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May 21, 1999

Christian Poindexter
Chairman of the Board and President
Constellation Energy Group
Vice Chairman, Board of Directors
Nuclear Energy Institute

Nuclear Energy Assembly
Washington, DC

May 21, 1999

Thank you, Joe. And welcome, ladies and gentlemen, to the 1999 Nuclear Energy Assembly.

This is an exciting time to be a part of this industry. Perhaps as exciting as the late 1950s and early 1960s, when nuclear energy's potential seemed boundless.

Today, having spent more than three decades gaining a better understanding of this technology … and improving it … the nuclear energy industry is again poised for a bright future.

However, today's optimism—rather than being based on a starry-eyed attraction to a new technology—is founded on the environmental contributions and the economic potential of well-run nuclear power plants in a competitive market.

Our bright future is also founded on the collective strength of this industry. We have amassed more than 2,000 reactor-years of experience. We have compiled an industrial safety record that is second to none. And our improved performance now has policymakers considering … seriously … a revival of nuclear energy.

Each of you … individually … has played a role in shaping our bright future.

Just as important is the collective effort of this industry.

Instead of being pulled in countless directions, as one might expect in an international organization with diverse interests, you—through NEI—have come together to set a common agenda … and to pursue the issues most important to the success of the industry.

Through the concerted effort of the 280 organizations that comprise the Nuclear Energy Institute, the potential of this industry is far greater than the sum of its parts.

During the past year to 18 months, much has happened. We have made truly remarkable progress.

Here are three examples.

  • First, regulatory reform is taking root … and the shift we are seeing toward more efficient licensing actions, as well as the focus on risk-informed regulation, is proof that the NRC is preparing for the fast pace of competition.
  • Second, through their historic purchases of nuclear power plants, AmerGen and Entergy have boldly proclaimed that nuclear energy will be competitive in a restructured marketplace.

  • Third, policymakers increasingly recognize the undeniable link between a clean environment and emission-free nuclear energy.
These achievements didn't just happen. The stars didn't align. It wasn't serendipity.

This remarkable progress resulted from following a well-worn path to success.

I am here to remind everyone in this room that this industry's many achievements since its birth have resulted from years of perseverance and unity.

As our industry prepares for the day when competition replaces a cost-of-service environment, we must continue to work together to ensure that nuclear technology is available for the millions of people who depend on it: for clean, reliable electricity … for irreplaceable nuclear medicine procedures … for the peace of mind and good health afforded by food irradiation.

For these reasons, and many others, millions of people in America and around the world need us to work as one … so they can continue to enjoy the benefits of this amazing technology.

We also have a vested interest in this technology.

Therefore, our job over the next two days is to exchange ideas … to challenge outdated thinking … to take advantage of the many opportunities that lie ahead.

These are the key opportunities before us:

Opportunity #1: Maximize asset value by getting down to the business of nuclear energy.

Opportunity #2: Support a regulatory process conducive to competition.

Opportunity #3: Leverage the environmental benefits of nuclear energy.

Before I address Opportunity #1—maximizing asset value—let me first say that the economic picture for nuclear energy is looking brighter than ever. And that isn't just Chris Poindexter talking.

U.S. nuclear plants are producing more power than ever … for less money. In fact, in 1998, U.S. nuclear plants set a record capacity factor of 79.6 percent.

But we can do better.

In a competitive market, yesterday's accomplishments are old news. Sure, it's okay to pat yourself on the back for a job well done. But the true measure of success is your ability to sustain it … and build on it.

What must we do then, to truly maximize the value of our nuclear power plants?

We must get down to the business of nuclear energy.

This requires more than incremental improvements in performance and efficiency. Yes, increased capacity factors and shorter refueling outages do matter. But they will serve only to keep pace with the competition.

To surpass our competitors, we must go beyond incremental. We must think strategically and act in fundamentally new ways.

My company … Baltimore Gas and Electric … as well as Duke Energy … have a forward-looking view of the future. We have embarked on the renewal of our plant licenses.

License renewal is unique in its simplicity. For a minimal investment, we get an extra 20 years to take advantage of improved performance and efficiency.

This may seem obvious … and I am sure that most companies will come to view renewal as an important part of their long-term generation planning.

But the fact remains, that obvious or not, if you are serious about getting down to the business of nuclear energy … and if you are serious about maximizing asset value … then license renewal is—or must become—an absolute business imperative.

Another forward-looking strategy emerged this spring, when several of our friends announced the formation of a nuclear operating company.

This concept will allow Northern States Power, Wisconsin Electric, Wisconsin Public Service and Alliant Energy to maximize asset value by:

  • consolidating the expertise and talents of employees
  • tapping the best practices from each company, and
  • controlling costs of commonly used services.
While I'm not necessarily advocating a consolidation of the industry, we must prepare collectively for competition. Specifically, we must work together to revise any ground rules that would stifle our ability to compete.

Much as the industry and NEI closed ranks to ensure that states treat stranded costs responsibly in restructuring, we must launch a concerted, cooperative effort to overturn outmoded laws and policies that will hinder the competitiveness of our nuclear power plants.

One issue that comes to mind is the need to remove adverse tax consequences that could result from license transfers. AmerGen and Entergy have set the stage for a major repositioning of this industry through their purchases of the Three Mile Island, Clinton and Pilgrim nuclear power plants.

It would be unconscionable if these and future deals become unworkable because of tax rulings that dampen competition.

Just as important, we must work cooperatively to ensure the continued collection of decommissioning costs via a wires charge.

These are issues and challenges that get to the heart of our ability to compete with other forms of generation. Solve them, and we all enjoy the benefits of a level playing field. Ignore them, and we pay the consequences—all of us.

This brings me to the second opportunity before our industry: creating and supporting a regulatory process conducive to competition.

Earlier, I mentioned the industry's well-worn path to success: perseverance and unity.

There is no better example of the value of working together than the progress we have seen in the area of regulatory reform.

Last month, for example, we witnessed the end of the Watch List.

Two weeks from now, the industry and NRC staff will launch a pilot program at nine of our plants to test a dramatically new oversight process … one that replaces subjectivity with consistency and risk-informed judgment.

I applaud this new process for several reasons. For one thing, it benefits our industry because it is based on real measures that focus on what is important to safety.

It also benefits the public, by providing a plant oversight process that is committed to their health and safety … and that can be clearly understood.

Just as significant is the improved professional relationship between the industry and the NRC that has grown out of this process.

This improved relationship--coupled with the commitment to reform the regulatory process by the commissioners and senior staff--provides us with numerous opportunities to implement risk-informed regulations.

Such a transition, I believe, will allow both the industry and the NRC to enter the new millennium ready for the challenges of competition.

Our opportunity, however, is predicated on maintaining the trust of our regulator. We have gotten this far, in large part, because improved and consistent performance has given the NRC the confidence to reform the way it regulates our plants. If our performance or safety record slips, so too will the NRC's confidence.

That said, we have an opportunity—along with the NRC—to develop a regulatory process that ensures safety, yet does not hinder competitiveness.

To date, no other agency or industry can boast an oversight process that protects safety without creating unnecessary burdens on those who are regulated.

We—the industry and the NRC—have a historic opportunity to create a regulatory process that can be replicated by other industries and agencies as a model for safety and fairness.

I would like to pledge to the commission the commitment of a unified industry to work with the Nuclear Regulatory Commission to develop such a model process.

That brings me to Opportunity #3: leveraging nuclear energy's environmental benefits.

Until a few years ago, nuclear energy's emission-free nature was seen as a fringe benefit.

Today, with an increased emphasis on reducing carbon emissions and air pollution, policymakers have awakened to what we call the "hidden value" of nuclear energy.

Last fall, for instance, Stuart Eizenstat told a gathering of environmental groups that any emission-reduction strategy must include contributions from nuclear energy.

The Clinton administration's lead negotiator on climate change said, and I quote: "Those who think we can accomplish these goals without a significant nuclear industry are simply mistaken."

Similarly, the administration's Energy Information Administration—an arm of the Department of Energy—projects that to reduce carbon emissions 3 percent below 1990 levels, most existing nuclear plants will have to renew their operating licenses.

If we want to make real gains … if we want to attain the aggressive targets in the Kyoto Protocol … EIA says that under certain scenarios the United States will need to build 42,000 megawatts of new nuclear capacity by 2020.

Now I'm not going to suggest that we'll be building any new plants in the next few years.

Although I believe that time will come, I'd prefer to address a challenge with greater near-term significance: attaining widespread recognition among policymakers of nuclear energy's crucial role in clean air compliance.

In addressing this challenge, we must … as an industry and through the Nuclear Energy Institute … work together to achieve several policy initiatives.

Foremost is the need to gain economic recognition for the clean air compliance value of emission-free nuclear energy. Future regulations should recognize the value of electricity sources that avoid emissions, as well as the value of curbing emissions from other types of plants.

Another policy issue that must be addressed is the trend toward disclosure and labeling. All sources of generation are required to reveal their emissions, discharges or other waste streams created.

Everyone knows about our used fuel … but few people seem to realize that all forms of generation have environmental impacts.

These issues point to a fundamental need for equity and fairness in the treatment of nuclear energy—particularly as we enter a competitive market.

What's in it for you? Increased awareness of the environmental benefits of nuclear energy and economic recognition for these significant contributions.

Put another way, working together to solve environmental policy issues will help maximize the value of your nuclear power plants.

There is one other issue I need to address: the enactment of used fuel legislation that benefits our entire industry.

While many of you may view this as a challenge, I view this as an opportunity … one that may be lost if this industry is divided and tempted by short-term solutions.

I don't need to tell you that dozens of nuclear power plants are fast running out of used fuel storage capacity. You're also aware of the political and public relations gauntlet that must be run to add on-site storage.

Finally, it is no secret that—for several plants—the only thing that stands in the way of decommissioning and license termination is the removal of used fuel.

All of these are compelling reasons to pursue resolution of our integrated, three-pronged approach to reforming DOE's used fuel management program.

The first element is litigation. The courts have upheld DOE's obligation, and have told utilities to resolve the issue through our standard contracts. This requires that we retain our right to litigate.

The second is continued support of the repository program. Although the opening of a permanent repository remains a long way off, we saw significant progress last December, when Secretary Richardson said that the Yucca Mountain viability assessment contained "no showstoppers."

The third element of the industry's approach to used fuel management is legislation. Clearly, we need legislation to ensure adequate funding of the repository program. And just as clearly, we need the help of Congress to ensure that DOE meets its longstanding contractual obligation to begin accepting used fuel by a date certain.

We can't lose sight of the synergistic effect of this integrated approach: Success in one area assures progress in the others.

As we enter a new millennium … and as we make the historic transition to a competitive industry … we have a number of opportunities before us:

  • First, maximizing the value of our nuclear power plants.
  • Second, creating and supporting a regulatory process that is conducive to competition.
  • Third, leveraging the environmental benefits of nuclear energy.
  • And fourth, enacting nuclear waste legislation that benefits the entire industry.
The past experience of this industry … and our past success … lead me to believe we can turn each of these challenges into opportunities.

As I said earlier, this is an exciting time to be a part of this industry. At no time in my career have the prospects for nuclear energy looked so good.

Yet we can't take success for granted.

As such, our mandate is clear: We must continue along that well-worn path to success. With unity and perseverance, we will transform this industry's enormous potential into reality.

Thank you.


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