Testimony of James T. Rhodes
Chairman, President and Chief Executive Officer
Institute of Nuclear Power Operations
February 4, 1999

Thank you, Mr. Chairman. I am James T. Rhodes, chairman, president and chief executive officer of the Institute of Nuclear Power Operations, based in Atlanta, Georgia. Let me thank you for the opportunity to represent INPO and provide testimony at this hearing.

Today, I will focus my remarks on three areas. First, I will discuss the progress made by the industry since my testimony to this committee last July. Second, I will highlight regulatory initiatives that have been and will continue to be a key factor in progress for the nuclear power industry. And third, I will focus on the importance of effectively managing the change process, particularly as it relates to the regulatory initiatives. This last point is especially important given the number of organizational changes taking place at the NRC, including the announced departure of Chairman Jackson.

Continuing industry progress

In July I discussed the improvement our industry has made in the past decade, as measured by a number of performance indicators. Today I am pleased to inform you that the industry has continued this solid progress into 1999.

Although the industry began 1998 with a number of plants struggling with extended shutdowns, the industry made a strong comeback last year. In fact, overall performance improved more in 1998 than at any time in recent years. Let me share with you a few key indicators of that improvement.

By the end of 1998, most of the plants that began the year in long-term shutdown were back on line, producing electricity for their customers. This includes plants such as Northeast Utilities' Millstone Unit 3 and Commonwealth Edison's Quad Cities Station Units 1 and 2 and LaSalle County Station Unit 1. In addition, current data indicate that nuclear electric generation continued to increase in 1998. For example, Commonwealth Edison recently reported that its nuclear program ended the year with a capacity factor of 65.5 percent -- more than 10 percentage points higher than their goal for the year, and more than 15 points higher than their 1997 results.

Also last July I reported to this committee that the trend of significant events per unit per year had decreased from 2.38 in 1985 to about 0.1 in 1997 -- a reduction factor of more than 20. Today I'm pleased to report even further improvement. NRC event data, confirmed by our own experience, shows an industry achievement of only .04 events per unit this past year. This data is represented on the graph below.

The final improvement of note is the number of plants in INPO's "Excellent" category. Following each plant evaluation, INPO provides an assessment number -- on a scale of 1 to 5 -- with category one being the "Excellent" performers. At INPO's annual Chief Executive Officers conference in November, we recognized 31 such plants, the most ever. The standards are very high, and the level of performance needed to earn an excellent rating has risen over the years. This graph shows an impressive, positive trend for the industry.

Regulatory initiatives

Now I would like to move into my second area of focus -- the regulatory changes that are important to continued improvement in the nuclear power industry. We applaud the regulatory initiatives that the Commission has underway. The progress made so far demonstrates the potential for ongoing improvements in the regulatory process. Many have said, and I will reiterate, that improvements such as these will play a central role in the health of the industry.

We continue to be encouraged by the openness being displayed by the NRC in communicating with its stakeholders. This open exchange of information and ideas is a key contributor to the safe and reliable operation of our nation's nuclear power plants.

This improved communication is evident through the NRC's periodic stakeholder meetings, the enhanced review and approval process for license renewal, and the ongoing development of the new reactor oversight process. This new oversight process is especially important. It enhances the NRC's ability to ensure public health and safety by more effectively allocating its resources and eliminating redundant oversight. Specifically, it will focus the inspection, assessment and enforcement processes on safety-significant items, allowing utilities appropriate control over activities and issues that are not safety-significant, but are vital to plant reliability and economic viability.

We recognize that for plants to achieve and remain in the upper band of performance defined in the proposed new oversight process, they will need highly effective self-assessments and corrective action programs. Let me point out that among the many areas we look at, plant performance in the areas of self-assessments and corrective actions is routinely reviewed during INPO plant evaluations and during our plant assistance visits. Therefore, INPO's mission of promoting excellence in plant operations is fully complementary to the new oversight process.

Another example of beneficial change is the significant reduction in items identified as Level IV violations. As you may be aware, these violations relate to issues that are not—on their own—of serious concern. As part of its progress toward risk-informed regulation, the NRC has clearly recognized the benefits of restricting violations to safety significant items, while using the inspection reports as the appropriate tool for highlighting potential areas for improvement. This in turn encourages the utilities to be even more rigorous in analyzing their own operations. They can be confident that proactive self-identification of minor, non-safety-related issues will not automatically result in civil penalties.

Effectively managing change

Having discussed the continuing improvements in the nuclear industry, and the regulatory initiatives that have supported these improvements, I would like to now turn my attention to the importance of effectively managing the change process within the NRC. We have had the opportunity to discuss this subject at recent stakeholder meetings and feel it is important to cover it here.

INPO has had extensive experience with change management. Currently, we have a series of initiatives underway to improve how we carry out our mission to promote the highest levels of safety and reliability in the operation of nuclear electric power plants. Therefore, we appreciate what the NRC faces as it strives to change and more effectively meet its regulatory responsibilities. NRC is currently undergoing significant philosophy, process, and staff changes, including changes at the senior leadership levels.

We've seen many utilities challenged with managing change. Some have had success, others have struggled. Based on our observations and experience, it is clear that change requires clarity of purpose, constant communication, training, and, most of all, persistence and hard work.

I'll begin with clarity of purpose. A clearly defined, long-term plan and simple goals are necessary. With clarity and simplicity, change leaders throughout the organization can help ensure strong support at all levels.

Second, constant communication is critical for success. Communication must be two-way, involving both sending information and receiving feedback. The stakeholder meetings are good examples that need to be applauded and need to continue. Being flexible enough to use relevant feedback from the stakeholders throughout the change process will contribute to the agency's ultimate success.

Internal communications are equally important. We understand the NRC Commissioners and senior staff are communicating their expectations throughout the organization. We all know that there can probably be no such thing as too much communication. But then -- just as importantly -- management must listen to employees to ensure that the messages are being received and understood. Of course, follow-up action must be taken where appropriate.

Third, preparing and training NRC employees for change, and helping them succeed, is another fundamental ingredient. Our experience shows that organizations often underestimate the effort required to engage and train the workforce on significant changes. The NRC must look hard at the ability of its workforce to digest and internalize the many process changes being made. NRC staff will be asked to do different things and in some cases to think differently about their jobs. Front-line employees such as the site resident inspectors are important interfaces with the plants and therefore critical points. They must not only understand the changes but also be able to implement the changes from day-to-day.

Also, additional skills training may be needed as the organization changes, particularly in light of new assignments, workforce reductions, retirements and transfers of experienced employees. Further, it is important that the NRC's award and recognition system support employees who successfully implement change.

Finally, success comes down to persistence and hard work. What the NRC is undertaking includes a change in culture. Cultural change takes time, tremendous energy, and most of all, significantly more persistence and hard work than is often expected. In time, change can be anchored into the culture of the organization -- but only through an ongoing, systematic effort.

Overall, we're encouraged by what we see happening at the agency thus far. But as Chairman Jackson has said, "Performance is what performance does." We've seen many organizations with great intentions have their change programs fall short because of poor implementation. Given the far-reaching effects of the changes the NRC is initiating, persistent and consistent execution of the change process is absolutely crucial to success. This -- as I said, and as you well know -- will take an immense amount of hard work.

In the meantime, we encourage the NRC to continue improving its responsiveness to industry needs, such as timely license amendments, transfers and renewals, and reducing administrative burdens. Additionally, while maintaining appropriate data propriety, increased information sharing may also help reduce duplication and administrative burdens.

In conclusion, we at INPO believe the industry -- and indeed the public -- wants and needs a more predictable, objective and responsive nuclear regulator. We're encouraged by what the agency is attempting to do -- that is, to become a more risk-informed, performance-based regulator. We believe the NRC is on the right track with its efforts to improve the inspection, enforcement and assessment processes, focusing on items directly related to the agency's mission -- the protection of public health and safety. We are encouraged by the fact that the Commissioners, the Executive Director for Operations, and the regional administrators recognize the importance of change management. We at INPO will continue to work in cooperation with the NRC to help ensure the safe operation of our nation's nuclear power plants.

Again, I appreciate this committee's interest in the regulation of a changing nuclear power industry. Your continued support and guidance will play an important role in helping the NRC provide effective regulation to help assure the safety of our industry.

Thank you very much.