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Federal Document Clearing House Congressional Testimony

July 26, 2000, Wednesday


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July 25, 2000 Testimony for the Record Submitted by Maureen Koetz Director, Environmental Policy Nuclear Energy Institute U.S. House of Representatives Science Committee Subcommittee on Energy and Environment My name is Maureen Koetz, and I am director of environmental policy for the Nuclear Energy Institute (NEI). NEI develops public policy for its more than 270 members of the nuclear industry that represent a broad spectrum of interests. In addition to representing every U.S. utility that operates a nuclear power plant, NEI's membership includes nuclear fuel cycle companies, suppliers, engineering and consulting firms, national research laboratories, manufacturers of radiopharmaceuticals, universities, labor unions and law firms. On behalf of NEI, I would like to thank Chairman Calvert, Ranking Member Costello and the members of this subcommittee for inviting NEI to testify on the value of America's nuclear power plants to our nation's energy security and environmental protection. As we move to the 21st century, environmental and energy challenges are once again upon us. And as Shakespeare said, Past is prologue. Issues related to reliability of supply and the need for emission controls again are converging as they did in the 1960s and 70s, demanding a comprehensive energy policy that effectively uses all forms of electricity generation to their full potential and advantage. Added to the policy challenges today and for future generations is the potential for climate change due to man-made emissions of greenhouse gases. As with air quality challenges in the past, a robust, safe nuclear energy program again will be the lynchpin in efforts to address these emissions while preserving the affordable electricity system that is the foundation for America's economic growth. The political rhetoric of a few has largely shouted down the quiet but steady energy security and environmental success at our country's 103 nuclear power reactors. As a result, the industry rarely is recognized or credited for nuclear energy's role in protecting our air quality, the industry's ability to minimize and safely manage its byproduct materials, and the industry's success in reducing dependence on foreign oil and underpinning American energy independence. Federal policymaking, especially national energy policy, must re- examine the unique and irreplaceable value of this expandable, emission-free energy source, and should craft policies and programs so electricity markets recognize and reward that value. This testimony provides a brief overview of the state of the industry, and discusses the policies and programs NEI believes will maintain and expand the irreplaceable contribution of nuclear energy to our energy and environmental goals. 1. A HISTORY OF SUCCESS Growth and Performance Unrivaled In the Electric Industry In the relatively short period since construction on the first commercial nuclear reactor began at Shippingport, Pa., in 1955, nuclear energy has evolved into a reliable, affordable, and essential baseload electricity technology. In 1999, nuclear plants generated a record 728 billion kilowatt-hours of electricity, 53 billion kilowatt-hours more than the previous year and 151 billion kilowatt-hours more than in 1990. Last year's record performance capped the best decade in the industry's history. Even with growth in overall energy demand and production, America's nuclear power plants have kept pace and, as our nation's second largest source of electricity, continue to provide approximately 20 percent of the nation's electricity. The dramatic increase in electricity generation by America's nuclear stations can be viewed as one the most successful energy efficiency programs of the last decade. It was equivalent to adding nineteen 1,000-megawatt power plants to our nation's electricity grid. And, the growth in nuclear power production avoided the environmental disruptions and impacts that would have occurred if new electric generation had to be brought on line to meet these needs. The lack of new nuclear construction since the 1980s often is identified as a sign of industry stagnation, when in fact, expanded operation of existing facilities has actually been the environmentally preferable alternative for making additional electricity. Nuclear power plant capacity increases and operating efficiencies are continuing. Plant uprates, improved maintenance and reduced outage times will contribute to even higher operating efficiency and additional electricity output from existing power plants. But these increases are finite, limited to the maximum capacity of each reactor. To meet future demands of an electricity-hungry digital economy, especially when environmental requirements limit some options, some electric companies are beginning to examine the market for new nuclear power plants. Nuclear Plant Safety Unparalleled Among Energy Providers America's nuclear energy industry, in more than 2,400 reactor- years of operation, has compiled a safety record that is unparalleled among the world's energy providers. The number of events triggering any of the multiple nuclear reactor safety systems decreased from 2.37 events per reactor in 1985 to the current level of 0.03, with a successful resolution of each event. This means that the defense-in-depth safety systems at these plants were activated less than one time on average for each plant. The reduction in "triggering events" represents an 80- fold improvement over the past 15 years. This and other continually improving safety and performance measures clearly demonstrate the industry's proven and unwavering commitment to excellence in operational safety. Nuclear Energy's Promising Economic Future During 1999, the average production cost of electricity generated by nuclear power plants was between two and two and a half cents per kilowatt-hour, making the one-two punch of coal and nuclear the most affordable electricity in the United States. Reduced production costs and growing electricity demand are leading the vast majority of nuclear power plant owners to extend their operating licenses for an additional 20 years. This April, the NRC approved the first license renewal for two reactors at the Calvert Cliff s nuclear power plant in Maryland. Another three reactors at the Oconee nuclear power plant in South Carolina also have received NRC-approved license renewals. Twenty-five other reactors have begun the renewal process or announced their intention to do so-dramatic evidence of the promising economic future for nuclear energy. As recently as three years ago, 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. Today, many of those same analysts are predicting only a handful of plants may close prior to the expiration of their licenses, and recognize that the vast majority of plants will extend their operating licenses beyond the initial 40-year period. We should expect total electric output from nuclear plants to continue to increase along with increases in productivity and additional plant uprates. Energy Security and Reduced Dependence on Foreign Oil At the time of the first oil embargo in 1973, approximately 20 percent of U.S. electricity supply came from oil-fired power plants. In some parts of the nation-the Northeast, for example- the percentage of oil-fired electric generation was considerably higher. Also in 1973, just five percent of U.S. electricity came from 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 other energy supply disruptions, protecting American businesses and homes from fluctuating cost and providing a reliable supply of electricity. Successful Waste Management Protects Public, Environment Like other electricity sources, nuclear power plants have byproducts that must be managed safely. The storage of used nuclear fuel by electric companies is one of the most successful solid waste management programs in the industrial sector. Used fuel rods are stored in deep steel-lined pools or in robust stainless steel containers. Throughout the nuclear generation cycle, the small volumes of waste byproducts actually created are carefully contained, packaged and safely stored. And, as a result of improved process efficiencies, the average volume of waste generated at nuclear power plants has decreased significantly in the past two decades. The high-level radioactive waste, in the form of used fuel rods, totals less than 20 tons per nuclear plant each year. The trillions of kilowatt-hours of nuclear electricity generated over more than 40 years have produced about 38,000 tons of used fuel rods. These rods, if stacked together, would fill a football field to a depth of a little more than four yards. Although U.S. policy originally envisioned recycling reactor fuel to separate the small volumes of waste and reuse the fuel remaining, the Ford and Carter administrations chose instead to dispose of the fuel after only one use in a deep geologic repository, leading to the disposal facility undergoing site characterization at Yucca Mountain. Overall, the environmental policies and practices at nuclear power plants are unique in having successfully prevented significant harmful impacts on the environment since the start of the commercial nuclear industry more than 40 years ago. Effective waste avoidance, minimization and management practices have successfully prevented or mitigated adverse impacts on water, land, habitat, species and air from releases or emissions in the production of nuclear electricity. Air Quality Protection Perhaps the most undervalued aspect of nuclear generation is its ability to avoid the emission of harmful pollutants while producing significant amounts of electricity. The Clean Air Act- the principal federal statute addressing air quality and man-made emissions-sets concentration levels allowable in the ambient air for pollutants, such as sulfur dioxide, ozone (and its precursor nitrogen oxide) and particulate matter. Regulations then prescribe various limitations on emissions required to meet these ambient air quality standards, and states take appropriate actions to limit overall emission levels to comply. The emission caps and permit restrictions that result represent a finite level of pollution permitted for a range of industrial activities in a defined area, including electricity production. The permissible levels of emissions have decreased over time, as restrictions have become tighter. Concurrently, the total amount of electricity needed to satisfy demand in states and regions has increased. Much of the burden for reducing concentrations of harmful air pollutants to meet Clean Air Act requirements has been focused on the electric utility industry because of the ease and cost effectiveness of controlling large, stationary sources of emissions compared with smaller, mobile sources such as automobiles. Reducing emission levels at new and existing facilities was the focus of many of the regulations implemented under the law. Technologies such as scrubbers, bag houses and low- emission burners have become standard tools in reducing emissions from combustion-based sources of electricity. However, reducing emissions is not the only method employed to achieve compliance with increasingly stringent Clean Air Act limitations. Avoiding the emissions in the first place while meeting increased electricity demand has also been an important compliance tool. In fact, between 1970 and 1990, the increased use of nuclear energy eliminated more nitrogen oxide emissions than actions taken to comply with Clean Air Act restrictions. Nuclear energy, by avoiding additional emissions as electricity output grows, acts as a vital partner in Clean Air Act compliance. So at the same time the United States was responding to the oil and gas shocks of the 1970s by re-balancing the energy supply portfolio to include nuclear energy, it was also aiding in the implementation of Clean Air Act requirements in states where the plants operated. Attainment designations, permit programs and other compliance actions under State Implementation Plans implicitly rely on the continued availability of existing non- emitting electricity. And as the United States takes steps to address the possible atmospheric impacts of carbon and other greenhouse gases, nuclear energy will be needed to bridge the gap between emissions abatement and continued energy security. Environmental protection and energy security are among the reasons why two out of three Americans favor nuclear energy. Sixty-five percent of college graduates/registered voters and 62 percent of the general public favor the use of nuclear energy as one of the ways to provide electricity. One reason for the steady support for nuclear energy is the perception that nuclear energy is a fuel of the future and is important for future generations. Americans tend to see solar and nuclear energy as sources of the future. In addition, there is broad support for the continued operation of existing nuclear power plants (76 percent) as well as for maintaining the option to build more nuclear power plants in the future (73 percent). II. ENERGY SECURITY + GREENHOUSE GAS ABATEMENT = NUCLEAR ENERGY This spring and summer, America is again experiencing the effects of relying on imported sources of energy, although the impacts are not as severe as the oil shocks of the 1970s. At the same time, increasing pressures to limit air emissions of all kinds further strain the energy supply as new power plant construction and capacity additions are delayed or constricted to stay within emission standards or caps. Adding to this equation is the growing recognition that prudent measures to limit greenhouse gas emissions may be necessary to forestall their possible negative effect on the climate. Lessons learned about the role of emission avoidance technologies in meeting Clean Air Act requirements during the last 20 years are prologue to the long-term, technology-based solutions that will be needed to control man-made greenhouse gases, such as carbon dioxide or methane. Unique factors affecting the control or abatement of these gases make avoidance technologies even more critical. Unlike nitrogen or sulfur oxides, the primary greenhouse gas--carbon dioxide-is derivative of the energy source in the fuel, not a byproduct material that can be eliminated through end-of-pipe controls or low-content fuels. Therefore, carbon control can be far more expensive than conventional pollution control programs, making technologies that avoid emissions all the more important. As with pollutants controlled under the Clean Air Act, climate change policies generally focus on sources that emit greenhouse gases or on technologies that reduce them. This narrow view fails to recognize the embedded reliance on non-emitting technology for emissions control. When the 1990 greenhouse gas emission baseline was calculated for the United States, 20 percent of our electricity was being supplied by nuclear power plants, avoiding the release of 141 million metric tons of carbon emissions if carbon-based fuels had been used instead. In 1999, U.S. nuclear plants avoided 167 million metric tons of carbon, and that grows each year as electricity production at nuclear power plants increases. Cumulatively, nuclear energy has avoided more than two billion metric tons of U.S. carbon emissions since 1973. From a compliance perspective, this emission avoidance role is essential. Based on current emission levels, the United States would be required to reduce greenhouse gas emissions by 162 million metric tons to achieve its original voluntary commitment under the United Nations Framework Convention on Climate Change (UNFCCC). Without nuclear energy's role in avoiding carbon, the United States would have to reduce carbon by more than 349 million metric tons to meet the 1990 baseline. The existing treaty commitment prompted the Clinton Administration, through the Department of Energy, to call for voluntary commitments by industry to reduce carbon emissions. In response, electricity providers and other industries have voluntarily mitigated greenhouse gas emissions. In 1999, nuclear power plants provided about one-half of the carbon reductions achieved by U.S. industry under the voluntary reporting program established in Section 1605b of the Energy Policy Act (EPAct). Voluntary reductions at nuclear power plants, the largest contribution by far to the program, were achieved by avoiding emissions primarily through increased efficiency and uprates in nuclear power plant capacity. Thus, the improved operation of nuclear power plants resulted directly in the avoidance of millions of additional tons of air emissions as it provided one of the most successful energy efficiency programs of the last decade. As lawmakers develop public policy on air quality, they should recognize that a ton of pollution avoided is as valuable as a ton reduced. NEI supports improving the National Inventory and Voluntary Reporting provisions in Section 1605b of EPAct so that all energy sources that avoid greenhouse gas emissions are equally recognized and rewarded by DOE anti-pollution programs. DOE should develop standardized benchmark measurements for calculating emissions avoided, based on emission levels of likely substitute electricity production, so that all non-emitting forms of electricity can be more accurately valued and priced in the marketplace for their contribution to air quality. In the past, the emissions avoided by nuclear plants were generally counted as internal offsets for regulated utilities required to meet both electricity demand in their service territory and environmental restrictions on their emitting generation. In a competitive market, not all energy providers may own a generation mix that allows such offsets to be calculated. With a benchmark providing a standardized figure (e.g., the emission rate in the regional power pool), companies that own and operate avoidance technologies can still calculate the emissions they are avoiding, and participate in programs, such as the 1605b effort. This need for standardized benchmarking holds true for all non- emitting technologies, such as hydro and renewables. Production increases at those facilities should not have to rely on offsets against co-owned emitting generation to be counted and recognized. These accounting improvements will provide accurate and transparent government-sponsored reporting to identify the technologies that are managing greenhouse gas emissions so consumers and the market can respond. The challenge for Congress is to develop public policy that will fully recognize and reward technologies that avoid the production of greenhouse gases and other air pollutants in tandem with efforts to reduce emissions from existing and future sources. Effectively crafting tax or-other economic policies that encourage the use of low- or non-emitting technologies can produce such an outcome. International negotiations are continuing to convert the voluntary restrictions in the Climate Convention to mandatory requirements. Ironically, many non-governmental organizations and other parties supporting the Kyoto Protocol also support efforts to exclude nuclear energy projects from the technology transfer programs and incentives the protocol creates as part of its Flexible Mechanisms program. These market-based credit- trading devices, such as the Clean Development Mechanism, have been designed to ease compliance costs and allow developing countries to benefit from the economic development likely to result from increased application of climate-friendly technologies. The United States' position in the negotiations has been to oppose the arbitrary and discriminatory exclusion of nuclear energy from these international credit trading and technology transfer programs. Excluding nuclear energy-the largest source of emission- free electricity in the United States and many other countries- from those technologies worthy of incentives for playing a major role in meeting Kyoto Protocol requirements would undermine any credible program to meet the requirements of the protocol. The Kyoto Protocol faces significant hurdles before it, or any agreement like it, could come into force in the United States. However, to the extent carbon abatement measures are considered prudent and appropriate, those measures should include the safe international deployment of nuclear energy as part of the global response to climate change. Large-scale, non-emitting technology, such as nuclear energy, is undeniably essential for any meaningful participation in greenhouse gas emission abatement in advanced developing countries as contemplated by the Byrd-Hagel resolution. For economies that are not yet producing significant levels of greenhouse gases due to underdevelopment, emission avoidance will be the major alternative available to provide meaningful participation without limiting future economic growth. Policies that ensure the United States retains its role as the leader in commercial nuclear technology are both a domestic compliance requirement and are crucial for a global solution to climate change. Federal Policy Imperatives for Energy Security, Environmental Protection Nuclear energy is, and will continue to be, an essential component of U.S. policy to provide both energy security and environmental protection. Though the future is bright for nuclear energy in the United States, that future will only be fully realized if industry and government, working together, effectively address the few long-term challenges facing the industry. The industry stands poised to provide a new generation of nuclear plants that are safe, economic, reliable and acceptable to the public. It also intends to operate existing plants safely, efficiently and economically. There is an important role for the federal government to play if the United States is to benefit from extended operation of current nuclear plants and a new generation of commercial reactors. The policy proposals outlined in this testimony win go a long way toward ensuring that nuclear energy sources can fairly compete with baseload alternatives and continue to provide the energy security and environmental protection that have been nuclear energy's hallmark for more than 40 years. 1. Preserve U.S. Global Leadership In Nuclear Science & Technology "Perhaps the most important reason that the government today is not doing all that it should in (nuclear) energy research and development is that the public has been lulled into a sense of complacency by a combination of low energy prices and little sense of the connection between energy and the larger economic, environmental and security issues that people do care very much about,"' according to an assessment of R&D funding by the President's Committee of Advisors on Science and Technology (PCAST). If the federal government does not do "all it can," the United States risks relinquishing its position as the world leader in nuclear science and technology-a position it has held since World War II. PCAST understood this potential peril in 1997 when it said: "If the pace of technological progress is not sufficient, the future will be less prosperous economically, more afflicted environmentally, and more burdened with conflict." 2 The United States has the largest number of nuclear power reactors (103) and the largest nuclear energy capacity (about 100,000 MW) of any nation. In 1999, electricity from nuclear plants in 31 states was enough to meet all of the electricity demand of France and the United Kingdom combined, or all of Central and South America. Simple logic would dictate that we also should be the world leader in funding for nuclear R&D. In its 1999 report, PCAST noted that its recommendation for nuclear R&D funding by the year 2003 ($120 million) would merely return the U.S. level of effort to that of 1995.3 In fiscal year 1998, funding for the Department of Energy's research and development program for improving commercial nuclear power plant technology was completely eliminated. Funding for this important program was revived at a modest level in 1999 and continues today at $28 million. But, as PCAST recommends, increased funding is essential to avoid significant negative impacts on efforts to recruit and sustain an educated workforce to design and operate nuclear plants in the future. The Nuclear Energy Research Initiative (NERI) and Nuclear Energy Plant Optimization (NEPO) research programs should be funded at levels double the Administration's 2001 budget request. These programs are designed to produce generic improvements that reduce capital and operating costs for both current reactors and advanced reactor designs available for new nuclear plant construction. Funding also is important for the Energy Department's University Support Program, which helps maintain research reactors and enhances educational programs in nuclear science and technology at our nation's colleges and universities. In what may be viewed as a response to congressional energy policy initiatives, the Clinton Administration is collaborating with more than a dozen nations to lay the foundation for an international research and development program for globally deployable advanced reactor designs. The International Nuclear Energy Research Initiative (NERI/I) is funded jointly by all participating nations to promote bilateral and multilateral research that is focused on advanced technologies to improve safe and efficient nuclear power plant operation and waste management. NERI/I is strongly supported by the nuclear industry and should receive equally ardent backing by Congress. Continued research and development is needed to maintain existing capacity and build new plants to meet our future energy and environmental challenges. In comparison to other electricity generating sources, nuclear energy unequivocally is the most economical federal research and development investment. In 1998, the federal government spent one cent on nuclear energy R&D for every kilowatt-hour of electricity generated at nuclear power plants. By comparison, the cost of natural gas R&D per kilowatt- hour of electricity generated was 36 cents; for solar photovoltaics, $21,566; and for wind energy $10,700. Obtaining a fair share of R&D funding is essential for the expanded use of nuclear energy. 2. Support Nonproliferation Programs The industry strongly supports the Clinton Administration goal to reduce stockpiles of nuclear weapons materials around the world. An important policy to meet this goal is the disposal of excess weapons-grade nuclear material by blending it into mixed-oxide fuel for use in nuclear power reactors in the United States and Russia. As part of the program, DOE is working with Russia on developing a gas reactor for plutonium disposition. The industry urges Congress to provide sufficient funding to ensure the successful implementation of the MOX fuel program for two reasons: The threat of weapons proliferation and conflict will be reduced, and commercial nuclear facilities will be assured of additional fuel supplies in support of continued greenhouse gas abatement. NEI also urges the Congress to instruct DOE to provide Congress with detailed five-year projections of the expected program costs for construction and operation of plutonium disposition facilities. 3. Assure Adequate Funding for the Repository Program at Yucca Mountain The Department of Energy's program to manage used nuclear fuel is at least 12 years behind schedule. The federal government's continued failure to meet its contractual and statutory deadline to begin accepting used fuel by 1998 threatens the continued operation of two of the nation's best-run nuclear power plants. The Clinton Administration has failed to offer a concrete plan for fulfilling its obligation until a federal repository is in operation in 2010 at the earliest. The Senate and House of Representatives passed legislation that would have provided early acceptance of fuel at the proposed Yucca Mountain repository in 2007 if it is determined to be a suitable site and licensed by the Nuclear Regulatory Commission. But President Clinton's veto of the bill has continued to thwart the bipartisan congressional support for resolving this issue. Keeping the federal repository program on track toward a presidential decision in 2001 on whether to proceed with licensing and construction of Yucca Mountain is imperative. The nuclear industry is encouraged by the impressive scientific foundation for decision-making that has been established and supports full funding for DOE's Yucca Mountain Project in fiscal year 2001 to ensure that approaching program milestones can be met. 4. Continue Improvement In NRC's Regulatory Oversight Program The NRC in recent years has served as a model of regulatory improvement, adopting a new reactor oversight process that is safety focused and relies on performance-based, objective indicators to judge acceptable levels of plant operations. The new process is more transparent and open than the old system and uses quantitative performance indicators. Revised inspection and enforcement programs have been integrated into this process as well. This new approach enhances public and worker safety by focusing management and regulatory attention on areas with the greatest safety significance. The nuclear industry strongly supports the ongoing changes at the NRC and commends the Congress for its effective oversight of that agency. Congress should eliminate duplicative regulation that has allowed the Environmental Protection Agency to become involved in issues that are more appropriately subject to NRC authority. For example, the EPA has threatened to overturn NCR's regulatory decisions by seeking remediation under Superfund for power plant and other nuclear facility sites decommissioned in accordance with NRC requirements. Another example of unnecessary and unproductive dual regulation is the application of the Resource Conservation and Recovery Act to commercial mixed wastes. In a recently completed report titled, Radiation Standards: Scientific Basis Inconclusive, and EPA and NRC Disagreement Continues, (GAO/RCED 00- 152, June 2000), the General Accounting Office recommended that sound public policy requires that radiation safety standards be consistent and science based. 5. Extend Self-insurance Pooling Under The Price-Anderson Act The public has $9.7 billion of insurance protection in the event of a nuclear reactor accident. The nuclear reactor operators-not the public or the federal government-pay for this insurance. This utility self-insurance pool was first established in 1957, when Congress passed the Price-Anderson Act. The act provides an umbrella of no-fault insurance protection for the public, and ensures that money will be immediately available to pay liability claims that could result from a major nuclear accident. Price- Anderson most recently was amended in 1988, and the deadline for reauthorization is 2002. In a 1998 report to Congress, the NRC recommended that the act be extended for an additional 10 years. DOE also has recommended that Congress approve an extension of the Price-Anderson law. Both agencies recommended reauthorization with minimal change. The nuclear industry strongly supports the reauthorization of the Price-Anderson Act. 6. Level the Electricity Competition Playing Field In recent years, state and federal initiatives have accelerated the transition to a competitive electricity market. As companies prepare to do business in this new market, the unbundling of their products and services will require a re-examination of costs and allocation of value to activities that previously were not valued. Nuclear energy remains a low-cost source of electricity in the emerging deregulated electricity market. Free- market competition demands that the playing field be level for all electricity generators. Congress can enact several legislative initiatives that remove unnecessary impediments to nuclear power and pave the way for sensible, market-based business decisions that win preserve and extend the operation of today's nuclear power plants. First, Congress should eliminate unnecessary requirements that may prevent effective ownership transactions in a competitive market. Consolidated ownership of nuclear plants allows for economies of scale in operations, maintenance, outage planning and administration. These transactions will also likely improve safety because ownership and operating responsibility will be consolidated in the hands of large companies with the financial and management resources to operate the plant at the highest possible levels of safety and reliability. Resulting cost savings encourage continued plant operation by reducing the operating costs of plants when it is operated as part of a larger nuclear organization. Industry consolidation is occurring through plant purchases, mergers and operational arrangements. PECO's AmerGen partnership with British Energy has completed the purchase of two plants and has agreements in place for the purchase of two additional units. Energy Corporation has completed one purchase and has an agreement to purchase two other plants. Other companies have expressed interest in purchasing nuclear plants, and a newly formed nuclear operating company is now operating seven plants in the Midwest, belonging to five different utilities. The number of nuclear plant transfers is expected to increase as states deregulate their electric generation markets. Policy changes are important to remove potential barriers to permitting otherwise economical plant consolidations, including revision of Section 468A of the Internal Revenue Code, which addresses the tax treatment of nuclear decommissioning trust funds. The tax code must be updated to recognize that in a deregulated environment, nuclear power plants may be owned and operated by an entity that is unregulated. The tax code provides for the tax- free transfer of qualified nuclear decommissioning funds as part of a plant sale or license transfer when a plant is transferred from one regulated entity to another. These provisions were written in 1984, a time when the IRS did not envision the possibility of a nuclear plant being sold to an unregulated entity. Although the IRS has used its discretionary authority to permit a tax-free transfer of these funds in private letter rulings related to the three plant sales completed to date, Congress should amend Section 468A of the tax code to clarify that plant sales to unregulated entities should not trigger a taxable event when decommissioning trust funds are transferred. Legislation has been introduced in the House of Representatives by Reps. Jerry Weller and Ben Cardin (H.R. 2038) and in the Senate by Sens. Frank Murkowski and John Breaux (S. 1308) to make these changes. The provisions of the Weller-Cardin bill are also included in H.R. 2944, Rep. Joe Barton's Electricity Competition and Reliability Act. Some of the provisions of H.R. 2038 also were included in H.R. 2488, the Financial Freedom Act of 1999, and some provisions were included in President Clinton's FY2000 budget proposal. In addition, public policy incentives to encourage carbon abatement or avoidance technologies must be equally applied, whether they are production and/or investment tax credits to address climate change, access to market-based pollution control mechanisms, or access to favorable financing and other funding mechanisms. The importance of nuclear energy to clean air and carbon abatement is one of the previously unvalued services for which companies must receive economic benefit to prevent competitive disadvantages, and position nuclear power plants to continue their crucial environmental contribution. Any plausible strategy to mitigate greenhouse gas emissions will require an expanded use of nuclear energy in the United States and around the world. Equal treatment in these market and incentive programs will allow new nuclear plants to effectively compete with alternative forms of generation, extending nuclear energy's unique ability to provide energy security and environmental protection. Conclusion This year, the world celebrated the 30th anniversary of Earth Day, including the significant environmental strides the United States has made since 1971. One of the most prominent environmental protection advancements in the industrial sector has been the increased reliance on domestically available nuclear energy to power our fast-growing digital economy while improving air quality. Congress should not lose sight of this important energy security and clean air compliance resource, and policymakers should employ a strategy that maximizes nuclear energy's potential to power our economy and improve our air quality. Together, the nuclear energy industry and the federal government can ensure that nuclear energy will continue to help meet our nation's public policy goals regarding energy production and environmental protection for the 65 million consumers who use electricity generated at nuclear power plants.

LOAD-DATE: August 9, 2000, Wednesday

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