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NATIONAL ENERGY POLICY: NUCLEAR ENERGY

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND AIR QUALITY

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

MARCH 27, 2001

Serial No. 107–10

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE

W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES ‘‘CHIP’’ PICKERING, Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

TOM DAVIS, Virginia

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

JOHN D. DINGELL, Michigan

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

TOM SAWYER, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

JANE HARMAN, California

DAVID V. MARVENTANO, Staff Director

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON ENERGY AND AIR QUALITY

JOE BARTON, Texas, Chairman

CHRISTOPHER COX, California

STEVE LARGENT, Oklahoma

Vice Chairman

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN SHADEGG, Arizona

CHARLES ‘‘CHIP’’ PICKERING, Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ED BRYANT, Tennessee

GEORGE RADANOVICH, California

MARY BONO, California

GREG WALDEN, Oregon

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

(Ex Officio)

RICK BOUCHER, Virginia

RALPH M. HALL, Texas

TOM SAWYER, Ohio

ALBERT R. WYNN, Maryland

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

JOHN D. DINGELL, Michigan

(Ex Officio)

(II)

2

C O N T E N T S

Page

Testimony of:

Aurilio, Anna, Legislative Director, U.S. PIRG ............................................. 89

Domenici, Hon. Pete V., a United States Senator from the State of New

Mexico ............................................................................................................ 51

Hutchinson, C. Randy, Senior Vice President, Business Development,

Entergy Nuclear ............................................................................................ 61

Hutzler, Mary J., Director, Office of Integrated Analysis and Forecasting,

Energy Information Administration ............................................................ 26

Longenecker, John R., Longenecker & Associates, Inc., Management Consultants .......................................................................................................... 81

Magwood, William D., Director, Office of Nuclear Energy, Science and

Technology, U.S. Department of Energy ..................................................... 20

Sproat, Edward F., III, Vice President of International Programs, Exelon

Corporation .................................................................................................... 77

Tollison, Alfred C., Jr., Executive Vice President, Institute of Nuclear

Power Operations .......................................................................................... 70

Travers, William D., Executive Director for Operations, U.S. Nuclear

Regulatory Commission ................................................................................ 13

Additional material submitted for the record:

Longenecker, John R., Longenecker & Associates, Inc., Management Consultants, responses for the record ................................................................ 139

Sproat, Edward F., III, Vice President of International Programs, Exelon

Corporation, responses for the record ......................................................... 136

(III)

(1)

NATIONAL ENERGY POLICY: NUCLEAR

ENERGY

TUESDAY, MARCH 27, 2001

HOUSE OF REPRESENTATIVES, COMMITTEE ON ENERGY AND COMMERCE, SUBCOMMITTEE ON ENERGY AND AIR QUALITY, Washington, DC.

The subcommittee met, pursuant to notice, at 1 p.m., in room

2123, Rayburn House Office Building, Hon. Joe Barton (chairman)

presiding.

Members present: Representatives Barton, Cox, Largent, Burr,

Whitfield, Ganske, Norwood, Shimkus, Wilson, Shadegg, Pickering,

Bryant, Walden, Tauzin (ex officio), Boucher, Markey, Strickland,

Barrett, and Luther.

Staff present: Dwight Cates, professional staff; Yong Choe, legislative clerk; and Rick Kessler, minority counsel.

Mr. BARTON. The subcommittee will come to order.

Today the Energy and Air Quality Subcommittee of the Energy

and Commerce Committee will have another in its continuing series of hearings on our energy policy options for the United States.

Today we are going to focus on nuclear energy, which currently

provides one-fifth of our electricity and is our second-largest fuel

source.

We all know how few nuclear plants have been built recently, i.e.

none. But that may soon change. Natural gas prices are expected

to remain high for the foreseeable future, especially with the current difficulties in gaining access to new resources and building infrastructure to market natural gas.

As this happens, other generation becomes more cost competitive.

Our current generation of nuclear plants have shown increases in

efficiency and safety, along with decreases in cost, as some of our

witnesses will explain later.

Today witnesses will discuss several different parts in the nuclear industry with a focus on the future. I want to commend

Chairman Meserve of the Nuclear Regulatory Commission for all of

his leadership efforts. Unfortunately, he cannot be here today. I

have heard good things about his leadership and continue to work

with him and the Commission and believe his interaction with this

subcommittee has been very, very cooperative.

I do want to thank Dr. Travers, who is here today for the NRC,

and I also want to thank our friends from the Department of Energy and the Energy Information Agency for being here.

Commercial witnesses on our second panel include Entergy, a

utility that has decided to make nuclear energy a part of its stratVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HEARINGS\71505 pfrm09 PsN: 71505
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egy for the future. Another witness can talk about one of the next

generation technologies that might make up future nuclear plant

orders—the Pebble Bed Modular Reactor.

It is important to note that there are other competing technologies, some of which have already been approved by the NRC.

In general, future plants will be easier to permit because of the

uniformity, less expensive because of their next generation technology, and more efficient as a power generator.

Later in this Congress, this subcommittee will begin to explore

the vitally important issue of the nuclear fuel cycle concerning our

Nation’s mining, conversion, and enrichment capability. I welcome

any statements for the record that those entities might offer.

Mr. John Longenecker is here today to speak on those issues as

a whole as the focus today is somewhat more on the regulatory

side.

Finally, the incredibly important issue of nuclear waste policy

will be dealt with by this subcommittee later in this Congress. We

all await news of the scientific work that is being currently done

at Yucca Mountain and the site recommendation that is due to the

Secretary of Energy later this year.

This subcommittee, on a bi-partisan basis, reported legislation

last year dealing with the budget issue, environmental standards,

interim storage, transportation, and on the waste storage issue. We

will discuss this same issue again later this year and hopefully successfully resolve it, put a bill on the President’s desk that he can

sign.

A problem with spent fuel cited at more than 100 sites throughout our nation is getting worse, not better. The Federal Government must live up to its obligations to take that waste out of its

distributed locations and get it safely in one proper repository. If

a Federal solution is not found soon, some plants will be forced to

close, not because of problems with the plants but because of laws

dealing with the waste that they generate.

That would mean that our electric reliability would be threatened. We have seen first-hand in California the effect on the economy and livelihood of consumers what happens when dysfunction

occurs in the electricity markets. In the first half of this year, we

will hold a hearing specifically on nuclear waste, Yucca Mountain,

and the Federal Government’s progress toward that decision deadline.

We will also look at the hearing record to draft a comprehensive

national energy policy that almost certainly will include a revitalization and nuclear option. We should identify changes in laws and

regulations that promote retention of the nuclear option and even

its expansion.

The Price-Anderson Act is up for reauthorization during this

Congress, and we must address liability and disaster preparedness

issues to send the signal that new next generation nuclear plants

are welcome in this country. Nuclear will and must be a part of a

balanced policy.

For those who want a reliable electricity source from plants with

growing efficiency in a fuel source of domestic supply, I say, ‘‘Look

at nuclear.’’ For those who don’t like dams or natural gas pipelines,

I say, ‘‘Look at nuclear.’’ And for those concerned about emissions

3

from coal plants, I say, ‘‘Look at nuclear.’’ You kind of get the message in this.

In my opinion, after all of the hearings in this and previous Congresses, one cannot possibly discuss a balanced energy portfolio

without taking a fresh and unbiased look at nuclear power. I look

forward to the testimony of the witnesses today and the questions

that the subcommittee is going to ask.

I would now like to recognize the ranking minority member, a

distinguished gentleman from Virginia, Congressman Boucher.

Mr. BOUCHER. Thank you very much, Mr. Chairman. Today we

will learn about the current contribution of nuclear power to our

national energy portfolio, its future potential, and what steps, if

any, we might take in order to ensure that nuclear energy has a

place in a balanced energy portfolio for the future.

In that light, I am very pleased to note that our subcommittee

will hear testimony later this afternoon from the Senator from New

Mexico, Mr. Domenici. As chairman of both the Senate Budget

Committee and also the Energy and Water Appropriations Subcommittee, Senator Domenici is uniquely well-positioned to comment on energy policy, and I look forward very much to his testimony and to having the benefit of his insights.

After coal, nuclear plants are our Nation’s second-largest source

of electricity and generate approximately 20 percent of our total

electricity output. But there is increasing uncertainty about the future role that nuclear energy will play in our Nation’s energy mix.

Although the Energy Information Administration identifies a

total of 259 nuclear units that were ordered since the 1950’s, all

of those orders occurred before 1978. No new orders for commercial

nuclear power plants were placed during all of the Reagan, Bush,

or Clinton Administrations.

Similarly, no new construction permits have been issued since

the end of the Carter Administration. Furthermore, the total number of cancellations by utilities of ordered units stands at 124. The

uncertainty surrounding the role of nuclear energy may be due, in

part, to the fact that nuclear power production has proven to be

highly capital-intensive.

Siting is also a problem for nuclear power plants. Despite a commendable safety record during the course of the past decade, the

public’s negative perception of nuclear power has not changed significantly during the past 20 years.

Another matter of concern is the current state and uncertain future of our Nation’s domestic nuclear fuel production capability, in

view of the privatization of the U.S. Uranium Enrichment Corporation. The problems attending its privatization were clearly delineated by a recent decision of the United States District Court for

the District of Columbia, and its ongoing problems have been the

source of numerous inquiries by this subcommittee and its individual members, particularly Mr. Strickland and Mr. Whitfield.

Finally, there is the question of nuclear waste disposal. Chairman Barton, the ranking member on the full committee, Mr. Dingell, and other members of this committee have demonstrated a bipartisan and serious commitment to ensuring that waste from our

Nation’s nuclear power plants will be disposed of permanently in

an environmentally safe and scientifically sound manner.

4

But that goal may be slipping away from us because of the diversion of ratepayer money from the nuclear waste fund for other purposes—an event that is threatening to derail the repository program which is paid for through the nuclear waste fund. And that

fund was created under the 1992 Act to pay for the DOE repository

program.

While more than $15 billion has been paid into the fund, only

about $6 billion has been appropriated for the repository program.

Data provided to the subcommittee by the DOE in recent years indicates that unless the balance in the waste fund is restored, the

repository program will face significant funding shortfalls beginning in 2003, which in turn could jeopardize prospects for opening

the repository by 2010.

Moreover, if damages from utility lawsuits are determined to be

awarded from the waste fund, and not from some other governmental source, the funding shortage will be significantly exacerbated. The only way that we can truly remedy this situation is to

restore the nuclear waste fund to its off-budget status, as this committee voted to do by a margin of 40 to six during the last Congress.

Surely, in a time of great surplus, we can afford to take this simple but essential step. And I look forward to working with my colleagues here, as well as in the other body, to accomplish this goal.

Mr. Chairman, despite these challenges, I note that during our

testimony today we will have witnesses from two electric utilities

who are optimistic about the prospects for nuclear energy in the future. And I think that is a positive development.

In order to assure access to affordable, safe, and reliable energy,

we must develop a balanced energy portfolio and, in my view, nuclear power should be part of that mix. The Federal Government

already helps the nuclear industry by limiting its liability under

the Price-Anderson Act.

And among the items which should be on the agenda of this subcommittee is the reauthorization of the Price-Anderson legislation

during the course of this Congress. And we should ensure that a

permanent nuclear waste repository will open by the end of this

decade.

These efforts, taken together, may or may not prove sufficient.

Some utilities and their shareholders foresee a future for nuclear

industry. Their advice concerning the steps this committee should

take to address the several problems that confront the industry will

be most welcome, and I want to commend you, Mr. Chairman, for

assembling this afternoon an excellent conversation on this subject

with knowledgeable witnesses who I am sure will provide outstanding guidance.

Mr. BARTON. I thank the gentleman from Virginia.

We now welcome the gentleman from Kentucky, Mr. Whitfield,

for an opening statement.

Mr. WHITFIELD. Thank you, Mr. Chairman. As many people

know, the Paducah Gaseous Diffusion Plant will soon become the

only uranium enrichment facility in operation in the United States.

We also have one remaining converter of natural uranium in this

country, and that conversion plant is located in Metropolis, Illinois.

5

Just last week, the Nuclear Regulatory Commission approved the

high assay upgrade license at the Paducah plant to allow the plant

to enrich uranium to the 4 or 5 percent level needed to power nuclear reactors. As has been stated, nuclear power supplies about 22

percent of our Nation’s electricity, but nuclear power plants obviously cannot operate without enriched uranium.

As I stated earlier, there will soon be only one enrichment facility in this country, and over half of our domestic supply of uranium

comes from Russia. But the Russian supply has been interrupted

five times in 5 years, and many people fear it will soon become too

costly to produce enriched uranium in the U.S. because it is cheaper to import from foreign sources.

The electricity crisis in California has taught us many lessons,

and one is that it reminds us, once again, we can ill afford to rely

on only one form of power generation in America, and particularly

as demand continues to exceed supply. Nuclear energy is a key

component to providing for our power needs now and in the future

as the existing plants obtain relicensure to operate for another 20

years, and hopefully we will have new power plants coming online.

As we go through this hearing, there are a number of issues we

must focus on, but I want all of us to remember the importance of

protecting our domestic capability to enrich uranium in the U.S.,

and I look forward to the testimony of our panels. And I yield back

the balance of my time.

Mr. BARTON. We thank the gentleman from Kentucky.

We now recognize the gentleman from Massachusetts for an

opening statement.

Mr. MARKEY. Thank you, Mr. Chairman, very much. And I thank

you for calling today’s hearing. It is very, very timely.

Tomorrow is the 22nd anniversary of the Three Mile Island nuclear accident, and April 26 will mark the 15th anniversary of the

Chernobyl nuclear accident. Now these two events—Three Mile Island and Chernobyl—stand as a stark warning to us about the

enormous risks and dangers inherent in nuclear reactor operations.

The nuclear industry supporters like to say that more people

have died from other forms of electricity generation than from nuclear power. But when there is an accident in a coal mine, they

don’t give warnings to pregnant women and children to evacuate

all of Central Pennsylvania. When there is an explosion of a natural gas pipeline, they don’t force 100,000 people to flee the area

and to throw away all fresh vegetables and fruit across Europe.

While offsite exposures at Three Mile Island were low, we now

know that we came close, very close, to a catastrophe. At

Chernobyl, at already know that at least 31 people have died, 140

people suffered severe radiation sickness and impairment, and

hundreds of thousands more were exposed to significant levels of

radiation.

Of course, the full human cost of the Chernobyl disaster is still

unknown, as those who have been exposed face the dread prospect

of thyroid cancers and other radiation-induced illnesses.

And what of nuclear waste? When are we ever going to solve that

issue? If the nuclear industry is so clean, why is the nuclear utility

industry trying to weaken groundwater protection standards—

weaken—for the Yucca Mountain waste repository? If it is so clean,

6

why is the nuclear industry trying to take away the EPA’s power

to establish these standards and give it to the NRC?

If it is so safe, why is the nuclear industry seeking to retain taxpayer-subsidized Price-Anderson insurance? If it is so safe, why is

the industry so insistent on retaining the provisions of Price-Anderson that indemnify the DOE contractors transporting spent fuel

from any liability in the case of an accident? The Mobil-Chernobyl

provision.

And if nuclear power is so economically viable, why is the industry seeking taxpayer financed Federal subsidies in the form of special tax breaks, special R&D subsidies, and even a Federal subsidy

to help defray future licensing costs? If it is so economic, why do

we provide government subsidized irradiation services for years, a

subsidy that we will revive if we were to bail out the U.S. Enrichment Corporation as some now desire?

If it is so economic, why do the utilities come in for bailouts of

their so-called stranded nuclear investments? Just over the last 5

years, bailouts that disguise the true costs of nuclear power by

shifting acquisition and construction costs from nuclear utility

shareholders to captive utility consumers.

I look forward to obtaining the answers to these questions in the

course of the day, so that I can really find out whether or not this

is a technology which is economical, is safe, and is clean.

I thank you, Mr. Chairman.

Mr. BARTON. I thank the gentleman.

The gentlelady from New Mexico, Congressman Wilson, is recognized for an opening statement.

Ms. WILSON. Thank you, Mr. Chairman. I appreciate your holding this hearing because nuclear energy has to be part of any comprehensive national energy policy. We have 104 nuclear generating

plants in the United States providing some 20 percent of the power

that we rely on for electricity.

And over the last decade, power produced by nuclear plants has

increased by 30 percent, roughly the equivalent of building 23 new

nuclear power plants, while by every measure safety has improved

markedly during the same period. The cost to produce nuclear

power is less than 2 cents per kilowatt hour, which compares with

coal at over 2 cents and natural gas at about 3.5 cents per kilowatt

hour.

Yet, with the demand for electricity growing every year, no nuclear power plants are projected to come online by 2020, and nuclear power is projected to decline to only 11 percent of the Nation’s

electricity generation by 2020. I am here to say today that things

are changing.

Since the incident at Three Mile Island, expanding reliance on

nuclear power has been a non-starter in America. It has been in

the ‘‘too hard’’ column. In the context of rolling blackouts in California, high prices, growing demand for power, and continued environmental protection and global warming concerns, America is taking a second look at nuclear power. And we should.

On this committee we are often charged with assessing risks and

benefits, balancing competing interests—in this case, the need to

protect the environment and public health with the need to make

sure that America’s energy needs are met.

7

We are trying to craft an energy policy for America that will reduce the dependence on foreign oil, make sure adequate power is

available at a reasonable price, protect the public health, promote

conservation, and minimize impact on the environment. Every

source of energy has risks and benefits. Where there are risks we

should seek to mitigate those risks, whether by investing in research and clean coal technology or improving the safety designs of

nuclear reactors. But we cannot take one energy source off the

table as we have in the last 20 years.

One of the barriers to increasing nuclear power capacity is the

capital cost of plants, and there is new and emerging power designs, some of them being tested in South Africa, that promise the

possibility of making the capital cost competitive with other kinds

of technologies.

We have challenges to address—opening Yucca Mountain, reauthorizing Price-Anderson, regulatory streamlining. It is time to

take on those challenges and take nuclear power out of the ‘‘too

hard’’ category.

Thank you, Mr. Chairman.

Mr. BARTON. We thank the gentlelady.

We recognize Congressman Strickland for an opening statement.

Mr. STRICKLAND. Thank you, Mr. Chairman. I am pleased that

we are holding this hearing today because I believe, as I have stated at previous subcommittee meetings, that we face an urgent

problem in this country; that is, the demise of a reliable domestic

nuclear fuel supply.

Last year, on June 20, the United States Enrichment Corporation announced it would cease production at the Portsmouth, Ohio,

gaseous diffusion plant in my district. This decision by USEC

leaves one gaseous diffusion plant in this country located in my

friend Mr. Whitfield’s district in Paducah, Kentucky.

This decision is alarming, Mr. Chairman, because the Portsmouth facility is the only plant with the capability of enriching

uranium to the desired commercial assay. I understand this past

Saturday the Paducah plant was able to enrich a little over 4 percent assay. I think that is good news. But it is important to note

that reactors presently use nearly 5 percent assay, and the trend

is toward higher assay fuel.

Portsmouth is the only plant licensed to enrich up to 10 percent

assay. As you know, over 20 percent of electricity in this country

comes from nuclear generation. Currently, the U.S. depends on imports from Russia for over 50 percent of its nuclear fuel, and we

understand that USEC is proposing to import even more fuel from

Russia’s commercial vendors, which would place U.S. nuclear

power plants in an OPEC-like dependency on Russia.

Given this existing dependency on Russian material, it seems absolutely reasonable to request that the Portsmouth plant is placed

in a warm standby mode until we know for sure that the Paducah

plant is capable of enriching uranium to commercial-grade over a

reasonable period of time.

Mr. Chairman, I have reviewed a number of reports which have

been released by GAO, the NRC, and DOE in the last few months,

and a particular report by the NRC predicts that the Paducah

plant may cease to be economically viable after the year 2003. If

8

the NRC is correct, and Paducah is not viable after 2003, do we

want to become dependent upon Russia for nearly 80 percent of our

nuclear fuel supply?

I say again, we have an urgent problem on our hands, one that

must be addressed within the next few weeks or the next few

months. Certainly, we don’t have years. And I hope today’s hearing

will shed some light on what it is that we can do as a Congress,

or what the administration and the Congress can do together, to

make sure that our Nation’s energy supply is secure.

Thank you, and I look forward to our witnesses.

Mr. BARTON. We thank the gentleman from Ohio.

The distinguished full committee chairman, Mr. Tauzin, is recognized for an opening statement.

Chairman TAUZIN. Thank you, Mr. Chairman. Mr. Barton, thank

you for holding the hearing today for examining the critical role

that the Nation’s energy infrastructure plays in the life of our

country, and the fact that nuclear now supplies as much as 20 percent of the Nation’s electricity cannot be forgotten.

Interestingly enough, over the past decade, the same nuclear reactors that provide our country with 20 percent of our electricity

have increased their output and efficiency by 30 percent, and that’s

pretty remarkable considering that we haven’t licensed a new nuclear plant for many years.

Recently I have noticed, however, initial stages of resurgence in

nuclear power and the interest of building new nuclear plants. The

current energy crisis we are in requires us to understand that natural gas and coal should not be the only fuel sources for developing

our future electric generation capacity.

Likewise, nuclear reactors have become a hot item in restructured markets. Six reactors have changed hands in the last 24

months. Several electric utilities have outlined aggressive plans to

invest and to extend the life of existing plants because they are

still reliable and provide a competitive stream of electricity.

Witnesses today will reveal that some utilities are contemplating

the construction of new nuclear plants, and that is good news for

maintaining the diversity of fuels that our country requires.

I want to make it clear, however, that it is not Congress or the

administration which will determine how many nuclear reactors

should be in operation. Ultimately, the fate of nuclear power will

be determined by the private sector, and energy markets will determine whether new and existing nuclear plants are an economical

source of generating capacity.

But the actions we take here in Congress can directly affect the

future outlook for maintaining a mix of fuels that obviously should

include nuclear energy.

Here are the few issues that I think we need to consider, Mr.

Chairman. First, the compensation liability provisions of the PriceAnderson Act are set to expire in the year 2002. It is important

that Congress reauthorize Price-Anderson, because without it there

will be no real opportunity to construct or to operate new nuclear

facilities.

Second, the NRC must regulate reactors to ensure they are safe.

The NRC must administer its authority in a consistent and evenVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 E:\HEARINGS\71505 pfrm09 PsN: 71505
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handed manner that does not discourage companies from future investments in nuclear power.

Third, the NRC must be prepared to renew as many as 30 reactor licenses that are set to expire in a few years. They recently renewed licenses to extend the life of five reactors in the states of

Maryland and South Carolina, but, obviously, with 30 requiring action the NRC must be prepared to manage dozens of renewal requests in the near future.

Fourth, it has been 20 years since they issued a new license to

construct a nuclear reactor, and we should all be concerned that

the NRC may be a little rusty in responding to any future requests.

Fifth, Congress and the administration must work harder to sell

the long-term disposal of spent nuclear fuel, and this is not just a

problem for the nuclear industry but also a big problem for the Department of Energy. In the long run, it is not safe to store spent

nuclear fuel in dozens of locations around the country at facilities

designed only for short-term storage. Continued uncertainty here

will only discourage future development of nuclear power.

The nuclear industry, the administration, and Congress must

focus our attention on the future viability of our domestic fuel industry as the gentleman just spoke to. We must make sure that the

country can produce nuclear fuel to feed our future energy needs

and to maintain our national security interest.

That is just a short list, Mr. Chairman, and I am sure this hearing and other hearings will develop more. But I want to thank you

for identifying these issues and making this inquiry a major part

of the fuel and energy review that your committee is undertaking

in advance of producing with the administration a new energy policy for this country.

Nuclear is, and will be, a major component of that policy. This

hearing is, therefore, critically important.

I thank you and yield back the balance of my time.

Mr. BARTON. We thank the distinguished full committee chairman.

The gentleman from Georgia, Mr. Norwood, is recognized for an

opening statement.

Mr. NORWOOD. Thank you, Mr. Chairman. I am sorry I was a

minute late. I was trying to time it so I could follow Mr. Markey,

and, doggone it, I missed it by one. I particularly thought he would

enjoy my opening statement.

I thank you very much for conducting this hearing today on nuclear energy and its role in the national energy policy of our country. I am glad to be here today discussing this subject, because I

believe that everyone’s goal of enacting coherent, comprehensive

energy policy is contingent upon developing and maintaining a

sound nuclear energy policy.

Nuclear power plants generate approximately one-fifth of the

electricity consumed in the United States, second only to that of

coal. Given the relatively stable price of nuclear fuel, nuclear power

is the lowest cost power in the nation, averaging below 2 cents per

kilowatt hour, well below the 3 to 4 cents per kilowatt hour cost

of natural gas.

Nuclear power generation enjoys significant environmental advantages encompassing the largest source of emission-free generaVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 E:\HEARINGS\71505 pfrm09 PsN: 71505
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tion of electricity in the United States. Nuclear power doesn’t hurt

the ozone or cause smog. Electricity generated from the 103 U.S.

nuclear plants account for roughly two-thirds of the emission-free

electricity, far exceeding hydropower’s contribution of approximately 29 percent.

Innovation with the research and development of sound science

has proved that disposal and storage of spent nuclear fuel can be

done in a safe and an environmental-friendly manner. We are now

very close to selecting Yucca Mountain as a permanent repository

for spent nuclear fuel. However, many, many years have passed

since the last permit was issued to construct a nuclear plant in this

country. Given the evidence in support of nuclear power generation, I fail to understand why.

I have said it before, but I would like to say it again here today,

Mr. Chairman. Electricity is the lifeline of our economy and is of

paramount importance to the entire public interest. Electricity disruption and unreliability on a national scale in my view would be

catastrophic. If you don’t believe me, just ask our friends out in

California.

The United States cannot afford to allow politics to continue to

dictate something contrary to good science and good public policy.

Thanks to our competent chairman and his leadership, this subcommittee has now held three hearings on the current crisis in

California. Although a number of factors have contributed to the

problems there, at the end of the day it is still a problem of supply

and demand. Demand for electricity in the United States is projected to continue rapid and expansive growth.

Nuclear energy is reliable, competitively priced, and emissionfree. No other generation source of electricity can provide significant amounts of low-cost and reliable power while enhancing air

quality.

Mr. Chairman, I appreciate the substance of these hearings, but,

more importantly, the open and methodical process in which they

have been held. It is a pleasure to work with this subcommittee as

we seek to craft what will be a real and comprehensive energy policy.

Mr. BARTON. I thank the gentleman from Georgia, and let me say

I look forward to working with him on health policy when I have

a chance to get to the Health Subcommittee.

Mr. NORWOOD. I will take care of it for you. Don’t worry.

Mr. BARTON. I know you will take care of it.

The gentleman from Oregon, Mr. Walden, is recognized for an

opening statement.

Mr. WALDEN. Thank you, Mr. Chairman. I will forego an opening

statement at this time.

Mr. BARTON. Seeing no other members present, the Chair would

ask unanimous consent that all members of the subcommittee not

present have the requisite number of days to put their statement

in the opening record at the appropriate point. Hearing no objection, so ordered.

[Additional statements submitted for the record follow:]

11

PREPARED STATEMENT OF HON. GREG GANSKE, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF IOWA

Mr. Chairman: I welcome Senator Domenici to the committee today and look forward to his thoughts on the future of nuclear energy. I am aware that nationwide

nuclear power plants produce approximately twenty percent of the electricity consumed in the United States. However, my state of Iowa has only one nuclear facility

in operation, the Duane Arnold nuclear power plant in Palo. Even with only one facility in my state, I am acutely aware of the need to establish a permanent repository for spent fuel. The Nuclear Waste Policy Act of 1982 required that a site be

established no later than January 31, 1998. Of course we all know that this has

not taken place.

This has caused local facilities to build more on-site storage facilities, which is not

the best public policy option. The current goal of the Department of Energy for

opening of the permanent site is now 2010...twelve years past the original deadline.

Mr. Chairman I am very aware that this committee has not been a part of the

problem, and has indeed been a part of the attempted solution. However, I hope

that this is the year that we can finally give some certainty to the future on this

issue and get legislation completely through the process and adopted into law to address this matter.

I am among those Members who are concerned about the level of carbon dioxide

emissions worldwide and the impact that those emissions are having on the earth’s

temperature. Based only on emissions factors, obviously nuclear power presents a

more favorable alternative. However, I feel we must resolve the questions regarding

long term waste disposal before we consider expansion in the industry. Our cumulative experience in attempting to create a national permanent waste repository

over the last two decades... has not been very encouraging. Thank you Mr. Chairman and I yield back my remaining time.

PREPARED STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF ILLINOIS

Good afternoon, Mr. Chairman and to all whom have shown up this afternoon.

I am looking forward to this hearing today.

I would very much like to thank the Chairman for holding this hearing today. As

many of you here today know, I am from Illinois, which is home to more nuclear

power plants than anywhere else in the country. So my opinion maybe a little biased.

As we will hear from most of the witnesses today, nuclear is making a comeback.

Only a few short years ago, the general public perception was that nuclear energy

was at death’s door. To paraphrase Mark Twain, the reports of nuclear’s death have

been greatly exaggerated. Not only have they been exaggerated, but nuclear energy

is close to becoming our energy leader for the future.

Nuclear is cheap and nuclear is emission-free. Over the last ten years nuclear energy has also become safer and more efficient. The 103 plants that currently operate

today produce more power than 110 plants did just 6 years ago.

When talking about nuclear energy in a national energy policy, one thing is clear.

If a cleaner environment and more affordable and reliable energy is the goal of a

national energy policy, then nuclear energy must play a more pronounced role.

A couple of weeks ago, many here heard me talk about all the positives of coal,

another fuel that is plentiful in Illinois. I believe that coal, and nuclear and natural

gas and hydro and all the other fuels need to part of a balanced national energy

policy. Like any good retirement portfolio, we need to have a national energy policy

that is diversified and uses all of our resources.

The only real downside to nuclear energy is figuring out what to do with the

waste. Yesterday, I visited Yucca Mountain with my colleague from Illinois, Mark

Kirk. What I saw and heard there has solidified my belief that Yucca Mountain is

a suitable place for a permanent repository. The only thing that is holding it back

is politics, because the science is there. I would encourage my fellow members,

whether you are for or against Yucca Mountain, to visit there and hear what the

scientist have to say. I’m sure you find it as educational as I did.

In closing Mr. Chairman, I would like to give you one statistic. Currently, France

generates 80% of their energy from nuclear power. If the US did that, we would be

10% below the emission levels outlined in the Kyoto Protocol.

Thank you.

12

PREPARED STATEMENT OF HON. ED BRYANT, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TENNESSEE

Mr. Chairman, thank you for holding today’s hearing on nuclear energy. For too

long, nuclear energy has had an image problem, despite its many advantages. When

many Americans think about nuclear energy, they envision the bumbling Homer

Simpson asleep at the control panel while the Springfield Nuclear Power Plant is

on the verge of a meltdown. While the antics of Homer Simpson make for great comedy, the misrepresentation of nuclear power is no laughing matter.

It’s not often that I would find anything to compliment the French on, but France,

by generating 80 percent of its electricity with nuclear power, has reduced its air

pollution by a factor of five. However, nuclear power’s future in the U.S. remains

questionable because of the negative images of Three-Mile Island and Chernobyl,

despite its advantages as a source of electricity free of harmful emissions.

In reality nuclear energy is quite safe. Comprehensive and highly reliable automated safety procedures at nuclear plants operating in the U.S. keep the communities they are located in safe. The public stigma surrounding nuclear plants is one

of several obstacles the nuclear power industry must overcome.

Other obstacles include high initial construction costs, operating and maintenance

expenses, long lead times, and regulatory uncertainty for new plants, which restricts

the utilization of this generation option.

We must streamline the regulatory process for nuclear power plants in the U.S.

In addition, we must address unanswered questions about how to dispose of lowlevel nuclear waste and spent fuel from nuclear power plants. Currently, spent fuel

is being stored on-site at nuclear power plants across the nation.

Our nation’s 103 nuclear power plants are valuable assets to the companies that

own and operate them, as well as to the consumers that buy the electricity they

produce. Nuclear power represents a vital hedge between the volatility of the natural gas market because of their predictable and stable operating costs. Unlike coalfired plants, nuclear plants do not have to deal with constantly escalating environmental requirements and clean air standards that drive up production costs.

From the rolling blackouts in California to our nation’s dependence on foreign oil,

the recent convergence of energy disasters is a wake-up call to this Congress to develop a National Energy Policy.

In terms of environmental benefits, cost, and efficiency, nuclear energy should be

a major part of a comprehensive National Energy Policy.

I look forward to hearing the testimony of the experts on today’s panel, and once

again I thank the Chairman for addressing this issue.

PREPARED STATEMENT OF HON. BILL LUTHER, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF MINNESOTA

Thank you Mr. Chairman for holding today’s hearing on nuclear energy. I am particularly pleased that you have included a public interest advocate to discuss some

of the very real problems of long lasting radioactive wastes for which there currently

is no safe viable solution. I am also hopeful that as we continue this series of hearings on domestic energy markets, we begin to focus more on renewable and alternative energy sources. Any national energy policy not weighed heavily toward developing new technologies will not result in long term solutions to today’s growing energy crisis. Thank you and I yield back the balance of my time.

Mr. BARTON. We would now like to welcome our first panel

today. We have, representing the Nuclear Regulatory Commission,

Dr. William Travers, who is the Executive Director for Operations

for the NRC. We have Mr. William Magwood, who is the Director

of the Office of Nuclear Energy, Science and Technology, from the

Department of Energy. And we have Ms. Mary Hutzler, who we

had last week I believe, who is the Director for the Office of Integrated Analysis and Forecasting from the Energy Information Administration.

We will start with Dr. Travers, and go to Mr. Magwood, and then

Ms. Hutzler.

At approximately 2 p.m., we expect that Senator Domenici is

going to be here to testify on a nuclear reform bill that he has just

13

put into play in the Senate. So we may have to break to let him

testify when he arrives.

Your statement is in the record in its entirety. We would recognize you for 7 minutes, Dr. Travers, to elaborate on it.

STATEMENTS OF WILLIAM D. TRAVERS, EXECUTIVE DIRECTOR FOR OPERATIONS, U.S. NUCLEAR REGULATORY COMMISSION; WILLIAM D. MAGWOOD, DIRECTOR, OFFICE OF NUCLEAR ENERGY, SCIENCE AND TECHNOLOGY, U.S. DEPARTMENT OF ENERGY; AND MARY J. HUTZLER, DIRECTOR, OFFICE OF INTEGRATED ANALYSIS AND FORECASTING, ENERGY INFORMATION ADMINISTRATION

Mr. TRAVERS. Thank you, Mr. Chairman, members of the subcommittee. I am pleased to testify today on behalf of the Nuclear

Regulatory Commission regarding the NRC’s perspective on how

nuclear energy fits into the national energy policy.

As the subcommittee knows, the Commission’s statutory mandate is to ensure the adequate protection of public health and safety, the common defense and security, and the environment, in the

application of nuclear technology for civilian use.

Although the Commission’s primary focus is on safety, it nonetheless recognizes that the quality, predictability, and timeliness of

its regulatory actions bear on licensee decisions related to construction and operation of nuclear power plants. The Commission also

recognizes that its decisions and actions as a regulator influence

the public’s perception of the NRC and ultimately the public’s perception of the safety of nuclear technology.

Currently, there are 104 nuclear power plants licensed by the

Commission to operate in 31 different states. As a group, they are

operating at high levels of safety and reliability. These plants have

produced approximately 20 percent of our Nation’s electricity over

the past several years, and in 2000 they produced a record 755,000

gigawatt hours of electricity.

The Nation’s nuclear generators have worked over the past 10

years to improve nuclear power plant performance, reliability, and

efficiency, while ensuring operational safety. The improved performance they have achieved is equivalent to placing 23 new large

plants online. The Commission has focused on ensuring that safety

has not been compromised as a result of these industry efforts.

The nuclear industry has undergone a period of remarkable

change. As electricity restructuring proceeds, the Commission is

witnessing the start of the consolidation of nuclear generating capacity among a smaller group of operating companies and the development of a market for nuclear power plants as capital assets.

As a result, the Commission has seen a significant increase in the

number of requests for approval of license transfers. These requests

increased from a historical average of about 2 to 3 per year to 20

to 25 in the past 2 years. The NRC has completed a number of improvements to its license transfer review process, and in calendar

2000 we reviewed and approved transfers in periods ranging from

about 4 to about 8 months. The Commission intends to strive to

continue to perform at this level of proficiency even in the face of

continued high demand.

14

Another result of the new economic conditions is an increasing

interest in license renewals beyond the original 40-year term. That

term, which was established by the Atomic Energy Act, did not reflect an engineering or a scientific limitation, but rather was based

on financial and antitrust concerns. The Commission now has the

technical bases and the experience on which to base judgments

about the potential useful life and safe operation of facilities.

The Commission has already reviewed the licenses of five units

at two sites for an additional 20 years, and I am happy to report

that the reviews of these licenses were completed on or ahead of

schedule. Applications from an additional five units at three sites

are currently under review, and many more are anticipated in the

coming years.

In recent years, the Commission has approved numerous license

amendments that permit its licensees to make small power

uprates. Collectively, these uprates supply the electricity equivalent to that of two large power plants. The Commission has received applications for several more substantial uprates and anticipates others within the near term.

The Commission has responded to numerous requests to approve

spent fuel cask designs for onsite dry storage. These actions, which

are expected to increase as other nuclear power plants require additional fuel storage, are providing an interim approach pending

implementation of a program for the long-term disposition of spent

fuel.

Certain matters also need to be resolved in order to make

progress on a geologic repository. The Energy Policy Act of 1992 requires the EPA to promulgate general standards while the Commission has the obligation to implement those standards. As you

know, the Commission has concerns about certain aspects of EPA’s

proposed approach and is currently working with EPA to resolve

these issues.

The Commission also is in a period of dynamic change as the

agency moves toward a more risk-informed and performance-based

regulatory paradigm. Perhaps the most visible aspect of this effort

is the new reactor oversight process. The new process was developed to focus inspection effort on those areas involving greatest

risk while simultaneously providing a more objective and transparent process. The Commission continues to work with its stakeholders to assess the effectiveness of this new process, and to date

the feedback received from both the industry and the public, in

general, is favorable.

In this period of increasing demand for electricity, serious industry interest in new construction of nuclear power plants in the

United States has recently emerged. As you know, the Commission

has already certified three advanced reactor designs. In addition to

these, there are new nuclear power plant technologies such as the

Pebble Bed Modular Reactor which some believe can provide enhanced benefits. The Commission recently directed the staff to assess its capabilities—the capabilities that would be necessary to review an application for a new reactor.

In order to confirm the safety of new reactor technologies, the

Commission believes that a strong nuclear research program

should be maintained. A comprehensive evaluation of the CommisVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00018 Fmt 6633 Sfmt 6602 E:\HEARINGS\71505 pfrm09 PsN: 71505
15

sion’s research program is underway with assistance from outside

experts. With the benefit of these insights, the Commission expects

to undertake steps to strengthen our research program over the

coming months.

Linked to these technical and regulatory assessments, the Commission is reviewing its human capital to assure the appropriate

professional staff is available for the Commission to fulfill its safety

mission. In some offices, nearly 25 percent of the staff are eligible

to retire today. In fact, the Commission has six times as many staff

over the age of 60 as it has staff under the age of 30. While the

numbers of individuals with technical skills critical to the achievement of the Commission’s safety mission is rapidly declining, the

educational system is not replacing them. The Commission staff

has taken steps to address this situation. However, the maintenance of a technically competent staff will require substantial effort

for an extended period.

Finally, Mr. Chairman, the Commission will continue to be active

in concentrating its staff’s efforts on its statutory responsibilities.

Those statutory mandates notwithstanding, the Commission is

mindful of the need to reduce unnecessary burden, so as not to inappropriately inhibit any renewed interest in nuclear power, to

maintain open communications with all of its stakeholders, and to

continue to encourage its highly qualified staff to strive for increased efficiency and effectiveness.

Mr. Chairman, that completes my oral statement, and, of course,

I will be happy to answer questions.

[The prepared statement of William D. Travers follows:]

PREPARED STATEMENT OF WILLIAM D. TRAVERS, EXECUTIVE DIRECTOR FOR

OPERATIONS

INTRODUCTION

Mr. Chairman, members of the Subcommittee, I am pleased to submit this testimony on behalf of the U.S. Nuclear Regulatory Commission (NRC) regarding the

NRC’s perspective on how nuclear energy fits into the U.S. National Energy Policy.

As the Subcommittee knows, the Commission’s mission is to ensure the adequate

protection of public health and safety, the common defense and security, and the

environment in the application of nuclear technology for civilian use. The Commission does not have a promotional role—the agency’s role is to ensure the safe application of nuclear technology if society elects to pursue the nuclear energy option.

The Commission recognizes, however, that its regulatory system should not establish inappropriate impediments to the application of nuclear technology. Many of the

Commission’s initiatives over the past several years have sought to maintain or enhance safety while simultaneously improving the efficiency and effectiveness of our

regulatory system. The Commission also recognizes that its decisions and actions as

a regulator influence the public’s perception of the NRC and ultimately the public’s

perception of the safety of nuclear technology. For this reason, the Commission’s primary performance goals also include increasing public confidence.

The Commission’s primary focus is on safety. The Commission nonetheless recognizes that the quality, predictability, and timeliness of its regulatory actions bear

on licensee decisions related to construction and operation of nuclear power

plants.Background

Currently there are 104 nuclear power plants licensed by the Commission to operate in the United States in 31 different states. As a group, they are operating at

high levels of safety and reliability.

These plants have produced approximately 20% of our nation’s electricity for the

past several years and are operated by about 40 different companies. In 2000, these

nuclear power plants produced a record 755-thousand gigawatt-hours of electricity.

16

1 Capacity factor is the ratio of electricity generated, for the period of time considered, to the

amount of energy that could have been generated at continuous full-power operation during the

same period.

Improved Licensee Efficiencies (Increased Capacity Factors)

The nation’s nuclear electricity generators have worked over the past 10 years to

improve nuclear power plant performance, reliability, and efficiency. According to

the Nuclear Energy Institute, the improved performance of the U.S. nuclear power

plants since 1990 is equivalent to placing 23 new 1000-MWe power plants on line.

The average capacity factor 1 for U.S. light water reactors was 86 percent in 1999,

up from 63 percent just 10 years ago. The Commission has focused on ensuring that

safety has not been compromised as a result of these industry efforts. The Commission will continue to carry out its regulatory responsibilities in an effective and efficient manner so as not to impede industry initiatives inappropriately.

U.S. Commercial Nuclear Power Reactor Average Capacity Factor and Net Generation

Year Number of Reactors

Licensed to Operate

Average Annual Capacity Factor (Percent)

Net Generation of Electricity

Thousands of

Gigawatthours Percent of Total U.S.

1989 ....................................................... 109 63 528 19.0

1990 ....................................................... 111 68 576 20.5

1991 ....................................................... 111 71 613 21.7

1992 ....................................................... 110 71 620 22.2

1993 ....................................................... 109 73 611 21.2

1994 ....................................................... 109 75 640 22.1

1995 ....................................................... 109 79 674 22.5

1996 ....................................................... 110 77 670 21.9

1997 ....................................................... 104 74 628 20.1

1998 ....................................................... 104 78 673 22.6

1999 ....................................................... 104 86 727 19.8

Electric Industry Restructuring

As the Subcommittee is aware, the nuclear industry has undergone a period of

remarkable change. The industry is in a period of transition in several dimensions,

probably experiencing more rapid change than in any other period in the history of

civilian nuclear power. As deregulation of electricity generation proceeds, the Commission is seeing significant restructuring among the licensees and the start of the

consolidation of nuclear generating capacity among a smaller group of operating

companies. In part, this change is due to an industry that has achieved gains in

both economic and safety performance over the past decade and thus has been able

to take advantage of the opportunities presented by industry restructuring. The

Commission has established a regulatory system that is technically sound, that is

fair, predictable, and reaches decisions with reasonable dispatch.

INITIATIVES IN THE AREA OF CURRENT REACTOR REGULATION

License Transfers

One of the more immediate results of the economic deregulation of the electric

power industry has been the development of a market for nuclear power plants as

capital assets themselves. As a result, the Commission has seen a significant increase in the number of requests for approval of license transfers. These requests

increased from a historical average of about two or three per year, to 20-25 in the

past two years.

The Commission has assured that our reviews of license transfer applications,

which focus on adequate protection of public health and safety, are conducted efficiently. These reviews sometimes require a significant expenditure of talent and energy by our staff to ensure a high quality and timely result. Our legislative proposal

to eliminate foreign ownership review could help to further streamline the process.

To date, the Commission believes that it has been timely in these transfers. For example, in CY 2000, the staff has reviewed and approved transfers in periods ranging

from four to eight months, depending on the complexity of the applications. The

Commission will strive to continue to perform at this level of proficiency even in the

face of continued demand.

17

License Renewals

Another result of the new economic conditions is an increasing interest in license

renewal that would allow plants to operate beyond the original 40-year term. That

term, which was established in the Atomic Energy Act (AEA), did not reflect a limitation that was determined by engineering or scientific considerations, but rather

was based on financial and antitrust concerns. The Commission now has the technical bases and experience on which to base judgments about the potential useful

life and safe operation of facilities and is addressing the question of extensions beyond the original 40-year term.

The focus of the Commission’s review of applications is on maintaining plant safety, with the primary concern directed at the effects of aging on important systems,

structures, and components. Applicants must demonstrate that they have identified

and can manage the effects of aging so as to maintain an acceptable level of safety

during the period of extended operation.

The Commission has now renewed the licenses of plants at two sites for an additional 20 years: Calvert Cliffs in Maryland, and Oconee in South Carolina, comprising a total of five units. The thorough reviews of these applications were completed ahead of schedule, which is indicative of the care exercised by licensees in

the preparation of the applications and the planning and dedication of the Commission staff. Applications for units from three additional sites—Hatch in Georgia,

ANO-1 in Arkansas, and Turkey Point in Florida—are currently under review. As

indicated by our licensees, many more applications for renewal are anticipated in

the coming years.

Although the Commission has met the projected schedules for the first reviews,

it would like the renewal process to become as effective and efficient as possible.

The extent to which the Commission is able to sustain or improve on our performance depends on the rate at which applications are actually received, the quality of

the applications, and the ability to staff the review effort. The Commission recognizes the importance of license renewal and is committed to providing high-priority

attention to this effort. As you know, the Commission encourages early notification

by licensees, in advance of their intentions to seek renewals, in order to allow adequate planning so as not to create unmanageable demands on staff resources.

Reactor Plant Power Uprates

In recent years, the Commission has approved numerous license amendments that

permit its licensees to make relatively small power uprates (approximately 2-7 percent increases in the output of a facility). Collectively, these uprates supplied the

electricity equivalent to that from two large power plants (approximately 2,000

MWe). The Commission has received applications for several substantial uprates,

and anticipates more within the near term. In addition, some nuclear generators

have requested Commission safety review of increasing fuel burnup, thereby extending the operating cycle between refueling outages and thus increasing nuclear plant

capacity factors. Such approvals are granted only after a thorough evaluation by

Commission staff to ensure that safe operation and shutdown can be achieved at

the higher power and increased fuel burnup.

High Level Waste Storage/Disposal (Spent Fuel Storage)

In the past several years, the Commission has responded to numerous requests

to approve spent fuel cask designs and independent spent fuel storage installations

for onsite dry storage of spent fuel. These actions have provided an interim approach pending implementation of a program for the long-term disposition of spent

fuel. The ability of the Commission to review and approve these requests has provided the needed additional onsite storage of spent nuclear fuel, thereby avoiding

plant shutdowns as spent fuel pools reach their capacity. The Commission anticipates that the current lack of a final disposal site will result in a large increase in

on-site dry storage capacity during this decade.

The Commission is currently reviewing an application for an Independent Spent

Fuel Storage Installation on the reservation of the Skull Valley Band of Goshute

Indians in Utah.

Certain matters also need to be resolved in order to make progress on a deep geologic repository for disposal of spent nuclear fuel. The Energy Policy Act of 1992 requires the Environmental Protection Agency (EPA) to promulgate general standards

to govern the site, while the Commission has the obligation to implement those

standards through its licensing and regulatory process. The Commission has concerns about certain aspects of EPA’s proposed approach and is working with EPA

to resolve these issues.

18

Risk-Informing the Commission’s Regulatory Framework

The Commission also is in a period of dynamic change as the Agency moves from

a prescriptive, deterministic approach towards a more risk-informed and performance-based regulatory paradigm. Improved probabilistic risk assessment techniques

combined with over four decades of accumulated experience with operating nuclear

power reactors have led the Commission to recognize that some regulations may not

serve their intended safety purpose and may not be necessary to provide adequate

protection of public health and safety. Where that is the case, the Commission has

determined it should revise or eliminate the requirements. On the other hand, the

Commission is prepared to strengthen our regulatory system where risk considerations reveal the need.

Perhaps the most visible aspect of the Commission’s efforts to risk-inform its regulatory framework is the new reactor oversight process. The process was initiated

on a pilot basis in 1999 and fully implemented in April 2000. The new process was

developed to focus inspection effort on those areas involving greater risk to the plant

and thus to workers and the public, while simultaneously providing a more objective

and transparent process. While the Commission continues to work with its stakeholders to assess the effectiveness of the revised oversight process, the feedback received from industry and the public is favorable.

FUTURE ACTIVITIES

Scheduling and Organizational Assumptions Associated with New Reactor Designs

While improved performance of operating nuclear power plants has resulted in

significant increases in electrical output, significant increased demands for electricity will need to be addressed by construction of new generating capacity of some

type. Serious industry interest in new construction of nuclear power plants in the

U.S. has only recently emerged. As you know, the Commission has already certified

three new reactor designs pursuant to 10 CFR Part 52. These designs include General Electric’s advanced boiling water reactor, Westinghouse’s AP-600 and Combustion Engineering’s System 80+. Because the Commission has certified these designs,

a new plant order may include one of these approved designs. However, the staff

is also conducting a preliminary review associated with other new designs.

In addition to the three already certified advanced reactor designs, there are new

nuclear power plant technologies, such as the Pebble Bed Modular Reactor, which

some believe can provide enhanced safety, improved efficiency, lower costs, as well

as other benefits. To ensure that the Commission staff is prepared to evaluate any

applications to introduce these advanced nuclear reactors, the Commission recently

directed the staff to assess the technical, licensing, and inspection capabilities that

would be necessary to review an application for an early site permit, a license application, or construction permit for a new reactor unit. This will include the capability

to review the designs for generation III+ or generation IV light water reactors including the Westinghouse AP-1000, the Pebble Bed Modular Reactor, and the International Reactor Innovative and Secure (IRIS) designs. In addition to assessing its

capability to review the new designs, the Commission will also examine its regulations relating to license applications, such as 10 CFR Parts 50 and 52, in order to

identify whether any enhancements are necessary.

In order to confirm the safety of new reactor designs and technology, the Commission believes that a strong nuclear research program should be maintained. A comprehensive evaluation of the Commission’s research program is underway with assistance from a group of outside experts and from the Advisory Committee on Reactor Safeguards. With the benefit of these insights, the Commission expects to undertake measures to strengthen our research program over the coming months.

Human Capital

Linked to these technical and regulatory assessments, the Commission is reviewing its human capital to assure that the appropriate professional staff is available

for the Commission to fulfill its traditional safety mission, as well as any new regulatory responsibilities in the area of licensing new reactor designs.

In some important offices within the Commission, nearly 25 percent of the staff

are eligible to retire today. In fact, the Commission has six times as many staff over

the age of 60 as it has staff under 30.

And, as with many Federal agencies, it is becoming increasingly difficult for the

Commission to hire personnel with the knowledge, skills, and abilities to conduct

the safety reviews, licensing, research, and oversight actions that are essential to

our safety mission. Moreover, the number of individuals with the technical skills

critical to the achievement of the Commission’s safety mission is rapidly declining

in the Nation and the educational system is not replacing them. The Commission’s

19

staff has taken steps to address this situation, and as a result, is now seeking systematically to identify future staffing needs and to develop strategies to address the

gaps. It is apparent, however, that the maintenance of a technically competent staff

will require substantial effort for an extended time.

As the Commission is currently challenged to meet its existing workload with

available resources, additional resources would be necessary to respond to increased

workload which could result from some of the initiatives discussed in this testimony.

IMPLICATIONS OF A NATIONAL ENERGY POLICY

The Commission has a stake in a national energy policy and has identified areas

where new legislation would be helpful to eliminate artificial restrictions and to reduce the uncertainty in the licensing process. These changes would maintain safety

while increasing flexibility in decision-making. Although those changes would have

little or no immediate impact on electrical supply, they would help establish the context for consideration of nuclear power by the private sector without any compromise of public health and safety or protection of the environment.

Legislation will be needed to extend the Price-Anderson Act. The Act, which

expires on August 1, 2002, establishes a framework that provides assurance

that adequate funds are available in the event of a nuclear accident and sets

out the process for consideration of nuclear claims. Without the framework provided by the Act, private-sector participation in nuclear power would be discouraged by the risk of large liabilities.

Several other legislative changes would be helpful. For example, Reorganization Plan No. 3 of 1970 could be revised to provide the Commission with the

sole responsibility to establish all generally applicable standards related to

Atomic Energy Act (AEA) materials, thereby avoiding dual regulation of such

matters by other agencies. Along these same lines, the Nuclear Waste Policy

Act of 1982 could be amended to provide the Commission with the sole authority to establish standards for high-level radioactive waste disposal. These

changes would serve to provide full protection of public health and safety, provide consistency, and avoid needless and duplicative regulatory burden.

Commission antitrust reviews could also be eliminated. As a result of the

growth of Federal antitrust law since the passage of the AEA, the Commission’s

antitrust reviews are redundant of the reviews of other agencies. The requirement for Commission review of such matters, which are distant from the Commission’s central expertise, should be eliminated.

Elimination of the ban on foreign ownership of U.S. nuclear plants would be

an enhancement since many of the entities that are involved in electrical generation have foreign participants, thereby making the ban on foreign ownership

increasingly anachronistic. The Commission has authority to deny a license that

would be inimical to the common defense and security, and thus an outright

ban on all foreign ownership is unnecessary.

With the strong Congressional interest in examining energy policy, the Commission is optimistic that there will be a legislative vehicle for making these changes

and thereby for updating the AEA.

SUMMARY

The Commission has long been, and will continue to be, active in concentrating

its staffs’ efforts on ensuring the adequate protection of public health and safety,

the common defense and security, and the environment in the application of nuclear

technology for civilian use. Those statutory mandates notwithstanding, the Commission is mindful of the need to: 1) reduce unnecessary burdens, so as not to inappropriately inhibit any renewed interest in nuclear power; (2) maintain open communications with all its stakeholders, in order to seek to ensure the full, fair, and timely consideration of issues that are brought to our attention; and (3) continue to encourage its highly qualified staff to strive for increased efficiency and effectiveness,

both in our dealings with all the Commission’s stakeholders and internally within

the agency.

I look forward to working with the Committee, and I welcome your comments and

questions.

Mr. NORWOOD [presiding]. Thank you very much, Dr. Travers.

Mr. Magwood, we would be pleased to hear from you now.

20

STATEMENT OF WILLIAM D. MAGWOOD

Mr. MAGWOOD. Thank you, Mr. Chairman. My name is Bill

Magwood. I am the Director of DOE’s Office of Nuclear Energy,

Science and Technology. It is a great pleasure to appear before you

today.

As you know, for the last several years DOE has been working

to coordinate with NRC, the industry, and others to try to understand what the issues facing nuclear power will be in the near

term and also in the longer term, and to find ways, both in terms

of research and institutionally, to remediate those problems. We

have made some progress, but, clearly, there is a lot that we need

still to do.

Over the last year or so, it has been very clear and very public

that there are some utilities in this country that are looking very

seriously to nuclear option for the first time in many years. We

have been very pleased to see that level of interest, and you are

going to hear from some of those utilities today.

Probably more important than any other single factor to make

industry more comfortable with the idea of building new nuclear

power plants in this country has been the tremendous progress the

NRC has made, and I give great credit to NRC, in proving itself

to be a reliable and consistent regulator. Without that, utilities

wouldn’t be here today talking to you.

In fact, I know from conversations with many utility executives

that NRC’s performance in license renewal is the single most important factor they point to when asked why they believe nuclear

has a future in the United States—because the NRC has done such

a good job.

That said, the industry itself deserves a great deal of credit. If

you go back to just 1990, just a little over 10 years ago, nuclear

power plants in this country were operating at only about 70 percent availability, which was a pretty miserable record when compared to other energy sources and compared to other nuclear power

plants in the world.

Today, U.S. nuclear power plants are among the best in the

world. We are operating our plants at an average of about 90 percent availability. That is an astonishing improvement in performance. A great deal of that credit is due to the management of the

utility companies who, during the 1990’s, understood that great

management is the way to get to high levels of safety and also high

levels of economy and performance. I think that they have done a

great job in moving toward that objective.

At the same time, the business structure of the nuclear industry

has been changing over the last several years, and I believe this

will probably prove to be more important than any other single factor in making a future for nuclear energy. The utility industry

itself has been consolidating over the last 2 or 3 years, and as has

been well reported in the papers, there have been a number of

mergers, as well as acquisitions of nuclear power plants.

What this has done is that it has served to centralize more nuclear power plants under the management of some of the best managed utilities in the country. I think this will lead to even more

economy and more effectiveness in the future, and an even greater

benefit to the Nation.

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In the longer-term, the consolidation of the nuclear industry will

result in formation of large electric utilities with a long-term interest in nuclear power, which will be a very important factor in utility considerations about the future of nuclear power.

DOE also has been very active in this area. We have been supporting research for the last several years to make sure that existing nuclear power plants operate reliably and effectively as they

operate for the long term. We have been supporting advanced research and development, looking at new types of nuclear power

plants. Our Nuclear Energy Research Initiative has been very successful in that regard.

We are also coordinating with other countries. Just last year, we

launched an initiative known as ‘‘Generation IV’’ to look at ways

of reforming nuclear power and—aimed at addressing barriers to

long-term use of nuclear energy—making it more effective than it

is today through the use of advanced technologies. Not to wait for

the long term, we are also been working with industry to find ways

to make deployment of new nuclear power plant technology occur

as quickly as possible.

We are working in all of these areas. Our statement covers all

of this in more detail, and I look forward to talking with the committee about that over the course of the hearing.

Thank you.

[The prepared statement of William D. Magwood follows:]

PREPARED STATEMENT OF WILLIAM D. MAGWOOD, IV, DIRECTOR, OFFICE OF NUCLEAR

ENERGY, SCIENCE AND TECHNOLOGY, U.S. DEPARTMENT OF ENERGY

Mr. Chairman and Members of the Subcommittee, I am William D. Magwood, IV,

Director of the Department of Energy’s Office of Nuclear Energy, Science and Technology. My office is charged to apply the science, engineering, and art of nuclear

technology to address a wide range of civilian requirements. We support research

and provide radioisotopes to find new treatments for cancer. We provide the advanced power systems without which the United States cannot explore the solar system. We develop new, advanced technologies to deal with spent nuclear fuel. But

our core and most important mission especially in these days of energy supply concern is the development of advanced nuclear energy technologies to satisfy the energy needs of the United States in a clean, safe, and cost-effective manner.

Our program has undergone a dramatic transformation in the last three years.

With the completion of the advanced light water reactor program in fiscal year 1998,

we saw our nuclear energy research budget essentially fall to zero. With a great

deal of planning and hard work; advice from our independent advisory committee,

the Nuclear Energy Research Advisory Committee (NERAC) and its many subcommittees and task forces; and effective and focused support from the Congress,

we have turned the program around. Our office is now focused on three key missions:

• Supporting R&D that enhances nuclear powers viability as part of the U.S. energy

portfolio.

• The support for irreplaceable U.S. nuclear R&D infrastructure, both in the Government and in U.S. universities; and

• Support for students and programs to develop the human capital required to preserve a viable future for nuclear technology in the United States.

While I will touch on all of these key missions in my statement today, I will primarily focus on the first one to provide you with information regarding our technology activities and how they impact the future of nuclear energy in the United

States.

RECENT DEVELOPMENTS: A PATH TO A VIABLE FUTURE FOR U.S. NUCLEAR ENERGY

First, however, I would like to provide you with some context for our efforts. Just

a few years ago, many analysts were predicting the end of nuclear energy in the

United States. Many predicted that in the face of electric industry competition large

22

numbers of nuclear power plants would be shut down before the end of their 40-

year licenses and the amount of energy generated by U.S. plants would slowly

erode. Many believed that nuclear couldn’t compete that U.S. utilities would turn

away from their plants, largely forego license renewals, and invest in alternative

sources of electric generation.

Reality has proven these forecasts to be incorrect. For the most part, it was always clear that the picture would be brighter than the worse predictions foresaw.

But few, even those of us who watch nuclear industry developments closest, would

have predicted the turn-around that is occurring today. This reversal of nuclear fortunes has reinforced the Departments re-energized nuclear R&D activities. We perceive three key reasons for this change in the United States:

1) Performance of nuclear utilities. Little more than a decade ago, U.S. nuclear

power plants were generating electricity only about 70% of the time. Today, the average is approaching 90%. U.S. nuclear plants rank high when compared with the

nuclear plants of other countries and compare very favorably with other sources of

generation in the United States. In fact, the average nuclear plant in the U.S. produces electricity at only about two cents per kilowatt-hour—far below the average

U.S. market price and about the same as the most efficient natural gas-fired power

plants. Moreover, our colleagues at the Energy Information Administration (EIA)

have just reported that U.S. nuclear power plants broke another record, producing

more electricity in the year 2000 than ever before—despite the closure of eight less

efficient units over the last decade.

2) Consolidation of the nuclear utility industry. Because of the performance of U.S.

plants, they have become attractive targets for acquisition. We are now seeing the

formation of large nuclear utilities in the United States that more closely resemble

the large nuclear-focused power companies in countries like Japan. Instead of many

utilities owning one or two plants, we expect that there will soon be far fewer nuclear utilities, with each owning a dozen or more plants. The highly successful

Exelon Corporation is a prototype of what appears to be taking shape in this country. This development not only provides for considerable efficiencies of scale in

parts, training, and other aspects of operation, but it has two other benefits of possibly greater import. First, consolidation exploits a realization that swept through

the industry less than a decade ago: that the safest plants were the most cost-competitive plants and that good management was the key to both. As the best operators of nuclear plants acquire more plants, the performance of nuclear plants is likely to increase. Second, as in other countries which plan to build new plants, large

utilities with majority nuclear generation have a long-term interest in nuclear

power well beyond that of utilities that operate one plant as part of a larger system.

3) Successful management at the Nuclear Regulatory Commission. Not long ago,

many utility executives cited the unpredictability of regulation in the U.S. as a primary barrier to the construction of new plants in the U.S. and an obstacle to utilities seeking license renewals to operate their nuclear power plants for an additional

20 years. NRC has since that time shown itself to be a fair and effective regulator

of the nuclear industry. Its process to approve the renewal of the operating license

for the Calvert Cliffs plant and later for the three-unit Oconee plant was a tremendous success for both the Commission and the industry. Completed years earlier and

millions less expensively than most analysts predicted, these first license renewals

proved that the industry could rely on the NRC for fair, stable, effective, and predictable regulation. Thirty-three nuclear power plants are entering the renewal

process now and informal contacts with utility executives now indicate that the

overwhelming majority if not all of U.S. nuclear power plant owners are planning

to apply for license renewals for their nuclear units.

Maintaining a strong option to build new nuclear power plants to meet near and

long-term energy needs is not an end unto itself for the United States. Nuclear

power plants provide important benefits that are not found with other energy options. Nuclear plants do not emit pollutants such as nitrogen oxides, sulfur oxides,

mercury, or particulates that affect human health. Nor do nuclear plants emit carbon dioxide. These plants have proven to be highly reliable in all weather conditions, cost-effective in operation, and act as crucial anchors to the national electric

grid.

That said, like all sources of energy, nuclear power has issues with which we

must deal. Utilities must be certain that the high costs for construction that characterize many plants completed in the late 1980s and early 1990s are not repeated.

The United States must successfully resolve the nuclear waste issue. And any remaining public concern over the safety of nuclear plants must be fully addressed.

As I conclude my remarks, I will discuss the challenges ahead including some of the

barriers that must still be overcome to enable the United States to maintain a

strong nuclear energy option for the future.

23

With this backdrop, I would like to highlight what the Department is doing in

the nuclear energy arena. We are active in three areas that affect the future of nuclear energy:

• We are supporting cooperative research with the utility industry to develop advanced technologies to enable existing nuclear power plants to operate reliably

and cost-effectively into the long-term;

• We are pursuing technology and institutional activities to clear the way for nearterm deployment of nuclear power plants in the United States; and

• We are leading a world-wide effort to develop standard, next-generation nuclear

energy technologies that could enable nuclear power to fully meet the promise

our predecessors saw in the 1950s and 1960s.

TECHNOLOGY FOR CURRENT PLANTS: BUILDING ON SUCCESS

To discuss the prospects for new nuclear power plants in the United States, it is

essential that existing U.S. plants be successful both in terms of safety performance

and in terms of economic competitiveness. The industry has made impressive strides

to meet this condition, particularly over the last decade. The Department assisted

in making some of this performance possible through its past programs to develop

high-burnup nuclear fuel (which has enabled utilities to reduce their fuel costs by

half, saving some $200 million each year) and to reduce occupational radiation exposures by 67% since 1985.

Now we enter a new phase. As U.S. plants receive license renewals, they must

be prepared to operate for an additional 20 years—a total of 60 years—far longer

than nuclear plants have been operated to date. While NRCs license renewals confirm that safety will not be impacted as these plants operate for the long term, it

is less clear what long-term operation means for reliability and cost-effectiveness.

The application of advanced technologies can also continue the process of enhancing

safety.

The Departments Nuclear Energy Plant Optimization (NEPO) program plays a

vital role in ensuring that current nuclear plants can continue to deliver reliable

and economic energy supplies up to and beyond their initial 40-year license period

by resolving open issues related to plant aging, and by applying new technologies

to improve plant economics, reliability, and availability. The NEPO program is costshared with industry through the Electric Power Research Institute (EPRI) and is

conducted in close cooperation with the Nuclear Regulatory Commission. The research conducted under the NEPO program is identified, prioritized, and selected

with broad input from utilities, national laboratories, the Departments Nuclear Energy Research Advisory Committee (NERAC), and other stakeholders. With dozens

of projects underway, this program demonstrates the Departments ability to lead

without massive funding: about 60 percent of NEPO funding is provided by industry

and the suite of projects focuses on areas that industry would not have pursued on

its own projects that look at the long-term and focus on the need for a stable, reliable, non-polluting electricity source for the United States.

NEAR-TERM DEPLOYMENT: ADVANCED STATE-OF-THE-ART NUCLEAR ENERGY

TECHNOLOGY FOR THIS DECADE

Third generation nuclear power plants have been very successful in several countries. Advanced plants based on U.S. technology have been and are being constructed in Japan, South Korea, and Taiwan and are expected to be selected by

other countries in the coming years. We believe that small but important enhancements to these plants (which have been referred to as ‘‘Gen III+’’ designs) could help

make them state-of-the-art and deployable in the United States by 2010. As part

of its Nuclear Energy Technologies activities, the Office of Nuclear Energy, Science

and Technology is working cooperatively with both the U.S. Nuclear Regulatory

Commission and the domestic commercial nuclear industry in several activities focused on supporting the potential near-term deployment of new nuclear generating

capacity in the U.S. in the next five to ten years.

Working with both the public and private sectors, we are reviewing the current

regulatory requirements associated with designing, licensing, siting and constructing new nuclear-based electricity generating facilities to identify areas where

changes in the regulatory requirements could be beneficial to both public and private sectors. Working with the Nuclear Regulatory Commission, we are developing

a new regulatory framework for advanced gas reactor technologies that recognizes

the inherent differences between the light water technology-based regulations that

currently govern the regulatory requirements. Working with the nuclear utility industry, we will be developing a demonstration program for early site permitting of

24

potential new generation facilities whether it be new plants on new sites or, more

likely, at sites upon which current nuclear plants are operating.

This latter activity holds particular interest for us. We believe that many of the

difficult issues associated with siting new facilities of any kind can be avoided in

the case of new nuclear plants in the United States. Many operating U.S. nuclear

plant sites were designed with four or six reactors in mind and currently host far

fewer. This provides a tremendous opportunity for expansion in this country and we,

working with industry, will examine the issues closely.

Finally, through NERAC, we are working with industry to develop a report identifying technical, regulatory, and institutional issues which must be addressed and a

delineation of those the actions necessary to successfully deploy new nuclear reactor

facilities in the U.S. by 2010. The report on near-term deployment opportunities will

be available in September 2001.

NERI AND I-NERI: A PEER-REVIEWED PATH TO ADVANCED NUCLEAR R&D

The Departments Nuclear Energy Research Initiative (NERI), a competitive, peerreviewed research and development selection process to fund researcher-initiated

R&D proposals from universities, national laboratories, and industry, has reinvigorated the Nations nuclear energy R&D organizations. Focused on research to address the potential long-term barriers to expanded use of nuclear power—economics,

safety, proliferation resistance, and waste minimization—the NERI program is

yielding innovative scientific and engineering R&D in nuclear fission and reactor

technology. Initiated in FY 1999, there are currently 55 projects underway with an

additional 15 projects expected to be selected for award in FY 2001. This program

signaled the return of the United States to nuclear R&D, but a return that reflected

important lessons learned and a new appreciation for harnessing outside expertise

to focus the research. NERI has, despite its limited funding, gone a long way to reinvigorate nuclear R&D in this country.

In FY 2001, the Department is launching the International Nuclear Energy Research Initiative, or I-NERI, to sponsor innovative scientific and engineering research and development conducted by joint teams of U.S. and foreign researchers.

Established as a cost-shared R&D program, the primary program objectives of the

I-NERI are to:

• Develop advanced concepts and scientific breakthroughs in nuclear fission and reactor technology to address and overcome the principal technical and scientific

obstacles to the expanded use of nuclear energy worldwide; • Promote bilateral and multilateral collaboration with international agencies and

research organizations to improve the development of nuclear energy; and • Promote and maintain the U.S. nuclear science and engineering infrastructure to

meet future technical challenges.

We are in the final stages of signing I-NERI agreements with France and South

Korea. We are negotiating agreements with Japan and South Africa, which we hope

to conclude this year. We also expect to conclude I-NERI agreements with the Nuclear Energy Agency of the Organization for Economic Cooperation and Development and with Euratom. When implemented, these agreements will magnify modest

U.S. investments in R&D many times over with great benefit to both the United

States and our research partners.

GENERATION IV: REALIZING THE ORIGINAL PROMISE OF NUCLEAR ENERGY

The Department initiated the Generation IV Nuclear Energy Systems Project (or

more simply, the ‘‘Gen IV Project’’) in January 2000, by convening a meeting of senior policy officials from interested countries. Representatives of nine countries participated in this initial discussion and considered the long-term interest of the countries in the application of nuclear energy, the international interest in advanced nuclear technologies, the barriers that might prevent the future expansion of nuclear

energy, and the interest of the representatives in exploring potential multilateral research projects to explore and develop new technologies. These representatives

agreed to a Joint Statement regarding the importance of the nuclear energy option

to the future and to a process to explore further cooperative activities.

As a result of this meeting, and subsequent meetings, the participants are currently exploring the formal creation of a Generation IV International Forum (GIF)

to pursue multilateral coordination and cooperation with the goal of identifying and

developing Gen IV technologies that could address the factors impacting the expansion of nuclear energy internationally: economic competitiveness of building and operating nuclear energy systems; remaining concerns regarding nuclear safety and

proliferation; and the challenge of minimizing and dealing successfully with nuclear

wastes.

25

The Technology Roadmap

A specially chartered subcommittee of the U.S. Governments Nuclear Energy Research Advisory Committee (NERAC) is providing guidance to the Department of

Energy’s (DOE) efforts to create a Generation IV Technology Roadmap—a document

which will identify and set research and development paths for the most promising

technologies. Professor Neil Todreas of MIT and Dr. Sol Levy, a world-respected pioneer in commercial nuclear power who is a retired manager from General Electric,

co-chair this ambitious effort and have brought together a highly experienced team

to oversee the Roadmap effort.

We believe that to be successful, future nuclear energy technologies must be

broadly acceptable—that is, meet the needs of many nations and not only those of

the United States. As a result, consistent with the requirements of the United

States, the Department is pursuing the Gen IV Project as an international effort

through the GIF. Together, approximately 150 senior, experienced engineers and

scientists from at least 10 countries will work together to create the Gen IV Technology Roadmap. We have found that U.S. leadership has been essential to this

process and that without the Departments initiative, this type of effort would not

have been possible. This Roadmap is scheduled to be completed by the end of FY

2002 and will:

• Draw upon a wide range of experts from government, national laboratories, industry, and academia;

• Set ambitious technology goals for next-generation systems;

• Identify the most promising concepts for advanced nuclear energy systems to meet

future energy needs; and

• Identify the R&D activities needed to develop these concepts and make them

ready for commercial deployment.

What are Generation IV Nuclear Energy Systems?

The international community has deployed over 400 nuclear reactors to produce

power, with new projects underway in several countries. Most operating plants are

based on the experience gained from the first generation of nuclear plants that were

built and operated in the late 1950’s and early 1960’s. These demonstrations of the

practicality of nuclear power enabled second generation plants to be built all over

the world, including over 100 in the United States. The lessons learned from the

second generation plants led directly to the development and deployment of third

generation (i.e., advanced light water) nuclear plants beginning in the 1990’s.

The next generation, Generation IV nuclear energy systems, would take the next

step in the evolution of nuclear power plant design. Finding new approaches—some

of which have been postulated in NERI projects—to make nuclear power more costeffective while further enhancing safety and proliferation-resistance will enable nuclear energy to fulfill the role envisioned in the early days of the development of

atomic fission.

To develop these new technologies, ambitious but achievable technology goals are

required against which technology concepts can compete and toward which research

activities can strive. NERAC developed initial draft technology goals for Gen IV systems earlier this year and while they continue to be refined, they have been largely

accepted by the international research community. The Gen IV goals reflect the

need for future nuclear energy systems to build upon the worlds experience with nuclear technology and develop systems that can be fully competitive with any other

form of energy production. These goals represent new thinking in the nuclear community, a recognition that nuclear energy must fully support all our economic, environmental, and societal ambitions. We expect that these goals will be finalized before the end of this Spring and become a standing testament to the determination

of the world nuclear technology energy community that nuclear energy must continue its development and meet its initial promise as a widely used source of energy,

providing benefit to all the worlds peoples.

CHALLENGES AHEAD: MUCH WORK REMAINS

Despite the United States long experience with nuclear power and the promising

outlook for near-term deployment of new nuclear power facilities, there remain important challenges to expanding the successful application of nuclear technology.

These, in addition to the activities discussed above, are the focus of the Departments efforts.

Foremost, we must continue the hard but essential work of dealing with disposal

of spent nuclear fuel. In this connection, the Departments Office of Civilian Radioactive Waste Management continues the scientific work and step-wise process for

26

a Secretarial decision on whether or not the Yucca Mountain site should be recommended to the President. Congressional support for this process is essential.

Next, we must recognize and deal with the nuclear energy research facility infrastructure within both the Departments national laboratories and the Nations university nuclear engineering programs. Over the last eight years, the Department

lost four irreplaceable research reactors and terminated a major project to build a

replacement facility. Working with the NERAC, we completed a Nuclear Science

and Technology Infrastructure Roadmap last year which raised a large number of

questions for the Department to address in determining the future course of DOE

facilities and their ability to support expanded needs for research.

Without such capacity, enhancing our nuclear R&D activities will become increasingly difficult. As a result, we and our colleagues at the Nuclear Regulatory Commission are looking overseas to countries such as Russia to request access to research facilities. As Congress requested last year, we are completing a program plan

on Advanced Accelerator Applications, exploring the potential of a new type of research facility to meet U.S. needs in the 21st Century. We will soon issue a report

to Congress on the analysis we have completed to date.

Finally, we are very concerned about the state of the Nations nuclear technology

education infrastructure. Through our University Fuel Assistance and Support program, the Department provides direct financial support to the Nations 28 remaining

university nuclear engineering programs and associated university research reactors. This assistance has shown positive effects in recent years the decline in students appears to be moderating. But funding is very limited and many important

university-based research facilities are in financial trouble. Worse, the number of

U.S. students earning degrees in nuclear-related fields is far lower than the annual

need.

We look forward to working with Congress to consider these issues. We support

the Vice Presidents interagency task force which is developing a much-needed, comprehensive strategy to the Nations energy needs. Together, Congress and the Bush

Administration will work to plan for our country’s energy future and together we

will address the issues that face us.

Mr. BARTON. Thank you, Mr. Magwood.

We will now hear from Ms. Hutzler for 7 minutes.

STATEMENT OF MARY J. HUTZLER

Ms. HUTZLER. Mr. Chairman, members of the subcommittee, I

appreciate the opportunity to appear before you today to discuss

the current and future use of nuclear power in the United States.

The Energy Information Administration is an autonomous statistical and analytical agency within the Department of Energy. We

are charged with providing objective, timely, and relevant data,

analysis, and projections for the use of the Department of Energy,

other government agencies, the U.S. Congress, and the public.

The projections in my testimony are from the Annual Energy

Outlook 2001, which provides projections and analysis of domestic

energy consumption, supply, and prices. Our projections are used

by government agencies, the private sector, and academia for their

energy analyses. Our projections are not meant to be exact predictions of the future. They represent a likely energy future, given

technological and demographic trends, current laws and regulations, and consumer behavior.

Today, nuclear power is the second largest supplier of U.S. electricity generation accounting for 20 percent of total generation. The

United States currently has 104 operable nuclear units, totaling

97.5 gigawatts of capacity. Electricity generation from nuclear

power increased in 2000 to 754 billion kilowatt hours, 30 percent

higher than 10 years ago.

The average capacity factor for U.S. nuclear power plants in 2000

was the highest in history at 89 percent, 35 percent higher than

just 10 years ago.

27

Increased performance has been achieved through improved operations resulting in shorter and fewer outages. Nearly all nuclear

plants now operate for 18 months between refuelings, 6 months

longer than the average refueling cycle during the 1970’s and

1980’s.

In 1999, production costs—the costs of fuel and operations and

maintenance—for nuclear plants average 1.9 cents per kilowatt

hour, about the same as coal plants and about two-thirds that of

natural gas steam plants. Safety improvements initiated during the

late 1980’s and in the 1990’s had caused nuclear costs to increase

and had lowered its output.

Generation from nuclear power plants is expected to rise slightly

over the next several years, due to increased production at existing

reactors. It is expected that recent trends and improved performance will be maintained, resulting in average capacity factors for

operating plants of 90 percent.

However, the long-term projection is for a decline in total generation from nuclear power as some existing nuclear reactors are retired and replaced by other mainly gas-fired generating units. Our

projections indicate that nuclear power will provide 11 percent of

the electricity generation in 2020, less than coal or natural gas.

Within the forecast, nuclear units are projected to retire when

their operation is no longer economic relative to replacement capacity. Due to the uncertainty surrounding future aging-related costs,

several cases were developed to analyze the effects on electricity

supply due to differing assumptions about the costs of maintaining

nuclear reactors which are depicted in this chart.

In the Reference Case, 33 units are projected to retire, while 27

units are projected to operate beyond their initial 40-year license

period. Currently, five units have received approval from the NRC

to extend their licenses for an additional 20 years. Another five

units have submitted applications, and 28 units have scheduled future submissions through 2004.

In our low nuclear case where it is assumed that aging-related

costs would begin earlier and at slightly higher costs than the Reference Case, a total of 18 additional units are projected to be retired through 2020 relative to the Reference Case.

In the high nuclear case where aging-related costs are assumed

to be 25 percent lower than the Reference Case, 11 units are projected to retire through 2020. That is about 9 percent of current capacity.

Since no new orders for nuclear capacity have been made in the

United States since 1978, projections of the cost of building nuclear

capacity are highly uncertain. In the Reference Case, the cost of a

new nuclear unit is based on the advanced passive reactor design,

the AP600, which has been approved by the NRC as part of its

standardized design certification.

The initial overnight capital cost, in 1999 dollars, of the AP600,

is assumed to be about $1,700 per kilowatt, compared to about

$1,000 to $1,200 per kilowatt for a coal-fired unit, and $400 to $500

per kilowatt for a gas-fired combined cycle unit.

Contingency factors are applied for delays during construction

due to unforseen problems such as weather or labor issues and for

the tendency to underestimate costs for new technologies. As new

28

capacity is built and experience is gained, capital costs decline. The

average generating cost of nuclear is higher than coal or natural

gas, which results in no new nuclear construction coming online by

2020 in our Reference Case.

However, if capital costs of nuclear were to fall to around $1,000

per kilowatt, nuclear could become a viable economic choice, particularly if natural gas prices were to remain at their current high

levels.

In summary, the nuclear industry has made significant strides in

improving the performance and lowering the operating costs of our

existing nuclear plants. As a result, nuclear power today provides

roughly one-fifth of our Nation’s electricity generation. Operating

performance achievements at individual nuclear units is expected

to remain high. The total output from nuclear plants is expected

to decline by about 20 percent between now and 2020, as some

units are expected to be retired.

The ability to relicense existing nuclear plants will extend the

operating lives of many of our current reactors. However, achieving

new orders for nuclear plants, based solely on economics, is unlikely due to the higher construction costs of the currently demonstrated technology relative to its fossil counterparts, as well as

uncertainties related to costs, safety, and waste.

Thank you, Mr. Chairman, and members of the subcommittee. I

will be happy to answer any questions you may have.

[The prepared statement of Mary J. Hutzler follows:]

PREPARED STATEMENT OF MARY J. HUTZLER, ENERGY INFORMATION

ADMINISTRATION, DEPARTMENT OF ENERGY

Mr. Chairman and Members of the Committee: I appreciate the opportunity to appear before you today to discuss current and future prospects for nuclear power in

the United States.

The Energy Information Administration (EIA) is an autonomous statistical and

analytical agency within the Department of Energy. We are charged with providing

objective, timely, and relevant data, analysis, and projections for the use of the Department of Energy, other Government agencies, the U.S. Congress, and the public.

We do not take positions on policy issues, but we do produce data and analysis reports that are meant to help policy makers determine energy policy. Because we

have an element of statutory independence with respect to the analyses that we

publish, our views are strictly those of EIA. We do not speak for the Department,

nor for any particular point of view with respect to energy policy, and our views

should not be construed as representing those of the Department or the Administration. However, EIA’s baseline projections on energy trends are widely used by Government agencies, the private sector, and academia for their own energy analyses.

The Committee has requested information about current and future utilization of

nuclear power for electricity generation, statutory and regulatory provisions that impact the use of nuclear power, the prospects for using nuclear power to meet future

generation needs, and the role of nuclear power in a comprehensive national energy

policy. EIA collects and interprets data on the current energy situation, and produces both short-term and long-term energy projections. The projections in this testimony are from our Annual Energy Outlook 2001, released late last year. The Annual Energy Outlook provides projections and analysis of domestic energy consumption, supply, and prices through 2020. These projections are not meant to be exact

predictions of the future, but represent a likely energy future, given technological

and demographic trends, current laws and regulations, and consumer behavior as

derived from known data. EIA recognizes that projections of energy markets are

highly uncertain and subject to many random events that cannot be foreseen, such

as weather, political disruptions, strikes, and technological breakthroughs. In addition, long-term trends in technology development, demographics, economic growth,

and energy resources may evolve along a different path than assumed in the Annual

Energy Outlook. Many of these uncertainties are explored through alternative cases.

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THE CURRENT SITUATION

Supply, Demand and Prices

The United States currently has 104 operable nuclear units, totaling 97.5

gigawatts of capacity. Electricity generation from nuclear power increased in 2000

to 754 billion kilowatthours, and the average capacity factor for U.S. nuclear power

plants in 2000 was the highest in history at 89% (Figure 1). Through 1990, the average annual capacity factor was less than 70%. Increased performance has been

achieved through improved operations resulting in shorter and fewer outages. During 1999, the average time required to refuel a nuclear reactor was 42 days, and

nearly all nuclear plants operate for 18 months between refuelings. During the

1970’s and 80’s the average refueling cycle was more typically 12 months, resulting

in more frequent outages. The industry’s median unplanned capacity loss factor was

just two percent in 1999.

In 1999, the production costs (expenditures for fuel and operations and maintenance) at nuclear power plants averaged 1.9 cents per kilowatthour (kwh), roughly

the same as the operating costs of coal-fired power plants, and about two-thirds the

operating costs of oil and natural gas-fired steam plants.

Fuel costs are a small part of the operating costs of a nuclear power plant. In

1999, U.S. utilities purchased a total of 47.9 million pounds of U3O8e (equivalent)

at an average price of $11.63 per pound U3O8e. Foreign sources supplied 76 percent

of the deliveries, mainly from Canada, Australia and Russia. Nuclear operators tend

to purchase uranium on long-term contracts and the prices are not particularly volatile. Utilities loaded fuel assemblies containing 58.8 million pounds U3O8e into reactors during 1999, and had inventories of 58.2 million pounds at year-end. U.S.

suppliers had 68.8 million tons of uranium inventories at year-end 1999. EIA estimates of U.S. uranium reserves total 1,182 million pounds, although the estimated

costs of mining and milling the uranium are higher than current market prices.

During 1999, a total of 4.5 million pounds U3O8e of uranium were produced by mining, and there were nine commercially operating uranium mines in the United

States. Once the uranium is purchased, it must then be enriched (increasing the

concentration of the fissionable isotope) before it can be used as nuclear fuel. U.S.

facilities provided 46 percent of U.S. utilities enrichment services in 1999, and foreign enrichment plants the remaining 54 percent. Enrichment services are also primarily obtained through long-term service contracts.

Legislative and Regulatory Challenges

The Nuclear Regulatory Commission (NRC) oversees the licensing and operation

of nuclear power plants. The typical operating license for a nuclear plant was issued

for 40 years. With the first wave of current plants brought online in the 1970s,

many of these units could be facing retirement in the near future. However, the

NRC has provided a process for nuclear plant owners to apply for renewal of their

operating licenses, adding another 20 years to the licensed lifetime. In March of

2000, Baltimore Gas and Electric’s two Calvert Cliffs units were the first nuclear

reactors to receive license renewal, extending their license expiration dates to 2034

and 2036, respectively. Also in 2000, three units at Oconee received license renewal

approval, and five other units have applications submitted. Future submittals have

been scheduled for roughly 40 percent of current plants through 2004. The NRC has

created a streamlined process to review applications, and the total time from application submitted to approval has been just under two years. The cost to the owner

of pursuing a license renewal has been estimated at between $10 million and $20

million per reactor, and requires detailed descriptions of expected aging effects and

how they will be addressed to maintain safe operation. The renewal approval does

not require the company to undertake potential capital expenditures to keep the

plant running the additional time, which could be substantially more than the cost

of obtaining the license. So the eventual retirement date of any plant will likely be

based on the economics of its operation rather than the actual date on the license.

To date, the longest a commercial nuclear plant in the United States has operated

is 33 years.

Nuclear waste disposal is a challenge that is faced primarily when the plant is

shut down and waiting to be decommissioned. Low level waste (LLW) disposal is

the responsibility of the states where the waste is generated. Interstate compacts

have been created to jointly develop sites for disposal; however, no new sites have

been opened even though the Low Level Radioactive Waste Policy Act stated that

disposal facilities could refuse to accept waste from outside their compacts beginning

in 1992. Currently, only three low-level waste sites exist: one in Hanford, Washington, which only accepts waste from states in the Northwest Compact in which

it resides, and the neighboring Rocky Mountain Compact; one in Clive, Utah, which

30

is only licensed to accept the lowest level—Class A—waste, and one in South Carolina, which is still accepting all classes of LLW from all states except North Carolina. States that do not have access to disposal facilities are likely to require the

waste generators to store their waste on-site until new disposal sites are available.

South Carolina has recently joined a compact with Connecticut and New Jersey, and

has enacted a state law to phase out acceptance of non-compact waste by 2008. The

site in Utah, operated by Envirocare, has applied for a license to accept the higher

classes of waste, and has no plans to limit acceptance of the waste. Low-level waste

disposal issues are important because they affect the cost and timing of decommissioning nuclear power plants.

The Department of Energy is working on siting a repository for spent nuclear fuel

and high-level waste. The proposed waste site at Yucca Mountain, NV is still undergoing site characterization, to determine if the site is suitable and should be recommended for development. The soonest this proposed facility could begin accepting

the waste is 2010. The initial storage of the spent fuel assemblies, once removed

from a reactor, is in steel lined pools at the reactor site. However, these are quickly

being filled to capacity at most reactors. For temporary storage, dry cask containers

have been developed and licensed by the NRC to store the used fuel assemblies.

Some of these storage containers should be suitable for transporting the waste once

the final repository is sited. The lack of a final repository is not likely to force any

operating nuclear reactors to shut down early, but will require the owners to purchase, and receive approval to install, the temporary storage containers on-site.

Finally, the Price-Anderson Act expires in 2002 and could create barriers to new

construction if it is not extended in its current form. The Price-Anderson Act was

enacted into law in 1957, as part of the Atomic Energy Act, to meet two objectives:

to remove any deterrents to private sector participation in nuclear energy due to the

threat of large liability claims in the event of a catastrophic nuclear accident, and

to ensure that adequate funds are available to the public if such an accident were

to occur. The Act limits liability to third parties in the event of a nuclear accident

to $9.43 billion. It also provides for a series of retroactive assessments paid by all

nuclear utilities if the total liability exceeds the amount of primary coverage. If the

Act is not extended, coverage for existing units would continue as provided by the

Act, but any new nuclear units would not be covered. The Price-Anderson Act has

been extended three times since 1957, and current legislation has been proposed in

the Senate that includes the extension of the Act through 2012.

THE OUTLOOK

The Annual Energy Outlook 2001 (AEO2001) reference case projects U.S. energy

supply, demand and prices through 2020. It assumes a continuation of current laws

and regulations, and provides alternative scenarios to deal with uncertainty in the

assumptions. It is expected that recent trends in improved performance will be

maintained, resulting in average capacity factors for operating plants of 90 percent

by the last years of the forecast. The long-term projection, however, is for a decline

in total generation from nuclear power as some existing nuclear reactors are retired

and replaced by other, mainly gas-fired, generating units (Figure 2).

Electricity demand is projected to grow at an annual average rate of 1.8 percent

between now and 2020. To meet this demand, and to replace retirements of older

generating units, EIA projects 413 gigawatts of new generating capacity will be

needed (including cogeneration capacity). Of this new capacity, 92 percent is projected to be combined-cycle or combustion turbine technology fueled by natural gas.

About five percent of the new capacity is expected to be coal-fired, and the remaining three percent renewable technologies. The projected operating cost of a new nuclear reactor (including capital recovery) is about 6 cents per kilowatthour, higher

than that for coal or combined-cycle capacity which are roughly 4 cents per

kilowatthour (Figure 3). Gas-fired units are favored particularly in restructured

electricity markets due to their lower capital costs, higher efficiencies, shorter construction times, and better load following characteristics.

Within the EIA forecast, nuclear units are forecast to retire when their operation

is no longer economic relative to replacement capacity. The forecast incorporates future aging-related costs that could be incurred as plants consider operating beyond

40 years. In the reference case, nuclear plants are assumed to incur additional capital costs of $14 per kilowatt (kw) per year after 40 years, and increase to $25/kw

per year after 50 years. These costs are reduced significantly for individual units

if they have already incurred major capital investments related to plant upgrades.

The aging related costs are similar in magnitude to annual capital additions assumed for existing fossil plants ($4-5/kw for gas plants, $10/kw for oil/gas steam

units and $16/kw for coal plants, on average). In the reference case, 27 percent of

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current capacity is forecast to retire by 2020, mainly after 2010. Of this retiring capacity, one nuclear plant is projected to retire before the end of its 40 year life, 30

units are forecast to retire at the end of their current license expiration and 2 units

are projected to retire ten years after their current license expiration (implying a

license renewal was received). Another 25 units have original licenses that expire

by 2020, but are forecast to receive license renewal and extend their operation beyond 2020.

Because the U.S. nuclear industry has no experience operating reactors beyond

40 years (the oldest operating reactor today is just over 30 years old), future operating costs and capital investments required are unknown. Due to the uncertainties

surrounding future aging-related costs, several cases were developed to further analyze the effects on electricity supply due to differing assumptions regarding the costs

of future operation (Figure 4). These results provide a range of possible futures for

existing nuclear power. In the low nuclear case it was assumed that aging related

costs would begin earlier, with capital additions of $5/kw per year starting at age

30. A total of 18 additional units were projected to be retired through 2020 relative

to the reference case. Additional fossil-fired capacity was projected to be built to replace the retiring nuclear capacity, and the carbon emissions from electric generators increased by two percent (16 million metric tons carbon equivalent) above the

reference case in 2020. In the high nuclear case, aging related costs were assumed

to be lower by 25 percent, resulting in more plants projected to operate beyond their

initial license life. In the high nuclear case only 11 units were projected to retire

through 2020 ( 9 percent of current capacity). About 14 gigawatts of fossil-fired capacity (roughly 47 units at 300 megawatts each) would no longer be required, relative to the reference case, and carbon emissions from electric generators would be

reduced by two percent (16 million metric tons carbon equivalent) by 2020.

There are additional uncertainties affecting other generating industries that could

change the competitiveness of nuclear power. Current natural gas prices are much

higher than normal in response to low levels of gas storage, unusually cold weather

and supply issues. The AEO2001 forecasts that this situation will reverse over the

next few years, as increased drilling and production occurs, and that gas prices will

return to more typical levels by 2004. Therefore, forecasts of the cost of new gasfired capacity later in the forecast are based on gas prices below the current levels.

More existing nuclear power plants would be economic if current gas prices remained throughout the forecast period, resulting in fewer retirements. However, it

is expected that this tight supply situation for natural gas will dissipate before

2010, when the retirement decisions for nuclear units start being made.

The electric generation sector may also face restrictions on the emissions of various pollutants in the future. Since the AEO2001 forecast incorporates current laws

and regulations, it requires the electric sector to meet sulfur dioxide and nitrogen

oxide restrictions as specified in the Clean Air Act. The summer season cap on nitrogen oxide (for 22 states) will be imposed in 2004 by the Environmental Protection

Agency (EPA). Because these reductions are being met by existing fossil plants by

adding the necessary control equipment, their operation and costs are not greatly

affected. If additional emissions were targeted in the future for reduction, such as

carbon dioxide, a large number of coal plants would be retired and replaced mainly

by gas-fired technology, leading to higher natural gas prices. This situation would

provide an economic incentive to continue operating more of the existing nuclear

power plants.

For example, the EIA recently performed an analysis of strategies for reducing

multiple emissions at power plants, at the request of then-Representative David M.

McIntosh, Chairman of the Subcommittee on National Economic Growth, Natural

Resources, and Regulatory Affairs of the House Government Reform Committee. In

this report, EIA was asked to provide an analysis of proposals to reduce sulfur dioxide (SO2) and nitrogen oxide (NOX) by 75 percent from 1997 levels, and carbon dioxide (CO2) to either 1990 levels or 7 percent below 1990 levels, similar to the general

requirements of the Kyoto protocol, but restricted to emissions by electric generators. In order to comply with the CO2 cap, the industry was projected to dramatically shift away from coal to natural gas, and to a lesser extent, renewables. This

analysis also showed fewer nuclear retirements (9 percent of current capacity) by

2020, as the higher natural gas prices (as much as 63 percent higher than the reference case in 2010) and CO2 allowance prices made it economical to continue operating more of the existing capacity. This scenario assumed the AEO2001 reference

case aging-related costs for nuclear plants, however, the nuclear capacity forecast

was similar to the high nuclear case due to the emissions targets and higher natural

gas prices. At the request of the Subcommittee, this analysis assumed that no new

nuclear power plants would be built throughout the forecast period.

32

Projections of the cost of building new nuclear capacity is difficult, due to the

length of time since a new unit has been ordered in the United States, and the lack

of experience in building new designs. The AEO2001 reference case bases the cost

of a new nuclear unit on the advanced passive reactor design (AP600), which has

been approved by the NRC as part of its standardized design certification. This design has evolved from the current operating designs, but also includes passive safety

features and is based on a smaller size (600 megawatts). The initial overnight capital cost (in 1999 dollars) of the AP600 is assumed to be $1730 per kilowatt, compared to $1020 to $1220/kw for a coal-fired unit and $420 to $530/kw for a gas-fired

combined cycle unit. Contingency factors are applied to the costs of all new capacity,

and are made up of two components—a project contingency factor, which is applied

throughout the forecast to account for delays during construction due to unforseen

problems such as weather or labor issues, and a technological optimism factor,

which is only applied to the first four units built of a new design to account for the

tendency to underestimate costs for new technologies. Capital costs decline over

time as new capacity is built and experience is gained. However, because the initial

cost for the advanced nuclear technology is much higher than other available technologies, it is not economic to build nuclear units in the reference case.

The Department of Energy’s Office of Nuclear Energy has developed long-term

cost goals for these evolutionary designs that are lower than current estimates. An

alternative nuclear cost case was developed assuming the cost of the new nuclear

technology was $1500/kw initially, falling to $1200/kw by 2015, with a ten percent

project contingency factor applied to these costs. In addition, cases were considered

assuming both 3 and 4 year construction times. In these cases the nuclear technology was closer to being competitive with coal and gas-fired capacity (Figure 5);

one new unit was projected to be built in the last years of the forecast under the

assumption of a 3 year lead time. (Nuclear units were not economic under a four

year lead time assumption.)

Worldwide, work has been developing on a more revolutionary new commercial

nuclear power technology, known as the pebble bed modular reactor. South Africa’s

state-owned utility has been working on the technology since 1993, but it has recently gained the interest of foreign energy policymakers as well as potential investors. One U.S. based company, PECO Energy, has joined with British Nuclear Fuels

Corporation in making financial commitments to the venture. PECO’s parent company, Exelon Corporation, has begun discussions with the NRC about building

PBMRs in the United States. The economics are expected to improve for this technology because of the plant’s small, modular design (110 megawatts each). The design incorporates passive safety features and would have higher thermal efficiency

than existing nuclear plants, requiring less fuel and producing less waste. The estimates of construction costs ($1000/kw) would be very competitive with new coalfired technologies available in the United States, if they could be attained. The construction costs would still be almost double that of a new gas combined-cycle unit

($530/kw). Ultimately, this design is still untested, and its future will be determined

in large part by the success or failure of the South African demonstration project,

scheduled for completion in 2005.

CONCLUSION

While nuclear power today provides roughly one-fifth of the nation’s electricity

generation, that share is expected to drop over the next two decades as some existing units are retired and replaced by other generating technologies. Coal will remain

a large supplier of electricity, and natural gas is expected to greatly increase its proportion of electricity generation. While operating performance at individual nuclear

units is expected to remain high, total output from nuclear plants is expected to decline by about twenty percent between now and 2020, as units are removed from

service.

The ability to relicense existing nuclear plants for an additional twenty years of

operation could extend the operating lives of current reactors, and delay retirements. However, achieving new orders for nuclear plants based solely on economics

is unlikely at this time due to the high construction costs of the technology, as well

as uncertainties related to costs, safety and waste. The challenge of waste disposal

is faced by existing nuclear power plants as they continue to store high level waste

on-site, waiting for site approval and construction of the permanent waste repository

required by the Nuclear Waste Policy Act.

Thank you, Mr. Chairman and members of the Subcommittee. I will be happy to

answer any questions you may have.

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35

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Mr. BARTON. Thank you.

The Chair would—is Mr. Tauzin in the room? We will recognize

him first if he is here. Okay.

The Chair would recognize himself, then, for 5 minutes to start

the questioning period. Dr. Travers or Mr. Magwood, can either of

you gentlemen tell me how many billions of dollars have been paid

into the nuclear waste fund since its creation in the 1980’s?

Mr. MAGWOOD. I don’t think I know the up-to-date number, but

I think it is in the order of $12 billion.

Mr. BARTON. Okay. Ms. Hutzler, can you tell me?

Ms. HUTZLER. No, I don’t have that number.

Mr. BARTON. You don’t have it either?

Ms. HUTZLER. No.

Mr. BARTON. Well, I want to know how many dollars have been

paid in, how many dollars have been paid out, where the money

has gone to, and how many dollars are officially still in the fund.

That would seem to be a baseline piece of information that we

would need. So do you think you all can handle that? Mr.

Magwood?

Mr. MAGWOOD. I was looking through my notes. I do have a calculation provided by the Office of Civilian Reactor Waste Management. I can give you the numbers they have. They indicate that

there is total cumulative fees of about $10.6 billion, with a total income, which includes defense fees, of $15.5 billion.

The disbursements to the program for expenditures have been totaling about $5.6 billion, and the balance in the fund currently is

$9.976 billion.

[The following was received for the record:]

In response to your question, I would like to provide the following information

supplied by the Department’s Office of Civilian Radioactive Waste Management,

which manages the Nuclear Waste Fund. The Nuclear Waste Fund is a special account established in the U.S. Treasury by the Nuclear Waste Policy Act.

As of December 31, 2000, the balance of the Nuclear Waste Fund was $9.976 billion. Receipts of the Fund, derived primarily from fees paid by the owners and generators of civilian spent nuclear fuel, totaled $10.673 billion. Receipts resulting from

return on Treasury security investments totaled $4.9 billion. Therefore, cumulative

receipts of the Fund totaled $15.573 billion.

Since enactment of the Nuclear Waste Policy Act, disbursements from the Fund

totaled $5.597 billion. These disbursements cover the costs for numerous expenditures. Over half has been spent on the characterization of Yucca Mountain, Nevada.

These expenditures have covered extensive scientific and technical work required to

gather the information needed to support a decision on whether Yucca Mountain is

suitable for use as a repository. Aside from expenditures related to the characterization of the Yucca Mountain site, additional funds have been spent on statutorily

mandated activities to identify other candidate repository sites, to support work toward siting a second repository, and to develop a monitored retrievable storage facility. All of these activities were later terminated. Also, funds have been expended

to pay for regulatory and scientific oversight, financial and technical assistance, and

payments-equal-to-taxes.

All expenditures from the Fund are limited to funds appropriated by Congress.

Mr. BARTON. Okay. Well, doublecheck that. And especially on the

disbursements we would like to know where the money has gone,

because one of the key elements in a nuclear waste bill later this

year is going to be paying to construct the site.

And last year the committee passed a funding resolution in the

House bill that actually used the nuclear waste fund for what it

was supposed to be used for, and my intention is to move a bill

37

that does that this year also. But in order to do that, I want to

know what the numbers are.

Okay. I would like to ask Dr. Travers—and, again, perhaps Mr.

Magwood—later in the hearing today we are going to hear from a

private industry representative who is going to talk about the Pebble Bed Modular Reactor, which is a much smaller reactor.

Now, my understanding of the projections that the EIA has

made, you all are basing those projections on the new lightwater

reactor, which is a much larger reactor. In my conversations with

industry representatives, I have not seen much interest in purchasing the new large lightwater reactor, but I have seen a lot of

interest in purchasing the smaller reactor if it is certified by the

NRC.

So what steps is DOE and the NRC taking to look at this different technology, this smaller, more passive safety of Pebble Bed

Reactor?

Mr. TRAVERS. Mr. Chairman, thank you. The NRC, for its part,

is engaged in a dialog with Exelon, and I think you are going to

hear from representatives of that company a little bit later.

We are, in the most technical sense, involved in a pre-application

review of specific key issues related to that design. Exelon, of

course, is reviewing whether or not to go forward with development

of a detailed technical design for this facility, and whether or not

to submit an application to the Nuclear Regulatory Commission.

We currently have a planning wedge in our budget for carrying

out a review of a combined operating license for a PBMR beginning

in either fiscal 2002 or fiscal 2003. But the activities that are currently being undertaken are those that are directed at identifying

key issues for this rather new technology, a technology that has not

been one that has been licensed, at least for large-scale production,

in the United States.

We are involved and engaged with Exelon in identifying the key

issues that would put us in the best position to move out quickly

should we receive an application from that company to license this

technology. And there are some unique elements to that.

The Commission has actually directed the NRC staff to begin a

reexamination of its capabilities for things such as construction inspection program for licensing the reactor technologies, and we

have undertaken, specific to your request, an examination of our

current regulations that would allow for licensing of new and innovative technologies.

We believe we fundamentally have the infrastructure in place

and the requirements in place that will provide our basis for moving forward. But there are unique elements to this design that, as

I mentioned earlier, heretofore have not been examined by the

NRC.

So there are some specific technical issues that are on somewhat

of a cutting edge, and certainly the experience in the NRC staff is

somewhat limited in these areas. But there is quite a lot.

Mr. BARTON. Do you see any statutory restriction in reviewing

the new technology?

Mr. TRAVERS. No, sir.

Mr. BARTON. Okay. So there is no need for new statutes to review different types of nuclear reactor technology?

38

Mr. TRAVERS. No, sir.

Mr. BARTON. Okay. Ms. Hutzler, this will be my last question.

The EIA 2000 analysis and 2001 analysis shows that about 27 percent of the existing nuclear power plants are going to shut down.

Given the increased operating efficiencies and fuel cycle efficiencies, why is that built into your assumption?

Ms. HUTZLER. It is based on economics. What we do is we look

at aging-related costs to keep these units operating. We do that for

fossil units as well. My written testimony indicated the costs that

we have for these units. For the fossil units, we assume that the

costs are added on in each year. The nuclear units are added on

later in the time horizon.

But for each unit, we take a look at the costs and whether it is

economic to continue operating or whether a replacement unit

should be built.

Mr. BARTON. Well, were any of those closures a result of an operating permit expiring? Is your analysis based on the theoretical economics of continuing to operate the plant?

Ms. HUTZLER. It is the latter.

Mr. BARTON. The latter.

Ms. HUTZLER. Continued economics.

Mr. BARTON. Okay. My time has expired.

The gentleman from Virginia is recognized for 5 minutes.

Mr. BOUCHER. Thank you, Mr. Chairman.

Dr. Travers, I notice that the NRC is proposing that the authority of the EPA to have oversight and enforcement capabilities with

regard to the cleanup of decommissioned nuclear plants be repealed. Can you give us some rationale for that? What is the thinking of the NRC with regard to how the public policy is better

served if EPA does not have this enforcement and review authority?

Mr. TRAVERS. Thank you for the question. The Commission has

been generally interested in issues where dual regulation or concurrent jurisdiction are at issue. And, of course, when you enter

into this sort of situation, the issues that arise from it are the predictability of government actions necessary, in this case, for decommissioning facilities.

The NRC has promulgated what we have called a license termination rule, which establishes a single all-pathway standard for

judging whether or not a nuclear facility—nuclear power, fuel facility, what have you—can be released after a decommissioning and

decontamination period.

We have run into a parallel jurisdictional issue with EPA wherein very often, or at least on occasion when the NRC has completed

its assessment of the adequacy of the decommissioning efforts, the

Environmental Protection Agency, under its authorities I think in

CERCLA, have raised issues that we feel technically in the main

are not justified.

So what we have urged in terms of legislative initiatives is a situation where the Congress reexamines whether or not the NRC

should be looked to as the principal establishment—principal organization responsible for establishing those sorts of standards, and

thereby increasing the predictability of the Federal process associated with the release and decommissioning of nuclear facilities.

39

Mr. BOUCHER. Let us suppose Congress approves your recommendation. What effect would that have on the liability under

Superfund of the owners of nuclear power plants?

Mr. TRAVERS. I am really not sure. I would have to answer that

one for the record.

[The following was received for the record:]

The Commission has established, by regulation, radiological criteria for the termination of licenses that fall under the Commission’s regulatory authority. These regulations provide a clear and consistent basis for determining the adequacy of remediation of residual radioactivity resulting from the possession of Atomic Energy Act

material. The NRC legislative proposal would establish that NRC’s cleanup standards are adequately protective for purposes of the Comprehensive Environmental

Response, Compensation, and Liability Act (Superfund), and that those NRC standards govern the cleanup of sites and material licensed by the Commission, or by an

Agreement State. In order for NRC licensees to remediate their sites, NRC regulations require that funds be set aside during the license term to ensure that sufficient money is available for the cleanup of residual atomic energy act materials.

To provide some background on this matter, the NRC has the statutory responsibility for the protection of public health and safety related to the possession and use

of source, byproduct, and special nuclear material under the Atomic Energy Act of

1954, as amended, and must ensure safeand timely decommissioning of the nuclear

facilities that it licenses. The EPA has responsibilities under CERCLA with respect

to cleanup activities at contaminated sites containing hazardous substances, which

can include sites subject to NRC regulation. Since September 8, 1983, EPA has generally deferred listing on the CERCLA National Priorities List (NPL) those sites

that are subject to NRC’s licensing authority, in recognition that NRC’s actions are

believed to be consistent with the CERCLA requirement to protect human health

and the environment. However, as EPA indicated in the Federal Register notice announcing the policy of CERCLA deferral to NRC, if EPA ‘‘determines that sites

which it has not listed as a matter of policy are not being properly responded to,

the Agency will consider listing those sites on the NPL’’ (see 48 FR 40658).

Since the initiation of the 1983 deferral policy, EPA has taken action at very few

formerly or currently licensed NRC sites. These EPA response actions at NRC licensed sites were conducted in joint cooperation, to address contamination that is

not within NRC’s regulatory authority, including non-radiological chemical contamination or contamination outside the facility boundary.

In the rare cases where the regulatory efforts of the NRC or an Agreement State

would not accomplish results that are satisfactory to the NRC or an Agreement

State, the Commission or, where applicable, the Agreement State, could request the

application of Superfund to effect adequate cleanups. Superfund would apply only

in this situation. That is, Superfund would not apply to NRC or Agreement State

licensees unless NRC or an Agreement State asks for its application.

The Commission’s proposal would end uncertainties facing former NRC licensees

regarding the future views of EPA with respect to acceptability of cleanup efforts

that the NRC has found to be adequate, and would resolve an outstanding issue

that has not been resolved regarding dual regulation.

Mr. BOUCHER. Well, I would invite you to do that, because if we

are going to consider seriously your recommendation, I think that

is a key consideration for us.

Mr. TRAVERS. Sure.

Mr. BOUCHER. I notice also that you are recommending that Congress amend the Atomic Energy Act and eliminate the restrictions

that exist in current law on the ability of foreign entities to own

nuclear power plants in the U.S. What is your rationale for that?

Mr. TRAVERS. Our rationale, sir, is that when these restrictions

were—at least we believe when these restrictions were first put

into the Act, nuclear technology was in its incipient stage. And it

was not a technology that, in large measure, was known and being

implemented around the world. Of course, today that situation has

largely changed.

40

And so that, combined with the fact that many of the organizational restructuring efforts that we see involve foreign entities, and

the fact that the Commission has with its capability the ability and

responsibility to determine if there is an inimicable problem with

a particular entity—for example, a country like Iraq, if you will—

we could still exercise our authority under the Act, we believe, even

without this prohibitive sort of exclusionary language that currently exists in the Atomic Energy Act.

Mr. BOUCHER. Well, would you be making the determination

with regard to whether there was some kind of national security

risk with a particular foreign entity having ownership of a facility

in the U.S.?

Mr. TRAVERS. The answer, I believe, is that the NRC could in

fact do that with consultation among Federal agencies that would

provide——

Mr. BOUCHER. Is that consultative requirement built into your

statutory proposal?

Mr. TRAVERS. I would have to answer that one for the record, sir.

I am not sure.

[The following was received for the record:]

The NRC’s legislative proposal does not include an express requirement for the

Commission to consult among Federal agencies before implementing the requirement that a license may not be issued to any person if, in the Commission’s opinion,

such issuance would be inimical to the common defense and security or to the

health and safety of the public (the latter requirement is contained in the last sentence of both sections 103 d. and 104 d. of the Atomic Energy Act, and it remains

unchanged). However, there are informal mechanisms through which the NRC may

obtain the views of the Executive Branch. In practice, the Commission has obtained

the views of other Federal agencies on issues of mutual concern, including those related to the protection of the common defense and security. These informal mechanisms would be available for use in making a determination implementing the restriction against issuance of a license to a new owner, as to whether issuance would

be inimical to the common defense and security.

Mr. BOUCHER. I would ask you to do that.

Mr. TRAVERS. Sure.

Mr. BOUCHER. Last year, largely at your request, Congress

changed the method by which you collect user fees, but there was

a provision adopted simultaneously that says that the utilities do

not have to pay for certain kinds of programs that are carried out

by the NRC—your international programs, for example.

Mr. TRAVERS. Yes.

Mr. BOUCHER. What effect is that provision having in terms of

the overall level of fee collection? Is it diminishing the level of fee

collection? And if it is diminishing the level of fee collection, are

you finding that you have adequate revenues with which to carry

forward your essential programs?

Mr. TRAVERS. Yes. In fact, it is, and——

Mr. BOUCHER. It is what?

Mr. TRAVERS. It is reducing the collections.

Mr. BOUCHER. Okay.

Mr. TRAVERS. Because as I understand the stipulation, 2 percent

going forward additive for the next 5 years, equating to 10 percent

ultimately, of fees that are currently obtained from our licensees

would be money that would be collected from the general fund instead.

41

And as you indicated, activities such as international activities

that we feel are sort of a generic benefit to our licensees but not

a direct one, are the sorts of activities that we had in mind in proposing this.

And in the main, the answer as far as, do we have enough monies to support our fundamental mission objectives, the answer is

that, generally—I mean, the answer is yes, and we are moving forward in the development of our budget to support and determine,

really, what sorts of resources would be required should projects

currently not anticipated, like advanced reactors, come before the

Commission.

The expectation is that if many of these projects did come before

the Commission in the near term, we would need to budget additional resources for that, because what we have today is very much

in play in activities such as license renewal and other activities.

Mr. BOUCHER. All right. Thank you, Dr. Travers. That is a complete answer.

Mr. BARTON. The gentleman’s time has expired.

The gentleman from Kentucky, Mr. Whitfield, is recognized for 5

minutes.

Mr. WHITFIELD. Thank you, Mr. Chairman.

Mr. Magwood, I know that your Office of Nuclear Energy does

not have responsibility anymore for the DUF-6 conversion project,

but I also know you are quite knowledgeable about it. And I think

you all have received five bids on March 1, and supposedly the Department of Energy will award a contract sometime in August to

build a facility at Paducah and at Portsmouth.

And I was curious, do you have any idea or thoughts on what the

appropriation level should be for fiscal year 2002 to keep that

project on track?

Mr. MAGWOOD. As you pointed out with the transfer of this program to DOE’s Office of Environmental Management, my office is

no longer responsible for the program, so it would be difficult to

give you a very precise answer. Let me say that I do know that industry has begun to express its interest in this project more formally and has asked for additional time to formulate bid packages.

My understanding is that the schedule for the program is being

reset based on the request made by industry.

As you know, this is a complex technological task that we have

asked industry to take on. Until the project schedule is redefined,

it is very difficult to know what the appropriation for next year

should be.

I do know that a number has been established by the Office of

Environmental Management, working with the Office of Management and Budget, and that will be in the President’s budget request. However, I think that that number may have been affected

by the fact that industry has asked for more time to prepare its

bids.

Mr. WHITFIELD. Okay. Now, let me ask you, this is a hypothetical

question. But Mr. Strickland and others talk frequently, as I do,

about the necessity for the capability to produce enriched uranium

domestically.

And, hypothetically, let us say that, as you know, USEC has in

negotiations with TENEX tried to amend their suspension agreeVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00045 Fmt 6633 Sfmt 6602 E:\HEARINGS\71505 pfrm09 PsN: 71505
42

ment to bring in commercial grade SWU from Russia. Obviously,

one of the reasons they want to do that is it would help them financially. And let us say that they do not receive approval to do that.

And then, second of all, they are the exclusive agent for the Russian agreement on highly enriched uranium, and there are other

utilities that have expressed an interest in also becoming an executive agent, so that USEC would not be the sole exclusive agent.

And let us say that that was approved and that USEC was no

longer the exclusive agent.

Then, let us suppose, USEC had real financial difficulty and

maybe would not be able to operate their plant. And as I said, all

of this is hypothetical. But if that happened and we would not have

any ability to enrich uranium domestically, what would you recommend we do?

Mr. MAGWOOD. That is an interesting hypothetical. I think that

the way that we are going to address this over the next several

weeks and into the future—that is, the issue of what to do with the

enrichment business in the United States, which is very important

as I think several opening statements reflected—is to recognize

that it has both an energy aspect to it and also a national security

aspect to it.

That said, the administration is examining these issues in the

context of both the Vice President’s energy review, which is underway, and also under the various national security reviews that are

being pursued.

And until those reviews are complete, it is very difficult to know

or to answer your question. There is simply a great deal of analysis, and policy review that needs to be completed, but I can promise you that it is something that is very, very high on the Secretary’s list of issues.

He has, in fact, formed a new senior-level task force within the

Department that brings together all of the components of the Department, including the National Nuclear Security Administration—to try to deal with this adequately. So as I say, I can’t really

answer your hypothetical at this point, but I do know that policy

is being established and hopefully very soon we will be able to address that.

Mr. WHITFIELD. Thank you.

Mr. BARTON. The gentleman’s time has expired.

Seeing no other members on the minority side, we are going to

let Mr. Strickland ask questions for 10 minutes, so that we will

only have one round of questions for this panel, and he had expressed an interest in a second round. So we are going to recognize

him for 10 minutes.

Mr. STRICKLAND. Thank you, Mr. Chairman.

Mr. Whitfield, thank you for that question. It is a question that

absolutely needs to be answered.

Mr. Travers, if the research on the Pebble Bed Reactor progresses to the point of it becoming viable, and it needs an 8-percent

assay in order to operate, and we are shutting down Portsmouth,

which is currently licensed to enrich to 10 percent, where will we

get the fuel that we may need at some future time for such a reactor?

43

Mr. TRAVERS. Well, Congressman, as you know, in relationship

to the remaining enrichment facility that will be operating shortly

in the U.S., that capacity has been recently increased from 2.75 to

5.5 percent. It is my understanding that for PBMR the enrichments

are on the order of 8 percent or so.

Exactly where that will come from I can’t say, but I think the

expectation—— Mr. STRICKLAND. Thank you.

Mr. TRAVERS. [continuing] is that it could come from abroad, or

potentially even from the reactivation of Portsmouth or the licensing of a new facility.

Mr. STRICKLAND. I think the truth is that once Portsmouth is put

on cold standby, we are talking about at least 11⁄2 to 2 years and

multiple millions of dollars to bring it back on stream. This is a

fuel we may need in the future, and we are proceeding to close this

facility. It just does not make sense.

Mr. Magwood, could you explain why DOE is proposing to maintain Portsmouth on cold standby? As a part of your answer, could

you tell me, did DOE expect to find itself facing these circumstances? And what are the consequences if we do not place

Portsmouth on cold standby?

Mr. MAGWOOD. To answer your second question first, it is very

clear we did not expect to be in this position.

Mr. STRICKLAND. That you did not expect.

Mr. MAGWOOD. Did not expect it. The government as a whole,

not just the Department, had a very clear understanding that the

Portsmouth and Paducah plants would operate until at least 2004.

Because of the financial issues that USEC has encountered, USEC

has decided to cease enrichment operation at Portsmouth considerably earlier.

As a result, the government was unprepared, quite frankly, for

the decision that was made, and had to react very, very quickly.

Mr. STRICKLAND. If I could just interrupt. I could say the government was not prepared because the government did not listen to

very clear warnings about what was likely to happen. What are the

consequences if we do not place Portsmouth on cold standby?

Mr. MAGWOOD. The consequences of not placing Portsmouth on

cold standby are that the plant would be placed in I guess what

has been called a cold iron mode, which is to say that you would

allow the plant to be shut down in a way that would not make it

likely ever to be brought back into operation, or you would go immediately to D&D, decontamination and decommission mode.

Mr. STRICKLAND. Can you tell me what the one-time costs are

for—annual costs for placing Portsmouth on cold standby? How

long will it take to restart the Portsmouth plant in the event that

it is necessary for our national needs in the future?

Mr. MAGWOOD. The annual cost projected for cold standby, including the cost of removing any uranium deposits in the plant systems, is about $65 million a year. If that condition is maintained

adequately, and it can be maintained that way for probably about

5 to 6 years without significant degradation of the plant, we would

be able to bring the plant back up in about 11⁄2 to 2 years.

Mr. STRICKLAND. How much would it cost to bring the plant back

into operation, if necessary?

44

Mr. MAGWOOD. I don’t know that off hand. I would have to answer that for the record.

Mr. STRICKLAND. As you know, Secretary Abraham announced

his plan for cold standby in Columbus, Ohio, on March 1. How does

the administration plan to fund that initiative? Will this committee

be required to review a reprogramming request? When can we expect to receive such a request?

Mr. MAGWOOD. The Department has been working very closely

with the Office of Management and Budget to formulate a plan to

meet the financial requirements of the cold standby approach. We

have not presented that as yet. It is currently under review by the

administration.

It is my belief that it will be forthcoming very soon. In fact, I am

hopeful that it will be forthcoming within the next couple of weeks.

But it is a very complicated matter. It is a very expensive issue to

be dealing with at this point in the fiscal year. So finding the resources has not been an easy matter, but we are trying to do that

now.

The Office of Environmental Management has the lead role to

work with the Department to try to find those resources, and they

are doing that now.

Mr. STRICKLAND. So are you telling me that we could expect perhaps within 2 weeks to have such a reprogramming request before

the Congress?

Mr. MAGWOOD. I am certainly hopeful of that. I think that if all

of the approvals are completed, it can show up in that timeframe.

Mr. STRICKLAND. As you know, Mr. Magwood, USEC has received approval from the NRC to produce enriched uranium at 5.5

at Paducah. However, recent reports in the press indicate that

USEC’s maximum economic output at the Paducah plant is only

about 4.5 million SWU per year when compared with the requirement of 10 million SWU to fulfill their contracts, both to the domestic and the foreign utilities.

Aside from safety, for which the NRC has already conducted a

review, are you confident that the Paducah plant will be able to reliably and economically enrich uranium up to 8 million SWU per

year at the 5.5 level assay?

Mr. MAGWOOD. I can’t personally give you that guarantee. I don’t

know that the Department is in a position to give that guarantee.

While we are very concerned about the energy security issues, it

is clearly a commercial matter for which USEC is responsible. If

NRC approves that upgrade from a safety perspective, we would

certainly have to defer to USEC as to whether it is economic to do

that.

Mr. STRICKLAND. So DOE does not have an answer as to whether

or not this country is going to be supplied with a reliable economic

domestic supply of enriched uranium to meet our Nation’s needs?

Is that what you are saying?

Mr. MAGWOOD. I am saying that DOE doesn’t have a role in

making the economic decisions for USEC. But we are concerned

about potential long-term and the near-term energy security issues

facing this country. As I have stated, the Vice President is conducting a very thorough review that includes this issue.

45

Mr. STRICKLAND. Mr. Travers, the NRC staff came to my office

a few days ago, and they provided me with this document, and it

laid out the timetable for closing the Portsmouth facility and for

their hope that the Paducah would achieve a certain level of enrichment.

I was somewhat stunned, and I will tell you why I was stunned.

We have got a facility that is currently finishing a fuel for our nuclear utilities. Paducah has been given permission to upgrade to 5

percent. We are in the process of closing our facility, making it inoperable for at least any reasonable expectation of coming back into

production.

And yet we have not yet seen whether or not the Paducah facility

can do what I believe you and the NRC is required to determine

under the law, and that is that they are a reliable, economic, domestic supplier of fuel.

The document that was brought to my office indicates that USEC

will begin to generate at 4 percent product during late March and

early April, and then USEC will generate near 5 percent product

for a few days in mid-April at Paducah. And then USEC will ramp

down power and assay to near 1 percent in early May.

Isn’t it reasonable to assume that something that is so critical to

the energy security of this nation would require more than a few

days’ demonstration on the part of the Paducah facility? We are

closing the plant that can provide the fuel before we know for sure.

Can you sit here today and tell me that you are absolutely sure

that the Paducah facility will be able to meet our domestic needs

in a reliable and an economic fashion after the Portsmouth facility

is closed?

Mr. TRAVERS. Well, Congressman, I think, as you know, Chairman Meserve and the NRC have given these concerns that have

been expressed by you and other stakeholders some very serious

consideration. And, in fact, the reliable and economic responsibilities that you relate to, as contained in Section 193(F)(2)(b), we believe, after consultation with the general counsel of the NRC, is

principally directed at the possibility of foreign——

Mr. STRICKLAND. Can I interrupt just a moment, sir? And I am

sorry. But you say ‘‘is principally.’’ Does that—— Mr. TRAVERS. It is, we believe, focused on this element, the potential for domestic—or, I am sorry, foreign entities becoming— gaining control and undermining the U.S. enrichment capability, as

opposed to and separate from an obligation that we, frankly, would

find difficult to exercise given our public health and safety responsibilities.

We think, rather, the objectives of the reliable and economic capacity of the country—rather than being an NRC responsibility

fundamentally should be exercised in the Congress and in other organizations of government, the Enrichment Oversight Committee.

And as I think Mr. Magwood pointed out, these discussions are

taking place.

Our role, as we have evaluated it, is a rather focused one in the

arena of assuring that the operations associated with the enrichment facilities, or facility in this case, are conducted in a manner

that is safe. And so while we have looked at this, and while we

have looked at the possibility of exercising your suggestion that we

46

limit our authorization at Paducah based on some linkage to the

Portsmouth facility, we really have found that to be separate and

a matter that should be considered separate. And so we—— Mr. BARTON. Okay. The gentleman’s time has expired, actually,

and that answer took about 4 minutes, that one answer. So if you

have additional questions, put them in writing, and we will certainly get them expeditiously. I know how important this is.

Mr. STRICKLAND. Mr. Chairman, I want to thank you for your

terrific patience, and I want to thank you for this hearing. And I

will follow your suggestion.

Mr. BARTON. You know, it brings back memories of my efforts on

a project down in Texas in my district called the Super Collidor

Project. It is a different level of intensity when it is in your district,

and you are to be commended for being well informed and on point

on the questions. But, unfortunately, we have got about 7 or 8

other members that need to ask questions.

The gentlelady from New Mexico is recognized for 5 minutes.

Ms. WILSON. Thank you, Mr. Chairman.

Mr. Travers, in your testimony, or at least in the summary of it,

you said that serious industry interest in new construction of nuclear power plants in the U.S. has only recently emerged. Could

you expand on that statement and who you think is out there toying with the idea of—what is going to happen here?

Mr. TRAVERS. One reason for stating that is if you look historically at orders for new nuclear power plants we haven’t, at the

NRC, received an application for a new order for a commercial generating station since before Three Mile Island. Some might find

that surprising. But before March 1979 was the last instance

where the NRC received an application for a new nuclear power

generation plant.

That having been said, we have over the last few years received

applications that imply an interest in the development of new nuclear technology. In that regard, I am referring to design certifications which have been forwarded to the Commission, and, in fact,

approved. These design certifications for three different plants——

Ms. WILSON. Thank you.

Mr. TRAVERS. [continuing] the advanced boiling water reactor,

and others—are available to be referenced without further regulatory or without substantial further regulatory review.

Ms. WILSON. Thank you.

Mr. TRAVERS. So they are available.

Ms. WILSON. I wondered whether it was those design certifications or whether you were aware of any potential applications

that——

Mr. TRAVERS. And I am.

Ms. WILSON. [continuing] you haven’t received but that might be

coming.

Mr. TRAVERS. And I am. And so I will finish very briefly by saying that what we are now experiencing is some more direct interest

in the possibility of actually building a new nuclear power plant or

at least licensing a site. And three instances come to mind—the

Pebble Bed Modular Reactor that we have some ongoing discussion

in a preapplication sense with Exelon; the advanced passive 1,000

reactor, which is a Westinghouse design, which has—which there

47

is an expressed interest for at least certification of the design if not

for building a plant; and, third, for the possibility of licensing a

site.

Again, this is an early site permit potential. What we are looking

at here is an NRC review that would allow a utility to have all of

the environmental review and approvals associated with the siting

requirements for a new nuclear plant, completed and available for

reference for—— Ms. WILSON. Okay.

Mr. TRAVERS. [continuing] between 10 and 20 years.

Ms. WILSON. Thank you.

Mr. Magwood, in your testimony, you talked about your work on

advanced U.S. nuclear plant designs similar to those that have

been constructed in Japan, South Korea, and Taiwan. In your opinion, where is the most promising technology for reducing the capital cost of nuclear plants?

Mr. MAGWOOD. That is a very good question. I think that there

are many different paths we can pursue. We have talked about the

potential for the Pebble Bed Reactor to present a new option. The

Department has also been investigating gas turbine modular heating reactors, which is a technology using some similar aspects but

a little different twist.

Also, with respect to the advanced light water reactors, there is

huge potential that we have discussed with utilities and with the

vendors to find smarter ways of building those technologies using

advanced information system technology, for example, to reduce the

cost of actually putting the plant together at a site, and also using

smart equipment, which can reduce the operating cost, which is another component.

So there is different pathways, and I think that they are all

going to have to be explored over the next several years to see what

should be pursued, if not everything at the same time. It depends

on what the utilities see as the economic model for building new

nuclear power plants.

Ms. WILSON. Do you have within the Department an R&D road

map for critical technologies to reduce the cost and improve the

safety of nuclear plants? Or, I mean, maybe another way of putting

that is, what do you need in your office, which I think is critical

to this whole question, what do you need to accelerate the development of the fourth generation of nuclear power?

Mr. MAGWOOD. Yes. We have started—due largely to the leadership that came from Congress—the Generation IV technology road

map, working not just with entities in the U.S. but with many

other countries as well.

There are now—and this may be a surprise to some people—

about 150 engineers and scientists all over the world working on

the Generation IV technology road map with a goal to finish the

road map next fall. This roadmap will provide a sense of what high

priority technology research should be pursued by the U.S. and

other countries and what the R&D plans should be to pursue those

technologies.

And once that is completed, we will need to decide whether the

Department should take an active role in developing those technologies using our national laboratories and other resources. That

48

is something we are pursuing right now very aggressively, and

hopefully about a year from now we will know a lot more.

Mr. LARGENT [presiding]. The gentlelady’s time has expired.

The gentleman from Georgia is recognized for 5 minutes.

Mr. NORWOOD. Thank you, Mr. Chairman. I have a couple of

questions that I will submit in writing and expect detailed answers, and would point out that if I were having problems in my

district with Plant Vogtle there wouldn’t be enough hours in the

day for me to ask questions. So with that in mind, I will yield the

balance of my time to Mr. Strickland.

Mr. STRICKLAND. Thank you, my friend. I want you to know

when I was meeting with the dentist earlier today I was saying

really good things about you. So——

Mr. NORWOOD. Why do you think I yielded my time?

Mr. STRICKLAND. Mr. Travers, I am going to try to be terribly

unemotional, and I want to read a part of Section 3116 to you, and

it says this. I am quoting, ‘‘No license or certificate of compliance

may be issued to the United States Enrichment Corporation or its

successors under this section or Sections 53, 63, or 1701, if the

Commission determines that the issuance of such a license or certificate of compliance would be inimical to, a) the common defense

and security of the United States, or’’—not and, but or ‘‘the maintenance of a reliable and economic domestic source of enrichment

services.’’

Now, you are telling me and the NRC apparently has made the

termination that they are going to either ignore that or assume

that it is not relevant to your responsibilities. The NRC general

counsel apparently has concluded that the requirement to make the

determination regarding reliable and economic domestic supply is,

‘‘principally directed to the possibility of foreign entities being in

control and undermining domestic enrichment capabilities in the

privatized USEC.’’

Your general counsel has apparently advised the NRC that it

may change its previous policies and interpretations of the Privatization Act so that the NRC will not have to render a determination on whether USEC’s certificate amendment will result in USEC

being a reliable and economic supplier of enrichment services.

Now, my question: can you please explain to me what new facts

or laws justify the agency making this stark change?

Mr. TRAVERS. Not being a lawyer, I am a little bit at a disadvantage, Congressman, but I think—and perhaps we have, and if we

haven’t we should—provide you with the legal analysis that has

been done in this matter.

I am relying on that, frankly, and the Commission has relied

upon it, and it really is the basis for Chairman Meserve’s letter to

you and Congressman Dingell that indicates that a very serious

look has been done to examine the Commission’s responsibilities

under the Act. And that as you have indicated, that a determination is that it is principally related to this possibility of——

Mr. STRICKLAND. Well, what about the part that is not ‘‘principally’’? I mean, it seems clear to me that you have got an obligation to make a determination regarding reliable and economic domestic source of enrichment industries.

49

I will tell you what really bothers me here, sir. You received a

1997 memo and a 2000 memo. They both reference the same law,

but they draw remarkably different conclusions about NRC’s legal

obligations. Is that true or not?

Mr. TRAVERS. I am not sure, but I guess I would point out there

is a practical problem that I think we face.

Mr. STRICKLAND. There is a practical problem that we face.

Mr. TRAVERS. Yes, sir. And it is simply that given our principal

focus on public health and safety, once we have looked at facilities

and whether they are operating safely, the principal regulatory

tools that we have at our disposal—issuances of orders, for example, to shut facilities down, or to have utilities take specific

actions——

Mr. STRICKLAND. Yes, sir. Can I interrupt just a moment?

Mr. TRAVERS. Yes, sir.

Mr. STRICKLAND. Is it possible that this Congress gave you additional statutory responsibilities other than those that you have historically been responsible for?

Mr. TRAVERS. Again, I am relying upon the general counsel’s

analysis of what the responsibilities of the agency are, and I believe the Commission has relied upon that as well.

Mr. STRICKLAND. This is what concerns me. Many months ago,

we started raising some of these issues about NRC’s responsibility.

We talked about it with NRC staff here in this committee. I had

them in my office.

And I think we raised some very legitimate issues regarding your

responsibility as an agency, and it seems to me that this second

memo is an attempt to cutoff our questions, attempt to reinterpret

your responsibilities in the light of the issues that I and others

were raising with your agency, and that is terribly troubling to me.

Was public notice or comment made available prior to the NRC’s

change of policy in this regard?

Mr. TRAVERS. As far as I know, there was no public notice given

prior to the general counsel’s legal analysis being provided to the

Commission.

Mr. STRICKLAND. And your general counsel apparently says that

this change could, in fact, lead to litigation.

Mr. LARGENT. The gentleman’s time has expired. Thank you.

Mr. STRICKLAND. I thank the Chair, and I thank my friend from

Georgia.

Mr. LARGENT. The gentleman from Wisconsin, Mr. Barrett, is

recognized for questions.

Mr. BARRETT. Thank you, Mr. Chairman. And given that Mr.

Strickland has obviously got serious concerns here, I would be more

than happy to yield my time to Mr. Strickland.

Mr. STRICKLAND. I thank my friend. You know, I don’t want to

be unfair to others and dominate this. We will submit questions.

But I would just like to point out to the Chair that we have an

agency of the Federal Government charged with a huge responsibility to protect the energy security of this nation, and I believe

they are being negligent and wilfully so, and I would hope that this

committee would take that very, very seriously.

Mr. LARGENT. I thank the gentleman.

50

The Chair recognizes himself for 5 minutes. I think I am next in

order here.

And we are—just to give you a heads up, we are expecting Senator Domenici to be here at any time. When he comes, we will complete the questions, let him testify, and then move forward.

Mr. Magwood, I had a question for you. In light of the concerns

that have been expressed in testimony before this committee today

about the scarcity of fuel in the future, why doesn’t the United

States reprocess spent nuclear fuel?

Mr. MAGWOOD. I think the most obvious answer to that question

is that it isn’t economic to do so. We have worked very closely with

other countries and discussing this issue over the years—Japan,

France, others. They have had to make very large investments in

plant and in people and in technology to begin reprocessing spent

fuel.

And I think that the primary reason U.S. industry hasn’t pursued this aggressively is because it is just not economic. That is not

to say it won’t be economic at some point in the long-term future,

but right now it certainly isn’t.

The former administration had a very aggressive policy regarding the proliferation aspects of reprocessing. The current administration hasn’t spoken to the issue but it may be something they

look at in the context of the Vice President’s energy review. But the

issue really hasn’t been raised at this point.

Mr. LARGENT. So you believe that if or when it becomes economically feasible that this country would begin reprocessing spent fuel?

Mr. MAGWOOD. I believe—— Mr. LARGENT. That is the only impediment?

Mr. MAGWOOD. I believe that if it becomes economic, then the industry will make a case to the government to begin looking at it,

and then it will be up to the government at that time to respond

to it from a policy perspective.

Mr. LARGENT. Okay. Dr. Travers, I had a question for you. We

have conflicting testimony. Senator Domenici is here, and we will

recognize him in just a moment. But in his testimony I was reading

with interest, in the fourth paragraph it says, ‘‘Safety has been a

vital focus of the NRC, as evidenced by a constant decrease in the

number of emergency shutdowns or scrams in our domestic plants.

In 1985, there were 2.4 scrams per reactor. Last year there were

just .03.’’

But in contrast to that testimony, testimony submitted by Anna

Aurilio with the Public Interest Research Group in the next panel,

she says, ‘‘There is a consistent pattern and history of lax NRC enforcement and oversight ranging from fire prevention to worker fatigue. The agency has focused on increasing the industry’s profitability, not protecting humans and the environment.’’

Would you like to respond to that testimony?

Mr. TRAVERS. Thank you, Mr. Chairman. I think we have a serious disagreement on views on this subject. The NRC has been, and

continues to be, an effective regulator with a bent and a passion,

really, for the assurance of safety in all of the civilian use of radioactive materials. And I think that has been borne out over time.

It is somewhat difficult sometimes to differentiate where the

NRC plays a role in the assurance of safety or the good record in

51

performance of the nuclear industry and where it is attributable in

the main to the industry. We like to think, based on the activities

that we have in place, that we have been a factor in the increasing

level of performance, and, in fact, the increasing level of safety over

time that the nuclear power industry has exhibited.

The Commission, for its part, has laid out policies that include

expectations that for the next generations of advanced reactors, for

example, they expect those designs to provide a higher level of safety than the current ones do today. We believe those are acceptable,

but, nevertheless, the Commission has put in place an expectation

that as we move forward potentially to develop new power reactor

designs and projects that they ought to be safer than the current

generation of nuclear power plants.

Mr. LARGENT. So you would say that workers are safer today,

that neighbors to nuclear facilities are safer today than they ever

have been?

Mr. TRAVERS. I would say that that is a fair statement.

Mr. LARGENT. Okay. With that, I would like to recognize Congresswoman Wilson from New Mexico to introduce our esteemed

colleague from the Senate, Mr. Domenici.

Ms. WILSON. Thank you, Mr. Chairman.

I am very fortunate, as a New Mexican in the House, to have a

senior Senator who is not only one of the most powerful members

of the Senate but one of the most capable as well, and who has

taught a young Member of Congress in the House how to be a better legislator.

And since I wasn’t much on committees and being a legislator before I showed up here, I needed a lot of work, and I wanted to publicly thank him for his stewardship, but also to share with the

members of this committee and with the members of the audience

that while most of us know him as the chairman of the Budget

Committee, he knows more about the budget than just about anybody in this town.

He has been one of the most stalwart advocates of a comprehensive energy policy for a long, long time, and when it wasn’t popular

to do so was encouraging people from all different parts of the political spectrum to reconsider nuclear energy. He has introduced

the nuclear energy supply bill in the Senate, and he is a self-acknowledged sucker for big science projects.

Ladies and gentlemen, it is my pleasure to introduce Senator

Pete Domenici.

Mr. DOMENICI. Thank you.

Mr. LARGENT. Senator, you are recognized for 5 minutes, and we

look forward to your testimony. Thank you for visiting us.

STATEMENT OF HON. PETE V. DOMENICI, A UNITED STATES

SENATOR FROM THE STATE OF NEW MEXICO

Mr. DOMENICI. Thank you very much. First, I apologize for being

late. I should have been earlier on the agenda, but I could not help

that. We couldn’t complete our luncheon where we were discussing

the budget today.

In any event, members of the Committee, and Mr. Chairman in

particular, I came mostly to tell you that I have come to the concluVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00055 Fmt 6633 Sfmt 6602 E:\HEARINGS\71505 pfrm09 PsN: 71505
52

sion that every now and then a crisis is good. It is not great, but

good.

And what I see now is that the energy crisis that is before us

is good, because it is going to make America evaluate our energy

supplies and the conservation practices that we are going to undertake in order to assure the American people that they are going to

have sufficient energy in the future to turn the lights on in their

houses, to turn the power on in their plants, to let streetlights in

the city light up, and offices across this land have sufficient electricity to make sure everybody can see and do their work.

In a nutshell, my hope is we come out of this crisis in much better shape with reference to our future. I, for one, have known, and

it didn’t take me very long to understand that energy and the

availability of it at a reasonable price, or as reasonable a price as

possible, is America’s life blood. Without it, we have no future, no

future whatsoever with reference to prosperity, with reference to

growth, with reference to jobs.

I have been for at least 4 years strongly advocating a return by

the United States of America to prowess in the area of nuclear

power at every level, build it back into our universities as a major

area and field of study, build it back into our energy department.

A department that, believe it or not, existed, Mr. Chairman, for

more than 1 decade without wanting to claim that nuclear power

was part of the energy department of the greatest Nation on

earth—a rather incredible phenomenon that existed for quite some

time.

I am proud to tell you that I have had a little bit to do with putting nuclear energy back into the energy department. This gentleman was hired to head up, after a dearth of years, that part of

the Department that does nuclear power research.

It is a budding part of the Department, but it is moving out and

causing universities to start rekindling nuclear activities on their

campuses with their bright students, and the world is leaving us

sort of behind. In Japan, in the next few months, there will be two

new starts of two brand-new nuclear reactors because they are

bound and determined to have a diversity of energy supply.

Now the United States comes to a period when we are extremely

short of energy for the future—in particular, electricity. And, obviously, we will continue to need crude oil more and more unless

something happens in the automobile area that isn’t on the horizon

today.

But the truth of the matter is that we are also bumping up

against something else, that the world wants to prosper and America wants the world to prosper. We want rich countries to be made

out of the poor countries of the world. The only way to do that is

an abundant supply of energy, and so what we are coming right

stark up to is, what do we do about air quality? And what do we

do about the pollution? And what do we do about the Greenhouse

effect?

And, Mr. Chairman, I am here to tell you that for a great nation

to turn its face away from nuclear power, in light of this kind of

a world situation, I don’t know the word, but I am going to say it

is borderline lunacy, because a few people have us frightened to

death about what we are going to do with the waste.

53

We are about—now we are not going to—but we were about to

abandon this perfectly clean fuel that is probably on average safer

than any other way to generate electricity, contrary to what we are

told. And we have one little problem left, and that is, what do we

do with the waste? There are some who would like you all to believe it is not a small problem, that it is sufficient that you should

abandon the option.

Well, I don’t know whether any of you have gone to France and

asked them to take you to the place wherein their nuclear waste

from reactors lies. But if you are going to do that, tell them in advance, ‘‘Don’t tell us when we arrive there. Just arrive there and

let us guess.’’ Because you will walk into a couple of buildings that

look like school buildings, like big gymnasiums.

And you walk out about 100 feet and they will punch you and

say, ‘‘Look down.’’ And when you look down, the former fuel rods

from their nuclear power are underneath you. They are in a solid

compound with glass, with concrete on top of it, so there is no radiation in that building. You can walk anywhere. You can serve food

there.

And they will have that for up to 50 years while they figure out

what to do with it permanently. But they are not worried because

they will figure out what to do with it permanently. And here we

sit pondering what in the world are we going to do about this kind

of energy supply for the future.

Now, in the U.S. Senate, I introduced a bill. I won’t ask anybody

to introduce it here, but I ask that if you are seriously considering

the diversity required in the American energy mix in the future

that you might take a look at it. As a matter of fact, it has one

very exciting section that they are working on in the Department

that is called ‘‘Transmutation of Waste.’’

Now, if you keep it open for those who are totally anti-nuclear,

they will line up to tell you that is a bad thing. But I am here to

tell you, if it works it is a good thing. Transmutation is a science,

currently proved on a model size that takes high level waste and

converts it into a much lower level waste that you can deal with

very easily, and the other byproducts are not such that we can’t

handle them. It is an expensive one, but we put it in the mix for

the future.

Now, there are other things to speak of, but I won’t do that now.

I will be glad to answer questions. And I just came over because

I knew this committee, led by this subcommittee, are going to do

some really important things in the next few months to establish

where we are going with an American energy crisis that may be

our most severe crisis.

And I wanted to urge you in my own way not to be frightened

away by those who focus on one little piece of the nuclear energy

cycle, but, rather, to look at the whole picture and the risks that

you avoid when you look at the whole picture versus the risks you

take.

And, frankly, I would assume that if that were the case and you

were unburdened by anything else, you would say, ‘‘Let us move

ahead to further perfect nuclear power because it is the right thing

to do for the future.’’

54

My last observation is, I heard the Nuclear Regulatory Commission man saying that we were doing better at safety, and yet producing at a higher capacity. That is true.

Since 1990, the capacity has been going up, and the safety

records have improved because the Nuclear Regulatory Commission has started to really regulate instead of playing games. They

don’t play games with the power plants anymore and having them

do a bunch of things that are irrelevant just to waste their time.

And as a consequence, they have produced the equivalent of 20

new 1,000-megawatt power plants in the generating capacity of existing American nuclear power plants just by getting the capacity

up from the 1970’s to the 1990’s per plant. No new plants, nothing

new, just doing it better.

I would hope that this day would go down that I am testifying

here that an event is occurring in our land wherein a nuclear

power plant is being bought commercially, as a commercial transaction, one utility company buying it from another and making it

part of a new inventory of the company that bought it which wants

diversity and assurance. They are going to pay for it, just like you

would pay for buying a natural gas power plant, and as a matter

of fact they will lower their rates by doing it. That is very exciting.

Thank you very much.

[The prepared statement of Hon. Pete V. Domenici follows:]

PREPARED STATEMENT OF HON. PETE V. DOMENICI, A U.S. SENATOR FROM THE STATE

OF NEW MEXICO

Mr. Chairman, thank you for the invitation to testify before your Subcommittee

on Energy and Air Quality. I compliment you on the choice of subject for this hearing, the role of nuclear energy in national energy policy—this issue is of critical importance to our nation’s energy and economic security.

Nuclear energy now provides about 22 percent of our electricity from 103 nuclear

reactors. The operating costs of nuclear energy are among the lowest of any source.

The Utility Data Institute recently reported production costs for nuclear at 1.83

cents per kilowatt-hour, with coal at 2.08 cents per kilowatt-hour.

Through careful optimization of operating efficiencies, the output of nuclear plants

has risen dramatically since the 1980’s; nuclear plants operated with an amazing

87 percent capacity factor in 2000. Since 1990, with no new nuclear plants, the output of our plants has still increased by over 20 percent. That’s equivalent to gaining

the output of about 20 new nuclear plants without building any.

Safety has been a vital focus, as evidenced by a constant decrease in the number

of emergency shutdowns, or ‘‘scrams,’’ in our domestic plants. In 1985, there were

2.4 scrams per reactor, last year there were just 0.03. While some use the Three

Mile Island accident to highlight their concerns with nuclear energy, the fact remains that our safety systems worked at Three Mile Island and no members of the

public were endangered.

Another example of the exemplary safety of nuclear reactors, when properly designed and managed, lies with our nuclear navy. They now operate about 90 nuclear

powered ships, and over the years, they’ve operated about 250 reactors in all. In

that time, they’ve accumulated 5,400 reactor-years of operation, over twice the number of reactor-years in our civilian sector. In all that time, they have never had a

significant incident with their reactors. They are welcomed into over 150 major foreign ports in over 50 countries.

Nuclear energy and coal are our major producers of our electricity—those two

sources provide over 70 percent. In both cases, their use presents significant risks.

Together, they illustrate a fundamental point, that absolutely every source of energy

presents both benefits and risks. It’s our responsibility to ensure that citizens are

presented with accurate information on benefits and risks, information that is free

from any political biases. And where risk areas are noted, it’s our responsibility to

devise programs that mitigate or avoid the risks. Solutions, through careful research, for clean coal and for nuclear waste storage address key risk areas for these

two electricity sources.

55

Interest in our nuclear plants is increasing along with dramatically increased confidence in their ability to contribute to our energy needs. Interest in re-licensing

plants, to extend their lifetime beyond the originally planned 40 years, has greatly

expanded. The NRC has now approved re-licensing for 5 reactors, and over 30 other

reactors have begun the renewal process. Industry experts now expect virtually all

operating plants to apply for license extension.

Nuclear energy is essentially emission free. We avoided the emission of 167 million tons of carbon last year or more than 2 billion tons since the 1970’s. In 1999,

nuclear power plants provided about half of the total carbon reductions achieved by

U.S. industry under the federal voluntary reporting program. The inescapable fact

is that nuclear energy is making an immense contribution to the environmental

health of our nation.

But unfortunately, when it comes to nuclear energy, we’re living on our past global leadership. Most of the technologies that drive the world’s nuclear energy systems

originated here. Much of our early leadership derived from our requirements for a

nuclear navy; that work enabled many of the civilian aspects of nuclear power.

Our reactor designs are found around the world. The reprocessing technology used

in some countries originated here. The fuel designs in use around the world largely

were developed here. This nation provided the global leadership to start the age of

nuclear energy.

Now, our leadership is seriously at risk. No nuclear plant has been ordered in the

United States in over 20 years. To some extent, this was driven by decreases in energy demand following the early oil price shocks and from public fears about Three

Mile Island and Chernobyl. But we also have allowed complex environmental reviews and regulatory stalemates to extend approval and construction times and to

seriously undercut prospects for any additional plants.

As a nation, we cannot afford to lose the nuclear energy option until we are ready

to specify with confidence how we are going to replace 22 percent of our electricity

with some other source offering comparable safety, reliability, low cost, and environmental attributes. We risk our nation’s future prosperity if we lose the nuclear option through inaction. Instead, we need concrete action to secure the nuclear option

for future generations. We must not subject the nation to the risk of inadequate energy supplies.

In closing, Mr. Chairman, There is no single ‘‘silver bullet’’ that will address our

nation’s thirst for clean, reliable, reasonably priced, energy sources. Energy is far

too important to our economic and military strength to rely on any small subset of

the available options. In my view, it is critically important to our nation that nuclear energy be treated as a strong, viable option for our nation’s electricity needs

now and into the distant future. This would ensure that future generations continue

to enjoy clean, safe, reliable electricity and the many benefits that this energy

source provides.

Mr. LARGENT. Thank you, Senator.

I will recognize the gentleman from Massachusetts, Mr. Markey,

for 5 minutes.

Mr. MARKEY. Thank you.

Senator, if you were looking at the nuclear power industry and

obstacles which existed to the construction of a plant, let us say in

New Mexico, what would you say would be the largest obstacle to

a utility in New Mexico just ordering a nuclear power plant right

now, and constructing one over the next 5 or 6 years?

Mr. DOMENICI. Well, I want to say to my good friend, Representative Markey, 5 years ago I would have told you the obstacles were

so many and so numerous that I couldn’t answer the question. I

would say impossible.

I think it is still highly improbable as of this particular moment

that you will do it, but I think we are getting very, very close. And

the obstacles that are going to remain are public opinion. Thus, I

guess that the next power plants will be built close to the existing

power plants, so you couldn’t pick New Mexico, but I don’t mind

you picking it. We just don’t have one.

But if we had one, my guess would be that if somebody wanted

to build one they would build it close to that, and that would be

56

one of the things you would look at in the country, I would think.

Doesn’t have to be the case.

Second, we have to have a new way of licensing. I think that has

evolved, so there is a bit of modularness to the licensing. Then you

would have a standard accepted design. If you chose to build that

design, you wouldn’t have to spend an inordinate amount of time

going through that licensing process. But you would still have seismic and other considerations with each site.

And last would be whether you could finance it, and it would appear to me that—5 years ago I would have said it is impossible.

Today I think the company that just bought one, and that is the

fourth one bought and sold recently, they got it financed.

Mr. MARKEY. There has been a bit of a change in the way in

which the industry itself used nuclear power. Back 2, 3, 4 years

ago, they were calling it ‘‘stranded investment.’’ All of these nuclear

power plants were called ‘‘stranded investment.’’ And they wanted

to be compensated by the ratepayers in the states as a condition

of moving to a deregulated marketplace.

And now, as you are pointing out, there are companies that are

purchasing these nuclear power plants, really at bargain basement

rates, and they are generating nuclear power at 90 percent efficiency. And so the industry itself—in other words, I guess my question is, do you believe that the industry itself had a misperception

heading into the late—really into the mid and late 1990’s in terms

of how efficient and affordable nuclear power was?

Because we have already changed the laws here. The nuclear licensing laws have been changed by the Congress in the past decade that streamlines that process. So do you think that—in other

words, is it more of a private sector issue now, where they are

going to have to just engage this in the states, take on public opinion, make the decision they are going to go to the markets and just

try to build, or is there something else here that you think that

Congress should do as a matter of public policy?

Mr. DOMENICI. Well, Representative Markey, I have a bill that

contains about 25 provisions, so I think there are some things we

ought to do as a nation.

But I am not suggesting that the industry—if this bill never happened, and we continue in a crisis mode—I am not suggesting that

industry might not find a solution as you are suggesting. But I

don’t think they were wrong 5 years ago. The market would not

have provided for the buying and selling of nuclear plants 5, 7, 10

years ago, because we weren’t in a crisis situation on energy, plus

there has become a much broader base of acceptance, believe it or

not.

Until you get the antis focusing in on one facility, the general

public in the United States accepts nuclear power today. So, you

know, that hasn’t been the case all of the time.

Mr. MARKEY. Can I just say ,in conclusion, Mr. Chairman, that

I want to agree with Congresswoman Wilson that you are a great

Senator and a great American.

Mr. DOMENICI. Thank you.

Mr. MARKEY. And we thank you for coming over here.

Mr. DOMENICI. Thank you very much.

Mr. LARGENT. I thank the gentleman. The gentleman yields back.

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I recognize the gentleman from Illinois, Mr. Shimkus, for 5 minutes of questions.

Mr. SHIMKUS. Thank you, Mr. Chairman.

Senator, and other people on the panel, welcome. Senator, a

quick question, and it really kind of ties to a question that we had

to the panelists earlier about the nuclear waste fund and the

money that has been put in by industry, the amount that has been

used for Yucca Mountain, and the balance, the unused portion.

Budgetarily, that is—you know, has it with Treasury—the Treasury Department is the steward of that, and it is not really dollars.

It has been spent. And there is—very similar, like Social Security

trust fund, where it has just been, you know, paperwork shuffled.

Senator, can you speak to the nuclear waste fund and the budgeting aspect of that?

Mr. DOMENICI. Well, I would be glad to. I don’t remember the

numbers. I do know that the trust fund has been sitting there, like

many trust funds. If the question has to do with why do we use

it in the totality of a budget, then I would just say to you that my

recollection is there are about 140 trust funds within the budget of

the United States—some little tiny ones, some very big ones.

And if we chose to take them all off budget and say we are going

to just run them on their own without relationship to a macro

budget of the country, then we would have very little left in the

budget. So we have left it in, and its reserves have been accounted

for in the totality of the budget, thus making it easier to balance

budgets and the like.

Of late, it doesn’t seem to matter very much, Mr. Chairman. The

surplus has grown so fast that they have left all of that subject to

reconsideration.

Mr. SHIMKUS. Thank you.

And I have a question for Mr. Travers. And there is really a dispute, and I know that times have changed also based upon the environment, that the Energy Information Administration forecast 27

percent increase—actually, forecast that 20 percent of the existing

nuclear generating capacity will retire by the year 2020 and be replaced by gas-fired generation.

Now, that may be prior to the gas spikes. I don’t know when that

report was filed, but that may have been past the doubling of the

natural gas prices that we have had over the last couple of months.

But the Nuclear Energy Institute forecasts that most of the existing nuclear reactor operators will seek to renew their licenses, continue in operations for 20 years, long after 2020. There seems to

be some degree of disagreement between EIA and NEI’s forecast on

the future of nuclear energy. What is the NRC’s forecast for license

renewals and future generating capacity of the existing nuclear

fleet?

Mr. TRAVERS. Thank you. We have formal indications from about

40 percent of the operating units that they will, in fact, seek renewed period of licensed operation. And we really have to rely on

the industry beyond that. The expectation, as you have indicated,

from organizations like NEI is that 80 percent or more may seek

license renewal.

Given that we rely on utilities to give us an indication of what

their planning is, that is really our best source of information. I am

58

not familiar with the assumptions that may underlie the EIA’s projections, but our current sort of budgeting assumptions are that 80

percent or more of the currently operating facilities will, in fact,

seek renewal. And I recognize that recently NEI has suggested that

most, perhaps more than—many more than 80 percent will.

Mr. SHIMKUS. You don’t see anything that would prohibit right

now industry from requesting renewals of the current facilities?

Mr. TRAVERS. I certainly don’t see anything that would limit it

in terms of our regulatory review process. It is one that we think

has been efficient thus far. It is one that we are seeking to improve

and factor in the experience of the initial application reviews as we

move forward, with a focus on safety and the plant aging issues

that dominate as you allow these plants to operate in a period of

continued operation beyond 40 years.

Mr. SHIMKUS. And, Senator, just to finish, I was at Yucca Mountain yesterday.

Mr. DOMENICI. Oh, you were?

Mr. SHIMKUS. And so if in France you can walk over the spent

nuclear waste, do you think we can safely put it inside a big mountain?

Mr. DOMENICI. Well, you see, the difference between the two philosophies is very, very big, in that we somehow are thinking that

we are going to put high-level waste from our reactors in the

ground, and then close it up and leave it there forever.

When I walked on top of the spent fuel rods in France, they

never intended to leave them there forever. They intended to leave

them there temporarily, so that they are completely different. Their

product will be treated differently in terms of how it is encapsulated, incarcerated, and everything else, in that gymnasium in

France versus putting it in the ground forever.

But I think you were really asking me whether I thought Yucca

Mountain would ever work, would we ever do it. And I don’t know,

because I think so long as you have two differing opinions as widespread as the Nuclear Regulatory Commission on what are adequate safety guidelines versus the Environmental Protection Agency’s guidelines, and they are so far apart, I don’t believe you can

build a facility under the environmental protection guidelines. I

don’t think it can be built.

So that is the hangup right now, as I understand it, in the country.

Mr. LARGENT. The gentleman’s time has expired.

Mr. SHIMKUS. Thank you, Mr. Chairman.

Mr. LARGENT. Senator Domenici, I just wanted you to know that

our committee staff has done a review, an initial review of your

bill, and it has several positive ideas in the bill that I think would

help develop our nuclear energy.

However, there were a few concerns, including nine new reports

to Congress, two new Assistant Secretaries at DOE, two new

named officers within the DOE, increased funding for nine research

grant and cooperative agreement programs, and two new expert

panels. And my concern is that we are going to need a new nuclear

reactor just to turn on the lights of all of those new positions created.

59

And the question that I had for you was, do all those positions

have to be in New Mexico?

Mr. DOMENICI. No.

Mr. LARGENT. I want to recognize the gentleman from Arizona,

Mr. Shadegg, for 5 minutes of questions.

Mr. DOMENICI. We want them there very badly, but—— Mr. SHADEGG. Senator, let me ask you, last week we received testimony here in this committee, both on Tuesday and Thursday, on

the California energy crisis, which is severe. And one of the witnesses explained that until—that current California law provides

that no nuclear plant can be constructed in California until the

issue of nuclear waste storage is resolved.

Mr. DOMENICI. Yes.

Mr. SHADEGG. I appreciate the analysis that you just gave my

colleague, Mr. Shimkus, about the dichotomy. I guess I am looking,

since I view you as a leader in this issue, for your guidance on how

we resolve the dichotomy between those two and where we can go

in this nation because I completely agree with you that we need

a mix of energy sources.

I think to continue to rely solely, as far as we can see into the

future, on natural gas is a—is not a wise policy. The Arizona—my

home state, as you know, has a fairly large nuclear power plant

which is operating well, and we are pleased with it.

I tend to agree with your statement about the acceptance of nuclear power by the American public. But I do think they want some

resolution of this issue of waste. And if you could give us guidance

on that I would appreciate it.

Mr. DOMENICI. Frankly, I want to tell you about your state. I

went to the Palo Verde plant, and, you know, that was much questioned for a long time. It isn’t being questioned now. If anybody

wants to find out what piece of geography in the U.S. is yielding

more megawatts of electricity per unit of ground, just go to the

Palo Verde plant.

There are three power plants there, 1,000 megawatts each I

think, which is a huge thing. If you want to see an example of

American construction and engineering prowess, if you are like me

when you see something that is put together with that kind of talent, you are just very proud to be there and see it. That is the way

I felt.

And then, to see all of these workers well paid, none of them,

from what I could tell, the least bit worried about their workplace,

they felt probably as safe or safer than they would in your natural

gas fields or mine producing natural gas out there at the well head.

Probably they felt safer in this place.

But I don’t have an answer. If California is going to insist that

we close the nuclear energy cycle before you build one in California, then I think they are going to have to wait a long time—

and maybe that is how they would like it—because I think we have

a political problem with the State of Nevada that is serious with

reference to the state fighting the Federal Government.

And you see if transportation is an issue, then what we should

do is have a temporary facility as close as possible to the permanent facility, so you don’t move everything twice. That is why it

was pretty smart to say, if you are going to put it in the ground,

60

wherever, in Nevada, why don’t you put the temporary facility for

30, 40, 50 years, close to it?

We can get neither of those approved, so we are going to look to

another policy. And I don’t think we are without options. I think

there are some that will be worked on, but I don’t know when that

will occur.

Mr. SHADEGG. Let me ask you a different question, then. The

Generation IV technology appears to at least to a certain degree

address this waste issue by the—I guess the encapsulating of the

fuel and glass, and the question of moisture no longer being able

to reach the fuel.

Do you see that as a long-term solution? And are there things

that your bill does to specifically promote Generation VI capability?

Mr. DOMENICI. Well, Generation IV also is a passively safe plant,

so that for those who envision meltdowns, you can’t have a meltdown with a Generation IV nuclear generator. Just by definition,

it is built so that can’t happen.

I have just been recently told by companies that own American

nuclear power production, none of which are Generation IV, that

they are not giving up on next generation of lightwater reactors.

They are not certain you have to go all the way to Generation IV.

There are a couple of new models by big American companies that

would improve the lightwater reactors so dramatically that rather

than waiting around for Generation IV to be ready, if they were

looking to build now, they would build one of the improved

lightwater reactors.

On the other hand, one of the most exciting things happening

about energy is the Generation IV, and one of those is going to be

built in South Africa. They are modular. They are small. That is

a very exciting idea. I don’t remember. Are they going to be 100

megawatts each? That is, you know, one-tenth the size of what we

have licensed for nuclear power. And then you just build more of

them under an expanding permit with the exact same replica.

And it has all of the other exciting features that you have described with reference to waste, so I think the world needs to move

with as much rapidity as possible in that direction. If we are worried about Greenhouse gases and the ambient air qualities, we

clearly should be helping with that. And I think our Nuclear Regulatory Commission is going to be helpful, Mr. Chairman, with the

Generation IV that is being built in South Africa.

Mr. SHADEGG. My time has expired.

Mr. LARGENT. The gentleman’s time has expired.

Mr. SHADEGG. I thank the gentleman for his testimony.

Mr. LARGENT. There is a sadistic side of me that wants to unleash my friend, Mr. Strickland, for 5 more minutes, but I am

going to resist that temptation and excuse our panel. Thank you,

Dr. Travers, Mr. Magwood, Ms. Hutzler, and Senator Domenici, for

shedding some light and your experiences with us. Thank you.

Thank you very much.

We will call the next panel forward.

Mr. NORWOOD [presiding]. We welcome our panel this afternoon.

Thank you for taking your time to come and be with us. The first

person we would like to hear from is Mr. Randy Hutchinson. He

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is Senior Vice President, Business Development, for Entergy Nuclear in Jackson, Mississippi.

Mr. Hutchinson, we are pleased you are here, and we would like

to hear from you for 5 minutes, please.

STATEMENTS OF C. RANDY HUTCHINSON, SENIOR VICE PRESIDENT, BUSINESS DEVELOPMENT, ENTERGY NUCLEAR; ALFRED C. TOLLISON, JR., EXECUTIVE VICE PRESIDENT, INSTITUTE OF NUCLEAR POWER OPERATIONS; EDWARD F.

SPROAT III, VICE PRESIDENT OF INTERNATIONAL PROGRAMS, EXELON CORPORATION; JOHN R. LONGENECKER,

LONGENECKER & ASSOCIATES, INC., MANAGEMENT CONSULTANTS; AND ANNA AURILIO, LEGISLATIVE DIRECTOR,

U.S. PIRG

Mr. HUTCHINSON. Thank you. Thank you, Mr. Norwood, Chairman Barton, Ranking Member Boucher, and other distinguished

members of the Energy and Air Quality Subcommittee. It is a

pleasure to appear before you today.

I am here on behalf of the Entergy Corporation and the Nuclear

Energy Institute. Entergy is a large nuclear utility with more than

2.5 million customers. We operate in Arkansas, Mississippi, Louisiana, and Texas, with more than 30,000 megawatts in generating

capacity.

We are also a large national nuclear operator. We have extensive

nuclear operations in the mid-south and in the northeast, primarily

in the Massachusetts and New York areas. I want to speak to the

resurgence or renewed interest or renaissance that we are seeing

in our industry today with nuclear power.

I think that is primarily for three reasons. First, the performance

of the Nation’s nuclear plants has improved dramatically. You have

heard discussion about the improvement in safety performance, capacity factors, or the availability factors of the plants in the industry have improved from around 65 percent in the 1980’s to about

90 percent today.

And as you heard previously, that is the equivalent of adding

about 23 1,000-megawatt generating plants to the grid. That is

enough to meet about 30 percent of the growth in demand that has

occurred during that time period.

Also, I think another factor that relates to increased performance

from the reactors is we have seen a consolidation in the industry

resulting in fewer but larger nuclear operators in this country

today. They bring far greater management expertise and focus to

nuclear operations.

Five years ago, there were 46 operators operating the Nation’s

103—or 104 we have heard today—nuclear plants. Today, 34 operators operate the same number, and I think we will continue to see

that consolidation in our industry. It is kind of like we—we view

it as kind of like buying a mutual fund. You can benefit from highly focused nuclear management expertise, and the sharing of nuclear talent and expertise across your fleet.

The second reason I think is that we are seeing that renaissance

relates to the—that nuclear power is not cost-competitive driven by

two factors; one, to improve performance, that has helped reduce

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nuclear production costs, but also the rise we have seen in natural

gas prices recently.

Today, nuclear production costs are lower than any other source

of generation that we have in the country, lower than coal, gas, oil.

And nuclear power provides a hedge against large price swings

that we see in the market in the gas and oil industry.

And then, the third reason I think we have seen renaissance in

the nuclear area is that the environmental benefits of nuclear energy are being recognized. Nuclear does not produce any Greenhouse gases or any combustion pollutants. I think the bottom line

is, in our view, that the Nation’s 103 nuclear plants today are producing about 22 percent of the electric power that is being consumed in this country in a safe, low-cost, and in an environmentalfriendly manner.

What is the future for nuclear power? Well, I think we are likely

to see this volatility in the oil and gas market in the future. Since

nuclear is now providing about 20 percent of the electricity consumed in this country today, we are likely to see nuclear power

around for a long time. I think that should be the case. And there

are some things in place to help ensure this.

The Nuclear Regulatory Commission has established a license renewal process to provide a mechanism for extending the life of an

operating nuclear power plant today for an additional 20 years beyond its 40-year licensed life. Several plants have either already

done this or are in the process of doing it. We are doing this with

our plants. We have one that is nearing the completion of a license

renewal process.

And the owners of at least two-thirds and perhaps more of the

operating plants in the country have indicated, some formally and

some informally to the Nuclear Regulatory Commission, that they

intend to apply for a life extension for their plants.

So this is an area where I think you can help. It is critically important, in our view, that the Nuclear Regulatory process remained

in place, adequately funded, and it continues to function in the effective and timely manner that it has so far to act on these license

renewal applications as they come along in the future.

To the question of, ‘‘Will new plants be built?’’ we think so eventually. I think several factors are giving us some optimism in this

area. One is that there are standard lightwater reactor designs

that have already been approved and—reviewed and approved by

the Nuclear Regulatory Commission and are on the shelf so to

speak.

You have heard some discussion on the advanced reactor technologies here that is being looked at and considered by some utilities in our industry. And the NRC has also developed and has in

place a new licensing process, a streamlined process for licensing

new plants. That process is yet untested in that nobody has used

it, but it is there.

And then, finally, an industry task force is in place that has been

formed, and it is working to identify and try to address issues that

are—have to be resolved. Some of these issues are likely to be industry needs confidence that the regulatory process is going to be

timely, effective, dependable.

63

I think the industry—we are going to have to get comfortable

and have some confidence and certainty in the fact that a new

plant can be built in—with a time to market in 36- to 42-month

timeframe and at a cost of something on the order of $1,000 a kilowatt hour that will compete with $3 and $4 gas.

And, finally, we also all look forward to the Department of Energy’s recommendation of the Yucca Mountain fuel repository and the

President’s approval hopefully later this year.

Thank you.

[The prepared statement of C. Randy Hutchinson follows:]

PREPARED STATEMENT OF C. RANDY HUTCHINSON, SENIOR VICE PRESIDENT,

BUSINESS DEVELOPMENT, ENTERGY NUCLEAR, INC.

Chairman Barton, Ranking Member Boucher and distinguished members of the

Energy and Air Quality Subcommittee, my name is Randy Hutchinson. I am the

Senior Vice President for Nuclear Business Development for Entergy Nuclear. My

staff buys nuclear power plants.

Entergy’s customers—2.5 million in Arkansas, Mississippi, Louisiana and Texas—

have long benefited from a diverse electric generating portfolio. Our company has

more than 30,000 megawatts of power using a range of fuels—29% from natural gas,

26% from nuclear, 17% from coal, 3% from oil and 26% from purchased power—an

almost ideal balanced mix of fuels. As a result, Entergy’s electric customers are not

as subject to the volatility of foreign oil and gas prices. And Entergy will maintain

this balanced fuel mix as the company grows.

Entergy Nuclear is headquartered in Jackson, Miss. Entergy Nuclear Southwest

has operated five reactors at four locations in Arkansas, Mississippi and Louisiana

going back about two decades.

Entergy Nuclear Northeast in White Plains, N.Y., is our new regional headquarters for that region. We own and operate the Pilgrim Nuclear Power Station

in Plymouth, Mass., the Indian Point 3 plant in Westchester County, N.Y. and the

James A. Fitzpatrick plant in Oswego County, N. Y. We have agreed to purchase

the Indian Point 1 and 2 plants from Con Edison and expect to close that transaction in mid-2001. Indian Point 1 has been in safe storage for 20 years, waiting

for decommissioning of the other two operating units.

Entergy Nuclear, the fastest growing nuclear operator in the nation, is now the

second largest with nine operating units. And we are aggressively competing for additional nuclear units wherever they are for sale. Nuclear power is a principal

growth strategy of our corporation. Indeed nuclear energy is our core competency.

Entergy has built its success on the foundation of a strong safety culture. When

you have invested billions of dollars in nuclear assets as Entergy has, believe me,

you are serious about safety at all times and at all levels. We know a reliable, top

performing plant is also a safe plant. Our operating experience of 25 years shows

they go together.

In our view, we are seeing a renaissance of nuclear power for three principal reasons:

• Operators of nuclear power plants have made significant improvements in the

performance of their plants. Capacity factors were around 65% in the 1980s,

meaning nuclear plants were producing about 65% of the power they could

produce in a year. Last year, the industry average capacity factor hit 89 percent. Our plants in Entergy were in the low to mid 90 percent range. Safety

performance has also improved as shown by INPO’s performance indicators.

• Secondly, nuclear power is now the lowest cost power in the nation. Production

costs at a nuclear plant are below 2 cents a kilowatt-hour, compared to 3-4

cents at a natural gas-fired plant

• Thirdly, nuclear does not emit the global warming gases and other pollutants that

other energy sources do.

Why is nuclear seeing this renaissance now?

We are seeing a confluence of forces. Natural gas prices have risen dramatically.

Historically gas has been available for prices in the $2-3 per million BTUs range

but those prices in the past year have risen to the $4-6 range nationally and even

hit $50 and more in California recently.

At the same time, the nation’s economy has continued to grow, increasing the demand for electric power across the nation. Higher fossil fuel prices and growing demand has been a powerful combination of forces.

64

It is also becoming much clearer to many that nuclear power is the lowest cost

power in the nation. The cost of nuclear fuel has long been relatively stable, not

subject to oil and gas price increases. Nuclear is also being recognized for its environmental advantages. Nuclear plants do not emit the global warming gases and

other pollutants that power plants running on other types of fuel do.

California today is seeing the perfect storm. Three colliding fronts. There is too

little supply and transmission capacity. No new power plants have been built in

California in a decade. State deregulation law forced utilities to sell their plants and

buy only in the day ahead market. Long-term power supply contracts were prohibited, a prescription for disaster. Then natural gas prices rose from $2-4 per million

BTUs to $50 and up. California could really use the Rancho Seco nuclear plant, shut

down a decade ago amid much controversy.

Deregulation is allowing and accelerating the consolidation of nuclear power industry that was already occurring and probably would have occurred anyway. Utilities with only one or two nuclear power plants have been realizing that it would

be increasingly difficult to remain competitive without the resources and capabilities

of larger operators.

We at Entergy Nuclear recognized the advantages of operating a fleet of nuclear

plants three or four years ago and decided to pursue a nuclear growth strategy. We

have now become the nation’s fastest growing nuclear operator, and truly a national

operator with two fleets of plants—in the South and in the Northeast.

Consolidation in the nuclear industry is bringing several advantages.

You can bring a very focused management to plant operations. Economics of scale

through purchasing can be achieved. You can spread financial risk over several

plants, much like spreading risk when you buy a mutual fund. You can pool talent

and expertise in financial, technical and management areas.

You can respond quickly to a problem at one plant with highly qualified expertise.

You can bring the best practices from all plants to each plant. And you grow to understand better what the regulatory authorities want and require.

You can easily see why consolidation is occurring. It is rapidly providing our country with higher levels of safety and reliable performance at lower costs.

Entergy Nuclear bought the first nuclear plant sold by a utility when we purchased the Pilgrim Nuclear Station from Boston Edison in July 1999. There have

been 13 acquisitions of nuclear plants since then, less than two years. Entergy has

been the fastest growing, having almost doubled our five-reactor fleet in the South

with four plants bought or under contract in the Northeast.

Five years ago, 46 operators were running the nation’s 103 nuclear plants. Today

24 operators are. Eventually there probably will be 5-8 principal nuclear operators.

The average nuclear plant operating today is only about 18 years old, far from

the expiration of its original 40-year operating license period. But as some of the

earliest plants approach their license periods, we in the industry have realized their

useful lives are actually much longer. As computer systems, instrumentation and

other technology has advanced, these whole systems have been replaced in today’s nuclear plants. In many ways, today’s operating plants are virtually new. Many

were originally designed with a 60-year life in mind, but were licensed for 40 years

to provide an extra margin of safety.

As a result, we are convinced the useful operating life of today’s plants can safely

be extended through a rigorous license renewal process for up to an additional 20

years. Several plants are in the relicensing process at present, including one of ours,

Arkansas Nuclear One unit 1.

To further demonstrate our commitment to nuclear power, Entergy Nuclear last

fall purchased a decommissioning services firm, TLG Services in Bridgewater,

Conn., to get world-class technical and scientific engineering expertise in the planning and cost estimating of decommissioning. And we are now offering complete nuclear life cycle management services to the U. S. industry.

Will new nuclear plants be built? Yes, we think so. But only if and when we can

bring some certainty to the industry. And you, as our nation’s policymakers, can

help to establish that certainty. New nuclear capacity can and will be built when

it makes sense to take the financial risk. The industry must see:

• Certainty in the costs of a new plant • Certainty in the regulatory permitting process, and

• Certainty in the time required to build.

Much work has already been done to design and obtain regulatory approval of

new advanced reactor designs that are simpler than today’s operating plants. Simpler generally means safer. It also means more competitive in both construction and

operating costs.

Much has also been accomplished by the industry and the NRC in developing a

streamlined license process. So that you can depend on actually operating the plant

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1 EIA, Annual Energy Outlook 2001

once built. A new licensing process must be thorough, and result in the issuance

of both a construction permit and an operating license. When today’s operating

plants were built, a construction permit was issued after much review and another

review was required before an operating license could be issued, often resulting in

years of additional delay and accumulating costs. As a result, as much as 20 percent

of the total cost of today’s plants was actually interest costs that had grown while

the plant was waiting to go into operation.

With advanced, simpler reactor designs, an improved construction and operating

license process, the time and resulting cost of a new nuclear plant would be better

known. That would translate to less financial risk, an imperative in today’s deregulated power marketplace. It can be done and is well on the way to reality. Your support as policymakers is critical.

In our view, a new nuclear plant will be built when one can reasonably depend on the cost of that capacity will be in the $1,000 per kilowatt range. And that cost

will be determined by the above circumstances.

We at Entergy and others in the industry have been working together with the

NRC to find solutions and bring certainty. We expect several nuclear operators will

announce early site locations later this year to begin the process of keeping the nuclear option open in this country.

The used nuclear fuel problem is, in our view, a political problem, not a technical

one. A decade of science has brought us very close to the selection of a permanent

storage facility at Yucca Mountain. The nation’s electric consumers have been paying one mill per kilowatt-hour produced at all nuclear plants into a Nuclear Waste

Fund that now totals $16 billion. The used fuel solution has been paid for. We are

confident the Department of Energy will complete its study and recommend moving

forward with the Yucca Mountain facility and the President will agree later this

year.

Entergy is committed to nuclear energy. We firmly believe nuclear will continue

to be a safe, reliable and lower cost source of power for our country. Nationally, nuclear energy is the second-largest source of U.S. electricity, producing one-fifth of

all electricity at record levels of safety and efficiency and at production costs lower

than coal and natural gas plants.

No other source of electricity can provide large amounts of power reliably and

reasonable costs while enhancing our air quality.

Nuclear energy will continue to help meet our nation’s public policy goals for energy security, economic growth and environmental protection. You and your colleagues can make it happen. I assure you, nuclear will respond with safe, reliable

and low cost energy. Today, and in the future.

With your help, nuclear power can continue to be a critical part of our nation’s

energy supply.

I hope you find this information helpful. Thank you for inviting me today.

GENERAL DISCUSSION OF ENERGY POLICY AND NUCLEAR ENERGY

Nationally, nuclear energy is the second-largest source of U.S. electricity, producing one-fifth of all electricity at record levels of safety and efficiency and at production costs lower than coal and natural gas plants.

I would like to thank Chairman Barton and this subcommittee for focusing on the

importance of national energy policy and the value of America’s nuclear power

plants to our nation’s energy supply and environmental protection.

From an energy policy perspective—the nation is at a crossroad. The greatest

source and constant driver of growth in the United States for the past century has

been electricity. Without vast and steadily increasing supplies of power, this nation

could not have become the economic marvel that it is. Many of the country’s most

significant advances—technological and societal—would not have been possible

without a constant flow of reliable, affordable electricity.

The Nation Needs a Comprehensive National Energy Policy

As the ‘‘new’’ economy converges with traditional economic infrastructure needs,

electricity will continue to be the driver of our economic engine, whether to power

the Internet or the nation’s assembly lines. As its cornerstone, any national energy

policy must increase domestic electricity supply in order to meet this new demand,

expected to increase at least 42 percent by 2020.1

To meet future electricity demand and maintain U.S. energy security, a comprehensive national energy policy must:

• Encourage investment in new power plant construction.

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2 EIA, Annual Energy Outlook 2001

• Continue regulatory modernization, including regulatory stability for operating

nuclear plants and licensing of new plants.

• Ensure sufficient funding for research, development and swift application of new

nuclear energy technologies is consistent with nuclear energy’s future role in

meeting U.S. energy needs.

• Eliminate discrimination and ensure nuclear energy receives the same treatment

as other electricity generating technologies in the marketplace.

• Educate the nation about the excellent safety record of nuclear energy and inject

sound science and intellectual honesty into the national energy debate so consumers may make informed energy choices.

• Maintain U.S. leadership and infrastructure to train the next generation of scientists, engineers and technicians required to design, build and operate nuclear

power plants.

Our nation cannot meet the demands of our growing population and economy

without increased power generation through the construction of new power plants.

We need to maintain the proportion of non-emitting baseload capacity through the

construction of new emission-free plants. This will maintain a diverse energy portfolio for the nation and continue the price stability nuclear energy offers.

Nuclear Energy: Significant Role in the Nation’s Electricity Portfolio

To achieve these short and long-term objectives requires an energy policy that

supports and encourages a continuing significant role for nuclear power. More than

ever, the nation relies on nuclear energy to meet the country’s soaring demand for

power. There is no longer any question that nuclear energy currently plays—and

will continue to play—a critical role in providing electricity to the nation. Today, the

nation’s 103 nuclear plants produce about 20 percent of our electricity.

More importantly, as plants have increased in efficiency over the last decade, nuclear power’s role in meeting consumer demand has grown by nearly 20 percent.

Clearly, nuclear energy is absolutely essential to the integrity of the U.S. electricity

grid and to our clean air goals.

Nuclear electricity is generated without producing greenhouse gases or other air

pollutants, thus providing Americans with tremendous environmental benefits.

Without nuclear energy, the United States could not meet air quality standards established by the Clean Air Act or international commitments to reduce greenhouse

gases, including carbon dioxide. The reduction of air pollutants or the avoidance of

emissions imparts significant health benefits to people across the nation, by reducing respiratory illness, for example.

Nuclear power plants are the nation’s greatest emission-free source of electricity—

producing nearly two-thirds of all emission-free power. And, as public demand for

clean air and a healthy environment increases in the future, nuclear energy is going

to become even more important.

The Emerging Energy Crisis

In analyzing recent events in California, as well as looking at increased consumer

heating and electricity bills elsewhere, the nation appears to be in the midst of an

emerging energy crisis. There may be debate about the exact variables at the root

of problems in California, but there is no debate that rolling blackouts in one of the

nation’s fastest growing states—the world’s sixth largest economy—represent a serious problem.

There is also no doubt that soaring heating and cooling bills for lower income families—including retirees—pose a serious threat to the health and safety of a large

number of Americans. And, with population growth and economic expansion expected to increase the need for new electricity generation capacity by more than

393,000 megawatts by 2020,2 events in California may only be the beginning of a

widespread energy shortage.

A few words from Silicon Valley—one of American’s great economic success stories—may illuminate not just the crisis, but what two of the world’s most forwardthinking executives see as one potential solution.

Nuclear Energy: A Time-Tested Solution

That nuclear energy is again figuring prominently on policymakers’ and business

leaders’ agendas is no coincidence. Indeed, this is not the first time the nation has

looked to nuclear energy as a solution to its energy woes. Looking back at recent

history to the last energy crisis in the United States, nuclear energy provided the

most significant and lasting response.

67

At the time of the first oil embargo in 1973, about 20 percent of U.S. electricity

supply came from power plants that used oil for fuel. In some parts of the nation— the Northeast, for example—the percentage of oil-fired electric generation was considerably higher. Just five percent of U.S. electricity was produced at 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 energy supply disruptions, protecting American businesses and homes from wildly fluctuating energy

costs and providing a reliable supply of electricity. Nuclear energy answered the call

then, and the industry is answering that call now.

It must be remembered that nuclear’s role in avoiding emissions also has significant implications for domestic economic development. If a state is not complying

with Clean Air Act regulations, it will be constrained when it comes to building new

conventional power plants as well as other industrial and manufacturing facilities.

Without nuclear energy, there will be difficult choices on the horizon as we try

to balance economic development, electricity needs and environmental goals. New

power plants will not come on line in the future without serious consideration of

their environmental impact. Again, California’s woes clearly show that energy, the

environment and economic development are inextricably linked. Nuclear energy is

the only expandable form of electricity generation that meets all three criteria.

Status of U.S. Nuclear Energy: Power for Today and Tomorrow

The United States has the largest commercial nuclear power industry in the

world. The 103 nuclear power reactors generate enough electricity to serve 67 million Americans, or the equivalent of the nuclear electricity needs of France and

Japan combined. The industry’s safety record is unparalleled among the world’s en- ergy providers, and nuclear power plant efficiency and production have improved

steadily during the last decade and today are at record levels. In 2000, nuclear

power plants in 31 states produced a record amount of electricity—754 billion kilowatt-hours.

The industry’s safety record has laid the foundation for this strong operational

performance. Safety and excellence are at the very core of the industry, and safety

is essential to its continued success in the competitive electricity market. As the industry moves forward, safety and low-cost power will continue to go hand-in-hand.

The increase in electricity generation at U.S. nuclear power plants during the

1990s was equivalent to adding twenty-three 1,000-megawatt power plants to our

nation’s electricity grid. That’s enough to meet 30% of all new electricity demand

during that time. This dramatic increase in electricity production by nuclear power

plants is one the most successful energy efficiency programs of the last decade. Safe,

outstanding performance at nuclear power plants, especially during the transition

to competitive electricity markets, is one reason why a growing number of policymakers, financial analysts and the public are rediscovering the benefits of nuclear

energy.

Outstanding operational performance is also a major reason why Entergy and

other energy companies are extending the operating licenses at existing reactors for

an additional 20 years. In 1997, 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, issued by the Nuclear Regulatory

Commission. However, many of those same analysts today have reassessed the situation and now predict only a handful of plants may close prior to the expiration of

their licenses. They now recognize that the vast majority of plants will extend their

operating licenses beyond the initial 40-year period.

And, it is also why the industry is looking at innovative partnerships for building

advanced reactor designs that will be necessary to meet the future demands of a

power-hungry digital economy and improve our air quality. The Energy Information

Administration, in its 2001 annual energy outlook, forecasts higher nuclear power

production.

‘‘In 2020, nuclear generation is projected to be 34 percent higher than forecast

last year, due to lower estimated costs for extending the life of current reactors

and higher projected natural gas prices.’’

ENERGY INFORMATION ADMINISTRATION

Energy Outlook, 2001

Even with this two-fold production and environmental advantage, nuclear power

plants are the lowest cost electricity generators. In 2000, the average production

cost of electricity generated by nuclear power plants was 1.83 cents per kilowatthour, making nuclear power the most affordable electricity in the United States.

68

Nuclear Energy’s Long History of Protecting our Air Quality

The environmental value of nuclear energy was recognized early by policy makers.

In Shippingport, Pa., over 50 years ago, nuclear energy’s clean air value tipped the

scales in favor of construction of the first demonstration nuclear power plant.

Beginning in the 1940s, Pittsburgh began instituting strict smoke control programs as part of urban redevelopment plans—well ahead of the rest of the nation.

At the time, Duquesne Light Company was petitioning to build a coal-fired plant

on the Allegheny River. They were encountering a great deal of resistance from the

area’s citizens, who were fearful of air pollution from the plant. The main reason

that Duquesne chose to bid on the nuclear project was because it offered power

without pollution.

That benefit is being rediscovered today, and promises to be of prime importance

in the future. Energy and the environment are increasingly being linked both locally

and globally. Yet, nuclear energy’s clean air benefits—its ability to avoid the emission of harmful air pollutants while producing vast amounts of electricity—is still

undervalued.

In the process of generating electricity, nuclear plants produce no carbon dioxide,

sulfur oxide or nitrogen oxides. Between 1970 and 1990, the increased use of nuclear energy alone eliminated more nitrogen oxide emissions than direct industry action taken to comply with the Clean Air Act. Nuclear energy, by avoiding additional

emissions as electricity output grows, acts as a vital partner in Clean Air Act compliance.

To meet more stringent Clean Air Act requirements and effectively manage carbon risk in the future, the United States must increase its percentage of non-emitting sources of electricity—such as nuclear energy, solar, hydro and wind—above the

current baseline of 30 percent. Of these electricity production technologies, nuclear

energy generates two-thirds of all emission-free electricity today, and is the only expandable, large-scale electricity source that avoids emissions and can meet the baseload energy demands of a growing, modern economy.

Industry Planning is Already Underway for New Nuclear Energy Plants

Although the average age of U.S. nuclear plants is only 18 years, we must begin

planning now to enhance these services through increases in production capacity,

improved efficiency, and license renewal. That’s why the industry is working now

to set the stage for construction of new advanced-designed nuclear plants that will

have more automatic safety systems and will be even more reliable and economical.

The industry is working together to lay the groundwork for new plants.Three advanced designs have already achieved certification by the NRC, having gone through

extensive, multi-year safety reviews. Of the three designs, two have been built and

are setting world-class performance records in Japan, while others are being built

in Korea and Taiwan.

Additionally, two more advanced designs are undergoing NRC review. One involves a review of changes to an existing approved design, uprating it from 600 to

1,000 megawatts. The other is a new reactor—known as the Pebble Bed Modular

Reactor—now in preliminary review by the NRC.

The NRC’s licensing process for new nuclear plants will ensure that safety, design

and site-related issues are resolved before large capital investments are made. A

new licensing process will allow the NRC to issue a single license to construct and

operate a new nuclear plant.

Industry executives have come together—contributing personnel, funding and

guidance—to develop a plan that will mark out a clear path for new nuclear plant

orders. This plan for the future considers safety standards and objectives; NRC licensing requirements; policy and legislative implications; capital investment needs

and changing business conditions.

Nuclear Energy: Balancing the Nation’s Energy Needs

Our nation cannot meet the demands of our growing population and economy

without increased power generation through the construction of new power plants.

We need to increase the proportion of non-emitting baseload capacity through the

construction of new emission-free plants. This will maintain both a diverse energy

portfolio for the nation, and the price stability that nuclear energy offers. In order

to do this, comprehensive national energy policy must

• Encourage investment in new power plant construction.

• Continue regulatory modernization, including regulatory stability for operating

nuclear plants and licensing of new plants.

• Ensure sufficient funding for research, development and swift application of new

nuclear energy technologies is consistent with nuclear energy’s future role in

meeting U.S. energy needs.

69

3 Nuclear Energy 2000: Public Support Remains Strong, Ann Stouffer Bisconti, Ph.D., Perspectives on Public Opinion, April 2000.

• Eliminate discrimination and ensure nuclear energy receives the same treatment

as other electricity generating technologies in the marketplace. • Educate the nation about the excellent safety record of nuclear energy and inject

sound science and intellectual honesty into the national energy debate so that

consumers may make informed energy choices. • Maintain U.S. leadership and infrastructure to train the next generation of scientists, engineers and technicians required to design, build and operate nuclear

power plants.

In a competitive marketplace, the nuclear energy industry has the primary responsibility for ensuring the viability of nuclear technology. However, the industry

values the important role that can be played by the federal government in preparing

the way for new nuclear power plants.

Protecting our air quality and our environment, as well as improving our energy

security, are among the reasons why two-thirds of Americans favor nuclear energy

as one way to generate electricity.

One reason for the steady support for nuclear energy is that the public views nuclear energy as a fuel of the future and believes it is important for future generations. Americans consider solar and nuclear energy as primary sources of energy for

the future. In addition, there is broad support for the continued operation of nuclear

power plants (76 percent) as well as for maintaining the option to build more nuclear power plants in the future (73 percent).3

And, a January survey by Bisconti Research Inc., shows an increase in those who

favor building more nuclear power plants. Fifty-one percent of those polled said that

the United States should ‘‘definitely’’ build more nuclear power plants in the future—compared with 42 percent in October 1999.

The increase in favorability for building new nuclear plants was largest in the

West, where those in favor increased from 33 percent in October 1999 to 52 percent

in the January survey. Clearly, the California crisis is impressing upon the public

the need for new electricity supplies.

Used Nuclear Fuel: Sound Science Supports Yucca Mountain

Federal legislation mandates a centralized geologic repository. The Nuclear Waste

Policy Act of 1982 and its 1987 amendments require or authorize the U.S. Department of Energy to locate, build and operate a deep, mined geologic repository for

used nuclear fuel. To pay for the permanent repository, the Nuclear Waste Policy

Act established the Nuclear Waste Fund. Since 1982, electricity consumers have

paid into the fund which now totals more than $16 billion.

Based on scientific information gathered from several sites, Congress in 1987 selected Yucca Mountain as the location for further study to determine if the desert

ridge is a suitable location for the federally operated underground repository. And,

the industry fully expects that the Energy Department will forward a science-based

decision on Yucca Mountain to the President later this year.

A decade of science has been completed and will lead to a draft report this spring.

A decision document is expected to be finalized in the fall, following hearings that

will take place in Nevada. It is important that DOE and the Administration move

ahead on schedule with the site recommendation process, leading to a decision by

the President on site suitability late this year. This decision allows DOE to prepare

documents to submit to the NRC to license a disposal facility.

Most used fuel is stored in steel-lined, water-filled vaults at nuclear power plants.

However, Entergy Nuclear and other nuclear power plant owners are absorbing the

cost of on-site storage of spent nuclear fuel, despite the fact that they have already

paid the government to perform this service. Other electric companies must build

additional storage facilities for used nuclear fuel at nuclear power plant sites until

a federal repository is operating.

Less than six percent of commercial reactor fuel is stored in additional ‘‘dry’’ storage facilities today, but by 2010, approximately 30 percent of used fuel will be

stored in these costly storage containers. Steps must be taken now to avoid a forced

shutdown of any nuclear power plant due to a lack of used fuel storage,

Universal Application of Nuclear Technology Saves and Protects Lives

For five decades, the United States has been the global leader in the use of nuclear technology to benefit society. America’s high-tech digital economy and high

standard of living simply would not be possible without the use of nuclear energy.

In addition, nuclear technology is used in scores of consumer products—both necessities and conveniences that enhance our daily lives.

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Among the necessities is nuclear energy, which provides one-fifth of our nation’s

electricity and is our largest supply of emission-free electricity, and nuclear medicine, which is used in one of every three medical diagnoses and treatments. Ten million Americans are diagnosed and treated every year using nuclear medicine. Radioactive isotopes also are essential to the biomedical research that seeks causes and

cures for diseases such as AIDS, cancer and Alzheimer’s disease.

Nuclear technology also is used agricultural applications, industrial manufacturing and environmental protection. The use of nuclear technologies in the field of

agriculture improves crop varieties, controls pests and preserves food. The use of irradiation in food safety continues to grow in the United States and has been used

for decades in Europe. In fact, food irradiation has been approved to control food

loss and to improve sanitation for more than 100 kinds of food in 41 countries.

These uses of nuclear technology make significant contributions to our quality of

life.

The associated economic benefit of the use of nuclear technology and nuclear materials on the economy is significant, accounting for more than $400 billion in revenues (6 percent of the gross domestic product) and 4.4 million jobs.

Conclusion: Nuclear Energy Powers America’s Future

One of the most prominent environmental protection programs in the industrial

sector during the last three decades has been America’s increased reliance on nuclear energy to power economic growth. No other source of electricity can provide

large amounts of power while enhancing our air quality.

Policymakers should maximize nuclear energy’s potential to improve our air quality while providing low-cost electricity to fuel our economy. Continued research and

development funding, streamlined business regulation, implementation of a federal

waste management program, and equal access to business incentives will ensure

that nuclear energy will continue to help meet our nation’s public policy goals for

energy security, economic growth and environmental protection.

Mr. NORWOOD. Thank you very much, Mr. Hutchinson. We appreciate your time and testimony.

I would like to introduce to the committee now Mr. A.C. Tollison,

Jr., the Executive Vice President, Institute of Nuclear Power Operations, from Atlanta, Georgia.

Welcome, Mr. Tollison, and please take 5 minutes.

STATEMENT OF ALFRED C. TOLLISON, JR.

Mr. TOLLISON. Thank you, Mr. Chairman, and good afternoon.

My name is Fred Tollison, Executive Vice President of the Institute of Nuclear Power Operations, INPO, in Atlanta. I have been

with INPO for 13 years and have worked in the nuclear power industry for 30 years. I was plant manager of the Brunswick station

in North Carolina for 5 years.

I am here to discuss safety and reliability in the nuclear power

industry. In fact, last year, U.S. nuclear power plants performed at

record levels of safety and reliability. I will begin with INPO’s activities and INPO’s role in the nuclear industry.

The Institute’s mission is to promote the highest levels of safety

and reliability to promote excellence in the operation of nuclear

power plants. INPO was formed in 1979 as a non-profit, independent, technical organization. Each of the 34 companies that operate nuclear plants in this country is a member of INPO.

Our key technical programs are, first, periodic, in-depth inspections of each nuclear plant. Second, training programs at each

plant are accredited by the independent National Nuclear Accrediting Board. Third, INPO analyses plant operating experience and

passes along lessons learned to the industry. And, fourth, INPO

provides industry assistance, including plant visits, seminars, and

workshops.

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Significant process has been achieved by the U.S. nuclear industry, in part through participation in these programs. Indicators

that measure the performance of nuclear plants best demonstrated

this progress. Since the mid-’80’s, INPO has tracked a series of 10

performance indicators. Aggressive goals were established at 5-year

intervals, and the year 2000 marks the end of the third such period.

The basic principal of performance indicators is that nuclear

plants with good performance, as measured by these indicators, are

generally recognized as well-managed plants. Such plants are more

reliable and typically have higher margins of safety.

Let me show you now the industry’s progress using a few selected indicators to your right. Unit capability factor is a measure

of the plant’s ability to stay online and produce electricity. In 2000,

the median was 91.1 percent, the best performance ever for this indicator, and for the second year in a row it exceeded the year 2000

goal.

Unplanned automatic scrams show the number of automatic reactor shutdowns per year. A low number indicates care and operations, good maintenance, and good training. The 2000 median

value was zero for the third straight year, continuing to exceed the

year 2000 goal.

Safety assistance performance monitors the availability of standby or redundant safety systems to provide backup electricity and

cooling water to the reactor if needed. The 2000 performance of 96

percent represents a high state of readiness for these systems. 2000

was a very successful year for the U.S. nuclear industry, the best

ever in terms of safety and reliability. The industry met or exceeded the year 2000 goals in all 10 performance indicators.

So what does this say about the future of the industry? U.S. nuclear plants are performing at record levels of safety and reliability.

Nuclear plant owners are vigorously pursuing license renewal, and

the industry is consolidating rapidly to improve efficiency. These

actions indicate that nuclear power is being recognized as a valuable, reliable source of energy today and for the future.

Without question, the industry will face new challenges as it

makes the transition to the competitive marketplace. INPO is helping the industry focus on the issues that will be important in the

near future to maintain and improve on safety and reliability.

In conclusion, nuclear energy is an essential domestic resource,

and proper management is important for today and for future generations. It is not an overstatement to say that a foundation is

being put in place for a renaissance in nuclear power. But this

foundation requires absolutely that we remain accident-free. This

requires vigilance and commitment not just to the higher standards

we have today but to continuous improvement.

With vigilance and with commitment to safety by the industry,

supported by INPO, and with oversight by a strong and fair regulator—the Nuclear Regulatory Commission—nuclear power has a

bright future in helping fulfill our Nation’s energy needs.

Thank you.

[The prepared statement of Alfred C. Tollison, Jr. follows:]

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PREPARED STATEMENT OF ALFRED C. TOLLISON, JR., EXECUTIVE VICE PRESIDENT, INSTITUTE OF NUCLEAR POWER OPERATIONS

Good afternoon. My name is Alfred C. Tollison, Jr., executive vice president of the

Institute of Nuclear Power Operations in Atlanta, Georgia. I have been asked to discuss the safety and performance of the commercial nuclear power industry today

and the trends we see for the future. I will begin my remarks with a brief explanation of INPO’s structure and activities and what INPO’s role is in the nuclear industry.

THE INSTITUTE OF NUCLEAR POWER OPERATIONS

The Institute was formed by the U.S. nuclear utility industry in late 1979 in response to the accident at Three Mile Island Nuclear Station. INPO’s mission is to

promote the highest levels of safety and reliability—to promote excellence—in the

operation of nuclear electric generating plants, including applying the lessons

learned from the President’s Commission on the Accident at Three Mile Island (the

Kemeny Commission). The nuclear utility industry leaders established INPO as an

independent organization—independent from governmental agencies and independent from any individual member.

INPO is a nonprofit, independent technical organization with a staff of about 350 and a 2001 budget of $59 million. The bulk of this budget is dedicated to travel and

employee compensation. Each of the 34 utilities in the United States with operational nuclear plants is a member of the Institute. To augment its professional

staff, INPO utilizes the expertise of loaned employees from members and participants. This program is designed to provide a continuing source of personnel with

recent nuclear plant experience to supplement the INPO staff. It also provides

loaned personnel with an opportunity to gain broader experience in the industry.

The Institute’s organization is similar in many ways to a typical U.S. corporation.

A Board of Directors, elected by INPO’s members, oversees the operations and activities of the Institute.The president and chief executive officer of the Institute is

elected by and reports to the Board of Directors. The current president and CEO

is Dr. James T. Rhodes. He also serves as Chairman of the Board.

In addition to the Board of Directors, an Advisory Council of professionals from

outside the industry reviews Institute activities and provides advice on broad objectives and methods to the Board of Directors. The Advisory Council is composed of

distinguished professionals including prominent educators, scientists, industrialists

and health specialists.

To ensure that INPO programs benefit from the best technical advice the industry

has to offer, an Executive Review Group reviews INPO programs and products in

the various technical areas on a continuing basis. The members of the Executive Review Group are experienced executives—typically the chief nuclear officers—who are

currently active in nuclear plant operations or management. An Academy Council

provides advice in the areas of training and accreditation, and an Industry Communications Council provides advice on effective communication of INPO programs and

activities.

Non-U.S. nuclear utility organizations from 13 countries participate in the Institute’s International Program. Ten nuclear steam system suppliers and architect-engineering and construction firms worldwide involved in nuclear work also participate in INPO through the Supplier Program.

The key technical activities of the Institute can be divided into four cornerstone

programs, which I will address in more detail later. They are:

1. Evaluations—Periodic evaluations are conducted of each operating nuclear electric plant in this country.

2. Training and Accreditation—Training programs for key personnel at each plant

are accredited by the independent National Nuclear Accrediting Board.

3. Events Analysis and Information Exchange—INPO analyzes operating experience

and feeds back lessons learned to the industry.

4. Assistance—This includes plant visits, courses, seminars, and workshops.

In addition, there is a detailed infrastructure to carry out each of these cornerstone programs. The Institutional Plan for the Institute of Nuclear Power Operations, updated last year, and our 2000 Annual Report provide additional details

about the Institute’s programs and are attached to this testimony (attachments A

and B).

All interactions between INPO and its members are held strictly confidential. This

is vital to the success of INPO’s mission. Utilities are voluntary members of INPO

and are under no regulatory obligation to provide information to INPO—or to be

members. Experience shows that utilities are more willing to set challenging goals

and to strive for excellence if they know they will not be criticized publicly if they

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fall somewhat short of these challenging goals. Over the years, U.S. courts and administrative agencies have consistently upheld this position.

INPO CORNERSTONE PROGRAMS

We believe the Institute’s cornerstone programs have directly contributed to the

industry’s progress.

Evaluations

The evaluation program cornerstone is a direct response to a recommendation of

the Kemeny Commission that—‘‘the industry must—set and police its own standards of excellence to ensure the effective management and safe operation of nuclear

electric generating plants.’’

A comprehensive program has been established for conducting, on a periodic

basis, independent evaluations of the operating nuclear plants and supporting corporate organizations of all U.S. nuclear utilities. These evaluations are performancebased and are designed to ensure that each utility is striving to meet the industry’s

high standards in key areas.

Teams of qualified and experienced personnel conduct these evaluations, focusing

on plant safety and reliability. The evaluation teams are augmented by senior reactor operators, other peer evaluators from operating units similar to those at the station being evaluated, and host utility peer evaluators. The scope of the evaluation

includes traditional functional categories such as operations, maintenance, and engineering that generally correspond to the nuclear station organization. The areas

evaluated include organizational effectiveness, operations, maintenance, engineering, radiological protection, chemistry, and training.

In addition, the teams evaluate cross-functional performance areas—processes

and behaviors that cross organizational boundaries and that address organizational

integration and interfaces. The cross-functional evaluation includes areas such as

safety culture, self-assessment and corrective action (learning organization), operating experience, human performance, and training.

The performance of operations and training personnel during simulator exercises

is included as part of each evaluation. Also included, where practicable, are observations of plant startups, shutdowns, and major planned evolutions. Evaluations of

each operating nuclear station are conducted at an average interval of 21 months.

Results from more than 875 plant evaluations INPO has conducted to date show

substantial improvements in the conduct of plant operations, enhanced maintenance

practices and improvements in equipment and human performance.

Training and Accreditation

Another excellent example of the industry’s response to the Kemeny Commission

is in its commitment to improved training through INPO. This commitment has resulted in considerable improvements in both the safety and reliability of the nation’s

nuclear power plants.

Under the training and accreditation cornerstone, the Institute assists its member

utilities in developing, implementing and maintaining high quality, comprehensive

training in a wide range of areas. INPO also evaluates the results of utility training

programs through the ongoing operating plant evaluation program and analyzes industry events to identify needed training improvements.

INPO manages an industrywide accreditation program for utility training programs through the National Academy for Nuclear Training. Established in 1985, the

National Academy for Nuclear Training provides a framework for the following

three essential elements in the industry’s program to strengthen nuclear utility

training:

• training activities, resources and facilities at nuclear utilities

• the National Nuclear Accrediting Board

• INPO’s training-related activities

The National Nuclear Accrediting Board is an independent body established to ensure that nuclear utility training programs meet the standards of the National

Academy for Nuclear Training. The Board is composed of eminent American scholars and executives from the following four groups:

• industrial training experts from fields outside the nuclear industry

• members of the postsecondary education community

• individuals nominated by the NRC

• senior utility executives

As an example of the National Nuclear Accrediting Board’s independence, the

Board’s charter requires that the majority of each panel be from outside the utility

industry when considering each accreditation action.

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The need for the work INPO is doing in training was recognized by the Kemeny

Commission when it recommended the establishment of ‘‘agency-accredited training

institutions’’ for nuclear plant operators. As a condition of membership, each of

INPO’s 34 member utilities has committed to achieve and maintain accreditation for

12 key positions involved in nuclear power operations. These positions include shift

managers; licensed and nonlicensed operators; maintenance supervisors, craftsmen,

and technicians; chemistry and radiological protection technicians; and engineers.

By the end of 1990, all U.S. nuclear power stations had achieved initial accreditation of all applicable training programs. Accreditation is maintained on an ongoing

basis and is formally renewed for each training program every four years.

INPO conducts courses and seminars in support of the National Academy for Nuclear Training. These courses and seminars help personnel better manage nuclear

technology, more effectively address leadership challenges, and improve their personal performance. Examples of courses conducted include the Chief Executive Officer Seminar, Reactor Technology Course for Utility Executives, Senior Nuclear

Plant Management Course, Control Room Teamwork Development Course, and professional development seminars for shift managers, maintenance supervisors, engineering supervisors, radiation protection and chemistry supervisors, and training

supervisors.

Events Analysis and Information Exchange

The exchange of industry operating experience is another direct result of a

Kemeny Commission recommendation which called for a ‘‘systematic gathering, review and analysis of operating experience at all nuclear power plants.’’ Through this

cornerstone program, each nuclear station provides data on events to the Institute’s

technical staff. At INPO, these industry events are reviewed for significance. Following this analysis, the Institute disseminates applicable lessons learned throughout the industry. As a follow-up, INPO evaluation teams check to see that nuclear

stations have implemented all the applicable recommendations.

The Institute has reviewed more than 100,000 events since its inception and provided 482 recommendations to member utilities and international participants

through 85 Significant Operating Experience Reports. More than 99 percent of the

482 recommendations (lessons learned) issued to date have been implemented industrywide.

Nuclear Network is an Internet-based electronic communications system available to all U.S. members and international participants. The system allows rapid

transmittal, storage and retrieval of nuclear plant information, and it provides a

means for questioning other members and participants about their experiences in

solving nuclear operations problems.

The Institute collects and analyzes data and information related to nuclear plant

performance. Members provide data on quantitative performance indicators on a

quarterly basis. This plant data is then consolidated for trending and analysis purposes. Industrywide data, plus trends developed from the data, is provided to member and participant utilities for a number of key operating plant performance indicators. These include the performance indicators used by the World Association of Nuclear Operators (WANO) for worldwide nuclear plant performance comparisons.

Members use this data in setting specific performance goals and in monitoring and

assessing performance of their nuclear plants. INPO uses performance goals from

individual utilities to help establish industrywide performance goals for plants in

the United States.

Assistance

The assistance cornerstone has also contributed to the industry’s improvements

by fostering comparison and the exchange of performance information and successful methods. Visits to member utilities by INPO personnel in response to requests

by the utilities are one of the most important modes of assistance. To date, INPO

has conducted more than 3,500 assistance visits.

Several categories of documents (such as guidelines and good practices) are designed and developed to assist member utilities in their efforts to achieve excellence

in operation, maintenance, training, and support of nuclear plants. These documents

are now in widespread use at every U.S. nuclear station and at many utilities

worldwide.

Another element of the assistance cornerstone is workshops. INPO sponsors workshops that afford the Institute, international participants and U.S. member utilities

an opportunity for face-to-face information exchange. Typically, all U.S. nuclear utilities are represented at these workshops that routinely address topics such as operations, operating experience and maintenance. International speakers are featured

at most INPO workshops to promote the worldwide sharing of information. INPO

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has sponsored 178 workshops with a cumulative attendance of more than 20,000

personnel. In addition, INPO has sponsored more than 330 working meetings and

seminars with a cumulative attendance of more than 5,300 personnel.

INPO’S INTERNATIONAL PROGRAM, WANO-AC

As INPO developed and expanded its activities, an International Participant Program was formed in 1981 to promote the widespread application of INPO standards

of excellence and ensure that INPO programs benefit from good practices and lessons learned worldwide. To accomplish this, the International Participant Program,

which is observing its twentieth anniversary this year, facilitates the exchange of

operating experience and technical information with participating international nuclear utilities and utility organizations in other countries.

There are currently 13 countries participating in the program. These include Belgium, Brazil, Canada, France, Germany, Japan, Korea, Mexico, Slovenia, South Africa, Spain, Taiwan and the United Kingdom.

It is important to note that following the Chernobyl accident, the International

Participant Program was instrumental in the formation of WANO. The mission of

WANO is to maximize the safety and reliability of the operation of nuclear power

plants by exchanging information and encouraging communication, comparison, and

emulation among its members.

WANO is organized through regional centers and includes every operating nuclear

electric plant in the world. INPO represents all U.S. utilities as a member of the

WANO-Atlanta Center.

INPO’S RELATIONSHIP WITH U.S. GOVERNMENT AGENCIES

INPO coordinates its activities with federal government agencies as appropriate.

The Institute maintains a formal Memorandum of Agreement with the Nuclear Regulatory Commission (NRC) and with the Department of Energy (DOE). These agreements reflect the desire of both organizations for a continuing, cooperative relationship in the exchange of experience, information and data related to the safety of nuclear power plants.

Although nuclear plant safety and protection of the public are fundamental goals

of both INPO and the NRC, their roles, while complementary, are different. INPO

was not created to supplant the regulatory role of the NRC, but to provide the

means whereby the industry itself could, acting collectively, make its nuclear operations safer. It was recognized that in establishing and meeting its goals and objectives, INPO would have to work closely with the NRC, while at the same time not

becoming or appearing to become an extension of or an advisor to the NRC or an

advocacy agent for the utilities.

INPO provides assistance to DOE to support improvement of operational safety

at DOE nuclear facilities. INPO conducts a limited number of assistance visits to

DOE nuclear facilities, provides DOE with copies of selected INPO documents and

domestic operating experience reports, and allows DOE personnel to attend industrywide workshops and conferences. A limited number of DOE personnel are given

access to Nuclear Network and selected information available on INPO’s member

Web site.

Additionally, certain aspects of INPO’s international program are coordinated

with the Department of State.

PERFORMANCE IMPROVEMENTS

In part through participation in INPO’s cornerstone programs, a great deal of

progress has been achieved by the U.S. nuclear industry. This progress may be best

exemplified by a set of performance indicators that reflect the considerable progress

in the areas of operations, training and maintenance.

In the mid-1980s, INPO began an initiative to develop additional methods for

measuring and comparing the performance of nuclear plants. A series of 10 nuclear

plant performance indicators was selected, and utilities have been reporting their

performance. These indicators have been adopted by WANO and are now used

worldwide. Aggressive goals are established at five-year intervals. The year 2000

marks the end of the third five-year period.

The basic principle inherent in the performance indicator program is that nuclear

plants with good performance, as measured by the overall set of performance indicators, are generally recognized as well-managed plants. Such plants are generally

more reliable and can be expected to have higher margins of safety.

Year 2000 was successful overall for the U.S. nuclear industry—the best ever in

terms of safety and reliability. For the first time, the industry met or exceeded the

five-year goals in all categories. Additionally, performance in every indicator was as

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good as or better than the previous year’s performance. The 2000 results continue

the remarkable record of progress that was started in 1980.

I won’t discuss each performance indicator in detail today. Instead, I will illustrate the industry’s progress using a few selected indicators, which are included in

the INPO 2000 Annual Report I mentioned earlier.

Unit Capability Factor is a measure of the plant’s ability to stay on line and

produce electricity. A high unit capability factor indicates effective plant programs

and practices to minimize unplanned outages and to optimize planned outages. In

1980, the industry median was 62.7 percent. In 2000, the median was 91.1 percent.

This represents the best performance ever for this indicator; and for the second year

in a row, it exceeds the 2000 goal.

Unplanned Automatic Scrams shows the number of automatic shutdowns for

approximately one year of operation. A low number indicates care in operations,

good maintenance, and good training. The median number has been reduced from

7.3 percent in 1980 to zero in 2000. In fact, the median value has been zero for

three straight years and continues to exceed the 2000 goal.

Safety System Performance monitors the availability of three important standby redundant safety systems to mitigate off-normal events. The industry’s goal is

to encourage a high state of readiness, with at least 85 percent of these systems

meeting specific 2000 goals for availability in excess of 97 percent. The 85 percent

target allows for normal year-to-year variations in individual system performance.

The 2000 performance of 96 percent is an increase over 1999 and continues to exceed the 2000 goal.

Collective Radiation Exposure examines the effectiveness of personnel radiation exposure controls for boiling water reactors and pressurized water reactors.

Low exposure indicates strong management attention to radiological protection.

Worker exposure has been reduced significantly over the past 20 years. The 2000

median value of 150 man-rem per unit for boiling water reactors is the best performance ever and exceeds the 2000 goal for the fourth straight year. This is a striking improvement over the 1980 figure of 859 man-rem per unit. Likewise, the pressurized water reactor value of 82 man-rem per unit exceeds the 2000 goal for the

third straight year, also a significant improvement over the 1980 figure of 417 manrem.

Not shown in the material provided, the INPO Performance Indicator Index is an

excellent illustration of the industry’s overall progress since 1985. This Index is a

weighted composite of the individual indicators on a scale of 0-100. In 1985, the aggregate Index value for the industry was 43. In 2000, the value was 94—an all-time

high.

TRENDS IN THE INDUSTRY

In short, the industry has made excellent overall progress in safety and reliability

since 1980 and is committed to seeing these improvements continue.

U.S. nuclear plants are performing at historically high levels from a safety and

reliability standpoint. Owners are vigorously pursuing license renewal. Also, with

the advent of deregulation, the industry is consolidating rapidly to further improve

efficiency. All this indicates that nuclear power is being recognized as a valuable,

reliable source of energy for the future. The business community is now recognizing

what the nuclear industry has spent 20 years demonstrating: These plants can be

operated safely and efficiently; and, if properly maintained, there is no reason they

can’t continue this performance well beyond their original 40-year licenses.

Unquestionably, the industry will face—and is already facing—new challenges as

it deals with deregulation and life extension issues. Long-term industry success will

require vigilance and commitment, not just to the higher standards we have today,

but to continuous improvement. INPO is helping the industry focus on the key

issues that will be important in the near future—issues like human performance,

equipment performance, and self-assessment and corrective action. New training

needs will also emerge as we prepare a new generation of nuclear professionals to

operate and maintain our nuclear fleet.

The U.S. industry will continue to set challenging goals for itself. Already, new

2005 goals have been established for the performance indicator program. Taking

into account the dramatic improvement of the industry as a whole during the past

two decades, these new goals focus more on plants that are performing below the

industry median. In concert with these changes, INPO is also adapting its programs

to further help these outlier plants improve their performance.

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CONCLUSION

In conclusion, nuclear energy is a God-given resource; and its proper management

is vitally important, not only today, but for future generations. I don’t believe it’s an overstatement to say that a foundation is being put in place for a renaissance

in nuclear power.

But this foundation requires absolutely that we remain accident-free. This requires vigilance and commitment, not just to the higher standards we have today,

but to continuous improvement. With vigilance and with commitment to safety by

the industry, supported by INPO, and with oversight by a strong and fair regulator,

I believe nuclear power has a bright future in helping fulfill our nation’s energy

needs.

At the 1989 INPO CEO Conference, on the observance of INPO’s tenth anniversary, then-U.S. Secretary of Energy Admiral James D. Watkins said, and I quote:

In the past 10 years, INPO has done an outstanding job in helping the nuclear

industry improve its performance. Ten years from now, on the twentieth anniversary of INPO, I sincerely hope that we can all celebrate the absence, during the

1990s, of a single significant incident at a nuclear reactor. If we do, we will be well

on our way to reestablishing nuclear power as a safe and viable source of energy,

not only for America, but for the world.

Thanks to the nuclear industry’s continued pursuit of excellence in plant safety

and reliability, I believe we are seeing the realization of Admiral Watkins’ vision

just as he predicted.

Thank you for the opportunity to share INPO’s perspective. Subject to your questions, this concludes my testimony.

Mr. NORWOOD. Thank you, Mr. Tollison.

And for the committee, I would like to introduce to you Mr. Ward

Sproat, Vice President of International Programs, Exelon Corporation, Kennett Square, Pennsylvania.

Welcome, Mr. Sproat.

STATEMENT OF EDWARD F. SPROAT III

Mr. SPROAT. Mr. Chairman, thank you. And thank you, members

of the committee.

For those of you who are not familiar with Exelon, we are the

largest nuclear generator in the U.S. with approximately 20 percent of the nuclear generating capacity under our operation and

control. We have approximately 37,000 megawatts of electric generating capacity in the U.S. of diversified fuel sources, and we have

another 8,500 megawatts under either construction or development.

There have been some references made to the Pebble Bed Modular Reactor here today, and I would like to give you a brief overview of that project and explain why Exelon is involved with that

project, and what our decisionmaking process is regarding that

technology moving forward.

Right now, we have committed up to $7.5 million of our own

money to be involved with the preliminary design of the Pebble

Bed Modular Reactor technology in South Africa. The other parties

that are partners in that venture at this point in time are British

Nuclear Fuels Limited, BNFL, of the UK; SCOM, which is the national electric utility of the Republic of South Africa; and the Industrial Development Corporation of South Africa.

The four partners are funding the preliminary design of that

technology which will be completed—the preliminary design will be

completed sometime in the next 2 to 3 months. At the end of June,

there will be produced a detailed feasibility study of the technology

which will be the basis for the decision by the partners to move forward with the project or not.

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If we make a decision to move forward with the project, the plan

is to build, with the appropriate approvals from the government of

South Africa, a full-size demonstration plant in South Africa, probably starting in late 2002, and that construction period would probably take approximately 3 years with another year of startup testing.

Let me make it very clear that Exelon’s involvement in this

project is not because we want to be a nuclear reactor supplier. We

want to be a nuclear power producer using this technology here in

the U.S. And let me just talk about why we are interested in this

technology and why we believe it is a good fit in the future.

Our company was formed of the merger of Commonwealth Edison in Illinois and Philadelphia Electric in Pennsylvania. Both of

those states are at the forefront of the electric market deregulation

in this country, and as a result we have gotten a pretty unique perspective on what the unregulated or the deregulated wholesale

marketplace looks like in this country.

And we believe that this small modular reactor technology has

got some unique aspects to it that very well fit the unique dynamics of a regional wholesale power marketplace, and we don’t believe, based on our current evaluations, that the currently available

other nuclear alternatives can compete successfully in that deregulated marketplace.

Let me just talk briefly about what some of those unique aspects

of that deregulated marketplace are. No. 1 is the technology needs

to be brought online quickly—a 36- to 48-month lead time at max—

because if a demand—supply/demand gap develops in a regional

marketplace, your competitors will beat you to market with combined cycle gas turbine technology. And if you can’t bring a nuclear

plant on in a relatively quick period of time, you are going to lose

your opportunity.

Obviously, the economics have to be able to compete with gasfired combined-cycle gas turbines at about 3 to 3.5 cents a kilowatt

hour for your all-in costs. Also, adding a large 1,100- or 1,200-

megawatt electric power plant to a deregulated marketplace will

probably throw off the supply/demand to the point where the marginal—while the prices in that market will be depressed to the

marginal costs of the lowest cost producer.

And, finally, the PBMR, we believe, is a very environmentally

sound alternative in terms of not emitting any air pollutants and

Greenhouse gases. So we intend to find out whether the PBMR

can, in fact, compete and meet those criteria that we believe are

necessary to compete in the deregulated marketplace in the future.

The PBMR itself is a high-temperature gas-cooled reactor, has a

helium gas turbine directly connected to the reactor, has an overall

thermal efficiency of about 40 to 42 percent, and provides, as was

mentioned to earlier by one of the members, provides—the fuel is

a very unique design, which is in a ceramic form which does not—

is not soluble in water, which is one of the concerns of a deep geological repository for spent fuel.

We do expect some regulatory hurdles, though, with trying to get

this technology licensed of a non-technical nature. Specifically, we

don’t know how long the licensing process is going to take. We do

79

believe that in an ideal situation we should be able to get this technology licensed in about 26 to 28 months.

However, given the uniqueness of the technology itself, given the

fact that the 10 CFR 50, Part 52 licensing process, which is the expedited licensing process, has never been tested before by anybody

in this country, that there is going to be a steep learning curve for

both ourselves and the Nuclear Regulatory Commission in utilizing

that licensing process for the first time.

So we do believe that that licensing process will—is somewhat

indeterminant in terms of the amount of time it is going to take.

Also, because of the small modular nature of these reactors,

there are some unique regulatory impediments that we are going

to have to overcome. Essentially, some of the requirements for financial protection, in terms of $80 million retroactive premium per

reactor that is currently required. That means an 1,100-megawatt

reactor would have the same premium as a 100-megawatt reactor

for the PBMR, and we think that is going to be a significant problem for us. And there are several others as outlined in my testimony.

Mr. NORWOOD. Of course, your testimony, Mr. Sproat, will be in

the record. And we are very grateful for the time that you have

been able to come and share with us.

Mr. SPROAT. Thank you, Mr. Chairman.

[The prepared statement of Edward F. Sproat III follows:]

PREPARED STATEMENT OF EDWARD F. SPROAT III, VICE PRESIDENT—INTERNATIONAL

PROJECTS, EXELON GENERATION COMPANY

Mr. Chairman and Members of the Subcommittee: I appreciate the invitation to

appear before the Subcommittee to discuss the views of Exelon Generation Company

regarding our interests in building new nuclear power plants in the United States

and the potential barriers we currently face in our efforts to do so. My name is Edward F. Sproat and I am the Vice President of International Projects for Exelon

Generation Company. Exelon Generation is a wholly owned subsidiary of Exelon

Corporation, which was formed last year by the merger of Unicom Corporation of

Chicago and PECO Energy Company of Philadelphia. Exelon Generation currently

owns and operates approximately 37,000 megawatts of diversified electrical generation with another 8,500 megawatts under construction or development. We are the

largest nuclear generation operator in the country with approximately 20% of the

nation’s nuclear generation capacity. Both Unicom and PECO Energy were pioneers

in the commercialization of civilian nuclear power with each company building its

first nuclear plant in the early 1960’s. As a result, our new company has both a

deep respect for and a keen understanding of nuclear power and we have been able

to make it the foundation of our successful generation business.

Exelon’s Involvement in the Pebble Bed Modular Reactor Project

You may have recently heard or read about the Pebble Bed Modular Reactor, or

PBMR, that is currently being developed in the Republic of South Africa. Exelon is

investing approximately $7.5 million in this project to complete the preliminary design so that a feasibility study of the technology and its economics can be completed.

Our other partners in this venture are ESKOM, the national electric utility of the

Republic of South Africa; the Industrial Development Corporation of South Africa;

and British Nuclear Fuels Limited (BNFL) of the United Kingdom. The study is due

to be completed early this summer. If the technology is deemed ready for commercialization, and if the economics prove to be competitive against other forms of generation, the partners with the appropriate approvals of the South African government will proceed to build a demonstration plant in South Africa near Cape Town.

Construction of that plant will take approximately thirty-six months, followed by a

twelve month testing period.

If Exelon’s review of the feasibility study is favorable, we do not intend to wait

for the completion of the demonstration plant in South Africa to begin the licensing

process to build a number of PBMR’s in this country. We would intend to submit

80

a license application for early site permitting in 2002, followed by an application for

a combined construction and operating license in 2003 after the detailed design is

completed in South Africa. We believe that the licensing process, under the best of

circumstances, could be completed in twenty-six months; but in reality, the time required is unknown as there are a number of technical and legal issues that will

need to be resolved. I will come back to the legal issues in a moment.

Reasons for Exelon’s Interest in the PBMR

Both Illinois and Pennsylvania are at the forefront of the deregulation of the electric utility industry. As a result, Exelon has been able to learn about the market

dynamics of the deregulated marketplace very quickly. To be able to compete in the

deregulated wholesale power markets, which have distinctly unique regional characteristics, new generation sources must be able to meet several criteria. Specifically,

new plants must be able to be permitted and brought on-line quickly, in thirty-six

to forty-eight months at the most, and they must be able to compete with gas-fired

combined cycle power plants on a total cost basis in the 3 to 3.5 cents per kilowatthour range. They must be small enough so that as their capacity is added to the

market, an oversupply situation is not created in the region that drives prices down

below the producers’ marginal costs. They must also meet the environmental constraints of the region. We don’t believe that the currently available designs of light

water reactor nuclear power plants can meet all of these criteria. We believe that

the PBMR is the only reactor currently under development that may be able to meet

the needs of this deregulated marketplace in the next five years. We intend to find

out if it can.

Description of the PBMR

The PBMR is a small nuclear power plant that would produce approximately 125

megawatts of electricity per module with four of these modules being able to fit on

a football field. Each module has a high temperature gas-cooled reactor that heats

helium under pressure to approximately 900 degrees Celsius, which turns a gas turbine connected to a generator. The helium then returns to the reactor. This direct

cycle allows higher efficiencies than existing nuclear plants and also significantly reduces the amount of water required for plant cooling over other power plants. The

coupling of a gas turbine directly to the helium reactor has only recently been made

possible through advances in gas turbine technology

The reactor core is comprised of about three hundred thousand fuel spheres that

are approximately the size of billiard balls. Each sphere contain approximately

14,000 coated particles of 9% enriched Uranium 235, each 0.5 millimeters in diameter. The coating on each particle is designed to contain the radioactive gases produced by nuclear fission and can withstand extremely high temperatures. As a result of the reactor and fuel designs, the fuel cannot melt under any conditions, a

significant safety improvement over existing reactor technology. The reactor and

fuel designs have been demonstrated through years of testing in Germany where the

Pebble Bed Reactor was invented in the early 1970’s. The South Africans are utilizing the German fuel and reactor technology for the PBMR and would be the suppliers of the fuel to be used in our reactors. The ceramic nature of this fuel also

make it insoluble in water which is significant in that it can’t leach into ground

water when stored underground in a spent fuel repository.

Regulatory Hurdles

As I mentioned before, the expected length of the process that we will face to license the first set of PBMR’s is difficult to determine. While the technical issues

will be complex, there are legal hurdles that appear to be more difficult to resolve.

Specifically, there are a number of regulations that were promulgated when it was

anticipated that only regulated electric utilities would build nuclear plants. These

regulations never foresaw the dawn of a deregulated power generation market and

are now obsolete. If Exelon proceeds with building PBMR’s, they will be merchant

nuclear power plants that will not be in a regulated utility rate structure. The financial risk of the plant will rest on the shareholder, not the ratepayer.

The financial burden imposed on small, modular plants by these inappropriate

regulations clearly has the potential to make the economics untenable. Some of the

key regulations which need to be addressed include the financial protection requirements of 10 CFR Part 140, the decommissioning funding requirements of 10 CFR

Part 50.75, the antitrust review requirements of 10CFR Part 50.33a, the annual

fees on a per reactor basis in 10 CFR Part 171, and the large emergency planning

zone requirements in 10 CFR Part 50.54(m).

In addition to the above regulations, the licensing process which we would follow

under 10 CFR Part 52 to obtain a combined construction and operating license for

these plants has never been utilized. As a result, we expect that there will be a

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steep learning curve for both the U.S. Nuclear Regulatory Commission staff and

ourselves on how to execute this process with resultant high costs and delays. We

will also need to work with the NRC staff to develop the technical licensing framework for the PBMR as the existing regulations are written for light water reactors.

Regulations will need to be developed for gas reactors, also at additional costs and

potential delay.

Potential Role for Public Funding

Exelon believes strongly that the development of the design and the cost to commercialize and build the PBMR should be borne by the PBMR partners. It is anticipated that the partners will invest upwards of $600 million of their own money to

make the PBMR commercially viable with Exelon investing a significant additional

amount to license and build the first PBMR’s. There are, however, a number of first

of a kind costs that Exelon will bear as the first licensee for this new technology

that will flow directly to government agencies such as the NRC in the form of licensing fees and the national laboratories as consultants to the NRC. As stated earlier,

we expect that the costs of licensing this technology will be higher than normal because of the unproven nature of the 10CFR Part 52 licensing process and the need

to create a gas reactor licensing framework. The technical expertise needed to review the PBMR application does not currently exist either in the NRC or in the national labs and will need to be developed. We believe it is appropriate for some level

of government funding to be provided to fund the work of government agencies in

these areas.

Summary

In conclusion, as the shortage of electricity supplies in several areas of the country looms large with the approach of summer, we must find ways to cut through

the morass of archaic legal and procedural impediments to building new environmentally benign sources of electricity. This is an issue of urgent national priority.

Nuclear power has earned the right to be counted among this country’s most viable options as a future power source. It has achieved an outstanding safety record

and serves as a stable and abundant domestic source of electricity which emits no

air pollutants or greenhouse gases. If we’re able to make the PBMR commercially

viable and cost competitive, we will have at least one potential solution to our future

energy needs.

Mr. NORWOOD. Is it Longenecker?

Mr. LONGENECKER. It is Longenecker.

Mr. NORWOOD. I would like to introduce John R. Longenecker to

the committee, Longenecker & Associates, Management Consultants from Del Mar, California. Thank you for taking your time to

be here, and please take 5 minutes.

STATEMENT OF JOHN R. LONGENECKER

Mr. LONGENECKER. Mr. Chairman, thank you.

I want to thank you for the opportunity to address the subcommittee on the issues involved with the——

Mr. NORWOOD. Pull the mike just a little closer.

Mr. LONGENECKER. [continuing] on the issues involved with the

U.S. nuclear fuel cycle. Living in California, I understand very well

the importance of secure energy supplies, and the reliable, economic supply of nuclear fuel is certainly essential to the future energy security of the United States.

Today, however, that supply is endangered. U.S. nuclear fuel

cycle companies are being challenged by a range of factors that include excess capacity because there were fewer reactors built than

the fuel cycle companies planned originally. Also, the sale of Russian highly enriched uranium, U.S. HEU blending, and sale of inventories including those of USECs challenge these industries.

With respect to uranium enrichment, Mr. Chairman, a very severe situation exists in the United States, where USEC is operating uneconomic, 50-year old plants, has no proven technology to

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replace them, and relies on Russian HEU blending and resale to

meet more than half of all of its commercial customer needs.

Constructing new, cost-competitive, enrichment capacity in the

United States as soon as possible is critical to the future of all

parts of the U.S. nuclear fuel cycle and must be a top priority.

There is a very strong linkage between a healthy uranium enrichment business and the health of the uranium conversion and fuel

fabrication industries in this country.

Now, the Russian highly enriched uranium agreement is certainly a key market factor. We all realize that maintaining political

and financial stability for the Russian HEU agreement is essential

for the fulfillment of our international policy objectives.

However, the U.S. Government should carefully consider several

aspects of that agreement, including the assignment of the role of

the executive agent of the Federal Government on behalf of the—

to the United States Enrichment Corporation as its sole agent. Second, how the billion dollar trading profits that have already accrued and will continue to accrue from that agreement should be

allocated. And, third, whether it is in the best interest of the

United States to allow USEC to broker additional supplies of enriched uranium from Russian commercial enrichment plants.

Now, it is my firm belief that government subsidies for non-competitive companies and trade sanctions against foreign competitors

will not build a sustainable basis for the continued use of nuclear

power in the United States. It is particularly alarming that the

anti-dumping action brought by USEC against its European competitors who have deployed low-cost technology over the past few

decades could increase fuel cost to U.S. ratepayers by $650 million

to $1.2 billion per year.

This suit has also created uncertainty about the assurance of

supply under existing import contracts to many U.S. utilities.

Mr. Chairman, I strongly believe that the United States must define a comprehensive strategy to maintain viable, competitive, nuclear fuel supplies for this country for the decades ahead. The roles

in implementing a long-term strategy to keep the U.S. nuclear industry competitive must be clear and must include substantial participation by both the government and private sector with the private sector taking the lead. Once the private sector has proposed

its solution the government can then determine whether and how

to support it.

Now, thus far, Mr. Chairman, I have spoken only to the front

end of the fuel cycle. As part of its overall nuclear fuel cycle strategy, I believe the government must place top priority on assuring

that a permanent disposal mechanism for used fuel is implemented

as soon as possible. Later this year, the Department of Energy will

issue its site recommendation for the Yucca Mountain project, and

this recommendation must be acted on promptly and a path forward defined and funded as soon as possible.

Mr. Chairman, in summary, if the government and private sector

evaluate the nuclear fuel supply situation in the United States and

decide that reliance on non-U.S. sources is acceptable due to the

high costs and risks involved in developing or maintaining our own

domestic industry, that is okay.

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However, an immediate public policy debate is warranted on how

best to assure that that doesn’t happen by sheer neglect. We need

a competitively priced nuclear fuel supply source in the United

States or abroad to provide reliable low-cost electricity to our nations.

I thank you, and I would be pleased to respond to your questions.

[The prepared statement of John R. Longenecker follows:]

PREPARED STATEMENT OF JOHN R. LONGENECKER, LONGENECKER & ASSOCIATES, INC., MANAGEMENT CONSULTANTS

Mr. Chairman, thank you for this opportunity to address the Subcommittee on

Energy and Air Quality on the issues involved with the US nuclear fuel cycle. I have

been involved with nuclear energy and nuclear fuel cycle issues for more than 28

years, and previously managed DOE’s uranium enrichment business as Deputy Assistant Secretary of DOE, and later as the first Transition Manager of USEC.

Today, parts of the nation, including my home state of California, are experiencing electricity shortages, with rolling blackouts that disrupt business and productivity in some of the nation’s key high-tech industrial regions. Nuclear power currently represents about 20% of electrical power consumed in the US, and any uncertainty regarding the reliable and economic supply of fuel to US nuclear power plants

could pose a serious threat to our nation.

My key conclusions regarding the US nuclear fuel cycle industry are as follows:

1. A reliable, economic supply of nuclear fuel is essential to the future energy security of the United States. That supply in endangered.

2. US nuclear fuel cycle companies are being challenged by a range of factors including the sale of Russian HEU, US HEU, and USEC’s inventories of natural and

enriched uranium.

3. A very severe situation exists in the uranium enrichment business, where the US

is operating 50-year-old plants, has no proven technology to replace them, and

relies on Russian HEU blending to meet more than half of all customer deliveries. Constructing new, cost competitive enrichment capacity in the United

States as soon as possible is critical to the future of all parts of the US nuclear

fuel cycle industry.

4. Maintaining political and financial stability for the Russian HEU Agreement is

essential for the fulfillment of international policy objectives.

However, the US government should carefully consider (a) the assignment of

the role of Executive Agent on behalf of the US government, (b) how the billion

dollar trading profits from brokering Russian enriched uranium should be allocated, and (c) whether it is in the best interests of the United States to allow

USEC to broker additional supplies of enriched uranium from Russian commercial enrichment plants.

5. Government subsidies for non-competitive companies and trade sanctions against

foreign competitors do not build a sustainable basis for the continued use of nuclear power in the United States. It is particularly alarming that the antidumping action brought by USEC against its European competitors could increase fuel costs to US ratepayers by $650 million to $1.2 billion per year, and

has created uncertainty about assurance of supply under existing import contracts.

6. The United States must define a comprehensive strategy to maintain viable, competitive nuclear fuel supplies for this country for the decades ahead. The roles

in implementing a long-term strategy to keep the US nuclear industry competitive must be clear, and must include substantial participation by both the government and private sector, with the private sector taking the lead.

BACKGROUND

The nuclear fuel cycle market is restructuring and consolidating. This restructuring has had some painful effects, exacerbated by the sale of Russian Highly Enriched Uranium, US HEU, and USEC’s inventories of natural and enriched uranium.

Maintaining political and financial stability for the Russian HEU Agreement is

essential for the fulfillment of international policy objectives. The US government’s

goal must be to assure that the Agreement’s supply contract stabilizes delivery arrangements for the next 15 years.

The viability of the Agreement must not be jeopardized if newly negotiated pricing

terms or conditions in the contract fail to assure the continuity of deliveries.

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However, the Russian HEU contract is only one part of the equation. The United

States must have an overarching objective to define a comprehensive strategy to

maintain viable, competitive nuclear fuel supplies for this country for the decades

ahead. Short term fixes and band-aid approaches must be avoided.

Today’s highly competitive market is no surprise to anyone who has followed the

nuclear fuel markets over the past 20 years. We have known for more than a decade

that due to the construction of fewer nuclear power plants than originally projected

and HEU blending, nuclear fuel supply exceeds demand in every sector. We have

also known for more than 25 years that US gaseous diffusion uranium enrichment

technology would become economically obsolete and would need to be replaced. However, today the US lacks any plan to address the key nuclear fuel cycle issues both

in the near term and in the long term.

In the context of assuring reasonable nuclear fuel supply at competitive prices,

I believe that the US must assure that it is not totally reliant on non-US sources

for its fuel. However, in order to survive, US fuel supply companies themselves must

be competitive. Government subsidies for non-competitive companies and trade

sanctions against foreign competitors do not build a sustainable basis for the continued use of nuclear power in the United States.

For example, the antidumping action brought by USEC against its European competitors in late 2000, has created significant market uncertainties, and could increase fuel costs to US ratepayers by $650 million to $1.2 billion per year.

In the final analysis, US citizens end up paying the bill for such actions, either

though higher taxes or higher electricity rates. The US nuclear fuel businesses must

be able to compete head-to-head in the world nuclear fuel market.

To develop a comprehensive nuclear fuel cycle strategy will require collaboration

among the Congress, the Administration, industry, labor, state governments, and

other constituencies. The ultimate goal must be to have a competitive, stable, viable

nuclear fuel supply for this country. Reliability of supply and price are crucial elements in this plan. More specifically, we must assure that nuclear fuel prices do

not suffer a shock similar to that experienced with natural gas prices recently. Fuel

prices must be stable and predictable if the nation is to rely on nuclear power as

part of its supply mix for the future.

The roles in implementing a long-term strategy to keep the US nuclear industry

competitive must be clear, and must include substantial participation by both the

government and private sector. The nuclear power industry must not and will not

rely on the government to implement a solution. The private sector should take the

lead. However, the government also has a key role to play. This role should be defined after the private sector plan is defined.

A key policy debate revolves around the Russian HEU Agreement. At present the

Russian HEU contract is under re-negotiation and will expire on December 31,

2001. The contract has already generated substantial profits for the exclusive US

Executive Agent, USEC. Under USEC’s proposed ‘‘market based’’ revision to the

supply contract with Tenex, the Russian Executive Agent, trading profits are estimated to be $1 billion or more over the next 10 years. USEC has also sought Administration approval to import and resell an additional one million SWU per year from

Russian commercial enrichment facilities.

Since this is a government-to-government agreement, and the Executive Agent is

selected by the US government, there needs to be an open dialogue regarding

whether and how profits generated by this government created franchise are allocated to promote the long-term viability of the nuclear fuel cycle industry.

More specifically, should this billion-dollar benefit accrue solely to USEC, for use

at its discretion, or should the US government have some say in how the trading

profits from this government-to-government agreement are utilized?

As part of this dialogue, consideration should be given to establishing a second

Executive Agent that would purchase a portion of the low enriched uranium derived

from HEU now being blended in Russia. Such action could increase the assurance

of continuity of the Russian HEU Agreement, allow USEC to take advantage of its

low marginal costs by increasing production at Paducah and thereby enhance its

near term profits and viability by lowering its average GDP production costs.

URANIUM ENRICHMENT

Today, USEC is the only North American supplier of uranium enrichment services, and the long-term future of this business is highly uncertain. USEC is the high

cost supplier in the market, and enrichment operations at the GDPs in the future

will operate at a loss. USEC utilized only about 29% of its nameplate GDP capacity

in 2000 (see Table 1), and over the next year will supply a majority of its customers

needs from Russian and US HEU blending. This situation led to the decision to

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close the Portsmouth GDP in 2001, and at some point in the future will lead to the

closure of the Paducah GDP. Trading profits from the Russian HEU agreement and

sale of natural and enriched uranium inventories provide essentially all of USEC’s

cash ($150-200 million per year) that is used to pay for dividends, capital upgrades,

R&D, and sales, general and administrative costs.

USEC is finding it more profitable to operate as a trader of blended HEU rather

than as a primary producer. This approach appears to lead inevitably to USEC

exiting the market as a primary producer. As a result, constructing replacement enrichment capacity in the US should be the key focus for the next few years.

Table 1—Worldwide capacity, sales and production of separative work

Nominal Production Capacity

(MSWU/year)

Estimated 2000

Sales (MSWU/

year)

Percent of Total

2000 Sales

Estimated Capacity Utilization

USEC (2 GDPs) ............................................................... 18.5 11.0 32% *29%

COGEMA .......................................................................... 10.8 7.1 20% 66%

TENEX ............................................................................. 14.0 8.5 24% 61%

URENCO .......................................................................... 4.8 4.8 14% 100%

Other ............................................................................... 3.4 3.4 10% 100%

Total ............................................................................... 51.5 34.8 100% 56%

* 5.5 million SWU supplied by Russian HEU

A reality of the uranium enrichment industry is that prices have been declining

since 1985. This decline was driven by the deployment and gradual improvement

of centrifuge technology, primarily in Europe. The continuing decrease in prices

should have been no surprise to anyone, since the Department of Energy (see Figure

1) Office of Uranium Enrichment, the predecessor to USEC, predicted this trend in

1984.

DOE committed to Congress and to its customers in 1985 to deploy AVLIS technology to meet this challenge. As shown in Figure 1, DOE was reasonably accurate

in its price projections. Also as predicted by DOE, Urenco added new enrichment

capacity to the market with production costs well below those of the US gaseous diffusion plants.

However, after an investment of about $1.5 billion, DOE did not deploy AVLIS,

instead transferring all rights to the technology to USEC. In 1994, USEC announced plans to deploy AVLIS, and proceeded to price aggressively in the market,

only to cancel those plans in 1999 when it faced financial problems. USEC’s credit

rating was downgraded to below investment grade (junk bond status) within 18

months of privatization.

USEC’s continued reliance on GDP technology in 2001 is not driven by the competitiveness of GDP technology, but rather by its lack of a proven technology to replace the GDPs. The high costs of GDP operation have been recognized for years.

In fact, the US Atomic Energy Commission announced in the mid-1970s that its

three GDPs were soon to be economically obsolete. Thus, 25 years later we should

not be surprised that the Portsmouth GDP is closing, and that the closure and replacement of the Paducah GDP is a reality that must be planned for.

What is surprising, and in fact astounding to many in the world, is that despite

the expenditure of more than $7 billion dollars of US government funds on centrifuge and AVLIS technology development and deployment over the past 40 years,

the United States today is still operating economically obsolete 50-year old gaseous

diffusion plants. In 1994, USEC announced its plans to have an AVLIS plant operating by 2002. If USEC had succeeded in this plan, it would have very different future prospects than it has today.

The solution to the future competitiveness of the US uranium enrichment industry was and still is the deployment of new, cost competitive enrichment capacity.

Low cost technologies have been developed and deployed by non-US enrichment

companies over the past three decades, while the US has failed to follow through

on past commitments to deploy new low cost enrichment technologies. It is ironic

that the same companies who followed through with the investment in advanced

technologies and new enrichment capacity over the past decades, now face trade

sanctions in the US. In addition, US utilities face supply uncertainties due to these

possible sanctions.

However, even with proven technologies, there are risks inherent in building any

new enrichment capacity in the US. These include market risks, regulatory risks,

and actions by governments such as trade restrictions. Assuming that these risks

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can be managed, Urenco and Russian centrifuge technologies are the low cost proven production options, and absent trade restrictions, are poised to dominate the

market for the foreseeable future. The question is whether the US will cede this

business to foreign suppliers.

The US DOE has proposed a revival of its centrifuge technology program, but

after being out of the centrifuge R&D arena for the last 15 years, the US has no

proven advanced gas centrifuge (AGC) design, limited design infrastructure, and no

production infrastructure. Although the US has a strong history in AGC development, the time, costs and risks involved with developing a competitive design, proving it, and deploying may be much less financially attractive than simply relying

on proven designs and equipment.

One path forward could be a private sector initiative to construct an enrichment

plant using proven technology, while the US government pursues advanced technologies for the long term, either centrifuge or laser, in an attempt to define an option that is substantially cheaper than today’s centrifuge plants. However, if the

government decides to pursue such an option, it must be soundly based to assure

that the end result will be a substantial economic advantage. If there is not a high

probability of such an advantage, government funds should not be spent.

The workers in the uranium enrichment industry have done a great job keeping

the US competitive for decades. However, with 50 year-old GDP technology, they

can only do so much. Furthermore, workers know that there is no long-term future

in working at economically obsolete facilities. They need to know the path forward,

or they will soon be forced to move to other industries with the obvious loss of technical expertise and skills.

Although it sometimes gets masked by rhetoric, the uranium enrichment business

is all about producing SWUs cheaper than you sell them. If the US keeps this focus,

it will have an economically viable production base at the end of the decade.

URANIUM

Natural uranium is a critical element of the nuclear fuel cycle. For the past several years, world production of uranium has been substantially less than world demand.

The difference between production and consumption was made up from HEU

blending, enrichment of depleted uranium tails and inventory sales. The largest single inventory seller was USEC, who sold about $100 million worth of inventories

that it obtained from DOE prior to privatization, in its fiscal year 2000 to raise cash

for its operations.

The countries with rich ore deposits today dominate the world uranium market.

Providing a measure of supply security to US utilities, Canada, with its vast low

cost reserves, is the world’s largest producer of uranium. As shown in Table 2, Australia was second, and former Soviet Union countries were the third largest producer of uranium in 1999.

US production was a small portion of world requirements, a situation that is unlikely to change substantially even as prices recover, due to relatively low uranium

ore grades and high mining costs.

A summary of 1999 uranium production follows:

Table 2—1999 Uranium Production

Area of Production Production % Of World Production

Canada ........................................................................................................................................................... 27

Australia ......................................................................................................................................................... 19

Former Soviet Union ....................................................................................................................................... 18

Central Africa ................................................................................................................................................. 10

Southern Africa ............................................................................................................................................... 12

United States .................................................................................................................................................. 6

Other ............................................................................................................................................................... 8

World uranium prices in the spot market hit an historic low in real terms in 2000,

at about $7/lb before recovering to the current level of about $8.20/lb. Prices have

been strongly impacted by Russian HEU blending and inventory sales. At present,

about one third of world uranium requirements are met from inventory sales and

HEU blending.

Although most uranium is delivered to utilities under long-term contracts at

prices higher than spot market prices, inventory sales have lowered even long-term

prices.

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Shown below in Table 3 are the spot prices for uranium over the past decade. At

present, spot uranium prices in the US market are about $8.20/lb, with long-term

prices at about $9.75/lb. Outside the US market, which restricts the importation of

Russian uranium, spot prices are substantially less at about $6.75/lb.

Overall, the uranium market is expected to be challenging over the next five years

as USEC and other inventory sales and Russian HEU blending continues. As these

inventories are depleted, primary producer sales will increase and prices should recover.

Table 3—Spot U3O8 Price Trends 1990-2000—In Restricted Market

Year Price/lb U3O8

US $

1990 ............................................................................................................................................................... 9.73

1991 ............................................................................................................................................................... 8.73

1992 ............................................................................................................................................................... 8.55

1993 ............................................................................................................................................................... 10.10

1994 ............................................................................................................................................................... 9.37

1995 ............................................................................................................................................................... 11.36

1996 ............................................................................................................................................................... 15.50

1997 ............................................................................................................................................................... 12.09

1998 ............................................................................................................................................................... 10.42

1999 ............................................................................................................................................................... 10.20

2000 ............................................................................................................................................................... 8.37

CONVERSION

The conversion of uranium concentrates into uranium hexafluoride (UF6) for enrichment by GDP or centrifuge is commonly called conversion. Although conversion

represents a small portion of total nuclear fuel cycle costs, it is an essential component. Worldwide consumption in 2000 was about 52 M kg/year, as compared to installed production of 63.2 M kg/year.

The principal suppliers of conversion services now include ConverDyn in the US,

Cameco in Canada, BNFL in the UK, Cogema in France, and Minatom in Russia.

Over the past decade, the worldwide conversion capacity decreased with the closing

of the Sequoyah Fuels facility in Oklahoma, reducing the number of conversion suppliers in North America from three to two. In addition, BNFL announced recently

that it would withdraw from the business in 2006, with Cameco assuming ownership of its operations. Capacities of these plants are shown below.

Table 5—Worldwide Uranium Conversion Capacity

Country Owner/Operator Plant Capacity

MTU/year

United States .................................................................. ConverDyn .................................................................. 14,000

Canada ............................................................................ Cameco ...................................................................... 12,500

China ............................................................................... CNNC .......................................................................... 1,000

France ............................................................................. Comurhex ................................................................... 14,350

Japan ............................................................................... PNC ............................................................................ 50

South Africa .................................................................... AEC ............................................................................. 1,000

United Kingdom .............................................................. British Nuclear Fuels, Ltd. ......................................... 6,000

Russia ............................................................................. Minatom ..................................................................... 14,000

India ................................................................................ DAE ............................................................................. 295

Total ................................................................................ .................................................................................... *63,195

*(consumption 52,000)

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Due to excess supplies and aggressive selling of inventories by entities including

USEC, conversion prices decreased to about $5.75/kg in 1996, and to about $2.50/

kg in 2000. However, recently conversion prices have recovered, and now stand at

about $4/kg for spot sales and $4.50/kg for long-term contracts.

In the future, as inventories are depleted, the conversion industry should stabilize. However, even though US customers can take some comfort from having two

North American suppliers, further industry consolidation is possible.

DISPOSAL OF USED FUEL

As part of its overall nuclear fuel cycle strategy, the government must place top

priority on assuring that a permanent disposal mechanism for used fuel is implemented as soon as possible. Later this year, DOE will issue its site recommendation

for the Yucca Mountain Project. This recommendation must be acted on promptly,

and a path forward defined and funded as quickly as possible.

Without some certainty on the disposal mechanism for used fuel, no additional

nuclear power plants will be built in the United States.

SUMMARY

In summary, now is the time for action to address the critical issues in the supply

of nuclear fuel cycle to US power plants in a manner that is technically and financially sound. Due to a range of factors, the future of US nuclear fuel supply is in

doubt. The situation is somewhat more secure for uranium and conversion services

due to the existence of competitive supply sources in Canada, but the long-term

prospects of USEC, the only North American supplier of enrichment services, are

highly uncertain.

The current US situation results from market factors, resource limitations, and

in some instances from management misjudgments. However, the reasons why we

arrived at this dysfunctional state are not as important as where we go from here

to address the problems.

If the government and private sector evaluate the nuclear fuel supply situation

and decide that reliance on non-US sources is acceptable due to the high costs and

risks involved in developing or maintaining a competitive US industry, that’s okay.

However, an immediate public policy debate is warranted on how best to assure

the flow of competitively priced nuclear fuel to provide reliable low cost electricity

to our nation.

Thank you for your attention.

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Mr. NORWOOD. Thank you, sir, for your time and generosity.

I would like to now introduce to the committee Ms. Anna Aurilio,

Legislative Director for U.S. PIRG in Washington, DC.

Ms. Aurilio?

STATEMENT OF ANNA AURILIO

Ms. AURILIO. Thank you, Mr. Chairman. Thanks for the opportunity to speak this afternoon.

My name is Anna Aurilio. I am the Legislative Director for the

state Public Interest Research Groups. We are non-profit, non-partisan, consumer and environmental advocacy groups active across

the country.

We have a long history of working on—working to shift the country away from polluting energy sources such as fossil and nuclear

and toward energy efficiency and clean renewable energy sources.

Today I am going to focus primarily on our concerns with nuclear

power.

We believe that nuclear power is unsafe, uneconomic, generates

waste for which there are no sound solutions, and should not be

promoted as a future energy source. First of all, nuclear power is

unsafe. All aspects of the nuclear fuel cycle pose tremendous risk

to human beings and the environment.

For example, uranium mining has caused illness and death in

workers. There is a new type of uranium mining now being used

in some areas called in situ leaching. I can’t think of an easier way

to contaminate precious and scarce groundwater supplies out in the

west.

Nuclear fuel from reactors after it comes out of a reactor is perhaps the most lethal material that we have ever generated on this

earth. Just a few seconds of exposure can cause death. Commercial

nuclear power in this country has generated by radioactivity 95

percent of the waste that future generations will have to deal with.

Now, nuclear power plants are very complex. And, thus, the

threat of an accident is certainly something that people should be

concerned about. Obviously, two of the most tragic examples were

the accident at the Chernobyl nuclear reactor and at Three Mile Island here in this country.

We are very concerned about the safety of the reactors operating

in this country, and we are astonished that the industry and the

Nuclear Regulatory Commission, instead of taking another look at

aging issues because reactors are deteriorating with age more

quickly than expected, particularly reactor pressure vessels and

steam generator tubes are deteriorating more quickly than expected—and I have talked to some of the scientists that did some

of the initial calculations.

We are astonished that the agency and the industry are pushing

to relax safety standards instead of trying to figure out how best

to protect the public.

Let me give you an example of something that happened in—last

year as an example of why the Nuclear Regulatory Commission has

standards and requirements that are just too lax. In the early

1990’s, the Commission proposed standards for steam generator

tubes. They were never implemented. Instead, the industry has voluntary self-regulation for the most part.

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In February 2000, the Indian Point Nuclear Generating Station

located just 24 miles from New York City had an accident where

a steam generator tube blew and released radioactive steam. Now,

the company was supposed to have replaced these tubes, which is

quite expensive, in 1993 but never did thanks to NRC’s lax oversight. Again, a reactor this close to such a large population on the

Hudson River poses a severe threat. Regulations should be increased and enforced, not loosened.

The second issue I would like to cover is that even though capacity factors may be going up, nuclear power is still unreliable. I was

very amused to see on the NEI website a press release saying that

increased capacity could fuel California’s energy shortage, and yet,

on February 3 of this year, the San Onofre Nuclear Generating

System had a breaker fire that has caused it to be down for the

past several weeks.

In fact, it is loss of this generation that is in part, because it is

unexpected, due to the rolling—causing the rolling blackouts that

California has currently been experiencing.

Nuclear power is uneconomic. I was pleased to see that the Energy Information Administration has got some more realistic examples of nuclear generating costs. It is incredible to us that the industry seems to shamelessly revise history and pretend that it has

transformed itself into a cost-effective energy source, and yet it continues to ask for taxpayer and ratepayer handouts.

Just a couple of things to raise the uneconomic nature of nuclear

power. In 1986, DOE looked at initial estimates of costs for 75 reactors. It was $45 billion. The final cost to construct those reactors

was $145 billion.

I guess I will conclude right now, because I am sure you will

have questions.

[The prepared statement of Anna Aurilio follows:]

PREPARED STATEMENT OF ANNA AURILIO, LEGISLATIVE DIRECTOR, U.S. PUBLIC

INTEREST RESEARCH GROUP

Good afternoon, my name is Anna Aurilio and I’m the Legislative Director of the

U.S. Public Interest Research Group, or U.S. PIRG. U.S. PIRG is the national office

for the State PIRGs, which are environmental, good government and consumer advocacy groups active around the country. Thank you for the opportunity to speak

today.

The state PIRGs have a long history of working for a clean affordable energy future. Our goal is shift from polluting and dangerous sources of energy such as nuclear and fossil energy to increased energy efficiency and clean renewable energy

sources.

Today I will be addressing nuclear energy issues. Nuclear power is unsafe, unreliable, uneconomic and generates long-lived radioactive wastes for which there is no

safe solution. It should be phased out as soon as possible and should not be encouraged as a future energy source.

Since the late 1970’s, the PIRGs have worked to protect the public from unsafe,

expensive nuclear reactors. PIRGs successfully opposed the construction of several

nuclear power plants because of cost, safety and nuclear waste concerns. For example, in 1982, litigation by MASSPIRG helped cancel the proposed Pilgrim 2 nuclear

power plant. In 1983, NJPIRG helped cancel the proposed Hope Creek nuclear

power plant. CoPIRG worked for the creation of the Office of Consumer Counsel

(OCC) in 1984. The OCC was key in protecting ratepayers from being burdened

with ‘‘stranded costs’’ in the St. Vrain nuclear power plant case.

During reauthorization of the Price-Anderson Act, the PIRGs successfully advocated for lower taxpayer liability in case of a nuclear accident. From 1993 through

1995, PIRG helped shift more than $500 million in nuclear and fossil R &D spending to efficiency and renewable programs. During that time, we helped convince

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1OECD Nuclear Energy Agency report ‘‘Chernobyl Ten Years On, Radiological and Health Impact’’, November, 1995. 2Public Citizen website http://www.citizen.org/Press/pr-cmep84.htm

3 Union of Concerned Scientists, Nuclear Plant Safety: Will the Luck Run Out? December 15,

1998

Congress to eliminate funding for two extremely expensive advanced reactor programs, the gas-cooled reactor and the Advanced Liquid Metal Reactor, saving taxpayers at least $5.6 billion.

NUCLEAR POWER IS UNSAFE.

Nuclear power poses an unacceptable threat to humans and the environment. All

aspects of the nuclear fuel cycle pose a risk to humans and the environment. Uranium mining and enrichment has caused sickness and death in workers and has

generated tons of mining and enrichment wastes, which continue to threaten nearby

communities. Current uranium mining practices include ‘‘in-situ’’ leaching, which

pollutes precious aquifers in the arid West. Irradiated fuel from nuclear reactors is

perhaps the most toxic material generated by humans. Unshielded, it delivers a lethal dose of radiation within seconds. According to the Department of Energy, 95%

of the radioactive waste (by radioactivity) in this country has been generated by

commercial nuclear reactors.

Nuclear power plants are very complex and contain enormous amounts of potential energy in the fuel at the core of the reactor. The most tragic example of the

dangers posed by this technology is the 1986 accident at the Chernobyl reactor in

the Ukraine. The explosion and core meltdown at Chernobyl released radiation that

generated a plume encompassing the entire Northern Hemisphere 1. Here in the

U.S., in addition to the partial core meltdown at Three Mile Island in 1979 which

forced the evacuation of nearly one hundred fifty thousand people, there have been

four other nuclear accidents in the U.S. involving at least partial core meltdown.2

The potential consequences of a serious accident are staggering. A 1982 study by

the Sandia National Laboratories found that a serious accident at a U.S. nuclear

reactor could cause hundreds to thousands of deaths in the near term.3 In 1985, in

response to a question posed by Representative Markey, an NRC commissioner responded that there was a 45% chance of a severe nuclear accident in the following

twenty years.

We are therefore very concerned about the safety of nuclear reactors currently operating in this country. We are astonished that the industry and the regulatory

agency have been lobbying for a relaxation of safety standards and oversight and

limiting the public’s access to these processes. We are concerned that utility deregulation and new ownership of reactors may increase risks of accidents because of increased pressure to run the plants closer to the margin. This risk is heightened by

the fact that the 103 operating reactors around the country are deteriorating with

age more quickly than expected. Even Vice President Cheney acknowledged the

aging problem on the television show ‘‘Hardball’’ (March 21): ‘‘[T]oday nuclear

power—produces 20 percent of our electricity, but that’s going to go down over

time—because some of these plants are wearing out.’’

CURRENT REGULATION IS INADEQUATE TO PROTECT PUBLIC HEALTH AND SAFETY.

For example, one aging-related problem is reactor embrittlement. Cracks in the

reactor vessel caused by constant neutron bombardment could lead to a meltdown.

When problems were found, the Nuclear Regulatory Commission (NRC) simply

changed the safety margins and allowed the utilities to recalculate their compliance.

Steam generators are also susceptible to premature degradation. The failure of as

few as ten tubes can lead to a reactor meltdown, yet the NRC has inadequate steam

generator tube standards. For example, the Indian Point 2 nuclear power plant is

located 24 miles north of New York City, along the Hudson River. It had been

scheduled for steam generator tube replacement in 1993, yet this never happened

thanks to increasingly lax NRC requirements. On February 2, 2000, a tube ruptured, releasing radioactive steam.

There is a consistent pattern and history of lax NRC enforcement and oversight

ranging from fire prevention to worker fatigue. The agency is focused on increasing

the industry’s profitability, not protecting humans and the environment. In fact a

recent letter to this subcommittee from the NRC’s Chairman Meserve reveals an

agenda focused on, among other things: wresting control of certain radioactive materials regulation from the Environmental Protection Agency (EPA); limiting the scope

of NEPA (National Environmental Policy Act) review for new power plants; and promoting new nuclear power plant siting. None of these changes will lead to increased

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4http://www.nei.org/doc.asp?docid=724

public health and safety. In fact, the NRC has been battling with the EPA for years

over radiation standards. NRC’s proposed standards are consistently less protective

than the EPA’s.

NUCLEAR POWER IS UNRELIABLE.

Complex and often mis-managed nuclear power plants are subject to frequent

fires, leaks and other accidents. For example, the Nuclear Energy Institute’s website

boasts that ‘‘Increased Nuclear Output Would Satisfy California’s Residential Demand.’’ 4 It fails to mention a February 3 fire at the San Onofre Nuclear Generating

Station that has shut the plant for weeks and is a key factor in current rolling

blackouts in California.

NUCLEAR POWER IS UNECONOMIC.

Nuclear power would not exist in this country today if it weren’t for enormous

subsidies paid for by ratepayers and taxpayers. Originally touted as being ‘‘too

cheap to meter’’, nuclear power plants are still too expensive for America. The nuclear industry has received the vast majority of energy research and development

funding, a special taxpayer-backed insurance policy known as the Price Anderson

Act, unjustified electric rates from state regulators, enormous and unwarranted bailouts in state deregulation plans, taxpayer-funded cleanup of uranium enrichment

sites plus a giveaway of the Uranium Enrichment Corporation, and an ultimately

taxpayer-funded nuclear waste dump. Many of the issues I raise here are described

in more detail in the Green Scissors report (www.greenscissors.org) released by U.S.

PIRG, Taxpayers for Common Sense and Friends of the Earth.

It is incredible that the nuclear industry shamelessly revises history to pretend

that it has transformed itself into a cost effective energy source. Yet the industry

continues to ask for more handouts.

TAXPAYER DOLLARS SHOULD NOT BE USED FOR MORE NUCLEAR RESEARCH AND

DEVELOPMENT FUNDING.

According to the Congressional Research Service, nuclear research and development has gotten more than 60%, or $66 billion in energy research and development

funding from 1948-1998. Led by Representative Markey and others, Congress wisely

killed funding for the gas-cooled reactor and the breeder reactor, saving taxpayers

at least $5.6 billion.

Now proposals to revive research programs to develop these uneconomic and dangerous reactors are creeping into the Department of Energy’s budget. Supporters of

the gas-cooled reactor proposed for South Africa may tout its cost. They do not highlight the fact that the design cuts costs by not building containment. The breeder

reactor supporters ignore the dismal failure of France’s breeder reactor program and

the chance of a reactor explosion if the coolant (usually highly reactive sodium)

leaks.

PHASE OUT THE PRICE ANDERSON ACT.

The industry is also lobbying for an extension of the Price Anderson Act, which

is due to expire in 2002. This law, passed in 1957 and amended in 1988 provides

a taxpayer funded insurance for the nuclear industry in the event of an accident.

We believe that this insurance program is an unwarranted taxpayer subsidy to the

nuclear industry that has no parallel in any other industry. During reauthorization

of the Price Anderson Act, PIRG and others successfully fought for lower taxpayer

liability in the event of an accident.

The American public is being barraged by misleading NEI ads touting the safety

and positive economics of nuclear power. Yet the February 28 letter from NRC Commissioner Meserve to Chairman Barton states, ‘‘[W]ithout the framework provided

by the Act, private-sector participation in nuclear power would be discouraged by

the risk of large liabilities.’’ The Federal Trade Commission has said that NEI’s ‘‘advertising campaign touting nuclear power as environmentally clean was without

substantiation.’’ Several reactors are extending their operating licenses through a

process which cuts out the public and essentially rubber-stamps the renewal application. If these plants are safe and economical enough to get a license extension,

they shouldn’t need a taxpayer-backed insurance plan.

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PROTECT CITIZENS FROM UNJUSTIFIED RATE INCREASES AND BAILOUTS AT THE STATE

LEVEL.

We realize that this committee does not have jurisdiction over state deregulation

and rate-making. However, in analyzing current electricity problems, it is important

to recognize the magnitude of the ratepayer subsidies enjoyed by this industry and

the role these subsidies have played in blocking competition and propping up economically marginal nuclear power plants.

In the 1980’s, the PIRGs successfully blocked unjustified rate increases for nuclear power mismanagement. As states across the country restructured their electricity markets, the promise to consumers was that these changes would provide

competition among electricity providers. Instead, utilities lobbied, and for the most

part received, an unjustified ratepayer-funded bailout of their uneconomic investments, usually nuclear power plants. The PIRGs, free market, and other consumer

and environmental groups in several states fought back against these requests for

‘‘stranded cost’’ recovery. We argued that these bailouts were unjustified and unfair

to consumers and would hamper efforts to shift towards clean energy. According to

a report released in 1998 with the Safe Energy Communication Council entitled

‘‘Ratepayer Robbery’’ we estimated these bailouts could total more than $112 billion

for just eleven states. There is strong evidence that without these bailouts, almost

half of the nuclear power plants would have shut down. Instead, aging plants have

been given a new lease on life, are in some cases, still shielded from market forces.

Some have been sold at rock-bottom prices to new owners who have every incentive

to run them close to the margin.

CURB TAXPAYER COSTS FOR NUCLEAR WASTE AND INDEX THE FEE TO INFLATION.

The nuclear industry is the only industry that we are aware of which has a government program to guarantee disposal of lethal waste. We agree with the industry

that the DOE has mismanaged the program. However, our solution is stop spending

money on the program and insure that enough money is collected now to adequately

cover future costs of a sound waste disposal program. A 1998 financial review commissioned by the State of Nevada concluded that the funding shortfall for the program would range from $12 to $17 billion in 1996 dollars. We urge that the Nuclear

Waste Fund Fee be indexed to inflation so that there will be adequate funds to cover

the ultimate cost of nuclear waste disposition.

THERE IS NO CURRENT SOUND SOLUTION FOR THE NUCLEAR WASTE PROBLEM.

Nuclear waste is one of the most dangerous substances created by humans. This

waste remains dangerous for at least a quarter of a million years (based on the

decay of Pu-239). One would expect that policies for dealing with this lethal material would be based on sound science and protecting public health. Instead nuclear

waste policies in this country have been based on political expediency. The incredible problems faced by citizens living near former DOE weapons sites, such as Hanford, Washington should be a lesson to those who want to ignore science and public

health.

We believe that the current project should be stopped, as the proposed dump site

at Yucca Mountain cannot meet current standards for containing the waste. In

1998, PIRG and more than one hundred environmental, consumer and safe energy

organizations petitioned then-Energy Secretary Richardson to disqualify Yucca

Mountain because it would not meet current standards for containing the waste. Instead, DOE is in the process of weakening the current site guidelines, a clear case

of changing the rules when science gives the answer that is not wanted.

We are pleased that President Clinton vetoed dangerous nuclear waste legislation

last year. This legislation would have interfered with EPA’s ability to set radiation

standards and would have prematurely moved nuclear waste to Yucca Mountain,

unnecessarily risking the lives of millions of Americans who live along the transport

routes. We are concerned that there are ongoing efforts by both the Department of

Energy and Nuclear Regulatory Commission to weaken radiation standards for the

site. We are also concerned that EPA’s ongoing review will lead to a standard that

will not adequately protect Nevadans who live near the site.

We urge this committee to re-examine nuclear waste policy and develop a public,

fair process based on sound science and protecting the public for deciding the ultimate fate of this extremely dangerous material. No country in the world has a permanent solution to this problem. The U.S. should reject its current mismanaged program that relies on changing the rules when the science isn’t favorable to the industry’s solution. Instead, we should show leadership by developing a solution focused

on sound science and protecting the public.

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CONCLUSION

Nuclear power is unsafe, uneconomic, unreliable and generates waste for which

there is no sound solution. It is a failed technology of the past and would not exist

were it not for enormous and unjustified government subsidies and policies. The

U.S. should do everything it can to protect the health and safety of the public as

well as our pocketbooks. Nuclear power should be phased out as quickly as possible

and replaced by energy efficiency and clean renewable energy.

Mr. NORWOOD. Thank you, Ms. Aurilio. We appreciate your being

here and your time.

Let me start the questions simply by maybe trying to set the

record straight. I am sorry my friend, Mr. Markey, is not here, but

he brought up the question of stranded cost in terms of deregulation of electricity.

And I think it is fair for the record to note that though the economics have gotten much better, not all power plants are the same,

and the one we happen to have was built under Jimmy Carter’s 21

percent interest rate. So it is a little different scenario when you

had to spend that much, and were forced to build the plant, incidentally.

Mr. Hutchinson and others, let me follow up on a question Mr.

Largent asked to the earlier panel, particularly the gentleman from

DOE. And the question was, why don’t we reprocess spent nuclear

fuel in this country? And he gave a very short answer. He simply

said, ‘‘Well, that is too expensive.’’ Do you agree with that? Is that

the correct answer to the question Mr. Largent posed to him?

Mr. HUTCHINSON. It is not economical in this country at this

time. That doesn’t mean it might not be at some time in the future.

That is why I think—— Mr. NORWOOD. Is it economical in France?

Mr. HUTCHINSON. I don’t know.

Mr. NORWOOD. I mean, I danced on those rods that Senator

Domenici—well, is it economical in Britain?

Mr. HUTCHINSON. Well, I know there is discussion going on in

Britain today as to whether they will continue to reprocess fuel due

to economics. But, clearly, it is not economical in this country, but

that doesn’t mean it might not be at some time in the future, which

is why I think, you know, R&D in this area is important, to preserve that option.

Mr. NORWOOD. Well, should we move forward with mixed oxide

plants reprocessing in this country?

Mr. HUTCHINSON. I don’t think we ought to eliminate any possible source of energy.

Mr. NORWOOD. Why I am confused is that I am told by the Brits

5 years ago that they did not use any of their tax dollars for their

energy department in Britain, because they made so much money

reprocessing fuel for Japan. Does anybody want to comment on

that? Anybody want to say that is incorrect?

Mr. HUTCHINSON. I am not—— Mr. NORWOOD. If you know it is, I need to know. You know these

British. They may have tricked me.

Mr. LONGENECKER. Mr. Chairman, could I try an answer to that,

please?

Mr. NORWOOD. Yes, Mr. Longenecker.

Mr. LONGENECKER. Back in the early days when Mr. Barton and

I first met about 20 years ago, in the Department of Energy, you

95

will recall at that time uranium prices were about $40 a pound and

projected to go at this time to maybe $70 to $100 a pound. Reprocessing spent fuel and separating out the reusable uranium and plutonium at $70 a pound uranium would make economic sense.

At that time, the French and British were processing industries,

were planned, and we began an industry here in the United States.

Today uranium prices are about $8 a pound, and that is due to a

number of finds of very rich reserves in Canada and Australia, and

other factors.

Uranium is a finite resource, and so we have to think about the

mined uranium and plutonium that is in that spent fuel. Mixed

oxide makes sense in this country today because it is a good way

of getting rid of the excess plutonium that we have around the

country that is very expensive to store.

I think proceeding with mixed oxide technology now builds the

technology base, and later we have the option, if uranium reserves

are finite and the Nation and the world continues to rely on nuclear, to go get that and reprocess it. So I think that the question

as to whether you permanently dispose of material in Yucca Mountain or whether you preserve the option to retrieve it later is a very

important one.

Mr. NORWOOD. Ms. Aurilio, I only have a minute, and I do have

a question I particularly wanted to ask you. If nuclear power,

which, of course, does not emit any Greenhouse gases is phased

out, with what would you propose we replace the 20 percent of the

Nation’s power supply that we would lose?

Ms. AURILIO. I believe that the future of this country is going to

lie in becoming more energy efficient, and we have been perplexed

as to why the Bush Administration seems to be ignoring energy efficiency, which can save consumers money, avoid pollution——

Mr. NORWOOD. So you think if we are all more efficient we can

do away with the 20 percent of energy that nuclear power presents?

Ms. AURILIO. It is certainly conceivable. And then the other piece

of it in terms——

Mr. NORWOOD. Now, you are going to be ready to prove that,

aren’t you?

Ms. AURILIO. In terms of new generating capacity, wind energy

is actually quite economical, and I want to just draw a contrast.

This week in Germany, farmers in Germany are blockading the

streets because they don’t want the reprocessed fuel to be driven

through their farmlands and potentially contaminate their farmlands, while in Iowa farmers are getting $2,000 a year per wind

turbine to put wind turbines on their farms. They still farm——

Mr. NORWOOD. Let me interrupt to ask you the last part of this

question before the time runs out. If you believe that renewables

could perhaps replace that 20 percent, I know you wouldn’t sit here

and tell me that unless you knew what the cost of that would be

to the nation.

Don’t count hydropower, hydroelectric power. Just what would it

cost this Nation’s economy to switch from nuclear to renewables to

pick up that 20 percent? I don’t know if conservation is going to

get the job done. They are working on it in California.

96

Ms. AURILIO. Yes. I actually think that it has to be a mix of conservation and renewables.

Mr. NORWOOD. Tell me what the cost is.

Ms. AURILIO. Right now, wind energy plants are at about 4 to 6

cents a kilowatt hour, and some are as low as 3 cents per kilowatt

hour. So I actually think that trying to revive the nuclear industry

will bankrupt this country, whereas going toward energy efficiency,

conservation, and renewable energy is the way of the future.

Mr. NORWOOD. So renewables, if we go that way, it will bankrupt

this country.

Ms. AURILIO. No, that is not what I said at all, sir.

Mr. NORWOOD. Well, say it again, then.

Ms. AURILIO. I said wind energy right now is going at 4 to 6

cents a kilowatt hour.

Mr. NORWOOD. Yes.

Ms. AURILIO. The best wind sites are actually as low as 3 cents

a kilowatt hour. I heard the person from Energy Information Administration actually say that the costs of new nuclear power

plants were at least 6 cents a kilowatt hour, so I would say that

wind is actually cheaper. And by her charts, it is cheaper than new

nuclear energy.

Mr. NORWOOD. So you would think we would get out there and

build some windmills right now.

Ms. AURILIO. In fact, in Iowa, as I said, they are building windmills. In Colorado, wind came in at less than the cost of a new gasfired power plant, and the utility is building windmills.

Mr. NORWOOD. Well, the private investment, the magnitude of

that, is gigantic. There is no question about it. And it has got to

be questionable, in my mind, if we did away—let us just say tomorrow we closed all nuclear power plants which shuts off 20 percent

of the electricity to this country and replaced it immediately with

wind. Somebody better be very, very right when they make a statement like that. Otherwise, it is going to cause this country a great

deal of trouble.

With that, I yield back the balance of my time. And, Mr. Strickland, you are up.

Mr. STRICKLAND. Thank you, Mr. Chairman.

Mr. Longenecker, I have a question regarding new technology. I

think you indicated USEC has an aging expensive technology.

Given USEC’s financial condition, do you foresee USEC employing

a new uranium enrichment technology in the next few years?

Mr. LONGENECKER. No.

Mr. STRICKLAND. That being the case, what alternatives are

there for us as a government, and what do you think the likely outcome will be, using your best judgment?

Mr. LONGENECKER. Well, as I said, this is a good job for the private sector. There are a lot of good technologies out there. There

are a lot of very highly qualified nuclear companies in the United

States and in the world. And in my estimate, because that is our

job is to follow this industry, we project that you could build in the

United States a new uranium enrichment plant using proven European technology in about 5 years with NRC licensing.

Russian technology would take slightly longer, and, you know,

there are some—within a decade, you might also be able to impleVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00100 Fmt 6633 Sfmt 6602 E:\HEARINGS\71505 pfrm09 PsN: 71505
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ment some other options that are currently being worked on in research and development. But I would say there are a number of options that can be implemented within a decade, and the company

that does it needs to have a strong financial background and access

to the technology, neither of which USEC has at this time.

Mr. STRICKLAND. What role do you think the government should

most appropriately play in the development of a new technology, if

any?

Mr. LONGENECKER. The difficulty that I have in defining that is

I think you need to wait for the private sector solution to come forward. If someone wants to build a plant in the United States, they

may do it with no government support whatsoever. And I think it

behooves us to wait until that private sector solution has been developed.

If you think about it, in 10 years, if it is a government solution— what worries me about the government trying to do this was 10

years is five Congresses and three Presidential elections and 10 annual budgets. And as you well know, the United States in the 20

years that I have been involved in this industry has spent $7 billion, as I say in my testimony, on centrifuge and laser, and we

have no new capacity to show for it.

So if this is a critical time, then I would put my money on the

private sector this time around, and let them define what government support they need.

Mr. STRICKLAND. Mr. Sproat, I would like to ask you about your

involvement or your company’s involvement in the Pebble Bed technology. And the question I have, have you looked at the implications of the fuel that you are going to need, or I understand that

you are going to need for this technology?

Is the fact that we perhaps will not have the enrichment capacity

at a level that you would need a hindrance or a detriment in your

decision to move forward and to invest in this technology?

Mr. SPROAT. I think, Mr. Strickland, the answer to that is we are

clearly looking at that. With this technology, there are a number

of unresolved issues, the economics being one of them, at this stage

of the game. And it would certainly be a factor in our decision.

However, as Mr. Longenecker said, that we believe there may be

some private sector solutions to the enrichment issue.

I think as you pointed out earlier today, that we are going to require, if we proceed with the project, 8 to 9 percent enrichment in

that fuel. And right now we have no currently available domestic

sources for that. And that first fuel would probably come from

South Africa with an enriched feed stock from Russia.

Mr. STRICKLAND. Isn’t it true, though, that you could get that

fuel from the current plant in Ohio, if necessary?

Mr. SPROAT. I believe so. It would need to be relicensed, I believe,

for the higher enrichment levels. Let us put it this way, we would

certainly prefer to have a domestic source of enriched feed stock for

this plant.

Mr. STRICKLAND. Yes. And if I am not misled, I believe the Portsmouth plant is currently licensed to enrich up to 10 percent.

Mr. SPROAT. It may be. I am just not sure.

Mr. STRICKLAND. In terms of the utility industry or industries, is

there concern—and if there is concern, how great is that concern—

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that we are not paying sufficient attention to making sure that we

have a domestic, economic, reliable source of enriched uranium?

Mr. SPROAT. There is a very large concern to that effect. The

large nuclear generating utilities don’t want to be in a position

where they are held hostage to a single supplier, and where we

don’t have some alternatives. And we also want to make sure we

have an economically competitive source of enriched feed stock for

the fuel, so that is a major concern of ours right now.

Mr. STRICKLAND. Thank you.

Thank you, Mr. Chairman.

Mr. BARTON. Thank you, Congressman.

The Chair would recognize himself. My first question to the panelists that tend to be generally supportive of nuclear power—what

action, if any, does this Congress and the Federal Government

need to take in this session to make the nuclear option a real option?

Mr. HUTCHINSON. As I have said in my remarks, we look forward

to the study being completed at Yucca Mountain. That recommendation will be made—— Mr. BARTON. So a high-level waste bill that the President signs.

Mr. HUTCHINSON. We would support and favor repeal of the

PUCA Act. There are a handful of utilities that that impacts. My

utility is one of those.

Mr. BARTON. That is kind of utility generic as opposed to nuclear

power specific. Anything else?

Mr. HUTCHINSON. We certainly want to know that the regulatory

processes going forward are dependable, timely, sort of thing, so we

need to be sure that that is—— Mr. BARTON. So there are some things that the NRC, in terms

of their process—— Mr. HUTCHINSON. Well, the NRC is looking at that process and

is, you know, I think doing an admirable job at this point of identifying areas that they can improve in. The license renewal is an example of that. In our view, it has gone very well.

Mr. BARTON. Mr. Tollison or Mr. Sproat or Mr. Longenecker,

other than a high-level waste bill, is there any other specific legislative action that is specific to the nuclear industry that you would

recommend?

Mr. TOLLISON. Well, we do need renewal of the Price-Anderson

Act. That is—— Mr. BARTON. Reauthorization of Price-Anderson.

Mr. TOLLISON. [continuing] very important. And the sooner and

the better.

Mr. BARTON. Okay. Mr. Sproat or Mr. Longenecker?

Mr. SPROAT. Mr. Chairman, I would say that one of the issues

that Dr. Travers referred to earlier regarding the loss of technical

expertise within the NRC and the national labs I think is a very

key issue in terms of making sure—particularly, say, if we bring

in new advanced nuclear technologies, making sure that we have

people in the Federal Government who have the capabilities to review those technologies and are qualified to review them I think

is very key.

I also think that a couple of the issues are brought out in my testimony regarding the fact that a number—the regulatory frameVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00102 Fmt 6633 Sfmt 6602 E:\HEARINGS\71505 pfrm09 PsN: 71505
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work in this country was written in anticipation of a regulated utility industry building nuclear power plants, and we are clearly moving away from that into a deregulated marketplace where there

will be merchant nuclear power plants. And some of the key toplevel regulatory guidance or regulatory requirements need to be

looked at and revised to recognize that changing marketplace.

Mr. BARTON. My next question, assuming a perfect world—you

always hear in marketing a perfect world, and assume a perfect

world; you never get it, but in all of the classes I took in business

school the first assumption was perfect world and perfect knowledge.

Where would nuclear power be economical to consider as an option, again, if you take all of the political and environmental issues

off the table? New nuclear power plants at 3 cents a kilowatt hour,

4 cents, 5, 6, at the generation, where is it a real economic option

compared to coal or natural gas?

Mr. SPROAT. Well, if I could answer that, just to give you a

benchmark. As we are evaluating the Pebble Bed Modular Reactor,

we are evaluating against gas-fired combined-cycle gas turbine

plants that assume long-term gas prices of about $3.50 per million

BTU. And we think that if we can produce a power plant that has

all-in costs at between 3 and 3.5 cents a kilowatt hour, we will not

only be able to compete but we will be able to earn a significant

return for our shareholders.

Mr. BARTON. ‘‘All-in’’ means construction and operations.

Mr. SPROAT. And operating and decommissioning funding and

spent fuel disposal.

Mr. BARTON. Okay. Does everybody tend to agree with that? Mr.

Longenecker?

Mr. LONGENECKER. Mr. Chairman, as you know, living in California where we are paying about 20 cents a kilowatt hour in San

Diego, and finding it very difficult to—— Mr. BARTON. When you can get it.

Mr. LONGENECKER. [continuing] when we can get it, and finding

it very difficult to find wholesale sources at 6 cents, a much higher

threshold would apply.

Mr. BARTON. You know in California there is a state law. You

couldn’t build in a nuclear power plant in California, even if it was

economical, until we get a solution to the waste issue.

Mr. LONGENECKER. Yes, sir. But I was addressing your question

of if another plant could be——

Mr. BARTON. In a perfect world, perfect——

Mr. LONGENECKER. Yes. Let me also add on your legislative

question, on December 31 of this year, Mr. Chairman, the Russian

highly enriched uranium agreement expires.

And I think it does warrant, as I said in my overview remarks,

some look by Congress on who the executive agent should be,

whether that continues to remain with USEC or whether it should

be allocated, some of that, to another executive agent, because the

stability of that agreement, keeping that material off the market

and putting it to use in nuclear power plants is a very, very important aspect of international policy for this country.

Mr. BARTON. Okay. Mr. Sproat, on the Pebble Bed Reactor, what

is the main advantage to your company of considering that? Is it

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the size of it, the modularity of it, the passive safety design of it?

I mean, what is the—what is it that attracts your company to looking at that design as compared to some of the designs that the

NRC—the next generation that they have already certified?

Mr. SPROAT. I think, Mr. Chairman, you summarized some of the

key characteristics. It is—because of its small size, it can be built— once we have it—have the design certified by the NRC, we believe

it can be built in approximately 24 months per unit as opposed to

between 5 to 7 years per unit for a conventional size nuclear power

plant.

Small capital investment required. Each unit would probably re- quire between $110 to $125 million per unit as opposed to several

billion dollars per unit. So the capital risk is much lower. And with

that lower capital cost, we do believe it has the potential—and this

is a key issue for us that we have not resolved yet—is that if we

can bring it in in that 3 to 3.5 cents per kilowatt hour, the economics will make it—— Mr. BARTON. Of the next generation designs that the NRC has

already certified, none of them are that size? They are all bigger?

Mr. SPROAT. All of them are larger. They would take longer to

build. They require a larger capital investment. And the lowest

price we believe we can get for an all-in cost out of that technology

is somewhere in the neighborhood of about 6 to 7 cents a kilowatt

hour.

Mr. BARTON. How do you answer the question about the enrichment of the fuel for the Pebble Bed Reactor? It is a lot higher

enrichment—— Mr. SPROAT. Right.

Mr. BARTON. [continuing] required than what is commercially

available right now, I am told, on the market.

Mr. SPROAT. That is correct.

Mr. BARTON. How do you answer that question?

Mr. SPROAT. Well, I think our—right now, as I said, we don’t

have a domestic source for that enrichment. We would like to get

one, and we are exploring a couple of different options.

Mr. BARTON. I mean, is it technically feasible—— Mr. SPROAT. It is absolutely technically feasible.

Mr. BARTON. [continuing] and within all the various national security protocols?

Mr. SPROAT. Yes.

Mr. BARTON. To get that highly enriched——

Mr. SPROAT. It is technically feasible, as well as, you know,

there—we haven’t explored, but another possible option is

downblending of military fuel into a lower——

Mr. BARTON. And who would actually—I am told you would actually have to build an enrichment plant to do that. Is that true or

not true? And if it is true, who would build it? Would that be a private sector company, or would it be——

Mr. SPROAT. We are exploring some options that are primarily focused on the private sector.

Mr. BARTON. Okay.

Mr. SPROAT. But I am really not prepared to talk about that.

Mr. BARTON. My time has expired, but I want to ask Ms. Aurilio

a question. I looked at your bio and it is pretty impressive. You

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have got a physics degree from Amherst, and you have got an environmental engineering degree from MIT. So that is—that impresses me, since I am an engineer with an MBA and a registered

professional engineer.

So I am going to assume that you are more than just another

pretty face coming before this subcommittee, that you actually have

a brain and you are very committed to what you believe in, and

you have spoken very eloquently.

Now, in the answer to Congressman Norwood’s question, you

talked about Three Mile Island and Chernobyl. What was the containment structure at Chernobyl?

Ms. AURILIO. The containment structure at Chernobyl was inadequate to contain the accident and——

Mr. BARTON. Isn’t it true that there was no containment structure?

Ms. AURILIO. And it was inadequate, and that is exactly what the

problem with the PBMR is.

Mr. BARTON. The second question—wait a minute. They didn’t

have one. Do we have any reactor in the United States in the commercial power generation that doesn’t have a containment structure?

Ms. AURILIO. No, we don’t.

Mr. BARTON. Okay.

Ms. AURILIO. But the PBMR is saying that they are going to cut

capital costs by not having a containment structure.

Mr. BARTON. Well, now, I didn’t ask that. I am just—you are a

physicist and you are an environmental engineer, and you put

Chernobyl on the table. So you have an—at least I have an obligation, if we are going to have a record on Chernobyl, let us have a

record. There was no containment structure at Chernobyl.

What was the design of the reactor at Chernobyl? Was it a

lightwater reactor? Was it a high pressure reactor? Or was it a design that we have not even built since the research stage in this

country, something called a hot graphite reactor?

Ms. AURILIO. It was a graphite moderated reactor, known as the

RBMK.

Mr. BARTON. Right. Now, isn’t that inherently one of the least

safe reactors? Do we have any of those types of designs even being

thought about in this country?

Ms. AURILIO. We don’t, but the PBMR——

Mr. BARTON. All right.

Ms. AURILIO. [continuing] would also be graphite moderated.

Mr. BARTON. So isn’t it a little unfair—it is no requirement that

people that testify be fair. I mean, just to be honest about it. The

whole point of this is to develop a record, but it is at least somewhat disingenuous to say the word ‘‘Chernobyl’’ as if that would

even be a possibility.

It is a different design, a very poor design. It was poorly manufactured. There was no containment. The operators weren’t very

well trained. Totally different than what we are talking about.

Wouldn’t you agree with that?

Now, you can still be against nuclear power. You are not unique

in that. But somebody with your background, as smart as you are,

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should try to be a little less disingenuous. Is that a fair statement,

or is that an unfair statement on my part?

Ms. AURILIO. With all due respect, Mr. Chairman, I believe nuclear fission reactors are inherently unsafe.

Mr. BARTON. I understand that.

Ms. AURILIO. The Chernobyl reactor is a different design than

U.S. reactors are, but we have played around with a lot of different

designs in this country. And we have some grave safety concerns

about the proposed PBMR reactor.

Mr. BARTON. No. Have you had a chance—you and your group— to look at this Pebble Bed? Because I am told that just the inherent

design of it, it is much more passively safe, that it—you know,

whereas the Chernobyl reactor was very passively unsafe.

So isn’t what Mr. Sproat and his group doing at least moving in

the right direction, if you assume that nuclear power—and you

don’t—but if you assume that nuclear power should be an option

at some point, would you at least agree in your group that they are

moving in the right direction in terms of safety?

Ms. AURILIO. I believe that the PBMR will not turn out to be a

safe or economical reactor. We are still studying up on the reactor.

We have grave concerns that as currently designed it, too, has no

containment.

Mr. BARTON. But in concept—— Ms. AURILIO. But if you would let me finish, because what I have

been seeing in the literature is that the containment would be the

fuel itself. And we have grave concerns because right now the company, BNFL, which is one of the partners which would be involved

also in making the fuel, we believe, they have been accused by both

Germany and Japan of falsifying data for manufacturing fuel for

reactors in Germany and Japan.

So we have very, very big concerns as to why you would want

to build a reactor that lacks containment. And Commissioner

Merrifield of the NRC did express some questions about that recently as well. And then why you would want to rely on manufacturing, which, as you know, it is never 100 percent perfect——

Mr. BARTON. I understand that. But at least it is a good idea—— Ms. AURILIO. [continuing] to contain radioactivity.

Mr. BARTON. [continuing] to build it. I mean, your group’s position that we can get there with conservation and renewable, you

know, the renewable exclusive of hydro is .2 of a quad, .2 of 1 percent of a quad. In other words, compared to the hundred quads

that this country used, it is just orders of magnitude below what

you would need to replace the existing power supply.

So if you are acting or attempting to act responsible, you know,

nuclear power, if we can get these next generation technologies

that are much safer and much more fail-safe, so that if things go

wrong the system automatically shuts itself down, which is my understanding of this Pebble Bed Reactor—and I could be totally

wrong on that—that is at least a step in the right direction. That

is my only point.

I am not trying to convert you. You know, that would be stupid

on my part. It would be unfair on my part. But give the industry

credit and the private sector credit for at least attempting to listen

to the concerns that we both share.

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Ms. AURILIO. But if it is so safe, then why do they need PriceAnderson coverage for these reactors as well?

Mr. BARTON. That is a decision that was made before I was even

born, quite frankly.

Ms. AURILIO. It doesn’t cover these types of reactor designs. I

mean, in reauthorization, if it is so safe and economical, perhaps

the industry could pay for it itself, then, pay for insurance

coverage—— Mr. BARTON. We may give you or your associates a chance to testify on that at the appropriate time. That is a valid question.

I am going to go to Mr.—let us see, we have already—Mr. Strickland has asked questions. We are going to go to Mr. Shimkus. Isn’t

that right? Yes.

Mr. SHIMKUS. Thank you. But, Mr. Strickland, you wanted to

make a comment to the chairman on your plant, and I want to give

you that opportunity.

Mr. STRICKLAND. Yes. And then I promise the chairman I will be

finished for the day.

Mr. BARTON. No, it is okay.

Mr. STRICKLAND. Two things just for the record, Mr. Chairman.

If the information that I have is accurate, and I believe it is, the

answer to your question, where would we get the fuel with the

higher assay, we currently have a plant that is licensed to enrich

uranium up to 10 percent. And within the next 21⁄2 months, we are

going to be placing that facility in an inoperable condition. So we

can do it now, but 21⁄2 months from now we will not be able to do

it.

And the second thing for the record, I have a report that was

sent to the Congress from the Department of Energy entitled ‘‘Report to Congress on Maintenance of Viable Domestic Uranium Conversion and Enrichment Industries,’’ and I was wondering if we

could enter that into the record.

Mr. BARTON. Without objection, so ordered.

[The information referred to follows:]

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Mr. STRICKLAND. Thank you, Mr. Chairman.

And thank you, my colleague.

Mr. BARTON. Mr. Shimkus?

Mr. SHIMKUS. Thank you.

Let me—Mr. Sproat, and others may comment on it, you identified a concern of mine that refers to, in essence, a brain drain out

of the NRC, especially with new technology that may come online,

especially with, as I mentioned to the previous panel, the relicensing aspects of a lot of plants in the future. Can you just reiterate that? And then I will let any of the other panelists talk about

that.

Mr. SPROAT. One of the things that we are—as we are looking

at the various issues we will face with trying to license the Pebble

Bed Modular Reactor—and just for the record we will have a containment. The design requirements may be different, but there

would be a containment building.

It is very clear that the gas reactor expertise that existed in the

national labs and the NRC back in the 1960’s and 1970’s and early

1980’s has pretty much dissipated. And as a result, we are facing

the possibility of coming into the government with an application

for this technology, if we decide to do that, where they will be really technically deficient in being able to review that technology.

And the NRC management recognizes this. In our discussions

with them, they believe they need to get their staffs educated. And

one of the things we are discussing with both the Department of

Energy and the NRC is to have an independent third-party such

as MIT or some other university develop the appropriate courses to

give to the various government employees to get them educated in

the technology, so that they could learn more about it prior to the

actual licensing effort starting.

Mr. SHIMKUS. Would anyone else want to add if they have a concern on the NRC? Mr. Tollison?

Mr. TOLLISON. The concern about the demographics of the NRC

staff that Mr. Travers introduced is shared somewhat by the industry. In other words, the average age of the nuclear professionals in

the industry is in the high forties, so over the next several years

a lot of people will be—a lot of very qualified people will be coming

into the retirement age zone.

And so there are several initiatives underway to revitalize the

pipeline of new people coming into the industry to operate the existing fleet until the end of life, and that end of life, as you have

heard today, in many plants will extend an additional 20 years. In

fact, as we speak, there is a workshop going on in Florida right

now that includes the universities and the utilities and the public

relations people to discuss the best strategy and approaches for revitalizing the pipeline.

And the NRC, in part, will be the beneficiary of that, because

that would create a supply of young graduates who are—who have

an education that would support regulating and licensing current

plants and future plants.

Mr. SHIMKUS. Thank you.

Let me go to Ms. Aurilio. On your submitted testimony, on page

5, you have a quotation attributed to the Federal Trade Commission that says, ‘‘NEI’s advertising campaign touting nuclear power

131

as environmentally clean was without substantiation.’’ Could you

give me a source for that?

Ms. AURILIO. Yes. I will have to get it to you in writing.

Mr. SHIMKUS. Because as far as we understand, the Federal

Trade Commission has made no such statement. So if you could

substantiate that, we would appreciate it, just for clarification.

The other thing, in the testimony you—actually, in the submitted

testimony, you mentioned specific standards that are not—that will

not be met at Yucca Mountain. What are those standards?

Ms. AURILIO. What I talked about in my testimony, what you

might be referring to, is that we are concerned that the Nuclear

Regulatory Commission is trying to take control over setting the

standards, which Congress gave EPA. Is that what you are referring to?

Mr. SHIMKUS. But you are not referring to any specific standards

that are set right now that science makes determinations that you

believe Yucca is not going to be able to make——

Ms. AURILIO. There are Department of Energy guidelines as to

the suitability of Yucca Mountain. In 1998, PIRG and many other

groups petitioned Department of Energy to withdraw Yucca Mountain as a nuclear waste dump site, because we felt it would not

meet the current guidelines. But the most——

Mr. SHIMKUS. And what are the current guidelines?

Ms. AURILIO. The guideline of most concern—I don’t have the cite

off the top of my head, but the guideline of most concern would be

that there would not be significant radioactive waste migration

along the paths of most likely leakage from the mountain. And we

felt that given the existing data that we had at that time that the

mountain would not meet that criteria.

Mr. SHIMKUS. And I would respectfully submit that we don’t

know any of that right now. And the issue is, if you want to establish some standards which are going to require—or you want the

DOE or the NRC or the EPA to meet, we ought to know what those

standards are.

Ms. AURILIO. But DOE had some standards at the time, and

their now revising it downward is the problem. And it said there

should be no significant——

Mr. SHIMKUS. So you would accept the previous standards.

Ms. AURILIO. There is different stages of the——

Mr. SHIMKUS. What standards would you accept? I guess that is

the question.

Ms. AURILIO. There is different stages of the process. What we

said in 1998 was, given the science that currently existed—for example, there was new evidence to indicate that plutonium, which

is relatively insoluble, could actually migrate pretty quickly offsite

because it could attach itself to other particles. So that would be

of concern.

There was enough information, given new scientific data, that

there could be considerable migration off the site of radioactive

waste. That did not meet DOE’s current guidelines.

In terms of what we would want to see out of a final repository

for nuclear waste—and, again, our premise is there is no sound solution yet that has been found. We would want the waste to be isoVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00135 Fmt 6633 Sfmt 6602 E:\HEARINGS\71505 pfrm09 PsN: 71505
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lated for human beings and the environment for the hazardous lifetime of the waste.

Mr. SHIMKUS. I think we will be very pleased with Yucca Mountain and its meeting not just NRC standards but whatever comes

out as far as the EPA standards. Having visited there yesterday,

I am very supportive.

And I would just ask a final question, Mr. Chairman, if I may.

Mr. BARTON. You have got as much time as you——

Mr. SHIMKUS. In the issue of doesn’t Yucca Mountain—back to

the industry folks. Doesn’t Yucca Mountain also present a possible

asset for us in the future? If we have high-level nuclear waste

stored, and we don’t have the ability, it is not economically feasible

at this time to reprocess that.

But could you not make an argument that there is an asset there

stored and buried that at times can be pulled out and reprocessed

once the ability to reprocess becomes economically feasible?

Mr. SPROAT. If I could, I will try and answer that. Absolutely

that is the case. I think one of the fallacies in the discussions on

Yucca Mountain so far is the broad assumption that we are going

to put it in the ground and it is gone forever. Clearly——

Mr. SHIMKUS. And Senator Domenici mentioned that, and I was

surprised that he said just close it up. And I don’t expect it to be

closed——

Mr. SPROAT. Well, that is the current game plan that DOE is offering. However, I think the reality is is that nobody can say with

certainly exactly how the repository will perform over 10,000 years.

But you can certainly start to put waste in that repository and

leave it in a retrievable form and see how the repository operates

over the next 50 years, 100 years, 150 years, and gain much greater certainty about what the long-term performance of the repository will be before you close off that option of making it—of closing

off the repository and not making that fuel retrievable for whatever

purpose; say, if the repository is not operating in the correct way,

or you wanted to take that fuel out and start reprocessing it for

economic reasons.

Mr. SHIMKUS. Thank you, Mr. Chairman. I will yield back my

time.

Mr. BARTON. Thank you.

Mr. Strickland, did you have one final question or any comment?

Mr. STRICKLAND. No, thank you, Mr. Chairman.

Mr. BARTON. Okay. I have just a few wrap-up questions. Mr.

Sproat, at what time do you expect the developer of the Pebble Bed

Reactor to bring forward an application for certification to the

NRC?

Mr. SPROAT. The current project schedule is that the partners

will make their decision by the end of this year as to whether or

not——

Mr. BARTON. ‘‘The partners’’ being?

Mr. SPROAT. Being Exelon, BNFL, SCOM in South Africa, and

IDC in South Africa. We will make our decision about whether to

proceed with the final design and the construction of the demonstration plant in South Africa. We will make that decision by the

end of the year.

133

The government of South Africa also needs to make a decision

about approving the construction of that demonstration reactor,

and we expect that to occur first quarter of 2002. Once that decision is made, at that point in time, then, we would intend to begin

the preparation of a combined construction operating license application for a set of PBMRs in this country—not one, but a string of

several, number yet to be determined, and location yet to be determined.

And we would expect to submit that application for the combined

construction operating license probably in the second half of 2003,

and we would probably precede that with an early site permitting

application for a site or several sites sometime in late 2002.

Mr. BARTON. And the site or several sites, would they likely be

sites of existing nuclear power plants?

Mr. SPROAT. They would most likely be sites of existing nuclear

power plants because the site—we already have a site characterized. The transmission capability to get the power out would already be there.

Mr. BARTON. Okay. Now, the other three witnesses that are supportive of the nuclear option, is it your general agreement that the

next generation of nuclear reactors, if any, that are ordered are

going to be of the smaller variety as opposed to the large, 500 or

larger megawatt variety that are currently certified?

Mr. HUTCHINSON. I don’t think I would necessarily agree with

that.

Mr. BARTON. You wouldn’t agree with that.

Mr. HUTCHINSON. No. I think you could see—there is a possibility you could see an existing design that is already approved on

the shelf, built—— Mr. BARTON. And some of those are being built overseas.

Mr. HUTCHINSON. Right.

Mr. BARTON. And are in operation, so you would have some certainty in operation.

Mr. HUTCHINSON. Built in Japan—right, and in Korea, in some

of those places. It will be driven by what the industry can finally

get comfortable with it, the time to market question, and construction costs. And I think given that those have times and costs that

compete with combined cycle gas turbines, whatever that turns out

to be, that you—then, that is where you will see——

Mr. BARTON. Okay. Mr. Tollison?

Mr. TOLLISON. Our focus at INPO is on the safety and reliability

of the existing fleet, and my only comment on your question would

be I think the success of the demonstration reactor down in Cape

Town would be a big factor in how we eventually go——

Mr. BARTON. Okay.

Mr. TOLLISON. [continuing] as an industry.

Mr. BARTON. Mr. Longenecker?

Mr. LONGENECKER. Mr. Chairman, I would say that the size of

the reactor that is going to be ordered is highly dependent on the

company that is building it, what their supply mix is. All of the arguments about small being, you know, modular, simple, cheap, and

you can add to it, is true. When you build a large one, you do have

the concern when it is out of service you have lost a large chunk

of your capacity.

134

But for companies that have a very substantial generating capacity where this does not represent a significant portion of it, the

large plants like the Japanese are looking at, economy of scale is

still true. And I think probably you will see a mix of them depending, again, on the company that is ordering them and their specific

needs and reliability concerns.

Mr. BARTON. Okay. My final question, I am going to go back to

the gentlelady from PIRG. Let us assume that I totally agree with

you, that I have just been blown away, I understand the logic, I

have had a Damascus Road experience, and I am totally a true believer now, that you have so impressed me—and your group—that

I just can’t wait to help you. Okay? Now that is a big assumption,

but let us assume that.

You said something to Mr. Shimkus that kind of set me back.

You know, let us say that next week I put in a bill to close down

all of the existing nuclear reactors. In a time-certain, we are going

to pay off the stranded costs, we are going to figure out a way to

build windmills and import power from Canada and take up the

slack for the existing plants.

You still have all this high-level waste scattered out all over the

country. And I come to your group and I say, ‘‘Solve that problem.

I will guarantee you no future problem.’’ I am a true believer now,

you know, but help me solve the existing waste problem. What is

your solution?

Ms. AURILIO. Well, I wish I had a solution, and I wish that the

industry had had a solution before they built the reactors. In fact,

some of the earlier scientists who developed nuclear energy, like

Enrico Fermi and Robert Oppenheimer, even said, ‘‘Don’t build

these commercial plants until you have solve the waste problem.’’ Mr. BARTON. No, but that cat is out of the bag.

Ms. AURILIO. I agree. I agree.

Mr. BARTON. Cloning has occurred. Okay? We can’t debate

whether there should be cloning. It has occurred.

Ms. AURILIO. Yes.

Mr. BARTON. So what do we do to solve the—— Ms. AURILIO. And I think the scenario that you set up in terms

of phasing out these plants as quickly as possible is something that

gives the public a good starting point.

Mr. BARTON. You are still not answering my question. You are

too smart. You know, I am going—— Ms. AURILIO. I am giving you a starting point.

Mr. BARTON. No, no. I want a—you don’t have to give it to me

today, obviously. But it is not valid to just say there is no solution.

Okay?

Ms. AURILIO. I can tell you about a process that we could use to

come to a solution.

Mr. BARTON. Man made the problem; man can solve the problem.

Now you can have it spread out in 102 locations or 50 locations or

one location or somewhere in between. You can put in an interim

basis, a permanent basis, you can reprocess it, you can shoot it to

the moon, you can put it under the ocean. But you can’t just say

there is no solution. That is not viable. This Congress can’t just

throw up its hands and say, ‘‘The PIRG says there is no solution.

So we are not even going to worry about it.’’

135

Ms. AURILIO. So our solution is to minimize the amount of waste

that ultimately has to be dealt with, which is your starting point,

and then starting out with a fair and honest process, which I don’t

believe the history of nuclear waste policymaking in this country

has been, and involving the public at every step of the way to make

a decision, because this is some of the most dangerous material we

have ever created.

I don’t think any country in the world has a permanent solution

to this problem, and the solutions that we have seen coming out

of the industry rely on changing the goalposts every time the

science shows us.

Mr. BARTON. Yes. You are a very good testifier. Okay? You are

very good at not answering the question and getting your political

commentary on the record. And, again, that is acceptable. But we

can’t be for no solution. Mr. Boucher and Mr. Waxman, Mr. Markey, right on down the road, on the Democrat side, can’t be for no

solution, nor can myself and Mr. Largent, Mr. Pickering, Mr. Burr,

Mr. Norwood, all the way down to Mr. Radanovich and Ms. Bono.

We can’t be for no solution. Okay? We can’t study it for another 20

years.

Ms. AURILIO. Why not?

Mr. BARTON. Because it is there.

Ms. AURILIO. It is there, and it is going to stay there, and they

are going to generate more of it.

Mr. BARTON. We have the technology. So your solution is just to

study it for 20 more years.

Ms. AURILIO. My solution is to make sure that we protect the

public and the environment and future generations, and the things

that I have seen coming out of the industry so far don’t do that.

They change the goalposts every time that science shows them it

is not going to contain the waste.

Mr. BARTON. Well, you know, it is a funny thing but in a different era, a different issue, you know, when we find bad actors or

we find something that is a potential problem, we don’t leave it

spread out. We put it together.

There is a jail in Ellis County, in Waksahatchee, all the bad guys

and girls in Ellis County go to that jail. If they are really bad guys,

they go to Huntsville. And if it is a Federal problem and they are

really, really bad guys, they go to a Federal—we concentrate where

we can control it, watch it, monitor it, do all of the good things that

your group supports.

There is no other issue that I am aware of in this country where

the solution is, a) not to do anything, or b) leave it spread out. I

don’t want a convicted felon in my backyard in a bird cage. I want

it in Ellis County or Huntsville or the Federal penitentiary.

Now, you can be against Yucca Mountain. You can be against the

process. That is totally acceptable. But at some point in time, to

be responsible—and I am not just talking to you. I am talking to

the whole group that you represent—needs to come forward with

some solution.

And the likelihood is—I wasn’t here for Senator Domenici. I

didn’t get to hear his testimony. But the likelihood is we are going

to put a high-level nuclear waste bill on the President’s desk someVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00139 Fmt 6633 Sfmt 6602 E:\HEARINGS\71505 pfrm09 PsN: 71505
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time in this calendar year. So if your group has got potential solutions, come forward.

And, you know, I think on a bipartisan basis we are going to be

very open to all of the potential safeguards and transportation

issues and local impact issues, and all of that. But just to say,

‘‘Don’t do anything,’’ you know, that dog won’t hunt anymore. It is

pretty well gone.

Ms. AURILIO. I don’t think that is what I was saying. I was saying minimize the amount of the waste and then come up with a

fair and public process, which so far has not existed, for making

the decision.

Mr. BARTON. Okay. That is fair enough.

I want to thank the panel. The Chair would ask unanimous consent that the statement of the Uranium Producers of America on

this issue be made a part of the official record. Is there objection?

Hearing none, so ordered.

Gentlemen and lady, we want to thank you. We may have questions for the record. We would ask that you put them back in. We

do plan to move legislation in the very—in this Congress on this

issue.

This hearing is adjourned.

[Whereupon, at 4:28 p.m., the subcommittee was adjourned.]

[Additional material submitted for the record follows:]

RESPONSES FOR THE RECORD OF EDWARD F. SPROAT III, VICE PRESIDENT OF

INTERNATIONAL PROGRAMS, EXELON CORPORATION

Question 1. Do you believe it is important for the nuclear utility industry to have

a domestic source of uranium enrichment services? If not, why not? What about conversion services?

Response. One of the primary advantages of nuclear fuel has been the presence

of a reliable and competitive nuclear fuel market. If nuclear power is to continue

to be competitive with other electric generation technologies, nuclear fuel supply—

both enrichment and conversion—must remain both reliable and competitive.

Clearly, a domestic source of enrichment services can furnish a high degree of reliability. At the same time, reliability is not merely dependent upon the geographic

location of the enrichment service provider. Enrichment companies must also be financially viable and able to provide assurances of their long-term viability. Today,

the market for enrichment services is truly global in nature, and many foreign suppliers of enrichment services have proven to be highly reliable.

It is equally important for the nuclear industry to have a fair and competitive

source of supply for enrichment services. Effective risk management dictates that

nuclear plant operators diversify their sources of fuel supplies, particularly in the

face of increasing competition and consolidation. Regardless of the price, no company will want to rely on a single source to meet 100 percent of their fuel enrichment needs.

In our view, as long as the nuclear fuel markets are reliable and competitive, a

domestic enrichment capability—while perhaps preferable—is not essential. As the

nuclear industry seeks to compete in an increasingly deregulated and competitive

electric industry, it is difficult to justify subsidizing enrichment service providers

using inefficient and obsolete technology merely because they are located in the

United States. We believe as a matter of policy that the interests of consumers

would be better served if USEC were subject to the rigors of a competitive market

for enrichment services rather than given continued protection as a monopoly service provider.

Question 2. In the past there has been a glut in nuclear fuel available to the US,

but that appears to be changing rapidly, with US dependence on a single plant providing less than half of US requirements, and the remaining supply coming from

Russia. Does the nuclear utility industry have any concerns about the reliability of

nuclear fuel supplies in the future in view of the fact that there have been 5 interruptions in shipments of nuclear fuel from Russia in the past 5 years?

137

Response. We do have concerns about the wisdom of depending on a limited number of suppliers for an essential service. While the disruptions in Russian supply

to date have had little actual impact, it is not clear what impact future disruptions

might have following the closure of USEC’s Portsmouth facility. If Cogema and

Urenco were forced from the US market as a result of USEC’s trade actions, the

consequences of any disruption in either Russian or USEC supply would be magnified.

Question 3. What are your views on the anti-dumping case brought by USEC?

How do you reconcile USEC efforts to raise SWU prices with the need to make the

Paducah plant viable as a domestic source of enrichment services? Wouldn’t a domestic enrichment plant be consistent with the view that we need a domestic supply?

Response. USEC has brought antidumping and countervailing duty actions

against enrichment service providers in Europe, which now supply about 20 percent

of the U.S. market. The purpose of the antidumping and countervailing duty laws

is to counteract sales of dumped or subsidized goods, not services. Though enrichment suppliers such as USEC and the European enrichers contract with the utilities

for the service of enriching uranium owned by the utilities, USEC is asking the

Commerce Department and the International Trade Commission to treat the enrichment services contracts as contracts for the sale of low-enriched uranium (LEU).

However, as described in a letter submitted to the Commerce Department by the

Ad Hoc Utilities Group, the trade laws do not cover sales of services, such as uranium enrichment contracts. The imposition of punitive duties on sales of services

would be both contrary to U. S. law and internationally unprecedented.

Contrary to USEC’s recent claims, the imposition of duties has the potential to

significantly impact ratepayers and the future competitiveness of nuclear power.

USEC is seeking duties of 39 to 73 percent. Since the value of LEU used by utilities

is $1.7 billion per year (on the basis of current market prices), the resulting increase

in utility fuel costs ranges from $650 million to $1.2 billion annually.

USEC attempts to minimize the potential impact of its trade action by understating the relative cost of enrichment. With NEI’s definition of production costs as

a basis, fuel represents roughly one third of production costs and enrichment represents roughly one half of fuel cost, so enrichment actually represents roughly 17

percent of nuclear production costs---not 10 percent as claimed by USEC. But even

this analysis understates the potential impact of USEC’s trade action, because U.S.

Customs assesses duties on the value of imported products—in this case LEU. Given

that LEU represents roughly 80 percent of the total value of nuclear fuel, roughly

27 percent of nuclear production costs are subject to higher costs from duties.

Through its trade actions, USEC seeks to impose prohibitive duties on its only

competition in the U.S. market. If USEC is successful, proven and reliable suppliers

may be effectively excluded from participating in the U.S. market, thereby eliminating vital competition in the supply of this critical service, on which the nuclear

generators depend.

USEC’s efforts to raise SWU prices are necessary only from their own perspective.

In Exelon’s view, as long as the nuclear fuel markets are reliable and competitive,

a domestic enrichment capability—while perhaps preferable—is not essential.

Question 4. While I know your industry benefits from low SWU prices in the

short-term, has the industry reached a consensus on what you would do if we lose

all domestic supply and Russian shipments were interrupted for a protracted period

of time?

Response. Exelon cannot speak for the nuclear utility industry, but we are not

aware of any such consensus. We believe that simultaneous loss of domestic supply

and interruption of Russian shipments is an unlikely scenario. In this extremely unlikely case, it is probable that certain actions would be taken by the U. S. government to assure that there was an adequate supply of enrichment services beyond

that available from other foreign suppliers. Many of the contracts currently held by

USEC are backed by US government performance guarantees that were extended

by the USEC privatization act. Government Actions could include allowing Russia

to sell low enriched uranium directly into the U.S. market by modifying the Suspension Agreement currently in place, restarting the Portsmouth GDP under DOE control, or both.

Question 5. In a matter of a few months, the restrictions on the ownership of

USEC stock will permit investors to hold more than 10% of its stock. There has

been some concern that efforts to maximize share price could result in the liquidation of USEC’s assets. Could you explain what provisions the nuclear utility industry has in place to assure deliveries of nuclear fuel in such a circumstance if the

Paducah plant were also closed as part of such liquidation?

138

Response. Maximization of USEC’s share price is not likely to lead to liquidation

of the company. Liquidation is likely if the share price or market valuation is less

than the value of USEC’s inventories.

Exelon cannot speak for the nuclear utility industry. Although an entity in control

of USEC could make the decision to cease operating the Paducah facility, there are

still contracts with USEC that require fulfillment. If the contracts were not abided

by, the new entity would face protracted legal actions from the customers.

In the event that the Paducah plant were closed and USEC ceased to function

as an entity, it is possible that the U. S. government could take over operation of

the facility until an alternative could be established to provide for enrichment demand no met by supplies available from foreign suppliers.

Question 6. Are utilities such as yours considering the deployment of advanced

uranium enrichment technologies?

Response. Exelon is considering many alternatives with respect to its nuclear fuel

supply.

DOE recently communicated to Congress that the United States needs an advanced enrichment technology development program to sustain its uranium enrichment industry in the long-term. While research on several domestic technology initiatives is ongoing, it is unlikely that these research initiatives will result in the

commercialization of an advanced technology prior to the retirement of USEC’s remaining gaseous diffusion plant. The best means of assuring an uninterrupted transition to a competitive domestic source of enrichment is through the construction of

a new plant by the private sector using existing centrifuge technology. The United

States should encourage private sector initiatives in this regard.

Question 7. Do utilities such as yourselves believe that USEC should remain as

the exclusive executive agent for the brokering of the blended down highly enriched

uranium from Russia. If not, what role to you see for nuclear power plant operators

such as your company?

Response. No. Exelon does not believe that USEC should remain as the exclusive

executive agent for brokering the blended down Russian HEU. Exelon believes that

an alternate executive agent or agents would provide competition that would be beneficial to the U.S. market as well as Russia.

USEC has suggested that the appointment of additional executive agents for Russian HEU would cause USEC to shut down its remaining domestic production facility. However, we believe that the appointment of additional executive agents would

forestall the retirement of USEC’s remaining production facility, not accelerate it.

Given that USEC’s sales have been relatively constant, use of the Russian HEU

material has directly displaced domestic production. Effective risk management dictates that utilities diversify their sources of fuel supplies, particularly in the face

of increasing competition and consolidation. For this reason alone, it is unrealistic

for USEC to expect to maintain greater than 70 percent of the U.S. enrichment market. Given the increasing pressures on utilities to manage risks, USEC’s continuation as the sole executive agent at a time when the volume of its sales may be

dropping due to utility diversification can only have the effect of reducing domestic

output. Additional executive agents would reduce USEC’s access to Russian supplies

and prompt USEC to increase its domestic output.

More importantly, the deeply discounted prices USEC is seeking in its recently

proposed HEU Agreement amendment threaten to introduce greater revenue uncertainties for the Russians. The most critical element to the HEU Agreement’s future

stability is the revenue received by Russia. Russia must be paid fair prices, which

can best be assured through the bidding of multiple executive agents. This would

also ensure that an alternative exists in the event one agent is unable to perform

for financial or other reasons. Given the importance of this supply to U.S. nuclear

generators and their customers, it is essential that immediate steps be taken to ensure its future reliability.

Question 8. If the utilities served as an executive agent for the Russian HEU deal

as a way to reduce their fuel costs by eliminating USEC as a middleman, would

you be willing to direct those savings into maintaining operations at Paducah until

new technology was deployed?

Response. As the nuclear generators seek to compete in an increasingly deregulated and competitive electric industry, it is difficult to justify subsidizing a particular enrichment service provider merely because it is located in the United

States. It is also not clear to us that operations at Paducah require a subsidy.

Question 9. I know you disagree with the Energy Information Agency’s view that

construction of new nuclear power plants in the U.S. for the foreseeable future is

unlikely. What would it cost to build a nuclear power plant using the best and proven technology available today?

139

Response. Current ‘‘extensions’’ of Light Water reactor plants (AP600, AP100,

ABWR, etc.) are estimated to cost between 3.5 and 5.1 cents/kWh to build and operate. These estimates may be optimistic, as no one has licensed or built such a plant

and we expect that the licensing and construction of these plants will take between

six and eight years each.

For reasons outlined in my written testimony, Exelon believes that a small, modular reactor such as the Pebble Bed Modular Reactor (PBMR) is best suited for operation in a deregulated marketplace. Preliminary studies estimate that the PBMR

could be built and operated for a total cost of 3.2 to 3.8 cents/kWh and constructed

in less than 24 months once the design has been certified by the Nuclear Regulatory

Commission.

RESPONSES FOR THE RECORD OF JOHN R. LONGENECKER, LONGENECKER &

ASSOCIATES, INC., MANAGEMENT CONSULTANTS

Question 1. How much SWU does the US use each year, and how much of this

is imported from Russia at present?

Response. In the year 2000, US nuclear power plants consumed 10.4 million SWU.

Of this total demand, about 53% was supplied by Russian HEU blending.

Question 2. If we all agree that it is in our best interest to dismantle Russia’s

nuclear arsenal and bring in 5.5 million SWU per year from that source, do you believe the federal government should subsidize that arrangement in the interest of

national security?

Response. No. I believe that the objectives of the US-Russian HEU agreement can

be achieved without subsidy by the US government. Under the current Russian

HEU contract, USEC realizes trading profits of about $100 million per year. As the

agreement is renegotiated to provide for future deliveries, market-based arrangements with multiple executive agents could provide continuity of supply without

subsidy. Since the HEU deal is a government-to-government agreement, I believe

that the most significant US government role is to facilitate the smooth continuation

of the contract to whatever extent that it can.

Question 3. In your opinion, how long can USEC operate the Paducah plant and

still turn a profit based on their existing and anticipated contracts with the nuclear

utilities?

Response. The answer to your question depends on the average price of SWU in

the market. Today USEC is the high cost producer in the world market based on

its failure to follow through on its earlier commitments to deploy new lower cost enrichment capacity. In the future, the production costs at Paducah are likely to exceed the cost of buying Russian SWU, and the costs of any of the other primary enrichment producers. Realizing this, USEC is attempting to increase prices to US

customers by its trade action against European suppliers of enrichment services.

A better alternative is for the US to build new, cost competitive domestic enrichment capacity as soon as possible. The high costs of production from the Paducah

GDP, and its economic obsolescence should stimulate a market response to build

cost competitive capacity either in the US or abroad. I strongly support building

new enrichment capacity in the US, but realize that regulatory and other conditions

would have to be conducive for this to occur.

While new enrichment capacity is being constructed, I assume that the US will

continue to need production from Paducah due to limits on Russian imports, and

the limited supply capability in Europe.

Question 4. Since the Russians have interrupted SWU deliveries on five occasions

in the last five years, can we consider the Russian SWU a reliable source?

Response. Reliability is certainly a major issue in nuclear fuel supply. Although

there are concerns regarding future changes in Russian policy, infrastructure failures and the like, overall, I believe that the Russian supply of blended HEU will

continue to be reliable. The US currently is dependent on Russian SWU, but the

Russians also depend strongly on the funds provided by the US for those SWU.

However, future short-term disruptions are possible, and I believe that the key

is for the US to factor potential problems into negotiations on the Russian HEU

deal, and also to find a way to bridge any short-term disruptions.

Question 5. Do you agree with the DOE assessments that although the Russian

HEU agreement is a very important proliferation agreement, it should not be considered a secure source of energy supply for our nation’s nuclear power plants due

to a number of unresolved issues in the Agreement’s implementation? What contingencies should be in place to provide enrichment services domestically, and does the

government have a role in paying for a portion of this energy security as part of

140

enabling the non-proliferation benefits of selling the imported uranium supplied

under the HEU Agreement with Russia?

Response. Reliability of supply issues exist, and the first priority of the US government should be to stabilize the Russian HEU agreement. One way of doing so

would be to name a second executive agent. This can be done at no cost to the government. Having multiple executive agents would offer greater assurance of continuity of deliveries by providing greater financial incentives to the Russians

through competition.

The trading profits from selling Russian HEU to utilities are derived from an exclusive franchise granted by the US government. Congress should examine whether

this exclusive franchise should continue to reside with USEC, and what benefit the

country will derive from the billion dollars in trading profits that the executive

agent is likely to realize over the next decade.

USEC appears to have enough inventories to bridge a supply disruption of at least

6 months. However, additional US government actions could also be taken, although

they would require government funding. For example, DOE could make its surplus

US HEU inventories available for blending in the event of a Russian supply disruption. Plans could be put in place that would allow the blending of HEU in US based

facilities to begin with a short lead-time.

Another alternative, although quite expensive, is for DOE to create a strategic

stockpile of enriched uranium. This could be done by accelerating the rate of Russian HEU blending, down blending US HEU, or by operating the Portsmouth GDP

for some period of time after June 2001. If such a stockpile is created, DOE should

agree to keep the material off the market, and only make it available in case of disruption.

Question 6. Do you believe is it important to have a domestic source of enrichment

services?

Response. Yes, this is vitally important to our national energy security. The US

government should act to assure that it facilitates and does not inhibit private sector efforts to construct new cost competitive enrichment capacity in the US as soon

as possible. I believe that this can be done by the private sector in 5 to 6 years.

The private sector should pick the technology to be deployed, and in the near term

this likely would involve non-US technology.

Continued development of US technology by DOE, possibly for long-term deployment, may be justified. However, the near term priority must be on constructing

new enrichment capacity to replace the economically obsolete US GDP capacity.

Question 7. The GAO in a December 2000 report questioned the benefits of proceeding forward with the proposal to import an additional 1 million SWU of enriched uranium from Russia that is produced in their commercial uranium enrichment plants. in addition to the 5.5 million SWU per year brought in under the nonproliferation agreement. What happens to the economics of the Paducah plant if

Russian commercial SWU is brought into the US and production is cut, say from

5 to 4 million SWU/year?

Response. In round numbers, assuming the availability of low cost power for production at Paducah of 5 million SWU per year, unit costs of production, excluding

R&D, administrative, dividends and interest costs, would be about $95/SWU. If production at Paducah were 4 million SWU per year, unit costs of production would

increase to about $105/SWU. Allocating USEC’s R&D, administrative, dividend and

interest costs to arrive at a breakeven price adds roughly another $15 to these numbers. As I stated before, USEC’s production costs are above those of any of the major

primary enrichment suppliers, and this points out the need for new, low cost enrichment capacity in the US.

Since the US likely will require the operation of the Paducah plant to meet domestic fuel needs, absent a decision to lift restrictions on the commercial sale of

Russian SWU in the US, our country needs new competitive enrichment capacity

as soon as possible. This should be the main US priority.

Question 8. Do you believe that USEC has a viable business model to sustain it

for the long run as a domestic nuclear fuel producer? If not, what should be done

to assure that there will be a domestic uranium enrichment industry over the next

3-5 years? What steps should Congress take to encourage this, if any?

Response. In my opinion, USEC does not have a viable business strategy to sustain it for the long term. USEC is increasingly becoming a trader of blended Russian HEU. In fact, it realizes trading profits of approximately $100 million per year

from this Executive Agency, and will meet about 75% of its 2001 deliveries to US

utilities using Russian SWU.

Since USEC lacks a proven low cost enrichment technology, its future strategy appears to rely mainly on obtaining import restrictions on its European competitors

to obtain an effective monopoly position in the US market, and on generating tradVerDate 11-MAY-2000 07:45 Oct 03, 2001 Jkt 073510 PO 00000 Frm 00144 Fmt 6633 Sfmt 6621 E:\HEARINGS\71505 pfrm09 PsN: 71505
141

ing profits from the brokering of Russian HEU. To assure that there is a viable US

industry in the future, I would suggest that Congress provide support, as needed

to private sector plans as they evolve to build new uranium enrichment capacity in

this country.

Question 9. Won’t the trade action by USEC extend the life of the domestic industry for a few more years, if successful?

Response. The United States needs a reliable, diverse, economic supply of enrichment services to sustain a competitive nuclear power option and to ensure future

energy security. USEC’s initiatives including its antidumping action against European enrichment suppliers, work against these objectives and are creating significant uncertainties and unnecessary financial costs for nuclear operators and customers

Today, although USEC supplies almost 70% of the US market, it seeks import duties of up to 73% on its lower cost European competitors, price reductions for Russian supplied SWU from HEU, and increased Russian SWU imports as a means of

survival.

If USEC won its trade case, it would effectively be granted a monopoly on the

US enrichment market, and could raise prices by the maximum allowed by the duties imposed on European enrichers. It is clear that imposition of duties would increase the cost of enrichment services from European suppliers, possibly excluding

them from the US market, and would allow USEC to increase its prices to US utilities accordingly.

Even if USEC acted as a ‘‘benevolent monopolist’’, and did not raise prices to the

maximum extent possible, US utilities would still end up paying hundreds of millions of dollars per year in higher nuclear fuel costs. Clearly, the financial impacts

of such action would be significant both to US electricity customers and to the US

economy as a whole. Furthermore, these hundreds of millions of dollars would accrue solely to USEC and its shareholders, providing USEC a financial windfall from

successful litigation rather than from efficient, competitive operations.

In addition, there is no certainty that USEC would use its windfall from the trade

sanctions to construct new enrichment capacity in the US. Specifically, USEC has

no proven advanced technology, and its credit rating has been downgraded to junk

bond status, making it unlikely that it could obtain financing to deploy any new enrichment technology that it might acquire. The stark reality is that under USEC’s

plan, US utilities and electricity customers could pay USEC billions in increased

fuel costs over the next decade and still have just one 60-year-old GDP operating

in this country.

In summary, unfounded trade sanctions on foreign uranium enrichment services

suppliers will not assure a sustainable uranium enrichment industry in the United

States. Trade sanctions would be bad for our nation’s economy, and may serve as

a distraction from the critical task of building new competitive US enrichment capacity. Rather than pursuing trade actions, the US should be focusing on implementing a credible plan for building new, low cost enrichment capacity in the US

so that we can compete in global markets.