News & Events

Thank you, Tony, for that encouraging report on where we stand today.

I am privileged to be associated with an industry that has demonstrated such world-class performance over the past 15 years or so and, more importantly, demonstrated the ability to sustain that performance—year in and year out.

As you know, I spent 38 years in the U.S. Navy, the last eight as director of Naval Reactors. Those of you who were ever associated with our Navy’s nuclear power program understand that we are not easily impressed. But the commercial nuclear industry’s performance is, by any measure, impressive. I salute you who did this, and thank you for making me part of this team.

I am also proud to stand here before you today and welcome you to San Francisco and this annual conference of the Nuclear Energy Institute.

And I am excited about the prospects for nuclear energy in the next several years. Tony’s report shows that we have built a strong foundation on which to build the future of nuclear energy in America and around the world.

Annual events like this Nuclear Energy Assembly are a good time to step back and take stock of where we are, and where we’re going. Tony Earley has given us an honest assessment of where we are.

Let me pick up where he left off and give you a blunt assessment of our unfinished business. We must be hard-nosed about the challenges and opportunities we face, or we will not address the challenges successfully, nor will we capitalize on the opportunities.

I want to focus on three major areas today: New nuclear plant construction. Used fuel management. Public, political and investor confidence and credibility.

We have unfinished business in all three areas.


First, new nuclear power plant construction.

Our political leaders, policymakers and even the general public have rediscovered the strategic value of nuclear energy as part of a diversified fuel and technology portfolio. Market forces have forced that recognition: declining reserve margins; growing need for new baseload generating capacity; unsustainable pressure on natural gas supply resulting in chronic, punishing price volatility; growing compliance pressures and cost on fossil-fired electric generation; mounting political concerns about climate change and greenhouse gas emissions.

All of these forces, buttressed by the sustained high levels of safety and reliability that Tony Earley talked about, have brought us to the brink of what many call the nuclear renaissance.

With the Energy Policy Act of 2005, the federal government has given us the tools to undertake the massive capital investments that will be required to build the next generation of nuclear power plants. The 20 or so new plants now in varying stages of planning and design represent probably $40 billion to $60 billion of investment. The production tax credits, regulatory delay insurance and loan guarantees in the Energy Policy Act are the catalysts driving the growing interest in new nuclear plant construction.

The Energy Policy Act formally recognized nuclear energy as clean energy, and provided a broad grant of authority in these three areas. Obtaining that authorization was a struggle, and required the exercise of substantial political effort and will. It was tough: Many of you worked with us, and with key members of Congress, to get that job done.

Tough as it was, however, implementing these provisions is just as challenging.

These are complex programs and initiatives. In one case, like the regulatory delay insurance, it has never been done before. Fashioning workable rules, guidelines and programs to realize the value of these three major financial incentives is a huge undertaking, and we have not completed the implementation—not by a long shot. The heavy lifting is still ahead of us.

Several weeks ago, the Treasury Department’s Internal Revenue Service published interim guidance on allocation of the production tax credits for new nuclear plants. Remember that last year’s legislation provided a credit of $18 per megawatt-hour for up to 6,000 megawatts of new nuclear generating capacity. The law was silent on the key issues of how to establish eligibility for the credit, and how to allocate the 6,000 megawatts.

NEI worked closely with the industry to develop a comprehensive recommendation on these issues and, I am pleased to report, Treasury largely accepted the approach we recommended. In order to qualify for the tax credit, companies must file applications for construction and operating licenses by the end of 2008. In order to receive an allocation, those projects must be under construction by the start of 2014.

So far, so good. But we have additional work to do in order to extract maximum financing value and leverage from these new tax credits. We must, for example, ensure that final regulations allow the credits to be transferred to passive equity partners. Some of the equity investors in new nuclear power plants may not be electric generating companies. They will be large financing institutions with equally large tax appetites. Their participation as potential investors could depend on their ability to gain access to the production tax credit.

Last year’s energy legislation also provided the so-called “standby support”—a $2 billion program designed to indemnify the first six new nuclear projects against delays caused by breakdowns in the regulatory process or by litigation. Federal risk insurance is provided routinely to American companies doing business overseas—through institutions like the Overseas Private Investment Corporation. But I’m not aware of any analogue that protects private-sector investment from unwarranted delay or intervention by our own government. Still, you will recall that this was one of the provisions in last year’s energy legislation to which President Bush was personally committed.

The Department of Energy published its interim final rules on standby support just last week. This is a complex rulemaking, and we are still in the process of analyzing the interim rule. We will recommend improvements where necessary and appropriate to create a workable program that meets the legislative intent. I commend the Department of Energy for the systematic way in which it has approached this rulemaking, starting with the Notice of Inquiry and public workshop last year. This approach afforded industry and other stakeholders the opportunity to provide input to the process before draft rules were developed.

And finally, we have the loan guarantee authority created by Title XVII of the Energy Policy Act. This provision is critical to our unregulated generating companies. It will allow them to structure more highly leveraged projects, with the debt secured by the government guarantee.

This will reduce overall cost of capital and reduce total project cost significantly. NEI’s modeling shows that the loan guarantee provision will reduce busbar cost by about 30 percent.

Although crucial for the merchant generating companies, we also see substantial interest in loan guarantees from those companies that remain subject to cost-of-service regulation, and that will build new nuclear plants as rate-based projects.

The Department of Energy is now developing guidelines to implement the loan guarantee program. NEI, working with the industry, has provided recommendations on major implementation issues.

I cannot possibly give you a complete inventory of those issues, but let me give you one example. The legislation allows DOE to provide a guarantee for up to 80 percent of total project cost. We assume that means a 100 percent guarantee for the 80 percent total project cost. However, generic loan guarantee guidelines from the Office of Management and Budget limit federal loan guarantees to 80 percent of the loan amount. If that guideline holds in the energy loan guarantee program, the project’s cost of capital would increase—because the guarantee would cover only 80 percent of the 80 percent project cost—and the project’s economic viability would erode somewhat.

There’s no reason for this to happen. The OMB guideline is just that: A guideline. Other federal credit programs, including the loan guarantees provided by the Export-Import Bank and the Rural Utilities Service, guarantee 100 percent of the loan amount. So we must work aggressively to ensure that the loan guarantee program is structured and priced and managed so that it is workable, and achieves the legislative intent.

In summary, we have several more months of analysis and negotiation and rulemaking ahead of us on implementation of last year’s energy legislation. I believe we will succeed in obtaining workable implementing regulations. But that outcome is not a foregone conclusion. It will not be automatic.

On top of the financial issues, we face a mountain of regulatory and licensing work. We have project-specific preparation of license applications—but also generic licensing issues—that must be resolved before companies can submit license applications … that will withstand regulatory scrutiny and not be subject to extensive revisions and requests for additional information, post-filing.

I’m talking about the major revision to Part 52, the new regulatory process, that is now under way ... development of COL application guidance ... development of a new Standard Review Plan to guide Nuclear Regulatory Commission staff reviews of
new-plant license applications ... and development of new security rules for new nuclear plants.

As Tony reported, we already have 10 companies currently preparing COL applications or planning new nuclear plants, yet the rules governing these applications are changing.

The NRC’s work must be concluded before the end of this year in order to support timely filing of applications for construction and operating licenses in 2007.

This is a substantial burden on NRC and industry resources, and places a high premium on efficiency on both sides. Both the industry and the NRC must perform well, exercising discipline, doing the job right the first time.

Success may require innovative approaches on both sides, new ways of doing business, possibly sharing of common project management tools and scheduling platforms to surface schedule and resource issues quickly, and to ensure accountability. I commend the NRC for taking initial steps in the direction of greater efficiency, by adopting its “design-centered” approach to license reviews. That is a good start, but we must do more.

This approach must extend into the licensing of specific projects, so that we learn from experience how to prepare and process applications more efficiently and more quickly. Follow-on applications for nuclear plants that reference a design that has already been licensed can be, and must be, processed more quickly than the first reference plant, since the only new information involves site-specific issues.

We simply must navigate smartly and adroitly through this licensing work. Remember that eligibility for the production tax credits and, possibly, the availability of other investment stimulus, is tied directly to NRC licensing milestones. We cannot afford to miss licensing milestones.

Before I leave this issue, I must tell you that our plans to build new nuclear power plants is a fledgling initiative. Like all fledglings struggling to leave the nest, this one is still fragile. NEI cannot possibly do this work alone. We need the entire industry working together, planning together and speaking with one voice. As we’ve seen, it simply is not productive when individual companies strike out on their own. There may be a time for that, sometime in the future. This is not that time.


Let me turn now to the issue of used fuel management.

I don’t believe I’ve ever been involved with a program that has so many moving parts. Let me quickly review the state of play.

• We have a site at Yucca Mountain in Nevada that was judged suitable by the president and the Congress some years ago, and we have $6 billion worth of scientific investigation and 20 years of study standing behind that suitability determination.
• We have the Department of Energy working hard to develop a new schedule for the project, including a firm date for filing the license application with the NRC. That application would have been filed by now if not for:
  • the lawsuit on the radiation standard, which sent the Environmental Protection Agency back to the drawing board
  • the need to investigate allegations of document falsification by U.S. Geological Survey scientists, now put to rest
  • the need to recertify the Licensing Support Network
  • design changes necessary to accommodate DOE’s recent decision to simplify surface facility design and use multipurpose canisters.
• We have a legislative proposal from the Bush administration that makes needed midcourse corrections to the Yucca Mountain program. Tony Earley covered the major elements of that legislation. This legislative proposal is well-aligned with the industry’s priorities, with the exception of one big missing element: A plan to move used nuclear fuel from our plant sites either to Yucca Mountain or to interim storage facilities. What’s missing is the fundamental government obligation that has gone, and is going, unexecuted.
• We have a much abbreviated legislative calendar in Congress this year, owing to the midterm elections, so the prospects for comprehensive legislation are difficult, at best.
• We have a new nuclear initiative from the Bush administration called the Global Nuclear Energy Partnership. GNEP is, first and foremost, a long-term vision for global expansion of nuclear energy, designed to minimize concerns about proliferation.

But GNEP does have distracting implications for used fuel management. It envisions the development of new technologies to reprocess used nuclear fuel, to separate out those materials that might produce additional energy, to fabricate fuel from those elements, and to use that new fuel in advanced fast flux reactors.

Despite the best efforts of the administration and NEI to explain otherwise, GNEP is too frequently characterized as a substitute for a permanent repository at Yucca Mountain, or as a reason to delay development of a repository—sometimes mistakenly by those who don’t know better, sometimes maliciously by those who do know better. GNEP is, of course, not a substitute for Yucca Mountain, or a reason to delay it.

No matter what the fuel cycle, or what the reactor type, nuclear power plants will always create long-lived waste byproducts that require long-term management.

We might reduce their volume and their heat load and their radiotoxicity—through technologies suggested by GNEP—but we will never eliminate those waste byproducts and we will, therefore, never eliminate the need for a permanent repository.

And remember, we will always need a repository for defense waste and for tens of thousands of tons of legacy fuel that will never be recycled.

The key question for our industry is this: Given these developments, imperatives and constraints, where do we go from here? How do we reconcile these objectives and priorities, which are not always perfectly aligned? How do we stitch together a coherent and credible program from these different threads?

We start by establishing priorities, and our NEI Executive Committee did this in February. The industry’s highest priority is for the government to take title to and begin moving used nuclear fuel from our plant sites as required by law.

The number-two priority is developing a statutory finding of waste confidence, to ensure that used fuel issues do not stand in the way of continued operation of existing plants or new-plant licensing.

Number three is freezing the nuclear waste fee at one mill per kilowatt-hour, and ensuring that all funds collected for the program are actually used for that purpose, and not diverted to other federal programs.

These are reasonable and responsible requirements, fully consistent with the Nuclear Waste Policy Act.

We want them as a single package in a single comprehensive piece of legislation.

We will take them separately, one by one, if we must, but only because the political reality in Congress forces us to accept incremental solutions rather than comprehensive ones.

Progress on all is better than progress on one. Progress on one is better than no progress at all.

Beyond these priorities, we can also establish certain guiding principles for this program.

• Certainty is a guiding principle. There must be an end game, and that end game is an integrated national waste policy that includes geologic disposal deep underground in a stable rock formation—the approach recommended by independent scientific organizations around the world, including our own National Academy of Sciences. Beyond question, the Yucca Mountain site meets this criteria.
• Safety is a guiding principle. We must be confident that pool storage and dry cask storage of used fuel at our plant sites, transportation, and long-term storage and disposal at a centralized facility continue to pose no threat to public health and safety. We know this to be true. On-site storage of used nuclear fuel is safe today, and safe for the indefinite future.
• Realism is a guiding principle. We must be realistic about how long we will be storing used nuclear fuel at our plant sites. With license renewal, our newer plants will be operating until 2040 and beyond, and generating used fuel until then.
• Flexibility is the fourth principle. We must have a national waste policy and used fuel management program that is flexible enough to accommodate advances in technology that could, in the longer term, have a profound impact on repository design. Higher burn-up fuels, advanced recycling technologies, advanced fuels, new reactors able to extract energy from today’s used fuel—all these would change the character, timing, size and scope of the nation’s used fuel management program. I would encourage us to stop talking in terms of a “solution to the used fuel issue.” This program is not an event, but an evolving process. The so-called “solution” 20 years from now almost certainly will be different from the “solution” we define today.
• And, finally, I would counsel patience as an important principle. This is a long-term program, designed to isolate radioactive materials for thousands of years. The delays are a source of immense frustration for us and for others, like the state public service commissioners who approve customer contributions to the Nuclear Waste Fund. The federal government must redress the delay that is the source of so much frustration—preferably by moving used fuel now—but we must also recognize the political environment and should not expect the delays to go away soon.

As I said earlier, this is a process, not an event, and will be influenced by programs like GNEP, by politics—particularly election outcomes—and by how disciplined and how agile we are in defining our priorities and executing plans to achieve them. The remainder of this year, and the rest of the Bush administration’s term in office, represents a window of opportunity to shape our nation’s policy for used fuel management. We are committed to making progress on this complex and politically challenging issue.


Before I leave you, let me say a few words about public, political, and investor support and confidence. Tony touched on this, but this truly is the glue that holds our business together. We can achieve 100 percent success in the two major areas I’ve discussed today, but it avails us little if we do not cultivate and earn the support and confidence of the public, of our political leaders and of our investors.

I’m sure we all know this, but we are being watched. In fact, we are being watched very closely.

Our political leaders and supporters are watching to see whether we are able to deliver a return on the political capital they invested in our industry in last year’s Energy Policy Act. I can assure you that key committees of the Congress will be exercising their oversight responsibilities aggressively: They are already asking the industry and the NRC why they are not seeing more rapid progress.

Will we rise to the challenge and move aggressively to build new nuclear plants, or shrink from the task?

Our investors are watching to see whether we can build new nuclear plants to cost and schedule. The financial community has a long memory. Many of them remember—or have heard about—our industry’s experience during the late 1970s and 1980s, when plant construction durations stretched out and costs soared. This 20-year-old prejudice is the common wisdom on Wall Street.

We must re-educate the financial community about the new licensing process, about how much more disciplined it is, and about the financial incentives in the Energy Policy Act and how they work to contain risk. NEI is doing this, but I beg you to integrate this educational effort into your own investor relations programs. We will help—with generic materials and briefing papers, sharing of best practices, and exchange of information.

We must continue to build the confidence of our political leaders and investors. The most important imperative here remains excellent operation of existing plants. We must become more open, more transparent. We must integrate community relations into our business planning. And when we break ground on new plants, we must be exacting and disciplined, and set realistic cost and schedule targets, and then we must meet them. We will be watched closely for any sign that we cannot manage these massively complex construction projects. On this, we cannot fail.

Finally, we must exercise a degree of care and humility with all, and particularly with those who may be skeptical about nuclear power but willing to listen, who may be inclined to support nuclear energy but have questions.

I call these the “Yes, but” questions.

“Yes, I support nuclear energy, but I’m a little concerned about safety.”

Or “Yes, I support nuclear power, but I’m a little concerned about used fuel.”

Or “Yes, I support nuclear power, but I’m a little concerned about cost.”

These are not attacks. They are legitimate questions, and we should treat them seriously and with sensitivity. Our industry raises many complex issues. We can help lift the veil and build understanding by simply telling the truth. We know the facts, and the facts are on our side.


I believe there are two kinds of people in the world. George Bernard Shaw described the two types well in one of his plays. One of the characters says: “You see things, and you say ‘why?’ But I dream things that never were, and say ‘why not?’”

Let’s reflect on that for a moment.

One kind of person looks at the world and sees it as it is, with all its difficulties and imperfections, and throws up his hands in frustration and despair and asks: “Why?”

The second type of person looks at the world and thinks about how it could be, how it should be, and summons up his or her energy and courage, and declares: “Why not?”

I didn’t sugar-coat anything this morning.

We have a lot of work to do. We can get it done. We will get it done.

We will relaunch this industry and this source of energy.

All we need is 10 or 20 or 30 thousand men and women like those in this room who will look at the world, and see how it should be, and who will say: “Why not?”

I know you are with me. Why not?