The Nuclear Energy Institute sets industry policy positions on various issues affecting the industry, including federal regulations that help ensure the safety of 103 operating nuclear power plants in 31 states. NEI represents 275 companies, including every U.S. utility licensed to operate a commercial nuclear reactor, their suppliers, fuel fabrication facilities, architectural and engineering firms, labor unions and law firms, radiopharmaceutical companies, research laboratories, universities and international nuclear organizations.
Summary of Key Points
Nuclear power plants, which produce nearly 20 percent of America's electricity, are our largest source of emission-free energy—an important consideration as Congress and other policymakers recognize the growing nexus of energy and environmental policy. Among the Congress, and indeed across the United States, there is a growing awareness that this is a proven industry with more than 2,000 reactor years of operating experience and with a product that will become even more valuable as we meet the demands of the 21st century.
Without nuclear energy, the United States will find it impossible to meet increasingly stringent U.S. clean air regulations as well as international carbon dioxide reduction goals. The nation's nuclear power plants provide clean air benefits while producing electricity at a competitive price—with production costs that are a fraction of a cent higher than coal-fired electricity and more cost-effective than natural gas, solar or wind power. Members of Congress increasingly are recognizing the important benefits of nuclear energy to our economy, our environment and energy future. This subcommittee's hearing last year, the first Nuclear Regulatory Commission oversight hearing in more than four years, is but one piece of tangible evidence of this increased policymaker recognition.
The single most important challenge facing the nuclear energy industry is a regulatory process that consumes licensee and NRC resources on issues that have little or no safety significance and that produces inconsistency in assessment and enforcement. Mr. Chairman, I cannot overstate the importance of this subcommittee's oversight, which has been instrumental in encouraging the NRC commissioners and staff to complete work on many long-standing issues, including outlining a plan to adopt risk-informed approaches to regulations for nuclear power plants, and revising the assessment process to use objective plant performance measures. The NRC has a number of promising regulatory reform initiatives underway. However, much work remains to be done and Congress should continue to provide the oversight that had already initiated meaningful reform of the NRC's regulatory process. The task at hand is sustaining the effort started last year. Specifically, the NRC should be encouraged by this subcommittee to develop and implement a long-term strategic plan as well as focusing on activities that can be completed in the near term. The NRC's long-range strategy should include these principles: a safety-focused regulatory framework that incorporates risk insights; u.a more efficient and accountable regulator; u.an integrated NRC strategy for achieving the objectives of regulatory reform; a specific timetable and milestones to ensure the NRC's long-range plan is implemented on schedule; and u.staff resources and a fully accountable budget that supports fundamental NRC reform. . Congress plays a vital role in assuring that federal nuclear regulations recognize the transition to a competitive electricity market while protecting public health and safety and preserving the nation's energy security. In that regard, Congress should direct the NRC to prepare a multi-year plan to achieve a safety-focused, results-oriented regulatory process—with clear accountabilities within the agency—that protects public health and safety.
This multi-year plan should include an annual planning process that establishes a meaningful set of NRC objectives with measurable results. The long-range strategic plan should integrate the principles of regulatory reform I described earlier, with measurable goals and objectives to demonstrate progress to achieve reform of the regulatory system. It also should recognize improved plant safety and performance and account for new demands on the regulatory process as a result of the transition to a competitive electricity market.
Mr. Chairman, the industry recommends that this subcommittee schedule another hearing by June and direct the NRC commissioners to present both the annual and multi-year strategies for reforming the regulatory process at that time. The subcommittee should then continue to hold hearings every six months until you are satisfied that progress in reforming the regulatory process is proceeding in the proper direction, at the proper pace and that it will be sustained. The committee then should schedule hearings, perhaps annually, to oversee NRC reform.
The NRC should also identify legislative changes needed to proceed with timely regulatory reform, such as amending the Atomic Energy Act with respect to foreign ownership, antitrust reviews and the adjudicatory hearing process. The commission should also support tax code amendments to ensure that nuclear plant decommissioning trust funds receive the same tax treatment when plants are purchased or plant licenses are transferred. Decommissioning must be adequately funded in a competitive market and the trust funds should be protected from bankruptcy.
Current law requires the NRC to collect approximately 100 percent of its budget from user fees on licensees. Most of those fees are collected as a generic assessment equally levied against all licensees, creating, in effect, a "miscellaneous" category to describe nearly 80 percent of its budget. This practice is contrary to sound and accountable budgeting. Congress should ensure that the NRC adheres fully to the requirements of the Omnibus Budget and Reconciliation Act of 1990 and submit legislation, if necessary, to modify NRC fee structure so that licensees are assessed fees only for those NRC programs related directly to licensee regulation. Unrelated agency expenditures, such as international activities and regulatory support to agreement states or other federal agencies, should not be included in nuclear plant licensee user fees, but should be included in a specific line item on the NRC's budget, subject to the authorization and appropriations process. Additionally, the agency's ability to collect user fees should be authorized annually by Congress until the commission completes its regulatory reform initiatives.
Finally, this subcommittee should resolve the impasse between the NRC and the Environmental Protection Agency in setting radiation protection standards. This subcommittee has jurisdiction over both federal agencies and should clarify that the proper scientific authority for this issue rests with the NRC, which has the expertise in setting standards for nuclear facilities. The commission's regulations have proven effective in protecting public health and safety as well as worker safety.
Background
In July 1998, I testified before this committee during a hearing of tremendous significance—one that has prompted the NRC to re-examine its fundamental regulatory practices and to begin the transition to a more focused, objective regulatory system for the nuclear power industry. Today, there is a greater recognition of the need for change at the NRC. The industry and other stakeholders have, during the past seven months, participated with the commissioners and NRC staff in productive dialogue to better understand all perspectives as the agency moves toward meaningful reform. The increased support and oversight from Congress has played a key role in this broad examination of the current regulatory system, and continued support from Congress will be essential to achieving sustained regulatory reform at the NRC.
As Commissioner Nils Diaz testified last July, the need to change the NRC's regulatory approach "is not an indictment of the past, but a requirement of the future." Like the industry it regulates, the NRC must adapt to a changing environment where the traditional cost-of-service market is yielding to a competitive market that places a premium on the ability of companies to provide excellent service safely and efficiently. Nuclear power plants are competitive today, with average production costs second only to coal-fired power plants. But in a competitive market, inefficient regulation can detract from safety and clearly impact nuclear plant economics.
Unlike any other electric generation source, nuclear power is unique because the costs of the entire electricity production lifecycle—including the uranium fuel manufacturing process, NRC regulation, waste management and plant decommissioning—are included in the cost of electricity to consumers. To remain competitive with other generation sources that do not internalize many of these expenses, all costs in the nuclear fuel cycle must be appropriate and reasonable. Plants will close if they cannot compete, raising potential electricity system reliability problems. Moreover, the nuclear electric generation will be replaced by power plants that emit greenhouse gases and other air pollutants. If that scenario unfolds, the United States will find it impossible to meet increasingly stringent U.S. clean air regulations and international carbon dioxide reduction goals.
I don't believe that that is the intent of Congress. In fact, the hearing by this subcommittee last July demonstrated that, for the first time since the mid-1980s, Congress has a strong interest in ensuring that the industry is regulated in a manner that protects public health and safety, but in a way in which the industry is not unduly burdened.
The United States has the largest commercial nuclear power industry in the world, and we are the global leaders in the development of advanced nuclear power plant technology. The foundation for this leadership role is the extensive use of nuclear power in this country and the industry's improved safety performance. The NRC's regulatory approach must also recognize these substantial improvements in nuclear plant performance. The industry's commitment to excellence in plant operations has resulted in dramatic gains in both safety and efficiency. Since 1985, for example, NRC data shows that the average number of significant events at U.S. plants has declined from nearly 2.5 per unit in 1985 to an average of .04 per unit in 1998. Moreover, improvements in nuclear plant operating efficiency since 1990 are equivalent to adding 11 large generating units to the national electric grid—further evidence of the industry's contribution to serving new electricity demand while meeting our nation's clean air goals.
The NRC has taken many steps to improve agency procedures since the July 30, 1998, hearing. These initial steps represent the beginning of the sustained agency commitment required to provide a transition to a regulatory system that mirrors the industry's improvement. The NRC's regulatory innovation must result in a safety-based regulatory process that is focused on adequate protection of public health and safety. To continue the process toward risk-informed, performance-based regulation, the agency should establish objective, clear regulatory thresholds that clearly convey the NRC's regulatory expectations and the associated actions of an accountable and responsible regulator.
With many states preparing to move toward a competitive electricity market, it is imperative that the NRC begin now to implement the following fundamental changes:
Near-Term Priorities
Implement a new regulatory oversight process with plant assessment rooted in a clear safety basis and inspection levels based on objective plant performance. NRC enforcement activities should be risk-informed and consistently applied so that licensee and NRC attention is clearly focused on items that are directly related to protecting public health and safety. Undertake timely, efficient proceedings for nuclear power plant license transfer and license renewal. For example, the NRC must meet or better the 30- to 36-month target for responding to the license renewal applications by Baltimore Gas & Electric Company and Duke Power Company. Experience gained from these first two reviews should be used to refine the process and allow the NRC to respond even faster to subsequent license applications. Adopt an initial set of risk-informed, performance-based regulations, including those related to maintenance, and undertake pilot projects to evaluate applying risk insights more broadly to the entire nuclear power plant. u.Apply risk-informed, performance-based regulations to the licensing and oversight of major materials licensees, such as fuel fabrication facilities, and to NRC regulation of medical applications.
Intermediate Priorities
In the 2000-2002 time frame, the NRC must transition to more objective, risk-informed nuclear plant regulation in which regulatory requirements are commensurate with risk. As the NRC moves toward reform of its regulatory process, the commission must examine what appropriate levels of staffing and budget are required. The industry believes the agency should ultimately optimize its resources, including an examination of its organizational structure, to conform with the new vision of regulatory oversight. The commission must allocate resources in a manner that ensures adequate staff support to set the foundation for broad regulatory reform. Reforming plant security requirements to ensure the adequate safety of the plants from any threat, including terrorists, while providing the balance to ensure that those security measures don't impact plant safety during the operation of these facilities.
Long-Term Priorities
Moving toward reforming the construction and operating license process for new advanced reactor designs. The Department of Energy's recent analysis of measures required to reduce greenhouse gas emissions to 3 percent below 1990 levels includes the construction of 42,000 megawatts of nuclear-powered electric generation. The energy and environmental reality will require the industry and the NRC to begin examining how to license new nuclear power plants in an efficient manner. Apply risk-informed insights to the remainder of the agency's regulations, including the design bases for both existing and new nuclear power plants. The regulatory environment is improving, but continued congressional oversight of the NRC is an important factor for continued improvement. For its part, the industry must continue to improve nuclear plant performance and be vigilant in assuring adequate protection of public health and safety. Similar to the industry's process and cultural changes in the 1980s and 90s to establish world-class safety performance, the NRC must undergo sweeping change, including a cultural change within the agency. This change requires long-term vision and commitment, and must ultimately include clearly articulated goals for the staffing and budgetary requirements of a more efficient and safety-focused regulator. The industry recognizes the need for the NRC to fully develop its strategic direction and accurately identify the staff and organizational needs to make a successful transition. However, the commission must ultimately optimize its resources and examine its organizational structure once the transition to a new regulatory process is complete.
Nuclear Power Plants Poised for Success in Competitive Markets
In providing one-fifth of U.S. electricity supply, nuclear energy is our nation's largest source of emission-free electricity. Nuclear energy also provides clean air benefits at a competitive price—with production costs that are a fraction of a cent higher than coal-fired electricity and more cost-effective than natural gas, solar or wind power. Most U.S. nuclear power plants compete as low-cost electricity providers today and are well-positioned as states open their electricity markets to competition. Measured solely by economic factors—operating and maintenance costs plus fuel costs, ongoing capital requirements and general and administrative expenses—most nuclear units will be very competitive in a deregulated electricity market. In fact, many nuclear plants should be able to improve their economic performance even further.
Production costs at nuclear power plants in the last three years continue to fall well below those the nuclear energy industry incurred at the start of the decade. Meanwhile, plant performance—measured by the capacity factor of plant operation—has in the last two years reached record high levels.
In a restructured environment that eliminates the rate base, earnings will be based solely on the difference between an electric generating plant's going-forward costs and the market price of power, and fully depreciated nuclear plants will demonstrate enormous potential. Nuclear power's marketplace appeal is evident in the purchase of Three Mile Island 1 by AmerGen, the joint operating company formed by PECO Energy Company and British Energy, and the purchase of Boston Edison Company's Pilgrim nuclear power plant by New Orleans-based Entergy Operations Incorporated. Also, Baltimore Gas & Electric Company and Duke Power Company have filed applications with the NRC to extend operations at five nuclear units for an additional 20-year period. Entergy Operations Incorporated in late January announced it plans to extend the license of one of its nuclear units, with a formal application expected in December. These events will become more frequent as electric utilities reposition themselves in the wake of state restructuring initiatives.
NRC Must Transition to Safety-Focused, Results-Oriented Agency
The industry has built a solid record of safe, efficient performance at nuclear power plants as it enters a new business environment. But the industry's continued commitment to safe nuclear plant operation must be accompanied by the NRC's ability to fulfill its mission as a strong and credible regulator. Both are essential to build and maintain public trust and confidence in nuclear energy.
As this subcommittee discussed last July, industry concerns over NRC regulation go back many years. Over time, regulatory requirements have become progressively more detailed and prescriptive. New requirements often are layered on top of old ones, without weeding out duplication and inconsistency. The result is that the regulatory process has no objective, measurable safety threshold. Many of the industry's regulatory concerns are long-standing, and previous NRC reform initiatives have not been sustained.
Congressional interest in the NRC has helped spark greater progress in many agency projects that are essential for a new regulatory process. Chief among those projects is developing a risk-informed, performance-based process for assessing plant performance. In a performance-based approach, the NRC would establish basic requirements and set overall performance goals, and plant management would decide how best to meet those goals. This approach is more sharply focused on safety because resources are applied to plant systems and equipment commensurate with their importance to safety.
Last October, the NRC redirected resources to concentrate on the development of a risk-informed, performance-based assessment process in three overaching strategic areas: reactor safety, radiation safety and plant security. This new process will provide a sharper focus on public health and safety—and because it incorporates the use of objective criteria—it will be much easier for the utilities and the public to understand regulatory expectations for nuclear plant operations.
Consistent with the risk-informed assessment process, similar changes are needed in the agency's enforcement process. Last October, the industry proposed changes to the NRC enforcement policy based upon guiding principles that are consistent with broader reforms being undertaken to improve NRC regulations and policies. These principles include:
Enforcement should be risk-informed so that licensees and NRC attention is clearly focused on items having actual consequences or high-risk significance for public health and safety. Enforcement should not result in the expenditure of NRC and licensee resources on non-safety significant violations. Enforcement should be consistent with the safety focus of the performance assessment process, but should not drive the assessment process or be used as a surrogate for assessment activities. u.Enforcement should be based upon readily understandable, objective criteria that are consistently and predictably applied. Enforcement should not be based on new interpretations or expanding views of compliance, or be driven by subjective terms. The industry has strongly encouraged the NRC to apply these principles as it reviews the enforcement policy. Such reform is necessary to ensure that the policy is risk-informed, objective and properly focused on safety.
Signs of Regulatory Improvement
The NRC has made tangible progress in some areas toward reforming the regulatory process since this subcommittee held its first oversight hearing last July. The commission has initiated programs to implement risk-informed regulation, inspection and enforcement programs, and has made notable progress in several projects it already had underway in 1998. The commission and staff should be commended for their initial steps toward regulatory reform. Some specific areas in which in the NRC has made progress in recent months include: The NRC staff has submitted to the commissioners a plan to adopt a risk-informed approach to 10 CFR 50, the basic regulatory oversight rules for nuclear power plants. The release of final safety evaluations for in-service inspection pilot programs. The NRC has adopted a risk-informed approach to inspecting welds of reactor coolant systems. These inspections are based on methodologies that rely on data from 20,000 previous weld exams. This risk-informed approach to inspections is being piloted at three nuclear plants. Industrywide, it is expected to reduce occupational radiation exposure by 15 percent as well as reduce the cost of inspection by $15 million to $25 million annually. Revising the nuclear plant assessment process to use objective plant performance indicators and risk-informed inspection findings. These changes promote a more understandable and predictable assessment process. Consistent with the new approach, the NRC has suspended the Systematic Assessment of Licensee Performance (SALP) program. The agency is considering eliminating the subjective SALP program and the release of the "watch list"—the list of those plants requiring increased regulatory attention—by 2000. A 30- to 36-month target for renewing licenses for Baltimore Gas and Electric Company's Calvert Cliffs plant and Duke Power Company's Oconee plant. By maintaining this time frame, the NRC can refine its process of reviewing license renewal applications and target resources on the most relevant issues. Subsequent license renewal applications should be reviewed more quickly. The commission issued a rule in December 1998 to establish a more efficient procedure for processing nuclear plant license transfers. The number of license transfer applications has increased from two to three per year to 20 in 1997 and 15 in 1998. The commission must remain committed to efficient reviews of transfer applications. Otherwise, the economic viability of licensees who must respond rapidly to changing market forces will be placed at risk. The NRC has established a process for reviewing certification of containers for storing and transporting used nuclear fuel within one year of a vendor's submission, which is a dramatic improvement over past practices.
Despite these initial steps toward reform, Congress must sustain this momentum by encouraging the NRC to continue improving its internal processes, such as increasing the efficiency of reviews, safety evaluations and the consideration of license renewal applications.
An efficient nuclear licensing process is especially crucial so that nuclear operating companies can make timely business decisions required in a competitive market. The economic viability of a license transfer proposal can change entirely due to the length of a commission review. The public interest can best be served when a relicensing process is managed expediently and not delayed by an unnecessarily lengthy, undisciplined hearing process. The NRC has recognized the importance of swift action in these cases and should be commended for its attention in 1998 to improving the licensing process. The commission should continue to ensure timely reviews and disciplined licensing board proceedings related to license transfers or amendments, and ensure that issues raised by intervenors in NRC proceedings are based on legitimate safety issues.
Reducing User Fees and Eliminating Duplicative Radiation Standards
Other industry issues also require agency reform and legislative attention. Last year, Congress approved a single-year extension of the NRC's authority to collect 100 percent user fees from licensees. The Omnibus Budget and Reconciliation Act of 1990, as amended, requires that the agency recover approximately 100 percent of its budget authority by assessing licensees annual fees consistent with the regulatory benefits derived. Most of those fees are collected as a generic assessment equally levied against licensees, creating, in effect, a "miscellaneous" category to describe nearly 80 percent of its budget. This practice is contrary to sound and accountable budgeting. Legislation is needed to modify the fee structure so that licensees are assessed only for those NRC programs necessary to regulate them. Unrelated agency expenditures, such as international activities and regulatory support to agreement states or other federal agencies, should not be included in nuclear plant licensee user fees, but should be included in a specific line item on the NRC's budget, subject to the authorization and appropriations process. Additionally, the agency's ability to collect user fees should be authorized annually by Congress until the commission completes its regulatory reform initiatives.
On another front, this subcommittee is uniquely positioned to resolve the impasse between the NRC and the Environmental Protection Agency in setting radiation standards. This duplicative regulation exists in many areas, but is most apparent in establishing radiation standards for a national repository for used nuclear fuel. This subcommittee has jurisdiction over both federal agencies and should clarify that the proper scientific authority for this issue rests with the NRC, which has the expertise in setting standards for nuclear facilities. The commission's regulations have proven effective in protecting public health and safety as well as worker safety. Conversely, EPA has little direct experience in regulating the use of radioactive materials and relies on a regulatory philosophy that lacks a scientific underpinning. The industry encourages this subcommittee to take actions necessary to eliminate dual regulation of nuclear facilities.
A Road Map for Comprehensive Reform
Mr. Chairman, Congress should continue its close oversight of the NRC and support effort to replace its outdated regulatory scheme with a risk-informed, performance-based process that is focused on those areas most important to safety. I cannot overstate the importance of this subcommittee's oversight, which has been instrumental in the NRC commissioners and staff completing work on many long-standing issues, including outlining a plan to adopt a risk-informed approach to NRC regulations and revising the assessment process to use objective plant performance indicators.
Congress plays a vital role in assuring that federal nuclear regulations recognize the transition to a competitive electricity market while protecting public health and safety and preserving the nation's energy security. In that capacity, allow me to summarize the industry's recommendations for Congressional action:
Require the NRC to prepare and maintain a multi-year strategic direction to achieve a safety-focused, results-oriented regulatory process—with clear accountabilities within the agency—that protects public health and safety. This long-term strategy should incorporate the principles discussed in this testimony and include the use of annual plans, which include meaningful regulatory reform objectives with measurable results. The commission should apprise Congress of its progress through periodic status reports. Schedule a hearing in June and direct the NRC commissioners to present the agency's multi-year strategy for reforming the regulatory process at that time. The NRC should ultimately optimize its resources, including an examination of its organizational structure, to conform with the new vision of regulatory oversight. Ensure the NRC adheres fully to the requirements of the Omnibus Budget and Reconciliation Act and submit legislation, if necessary, to modify the fee structure so that licensees are assessed fees only for those NRC programs related directly to licensee regulation. Most of those fees are collected as a generic assessment equally levied against licensees, creating, in effect, a "miscellaneous" category to describe nearly 80 percent of its budget. This practice is contrary to sound and accountable budgeting. The agency's ability to collect user fees should be authorized annually by Congress until the commission completes its regulatory reform initiatives. Resolve the impasse between the NRC and the Environmental Protection Agency in setting radiation protection standards. This subcommittee has jurisdiction over both federal agencies and should clarify that the proper scientific authority for this issue rests with the NRC, which has the expertise in setting standards for nuclear facilities. The commission's regulations have proven effective in protecting public health and safety as well as worker safety.
Mr. Chairman, the industry requests that this subcommittee continue its close oversight of the NRC to ensure the necessary steps toward broad reform of the agency are being taken in a comprehensive and timely manner. The NRC has made tremendous progress in recent months, but it must establish the long-term vision and work plan for making the regulatory framework for the commercial nuclear energy industry risk-informed and performance-based, and focused on those areas most important to protect the health and safety of the public.