Good morning, and welcome to this year’s Nuclear Energy Assembly. I’m honored to have the opportunity, once again, to highlight the achievements of this remarkable industry, especially the outstanding performance of our nation’s nuclear power plants.

Today’s excellent nuclear plant performance is the result of many years of hard work. The industry started with a strategic vision, translated that vision into discrete actions, or tactics, and ultimately achieved the world-class performance level we envisioned at the beginning.

For example, a nuclear plant capacity factor of 70 percent once was cause for celebration. Last year, the industry average was nearly 91 percent.

Safety performance also is world-class—clear evidence that safety and efficiency go hand in hand. We must continue the relentless focus on safety that has brought the nuclear energy industry to this high level of performance. “Complacency” has no place in our lexicon—and certainly no place in the way we operate and maintain our nuclear reactors.

Working together, the nuclear industry has achieved many other significant goals—for example, license renewal, safety-focused regulation, and a presidential recommendation to develop Yucca Mountain as a repository for used nuclear fuel.

A decade ago, license renewal was a long-term goal, and the outlook was cloudy. Now the Nuclear Regulatory Commission has renewed the licenses for eight reactors. Fifteen more are under review and license renewal applications for another 25 reactors will be submitted between June of this year and April 2005. That is nearly half the operating nuclear power reactors in the United States. We expect that virtually all U.S. nuclear reactors will pursue license renewal and that the NRC will continue to make the review process more efficient.

The industry and the NRC worked for many years on regulatory improvements. The days of prescriptive regulation are fading into the past, as the NRC implements more safety-focused approaches based on plant performance.

Consolidation has changed our industry substantially, concentrating the ownership and operational responsibilities for nuclear reactors, in the hands of larger operating companies.

Consolidation is a positive strategic move for the nuclear industry, because it provides even better opportunities to share expertise, improve safety and achieve economies of scale. The biggest example of a successful industry strategy has been 20 years in the making, and the goal line is still ahead of us.

In February, President Bush recommended that Yucca Mountain be developed as a repository for used nuclear fuel and high-level radioactive defense waste. But because the host state—Nevada--has a unique right to object to the site designation, Congress must reaffirm the president’s decision for the project to move to the licensing phase.

I’m optimistic that Congress will do the right thing and approve development of the repository—but only if we remain committed in our support.

These are just a few examples of what the industry has been able to achieve by operating strategically—clearly defining what we wanted to achieve and staying focused on it—while implementing tactics designed to make those goals a reality.

The theme of our conference, “Operating Strategically in a Tactical World”, underscores that mission.

No matter how successful the nuclear industry is today, even greater potential lies ahead. Our best strategic planning and execution is required to continue this success. As my examples indicate, it isn’t an either/or decision—either to operate strategically or to operate tactically. We have to do both.

There is a famous quote by a Chinese general of the fourth century B.C., Sun Tzu: “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” In military terminology, strategy refers to the big picture—planning ahead so you’re ready for the next engagement. Tactics are the methods used when you engage the enemy. Those definitions are grossly simplified, of course, but they convey the relationship between the two. Business operates in a tactical world much of the time. Our enemy, so to speak, is anything that affects the long-term financial viability of our companies, endangering our ability to accomplish our mission.

The nuclear industry operates in a tactical world much of the time as well. For example, our initial response to the events of September 11 was, of necessity, a tactical one.

But we’re also reviewing our long-term strategy for nuclear plant security in light of the nation’s changing domestic security needs. Whether it is security or some other issue, we can’t get so caught up in the tactical world that we lose sight of strategic goals—or allow others to lose sight of them.

How can we ensure that the nuclear industry, and our individual companies, are using tactics that support our long-term strategy? Over the next day-and-a-half, you’ll hear a variety of perspectives on this topic. For my part, I’m going to discuss what the industry has been able to achieve by maintaining a strategic focus.

More than 20 years ago, the nuclear industry began to set strategic goals to improve plant performance. We weren’t satisfied with a capacity factor of 58 percent—the industry average in 1980. We knew that by improving the way we manage our plants, we could do better—and last year’s 91 percent average capacity factor attests to our success.

Nuclear plants in the top-performing quartile have a three-year rolling average capacity factor of 95 percent. Realistically, that is nearing the maximum level of performance, given that nuclear plants have to refuel and perform a good deal of maintenance and inspections while offline. It follows that with a high average capacity factor in 2001, the production from U.S. nuclear plants also was at record levels—about 762 billion kilowatt-hours. Clearly, the industry is sustaining the extraordinary production levels of recent years.

Our safety record remains outstanding, too. We now have about two years of experience with the NRC’s new reactor oversight process, which tracks 18 quantitative safety indicators. Most indicators across the industry are in the top level of performance. Nevertheless, the industry still can improve its performance.

The lowest-performing plants, which beat the average performers of 15 years ago, have some distance to go before they approach the level of today’s top-performing plants. But overall, we probably have squeezed out most of the large performance improvements that are realistically achievable, when viewed in three-year periods.

The industry’s goal is to sustain this high level of performance—which means maintaining our commitment to safety and constant, incremental performance improvements.

A moment ago, I mentioned security as an example of how the industry integrates strategy and tactics.

As I said, our response to September 11, and the NRC’s response, were largely tactical. All across the country, the nuclear energy industry moved immediately to place nuclear reactors at the highest level of security alert. The overall strategy was put in place long ago and the appropriate tactics are well defined. So when the moment came, we knew what we had to do and we did it—voluntarily.

Long-time critics of nuclear energy responded predictably, spinning tales of potentially catastrophic events involving nuclear power plants and, in some cases, calling for their shutdown.

It’s ironic because the nuclear industry probably has spent more time and resources on security and emergency preparedness than any other industry.

Nuclear power plants are the best-protected element of our nation’s critical infrastructure —protected by a combination of their robust design, sophisticated security equipment, and superbly trained, well equipped security forces.

Security at our sites rivals that in place at military installations. Since September 11, the nuclear industry has heightened security even more.

Immediately after the September 11 attacks, all nuclear power plants went to the highest level of alert—and they remain at that level today. Sustaining the highest level of security means that electric companies have added more qualified security personnel, increased surveillance patrols in owner-controlled areas, increased the distances at which vehicles are inspected, reduced visitor access and, in some cases—unfortunately—temporarily closed visitors’ centers and public recreational facilities on plant property.

Rigorous security programs have always been part of the way we do business. Security is an element of plant safety—which is why the NRC and the industry set the bar so high for individuals who want to become nuclear plant security officers.

Earlier this year, legislation was introduced in Congress that would make nuclear plant security officers federal employees. In fact, it would make them NRC employees. And what a different NRC that would be—part safety regulator, part security force. The NRC and the industry strongly oppose federalizing the security force. As NRC Chairman Richard Meserve has said, the proposal addresses a nonexistent problem.

Many policymakers and members of the public knew little about nuclear power plant security, until recently. The industry must ensure that policymakers, in particular, are well—informed about plant security so they can reassure the public.

Many plants have hosted members of Congress, the media and other opinion leaders, showing them the extent of the plant’s security measures, at least as far as safeguards considerations allow. Typically, the visitors have come away impressed.

Early this year, Florida Senator Bob Graham visited St. Lucie, which is just across the state from here, to put in a shift as a security officer, and observe first-hand the type of personnel, equipment and procedures that protect nuclear plants.

Senator Graham, who is chairman of the Senate Select Committee on Intelligence, communicated to his colleagues after his visit that nuclear plants are secure and that federalizing their security forces would not improve the already robust security at the facilities.

Since January, NEI has implemented an extensive communications program, including print and radio ads, in the Washington, D.C., area, to call policymakers’ attention to our security programs, which are second to none in the industrial sector.

The industry also is focusing on ensuring a seamless sharing of responsibility among the industry, state and local law enforcement agencies, the intelligence community and the U.S. military.

Toward that end, NEI is working with the NRC, the Office of Homeland Security, and Congress to clearly define the respective roles of industry and government.

So where does the public stand on nuclear plant safety, in light of recent events?
 
Several nationwide surveys have been conducted for the industry since September 11. In early October, 66 percent of the public said nuclear power plants are safe—a record high. That number declined a bit in February to 60 percent. However, even with the decline, public confidence in safety remains at the highest levels ever for the industry. By and large, recent attention to domestic security concerns has not diminished public support for nuclear energy—including new plants. Two-thirds of those surveyed in February said it would be acceptable to build a new nuclear power plant next to the nearest nuclear plant that is already operating.

The prospect for building new nuclear plants continues to have strong support among Washington, D.C., policymakers.

The administration, and many in Congress, recognize that nuclear energy is a vital part of our nation’s diverse and environmentally responsible energy portfolio.

Last October, President Bush made one of the strongest statements of support for nuclear energy that I have ever heard from a president of the United States.

He said:

We need to be more self-reliant and self-sufficient. It is in our nation’s interest that we develop more energy supplies at home. It is in our nation’s interest that we look at safe nuclear power.

Energy security is one of nuclear energy’s benefits. Environmental protection is another.

The Department of Energy reported in March that—for the second straight year—nuclear reactors accounted for the largest voluntary reductions in greenhouse gases.

By increasing the electricity production at their nuclear reactors, several generating companies were able to substitute emission-free electricity, for electricity generated by fossil-fuel-fired plants.

Let me explain what I mean when I say the largest reductions. DOE reported that 43 percent of the voluntary carbon reductions in 2000 resulted from nuclear energy. And that’s with only half the nation’s 103 reactors reporting data under the voluntary carbon reduction program.

Looking at it another way, nuclear energy-related carbon reduction projects accounted for less than 3 percent of the nearly two thousand projects reported by U.S. companies, yet they offset approximately 117 million metric tons of carbon equivalent.

Clearly, the United States must continue to rely on nuclear energy for a large portion of its electricity to promote our energy security and protect our nation’s air quality.

Business people with a keen eye for value know that nuclear reactors are an excellent investment. Just recently, Lew Hay’s company, FPL Group, was the winning bidder in the auction of the Seabrook nuclear plant in New Hampshire. FPL agreed to buy 88 percent of the plant for $837 million. That means another strong nuclear operator will gain a foothold in the Northeast, providing emission-free electricity to an area that desperately needs it.

 It is vital that our nation continue to rely on nuclear energy for a substantial portion of its electricity, and to maintain a diverse fuel mix.

It is also vital for the nation to develop a permanent repository for the used fuel from nuclear power plants, and from the aircraft carriers and submarines that help protect our freedom.

Today, used nuclear fuel and defense waste are stored in 39 states. It is safely managed in temporary storage, but there is broad agreement that it would be better to place the material in a central repository.

Early this year, Energy Secretary Spencer Abraham recommended to President Bush that Yucca Mountain, Nevada, be developed as a waste repository. His decision was based on 20 years of rigorous scientific study.

The president, in turn, recommended the site to Congress. As expected, Nevada objected, sending the issue to Congress for final resolution. Congress has until July 25 to decide whether the project should continue, or whether it will be killed. Approval will require a simple majority, but the politics of used nuclear fuel are never simple.

The nuclear industry has been working on various aspects of the Yucca Mountain project since 1987, when Congress designated that desert ridge in Nevada as the site to study for a potential repository. Since then, waste legislation has come and gone on Capitol Hill. The media have covered the project in thousands of pages of reporting. Sometimes we tired of reading about it.

This time is different. Absent approval of identical resolutions by a majority in both houses of Congress, Nevada’s objection will eliminate Yucca Mountain from any further consideration as a waste repository site.

As nuclear industry executives, we must ensure that the senators and congressmen who represent our states know how important this vote is. We recognize that the opponents are trying to scare votes away with horrors stories about transportation. Yes, transportation is and will be a challenge, but it is one that can be met successfully. Leaving nuclear material at storage facilities in 39 states is not the long-term solution. Leaving the federal government holding a huge financial liability for failure to meet its obligation to manage used nuclear fuel is not the long-term solution.

In recent action in the House, the House Energy and Commerce Committee passed—by a vote of 41 to 6—a House Joint Resolution approving Yucca Mountain, Nevada, for the development of an underground repository for the disposal of high-level radioactive waste, and used nuclear fuel.

This is excellent news, but much more remains to be done. The resolution could go to the House floor next week for a vote, and we expect it to be favorable.

The Senate will be more of a challenge. We expect hearings to begin in the Senate Energy and Natural Resources Committee later this month, but no date has been mentioned as yet for committee or floor vote.

The only action that supports a long-term solution for used nuclear fuel—based on science, not politics—is a vote to proceed with construction of the repository. We must remain vigilant in our support for this project.

The United States will need new nuclear power plants in the future to meet increased electricity demand, while protecting our nation’s air quality.

At last year’s Nuclear Energy Assembly, the industry announced Vision 2020, a strategy for adding 50,000 megawatts of new nuclear plant capacity and 10,000 megawatts of enhanced performance by current reactors by 2020.

By 2020, these 60,000 megawatts will be just enough to maintain nuclear energy’s current proportion of electricity generation, between 20 to 23 percent.

Energy Secretary Abraham announced a new program in February, Nuclear Energy, 2010, that sets the stage for building new nuclear power plants in the United States by the end of the decade. The Energy Department plans to invest $38.5 million in fiscal year 2003 as part of a multi-year program partnering with the industry, to demonstrate the Nuclear Regulatory Commission’s new plant licensing process.

This is on top of smaller amounts of fiscal year 2001 and 2002 money that DOE is in the process of awarding to support the first-ever early site permit applications. The U.S. Senate passed an amendment to national energy policy codifying the Nuclear Energy 2010 program.

We soon expect to see the first application for an early site permit for a nuclear power plant. Once granted, an early site permit will enable the company that holds it to consider building a nuclear plant when it needs new generating capacity. It provides for a higher degree of certainty—in other words, less risk—in the decision-making process. Dominion announced last month that it plans to begin work this summer on an early site permit application at their North Anna site and Entergy has chosen the Grand Gulf site for the same. Exelon also has said it plans to pursue early site permitting applications. All three are targeting a June 2003 submittal date.

The industry also is developing communication strategies for supporting successful early site permit applications and, at some point in the future, applications to construct and operate new nuclear plants.

Recently, Exelon announced that it will not participate in the pebble-bed modular reactor project beyond the current phase, which deals with feasibility and environmental impact assessments. That was a business decision, based on a change in the company’s strategic direction.

But the pebble-bed reactor project will go forward. Exelon’s expertise and leadership helped put this new design on the path to commercialization, and there continues to be strong interest in the design worldwide.

At this point in the history of nuclear energy in the United States, the industry is implementing near-term tactics to support long-term strategies related to security management of used nuclear fuel, ensuring that we have a future workforce of highly trained professionals and many other issues.

At last year’s Nuclear Energy Assembly, the future of nuclear energy appeared extraordinarily bright. The mood at that conference was nearly euphoric. Since then, many sobering things have happened in the United States and elsewhere around the world.

Have the prospects for nuclear energy dimmed? In a word, no. Last year, we talked about nuclear energy’s renaissance, and what it would take to move from renaissance to reality and to turn the positive developments into concrete progress.

We knew that the work ahead would be hard. We knew that it would call upon the best that is in us—as this technology always has. The industry already is working toward the big goals it established last year. And we will achieve those goals.

As we move forward, we must keep our eyes focused on strategies for ensuring a bright future for nuclear energy. Let’s not get so caught in the day-to-day press of competitive business tactics that we lose sight of the industry’s long-term goals. This is, and always will be, a long-term business.

Management expert Peter Drucker likens strategy to a ship’s compass bearing. Without one, he said, “A ship would neither find its port nor be able to estimate the time required to get there.” Our industry prides itself on setting meaningful goals and working collaboratively to achieve them.

We said we would achieve world-class reactor performance, and we did. We said we would renew the operating licenses for nuclear power plants, and we are.

We said we would see a safety-focused new regulatory oversight process put in place, and we did that too.

Last year, I noted that President Bush and Vice President Cheney had given us the ball when they included nuclear energy in the administration’s energy policy. Let’s move that ball across the finish line. Let’s bring the Yucca Mountain to a favorable closure, and get on with building new nuclear power plants.

Thank you.