Copyright 2000 Federal News Service, Inc.
Federal News Service
September 28, 2000, Thursday
SECTION: PREPARED TESTIMONY
LENGTH: 2286 words
HEADLINE:
PREPARED STATEMENT OF DAVID SPARBY VICE PRESIDENT, GOVERNMENT AND REGULATORY
AFFAIRS, XCEL ENERGY INC.
BEFORE THE SENATE
COMMITTEE ON ENERGY AND NATURAL RESOURCES
BODY:
Introduction
Chairman Murkowski, Senator Bingaman and other members
of the Committee:
I am David Sparby, Vice President for Government and
Regulatory Affairs of Xcel Energy Inc. Xcel Energy was created as the result of
a merger between Minneapolis based Northern States Power (NSP) and Denver-based
New Century Energies (NCE). The merger of those two companies was completed on
August 17 of this year, only 17 months after it was announced. Trading under our
new Xcel name began the following Monday, August 21. Xcel Energy serves more
than 3 million electricity and 1.5 million natural gas customers in 12 states,
and 2 million electricity customers internationally. Xcel Energy, through its
subsidiary Northern States Power, owns the single unit Monticello and two-unit
Prairie Island nuclear generating plants in the state of Minnesota. As we have
previously testified, the default by the Department of Energy on its obligation
to accept used nuclear fuel beginning in 1998, as required by the 1982 Nuclear
Waste Policy Act (NWPA) and the Standard Contract we entered into pursuant to
that Act has caused much controversy in Minnesota. The failure of the DOE to
meet its obligations has threatened the future operation of the Prairie Island
generating plant and resulted in significant damage to Xcel Energy, its
customers and the region. We would like to thank you, Mr. Chairman, for your
diligent efforts to address the used nuclear fuel crisis in the United States.
You have been a singular champion in the effort to hold the federal government
accountable for its actions (or perhaps more appropriately, its lack of action)
on this issue.
We are here today to update you on the latest
developments in our litigation with the Department of Energy (DOE). We believe
the recent decision, by the Federal Circuit Court of Appeals, in combination
with the decision relative to three New England facilities, leads to the
inescapable conclusion that DOE will not escape liability for the damages that
it is inflicting on our company, and others.
We are also here to tell
you that an award of damages, when it comes, will not be a satisfactory result.
At Xcel, this litigation has never been about winning damages. The only
satisfactory result is the federal government meeting its statutory and
contractual obligations and taking the steps necessary to secure, move, and
manage our used fuel.
Allow me to step back for a minute and provide you
with some of the pertinent facts about the Monticello and Prairie Island
facilities, their importance to the economic prosperity of Minnesota and the
upper mid-west, and a short chronology of our efforts (and the efforts of the
appropriate authorities in the State of Minnesota) to deal with the failure of
the Department of Energy to implement the 1982 NWPA.
The Value of Our
Nuclear Assets
NSP's Monticello plant was first licensed for commercial
operation in 1970. The Prairie Island's units received their operational
licenses from the Atomic Energy Commission in 1973 and 1974. On June 25, 1999
Prairie Island's Unit 1 became the first reactor in the world rated at 560
megawatts gross capacity to produce 100 million megawatt-hours of electricity.
Unit 2 at the Prairie Island plant generated its 100 millionth megawatt hour of
electricity during last October.
Unit 2 set a production record in 1999,
generating 4,597,443 megawatt hours. Additionally, unit 2 set a record run for
the site, operating non-stop for 446 days before being taken off line for a
scheduled refueling outage in May, 2000. Both Monticello and the two Prairie
Island reactors have been consistently recognized as safe, low-cost, efficient
producers of electricity. Both facilities have achieved high marks for
operational safety from both the Nuclear Regulatory Commission (NRC) and the
Institute of Nuclear Power Operators (INPO).
On the state and local
level, Prairie Island is critical to the continued economic viability of
Minnesota businesses. It is the lowest cost generator within the Xcel system. It
employs over 600 skilled local residents and pays over $22
million in taxes each year to local governmental entities, including almost
$17 million in property taxes alone.
Recent analyses
have shown that were Prairie Island to shut down prematurely, property taxes in
the City of Red Wing and Goodhue County would increase by two and one-half
times. In addition, Xcel has calculated that such a shut-down would cost the
citizens of Minnesota $650 million in present dollars for
replacement power costs through the remaining license term of the facility and
fully $2.2 billion in such costs if we were to -- as most other
nuclear generators are doing -- extend the license term for an additional 20
years.
Why, one might ask, would we be calculating the impact of the
premature shut-down of this outstanding facility?
The answer, quite
simply, is the lack of confidence that the Minnesota legislature has in the
ability of the federal government to live up to its commitment to remove and
manage the used fuel produced at this power station. In 1989, it became obvious
to us that the DOE might not be in a position to take used fuel to the proposed
Yucca Mountain repository. Although it had not yet formally
announced a delay in the acceptance date for such fuel, it was clear that the
program was falling further and further behind crucial interim schedules.
Dry Storage at Prairie Island
Coincidentally, the fuel storage
pool at Prairie Island was beginning to fill. We could project that with a
continuation of excellent operation, we would be faced with the prospect of
losing the ability to discharge a full core of fuel to the pool. At that point,
we initiated the steps necessary to allow us to remove a portion of the spent
fuel that had been aging in the pools at our site and transfer it to an NRC
licensed dry storage system. Our plans received a positive endorsement from the
Minnesota Environmental Quality Board, Department of Public Service and Public
Utilities Commission, as well as the federal Nuclear Regulatory Commission.
Shortly after it was issued, however, the decision of the Public
Utilities Commission was challenged in state court. The basis for the challenge
was a 1977 state law that required legislative approval for a facility in the
state if nuclear waste was be disposed of by "burial in the soil", or
"permanently stored." The Minnesota courts found that our plan violated this
provision (specifically because of the delays in the DOE program which had yet
to break ground at Yucca Mountain and was enmeshed with the
State of Nevada in separate litigation) and directed that a resolution to the
issue lay with the legislature. The subsequent session of the state legislature
was dominated by discussions over the spent fuel issue.
As enacted, the
bill:
-- limited the company to the construction and use of no more than
17 dry storage containers at Prairie Island and required us to search for an
alternate site in Goodhue County;
-- required NSP to construct 425
megawatts of wind and 125 megawatts of biomass "without regard to cost" by 2002;
-- required NSP to construct and additional 400 megawatts of wind power
if it was determined the low cost option;
-- prohibited NSP from
constructing any additional nuclear energy plants;
-- required NSP to
institute a 50% rate break for defined low income customers; and
--
required NSP to increase its conservation spending from 1.5% to 2.0% of budget
on an annual basis.
We have calculated that the cost of meeting our
legislated requirements costs our customers roughly more than
$50 million per year.
At Xcel, and before that at NSP,
we were not satisfied with simply implementing the strictures of the
legislature. We have, over the past decade, undertaken a number of other steps
to protect our ratepayers and our shareholders from these and other costs
occasioned by the DOE's failure to timely implement the 1982 NWPA. For the past
10 years, our company has pursued a three-prong strategy designed to ensure that
the federal government meets its obligation.
With your leadership and
the help of the Nuclear Waste Strategy Coalition, we have doggedly pursued
legislation that would focus DOE's Yucca Mountain program on
safety and science rather than politics and ensure that the agency began to
accept waste in a timely manner. In conjunction with other utility companies, we
have undertaken efforts to build a private centralized storage facility, a
project that is ongoing (and would be unnecessary were DOE to meet its
obligation). Finally, and perhaps most regrettably, we were forced to undertake
a long series of court suits designed to force the government to fulfill its
contractual obligation. Litigation Against the Department of Energy
In
1994, NSP and other utilities brought a lawsuit against DOE to establish the
Department's unconditional obligation to accept the spent fuel by the 1998
deadline. DOE took the position that it had no obligation and that it was only
required to begin taking spent fuel when the permanent repository began to
operate. The US Court of Appeals for the D.C. Circuit in July 1996 recognized
that DOE's position would read the 1998 date out of the NWPA. The Court ruled
that DOE was required to begin taking spent fuel by the 1998 date, even if the
permanent repository was not yet ready.
Unfortunately, rather than
taking the Court at its word and moving forward with its obligation to begin
taking spent fuel by 1998, DOE's response was to announce that it would fail to
meet its obligation. As a result, NSP - other utilities and states and state
regulatory commissions, went back to the D;C. Circuit to ask that the Court
order DOE to meet its obligation. Again, the Court in November 1997 reaffirmed
DOE's unconditional obligation. However, because the Court determined that NSP
and the other utilities had a "potentially adequate remedy" under the Standard
Contract, it did not order DOE to perform. Instead the Court ruled that DOE
would not be allowed to claim that its failure to meet the 1998 obligation was
unavoidable and would therefore not be allowed to avoid paying the utilities for
the costs they would incur because of DOE's failure.
The primary goal in
these lawsuits has always been to compel DOE to meet its statutory and
contractual obligations and accept spent fuel. As the D.C. Circuit was unwilling
to order DOE to perform, NSP's only potential remedy was to seek to recover its
monetary damages from DOE. In June 1998, NSP and four other utilities filed
lawsuits in the U.S. Court of Federal Claims seeking damages from DOE's delay.
In NSP's case, the damages exceed $1 billion. While
this may seem like a large amount, the damages caused by include amounts - NSP
has expended to expand its spent fuel storage facilities, an action that would
have been unnecessary had DOE begun to take spent fuel in 1998, NSP has invested
in a private, away-from-reactor spent fuel storage facility, another activity
that it would not have done had DOE performed. NSP has incurred the significant
costs to carry out the state-mandated actions directly resulting from DOE's
breach. Finally, because of the limits imposed by the state, the Prairie Island
plant is at risk of a premature and very expensive shutdown, solely because of
the state 'legislation initiated as a direct result of DOE's failure to meet the
1998 obligation.
DOE attempted to derail the utilities' lawsuits by that
the utilities could only recover their damages through the DOE Contracting
Officer. The U.S. Court of Appeals for the Federal Circuit on August 31 rejected
the argument and held the utilities could bring their lawsuits in the Court of
Federal Claims and that DOE was indeed liable for damages. While we would hope
that after this long and tortuous path that DOE would finally recognize its
obligation to the utilities, the signs are that DOE will continue to delay
resolving the utilities' legitimate claims. We can only hope that this
Committee's longstanding interest in resolving the nation's nuclear waste
problems will convince the DOE that the solution is not more litigation, nor the
imposition of large damages judgments on the Government, but rather the prompt
initiation by DOE of a program to develop interim spent fuel storage. While it
is too late to turn the clock back and take spent fuel by the 1998 deadline, it
is not too late for DOE to mitigate the substantial damages which it will
otherwise incur.
Conclusion
Where does all this leave us?
Mr. Chairman, as we sit here today, our lawyers are proceeding with the
next step in the litigation. This means that the day is that much closer when
the taxpayers of the United States will be faced with footing the bill for the
DOE's inability to complete the job Congress gave it in 1982. And, thus, the
prediction you have been making during debates over changes you have proposed to
authorizing legislation over the past couple of years are that much closer to
coming true.
Unfortunately, it also means that we are that much closer
to the day when we are going to have to shut down operations at Prairie Island
with all the attendant consequences. For monetary damages are not going to solve
the problem we face. Simply put, unless the DOE institutes a plan of action, or
the Congress enacts appropriate legislation, or less desirably, the private
sector develops an interim site that will allow for the movement of spent fuel,
closure will be the inevitable consequence.
Mr. Chairman, we know that
is not something you want to see. We implore you to keep up the good fight and
we pledge to do our utmost to support you.
END
LOAD-DATE: September 30, 2000
