return on Investment I = Amount of investment D = Depreciation

26. Lessons of the 1970s, Now Being Studiously Unlearned 1) Markets adjusted for externalities are smarter than regulators. 2) Who bears risks of runaway costs?

27. Energy Policy Act of 2005 • Loan guarantees up to 80% of project costs, shifts risk and therefore lowers cost of capital (but not of project) • Production tax credit (1.8 cents/kwh for 6000mw) • Delay insurance ($500 million for 2 plants, 250 million for next 4) • Price-Anderson renewal • Licensing cost sharing • EPAct05 shifts costs/risks. It does not lower them. • Plants built this way are not a “renaissance”.

28. Retreat from Market Principles in Some States • Abrogate competitive bidding requirements; • Charging plants to customers before completion.

29. Nuclear Has Received Bulk of Federal R&D Support (Earth Track05)

31. Issue #3: Nonproliferation • India’s 10-15kt “peace bomb” of May, 1974 • Pakistan declared that it would develop a nuclear explosive “if we have to eat grass”. • US efforts to deny use of US heavy water; • In contrast to Canadian cut-off • Ford/Carter reassessment of reprocessing and breeder reactors • Passage of the U.S. Nonproliferation Act of 1978

32. The NNPA of 1978 • NRC approval of exports only if • Assurance against use in explosives • Adequate physical security • Approval over retransfer • Approval over reprocessing • “Full scope” safeguards

33. Recent Setbacks • GNEP reverses U.S. position on reprocessing while doing nothing to strengthen the IAEA. • Arrangement with India required modifying of NNPA to eliminate full scope safeguards requirements for a demonstrated proliferator. • Implications for Iranian situation

34. Issue #4: Yucca Mountain • “Waste confidence” as a basis for reactor licensing; • Role of the EPA standard: • There is no EPA standard • There is high likelihood of more litigation even before application is filed

35. Issue # 5; The Quality of Nuclear Regulation • "Our great hazard is that this great benefit to mankind will be killed aborning by unnecessary regulation." AEC Commissioner Willard Libby, 1955; • TMI Report Conclusion – “Fundamental changes in the attitudes of the NRC and the industry are necessary”; • NRC is made up primarily of dedicated and capable staff, but quality of leadership and Congressional oversight are again in question.

36. The Safety Goal • Individual members of the public should be provided a level of protection from the consequences of nuclear power plant operation such that they bear no significant additional risk to life and health, and societal risks to life and health from nuclear power should be comparable to or less than the risks of generating electricity by viable competing technologies and should not be a significant addition to other societal risks.

37. Connecting Ten Dots 1)  A 2002 survey of NRC employees says that 40% would be scared to raise significant safety questions.  Then Chairman Richard Meserve said this was a big improvement from the 50% of five years earlier. 2)  January 2003 - A NY Times story reported that the NRC had ruled that terrorism was too speculative to be considered in NRC licensing proceedings, even as the Bush administration and Congress considered terrorism likely enough to suspend habeas corpus.  This position has since been rejected by the 9th Circuit Court of Appeals, but the NRC continues to apply it elsewhere. Incidentally, the original staff testimony taking this position was submitted on September 12, 2001, while the Trade Center and the Pentagon were still smoldering.  The licensing board wanted to admit the contention over the staff objection but was overruled by the commission. 3)   From an NYT editorial of January 7, 2003 - Unfortunately, the regulatory agency that was supposed to ride herd on unsafe plants was equally negligent. A report just released by the N.R.C.'s inspector general concludes that the regulatory staff was slow to order Davis-Besse to shut down for inspection, in large part because it did not want to impose unnecessary costs on the owner and did not want to give the industry a black eye. Although the N.R.C. insists that safety remains its top priority, its timidity in this case cries out for a searching Congressional inquiry into whether the regulators can still be counted on to protect the public from cavalier reactor operators.

38. Connecting 10 Dots 4)  In 2003 the NRC submitted the name of Sam Collins, the official who had overseen the Davis Besse lapses, to the Office of Personnel for the highest civilian financial award, a 35% bonus - or about $40,000. During the time covered by the award, the NRC inspector general also concluded that Collins had knowingly inserted a false statement into a letter sent by the NRC chair to David Lochbaum at the Union of Concerned Scientists. As Lochbaum observed at the time "The NRC has a safety culture problem. The survey released last December showed that only 51% of the workers felt comfortable raising safety concerns. The Commission can only reinforce the fears by rewarding a person who has falsified documents, chided those who did their jobs, and taken repeated steps to undermine safety". 5)   Immediately after the September 11 attacks, the NRC rushed out a claim that nuclear power plants were designed to withstand such crashes.  This claim, which had not correct, was later withdrawn. 6)  Two unprecedented speeches by a Commissioner attacking groups with a history of responsible participationin NRC proceedings.

39. Connecting 10 Dots 7) The claim by Senator Pete Domenici that he had successfully persuaded the NRC to reverse its "adversarial attitude" toward the nuclear industry by threatening to cut its budget by one-third during a 1998 meeting with the chair (from Senator Pete V. Domenici, A Brighter Tomorrow; Fulfilling the Promise of Nuclear Energy (Rowman and Littlefield, 1998, pp. 74-75)  8)  The fact that the current NRC chair (Dale Klein) appeared in paid industry ads attesting to the safety of Yucca Mountain.  When Commissioner Jaczko was appointed from the staff of Nevada Senator Harry Reid, he was required to take no part in Yucca Mountain matters for a year or two.  No such requirement was placed on Klein. 9)  The NRC has dramatically curtailed the opportunities for public participation.  To give but one of many examples, lawyers can no longer cross examine in most cases. They must submit their questions to the licensing board chair, who decides whether or not to ask them. 10)   "The top U.S. nuclear regulator vouched for the safety of a new Westinghouse nuclear reactor - yet to be built anywhere in the world - in a sales pitch to supply China's growing power industry.....U.S. Nuclear Regulatory Commission Chairman Nils Diaz said the U.S. $1.5 billion AP1000 reactor made by Westinghouse Electric Co. is likely to receive regulatory approval in the next few months."  Associated Press, October 19, 2004

40. An Unfortunate Reality • The nuclear power programs that actually unfold are never the idealized programs that nuclear proponents envision. • Just look at the Energy Policy Act of 2005, NRC biases, the Global Nuclear Energy Partnership, the recent deal with India

41. Sensible Energy Policy that Might Improve Nuclear Power Prospects and Command Broad Political Support • Implement climate change policy that creates (or recognizes) value of all carbon reducing technologies, including carbon sequestration, energy efficiency and renewable energy • Carbon caps and markets • Carbon taxes • Carbon reducing set asides (portfolio standards) and/or production tax credits • Remove Price-Anderson liability limitations for future projects • Use neutral market mechanisms to choose least costly approaches among these • Avoid “pin-the-tail-on-the-donkey” energy policy making • Take the time to deal sensibly with waste, proliferation and safeguards; • Rigorous prioritization of options for research purposes – effective, efficient, expeditious; • Recreate the Nuclear Regulatory Commission as an impartial and widely respected regulatory body.