Testimony before
the United States Senate
Committee on
Environment and Public Works
Subcommittee on
Nuclear Regulation
Renewal of the
Price Anderson Act
January 23, 2002
Visiting
Lecturer in Energy Policy and Environmental Protection Yale University
Associate,
Regulatory Assistance Project
Former Chair,
New York Public Service Commission and Maine Public Utilities Commission
Former
Commissioner, U.S. Nuclear Regulatory Commission
Past President,
National Association of Regulatory Utility Commissioners
Thank you very
much for the invitation to testify regarding the renewal of the Price-Anderson
Act. This is the second time I have
done so, having testified also in 1985, on the last occasion that Price
Anderson came up for renewal. Aspects
of the law have provided for a system of self-insurance by the nuclear industry
for some 45 years. While these
provisions can and should be strengthened to assure funding in the event of a
serious nuclear accident, the underlying concept is sensible.
However, the
electric industry has changed significantly since Congress last renewed
Price-Anderson. These changes undermine
the wisdom and the fairness of applying the liability limitation provisions to
new nuclear units and perhaps also to units whose licensed life is extended
beyond its original term.
The most
significant change is the opening of the electric power market to competition
among all forms of power generation. A
national policy requiring competitive electric power supply was achieved
through the enactment of the Energy Policy Act of 1992 and subsequent
proceedings of the Federal Energy Regulatory Commission. Pursuant to this national policy, all power
plants should now have an equal opportunity to sell into the wholesale electric
market based on their costs and other operating characteristics. The basis for this policy is the belief that
marketplace competition will produce lower prices and greater customer
satisfaction than did the power plant selection process based on utility and
governmental forecasts that prevailed when Price-Anderson was enacted and
renewed.
In a competitive
power generation market, capacity from nuclear plants must compete with capacity
from fossil fuels and from renewable resources, none of which enjoy any type of
federally mandated liability limitation.
Under these circumstances, the liability limitation has two
anticompetitive effects. First, new
nuclear capacity appears cheaper than it really is relative to other sources,
or B for that matter
B relative to
investment in energy efficiency. This
is because its cost of capital does not reflect the risk of having to pay for
damages in excess of $9 billion, when estimates of worst-case accident or
sabotage scenarios are much higher than that.
Second, any nuclear design that is truly inherently safe or that is at
least incapable of doing more than $9 billion in damage does not enjoy the
benefit of its improved safety in competition with those nuclear plants that do
benefit from the liability limitation.
Indeed, the liability limitation ultimately is less a subsidy of nuclear
power than of nuclear catastrophe. As
such, it removes market incentives for B for example B remote siting,
underground siting and inherently safe designs. Companies offering designs that
have such advantages would be well advised to volunteer to forego the liability
limitation and the public skepticism that it engenders.
The risk of an
accident that exceeds $9 billion in damages is in no way diminished by the
Price-Anderson Act. The Act
merely requires that B whatever that risk is B it will be
borne either by those who suffer the damage or by the nation=s
taxpayers. In the wake of September 11,
the possibility of a disaster involving nuclear energy and costing many times
$9 billion is clearly not as low as we had thought. Rather than underwrite industry costs in the event of such an
accident, it would seem wiser for Congress to adopt a framework that encourages
the deployment of energy sources B conceivably including inherently safe
nuclear sources B that do not
carry with them the potential for inflicting such large damages.
No connection
exists between the upper limit on liability and the more desirable features of
Price-Anderson. Removal of the limit
coupled with a provision extending the retrospective annual premium until all
damages had been paid would provide more assurance to the general public than
the present law. Indeed, most of the
witnesses who testified in favor of Price-Anderson renewal in the House last
year made little or no mention of the liability limit for nuclear power plants[1]. Their testimony urged retention of the
mutual-insurance scheme and other aspects of the law. If they saw Price-Anderson as essential to future nuclear plants,
to nuclear relicensing, to increasing the licensed output of nuclear power
plants, they did not say so. Even the
two witnesses who endorsed the liability limit offered no proof that it is
still needed[2]. The most vehement claim that the liability
limit is essential to the future of nuclear power was made by a witness
opposing renewal[3].
The fact is that
other industries B marine oil transport comes to mind B are required to
provide a mutual insurance framework independent of any liability limit that
may exist. And the Price-Anderson
mutual-insurance requirement need not be modified if the liability limit were
removed.
The
Price-Anderson limited liability principle was originally adopted as part of a
bargain that included detailed requirements for public participation in the
nuclear licensing process. Over the
years, those protections have been substantially eroded, usually on the basis
of arguments that nuclear technology had substantially matured and no longer
required so substantial a set of intervenor protections[4]. Furthermore, probabilistic risk assessment
has been introduced into many aspects of nuclear regulation, again based on the
rationale that the technology and risk assessment methodology have matured to
an extent now adequate to provide informed judgment about accident probability[5].
What then are we
to make of continued insistence on liability limits? Can it really be that all of this maturing, all of this increased
database only counts when it is being used to reduce aspects of NRC safety
oversight? That it counts for nothing
in the context of reconsidering the liability limit?
Such a result is
indefensible. If the technology is
mature enough to cut public hearing and information rights to the vanishing
point, if it is mature enough to circumscribe regulatory scrutiny with
probabilistic risk assessment, then it is too mature to need a limitation on
its liability for catastrophic accidents.
The
justification for the limit dates from a time when other alternatives to fossil
fuels did not exist. Now, however, at a
time when competitive markets are actually providing as many or more new
renewable megawatts worldwide as new nuclear megawatts, this argument is out of
date. If nuclear law is to be updated B as industry
witnesses urge B to take account
of changes in the 1990s, then Congress should take all of those changes into
account. Congress should let nuclear
power compete within a framework that will reward its safest designs to the
fullest. Congress should not continue a
framework that encourages facilities with a remote potential for extreme
catastrophe to substitute for facilities that can provide or conserve energy in
safer ways.
At the very
least, those who support renewal of the liability limitation can hardly oppose
measures providing support for renewable energy and energy efficiency as part
of restructuring legislation. The
liability limitation is a specific override of an asserted free market outcome B the
unwillingness of private insurers to cover the full potential costs of a
nuclear accident. If such a
countermarket subsidy is to be offered to one technology, then the least that
can responsibly be done is to ascertain its value and offer a comparable
subsidy to other technologies that offer the same advantages of domestic supply
and diminished air pollution, especially since these technologies really are in
the startup phase that was said to justify the Price Anderson Act when first it
became law, 45 years ago.
Thank you again
for the invitation to testify.
[1] For example, Chairman
Meserve of the NRC and Mr. Fertel of the Nuclear Energy Institute barely hint
that they are testifying in favor of a liability limitation.
[2] Testimony of George
Davis on behalf of Westinghouse and of John Quattrocchi on behalf of American
Nuclear Insurers.
[3] Testimony of Anna
Aurilio on behalf of the U.S. Public Interest Research Group.
[4] For indication that this
process continues, see NRC=s proposed AChanges to Adjudicatory Process@ (RIN 3150-AG49), 66 FR 19609-19671 (April
16, 2001).
[5] See, for example, the
October 11, 2000, letter from the Advisory Committee on Reactor Safeguards to
Chairman Richard Meserve, stating, AIn over two decades of development following the
Reactor Safety Study, PRA reached a level of maturity that allows it to be used
to identify unnecessary regulatory burden, as well as additional safety
improvements@. In his House testimony on Price-Anderson,
Chairman Meserve noted, AImproved probabilistic
risk assessment techniques combined with more than four decades of accumulated
experience with operating nuclear power reactors has led the commission to
realize that some regulations may not achieve their intended safety purpose and
may not be necessary to provide adequate protection of the public health and
safety.@