The Price-Anderson Act requires the nuclear energy industry to maintain liability insurance to compensate the public in the event of a nuclear accident. This coverage is provided through a combination of private insurance purchased by the companies that operate nuclear power plants and a framework that holds every nuclear plant in the United States financially responsible for a share of claims exceeding the amount covered by private insurance. Currently, the industry has $13.6 billion in liability insurance coverage.
Price-Anderson establishes the framework for nuclear plant liability insurance and sets an upper limit on industrywide liability. The cost of this insurance is borne by the industry. However, if the entire insurance pool is exhausted, state and local governments can petition Congress for additional disaster relief.
Insurance pools set up under the act disbursed approximately $71 million in claims and litigation costs related to the 1979 accident at Three Mile Island. The act has proven so successful that Congress has used it as a model for legislation to protect the public against potential losses or harm from other hazards.
Congress has extended the Price-Anderson Act several times, making significant alterations, most recently in the Energy Policy Act of 2005.
Liability Coverage Up to $13.6 Billion
Congress passed the Price-Anderson legislation in 1957 as an amendment to the Atomic Energy Act to ensure that substantial funds will be available to compensate the public in the event of a nuclear accident. Through this program, the nuclear energy industry maintains $13.6 billion in liability coverage.
The costs of this insurance are borne by the industry, unlike the corresponding costs of some other power sources. Costs from hydropower mishaps, such as dam failure and resultant flooding, for example, are borne directly by the public. The 1977 failure of the Teton Dam in Idaho caused $500 million in property damage, but the only compensation provided to those affected was about $200 million in low-cost government loans.
The nuclear energy industry’s liability insurance consists of two tiers:
The first tier provides $375 million in liability insurance coverage per incident—the maximum amount available through private insurers. This coverage is provided by insurance pools, which are groups of insurance companies pledging assets that enable them to provide much higher coverage than an individual company could offer. Utilities pay an annual insurance premium for each reactor site. As of 2014, the average annual premium for a single-unit reactor site was $860,000.
If the first tier funds are not sufficient to cover claims arising from an accident, a second tier of financial protection applies. This tier offers additional liability insurance coverage up to $13.2 billion per incident. This amount is adjusted periodically for inflation, most recently in 2013. All operating nuclear reactors in the United States participate in the second-tier financial protection program. After a reactor incident, every plant would be required to pay a premium equal to its proportionate share of the excess loss, up to a maximum of $121.3 million per reactor per accident. This can increase to $127.3 million if a 5 percent surcharge to cover legal costs is included.
Congress can modify or increase the insurance liability coverage limits at any time through legislation. If the entire insurance pool is exhausted, responding organizations like state and local governments can petition Congress for additional disaster relief under provisions of the Price-Anderson Act.
Past Success: The Three Mile Island Accident
The Three Mile Island accident in 1979 demonstrated the ability of the Price-Anderson Act to effectively compensate the public. Immediately following the accident, Pennsylvania’s governor recommended the evacuation of pregnant women and families with young children living in the area nearest the plant site.
At the time of the accident, the first tier of coverage—the private insurance pools—provided $140 million in coverage. The insurance pools immediately assembled insurance adjusters from across the country at a central claims office in Harrisburg, Pa. The adjusters advanced money to evacuated families for living expenses incurred while away from their homes, requesting that any unused funds be returned. Recipients responded by sending back several thousand dollars. In addition, the insurance pools reimbursed 636 individuals and families for lost wages as a result of the accident.
In addition to the cash advances and reimbursements, the insurance pools later settled a class-action suit for economic loss filed on behalf of residents in a 25-mile radius around Three Mile Island. The last of the litigation was resolved in 2003.
Insurance pools have paid approximately $71 million to date in claims and litigation costs connected with the Three Mile Island accident.