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August 25 2010

James O. Ellis, Jr.,
President and Chief Executive Officer
Institute of Power Operations

National Commission on the
BP Deepwater
Horizon Oil Spill and Offshore Drilling

Washington, D.C.
August 25, 2010


Testimony for the Record

The Role of the Institute of Nuclear Power Operations
In Self-Regulation of the Commercial Nuclear Power Industry

Good afternoon.

I am Jim Ellis, the President and Chief Executive Officer of the Institute of Nuclear Power Operations, more commonly known as INPO.  With me today is Dr. Zack Pate, who joined INPO in 1980, shortly after it was founded, and served as the Institute’s CEO for many of its formative years from 1984 to 1998.  Also with me is Lee Gard, my staff assistant.

I am pleased to be here to provide remarks to this Commission.  Materials describing INPO’s organization, programs, and activities were sent in advance – and I will not review those items today.

I am here today to address self-regulation in a high technology industry.  I will first talk briefly about the founding of INPO and then I will discuss the key factors that have enabled INPO and self-regulation to effectively help improve safety in the commercial nuclear power industry. 

Before proceeding, I want to acknowledge the eleven crew members of the Deepwater Horizon who died during the accident and express our condolences to their families, friends and colleagues.  It is vital that the lessons learned and the actions to be taken as a result of this Commission’s work and other investigations help prevent a repeat of such accidents.

Three Mile Island and INPO’s Founding

The founding of INPO and the beginning of self-regulation in the U.S. nuclear power industry came after the industry suffered its most serious accident – a partial meltdown of the Three Mile Island Unit 2 reactor core in March 1979. 

The event quickly became widely known as TMI, and the image of the plant’s cooling towers is one that has remained with the industry even today.  And while there were no deaths, injuries or environmental damage caused by TMI, it did generate concerns and reactions similar to those being addressed in the aftermath of the Deepwater Horizon accident – including questions about the overall safety and integrity of the industry, a fear of the unknown with uncertainty about the causes and ultimate consequences, and a severe loss of public trust and confidence.

At the time of the TMI accident, the United States had 70 commercial nuclear power reactors in operation, with an operating record of more than 400 reactor-years of service without a major event impacting the public.  Following TMI, nearly 100 nuclear power plants either planned or under construction were cancelled and no new permits or licenses for construction have been issued in the U.S. in 32 years. 

The Three Mile Island accident was caused by a combination of human error, equipment and design problems.  More broadly, the event showed weaknesses in the industry’s approach to operational standards, training, the sharing and use of industry operating experience, and emergency response.

Recognizing the need for prompt and comprehensive action, key leaders in the commercial nuclear power industry moved quickly to form INPO.  In fact, we were already incorporated by the time the report of the President’s Commission on the Accident at Three Mile Island was issued in October 1979, seven months after the event. Recognizing the need for credible and authoritative leadership, the industry selected retired Vice Admiral Eugene P. Wilkinson as the Institute’s first President and CEO. He had been Commanding Officer of USS Nautilus, the first nuclear powered vessel, and was a stalwart of the early Navy nuclear program.

This is an appropriate time to invite Dr. Pate to provide his historical perspective on the formation of INPO, before continuing my remarks.

[Dr. Pate’ s remarks]

Thank you, Zack.

Though both INPO and the industry that it serves have evolved over the years, the primary recommendations from that effort, known as the Kemeny Commission, formed the basis for INPO’s cornerstone programs, which remain in place today.  The four cornerstone programs – Evaluations, Training, Analysis, and Assistance – are described in detail in the materials provided in advance.

INPO is a nongovernmental corporation that operates on a not-for-profit basis.  We operate independently of the industry – and we avoid any conflicts of interest. 

We, specifically, legally and philosophically, cannot act as an advocate for the nuclear power industry – that is not our role.  Our role is to help the nuclear power industry set and achieve the highest standards of safety and excellence in operational performance.

Since our inception, all organizations that have direct responsibility to operate or construct commercial nuclear power plants in the United States have maintained continuous membership in INPO.  Currently, we have 26 members that operate 104 nuclear power reactors in 31 states.  In addition, many international groups and supplier organizations are voluntary participants in INPO. 

We have a staff of about 400 nuclear power professionals, which includes about 60 employees on loan to us from member utilities.  Our annual budget is $99 million, most of which comes from member and participant dues.

I’ll now move on to discuss what we believe are the five key factors that have enabled INPO and self-regulation to be effective in fostering the highest standards of nuclear power safety at our nation’s commercial nuclear plants.

The five key factors are: Chief Executive Officer (CEO) engagement, a nuclear power safety focus, support from the nuclear power industry, accountability, and independence.

CEO Engagement – gaining the support and personal involvement of the member company chief executive officers – was a fundamental element in the founding of INPO.

From the beginning, INPO’s Board of Directors has been comprised of member CEOs and other senior utility executives.  Mayo Shattuck, Chairman and CEO of Constellation Energy Group, is our current Chairman, and all of our other board members are CEOs or Presidents of the nuclear operating company.

We have found that working directly with CEOs is vital to maintaining industry support and responsiveness to our safety mission and initiatives.  For example, we provide CEOs personally, in the presence of their line management, with detailed briefings of every evaluation conducted at their nuclear power plants. 

We also communicate with and send requests for action on operational matters directly to CEOs.  Earlier this summer, for example, I sent every CEO a letter that described a dissatisfying trend in recent nuclear power plant operational events, and asked them to coordinate with their management team and provide me personally with specific actions and response. 

Every CEO also participates personally in the INPO annual conference, which focuses on nuclear safety, and during which operational events and nuclear power plant ratings assigned by INPO are discussed candidly with them.

The second key factor I will discuss is maintaining a Nuclear Safety Focus.

INPO’s mission, which has not wavered since its founding, is to promote the highest levels of safety and reliability – to promote excellence – in the operation of commercial nuclear power plants.  The distinction of promoting excellence, rather than regulatory compliance, is fundamental to INPO’s role in raising nuclear power safety performance.

Over the years, there have been many suggestions and requests for INPO to become involved in a variety of new issues, or with different stakeholders.  And although each such endeavor may have provided some benefit to the nuclear power industry, they also would have diluted the attention and resources placed on our mission of excellence in nuclear power safety.

In the end, nuclear power safety is why we exist, and it is always through the lens of improving nuclear power safety that we examine any potential new activities or changes in the scope of current efforts.

The third key factor in effective self-regulation and improving nuclear power safety has been the Support from the Industry.

The nuclear power industry understands and has accepted that a key part of self-regulation is subjecting its plants to on-site peer reviews, which we call plant evaluations.  The evaluations are intrusive, comprehensive, and performance-based, and their importance cannot be overstated.  Since 1980, we have conducted nearly 1,200 plant evaluations, an average of more than 16 at every nuclear power plant, inspecting them, on average, once every two years. 

The nuclear power industry participated in developing standards of excellence, and then committed to meeting the standards.  The strong industry participation has continued, and it has played a key role in the numerous advanced standards and guidelines developed over the years, but the leadership of INPO, supported by our Board of Directors, makes the final decision on expected levels of performance.

Although INPO programs today are part of the fabric of the nuclear power industry, gaining wide acceptance in the early years was not easy.  Some nuclear power plants questioned the technical credibility of the plant evaluation teams and were skeptical about the value of INPO evaluations. We addressed these issues and overcame the challenges by continuing to hire competent and operationally experienced staff, many of whom had valuable experience as managers in commercial or Navy nuclear power plants.  And we continued to deliver plant evaluation reports that identified important safety and reliability issues that – when corrected – improved safety and reliability, thereby improving performance. 

In addition to its acceptance and welcoming of INPO activities and programs, the nuclear power industry supports and participates in self-regulation through INPO with involvement in advisory groups, industry task forces and working groups, and by loaning employees to INPO to serve in a variety of functions, including as peer evaluators. 

The support provides benefits to the individual organizations, as well as to the entire nuclear power industry.  By serving as peer evaluators for example, professionals from individual utilities not only provide added and current experience to the INPO evaluation team, they also gain insight into nuclear power industry best practices and take that knowledge back to their own companies. 

Through their participation peer evaluators also acquire a first-hand understanding of INPO’s role and the importance of industry self-regulation.  Over the years, more than 13,000 industry peer evaluators have served on INPO teams.

The fourth key factor is Accountability.

Self-regulation cannot be effective without an effective means of enforcement.  During INPO’s first five years, we completed a few rounds of evaluations at every nuclear power plant, and it was clear that not all members were responsive to INPO’s findings. 

To improve our effectiveness, we had a group of senior industry executives – led by Lee Sillin, former chairman of Northeast Utilities – do a broad self-assessment of INPO activities.  Their recommendations included toughening the language in INPO evaluation reports, establishing a formal process for assessing the evaluation results, and assigning a numerical performance rating based on the assessment. 

Doing that enabled us to exert more authority and demand more accountability.  It also helped build our credibility with the nuclear power industry and with the regulator. 

In addition, we changed our policy for distributing INPO evaluation reports.  We made the evaluation reports confidential, distributed only to the utility whose nuclear power plant was evaluated.  This change – from our initial policy of distributing all evaluation reports industry-wide – provided for more open and candid interactions and discussions of problems or areas for improvement.  The confidentiality of reports has proven to be an important aspect of performance improvement and nuclear safety. 

Sanctions can come in various forms.  Although INPO does not have the statutory standing to shut down an operating plant, we, on several occasions over our first 15 years, exerted pressure that influenced nuclear power plant operators to shut down or delay starting up until specific safety issues we raised were properly addressed. 

We also take formal follow-up actions when a plant exhibits a lack of responsiveness or chronically poor performance.  In one notable case, a company’s board of directors made changes in its executive leadership in response to our escalating concerns about their corporate management’s lack of responsiveness.  There have been other situations where companies have been unsuccessful in improving chronic low performance at their nuclear power plants, and – through INPO escalation and pressure – changes were made from the top down.  In all these cases, our actions were taken with the full support of the INPO Board and the broader industry. It is this peer pressure that is perhaps INPO’s most effective tool for driving real change. 

Another incentive for nuclear power plants to perform well comes from the industry’s collective insurance company, also known as Nuclear Electric Insurance Limited, or NEIL.  After the TMI accident, all nuclear power plants were required to carry insurance through NEIL. NEIL, in turn, requires INPO membership as a condition of insurability, and it uses INPO plant evaluation ratings as a factor in setting insurance premiums.

The fifth key factor is Independence.

For INPO to be successful in its self-regulation role, we must be a part of the nuclear power industry and a useful resource.  But at the same time, we must remain independent and work to high standards. 

In particular, we need to be independent from any one company or nuclear power plant.  We accomplish this in the institutionalized ways in which we select team members and distinguish clearly between our evaluative role and the many other collaborative interactions and activities with our members. 

Our mission is largely independent from the regulator – the Nuclear Regulatory Commission – but it is also complementary in that both organizations focus on nuclear safety.  Over the years, the NRC has formally endorsed selected INPO programs as a satisfactory means for nuclear power plant operators to meet certain regulatory requirements.  And INPO has provided the NRC with regular updates and communications on topics of mutual interest related to improving performance in the industry. 

Results

Through its 30-plus-year history, INPO has continued to raise the bar for nuclear power plant safety and performance and has been a catalyst for action on important issues. 

Since the founding of INPO and the start of self-regulation in the nuclear power industry, there have been significant performance improvements in essentially every measure of safety and reliability. 

For example, in the early 1980s, the typical nuclear power plant had a capacity factor of 63 percent.  Capacity factor is the actual amount of electricity generated by a plant divided by the amount it could have generated if it was operating continually at full capacity. 

The typical plant also experienced seven automatic shutdowns per year.  And it had a collective radiation exposure that – although it met regulatory and health requirements – we felt could be significantly reduced. 

Today, and throughout this past decade, the typical nuclear power plant now has a capacity factor above 91 percent, with zero automatic shutdowns per year, and occupational radiation exposure about six times lower than in the 1980s.  In addition, the number and severity of operational events at nuclear power plants has dramatically improved since then. 

Self-regulation, however, is not a perfect process.  Over the last thirty years we occasionally find that – even with high industry standards, regulatory oversight, self-regulation and INPO – a series of errors or omissions can align to produce an unexpected major operational event or declining trend in industry performance.  This reality demands constant vigilance.

In response to these issues, INPO, with industry support, conducts periodic critical self-assessments of our own performance, and we have, as a result, implemented many changes to our practices.  As an example, in recent years we have significantly expanded our approach to dealing with organizational safety culture. 

As industry programs have matured over the decades, the nature of issues often has become more subtle, making it more challenging to observe and quantify.  So in order to maintain effectiveness, our evaluation process and other cornerstone activities must continue to evolve and improve. 

Today, we often engage plants in discussing difficult issues such as risk assessment and risk management, operational decision-making, long-term equipment strategies, leadership capability and development, safety culture, and corporate governance and oversight.

Summary

In summary, we believe that INPO and self-regulation in the nuclear power industry represent a substantial and successful effort undertaken by a high-technology industry to raise its safety standards and performance levels. 

We believe self-regulation has proven to work effectively in the nuclear power industry.  And we also believe the key factors to successful self regulation have been and continue to be CEO engagement, a nuclear power safety focus, industry support, accountability, and independence. 

Thank you for allowing me to speak before the Commission.

I would be happy to answer questions.