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Oliver D. Kingsley, Jr.
President and Chief Nuclear Officer
Exelon Generation Company

U.S. Senate
Committee on Environment and Public Works
Subcommittee on Clean Air, Wetlands, Private Property and Nuclear Safety

Washington, D.C.
May 8, 2001

Testimony for the Record

Executive Summary
Nuclear energy is experiencing a renaissance in the United States and is becoming a viable option for meeting increasing energy demand for several reasons.

The current state of the industry is positive:
  • Nuclear has a proven track record of safe and improving operations;
  • Nuclear power is economically competitive;
  • Nuclear capacity is increasing, even without building new plants;
  • Prospects for license extension for existing plants are positive; and
  • The current regulatory environment is stable and constructive.

The Nuclear Regulatory Commission (NRC) has successfully implemented the new Reactor Oversight Process. This is a very positive development; it is already resulting in growing public acceptance of nuclear power.

In order to sustain the nuclear renaissance we must have a national energy policy that  recognizes the valuable role of nuclear energy. We must complete the work necessary to build a geologic repository for used fuel. Sustaining the nuclear renaissance requires successful efforts on a variety of fronts:
  • A reliable, competitive nuclear fuel market;
  • Legislative and regulatory reforms;
  • A stable new plant regulatory framework;
  • Renewing the Price-Anderson Act;
  • Public funding for first-time costs
  • Enhancing nuclear research and development programs;
  • Retaining and attracting top talent;
  • Developing an environmental policy that recognizes the advantages of emission-free electricity; and
  • Properly aligning NRC resources.

Exelon has invested in a joint venture to study the feasibility of an advanced nuclear reactor  design called the Pebble Bed Modular Reactor (PBMR). These reactors are inherently safe, small, modular, gas-cooled designs intended for merchant plant installations anywhere in the world. This technology is currently being developed in the Republic of South Africa. We are investigating the technical, licensing, and economic feasibility of building new power plants based on this technology in the United States.

Testimony of Oliver D. Kingsley, Jr.
Mr. Chairman and Members of the Subcommittee:

I appreciate the invitation to appear before the Subcommittee to discuss the state of the nuclear energy industry and the role that nuclear power can play in meeting America's future energy needs. My name is Oliver D. Kingsley, Jr., and I am the President and Chief Nuclear Officer of Exelon Nuclear, the nuclear division of Exelon Generation Company.

Exelon Generation is a wholly owned subsidiary of Exelon Corporation. Exelon was formed last year by the merger of Unicom Corporation of Chicago and PECO Energy Company of Philadelphia. Exelon Generation currently owns and operates approximately 37,000 megawatts of diversified electrical generation, including 17 nuclear reactors that generate 16,970 megawatts of electricity. We have another 8,500 megawatts of non-nuclear generation under construction or development. Exelon is the largest nuclear generation operator in the country with approximately 20% of the nation's nuclear generation capacity, and the third largest private nuclear operator in the world. We also own 50% of AmerGen Energy, which is a partnership with British Energy of Edinburgh, Scotland. Amergen owns three of the 17 units in the Exelon fleet.

The State of the Industry
The nuclear industry is receiving substantial public attention as policymakers evaluate options for maintaining a clean, safe, reliable, and low-cost energy supply for the United States. The renewed focus on nuclear energy is due to a variety of reasons:
  • Nuclear has a proven track record of safe and improving operations;
  • Nuclear power is economically competitive;
  • Nuclear capacity is increasing, even without building new plants;
  • Prospects for license extension for existing plants are positive; and
  • The current regulatory environment is stable and constructive.

The nuclear energy industry is contributing safe, cost competitive, and reliable baseload power to meet the nation's energy needs, all without emitting any air pollutants or greenhouse gases associated with fossil-fired plants.

Nuclear Power is Economically Competitive
Let me highlight the current economics of nuclear power production. In our vernacular, the total cost of producing electricity from a power plant is known as the "all-in" cost. Current, well-managed nuclear plants have an all-in cost of less than 2.5 cents per kilowatt-hour (kWh). This cost compares favorably with the all-in cost for combined cycle natural gas plants at 3.5 to 4.5 cents per kilowatt-hour (assuming a gas price of $3 to $4 per million BTUs). Natural gas prices paid by electricity generators have doubled in the past year and are likely to continue to exceed historical costs. In contrast, nuclear fuel costs have been substantially less volatile. For the industry as a whole, nuclear production costs in 1999 of 1.83 cents per kilowatt-hour were lower than production costs for coal (2.07 cents per kilowatt-hour), natural gas (3.52 cents per kilowatt hour, even prior to natural gas price spikes) or oil (3.18 cents per kilowatt-hour).

The recent crisis in California has led policymakers to focus on the need for a sound, comprehensive national energy strategy. Clearly, our national energy policy should include recognition of the important role that nuclear power has played — and will continue to play — in meeting the nation's growing energy needs and addressing clean air goals.

Nuclear Capacity is Increasing — Without Building New Plants
Even though we have not constructed any new nuclear power plants in our country in recent years, our nation's nuclear capacity is increasing. Two things are happening: we are adding capacity at existing plants and we are operating those plants more efficiently. For example, Exelon Nuclear is adding nuclear capacity through a combination of power uprates and plant modifications that will improve the efficiency of the units. Through these modifications and improved operation, Exelon Nuclear will increase net generation from its current fleet by  approximately 9 million-megawatt hours by 2003, the equivalent of adding a new 1,200 megawatt plant. Our planned power uprates will be achieved at a construction cost $300-$400 per kilowatt, well under the cost of $500 to $700 per kilowatt for a new combined cycle natural gas plant, and $1,000 to $1,250 per kilowatt for new clean coal technologies. Other utilities are doing the same.

Prospects for License Extension are Positive
The long-term prospects for our nation's nuclear fleet are also positive, defying some predictions. As recently as 1997, the NRC estimated that only a faction of currently operating reactors would seek to extend their operating licenses. Today, most observers, including NRC Chairman Meserve, predict that the vast majority of the nation's 103 operating plants will apply for 20-year license extensions. Between 2001-2003, Exelon will submit license renewal applications to the NRC for the Peach Bottom, Dresden and Quad Cities nuclear power plants, and we are reviewing the potential for license renewal for the remainder of the Exelon fleet.

With the forces of market competition reshaping the entire electricity industry and driving down the cost of electricity, nuclear power's competitiveness will continue to hinge, in part, on how well federal regulations keep pace with industry changes.

Current Regulatory Environment is Stable and Constructive
The current regulatory environment has become more stable, timely, and predictable, and is an important contributor to improved performance of nuclear plants in the United States. This means that operators can focus more on achieving operational efficiencies and regulators can focus more on issues of safety significance. It is important to note that safety is being maintained and, in fact enhanced, as these benefits of regulatory reform are being realized. The Nuclear Regulatory Commission — and this Subcommittee — can claim a number of successes in their efforts to improve the nuclear regulatory environment. These include successful implementation of the NRC Reactor Oversight Process, the timely extension of operating licenses at Calvert Cliffs and Oconee, the establishment of a one-step licensing process for advanced reactors, the streamlining of the license transfer process, and the increased efficiency in processing licensing actions.

NRC Reactor Oversight Process
While Exelon Nuclear is proud of the work that we have done to improve our operations and production, we must note that many of these improvements have been facilitated by regulatory changes. A fine example of this is the NRC Reactor Oversight Process, which has created greater certainty and predictability in the regulatory environment. I want to recap  some of the progress made to date while indicating areas where additional improvements are needed.

The Reactor Oversight Process (ROP) is a decided improvement over the previous process. The new approach is objective, safety-focused, predictable and more understandable to the industry and the public. In most cases the process has been demonstrated to objectively distinguish levels of safety performance and to consistently apply the prescribed levels of NRC oversight to these differing levels of performance. This safety focus of the NRC enables us to continuously sharpen our safety focus while more efficiently applying our resources to "do the right thing right the first time". This improved focus also serves to reinforce the industry's obligation to find and fix our own problems. But more importantly it places the accountability for safe and efficient operation squarely where it belongs — with us, the nuclear operators.

The NRC, working closely with its stakeholders, has achieved a largely revised and vastly improved regulatory framework for NRC oversight of licensees in a short amount of time. I cannot fail to acknowledge the vital role that the Nuclear Energy Institute has played in helping the industry establish improved communications and a cooperative working relationship with the NRC. This relationship only exists as the result of proper execution of our regulatory processes combined with industry-wide continued good performance.

Both the industry and the NRC are continuing to properly prioritize and pursue process improvements that reflect the lessons learned from the initial year of implementation of the Reactor Oversight Process. An important initiative to achieve common industry performance indicators is in progress that will sharpen the focus on risk significant conditions, reduce undue burden caused by differing definitions, and address perceived concerns regarding inconsistencies.

Sustaining the Nuclear Option
In addition to the progress that has been made on the previously mentioned issues, there remain many regulatory and legislative actions needed to continue this progress and set the stage for construction of new plants. In order to sustain the nuclear option we need:
  • A reliable, competitive nuclear fuel market;
  • Legislative and regulatory reforms;
  • A stable new plant regulatory framework;
  • Renewal of the Price-Anderson Act;
  • Public funding for first-time costs;
  • Enhanced nuclear research and development programs;
  • To retain and attract top talent;
  • Environmental policy must recognize the advantages of emission-free electricity; and
  • Proper alignment of NRC resources.

I would be remiss if I do not mention the urgent need for the government to complete the work necessary to build a geologic repository for used nuclear fuel. Until the federal government can implement a disposal program and resolve the issue of used fuel disposal, garnering public support for new nuclear units will be a difficult challenge.

Need for a Reliable, Competitive Nuclear Fuel Market
Nuclear plants have enjoyed a high degree of reliability with regard to fuel supply, with the vast majority of uranium and enrichment services provided domestically. The nuclear industry has also benefited from a relatively competitive market for fuel and fuel services in recent years, which has kept prices for enrichment services relatively low. This has been important in making nuclear energy competitive with other energy sources because fuel is one of the largest single components in the cost of generating electricity. A fair and open competitive market for enrichment services must be maintained to prevent the possibility of dramatic increases in the cost of nuclear fuel. However, pending anti-dumping and countervailing duty allegations raised by the United States Enrichment Corporation (USEC) threaten to result in a single source of enrichment services in the U.S. Should USEC prevail in the pending trade actions, nuclear utilities in the United States anticipate fuel cost increases of between $650 to $1,250 million per year for the industry as a whole.

USEC is also attempting to retain its position as the sole Executive Agent for implementation of the U.S-Russian Highly Enriched Uranium (HEU) Agreement. If USEC is permitted to retain exclusive access to enriched uranium brought into the U.S. under the HEU Agreement, they will further limit potential competition in the enrichment market. A competitive fuel market is essential to ensuring a reasonably priced fuel supply for nuclear reactors and, consequently for consumers.

Legislative and Regulatory Reforms are Needed
We strongly believe that the safety philosophy embodied in the Reactor Oversight Process should be codified in regulations to further institutionalize this important change. In addition, existing duplicative and inconsistent radiation protection standards between federal agencies must be resolved and ultimate authority for those standards should rest with the NRC. We also agree with the NRC's recommendations for legislation that would improve the Commission's flexibility in decision-making and reduce unnecessary regulatory burden. However, if prohibitions on foreign ownership are lifted, we feel that doing so should be tied to providing reciprocal rights for U. S. companies to compete overseas.

Stable New Plant Regulatory Framework Needed
The time is right for the next generation of nuclear plants to emerge as an element in the national energy mix. What will it take for new nuclear plants to be built in the United States? The answer to that question has changed in recent years as the nation's electric industry has been restructured. In addition to being safe, reliable, and clean, new plants have to possess an additional characteristic: as merchant plants, they must be economic. New plants must be able to compete with cleaner coal and natural gas technologies, take less time to construct, and require lower initial investments. In today's environment, a new nuclear plant must be relatively small-scale (in terms of generating capacity) so as not to disrupt the economics of the regional power market that the plant is built to serve.

Above all, we need a licensing process that provides predictable outcomes for applicants. Since the last plants were licensed, numerous changes have taken place in the NRC regulations that support licensing of new plants. However, many of these changes have not been tested in actual licensing proceedings. Moreover, the process needs to be able to accommodate new license applications for merchant plants including small, modular designs.

In order to move forward with the implementation of new reactor technologies, additional design and licensing work is required; so are regulatory changes. We must further reduce the uncertainty of the one-step licensing process contained in 10 CFR Part 52. Part 52 contemplates a one-step process to site, design, construct, and operate a new plant. We applaud the goal of a one-step process and believe that such a process is essential. However, we believe that additional work on the process will be necessary, particularly when it comes time to license a gas cooled reactor.

We need a safety-focused and risk-informed technical licensing framework for new reactors that embodies the NRC's safety philosophy. We also need changes to regulations to make them compatible with applications for so-called "merchant" plants. These changes should include eliminating the need for decommissioning funding assurance and analysis of transmission system stability. Informal hearing procedures should be extended to a wider array of licensing actions while ensuring continued opportunities for public participation. Existing regulations should be reviewed for their potential adverse impact on small, modular designs. NRC fees should be assessed on a "per site" basis rather than by the number of reactors. Minimum licensed operator staffing levels should be addressed.

Price-Anderson Act Must be Renewed
Most importantly, we believe the Price-Anderson Act should be renewed indefinitely. However, treatment of modular reactors under the Price Anderson Act must be clarified to avoid the situation where a 10-module, 110 megawatt plant faces 10-times the liability of a single-unit 1100 megawatt plant.

Need for Public Funding for First-Time Costs
Some form of cost-sharing between the Department of Energy and the private sector may be needed to efficiently and effectively apply the financial resources needed to cover the first-time costs associated with implementing the one-step licensing process contained in 10 CFR Part 52, the cost of developing an advanced reactor licensing framework to be used by the NRC, and the cost of developing the technical expertise needed by the NRC and its consultants to review a new plant application.

DOE funding support must be focused on both near-and long-term design developments. Forms of potential DOE support could include:
  • Design approval support for the industry or the NRC;
  • Financial support for demonstration projects for first-of-a-kind/untested processes or technologies;
  • Development of training programs on emerging technologies (e.g., gas-cooled reactors) that will better enable industry, political leaders and regulators to understand the new technologies and to render well-informed decisions.

Enhanced Nuclear Research and Development (R&D) Programs

Exelon believes that the nation is at a critical juncture in securing adequate energy resources for the future. Federal support of nuclear R&D programs that enable continued performance improvements for current nuclear plants and timely siting, design, licensing and construction of new nuclear plants should be high priority for the Congress and the Administration.

Improvements in technology have been a major contributor to the improved safety, unit capacity, reliability and cost performance of current U.S. nuclear units and to electricity consumers. Exelon has realized operational and safety benefits of nuclear R&D in many areas (e.g., predictive maintenance, advanced fuel designs, analytical computer models, digital instrumentation and control upgrades, and probabilistic risk assessment tools).

Further research and development is needed to support new nuclear plants in the areas of new reactor and fuel design, code verification and standards development, establishment of a top-down safety-focused and risk-informed regulatory framework, selected materials research projects and process demonstration projects (i.e., early site permitting).

To support a comprehensive national energy policy, R&D funding should support near-term deployment as well as longer-term advancements in reactor design alternatives. Nuclear R&D funding must also be made available to universities supporting nuclear technology degree programs (engineering, physics, materials, etc.) so that these programs can increase in size. This support for university programs leads to the development of high quality nuclear professionals to sustain the U.S. nuclear infrastructure.

Retain and Attract Top Talent
Nuclear stakeholders must band together to address short and longer-term staffing needs. At Exelon, 69% of our nuclear workforce is over 40 with 19% over 50. A similar analysis by the NRC of their own workforce demographics yielded more extreme results. We need a viable feeder group of nuclear professionals to operate and maintain our plants. Nuclear industry suppliers and associations will need this talent to preserve the nuclear industry infrastructure. Government agencies such as DOE, NRC, and the national laboratories will need this talent to carry out their respective missions. Universities will need new faculty to conduct research and to educate future generations of nuclear professionals.

In order to retain and attract the top talent, it is imperative to create and sustain a favorable environment for nuclear energy that sends a clear message that nuclear professionals have expanding opportunities with bright futures. We each have a part to play — through our support of university programs involving nuclear technologies; through nuclear R&D funding; through achievement of regulatory reform and investment in license renewal and new nuclear technologies. Each of these actions sends a message.

Exelon helped to create and remains active in the DOE/Industry Matching Grant Program for University Nuclear Engineering Departments. This program has had a major impact in improving the educational infrastructure for supplying nuclear engineers and has allowed the departments to enhance the quality of their programs. In the upcoming fiscal year, the DOE has 23 universities and 37 sponsors vying for funding under the Marching Grant Program. Exelon remains actively involved with nuclear programs at several universities in Illinois, Pennsylvania, and Wisconsin. However, a national program is needed to support a strategic energy policy.

Environmental Policy that Recognizes Nuclear Advantages
The Federal governmental should treat all energy sources similarly with regard to environmental regulation. Support for environmentally beneficial methods of generation should be based on objective, scientific criteria that accurately measure potential adverse impacts from such generation for all environmental media and resources, taking into account the actual amount of electricity that could be produced. For example, an "environmentally preferable power" certification system could be developed that would recognize nuclear efficiency projects as environmentally preferable. In addition, measures to obtain economic value for nuclear energy's role in avoiding emissions of air pollutants and greenhouse gases, such as emissions allowances or credit for avoided carbon dioxide emissions, should be put in place. Further, any future legislation to implement global warming programs should provide nuclear efficiency improvements with carbon dioxide credits or provide similar recognition of nuclear's valuable role as an emissions-free energy source.

Proper Alignment of NRC Resources
In light of all the changes and challenges that the NRC must manage, proper allocation of resources will be critical to the Commission's success. The stability of the regulatory environment hinges, in part, on the NRC's ability to establish a proper balance and priority between existing reform efforts and new initiatives.

Through a more robust strategic planning process, the NRC has taken steps to keep pace with industry restructuring and to ensure that the Commission can continue to be supportive of our country's growing energy needs. The NRC is updating its blueprint for its transition to a more risk-informed regulatory framework and has recently increased its focus on the licensing of new nuclear plants. Effective implementation of the Reactor Oversight Process and achievement of efficiencies in other areas can enable NRC resources to be realigned to meet the future demands it will face.

Exelon believes that the following areas will require significant NRC attention and resources over the next five years:
  • Efficient processing of license renewal applications;
  • Licensing of generation improvements (e.g., 24-month operating cycles, power
  • rating increases);
  • Licensing of new nuclear technologies (e.g., steam generator programs, advanced
  • non-light water reactor designs);
  • Licensing of a geologic repository for used nuclear fuel; and
  • Further regulatory reforms (e.g., risk-informed regulation, regulatory burden reduction, and further Reactor Oversight Process improvements).

Exelon supports the analysis and redeployment of NRC operations to reflect the need to simultaneously support multiple strategic initiatives while keeping its eye on the ball —properly executing its core mission to protect public health and safety.

The Pebble Bed Modular Reactor Project
To provide a context for the changes I just described, let me describe Exelon's plans. Exelon Generation has evaluated various technologies and options for future electricity generation and has determined that small, modular nuclear power plants could provide a competitive advantage in the deregulated wholesale power marketplace. These plants could also make a significant contribution to the reduction of greenhouse gases and air pollution usually attributed to electric generation. As a result, we have invested in a joint venture to study the feasibility of an advanced nuclear reactor design called the Pebble Bed Modular Reactor (PBMR). These reactors are small (110-125 megawatts), modular, gas-cooled designs intended for merchant plant installations anywhere in the world. This technology is currently being developed in the Republic of South Africa. We are investigating the technical, licensing, and economic feasibility of building new power plants based on this technology in the United States.

The key advantages of this technology appear to be:
  • Increased nuclear safety;
  • Minimal environmental impact with no greenhouse gas emissions;
  • Low capital and operating costs;
  • Stable fuel costs;
  • Short construction time; and
  • The flexibility to add incremental capacity in regional markets to economically match load growth.

We believe that these advantages are clearly in both our competitive interest and in the national interest.

If the technology is deemed ready for commercialization, and if the economics prove to be competitive against other forms of generation, Exelon and its partners will proceed to build a demonstration plant in South Africa near Cape Town. Construction of that plant will take approximately thirty-six months, followed by a twelve-month testing period.

If Exelon's review of the feasibility study is favorable, we do not intend to wait for the completion of the demonstration plant in South Africa to begin the licensing process to build a number of PBMRs in this country. We would submit a license application for early site permitting in 2002, followed by an application for a combined construction and operating license after the necessary detailed design is completed in South Africa in 2002.

In conclusion, as the shortage of electricity supplies in several areas of the country looms large and as our society places an ever-increasing importance on cleaner air, we must find ways to preserve and enhance the nuclear option as a component of the national energy supply. This is an issue of urgent national priority.

Nuclear power has earned the right to be counted among this country's most viable options as a future power source. It has achieved an outstanding safety record and serves as a stable, economic and abundant domestic source of electricity that emits no air pollutants or greenhouse gases associated with fossil-fired plants.

Thank you for giving me the opportunity to share Exelon's perspectives on the state of the nuclear industry, including the importance of a stable and predictable nuclear regulatory environment, and the important role that nuclear power can play.