Public Policy

Chairman Gekas, Ranking Member Nadler and members of the subcommittee, my name is Ted Garrish. I am a vice president at the Nuclear Energy Institute. NEI is the policy-setting organization for the U.S. nuclear energy industry. We represent more than 275 members worldwide, including every U.S. electric utility that operates a nuclear power plant, as well as suppliers, nuclear fuel cycle companies, engineering and consulting firms, radiopharmaceutical laboratories, universities, and labor unions.

Nuclear power plants produce nearly 20 percent of the nation's electricity and provide the largest source of emission-free energy in the United States. This energy source must be sustained to meet the energy, economic and environmental protection demands of the 21st century.

The U.S. nuclear energy industry has built a solid record of safe, efficient performance at the nation's 103 nuclear power reactors, making it the global leader in advanced nuclear power technology.

Obviously a critical component in determining the economic vitality of any industry is the tax structure under which it must operate. In the nuclear power industry, we are faced with somewhat unique circumstances. Our industry pays a user fee for its regulation by the Nuclear Regulatory Commission, and pays a millage fee for the ultimate storage of our used nuclear fuel. It is rare for an industry to pay for both the disposition of its used fuel and also its own regulation.

But it does not stop there. The nuclear industry, through its customers, actually pays for much more. The Nuclear Regulatory Commission annually collects nearly $50 million from user fees to pay for programs that are not directly related to regulating our industry. During the next fiscal year, it is anticipated that the Federal government will collect an additional half billion dollars more into the Nuclear Waste Fund than it appropriates to programs dedicated to its intended purpose, the management of used nuclear fuel.

While these two revenue raisers are generally referred to as fees, the fact is that both are broad-based taxes that are ultimately being collected from the consumers of nuclear generated electricity—used by nearly every American.

Because of the basic unfairness of the way these fees are applied to the nuclear power industry, I would like to voice our industry's support for the Taxpayer's Defense Act. Although this legislation would not solve all of the problems I mention, at a minimum, the protections offered by The Taxpayer's Defense Act would cause some significant positive changes in programs important to our industry.

The Nuclear Waste Fund was established in 1982 by the Nuclear Waste Policy Act (NWPA). That legislation imposed a one mill per kilowatt-hour fee on customers who use electricity generated by nuclear power. In return for paying this user fee to the Nuclear Waste Fund, the federal government was made responsible, by law, for the transport, storage and disposal of all commercially generated used nuclear fuel.

The Nuclear Waste Fund now receives a minimum of $630 million per year. To date, consumers have committed about $16 billion to the fund. As was fully intended by Congress, spending from the Nuclear Waste Fund in its initial years has not approached the revenues generated by the one-mill fee. In fact, the Energy Department has spent only $5.9 billion on the program, including $1.2 billion from defense appropriations. There is a balance of $8.6 billion.

According to a Department of Energy report released in December 1998, the one mill per kilowatt-hour fee will be sufficient to raise the $43 billion needed to fund the nuclear waste disposal program to its completion several decades from now. However, in the unlikely event that current projections prove incorrect, a mechanism was included in the NWPA to increase the fee.

Under current law, the Energy Secretary may propose a fee adjustment for consideration by the Congress. Under a provision that is generally considered unconstitutional, current law allows the Secretary's recommended fee increase to go into effect unless disapproved by one branch of Congress. Allowing one-house to override the Secretary's recommended fee increase amounts to a one-house veto of the type declared unconstitutional by the Supreme Court in 1983. The nuclear industry feels strongly that an affirmative vote of both houses of congress should be required to raise any tax or fee.

Over the past decade, Congress has used billions of dollars from the Nuclear Waste Fund to pay for totally unrelated programs-not the management of used nuclear fuel. At the same time, the Federal government already has failed to meet its obligation to begin disposing of used nuclear fuel by January 31, 1998.

Emmit George, the Chairman of the National Association of Regulatory Utility Commissions' (NARUC) subcommittee on nuclear waste disposal, put it best when he concluded:

"Ratepayer funds paid into the Nuclear Waste Fund are clearly not being used for their intended purposes, further impeding progress on the high-level waste disposal program."

The simple fact is that much of the money being collected from hundreds of thousands of consumers of electricity generated by nuclear power is being diverted to pay for completely unrelated projects. Put another way, the Nuclear Waste Fund has been used to help balance our budget or to artificially increase the surplus.

As a result, two major issues have arisen relative to this program and the Nuclear Waste Fund. First, the government has not performed its side of the bargain. DOE did not begin accepting nuclear fuel for long-term disposal by February 1998 as it was contractually obligated. In fact, the DOE has fallen at least 12 years behind in meeting its legal requirements.

And second, full access to the fund for appropriation has been difficult because expenditures from the fund have been subject to the spending limitations of the Budget Enforcement Act. Although the NWF has a $8.6 billion-dollar surplus, the Administration and Congress have not been able to fully fund the program due to current budget restrictions.

As Congress has attempted to reform the budget process regarding used nuclear fuel, several pieces of legislation have been considered. Each time these reforms were considered, there was a tendency to consider changes which included a mechanism to increase fees to make up for the procedurally produced shortfall in appropriations. In essence, the consumers of electricity generated by nuclear power would have to pay even more to subsidize unrelated federal spending. The bill this subcommittee is currently considering, The Taxpayers Defense Act would provide a degree of protection against arbitrary fee increases for the consumers of electricity generated by nuclear power.

Congress should make every effort to ensure that increases in fees such as the NWPA millage fee are not easily increased. The fee that supports the NWF should not be increased without the express consent of both houses of Congress. The approach embodied in The Taxpayers Defense Act is sane and sensible public policy and should govern the way that the nuclear industry's millage fee is increased.

Paying for more than our own regulation by the NRC
Yet another user fee, this time intended to cover the costs of NRC regulation of nuclear facilities, dramatically impacts the nuclear industry.

Nearly all of the operating costs of the Nuclear Regulatory Commission are currently assessed as user fees paid by that agency's hundreds of licensees. Since nuclear power plants are the most significant of those licensees, the 103 nuclear power reactors currently in service pay nearly 90 per cent of the Nuclear Regulatory Commission's budget. The portion of this year's NRC budget to be paid by its licensees is $448.4 million.

The process used by the NRC to collect its user fee is somewhat unique in our government. Congress starts the process by appropriating the NRC's budget for the coming fiscal year. The following spring, the NRC issues a rule, published in the Federal Register, to collect the necessary fees from its licensees. That rule is formally adopted several weeks later, and the fees are paid before the end of the fiscal year. Then the process begins anew for the next fiscal year.

Nuclear licensees have not always paid the entire cost of their regulation. The user fee started at 33 percent and was ultimately raised to nearly 100 percent as part of the Omnibus Budget Reconciliation Act of 1990. As is apparent from the title of that legislation, the user fee was raised in 1990 to help balance our budget.

That change has had some unintended consequences. Although most of the resources and staff at the NRC are dedicated to the regulation of its licensees, the NRC funds several programs that are not directly related to that goal. These programs include some international activities as well as the agreement state oversight program and others. In a report sent to Congress earlier this year, the NRC acknowledged that these programs cost approximately $50 million annually.

It is one thing for a user fee to pay for services that are received by the user. It is quite another for a user fee to pay for general programs that more appropriately should be supported by general revenues. Once again, fees from the nuclear industry are being used not for their intended purposes but to help balance our nation's budget or to increase the surplus.

As is the case with the Nuclear Waste Fund, current congressional budget rules stand in the way of an appropriate and fair resolution of this issue. Because the user fee offsets the appropriation to the Nuclear Regulatory Commission, limiting that fee to support only direct services would force appropriators to find funding for the exempted programs under already tight discretionary spending caps.

The Taxpayers Defense Act would help solve this problem. By defining a tax as a mandatory payment of money to the extent such payment does not compensate the Federal government or other payee for a specific benefit conferred directly on the taxpayer, the Taxpayers Protection Act would change the process for implementing the NRC's user fee.

Because that legislation requires that any rule raising a tax be approved by Congress, the NRC would be mandated, under the provisions of section 816 of the bill, to send its fee rule to Congress to be approved under the expedited procedures of this legislation. This will force the NRC and Congress to take a closer look at whether it is appropriate to collect user fees for services that are not directly related to the industry's regulation.

The Taxpayers Defense Act may also help resolve a somewhat different concern of the nuclear industry regarding the NRC's user fee. The NRC actually collects two types of user fees from licensees. The first are fees that are charged when a direct service is provided to a licensee. The second is an annual fee that is levied upon all licensees and that, in effect, collects the remainder of the NRC's budget not collected from direct fees.

Under this system, the NRC collects a mere twenty percent of its budget from direct fees and the remaining eighty percent is collected from generic annual fees. The nuclear power industry strongly believes that this is contrary to sound and open budgeting. Essentially eighty percent of the NRC budget falls into a miscellaneous category, preventing it from being adequately reviewed and analyzed by the Congress and other interested parties.

Our industry hopes that legislation like The Taxpayers Defense Act will help solve this problem. The definition of a "tax" is the key issue. If the annual generic user fee does not compensate the NRC for a "specific benefit conferred directly" upon the licensee, its implementation would require Congressional approval under section 816 of the bill. We would welcome the additional oversight that the procedures of that section would provide to that portion of the NRC's budget should this be the case.

To summarize, Mr. Chairman, the nuclear industry is paying nearly $1.1 billion dollars in fees to the federal government each and every year. But, the federal government is diverting one-half billion dollars of this revenue to pay for programs unrelated to the intended purpose of those fees. Few industries are burdened with such user fees, certainly not nuclear energy's competitors. Congress needs to level the playing field. The nuclear power industry urges your subcommittee to adopt The Taxpayer Defense Act in the hope that the legislation will begin to resolve our industry's concerns over unfair taxation in the guise of user fees.

Mr. Chairman, on behalf of the Nuclear Energy Institute and our membership, I want to thank the subcommittee for this opportunity to present our views on this important issue. I welcome any questions from the members of this subcommittee.