To determine why NRC did not identify and prevent the vessel head corrosion at the Davis-Besse nuclear power plant, we reviewed NRC’s lessons-learned task force report; FirstEnergy’s root cause analysis reports; NRC’s Office of the Inspector General reports on Davis-Besse; NRC’s augmented inspection team report; and NRC’s inspection reports and licensee assessments from 1998 through 2001. We also reviewed NRC generic communications issued on boric acid corrosion and on nozzle cracking. In addition, we interviewed NRC regional officials who were involved in overseeing Davis-Besse at the time corrosion was occurring, and when the reactor vessel head cavity was found, to learn what information they had, their knowledge of plant activities, and how they communicated information to headquarters. We also held discussions with the resident inspector who was at Davis-Besse at the time that corrosion was occurring to determine what information he had and how this information was communicated to the regional office. Further, we met with FirstEnergy and NRC officials at Davis-Besse and walked through the facility, including the containment building, to understand the nature and extent of NRC’s oversight of licensees. Additionally, we met with NRC headquarters officials to discuss the oversight process as it related to Davis-Besse, and the extent of their knowledge of conditions at Davis- Besse. We also met with county officials from Ottawa County, Ohio, to discuss their views on NRC and Davis-Besse plant safety. Further, we met with representatives from a variety of public interest groups to obtain their thoughts on NRC’s oversight and the agency’s proposed changes in the wake of Davis-Besse. To determine whether the process NRC used was credible when deciding to allow Davis-Besse to delay its shutdown, we evaluated NRC guidelines for reviewing licensee requests for temporary and permanent license changes, or amendments to their licenses. We also reviewed NRC guidance for making and documenting agency decisions, such as those on whether to accept licensee responses to generic communications, as well as NRC’s policies and procedures for taking enforcement action. We supplemented these reviews with an analysis of internal NRC correspondence related to the decision-making process, including e-mail correspondence, notes, and briefing slides. We also reviewed NRC’s request for additional information to FirstEnergy following the issuance of NRC’s generic bulletin for conducting reactor vessel head and nozzle inspections, as well as responses provided by FirstEnergy. In addition, we reviewed the draft shutdown order that NRC prepared before accepting FirstEnergy’s proposal to conduct its inspection in mid-February 2002. We reviewed these documents to determine whether the basis for NRC’s decision was clearly laid out, persuasive, and defensible to a party outside of NRC. As part of our analysis for determining whether NRC’s process was credible, we also obtained and reviewed NRC’s probabilistic risk assessment (PRA) calculations that it developed to guide its decision making. To conduct this analysis, we relied on the advice of consultants who, collectively, have an extensive background in nuclear engineering, PRA, and metallurgy. These consultants included Dr. John C. Lee, Professor and Chair, Nuclear Engineering and Radiological Sciences at the University of Michigan’s College of Engineering; Dr. Thomas H. Pigford, Professor Emeritus, at the University of California-Berkeley’s College of Engineering; and Dr. Gary S. Was, Associate Dean for Research in the College of Engineering, and Professor, Nuclear Engineering and Radiological Sciences at the University of Michigan’s College of Engineering. These consultants reviewed internal NRC correspondence relating to NRC’s PRA estimate, NRC’s calculations, and the basis for these calculations. These consultants also discussed the basis for NRC’s estimates with NRC officials and outside contractors who provided information to NRC as it developed its estimates. These consultants were selected on the basis of recommendations made by other nuclear engineering experts, their résumés, their collective experience, lack of a conflict of interest, and previous experience with assessing incidents at nuclear power plants such as Three Mile Island. To determine whether NRC is taking sufficient action in the wake of the Davis-Besse incident to prevent similar problems from developing in the future, we reviewed NRC’s lessons-learned task force recommendations, NRC’s analysis of the underlying causes for failing to identify the corrosion of the reactor vessel head, and NRC’s action plan developed in response to the task force recommendations. We also reviewed other NRC lessons- learned task force reports and their recommendations, our prior reports to identify issues related to those at Davis-Besse, and NRC’s Office of the Inspector General reports. We met with NRC officials responsible for implementing task force recommendations to obtain a clear understanding of the actions they were taking and the status of their efforts, and discussed NRC’s recommendations with NRC regional officials, on-site inspectors, and representatives from public interest groups. We conducted our review from November 2002 through May 2004 in accordance with generally accepted government auditing standards. NRC, as an independent federal agency, regulates the commercial uses of nuclear material to ensure adequate protection of public health and safety and the environment. NRC is headed by a five-member commission appointed by the President and confirmed by the Senate; one commissioner is appointed as chairman. NRC has about 2,900 employees who work in its headquarters office in Rockville, Maryland, and its four regional offices. NRC is financed primarily by fees that it imposes on commercial users of the nuclear material that it regulates. For fiscal year 2004, NRC’s appropriated budget of $626 million includes about $546 million financed by these fees. NRC regulates the nation’s commercial nuclear power plants by establishing requirements for plant owners and operators to follow in the design, construction, and operation of the nuclear reactors. NRC also licenses the reactors and individuals who operate them. Currently, 104 commercial nuclear reactors at 65 locations are licensed to operate. Many of these reactors have been in service since the early to mid-1970s. NRC initially licensed the reactors to operate for 40 years, but as these licenses approach their expiration dates, NRC has been granting 20-year extensions. To ensure the reactors are operated within their licensing requirements and technical specifications, NRC oversees them by both inspecting activities at the plants and assessing plant performance. NRC’s inspections consist of both routine, or baseline, inspections and supplemental inspections to assess particular licensee programs or issues that arise at a power plant. Inspections may also occur in response to a specific operational problem or event that has occurred at a plant. NRC maintains inspectors at every operating nuclear power plant in the United States and supplements the inspections conducted by these resident inspectors with inspections conducted by staff from its regional offices and from headquarters. Generally, inspectors verify that the plant’s operator qualifications and operations, engineering, maintenance, fuel handling, emergency preparedness, and environmental and radiation protection programs are adequate and comply with NRC safety requirements. NRC also oversees licensees by requesting information on their activities. NRC requires that information provided by licensees be complete and accurate and, according to NRC officials, this is an important aspect of the agency’s oversight. While we have added information to this report on the requirement that licensees provide NRC with complete and accurate information, we believe that NRC’s oversight program should not place undue reliance on this requirement. Nuclear power plants have many physical structures, systems, and components, and licensees have numerous activities under way, 24-hours a day, to ensure the plants operate safely. Programs to ensure quality assurance and safe operations include monitoring, maintenance, and inspection. To carry out these programs, licensees typically prepare several thousand reports per year describing conditions at the plant that need to be addressed to ensure continued safe operations. Because of the large number of activities and physical structures, systems, and components, NRC focuses its inspections on those activities and pieces of equipment or systems that are considered to be most significant for protecting public health and safety. NRC terms this a “risk-informed” approach for regulating nuclear power plants. Under this risk-informed approach, some systems and activities that NRC considers to have relatively less safety significance receive little NRC oversight. NRC has adopted a risk-informed approach because it believes it can focus its regulatory resources on those areas of the plant that the agency considers to be most important to safety. In addition, it was able to adopt this approach because, according to NRC, safety performance at nuclear power plants has improved as a result of more than 25 years of operating experience. To decide whether inspection findings are minor or major, NRC uses a process it began in 2000 to determine the extent to which violations compromise plant safety. Under this process, NRC characterizes the significance of its inspection findings by using a significance determination process to evaluate how an inspection finding impacts the margin of safety at a power plant. NRC has a range of enforcement actions it can take, depending on how much the safety of the plant had been compromised. For findings that have low safety significance, NRC can choose to take no formal enforcement action. In these instances, nonetheless, licensees remain responsible for addressing the identified problems. For more serious findings, NRC may take more formal action, such as issuing enforcement orders. Orders can be used to modify, suspend, or even revoke an operating license. NRC has issued one enforcement order to shut down an operating power plant in its 28-year history—in 1987, after NRC discovered control room personnel sleeping while on duty at the Peach Bottom nuclear power plant in Pennsylvania. In addition to enforcement orders, NRC can issue civil penalties of up to $120,000 per violation per day.