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Federal Document Clearing House
Congressional Testimony
July 26, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 9614 words
COMMITTEE:
HOUSE SCIENCE
SUBCOMMITTEE: ENERGY AND
ENVIRONMENT
HEADLINE: TESTIMONY NUCLEAR ENERGY SECURITY
TESTIMONY-BY: MAUREEN KOETZ , DIRECTOR
AFFILIATION: ENVIRONMENTAL POLICY NUCLEAR ENERGY
INSTITUTE
BODY:
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
