Copyright 2000 Federal News Service, Inc.
Federal News Service
September 28, 2000, Thursday
SECTION: PREPARED TESTIMONY
LENGTH: 1612 words
HEADLINE:
PREPARED STATEMENT OF JOHN W. ROWE CHAIRMAN, PRESIDENT, AND CEO UNICOM
CORPORATION AND COMMONWEALTH EDISON
BEFORE THE
SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES
BODY:
Mr. Chairman and Members of the Committee:
My name is John W. Rowe. I am Chairman and CEO of Unicom Corporation. I
am also Chairman of the Edison Electric Institute and a Member of the Board of
Directors of the Nuclear Energy Institute. While my statement has not been
reviewed by those organizations, my views are probably representative of a
majority of their members.
I appreciate the opportunity to appear before
this Committee to share my view of the impact of two recent decisions by the
United States Court of Appeals for the Federal Circuit on the Nation's
programmatic effort to safely dispose of spent nuclear fuel. The decisions in
the Northern States case and the companion Yankee case reiterate earlier courts'
decisions that the government has breached its contractual obligation to begin
removing utilities' spent nuclear fuel by January 31, 1998. Let me say that my
company has a !or at stake in the litigation. We are already the Nation's
largest nuclear utility, with 10 nuclear generating stations representing about
10,000 megawatts of capacity. We have agreed to merge with PECO Energy. Once
that merger is complete - which should be next month - our nuclear fleet will
dwarf all others. The new Exelon Corporation will have a total of 17 nuclear
generating stations representing about 17,000 megawatts of capacity.
additionally, we also have spent fuel at three of our four shutdown plants that
must be moved. My remarks today will address three major topics.
--
First, a brief description of recent developments in the courts, which confirm
the obligations of the Department of Energy to remove and ultimately dispose of
the nation's spent nuclear fuel;
-- Second, a brief description of the
fiscal implications of those decisions; and
-- Third, a renewed call for
progress on the repository program.
Before I discuss the implications of
the recent Court decisions, I want to thank you, Mr. Chairman, for championing
the nuclear waste legislation this year. Like you, we were very disappointed
that the President vetoed your bill. ComEd and our employees put a tremendous
effort into a campaign designed to make the Delegation aware of the importance
of your bill to us and to our state. We put fullpage ads in our major
newspapers, and our employees sent over 4,000 emails to the two Illinois
Senators urging them to vote to override the veto. Unfortunately the veto
override effort failed.
Members of this Committee are abundantly aware
of the important role that nuclear energy plays in our Nation's energy supply -
almost 20% of our 1999 electrical production. Recently we have had vivid
reminders in the headlines that we are far too dependent upon foreign nations
for our vital energy supplies. Prices of all domestic fuels - except nuclear -
have surged in recent months because of tight world oil supplies. Concerns about
oil supplies, particularly as a heating fuel, have caused the President to order
the largest drawdown of the nation's Strategic Petroleum Reserve in history.
Natural gas, seen as cheap and abundant and the "fuel of choice" for new
electric generating capacity, is in greater demand at a much higher cost than at
any time in recent years. Given the increasing environmental challenges faced by
coal as a fuel for electric generation in light of concerns about global
warming, it is vitally important that the nuclear fuel option be a viable one.
The nuclear fuel option will not remain viable, however, unless progress
is made in resolving the vexing problems facing DOE's spent nuclear fuel
program.
The Nuclear Waste Policy Act established the fundamental
governmental obligation and duty to provide for the safe disposal of spent
nuclear fuel. As required by law, my company entered into the Department of
Energy's Standard Contract under the Act in 1983, which defines DOE's
obligations. Together with other utilities, Illinois customers have paid over
$2 billion to enable the DOE to build a repository to accept
and dispose spent nuclear fuel. Unfortunately, the repository is not even close
to being a reality. Everyone - including the DOE - recognizes that DOE has
failed to meet its contractual obligation to begin taking the spent fuel as of
January 31, 1998.
The Government has argued that it did not "breach" its
contractual obligation. Rather they argue that failure to begin taking the spent
fuel was merely an "avoidable delay" that could be cured by an administrative
"readjustment" of rates paid by utilities.
The United States Court of
Appeals for the Federal Circuit did not buy the Government's argument. The Court
unambiguously confirmed that the Government has breached its obligations under
the Standard Contract and that the utilities are entitled to sue the Government
in the Court of Federal Claims for money damages caused them by the Government's
breach.
I do not use the term "breach" lightly. This is not rhetorical
excess. The Court affirmed a trial court order, unambiguously ruling that the
Government was liable for breach of contract, leaving open only the extent of
the utility's damages.
The court was ruling in two of the pending cases.
Many others, including our own, are on file. At this time, there are 12 pending
actions, including ours, against the Government in the Court of Federal Claims.
Most observers expect that numerous other utilities will file similar cases in
the near future in the wake of the two decisions.
ComEd has filed a
motion for summary judgment, and the trial court in our case has ordered the
Government to respond by October 30th as to why it should not also be granted,
on the strength of the Federal Circuit's decisions.
I believe the
Federal Circuit's decisions in the Northern States and Yankee cases are
significant in the following respects:
-- By affirming that the
utilities can pursue breach of contract cases in the Court of Federal Claims,
rather than administrative claims before the DOE, the Federal Circuit's
decisions have made it more likely that the utilities will be owed large damages
in the near future.
-- By affirming the Government's liability as a
matter of law and of undisputed fact, the Federal Circuit's decisions make it
likely that the trial courts will soon enter similar liability decisions in the
other lawsuits that various utilities have filed against the Government.
-- From the taxpayers' point of view, in relatively short order, it is
likely that the Government will be facing multiple damage claims in the billions
of dollars, where the only question will be how much the Government will be
required to pay, rather than whether it is liable to pay.
-- Finally,
because the Court of Federal Claims can only award money damages, rather than
"adjustments" of payments into the Nuclear Waste Fund, the decisions mean that
the Government will have to reimburse the utilities with real money - rather
than with credits. That money will likely come from either DOE's budget or the
Judgement Fund. This will have a significant impact from a budgetary point of
view that should be of concern to this Committee.
Our merger partner,
PECO Energy, recently entered into a settlement with the Department of Energy
with respect to DOE's obligations to take spent nuclear fuel from the Peach
Bottom Atomic Power Station. That settlement was the first of its kind. While we
respect and appreciate DOE's work in reaching this agreement, it does not move
forward the day when nuclear waste will be permanently stored.
DOE has
told the utilities that it is interested in reaching additional out of court
settlements. I am precluded from discussing the specifics of any ongoing
discussions. But DOE has said publicly that it wishes to apply the Peach Bottom
settlement approach across the board. DOE thus refuses to recognize that a "one
size fits art" approach to settlement wilt not work. Each case presents
different facts and circumstances. Unless the Government is willing to recognize
those differences a settlement strategy simply will not solve this litigation.
In the meantime, the Government is accumulating liabilities that are increasing
and compounding every day, and we get no closer to solving the ultimate issue.
There is an urgent need for the Government to make further progress
toward opening the Yucca Mountain repository. It is absolutely
critical for the Secretary of Energy to make his site suitability recommendation
to the President rarer this year. It is equally critical for the Environmental
Protection Administration Administrator to issue a Final Rule establishing the
radiation protection standard for the repository. The Final Rule must arrow for
the successful licensing of a safe, environmentally sound, repository. Finally,
the next President must make a timely recommendation next year to the Nuclear
Regulatory Commission to proceed with licensing the repository.
Further
delays in the Yucca Mountain program will only add even more to
the costs already caused by the Government's breach of contract. As a result of
the Federal Circuit's decisions, it is more likely that the taxpayers will
ultimately have to foot the bill for the Government's delay. The only way to
stop wasting our customers' funds, and taxpayers' funds is to begin construction
of the repository so that it is opened at the earliest possible date. Only then
will the Government finally fulfill its long-delayed obligation to begin taking
spent nuclear fuel from the utilities. Until then, the Government's financial
obligations will continue to increase.
Once again I appreciate the
opportunity to appear before this Committee. I will be pleased to try to answer
your questions.
END
LOAD-DATE: September 30,
2000 
