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[Senate Hearing 107-89]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 107-89

                         NUCLEAR POWER INDUSTRY

=======================================================================

                             JOINT HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES

                                and the

                            SUBCOMMITTEE ON
                      ENERGY AND WATER DEVELOPMENT

                                 of the

                      COMMITTEE ON APPROPRIATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

        TO CONDUCT OVERSIGHT ON THE STATE OF THE NUCLEAR POWER 
   INDUSTRY AND THE FUTURE OF THE INDUSTRY IN A COMPREHENSIVE ENERGY 
                                STRATEGY

                               __________

                              MAY 3, 2001

                       Printed for the use of the
           Committee on Energy and Natural Resources and the
                      Committee on Appropriations

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
73-965                     WASHINGTON : 2001

_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402
  

               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  FRANK H. MURKOWSKI, Alaska, Chairman
PETE V. DOMENICI, New Mexico         JEFF BINGAMAN, New Mexico
DON NICKLES, Oklahoma                DANIEL K. AKAKA, Hawaii
LARRY E. CRAIG, Idaho                BYRON L. DORGAN, North Dakota
BEN NIGHTHORSE CAMPBELL, Colorado    BOB GRAHAM, Florida
CRAIG THOMAS, Wyoming                RON WYDEN, Oregon
RICHARD C. SHELBY, Alabama           TIM JOHNSON, South Dakota
CONRAD BURNS, Montana                MARY L. LANDRIEU, Louisiana
JON KYL, Arizona                     EVAN BAYH, Indiana
CHUCK HAGEL, Nebraska                DIANNE FEINSTEIN, California
GORDON SMITH, Oregon                 CHARLES E. SCHUMER, New York
                                     MARIA CANTWELL, Washington
                    Brian P. Malnak, Staff Director
                      David G. Dye, Chief Counsel
                 James P. Beirne, Deputy Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                                 ------                                

                      COMMITTEE ON APPROPRIATIONS

                     TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi            ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania          DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico         ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri        PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky            TOM HARKIN, Iowa
CONRAD BURNS, Montana                BARBARA A. MIKULSKI, Maryland
RICHARD C. SHELBY, Alabama           HARRY REID, Nevada
JUDD GREGG, New Hampshire            HERB KOHL, Wisconsin
ROBERT F. BENNETT, Utah              PATTY MURRAY, Washington
BEN NIGHTHORSE CAMPBELL, Colorado    BYRON L. DORGAN, North Dakota
LARRY CRAIG, Idaho                   DIANNE FEINSTEIN, California
KAY BAILEY HUTCHISON, Texas          RICHARD J. DURBIN, Illinois
MIKE DeWINE, Ohio                    TIM JOHNSON, South Dakota
                                     MARY L. LANDRIEU, Louisiana
                   Steven J. Cortese, Staff Director
                 Lisa Sutherland, Deputy Staff Director
              Terrence E. Sauvain, Minority Staff Director
                                 ------                                

              Subcommittee on Energy and Water Development

                 PETE V. DOMENICI, New Mexico Chairman
THAD COCHRAN, Mississippi            HARRY REID, Nevada
MITCH McCONNELL, Kentucky            ROBERT C. BYRD, West Virginia
ROBERT F. BENNETT, Utah              ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                PATTY MURRAY, Washington
LARRY CRAIG, Idaho                   BYRON DORGAN, North Dakota
TED STEVENS, Alaska (ex officio)     DIANNE FEINSTEIN, California

                           Professional Staff

                               Clay Sell
                              Tammy Perrin
                        Drew Willison (Minority)

                         Administrative Support

                            Lashawnda Smith
                       Nancy Olkewicz (Minority)

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Ahearne, John, Adjunct Professor, Duke University, Durham, NC....    26
Asselstine, James K., Managing Director, Lehman Brothers, Inc., 
  New York, NY...................................................    21
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     5
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     4
Landrieu, Hon. Mary L., U.S. Senator from Louisiana..............     6
MacLean, Heather J., Graduate Student, Nuclear Engineering, 
  Massachusetts Institute of Technology, Cambridge, MA...........    30
McNeill, Corbin A., Jr., Chairman & Co-CEO, Exelon Corporation, 
  Chicago, IL....................................................    14
Meserve, Richard, Chairman, U.S. Nuclear Regulatory Commission...     7
Murkowski, Hon. Frank H., U.S. Senator from Alaska...............     1
Rhodes, Richard, Author, Madison, CT.............................    28

 
                         NUCLEAR POWER INDUSTRY

                              ----------                              

                         THURSDAY, MAY 3, 2001

        U.S. Senate, Committee on Energy and Natural 
            Resources, and the Subcommittee on Energy and 
            Water Development of the Committee on 
            Appropriations, Washington, DC.

    The committee and subcommittee met, pursuant to notice, at 
10:04 a.m. in room SD-366, Dirksen Senate Office Building, Hon. 
Frank H. Murkowski, chairman, Committee on Energy and Natural 
Resources, and Hon. Pete V. Domenici, chairman, Subcommittee on 
Energy and Water Development, Committee on Appropriations, 
presiding.

         OPENING STATEMENT OF HON. FRANK H. MURKOWSKI, 
                    U.S. SENATOR FROM ALASKA

    Chairman Murkowski. Good morning, ladies and gentlemen. I 
want to welcome you to this joint hearing between the Energy 
and Natural Resources Committee and the Subcommittee on Energy 
and Water of the Senate Appropriations Committee.
    What we are going to discuss today is a very important 
matter, and that is the state of the nuclear power industry and 
the future of the industry in a comprehensive energy strategy. 
I am very pleased to have two of my colleagues with me, Senator 
Bingaman, the ranking minority member of this committee, and my 
good friend Senator Domenici, who is the senior member of the 
Energy and Natural Resources Committee, I might add, both from 
New Mexico.
    The hearing on the state of our nuclear power industry and 
the future of that industry in a comprehensive energy strategy, 
is timely, to say the least. We are seeing more and more 
interest in utilizing nuclear energy as a consequence of the 
energy crisis that this country is in. We can reflect on 
California and we can reflect on increasing gasoline prices, or 
increasing natural gas prices in our own bills here in 
Washington, D.C. that clearly indicate we have a significant 
increase in demand, and our supply sources are not keeping up 
with that demand.
    Thanks to these members and Senator Domenici in particular 
for his tireless efforts on this subject, we have this 
opportunity this morning, and I am very pleased that both the 
Senators from New Mexico are working together on this. I look 
forward to co-chairing with Senator Domenici.
    Now, as you are well aware, I have introduced a bipartisan 
comprehensive energy bill that addresses both supply and demand 
issues. We must have a diverse and responsible energy mix if we 
are ever to lessen our dependence on imported oil, and I do not 
say replace it, but I say lessen.
    As we reflect on the role of nuclear energy, it is 
interesting to reflect that it is an industry we have somewhat 
taken for granted. It produces about 20 percent of the power 
generation of this country, and leveled off there, and we 
really have not had any new developments for about 10 years. I 
had used 20 years, but I was reminded by Earl Nye that it is in 
reality 10 years. That is Texas Utilities, in case you are 
wondering.
    Now, we must have a diverse and responsible response to 
meeting our energy demands. Production of electricity from 
nuclear energy emits no greenhouse gases, no CO2, no 
SOX, no NOX. It is a base load power, 
keeps our grid stable, reliable, and it is kind of interesting 
to note in the California chaos, nuclear still supplies about 
16 percent of California's electricity. We wonder where 
California would be today without the nuclear power industry. 
High natural gas prices and low uranium prices have helped to 
make electricity produced from nuclear some of the cheapest in 
the country. Perhaps some day we might reach the fabled ``too 
cheap to meter'' goal, but I am not going to hold my breath for 
that to happen.
    Safe, efficient U.S. nuclear plants are operating at record 
efficiencies in this country today. U.S. nuclear reactors have 
achieved close to 90 percent efficiency, a dramatic increase, 
and those organizations that have achieved that have a great 
deal to be proud of, because they have done it in a manner that 
does not compromise safety.
    Total efficiency increases during the nineties for existing 
plants was the equivalent of adding approximately 23 1,000 
megawatt power units, and keep in mind, that is all clean, non-
emitting generation. And now we have seen nuclear energy on the 
upswing. 4 or 5 years ago, who would have thought we would hear 
talk of buying and selling, and yes, even planning to build new 
plants. Today, this discussion is happening.
    I had an opportunity a few weeks ago to discuss how you 
would approach the conceptual idea of proceeding with a new 
powerplant. The suggestion was made that you might go to an 
area where you already have an existing plant where the siting 
has been approved, so you do not have that problem to go 
through, maybe get four or five of the major utilities to come 
together to underwrite the cost and take a proportional equity 
interest in a new nuclear powerplant, with the provision that 
the Government, without eliminating any safeguards, would 
guarantee that once it was built to specifications, it would be 
allowed to go into production, because that is one of the risks 
of building a nuclear plant. You could build it, and then you 
might find you cannot license it, but nevertheless, it was an 
interesting conversation, and I think it is healthy that the 
industry is beginning to explore some possible developments in 
getting back in nuclear construction.
    U.S. industry, as I have indicated, is beginning to 
consider putting dollars into the evaluation of new plants. By 
the end of 2001 the Chicago-based Exelon Corporation will have 
invested, I am told, $15 million in a South African venture to 
build a pebble-bed modular reactor. We have Mr. Corbin McNeill 
here today to tell us a little bit more about that, so I will 
not go into that any further, but given the public's general 
acceptance that we have got to address this energy crisis, 
there is more and more awareness and consideration given to the 
role of the nuclear industry.
    This past April, the Associated Press commissioned a poll 
that suggests half of those polled support using nuclear 
powerplants to reduce the electricity--I am not sure I believe 
this figure coming up, but it says 56 percent would not mind a 
nuclear plant within 10 miles of their home. I think that is 
contrary to the NIMBY theory of not in my backyard, but anyway, 
I will just read what it says, because I want to make the staff 
feel that I have done my job.
    [Laughter.]
    Chairman Murkowski. Granted, we still have to solve our 
waste problem, but I believe that has been more of a political 
problem than a technical problem. Those of us who observed what 
the French have done, particularly as a consequence of the 1973 
Arab oil embargo, where they made a decision they were not 
going to be held hostage by the Mideast, and went off on a 
nuclear binge, and now 75 percent of their power is generated 
by nuclear power, and it evidently does not affect the wine, 
because as you go through France, you see powerplants out in 
the vineyards.
    The significance of what they have done, though, is the 
technology to recover the waste. Our industry is strangling on 
its waste. They have a technique to recover the waste, put the 
plutonium back into the reactor, burn the plutonium, reduce the 
proliferation risk, vitrify the waste and put it away, and we 
are still agonizing about what to do with the waste.
    In any event, in conclusion, we perhaps are making progress 
on Yucca Mountain. I have not checked with the Nevada 
delegation lately, but I am encouraged by the Department of 
Energy's IG investigation that found no bias in the science 
process at Yucca. It seems like if any excuse comes up to delay 
that process, why Murphy will make sure it comes up.
    We now expect the science and engineering report from the 
Department any day, and I am confident that, as with the 
December 1999 Viability Assessment, there will be no show-
stoppers. I am confident of that. In any event, if we ever hope 
to achieve energy security and energy independence in this 
country, we cannot abandon the nuclear option. It is an 
important and integral part of our energy mix, our economy 
depends on nuclear energy, our national security depends on 
nuclear energy, our environment depends on nuclear energy, and 
our future, to a large degree, in electric generation depends 
on nuclear energy.
    So I look forward to the witnesses, and look for a lively 
discussion. Senator Domenici, since you and I are co-chairing 
this, and that puts Senator Bingaman, I guess, since there is 
only three or four of us here--ordinarily I would call on 
Senator Bingaman, but you are co-chairing, so in the order of 
deference between the two of you, you can figure it out.
    [Laughter.]

       STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Domenici. We had actually figured on starting 
without you, he and I, and I was going to----
    [Laughter.]
    Senator Domenici [continuing]. Chair it anyway. We had 
already agreed.
    Thank you very much, Mr. Chairman.
    Chairman Murkowski. It's a good thing I got here.
    Senator Domenici. We would have had a disaster. In any 
event, let me take just a few moments. First I want to join 
Senator Murkowski in calling this meeting to order. The 
Subcommittee of Appropriations that is called Energy and Water, 
which I have been privileged to chair for a long time, has most 
of the money and the funding from the Federal Government 
standpoint when it comes to nuclear power and all the other 
matters nuclear, and not too many years ago, there is no 
question that we would not have considered such a hearing, 
because there would have been little or no interest. People 
would have been wondering what we were doing.
    At that point we had a lot of extra energy, so it even made 
it more of a hearing that people would not consider very 
relevant. We had a supply of nuclear power, and it was a dying 
industry, and all I guess we want to leave with today is the 
theme of how things have changed, and I think they have changed 
for the better.
    Headlines in papers all across the country call out the new 
interest in nuclear energy. I see a few of them up there on the 
chart. We will talk to them in just a moment.
    Today, it is increasingly recognized that nuclear energy is 
providing a safe, reliable, and wonderfully clean energy for 
our electrical needs. It does not matter much what paper you 
refer to, the Washington Post, Washington Times, New York 
Times, Wall Street Journal, USA Today, the picture is the same. 
Nuclear energy is poised for a dramatic rebirth. I believe that 
if we will just get leadership in the Congress and the White 
House, it will happen. One headline says, It is Time for Greens 
to go Nuclear. Wall Street Journal, and Nuclear Power Can Halt 
Shortages, Los Angeles Times.
    Less than 4 years ago, October 1997, at Harvard University, 
the stage was pretty lonely when I started participating in a 
series of lectures and speeches. I called for a new dialogue in 
nuclear technologies. The progress since then has been 
spectacular. The energy crisis finally being obvious--it was 
there all along, the shortage--has pushed this premise along 
very, very rapidly.
    Our witnesses today, and many of you in this room, have 
worked to provide accurate information to the public about 
nuclear power, its current impact and its future promise. I am 
very proud to realize now that if we repeated the Harvard 
speech today, the stage would be crowded, so let me cite three 
of the spectacular events, achievements of nuclear energy.
    First, it is producing 22 percent of our electricity at 
costs that are now even lower than coal, and the availability 
of the 103 plants has increased so dramatically that we have 
effectively gained output of more than 20 plants, without 
building any. That is, the efficiency of the plants has done 
that.
    Second, its safety record is absolutely superb. New safety 
records are being set by our commercial plants every day, and 
our nuclear Navy powerplants, which have more than twice the 
operational experience of commercial plants, have never had a 
significant accident.
    At the same time, I like to emphasize that 90 nuclear ships 
of the Navy, powered by over 100 reactors, are welcomed into 
just about every port in the world, with just one exception, 
New Zealand, and they carry in their bowels one or two nuclear 
powerplants with spent fuel rods on board, and they boat into 
ports, and are welcome. I think that means there is very little 
risk. That is how I see it.
    Third, it has avoided air emissions, more than 2 billion 
tons of carbon. I just received life cycle data from a new 
Japanese study. It confirms the tremendous advantage of nuclear 
energy over fossil fuel plants, and shows that solar and wind 
are larger pollutant emitters than nuclear.
    In some of my recent discussion about nuclear energy, I 
have discussed the increasing trend toward globalization, 
through globalization the world becomes more integrated, and 
clearly it is one way to provide more economic prosperity for 
the world. Our high technology products find themselves in the 
markets of these countries, and it is pretty obvious these 
countries are going to need energy. What will they choose?
    At this point in history, I am sure one of the witnesses 
can tell us who has orders for nuclear powerplants now, what 
countries around the world are ordering them. What is the 
backlog, what is the long term as of now, what do orders look 
like in the Koreas and Japans and others?
    So from my standpoint, there is going to be prosperity in 
the world, and American leadership is going to have to insist 
on prosperity in America, and when we look at our energy needs, 
subtract all the conservation we can do, there is still a huge 
supply vacuum. I think we are going to be able to honestly 
assess the role of nuclear in that, and I believe it will be 
significant, and I believe it will occur. It will not be 
sometime 100 years from now like people thought. It will be in 
a reasonable time frame.
    With that, I want to just quickly--unless you want to 
introduce the witnesses.
    Chairman Murkowski. No, I will be happy, you can introduce 
them. Maybe Senator Bingaman would like to--
    Senator Domenici. Fine. Senator Bingaman, I yield.

         STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Bingaman. Well, thank both of you for scheduling 
this hearing, both chairmen. I believe there is strong 
bipartisan support, at least on the Energy Committee, for 
nuclear power. Nuclear power does play a very essential role, 
an indispensable role in providing the power that we use today. 
By extending the operating lives of the current generation of 
nuclear plants, the expectation is, I think, realistic that it 
will continue to play a very central role.
    The more difficult question, which I am sure we will hear a 
lot of testimony about, is whether new nuclear powerplants will 
be built in the foreseeable future in this country. Plainly, 
they would not have been built under the cumbersome and 
uncertain licensing and regulatory process of the past, but 9 
years ago Congress streamlined that licensing system. The 
system that we enacted in 1992 remains untested and unused, but 
it does offer the next generation of reactors more timely and 
predictable licensing decisions than the old system did.
    The reasons the utility industry has been unwilling to 
order new powerplants, as far as I understand it, is primarily 
an economic reason, and also relates to the changing structure 
of the electricity market, and that has been more important 
than the nuclear safety regulation issue.
    There are things that Congress needs to be doing. We need 
to get on with the nuclear waste repository. We need to renew 
the Price-Anderson Act, we need to restore funds for nuclear 
research, and encourage bright students like Ms. MacLean to 
choose nuclear engineering as a career, and most of all, 
perhaps, we need to ensure that the Nuclear Regulatory 
Commission remains a credible and effective and vigilant 
regulator so that the public can have confidence in the safety 
of nuclear powerplants.
    In the final analysis, I believe it will be up to the 
industry to decide whether to build plants or not. For over 20 
years the decision has been not to go ahead with any new 
plants. There is evidence that that is changing, and I hope we 
can hear some good testimony on that from our witnesses today.
    Thank you again for holding the hearing.
    Senator Domenici. Thank you, Senator.
    Chairman Murkowski. Senator Hagel I believe just stepped 
out for a phone call. Senator Landrieu, we have had opening 
statements, and we are ready for the witnesses.

       STATEMENT OF HON. MARY L. LANDRIEU, U.S. SENATOR 
                         FROM LOUISIANA

    Senator Landrieu. Thank you, Mr. Chairman. I will just be 
brief, but I would like to say that I am glad we are having 
this hearing, and I want to commend Senator Domenici 
particularly for his leadership and, of course, the chairman 
and the ranking member. Senator Domenici has spent a tremendous 
amount of time, energy and great passion on this issue. I think 
he has taken the right approach to this particular aspect of 
energy policy, and I am proud to join him as original cosponsor 
of his bill.
    I do believe that one of the cornerstones of energy policy 
in this Nation must include an increase of domestic supply. 
Nuclear serves as one important component of our supply. We 
also obviously need to reduce demand, but I think it should be 
apparent to everyone that the domestic supply issue as well as 
the supply necessary to fuel our electric grid, are crucial. 
Senator Domenici, I want to commend you for your good work.
    Senator Domenici. Thank you.
    Senator Landrieu. I am proud to be a cosponsor of his bill, 
and look forward to working with you all. Thank you.
    Chairman Murkowski. Senator Domenici.
    Senator Domenici. Might I just name the witnesses and give 
a little tiny background and then we can proceed, Mr. Chairman.
    First, Richard Meserve serves as Chairman of the U.S. 
Nuclear Regulatory Commission, previously served as legal 
counsel for the President's Science and Technology Advisor. I 
want to compliment you right now on the work of the Nuclear 
Regulatory Commission, the last 3 years or so with the 
revamping that is taking place, and putting the assets more in 
the area of where they were needed. You have done an excellent 
job, and I think you should be very proud of the safety that 
has ensued, and the increased production that has come along as 
a causal relationship to that, so thanks for your work.
    Second, Mr. Richard Rhodes, Pulitzer prize-winning author 
of a wide range of books. His articles have appeared 
everywhere, from Reader's Digest to Atlantic Playboy. His book, 
Nuclear Renewal, is one of the clearest and best calls for a 
strong role for nuclear energy. We thank you very much for 
being here and for what you have contributed to the dialogue, 
Mr. Rhodes. It is must-reading for those who are trying to 
understand where we are going.
    Third, Corbin McNeill, Jr., chairman and CEO of Exelon 
Corporation. You are going to address the panel, and your 
company operates the country's largest fleet of nuclear plants.
    Fourth is Heather MacLean, currently a graduate student of 
nuclear engineering at MIT. Senator Bingaman just alluded to 
our hope that we will have more like you. We look forward to 
listening to you.
    Fifth is James Asselstine, managing director of Lehman 
Brothers in New York, who served as a commissioner of the U.S. 
Regulatory Commission from 1982 to 1987.
    Sixth is Dr. John Ahearne, professor of Duke University, 
served as chairman and commissioner of the U.S. Nuclear 
Regulatory Commission from 1978 to 1983, and has had many other 
national positions.
    So shall we start at that side of table with Richard 
Meserve.

            STATEMENT OF RICHARD MESERVE, CHAIRMAN, 
               U.S. NUCLEAR REGULATORY COMMISSION

    Mr. Meserve. Chairman Murkowski, Chairman Domenici, members 
of the committee, I am very pleased to testify on behalf of the 
U.S. Nuclear Regulatory Commission on how nuclear energy fits 
into a comprehensive energy strategy. I have submitted a 
statement for the record, but would like to make a brief 
summary.
    Chairman Murkowski. Your statement will be entered into the 
record.
    Mr. Meserve. At the outset, I would like to acknowledge the 
presence in the audience of two of my fellow Commissioners, 
Edward McGaffigan and Jeffrey Merrifield. I very much 
appreciated Senator Domenici's kind word, but I must say that I 
have had the benefit as Chairman of very capable colleagues on 
the Commission, and of very talented staff.
    As you know, the Commission does not have a promotional 
role for nuclear power. Rather, the agency seeks to ensure the 
safe application of nuclear technology, if society elects to 
pursue the nuclear energy option.
    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. We believe that the Commission's most 
recent legislative proposal, which is described in my 
statement, would enhance safety and improve our regulatory 
system even more.
    I am pleased to see that many of our proposals have been 
incorporated into proposals now pending before Congress. The 
Commission also recognizes that its decisions and actions as a 
regulator influences 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 goals 
also include increasing public confidence.
    Currently, there are 104 nuclear powerplants 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 
percent of our Nation's electricity for the past several years. 
In 2000, these nuclear powerplants produced a record 755,000 
gigawatt hours of electricity.
    The Nation's nuclear electricity generators have worked 
over the past 10 years to improve nuclear powerplant 
performance, reliability, and efficiency. The improved 
performance of U.S. nuclear powerplants since 1990 is 
equivalent to placing 23 new 1,000 megawatt powerplants on 
line. The Commission has focused on ensuring that safety is not 
compromised as a result of these industry efforts.
    The nuclear industry is undergoing a period of remarkable 
change, as several of the opening statements indicated. One of 
the more immediate results of the economic deregulation of the 
electric power industry has been the development of a market 
for nuclear powerplants 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 have 
increased from an historical average of about two or three per 
year to 20 to 25 in the past 2 years.
    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. The Commission has 
renewed the licenses of five units at two sites, for an 
additional 20 years. The thorough reviews of these applications 
were completed ahead of schedule. Applications for an 
additional five units at three sites are currently under 
review.
    As indicated by our licensees, many more applications for 
renewal are anticipated in the coming years. The Commission 
recognizes the importance of license renewal and is committed 
to providing high priority attention to this effort.
    In recent years, the Commission has approved numerous 
license amendments to permit licensees to make power increases 
or up-rates. Typically, these increases have been approximately 
2 to 7 percent. These up-rates in the aggregate have resulted 
in adding approximately 2,000 megawatts to the grid.
    The NRC is now reviewing five license amendment requests 
for larger power up-rates. These requests are for boiling water 
reactors and are up-rates of 15 to 20 percent. While the staff 
has not received requests for additional up-rates beyond these 
five, some estimates indicate that as many as 22 boiling water 
reactors may request such up-rates. These up-rates, if allowed, 
could add approximately 3,000 to 4,500 megawatts.
    In addition to the three already-certified advanced reactor 
designs, there are new nuclear powerplant technologies, such as 
the pebble bed modular reactor, which some believe can provide 
enhanced safety, improved efficiency, lower cost, as well as 
other benefits. To ensure that the Commission staff is prepared 
to evaluate any applications to introduce these advanced 
reactors, the Commission recently directed the staff to assess 
the capabilities that would be necessary to review an 
application for new construction. An examination of possible 
changes in our rules is also underway.
    In order to confirm the safety of new reactor designs and 
technology, the Commission believes that a strong nuclear 
research program should be maintained. Additionally, the 
Commission is reviewing its human capital to assure that the 
appropriate professional staff is available for the Commission 
to fulfill its safety mission, as well as any new regulatory 
responsibilities in the area of licensing new reactor designs.
    The Commission has long been and will continue to be active 
in concentrating its staff's efforts to achieve our statutory 
mandate. We are also mindful of the need to reduce unnecessary 
burdens, to maintain open communications with all our 
stakeholders, to continue to encourage our staff to strive for 
increased efficiency and effectiveness.
    I look forward to working with the committees, and I 
welcome your comments and questions. Thank you.
    [The prepared statement of Mr. Meserve follows:]

     PREPARED STATEMENT OF RICHARD MESERVE, CHAIRMAN, U.S. NUCLEAR 
                         REGULATORY COMMISSION

                              INTRODUCTION

    Mr. Chairman, members of the Committees, I am pleased to submit 
this testimony on behalf of the U.S. Nuclear Regulatory Commission 
(NRC) on how nuclear energy fits into a comprehensive energy strategy. 
As you know, 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--
rather, the Agency seeks 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. We believe the Commission's most recent legislative 
proposals would enhance safety and improve our regulatory system even 
further and are pleased to see that many of our proposals have been 
incorporated into the bills before this Committee. 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.
                               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. 
(See Charts on Attachments 1 and 2.) \1\
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    \1\ Attachments 1-3 have been retained in committee files.
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    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. (See Graph on 
Attachment 3.)

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 for U.S. light water reactors was 88 percent in 2000, up from 63 
percent in 1989.\2\ (See Table on Attachment 3.) The Commission has 
focused on ensuring that safety is not compromised as a result of these 
industry efforts. The Commission seeks to carry out its regulatory 
responsibilities in an effective and efficient manner so as not to 
impede industry initiatives inappropriately.
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    \2\ 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.
---------------------------------------------------------------------------

Electric Industry Restructuring
    As you are aware, the nuclear industry is undergoing 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. This change is due, in part, to an industry that has 
achieved gains in both economic and safety performance over the past 
decade and thus is able to take advantage of the opportunities 
presented by industry restructuring.

         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. As a result, the Commission has 
seen a significant increase in the number of requests for approval of 
license transfers. These requests have increased from an historical 
average of about two or three per year, to 20-25 in the past two years.
    The Commission seeks to ensure 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 staff resources 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 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.

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 make 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 or exceeded 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 applications to seek renewals, in order to allow 
adequate planning of demands on staff resources. The Commission is 
committed to maintaining the quality of its safety reviews.

Reactor Plant Power Uprates
    In recent years, the Commission has approved numerous license 
amendments that permit licensees to make relatively small power 
increases or uprates. Typically, these increases have been 
approximately 2% to 7%. These uprates, in the aggregate, resulted in 
adding approximately 2000 MWe or two new 1000 MWe power plants.
    The NRC is now reviewing five license amendment requests for larger 
power uprates. These requests are for Boiling Water Reactors (BWR's) 
and are for uprates of 15% to 20%. (There are two primary designs for 
operating light water reactors: Boiling Water Reactors and Pressurized 
Water Reactors.) While the staff has not received requests for 
additional uprates beyond these five, some estimates indicate that as 
many as 22 BWR'S may request uprates in the 15% to 20% range. These 
uprates, if allowed, could add approximately 3,000 to 4,500 MWe to the 
grid.
    Approvals for uprates are granted only after a thorough evaluation 
by NRC staff to ensure safe operation of the plants at the higher 
power. Plant changes and modifications are necessary to support a large 
power uprate, and thus require significant financial investment by the 
licensee. While the NRC does not know the number of uprate requests 
that will be received, the staff is evaluating ways to streamline the 
review and approval process. As with license renewals, the Commission 
encourages early notification by licensees, in advance of their 
applications for uprates, in order to allow adequate planning of 
demands on staff resources.

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. Some of our legislative proposals would eliminate 
these issues.

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 toward a more risk-
informed and performance-based regulatory paradigm. Improved 
probabilistic risk assessment techniques combined with more than four 
decades of accumulated experience with operating nuclear power reactors 
has 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. Although 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. 
Licensees have also indicated to the NRC that applications for early 
site permits could be submitted in the near future. These permits would 
allow pre-certification of sites for possible construction of nuclear 
power plants.
    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, and 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, General Atomics' Gas Turbine Modular Helium 
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. We also recently 
established the Future Licensing Project Organization in order to 
prepare for and manage future reactor and site licensing applications.
    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 mission critical 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 staff has taken initial 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. The various Senate energy bills properly give attention 
to such matters. The Commission would be pleased to offer some further 
suggestions in the same vein.
    The Commission is currently challenged to meet its existing 
workload with available resources; nevertheless, the NRC, with its 
current budget, can continue to carry out its mission to protect health 
and safety, to promote the common defense and security, and to protect 
the environment. However, additional resources will be necessary to 
respond to increased workloads which could result from some of the 
initiatives discussed in this testimony or proposed in pending 
legislation.

                         LEGISLATIVE PROPOSALS

    The Commission has identified in its legislative proposals 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.
          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 of new reactor licenses 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 problematic. 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. Indeed, we 
note that certain of these matters are included in bills now before 
this Committee.

                                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 of 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 internally and in our dealings with all of the Commission's 
stakeholders.
    I look forward to working with the Committees, and I welcome your 
comments and questions.

    Senator Domenici. Mr. Corbin McNeill.

        STATEMENT OF CORBIN A. McNEILL, JR., CHAIRMAN & 
            CO-CEO, EXELON CORPORATION, CHICAGO, IL

    Mr. McNeill. Thank you very much, Senator. I am Corbin A. 
McNeill, Jr., and I am chairman and co-chief executive officer 
of Exelon Corporation, and president of our subsidiary, Exelon 
Generation Company.
    There are five key messages that I would like to leave with 
you today. First and foremost is that the state of the industry 
today is very sound and, as Chairman Meserve has noted, today's 
reactors are operating at record levels of safety, output, 
competitive cost, and reliability.
    Second, the outlook for the existing fleet of nuclear 
plants is excellent, and current plants can be expected to 
produce more electricity through increased efficiency and 
capacity increases.
    Third, there is a critical shortage of generating capacity 
in the United States. The new nuclear plants can play a role in 
meeting our Nation's growing demand for environmentally clean 
electricity.
    Fourth, there are a number of new advanced nuclear 
technologies that have been approved by the Nuclear Regulatory 
Commission, and other new designs are on the horizon, including 
the new pebble bed modular reactor, which Exelon believes can 
provide future generation safely, economically and cleanly.
    And lastly, that there are several outdated legislative and 
regulatory requirements that should be modernized to reflect 
the new deregulated marketplace in which future nuclear plants 
will be built.
    Rather than spending time reviewing the state of the 
industry at this point, and I have done that in my written 
statement, let me jump right to a discussion of the future of 
nuclear energy. For the current fleet of reactors, I see three 
trends that are continuing into the near future. First, 
increased output from existing plants, a gradual consolidation 
of plant ownership and operation, and the application for 
renewal of existing operating licenses.
    Electric generation from the current fleet of nuclear 
reactors is likely to increase as a result of higher capacity 
factors and plant up-rates, which Commissioner Meserve 
highlighted. Exelon Nuclear alone plans to add approximately 
1,000 megawatts, or nearly one new plant of new capacity over 
the next 3 years through up-rates, and NEI, the Nuclear Energy 
Institute predicts that the industry will add 8,000 to 12,000 
megawatts of new capacity over the next several years.
    The consolidation trend of the industry has seen in recent 
years is also likely to continue, though at a slower pace than 
we have seen in the recent past. While two utilities have 
announced their intention to auction plants later this year, 
most of the consolidation that will occur in the future will be 
likely through mergers and acquisitions of entire utilities.
    Finally, despite earlier predictions by the NRC, the Energy 
Information Administration, and others, most industry observers 
predict that the vast majority of the Nation's 103 operating 
plants will apply for license extensions rather than be shut 
down, as predicted.
    As for new plants, I would note that the DOE estimates that 
the United States will need to construct more than 1,300 new 
powerplants over the next 20 years to meet future demand for 
electricity and, as these new plants are built, it is 
critically important that there be a diversity of energy 
sources to include nuclear.
    Senator Domenici. What are the size of those plants?
    Mr. McNeill. I do not know exactly what the size is. I 
would say that it is probably in the 600 to 800 megawatt range, 
because that is the typical range size that is being 
constructed today.
    New nuclear plants will have to possess three 
characteristics to be acceptable. They must be safe, economic, 
and clean. The pebble bed modular reactor, a design under 
development in South Africa, possesses these characteristics 
and, I believe, answers every criticism of the technology, with 
the exception of nuclear waste storage, which is an issue that 
I even have more confidence that Senator Murkowski will see a 
major jump by this time next year in acceleration and its 
movement toward identifying Yucca Mountain.
    The PBMR technology uses a ceramic fuel design that cannot 
suffer meltdown. In the PBMR, through physical characteristics 
of the design, the reactor temperature never rises above 1,600 
degrees Centigrade, even under the worst case loss of coolant 
accident, and the PBMR fuel, however, does not even begin to 
degrade until temperatures reach about 2,000 degrees 
Centigrade.
    As a small modular reactor, in the 110 to 125 megawatt 
range, the PBMR is well-suited for use in deregulated power 
markets. Capital costs of each PBMR module are expected to be a 
fraction of the costs of the current larger reactors, roughly 
$125 to $150 million for 125-megawatt plant, which 
significantly reduces the investment risk for the builder of 
the plant.
    PBMR's can be built in 18 to 24 months, and the speed of 
the market is essential if the PBMR is to compete effectively 
with coal and natural gas plants in a deregulated environment. 
Timely licensing action will be necessary to take advantage of 
the shorter construction time.
    Adding small increments of capacity which better match new 
supply with demand growth prevents an oversupply situation, 
volatility of electricity pricing in the marketplace, and 
allows quicker recovery of the capital cost and, like our 
current nuclear reactors, the PBMR will emit no air pollutants 
or greenhouse gases.
    We are developing the PBMR on the following time line. This 
summer, we will complete the detailed feasibility study. By 
November, we will, in conjunction with the rest of the 
investors, make a decision whether to build a demonstration 
plant in South Africa. In early 2002, we would contemplate 
early site licensing in the United States, and by late 2002 or 
early 2003, application for a combined construction and 
operating license.
    Many legal and regulatory requirements that we run into are 
really outdated. Two categories of these that should be 
addressed as a result of that fact are, first, that new nuclear 
plants will be merchant plants operating in a deregulated 
environment, and the PBMR is a small, modular reactor that 
produces roughly one-tenth of the power of a conventional 1,100 
megawatt light water reactor, and two important issues must be 
resolved in conjunction with first, the Price-Anderson Act, 
which will expire in 2002 must be renewed, and the Federal 
Government must assure the existence of a competitive nuclear 
fuel market.
    The smaller size of these plants also requires that 
consideration be given in the relicensing of the Price-Anderson 
Act, consideration so that they do not bear the same burden, 
but they have a proportionate burden for other reactors of 
larger size in the payments under Price-Anderson if it was ever 
implemented.
    Also, while the development of the design of the PBMR is 
being done on a commercial basis buy the partners, it would be 
appropriate for some level of Government funding to be provided 
for first of a kind costs incurred by the NRC in developing the 
staff necessary for this new technology, and as a result of the 
unproven nature of the 10 CFR part 52 licensing process and the 
need to create a new process for the gas reactor.
    Thank you again for the opportunity to discuss this issue, 
and I look forward to questions.
    [The prepared statement of Mr. McNeill follows:]

   PREPARED STATEMENT OF CORBIN A. MCNEILL, JR., CHAIRMAN & CO-CEO, 
                    EXELON CORPORATION, CHICAGO, IL

    Chairman Murkowski, Chairman Domenici, and Members of the Committee 
and Subcommittee:
    I am Corbin A. McNeill, Jr., and I am Chairman and Co-Chief 
Executive Officer of Exelon Corporation and President of Exelon 
Generation Company. I appreciate the opportunity to appear before you 
today to discuss the state of the nuclear energy industry and the role 
that nuclear power can play in meeting America's future energy needs.
    Exelon Corporation was formed last year by the merger of Unicom 
Corporation of Chicago and PECO Energy Company of Philadelphia. Exelon 
is the holding company for three wholly-owned subsidiaries: Exelon 
Energy Delivery, which includes Commonwealth Edison and PECO Energy, 
two distribution companies providing electric service in Northern 
Illinois and electric and natural gas service in Southeastern 
Pennsylvania, respectively; Exelon Enterprises, which owns a host of 
unregulated businesses involved in energy and infrastructure services, 
broadband and telecommunications services, and other ventures; and 
Exelon Generation Company.
    Exelon Generation currently owns and operates approximately 37,000 
megawatts of diversified electrical generation, including 17 nuclear 
reactors which generate 16,970 megawatts of electricity. We have 
another 8,500 megawatts of non-nuclear generation under construction or 
development. Exelon is the largest nuclear operator in the country, 
with approximately 20% of the nation's nuclear generation capacity, and 
the third largest private nuclear operator in the world. AmerGen Energy 
is a partnership between Exelon Generation and British Energy of 
Edinburgh, Scotland that was created to purchase nuclear power plants 
in the United States. AmerGen currently owns and operates nuclear 
plants in Illinois, New Jersey, and Pennsylvania.
    In my testimony today, I want to provide you with five key 
messages:

   The state of the nuclear industry is sound. Reactors are 
        operating at record levels of safety, output, and reliability.
   The outlook for the existing fleet of nuclear plants is 
        excellent, and current plants can be expected to produce more 
        electricity through increased efficiency and capacity uprates.
   There is a critical shortage of generating capacity in the 
        United States, and new nuclear plants can play a role in 
        narrowing the gap between supply and demand.
   There are a number of new nuclear technologies that have 
        been approved by the NRC and others that are on the horizon, 
        including the Pebble Bed Modular Reactor, which Exelon believes 
        can provide future generation safely, economically, and 
        cleanly.
   There are several outdated legislative and regulatory 
        requirements that must be modernized to reflect the new 
        deregulated marketplace in which future nuclear plants will be 
        built.

                         STATE OF THE INDUSTRY

    In assessing the state of the commercial nuclear industry today, I 
am pleased to report that the industry is operating at extraordinarily 
high levels by any measure of performance.
    No other source of energy receives the scrutiny that nuclear power 
does. The nuclear industry is held to the highest standards of 
operation by regulators, legislators, investors, the media, and the 
general public. The industry has been required to produce power safer, 
cheaper, and cleaner than any other source of baseload electric 
generation in order to gain public acceptance. This has presented the 
industry with enormous challenges, but the industry has successfully 
embraced and met these challenges.
    In fact, the industry has held itself to the highest standards of 
operation. In 1980, the industry established the Institute of Nuclear 
Power Operations (INPO) to allow the industry to provide internal 
assessments of power plant performance and to share operational best 
practices industry-wide.
    I have included as an attachment to my written testimony the most 
recent report by INPO that outlines the industry's achievement as 
judged against 10 separate goals for industry performance. For each of 
the 10 performance indicator goals set by INPO in 1995, the industry 
has met or exceeded the performance goals for the year 2000.*
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    * The report has been retained in committee files.
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    Let me provide a brief overview of the industry's performance in 
five major areas.
    Safety. The nuclear industry remains deeply committed to operating 
our reactors in a manner that protects the health and safety of both 
the public and our workers. The industry today is operating at an 
extraordinarily high level of safety, having exceeded the INPO 
performance targets by over 10 percent for safety system readiness, 
collective radiation exposure of employees, and industrial safety 
accident rate. At one time, critics of nuclear power argued that 
reactor operators in a deregulated marketplace would be pressured to 
cut corners on safety in pursuit of greater economic return. The 
industry's record, however, has proven that safety and operational 
excellence go hand-in-hand.
    Economics. In economics, too, the industry is performing at 
unprecedented levels. For the first time in a decade, production costs 
for nuclear power are lower than those for coal. Nuclear production 
costs in 1999 were 1.83 cents/kWh; production costs for coal were 2.07 
cents/kWh; for gas, 3.52 cents/kWh (even prior to gas price spikes); 
for oil, 3.18 cents/kWh. An existing well-managed nuclear power plant 
can produce electricity at an all-in cost of less than 2.5 cents/kWh. 
This cost compares to combined cycle gas plants at 3.5-4.5 cents/kWh, 
assuming a gas price of $3 to $4 per million BTUs.
    Reliability and Operational Excellence. Closely related to 
economics is the area of reliability and operational excellence. The 
industry is operating plants at record high capacity factors, achieving 
an industry-wide average of over 91 percent capacity during 2000. As a 
result, the nuclear industry is generating more electricity than at any 
time in the past, even though there are fewer operating reactors today 
than there were just a few years ago. In the last decade, the nuclear 
industry has added the equivalent of 23 new 1,000 megawatt plants 
through increased output from the current reactor fleet. These gains 
have come not only from increased capacity factors, but also from 
capacity additions at existing plants through power uprates. According 
to INPO's 2000 Performance Indicator report, unplanned capability loss 
factors, unplanned automatic scrams, thermal performance, and fuel 
reliability indicators all show record performance as well.
    Environmental Performance. No other baseload energy source is as 
efficient at limiting and containing the amount of pollution it 
generates. Nuclear plants emit no pollutants or greenhouse gases into 
the air. Nuclear plants are playing a key role in allowing many areas 
of the country to meet clean air requirements mandated by the 
Environmental Protection Agency, and Vice President, Richard Cheney is 
among the policymakers worldwide who have publicly recognized the 
importance of nuclear energy in reducing emissions of carbon dioxide 
and greenhouse gases. In a major energy policy speech earlier this 
week, in fact, Vice President Cheney referred to nuclear power as ``the 
cleanest method of power generation that we know.''
    Nuclear reactors also emit no pollutants into the water beyond 
thermal discharge. And while some solid wastes from nuclear plants 
contain long-lived radioactive elements, these wastes are stored, 
transported, and disposed of safely in a manner that isolates the waste 
from the public and the environment. Since 1980, the volume of solid 
low-level radioactive waste generated by nuclear reactors has decreased 
an astounding 94% at boiling water reactors and 96% at pressurized 
water reactors. As for spent fuel, the industry continues to store this 
material safely onsite, either in spent fuel pools or in dry cask 
storage. The federal government has failed in its obligation to begin 
removing spent fuel from reactor sites by 1998. While the Department of 
Energy (DOE) appears to be making progress in their investigation of 
Yucca Mountain as a permanent repository for spent fuel, the federal 
government must work to meet its obligation in a more timely manner.
    Public Acceptance. A natural result of the industry's strong 
performance is an increase in the level of public acceptance of nuclear 
energy. Recent surveys by the Nuclear Energy Institute (NEI) and the 
Associated Press indicate that the public is increasingly supportive of 
nuclear power. Interestingly, last month's Associated Press poll found 
that 55 percent of those who support nuclear power would support a new 
plant within 10 miles of their home. Recent NEI surveys also show that 
acceptance of new nuclear plants is increasing, particularly in the 
West.
    Policymakers, the media, and the public itself often fail to give 
people enough credit for being able to make an informed decision about 
nuclear power. When surveyed, many people who support nuclear power 
believe that their neighbors do not. Yet, surveys consistently show 
that a majority of the public has a favorable opinion of nuclear power. 
Public acceptance presents perhaps the biggest challenge for the 
nuclear industry in that we can only indirectly influence how the 
public perceives the industry. Countering inaccurate and reckless 
statements from the anti-nuclear community takes an enormous amount of 
public education.

                FUTURE OF THE INDUSTRY--CURRENT REACTORS

    It will come as no surprise that I believe that the nuclear energy 
industry has an exceptionally bright future. For the current fleet of 
reactors, I see three trends continuing in the near future: increased 
output of electricity from existing nuclear reactors, a gradual 
consolidation of plant ownership and operations, and applications for 
the renewal of existing operating licenses.
    Electric generation from the current fleet of nuclear reactors is 
likely to increase as a result of higher capacity factors and plant 
uprates. As strong as the performance of the current fleet of nuclear 
plants is today, capacity factors can increase further as the industry 
continues to share best practices among plants. In fact, I think that 
this is a trend that we will see not just in the United States, but 
worldwide as well. While plants are nearing their maximum capacity 
factors, plants can produce additional electricity by uprating units to 
increase their maximum capacity. The Chairman of the House Energy and 
Commerce Committee recently noted in a letter to NRC Chairman Meserve 
that there are 14 license applications pending at the NRC for power 
uprates which would add over 1,000 megawatts of new capacity. Exelon 
Nuclear plans to add approximately 1,000 megawatts of new capacity over 
the next three years through uprates at our existing plants. Some 
industry analysts believe that a total of 8,000 to 12,000 megawatts of 
additional generation can be gained if uprates were sought by the 
current fleet of reactors.
    The consolidation trend that the industry has seen in recent years 
is also likely to continue, though at a slower pace than we have seen 
in the past. Since 1998, nearly two dozen reactors have changed hands 
through utility mergers and acquisitions, the sale or auction of 
individual plants, and the formation of nuclear operating companies. 
While two utilities have announced their intention to auction plants 
later this year, most of the consolidation that will occur in the 
future is likely to be through mergers and acquisitions.
    A final trend affecting the current fleet of reactors deals with 
plant life extension through license renewals. As recently as 1997, the 
Nuclear Regulatory Commission (NRC) estimated that only a fraction of 
currently operating reactors would seek to extend their operating 
licenses. Predictions by the Energy Information Administration (EIA) 
were even more dire, with EIA estimating that 58 reactors would cease 
operation between 1996 and 2015. The improved economic performance of 
plants, combined with a recognition of the clean air compliance value 
of emissions-free generation, have led the NRC and EIA to reexamine 
those estimates. Today, most observers, including NRC Chairman Richard 
Meserve, predict that the vast majority of the nation's current 103 
operating plants will apply for 20-year license extensions.
                   future of the industry--new plants
    The demand for electricity in the United States is growing rapidly. 
The DOE estimates that electricity demand will grow by 45 percent over 
the next 20 years. Based on that estimate, the U.S. will need more than 
1,300 new power plants--65 a year--to meet that demand. It is 
significant to note that it was over 15 years ago when 65 plants were 
last built in a single year in the United States.
    As these new plants are built, it is critically important that 
there is a diversity of energy sources. One of the reasons California 
is having such difficulty is that they depend too much on natural gas 
as the fuel for electric generation. New plants cannot just operate on 
natural gas, but must also include coal hydro, solar, wind, and yes, 
nuclear.
    New nuclear plants will have to be safe, economic, and clean to be 
acceptable to legislators, regulators, investors, and the public.
    Safe. Any new nuclear technology must be passively or inherently 
safe. Given the importance of public opinion in the siting of any new 
industrial facility, any new nuclear plant should exhibit such safety 
features, and the new reactor technologies certified by the NRC 
incorporate many passive design features.
    Economics. Of course, any new reactor technology must be 
economically competitive with other generation sources. In the newly 
deregulated marketplace, however, it is also important for any new 
technology to have a low capital cost, to have short construction lead 
times, and to be of relatively small size so as not to disrupt the 
economics of the regional market the plant is built to serve.
    Clean. New reactor technologies must also have a minimal impact on 
the environment.
    The industry is working together to lay the groundwork for new 
nuclear plants. The NRC has certified three new advanced reactor 
designs after conducting extensive, multi-year safety reviews. Of the 
three new certified designs, two have been built and are setting world-
class performance records in Japan, and additional reactors are being 
built in Korea and Taiwan. Two additional advanced designs are expected 
to be submitted to the NRC in the near future for approval.

                     THE PEBBLE BED MODULAR REACTOR

    Exelon Corporation believes that we have found a technology that 
possesses the characteristics necessary to successfully compete in a 
deregulated environment in the Pebble Bed Modular Reactor (PBMR), a 
design under development in South Africa. Exelon is a partner in the 
PBMR project with Eskom, the state-owned utility in South Africa; the 
Industrial Development Corporation of South Africa, a state-owned 
investment firm; and BNFL, the former British Nuclear Fuels Limited. 
The PBMR technology is an evolutionary improvement of a proven design 
previously utilized in Germany. Let me explain.
    Safe. The Pebble Bed technology relies on a ceramic fuel design 
that cannot suffer meltdown. Fuel melting is the primary safety concern 
related to current light water reactor technology. In the PBMR, the 
reactor temperature never rises above 1600 degrees Celsius, even under 
a worst-case loss of coolant accident. PBMR fuel, however, does not 
begin to degrade until temperatures reach 2000 degrees Celsius.
    Economic. As a small (110-125 megawatt) modular reactor, the PBMR 
is well-suited for use in a deregulated power market.

   Low Capital Cost: Capital costs for each PBMR module are 
        expected to be a fraction of the cost of current reactors--
        roughly $125 to $150 million for a 125 MW plant--thus 
        decreasing investment risk. At $1,100 per kilowatt to 
        construct, the PBMR can be competitive with other energy 
        sources.
   Speed to Market: We estimate that the PBMR can be built in 
        18 to 24 months, as opposed to 48 to 72 months or more for 
        large reactors. Speed to market is essential if the PBMR is to 
        compete effectively with coal and natural gas-fired plants in a 
        deregulated market. Of course, the construction timeframe does 
        not include the time necessary to receive regulatory approvals 
        for building the plant. Timely licensing action will be 
        necessary to take advantage of the quick construction time.
   Small Size: Adding small increments of new capacity to 
        electric markets will better match new electric supply with 
        demand growth, thus preventing an oversupply of electricity and 
        allowing a quicker recovery of the capital costs.

    Clean. Like current nuclear reactors, PBMR reactors will emit no 
air pollutants or greenhouse gases, and since the PBMR is a more 
efficient reactor, the plant uses a fraction of the water used by 
conventional light water reactors. This lack of reliance on water may 
also enable the PBMR to be sited in locations that are not suitable for 
light water reactors.
    The PBMR project is currently in its preliminary stage, with a 
detailed study of the design being conducted by an international team 
of experts. The study is due to be completed 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 
will proceed to build a demonstration plant in South Africa near Cape 
Town. We estimate that construction of the plant will take 36 months, 
with a 12-month testing period following the completion of 
construction.
    If Exelon's review of the feasibility study is favorable, we intend 
to begin the licensing process to build a number of PBMRs in the U.S. 
as soon as next year. Our current business plan calls for the 
submission of 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.
    Of course, a number of legal and regulatory issues must be 
addressed before a pebble bed reactor can be built in the United 
States. Most of these issues fall into one of two categories: the first 
category results from the fact that new nuclear plants would be 
merchant plants operating in a deregulated environment; the second 
category results from the fact that the PBMR is a small, modular 
reactor that produces roughly one-tenth of the power of a conventional 
1,100 megawatt light water reactor.
    The current NRC regulations were promulgated when it was 
anticipated that only regulated electric utilities would build nuclear 
plants. These regulations did not foresee the dawn of a deregulated 
power generation market and are now obsolete. If Exelon builds a PBMR, 
it will be a merchant nuclear power plant that will not be in a 
regulated utility rate structure. The financial risk of the plant will 
rest on the shareholder, not the ratepayer. If these outdated 
regulations are not changed, the financial burden imposed on merchant 
plants clearly has the potential to make the economics untenable. Some 
of the key regulations that need to be addressed include the financial 
protection requirements of 10 CFR Part 140, the decommissioning funding 
requirements of 10 CFR Part 50.75, and the antitrust review 
requirements of 10 CFR Part 50.33a.
    The PBMR would similarly be disadvantaged by current regulations 
because of its small size. For example, the Price-Anderson Act should 
be amended to treat Pebble Bed Modular Reactors in a manner that 
recognizes the inequity of treating individual PBMR modules as separate 
facilities. Under the current NRC interpretation of Price-Anderson, a 
10-module, 1,100 megawatt PBMR site would have 10 times the potential 
retroactive liability of a single 1,100 megawatt light water reactor. 
Similarly, the annual fees assessed on a per reactor basis under 10 CFR 
Part 171 should be revised to recognize the disparity between a 110 125 
megawatt PBMR and a much larger light water reactor. The large 
emergency planning zone requirements in 10 CFR Part 50.47 should also 
be revisited given the fundamental safety differences between a PBMR 
and current reactors.
    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 steep learning curve for both 
the NRC 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.
    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. We anticipate 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 PBMRs. 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 10 CFR 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.
    Finally, the federal government must take additional action if new 
plants using any nuclear technology are to be built. First, Congress 
must renew the Price-Anderson Act, which will expire in August 2002. 
Second, Congress and the Administration must take steps to assure the 
existence of a competitive nuclear fuel market.
    Thank you again for the opportunity to discuss this important issue 
with you today.

    Senator Domenici. Thank you. James Asselstine, Lehman 
Brothers. We welcome your testimony.

  STATEMENT OF JAMES K. ASSELSTINE, MANAGING DIRECTOR, LEHMAN 
                  BROTHERS, INC., NEW YORK, NY

    Mr. Asselstine. Thank you, Mr. Chairman. I submitted a 
written statement, so what I will do is really just summarize 
some of the testimony.
    Senator Domenici. It will be made a part of the record.
    Mr. Asselstine. My perspective here is really as a 
financial analyst, and I and most of my counterparts and 
colleagues spend a fair amount of our time looking at and 
evaluating the economic value of generating assets in this 
country as we move to a competitive marketplace. My conclusion, 
and I think it is shared by many, if not most of my colleagues, 
is that nuclear assets are looking to have very significant 
value in a competitive marketplace, and we really look to five 
elements or factors in reaching that conclusion.
    One is the satisfactory progress in terms of restructuring 
within the industry, and generally a fairly good track record 
in terms of how nuclear issues are being addressed in 
individual State restructuring plans. Second is nuclear 
economics, third, the improved operating performance that we 
have seen from the plants, particularly over the past decade or 
so, fourth, some of the positive regulatory changes that we 
have seen at the NRC, and finally some of the steps that have 
been taken in terms of industry consolidation and changing 
operating arrangements for the companies and the plants, and I 
will touch a little bit more on each of those.
    In terms of industry restructuring, about half of the 
country now has adopted formal restructuring plans to move to a 
competitive marketplace. Those plans cover about 60 of the 
nuclear units in the country, so we have enough of a track 
record at this point I think to assess how nuclear issues are 
being addressed in industry restructuring.
    There are really two cost considerations. The first is the 
utilities' ability to recover their stranded costs, the second 
is the ability to recover decommissioning costs. Those both 
relate fairly directly to nuclear.
    In terms of stranded cost recovery, although no company is 
being given an absolute guarantee, in general the State 
restructuring plans provide a reasonable opportunity for 
stranded cost recovery. Similarly, for decommissioning 
expenses, those expenses have been recognized to be a health 
and safety expense largely incurred during the regulated 
operation of the plants, and those costs have been allowed to 
be recovered as well, so by and large, industry restructuring 
so far has treated nuclear fairly and evenhandedly, and 
restructuring has been relatively benign for the nuclear fleet 
in this country.
    In terms of nuclear economics, nuclear enjoys several 
advantages, and I think a number of the members of the 
committee have already touched upon those in terms of the low 
and stable fuel costs that nuclear units have. They are low on 
environmental impacts. These are relatively large base load 
plants, which enjoy economies of scale, and in many instances 
these plants are must-run units that are necessary for system 
reliability.
    If you compare nuclear costs to those of coal and gas-fired 
generation, nuclear compares very favorably today. A well-run 
large base-load coal plant can generate power at 2 cents or 
slightly below per kilowatt hour. Combined cycle gas-fired 
units with the increase in natural gas prices are beginning to 
push 4 to 5 cents per kilowatt hour Most all nuclear fleet in 
this country has operating costs that compare very favorably 
with coal, and well under where current gas-fired generation is 
today, so it appears to us that the nuclear fleet today is very 
competitive compared with other alternatives.
    Senator Domenici. Would you put your mike up a little 
closer?
    Mr. Asselstine. We have also seen fairly significant 
improvement in the operating performance of the units. If you 
look at operating costs, fuel and maintenance costs, if you 
look at the capacity factors of the units themselves, the 
length of refueling outages, the reporting of unusual events to 
the NRC, all of those indicators have shown very significant, 
dramatic improvement over the past decade, and that has been 
something to those of us in the financial community that have 
provided the assurance of the value of these units.
    In terms of regulatory changes, I thing that Chairman 
Meserve and his colleagues have done an excellent job in 
carrying out their health and safety responsibilities, but also 
doing that in a way that adapted to the changing requirements 
of a competitive industry for nuclear units, and I would point 
to three elements in particular where we have seen positive 
contributions from the NRC.
    One is in the new plant oversight and assessment process, a 
second is in processing license transfers, ownership changes 
for nuclear units as we move to competition has required 
significant activity on NRC's part in terms of approving 
license transfers, license amendments, and finally, in the 
license renewal process, and as Chairman Meserve pointed out, 
the commission in relatively quick time approved license 
extensions for five units. If you add up all of the units that 
have indicated a desire to move to plant life extension, they 
total almost 40 percent of the plants in the country.
    Finally, in terms of industry consolidation, we have seen 
different changes in terms of ownership arrangement for the 
plants. I tend to believe those will also enhance the 
efficiency and lower the cost profile of those plants going 
forward.
    Turning to future commitments for plants, I would cite five 
requirements as being important. First, new nuclear units will 
have to be cost-competitive on a stand-alone basis. One of the 
challenges here is the initial capital investment for nuclear 
units. As with coal units, it is somewhat higher than gas-fired 
plants. That issue will probably need to be addressed in terms 
of the utility's ability, or the generating company's ability 
to recover those costs going forward.
    Second, it is necessary, given the past experience that we 
have had in this country, to provide both the generating 
companies and investors with assurance that plants can be built 
on a predictable schedule and at a predictable cost.
    Third, appropriate financing arrangements will have to be 
provided if you will see future nuclear commitments in this 
country.
    Fourth, we will need continued assurance of a reliable low 
coast supply of fuel and enrichment services for the plants to 
maintain one of nuclear's key cost advantages, and finally, on 
the public acceptance side, I think the one issue where we 
could see some additional progress would be in developing a 
solution to the spent fuels disposal problem.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Asselstine follows:]

     PREPARED STATEMENT OF JAMES K. ASSELSTINE, MANAGING DIRECTOR, 
                  LEHMAN BROTHERS, INC., NEW YORK, NY

    Mr. Chairman, and members of the Committee and Subcommittee, I want 
to thank you for your invitation to testify at this joint hearing on 
the state of the nuclear power industry and the future of the industry 
in a comprehensive energy strategy. I head the High Grade Credit 
Research Department at Lehman Brothers, and I am the senior credit 
analyst on Lehman's fixed income research team following the electric 
utility industry. I am pleased to offer my perspective as a financial 
analyst on the state of the nuclear power industry and the future of 
the industry in a comprehensive energy strategy. My testimony will 
consist of two parts. The first part will address the current state of 
the industry, focusing on the 103 nuclear units now in operation in 
this country. The second part will consider the conditions under which 
we might see future commitments to new nuclear units in the United 
States.
    Turning to my first topic, I believe that there is a growing 
recognition within the financial community that the existing nuclear 
units in this country can be attractive and valuable assets as the 
industry makes the transition to competitive power markets. This view 
is based upon five factors: the generally beneficial treatment of 
nuclear assets in the various state restructuring plans that have been 
adopted to date; the favorable economics for nuclear units, which make 
most, if not all, of the nuclear units in operation in the U.S. today 
competitive on a cost basis with other available forms of generation; 
the significant improvement in operating performance at the plants over 
the past decade; positive regulatory developments at the Nuclear 
Regulatory Commission, which allow the NRC to discharge its health and 
safety responsibilities while at the same time permitting the units to 
retain their low cost advantage in a competitive power market; and 
finally, consolidation within the industry and new operating 
arrangements for the plants, which should further enhance the low cost 
position of our nuclear units.
    Turning first to industry restructuring, to date, 24 states and the 
District of Columbia have adopted comprehensive industry restructuring 
plans for the electric utility industry, either through legislation or 
by administrative action. About 60 operating nuclear units are included 
within these states, giving us a reasonable basis for assessing how 
nuclear issues will be addressed in the transition to competitive power 
markets. These state restructuring plans have addressed two important 
cost components for nuclear units. For a utility's stranded costs--that 
is, the difference between the current capital investment in a plant 
and the estimated value of that plant based upon estimated power prices 
in a competitive market--state restructuring plans have generally 
provided the utilities a reasonable opportunity to recover their 
stranded costs. Stranded costs have generally been recoverable through 
a combination of established rates during the transition period to 
competition, the benefits of securitized financings, often known as 
rate reduction bonds, cost reductions, and the proceeds of asset sales. 
Although we are still in the transition period in most jurisdictions, 
the evidence suggests that in most instances, the utilities will likely 
recover most or all of their stranded costs. Decommissioning expenses 
represent the second nuclear-related cost component being addressed in 
industry restructuring plans. Recent decommissioning cost estimates 
tend to fall in the range of $400-$450 million per reactor, or about 
$40-$45 billion in total for the industry. Of this amount, more than 
one-third of the expected costs has been collected to date. State 
restructuring plans have generally recognized that nuclear plant 
decommissioning is a health and safety requirement, and that 
decommissioning costs largely represent a pre-existing obligation that 
was incurred during the operation of the plants under the regulated 
regime. Accordingly, restructuring plans have typically allowed the 
recovery of decommissioning costs through a wires charge to be paid by 
utility distribution customers.
    This brings me to my second factor, nuclear economics. With 
provisions for the recovery of most or all stranded costs and of 
decommissioning costs, the ongoing operating costs of the units becomes 
the key variable in assessing the economics of nuclear power in a 
competitive power market. Nuclear units enjoy several important 
advantages, including their low and stable fuel costs, and their low 
environmental emissions when compared with fossil-fueled generation. 
Further, most nuclear units are large, baseload generators which enjoy 
significant economies of scale, and many are ``must-run'' units that 
are needed to maintain system reliability. Nevertheless, nuclear units 
must compete on a cost basis in what is likely to be a highly 
competitive generation market. Several factors affect expected 
wholesale power prices. Wholesale prices in many regions of the country 
are increasing, driven in part by increases in natural gas prices. 
Marginal pricing in the market is typically set by coal-fired 
generation and combined cycle gas. Environmental requirements are 
increasing for coal-fired generation. Today, efficient, baseload coal-
fired plants can produce power at two cents/kWh or less, and new 
combined cycle gas-fired plants can produce power at four to five 
cents/kWh. By comparison, a well-run single nuclear unit can produce 
power at or slightly above two cents/kWh, and large, multi-unit nuclear 
plants can do somewhat better. These cost numbers reflect the cost of 
fuel, operating and maintenance costs, new capital costs, taxes, and 
general and administrative expenses.
    My third factor is the improving operating performance of the 
plants. Production costs--fuel, and operating and maintenance costs--
have been steadily declining, with an average of 1.83 cents/kWh in 
1999. On a three-year rolling average for 1997-1999, the plants in the 
top quarter of the industry had production costs of 1.33 cents/kWh; 
plants in the bottom quarter had production costs of 2.8 cents/kWh. 
Nuclear plants in the top three quarters are fully cost-competitive 
with coal-fired units, and all nuclear units are cost-competitive with 
new combined cycle gas. Substantial performance improvement is also 
evident in the increased plant capacity factors over the past decade. 
In 1990, only about half of the operating nuclear units in the country 
had capacity factors above 70%, and less than one-third of the units 
had capacity factors above 80%. In contrast, in 1999, 98 units, or all 
but five, had capacity factors above 70%, and 90 units had capacity 
factors above 80%. This trend is also reflected in the length of plant 
refueling outages. In 1990, the average duration for refueling outages 
was 101 days; in 1999, the average duration was 41.5 days, and the top 
performers within the industry conducted refueling outages of 25 days 
or less. Another measure of improved performance is the number of 
unusual events reported to the NRC. In 1990, the number of unusual 
events reported was 151; in contrast, in 2000, the number was 18. These 
figures portray a clear trend in improved economic and operational 
performance within the industry.
    My fourth factor is the adoption of positive regulatory changes by 
the NRC in the areas of plant oversight and assessment, the review of 
license transfer requests, and the consideration of license renewal 
applications. The NRC has adopted a new plant oversight and assessment 
process, which replaces the agency's earlier Systematic Assessment of 
Licensee Performance (SALP) and Watch List process. The new oversight 
and assessment process uses more objective criteria to monitor and 
evaluate plant performance, and provides a greater focus on the safety 
significance of operating events. These changes, which make the 
regulatory process more predictable and objective, are consistent with 
the improving trend in plant performance. In the area of license 
transfers, industry restructuring is leading to the need for a number 
of plant ownership changes, which require NRC license transfer 
approval. The NRC established an expedited hearing process in 1998, 
which allows the agency to discharge its health and safety 
responsibilities in a predictable and timely manner. Finally, the NRC 
has demonstrated a successful plant license renewal process, which led 
to plant license renewal decisions for the five Calvert Cliffs and 
Oconee units in less than 23 months. License renewal applications were 
filed for five additional units in 2000, and applications are expected 
to be submitted for a further 28 units in the 2001-2004 time period. 
Taken together, these units represent almost 40% of the operating units 
in the country.
    My final factor is industry consolidation and the adoption of new 
operating arrangements within the industry. Consolidation carries with 
it several benefits, including greater economies of scale, broader 
career development opportunities leading to improved employee 
retention, and the ability to capture the operating strengths and 
experience of the stronger performers. In addition, these larger 
nuclear operating organizations may be better equipped to cope with 
individual plant challenges. Consolidation takes several forms. One 
form is the creation of fewer, larger companies through mergers and 
acquisitions, which have resulted in greater nuclear management 
concentration. One example is the merger of PECO Energy and Unicom to 
form Exelon, which created the largest nuclear operating organization 
in the country with 17 operating units. A second example is the merger 
of Carolina Power & Light and Florida Power Corporation to form 
Progress Energy, which operates five nuclear units. Another form of new 
operating arrangements is the use of corporate restructuring within the 
industry. As the electric utilities transition to a competitive market, 
an increasing number of companies that wish to retain their generating 
plants are moving to a holding company structure with separate 
subsidiaries for the regulated transmission and distribution business, 
and for the unregulated generation business. In many instances, these 
new, unregulated generation subsidiaries will have a significant 
nuclear component. A third form of consolidation is through nuclear 
plant sales. In 1999, Entergy completed its purchase of the Pilgrim 
plant and AmerGen Energy completed its purchases of the Three Mile 
Island and Clinton units. In 2000, AmerGen Energy completed its 
purchase of Oyster Creek, and Entergy completed its purchases of the 
Indian Point 3 and Fitzpatrick units. Last month, Dominion Resources 
completed its purchase of the three Millstone units. Sales of minority 
interests in the Salem and Hope Creek units to Exelon and PSEG Power, 
and the sale of the Nine Mile Point units to Constellation Nuclear are 
pending, and other plants including Vermont Yankee and Seabrook will 
likely be auctioned in the future. Finally, still other electric 
utilities are forming strategic alliances for certain aspects of the 
operation of their nuclear units. Examples include the Nuclear 
Management Company, which now serves as the licensee for eight units in 
the Midwest, the STARS alliance, which provides cooperative efforts for 
outage management, procurement, and regulatory affairs for eight 
similar nuclear units, and ongoing studies by the Omaha and Nebraska 
Public Power Districts of the feasibility of a joint operating company 
for their two nuclear units.
    Taken together, the generally positive treatment of nuclear issues 
in state restructuring plans, the strong economic competitiveness of 
nuclear units compared with other alternatives, the improving trend in 
nuclear operating performance, positive NRC regulatory developments, 
and the benefits of consolidation in nuclear plant operations are 
leading many of us in the financial community to conclude that our 
existing nuclear units can be attractive and valuable assets in a 
competitive power market. As a final matter, it is worth noting that 
the most rapid and cost-effective means of increasing nuclear 
generation in this country is through pursuing incremental gains in 
operating performance, as well as license renewal, for the existing 
plants.
    In the second part of my testimony, I want to consider the 
conditions under which we might see future commitments for new nuclear 
units in this country. I see five requirements that must be met if new 
nuclear units are to be ordered and built. First, a new nuclear unit 
must be cost competitive on a stand-alone basis with other 
alternatives, such a clean coal technology and gas-fired generation. 
One challenge for new nuclear and coal-fired generation is the 
relatively higher initial capital investment required as compared with 
a new combined cycle gas-fired plant. This disadvantage could be 
overcome by a combination of lowering the initial cost differential and 
perhaps by permitting the accelerated depreciation of the plant 
investment.
    Second, given the past experience with the construction and cost of 
the current generation of nuclear plants, the generating companies and 
their investors will require assurance that the plant can be built at a 
predictable cost and on a predictable schedule. There are two aspects 
to this requirement. The first aspect requires validating the expected 
performance of the NRC's new licensing and regulatory process for the 
approval of standardized designs and sites. The intent of this process 
is to permit the advance approval of new plant designs and sites in 
order to minimize the time and uncertainty related to the regulatory 
approval for the start of plant construction, and especially, for the 
start of plant operation. Although the NRC has approved several 
advanced designs, the effectiveness of the entire process remains to be 
tested. The second aspect requires measures to mitigate construction 
completion and plant performance risk. Such risk sharing measures as 
turnkey construction contracts, required plant performance 
specifications, and liquidated damages provisions for nonperformance or 
delays, which are commonly used in other power plant construction 
projects, or other alternative risk sharing arrangements among the 
project participants, may be needed.
    Third, a new nuclear plant project must have appropriate financing 
arrangements. One complicating factor here is that unlike previous 
plants, which were built under a regulated regime that generally 
provided for recovery of prudent costs from ratepayers, future plants 
must be built, financed, and operated in a competitive power market. At 
least for the initial plants, stand-alone financing for a nuclear 
project would likely require substantial equity investments from a 
number of project participants to minimize the adverse financial impact 
on any single participant. Alternatively, a new nuclear unit could be 
financed as part of a much larger operating generation company, thereby 
diluting the new nuclear construction risk exposure sufficiently. Over 
the past year, we have seen strong receptivity in the equity and debt 
markets to financings for the new competitive generation companies 
within the industry, including a recent debt financing for PSEG Power, 
a company with several operating nuclear units. A successful 
competitive generation company with a substantial portfolio of nuclear 
and non-nuclear generating assets might well be able to ``shelter'' the 
higher risk of a new nuclear unit.
    Fourth, commitments to new nuclear units will require continued 
assurance of a reliable, low cost supply of fuel and enrichment 
services to preserve one of nuclear's key cost advantages. Finally, new 
nuclear commitments will also require public acceptance. On the safety 
side, continued strong performance of the existing plants together with 
a continued effective NRC regulatory and oversight process should lead 
to public acceptance of new plant commitments. The one area requiring 
further attention is the need to demonstrate progress in developing a 
solution for the disposal of spent fuel.

    Senator Domenici. Thank you very much.
    Mr. John Ahearne, professor, Duke University.

         STATEMENT OF JOHN AHEARNE, ADJUNCT PROFESSOR, 
                  DUKE UNIVERSITY, DURHAM, NC

    Dr. Ahearne. Thank you, Mr. Chairman and Senators. I am 
here representing myself. In 5 minutes I would like to briefly 
cover five topics, NERAC research, education system, 
infrastructure, and nuclear waste.
    A few words on NERAC. That is the Nuclear Energy Research 
Advisory Committee. It was set up several years ago to advise 
the nuclear energy part of the Department of Energy on things 
nuclear. We have generated several reports, and I would like to 
submit for the record the summaries of those reports. One is on 
the blue ribbon panel to look at education issues, another on 
isotope research and production planning, another on 
proliferation-resistant nuclear power systems, and the fourth 
on the long-term R&D plan, and I would like to submit those for 
the record.
    Senator Domenici. That is done.
    Dr. Ahearne. I would also submit the statement which is 
called, Goals for Nuclear Energy.* This was just passed. It is 
a 2-page summary passed by NERAC on Monday, and I submit that 
also for the record.
---------------------------------------------------------------------------
    * Retained in committee files.
---------------------------------------------------------------------------
    On research, research is the fundamental support for an 
advanced technology. The United States is a country that 
depends on advanced technology. Let me quote from the 
Scientific Allocation of Scientific Resources. This is a 
National Science Board, March 28 of this year discussion draft. 
It says, the Federal role today is especially critical for 
research that is high risk, requires long-term investment in 
the expectation of high pay-offs to society, or that is 
unlikely to be funded by the private sector, for unique, 
costly, cutting-edge research facilities and instrumentation, 
and for academic research that is a primary purpose, supports 
the education of the future science and engineering workforce. 
That directly applies to nuclear energy enterprise.
    The past administration, until the closing years, did not 
support nuclear energy research. In 1997, PCAST, the 
President's Council to the Advisor on Science and Technology, 
did put out on Federal energy R&D, and it recommended something 
that we call NERI, the nuclear energy research initiative, and 
it began in 1998. It was a program to bring water to a parched 
discipline. The program began and was supported, not at the 
PCAST recommended level, but was supported, and I was delighted 
to read in the several Senate bills--S. 388, S. 472, S. 597--
strong support for NERI.
    Many in the nuclear community have welcomed the positive 
words on nuclear by the administration, but the DOE budget 
cripples the NERI program. From $28 million in 2001, the 
program is cut to $11 million in 2002, and there are two 
invisible aspects of that cut. First, this will not allow any 
new starts. It will only carry on to completion the grants that 
were made in the last 2 years.
    Then, second, the grants that were awarded 3 years ago for 
the first time come to completion. Some of those would deserve 
being funded for a continuing basis. There is no money to do 
that.
    The message to the research community that DOE has given by 
what they have done to NERI is that DOE is not interested in 
nuclear energy research, and hopefully the Congress can redress 
that.
    Nuclear energy is more than electricity generation. Medical 
isotopes are widely used, more than 12 million procedures a 
year, industrial use, for example, for nondestructive testing, 
and space power. The Rover, the little device that captured the 
American public's interest as it moved around on Mars, was 
powered by nuclear power.
    Education. Nuclear energy is disappearing on campuses, for 
many reasons, a hostile administration, an apparent demise of 
nuclear powerplants, and no money for students and faculty. 
Also, university research reactors are disappearing. This year, 
at the moment, research reactors are--what are generally 
regarded as the best undergraduate and graduate nuclear 
engineering departments, Michigan and MIT, their research 
reactors are slated to close. Why? The lack of Energy 
Department support.
    Infrastructures in university and national labs, both of 
them are decaying. It is hard to convince young students that a 
field is viable if physical signs indicate it is not. In these 
Goals for Nuclear Energy, we say, it is hard to imagine a 
revitalization powered by utilization of 40- to 50-year-old 
infrastructure.
    And then finally, on waste, waste is long seen as the 
Achilles heel, the total flaw of nuclear power. The lack of the 
Energy Department taking spent fuel may close down some 
reactors, something that opponents have not been able to do, 
but there are several States that are now saying they will not 
allow any more dry casks to be built, because those States are 
viewing themselves as becoming the national repository.
    The permanent disposal of high-level waste has been 
accomplished nowhere in the world. Finland is the country that 
is closest to actually getting somewhere. The scientific and 
technical community believes that deep geological repositories 
are acceptable, but as Congress well knows, there is much more 
to getting a site built than having the technical community 
agree that it is a good idea.
    This summer, a report will come out from the National 
Research Council on geological disposal of high-level waste, 
and I think that will have some light to shed on this issue, 
and I will be glad later to answer any questions, and I look 
forward particularly to hearing from the graduate student, who 
can probably speak much more eloquently on the need for funding 
of students.
    Senator Domenici. Thank you very much, doctor.
    Mr. Rhodes, would you proceed?

        STATEMENT OF RICHARD RHODES, AUTHOR, MADISON, CT

    Mr. Rhodes. Thank you, Mr. Chairman, members of the 
committee. I have provided a statement for the record. I would 
like to just comment a little bit.
    I am an independent journalist and historian. I have 
written about nuclear issues for the last 30 years. I am not a 
scientist or an engineer, but simply an informed citizen. To 
quote Secretary of State James Baker, ``I got no dog in this 
fight,'' but I do have three young grandchildren, and I care 
about their future.
    I just returned from the annual Japan Atomic Industrial 
Forum Conference. It was held this year in Northern Japan. We 
toured the new reprocessing facility that is under construction 
at Rokashomora, and I must say, it was a wistful experience to 
realize there was no American technology there, no American 
participation there. I know the word reprocessing has been 
taboo in these halls. Sooner or later, I think it is an issue 
we are going to have to confront.
    My book, Nuclear Renewal, which was published in 1994, gave 
me a chance to talk to some of the pioneers in the industry. I 
remember vividly speaking with Philip Fleger, who was the 
chairman of Duquesne Light, the company that built the first 
commercial nuclear power reactor in the United States, at 
Shippingport.
    Fleger said the reason they went nuclear was for pollution 
control. They were facing an increasing demand in Pittsburgh, 
the smoky city in those days. Objectors were objecting to 
building a coal plant, and the answer, and the solution, the 
green solution in those days was to go nuclear. Nuclear power 
is still the greenest form of energy that we have.
    I think that we must deal with, or at least discuss, what 
is clearly a strong anti-nuclear bias in many of the media. I 
say that as a practicing journalist. I started out writing 
about nuclear power from an anti-nuclear perspective simply 
because I did not know any better, and as I got to know the 
people who worked in the field, and as I got to understand the 
technology, my position changed to being essentially pro-
nuclear.
    To read the newspaper or watch television, you would never 
know that coal-burning, besides killing at least 15,000 
Americans every year from lung diseases, also releases 100 
times as much radioactivity into the environment, megawatt for 
megawatt, as nuclear power does.
    Polling indicates that ordinary Americans have a generally 
favorable view of nuclear power, but believe other people, 
believe their neighbors disapprove of it.
    I think that obviously the media's bias is not something 
that this Congress can address, but surely the responsible 
parties in the media might want to think about their position, 
which seems to me to run counter to the interests of public 
health in the United States, much less energy policy.
    Let me close by mentioning a conversation I had some years 
ago with Marcel Boiteux, who was the director of Electricite de 
France at the time that France began to go commercially to 
nuclear power. When I interviewed Dr. Boiteux, I made the 
mistake of suggesting that the French Government and the 
industry had encountered little resistance when they made their 
decision to move to what is now about 80 percent dependence on 
nuclear electricity. He was indignant. He said, to the 
contrary, they had enormous problems. He said, our employees 
received death threats. Coffins were delivered to plant sites. 
My apartment, he told me, was bombed with plastique. He said, 
the stairs collapsed through eight floors. It was a very 
difficult time.
    But then, he said, something important happened. At the end 
of July 1977, he told me, the president of the republic, 
Giscard d'Estainge, courageously announced that the nuclear 
policy was not an EDF policy, it was a French policy, and that, 
he concluded, changed the climate completely, because once the 
whole of the political scene had taken a positive position in 
relation to nuclear power, there was little protest.
    That, I think, is what Senator Domenici and others in this 
organization have, in fact, been doing these recent years, and 
I commend you for it. Robert Oppenheimer, who, of course, was 
the physicist who led the Los Alamos Laboratory in the 
development of the first nuclear weapons, said something 
similar once at a dark time in American history. He said, the 
answer to fear does not always lie in dissipating the causes of 
fear. Sometimes the answer lies in courage.
    Thank you.
    [The prepared statement of Mr. Rhodes follows:]

       PREPARED STATEMENT OF RICHARD RHODES, AUTHOR, MADISON, CT

    My name is Richard Rhodes. I'm an independent journalist and 
historian, the author of eighteen books and numerous articles for 
national magazines. One of my books, The Making of the Atomic Bomb, won 
the 1988 Pulitzer Prize in Nonfiction. Since 1970 I've written 
extensively about nuclear power, most recently in the journal Foreign 
Affairs. I'm not a scientist or an engineer but simply an informed 
citizen. I have no financial or professional connection with the 
nuclear power industry. I do have three young grandchildren, and I care 
about their future.
    I've been writing about nuclear power issues since the early 1970s, 
when the Energy Crisis moved them to the foreground. I vividly remember 
interviewing Philip Fleger, chairman of Duquesne Light, which started 
up the first American demonstration nuclear power plant at 
Shippingport, Pennsylvania, in 1954. The basic reason Duquesne went 
nuclear, Fleger recalled, was pollution control. Pittsburgh was still 
very much the Smoky City in the early 1950s. It had begun urban 
redevelopment in the late 1940s, instituting strict smoke control. By 
the time the AEC solicited bids for the demonstration project, sulfur 
oxide controls were under discussion in the Pittsburgh area, well ahead 
of the rest of the nation. Duquesne at that time was petitioning to 
build a coal-fired power plant on the Allegheny River, and citizens 
were resisting. ``We encountered a great deal of harassment and delay 
from objectors,'' Fleger told me--objectors objecting to coal, that is, 
not to nuclear power. Fleger added, ``It began to look as if we 
wouldn't be able to complete the plant on time to meet the power 
demands we were facing.'' Doesn't that sound familiar? From Fleger's 
and the Pittsburgh community's point of view, Shippingport was a 
godsend.
    In 1954, nuclear power was generally perceived to be the green form 
of energy for electrical generation. Nothing whatsoever has changed, 
factually speaking, in the forty-seven years since then. Nuclear power 
is still the greenest form of energy for electrical generation, greener 
even than hydropower, solar or wind if damage to the environment is the 
measure. France, by generating 80 percent of its electricity with 
nuclear power, has reduced its air pollution by a factor of five. The 
U.S. nuclear power industry has already made the largest contribution 
of any U.S. industry to meeting the U.S. Kyoto commitment.
    Why then is nuclear considered so problematic in the United States? 
I think we should distinguish between public opinion as measured by 
media coverage and public opinion as measured by scientific polling. As 
a professional writer with more than eighty articles published in 
national magazines across the past thirty years, it's my judgment that 
the media has developed an antinuclear bias. There's ample evidence of 
that bias in media coverage of accidents and breakdowns, which is far 
more sensational and punitive for nuclear power than for other kinds of 
energy generation.
    To read the newspaper or watch television, you would never know 
that coal burning, besides killing at least 15,000 Americans every year 
from lung diseases, also releases one hundred times as much 
radioactivity into the environment, megawatt for megawatt, as nuclear 
power. Polling indicates that ordinary Americans have a generally 
favorable view of nuclear power but believe other people disapprove of 
it. With more than 100 power reactors operating nationwide, supplying 
20 percent of U.S. electricity, millions of Americans live comfortably 
near nuclear power plants. If they are reluctant to see new nuclear 
power plants constructed in their communities, they are equally 
reluctant to see coal or even gas-fired power plants constructed. NIMBY 
is a fact of life in America today, and a serious problem as energy 
shortages loom. Certainly it has been part of California's problem.
    Let me close by mentioning a conversation I had some years ago with 
Marcel Boiteux, the director of Electricite de France who pioneered 
French commercial nuclear power. When I interviewed Dr. Boiteux I made 
the mistake of suggesting they had encountered little public 
resistance. To the contrary, he told me indignantly, there were 
enormous problems. ``Our employees received death threats,'' he said. 
``Coffins were delivered to the plant sites. My apartment was bombed 
with plastique--the stairs collapsed through eight floors. It was a 
very difficult time.'' But then, he said, something important happened. 
``At the end of July 1977,'' he told me, ``the president of the 
republic, Giscard d'Estaing, courageously announced that the nuclear 
policy was not an EDF policy: it was a French policy. And that,'' 
Boiteux concluded, ``changed the climate completely, because once the 
whole of the political scene had taken a positive position in relation 
to nuclear power, there was little protest.''
    Robert Oppenheimer said something similar once, at a dark time in 
American history. ``The answer to fear,'' he said, ``does not always 
lie in dissipating the causes of fear; sometimes the answer lies in 
courage.''

    Senator Domenici. Thank you very much.
    Heather, we are glad to have you.

  STATEMENT OF HEATHER J. MacLEAN, GRADUATE STUDENT, NUCLEAR 
ENGINEERING, MASSACHUSETTS INSTITUTE OF TECHNOLOGY, CAMBRIDGE, 
                               MA

    Ms. MacLean. Thank you very much. It is an honor to present 
testimony at this joint committee hearing today. I would like 
to thank Senators Murkowski and Domenici for inviting me here.
    There have been many positive discussions recently about 
the role of nuclear power in our Nation's energy supply, both 
within the industry and in the general public and press. I have 
dedicated my education and career to creating safer, more 
efficient nuclear energy, often struggling against poor public 
perception and a lack of awareness of the benefits of nuclear 
technologies.
    As I near the end of my graduate work, and contemplate my 
future career, it has been especially encouraging to hear 
government leaders in both Congress and the executive branch 
discussing the importance of nuclear energy. Words alone, 
however, are not enough. We must take action now to reverse the 
decline in our nuclear human resources.
    In my 9 years of studying nuclear engineering, I have 
conducted experiments at three university research reactors, 
earned by NRC operator's license at the University of 
Wisconsin, worked three summers at a commercial nuclear 
powerplant, and am now working closely with the Knolls Atomic 
Power Laboratory on my Ph.D. research.
    I have always worked with students, professors, and 
professionals who are committed to the challenges of making 
advances in nuclear science and technology. It is through these 
experiences that I have developed my belief in the importance 
of nuclear energy to our Nation's development and security, and 
have become dedicated to rebuilding our future in nuclear 
energy.
    To continue our past successes and make future advances in 
nuclear engineering, we must start now to rebuild our strongest 
resource, our students. To do this requires three commitments. 
First, we must attract new students to nuclear engineering 
programs, or we will not be able to run our current reactors or 
design new ones.
    Second, we must also encourage young Ph.D. graduates to 
teach the next generation of students. Without new professors, 
who will develop the future nuclear engineers and scientists we 
so desperately need, and third, equally as important, we must 
also support the nuclear industry and encourage a business 
climate where utilities can make decisions to build new plants 
without undue uncertainty. We need a business environment in 
which the nuclear industry can thrive, seeking innovative and 
progressive solutions so that students will want to 
participate.
    Unfortunately, the group of nuclear engineers with whom I 
have worked is shrinking, as talented and skilled nuclear 
graduates are leaving the field. The nuclear power industry is 
still often seen as a dying one, and many of my classmates are 
pursuing other careers with higher perceived opportunity and 
longer term, more certain futures. For those same reasons, few 
new students are willing to join nuclear engineering programs, 
and many departments have closed or merged with others.
    During the past decade, the number of nuclear engineering 
programs has declined by 50 percent, with only approximately 25 
4-year degree programs remaining. Equally alarming, in just the 
past 10 years, enrollments in nuclear engineering Nation-wide 
have dropped by almost 60 percent. This year, the demand for 
nuclear engineers exceeded supply by 350. Companies actually 
want to hire nuclear engineers now, but there are not enough.
    This trend will only continue to worsen, as 76 percent of 
our nuclear professionals will be eligible to retire in 5 
years. At the same time, more and more plants are renewing 
their licenses and are in need of qualified nuclear engineers. 
We must take action now to stop the decline in the nuclear 
workforce and rebuild our human resources for the future.
    When I was first offered a summer job at a commercial 
nuclear powerplant 7 years ago, I was sure it was not the 
career path for me. 3 months later, I realized I could not have 
been more wrong. As a nuclear engineering student, working at a 
powerplant was an amazing experience, an incredible opportunity 
to see, in operation, the ideas I had read about in textbooks.
    In my graduate studies, I am working with a team designing 
an advanced gas-cooled pebble-bed reactor, a concept that has 
received much positive attention in the press recently. We are 
developing a safe, reliable reactor technology that is also 
easy to build and operate, and is competitive with natural gas 
plants. I have decided to stay in nuclear engineering, and 
continue to work on advance designs, often despite the advice 
of engineering colleagues, because these technologies offer 
improved safety, higher efficiency, clean air, and integrated 
waste management.
    However, I do not think I would have stayed at MIT had I 
not been a recipient of DOE nuclear engineering fellowship. The 
fellowship program awarded me the opportunity to stay in school 
and research a topic I found important and vital to nuclear 
engineering. It is clear that our educational institutions are 
world-class, and have been at the forefront of new nuclear 
technology development, but we are in danger of losing our edge 
and our expertise, immediately to be followed by global 
leadership.
    The industry cannot survive without new students. The best 
way to attract new students is with an active, viable industry 
with long-term careers. The Government needs to help by sending 
the message that nuclear energy is an important national 
resource, vital to our economic development and environmental 
health, by helping ensure opportunities for the future.
    As an optimistic nuclear engineering student, I would like 
to encourage the members of these committees to support nuclear 
energy and its students by supporting bills such as S. 242, 
sponsored by Senator Bingaman, and S. 472, sponsored by Senator 
Domenici.
    Thank you very much for your interest in the future of 
nuclear energy.
    [The prepared statement of Ms. MacLean follows:]

  PREPARED STATEMENT OF HEATHER J. MACLEAN, GRADUATE STUDENT, NUCLEAR 
   ENGINEERING, MASSACHUSETTS INSTITUTE OF TECHNOLOGY, CAMBRIDGE, MA

               ATTRACTING STUDENTS FOR THE NUCLEAR FUTURE

Supporting Our Best Nuclear Resource--Our Students
    It is an honor to present testimony at this joint committee hearing 
on the current state and future of nuclear power. I would like to thank 
Senators Murkowski and Domenici for inviting me here today. I am also 
honored to be the second student from MIT to be invited to speak on the 
future of nuclear energy, following Alan Smith's testimony before the 
Senate Appropriations Subcommittee on Energy and Water Development in 
1998.
    There have been many positive discussions recently about the role 
of nuclear power in our nation's energy supply, both within the nuclear 
industry and in the general public and press. These discussions and 
increasing acknowledgement of the benefits of nuclear power and a more 
open discussion about the possibility of nuclear power becoming a more 
active participant in our energy mix have been extremely encouraging to 
me as I near the end of my graduate work and contemplate my future 
career. I have dedicated my education and career, my life's work, to 
creating safer, more efficient nuclear energy, often struggling against 
poor public perception and a lack of awareness of the benefits of 
nuclear technologies. Therefore, it has been especially encouraging to 
hear government leaders in Congress and the Executive branch discussing 
the importance of nuclear energy. Vice President Cheney has publicly 
emphasized the need for new nuclear power plants to meet increasing 
power demands and environmental concerns. Words alone, however, are not 
enough; we must take action to reverse the decline in our nuclear human 
resources.
    In my nine years of studying nuclear engineering, I have had many 
exciting and rewarding opportunities to experience the hands-on effects 
of the theory I have learned. I have been fortunate to have conducted 
experiments at three university research reactors (at the University of 
Michigan Ford Nuclear Reactor, the University of Wisconsin Nuclear 
Reactor, and the Massachusetts Institute of Technology Reactor); earn 
my NRC operator's license at the University of Wisconsin Nuclear 
Reactor; work three summers at a commercial nuclear power plant, 
including sitting above the core during a refueling outage; tour seven 
commercial nuclear power plants; and work closely with Knolls Atomic 
Power Laboratory and the Idaho National Engineering and Environmental 
Laboratory on my Ph.D. research. I have also served as the president of 
both the University of Wisconsin and MIT Student Sections of the 
American Nuclear Society and have helped organize student programs at 
national meetings. I have always worked with students, professors, and 
professionals who are committed to the challenges of making advances in 
nuclear science and technology. It is through these experiences that I 
have developed my belief in the importance of nuclear energy to our 
nation's development and security and have become dedicated to 
rebuilding our future in nuclear energy.
    To continue our past successes and make future advances in nuclear 
engineering we must start now to rebuild our strongest resource--our 
students. To do this, we must attract new students to nuclear 
engineering programs, or we will not be able to run our current 
reactors or design new ones. We must also encourage young Ph.D. 
graduates to teach the next generation of students; without new 
professors, who will develop the future nuclear engineers and 
scientists we so desperately need? Equally as important, we must also 
support the nuclear industry and encourage a business climate where 
utilities can make decisions to build new nuclear plants without undue 
uncertainty. We need a business environment in which the nuclear 
industry can thrive, seeking innovative and progressive solutions, so 
that students will want to participate.
    In my graduate studies, I am working with a team designing an 
advanced gas-cooled pebble bed reactor, a concept that has received 
much positive attention in the public press recently. Working closely 
with other universities, national laboratories, and the international 
industry, we are developing a safe, reliable reactor technology that is 
also easy to build and operate and is competitive with natural gas 
plants. The safety and viability of this and other advanced designs 
needs the type of attention and research that previous research 
reactors provided for the current technology. I chose to work on this 
design because it offers the possibility of reintroducing nuclear 
energy technologies to the American market and seeks to improve on 
plant design, incorporating many of the lessons learned over the past 
50 years. Even more importantly, I've decided to stay in nuclear and 
continue to work on advanced designs, often despite the advice of 
engineering colleagues, because these technologies offer improved 
safety, cleaner air, and solutions that address the waste issue.
    I don't think I would have stayed at MIT past a master's degree had 
I not been a recipient of a DOE Nuclear Engineering Fellowship. The 
Fellowship program awarded me the opportunity to stay in school and 
research a topic I found important and vital to nuclear engineering. 
Not only has the fellowship program supported me financially; the 
opportunity to conduct part of my research at the Knolls Atomic Power 
Laboratory has been invaluable.
    Created in 1948, the Atomic Energy Commission Special Fellows 
program, predecessor to the DOE Fellowship program, trained bright, 
young students in nuclear science and related fields. Between 1948 and 
1970 this program supported 75 to 100 students per year at 60 national 
education institutions. Former AEC Fellows authored many of the leading 
textbooks used in nuclear engineering today. AEC Special Fellows 
graduates include four Nobel Laureates, several DOE Laboratory 
Directors, and University Presidents. AEC Fellow graduate James 
Duderstadt is the author of my first nuclear engineering textbook and 
the President Emeritus of the University of Michigan.
    Many of the AEC Special Fellows program graduates went on to teach 
in nuclear engineering programs, developing advances in nuclear 
technology while training the next generation of nuclear engineers. 
Today, there are only about 25 university programs offering nuclear 
engineering degrees and the DOE Nuclear Engineering Fellowship program 
supports only 22 students. Equally alarming, in just the past ten 
years, enrollments in nuclear engineering nationwide have dropped by 
almost 60 percent (from 3,440 to 1,520) according to written testimony 
submitted by James Duderstadt, Chairman of the Nuclear Energy Research 
Advisory Committee. This year, the demand for nuclear engineers 
exceeded supply by 350; by 2003 it will be more than 400. This trend 
will only continue to worsen as more nuclear professionals are eligible 
to retire and more and more plants are renewing their licenses and are 
in need of qualified nuclear engineers. We must take action now to stop 
the decline in the nuclear workforce and rebuild our human resources 
for the future.
    When I was first offered a summer job at a commercial nuclear power 
plant seven years ago, I was sure it wasn't the career path for me. 
With my limited knowledge at the time, I thought the future of nuclear 
power was dim; no new plants had been ordered in 25 years and the 
oldest plants were just beginning the decommissioning process, with 
more to follow. I was attracted by the future prospects of creating 
energy through fusion, but saw little hope in the fission industry. 
Three months later, I realized I couldn't have been more wrong! The 
atmosphere at the plant was electric; the plant I was at had been 
through some hard times, but everyone on site was dedicated to getting 
the plant up and running and operating well. As a nuclear engineering 
student, working at a power plant was an amazing experience, an 
incredible opportunity to see, in operation, the ideas I had read about 
in textbooks. Two-inch square black and white diagrams of nuclear 
reactor cores in a textbook simply don't compare to seeing the real 
thing, in full size and color, while sitting above 30 feet of water. 
Few things have been as memorable as sitting above the core supporting 
the operators as old fuel was moved out and new fuel brought in. I 
returned for two more summers, always comparing what I learned in class 
to what I saw at the plant.
    Unfortunately, the group of nuclear engineers with whom I have 
worked is shrinking as talented and skilled nuclear graduates are 
leaving the field. The nuclear power industry is often seen as a dying 
one and many of my classmates are pursuing other careers with higher 
perceived opportunity and longer-term, more certain, and exciting 
futures. For these same reasons, few new students are entering nuclear 
engineering programs. Many nuclear engineering departments have closed 
or merged with other, larger departments. During the past decade, the 
number of nuclear engineering programs has declined by 50 percent, with 
only approximately 25 four-year degree programs currently existing 
nationwide.
    It is important that we attract students to our nuclear education 
programs to develop the future workforce. To do that, students (and 
their parents) need to understand the importance of nuclear energy to 
our nation's future. However, our nuclear programs are disappearing and 
those remaining are growing older. Over two-thirds of the faculty in 
these programs are 45 years or older. The statistics are even more 
severe in the overall nuclear picture: according to the Department of 
Energy University Nuclear Science and Engineering Act, Senate Bill S. 
242, 76 percent of the nation's professional nuclear workforce will be 
eligible to retire in five years. If we don't bring new students into 
the universities and into nuclear jobs now, we will lose the 
opportunity to transfer that hard-earned knowledge to the next 
generation. We've invested over 50 years of dedicated research to 
develop our nuclear programs, both for civilian and defense purposes, 
if we don't save it now, we will have to start over.
    The continued survival and success of our nuclear energy industry 
requires government leadership fostering attitudes that value the 
contribution energy makes to our standard of living and the benefits 
achieved from nuclear science and technology. Energy is a commodity 
different from most other consumer goods and is usually taken for 
granted by those who use it. When asked where electricity comes from, 
the most common answer in the United States is ``from the outlet'' or 
``from the switch''. Energy is absolutely vital to our economic 
prosperity, technological advances in all fields, and our standard of 
living. Recognizing and promoting the value of energy as a national 
good, as a solution to problems, not a detriment, is crucial to 
maintaining a vibrant, innovative, and reliable energy industry.
    I am sure that most members of these committees here today would 
agree that nuclear energy is vital to our nation's economic and 
environmental health. Nuclear energy provides reliable electricity 
generation, supplying 20 percent of the electricity we consume, and is 
free of greenhouse gas emissions and pollutants. To ensure the 
availability of nuclear power in our overall energy strategy, we must 
continue to attract students to nuclear engineering education programs 
to provide a qualified workforce for the future.
    At many of our universities, we are training as many foreign 
students as domestic. It is clear that our educational institutions are 
world-class and have been at the forefront of new nuclear technology 
development, but we are in danger of losing our edge and our expertise 
immediately to be followed by our global leadership. If we cannot 
attract our own students into these programs and into industry, we will 
be forced to buy nuclear technology back from the other countries that 
have supported nuclear power as a part of their own energy strategies 
when we decide it's necessary here.
    Since I've entered this field I've always known that there would be 
jobs available for me, though I have been afraid that my career would 
consist of decommissioning the current reactors. Given the current 
discussions and renewed interest in nuclear power, I am once again 
excited about the opportunities that will be available to me when I 
graduate. The prospect of being a member of a team working to develop a 
new reactor technology and bringing new nuclear reactors to the 
American market would be a dream job for me! I believe that nuclear 
energy is important to our energy mix, our energy independence and 
stability, our economic prosperity, and our environmental health. 
Nuclear technology provides wide-reaching benefits to our society not 
only through energy stability, but also through medical diagnoses and 
treatments, and food safety, just to name a few. I want to make a 
contribution to this technology that is not just a future job for me, 
but also a core belief.
    To revitalize our nuclear industry and to continue to support the 
tremendous achievements made during the past 50 years requires, in my 
opinion, three commitments. We must attract students to nuclear 
engineering programs; we must attract new, young professors to those 
programs to teach the next generation of nuclear professionals; and we 
must enhance the business climate for the introduction of new 
technologies. Students will only be attracted to nuclear engineering if 
they can see active, exciting, and long-term careers. I have found out, 
contrary to my initial opinions, that the nuclear industry is indeed 
exciting, challenging, and rewarding. Unfortunately, it seems to be a 
secret we try to keep from everyone else. The government needs to help 
by sending the message that nuclear energy is an important national 
resource, vital to our economic development and environmental health, 
and by helping ensure opportunities for the future.
    As an optimistic nuclear engineering student, I would like to 
encourage the members of these committees to support nuclear energy and 
its students by supporting bills such as Senate Bills S. 242, the 
Department of Energy University Nuclear Science and Engineering Act, 
sponsored by Senator Bingaman, and S. 472, the Nuclear Energy 
Electricity Supply Assurance Act, sponsored by Senator Domenici.
    Thank you for your interest in the future of nuclear energy!

    Senator Domenici. Thank you very much, ma'am. Mr. Chairman, 
we are finished with our witnesses.
    Chairman Murkowski. Thank you very much. I apologize for 
running in and out of here like this, but I had the Ambassador 
from South Korea in, and that is one of the problems we have.
    I just have one question that I would like to pose to Mr. 
McNeill relative to the pebble bed reactor, and it involves 
your comment that this appears to be the safest technology that 
we have been able to theoretically develop. That kind of leads 
me into my question.
    If you were going to evaluate the next step for the nuclear 
industry in the United States, would you not think that it 
would be somewhat of a risk to start on an unproven technology 
such as the pebble bed, even though it seems to have a great 
deal of promise, particularly from the standpoint of the 
unlikely possibility for meltdowns and so forth, or would we be 
better off, if we are going to initiate a new program, to go 
back to a more conventional light water reactor that has proven 
technology, and we know what the costs are, and we know through 
experience the operational procedure and so forth?
    It would seem to me that there is some risk in initiating a 
new technology that has yet to be proven in the sense of 
operational functions that if the costs went up, or we had some 
problems, it could again set back the industry from the 
standpoint of the criticism from public and Government over 
delays, cost increases and so forth, so if you could just 
comment on that very briefly, and I will yield to my 
colleagues.
    Mr. McNeill. I would be happy to. First of all, the reactor 
technology in the pebble bed is evolutionary, it is not 
revolutionary. It is not new. This is a design that has been 
used in Europe, in Germany for about 20 years. The problems 
associated with that design have been identified, and we are 
incorporating the solutions to those modest problems in our 
design, so what is different in the pebble bed is the coupling 
of the reactor with a direct cycle turbine. We do not think 
that is--while it is new, we do not think it is of high risk, 
because turbine technology is fairly well understood in itself.
    So on a personal basis, representing my company, I think it 
is a risk for our investment purposes that is worth taking, 
given the other advantages that come with the design and the 
safety features and the small modularity that come with that 
particular design.
    Chairman Murkowski. Well, let me ask you one more question. 
Do you intend, then, since you are one of the larger operators 
of nuclear plants, to proceed with an application at a given 
time, to develop the pebble bed reactor?
    Mr. McNeill. As I highlighted in my written testimony, 
based upon our evaluation of the design feasibility study, 
which will be done this summer, in conjunction with the other 
investors, we would make a decision in the fall to move ahead 
with a demonstration plant in South Africa, follow that up with 
an early site permitting process in the United States sometime 
early to mid next year, more likely mid next year, and then a 
design for an application for a construction and operating 
license under Part 52 late next year or early in 2003.
    Chairman Murkowski. Is that process going to require any 
role for the Federal Government, other than the review, 
obviously of permits and application and so forth? Is there 
going to be a request for an expedited procedure, or is there 
going to be some kind of a request that will ensure that if it 
is built it is going to receive operational approval?
    Mr. McNeill. We would do this under the new Part 52 
permitting process, in which we would expect to exercise the 
new requirements that were put in place in the late 1980's. It 
would be the first, I think, the first application for 
construction, unless somebody gets there with a light water 
application prior to that, and one of the benefits of this 
design is, is that we would only be risking $150 million.
    Not that that is a small amount of money, but it is not the 
$2 to $3 billion that have been at risk in prior constructions, 
and this is one of the fundamental benefits of this design, 
that I do not think people fully comprehend yet, is that the 
investment risk is much smaller than it was in prior designs.
    Chairman Murkowski. Well, that is very encouraging, and we 
are certainly pleased to hear that, and I trust that as you 
proceed, that if you are going to need anything other than the 
normal reviews of the permits and so forth from the Federal 
Government, that you advise us.
    Mr. McNeill. I think in my written testimony we have 
highlighted a few items that would be beneficial in terms of 
providing funding to the NRC for development of expertise in 
this technology, and some other things.
    Chairman Murkowski. Thank you very much.
    Senator Domenici.
    Senator Domenici. Senator Bingaman, do you want to proceed?
    Does anyone know how many nuclear powerplants are in some 
phase of construction or on a permanent order status anywhere, 
a combination of those in the world, Japan or elsewhere? 
Anybody at the table know how many that is?
    Mr. Meserve. Senator, we would be prepared to submit more 
complete information for the record. I do know that the 
Japanese have an aggressive program for construction of 
reactors. Similarly, the Koreans, who have 16 nuclear reactors 
now, have aspirations of building about another 10 or so over 
the next 15 years.
    [The information referred to follows:]

    According to the Nuclear News, as of December 31, 2000, 40 nuclear 
power reactors were either under construction or on order outside the 
United States (1 in Argentina, 4 in Armenia, 1 in Brazil, 8 in China, 1 
in Czech Republic, 4 in India, 1 in Iran, 4 in Japan, 2 in Russia, 2 in 
Slovakia, 2 in North Korea, 4 in South Korea, 4 in Ukraine, and 2 in 
Taiwan).

    Senator Domenici. So Japan is planning on 15 for their 
energy needs in the future? What about China?
    Mr. Meserve. I do not know the precise number that the 
Japanese are planning on, but they do have aspirations for 
construction. There is a reactor that is under construction in 
Taiwan right now. The Russians have an interest in new 
reactors. It is clear the Chinese have aggressive interest in 
nuclear reactors. There recently, as I understand it, was an 
application for new construction in Finland. There are a 
variety of countries in the world that have an interest in and 
plans for construction.
    Senator Domenici. Anybody else?
    Mr. Rhodes. The vice chairman of the Chinese Atomic Energy 
Authority spoke at the conference I attended in Japan. He said 
that eight units with total capacity of 6,600 megawatts will be 
completed and put into operation between 2003 and 2005.
    Taiwan, of course, has one new plant, North Korea has two 
plants under construction, with U.S. support, which we may all 
be grateful, and then Finland is pursuing developing one more 
plant. That was the information from the conference.
    Senator Domenici. Anybody else know of any more?
    Mr. McNeill. Senator, let me clarify up one thing. I have 
been informed that the 1,300 plant construction requirement the 
DOE predicts is 300 megawatts each, so that is a more accurate 
number than the one I gave you.
    Senator Domenici. So the current DOE assessment of how many 
new powerplants we need online for electricity is 1,300.
    Mr. McNeill. 1,300, and they would be of the 300-megawatt 
size.
    Senator Domenici. Which are much smaller than we have been 
building.
    Mr. McNeill. Yes, they would be.
    Senator Domenici. Anybody else, do you know anything about 
any other powerplants being ordered?
    Dr. Ahearne. Well, Russia, of course, is quite interested 
in getting back to completing some of the plants that they had 
halted, and if they can find money somewhere, they would like 
to build some more, but money is being a real problem for them.
    Senator Domenici. Well, let me move ahead rather quickly 
and just lay before the record, with reference to the 
activities that are going on in the Department of Energy that 
affect nuclear research and the like, and what is happening to 
them.
    The budget of the executive branch for the Department of 
Energy, Senator, looks kind of like they put it together not 
anticipating that they were going to do anything in the nuclear 
field. Now, maybe they are coming around saying they are, but 
that is kind of what it looks like. Nuclear energy research, an 
area which you have referred to, we have been funding that 
without executive requests for a number of years. It is $35 
million. It has been halved, been cut in half.
    Dr. Ahearne. More than that, cut more than that.
    Senator Domenici. Okay. We are putting it down as a half. 
Maybe it is more. There is a very serious research effort on 
low-dose radiation effect which I think all of you would concur 
is a national necessity.
    We have been using this linear automatic relationship on a 
linear basis for years, and that makes people much more fearful 
of low-level radiation than we think they are going to have to 
be, and this is cut back from 20 to 10 or lower, and university 
research which you were referring to, Heather, we had at $12 
million, not a lot, but we have got started, right out of that 
little budget. I think that has been cut in half, or more, so I 
believe we have to go back--in fact, the American effort is 
going to be to get back into doing something in this area.
    Then we have to have a Department of Energy that has some 
nuclear science somewhere in the building. It cannot go 
somewhere else for nuclear energy. It has got to be in the 
building. Some of these things have to be happening.
    I have a lot more, but I am going to let Senator Bingaman, 
my friend from Nebraska, and then I will try to wrap up. 
Senator.
    Senator Bingaman. Thank you very much. One other aspect of 
this projection about how many new plants we are going to need 
in the future, I think that comes from the Energy Information 
Administration's Annual Energy Outlook for 2001. They say in 
there that they anticipate we will need 393 gigawatts of new 
generating capacity, 16 percent of which will replace retired 
nuclear capacity, so 16 percent of the additional capacity they 
anticipate we will need between now and 2020, will be needed to 
make up for retired nuclear capacity.
    Chairman Meserve, you said something that led me to believe 
that a lot of that anticipated retiring of nuclear capacity is 
not likely to happen. Am I right about that?
    Mr. Meserve. You are right, Senator.
    Senator Bingaman. Do we have an idea as to whether there 
will be retiring of any of our existing nuclear capacity?
    Mr. Meserve. About 40 percent of the fleet have come in and 
told us already that they intend to seek license renewal. 
Informally, we have been told that 85 to as much as 100 percent 
of the fleet will, in fact, seek license renewal.
    This reflects that these plants are the low-cost producers, 
and it is in the interest, then, of the generating companies to 
keep them online if they can.
    Senator Bingaman. So it is very possible that the retiring 
nuclear plants that 16 percent of the new generating capacity 
that EIA says we need to replace, will not, in fact, be 
retired?
    Mr. Meserve. That is correct.
    Senator Bingaman. Let me ask also, Chairman Meserve, you 
cited a whole bunch of new responsibilities which were not 
necessarily expected 6 months ago when the administration 
started putting its budget together.
    I know this is a long process each year when the 
administration starts putting budgets together, but all of 
these applications for renewal, all the applications for 
expanding capability that you talked about, Mr. McNeill's 
reference to perhaps this new technology that they are coming 
on with, which will require additional--I am just wondering 
whether the Nuclear Regulatory Commission budget, the way it 
has been presented to us, is going to reflect any of that, or 
if you could give us an estimate as to how much additional 
funding the NRC is going to need in order to carry out these 
new responsibilities.
    Mr. Meserve. Yes, Senator, you are quite correct that the 
budget process does involve us starting to engage with OMB 
around this time of the year, and a lot of the changed 
environment that we have been discussing today has been 
something that has just emerged in the last few months.
    We are in the process of evaluating the implications that 
that will have for us for the fiscal year 2002 budget, which is 
the one that is before you now. I would be very happy to submit 
information for the record as to what increased demands that 
places on us.
    [The following information was provided:]

    Serious industry interest in new construction of nuclear power 
plants has only recently emerged. As a result, after a mid-year budget 
review, the NRC reprogrammed approximately 12 full-time-equivalent 
(FTE) staff in FY 2001 to evaluate and assess the agency's technical, 
licensing, and inspection capabilities. These resources have been made 
available through efficiencies and postponing work that in the short-
term should have no impact on our ability to meet our Strategic Plan 
goals, metrics and program requirements. This evaluation and assessment 
of our capabilities will help identify any enhancements that are 
necessary to ensure that the agency can effectively carry out its 
responsibilities associated with an early site permit application, pre-
application and license reviews, and the construction of a new nuclear 
power plant. The new initiative will not affect our ability to continue 
to ensure the adequate protection of public health and safety at 
existing operating facilities in FY 2001.
    The preliminary estimate of resources needed in FY 2002 to review 
early site permit applications, conduct pre-application and license 
review activities, and begin to assess the advanced technologies being 
considered by industry, is approximately $15-$18 million. Since there 
was no indication of serious industry interest in future licensing 
activities at the time our FY 2002 budget was developed, the budget now 
before the Congress does not include resources which may be needed for 
these activities. We note that there are significant demands on NRC 
budget resources to ensure safety of existing operating facilities and 
continue important ongoing initiatives, such as renewal of existing 
reactor licenses, and moving forward a more risk-informed regulatory 
environment. To the extent additional resources are needed and 
approved, NRC would need appropriate lead time to hire and train 
personnel to perform activities associated with these new initiatives.

    Senator Bingaman. I think that would be very useful for us.
    Mr. Asselstine, you cited about five requirements you 
believe need to be met if new nuclear plants are to be built in 
the country. Do you see any legislation that is required in 
order to achieve any of those requirements? I mean, did you 
identify in your analysis things that we need to change in the 
law in order for this to become a reality?
    Mr. Asselstine. I am not sure that there are a lot of 
legislative changes that are really necessary here. As a result 
of the Congress' past action, we now do have a new regulatory 
process, a streamlined process, as you pointed out, for site 
approval, for standardized design approval. What we really need 
to do, I think, now, is come in with a couple of applications 
and test that process out, and validate it, to demonstrate 
that, in fact, it will work as intended.
    One area that might help, and I mentioned this briefly in 
my comments, one of the challenges in terms of building either 
new coal plants or new nuclear plants is the relatively larger 
initial capital investment for those plants, and one thing that 
the Congress might look at is accelerating depreciation for 
those investments. That would certainly make making the larger 
up-front capital investment for a nuclear unit or for a coal-
fired plant more attractive to a generating company going 
forward.
    A generating company will look at, what investment do I 
have to make today, how quickly will I be able to recover that 
investment, and right now the balance has clearly been skewed 
in favor of new gas-fired generating capacity. The plants are 
cheaper to build initially, operating costs may be higher over 
the remaining life, but the risk profile of the initial 
investment is quite low, and that has driven most generating 
companies to make commitments to gas-fired capacity, and that 
has been the name of the game, literally for the past several 
of years.
    Senator Bingaman. Let me ask Chairman Meserve one other 
question here. How long a period are we looking at for the NRC 
to issue a license to construct and operate a plant? One of the 
other factors, I assume, that causes investors to look more 
favorably upon gas-generating plants instead of nuclear is the 
delay that they anticipate in getting a license issued, so I 
guess there are two different kinds that we talked about here.
    You have certified designs that the Nuclear Regulatory 
Commission has already approved. If a utility board comes in 
and requests a license to go ahead with one of those, could you 
give us a time frame, and then if they request a new design--I 
gather this pebble bed reactor would qualify as different from 
those--how long would that take?
    Mr. Meserve. What we have tried to do is to put in place a 
process that gets as many of the regulatory decisions as 
possible made early so that an investor has some predictability 
in the process before a lot of money is sunk into a project 
that may go nowhere.
    We have not exercised, yet, the regulatory system that we 
have in place that is intended to provide that predictability, 
other than certifying designs. We have three advanced reactor 
designs that have been certified. None of them have been built 
in the United States, but there have been three designs on the 
shelf, as you indicated.
    We also have a process that allows issuance of an early 
site permit. Before you have announced an intention to actually 
use the site, you can come in and have the issues as to the 
site addressed and resolved early.
    We also have the prospect of a combined license, which 
means early in the process you can have all of the issues 
resolved. Such an application might include a reference to an 
early site permit and a certified design. That would be faster, 
obviously, if you did that.
    Since we have not tested these processes, I would be very 
reluctant to give you an estimate on which you could rely as to 
the time for their completion. It is clearly something that 
would likely take several years. You have to go through a NEPA 
process, for example, which means that there is preparation of 
an environmental impact statement. There might be hearings, 
which of course would be a wild card that could affect the 
timing of events.
    We think we have in place a system that does enable us to 
avoid some of the pitfalls that have existed in the past as to 
late decisionmaking from an economic point of view, and delayed 
decisionmaking.
    Senator Bingaman. Mr. McNeill, did you want to supplement 
that answer?
    Mr. McNeill. Our estimate, Senator, is that that is roughly 
a 27-month process.
    Senator Bingaman. 27 months from the time you filed the 
application to the time that it is granted?
    Mr. McNeill. Yes. We think that that is sort of a favorable 
time line because of the requirements. Some of them are 
requirements that have been longstanding in place, NEPA and 
things of that nature. We would encourage creating the ability 
to move through that in a faster manner, just to make sure that 
time lines are kept as reasonable, but shortened as much as is 
feasible, and I do not know what that is right now, but from a 
business standpoint, without relation to anything, if we could 
do that in 18 months I would feel a lot better on things.
    Senator Bingaman. Thank you very much, Mr. Chairman.
    Senator Domenici. Were you finished, then?
    Senator Bingaman. Yes.
    Senator Domenici. Thank you for the questions, Senator. 
Good questions.
    I would like to talk a little bit with all of you about the 
way things are changing. First, let us talk with the financial 
man. What you are saying, coupled with what Corbin McNeill is 
saying regarding the kind of powerplant that we will be 
building in the future, his expectation is they will not be 
1,000 kilowatt, big ones that the finance people have to look 
at and wonder if they can finance because it is going to take 
10 to 12, 14 years to get finished.
    We are talking about the marketplace having a bigger impact 
here because it is assumed we can get these done quicker, and 
that they will probably be modular, upon which you can add 
later on whatever models are desired.
    Between the two of you, could you tell us, other than size, 
what makes this doable now, and we could not do anything 10 
years ago? Is it new design, is it the new statute that we have 
where you can now apply under--could you just share with the 
committee what is making it possible? Go ahead.
    Mr. Asselstine. I think several factors. One, 10 years ago, 
all of the experience of working through recovering the initial 
investment and the cost of the current generation of plants was 
pretty fresh on our minds, and it certainly had an impact on 
the credit quality and the financial position of the utilities, 
and also it had an impact on investors as well.
    Second, that was at a time when we then had a substantial 
amount of base load generating capacity. There really was not 
much need at that point in many parts of the country for new, 
large base load generating plants so the need really was not 
there, either.
    Third, we did not have the new NRC regulatory process. At 
the time, under the old regime, you had to come in with an 
application to build a new plant, and you also had to face the 
risk of a licensing process prior to the time that the plant 
would go into operation, and if you are trying to build a plant 
and really needed that plant at a particular period of time, 
there was a fair degree of regulatory uncertainty.
    We all hope and expect that the changes were made, both by 
the Congress and by the NRC, have now created a process where 
you can really move a substantial part of that key 
decisionmaking early on, fully ventilate the issues, but 
approve the design, approve the site before you really need to 
move ahead with building a plant so that once you make the 
decision to build a plant you can get through the regulatory 
process quickly and, most importantly, you will not face 
significant uncertainty once the plant is largely completed, 
and you have made the investment in the plant.
    At that point, those of us on the financial side, those of 
us on the company side want one thing, want the plant to go 
into operation and run well on a predictable and timely basis.
    The pebble bed design that Corbin described clearly does 
have a number of attractive elements to it. You can build the 
plants with smaller modules, so you are adding a smaller 
increment of generating capacity, rather than 1,200 megawatts 
at a time. The initial capital investment in the plant is 
considerably smaller, and it enables the generating company to 
say precisely what Corbin said earlier, my total commitment and 
my total investment is $150 million. If things do not work out 
as we expect they will, that is the limit of my risk and my 
exposure.
    I think you could do the same thing with larger plants or 
the evolutionary light water reactor designs, either the 600 
megawatt plants, or conceivably either--or the larger ones, but 
you probably need to bring in more project participants to 
limit their individual exposure so that they can make that same 
statement.
    Mr. McNeill. I agree, and I think that is a very good 
analysis. I think you need to put this in a context, however. 
In many parts of the country today, the utility marketplace is 
deregulated, and the large--my view is that the large reactors 
fit very well in either regulated or controlled economies, and 
that is why you see them being built in Japan, in Taiwan, in 
China, because you are putting large increments of capacity 
online at one time.
    Much of that is excess capacity, and you are able to 
recover your investment only because of the regulated stream of 
revenue that comes with the rate regulation, so in a 
deregulated environment, you need to bring in smaller 
increments of capacity, such that you do not disturb market 
prices drastically, because if you brought a big unit in the 
line prices would drop to marginal cost pricing instead of full 
recovery pricing, and you see a much better adaptation of a 
deregulated marketplace in small modular reactors.
    The shorter lead time, the 18- to 24-month construction 
period, is facilitated by the fact that in this small modular 
design much of the construction is done in factory 
construction, which is much more quality controllable, much 
more efficient in its manufacturing processes, and therefore 
does not lead to as much inefficient, lost productivity that 
you have seen in the construction of the large plants.
    Senator Domenici. Mr. Rhodes, you mentioned in your 
remarks, if I got it right, that maybe we needed some courage. 
Perhaps that is what would put this into focus and perhaps get 
us to proceed in the proper manner. Aside from that, which 
wholeheartedly agree with, I do not have any problem in terms 
of, if that means talk about something that is needed even if 
people are going to disagree, and wholeheartedly, and stay with 
it, we have some people prepared to do that.
    But you must have, in your long involvement in this, seen 
some other things that ought to be changed, as you see it, 
which would bring on new powerplants for our future needs, here 
and in the world.
    Mr. Rhodes. One aspect of nuclear power that I think has 
never been much discussed, but is a very crucial part of its 
contribution, is its public health advantages. I suspect that 
is because utilities that run nuclear powerplants frequently 
also run coal plants, but when you look at the relative 
benefits and risks in terms of health of a system that puts no 
pollutants into the environment at all until the waste is 
eventually retired, compared to one that processes so much 
material that it necessarily pollutes.
    In the case of coal, but also but in the case of natural 
gas, and, indeed, even in the case of wind and solar systems, 
when you count the necessary construction materials, the 
advantages in terms of saving American lives simply has not 
been discussed. Nuclear power has been perceived to be 
something that is dangerous when, to the contrary, one can look 
at the numbers and say, even if there were leakage from a waste 
repository in 10,000 years, how do you balance that risk 
against the fact that--this is a World Health Organization 
number--that 3 million people die in the world every year from 
indoor and outdoor air pollution.
    So if that perspective were something that we might 
consider a little bit. One of the participants in the 
conference in Japan, who is the head of Cogema, the 
reprocessing operation, suggested that what we need is an 
authoritative world data base that looks at all the different 
kinds of energy generation systems in terms of their economics, 
their health, and all these other questions that we are 
concerned with. Everyone, through, presumably, the Internet, 
might have a place to go to, say, what is the advantage, what 
is the disadvantage.
    Senator Domenici. I am going to take a minute, and he is 
going to take the chair, and I will be right back.
    Chairman Murkowski. Thank you, Senator Domenici. I would 
like to pose a question to Mr. Meserve and Mr. O'Neill relative 
to Price-Anderson. We have got Price-Anderson in the 
comprehensive energy bill, and that is going to be taken up 
probably sometime--I am guessing prior to 4 July recess, but 
again, I am guessing. The Energy Task Force report is going to 
come out mid-month, this month. Do you have any views on 
whether or not we should try and move legislation out 
separately, or as part of the comprehensive bill? We all agree 
it is necessary to the industry.
    Mr. Meserve. The Nuclear Regulatory Commission has endorsed 
the notion of the renewal of the Price-Anderson Act. It is my 
understanding that this is of great importance and interest to 
the industry as well, that the Price-Anderson Act be renewed 
early, and so I think perhaps moving it as a separate bill is 
wise.
    Let me add, if I may, Senator----
    Chairman Murkowski. You see, the problem with moving it as 
a separate bill around here is what you get with the bill, 
particularly in this tied Senate.
    Mr. Meserve. Yes. Well, I will not purport to be able to 
second-guess your judgment on those matters, Senator.
    [Laughter.]
    Chairman Murkowski. If we try and move it, you folks are 
going to have to be pretty active in trying to keep it clean, 
otherwise you can drag it down in the process. That is what 
worries me, but I agree with the importance.
    Mr. McNeill.
    Mr. McNeill. I know the industry would like to move it 
along, whatever way I think you feel that it could move along 
fastest.
    On a specific basis, for looking at new modular reactor 
design, we need to find a way, whether it is legislatively or 
an interpretation of the legislation, to make sure that small 
modular designs are proportionately covered by the Price-
Anderson requirements, so that the fees that would be paid by a 
modular individual plant would be proportionate to those paid 
by a larger plant.
    Mr. Meserve. Senator, if I may, there is one aspect of the 
Price-Anderson Act that I would like to mention to you. I know 
that several of the bills that are pending before the Senate 
now include an NRC recommendation having to do with the 
retrospective premium, a recommendation that it be increased 
from $10 to $20 million.
    That recommendation was made at a time when everybody 
anticipated that the number of nuclear powerplants in the 
United States would be drastically reduced over time, and that 
therefore there was a need for that increase. That seems 
unlikely to be necessary now. The Commission is reevaluating 
that recommendation, and we will be submitting something to you 
as to that recommendation shortly.
    Chairman Murkowski. I appreciate that. I have one other 
question, and that is for the Lehman Brothers gentleman, Mr. 
James Asselstine, and it is relative to this hyperconsideration 
on wholesale price caps, and my question to you is, do you 
think the financial community would finance a nuclear plant if 
wholesale price caps did not give you the flexibility to let 
the market determine the rate structure, because we are seeing 
a situation in California now where we have got some real 
problems.
    We have had retail caps, and clearly the result of that is 
that Californians are subjected to an obligation as taxpayers 
that ordinarily they would be subject to as ratepayers. They 
are the same people. I hope they can figure out the difference, 
or somebody can explain it to them, maybe the media in 
California will take that obligation. They have not done a very 
good job so far.
    But my point is, specifically, what do wholesale price caps 
do to you and your industry's willingness to finance 
rejuvenation of the nuclear industry?
    Mr. Asselstine. I think that whether it is nuclear or 
nonnuclear generating asset probably does not matter that much. 
Investors are going to want to have confidence, if they look at 
financing a competitive generation asset, that that asset is 
going to be able to earn a reasonable return in the market in 
which they have to operate in.
    We have seen a number of financings over the past couple of 
years for competitive generation assets. They could be single 
powerplants, or they can be generation companies.
    Chairman Murkowski. Get specific, now, because I am going 
to pin you down if you do not. Where do you get this level of 
comfort, if you have wholesale price caps on?
    Mr. Asselstine. It is very difficult if you have caps on, 
particularly caps that would be there for an extended period of 
time. We evaluate what the market looks like, and what we look 
for is the ability to price power at a level that will allow a 
fair return.
    Chairman Murkowski. So you are telling me it is where the 
price cap is.
    Mr. Asselstine. Or not having a cap at all, that is right, 
and investors have been most comfortable with the competitive 
generation markets that have operated as free markets, without 
artificial restrictions, where you have price transparency, and 
where we, as outsiders, can look at that market and gain 
comfort in the way the market is running, and the best example 
I can give you is the PJM pool. I personally believe that is 
the best-functioning competitive market in the country today.
    Chairman Murkowski. Why?
    Mr. Asselstine. It is the largest market, it is very 
liquid, you have a large number of participants in the market--
--
    Chairman Murkowski. It has no price caps.
    Mr. Asselstine. No price caps. You have a substantial 
amount of base load generation in that pool that provides very 
stable and steady pricing, and you have market mechanisms in 
terms of allowing the participants to buy power directly from 
generators.
    Chairman Murkowski. So you have got competition, and you 
have got overcapacity.
    Mr. Asselstine. And a fair amount of capacity, that is 
exactly right.
    Chairman Murkowski. Yes, but when you do not have that, 
which is what we are faced with in California, how do you 
create it if you have wholesale price caps?
    Mr. Asselstine. California is a particularly difficult 
situation right now. You clearly need more generation built, 
and you do not want to discourage it.
    Chairman Murkowski. Well, what I want to try to do is get 
the investment community to help us out one way or another 
here, because we can beat our gums around and say, well, you 
need this or that, but if you folks are not going to finance, 
the State of California can put all the permits out in the 
world and nobody is going to finance a plant if those price 
caps are too tight in your evaluation to make a return on 
investment. You folks need to tell us that.
    Mr. McNeill. I think there is an important feature here. 
What is being proposed at the State level in California is 
basically rate-of-return regulation. They want to go back to 
price caps for individual operators that represent their cost, 
and if you really look at that, what that does is, it 
discourages lower cost generation coming into the market, 
because it will be treated just the same as other generation, 
and what you really want to do, if you are going to set a price 
cap, it is a uniform price cap, and it allows cheaper 
generation to come in and get rewarded by getting a higher 
return than it would have, which is the way normal markets 
function.
    So I think the real issue is that--I know there is this 
debate on whether price caps ought to be applied at all. If 
they are applied, and I know there is a lot of political 
pressure to do that, they should not be cost of--rate-of-return 
or cost-of-generation based. They ought to be uniform price 
caps across the whole spectrum.
    Chairman Murkowski. And you have got to have them high 
enough.
    Mr. McNeill. That is correct.
    Chairman Murkowski. What is high enough? We don't know.
    Mr. McNeill. I will tell you. If my PBMR comes in at the 
cost structure that we think, I will sign contracts that are 10 
percent below what is existing in the marketplace today at 
least, is what is being----
    Chairman Murkowski. So you want a price cap that is 10 
percent above, is that right? I mean, somebody tell us, for 
heaven's sake. Do you expect us to know?
    Senator Domenici. Well, they did not come here for that.
    Chairman Murkowski. Just a minute, the gentleman from 
Lehman Brothers----
    Mr. Asselstine. I would like nothing better than to see a 
solution to the problem.
    Chairman Murkowski. Well, you have got to be part of the 
solution by telling us what you are going to finance and what 
you are not, because we sit around here and discuss the merits 
of price caps, and California says, we have got all these 
permits out there, and if you are not going to finance them, we 
are both wasting our time.
    Mr. Asselstine. If we are looking at financing a generating 
investment, what we need to know is, where is the money going 
to come from to pay us back, and is it going to be adequate, 
and you can do that one of a couple of ways. You could sign a 
contract with the State of California to sell the power to the 
State at a fixed price, and you know what recovery you will get 
from that. That is one alternative.
    If you are not going to go that route and you are going to 
sell power into the competitive marketplace, we will need 
assurance that over time that marketplace will operate 
efficiently and competitively, which means no caps, or caps 
that clearly are not going to constrain the expected economic 
performance of that plant.
    Right now you have got a problem in California because it 
is going to take 2 or 3 years to build the supply that is 
really necessary to meet demand because of the failure to build 
plants over the last several years. You need to figure out how 
to bridge that gap without destroying that new plant investment 
that is critical to solving the problem on a long-term basis.
    Chairman Murkowski. Well, are we going to bridge that gap 
if we put on wholesale price caps in California?
    Mr. McNeill. If they are set high enough, I think you will.
    Mr. Asselstine. If you set them too low, you will not.
    Chairman Murkowski. Well, okay, but you know, we asked the 
question of how high is high, and it is basically a return on 
investment.
    Mr. McNeill. On the most expensive plant.
    Chairman Murkowski. Probably. Well, for example--and I am 
going to conclude--Pennsylvania has 1,000, Texas has 1,000, but 
they also have significant capacity and efficient plants. Would 
that work in California today?
    Mr. McNeill. Senator, if I could just make--Pennsylvania, 
when power can be met inside of PJM the cap is 1,000. If they 
have to go outside and import power, then the price is 
uncapped.
    Chairman Murkowski. Is that right?
    Mr. McNeill. And that 1,000 is an artificial number, 
because the computer will not accept a number greater than 
$999.99. That is why that cap is there.
    Chairman Murkowski. Thank you, Senator Domenici. As they 
look to a solution from us----
    [Laughter.]
    Mr. McNeill. Well, you might use that solution, find 
something that simple, that the computer will not take the 
number higher.
    Senator Domenici. Thank you, Chairman. I am glad that such 
an expert group was asked some of the most profound questions 
of our day, and I thank you for the questions. I want to get 
back to the nuclear, if I could, for just a minute. Let me talk 
a minute with the chairman. First of all, we still have a big 
issue with reference to America's effort to go on with a 
permanent depository for spent fuel.
    Whether one thinks it is right or wrong, whether we should 
do it or not, the EPA Administrator, many people have 
communicated with her in writing and otherwise about this 
problem. I wrote to her in March, at the end of March, noting 
that the draft EPA regulations for Yucca Mountain were severely 
criticized by the National Academy for Sciences. No such 
criticism, to my knowledge, was leveled by the academy against 
the proposed NRC standards.
    I suggested in my letter that the EPA and the NRC should be 
working to harmonize these differences in standards, in 
approaches to the standards. On April 26, the Administrator 
reported that the EPA and the NRC, and I quote, ``are working 
through an interagency process to determine the most 
appropriate public health standard for Yucca Mountain.''
    What is your view of the current interagency effort?
    Mr. Meserve. Senator Domenici, there is an interagency 
effort that is underway. The context for this was that, as 
Secretary Browner was leaving the EPA, she had a proposed final 
rule for Yucca Mountain that was submitted to OMB. With the new 
administration coming in there has been discussion between EPA 
and the Department of Energy and EPA and the NRC about issues 
associated with that proposal, and those discussions are still 
underway.
    At this juncture, I personally do not have a sense as to 
exactly how it is going to turn out. We have articulated views, 
which I know you are familiar with, about the need for a 
groundwater standard, and about the appropriate all-pathways 
limit. The process of evaluating this matter is now underway in 
the executive branch.
    Senator Domenici. Well, I wanted some kind of notion 
whether they were proceeding in a manner that might yield a 
conclusion, or are we just standing at opposite sides of the 
room yelling at each other?
    Mr. Meserve. I would say that we certainly are not standing 
on opposite sides of the room yelling at each other. I don't 
want to suggest that there are no differences of views that are 
expressed in this context, but I think that there is an effort 
that is underway to try to find a satisfactory resolution. 
Whether that will be achieved or not, I think it is too early 
to say.
    Senator Domenici. Okay. I want to make an observation 
regarding your funding and new regulatory aspects of your 
commission. You have the requests in to the appropriators 
through the budget, and you will be called upon for your needs 
as to dollars. We will try to take care of that in the 
appropriation bill. I think you know that.
    Mr. Meserve. Good. Thank you very much, Senator. We 
appreciate that.
    Senator Domenici. My last question has to do with--first, 
before I do that, Ms. MacLean, you have been listening here, 
and you obviously are in the middle of nuclear energy and know 
a lot about it. Do you want to contribute here? I will give you 
a general question. From your knowledge and experience, what 
would you like to tell the Senate we ought to do about nuclear 
power to make it become a more realistic part of our energy 
future?
    Ms. MacLean. I have been very encouraged over the past 
couple of years at the progress we have made in talking about 
nuclear. It has been an idea and a word that 6 years ago I 
would not have even considered the possibility of bringing new 
reactors to the market.
    From my personal standpoint it would be an absolutely 
thrilling job to be a part of a team that brings new reactor 
technologies and new reactors of any kind to the market, and 
part of what is necessary is making it possible for companies 
that want to do that to be able to do it. At the same time, I 
think we are facing a serious shortage of students. I know that 
I have always been part of incredibly small departments, which 
is nice as a student, you get that personal feel, but being a 
graduating class of, I think, about eight people is not going 
to sustain industry, and part of what we need is research 
funding to get students into school and keep them in school. I 
know that the fellowship program I have been a recipient of, 
the DOE nuclear engineering fellowship, kept me in school. I am 
not sure I would have been here, had it not been for that 
fellowship.
    But all of those things fit together, and funding 
fellowships without funding research does not get us anywhere. 
Funding research without supporting the industry will never 
attract students, so being able to support both verbally, by 
sending the message that we value the resource, and being able 
to shore up our funds again I think are both very important.
    Senator Domenici. Thank you very much.
    My last question, then I will yield to my friend from 
Idaho. For you, Mr. Rhodes, I, in introducing you, stated that 
you have written a lot of books that people have read, and that 
probably you have influenced them. In your travels you do sense 
a growing optimism, I believe, for the re-birth of nuclear 
energy. I think you have told us that.
    Could I say, some of the critics argue that we have other 
options as a Nation. They say that we can further improve 
energy conservation, and that renewables are poised to take 
over large-scale production of electricity. Based on your 
studies--I do not want to say are those accurate statements, 
but I do want to say, do you think that statement is realistic 
with reference to solving the energy future for Americans?
    Mr. Rhodes. Senator, I debated Amory Lovins recently in a 
conference in Washington about nuclear proliferation, so I have 
had recent experience with these arguments. Obviously, 
efficiency and conservation are important. Obviously, they are 
going to be more important as energy demand grows.
    But we are adding a new California in terms of population 
to the United States every 10 years, and I seriously doubt if 
efficiency, as long as we want to live the way we live as 
Americans, is going to get us there. It seems clear to me that 
we have to move toward more capacity, more base load capacity 
in particular.
    If you look at the numbers on the renewable systems that 
are already in place, they are really pretty discouraging in 
terms of capacity. The wind farm in Wisconsin that was built as 
a result of the desire by the nuclear power industry to build 
some dry cask storage had, I think, in one typical month about 
13 percent capacity. These things are inherent in the problem 
of collecting energy from diverse sources, obviously, not to 
mention the hidden costs in developing the materials for those 
dispersed collection systems in terms of air pollution in the 
manufacturing of those materials.
    So I think the answer to your question from my personal 
perspective is, clearly we need more base load capacity, and 
the only form of base load capacity that is really free of both 
pollutants and of greenhouse gases is nuclear power.
    Let me just add to that. You know, the question of the 
linear no-threshold model is a very important one, as you well 
know, Senator. In a sense, it has become the tail that wags the 
dog. If it were understood that low-level radioactivity is 
essentially harmless, and I think there is good evidence that 
that is so, and may, indeed, even be beneficial, which is a 
more controversial discussion, the problem of disposing of 
spent fuel would suddenly be trivial. We have this problem 
because the standards that are being discussed are so very low, 
much, much lower than the natural diversity of radiation in our 
natural environment.
    So settling, or at least renewing the debate scientifically 
about the linear no-threshold theory is a very important part 
of these future possible developments.
    Senator Domenici. Thank you very much.
    Senator Craig.
    Senator Craig. A couple of questions, and I will not hold 
any of you here any longer.
    First of all, I notice that you spent some time in Idaho at 
the INEEL.
    Ms. MacLean. Yes, I have.
    Senator Craig. I hope that was a meaningful experience for 
you.
    Ms. MacLean. The people that I worked with through the lab 
have been great. We have had a lot of very positive 
interactions. One of the reasons I chose the project that I am 
working on, which is design of pebble bed reactor, is because 
of the involvement of the national labs. Because they were 
involved there were other scientists interested. It elevated 
its importance in my mind. It was not just somebody's pie-in-
the-sky idea. It was an actual project that had serious 
interest from the Government and from the labs.
    Senator Craig. Mr. McNeill, in your view--I am going to 
play off from what Heather has just said. How do DOE's national 
laboratories fit into the research picture for advanced nuclear 
design, and do you think the labs should be looking beyond 
technologies such as pebble bed to even more advanced concepts, 
so-called Generation 4 type designs?
    Mr. McNeill. As you know, from a corporate interest, my 
interest is in making profit serving humanity in the selling of 
electricity, and I tend to look at the shorter-term ideas.
    There is a place--in fact, I think we have had some 
discussions with DOE about the testing of fuel designs 
associated with the pebble bed reactor in the United States 
here. There has not been a great deal of testing of that, 
although there has been extensive testing in Germany, and 
Russia, and I think now some in China, and we have been 
exploring with DOE the possibility of doing some testing here 
in the United States in that field, so that is one immediate 
application with respect to U.S. research interest.
    The second thing is, I do believe that in the longer term, 
as you move beyond these advanced designs that we are talking 
about here today that, given world energy needs, the longevity 
of energy consumption, there may, in fact, be needs for 
continued liquid metal reactor research, because they do offer 
some advances in terms of automated refueling processing using 
metallic fuels and things of that nature that offer almost a 
complete fuel cycle with the generation of only modest amounts 
of radioactive waste when we get done, so I do not want to 
discourage that. It is just that my near-term interests tend to 
be more commercial in nature.
    Senator Craig. Well, of course, in the long term, to be 
able to not only use more of the energy source available, but 
to use it in a way that produces less of a waste stream has got 
to be part of what we look at.
    Mr. Chairman, in your testimony, you discussed the role 
that research needs to play in laying the groundwork for 
licensing these advanced reactor designs such as the pebble 
bed. What role should the Office of Research within the NRC be 
playing in this process, and is the NRC's research staff 
involved in the future licensing project organization which you 
describe in your testimony?
    Mr. Meserve. We have recently had the benefit of an 
evaluation of research at the NRC and John Ahearne was a 
participant in that exercise. In a nutshell, the group as a 
whole saw that research was an essential ingredient to enable 
us to fulfill our mission in assuring safety, and in particular 
with regard to advanced reactors. Because of the fact that 
advanced reactors raise issues that are at the technical 
forefront, and that we need to understand, we have a group 
within our research organization that is very much involved in 
such matters.
    In fact, the people from Exelon were in to visit with NRC 
this week, and had a meeting that was sponsored by our research 
organization, in order to discuss a variety of the issues 
associated in particular with the pebble bed reactor. Our 
research staff are very actively involved in this process, and 
it is essential that they be involved.
    Senator Domenici. Senator, could I just indicate that I am 
going to leave, and you are in control. I want to thank all of 
you very much for your testimony and for your help.
    Senator Craig. Yes, John.
    Dr. Ahearne. I just want to point out that just as DOE's 
research budget has shrank to close to disappearances, the 
NRC's research budget also went to a free fall and decline, and 
I think part of that was based upon when the decision was made 
that the NRC had to recover all of its cost from fees and 
licensees, it is difficult to justify the fundamental 
preparation research necessary, and I think that is the real 
issue.
    Now, when you come in with basically a newer type design, 
such as the pebble bed--they ran into the same problems some 
years ago when the can-do people were interested in perhaps 
getting a review. The staff has to have time in advance to work 
through and develop the necessary review codes and analysis. 
That takes money.
    Senator Craig. Yes.
    Gentlemen, lady, thank you all very much for your testimony 
and your presence. I am excited, as I think most of us are, of 
an opportunity to produce some clean energy for our country. 
Thank you for coming.
    The committee will stand adjourned.
    [Whereupon, at 12:02 p.m., the hearing was adjourned.]

    [Following is the answer of Chairman Meserve to a question 
from Senator Domenici:]

    Question. Would you please provide for the record, the NRC views on 
needs for funding to develop a research basis in support of licensing 
requests for new technologies, including new reactor concepts. I've 
been concerned that the NRC, with its current reliance solely on user-
generated fees, may have been forced to sacrifice this forward-looking 
component of your capabilities. And it's hard to justify such 
development from user fees when the requests have not come in yet.
    Answer. The NRC's FY 2002 budget request includes some funds to 
evaluate new technologies as they apply to existing operating reactors. 
This includes funding for certain new technology applications, such as: 
1) advanced fuel and cladding designs, 2) digital instrumentation and 
control systems, and advanced sensor equipment, 3) techniques for 
evaluating the condition of existing wiring systems and potential 
replacement wiring materials, 4) management of spent fuel, and 5) risk 
assessments of new technologies. This research is generally focused on 
near term applications. However, the NRC's FY 2002 budget does not 
include funding for more forward looking research in these areas or for 
other new technology applications.
    Subsequent to submission of the NRC's FY 2002 budget request, 
considerable industry interest and activity has developed with respect 
to new reactor siting, new reactor concepts, and the new technologies 
upon which they are based. Since there was no indication of serious 
industry interest in new reactor licensing activities at the time our 
FY 2002 budget was developed, it does not include resources to develop 
a research basis to evaluate licensing requests for new reactor 
concepts and facility siting reviews. As described in response to 
question 2, the NRC's preliminary estimate of resources to review early 
site permit applications, conduct pre-application and license review 
activities, and begin to assess the advanced technologies being 
considered by industry is approximately $15-18 million. This includes 
approximately $12 million for research related to new reactor licensing 
activities.
    These research resources would support the initial evaluation of 
new data and technology in the pre-application phase to understand the 
new designs and technology, and would allow the NRC to identify the 
needed infrastructure for evaluation of license applications as well as 
support the development of analytical tools and data, review guidance, 
and expertise to facilitate regulatory action.

                               
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