Public Policy

Chairman Bingaman, ranking member Pete Domenici, and distinguished members of the committee, I am Marvin Fertel, Executive Vice President and Chief Nuclear Officer at the Nuclear Energy Institute (NEI).  I am honored to address the subcommittee on the subject of the Russian Suspension Agreement (RSA).

NEI brings together and is responsible for developing policy for the U.S. nuclear industry.  NEI’s 307 corporate and other members represent a broad spectrum of interests, including every U.S. electric company that operates a nuclear power plant, the existing U.S. enricher and all proposed U.S. enrichers, the sole U.S. convertor, and the major U.S. uranium miners.  NEI’s membership also includes suppliers, engineering and consulting firms, national research laboratories, manufacturers of radiopharmaceuticals, universities, labor unions, and law firms.

The United States faces major demand for new base-load electricity generation.  The Administration and Congress both have recognized that nuclear power plants are critical to meeting electricity supply and for addressing climate change issues.  The 104 operating nuclear power plants represent about 11% of installed capacity; however, they provide nearly 20% of electricity demand.  In response, the nuclear industry is in an expansion mode.  One of the strengths of the nuclear option relative to other energy sources is forward price stability.  In the face of rising energy costs to consumers, ensuring a predictable, reliable nuclear fuel supply is essential to being able to continue to offer the benefits of nuclear energy to our electricity consumers.  Expansion of nuclear energy is also occurring throughout the world.  The International Atomic Energy Agency is protecting about a 15% increase in the number of operating reactors by 2020.  This world wide expansion requires the expansion of the world suppliers of nuclear fuel cycle services.  This is why it is important for U.S. utilities to have access to international suppliers.

In 2007 utilities submitted to the NRC combined license applications for 7 new nuclear power plants and additional announcements account for 24 more plants.  This expansion is predicated on a reliable and economically competitive nuclear fuel supply.  Numerous mining and milling companies have reactivated or have submitted applications to states and/or the Nuclear Regulatory Commission (NRC) for uranium mines and mills.  In 2007 Converdyn, working with Honeywell, increased the conversion capacity of the Metropolis, IL facility.  USEC has licensed a new enrichment facility which is currently in the demonstration phase, LES has licensed and begun construction of a new enrichment facility, and AREVA and General Electric have both announced plans for new enrichment facilities.  The billion of dollars in financing for these facilities is proceeding under existing law.  It is critical to the utilities, nuclear fuel suppliers, and the country that everyone succeeds. In this environment, the RSA must be viewed in terms of the overall fuel supply market and how perturbations in one facet of the market can have ramifications across all sectors. 

Our comments today are based on the following principles:

1.    It is critical from both a non-proliferation and a U.S. nuclear fuel reliability perspective that the existing U.S./Russian HEU Agreement be fully and efficiently implemented through completion in 2013.
2.    It is desirable to modernize and expand the economical and reliable domestic uranium and conversion service capabilities.
3.    It is desirable to modernize and expand economically competitive and reliable domestic enrichment capacity as currently being pursued by USEC, LES, AREVA, and GE and any others that might want to locate in the US.
4.    Given that the U.S.-Russian HEU Agreement will be fulfilled by the end of 2013, it is necessary, for reliability of nuclear fuel supply, that U.S. nuclear power plants have access to the global nuclear fuel supply market including uranium, conversion, and enrichment.  Even with the expansions previously cited, domestic supply will not be sufficient to meet all U.S. needs by 2013.

A key responsibility of NEI is to work together with all sectors of the industry to develop positions on government policies that support the overall health of the entire nuclear energy enterprise.  In the area of fuel supply, a healthy tension always exists between the interests of buyers and suppliers.  NEI has been able to successfully bring them together in preparing input to the U.S. government.  The greatest assurance of market stability is multiple suppliers.  Our primary goal with respect to the fuel market is to create as much certainty in the marketplace as possible. This certainty is important to the development and deployment of new properties for all components of the fuel supply chain.  Competition among all suppliers is a good thing.  Certainly the U.S. suppliers want access to sell in the broad international market, and utilities want to be able to buy internationally as well.

Today’s situation in Russian is quite different from what existed when the RSA first came about.  At that time, Russia was still functioning as a non-market economy.  Today it is on the verge of ascension to the World Trade Organization, and its energy resources form a major component for its continued economic growth.

Well before the current amendment to the RSA was signed, the U.S. industry had discussions about what might constitute acceptable quantities of Russian commercial material entering the U.S. market.  The quantity limits for Russian exports to the U.S. now contained in the RSA are reasonably consistent with what the industry had discussed.  The provision that states that the Department of Commerce can allow additional imports in case of supply emergencies provides an important way to ensure adequate supply. The RSA also provides for a needed transition period for getting from our current reliance on Russian supplies under the U.S.-Russian HEU Agreement to what will be required once that Agreement terminates in 2013.  Post-2013, access to Russian commercial enrichment will be essential. 

The material supplied in the U.S. under the U.S.-Russian HEU Agreement has formed a vital part of the enrichment supply for U.S. reactors over the term of the agreement, at times providing more than 50 percent of our annual enrichment requirements through sales by the U.S. executive agent, USEC.  We will continue to rely on this material through the completion of the existing agreement in 2013.  Yet while we have every expectation that the Russians are committed to fulfilling their obligations under the existing agreement, the Russians have been very clear that they do not intend to seek an extension of the agreement.  This agreement that established this significant source of supply for U.S. reactors will cease to exist after 2013, and alternate sources will be required to fully meet the needs of existing reactors as well as for any new generating capacity. 

Even assuming the timely completion of USEC’s American Centrifuge Plant (ACP) and the LES National Enrichment Facility now under construction in New Mexico, the combined capacity of these plants will not fully replace the existing capacity of USEC’s Paducah facility by 2014, much less be able to compensate for the contribution now received under the HEU agreement.  Looking at the most optimistic projections by all the companies with future domestic enrichment facilities under construction or on the drawing boards, production in the U.S. in 2014 is slated to be less than 11 million SWU, clearly not sufficient to meet the current demand of about 14.4 and adding  new plants will increase it between approximately 1.5 to over 3.0  million SWU.  At least two of the planned facilities, the ACP and GE Hitachi’s SILEX effort, involve commercially unproven technologies.  While AREVA has announced plans for a facility using proven technology similar to that being used by LES in New Mexico, the AREVA facility has not yet even been sited.  Delays in opening any of these enrichment plants will further increase the gap between domestic supply and demand. 

With these uncertainties in future supply, it is essential that nuclear generators have access to international sources of supply, including that from Russia.  The implications of uncertainty and unreliability that could result from having even one nuclear unit sit idle for lack of timely delivery of fuel would be totally unacceptable.  A nuclear fuel market that is open and fair will be critical to expansion of nuclear generation worldwide.  Technological innovation is fostered by open markets.  Advancement is fostered by market competition, not by government protections and allocation schemes.  Recent trends in uranium pricing vividly illustrate that market signals can and do work. 

As the ultimate users of nuclear fuel with billions of dollars of generation investment at stake, no sector has more incentive to ensure the continued operation of a healthy fuel supply industry than the utility sector.  It is not in the self-interest of fuel buyers to become over-dependent on any single source of supply. U.S. utilities fully recognize the need to manage the costs and risks of operating their generating plants by maintaining diverse sources of supply for all fuel components.  Events in recent years have demonstrated dramatically the importance of supply diversity.  Physical and regulatory issues have triggered prolonged shutdowns of operating mining and conversion facilities, and delayed the opening of anticipated new sources.  Unexpected disruptions can occur in any portion of the supply chain, and utility managers cannot afford to be left without options to ensure plants stay on line.

The electric utility sector cannot operate its nuclear units without a secure fuel supply; without a successful nuclear electricity utility market, the nuclear fuel supply community will have no customers.  The parties represented at this table, along with the other sectors of the industry, are willing to work together, in cooperation with the U.S. government and the Russians, to achieve a framework that meets the common objective we all share – the continued growth of clean, safe nuclear energy. 

While there could be a number of options used to support continued growth of nuclear energy and competitive fuel supply, one potential vehicle for achieving our joint objectives might be a government to government agreement modeled after the very successful U.S.-Russian HEU Agreement.  Such an agreement could be consistent with the mutual U.S. and Russian objectives of fuel supply assurance.  Successful development and maintenance of adequate sources for enrichment supply in both countries to support a robust generation industry underscores that countries seeking to begin nuclear generation need not pursue their own enrichment facilities to be certain of supply.  

NEI appreciates the opportunity to address the committee and would be happy to answer any questions you may have.