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April 12, 1999

Shaping the Future
of Nuclear Energy

Remarks by Joe F. Colvin
President and CEO
The Nuclear Energy Institute

NEI Fuel Cycle 99
Austin, Texas

April 12, 1999

Good morning, and thank you for joining us for Fuel Cycle 99.

I would like to thank Wes Taylor for his Texas hospitality and his kind welcome to Austin and the Lone Star State.

Since I grew up in a neighboring state, before I get started I thought I'd share a tip that might help you better appreciate the unique character of Texans.

If a person is from Texas, he or she will tell you.

If they don't tell you, don't embarrass them by making them admit that they're not a native!

I am delighted to be able to address this fuel cycle conference—and this vital sector of the nuclear energy industry.

No matter how bright the future of our industry—and I believe it is brilliant—without a robust, stable and predictable fuel cycle, nuclear energy cannot prosper.

You and your companies are integral to our current success and will become even more so in a competitive electricity marketplace.

And like nuclear power generation, your business is a global industry—as the large international presence at this conference clearly demonstrates.

Other similarities exist. Like the power generation side of the business, the nuclear fuel industry is experiencing consolidation.

And just as the generators are experiencing change, the emergence of secondary sources of material is changing the calculus of your business.

But these changes are providing new, challenging and rewarding opportunities.

This past year certainly was one to remember across our entire industry. We made important gains in a number of areas, including competitiveness and market restructuring, regulatory reform and resolving the used fuel issue.

USEC went public… and we recently resolved the commercial aspects of the U.S.-Russia HEU agreement.

We have seen the financial community grow to be bullish on the nuclear industry… and on the trend toward consolidation.

Leading Wall Street utility analyst Robert Rubin put it very simply when he recently noted that the "people who are buying the nuclear plants are very smart."

Policymaker support is also stronger than ever. Congress, in particular, is increasingly supportive of nuclear energy.

This morning, I'll speak about some of those events that are shaping the destiny of our industry.

I probably will violate the important tenets of "Texas-speak," which are: "Talk low, talk slow and don't say too much."

But I want you to share my confidence and optimism about the future of nuclear energy.

Along the way, I will touch on some broad issues, which our distinguished morning panel—and others over the next two-and-a-half days—will delve into in greater detail. I would like to thank all of our speakers in advance for their participation, and—like you—I am eager to hear what they have to say.

The importance of nuclear energy to the United States and to the world is increasingly being recognized by a large and diverse audience.

From policymakers to opinion-shapers… from the financial community to the people at our nuclear power plants…

…there is a growing awareness that ours is a proven industry with 8,6001 reactor-years of operating experience worldwide…

…and with a product that will become increasingly valuable as we tackle the pressing demands of the 21st century.

One reason for this enhanced recognition—and a primary reason we should be so optimistic about the future of our industry—is the long, hard work and dedication of the companies and individuals that energize our business.

Our industry is poised to capitalize on the opportunities before us today… because those that make it work never stopped learning from the past and preparing for the future.

They never lost sight of the fact that the objective test of any technology is a proven track record of excellence.

Over more than four decades of successful operation, all the key indicators of nuclear energy's safety and reliability have improved steadily.

We have fewer unplanned shutdowns, fewer safety system actuations, fewer forced outages, higher capacity factors and higher reliability.

For example, last year U.S. nuclear power plants achieved an 87 percent unit capability factor… and 98 percent of units achieved safety system performance goals set for the year 2000.

In fact, from 1990-1998, increases in capacity factor at the nation's nuclear plants resulted in an 11 percentage point increase in nuclear generation.

That translates into the rough equivalent of adding 11 new 1,000-megawatt plants to the grid.

With more than 100 nuclear power plants providing about 20 percent of America's electricity, it is clear that the U.S. nuclear energy industry has passed the excellent-track-record test.

Another reason I believe we all should be optimistic about the future of nuclear energy is the advent of competition in the electric power industry.

As I have said on a number of occasions, competition is one of the best things to happen to nuclear energy in many years.

Three years ago, as restructuring started in earnest, the U.S. nuclear power industry faced an uncertain future.

There were significant unanswered questions about recovering the capital invested in nuclear plants… and about nuclear energy's ability to compete in a deregulated market.

All in all, a lot of hand wringing!

Today, the level of uncertainty is significantly reduced, the fundamentals of the nuclear business are sound, and our economic prospects are bright and getting brighter.

Twenty states—encompassing 52 operating nuclear units—have taken final action on electricity restructuring plans. Most states have provided utilities with a reasonable opportunity to recover stranded costs.

All things considered, most nuclear plants are well-positioned for a competitive commodity market.

Based on a three-year rolling average (1994-1997), the United States had nine nuclear units producing electricity below 1.5 cents per kilowatt-hour, and 40 units producing at below 2 cents per kilowatt-hour.

Below 2 cents per kilowatt-hour is more than competitive.

This is important because plants with the lowest production costs also tend to be the industry's most efficient and safest units.

Strong economic performance is consistent with safety.

Moreover, as competition develops, many nuclear plants should be able to improve their economic performance significantly.

The industry is well-positioned for competition today largely because individual companies, and the industry as a whole, started working to improve economic performance in the late 1980s.

As a result, nuclear power generation costs are declining and can decline still further.

Through innovation and cost-effective fuel cycle operation, your side of the business has greatly aided cost-management on the generation side of the business.

These positive trends are being formalized in the historic move toward license renewal and plant purchases.

Already, two companies have filed for 20-year license extensions for their combined five units… and at least six other companies have notified the NRC of their intention to do so in the near future.

Mike Tuckman of Duke Power will discuss this issue in greater detail shortly.

Suffice it for me to say that the future will see more relicensing initiatives that will cost less and take less time.

Additionally, two2 nuclear power plants are being purchased by companies making the deliberate decision to focus their core business on nuclear energy generation.

At least three3 other plants are being examined as potential candidates for purchase.

Moreover, when the "hidden value" of nuclear energy's emission-free nature is added to the mix, nuclear power becomes an even more valuable asset.

It is clear that it will be impossible to balance future electricity demand with increasingly stringent clean air imperatives without at least maintaining the present level of nuclear generation.

When the ambitious goals of the proposed Kyoto Protocol are taken into account, the stage is set for more license transfers and renewals and—eventually—the expansion of nuclear generation.

And while the Congress remains undecided about the Kyoto Protocol, its commitment to carbon abatement strategies is clear.

In short, today's nuclear industry is reinventing itself to deal with the business of nuclear energy and competition.

But for nuclear energy to compete on an equal footing with other forms of generation in a competitive electricity marketplace, regulatory reform is a prerequisite.

Fortunately, we have seen remarkable progress at the NRC toward comprehensive regulatory reform..

Driven by competition, the industry will become more business focused, and the regulatory process must follow suit.

A strong, credible, effective regulator is essential to our industry.

Establishing standards where needed is a matter of necessity. Eliminating requirements where not needed is essential.

These actions will be key to reducing unnecessary costs and to establishing more efficient regulatory processes.

The Nuclear Regulatory Commissioners and senior staff recognize the inherent value and necessity of changing the existing regulatory process to make it more effective and safety-focused.

The commission initiated programs to implement risk-informed regulation, inspection and enforcement.

The plant assessment process also needs to be improved… and the NRC has initiated a review and reform of that program.

The focus here is clear: objective, clearly defined requirements that are sharply focused on public health and safety.

And while the major focus has been on power plant regulation, the NRC and the industry are also vigorously pursuing risk-informing fuel cycle facility regulations.

These NRC actions are commendable and consistent with the direction in which the industry believes the regulatory process must move.

However, the onset of competition means that time is of the essence.

As you are aware, both the fuel cycle business and the nuclear power generation business depend on an equitable and timely resolution to the used nuclear fuel situation.

The industry has adopted a three-pronged approach to the federal used nuclear fuel program that involves:

  • Litigation
  • Legislation and
  • Program initiatives.

All three areas work together.

Litigation—especially with the potential for large monetary damages—gives Congress and the administration an impetus to fulfill its statutory obligation.

Comprehensive legislation—which 70 percent of the last Congress supported—also would encourage the administration to move forward and execute a successful repository program.

Legislation calling for temporary storage of used nuclear fuel is currently before both houses of Congress.

In turn, a successful repository program gives Congress the confidence that it can legislate temporary storage at Yucca Mountain because of the prospect that the repository will be successful.

The Yucca Mountain viability assessment issued last December is an important indicator that the repository will function as expected.

Ten lawsuits are pending before the U. S. Court of Federal Claims seeking more than $4 billion in monetary damages as a result of DOE's failure to begin removing used fuel from plant sites.

In the first three lawsuits, the court found that DOE was liable for damages caused by its breach of contract with the utilities. These lawsuits are now in the damage assessment phase.

Two months ago, Energy Secretary Bill Richardson floated a concept that the administration believes would resolve the impasse.

Under the concept, DOE would "take title" to used nuclear fuel at plant sites in exchange for utilities' dropping litigation against the federal government.

The Energy Department intends to finance its used fuel caretaker role by drawing monies from the Nuclear Waste Fund.

Theoretically, the department plans to begin moving fuel to the permanent repository once it opens in 2010.

I say theoretically because—based on current budget rules—DOE could not complete the repository until 2020… or even later.

Furthermore, by drawing down the Nuclear Waste Fund, DOE likely would aggravate already contentious appropriations issues… and postpone the date for operation of a permanent repository even further.

While elements of Secretary Richardson's concept show potential as part of a comprehensive approach, as an alternative it falls short of meeting the industry's critical needs and DOE's legal responsibility.

Simply stated, the devil is in the details, and the department has yet to provide any details.

Nevertheless, the concept may serve as a starting point for a constructive dialogue between DOE and the industry on how to resolve this formidable problem.

In the meantime, the industry must aggressively pursue implementation of the federal integrated used fuel management system.

Collectively, the industry supports the two bills that have been introduced in Congress—H.R. 45 and S. 608.

We believe—first and foremost—that this legislation is the key to resolving this very tough problem.

As the old adage goes, paths clear before those who know where they are going… and are determined to get there.

The nuclear energy industry knows where it is going and is very determined to get there.

But in order to reach our destination, we must maintain industry consensus on that direction.

And we must intensify our efforts to secure lasting and meaningful change.

Nuclear energy enjoyed a banner year in 1998, and indications are that that will continue. I am also confident that new nuclear power plants will be built in the United States.

On Capitol Hill, both houses of Congress have shown increased interest in a wide range of nuclear technology issues.

The Senate Nuclear Caucus and the House Nuclear Issues Working Group are exploring in detail the entire gamut of nuclear energy issues, from medical isotopes to power generation.

Nevertheless, most outside the industry remain oblivious to how safely, reliably and economically the nation's nuclear plants produce electricity.

Despite the fact that nearly two-thirds of the public supports nuclear energy, focus-group results suggest that the majority of college educated, registered voters believe that there are fewer than 10 nuclear power plants operating in the United States.

The public simply does not understand what we do, how safely we do it, and how important nuclear-generated electricity is to the well-being of our nation.

Nuclear energy and nuclear technologies are a major part of everyday life, but an image problem persists even among the most informed members of the public.

This can only constrain efforts to reinvent and revitalize the nuclear energy business.

Moreover, we can't rely on the media to correct the problem.

During the recent observance of the 20th anniversary of the accident at Three Mile Island, the plant's owner fielded hundreds of media inquiries about the accident and the likelihood of a recurrence.

But did anyone see any news stories about the industry's historic 1998 performance?

Probably not, because the mainstream media tends to emphasize the unusual and the negative. The TMI anniversary made for good headlines, consistently safe performance doesn't.

That tells me that if good news about our industry is to be heard, we must take it upon ourselves to deliver it.

Simply put, as an industry we must do more to get our message out to the public.

We must work harder to improve the technological literacy of our communities and make manifest in their eyes the many benefits of a wide range of nuclear technologies.

We must make very clear the direct link between the public's desire for clean air and reliable electricity… and nuclear energy's emission-free nature.

We must impress upon the public that it is a fulfillment of our collective environmental obligation to future generations to safely store used fuel at a central location.

When we do that, we get results.

For example, the 65 percent of college educated voters that support nuclear energy jumps 10 percentage points to 75 percent when they are given two important pieces of information:

  • One, that nuclear energy provides clean air advantages and

  • Two, that 20 percent of U.S. electricity is generated by nuclear power plants.
Moreover, when informed of nuclear energy's clean air benefits, two-thirds of respondents said that this point would increase their support for federal legislation to take used fuel to a centralized temporary storage facility.

NEI has also recently launched another flight of its comprehensive communications campaign on the many benefits of nuclear technologies.

The first of a series of opinion leader advertisements will begin running this week. This program is aimed at impressing upon opinion leaders the many benefits that our industry brings to the table.

I encourage you to use these ads within your own companies. You can see samples of the ads at the display outside.

We also have initiated an ambitious program to work with our member companies in building grassroots support for our industry.

The EnAct initiative will promote new grassroots technology and communication tools that will help members reach out to their local communities and educate the public about what we do.

I encourage your participation in the program… and I encourage you to get your companies more involved on the grassroots level.

I want to leave you with a simple message.

The nuclear industry has a vision for tomorrow. And in it, nuclear energy plays an ever more important role…

… maintaining a safe, reliable energy supply… minimizing the environmental impact of electricity generation … and contributing to our economy.

In many respects, that vision is being realized today.

There is great cause for optimism about the future.

But there also is much work left to be done, by all of us.

There's another good Texas adage that I need to follow: "Never miss a good chance to shut up!" So I will!

Thank you.

1 Total operating years worldwide is 8,576. U.S. total is 2,208. Both figures are as of July 1998.
2 TMI Unit 1 and Pilgrim.
3 Clinton, Nine Mile Point and Vermont Yankee.


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