Public Policy

Chairman Barton, Ranking Member Boucher and distinguished members of the subcommittee, I am Marvin Fertel, senior vice president at the Nuclear Energy Institute (NEI). On behalf of NEI, I would like to commend you for focusing the 108th Congress’ attention today on legislation to implement comprehensive national energy policy.

NEI is responsible for developing policy for the U.S. nuclear industry. NEI’s 270 corporate and other members represent a broad spectrum of interests, including every U.S. electric company that operates a nuclear power plant. NEI’s membership also includes nuclear fuel cycle companies, suppliers, engineering and consulting firms, national research laboratories, manufacturers of radiopharmaceuticals, universities, labor unions and law firms.

The nuclear industry continues to play an important part in addressing the issues that face this country in meeting our energy needs.  Nuclear energy already is a vital part of our diverse energy portfolio, producing electricity—safely and cleanly—for one of every five U.S. homes and businesses. Our nation’s comprehensive energy policy must ensure an affordable, reliable supply of energy, and nuclear energy provides one of the solutions to several policy challenges that our nation faces. Among these policy challenges are:

• generating reliable and affordable electricity to meet projected increases in consumer demand over the next two decades
• protecting our nation’s air and ecological quality through the emission-free generation of electricity at nuclear power plants
• providing secure national energy supplies that are not susceptible to price spikes or disruptions because of global politics.

I will speak to each of these points briefly. Before doing so, however, I feel that I must comment on the readiness of our nation’s nuclear energy facilities in the wake of the events of Sept. 11, 2001.

We support to the fullest the president’s creation of the Department of Homeland Security, and we commend the leadership of the House of Representatives in supporting his efforts. We believe that a central organization is essential to provide the necessary integration of intelligence information, vulnerability and threat assessment and, ultimately, to assure the availability of necessary government resources to protect our critical infrastructure.

The nuclear industry’s goal is to develop a seamless integration of private and public capabilities to protect vital facilities within our country’s infrastructure, including nuclear energy facilities. This integration should coordinate response capabilities of industry, state and local entities, national defense and homeland security. The nuclear industry is working diligently with the Nuclear Regulatory Commission and other federal entities to achieve this comprehensive response capability.

Since Sept. 11, 2001, the nuclear energy industry has been on a high state of alert. The defense-in-depth inherent in the robust design of our plants has been reassessed and augmented. During the past 18 months, our industry has invested an additional $370 million in security-related improvements, including stronger perimeter security; improved background checks; and tighter access control at our plants. As part of this effort, the nuclear energy industry has added about one-third more security officers, for a total of 7,000 well-trained, heavily armed security officers at 67 sites.

The industry will continue to make these investments and improvements to comply with the Nuclear Regulatory Commission’s requirements.

Increased Nuclear Production
With assured security, the industry’s 103 operating reactors will continue to provide safe, affordable and reliable electricity for the nation. U.S. nuclear power plants generated a record 778 billion kilowatt-hours of electricity last year and the industry’s capacity factor—a measure of efficiency at power plants—was a record 91.5, well above any other type of power plants in the United States. The industry will continue to increase the amount of electricity generated by nuclear power by relicensing current reactors, continuing to improve efficiency and implementing new technology to “uprate” reactors. We also are pursuing major initiatives leading to building advanced nuclear power plants over the next two decades.

Nuclear energy is the second largest source of electricity in the United States. The industry has reached record levels of safety, reliability, efficiency and output in the United States.

Nuclear energy is the least expensive source of baseload power in the United States, with very stable forward pricing. It therefore provides stability to the entire country’s electrical supply system and plays an important role in sustaining our nation’s economy.

Nuclear energy’s contribution to U.S. electricity supply is essential to sustain economic growth, meet the electricity needs of our increasing population, and meet growing U.S. electricity demand for today and the future. The Energy Information Agency anticipates a 1.8 percent electricity growth rate through the next two decades, requiring the addition of 400,000 megawatts of new electricity capacity. The nuclear industry’s Vision 2020 strategic plan has set a goal of 50,000 megawatts of additional nuclear generation by 2020, which is required simply to maintain the nation’s current level of electricity production from emission-free sources, such as hydropower, nuclear and renewable energy. We must have new sources of energy for economic growth, but we also must maintain our commitment to improving our air quality and our environment. With nuclear energy, we can do both.

To satisfy this growing electricity demand, the nuclear industry is implementing a three-part program:

• maintaining the energy production of existing reactors through license renewal
• expanding output from the existing reactors by continuing to improve efficiency and reliability, and by investing the capital required to increase the capacity of the reactors
• laying the groundwork for construction and operation of new nuclear plants.

Several of America’s nuclear generating companies, working with NEI, are implementing a broad-based plan to create the business conditions necessary for construction of new nuclear power plants. The plan includes:

• initiatives to reduce the initial capital cost of new nuclear power plants
• programs to create a stable licensing regime and reduce regulatory uncertainties, including industry programs to demonstrate the new NRC processes for siting and licensing new nuclear plants.

The 1992 Energy Policy Act significantly improved the licensing process for new nuclear plants. All design, safety and site-related issues are resolved with full public participation before capital is invested. The chairman of this subcommittee, Mr. Barton of Texas, was a principal author of this major improvement to the NRC licensing process.

The new approach allows the NRC to:

• “certify” a standardized nuclear power plant design. Certification is a formal rulemaking process. It requires a substantial up-front investment to prepare a reactor design—complete and detailed enough to satisfy the NRC that the design meets all NRC safety standards.
• evaluate and pre-approve a prospective site for a new nuclear plant
• issue a single license to construct and operate a new nuclear plant if a company uses an NRC-certified design and a pre-approved site.

Three reactor designs—a 1,300-megawatt advanced boiling water reactor, a 1,300-megawatt pressurized water reactor, and a 600-megawatt pressurized water reactor—have been certified by the NRC. Two advanced boiling water reactors have been built in Japan. Taiwan is building two more. And South Korea is building variants of the large pressurized water reactor. A design for a 1,000-megawatt advanced pressurized water reactor is undergoing certification review, and five other designs are in varying stages of certification.

Private companies would only undertake investments of this size if new nuclear power plants are competitive in the marketplace with other sources of electricity and if there is stability in the regulatory process to license the facilities. Few policy initiatives, however, now exist to stimulate companies to invest in new nuclear plants sooner than they otherwise would. Though the Department of Energy is working with the industry to demonstrate the new plant licensing concepts, larger initiatives do not exist to reduce the investment risk associated with a large capital project, such as the construction of new nuclear power plants.

The policy initiatives necessary to stimulate construction of new nuclear generating capacity include:

• continuation of the Energy Department’s “Nuclear Power 2010” initiative, which is a government/industry partnership to pursue two short-term objectives: resolving technical and/or economic issues associated with new nuclear plant designs, and validating the new NRC licensing process—verifying that it works as intended and that it will not place private sector investment at risk. This initiative requires relatively modest federal investment in nuclear energy research and development.
• new authorization for the secretary of energy to provide financial assistance through loans, loan guarantees and lines of credit for a limited number of new nuclear projects
• changes to the tax laws to treat depreciation of investment in critical energy infrastructure—such as nuclear power plants—equitably with other large capital investment projects. Additionally, incentives through investment tax credits may be desirable.

Nuclear Plant Safety Lays Groundwork For Extending Operations
The excellent safety record of U.S. nuclear power plants lays the groundwork for refining regulatory oversight of these plants for extending the federal licenses of the reactors for an additional 20 years, to a total of 60 years of production.

Through the NRC’s revised nuclear plant oversight process, regulators now focus their attention on areas that are most significant to safety at the plant, rather than treating all areas as if they were of equal significance to safety.

In addition, America’s nuclear energy plants represent the gold standard for industry safety. Working in a nuclear power plant is safer than working in the banking industry, according to safety statistics from the Bureau of Labor Statistics.

In addition, the agency has put in place an efficient process for renewing the licences for today’s plants. The average nuclear plant today is about 18 years old, far from the expiration of its original 40-year operating period established in NRC licenses. The 40-year license term reflects both the amortization period generally used by electric utility companies for large capital investments and the licensing approach used for radio stations. However, as some of the plants built in the 1970s approach the end of their original license periods, experience demonstrates clearly that reactors can generate electricity safely much longer than their original 40-year license.

As computer systems, instrumentation and other technologies have advanced, whole systems have been replaced in nuclear power plants.  In many of these areas, nuclear power plants are virtually new, and they are safer and more efficient than ever.

Ten U.S. reactors already have been approved for 20-year license renewals, and about half of the nation’s 103 nuclear power plants have filed or announced plans to submit license renewal applications to the NRC during the next few years. NEI expects that nearly all of the nation’s reactors will eventually apply for license renewal.

Used Nuclear Fuel Management
The industry safely manages used nuclear fuel today at nuclear power plant sites. There has never been any health or environmental impact to the public from used nuclear fuel management.

Federal law has mandated the development of a centralized geologic repository for long-term stewardship of used fuel from nuclear power plants and the radioactive byproducts of the federal government’s nuclear programs. The Nuclear Waste Policy Act of 1982 and its 1987 amendments require DOE to locate, build and operate a deep, mined geologic repository for used nuclear fuel. The 1987 amendments designated Yucca Mountain, Nev., as the site to be studied for a potential repository.

President Bush last year approved Yucca Mountain as the site to develop a federal repository and the decision was upheld by the 107th Congress. I want to thank this committee for its leadership in moving the Yucca Mountain resolution in Congress. The next step in that process is the NRC’s licensing the repository site and granting construction authorization. DOE expects to file a license application with the NRC by December 2004.  It is imperative that DOE meets its milestones for licensing so the repository can be built and operating by 2010.

To pay for the repository, the Nuclear Waste Policy Act established the federal Nuclear Waste Fund. Since 1983, consumers of electricity generated at nuclear power plants have paid a tax of one-tenth of a cent per kilowatt-hour of nuclear-energy-generated electricity they use into the fund, which now totals some $22 billion in payments and interest. More than $6 billion from the Nuclear Waste Fund has been used for scientific and engineering studies.

Congress must ensure that the program is adequately funded through the annual appropriations process. Budget restrictions and processes that unnecessarily prohibit use of the Nuclear Waste Fund for project development must be removed. The nuclear energy industry supports the administration’s proposal to adjust the fund’s discretionary spending cap. We encourage the committee to support that proposal, but we recognize that a more permanent fix is needed to ensure that funds collected for the waste program are allocated as needed to that project.

Nuclear Energy’s Proven Role In Preserving Our Environment
Nuclear energy is the only large source of electricity that is both emission-free and readily expandable. Its exemplary safety record, outstanding reliability, low operating costs and future price stability make nuclear energy a vital fuel for the future.

Nuclear energy accounts for three-fourths of all U.S. emission-free electricity generation. The Bush administration has established a proposal to cut U.S. greenhouse gas emissions by 18 percent by 2012 through a voluntary approach that is compatible with economic growth. The administration clearly believes that nuclear energy is a key to the plan’s success. Secretary of Energy Spencer Abraham recently said of nuclear energy, “It’s obvious to me that an energy source capable of supplying a significant proportion of the world’s power with no greenhouse gas emissions should be at the center of the debate.”

The electric utility industry and DOE have established a voluntary partnership called Power Partners to develop and implement voluntary greenhouse gas reduction activities that will also sustain economic growth. Power Partners’ actions are guided by the principles of improved energy efficiency, increased investments in research and development, technological innovation, market-based initiatives, and cost-effective reductions in carbon emissions.

The nuclear energy industry will play a significant role in the Power Partners program. The U.S. nuclear industry can increase its output by about 10,000 megawatts of capacity by 2012, resulting in incremental reductions of 22 million metric tons of carbon equivalent. The additional electricity production at nuclear power plants would come from power uprates, improved productivity and plant restarts.

As a result, the nuclear energy industry could meet one-fifth of the president’s goal of reducing greenhouse gas emissions by 18 percent in the next 10 years, building upon the nuclear industry’s clean-air accomplishments during the past four decades.

Looking beyond 2012, the nuclear energy industry is prepared to play a major role in sustaining the president’s commitment to reduce the greenhouse gas intensity of the U.S. economy, as the industry pursues its goal of building 50,000 megawatts of new nuclear energy capacity in the United States by 2020. This additional 50,000 megawatts would reduce U.S. greenhouse gas emissions by approximately 100 million metric tons of carbon equivalent. At the same time, nuclear energy avoids emissions of sulfur dioxide and nitrogen oxide.

Public Support for Nuclear Energy
Protecting our environment and improving U.S. energy security are among the reasons why two out of three Americans favor nuclear energy as one way to generate electricity.

Another reason for the public’s steady support for nuclear energy is that the public views nuclear energy as a fuel of the future.

In an October 2002 survey, a record high 73 percent of college graduates registered to vote favored the use of nuclear energy. Those who “strongly support” the use of nuclear energy outnumbered those who “strongly oppose” by an increasingly wide margin—three to one.

Nearly two-thirds of the general public favored nuclear energy, and the gap between those who strongly favor (30 percent) and strongly oppose (15 percent) nuclear energy is the largest that it has been during the past two decades. The trends among the general public over the years have paralleled those among college graduates who are registered to vote—but the more educated and politically active group always has been more favorable toward nuclear energy.

Record numbers of college graduate voters—88 percent—also supported renewing the licenses of nuclear power plants that meet federal standards, and 77 percent strongly agreed we should keep the option to build more nuclear power plants in the future.  Fifty-nine percent of college graduate voters and 55 percent of all adults agreed that we should “definitely build more nuclear power plants.”

Comprehensive Energy Legislation
NEI believes that diversity of supply and technology are the strength of our electrical system. With regard to nuclear energy’s role in a comprehensive energy policy, NEI encourages the committee to support the following recommendations:

Renewal of the Price-Anderson Act
Congress should renew the Price-Anderson Act as soon as possible. The Price-Anderson Act of 1957, signed into law as an amendment to the Atomic Energy Act, provides for payment of public liability claims related to any nuclear incident. It is a proven framework that has worked for nearly 45 years.  Given this proven record, Congress should renew it indefinitely. If needed, Congress can reopen the law—as it can any law—at any time if modifications are needed. In addition, Congress can request periodic updates on the status of Price-Anderson Act implementation from the NRC in order to provide a basis for change if necessary.

In its 1998 report to Congress, the Nuclear Regulatory Commission said that the Price-Anderson Act has “proven to be a remarkably successful piece of legislation” that has grown in depth of coverage and that proved its viability in the aftermath of the Three Mile Island accident.

Amendments to the Atomic Energy Act
The Atomic Energy Act should be amended so that the NRC is positioned to meet the energy challenges of the 21st century.  Recommended amendments to the law include:

• Removing the statutory requirement that NRC conduct antitrust reviews of applications to build new nuclear plants.  This review already is being done by other federal agencies that have the core competencies to perform it.     
• Removing the statutory prohibition of foreign ownership of U.S. commercial nuclear power plants.  The NRC would have the responsibility to ensure that their actions are not inimical to our national security.
• Ensuring that smaller, modular nuclear reactors are not subjected to inappropriate liability under the Price-Anderson Act’s secondary financial protection provision.

The secretary of energy should be authorized to provide financial assistance through loans, loan guarantees and lines of credit to a limited number of new nuclear projects.

Tax treatment updated to reflect today’s business conditions and to enable sustained private sector investment in, and large-scale commercial deployment of critical energy infrastructure, particularly large capital projects—such as nuclear projects.  Also, reform is needed for tax treatment for decommissioning funds, as in the House version of H.R. 4 that was passed last year.

Authorization for nuclear energy research and development should include:

• Funding for government/industry activities, including the Nuclear Energy Research Initiative, aimed at the development of new reactor technologies; the Nuclear Energy Plant Optimization, focused on the optimization of existing reactors; and the Energy Department’s “Nuclear Power 2010” initiative, with an objective of building a new reactor within this decade.
• Authorization to support enhanced university nuclear science and engineering programs to ensure ample nuclear professionals for the future.
• Funding demonstration projects using nuclear energy to produce hydrogen, both at existing nuclear energy plants and through new advanced reactors.  NEI urges supporting a demonstration project for using new reactor designs in this effort at a national laboratory.  This would provide a dramatic boost to the president’s Clear Skies initiative to promote the use of this clean fuel for the future.
• Providing increased predictability for the introduction of uranium from U.S. government inventories into the commercial marketplace.  Market participants must be able to plan prudently for the introduction of this uranium into the market, and to avoid adverse affects on the domestic uranium mining, conversion or enrichment industries.
• Elevating the Office of Nuclear Energy at the Department of Energy to assistant secretary status, thereby assigning the appropriate level of focus to nuclear energy within the nation’s energy policy.
• Creating an Office of Used Nuclear Fuel Research within the Energy Department.

Conclusion
Nuclear energy provides clean, affordable and reliable electricity to one of every five U.S. homes and business and has been a vital partner in meeting clean-air requirements since passage of the Clean Air Act.  As our country’s electricity demand continues to rise, nuclear energy will be even more important to American consumers.  A prudent national energy policy must include provisions for expansion of the nuclear energy industry. One of the most fundamental elements of America’s economic strength is the diversity of energy supply that drives our economy. Nuclear energy is a critical component to preserve our diverse energy supply, to continue to lessen our dependence on volatile foreign energy, and to meet new requirements for emission-free electricity.

Thank you for this opportunity to share the nuclear energy industry's perspective on the important policy issues this subcommittee is considering. NEI encourages the subcommittee to give full consideration to the policy recommendations the industry has outlined in this testimony.