[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



                 NATIONAL ENERGY POLICY: NUCLEAR ENERGY

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON ENERGY AND AIR QUALITY

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 27, 2001

                               __________

                           Serial No. 107-10

                               __________

       Printed for the use of the Committee on Energy and Commerce



 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house
                               __________

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                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio                RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania     EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia                 SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma              BART GORDON, Tennessee
RICHARD BURR, North Carolina         PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa                    ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia             BART STUPAK, Michigan
BARBARA CUBIN, Wyoming               ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois               TOM SAWYER, Ohio
HEATHER WILSON, New Mexico           ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona             GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING,          KAREN McCARTHY, Missouri
Mississippi                          TED STRICKLAND, Ohio
VITO FOSSELLA, New York              DIANA DeGETTE, Colorado
ROY BLUNT, Missouri                  THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia                  BILL LUTHER, Minnesota
ED BRYANT, Tennessee                 LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland     MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana                 CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California        JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska

                  David V. Marventano, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

                 Subcommittee on Energy and Air Quality

                      JOE BARTON, Texas, Chairman

CHRISTOPHER COX, California          RICK BOUCHER, Virginia
STEVE LARGENT, Oklahoma              RALPH M. HALL, Texas
  Vice Chairman                      TOM SAWYER, Ohio
RICHARD BURR, North Carolina         ALBERT R. WYNN, Maryland
ED WHITFIELD, Kentucky               MICHAEL F. DOYLE, Pennsylvania
GREG GANSKE, Iowa                    CHRISTOPHER JOHN, Louisiana
CHARLIE NORWOOD, Georgia             HENRY A. WAXMAN, California
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
HEATHER WILSON, New Mexico           BART GORDON, Tennessee
JOHN SHADEGG, Arizona                BOBBY L. RUSH, Illinois
CHARLES ``CHIP'' PICKERING,          KAREN McCARTHY, Missouri
Mississippi                          TED STRICKLAND, Ohio
VITO FOSSELLA, New York              THOMAS M. BARRETT, Wisconsin
ROY BLUNT, Missouri                  BILL LUTHER, Minnesota
ED BRYANT, Tennessee                 JOHN D. DINGELL, Michigan
GEORGE RADANOVICH, California          (Ex Officio)
MARY BONO, California
GREG WALDEN, Oregon
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Aurilio, Anna, Legislative Director, U.S. PIRG...............    89
    Domenici, Hon. Pete V., a United States Senator from the 
      State of New Mexico........................................    51
    Hutchinson, C. Randy, Senior Vice President, Business 
      Development, Entergy Nuclear...............................    61
    Hutzler, Mary J., Director, Office of Integrated Analysis and 
      Forecasting, Energy Information Administration.............    26
    Longenecker, John R., Longenecker & Associates, Inc., 
      Management Consultants.....................................    81
    Magwood, William D., Director, Office of Nuclear Energy, 
      Science and Technology, U.S. Department of Energy..........    20
    Sproat, Edward F., III, Vice President of International 
      Programs, Exelon Corporation...............................    77
    Tollison, Alfred C., Jr., Executive Vice President, Institute 
      of Nuclear Power Operations................................    70
    Travers, William D., Executive Director for Operations, U.S. 
      Nuclear Regulatory Commission..............................    13
Additional material submitted for the record:
    Longenecker, John R., Longenecker & Associates, Inc., 
      Management Consultants, responses for the record...........   139
    Sproat, Edward F., III, Vice President of International 
      Programs, Exelon Corporation, responses for the record.....   136

                                 (iii)

  

 
                 NATIONAL ENERGY POLICY: NUCLEAR ENERGY

                              ----------                              


                        TUESDAY, MARCH 27, 2001

                  House of Representatives,
                  Committee on Energy and Commerce,
                    Subcommittee on Energy and Air Quality,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1 p.m., in 
room 2123, Rayburn House Office Building, Hon. Joe Barton 
(chairman) presiding.
    Members present: Representatives Barton, Cox, Largent, 
Burr, Whitfield, Ganske, Norwood, Shimkus, Wilson, Shadegg, 
Pickering, Bryant, Walden, Tauzin (ex officio), Boucher, 
Markey, Strickland, Barrett, and Luther.
    Staff present: Dwight Cates, professional staff; Yong Choe, 
legislative clerk; and Rick Kessler, minority counsel.
    Mr. Barton. The subcommittee will come to order.
    Today the Energy and Air Quality Subcommittee of the Energy 
and Commerce Committee will have another in its continuing 
series of hearings on our energy policy options for the United 
States. Today we are going to focus on nuclear energy, which 
currently provides one-fifth of our electricity and is our 
second-largest fuel source.
    We all know how few nuclear plants have been built 
recently, i.e. none. But that may soon change. Natural gas 
prices are expected to remain high for the foreseeable future, 
especially with the current difficulties in gaining access to 
new resources and building infrastructure to market natural 
gas.
    As this happens, other generation becomes more cost 
competitive. Our current generation of nuclear plants have 
shown increases in efficiency and safety, along with decreases 
in cost, as some of our witnesses will explain later.
    Today witnesses will discuss several different parts in the 
nuclear industry with a focus on the future. I want to commend 
Chairman Meserve of the Nuclear Regulatory Commission for all 
of his leadership efforts. Unfortunately, he cannot be here 
today. I have heard good things about his leadership and 
continue to work with him and the Commission and believe his 
interaction with this subcommittee has been very, very 
cooperative.
    I do want to thank Dr. Travers, who is here today for the 
NRC, and I also want to thank our friends from the Department 
of Energy and the Energy Information Agency for being here.
    Commercial witnesses on our second panel include Entergy, a 
utility that has decided to make nuclear energy a part of its 
strategy for the future. Another witness can talk about one of 
the next generation technologies that might make up future 
nuclear plant orders--the Pebble Bed Modular Reactor.
    It is important to note that there are other competing 
technologies, some of which have already been approved by the 
NRC. In general, future plants will be easier to permit because 
of the uniformity, less expensive because of their next 
generation technology, and more efficient as a power generator.
    Later in this Congress, this subcommittee will begin to 
explore the vitally important issue of the nuclear fuel cycle 
concerning our Nation's mining, conversion, and enrichment 
capability. I welcome any statements for the record that those 
entities might offer.
    Mr. John Longenecker is here today to speak on those issues 
as a whole as the focus today is somewhat more on the 
regulatory side.
    Finally, the incredibly important issue of nuclear waste 
policy will be dealt with by this subcommittee later in this 
Congress. We all await news of the scientific work that is 
being currently done at Yucca Mountain and the site 
recommendation that is due to the Secretary of Energy later 
this year.
    This subcommittee, on a bi-partisan basis, reported 
legislation last year dealing with the budget issue, 
environmental standards, interim storage, transportation, and 
on the waste storage issue. We will discuss this same issue 
again later this year and hopefully successfully resolve it, 
put a bill on the President's desk that he can sign.
    A problem with spent fuel cited at more than 100 sites 
throughout our nation is getting worse, not better. The Federal 
Government must live up to its obligations to take that waste 
out of its distributed locations and get it safely in one 
proper repository. If a Federal solution is not found soon, 
some plants will be forced to close, not because of problems 
with the plants but because of laws dealing with the waste that 
they generate.
    That would mean that our electric reliability would be 
threatened. We have seen first-hand in California the effect on 
the economy and livelihood of consumers what happens when 
dysfunction occurs in the electricity markets. In the first 
half of this year, we will hold a hearing specifically on 
nuclear waste, Yucca Mountain, and the Federal Government's 
progress toward that decision deadline.
    We will also look at the hearing record to draft a 
comprehensive national energy policy that almost certainly will 
include a revitalization and nuclear option. We should identify 
changes in laws and regulations that promote retention of the 
nuclear option and even its expansion.
    The Price-Anderson Act is up for reauthorization during 
this Congress, and we must address liability and disaster 
preparedness issues to send the signal that new next generation 
nuclear plants are welcome in this country. Nuclear will and 
must be a part of a balanced policy.
    For those who want a reliable electricity source from 
plants with growing efficiency in a fuel source of domestic 
supply, I say, ``Look at nuclear.'' For those who don't like 
dams or natural gas pipelines, I say, ``Look at nuclear.'' And 
for those concerned about emissions from coal plants, I say, 
``Look at nuclear.'' You kind of get the message in this.
    In my opinion, after all of the hearings in this and 
previous Congresses, one cannot possibly discuss a balanced 
energy portfolio without taking a fresh and unbiased look at 
nuclear power. I look forward to the testimony of the witnesses 
today and the questions that the subcommittee is going to ask.
    I would now like to recognize the ranking minority member, 
a distinguished gentleman from Virginia, Congressman Boucher.
    Mr. Boucher. Thank you very much, Mr. Chairman. Today we 
will learn about the current contribution of nuclear power to 
our national energy portfolio, its future potential, and what 
steps, if any, we might take in order to ensure that nuclear 
energy has a place in a balanced energy portfolio for the 
future.
    In that light, I am very pleased to note that our 
subcommittee will hear testimony later this afternoon from the 
Senator from New Mexico, Mr. Domenici. As chairman of both the 
Senate Budget Committee and also the Energy and Water 
Appropriations Subcommittee, Senator Domenici is uniquely well-
positioned to comment on energy policy, and I look forward very 
much to his testimony and to having the benefit of his 
insights.
    After coal, nuclear plants are our Nation's second-largest 
source of electricity and generate approximately 20 percent of 
our total electricity output. But there is increasing 
uncertainty about the future role that nuclear energy will play 
in our Nation's energy mix.
    Although the Energy Information Administration identifies a 
total of 259 nuclear units that were ordered since the 1950's, 
all of those orders occurred before 1978. No new orders for 
commercial nuclear power plants were placed during all of the 
Reagan, Bush, or Clinton Administrations.
    Similarly, no new construction permits have been issued 
since the end of the Carter Administration. Furthermore, the 
total number of cancellations by utilities of ordered units 
stands at 124. The uncertainty surrounding the role of nuclear 
energy may be due, in part, to the fact that nuclear power 
production has proven to be highly capital-intensive.
    Siting is also a problem for nuclear power plants. Despite 
a commendable safety record during the course of the past 
decade, the public's negative perception of nuclear power has 
not changed significantly during the past 20 years.
    Another matter of concern is the current state and 
uncertain future of our Nation's domestic nuclear fuel 
production capability, in view of the privatization of the U.S. 
Uranium Enrichment Corporation. The problems attending its 
privatization were clearly delineated by a recent decision of 
the United States District Court for the District of Columbia, 
and its ongoing problems have been the source of numerous 
inquiries by this subcommittee and its individual members, 
particularly Mr. Strickland and Mr. Whitfield.
    Finally, there is the question of nuclear waste disposal. 
Chairman Barton, the ranking member on the full committee, Mr. 
Dingell, and other members of this committee have demonstrated 
a bipartisan and serious commitment to ensuring that waste from 
our Nation's nuclear power plants will be disposed of 
permanently in an environmentally safe and scientifically sound 
manner.
    But that goal may be slipping away from us because of the 
diversion of ratepayer money from the nuclear waste fund for 
other purposes--an event that is threatening to derail the 
repository program which is paid for through the nuclear waste 
fund. And that fund was created under the 1992 Act to pay for 
the DOE repository program.
    While more than $15 billion has been paid into the fund, 
only about $6 billion has been appropriated for the repository 
program. Data provided to the subcommittee by the DOE in recent 
years indicates that unless the balance in the waste fund is 
restored, the repository program will face significant funding 
shortfalls beginning in 2003, which in turn could jeopardize 
prospects for opening the repository by 2010.
    Moreover, if damages from utility lawsuits are determined 
to be awarded from the waste fund, and not from some other 
governmental source, the funding shortage will be significantly 
exacerbated. The only way that we can truly remedy this 
situation is to restore the nuclear waste fund to its off-
budget status, as this committee voted to do by a margin of 40 
to six during the last Congress.
    Surely, in a time of great surplus, we can afford to take 
this simple but essential step. And I look forward to working 
with my colleagues here, as well as in the other body, to 
accomplish this goal.
    Mr. Chairman, despite these challenges, I note that during 
our testimony today we will have witnesses from two electric 
utilities who are optimistic about the prospects for nuclear 
energy in the future. And I think that is a positive 
development.
    In order to assure access to affordable, safe, and reliable 
energy, we must develop a balanced energy portfolio and, in my 
view, nuclear power should be part of that mix. The Federal 
Government already helps the nuclear industry by limiting its 
liability under the Price-Anderson Act.
    And among the items which should be on the agenda of this 
subcommittee is the reauthorization of the Price-Anderson 
legislation during the course of this Congress. And we should 
ensure that a permanent nuclear waste repository will open by 
the end of this decade.
    These efforts, taken together, may or may not prove 
sufficient. Some utilities and their shareholders foresee a 
future for nuclear industry. Their advice concerning the steps 
this committee should take to address the several problems that 
confront the industry will be most welcome, and I want to 
commend you, Mr. Chairman, for assembling this afternoon an 
excellent conversation on this subject with knowledgeable 
witnesses who I am sure will provide outstanding guidance.
    Mr. Barton. I thank the gentleman from Virginia.
    We now welcome the gentleman from Kentucky, Mr. Whitfield, 
for an opening statement.
    Mr. Whitfield. Thank you, Mr. Chairman. As many people 
know, the Paducah Gaseous Diffusion Plant will soon become the 
only uranium enrichment facility in operation in the United 
States. We also have one remaining converter of natural uranium 
in this country, and that conversion plant is located in 
Metropolis, Illinois.
    Just last week, the Nuclear Regulatory Commission approved 
the high assay upgrade license at the Paducah plant to allow 
the plant to enrich uranium to the 4 or 5 percent level needed 
to power nuclear reactors. As has been stated, nuclear power 
supplies about 22 percent of our Nation's electricity, but 
nuclear power plants obviously cannot operate without enriched 
uranium.
    As I stated earlier, there will soon be only one enrichment 
facility in this country, and over half of our domestic supply 
of uranium comes from Russia. But the Russian supply has been 
interrupted five times in 5 years, and many people fear it will 
soon become too costly to produce enriched uranium in the U.S. 
because it is cheaper to import from foreign sources.
    The electricity crisis in California has taught us many 
lessons, and one is that it reminds us, once again, we can ill 
afford to rely on only one form of power generation in America, 
and particularly as demand continues to exceed supply. Nuclear 
energy is a key component to providing for our power needs now 
and in the future as the existing plants obtain relicensure to 
operate for another 20 years, and hopefully we will have new 
power plants coming online.
    As we go through this hearing, there are a number of issues 
we must focus on, but I want all of us to remember the 
importance of protecting our domestic capability to enrich 
uranium in the U.S., and I look forward to the testimony of our 
panels. And I yield back the balance of my time.
    Mr. Barton. We thank the gentleman from Kentucky.
    We now recognize the gentleman from Massachusetts for an 
opening statement.
    Mr. Markey. Thank you, Mr. Chairman, very much. And I thank 
you for calling today's hearing. It is very, very timely.
    Tomorrow is the 22nd anniversary of the Three Mile Island 
nuclear accident, and April 26 will mark the 15th anniversary 
of the Chernobyl nuclear accident. Now these two events--Three 
Mile Island and Chernobyl--stand as a stark warning to us about 
the enormous risks and dangers inherent in nuclear reactor 
operations.
    The nuclear industry supporters like to say that more 
people have died from other forms of electricity generation 
than from nuclear power. But when there is an accident in a 
coal mine, they don't give warnings to pregnant women and 
children to evacuate all of Central Pennsylvania. When there is 
an explosion of a natural gas pipeline, they don't force 
100,000 people to flee the area and to throw away all fresh 
vegetables and fruit across Europe.
    While offsite exposures at Three Mile Island were low, we 
now know that we came close, very close, to a catastrophe. At 
Chernobyl, at already know that at least 31 people have died, 
140 people suffered severe radiation sickness and impairment, 
and hundreds of thousands more were exposed to significant 
levels of radiation.
    Of course, the full human cost of the Chernobyl disaster is 
still unknown, as those who have been exposed face the dread 
prospect of thyroid cancers and other radiation-induced 
illnesses.
    And what of nuclear waste? When are we ever going to solve 
that issue? If the nuclear industry is so clean, why is the 
nuclear utility industry trying to weaken groundwater 
protection standards--weaken--for the Yucca Mountain waste 
repository? If it is so clean, why is the nuclear industry 
trying to take away the EPA's power to establish these 
standards and give it to the NRC?
    If it is so safe, why is the nuclear industry seeking to 
retain taxpayer-subsidized Price-Anderson insurance? If it is 
so safe, why is the industry so insistent on retaining the 
provisions of Price-Anderson that indemnify the DOE contractors 
transporting spent fuel from any liability in the case of an 
accident? The Mobil-Chernobyl provision.
    And if nuclear power is so economically viable, why is the 
industry seeking taxpayer financed Federal subsidies in the 
form of special tax breaks, special R&D subsidies, and even a 
Federal subsidy to help defray future licensing costs? If it is 
so economic, why do we provide government subsidized 
irradiation services for years, a subsidy that we will revive 
if we were to bail out the U.S. Enrichment Corporation as some 
now desire?
    If it is so economic, why do the utilities come in for 
bailouts of their so-called stranded nuclear investments? Just 
over the last 5 years, bailouts that disguise the true costs of 
nuclear power by shifting acquisition and construction costs 
from nuclear utility shareholders to captive utility consumers.
    I look forward to obtaining the answers to these questions 
in the course of the day, so that I can really find out whether 
or not this is a technology which is economical, is safe, and 
is clean.
    I thank you, Mr. Chairman.
    Mr. Barton. I thank the gentleman.
    The gentlelady from New Mexico, Congressman Wilson, is 
recognized for an opening statement.
    Ms. Wilson. Thank you, Mr. Chairman. I appreciate your 
holding this hearing because nuclear energy has to be part of 
any comprehensive national energy policy. We have 104 nuclear 
generating plants in the United States providing some 20 
percent of the power that we rely on for electricity.
    And over the last decade, power produced by nuclear plants 
has increased by 30 percent, roughly the equivalent of building 
23 new nuclear power plants, while by every measure safety has 
improved markedly during the same period. The cost to produce 
nuclear power is less than 2 cents per kilowatt hour, which 
compares with coal at over 2 cents and natural gas at about 3.5 
cents per kilowatt hour.
    Yet, with the demand for electricity growing every year, no 
nuclear power plants are projected to come online by 2020, and 
nuclear power is projected to decline to only 11 percent of the 
Nation's electricity generation by 2020. I am here to say today 
that things are changing.
    Since the incident at Three Mile Island, expanding reliance 
on nuclear power has been a non-starter in America. It has been 
in the ``too hard'' column. In the context of rolling blackouts 
in California, high prices, growing demand for power, and 
continued environmental protection and global warming concerns, 
America is taking a second look at nuclear power. And we 
should.
    On this committee we are often charged with assessing risks 
and benefits, balancing competing interests--in this case, the 
need to protect the environment and public health with the need 
to make sure that America's energy needs are met.
    We are trying to craft an energy policy for America that 
will reduce the dependence on foreign oil, make sure adequate 
power is available at a reasonable price, protect the public 
health, promote conservation, and minimize impact on the 
environment. Every source of energy has risks and benefits. 
Where there are risks we should seek to mitigate those risks, 
whether by investing in research and clean coal technology or 
improving the safety designs of nuclear reactors. But we cannot 
take one energy source off the table as we have in the last 20 
years.
    One of the barriers to increasing nuclear power capacity is 
the capital cost of plants, and there is new and emerging power 
designs, some of them being tested in South Africa, that 
promise the possibility of making the capital cost competitive 
with other kinds of technologies.
    We have challenges to address--opening Yucca Mountain, 
reauthorizing Price-Anderson, regulatory streamlining. It is 
time to take on those challenges and take nuclear power out of 
the ``too hard'' category.
    Thank you, Mr. Chairman.
    Mr. Barton. We thank the gentlelady.
    We recognize Congressman Strickland for an opening 
statement.
    Mr. Strickland. Thank you, Mr. Chairman. I am pleased that 
we are holding this hearing today because I believe, as I have 
stated at previous subcommittee meetings, that we face an 
urgent problem in this country; that is, the demise of a 
reliable domestic nuclear fuel supply.
    Last year, on June 20, the United States Enrichment 
Corporation announced it would cease production at the 
Portsmouth, Ohio, gaseous diffusion plant in my district. This 
decision by USEC leaves one gaseous diffusion plant in this 
country located in my friend Mr. Whitfield's district in 
Paducah, Kentucky.
    This decision is alarming, Mr. Chairman, because the 
Portsmouth facility is the only plant with the capability of 
enriching uranium to the desired commercial assay. I understand 
this past Saturday the Paducah plant was able to enrich a 
little over 4 percent assay. I think that is good news. But it 
is important to note that reactors presently use nearly 5 
percent assay, and the trend is toward higher assay fuel.
    Portsmouth is the only plant licensed to enrich up to 10 
percent assay. As you know, over 20 percent of electricity in 
this country comes from nuclear generation. Currently, the U.S. 
depends on imports from Russia for over 50 percent of its 
nuclear fuel, and we understand that USEC is proposing to 
import even more fuel from Russia's commercial vendors, which 
would place U.S. nuclear power plants in an OPEC-like 
dependency on Russia.
    Given this existing dependency on Russian material, it 
seems absolutely reasonable to request that the Portsmouth 
plant is placed in a warm standby mode until we know for sure 
that the Paducah plant is capable of enriching uranium to 
commercial-grade over a reasonable period of time.
    Mr. Chairman, I have reviewed a number of reports which 
have been released by GAO, the NRC, and DOE in the last few 
months, and a particular report by the NRC predicts that the 
Paducah plant may cease to be economically viable after the 
year 2003. If the NRC is correct, and Paducah is not viable 
after 2003, do we want to become dependent upon Russia for 
nearly 80 percent of our nuclear fuel supply?
    I say again, we have an urgent problem on our hands, one 
that must be addressed within the next few weeks or the next 
few months. Certainly, we don't have years. And I hope today's 
hearing will shed some light on what it is that we can do as a 
Congress, or what the administration and the Congress can do 
together, to make sure that our Nation's energy supply is 
secure.
    Thank you, and I look forward to our witnesses.
    Mr. Barton. We thank the gentleman from Ohio.
    The distinguished full committee chairman, Mr. Tauzin, is 
recognized for an opening statement.
    Chairman Tauzin. Thank you, Mr. Chairman. Mr. Barton, thank 
you for holding the hearing today for examining the critical 
role that the Nation's energy infrastructure plays in the life 
of our country, and the fact that nuclear now supplies as much 
as 20 percent of the Nation's electricity cannot be forgotten.
    Interestingly enough, over the past decade, the same 
nuclear reactors that provide our country with 20 percent of 
our electricity have increased their output and efficiency by 
30 percent, and that's pretty remarkable considering that we 
haven't licensed a new nuclear plant for many years.
    Recently I have noticed, however, initial stages of 
resurgence in nuclear power and the interest of building new 
nuclear plants. The current energy crisis we are in requires us 
to understand that natural gas and coal should not be the only 
fuel sources for developing our future electric generation 
capacity.
    Likewise, nuclear reactors have become a hot item in 
restructured markets. Six reactors have changed hands in the 
last 24 months. Several electric utilities have outlined 
aggressive plans to invest and to extend the life of existing 
plants because they are still reliable and provide a 
competitive stream of electricity.
    Witnesses today will reveal that some utilities are 
contemplating the construction of new nuclear plants, and that 
is good news for maintaining the diversity of fuels that our 
country requires.
    I want to make it clear, however, that it is not Congress 
or the administration which will determine how many nuclear 
reactors should be in operation. Ultimately, the fate of 
nuclear power will be determined by the private sector, and 
energy markets will determine whether new and existing nuclear 
plants are an economical source of generating capacity.
    But the actions we take here in Congress can directly 
affect the future outlook for maintaining a mix of fuels that 
obviously should include nuclear energy.
    Here are the few issues that I think we need to consider, 
Mr. Chairman. First, the compensation liability provisions of 
the Price-Anderson Act are set to expire in the year 2002. It 
is important that Congress reauthorize Price-Anderson, because 
without it there will be no real opportunity to construct or to 
operate new nuclear facilities.
    Second, the NRC must regulate reactors to ensure they are 
safe. The NRC must administer its authority in a consistent and 
even-handed manner that does not discourage companies from 
future investments in nuclear power.
    Third, the NRC must be prepared to renew as many as 30 
reactor licenses that are set to expire in a few years. They 
recently renewed licenses to extend the life of five reactors 
in the states of Maryland and South Carolina, but, obviously, 
with 30 requiring action the NRC must be prepared to manage 
dozens of renewal requests in the near future.
    Fourth, it has been 20 years since they issued a new 
license to construct a nuclear reactor, and we should all be 
concerned that the NRC may be a little rusty in responding to 
any future requests.
    Fifth, Congress and the administration must work harder to 
sell the long-term disposal of spent nuclear fuel, and this is 
not just a problem for the nuclear industry but also a big 
problem for the Department of Energy. In the long run, it is 
not safe to store spent nuclear fuel in dozens of locations 
around the country at facilities designed only for short-term 
storage. Continued uncertainty here will only discourage future 
development of nuclear power.
    The nuclear industry, the administration, and Congress must 
focus our attention on the future viability of our domestic 
fuel industry as the gentleman just spoke to. We must make sure 
that the country can produce nuclear fuel to feed our future 
energy needs and to maintain our national security interest.
    That is just a short list, Mr. Chairman, and I am sure this 
hearing and other hearings will develop more. But I want to 
thank you for identifying these issues and making this inquiry 
a major part of the fuel and energy review that your committee 
is undertaking in advance of producing with the administration 
a new energy policy for this country.
    Nuclear is, and will be, a major component of that policy. 
This hearing is, therefore, critically important.
    I thank you and yield back the balance of my time.
    Mr. Barton. We thank the distinguished full committee 
chairman.
    The gentleman from Georgia, Mr. Norwood, is recognized for 
an opening statement.
    Mr. Norwood. Thank you, Mr. Chairman. I am sorry I was a 
minute late. I was trying to time it so I could follow Mr. 
Markey, and, doggone it, I missed it by one. I particularly 
thought he would enjoy my opening statement.
    I thank you very much for conducting this hearing today on 
nuclear energy and its role in the national energy policy of 
our country. I am glad to be here today discussing this 
subject, because I believe that everyone's goal of enacting 
coherent, comprehensive energy policy is contingent upon 
developing and maintaining a sound nuclear energy policy.
    Nuclear power plants generate approximately one-fifth of 
the electricity consumed in the United States, second only to 
that of coal. Given the relatively stable price of nuclear 
fuel, nuclear power is the lowest cost power in the nation, 
averaging below 2 cents per kilowatt hour, well below the 3 to 
4 cents per kilowatt hour cost of natural gas.
    Nuclear power generation enjoys significant environmental 
advantages encompassing the largest source of emission-free 
generation of electricity in the United States. Nuclear power 
doesn't hurt the ozone or cause smog. Electricity generated 
from the 103 U.S. nuclear plants account for roughly two-thirds 
of the emission-free electricity, far exceeding hydropower's 
contribution of approximately 29 percent.
    Innovation with the research and development of sound 
science has proved that disposal and storage of spent nuclear 
fuel can be done in a safe and an environmental-friendly 
manner. We are now very close to selecting Yucca Mountain as a 
permanent repository for spent nuclear fuel. However, many, 
many years have passed since the last permit was issued to 
construct a nuclear plant in this country. Given the evidence 
in support of nuclear power generation, I fail to understand 
why.
    I have said it before, but I would like to say it again 
here today, Mr. Chairman. Electricity is the lifeline of our 
economy and is of paramount importance to the entire public 
interest. Electricity disruption and unreliability on a 
national scale in my view would be catastrophic. If you don't 
believe me, just ask our friends out in California.
    The United States cannot afford to allow politics to 
continue to dictate something contrary to good science and good 
public policy.
    Thanks to our competent chairman and his leadership, this 
subcommittee has now held three hearings on the current crisis 
in California. Although a number of factors have contributed to 
the problems there, at the end of the day it is still a problem 
of supply and demand. Demand for electricity in the United 
States is projected to continue rapid and expansive growth.
    Nuclear energy is reliable, competitively priced, and 
emission-free. No other generation source of electricity can 
provide significant amounts of low-cost and reliable power 
while enhancing air quality.
    Mr. Chairman, I appreciate the substance of these hearings, 
but, more importantly, the open and methodical process in which 
they have been held. It is a pleasure to work with this 
subcommittee as we seek to craft what will be a real and 
comprehensive energy policy.
    Mr. Barton. I thank the gentleman from Georgia, and let me 
say I look forward to working with him on health policy when I 
have a chance to get to the Health Subcommittee.
    Mr. Norwood. I will take care of it for you. Don't worry.
    Mr. Barton. I know you will take care of it.
    The gentleman from Oregon, Mr. Walden, is recognized for an 
opening statement.
    Mr. Walden. Thank you, Mr. Chairman. I will forego an 
opening statement at this time.
    Mr. Barton. Seeing no other members present, the Chair 
would ask unanimous consent that all members of the 
subcommittee not present have the requisite number of days to 
put their statement in the opening record at the appropriate 
point. Hearing no objection, so ordered.
    [Additional statements submitted for the record follow:]
 Prepared Statement of Hon. Greg Ganske, a Representative in Congress 
                         from the State of Iowa
    Mr. Chairman: I welcome Senator Domenici to the committee today and 
look forward to his thoughts on the future of nuclear energy. I am 
aware that nationwide nuclear power plants produce approximately twenty 
percent of the electricity consumed in the United States. However, my 
state of Iowa has only one nuclear facility in operation, the Duane 
Arnold nuclear power plant in Palo. Even with only one facility in my 
state, I am acutely aware of the need to establish a permanent 
repository for spent fuel. The Nuclear Waste Policy Act of 1982 
required that a site be established no later than January 31, 1998. Of 
course we all know that this has not taken place.
    This has caused local facilities to build more on-site storage 
facilities, which is not the best public policy option. The current 
goal of the Department of Energy for opening of the permanent site is 
now 2010 . . . twelve years past the original deadline.
    Mr. Chairman I am very aware that this committee has not been a 
part of the problem, and has indeed been a part of the attempted 
solution. However, I hope that this is the year that we can finally 
give some certainty to the future on this issue and get legislation 
completely through the process and adopted into law to address this 
matter.
    I am among those Members who are concerned about the level of 
carbon dioxide emissions worldwide and the impact that those emissions 
are having on the earth's temperature. Based only on emissions factors, 
obviously nuclear power presents a more favorable alternative. However, 
I feel we must resolve the questions regarding long term waste disposal 
before we consider expansion in the industry. Our cumulative experience 
in attempting to create a national permanent waste repository over the 
last two decades . . . has not been very encouraging. Thank you Mr. 
Chairman and I yield back my remaining time.
                                 ______
                                 
 Prepared Statement of Hon. John Shimkus, a Representative in Congress 
                       from the State of Illinois
    Good afternoon, Mr. Chairman and to all whom have shown up this 
afternoon. I am looking forward to this hearing today.
    I would very much like to thank the Chairman for holding this 
hearing today. As many of you here today know, I am from Illinois, 
which is home to more nuclear power plants than anywhere else in the 
country. So my opinion maybe a little biased.
    As we will hear from most of the witnesses today, nuclear is making 
a comeback. Only a few short years ago, the general public perception 
was that nuclear energy was at death's door. To paraphrase Mark Twain, 
the reports of nuclear's death have been greatly exaggerated. Not only 
have they been exaggerated, but nuclear energy is close to becoming our 
energy leader for the future.
    Nuclear is cheap and nuclear is emission-free. Over the last ten 
years nuclear energy has also become safer and more efficient. The 103 
plants that currently operate today produce more power than 110 plants 
did just 6 years ago.
    When talking about nuclear energy in a national energy policy, one 
thing is clear. If a cleaner environment and more affordable and 
reliable energy is the goal of a national energy policy, then nuclear 
energy must play a more pronounced role.
    A couple of weeks ago, many here heard me talk about all the 
positives of coal, another fuel that is plentiful in Illinois. I 
believe that coal, and nuclear and natural gas and hydro and all the 
other fuels need to part of a balanced national energy policy. Like any 
good retirement portfolio, we need to have a national energy policy 
that is diversified and uses all of our resources.
    The only real downside to nuclear energy is figuring out what to do 
with the waste. Yesterday, I visited Yucca Mountain with my colleague 
from Illinois, Mark Kirk. What I saw and heard there has solidified my 
belief that Yucca Mountain is a suitable place for a permanent 
repository. The only thing that is holding it back is politics, because 
the science is there. I would encourage my fellow members, whether you 
are for or against Yucca Mountain, to visit there and hear what the 
scientist have to say. I'm sure you find it as educational as I did.
    In closing Mr. Chairman, I would like to give you one statistic. 
Currently, France generates 80% of their energy from nuclear power. If 
the US did that, we would be 10% below the emission levels outlined in 
the Kyoto Protocol.
    Thank you.
                                 ______
                                 
Prepared Statement of Hon. Ed Bryant, a Representative in Congress from 
                         the State of Tennessee
    Mr. Chairman, thank you for holding today's hearing on nuclear 
energy. For too long, nuclear energy has had an image problem, despite 
its many advantages. When many Americans think about nuclear energy, 
they envision the bumbling Homer Simpson asleep at the control panel 
while the Springfield Nuclear Power Plant is on the verge of a 
meltdown. While the antics of Homer Simpson make for great comedy, the 
misrepresentation of nuclear power is no laughing matter.
    It's not often that I would find anything to compliment the French 
on, but France, by generating 80 percent of its electricity with 
nuclear power, has reduced its air pollution by a factor of five. 
However, nuclear power's future in the U.S. remains questionable 
because of the negative images of Three-Mile Island and Chernobyl, 
despite its advantages as a source of electricity free of harmful 
emissions.
    In reality nuclear energy is quite safe. Comprehensive and highly 
reliable automated safety procedures at nuclear plants operating in the 
U.S. keep the communities they are located in safe. The public stigma 
surrounding nuclear plants is one of several obstacles the nuclear 
power industry must overcome.
    Other obstacles include high initial construction costs, operating 
and maintenance expenses, long lead times, and regulatory uncertainty 
for new plants, which restricts the utilization of this generation 
option.
    We must streamline the regulatory process for nuclear power plants 
in the U.S.
    In addition, we must address unanswered questions about how to 
dispose of low-level nuclear waste and spent fuel from nuclear power 
plants. Currently, spent fuel is being stored on-site at nuclear power 
plants across the nation.
    Our nation's 103 nuclear power plants are valuable assets to the 
companies that own and operate them, as well as to the consumers that 
buy the electricity they produce. Nuclear power represents a vital 
hedge between the volatility of the natural gas market because of their 
predictable and stable operating costs. Unlike coal-fired plants, 
nuclear plants do not have to deal with constantly escalating 
environmental requirements and clean air standards that drive up 
production costs.
    From the rolling blackouts in California to our nation's dependence 
on foreign oil, the recent convergence of energy disasters is a wake-up 
call to this Congress to develop a National Energy Policy.
    In terms of environmental benefits, cost, and efficiency, nuclear 
energy should be a major part of a comprehensive National Energy 
Policy.
    I look forward to hearing the testimony of the experts on today's 
panel, and once again I thank the Chairman for addressing this issue.
                                 ______
                                 
 Prepared Statement of Hon. Bill Luther, a Representative in Congress 
                      from the State of Minnesota
    Thank you Mr. Chairman for holding today's hearing on nuclear 
energy. I am particularly pleased that you have included a public 
interest advocate to discuss some of the very real problems of long 
lasting radioactive wastes for which there currently is no safe viable 
solution. I am also hopeful that as we continue this series of hearings 
on domestic energy markets, we begin to focus more on renewable and 
alternative energy sources. Any national energy policy not weighed 
heavily toward developing new technologies will not result in long term 
solutions to today's growing energy crisis. Thank you and I yield back 
the balance of my time.

    Mr. Barton. We would now like to welcome our first panel 
today. We have, representing the Nuclear Regulatory Commission, 
Dr. William Travers, who is the Executive Director for 
Operations for the NRC. We have Mr. William Magwood, who is the 
Director of the Office of Nuclear Energy, Science and 
Technology, from the Department of Energy. And we have Ms. Mary 
Hutzler, who we had last week I believe, who is the Director 
for the Office of Integrated Analysis and Forecasting from the 
Energy Information Administration.
    We will start with Dr. Travers, and go to Mr. Magwood, and 
then Ms. Hutzler.
    At approximately 2 p.m., we expect that Senator Domenici is 
going to be here to testify on a nuclear reform bill that he 
has just put into play in the Senate. So we may have to break 
to let him testify when he arrives.
    Your statement is in the record in its entirety. We would 
recognize you for 7 minutes, Dr. Travers, to elaborate on it.

    STATEMENTS OF WILLIAM D. TRAVERS, EXECUTIVE DIRECTOR FOR 
  OPERATIONS, U.S. NUCLEAR REGULATORY COMMISSION; WILLIAM D. 
   MAGWOOD, DIRECTOR, OFFICE OF NUCLEAR ENERGY, SCIENCE AND 
  TECHNOLOGY, U.S. DEPARTMENT OF ENERGY; AND MARY J. HUTZLER, 
DIRECTOR, OFFICE OF INTEGRATED ANALYSIS AND FORECASTING, ENERGY 
                   INFORMATION ADMINISTRATION

    Mr. Travers. Thank you, Mr. Chairman, members of the 
subcommittee. I am pleased to testify today on behalf of the 
Nuclear Regulatory Commission regarding the NRC's perspective 
on how nuclear energy fits into the national energy policy.
    As the subcommittee knows, the Commission's statutory 
mandate is to ensure the adequate protection of public health 
and safety, the common defense and security, and the 
environment, in the application of nuclear technology for 
civilian use.
    Although the Commission's primary focus is on safety, it 
nonetheless recognizes that the quality, predictability, and 
timeliness of its regulatory actions bear on licensee decisions 
related to construction and operation of nuclear power plants. 
The Commission also recognizes that its decisions and actions 
as a regulator influence the public's perception of the NRC and 
ultimately the public's perception of the safety of nuclear 
technology.
    Currently, there are 104 nuclear power plants licensed by 
the Commission to operate in 31 different states. As a group, 
they are operating at high levels of safety and reliability. 
These plants have produced approximately 20 percent of our 
Nation's electricity over the past several years, and in 2000 
they produced a record 755,000 gigawatt hours of electricity.
    The Nation's nuclear generators have worked over the past 
10 years to improve nuclear power plant performance, 
reliability, and efficiency, while ensuring operational safety. 
The improved performance they have achieved is equivalent to 
placing 23 new large plants online. The Commission has focused 
on ensuring that safety has not been compromised as a result of 
these industry efforts.
    The nuclear industry has undergone a period of remarkable 
change. As electricity restructuring proceeds, the Commission 
is witnessing the start of the consolidation of nuclear 
generating capacity among a smaller group of operating 
companies and the development of a market for nuclear power 
plants as capital assets. As a result, the Commission has seen 
a significant increase in the number of requests for approval 
of license transfers. These requests increased from a 
historical average of about 2 to 3 per year to 20 to 25 in the 
past 2 years. The NRC has completed a number of improvements to 
its license transfer review process, and in calendar 2000 we 
reviewed and approved transfers in periods ranging from about 4 
to about 8 months. The Commission intends to strive to continue 
to perform at this level of proficiency even in the face of 
continued high demand.
    Another result of the new economic conditions is an 
increasing interest in license renewals beyond the original 40-
year term. That term, which was established by the Atomic 
Energy Act, did not reflect an engineering or a scientific 
limitation, but rather was based on financial and antitrust 
concerns. The Commission now has the technical bases and the 
experience on which to base judgments about the potential 
useful life and safe operation of facilities.
    The Commission has already reviewed the licenses of five 
units at two sites for an additional 20 years, and I am happy 
to report that the reviews of these licenses were completed on 
or ahead of schedule. Applications from an additional five 
units at three sites are currently under review, and many more 
are anticipated in the coming years.
    In recent years, the Commission has approved numerous 
license amendments that permit its licensees to make small 
power uprates. Collectively, these uprates supply the 
electricity equivalent to that of two large power plants. The 
Commission has received applications for several more 
substantial uprates and anticipates others within the near 
term.
    The Commission has responded to numerous requests to 
approve spent fuel cask designs for onsite dry storage. These 
actions, which are expected to increase as other nuclear power 
plants require additional fuel storage, are providing an 
interim approach pending implementation of a program for the 
long-term disposition of spent fuel.
    Certain matters also need to be resolved in order to make 
progress on a geologic repository. The Energy Policy Act of 
1992 requires the EPA to promulgate general standards while the 
Commission has the obligation to implement those standards. As 
you know, the Commission has concerns about certain aspects of 
EPA's proposed approach and is currently working with EPA to 
resolve these issues.
    The Commission also is in a period of dynamic change as the 
agency moves toward a more risk-informed and performance-based 
regulatory paradigm. Perhaps the most visible aspect of this 
effort is the new reactor oversight process. The new process 
was developed to focus inspection effort on those areas 
involving greatest risk while simultaneously providing a more 
objective and transparent process. The Commission continues to 
work with its stakeholders to assess the effectiveness of this 
new process, and to date the feedback received from both the 
industry and the public, in general, is favorable.
    In this period of increasing demand for electricity, 
serious industry interest in new construction of nuclear power 
plants in the United States has recently emerged. As you know, 
the Commission has already certified three advanced reactor 
designs. In addition to these, there are new nuclear power 
plant technologies such as the Pebble Bed Modular Reactor which 
some believe can provide enhanced benefits. The Commission 
recently directed the staff to assess its capabilities--the 
capabilities that would be necessary to review an application 
for a new reactor.
    In order to confirm the safety of new reactor technologies, 
the Commission believes that a strong nuclear research program 
should be maintained. A comprehensive evaluation of the 
Commission's research program is underway with assistance from 
outside experts. With the benefit of these insights, the 
Commission expects to undertake steps to strengthen our 
research program over the coming months.
    Linked to these technical and regulatory assessments, the 
Commission is reviewing its human capital to assure the 
appropriate professional staff is available for the Commission 
to fulfill its safety mission. In some offices, nearly 25 
percent of the staff are eligible to retire today. In fact, the 
Commission has six times as many staff over the age of 60 as it 
has staff under the age of 30. While the numbers of individuals 
with technical skills critical to the achievement of the 
Commission's safety mission is rapidly declining, the 
educational system is not replacing them. The Commission staff 
has taken steps to address this situation. However, the 
maintenance of a technically competent staff will require 
substantial effort for an extended period.
    Finally, Mr. Chairman, the Commission will continue to be 
active in concentrating its staff's efforts on its statutory 
responsibilities. Those statutory mandates notwithstanding, the 
Commission is mindful of the need to reduce unnecessary burden, 
so as not to inappropriately inhibit any renewed interest in 
nuclear power, to maintain open communications with all of its 
stakeholders, and to continue to encourage its highly qualified 
staff to strive for increased efficiency and effectiveness.
    Mr. Chairman, that completes my oral statement, and, of 
course, I will be happy to answer questions.
    [The prepared statement of William D. Travers follows:]
   Prepared Statement of William D. Travers, Executive Director for 
                               Operations

                              INTRODUCTION
    Mr. Chairman, members of the Subcommittee, I am pleased to submit 
this testimony on behalf of the U.S. Nuclear Regulatory Commission 
(NRC) regarding the NRC's perspective on how nuclear energy fits into 
the U.S. National Energy Policy. As the Subcommittee knows, the 
Commission's mission is to ensure the adequate protection of public 
health and safety, the common defense and security, and the environment 
in the application of nuclear technology for civilian use. The 
Commission does not have a promotional role--the agency's role is to 
ensure the safe application of nuclear technology if society elects to 
pursue the nuclear energy option. The Commission recognizes, however, 
that its regulatory system should not establish inappropriate 
impediments to the application of nuclear technology. Many of the 
Commission's initiatives over the past several years have sought to 
maintain or enhance safety while simultaneously improving the 
efficiency and effectiveness of our regulatory system. The Commission 
also recognizes that its decisions and actions as a regulator influence 
the public's perception of the NRC and ultimately the public's 
perception of the safety of nuclear technology. For this reason, the 
Commission's primary performance goals also include increasing public 
confidence.
    The Commission's primary focus is on safety. The Commission 
nonetheless recognizes that the quality, predictability, and timeliness 
of its regulatory actions bear on licensee decisions related to 
construction and operation of nuclear power plants.Background
    Currently there are 104 nuclear power plants licensed by the 
Commission to operate in the United States in 31 different states. As a 
group, they are operating at high levels of safety and reliability.
    These plants have produced approximately 20% of our nation's 
electricity for the past several years and are operated by about 40 
different companies. In 2000, these nuclear power plants produced a 
record 755-thousand gigawatt-hours of electricity.
Improved Licensee Efficiencies (Increased Capacity Factors)
    The nation's nuclear electricity generators have worked over the 
past 10 years to improve nuclear power plant performance, reliability, 
and efficiency. According to the Nuclear Energy Institute, the improved 
performance of the U.S. nuclear power plants since 1990 is equivalent 
to placing 23 new 1000-MWe power plants on line. The average capacity 
factor 1 for U.S. light water reactors was 86 percent in 
1999, up from 63 percent just 10 years ago. The Commission has focused 
on ensuring that safety has not been compromised as a result of these 
industry efforts. The Commission will continue to carry out its 
regulatory responsibilities in an effective and efficient manner so as 
not to impede industry initiatives inappropriately.
---------------------------------------------------------------------------
    \1\ Capacity factor is the ratio of electricity generated, for the 
period of time considered, to the amount of energy that could have been 
generated at continuous full-power operation during the same period.

                U.S. Commercial Nuclear Power Reactor Average Capacity Factor and Net Generation
----------------------------------------------------------------------------------------------------------------
                                                                               Net Generation of Electricity
                                  Number of Reactors    Average Annual   ---------------------------------------
                                      Licensed to       Capacity Factor      Thousands of      Percent of Total
                                        Operate            (Percent)         Gigawatthours           U.S.
----------------------------------------------------------------------------------------------------------------
1989............................                109                  63                 528                19.0
1990............................                111                  68                 576                20.5
1991............................                111                  71                 613                21.7
1992............................                110                  71                 620                22.2
1993............................                109                  73                 611                21.2
1994............................                109                  75                 640                22.1
1995............................                109                  79                 674                22.5
1996............................                110                  77                 670                21.9
1997............................                104                  74                 628                20.1
1998............................                104                  78                 673                22.6
1999............................                104                  86                 727                19.8
----------------------------------------------------------------------------------------------------------------

Electric Industry Restructuring
    As the Subcommittee is aware, the nuclear industry has undergone a 
period of remarkable change. The industry is in a period of transition 
in several dimensions, probably experiencing more rapid change than in 
any other period in the history of civilian nuclear power. As 
deregulation of electricity generation proceeds, the Commission is 
seeing significant restructuring among the licensees and the start of 
the consolidation of nuclear generating capacity among a smaller group 
of operating companies. In part, this change is due to an industry that 
has achieved gains in both economic and safety performance over the 
past decade and thus has been able to take advantage of the 
opportunities presented by industry restructuring. The Commission has 
established a regulatory system that is technically sound, that is 
fair, predictable, and reaches decisions with reasonable dispatch.

         INITIATIVES IN THE AREA OF CURRENT REACTOR REGULATION
License Transfers
    One of the more immediate results of the economic deregulation of 
the electric power industry has been the development of a market for 
nuclear power plants as capital assets themselves. As a result, the 
Commission has seen a significant increase in the number of requests 
for approval of license transfers. These requests increased from a 
historical average of about two or three per year, to 20-25 in the past 
two years.
    The Commission has assured that our reviews of license transfer 
applications, which focus on adequate protection of public health and 
safety, are conducted efficiently. These reviews sometimes require a 
significant expenditure of talent and energy by our staff to ensure a 
high quality and timely result. Our legislative proposal to eliminate 
foreign ownership review could help to further streamline the process. 
To date, the Commission believes that it has been timely in these 
transfers. For example, in CY 2000, the staff has reviewed and approved 
transfers in periods ranging from four to eight months, depending on 
the complexity of the applications. The Commission will strive to 
continue to perform at this level of proficiency even in the face of 
continued demand.
License Renewals
    Another result of the new economic conditions is an increasing 
interest in license renewal that would allow plants to operate beyond 
the original 40-year term. That term, which was established in the 
Atomic Energy Act (AEA), did not reflect a limitation that was 
determined by engineering or scientific considerations, but rather was 
based on financial and antitrust concerns. The Commission now has the 
technical bases and experience on which to base judgments about the 
potential useful life and safe operation of facilities and is 
addressing the question of extensions beyond the original 40-year term.
    The focus of the Commission's review of applications is on 
maintaining plant safety, with the primary concern directed at the 
effects of aging on important systems, structures, and components. 
Applicants must demonstrate that they have identified and can manage 
the effects of aging so as to maintain an acceptable level of safety 
during the period of extended operation.
    The Commission has now renewed the licenses of plants at two sites 
for an additional 20 years: Calvert Cliffs in Maryland, and Oconee in 
South Carolina, comprising a total of five units. The thorough reviews 
of these applications were completed ahead of schedule, which is 
indicative of the care exercised by licensees in the preparation of the 
applications and the planning and dedication of the Commission staff. 
Applications for units from three additional sites--Hatch in Georgia, 
ANO-1 in Arkansas, and Turkey Point in Florida--are currently under 
review. As indicated by our licensees, many more applications for 
renewal are anticipated in the coming years.
    Although the Commission has met the projected schedules for the 
first reviews, it would like the renewal process to become as effective 
and efficient as possible. The extent to which the Commission is able 
to sustain or improve on our performance depends on the rate at which 
applications are actually received, the quality of the applications, 
and the ability to staff the review effort. The Commission recognizes 
the importance of license renewal and is committed to providing high-
priority attention to this effort. As you know, the Commission 
encourages early notification by licensees, in advance of their 
intentions to seek renewals, in order to allow adequate planning so as 
not to create unmanageable demands on staff resources.
Reactor Plant Power Uprates
    In recent years, the Commission has approved numerous license 
amendments that permit its licensees to make relatively small power 
uprates (approximately 2-7 percent increases in the output of a 
facility). Collectively, these uprates supplied the electricity 
equivalent to that from two large power plants (approximately 2,000 
MWe). The Commission has received applications for several substantial 
uprates, and anticipates more within the near term. In addition, some 
nuclear generators have requested Commission safety review of 
increasing fuel burnup, thereby extending the operating cycle between 
refueling outages and thus increasing nuclear plant capacity factors. 
Such approvals are granted only after a thorough evaluation by 
Commission staff to ensure that safe operation and shutdown can be 
achieved at the higher power and increased fuel burnup.
High Level Waste Storage/Disposal (Spent Fuel Storage)
    In the past several years, the Commission has responded to numerous 
requests to approve spent fuel cask designs and independent spent fuel 
storage installations for onsite dry storage of spent fuel. These 
actions have provided an interim approach pending implementation of a 
program for the long-term disposition of spent fuel. The ability of the 
Commission to review and approve these requests has provided the needed 
additional onsite storage of spent nuclear fuel, thereby avoiding plant 
shutdowns as spent fuel pools reach their capacity. The Commission 
anticipates that the current lack of a final disposal site will result 
in a large increase in on-site dry storage capacity during this decade.
    The Commission is currently reviewing an application for an 
Independent Spent Fuel Storage Installation on the reservation of the 
Skull Valley Band of Goshute Indians in Utah.
    Certain matters also need to be resolved in order to make progress 
on a deep geologic repository for disposal of spent nuclear fuel. The 
Energy Policy Act of 1992 requires the Environmental Protection Agency 
(EPA) to promulgate general standards to govern the site, while the 
Commission has the obligation to implement those standards through its 
licensing and regulatory process. The Commission has concerns about 
certain aspects of EPA's proposed approach and is working with EPA to 
resolve these issues.
Risk-Informing the Commission's Regulatory Framework
    The Commission also is in a period of dynamic change as the Agency 
moves from a prescriptive, deterministic approach towards a more risk-
informed and performance-based regulatory paradigm. Improved 
probabilistic risk assessment techniques combined with over four 
decades of accumulated experience with operating nuclear power reactors 
have led the Commission to recognize that some regulations may not 
serve their intended safety purpose and may not be necessary to provide 
adequate protection of public health and safety. Where that is the 
case, the Commission has determined it should revise or eliminate the 
requirements. On the other hand, the Commission is prepared to 
strengthen our regulatory system where risk considerations reveal the 
need.
    Perhaps the most visible aspect of the Commission's efforts to 
risk-inform its regulatory framework is the new reactor oversight 
process. The process was initiated on a pilot basis in 1999 and fully 
implemented in April 2000. The new process was developed to focus 
inspection effort on those areas involving greater risk to the plant 
and thus to workers and the public, while simultaneously providing a 
more objective and transparent process. While the Commission continues 
to work with its stakeholders to assess the effectiveness of the 
revised oversight process, the feedback received from industry and the 
public is favorable.

                           FUTURE ACTIVITIES
Scheduling and Organizational Assumptions Associated with New Reactor 
        Designs
    While improved performance of operating nuclear power plants has 
resulted in significant increases in electrical output, significant 
increased demands for electricity will need to be addressed by 
construction of new generating capacity of some type. Serious industry 
interest in new construction of nuclear power plants in the U.S. has 
only recently emerged. As you know, the Commission has already 
certified three new reactor designs pursuant to 10 CFR Part 52. These 
designs include General Electric's advanced boiling water reactor, 
Westinghouse's AP-600 and Combustion Engineering's System 80+. Because 
the Commission has certified these designs, a new plant order may 
include one of these approved designs. However, the staff is also 
conducting a preliminary review associated with other new designs.
    In addition to the three already certified advanced reactor 
designs, there are new nuclear power plant technologies, such as the 
Pebble Bed Modular Reactor, which some believe can provide enhanced 
safety, improved efficiency, lower costs, as well as other benefits. To 
ensure that the Commission staff is prepared to evaluate any 
applications to introduce these advanced nuclear reactors, the 
Commission recently directed the staff to assess the technical, 
licensing, and inspection capabilities that would be necessary to 
review an application for an early site permit, a license application, 
or construction permit for a new reactor unit. This will include the 
capability to review the designs for generation III+ or generation IV 
light water reactors including the Westinghouse AP-1000, the Pebble Bed 
Modular Reactor, and the International Reactor Innovative and Secure 
(IRIS) designs. In addition to assessing its capability to review the 
new designs, the Commission will also examine its regulations relating 
to license applications, such as 10 CFR Parts 50 and 52, in order to 
identify whether any enhancements are necessary.
    In order to confirm the safety of new reactor designs and 
technology, the Commission believes that a strong nuclear research 
program should be maintained. A comprehensive evaluation of the 
Commission's research program is underway with assistance from a group 
of outside experts and from the Advisory Committee on Reactor 
Safeguards. With the benefit of these insights, the Commission expects 
to undertake measures to strengthen our research program over the 
coming months.
Human Capital
    Linked to these technical and regulatory assessments, the 
Commission is reviewing its human capital to assure that the 
appropriate professional staff is available for the Commission to 
fulfill its traditional safety mission, as well as any new regulatory 
responsibilities in the area of licensing new reactor designs.
    In some important offices within the Commission, nearly 25 percent 
of the staff are eligible to retire today. In fact, the Commission has 
six times as many staff over the age of 60 as it has staff under 30.
    And, as with many Federal agencies, it is becoming increasingly 
difficult for the Commission to hire personnel with the knowledge, 
skills, and abilities to conduct the safety reviews, licensing, 
research, and oversight actions that are essential to our safety 
mission. Moreover, the number of individuals with the technical skills 
critical to the achievement of the Commission's safety mission is 
rapidly declining in the Nation and the educational system is not 
replacing them. The Commission's staff has taken steps to address this 
situation, and as a result, is now seeking systematically to identify 
future staffing needs and to develop strategies to address the gaps. It 
is apparent, however, that the maintenance of a technically competent 
staff will require substantial effort for an extended time.
    As the Commission is currently challenged to meet its existing 
workload with available resources, additional resources would be 
necessary to respond to increased workload which could result from some 
of the initiatives discussed in this testimony.

                IMPLICATIONS OF A NATIONAL ENERGY POLICY
    The Commission has a stake in a national energy policy and has 
identified areas where new legislation would be helpful to eliminate 
artificial restrictions and to reduce the uncertainty in the licensing 
process. These changes would maintain safety while increasing 
flexibility in decision-making. Although those changes would have 
little or no immediate impact on electrical supply, they would help 
establish the context for consideration of nuclear power by the private 
sector without any compromise of public health and safety or protection 
of the environment.
          Legislation will be needed to extend the Price-Anderson Act. 
        The Act, which expires on August 1, 2002, establishes a 
        framework that provides assurance that adequate funds are 
        available in the event of a nuclear accident and sets out the 
        process for consideration of nuclear claims. Without the 
        framework provided by the Act, private-sector participation in 
        nuclear power would be discouraged by the risk of large 
        liabilities.
          Several other legislative changes would be helpful. For 
        example, Reorganization Plan No. 3 of 1970 could be revised to 
        provide the Commission with the sole responsibility to 
        establish all generally applicable standards related to Atomic 
        Energy Act (AEA) materials, thereby avoiding dual regulation of 
        such matters by other agencies. Along these same lines, the 
        Nuclear Waste Policy Act of 1982 could be amended to provide 
        the Commission with the sole authority to establish standards 
        for high-level radioactive waste disposal. These changes would 
        serve to provide full protection of public health and safety, 
        provide consistency, and avoid needless and duplicative 
        regulatory burden.
          Commission antitrust reviews could also be eliminated. As a 
        result of the growth of Federal antitrust law since the passage 
        of the AEA, the Commission's antitrust reviews are redundant of 
        the reviews of other agencies. The requirement for Commission 
        review of such matters, which are distant from the Commission's 
        central expertise, should be eliminated.
          Elimination of the ban on foreign ownership of U.S. nuclear 
        plants would be an enhancement since many of the entities that 
        are involved in electrical generation have foreign 
        participants, thereby making the ban on foreign ownership 
        increasingly anachronistic. The Commission has authority to 
        deny a license that would be inimical to the common defense and 
        security, and thus an outright ban on all foreign ownership is 
        unnecessary.
    With the strong Congressional interest in examining energy policy, 
the Commission is optimistic that there will be a legislative vehicle 
for making these changes and thereby for updating the AEA.

                                SUMMARY
    The Commission has long been, and will continue to be, active in 
concentrating its staffs' efforts on ensuring the adequate protection 
of public health and safety, the common defense and security, and the 
environment in the application of nuclear technology for civilian use. 
Those statutory mandates notwithstanding, the Commission is mindful of 
the need to: 1) reduce unnecessary burdens, so as not to 
inappropriately inhibit any renewed interest in nuclear power; (2) 
maintain open communications with all its stakeholders, in order to 
seek to ensure the full, fair, and timely consideration of issues that 
are brought to our attention; and (3) continue to encourage its highly 
qualified staff to strive for increased efficiency and effectiveness, 
both in our dealings with all the Commission's stakeholders and 
internally within the agency.
    I look forward to working with the Committee, and I welcome your 
comments and questions.

    Mr. Norwood [presiding]. Thank you very much, Dr. Travers.
    Mr. Magwood, we would be pleased to hear from you now.

                 STATEMENT OF WILLIAM D. MAGWOOD

    Mr. Magwood. Thank you, Mr. Chairman. My name is Bill 
Magwood. I am the Director of DOE's Office of Nuclear Energy, 
Science and Technology. It is a great pleasure to appear before 
you today.
    As you know, for the last several years DOE has been 
working to coordinate with NRC, the industry, and others to try 
to understand what the issues facing nuclear power will be in 
the near term and also in the longer term, and to find ways, 
both in terms of research and institutionally, to remediate 
those problems. We have made some progress, but, clearly, there 
is a lot that we need still to do.
    Over the last year or so, it has been very clear and very 
public that there are some utilities in this country that are 
looking very seriously to nuclear option for the first time in 
many years. We have been very pleased to see that level of 
interest, and you are going to hear from some of those 
utilities today.
    Probably more important than any other single factor to 
make industry more comfortable with the idea of building new 
nuclear power plants in this country has been the tremendous 
progress the NRC has made, and I give great credit to NRC, in 
proving itself to be a reliable and consistent regulator. 
Without that, utilities wouldn't be here today talking to you.
    In fact, I know from conversations with many utility 
executives that NRC's performance in license renewal is the 
single most important factor they point to when asked why they 
believe nuclear has a future in the United States--because the 
NRC has done such a good job.
    That said, the industry itself deserves a great deal of 
credit. If you go back to just 1990, just a little over 10 
years ago, nuclear power plants in this country were operating 
at only about 70 percent availability, which was a pretty 
miserable record when compared to other energy sources and 
compared to other nuclear power plants in the world.
    Today, U.S. nuclear power plants are among the best in the 
world. We are operating our plants at an average of about 90 
percent availability. That is an astonishing improvement in 
performance. A great deal of that credit is due to the 
management of the utility companies who, during the 1990's, 
understood that great management is the way to get to high 
levels of safety and also high levels of economy and 
performance. I think that they have done a great job in moving 
toward that objective.
    At the same time, the business structure of the nuclear 
industry has been changing over the last several years, and I 
believe this will probably prove to be more important than any 
other single factor in making a future for nuclear energy. The 
utility industry itself has been consolidating over the last 2 
or 3 years, and as has been well reported in the papers, there 
have been a number of mergers, as well as acquisitions of 
nuclear power plants.
    What this has done is that it has served to centralize more 
nuclear power plants under the management of some of the best 
managed utilities in the country. I think this will lead to 
even more economy and more effectiveness in the future, and an 
even greater benefit to the Nation.
    In the longer-term, the consolidation of the nuclear 
industry will result in formation of large electric utilities 
with a long-term interest in nuclear power, which will be a 
very important factor in utility considerations about the 
future of nuclear power.
    DOE also has been very active in this area. We have been 
supporting research for the last several years to make sure 
that existing nuclear power plants operate reliably and 
effectively as they operate for the long term. We have been 
supporting advanced research and development, looking at new 
types of nuclear power plants. Our Nuclear Energy Research 
Initiative has been very successful in that regard.
    We are also coordinating with other countries. Just last 
year, we launched an initiative known as ``Generation IV'' to 
look at ways of reforming nuclear power and--aimed at 
addressing barriers to long-term use of nuclear energy--making 
it more effective than it is today through the use of advanced 
technologies. Not to wait for the long term, we are also been 
working with industry to find ways to make deployment of new 
nuclear power plant technology occur as quickly as possible.
    We are working in all of these areas. Our statement covers 
all of this in more detail, and I look forward to talking with 
the committee about that over the course of the hearing.
    Thank you.
    [The prepared statement of William D. Magwood follows:]
   Prepared Statement of William D. Magwood, IV, Director, Office of 
   Nuclear Energy, Science and Technology, U.S. Department of Energy
    Mr. Chairman and Members of the Subcommittee, I am William D. 
Magwood, IV, Director of the Department of Energy's Office of Nuclear 
Energy, Science and Technology. My office is charged to apply the 
science, engineering, and art of nuclear technology to address a wide 
range of civilian requirements. We support research and provide 
radioisotopes to find new treatments for cancer. We provide the 
advanced power systems without which the United States cannot explore 
the solar system. We develop new, advanced technologies to deal with 
spent nuclear fuel. But our core and most important mission especially 
in these days of energy supply concern is the development of advanced 
nuclear energy technologies to satisfy the energy needs of the United 
States in a clean, safe, and cost-effective manner.
    Our program has undergone a dramatic transformation in the last 
three years. With the completion of the advanced light water reactor 
program in fiscal year 1998, we saw our nuclear energy research budget 
essentially fall to zero. With a great deal of planning and hard work; 
advice from our independent advisory committee, the Nuclear Energy 
Research Advisory Committee (NERAC) and its many subcommittees and task 
forces; and effective and focused support from the Congress, we have 
turned the program around. Our office is now focused on three key 
missions:

 Supporting R&D that enhances nuclear powers viability as part 
        of the U.S. energy portfolio.
 The support for irreplaceable U.S. nuclear R&D infrastructure, 
        both in the Government and in U.S. universities; and
 Support for students and programs to develop the human capital 
        required to preserve a viable future for nuclear technology in 
        the United States.
    While I will touch on all of these key missions in my statement 
today, I will primarily focus on the first one to provide you with 
information regarding our technology activities and how they impact the 
future of nuclear energy in the United States.
 recent developments: a path to a viable future for u.s. nuclear energy
    First, however, I would like to provide you with some context for 
our efforts. Just a few years ago, many analysts were predicting the 
end of nuclear energy in the United States. Many predicted that in the 
face of electric industry competition large numbers of nuclear power 
plants would be shut down before the end of their 40-year licenses and 
the amount of energy generated by U.S. plants would slowly erode. Many 
believed that nuclear couldn't compete that U.S. utilities would turn 
away from their plants, largely forego license renewals, and invest in 
alternative sources of electric generation.
    Reality has proven these forecasts to be incorrect. For the most 
part, it was always clear that the picture would be brighter than the 
worse predictions foresaw. But few, even those of us who watch nuclear 
industry developments closest, would have predicted the turn-around 
that is occurring today. This reversal of nuclear fortunes has 
reinforced the Departments re-energized nuclear R&D activities. We 
perceive three key reasons for this change in the United States:
    1) Performance of nuclear utilities. Little more than a decade ago, 
U.S. nuclear power plants were generating electricity only about 70% of 
the time. Today, the average is approaching 90%. U.S. nuclear plants 
rank high when compared with the nuclear plants of other countries and 
compare very favorably with other sources of generation in the United 
States. In fact, the average nuclear plant in the U.S. produces 
electricity at only about two cents per kilowatt-hour--far below the 
average U.S. market price and about the same as the most efficient 
natural gas-fired power plants. Moreover, our colleagues at the Energy 
Information Administration (EIA) have just reported that U.S. nuclear 
power plants broke another record, producing more electricity in the 
year 2000 than ever before--despite the closure of eight less efficient 
units over the last decade.
    2) Consolidation of the nuclear utility industry. Because of the 
performance of U.S. plants, they have become attractive targets for 
acquisition. We are now seeing the formation of large nuclear utilities 
in the United States that more closely resemble the large nuclear-
focused power companies in countries like Japan. Instead of many 
utilities owning one or two plants, we expect that there will soon be 
far fewer nuclear utilities, with each owning a dozen or more plants. 
The highly successful Exelon Corporation is a prototype of what appears 
to be taking shape in this country. This development not only provides 
for considerable efficiencies of scale in parts, training, and other 
aspects of operation, but it has two other benefits of possibly greater 
import. First, consolidation exploits a realization that swept through 
the industry less than a decade ago: that the safest plants were the 
most cost-competitive plants and that good management was the key to 
both. As the best operators of nuclear plants acquire more plants, the 
performance of nuclear plants is likely to increase. Second, as in 
other countries which plan to build new plants, large utilities with 
majority nuclear generation have a long-term interest in nuclear power 
well beyond that of utilities that operate one plant as part of a 
larger system.
    3) Successful management at the Nuclear Regulatory Commission. Not 
long ago, many utility executives cited the unpredictability of 
regulation in the U.S. as a primary barrier to the construction of new 
plants in the U.S. and an obstacle to utilities seeking license 
renewals to operate their nuclear power plants for an additional 20 
years. NRC has since that time shown itself to be a fair and effective 
regulator of the nuclear industry. Its process to approve the renewal 
of the operating license for the Calvert Cliffs plant and later for the 
three-unit Oconee plant was a tremendous success for both the 
Commission and the industry. Completed years earlier and millions less 
expensively than most analysts predicted, these first license renewals 
proved that the industry could rely on the NRC for fair, stable, 
effective, and predictable regulation. Thirty-three nuclear power 
plants are entering the renewal process now and informal contacts with 
utility executives now indicate that the overwhelming majority if not 
all of U.S. nuclear power plant owners are planning to apply for 
license renewals for their nuclear units.
    Maintaining a strong option to build new nuclear power plants to 
meet near and long-term energy needs is not an end unto itself for the 
United States. Nuclear power plants provide important benefits that are 
not found with other energy options. Nuclear plants do not emit 
pollutants such as nitrogen oxides, sulfur oxides, mercury, or 
particulates that affect human health. Nor do nuclear plants emit 
carbon dioxide. These plants have proven to be highly reliable in all 
weather conditions, cost-effective in operation, and act as crucial 
anchors to the national electric grid.
    That said, like all sources of energy, nuclear power has issues 
with which we must deal. Utilities must be certain that the high costs 
for construction that characterize many plants completed in the late 
1980s and early 1990s are not repeated. The United States must 
successfully resolve the nuclear waste issue. And any remaining public 
concern over the safety of nuclear plants must be fully addressed. As I 
conclude my remarks, I will discuss the challenges ahead including some 
of the barriers that must still be overcome to enable the United States 
to maintain a strong nuclear energy option for the future.
    With this backdrop, I would like to highlight what the Department 
is doing in the nuclear energy arena. We are active in three areas that 
affect the future of nuclear energy:

 We are supporting cooperative research with the utility 
        industry to develop advanced technologies to enable existing 
        nuclear power plants to operate reliably and cost-effectively 
        into the long-term;
 We are pursuing technology and institutional activities to 
        clear the way for near-term deployment of nuclear power plants 
        in the United States; and
 We are leading a world-wide effort to develop standard, next-
        generation nuclear energy technologies that could enable 
        nuclear power to fully meet the promise our predecessors saw in 
        the 1950s and 1960s.
           technology for current plants: building on success
    To discuss the prospects for new nuclear power plants in the United 
States, it is essential that existing U.S. plants be successful both in 
terms of safety performance and in terms of economic competitiveness. 
The industry has made impressive strides to meet this condition, 
particularly over the last decade. The Department assisted in making 
some of this performance possible through its past programs to develop 
high-burnup nuclear fuel (which has enabled utilities to reduce their 
fuel costs by half, saving some $200 million each year) and to reduce 
occupational radiation exposures by 67% since 1985.
    Now we enter a new phase. As U.S. plants receive license renewals, 
they must be prepared to operate for an additional 20 years--a total of 
60 years--far longer than nuclear plants have been operated to date. 
While NRCs license renewals confirm that safety will not be impacted as 
these plants operate for the long term, it is less clear what long-term 
operation means for reliability and cost-effectiveness. The application 
of advanced technologies can also continue the process of enhancing 
safety.
    The Departments Nuclear Energy Plant Optimization (NEPO) program 
plays a vital role in ensuring that current nuclear plants can continue 
to deliver reliable and economic energy supplies up to and beyond their 
initial 40-year license period by resolving open issues related to 
plant aging, and by applying new technologies to improve plant 
economics, reliability, and availability. The NEPO program is cost-
shared with industry through the Electric Power Research Institute 
(EPRI) and is conducted in close cooperation with the Nuclear 
Regulatory Commission. The research conducted under the NEPO program is 
identified, prioritized, and selected with broad input from utilities, 
national laboratories, the Departments Nuclear Energy Research Advisory 
Committee (NERAC), and other stakeholders. With dozens of projects 
underway, this program demonstrates the Departments ability to lead 
without massive funding: about 60 percent of NEPO funding is provided 
by industry and the suite of projects focuses on areas that industry 
would not have pursued on its own projects that look at the long-term 
and focus on the need for a stable, reliable, non-polluting electricity 
source for the United States.

    NEAR-TERM DEPLOYMENT: ADVANCED STATE-OF-THE-ART NUCLEAR ENERGY 
                       TECHNOLOGY FOR THIS DECADE
    Third generation nuclear power plants have been very successful in 
several countries. Advanced plants based on U.S. technology have been 
and are being constructed in Japan, South Korea, and Taiwan and are 
expected to be selected by other countries in the coming years. We 
believe that small but important enhancements to these plants (which 
have been referred to as ``Gen III+'' designs) could help make them 
state-of-the-art and deployable in the United States by 2010. As part 
of its Nuclear Energy Technologies activities, the Office of Nuclear 
Energy, Science and Technology is working cooperatively with both the 
U.S. Nuclear Regulatory Commission and the domestic commercial nuclear 
industry in several activities focused on supporting the potential 
near-term deployment of new nuclear generating capacity in the U.S. in 
the next five to ten years.
    Working with both the public and private sectors, we are reviewing 
the current regulatory requirements associated with designing, 
licensing, siting and constructing new nuclear-based electricity 
generating facilities to identify areas where changes in the regulatory 
requirements could be beneficial to both public and private sectors. 
Working with the Nuclear Regulatory Commission, we are developing a new 
regulatory framework for advanced gas reactor technologies that 
recognizes the inherent differences between the light water technology-
based regulations that currently govern the regulatory requirements. 
Working with the nuclear utility industry, we will be developing a 
demonstration program for early site permitting of potential new 
generation facilities whether it be new plants on new sites or, more 
likely, at sites upon which current nuclear plants are operating.
    This latter activity holds particular interest for us. We believe 
that many of the difficult issues associated with siting new facilities 
of any kind can be avoided in the case of new nuclear plants in the 
United States. Many operating U.S. nuclear plant sites were designed 
with four or six reactors in mind and currently host far fewer. This 
provides a tremendous opportunity for expansion in this country and we, 
working with industry, will examine the issues closely.
    Finally, through NERAC, we are working with industry to develop a 
report identifying technical, regulatory, and institutional issues 
which must be addressed and a delineation of those the actions 
necessary to successfully deploy new nuclear reactor facilities in the 
U.S. by 2010. The report on near-term deployment opportunities will be 
available in September 2001.

     NERI AND I-NERI: A PEER-REVIEWED PATH TO ADVANCED NUCLEAR R&D
    The Departments Nuclear Energy Research Initiative (NERI), a 
competitive, peer-reviewed research and development selection process 
to fund researcher-initiated R&D proposals from universities, national 
laboratories, and industry, has reinvigorated the Nations nuclear 
energy R&D organizations. Focused on research to address the potential 
long-term barriers to expanded use of nuclear power--economics, safety, 
proliferation resistance, and waste minimization--the NERI program is 
yielding innovative scientific and engineering R&D in nuclear fission 
and reactor technology. Initiated in FY 1999, there are currently 55 
projects underway with an additional 15 projects expected to be 
selected for award in FY 2001. This program signaled the return of the 
United States to nuclear R&D, but a return that reflected important 
lessons learned and a new appreciation for harnessing outside expertise 
to focus the research. NERI has, despite its limited funding, gone a 
long way to reinvigorate nuclear R&D in this country.
    In FY 2001, the Department is launching the International Nuclear 
Energy Research Initiative, or I-NERI, to sponsor innovative scientific 
and engineering research and development conducted by joint teams of 
U.S. and foreign researchers. Established as a cost-shared R&D program, 
the primary program objectives of the I-NERI are to:

 Develop advanced concepts and scientific breakthroughs in 
        nuclear fission and reactor technology to address and overcome 
        the principal technical and scientific obstacles to the 
        expanded use of nuclear energy worldwide;
 Promote bilateral and multilateral collaboration with 
        international agencies and research organizations to improve 
        the development of nuclear energy; and
 Promote and maintain the U.S. nuclear science and engineering 
        infrastructure to meet future technical challenges.
    We are in the final stages of signing I-NERI agreements with France 
and South Korea. We are negotiating agreements with Japan and South 
Africa, which we hope to conclude this year. We also expect to conclude 
I-NERI agreements with the Nuclear Energy Agency of the Organization 
for Economic Cooperation and Development and with Euratom. When 
implemented, these agreements will magnify modest U.S. investments in 
R&D many times over with great benefit to both the United States and 
our research partners.

    GENERATION IV: REALIZING THE ORIGINAL PROMISE OF NUCLEAR ENERGY
    The Department initiated the Generation IV Nuclear Energy Systems 
Project (or more simply, the ``Gen IV Project'') in January 2000, by 
convening a meeting of senior policy officials from interested 
countries. Representatives of nine countries participated in this 
initial discussion and considered the long-term interest of the 
countries in the application of nuclear energy, the international 
interest in advanced nuclear technologies, the barriers that might 
prevent the future expansion of nuclear energy, and the interest of the 
representatives in exploring potential multilateral research projects 
to explore and develop new technologies. These representatives agreed 
to a Joint Statement regarding the importance of the nuclear energy 
option to the future and to a process to explore further cooperative 
activities.
    As a result of this meeting, and subsequent meetings, the 
participants are currently exploring the formal creation of a 
Generation IV International Forum (GIF) to pursue multilateral 
coordination and cooperation with the goal of identifying and 
developing Gen IV technologies that could address the factors impacting 
the expansion of nuclear energy internationally: economic 
competitiveness of building and operating nuclear energy systems; 
remaining concerns regarding nuclear safety and proliferation; and the 
challenge of minimizing and dealing successfully with nuclear wastes.
The Technology Roadmap
    A specially chartered subcommittee of the U.S. Governments Nuclear 
Energy Research Advisory Committee (NERAC) is providing guidance to the 
Department of Energy's (DOE) efforts to create a Generation IV 
Technology Roadmap--a document which will identify and set research and 
development paths for the most promising technologies. Professor Neil 
Todreas of MIT and Dr. Sol Levy, a world-respected pioneer in 
commercial nuclear power who is a retired manager from General 
Electric, co-chair this ambitious effort and have brought together a 
highly experienced team to oversee the Roadmap effort.
    We believe that to be successful, future nuclear energy 
technologies must be broadly acceptable--that is, meet the needs of 
many nations and not only those of the United States. As a result, 
consistent with the requirements of the United States, the Department 
is pursuing the Gen IV Project as an international effort through the 
GIF. Together, approximately 150 senior, experienced engineers and 
scientists from at least 10 countries will work together to create the 
Gen IV Technology Roadmap. We have found that U.S. leadership has been 
essential to this process and that without the Departments initiative, 
this type of effort would not have been possible. This Roadmap is 
scheduled to be completed by the end of FY 2002 and will:

 Draw upon a wide range of experts from government, national 
        laboratories, industry, and academia;
 Set ambitious technology goals for next-generation systems;
 Identify the most promising concepts for advanced nuclear 
        energy systems to meet future energy needs; and
 Identify the R&D activities needed to develop these concepts 
        and make them ready for commercial deployment.
What are Generation IV Nuclear Energy Systems?
    The international community has deployed over 400 nuclear reactors 
to produce power, with new projects underway in several countries. Most 
operating plants are based on the experience gained from the first 
generation of nuclear plants that were built and operated in the late 
1950's and early 1960's. These demonstrations of the practicality of 
nuclear power enabled second generation plants to be built all over the 
world, including over 100 in the United States. The lessons learned 
from the second generation plants led directly to the development and 
deployment of third generation (i.e., advanced light water) nuclear 
plants beginning in the 1990's.
    The next generation, Generation IV nuclear energy systems, would 
take the next step in the evolution of nuclear power plant design. 
Finding new approaches--some of which have been postulated in NERI 
projects--to make nuclear power more cost-effective while further 
enhancing safety and proliferation-resistance will enable nuclear 
energy to fulfill the role envisioned in the early days of the 
development of atomic fission.
    To develop these new technologies, ambitious but achievable 
technology goals are required against which technology concepts can 
compete and toward which research activities can strive. NERAC 
developed initial draft technology goals for Gen IV systems earlier 
this year and while they continue to be refined, they have been largely 
accepted by the international research community. The Gen IV goals 
reflect the need for future nuclear energy systems to build upon the 
worlds experience with nuclear technology and develop systems that can 
be fully competitive with any other form of energy production. These 
goals represent new thinking in the nuclear community, a recognition 
that nuclear energy must fully support all our economic, environmental, 
and societal ambitions. We expect that these goals will be finalized 
before the end of this Spring and become a standing testament to the 
determination of the world nuclear technology energy community that 
nuclear energy must continue its development and meet its initial 
promise as a widely used source of energy, providing benefit to all the 
worlds peoples.

                  CHALLENGES AHEAD: MUCH WORK REMAINS
    Despite the United States long experience with nuclear power and 
the promising outlook for near-term deployment of new nuclear power 
facilities, there remain important challenges to expanding the 
successful application of nuclear technology. These, in addition to the 
activities discussed above, are the focus of the Departments efforts.
    Foremost, we must continue the hard but essential work of dealing 
with disposal of spent nuclear fuel. In this connection, the 
Departments Office of Civilian Radioactive Waste Management continues 
the scientific work and step-wise process for a Secretarial decision on 
whether or not the Yucca Mountain site should be recommended to the 
President. Congressional support for this process is essential.
    Next, we must recognize and deal with the nuclear energy research 
facility infrastructure within both the Departments national 
laboratories and the Nations university nuclear engineering programs. 
Over the last eight years, the Department lost four irreplaceable 
research reactors and terminated a major project to build a replacement 
facility. Working with the NERAC, we completed a Nuclear Science and 
Technology Infrastructure Roadmap last year which raised a large number 
of questions for the Department to address in determining the future 
course of DOE facilities and their ability to support expanded needs 
for research.
    Without such capacity, enhancing our nuclear R&D activities will 
become increasingly difficult. As a result, we and our colleagues at 
the Nuclear Regulatory Commission are looking overseas to countries 
such as Russia to request access to research facilities. As Congress 
requested last year, we are completing a program plan on Advanced 
Accelerator Applications, exploring the potential of a new type of 
research facility to meet U.S. needs in the 21st Century. We will soon 
issue a report to Congress on the analysis we have completed to date.
    Finally, we are very concerned about the state of the Nations 
nuclear technology education infrastructure. Through our University 
Fuel Assistance and Support program, the Department provides direct 
financial support to the Nations 28 remaining university nuclear 
engineering programs and associated university research reactors. This 
assistance has shown positive effects in recent years the decline in 
students appears to be moderating. But funding is very limited and many 
important university-based research facilities are in financial 
trouble. Worse, the number of U.S. students earning degrees in nuclear-
related fields is far lower than the annual need.
    We look forward to working with Congress to consider these issues. 
We support the Vice Presidents interagency task force which is 
developing a much-needed, comprehensive strategy to the Nations energy 
needs. Together, Congress and the Bush Administration will work to plan 
for our country's energy future and together we will address the issues 
that face us.

    Mr. Barton. Thank you, Mr. Magwood.
    We will now hear from Ms. Hutzler for 7 minutes.

                  STATEMENT OF MARY J. HUTZLER

    Ms. Hutzler. Mr. Chairman, members of the subcommittee, I 
appreciate the opportunity to appear before you today to 
discuss the current and future use of nuclear power in the 
United States.
    The Energy Information Administration is an autonomous 
statistical and analytical agency within the Department of 
Energy. We are charged with providing objective, timely, and 
relevant data, analysis, and projections for the use of the 
Department of Energy, other government agencies, the U.S. 
Congress, and the public.
    The projections in my testimony are from the Annual Energy 
Outlook 2001, which provides projections and analysis of 
domestic energy consumption, supply, and prices. Our 
projections are used by government agencies, the private 
sector, and academia for their energy analyses. Our projections 
are not meant to be exact predictions of the future. They 
represent a likely energy future, given technological and 
demographic trends, current laws and regulations, and consumer 
behavior.
    Today, nuclear power is the second largest supplier of U.S. 
electricity generation accounting for 20 percent of total 
generation. The United States currently has 104 operable 
nuclear units, totaling 97.5 gigawatts of capacity. Electricity 
generation from nuclear power increased in 2000 to 754 billion 
kilowatt hours, 30 percent higher than 10 years ago.
    The average capacity factor for U.S. nuclear power plants 
in 2000 was the highest in history at 89 percent, 35 percent 
higher than just 10 years ago.
    Increased performance has been achieved through improved 
operations resulting in shorter and fewer outages. Nearly all 
nuclear plants now operate for 18 months between refuelings, 6 
months longer than the average refueling cycle during the 
1970's and 1980's.
    In 1999, production costs--the costs of fuel and operations 
and maintenance--for nuclear plants average 1.9 cents per 
kilowatt hour, about the same as coal plants and about two-
thirds that of natural gas steam plants. Safety improvements 
initiated during the late 1980's and in the 1990's had caused 
nuclear costs to increase and had lowered its output.
    Generation from nuclear power plants is expected to rise 
slightly over the next several years, due to increased 
production at existing reactors. It is expected that recent 
trends and improved performance will be maintained, resulting 
in average capacity factors for operating plants of 90 percent.
    However, the long-term projection is for a decline in total 
generation from nuclear power as some existing nuclear reactors 
are retired and replaced by other mainly gas-fired generating 
units. Our projections indicate that nuclear power will provide 
11 percent of the electricity generation in 2020, less than 
coal or natural gas.
    Within the forecast, nuclear units are projected to retire 
when their operation is no longer economic relative to 
replacement capacity. Due to the uncertainty surrounding future 
aging-related costs, several cases were developed to analyze 
the effects on electricity supply due to differing assumptions 
about the costs of maintaining nuclear reactors which are 
depicted in this chart.
    In the Reference Case, 33 units are projected to retire, 
while 27 units are projected to operate beyond their initial 
40-year license period. Currently, five units have received 
approval from the NRC to extend their licenses for an 
additional 20 years. Another five units have submitted 
applications, and 28 units have scheduled future submissions 
through 2004.
    In our low nuclear case where it is assumed that aging-
related costs would begin earlier and at slightly higher costs 
than the Reference Case, a total of 18 additional units are 
projected to be retired through 2020 relative to the Reference 
Case.
    In the high nuclear case where aging-related costs are 
assumed to be 25 percent lower than the Reference Case, 11 
units are projected to retire through 2020. That is about 9 
percent of current capacity.
    Since no new orders for nuclear capacity have been made in 
the United States since 1978, projections of the cost of 
building nuclear capacity are highly uncertain. In the 
Reference Case, the cost of a new nuclear unit is based on the 
advanced passive reactor design, the AP600, which has been 
approved by the NRC as part of its standardized design 
certification.
    The initial overnight capital cost, in 1999 dollars, of the 
AP600, is assumed to be about $1,700 per kilowatt, compared to 
about $1,000 to $1,200 per kilowatt for a coal-fired unit, and 
$400 to $500 per kilowatt for a gas-fired combined cycle unit.
    Contingency factors are applied for delays during 
construction due to unforseen problems such as weather or labor 
issues and for the tendency to underestimate costs for new 
technologies. As new capacity is built and experience is 
gained, capital costs decline. The average generating cost of 
nuclear is higher than coal or natural gas, which results in no 
new nuclear construction coming online by 2020 in our Reference 
Case.
    However, if capital costs of nuclear were to fall to around 
$1,000 per kilowatt, nuclear could become a viable economic 
choice, particularly if natural gas prices were to remain at 
their current high levels.
    In summary, the nuclear industry has made significant 
strides in improving the performance and lowering the operating 
costs of our existing nuclear plants. As a result, nuclear 
power today provides roughly one-fifth of our Nation's 
electricity generation. Operating performance achievements at 
individual nuclear units is expected to remain high. The total 
output from nuclear plants is expected to decline by about 20 
percent between now and 2020, as some units are expected to be 
retired.
    The ability to relicense existing nuclear plants will 
extend the operating lives of many of our current reactors. 
However, achieving new orders for nuclear plants, based solely 
on economics, is unlikely due to the higher construction costs 
of the currently demonstrated technology relative to its fossil 
counterparts, as well as uncertainties related to costs, 
safety, and waste.
    Thank you, Mr. Chairman, and members of the subcommittee. I 
will be happy to answer any questions you may have.
    [The prepared statement of Mary J. Hutzler follows:]
       Prepared Statement of Mary J. Hutzler, Energy Information 
                  Administration, Department of Energy
    Mr. Chairman and Members of the Committee: I appreciate the 
opportunity to appear before you today to discuss current and future 
prospects for nuclear power in the United States.
    The Energy Information Administration (EIA) is an autonomous 
statistical and analytical agency within the Department of Energy. We 
are charged with providing objective, timely, and relevant data, 
analysis, and projections for the use of the Department of Energy, 
other Government agencies, the U.S. Congress, and the public. We do not 
take positions on policy issues, but we do produce data and analysis 
reports that are meant to help policy makers determine energy policy. 
Because we have an element of statutory independence with respect to 
the analyses that we publish, our views are strictly those of EIA. We 
do not speak for the Department, nor for any particular point of view 
with respect to energy policy, and our views should not be construed as 
representing those of the Department or the Administration. However, 
EIA's baseline projections on energy trends are widely used by 
Government agencies, the private sector, and academia for their own 
energy analyses.
    The Committee has requested information about current and future 
utilization of nuclear power for electricity generation, statutory and 
regulatory provisions that impact the use of nuclear power, the 
prospects for using nuclear power to meet future generation needs, and 
the role of nuclear power in a comprehensive national energy policy. 
EIA collects and interprets data on the current energy situation, and 
produces both short-term and long-term energy projections. The 
projections in this testimony are from our Annual Energy Outlook 2001, 
released late last year. The Annual Energy Outlook provides projections 
and analysis of domestic energy consumption, supply, and prices through 
2020. These projections are not meant to be exact predictions of the 
future, but represent a likely energy future, given technological and 
demographic trends, current laws and regulations, and consumer behavior 
as derived from known data. EIA recognizes that projections of energy 
markets are highly uncertain and subject to many random events that 
cannot be foreseen, such as weather, political disruptions, strikes, 
and technological breakthroughs. In addition, long-term trends in 
technology development, demographics, economic growth, and energy 
resources may evolve along a different path than assumed in the Annual 
Energy Outlook. Many of these uncertainties are explored through 
alternative cases.

                         THE CURRENT SITUATION
Supply, Demand and Prices
    The United States currently has 104 operable nuclear units, 
totaling 97.5 gigawatts of capacity. Electricity generation from 
nuclear power increased in 2000 to 754 billion kilowatthours, and the 
average capacity factor for U.S. nuclear power plants in 2000 was the 
highest in history at 89% (Figure 1). Through 1990, the average annual 
capacity factor was less than 70%. Increased performance has been 
achieved through improved operations resulting in shorter and fewer 
outages. During 1999, the average time required to refuel a nuclear 
reactor was 42 days, and nearly all nuclear plants operate for 18 
months between refuelings. During the 1970's and 80's the average 
refueling cycle was more typically 12 months, resulting in more 
frequent outages. The industry's median unplanned capacity loss factor 
was just two percent in 1999.
    In 1999, the production costs (expenditures for fuel and operations 
and maintenance) at nuclear power plants averaged 1.9 cents per 
kilowatthour (kwh), roughly the same as the operating costs of coal-
fired power plants, and about two-thirds the operating costs of oil and 
natural gas-fired steam plants.
    Fuel costs are a small part of the operating costs of a nuclear 
power plant. In 1999, U.S. utilities purchased a total of 47.9 million 
pounds of U3O8e (equivalent) at an average price of $11.63 per pound 
U3O8e. Foreign sources supplied 76 percent of the deliveries, mainly 
from Canada, Australia and Russia. Nuclear operators tend to purchase 
uranium on long-term contracts and the prices are not particularly 
volatile. Utilities loaded fuel assemblies containing 58.8 million 
pounds U3O8e into reactors during 1999, and had inventories of 58.2 
million pounds at year-end. U.S. suppliers had 68.8 million tons of 
uranium inventories at year-end 1999. EIA estimates of U.S. uranium 
reserves total 1,182 million pounds, although the estimated costs of 
mining and milling the uranium are higher than current market prices. 
During 1999, a total of 4.5 million pounds U3O8e of uranium were 
produced by mining, and there were nine commercially operating uranium 
mines in the United States. Once the uranium is purchased, it must then 
be enriched (increasing the concentration of the fissionable isotope) 
before it can be used as nuclear fuel. U.S. facilities provided 46 
percent of U.S. utilities enrichment services in 1999, and foreign 
enrichment plants the remaining 54 percent. Enrichment services are 
also primarily obtained through long-term service contracts.
Legislative and Regulatory Challenges
    The Nuclear Regulatory Commission (NRC) oversees the licensing and 
operation of nuclear power plants. The typical operating license for a 
nuclear plant was issued for 40 years. With the first wave of current 
plants brought online in the 1970s, many of these units could be facing 
retirement in the near future. However, the NRC has provided a process 
for nuclear plant owners to apply for renewal of their operating 
licenses, adding another 20 years to the licensed lifetime. In March of 
2000, Baltimore Gas and Electric's two Calvert Cliffs units were the 
first nuclear reactors to receive license renewal, extending their 
license expiration dates to 2034 and 2036, respectively. Also in 2000, 
three units at Oconee received license renewal approval, and five other 
units have applications submitted. Future submittals have been 
scheduled for roughly 40 percent of current plants through 2004. The 
NRC has created a streamlined process to review applications, and the 
total time from application submitted to approval has been just under 
two years. The cost to the owner of pursuing a license renewal has been 
estimated at between $10 million and $20 million per reactor, and 
requires detailed descriptions of expected aging effects and how they 
will be addressed to maintain safe operation. The renewal approval does 
not require the company to undertake potential capital expenditures to 
keep the plant running the additional time, which could be 
substantially more than the cost of obtaining the license. So the 
eventual retirement date of any plant will likely be based on the 
economics of its operation rather than the actual date on the license. 
To date, the longest a commercial nuclear plant in the United States 
has operated is 33 years.
    Nuclear waste disposal is a challenge that is faced primarily when 
the plant is shut down and waiting to be decommissioned. Low level 
waste (LLW) disposal is the responsibility of the states where the 
waste is generated. Interstate compacts have been created to jointly 
develop sites for disposal; however, no new sites have been opened even 
though the Low Level Radioactive Waste Policy Act stated that disposal 
facilities could refuse to accept waste from outside their compacts 
beginning in 1992. Currently, only three low-level waste sites exist: 
one in Hanford, Washington, which only accepts waste from states in the 
Northwest Compact in which it resides, and the neighboring Rocky 
Mountain Compact; one in Clive, Utah, which is only licensed to accept 
the lowest level--Class A--waste, and one in South Carolina, which is 
still accepting all classes of LLW from all states except North 
Carolina. States that do not have access to disposal facilities are 
likely to require the waste generators to store their waste on-site 
until new disposal sites are available. South Carolina has recently 
joined a compact with Connecticut and New Jersey, and has enacted a 
state law to phase out acceptance of non-compact waste by 2008. The 
site in Utah, operated by Envirocare, has applied for a license to 
accept the higher classes of waste, and has no plans to limit 
acceptance of the waste. Low-level waste disposal issues are important 
because they affect the cost and timing of decommissioning nuclear 
power plants.
    The Department of Energy is working on siting a repository for 
spent nuclear fuel and high-level waste. The proposed waste site at 
Yucca Mountain, NV is still undergoing site characterization, to 
determine if the site is suitable and should be recommended for 
development. The soonest this proposed facility could begin accepting 
the waste is 2010. The initial storage of the spent fuel assemblies, 
once removed from a reactor, is in steel lined pools at the reactor 
site. However, these are quickly being filled to capacity at most 
reactors. For temporary storage, dry cask containers have been 
developed and licensed by the NRC to store the used fuel assemblies. 
Some of these storage containers should be suitable for transporting 
the waste once the final repository is sited. The lack of a final 
repository is not likely to force any operating nuclear reactors to 
shut down early, but will require the owners to purchase, and receive 
approval to install, the temporary storage containers on-site.
    Finally, the Price-Anderson Act expires in 2002 and could create 
barriers to new construction if it is not extended in its current form. 
The Price-Anderson Act was enacted into law in 1957, as part of the 
Atomic Energy Act, to meet two objectives: to remove any deterrents to 
private sector participation in nuclear energy due to the threat of 
large liability claims in the event of a catastrophic nuclear accident, 
and to ensure that adequate funds are available to the public if such 
an accident were to occur. The Act limits liability to third parties in 
the event of a nuclear accident to $9.43 billion. It also provides for 
a series of retroactive assessments paid by all nuclear utilities if 
the total liability exceeds the amount of primary coverage. If the Act 
is not extended, coverage for existing units would continue as provided 
by the Act, but any new nuclear units would not be covered. The Price-
Anderson Act has been extended three times since 1957, and current 
legislation has been proposed in the Senate that includes the extension 
of the Act through 2012.

                              THE OUTLOOK
    The Annual Energy Outlook 2001 (AEO2001) reference case projects 
U.S. energy supply, demand and prices through 2020. It assumes a 
continuation of current laws and regulations, and provides alternative 
scenarios to deal with uncertainty in the assumptions. It is expected 
that recent trends in improved performance will be maintained, 
resulting in average capacity factors for operating plants of 90 
percent by the last years of the forecast. The long-term projection, 
however, is for a decline in total generation from nuclear power as 
some existing nuclear reactors are retired and replaced by other, 
mainly gas-fired, generating units (Figure 2).
    Electricity demand is projected to grow at an annual average rate 
of 1.8 percent between now and 2020. To meet this demand, and to 
replace retirements of older generating units, EIA projects 413 
gigawatts of new generating capacity will be needed (including 
cogeneration capacity). Of this new capacity, 92 percent is projected 
to be combined-cycle or combustion turbine technology fueled by natural 
gas. About five percent of the new capacity is expected to be coal-
fired, and the remaining three percent renewable technologies. The 
projected operating cost of a new nuclear reactor (including capital 
recovery) is about 6 cents per kilowatthour, higher than that for coal 
or combined-cycle capacity which are roughly 4 cents per kilowatthour 
(Figure 3). Gas-fired units are favored particularly in restructured 
electricity markets due to their lower capital costs, higher 
efficiencies, shorter construction times, and better load following 
characteristics.
    Within the EIA forecast, nuclear units are forecast to retire when 
their operation is no longer economic relative to replacement capacity. 
The forecast incorporates future aging-related costs that could be 
incurred as plants consider operating beyond 40 years. In the reference 
case, nuclear plants are assumed to incur additional capital costs of 
$14 per kilowatt (kw) per year after 40 years, and increase to $25/kw 
per year after 50 years. These costs are reduced significantly for 
individual units if they have already incurred major capital 
investments related to plant upgrades. The aging related costs are 
similar in magnitude to annual capital additions assumed for existing 
fossil plants ($4-5/kw for gas plants, $10/kw for oil/gas steam units 
and $16/kw for coal plants, on average). In the reference case, 27 
percent of current capacity is forecast to retire by 2020, mainly after 
2010. Of this retiring capacity, one nuclear plant is projected to 
retire before the end of its 40 year life, 30 units are forecast to 
retire at the end of their current license expiration and 2 units are 
projected to retire ten years after their current license expiration 
(implying a license renewal was received). Another 25 units have 
original licenses that expire by 2020, but are forecast to receive 
license renewal and extend their operation beyond 2020.
    Because the U.S. nuclear industry has no experience operating 
reactors beyond 40 years (the oldest operating reactor today is just 
over 30 years old), future operating costs and capital investments 
required are unknown. Due to the uncertainties surrounding future 
aging-related costs, several cases were developed to further analyze 
the effects on electricity supply due to differing assumptions 
regarding the costs of future operation (Figure 4). These results 
provide a range of possible futures for existing nuclear power. In the 
low nuclear case it was assumed that aging related costs would begin 
earlier, with capital additions of $5/kw per year starting at age 30. A 
total of 18 additional units were projected to be retired through 2020 
relative to the reference case. Additional fossil-fired capacity was 
projected to be built to replace the retiring nuclear capacity, and the 
carbon emissions from electric generators increased by two percent (16 
million metric tons carbon equivalent) above the reference case in 
2020. In the high nuclear case, aging related costs were assumed to be 
lower by 25 percent, resulting in more plants projected to operate 
beyond their initial license life. In the high nuclear case only 11 
units were projected to retire through 2020 ( 9 percent of current 
capacity). About 14 gigawatts of fossil-fired capacity (roughly 47 
units at 300 megawatts each) would no longer be required, relative to 
the reference case, and carbon emissions from electric generators would 
be reduced by two percent (16 million metric tons carbon equivalent) by 
2020.
    There are additional uncertainties affecting other generating 
industries that could change the competitiveness of nuclear power. 
Current natural gas prices are much higher than normal in response to 
low levels of gas storage, unusually cold weather and supply issues. 
The AEO2001 forecasts that this situation will reverse over the next 
few years, as increased drilling and production occurs, and that gas 
prices will return to more typical levels by 2004. Therefore, forecasts 
of the cost of new gas-fired capacity later in the forecast are based 
on gas prices below the current levels. More existing nuclear power 
plants would be economic if current gas prices remained throughout the 
forecast period, resulting in fewer retirements. However, it is 
expected that this tight supply situation for natural gas will 
dissipate before 2010, when the retirement decisions for nuclear units 
start being made.
    The electric generation sector may also face restrictions on the 
emissions of various pollutants in the future. Since the AEO2001 
forecast incorporates current laws and regulations, it requires the 
electric sector to meet sulfur dioxide and nitrogen oxide restrictions 
as specified in the Clean Air Act. The summer season cap on nitrogen 
oxide (for 22 states) will be imposed in 2004 by the Environmental 
Protection Agency (EPA). Because these reductions are being met by 
existing fossil plants by adding the necessary control equipment, their 
operation and costs are not greatly affected. If additional emissions 
were targeted in the future for reduction, such as carbon dioxide, a 
large number of coal plants would be retired and replaced mainly by 
gas-fired technology, leading to higher natural gas prices. This 
situation would provide an economic incentive to continue operating 
more of the existing nuclear power plants.
    For example, the EIA recently performed an analysis of strategies 
for reducing multiple emissions at power plants, at the request of 
then-Representative David M. McIntosh, Chairman of the Subcommittee on 
National Economic Growth, Natural Resources, and Regulatory Affairs of 
the House Government Reform Committee. In this report, EIA was asked to 
provide an analysis of proposals to reduce sulfur dioxide 
(SO2) and nitrogen oxide (NOX) by 75 percent from 
1997 levels, and carbon dioxide (CO2) to either 1990 levels 
or 7 percent below 1990 levels, similar to the general requirements of 
the Kyoto protocol, but restricted to emissions by electric generators. 
In order to comply with the CO2 cap, the industry was 
projected to dramatically shift away from coal to natural gas, and to a 
lesser extent, renewables. This analysis also showed fewer nuclear 
retirements (9 percent of current capacity) by 2020, as the higher 
natural gas prices (as much as 63 percent higher than the reference 
case in 2010) and CO2 allowance prices made it economical to 
continue operating more of the existing capacity. This scenario assumed 
the AEO2001 reference case aging-related costs for nuclear plants, 
however, the nuclear capacity forecast was similar to the high nuclear 
case due to the emissions targets and higher natural gas prices. At the 
request of the Subcommittee, this analysis assumed that no new nuclear 
power plants would be built throughout the forecast period.
    Projections of the cost of building new nuclear capacity is 
difficult, due to the length of time since a new unit has been ordered 
in the United States, and the lack of experience in building new 
designs. The AEO2001 reference case bases the cost of a new nuclear 
unit on the advanced passive reactor design (AP600), which has been 
approved by the NRC as part of its standardized design certification. 
This design has evolved from the current operating designs, but also 
includes passive safety features and is based on a smaller size (600 
megawatts). The initial overnight capital cost (in 1999 dollars) of the 
AP600 is assumed to be $1730 per kilowatt, compared to $1020 to $1220/
kw for a coal-fired unit and $420 to $530/kw for a gas-fired combined 
cycle unit. Contingency factors are applied to the costs of all new 
capacity, and are made up of two components--a project contingency 
factor, which is applied throughout the forecast to account for delays 
during construction due to unforseen problems such as weather or labor 
issues, and a technological optimism factor, which is only applied to 
the first four units built of a new design to account for the tendency 
to underestimate costs for new technologies. Capital costs decline over 
time as new capacity is built and experience is gained. However, 
because the initial cost for the advanced nuclear technology is much 
higher than other available technologies, it is not economic to build 
nuclear units in the reference case.
    The Department of Energy's Office of Nuclear Energy has developed 
long-term cost goals for these evolutionary designs that are lower than 
current estimates. An alternative nuclear cost case was developed 
assuming the cost of the new nuclear technology was $1500/kw initially, 
falling to $1200/kw by 2015, with a ten percent project contingency 
factor applied to these costs. In addition, cases were considered 
assuming both 3 and 4 year construction times. In these cases the 
nuclear technology was closer to being competitive with coal and gas-
fired capacity (Figure 5); one new unit was projected to be built in 
the last years of the forecast under the assumption of a 3 year lead 
time. (Nuclear units were not economic under a four year lead time 
assumption.)
    Worldwide, work has been developing on a more revolutionary new 
commercial nuclear power technology, known as the pebble bed modular 
reactor. South Africa's state-owned utility has been working on the 
technology since 1993, but it has recently gained the interest of 
foreign energy policymakers as well as potential investors. One U.S. 
based company, PECO Energy, has joined with British Nuclear Fuels 
Corporation in making financial commitments to the venture. PECO's 
parent company, Exelon Corporation, has begun discussions with the NRC 
about building PBMRs in the United States. The economics are expected 
to improve for this technology because of the plant's small, modular 
design (110 megawatts each). The design incorporates passive safety 
features and would have higher thermal efficiency than existing nuclear 
plants, requiring less fuel and producing less waste. The estimates of 
construction costs ($1000/kw) would be very competitive with new coal-
fired technologies available in the United States, if they could be 
attained. The construction costs would still be almost double that of a 
new gas combined-cycle unit ($530/kw). Ultimately, this design is still 
untested, and its future will be determined in large part by the 
success or failure of the South African demonstration project, 
scheduled for completion in 2005.

                               CONCLUSION
    While nuclear power today provides roughly one-fifth of the 
nation's electricity generation, that share is expected to drop over 
the next two decades as some existing units are retired and replaced by 
other generating technologies. Coal will remain a large supplier of 
electricity, and natural gas is expected to greatly increase its 
proportion of electricity generation. While operating performance at 
individual nuclear units is expected to remain high, total output from 
nuclear plants is expected to decline by about twenty percent between 
now and 2020, as units are removed from service.
    The ability to relicense existing nuclear plants for an additional 
twenty years of operation could extend the operating lives of current 
reactors, and delay retirements. However, achieving new orders for 
nuclear plants based solely on economics is unlikely at this time due 
to the high construction costs of the technology, as well as 
uncertainties related to costs, safety and waste. The challenge of 
waste disposal is faced by existing nuclear power plants as they 
continue to store high level waste on-site, waiting for site approval 
and construction of the permanent waste repository required by the 
Nuclear Waste Policy Act.
    Thank you, Mr. Chairman and members of the Subcommittee. I will be 
happy to answer any questions you may have.
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    Mr. Barton. Thank you.
    The Chair would--is Mr. Tauzin in the room? We will 
recognize him first if he is here. Okay.
    The Chair would recognize himself, then, for 5 minutes to 
start the questioning period. Dr. Travers or Mr. Magwood, can 
either of you gentlemen tell me how many billions of dollars 
have been paid into the nuclear waste fund since its creation 
in the 1980's?
    Mr. Magwood. I don't think I know the up-to-date number, 
but I think it is in the order of $12 billion.
    Mr. Barton. Okay. Ms. Hutzler, can you tell me?
    Ms. Hutzler. No, I don't have that number.
    Mr. Barton. You don't have it either?
    Ms. Hutzler. No.
    Mr. Barton. Well, I want to know how many dollars have been 
paid in, how many dollars have been paid out, where the money 
has gone to, and how many dollars are officially still in the 
fund. That would seem to be a baseline piece of information 
that we would need. So do you think you all can handle that? 
Mr. Magwood?
    Mr. Magwood. I was looking through my notes. I do have a 
calculation provided by the Office of Civilian Reactor Waste 
Management. I can give you the numbers they have. They indicate 
that there is total cumulative fees of about $10.6 billion, 
with a total income, which includes defense fees, of $15.5 
billion.
    The disbursements to the program for expenditures have been 
totaling about $5.6 billion, and the balance in the fund 
currently is $9.976 billion.
    [The following was received for the record:]

    In response to your question, I would like to provide the following 
information supplied by the Department's Office of Civilian Radioactive 
Waste Management, which manages the Nuclear Waste Fund. The Nuclear 
Waste Fund is a special account established in the U.S. Treasury by the 
Nuclear Waste Policy Act.
    As of December 31, 2000, the balance of the Nuclear Waste Fund was 
$9.976 billion. Receipts of the Fund, derived primarily from fees paid 
by the owners and generators of civilian spent nuclear fuel, totaled 
$10.673 billion. Receipts resulting from return on Treasury security 
investments totaled $4.9 billion. Therefore, cumulative receipts of the 
Fund totaled $15.573 billion.
    Since enactment of the Nuclear Waste Policy Act, disbursements from 
the Fund totaled $5.597 billion. These disbursements cover the costs 
for numerous expenditures. Over half has been spent on the 
characterization of Yucca Mountain, Nevada. These expenditures have 
covered extensive scientific and technical work required to gather the 
information needed to support a decision on whether Yucca Mountain is 
suitable for use as a repository. Aside from expenditures related to 
the characterization of the Yucca Mountain site, additional funds have 
been spent on statutorily mandated activities to identify other 
candidate repository sites, to support work toward siting a second 
repository, and to develop a monitored retrievable storage facility. 
All of these activities were later terminated. Also, funds have been 
expended to pay for regulatory and scientific oversight, financial and 
technical assistance, and payments-equal-to-taxes.
    All expenditures from the Fund are limited to funds appropriated by 
Congress.

    Mr. Barton. Okay. Well, doublecheck that. And especially on 
the disbursements we would like to know where the money has 
gone, because one of the key elements in a nuclear waste bill 
later this year is going to be paying to construct the site.
    And last year the committee passed a funding resolution in 
the House bill that actually used the nuclear waste fund for 
what it was supposed to be used for, and my intention is to 
move a bill that does that this year also. But in order to do 
that, I want to know what the numbers are.
    Okay. I would like to ask Dr. Travers--and, again, perhaps 
Mr. Magwood--later in the hearing today we are going to hear 
from a private industry representative who is going to talk 
about the Pebble Bed Modular Reactor, which is a much smaller 
reactor.
    Now, my understanding of the projections that the EIA has 
made, you all are basing those projections on the new 
lightwater reactor, which is a much larger reactor. In my 
conversations with industry representatives, I have not seen 
much interest in purchasing the new large lightwater reactor, 
but I have seen a lot of interest in purchasing the smaller 
reactor if it is certified by the NRC.
    So what steps is DOE and the NRC taking to look at this 
different technology, this smaller, more passive safety of 
Pebble Bed Reactor?
    Mr. Travers. Mr. Chairman, thank you. The NRC, for its 
part, is engaged in a dialog with Exelon, and I think you are 
going to hear from representatives of that company a little bit 
later.
    We are, in the most technical sense, involved in a pre-
application review of specific key issues related to that 
design. Exelon, of course, is reviewing whether or not to go 
forward with development of a detailed technical design for 
this facility, and whether or not to submit an application to 
the Nuclear Regulatory Commission.
    We currently have a planning wedge in our budget for 
carrying out a review of a combined operating license for a 
PBMR beginning in either fiscal 2002 or fiscal 2003. But the 
activities that are currently being undertaken are those that 
are directed at identifying key issues for this rather new 
technology, a technology that has not been one that has been 
licensed, at least for large-scale production, in the United 
States.
    We are involved and engaged with Exelon in identifying the 
key issues that would put us in the best position to move out 
quickly should we receive an application from that company to 
license this technology. And there are some unique elements to 
that.
    The Commission has actually directed the NRC staff to begin 
a reexamination of its capabilities for things such as 
construction inspection program for licensing the reactor 
technologies, and we have undertaken, specific to your request, 
an examination of our current regulations that would allow for 
licensing of new and innovative technologies.
    We believe we fundamentally have the infrastructure in 
place and the requirements in place that will provide our basis 
for moving forward. But there are unique elements to this 
design that, as I mentioned earlier, heretofore have not been 
examined by the NRC.
    So there are some specific technical issues that are on 
somewhat of a cutting edge, and certainly the experience in the 
NRC staff is somewhat limited in these areas. But there is 
quite a lot.
    Mr. Barton. Do you see any statutory restriction in 
reviewing the new technology?
    Mr. Travers. No, sir.
    Mr. Barton. Okay. So there is no need for new statutes to 
review different types of nuclear reactor technology?
    Mr. Travers. No, sir.
    Mr. Barton. Okay. Ms. Hutzler, this will be my last 
question. The EIA 2000 analysis and 2001 analysis shows that 
about 27 percent of the existing nuclear power plants are going 
to shut down. Given the increased operating efficiencies and 
fuel cycle efficiencies, why is that built into your 
assumption?
    Ms. Hutzler. It is based on economics. What we do is we 
look at aging-related costs to keep these units operating. We 
do that for fossil units as well. My written testimony 
indicated the costs that we have for these units. For the 
fossil units, we assume that the costs are added on in each 
year. The nuclear units are added on later in the time horizon.
    But for each unit, we take a look at the costs and whether 
it is economic to continue operating or whether a replacement 
unit should be built.
    Mr. Barton. Well, were any of those closures a result of an 
operating permit expiring? Is your analysis based on the 
theoretical economics of continuing to operate the plant?
    Ms. Hutzler. It is the latter.
    Mr. Barton. The latter.
    Ms. Hutzler. Continued economics.
    Mr. Barton. Okay. My time has expired.
    The gentleman from Virginia is recognized for 5 minutes.
    Mr. Boucher. Thank you, Mr. Chairman.
    Dr. Travers, I notice that the NRC is proposing that the 
authority of the EPA to have oversight and enforcement 
capabilities with regard to the cleanup of decommissioned 
nuclear plants be repealed. Can you give us some rationale for 
that? What is the thinking of the NRC with regard to how the 
public policy is better served if EPA does not have this 
enforcement and review authority?
    Mr. Travers. Thank you for the question. The Commission has 
been generally interested in issues where dual regulation or 
concurrent jurisdiction are at issue. And, of course, when you 
enter into this sort of situation, the issues that arise from 
it are the predictability of government actions necessary, in 
this case, for decommissioning facilities.
    The NRC has promulgated what we have called a license 
termination rule, which establishes a single all-pathway 
standard for judging whether or not a nuclear facility--nuclear 
power, fuel facility, what have you--can be released after a 
decommissioning and decontamination period.
    We have run into a parallel jurisdictional issue with EPA 
wherein very often, or at least on occasion when the NRC has 
completed its assessment of the adequacy of the decommissioning 
efforts, the Environmental Protection Agency, under its 
authorities I think in CERCLA, have raised issues that we feel 
technically in the main are not justified.
    So what we have urged in terms of legislative initiatives 
is a situation where the Congress reexamines whether or not the 
NRC should be looked to as the principal establishment--
principal organization responsible for establishing those sorts 
of standards, and thereby increasing the predictability of the 
Federal process associated with the release and decommissioning 
of nuclear facilities.
    Mr. Boucher. Let us suppose Congress approves your 
recommendation. What effect would that have on the liability 
under Superfund of the owners of nuclear power plants?
    Mr. Travers. I am really not sure. I would have to answer 
that one for the record.
    [The following was received for the record:]

    The Commission has established, by regulation, radiological 
criteria for the termination of licenses that fall under the 
Commission's regulatory authority. These regulations provide a clear 
and consistent basis for determining the adequacy of remediation of 
residual radioactivity resulting from the possession of Atomic Energy 
Act material. The NRC legislative proposal would establish that NRC's 
cleanup standards are adequately protective for purposes of the 
Comprehensive Environmental Response, Compensation, and Liability Act 
(Superfund), and that those NRC standards govern the cleanup of sites 
and material licensed by the Commission, or by an Agreement State. In 
order for NRC licensees to remediate their sites, NRC regulations 
require that funds be set aside during the license term to ensure that 
sufficient money is available for the cleanup of residual atomic energy 
act materials.
    To provide some background on this matter, the NRC has the 
statutory responsibility for the protection of public health and safety 
related to the possession and use of source, byproduct, and special 
nuclear material under the Atomic Energy Act of 1954, as amended, and 
must ensure safeand timely decommissioning of the nuclear facilities 
that it licenses. The EPA has responsibilities under CERCLA with 
respect to cleanup activities at contaminated sites containing 
hazardous substances, which can include sites subject to NRC 
regulation. Since September 8, 1983, EPA has generally deferred listing 
on the CERCLA National Priorities List (NPL) those sites that are 
subject to NRC's licensing authority, in recognition that NRC's actions 
are believed to be consistent with the CERCLA requirement to protect 
human health and the environment. However, as EPA indicated in the 
Federal Register notice announcing the policy of CERCLA deferral to 
NRC, if EPA ``determines that sites which it has not listed as a matter 
of policy are not being properly responded to, the Agency will consider 
listing those sites on the NPL'' (see 48 FR 40658).
    Since the initiation of the 1983 deferral policy, EPA has taken 
action at very few formerly or currently licensed NRC sites. These EPA 
response actions at NRC licensed sites were conducted in joint 
cooperation, to address contamination that is not within NRC's 
regulatory authority, including non-radiological chemical contamination 
or contamination outside the facility boundary.
    In the rare cases where the regulatory efforts of the NRC or an 
Agreement State would not accomplish results that are satisfactory to 
the NRC or an Agreement State, the Commission or, where applicable, the 
Agreement State, could request the application of Superfund to effect 
adequate cleanups. Superfund would apply only in this situation. That 
is, Superfund would not apply to NRC or Agreement State licensees 
unless NRC or an Agreement State asks for its application.
    The Commission's proposal would end uncertainties facing former NRC 
licensees regarding the future views of EPA with respect to 
acceptability of cleanup efforts that the NRC has found to be adequate, 
and would resolve an outstanding issue that has not been resolved 
regarding dual regulation.

    Mr. Boucher. Well, I would invite you to do that, because 
if we are going to consider seriously your recommendation, I 
think that is a key consideration for us.
    Mr. Travers. Sure.
    Mr. Boucher. I notice also that you are recommending that 
Congress amend the Atomic Energy Act and eliminate the 
restrictions that exist in current law on the ability of 
foreign entities to own nuclear power plants in the U.S. What 
is your rationale for that?
    Mr. Travers. Our rationale, sir, is that when these 
restrictions were--at least we believe when these restrictions 
were first put into the Act, nuclear technology was in its 
incipient stage. And it was not a technology that, in large 
measure, was known and being implemented around the world. Of 
course, today that situation has largely changed.
    And so that, combined with the fact that many of the 
organizational restructuring efforts that we see involve 
foreign entities, and the fact that the Commission has with its 
capability the ability and responsibility to determine if there 
is an inimicable problem with a particular entity--for example, 
a country like Iraq, if you will--we could still exercise our 
authority under the Act, we believe, even without this 
prohibitive sort of exclusionary language that currently exists 
in the Atomic Energy Act.
    Mr. Boucher. Well, would you be making the determination 
with regard to whether there was some kind of national security 
risk with a particular foreign entity having ownership of a 
facility in the U.S.?
    Mr. Travers. The answer, I believe, is that the NRC could 
in fact do that with consultation among Federal agencies that 
would provide----
    Mr. Boucher. Is that consultative requirement built into 
your statutory proposal?
    Mr. Travers. I would have to answer that one for the 
record, sir. I am not sure.
    [The following was received for the record:]

    The NRC's legislative proposal does not include an express 
requirement for the Commission to consult among Federal agencies before 
implementing the requirement that a license may not be issued to any 
person if, in the Commission's opinion, such issuance would be inimical 
to the common defense and security or to the health and safety of the 
public (the latter requirement is contained in the last sentence of 
both sections 103 d. and 104 d. of the Atomic Energy Act, and it 
remains unchanged). However, there are informal mechanisms through 
which the NRC may obtain the views of the Executive Branch. In 
practice, the Commission has obtained the views of other Federal 
agencies on issues of mutual concern, including those related to the 
protection of the common defense and security. These informal 
mechanisms would be available for use in making a determination 
implementing the restriction against issuance of a license to a new 
owner, as to whether issuance would be inimical to the common defense 
and security.

    Mr. Boucher. I would ask you to do that.
    Mr. Travers. Sure.
    Mr. Boucher. Last year, largely at your request, Congress 
changed the method by which you collect user fees, but there 
was a provision adopted simultaneously that says that the 
utilities do not have to pay for certain kinds of programs that 
are carried out by the NRC--your international programs, for 
example.
    Mr. Travers. Yes.
    Mr. Boucher. What effect is that provision having in terms 
of the overall level of fee collection? Is it diminishing the 
level of fee collection? And if it is diminishing the level of 
fee collection, are you finding that you have adequate revenues 
with which to carry forward your essential programs?
    Mr. Travers. Yes. In fact, it is, and----
    Mr. Boucher. It is what?
    Mr. Travers. It is reducing the collections.
    Mr. Boucher. Okay.
    Mr. Travers. Because as I understand the stipulation, 2 
percent going forward additive for the next 5 years, equating 
to 10 percent ultimately, of fees that are currently obtained 
from our licensees would be money that would be collected from 
the general fund instead.
    And as you indicated, activities such as international 
activities that we feel are sort of a generic benefit to our 
licensees but not a direct one, are the sorts of activities 
that we had in mind in proposing this.
    And in the main, the answer as far as, do we have enough 
monies to support our fundamental mission objectives, the 
answer is that, generally--I mean, the answer is yes, and we 
are moving forward in the development of our budget to support 
and determine, really, what sorts of resources would be 
required should projects currently not anticipated, like 
advanced reactors, come before the Commission.
    The expectation is that if many of these projects did come 
before the Commission in the near term, we would need to budget 
additional resources for that, because what we have today is 
very much in play in activities such as license renewal and 
other activities.
    Mr. Boucher. All right. Thank you, Dr. Travers. That is a 
complete answer.
    Mr. Barton. The gentleman's time has expired.
    The gentleman from Kentucky, Mr. Whitfield, is recognized 
for 5 minutes.
    Mr. Whitfield. Thank you, Mr. Chairman.
    Mr. Magwood, I know that your Office of Nuclear Energy does 
not have responsibility anymore for the DUF-6 conversion 
project, but I also know you are quite knowledgeable about it. 
And I think you all have received five bids on March 1, and 
supposedly the Department of Energy will award a contract 
sometime in August to build a facility at Paducah and at 
Portsmouth.
    And I was curious, do you have any idea or thoughts on what 
the appropriation level should be for fiscal year 2002 to keep 
that project on track?
    Mr. Magwood. As you pointed out with the transfer of this 
program to DOE's Office of Environmental Management, my office 
is no longer responsible for the program, so it would be 
difficult to give you a very precise answer. Let me say that I 
do know that industry has begun to express its interest in this 
project more formally and has asked for additional time to 
formulate bid packages. My understanding is that the schedule 
for the program is being reset based on the request made by 
industry.
    As you know, this is a complex technological task that we 
have asked industry to take on. Until the project schedule is 
redefined, it is very difficult to know what the appropriation 
for next year should be.
    I do know that a number has been established by the Office 
of Environmental Management, working with the Office of 
Management and Budget, and that will be in the President's 
budget request. However, I think that that number may have been 
affected by the fact that industry has asked for more time to 
prepare its bids.
    Mr. Whitfield. Okay. Now, let me ask you, this is a 
hypothetical question. But Mr. Strickland and others talk 
frequently, as I do, about the necessity for the capability to 
produce enriched uranium domestically.
    And, hypothetically, let us say that, as you know, USEC has 
in negotiations with TENEX tried to amend their suspension 
agreement to bring in commercial grade SWU from Russia. 
Obviously, one of the reasons they want to do that is it would 
help them financially. And let us say that they do not receive 
approval to do that.
    And then, second of all, they are the exclusive agent for 
the Russian agreement on highly enriched uranium, and there are 
other utilities that have expressed an interest in also 
becoming an executive agent, so that USEC would not be the sole 
exclusive agent. And let us say that that was approved and that 
USEC was no longer the exclusive agent.
    Then, let us suppose, USEC had real financial difficulty 
and maybe would not be able to operate their plant. And as I 
said, all of this is hypothetical. But if that happened and we 
would not have any ability to enrich uranium domestically, what 
would you recommend we do?
    Mr. Magwood. That is an interesting hypothetical. I think 
that the way that we are going to address this over the next 
several weeks and into the future--that is, the issue of what 
to do with the enrichment business in the United States, which 
is very important as I think several opening statements 
reflected--is to recognize that it has both an energy aspect to 
it and also a national security aspect to it.
    That said, the administration is examining these issues in 
the context of both the Vice President's energy review, which 
is underway, and also under the various national security 
reviews that are being pursued.
    And until those reviews are complete, it is very difficult 
to know or to answer your question. There is simply a great 
deal of analysis, and policy review that needs to be completed, 
but I can promise you that it is something that is very, very 
high on the Secretary's list of issues.
    He has, in fact, formed a new senior-level task force 
within the Department that brings together all of the 
components of the Department, including the National Nuclear 
Security Administration--to try to deal with this adequately. 
So as I say, I can't really answer your hypothetical at this 
point, but I do know that policy is being established and 
hopefully very soon we will be able to address that.
    Mr. Whitfield. Thank you.
    Mr. Barton. The gentleman's time has expired.
    Seeing no other members on the minority side, we are going 
to let Mr. Strickland ask questions for 10 minutes, so that we 
will only have one round of questions for this panel, and he 
had expressed an interest in a second round. So we are going to 
recognize him for 10 minutes.
    Mr. Strickland. Thank you, Mr. Chairman.
    Mr. Whitfield, thank you for that question. It is a 
question that absolutely needs to be answered.
    Mr. Travers, if the research on the Pebble Bed Reactor 
progresses to the point of it becoming viable, and it needs an 
8-percent assay in order to operate, and we are shutting down 
Portsmouth, which is currently licensed to enrich to 10 
percent, where will we get the fuel that we may need at some 
future time for such a reactor?
    Mr. Travers. Well, Congressman, as you know, in 
relationship to the remaining enrichment facility that will be 
operating shortly in the U.S., that capacity has been recently 
increased from 2.75 to 5.5 percent. It is my understanding that 
for PBMR the enrichments are on the order of 8 percent or so.
    Exactly where that will come from I can't say, but I think 
the expectation----
    Mr. Strickland. Thank you.
    Mr. Travers. [continuing] is that it could come from 
abroad, or potentially even from the reactivation of Portsmouth 
or the licensing of a new facility.
    Mr. Strickland. I think the truth is that once Portsmouth 
is put on cold standby, we are talking about at least 1\1/2\ to 
2 years and multiple millions of dollars to bring it back on 
stream. This is a fuel we may need in the future, and we are 
proceeding to close this facility. It just does not make sense.
    Mr. Magwood, could you explain why DOE is proposing to 
maintain Portsmouth on cold standby? As a part of your answer, 
could you tell me, did DOE expect to find itself facing these 
circumstances? And what are the consequences if we do not place 
Portsmouth on cold standby?
    Mr. Magwood. To answer your second question first, it is 
very clear we did not expect to be in this position.
    Mr. Strickland. That you did not expect.
    Mr. Magwood. Did not expect it. The government as a whole, 
not just the Department, had a very clear understanding that 
the Portsmouth and Paducah plants would operate until at least 
2004. Because of the financial issues that USEC has 
encountered, USEC has decided to cease enrichment operation at 
Portsmouth considerably earlier.
    As a result, the government was unprepared, quite frankly, 
for the decision that was made, and had to react very, very 
quickly.
    Mr. Strickland. If I could just interrupt. I could say the 
government was not prepared because the government did not 
listen to very clear warnings about what was likely to happen. 
What are the consequences if we do not place Portsmouth on cold 
standby?
    Mr. Magwood. The consequences of not placing Portsmouth on 
cold standby are that the plant would be placed in I guess what 
has been called a cold iron mode, which is to say that you 
would allow the plant to be shut down in a way that would not 
make it likely ever to be brought back into operation, or you 
would go immediately to D&D, decontamination and decommission 
mode.
    Mr. Strickland. Can you tell me what the one-time costs are 
for--annual costs for placing Portsmouth on cold standby? How 
long will it take to restart the Portsmouth plant in the event 
that it is necessary for our national needs in the future?
    Mr. Magwood. The annual cost projected for cold standby, 
including the cost of removing any uranium deposits in the 
plant systems, is about $65 million a year. If that condition 
is maintained adequately, and it can be maintained that way for 
probably about 5 to 6 years without significant degradation of 
the plant, we would be able to bring the plant back up in about 
1\1/2\ to 2 years.
    Mr. Strickland. How much would it cost to bring the plant 
back into operation, if necessary?
    Mr. Magwood. I don't know that off hand. I would have to 
answer that for the record.
    Mr. Strickland. As you know, Secretary Abraham announced 
his plan for cold standby in Columbus, Ohio, on March 1. How 
does the administration plan to fund that initiative? Will this 
committee be required to review a reprogramming request? When 
can we expect to receive such a request?
    Mr. Magwood. The Department has been working very closely 
with the Office of Management and Budget to formulate a plan to 
meet the financial requirements of the cold standby approach. 
We have not presented that as yet. It is currently under review 
by the administration.
    It is my belief that it will be forthcoming very soon. In 
fact, I am hopeful that it will be forthcoming within the next 
couple of weeks. But it is a very complicated matter. It is a 
very expensive issue to be dealing with at this point in the 
fiscal year. So finding the resources has not been an easy 
matter, but we are trying to do that now.
    The Office of Environmental Management has the lead role to 
work with the Department to try to find those resources, and 
they are doing that now.
    Mr. Strickland. So are you telling me that we could expect 
perhaps within 2 weeks to have such a reprogramming request 
before the Congress?
    Mr. Magwood. I am certainly hopeful of that. I think that 
if all of the approvals are completed, it can show up in that 
timeframe.
    Mr. Strickland. As you know, Mr. Magwood, USEC has received 
approval from the NRC to produce enriched uranium at 5.5 at 
Paducah. However, recent reports in the press indicate that 
USEC's maximum economic output at the Paducah plant is only 
about 4.5 million SWU per year when compared with the 
requirement of 10 million SWU to fulfill their contracts, both 
to the domestic and the foreign utilities.
    Aside from safety, for which the NRC has already conducted 
a review, are you confident that the Paducah plant will be able 
to reliably and economically enrich uranium up to 8 million SWU 
per year at the 5.5 level assay?
    Mr. Magwood. I can't personally give you that guarantee. I 
don't know that the Department is in a position to give that 
guarantee. While we are very concerned about the energy 
security issues, it is clearly a commercial matter for which 
USEC is responsible. If NRC approves that upgrade from a safety 
perspective, we would certainly have to defer to USEC as to 
whether it is economic to do that.
    Mr. Strickland. So DOE does not have an answer as to 
whether or not this country is going to be supplied with a 
reliable economic domestic supply of enriched uranium to meet 
our Nation's needs? Is that what you are saying?
    Mr. Magwood. I am saying that DOE doesn't have a role in 
making the economic decisions for USEC. But we are concerned 
about potential long-term and the near-term energy security 
issues facing this country. As I have stated, the Vice 
President is conducting a very thorough review that includes 
this issue.
    Mr. Strickland. Mr. Travers, the NRC staff came to my 
office a few days ago, and they provided me with this document, 
and it laid out the timetable for closing the Portsmouth 
facility and for their hope that the Paducah would achieve a 
certain level of enrichment.
    I was somewhat stunned, and I will tell you why I was 
stunned. We have got a facility that is currently finishing a 
fuel for our nuclear utilities. Paducah has been given 
permission to upgrade to 5 percent. We are in the process of 
closing our facility, making it inoperable for at least any 
reasonable expectation of coming back into production.
    And yet we have not yet seen whether or not the Paducah 
facility can do what I believe you and the NRC is required to 
determine under the law, and that is that they are a reliable, 
economic, domestic supplier of fuel.
    The document that was brought to my office indicates that 
USEC will begin to generate at 4 percent product during late 
March and early April, and then USEC will generate near 5 
percent product for a few days in mid-April at Paducah. And 
then USEC will ramp down power and assay to near 1 percent in 
early May.
    Isn't it reasonable to assume that something that is so 
critical to the energy security of this nation would require 
more than a few days' demonstration on the part of the Paducah 
facility? We are closing the plant that can provide the fuel 
before we know for sure.
    Can you sit here today and tell me that you are absolutely 
sure that the Paducah facility will be able to meet our 
domestic needs in a reliable and an economic fashion after the 
Portsmouth facility is closed?
    Mr. Travers. Well, Congressman, I think, as you know, 
Chairman Meserve and the NRC have given these concerns that 
have been expressed by you and other stakeholders some very 
serious consideration. And, in fact, the reliable and economic 
responsibilities that you relate to, as contained in Section 
193(F)(2)(b), we believe, after consultation with the general 
counsel of the NRC, is principally directed at the possibility 
of foreign----
    Mr. Strickland. Can I interrupt just a moment, sir? And I 
am sorry. But you say ``is principally.'' Does that----
    Mr. Travers. It is, we believe, focused on this element, 
the potential for domestic--or, I am sorry, foreign entities 
becoming--gaining control and undermining the U.S. enrichment 
capability, as opposed to and separate from an obligation that 
we, frankly, would find difficult to exercise given our public 
health and safety responsibilities.
    We think, rather, the objectives of the reliable and 
economic capacity of the country--rather than being an NRC 
responsibility fundamentally should be exercised in the 
Congress and in other organizations of government, the 
Enrichment Oversight Committee. And as I think Mr. Magwood 
pointed out, these discussions are taking place.
    Our role, as we have evaluated it, is a rather focused one 
in the arena of assuring that the operations associated with 
the enrichment facilities, or facility in this case, are 
conducted in a manner that is safe. And so while we have looked 
at this, and while we have looked at the possibility of 
exercising your suggestion that we limit our authorization at 
Paducah based on some linkage to the Portsmouth facility, we 
really have found that to be separate and a matter that should 
be considered separate. And so we----
    Mr. Barton. Okay. The gentleman's time has expired, 
actually, and that answer took about 4 minutes, that one 
answer. So if you have additional questions, put them in 
writing, and we will certainly get them expeditiously. I know 
how important this is.
    Mr. Strickland. Mr. Chairman, I want to thank you for your 
terrific patience, and I want to thank you for this hearing. 
And I will follow your suggestion.
    Mr. Barton. You know, it brings back memories of my efforts 
on a project down in Texas in my district called the Super 
Collidor Project. It is a different level of intensity when it 
is in your district, and you are to be commended for being well 
informed and on point on the questions. But, unfortunately, we 
have got about 7 or 8 other members that need to ask questions.
    The gentlelady from New Mexico is recognized for 5 minutes.
    Ms. Wilson. Thank you, Mr. Chairman.
    Mr. Travers, in your testimony, or at least in the summary 
of it, you said that serious industry interest in new 
construction of nuclear power plants in the U.S. has only 
recently emerged. Could you expand on that statement and who 
you think is out there toying with the idea of--what is going 
to happen here?
    Mr. Travers. One reason for stating that is if you look 
historically at orders for new nuclear power plants we haven't, 
at the NRC, received an application for a new order for a 
commercial generating station since before Three Mile Island. 
Some might find that surprising. But before March 1979 was the 
last instance where the NRC received an application for a new 
nuclear power generation plant.
    That having been said, we have over the last few years 
received applications that imply an interest in the development 
of new nuclear technology. In that regard, I am referring to 
design certifications which have been forwarded to the 
Commission, and, in fact, approved. These design certifications 
for three different plants----
    Ms. Wilson. Thank you.
    Mr. Travers. [continuing] the advanced boiling water 
reactor, and others--are available to be referenced without 
further regulatory or without substantial further regulatory 
review.
    Ms. Wilson. Thank you.
    Mr. Travers. So they are available.
    Ms. Wilson. I wondered whether it was those design 
certifications or whether you were aware of any potential 
applications that----
    Mr. Travers. And I am.
    Ms. Wilson. [continuing] you haven't received but that 
might be coming.
    Mr. Travers. And I am. And so I will finish very briefly by 
saying that what we are now experiencing is some more direct 
interest in the possibility of actually building a new nuclear 
power plant or at least licensing a site. And three instances 
come to mind--the Pebble Bed Modular Reactor that we have some 
ongoing discussion in a preapplication sense with Exelon; the 
advanced passive 1,000 reactor, which is a Westinghouse design, 
which has--which there is an expressed interest for at least 
certification of the design if not for building a plant; and, 
third, for the possibility of licensing a site.
    Again, this is an early site permit potential. What we are 
looking at here is an NRC review that would allow a utility to 
have all of the environmental review and approvals associated 
with the siting requirements for a new nuclear plant, completed 
and available for reference for----
    Ms. Wilson. Okay.
    Mr. Travers. [continuing] between 10 and 20 years.
    Ms. Wilson. Thank you.
    Mr. Magwood, in your testimony, you talked about your work 
on advanced U.S. nuclear plant designs similar to those that 
have been constructed in Japan, South Korea, and Taiwan. In 
your opinion, where is the most promising technology for 
reducing the capital cost of nuclear plants?
    Mr. Magwood. That is a very good question. I think that 
there are many different paths we can pursue. We have talked 
about the potential for the Pebble Bed Reactor to present a new 
option. The Department has also been investigating gas turbine 
modular heating reactors, which is a technology using some 
similar aspects but a little different twist.
    Also, with respect to the advanced light water reactors, 
there is huge potential that we have discussed with utilities 
and with the vendors to find smarter ways of building those 
technologies using advanced information system technology, for 
example, to reduce the cost of actually putting the plant 
together at a site, and also using smart equipment, which can 
reduce the operating cost, which is another component.
    So there is different pathways, and I think that they are 
all going to have to be explored over the next several years to 
see what should be pursued, if not everything at the same time. 
It depends on what the utilities see as the economic model for 
building new nuclear power plants.
    Ms. Wilson. Do you have within the Department an R&D road 
map for critical technologies to reduce the cost and improve 
the safety of nuclear plants? Or, I mean, maybe another way of 
putting that is, what do you need in your office, which I think 
is critical to this whole question, what do you need to 
accelerate the development of the fourth generation of nuclear 
power?
    Mr. Magwood. Yes. We have started--due largely to the 
leadership that came from Congress--the Generation IV 
technology road map, working not just with entities in the U.S. 
but with many other countries as well.
    There are now--and this may be a surprise to some people--
about 150 engineers and scientists all over the world working 
on the Generation IV technology road map with a goal to finish 
the road map next fall. This roadmap will provide a sense of 
what high priority technology research should be pursued by the 
U.S. and other countries and what the R&D plans should be to 
pursue those technologies.
    And once that is completed, we will need to decide whether 
the Department should take an active role in developing those 
technologies using our national laboratories and other 
resources. That is something we are pursuing right now very 
aggressively, and hopefully about a year from now we will know 
a lot more.
    Mr. Largent [presiding]. The gentlelady's time has expired.
    The gentleman from Georgia is recognized for 5 minutes.
    Mr. Norwood. Thank you, Mr. Chairman. I have a couple of 
questions that I will submit in writing and expect detailed 
answers, and would point out that if I were having problems in 
my district with Plant Vogtle there wouldn't be enough hours in 
the day for me to ask questions. So with that in mind, I will 
yield the balance of my time to Mr. Strickland.
    Mr. Strickland. Thank you, my friend. I want you to know 
when I was meeting with the dentist earlier today I was saying 
really good things about you. So----
    Mr. Norwood. Why do you think I yielded my time?
    Mr. Strickland. Mr. Travers, I am going to try to be 
terribly unemotional, and I want to read a part of Section 3116 
to you, and it says this. I am quoting, ``No license or 
certificate of compliance may be issued to the United States 
Enrichment Corporation or its successors under this section or 
Sections 53, 63, or 1701, if the Commission determines that the 
issuance of such a license or certificate of compliance would 
be inimical to, a) the common defense and security of the 
United States, or''--not and, but or ``the maintenance of a 
reliable and economic domestic source of enrichment services.''
    Now, you are telling me and the NRC apparently has made the 
termination that they are going to either ignore that or assume 
that it is not relevant to your responsibilities. The NRC 
general counsel apparently has concluded that the requirement 
to make the determination regarding reliable and economic 
domestic supply is, ``principally directed to the possibility 
of foreign entities being in control and undermining domestic 
enrichment capabilities in the privatized USEC.''
    Your general counsel has apparently advised the NRC that it 
may change its previous policies and interpretations of the 
Privatization Act so that the NRC will not have to render a 
determination on whether USEC's certificate amendment will 
result in USEC being a reliable and economic supplier of 
enrichment services.
    Now, my question: can you please explain to me what new 
facts or laws justify the agency making this stark change?
    Mr. Travers. Not being a lawyer, I am a little bit at a 
disadvantage, Congressman, but I think--and perhaps we have, 
and if we haven't we should--provide you with the legal 
analysis that has been done in this matter.
    I am relying on that, frankly, and the Commission has 
relied upon it, and it really is the basis for Chairman 
Meserve's letter to you and Congressman Dingell that indicates 
that a very serious look has been done to examine the 
Commission's responsibilities under the Act. And that as you 
have indicated, that a determination is that it is principally 
related to this possibility of----
    Mr. Strickland. Well, what about the part that is not 
``principally''? I mean, it seems clear to me that you have got 
an obligation to make a determination regarding reliable and 
economic domestic source of enrichment industries.
    I will tell you what really bothers me here, sir. You 
received a 1997 memo and a 2000 memo. They both reference the 
same law, but they draw remarkably different conclusions about 
NRC's legal obligations. Is that true or not?
    Mr. Travers. I am not sure, but I guess I would point out 
there is a practical problem that I think we face.
    Mr. Strickland. There is a practical problem that we face.
    Mr. Travers. Yes, sir. And it is simply that given our 
principal focus on public health and safety, once we have 
looked at facilities and whether they are operating safely, the 
principal regulatory tools that we have at our disposal--
issuances of orders, for example, to shut facilities down, or 
to have utilities take specific actions----
    Mr. Strickland. Yes, sir. Can I interrupt just a moment?
    Mr. Travers. Yes, sir.
    Mr. Strickland. Is it possible that this Congress gave you 
additional statutory responsibilities other than those that you 
have historically been responsible for?
    Mr. Travers. Again, I am relying upon the general counsel's 
analysis of what the responsibilities of the agency are, and I 
believe the Commission has relied upon that as well.
    Mr. Strickland. This is what concerns me. Many months ago, 
we started raising some of these issues about NRC's 
responsibility. We talked about it with NRC staff here in this 
committee. I had them in my office.
    And I think we raised some very legitimate issues regarding 
your responsibility as an agency, and it seems to me that this 
second memo is an attempt to cutoff our questions, attempt to 
reinterpret your responsibilities in the light of the issues 
that I and others were raising with your agency, and that is 
terribly troubling to me.
    Was public notice or comment made available prior to the 
NRC's change of policy in this regard?
    Mr. Travers. As far as I know, there was no public notice 
given prior to the general counsel's legal analysis being 
provided to the Commission.
    Mr. Strickland. And your general counsel apparently says 
that this change could, in fact, lead to litigation.
    Mr. Largent. The gentleman's time has expired. Thank you.
    Mr. Strickland. I thank the Chair, and I thank my friend 
from Georgia.
    Mr. Largent. The gentleman from Wisconsin, Mr. Barrett, is 
recognized for questions.
    Mr. Barrett. Thank you, Mr. Chairman. And given that Mr. 
Strickland has obviously got serious concerns here, I would be 
more than happy to yield my time to Mr. Strickland.
    Mr. Strickland. I thank my friend. You know, I don't want 
to be unfair to others and dominate this. We will submit 
questions. But I would just like to point out to the Chair that 
we have an agency of the Federal Government charged with a huge 
responsibility to protect the energy security of this nation, 
and I believe they are being negligent and wilfully so, and I 
would hope that this committee would take that very, very 
seriously.
    Mr. Largent. I thank the gentleman.
    The Chair recognizes himself for 5 minutes. I think I am 
next in order here.
    And we are--just to give you a heads up, we are expecting 
Senator Domenici to be here at any time. When he comes, we will 
complete the questions, let him testify, and then move forward.
    Mr. Magwood, I had a question for you. In light of the 
concerns that have been expressed in testimony before this 
committee today about the scarcity of fuel in the future, why 
doesn't the United States reprocess spent nuclear fuel?
    Mr. Magwood. I think the most obvious answer to that 
question is that it isn't economic to do so. We have worked 
very closely with other countries and discussing this issue 
over the years--Japan, France, others. They have had to make 
very large investments in plant and in people and in technology 
to begin reprocessing spent fuel.
    And I think that the primary reason U.S. industry hasn't 
pursued this aggressively is because it is just not economic. 
That is not to say it won't be economic at some point in the 
long-term future, but right now it certainly isn't.
    The former administration had a very aggressive policy 
regarding the proliferation aspects of reprocessing. The 
current administration hasn't spoken to the issue but it may be 
something they look at in the context of the Vice President's 
energy review. But the issue really hasn't been raised at this 
point.
    Mr. Largent. So you believe that if or when it becomes 
economically feasible that this country would begin 
reprocessing spent fuel?
    Mr. Magwood. I believe----
    Mr. Largent. That is the only impediment?
    Mr. Magwood. I believe that if it becomes economic, then 
the industry will make a case to the government to begin 
looking at it, and then it will be up to the government at that 
time to respond to it from a policy perspective.
    Mr. Largent. Okay. Dr. Travers, I had a question for you. 
We have conflicting testimony. Senator Domenici is here, and we 
will recognize him in just a moment. But in his testimony I was 
reading with interest, in the fourth paragraph it says, 
``Safety has been a vital focus of the NRC, as evidenced by a 
constant decrease in the number of emergency shutdowns or 
scrams in our domestic plants. In 1985, there were 2.4 scrams 
per reactor. Last year there were just .03.''
    But in contrast to that testimony, testimony submitted by 
Anna Aurilio with the Public Interest Research Group in the 
next panel, she says, ``There is a consistent pattern and 
history of lax NRC enforcement and oversight ranging from fire 
prevention to worker fatigue. The agency has focused on 
increasing the industry's profitability, not protecting humans 
and the environment.''
    Would you like to respond to that testimony?
    Mr. Travers. Thank you, Mr. Chairman. I think we have a 
serious disagreement on views on this subject. The NRC has 
been, and continues to be, an effective regulator with a bent 
and a passion, really, for the assurance of safety in all of 
the civilian use of radioactive materials. And I think that has 
been borne out over time.
    It is somewhat difficult sometimes to differentiate where 
the NRC plays a role in the assurance of safety or the good 
record in performance of the nuclear industry and where it is 
attributable in the main to the industry. We like to think, 
based on the activities that we have in place, that we have 
been a factor in the increasing level of performance, and, in 
fact, the increasing level of safety over time that the nuclear 
power industry has exhibited.
    The Commission, for its part, has laid out policies that 
include expectations that for the next generations of advanced 
reactors, for example, they expect those designs to provide a 
higher level of safety than the current ones do today. We 
believe those are acceptable, but, nevertheless, the Commission 
has put in place an expectation that as we move forward 
potentially to develop new power reactor designs and projects 
that they ought to be safer than the current generation of 
nuclear power plants.
    Mr. Largent. So you would say that workers are safer today, 
that neighbors to nuclear facilities are safer today than they 
ever have been?
    Mr. Travers. I would say that that is a fair statement.
    Mr. Largent. Okay. With that, I would like to recognize 
Congresswoman Wilson from New Mexico to introduce our esteemed 
colleague from the Senate, Mr. Domenici.
    Ms. Wilson. Thank you, Mr. Chairman.
    I am very fortunate, as a New Mexican in the House, to have 
a senior Senator who is not only one of the most powerful 
members of the Senate but one of the most capable as well, and 
who has taught a young Member of Congress in the House how to 
be a better legislator.
    And since I wasn't much on committees and being a 
legislator before I showed up here, I needed a lot of work, and 
I wanted to publicly thank him for his stewardship, but also to 
share with the members of this committee and with the members 
of the audience that while most of us know him as the chairman 
of the Budget Committee, he knows more about the budget than 
just about anybody in this town.
    He has been one of the most stalwart advocates of a 
comprehensive energy policy for a long, long time, and when it 
wasn't popular to do so was encouraging people from all 
different parts of the political spectrum to reconsider nuclear 
energy. He has introduced the nuclear energy supply bill in the 
Senate, and he is a self-acknowledged sucker for big science 
projects.
    Ladies and gentlemen, it is my pleasure to introduce 
Senator Pete Domenici.
    Mr. Domenici. Thank you.
    Mr. Largent. Senator, you are recognized for 5 minutes, and 
we look forward to your testimony. Thank you for visiting us.

  STATEMENT OF HON. PETE V. DOMENICI, A UNITED STATES SENATOR 
                  FROM THE STATE OF NEW MEXICO

    Mr. Domenici. Thank you very much. First, I apologize for 
being late. I should have been earlier on the agenda, but I 
could not help that. We couldn't complete our luncheon where we 
were discussing the budget today.
    In any event, members of the Committee, and Mr. Chairman in 
particular, I came mostly to tell you that I have come to the 
conclusion that every now and then a crisis is good. It is not 
great, but good.
    And what I see now is that the energy crisis that is before 
us is good, because it is going to make America evaluate our 
energy supplies and the conservation practices that we are 
going to undertake in order to assure the American people that 
they are going to have sufficient energy in the future to turn 
the lights on in their houses, to turn the power on in their 
plants, to let streetlights in the city light up, and offices 
across this land have sufficient electricity to make sure 
everybody can see and do their work.
    In a nutshell, my hope is we come out of this crisis in 
much better shape with reference to our future. I, for one, 
have known, and it didn't take me very long to understand that 
energy and the availability of it at a reasonable price, or as 
reasonable a price as possible, is America's life blood. 
Without it, we have no future, no future whatsoever with 
reference to prosperity, with reference to growth, with 
reference to jobs.
    I have been for at least 4 years strongly advocating a 
return by the United States of America to prowess in the area 
of nuclear power at every level, build it back into our 
universities as a major area and field of study, build it back 
into our energy department. A department that, believe it or 
not, existed, Mr. Chairman, for more than 1 decade without 
wanting to claim that nuclear power was part of the energy 
department of the greatest Nation on earth--a rather incredible 
phenomenon that existed for quite some time.
    I am proud to tell you that I have had a little bit to do 
with putting nuclear energy back into the energy department. 
This gentleman was hired to head up, after a dearth of years, 
that part of the Department that does nuclear power research.
    It is a budding part of the Department, but it is moving 
out and causing universities to start rekindling nuclear 
activities on their campuses with their bright students, and 
the world is leaving us sort of behind. In Japan, in the next 
few months, there will be two new starts of two brand-new 
nuclear reactors because they are bound and determined to have 
a diversity of energy supply.
    Now the United States comes to a period when we are 
extremely short of energy for the future--in particular, 
electricity. And, obviously, we will continue to need crude oil 
more and more unless something happens in the automobile area 
that isn't on the horizon today.
    But the truth of the matter is that we are also bumping up 
against something else, that the world wants to prosper and 
America wants the world to prosper. We want rich countries to 
be made out of the poor countries of the world. The only way to 
do that is an abundant supply of energy, and so what we are 
coming right stark up to is, what do we do about air quality? 
And what do we do about the pollution? And what do we do about 
the Greenhouse effect?
    And, Mr. Chairman, I am here to tell you that for a great 
nation to turn its face away from nuclear power, in light of 
this kind of a world situation, I don't know the word, but I am 
going to say it is borderline lunacy, because a few people have 
us frightened to death about what we are going to do with the 
waste.
    We are about--now we are not going to--but we were about to 
abandon this perfectly clean fuel that is probably on average 
safer than any other way to generate electricity, contrary to 
what we are told. And we have one little problem left, and that 
is, what do we do with the waste? There are some who would like 
you all to believe it is not a small problem, that it is 
sufficient that you should abandon the option.
    Well, I don't know whether any of you have gone to France 
and asked them to take you to the place wherein their nuclear 
waste from reactors lies. But if you are going to do that, tell 
them in advance, ``Don't tell us when we arrive there. Just 
arrive there and let us guess.'' Because you will walk into a 
couple of buildings that look like school buildings, like big 
gymnasiums.
    And you walk out about 100 feet and they will punch you and 
say, ``Look down.'' And when you look down, the former fuel 
rods from their nuclear power are underneath you. They are in a 
solid compound with glass, with concrete on top of it, so there 
is no radiation in that building. You can walk anywhere. You 
can serve food there.
    And they will have that for up to 50 years while they 
figure out what to do with it permanently. But they are not 
worried because they will figure out what to do with it 
permanently. And here we sit pondering what in the world are we 
going to do about this kind of energy supply for the future.
    Now, in the U.S. Senate, I introduced a bill. I won't ask 
anybody to introduce it here, but I ask that if you are 
seriously considering the diversity required in the American 
energy mix in the future that you might take a look at it. As a 
matter of fact, it has one very exciting section that they are 
working on in the Department that is called ``Transmutation of 
Waste.''
    Now, if you keep it open for those who are totally anti-
nuclear, they will line up to tell you that is a bad thing. But 
I am here to tell you, if it works it is a good thing. 
Transmutation is a science, currently proved on a model size 
that takes high level waste and converts it into a much lower 
level waste that you can deal with very easily, and the other 
byproducts are not such that we can't handle them. It is an 
expensive one, but we put it in the mix for the future.
    Now, there are other things to speak of, but I won't do 
that now. I will be glad to answer questions. And I just came 
over because I knew this committee, led by this subcommittee, 
are going to do some really important things in the next few 
months to establish where we are going with an American energy 
crisis that may be our most severe crisis.
    And I wanted to urge you in my own way not to be frightened 
away by those who focus on one little piece of the nuclear 
energy cycle, but, rather, to look at the whole picture and the 
risks that you avoid when you look at the whole picture versus 
the risks you take.
    And, frankly, I would assume that if that were the case and 
you were unburdened by anything else, you would say, ``Let us 
move ahead to further perfect nuclear power because it is the 
right thing to do for the future.''
    My last observation is, I heard the Nuclear Regulatory 
Commission man saying that we were doing better at safety, and 
yet producing at a higher capacity. That is true.
    Since 1990, the capacity has been going up, and the safety 
records have improved because the Nuclear Regulatory Commission 
has started to really regulate instead of playing games. They 
don't play games with the power plants anymore and having them 
do a bunch of things that are irrelevant just to waste their 
time.
    And as a consequence, they have produced the equivalent of 
20 new 1,000-megawatt power plants in the generating capacity 
of existing American nuclear power plants just by getting the 
capacity up from the 1970's to the 1990's per plant. No new 
plants, nothing new, just doing it better.
    I would hope that this day would go down that I am 
testifying here that an event is occurring in our land wherein 
a nuclear power plant is being bought commercially, as a 
commercial transaction, one utility company buying it from 
another and making it part of a new inventory of the company 
that bought it which wants diversity and assurance. They are 
going to pay for it, just like you would pay for buying a 
natural gas power plant, and as a matter of fact they will 
lower their rates by doing it. That is very exciting.
    Thank you very much.
    [The prepared statement of Hon. Pete V. Domenici follows:]
 Prepared Statement of Hon. Pete V. Domenici, a U.S. Senator from the 
                          State of New Mexico
    Mr. Chairman, thank you for the invitation to testify before your 
Subcommittee on Energy and Air Quality. I compliment you on the choice 
of subject for this hearing, the role of nuclear energy in national 
energy policy--this issue is of critical importance to our nation's 
energy and economic security.
    Nuclear energy now provides about 22 percent of our electricity 
from 103 nuclear reactors. The operating costs of nuclear energy are 
among the lowest of any source. The Utility Data Institute recently 
reported production costs for nuclear at 1.83 cents per kilowatt-hour, 
with coal at 2.08 cents per kilowatt-hour.
    Through careful optimization of operating efficiencies, the output 
of nuclear plants has risen dramatically since the 1980's; nuclear 
plants operated with an amazing 87 percent capacity factor in 2000. 
Since 1990, with no new nuclear plants, the output of our plants has 
still increased by over 20 percent. That's equivalent to gaining the 
output of about 20 new nuclear plants without building any.
    Safety has been a vital focus, as evidenced by a constant decrease 
in the number of emergency shutdowns, or ``scrams,'' in our domestic 
plants. In 1985, there were 2.4 scrams per reactor, last year there 
were just 0.03. While some use the Three Mile Island accident to 
highlight their concerns with nuclear energy, the fact remains that our 
safety systems worked at Three Mile Island and no members of the public 
were endangered.
    Another example of the exemplary safety of nuclear reactors, when 
properly designed and managed, lies with our nuclear navy. They now 
operate about 90 nuclear powered ships, and over the years, they've 
operated about 250 reactors in all. In that time, they've accumulated 
5,400 reactor-years of operation, over twice the number of reactor-
years in our civilian sector. In all that time, they have never had a 
significant incident with their reactors. They are welcomed into over 
150 major foreign ports in over 50 countries.
    Nuclear energy and coal are our major producers of our 
electricity--those two sources provide over 70 percent. In both cases, 
their use presents significant risks. Together, they illustrate a 
fundamental point, that absolutely every source of energy presents both 
benefits and risks. It's our responsibility to ensure that citizens are 
presented with accurate information on benefits and risks, information 
that is free from any political biases. And where risk areas are noted, 
it's our responsibility to devise programs that mitigate or avoid the 
risks. Solutions, through careful research, for clean coal and for 
nuclear waste storage address key risk areas for these two electricity 
sources.
    Interest in our nuclear plants is increasing along with 
dramatically increased confidence in their ability to contribute to our 
energy needs. Interest in re-licensing plants, to extend their lifetime 
beyond the originally planned 40 years, has greatly expanded. The NRC 
has now approved re-licensing for 5 reactors, and over 30 other 
reactors have begun the renewal process. Industry experts now expect 
virtually all operating plants to apply for license extension.
    Nuclear energy is essentially emission free. We avoided the 
emission of 167 million tons of carbon last year or more than 2 billion 
tons since the 1970's. In 1999, nuclear power plants provided about 
half of the total carbon reductions achieved by U.S. industry under the 
federal voluntary reporting program. The inescapable fact is that 
nuclear energy is making an immense contribution to the environmental 
health of our nation.
    But unfortunately, when it comes to nuclear energy, we're living on 
our past global leadership. Most of the technologies that drive the 
world's nuclear energy systems originated here. Much of our early 
leadership derived from our requirements for a nuclear navy; that work 
enabled many of the civilian aspects of nuclear power.
    Our reactor designs are found around the world. The reprocessing 
technology used in some countries originated here. The fuel designs in 
use around the world largely were developed here. This nation provided 
the global leadership to start the age of nuclear energy.
    Now, our leadership is seriously at risk. No nuclear plant has been 
ordered in the United States in over 20 years. To some extent, this was 
driven by decreases in energy demand following the early oil price 
shocks and from public fears about Three Mile Island and Chernobyl. But 
we also have allowed complex environmental reviews and regulatory 
stalemates to extend approval and construction times and to seriously 
undercut prospects for any additional plants.
    As a nation, we cannot afford to lose the nuclear energy option 
until we are ready to specify with confidence how we are going to 
replace 22 percent of our electricity with some other source offering 
comparable safety, reliability, low cost, and environmental attributes. 
We risk our nation's future prosperity if we lose the nuclear option 
through inaction. Instead, we need concrete action to secure the 
nuclear option for future generations. We must not subject the nation 
to the risk of inadequate energy supplies.
    In closing, Mr. Chairman, There is no single ``silver bullet'' that 
will address our nation's thirst for clean, reliable, reasonably 
priced, energy sources. Energy is far too important to our economic and 
military strength to rely on any small subset of the available options. 
In my view, it is critically important to our nation that nuclear 
energy be treated as a strong, viable option for our nation's 
electricity needs now and into the distant future. This would ensure 
that future generations continue to enjoy clean, safe, reliable 
electricity and the many benefits that this energy source provides.

    Mr. Largent. Thank you, Senator.
    I will recognize the gentleman from Massachusetts, Mr. 
Markey, for 5 minutes.
    Mr. Markey. Thank you.
    Senator, if you were looking at the nuclear power industry 
and obstacles which existed to the construction of a plant, let 
us say in New Mexico, what would you say would be the largest 
obstacle to a utility in New Mexico just ordering a nuclear 
power plant right now, and constructing one over the next 5 or 
6 years?
    Mr. Domenici. Well, I want to say to my good friend, 
Representative Markey, 5 years ago I would have told you the 
obstacles were so many and so numerous that I couldn't answer 
the question. I would say impossible.
    I think it is still highly improbable as of this particular 
moment that you will do it, but I think we are getting very, 
very close. And the obstacles that are going to remain are 
public opinion. Thus, I guess that the next power plants will 
be built close to the existing power plants, so you couldn't 
pick New Mexico, but I don't mind you picking it. We just don't 
have one.
    But if we had one, my guess would be that if somebody 
wanted to build one they would build it close to that, and that 
would be one of the things you would look at in the country, I 
would think. Doesn't have to be the case.
    Second, we have to have a new way of licensing. I think 
that has evolved, so there is a bit of modularness to the 
licensing. Then you would have a standard accepted design. If 
you chose to build that design, you wouldn't have to spend an 
inordinate amount of time going through that licensing process. 
But you would still have seismic and other considerations with 
each site.
    And last would be whether you could finance it, and it 
would appear to me that--5 years ago I would have said it is 
impossible. Today I think the company that just bought one, and 
that is the fourth one bought and sold recently, they got it 
financed.
    Mr. Markey. There has been a bit of a change in the way in 
which the industry itself used nuclear power. Back 2, 3, 4 
years ago, they were calling it ``stranded investment.'' All of 
these nuclear power plants were called ``stranded investment.'' 
And they wanted to be compensated by the ratepayers in the 
states as a condition of moving to a deregulated marketplace.
    And now, as you are pointing out, there are companies that 
are purchasing these nuclear power plants, really at bargain 
basement rates, and they are generating nuclear power at 90 
percent efficiency. And so the industry itself--in other words, 
I guess my question is, do you believe that the industry itself 
had a misperception heading into the late--really into the mid 
and late 1990's in terms of how efficient and affordable 
nuclear power was?
    Because we have already changed the laws here. The nuclear 
licensing laws have been changed by the Congress in the past 
decade that streamlines that process. So do you think that--in 
other words, is it more of a private sector issue now, where 
they are going to have to just engage this in the states, take 
on public opinion, make the decision they are going to go to 
the markets and just try to build, or is there something else 
here that you think that Congress should do as a matter of 
public policy?
    Mr. Domenici. Well, Representative Markey, I have a bill 
that contains about 25 provisions, so I think there are some 
things we ought to do as a nation.
    But I am not suggesting that the industry--if this bill 
never happened, and we continue in a crisis mode--I am not 
suggesting that industry might not find a solution as you are 
suggesting. But I don't think they were wrong 5 years ago. The 
market would not have provided for the buying and selling of 
nuclear plants 5, 7, 10 years ago, because we weren't in a 
crisis situation on energy, plus there has become a much 
broader base of acceptance, believe it or not.
    Until you get the antis focusing in on one facility, the 
general public in the United States accepts nuclear power 
today. So, you know, that hasn't been the case all of the time.
    Mr. Markey. Can I just say ,in conclusion, Mr. Chairman, 
that I want to agree with Congresswoman Wilson that you are a 
great Senator and a great American.
    Mr. Domenici. Thank you.
    Mr. Markey. And we thank you for coming over here.
    Mr. Domenici. Thank you very much.
    Mr. Largent. I thank the gentleman. The gentleman yields 
back.
    I recognize the gentleman from Illinois, Mr. Shimkus, for 5 
minutes of questions.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Senator, and other people on the panel, welcome. Senator, a 
quick question, and it really kind of ties to a question that 
we had to the panelists earlier about the nuclear waste fund 
and the money that has been put in by industry, the amount that 
has been used for Yucca Mountain, and the balance, the unused 
portion.
    Budgetarily, that is--you know, has it with Treasury--the 
Treasury Department is the steward of that, and it is not 
really dollars. It has been spent. And there is--very similar, 
like Social Security trust fund, where it has just been, you 
know, paperwork shuffled. Senator, can you speak to the nuclear 
waste fund and the budgeting aspect of that?
    Mr. Domenici. Well, I would be glad to. I don't remember 
the numbers. I do know that the trust fund has been sitting 
there, like many trust funds. If the question has to do with 
why do we use it in the totality of a budget, then I would just 
say to you that my recollection is there are about 140 trust 
funds within the budget of the United States--some little tiny 
ones, some very big ones.
    And if we chose to take them all off budget and say we are 
going to just run them on their own without relationship to a 
macro budget of the country, then we would have very little 
left in the budget. So we have left it in, and its reserves 
have been accounted for in the totality of the budget, thus 
making it easier to balance budgets and the like.
    Of late, it doesn't seem to matter very much, Mr. Chairman. 
The surplus has grown so fast that they have left all of that 
subject to reconsideration.
    Mr. Shimkus. Thank you.
    And I have a question for Mr. Travers. And there is really 
a dispute, and I know that times have changed also based upon 
the environment, that the Energy Information Administration 
forecast 27 percent increase--actually, forecast that 20 
percent of the existing nuclear generating capacity will retire 
by the year 2020 and be replaced by gas-fired generation.
    Now, that may be prior to the gas spikes. I don't know when 
that report was filed, but that may have been past the doubling 
of the natural gas prices that we have had over the last couple 
of months.
    But the Nuclear Energy Institute forecasts that most of the 
existing nuclear reactor operators will seek to renew their 
licenses, continue in operations for 20 years, long after 2020. 
There seems to be some degree of disagreement between EIA and 
NEI's forecast on the future of nuclear energy. What is the 
NRC's forecast for license renewals and future generating 
capacity of the existing nuclear fleet?
    Mr. Travers. Thank you. We have formal indications from 
about 40 percent of the operating units that they will, in 
fact, seek renewed period of licensed operation. And we really 
have to rely on the industry beyond that. The expectation, as 
you have indicated, from organizations like NEI is that 80 
percent or more may seek license renewal.
    Given that we rely on utilities to give us an indication of 
what their planning is, that is really our best source of 
information. I am not familiar with the assumptions that may 
underlie the EIA's projections, but our current sort of 
budgeting assumptions are that 80 percent or more of the 
currently operating facilities will, in fact, seek renewal. And 
I recognize that recently NEI has suggested that most, perhaps 
more than--many more than 80 percent will.
    Mr. Shimkus. You don't see anything that would prohibit 
right now industry from requesting renewals of the current 
facilities?
    Mr. Travers. I certainly don't see anything that would 
limit it in terms of our regulatory review process. It is one 
that we think has been efficient thus far. It is one that we 
are seeking to improve and factor in the experience of the 
initial application reviews as we move forward, with a focus on 
safety and the plant aging issues that dominate as you allow 
these plants to operate in a period of continued operation 
beyond 40 years.
    Mr. Shimkus. And, Senator, just to finish, I was at Yucca 
Mountain yesterday.
    Mr. Domenici. Oh, you were?
    Mr. Shimkus. And so if in France you can walk over the 
spent nuclear waste, do you think we can safely put it inside a 
big mountain?
    Mr. Domenici. Well, you see, the difference between the two 
philosophies is very, very big, in that we somehow are thinking 
that we are going to put high-level waste from our reactors in 
the ground, and then close it up and leave it there forever.
    When I walked on top of the spent fuel rods in France, they 
never intended to leave them there forever. They intended to 
leave them there temporarily, so that they are completely 
different. Their product will be treated differently in terms 
of how it is encapsulated, incarcerated, and everything else, 
in that gymnasium in France versus putting it in the ground 
forever.
    But I think you were really asking me whether I thought 
Yucca Mountain would ever work, would we ever do it. And I 
don't know, because I think so long as you have two differing 
opinions as widespread as the Nuclear Regulatory Commission on 
what are adequate safety guidelines versus the Environmental 
Protection Agency's guidelines, and they are so far apart, I 
don't believe you can build a facility under the environmental 
protection guidelines. I don't think it can be built.
    So that is the hangup right now, as I understand it, in the 
country.
    Mr. Largent. The gentleman's time has expired.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Mr. Largent. Senator Domenici, I just wanted you to know 
that our committee staff has done a review, an initial review 
of your bill, and it has several positive ideas in the bill 
that I think would help develop our nuclear energy.
    However, there were a few concerns, including nine new 
reports to Congress, two new Assistant Secretaries at DOE, two 
new named officers within the DOE, increased funding for nine 
research grant and cooperative agreement programs, and two new 
expert panels. And my concern is that we are going to need a 
new nuclear reactor just to turn on the lights of all of those 
new positions created.
    And the question that I had for you was, do all those 
positions have to be in New Mexico?
    Mr. Domenici. No.
    Mr. Largent. I want to recognize the gentleman from 
Arizona, Mr. Shadegg, for 5 minutes of questions.
    Mr. Domenici. We want them there very badly, but----
    Mr. Shadegg. Senator, let me ask you, last week we received 
testimony here in this committee, both on Tuesday and Thursday, 
on the California energy crisis, which is severe. And one of 
the witnesses explained that until--that current California law 
provides that no nuclear plant can be constructed in California 
until the issue of nuclear waste storage is resolved.
    Mr. Domenici. Yes.
    Mr. Shadegg. I appreciate the analysis that you just gave 
my colleague, Mr. Shimkus, about the dichotomy. I guess I am 
looking, since I view you as a leader in this issue, for your 
guidance on how we resolve the dichotomy between those two and 
where we can go in this nation because I completely agree with 
you that we need a mix of energy sources.
    I think to continue to rely solely, as far as we can see 
into the future, on natural gas is a--is not a wise policy. The 
Arizona--my home state, as you know, has a fairly large nuclear 
power plant which is operating well, and we are pleased with 
it.
    I tend to agree with your statement about the acceptance of 
nuclear power by the American public. But I do think they want 
some resolution of this issue of waste. And if you could give 
us guidance on that I would appreciate it.
    Mr. Domenici. Frankly, I want to tell you about your state. 
I went to the Palo Verde plant, and, you know, that was much 
questioned for a long time. It isn't being questioned now. If 
anybody wants to find out what piece of geography in the U.S. 
is yielding more megawatts of electricity per unit of ground, 
just go to the Palo Verde plant.
    There are three power plants there, 1,000 megawatts each I 
think, which is a huge thing. If you want to see an example of 
American construction and engineering prowess, if you are like 
me when you see something that is put together with that kind 
of talent, you are just very proud to be there and see it. That 
is the way I felt.
    And then, to see all of these workers well paid, none of 
them, from what I could tell, the least bit worried about their 
workplace, they felt probably as safe or safer than they would 
in your natural gas fields or mine producing natural gas out 
there at the well head. Probably they felt safer in this place.
    But I don't have an answer. If California is going to 
insist that we close the nuclear energy cycle before you build 
one in California, then I think they are going to have to wait 
a long time--and maybe that is how they would like it--because 
I think we have a political problem with the State of Nevada 
that is serious with reference to the state fighting the 
Federal Government.
    And you see if transportation is an issue, then what we 
should do is have a temporary facility as close as possible to 
the permanent facility, so you don't move everything twice. 
That is why it was pretty smart to say, if you are going to put 
it in the ground, wherever, in Nevada, why don't you put the 
temporary facility for 30, 40, 50 years, close to it?
    We can get neither of those approved, so we are going to 
look to another policy. And I don't think we are without 
options. I think there are some that will be worked on, but I 
don't know when that will occur.
    Mr. Shadegg. Let me ask you a different question, then. The 
Generation IV technology appears to at least to a certain 
degree address this waste issue by the--I guess the 
encapsulating of the fuel and glass, and the question of 
moisture no longer being able to reach the fuel.
    Do you see that as a long-term solution? And are there 
things that your bill does to specifically promote Generation 
VI capability?
    Mr. Domenici. Well, Generation IV also is a passively safe 
plant, so that for those who envision meltdowns, you can't have 
a meltdown with a Generation IV nuclear generator. Just by 
definition, it is built so that can't happen.
    I have just been recently told by companies that own 
American nuclear power production, none of which are Generation 
IV, that they are not giving up on next generation of 
lightwater reactors. They are not certain you have to go all 
the way to Generation IV. There are a couple of new models by 
big American companies that would improve the lightwater 
reactors so dramatically that rather than waiting around for 
Generation IV to be ready, if they were looking to build now, 
they would build one of the improved lightwater reactors.
    On the other hand, one of the most exciting things 
happening about energy is the Generation IV, and one of those 
is going to be built in South Africa. They are modular. They 
are small. That is a very exciting idea. I don't remember. Are 
they going to be 100 megawatts each? That is, you know, one-
tenth the size of what we have licensed for nuclear power. And 
then you just build more of them under an expanding permit with 
the exact same replica.
    And it has all of the other exciting features that you have 
described with reference to waste, so I think the world needs 
to move with as much rapidity as possible in that direction. If 
we are worried about Greenhouse gases and the ambient air 
qualities, we clearly should be helping with that. And I think 
our Nuclear Regulatory Commission is going to be helpful, Mr. 
Chairman, with the Generation IV that is being built in South 
Africa.
    Mr. Shadegg. My time has expired.
    Mr. Largent. The gentleman's time has expired.
    Mr. Shadegg. I thank the gentleman for his testimony.
    Mr. Largent. There is a sadistic side of me that wants to 
unleash my friend, Mr. Strickland, for 5 more minutes, but I am 
going to resist that temptation and excuse our panel. Thank 
you, Dr. Travers, Mr. Magwood, Ms. Hutzler, and Senator 
Domenici, for shedding some light and your experiences with us. 
Thank you. Thank you very much.
    We will call the next panel forward.
    Mr. Norwood [presiding]. We welcome our panel this 
afternoon. Thank you for taking your time to come and be with 
us. The first person we would like to hear from is Mr. Randy 
Hutchinson. He is Senior Vice President, Business Development, 
for Entergy Nuclear in Jackson, Mississippi.
    Mr. Hutchinson, we are pleased you are here, and we would 
like to hear from you for 5 minutes, please.

   STATEMENTS OF C. RANDY HUTCHINSON, SENIOR VICE PRESIDENT, 
BUSINESS DEVELOPMENT, ENTERGY NUCLEAR; ALFRED C. TOLLISON, JR., 
     EXECUTIVE VICE PRESIDENT, INSTITUTE OF NUCLEAR POWER 
      OPERATIONS; EDWARD F. SPROAT III, VICE PRESIDENT OF 
      INTERNATIONAL PROGRAMS, EXELON CORPORATION; JOHN R. 
    LONGENECKER, LONGENECKER & ASSOCIATES, INC., MANAGEMENT 
 CONSULTANTS; AND ANNA AURILIO, LEGISLATIVE DIRECTOR, U.S. PIRG

    Mr. Hutchinson. Thank you. Thank you, Mr. Norwood, Chairman 
Barton, Ranking Member Boucher, and other distinguished members 
of the Energy and Air Quality Subcommittee. It is a pleasure to 
appear before you today.
    I am here on behalf of the Entergy Corporation and the 
Nuclear Energy Institute. Entergy is a large nuclear utility 
with more than 2.5 million customers. We operate in Arkansas, 
Mississippi, Louisiana, and Texas, with more than 30,000 
megawatts in generating capacity.
    We are also a large national nuclear operator. We have 
extensive nuclear operations in the mid-south and in the 
northeast, primarily in the Massachusetts and New York areas. I 
want to speak to the resurgence or renewed interest or 
renaissance that we are seeing in our industry today with 
nuclear power.
    I think that is primarily for three reasons. First, the 
performance of the Nation's nuclear plants has improved 
dramatically. You have heard discussion about the improvement 
in safety performance, capacity factors, or the availability 
factors of the plants in the industry have improved from around 
65 percent in the 1980's to about 90 percent today.
    And as you heard previously, that is the equivalent of 
adding about 23 1,000-megawatt generating plants to the grid. 
That is enough to meet about 30 percent of the growth in demand 
that has occurred during that time period.
    Also, I think another factor that relates to increased 
performance from the reactors is we have seen a consolidation 
in the industry resulting in fewer but larger nuclear operators 
in this country today. They bring far greater management 
expertise and focus to nuclear operations.
    Five years ago, there were 46 operators operating the 
Nation's 103--or 104 we have heard today--nuclear plants. 
Today, 34 operators operate the same number, and I think we 
will continue to see that consolidation in our industry. It is 
kind of like we--we view it as kind of like buying a mutual 
fund. You can benefit from highly focused nuclear management 
expertise, and the sharing of nuclear talent and expertise 
across your fleet.
    The second reason I think is that we are seeing that 
renaissance relates to the--that nuclear power is not cost-
competitive driven by two factors; one, to improve performance, 
that has helped reduce nuclear production costs, but also the 
rise we have seen in natural gas prices recently.
    Today, nuclear production costs are lower than any other 
source of generation that we have in the country, lower than 
coal, gas, oil. And nuclear power provides a hedge against 
large price swings that we see in the market in the gas and oil 
industry.
    And then, the third reason I think we have seen renaissance 
in the nuclear area is that the environmental benefits of 
nuclear energy are being recognized. Nuclear does not produce 
any Greenhouse gases or any combustion pollutants. I think the 
bottom line is, in our view, that the Nation's 103 nuclear 
plants today are producing about 22 percent of the electric 
power that is being consumed in this country in a safe, low-
cost, and in an environmental-friendly manner.
    What is the future for nuclear power? Well, I think we are 
likely to see this volatility in the oil and gas market in the 
future. Since nuclear is now providing about 20 percent of the 
electricity consumed in this country today, we are likely to 
see nuclear power around for a long time. I think that should 
be the case. And there are some things in place to help ensure 
this.
    The Nuclear Regulatory Commission has established a license 
renewal process to provide a mechanism for extending the life 
of an operating nuclear power plant today for an additional 20 
years beyond its 40-year licensed life. Several plants have 
either already done this or are in the process of doing it. We 
are doing this with our plants. We have one that is nearing the 
completion of a license renewal process.
    And the owners of at least two-thirds and perhaps more of 
the operating plants in the country have indicated, some 
formally and some informally to the Nuclear Regulatory 
Commission, that they intend to apply for a life extension for 
their plants.
    So this is an area where I think you can help. It is 
critically important, in our view, that the Nuclear Regulatory 
process remained in place, adequately funded, and it continues 
to function in the effective and timely manner that it has so 
far to act on these license renewal applications as they come 
along in the future.
    To the question of, ``Will new plants be built?'' we think 
so eventually. I think several factors are giving us some 
optimism in this area. One is that there are standard 
lightwater reactor designs that have already been approved 
and--reviewed and approved by the Nuclear Regulatory Commission 
and are on the shelf so to speak.
    You have heard some discussion on the advanced reactor 
technologies here that is being looked at and considered by 
some utilities in our industry. And the NRC has also developed 
and has in place a new licensing process, a streamlined process 
for licensing new plants. That process is yet untested in that 
nobody has used it, but it is there.
    And then, finally, an industry task force is in place that 
has been formed, and it is working to identify and try to 
address issues that are--have to be resolved. Some of these 
issues are likely to be industry needs confidence that the 
regulatory process is going to be timely, effective, 
dependable.
    I think the industry--we are going to have to get 
comfortable and have some confidence and certainty in the fact 
that a new plant can be built in--with a time to market in 36- 
to 42-month timeframe and at a cost of something on the order 
of $1,000 a kilowatt hour that will compete with $3 and $4 gas.
    And, finally, we also all look forward to the Department of 
Energy's recommendation of the Yucca Mountain fuel repository 
and the President's approval hopefully later this year.
    Thank you.
    [The prepared statement of C. Randy Hutchinson follows:]
   Prepared Statement of C. Randy Hutchinson, Senior Vice President, 
              Business Development, Entergy Nuclear, Inc.
    Chairman Barton, Ranking Member Boucher and distinguished members 
of the Energy and Air Quality Subcommittee, my name is Randy 
Hutchinson. I am the Senior Vice President for Nuclear Business 
Development for Entergy Nuclear. My staff buys nuclear power plants.
    Entergy's customers--2.5 million in Arkansas, Mississippi, 
Louisiana and Texas--have long benefited from a diverse electric 
generating portfolio. Our company has more than 30,000 megawatts of 
power using a range of fuels--29% from natural gas, 26% from nuclear, 
17% from coal, 3% from oil and 26% from purchased power--an almost 
ideal balanced mix of fuels. As a result, Entergy's electric customers 
are not as subject to the volatility of foreign oil and gas prices. And 
Entergy will maintain this balanced fuel mix as the company grows.
    Entergy Nuclear is headquartered in Jackson, Miss. Entergy Nuclear 
Southwest has operated five reactors at four locations in Arkansas, 
Mississippi and Louisiana going back about two decades.
    Entergy Nuclear Northeast in White Plains, N.Y., is our new 
regional headquarters for that region. We own and operate the Pilgrim 
Nuclear Power Station in Plymouth, Mass., the Indian Point 3 plant in 
Westchester County, N.Y. and the James A. Fitzpatrick plant in Oswego 
County, N. Y. We have agreed to purchase the Indian Point 1 and 2 
plants from Con Edison and expect to close that transaction in mid-
2001. Indian Point 1 has been in safe storage for 20 years, waiting for 
decommissioning of the other two operating units.
    Entergy Nuclear, the fastest growing nuclear operator in the 
nation, is now the second largest with nine operating units. And we are 
aggressively competing for additional nuclear units wherever they are 
for sale. Nuclear power is a principal growth strategy of our 
corporation. Indeed nuclear energy is our core competency.
    Entergy has built its success on the foundation of a strong safety 
culture. When you have invested billions of dollars in nuclear assets 
as Entergy has, believe me, you are serious about safety at all times 
and at all levels. We know a reliable, top performing plant is also a 
safe plant. Our operating experience of 25 years shows they go 
together.
    In our view, we are seeing a renaissance of nuclear power for three 
principal reasons:

 Operators of nuclear power plants have made significant 
        improvements in the performance of their plants. Capacity 
        factors were around 65% in the 1980s, meaning nuclear plants 
        were producing about 65% of the power they could produce in a 
        year. Last year, the industry average capacity factor hit 89 
        percent. Our plants in Entergy were in the low to mid 90 
        percent range. Safety performance has also improved as shown by 
        INPO's performance indicators.
 Secondly, nuclear power is now the lowest cost power in the 
        nation. Production costs at a nuclear plant are below 2 cents a 
        kilowatt-hour, compared to 3-4 cents at a natural gas-fired 
        plant
 Thirdly, nuclear does not emit the global warming gases and 
        other pollutants that other energy sources do.
    Why is nuclear seeing this renaissance now?
    We are seeing a confluence of forces. Natural gas prices have risen 
dramatically. Historically gas has been available for prices in the $2-
3 per million BTUs range but those prices in the past year have risen 
to the $4-6 range nationally and even hit $50 and more in California 
recently.
    At the same time, the nation's economy has continued to grow, 
increasing the demand for electric power across the nation. Higher 
fossil fuel prices and growing demand has been a powerful combination 
of forces.
    It is also becoming much clearer to many that nuclear power is the 
lowest cost power in the nation. The cost of nuclear fuel has long been 
relatively stable, not subject to oil and gas price increases. Nuclear 
is also being recognized for its environmental advantages. Nuclear 
plants do not emit the global warming gases and other pollutants that 
power plants running on other types of fuel do.
    California today is seeing the perfect storm. Three colliding 
fronts. There is too little supply and transmission capacity. No new 
power plants have been built in California in a decade. State 
deregulation law forced utilities to sell their plants and buy only in 
the day ahead market. Long-term power supply contracts were prohibited, 
a prescription for disaster. Then natural gas prices rose from $2-4 per 
million BTUs to $50 and up. California could really use the Rancho Seco 
nuclear plant, shut down a decade ago amid much controversy.
    Deregulation is allowing and accelerating the consolidation of 
nuclear power industry that was already occurring and probably would 
have occurred anyway. Utilities with only one or two nuclear power 
plants have been realizing that it would be increasingly difficult to 
remain competitive without the resources and capabilities of larger 
operators.
    We at Entergy Nuclear recognized the advantages of operating a 
fleet of nuclear plants three or four years ago and decided to pursue a 
nuclear growth strategy. We have now become the nation's fastest 
growing nuclear operator, and truly a national operator with two fleets 
of plants--in the South and in the Northeast.
    Consolidation in the nuclear industry is bringing several 
advantages.
    You can bring a very focused management to plant operations. 
Economics of scale through purchasing can be achieved. You can spread 
financial risk over several plants, much like spreading risk when you 
buy a mutual fund. You can pool talent and expertise in financial, 
technical and management areas.
    You can respond quickly to a problem at one plant with highly 
qualified expertise. You can bring the best practices from all plants 
to each plant. And you grow to understand better what the regulatory 
authorities want and require.
    You can easily see why consolidation is occurring. It is rapidly 
providing our country with higher levels of safety and reliable 
performance at lower costs.
    Entergy Nuclear bought the first nuclear plant sold by a utility 
when we purchased the Pilgrim Nuclear Station from Boston Edison in 
July 1999. There have been 13 acquisitions of nuclear plants since 
then, less than two years. Entergy has been the fastest growing, having 
almost doubled our five-reactor fleet in the South with four plants 
bought or under contract in the Northeast.
    Five years ago, 46 operators were running the nation's 103 nuclear 
plants. Today 24 operators are. Eventually there probably will be 5-8 
principal nuclear operators.
    The average nuclear plant operating today is only about 18 years 
old, far from the expiration of its original 40-year operating license 
period. But as some of the earliest plants approach their license 
periods, we in the industry have realized their useful lives are 
actually much longer. As computer systems, instrumentation and other 
technology has advanced, these whole systems have been replaced in 
today's nuclear plants. In many ways, today's operating plants are 
virtually new. Many were originally designed with a 60-year life in 
mind, but were licensed for 40 years to provide an extra margin of 
safety.
    As a result, we are convinced the useful operating life of today's 
plants can safely be extended through a rigorous license renewal 
process for up to an additional 20 years. Several plants are in the 
relicensing process at present, including one of ours, Arkansas Nuclear 
One unit 1.
    To further demonstrate our commitment to nuclear power, Entergy 
Nuclear last fall purchased a decommissioning services firm, TLG 
Services in Bridgewater, Conn., to get world-class technical and 
scientific engineering expertise in the planning and cost estimating of 
decommissioning. And we are now offering complete nuclear life cycle 
management services to the U. S. industry.
    Will new nuclear plants be built? Yes, we think so. But only if and 
when we can bring some certainty to the industry. And you, as our 
nation's policymakers, can help to establish that certainty. New 
nuclear capacity can and will be built when it makes sense to take the 
financial risk. The industry must see:

 Certainty in the costs of a new plant
 Certainty in the regulatory permitting process, and
 Certainty in the time required to build.
    Much work has already been done to design and obtain regulatory 
approval of new advanced reactor designs that are simpler than today's 
operating plants. Simpler generally means safer. It also means more 
competitive in both construction and operating costs.
    Much has also been accomplished by the industry and the NRC in 
developing a streamlined license process. So that you can depend on 
actually operating the plant once built. A new licensing process must 
be thorough, and result in the issuance of both a construction permit 
and an operating license. When today's operating plants were built, a 
construction permit was issued after much review and another review was 
required before an operating license could be issued, often resulting 
in years of additional delay and accumulating costs. As a result, as 
much as 20 percent of the total cost of today's plants was actually 
interest costs that had grown while the plant was waiting to go into 
operation.
    With advanced, simpler reactor designs, an improved construction 
and operating license process, the time and resulting cost of a new 
nuclear plant would be better known. That would translate to less 
financial risk, an imperative in today's deregulated power marketplace. 
It can be done and is well on the way to reality. Your support as 
policymakers is critical.
    In our view, a new nuclear plant will be built when one can 
reasonably depend on the cost of that capacity will be in the $1,000 
per kilowatt range. And that cost will be determined by the above 
circumstances.
    We at Entergy and others in the industry have been working together 
with the NRC to find solutions and bring certainty. We expect several 
nuclear operators will announce early site locations later this year to 
begin the process of keeping the nuclear option open in this country.
    The used nuclear fuel problem is, in our view, a political problem, 
not a technical one. A decade of science has brought us very close to 
the selection of a permanent storage facility at Yucca Mountain. The 
nation's electric consumers have been paying one mill per kilowatt-hour 
produced at all nuclear plants into a Nuclear Waste Fund that now 
totals $16 billion. The used fuel solution has been paid for. We are 
confident the Department of Energy will complete its study and 
recommend moving forward with the Yucca Mountain facility and the 
President will agree later this year.
    Entergy is committed to nuclear energy. We firmly believe nuclear 
will continue to be a safe, reliable and lower cost source of power for 
our country. Nationally, nuclear energy is the second-largest source of 
U.S. electricity, producing one-fifth of all electricity at record 
levels of safety and efficiency and at production costs lower than coal 
and natural gas plants.
    No other source of electricity can provide large amounts of power 
reliably and reasonable costs while enhancing our air quality.
    Nuclear energy will continue to help meet our nation's public 
policy goals for energy security, economic growth and environmental 
protection. You and your colleagues can make it happen. I assure you, 
nuclear will respond with safe, reliable and low cost energy. Today, 
and in the future.
    With your help, nuclear power can continue to be a critical part of 
our nation's energy supply.
    I hope you find this information helpful. Thank you for inviting me 
today.

         GENERAL DISCUSSION OF ENERGY POLICY AND NUCLEAR ENERGY
    Nationally, nuclear energy is the second-largest source of U.S. 
electricity, producing one-fifth of all electricity at record levels of 
safety and efficiency and at production costs lower than coal and 
natural gas plants.
    I would like to thank Chairman Barton and this subcommittee for 
focusing on the importance of national energy policy and the value of 
America's nuclear power plants to our nation's energy supply and 
environmental protection.
    From an energy policy perspective--the nation is at a crossroad. 
The greatest source and constant driver of growth in the United States 
for the past century has been electricity. Without vast and steadily 
increasing supplies of power, this nation could not have become the 
economic marvel that it is. Many of the country's most significant 
advances--technological and societal--would not have been possible 
without a constant flow of reliable, affordable electricity.
The Nation Needs a Comprehensive National Energy Policy
    As the ``new'' economy converges with traditional economic 
infrastructure needs, electricity will continue to be the driver of our 
economic engine, whether to power the Internet or the nation's assembly 
lines. As its cornerstone, any national energy policy must increase 
domestic electricity supply in order to meet this new demand, expected 
to increase at least 42 percent by 2020.1
---------------------------------------------------------------------------
    \1\ EIA, Annual Energy Outlook 2001
---------------------------------------------------------------------------
    To meet future electricity demand and maintain U.S. energy 
security, a comprehensive national energy policy must:

 Encourage investment in new power plant construction.
 Continue regulatory modernization, including regulatory 
        stability for operating nuclear plants and licensing of new 
        plants.
 Ensure sufficient funding for research, development and swift 
        application of new nuclear energy technologies is consistent 
        with nuclear energy's future role in meeting U.S. energy needs.
 Eliminate discrimination and ensure nuclear energy receives 
        the same treatment as other electricity generating technologies 
        in the marketplace.
 Educate the nation about the excellent safety record of 
        nuclear energy and inject sound science and intellectual 
        honesty into the national energy debate so consumers may make 
        informed energy choices.
 Maintain U.S. leadership and infrastructure to train the next 
        generation of scientists, engineers and technicians required to 
        design, build and operate nuclear power plants.
    Our nation cannot meet the demands of our growing population and 
economy without increased power generation through the construction of 
new power plants. We need to maintain the proportion of non-emitting 
baseload capacity through the construction of new emission-free plants. 
This will maintain a diverse energy portfolio for the nation and 
continue the price stability nuclear energy offers.
Nuclear Energy: Significant Role in the Nation's Electricity Portfolio
    To achieve these short and long-term objectives requires an energy 
policy that supports and encourages a continuing significant role for 
nuclear power. More than ever, the nation relies on nuclear energy to 
meet the country's soaring demand for power. There is no longer any 
question that nuclear energy currently plays--and will continue to 
play--a critical role in providing electricity to the nation. Today, 
the nation's 103 nuclear plants produce about 20 percent of our 
electricity.
    More importantly, as plants have increased in efficiency over the 
last decade, nuclear power's role in meeting consumer demand has grown 
by nearly 20 percent. Clearly, nuclear energy is absolutely essential 
to the integrity of the U.S. electricity grid and to our clean air 
goals.
    Nuclear electricity is generated without producing greenhouse gases 
or other air pollutants, thus providing Americans with tremendous 
environmental benefits. Without nuclear energy, the United States could 
not meet air quality standards established by the Clean Air Act or 
international commitments to reduce greenhouse gases, including carbon 
dioxide. The reduction of air pollutants or the avoidance of emissions 
imparts significant health benefits to people across the nation, by 
reducing respiratory illness, for example.
    Nuclear power plants are the nation's greatest emission-free source 
of electricity--producing nearly two-thirds of all emission-free power. 
And, as public demand for clean air and a healthy environment increases 
in the future, nuclear energy is going to become even more important.
The Emerging Energy Crisis
    In analyzing recent events in California, as well as looking at 
increased consumer heating and electricity bills elsewhere, the nation 
appears to be in the midst of an emerging energy crisis. There may be 
debate about the exact variables at the root of problems in California, 
but there is no debate that rolling blackouts in one of the nation's 
fastest growing states--the world's sixth largest economy--represent a 
serious problem.
    There is also no doubt that soaring heating and cooling bills for 
lower income families--including retirees--pose a serious threat to the 
health and safety of a large number of Americans. And, with population 
growth and economic expansion expected to increase the need for new 
electricity generation capacity by more than 393,000 megawatts by 
2020,2 events in California may only be the beginning of a 
widespread energy shortage.
---------------------------------------------------------------------------
    \2\ EIA, Annual Energy Outlook 2001
---------------------------------------------------------------------------
    A few words from Silicon Valley--one of American's great economic 
success stories--may illuminate not just the crisis, but what two of 
the world's most forward-thinking executives see as one potential 
solution.
Nuclear Energy: A Time-Tested Solution
    That nuclear energy is again figuring prominently on policymakers' 
and business leaders' agendas is no coincidence. Indeed, this is not 
the first time the nation has looked to nuclear energy as a solution to 
its energy woes. Looking back at recent history to the last energy 
crisis in the United States, nuclear energy provided the most 
significant and lasting response.
    At the time of the first oil embargo in 1973, about 20 percent of 
U.S. electricity supply came from power plants that used oil for fuel. 
In some parts of the nation--the Northeast, for example--the percentage 
of oil-fired electric generation was considerably higher. Just five 
percent of U.S. electricity was produced at nuclear power plants.
    In the subsequent decades, 89 new nuclear reactors began operating, 
effectively replacing oil as a fuel source for electricity, and making 
nuclear energy one of the most successful energy security programs. 
Today, nuclear power reactors continue to provide a reliable hedge 
against volatile fuel prices and energy supply disruptions, protecting 
American businesses and homes from wildly fluctuating energy costs and 
providing a reliable supply of electricity. Nuclear energy answered the 
call then, and the industry is answering that call now.
    It must be remembered that nuclear's role in avoiding emissions 
also has significant implications for domestic economic development. If 
a state is not complying with Clean Air Act regulations, it will be 
constrained when it comes to building new conventional power plants as 
well as other industrial and manufacturing facilities.
    Without nuclear energy, there will be difficult choices on the 
horizon as we try to balance economic development, electricity needs 
and environmental goals. New power plants will not come on line in the 
future without serious consideration of their environmental impact. 
Again, California's woes clearly show that energy, the environment and 
economic development are inextricably linked. Nuclear energy is the 
only expandable form of electricity generation that meets all three 
criteria.
Status of U.S. Nuclear Energy: Power for Today and Tomorrow
    The United States has the largest commercial nuclear power industry 
in the world. The 103 nuclear power reactors generate enough 
electricity to serve 67 million Americans, or the equivalent of the 
nuclear electricity needs of France and Japan combined. The industry's 
safety record is unparalleled among the world's energy providers, and 
nuclear power plant efficiency and production have improved steadily 
during the last decade and today are at record levels. In 2000, nuclear 
power plants in 31 states produced a record amount of electricity--754 
billion kilowatt-hours.
    The industry's safety record has laid the foundation for this 
strong operational performance. Safety and excellence are at the very 
core of the industry, and safety is essential to its continued success 
in the competitive electricity market. As the industry moves forward, 
safety and low-cost power will continue to go hand-in-hand.
    The increase in electricity generation at U.S. nuclear power plants 
during the 1990s was equivalent to adding twenty-three 1,000-megawatt 
power plants to our nation's electricity grid. That's enough to meet 
30% of all new electricity demand during that time. This dramatic 
increase in electricity production by nuclear power plants is one the 
most successful energy efficiency programs of the last decade. Safe, 
outstanding performance at nuclear power plants, especially during the 
transition to competitive electricity markets, is one reason why a 
growing number of policymakers, financial analysts and the public are 
rediscovering the benefits of nuclear energy.
    Outstanding operational performance is also a major reason why 
Entergy and other energy companies are extending the operating licenses 
at existing reactors for an additional 20 years. In 1997, some energy 
forecasters were predicting that dozens of nuclear power plants would 
shut down prematurely and that many more would shut down at the end of 
their 40-year licenses, issued by the Nuclear Regulatory Commission. 
However, many of those same analysts today have reassessed the 
situation and now predict only a handful of plants may close prior to 
the expiration of their licenses. They now recognize that the vast 
majority of plants will extend their operating licenses beyond the 
initial 40-year period.
    And, it is also why the industry is looking at innovative 
partnerships for building advanced reactor designs that will be 
necessary to meet the future demands of a power-hungry digital economy 
and improve our air quality. The Energy Information Administration, in 
its 2001 annual energy outlook, forecasts higher nuclear power 
production.
          ``In 2020, nuclear generation is projected to be 34 percent 
        higher than forecast last year, due to lower estimated costs 
        for extending the life of current reactors and higher projected 
        natural gas prices.''
                          Energy Information Administration
                                               Energy Outlook, 2001
    Even with this two-fold production and environmental advantage, 
nuclear power plants are the lowest cost electricity generators. In 
2000, the average production cost of electricity generated by nuclear 
power plants was 1.83 cents per kilowatt-hour, making nuclear power the 
most affordable electricity in the United States.
Nuclear Energy's Long History of Protecting our Air Quality
    The environmental value of nuclear energy was recognized early by 
policy makers. In Shippingport, Pa., over 50 years ago, nuclear 
energy's clean air value tipped the scales in favor of construction of 
the first demonstration nuclear power plant.
    Beginning in the 1940s, Pittsburgh began instituting strict smoke 
control programs as part of urban redevelopment plans--well ahead of 
the rest of the nation. At the time, Duquesne Light Company was 
petitioning to build a coal-fired plant on the Allegheny River. They 
were encountering a great deal of resistance from the area's citizens, 
who were fearful of air pollution from the plant. The main reason that 
Duquesne chose to bid on the nuclear project was because it offered 
power without pollution.
    That benefit is being rediscovered today, and promises to be of 
prime importance in the future. Energy and the environment are 
increasingly being linked both locally and globally. Yet, nuclear 
energy's clean air benefits--its ability to avoid the emission of 
harmful air pollutants while producing vast amounts of electricity--is 
still undervalued.
    In the process of generating electricity, nuclear plants produce no 
carbon dioxide, sulfur oxide or nitrogen oxides. Between 1970 and 1990, 
the increased use of nuclear energy alone eliminated more nitrogen 
oxide emissions than direct industry action taken to comply with the 
Clean Air Act. Nuclear energy, by avoiding additional emissions as 
electricity output grows, acts as a vital partner in Clean Air Act 
compliance.
    To meet more stringent Clean Air Act requirements and effectively 
manage carbon risk in the future, the United States must increase its 
percentage of non-emitting sources of electricity--such as nuclear 
energy, solar, hydro and wind--above the current baseline of 30 
percent. Of these electricity production technologies, nuclear energy 
generates two-thirds of all emission-free electricity today, and is the 
only expandable, large-scale electricity source that avoids emissions 
and can meet the baseload energy demands of a growing, modern economy.
Industry Planning is Already Underway for New Nuclear Energy Plants
    Although the average age of U.S. nuclear plants is only 18 years, 
we must begin planning now to enhance these services through increases 
in production capacity, improved efficiency, and license renewal. 
That's why the industry is working now to set the stage for 
construction of new advanced-designed nuclear plants that will have 
more automatic safety systems and will be even more reliable and 
economical.
    The industry is working together to lay the groundwork for new 
plants.Three advanced designs have already achieved certification by 
the NRC, having gone through extensive, multi-year safety reviews. Of 
the three designs, two have been built and are setting world-class 
performance records in Japan, while others are being built in Korea and 
Taiwan.
    Additionally, two more advanced designs are undergoing NRC review. 
One involves a review of changes to an existing approved design, 
uprating it from 600 to 1,000 megawatts. The other is a new reactor--
known as the Pebble Bed Modular Reactor--now in preliminary review by 
the NRC.
    The NRC's licensing process for new nuclear plants will ensure that 
safety, design and site-related issues are resolved before large 
capital investments are made. A new licensing process will allow the 
NRC to issue a single license to construct and operate a new nuclear 
plant.
    Industry executives have come together--contributing personnel, 
funding and guidance--to develop a plan that will mark out a clear path 
for new nuclear plant orders. This plan for the future considers safety 
standards and objectives; NRC licensing requirements; policy and 
legislative implications; capital investment needs and changing 
business conditions.
Nuclear Energy: Balancing the Nation's Energy Needs
    Our nation cannot meet the demands of our growing population and 
economy without increased power generation through the construction of 
new power plants. We need to increase the proportion of non-emitting 
baseload capacity through the construction of new emission-free plants. 
This will maintain both a diverse energy portfolio for the nation, and 
the price stability that nuclear energy offers. In order to do this, 
comprehensive national energy policy must

 Encourage investment in new power plant construction.
 Continue regulatory modernization, including regulatory 
        stability for operating nuclear plants and licensing of new 
        plants.
 Ensure sufficient funding for research, development and swift 
        application of new nuclear energy technologies is consistent 
        with nuclear energy's future role in meeting U.S. energy needs.
 Eliminate discrimination and ensure nuclear energy receives 
        the same treatment as other electricity generating technologies 
        in the marketplace.
 Educate the nation about the excellent safety record of 
        nuclear energy and inject sound science and intellectual 
        honesty into the national energy debate so that consumers may 
        make informed energy choices.
 Maintain U.S. leadership and infrastructure to train the next 
        generation of scientists, engineers and technicians required to 
        design, build and operate nuclear power plants.
    In a competitive marketplace, the nuclear energy industry has the 
primary responsibility for ensuring the viability of nuclear 
technology. However, the industry values the important role that can be 
played by the federal government in preparing the way for new nuclear 
power plants.
    Protecting our air quality and our environment, as well as 
improving our energy security, are among the reasons why two-thirds of 
Americans favor nuclear energy as one way to generate electricity.
    One reason for the steady support for nuclear energy is that the 
public views nuclear energy as a fuel of the future and believes it is 
important for future generations. Americans consider solar and nuclear 
energy as primary sources of energy for the future. In addition, there 
is broad support for the continued operation of nuclear power plants 
(76 percent) as well as for maintaining the option to build more 
nuclear power plants in the future (73 percent).3
---------------------------------------------------------------------------
    \3\ Nuclear Energy 2000: Public Support Remains Strong, Ann 
Stouffer Bisconti, Ph.D., Perspectives on Public Opinion, April 2000.
---------------------------------------------------------------------------
    And, a January survey by Bisconti Research Inc., shows an increase 
in those who favor building more nuclear power plants. Fifty-one 
percent of those polled said that the United States should 
``definitely'' build more nuclear power plants in the future--compared 
with 42 percent in October 1999.
    The increase in favorability for building new nuclear plants was 
largest in the West, where those in favor increased from 33 percent in 
October 1999 to 52 percent in the January survey. Clearly, the 
California crisis is impressing upon the public the need for new 
electricity supplies.
Used Nuclear Fuel: Sound Science Supports Yucca Mountain
    Federal legislation mandates a centralized geologic repository. The 
Nuclear Waste Policy Act of 1982 and its 1987 amendments require or 
authorize the U.S. Department of Energy to locate, build and operate a 
deep, mined geologic repository for used nuclear fuel. To pay for the 
permanent repository, the Nuclear Waste Policy Act established the 
Nuclear Waste Fund. Since 1982, electricity consumers have paid into 
the fund which now totals more than $16 billion.
    Based on scientific information gathered from several sites, 
Congress in 1987 selected Yucca Mountain as the location for further 
study to determine if the desert ridge is a suitable location for the 
federally operated underground repository. And, the industry fully 
expects that the Energy Department will forward a science-based 
decision on Yucca Mountain to the President later this year.
    A decade of science has been completed and will lead to a draft 
report this spring. A decision document is expected to be finalized in 
the fall, following hearings that will take place in Nevada. It is 
important that DOE and the Administration move ahead on schedule with 
the site recommendation process, leading to a decision by the President 
on site suitability late this year. This decision allows DOE to prepare 
documents to submit to the NRC to license a disposal facility.
    Most used fuel is stored in steel-lined, water-filled vaults at 
nuclear power plants. However, Entergy Nuclear and other nuclear power 
plant owners are absorbing the cost of on-site storage of spent nuclear 
fuel, despite the fact that they have already paid the government to 
perform this service. Other electric companies must build additional 
storage facilities for used nuclear fuel at nuclear power plant sites 
until a federal repository is operating.
    Less than six percent of commercial reactor fuel is stored in 
additional ``dry'' storage facilities today, but by 2010, approximately 
30 percent of used fuel will be stored in these costly storage 
containers. Steps must be taken now to avoid a forced shutdown of any 
nuclear power plant due to a lack of used fuel storage,
Universal Application of Nuclear Technology Saves and Protects Lives
    For five decades, the United States has been the global leader in 
the use of nuclear technology to benefit society. America's high-tech 
digital economy and high standard of living simply would not be 
possible without the use of nuclear energy. In addition, nuclear 
technology is used in scores of consumer products--both necessities and 
conveniences that enhance our daily lives.
    Among the necessities is nuclear energy, which provides one-fifth 
of our nation's electricity and is our largest supply of emission-free 
electricity, and nuclear medicine, which is used in one of every three 
medical diagnoses and treatments. Ten million Americans are diagnosed 
and treated every year using nuclear medicine. Radioactive isotopes 
also are essential to the biomedical research that seeks causes and 
cures for diseases such as AIDS, cancer and Alzheimer's disease.
    Nuclear technology also is used agricultural applications, 
industrial manufacturing and environmental protection. The use of 
nuclear technologies in the field of agriculture improves crop 
varieties, controls pests and preserves food. The use of irradiation in 
food safety continues to grow in the United States and has been used 
for decades in Europe. In fact, food irradiation has been approved to 
control food loss and to improve sanitation for more than 100 kinds of 
food in 41 countries. These uses of nuclear technology make significant 
contributions to our quality of life.
    The associated economic benefit of the use of nuclear technology 
and nuclear materials on the economy is significant, accounting for 
more than $400 billion in revenues (6 percent of the gross domestic 
product) and 4.4 million jobs.
Conclusion: Nuclear Energy Powers America's Future
    One of the most prominent environmental protection programs in the 
industrial sector during the last three decades has been America's 
increased reliance on nuclear energy to power economic growth. No other 
source of electricity can provide large amounts of power while 
enhancing our air quality.
    Policymakers should maximize nuclear energy's potential to improve 
our air quality while providing low-cost electricity to fuel our 
economy. Continued research and development funding, streamlined 
business regulation, implementation of a federal waste management 
program, and equal access to business incentives will ensure that 
nuclear energy will continue to help meet our nation's public policy 
goals for energy security, economic growth and environmental 
protection.

    Mr. Norwood. Thank you very much, Mr. Hutchinson. We 
appreciate your time and testimony.
    I would like to introduce to the committee now Mr. A.C. 
Tollison, Jr., the Executive Vice President, Institute of 
Nuclear Power Operations, from Atlanta, Georgia.
    Welcome, Mr. Tollison, and please take 5 minutes.

              STATEMENT OF ALFRED C. TOLLISON, JR.

    Mr. Tollison. Thank you, Mr. Chairman, and good afternoon.
    My name is Fred Tollison, Executive Vice President of the 
Institute of Nuclear Power Operations, INPO, in Atlanta. I have 
been with INPO for 13 years and have worked in the nuclear 
power industry for 30 years. I was plant manager of the 
Brunswick station in North Carolina for 5 years.
    I am here to discuss safety and reliability in the nuclear 
power industry. In fact, last year, U.S. nuclear power plants 
performed at record levels of safety and reliability. I will 
begin with INPO's activities and INPO's role in the nuclear 
industry.
    The Institute's mission is to promote the highest levels of 
safety and reliability to promote excellence in the operation 
of nuclear power plants. INPO was formed in 1979 as a non-
profit, independent, technical organization. Each of the 34 
companies that operate nuclear plants in this country is a 
member of INPO.
    Our key technical programs are, first, periodic, in-depth 
inspections of each nuclear plant. Second, training programs at 
each plant are accredited by the independent National Nuclear 
Accrediting Board. Third, INPO analyses plant operating 
experience and passes along lessons learned to the industry. 
And, fourth, INPO provides industry assistance, including plant 
visits, seminars, and workshops.
    Significant process has been achieved by the U.S. nuclear 
industry, in part through participation in these programs. 
Indicators that measure the performance of nuclear plants best 
demonstrated this progress. Since the mid-'80's, INPO has 
tracked a series of 10 performance indicators. Aggressive goals 
were established at 5-year intervals, and the year 2000 marks 
the end of the third such period.
    The basic principal of performance indicators is that 
nuclear plants with good performance, as measured by these 
indicators, are generally recognized as well-managed plants. 
Such plants are more reliable and typically have higher margins 
of safety.
    Let me show you now the industry's progress using a few 
selected indicators to your right. Unit capability factor is a 
measure of the plant's ability to stay online and produce 
electricity. In 2000, the median was 91.1 percent, the best 
performance ever for this indicator, and for the second year in 
a row it exceeded the year 2000 goal.
    Unplanned automatic scrams show the number of automatic 
reactor shutdowns per year. A low number indicates care and 
operations, good maintenance, and good training. The 2000 
median value was zero for the third straight year, continuing 
to exceed the year 2000 goal.
    Safety assistance performance monitors the availability of 
standby or redundant safety systems to provide backup 
electricity and cooling water to the reactor if needed. The 
2000 performance of 96 percent represents a high state of 
readiness for these systems. 2000 was a very successful year 
for the U.S. nuclear industry, the best ever in terms of safety 
and reliability. The industry met or exceeded the year 2000 
goals in all 10 performance indicators.
    So what does this say about the future of the industry? 
U.S. nuclear plants are performing at record levels of safety 
and reliability. Nuclear plant owners are vigorously pursuing 
license renewal, and the industry is consolidating rapidly to 
improve efficiency. These actions indicate that nuclear power 
is being recognized as a valuable, reliable source of energy 
today and for the future.
    Without question, the industry will face new challenges as 
it makes the transition to the competitive marketplace. INPO is 
helping the industry focus on the issues that will be important 
in the near future to maintain and improve on safety and 
reliability.
    In conclusion, nuclear energy is an essential domestic 
resource, and proper management is important for today and for 
future generations. It is not an overstatement to say that a 
foundation is being put in place for a renaissance in nuclear 
power. But this foundation requires absolutely that we remain 
accident-free. This requires vigilance and commitment not just 
to the higher standards we have today but to continuous 
improvement.
    With vigilance and with commitment to safety by the 
industry, supported by INPO, and with oversight by a strong and 
fair regulator--the Nuclear Regulatory Commission--nuclear 
power has a bright future in helping fulfill our Nation's 
energy needs.
    Thank you.
    [The prepared statement of Alfred C. Tollison, Jr. 
follows:]
     Prepared Statement of Alfred C. Tollison, Jr., Executive Vice 
            President, Institute of Nuclear Power Operations
    Good afternoon. My name is Alfred C. Tollison, Jr., executive vice 
president of the Institute of Nuclear Power Operations in Atlanta, 
Georgia. I have been asked to discuss the safety and performance of the 
commercial nuclear power industry today and the trends we see for the 
future. I will begin my remarks with a brief explanation of INPO's 
structure and activities and what INPO's role is in the nuclear 
industry.

               THE INSTITUTE OF NUCLEAR POWER OPERATIONS
    The Institute was formed by the U.S. nuclear utility industry in 
late 1979 in response to the accident at Three Mile Island Nuclear 
Station. INPO's mission is to promote the highest levels of safety and 
reliability--to promote excellence--in the operation of nuclear 
electric generating plants, including applying the lessons learned from 
the President's Commission on the Accident at Three Mile Island (the 
Kemeny Commission). The nuclear utility industry leaders established 
INPO as an independent organization--independent from governmental 
agencies and independent from any individual member.
    INPO is a nonprofit, independent technical organization with a 
staff of about 350 and a 2001 budget of $59 million. The bulk of this 
budget is dedicated to travel and employee compensation. Each of the 34 
utilities in the United States with operational nuclear plants is a 
member of the Institute. To augment its professional staff, INPO 
utilizes the expertise of loaned employees from members and 
participants. This program is designed to provide a continuing source 
of personnel with recent nuclear plant experience to supplement the 
INPO staff. It also provides loaned personnel with an opportunity to 
gain broader experience in the industry.
    The Institute's organization is similar in many ways to a typical 
U.S. corporation. A Board of Directors, elected by INPO's members, 
oversees the operations and activities of the Institute.The president 
and chief executive officer of the Institute is elected by and reports 
to the Board of Directors. The current president and CEO is Dr. James 
T. Rhodes. He also serves as Chairman of the Board.
    In addition to the Board of Directors, an Advisory Council of 
professionals from outside the industry reviews Institute activities 
and provides advice on broad objectives and methods to the Board of 
Directors. The Advisory Council is composed of distinguished 
professionals including prominent educators, scientists, industrialists 
and health specialists.
    To ensure that INPO programs benefit from the best technical advice 
the industry has to offer, an Executive Review Group reviews INPO 
programs and products in the various technical areas on a continuing 
basis. The members of the Executive Review Group are experienced 
executives--typically the chief nuclear officers--who are currently 
active in nuclear plant operations or management. An Academy Council 
provides advice in the areas of training and accreditation, and an 
Industry Communications Council provides advice on effective 
communication of INPO programs and activities.
    Non-U.S. nuclear utility organizations from 13 countries 
participate in the Institute's International Program. Ten nuclear steam 
system suppliers and architect-engineering and construction firms 
worldwide involved in nuclear work also participate in INPO through the 
Supplier Program.
    The key technical activities of the Institute can be divided into 
four cornerstone programs, which I will address in more detail later. 
They are:

1. Evaluations--Periodic evaluations are conducted of each operating 
        nuclear electric plant in this country.
2. Training and Accreditation--Training programs for key personnel at 
        each plant are accredited by the independent National Nuclear 
        Accrediting Board.
3. Events Analysis and Information Exchange--INPO analyzes operating 
        experience and feeds back lessons learned to the industry.
4. Assistance--This includes plant visits, courses, seminars, and 
        workshops.
    In addition, there is a detailed infrastructure to carry out each 
of these cornerstone programs. The Institutional Plan for the Institute 
of Nuclear Power Operations, updated last year, and our 2000 Annual 
Report provide additional details about the Institute's programs and 
are attached to this testimony (attachments A and B).
    All interactions between INPO and its members are held strictly 
confidential. This is vital to the success of INPO's mission. Utilities 
are voluntary members of INPO and are under no regulatory obligation to 
provide information to INPO--or to be members. Experience shows that 
utilities are more willing to set challenging goals and to strive for 
excellence if they know they will not be criticized publicly if they 
fall somewhat short of these challenging goals. Over the years, U.S. 
courts and administrative agencies have consistently upheld this 
position.

                       INPO CORNERSTONE PROGRAMS
    We believe the Institute's cornerstone programs have directly 
contributed to the industry's progress.
Evaluations
    The evaluation program cornerstone is a direct response to a 
recommendation of the Kemeny Commission that--``the industry must--set 
and police its own standards of excellence to ensure the effective 
management and safe operation of nuclear electric generating plants.''
    A comprehensive program has been established for conducting, on a 
periodic basis, independent evaluations of the operating nuclear plants 
and supporting corporate organizations of all U.S. nuclear utilities. 
These evaluations are performance-based and are designed to ensure that 
each utility is striving to meet the industry's high standards in key 
areas.
    Teams of qualified and experienced personnel conduct these 
evaluations, focusing on plant safety and reliability. The evaluation 
teams are augmented by senior reactor operators, other peer evaluators 
from operating units similar to those at the station being evaluated, 
and host utility peer evaluators. The scope of the evaluation includes 
traditional functional categories such as operations, maintenance, and 
engineering that generally correspond to the nuclear station 
organization. The areas evaluated include organizational effectiveness, 
operations, maintenance, engineering, radiological protection, 
chemistry, and training.
    In addition, the teams evaluate cross-functional performance 
areas--processes and behaviors that cross organizational boundaries and 
that address organizational integration and interfaces. The cross-
functional evaluation includes areas such as safety culture, self-
assessment and corrective action (learning organization), operating 
experience, human performance, and training.
    The performance of operations and training personnel during 
simulator exercises is included as part of each evaluation. Also 
included, where practicable, are observations of plant startups, 
shutdowns, and major planned evolutions. Evaluations of each operating 
nuclear station are conducted at an average interval of 21 months.
    Results from more than 875 plant evaluations INPO has conducted to 
date show substantial improvements in the conduct of plant operations, 
enhanced maintenance practices and improvements in equipment and human 
performance.
Training and Accreditation
    Another excellent example of the industry's response to the Kemeny 
Commission is in its commitment to improved training through INPO. This 
commitment has resulted in considerable improvements in both the safety 
and reliability of the nation's nuclear power plants.
    Under the training and accreditation cornerstone, the Institute 
assists its member utilities in developing, implementing and 
maintaining high quality, comprehensive training in a wide range of 
areas. INPO also evaluates the results of utility training programs 
through the ongoing operating plant evaluation program and analyzes 
industry events to identify needed training improvements.
    INPO manages an industrywide accreditation program for utility 
training programs through the National Academy for Nuclear Training. 
Established in 1985, the National Academy for Nuclear Training provides 
a framework for the following three essential elements in the 
industry's program to strengthen nuclear utility training:

 training activities, resources and facilities at nuclear 
        utilities
 the National Nuclear Accrediting Board
 INPO's training-related activities
    The National Nuclear Accrediting Board is an independent body 
established to ensure that nuclear utility training programs meet the 
standards of the National Academy for Nuclear Training. The Board is 
composed of eminent American scholars and executives from the following 
four groups:

 industrial training experts from fields outside the nuclear 
        industry
 members of the postsecondary education community
 individuals nominated by the NRC
 senior utility executives
    As an example of the National Nuclear Accrediting Board's 
independence, the Board's charter requires that the majority of each 
panel be from outside the utility industry when considering each 
accreditation action.
    The need for the work INPO is doing in training was recognized by 
the Kemeny Commission when it recommended the establishment of 
``agency-accredited training institutions'' for nuclear plant 
operators. As a condition of membership, each of INPO's 34 member 
utilities has committed to achieve and maintain accreditation for 12 
key positions involved in nuclear power operations. These positions 
include shift managers; licensed and nonlicensed operators; maintenance 
supervisors, craftsmen, and technicians; chemistry and radiological 
protection technicians; and engineers.
    By the end of 1990, all U.S. nuclear power stations had achieved 
initial accreditation of all applicable training programs. 
Accreditation is maintained on an ongoing basis and is formally renewed 
for each training program every four years.
    INPO conducts courses and seminars in support of the National 
Academy for Nuclear Training. These courses and seminars help personnel 
better manage nuclear technology, more effectively address leadership 
challenges, and improve their personal performance. Examples of courses 
conducted include the Chief Executive Officer Seminar, Reactor 
Technology Course for Utility Executives, Senior Nuclear Plant 
Management Course, Control Room Teamwork Development Course, and 
professional development seminars for shift managers, maintenance 
supervisors, engineering supervisors, radiation protection and 
chemistry supervisors, and training supervisors.
Events Analysis and Information Exchange
    The exchange of industry operating experience is another direct 
result of a Kemeny Commission recommendation which called for a 
``systematic gathering, review and analysis of operating experience at 
all nuclear power plants.'' Through this cornerstone program, each 
nuclear station provides data on events to the Institute's technical 
staff. At INPO, these industry events are reviewed for significance. 
Following this analysis, the Institute disseminates applicable lessons 
learned throughout the industry. As a follow-up, INPO evaluation teams 
check to see that nuclear stations have implemented all the applicable 
recommendations.
    The Institute has reviewed more than 100,000 events since its 
inception and provided 482 recommendations to member utilities and 
international participants through 85 Significant Operating Experience 
Reports. More than 99 percent of the 482 recommendations (lessons 
learned) issued to date have been implemented industrywide.
    Nuclear Network' is an Internet-based electronic 
communications system available to all U.S. members and international 
participants. The system allows rapid transmittal, storage and 
retrieval of nuclear plant information, and it provides a means for 
questioning other members and participants about their experiences in 
solving nuclear operations problems.
    The Institute collects and analyzes data and information related to 
nuclear plant performance. Members provide data on quantitative 
performance indicators on a quarterly basis. This plant data is then 
consolidated for trending and analysis purposes. Industrywide data, 
plus trends developed from the data, is provided to member and 
participant utilities for a number of key operating plant performance 
indicators. These include the performance indicators used by the World 
Association of Nuclear Operators (WANO) for worldwide nuclear plant 
performance comparisons. Members use this data in setting specific 
performance goals and in monitoring and assessing performance of their 
nuclear plants. INPO uses performance goals from individual utilities 
to help establish industrywide performance goals for plants in the 
United States.
Assistance
    The assistance cornerstone has also contributed to the industry's 
improvements by fostering comparison and the exchange of performance 
information and successful methods. Visits to member utilities by INPO 
personnel in response to requests by the utilities are one of the most 
important modes of assistance. To date, INPO has conducted more than 
3,500 assistance visits.
    Several categories of documents (such as guidelines and good 
practices) are designed and developed to assist member utilities in 
their efforts to achieve excellence in operation, maintenance, 
training, and support of nuclear plants. These documents are now in 
widespread use at every U.S. nuclear station and at many utilities 
worldwide.
    Another element of the assistance cornerstone is workshops. INPO 
sponsors workshops that afford the Institute, international 
participants and U.S. member utilities an opportunity for face-to-face 
information exchange. Typically, all U.S. nuclear utilities are 
represented at these workshops that routinely address topics such as 
operations, operating experience and maintenance. International 
speakers are featured at most INPO workshops to promote the worldwide 
sharing of information. INPO has sponsored 178 workshops with a 
cumulative attendance of more than 20,000 personnel. In addition, INPO 
has sponsored more than 330 working meetings and seminars with a 
cumulative attendance of more than 5,300 personnel.

                 INPO'S INTERNATIONAL PROGRAM, WANO-AC
    As INPO developed and expanded its activities, an International 
Participant Program was formed in 1981 to promote the widespread 
application of INPO standards of excellence and ensure that INPO 
programs benefit from good practices and lessons learned worldwide. To 
accomplish this, the International Participant Program, which is 
observing its twentieth anniversary this year, facilitates the exchange 
of operating experience and technical information with participating 
international nuclear utilities and utility organizations in other 
countries.
    There are currently 13 countries participating in the program. 
These include Belgium, Brazil, Canada, France, Germany, Japan, Korea, 
Mexico, Slovenia, South Africa, Spain, Taiwan and the United Kingdom.
    It is important to note that following the Chernobyl accident, the 
International Participant Program was instrumental in the formation of 
WANO. The mission of WANO is to maximize the safety and reliability of 
the operation of nuclear power plants by exchanging information and 
encouraging communication, comparison, and emulation among its members.
    WANO is organized through regional centers and includes every 
operating nuclear electric plant in the world. INPO represents all U.S. 
utilities as a member of the WANO-Atlanta Center.

           INPO'S RELATIONSHIP WITH U.S. GOVERNMENT AGENCIES
    INPO coordinates its activities with federal government agencies as 
appropriate. The Institute maintains a formal Memorandum of Agreement 
with the Nuclear Regulatory Commission (NRC) and with the Department of 
Energy (DOE). These agreements reflect the desire of both organizations 
for a continuing, cooperative relationship in the exchange of 
experience, information and data related to the safety of nuclear power 
plants.
    Although nuclear plant safety and protection of the public are 
fundamental goals of both INPO and the NRC, their roles, while 
complementary, are different. INPO was not created to supplant the 
regulatory role of the NRC, but to provide the means whereby the 
industry itself could, acting collectively, make its nuclear operations 
safer. It was recognized that in establishing and meeting its goals and 
objectives, INPO would have to work closely with the NRC, while at the 
same time not becoming or appearing to become an extension of or an 
advisor to the NRC or an advocacy agent for the utilities.
    INPO provides assistance to DOE to support improvement of 
operational safety at DOE nuclear facilities. INPO conducts a limited 
number of assistance visits to DOE nuclear facilities, provides DOE 
with copies of selected INPO documents and domestic operating 
experience reports, and allows DOE personnel to attend industrywide 
workshops and conferences. A limited number of DOE personnel are given 
access to Nuclear Network and selected information available on INPO's 
member Web site.
    Additionally, certain aspects of INPO's international program are 
coordinated with the Department of State.

                        PERFORMANCE IMPROVEMENTS
    In part through participation in INPO's cornerstone programs, a 
great deal of progress has been achieved by the U.S. nuclear industry. 
This progress may be best exemplified by a set of performance 
indicators that reflect the considerable progress in the areas of 
operations, training and maintenance.
    In the mid-1980s, INPO began an initiative to develop additional 
methods for measuring and comparing the performance of nuclear plants. 
A series of 10 nuclear plant performance indicators was selected, and 
utilities have been reporting their performance. These indicators have 
been adopted by WANO and are now used worldwide. Aggressive goals are 
established at five-year intervals. The year 2000 marks the end of the 
third five-year period.
    The basic principle inherent in the performance indicator program 
is that nuclear plants with good performance, as measured by the 
overall set of performance indicators, are generally recognized as 
well-managed plants. Such plants are generally more reliable and can be 
expected to have higher margins of safety.
    Year 2000 was successful overall for the U.S. nuclear industry--the 
best ever in terms of safety and reliability. For the first time, the 
industry met or exceeded the five-year goals in all categories. 
Additionally, performance in every indicator was as good as or better 
than the previous year's performance. The 2000 results continue the 
remarkable record of progress that was started in 1980.
    I won't discuss each performance indicator in detail today. 
Instead, I will illustrate the industry's progress using a few selected 
indicators, which are included in the INPO 2000 Annual Report I 
mentioned earlier.
    Unit Capability Factor is a measure of the plant's ability to stay 
on line and produce electricity. A high unit capability factor 
indicates effective plant programs and practices to minimize unplanned 
outages and to optimize planned outages. In 1980, the industry median 
was 62.7 percent. In 2000, the median was 91.1 percent. This represents 
the best performance ever for this indicator; and for the second year 
in a row, it exceeds the 2000 goal.
    Unplanned Automatic Scrams shows the number of automatic shutdowns 
for approximately one year of operation. A low number indicates care in 
operations, good maintenance, and good training. The median number has 
been reduced from 7.3 percent in 1980 to zero in 2000. In fact, the 
median value has been zero for three straight years and continues to 
exceed the 2000 goal.
    Safety System Performance monitors the availability of three 
important standby redundant safety systems to mitigate off-normal 
events. The industry's goal is to encourage a high state of readiness, 
with at least 85 percent of these systems meeting specific 2000 goals 
for availability in excess of 97 percent. The 85 percent target allows 
for normal year-to-year variations in individual system performance. 
The 2000 performance of 96 percent is an increase over 1999 and 
continues to exceed the 2000 goal.
    Collective Radiation Exposure examines the effectiveness of 
personnel radiation exposure controls for boiling water reactors and 
pressurized water reactors. Low exposure indicates strong management 
attention to radiological protection. Worker exposure has been reduced 
significantly over the past 20 years. The 2000 median value of 150 man-
rem per unit for boiling water reactors is the best performance ever 
and exceeds the 2000 goal for the fourth straight year. This is a 
striking improvement over the 1980 figure of 859 man-rem per unit. 
Likewise, the pressurized water reactor value of 82 man-rem per unit 
exceeds the 2000 goal for the third straight year, also a significant 
improvement over the 1980 figure of 417 man-rem.
    Not shown in the material provided, the INPO Performance Indicator 
Index is an excellent illustration of the industry's overall progress 
since 1985. This Index is a weighted composite of the individual 
indicators on a scale of 0-100. In 1985, the aggregate Index value for 
the industry was 43. In 2000, the value was 94--an all-time high.

                         TRENDS IN THE INDUSTRY
    In short, the industry has made excellent overall progress in 
safety and reliability since 1980 and is committed to seeing these 
improvements continue.
    U.S. nuclear plants are performing at historically high levels from 
a safety and reliability standpoint. Owners are vigorously pursuing 
license renewal. Also, with the advent of deregulation, the industry is 
consolidating rapidly to further improve efficiency. All this indicates 
that nuclear power is being recognized as a valuable, reliable source 
of energy for the future. The business community is now recognizing 
what the nuclear industry has spent 20 years demonstrating: These 
plants can be operated safely and efficiently; and, if properly 
maintained, there is no reason they can't continue this performance 
well beyond their original 40-year licenses.
    Unquestionably, the industry will face--and is already facing--new 
challenges as it deals with deregulation and life extension issues. 
Long-term industry success will require vigilance and commitment, not 
just to the higher standards we have today, but to continuous 
improvement. INPO is helping the industry focus on the key issues that 
will be important in the near future--issues like human performance, 
equipment performance, and self-assessment and corrective action. New 
training needs will also emerge as we prepare a new generation of 
nuclear professionals to operate and maintain our nuclear fleet.
    The U.S. industry will continue to set challenging goals for 
itself. Already, new 2005 goals have been established for the 
performance indicator program. Taking into account the dramatic 
improvement of the industry as a whole during the past two decades, 
these new goals focus more on plants that are performing below the 
industry median. In concert with these changes, INPO is also adapting 
its programs to further help these outlier plants improve their 
performance.

                               CONCLUSION
    In conclusion, nuclear energy is a God-given resource; and its 
proper management is vitally important, not only today, but for future 
generations. I don't believe it's an overstatement to say that a 
foundation is being put in place for a renaissance in nuclear power.
    But this foundation requires absolutely that we remain accident-
free. This requires vigilance and commitment, not just to the higher 
standards we have today, but to continuous improvement. With vigilance 
and with commitment to safety by the industry, supported by INPO, and 
with oversight by a strong and fair regulator, I believe nuclear power 
has a bright future in helping fulfill our nation's energy needs.
    At the 1989 INPO CEO Conference, on the observance of INPO's tenth 
anniversary, then-U.S. Secretary of Energy Admiral James D. Watkins 
said, and I quote:
    In the past 10 years, INPO has done an outstanding job in helping 
the nuclear industry improve its performance. Ten years from now, on 
the twentieth anniversary of INPO, I sincerely hope that we can all 
celebrate the absence, during the 1990s, of a single significant 
incident at a nuclear reactor. If we do, we will be well on our way to 
reestablishing nuclear power as a safe and viable source of energy, not 
only for America, but for the world.
    Thanks to the nuclear industry's continued pursuit of excellence in 
plant safety and reliability, I believe we are seeing the realization 
of Admiral Watkins' vision just as he predicted.
    Thank you for the opportunity to share INPO's perspective. Subject 
to your questions, this concludes my testimony.

    Mr. Norwood. Thank you, Mr. Tollison.
    And for the committee, I would like to introduce to you Mr. 
Ward Sproat, Vice President of International Programs, Exelon 
Corporation, Kennett Square, Pennsylvania.
    Welcome, Mr. Sproat.

                STATEMENT OF EDWARD F. SPROAT III

    Mr. Sproat. Mr. Chairman, thank you. And thank you, members 
of the committee.
    For those of you who are not familiar with Exelon, we are 
the largest nuclear generator in the U.S. with approximately 20 
percent of the nuclear generating capacity under our operation 
and control. We have approximately 37,000 megawatts of electric 
generating capacity in the U.S. of diversified fuel sources, 
and we have another 8,500 megawatts under either construction 
or development.
    There have been some references made to the Pebble Bed 
Modular Reactor here today, and I would like to give you a 
brief overview of that project and explain why Exelon is 
involved with that project, and what our decisionmaking process 
is regarding that technology moving forward.
    Right now, we have committed up to $7.5 million of our own 
money to be involved with the preliminary design of the Pebble 
Bed Modular Reactor technology in South Africa. The other 
parties that are partners in that venture at this point in time 
are British Nuclear Fuels Limited, BNFL, of the UK; SCOM, which 
is the national electric utility of the Republic of South 
Africa; and the Industrial Development Corporation of South 
Africa.
    The four partners are funding the preliminary design of 
that technology which will be completed--the preliminary design 
will be completed sometime in the next 2 to 3 months. At the 
end of June, there will be produced a detailed feasibility 
study of the technology which will be the basis for the 
decision by the partners to move forward with the project or 
not.
    If we make a decision to move forward with the project, the 
plan is to build, with the appropriate approvals from the 
government of South Africa, a full-size demonstration plant in 
South Africa, probably starting in late 2002, and that 
construction period would probably take approximately 3 years 
with another year of startup testing.
    Let me make it very clear that Exelon's involvement in this 
project is not because we want to be a nuclear reactor 
supplier. We want to be a nuclear power producer using this 
technology here in the U.S. And let me just talk about why we 
are interested in this technology and why we believe it is a 
good fit in the future.
    Our company was formed of the merger of Commonwealth Edison 
in Illinois and Philadelphia Electric in Pennsylvania. Both of 
those states are at the forefront of the electric market 
deregulation in this country, and as a result we have gotten a 
pretty unique perspective on what the unregulated or the 
deregulated wholesale marketplace looks like in this country.
    And we believe that this small modular reactor technology 
has got some unique aspects to it that very well fit the unique 
dynamics of a regional wholesale power marketplace, and we 
don't believe, based on our current evaluations, that the 
currently available other nuclear alternatives can compete 
successfully in that deregulated marketplace.
    Let me just talk briefly about what some of those unique 
aspects of that deregulated marketplace are. No. 1 is the 
technology needs to be brought online quickly--a 36- to 48-
month lead time at max--because if a demand--supply/demand gap 
develops in a regional marketplace, your competitors will beat 
you to market with combined cycle gas turbine technology. And 
if you can't bring a nuclear plant on in a relatively quick 
period of time, you are going to lose your opportunity.
    Obviously, the economics have to be able to compete with 
gas-fired combined-cycle gas turbines at about 3 to 3.5 cents a 
kilowatt hour for your all-in costs. Also, adding a large 
1,100- or 1,200-megawatt electric power plant to a deregulated 
marketplace will probably throw off the supply/demand to the 
point where the marginal--while the prices in that market will 
be depressed to the marginal costs of the lowest cost producer.
    And, finally, the PBMR, we believe, is a very 
environmentally sound alternative in terms of not emitting any 
air pollutants and Greenhouse gases. So we intend to find out 
whether the PBMR can, in fact, compete and meet those criteria 
that we believe are necessary to compete in the deregulated 
marketplace in the future.
    The PBMR itself is a high-temperature gas-cooled reactor, 
has a helium gas turbine directly connected to the reactor, has 
an overall thermal efficiency of about 40 to 42 percent, and 
provides, as was mentioned to earlier by one of the members, 
provides--the fuel is a very unique design, which is in a 
ceramic form which does not--is not soluble in water, which is 
one of the concerns of a deep geological repository for spent 
fuel.
    We do expect some regulatory hurdles, though, with trying 
to get this technology licensed of a non-technical nature. 
Specifically, we don't know how long the licensing process is 
going to take. We do believe that in an ideal situation we 
should be able to get this technology licensed in about 26 to 
28 months.
    However, given the uniqueness of the technology itself, 
given the fact that the 10 CFR 50, Part 52 licensing process, 
which is the expedited licensing process, has never been tested 
before by anybody in this country, that there is going to be a 
steep learning curve for both ourselves and the Nuclear 
Regulatory Commission in utilizing that licensing process for 
the first time.
    So we do believe that that licensing process will--is 
somewhat indeterminant in terms of the amount of time it is 
going to take.
    Also, because of the small modular nature of these 
reactors, there are some unique regulatory impediments that we 
are going to have to overcome. Essentially, some of the 
requirements for financial protection, in terms of $80 million 
retroactive premium per reactor that is currently required. 
That means an 1,100-megawatt reactor would have the same 
premium as a 100-megawatt reactor for the PBMR, and we think 
that is going to be a significant problem for us. And there are 
several others as outlined in my testimony.
    Mr. Norwood. Of course, your testimony, Mr. Sproat, will be 
in the record. And we are very grateful for the time that you 
have been able to come and share with us.
    Mr. Sproat. Thank you, Mr. Chairman.
    [The prepared statement of Edward F. Sproat III follows:]
      Prepared Statement of Edward F. Sproat III, Vice President--
           International Projects, Exelon Generation Company
    Mr. Chairman and Members of the Subcommittee: I appreciate the 
invitation to appear before the Subcommittee to discuss the views of 
Exelon Generation Company regarding our interests in building new 
nuclear power plants in the United States and the potential barriers we 
currently face in our efforts to do so. My name is Edward F. Sproat and 
I am the Vice President of International Projects for Exelon Generation 
Company. Exelon Generation is a wholly owned subsidiary of Exelon 
Corporation, which was formed last year by the merger of Unicom 
Corporation of Chicago and PECO Energy Company of Philadelphia. Exelon 
Generation currently owns and operates approximately 37,000 megawatts 
of diversified electrical generation with another 8,500 megawatts under 
construction or development. We are the largest nuclear generation 
operator in the country with approximately 20% of the nation's nuclear 
generation capacity. Both Unicom and PECO Energy were pioneers in the 
commercialization of civilian nuclear power with each company building 
its first nuclear plant in the early 1960's. As a result, our new 
company has both a deep respect for and a keen understanding of nuclear 
power and we have been able to make it the foundation of our successful 
generation business.
Exelon's Involvement in the Pebble Bed Modular Reactor Project
    You may have recently heard or read about the Pebble Bed Modular 
Reactor, or PBMR, that is currently being developed in the Republic of 
South Africa. Exelon is investing approximately $7.5 million in this 
project to complete the preliminary design so that a feasibility study 
of the technology and its economics can be completed. Our other 
partners in this venture are ESKOM, the national electric utility of 
the Republic of South Africa; the Industrial Development Corporation of 
South Africa; and British Nuclear Fuels Limited (BNFL) of the United 
Kingdom. The study is due to be completed early this summer. If the 
technology is deemed ready for commercialization, and if the economics 
prove to be competitive against other forms of generation, the partners 
with the appropriate approvals of the South African government will 
proceed to build a demonstration plant in South Africa near Cape Town. 
Construction of that plant will take approximately thirty-six months, 
followed by a twelve month testing period.
    If Exelon's review of the feasibility study is favorable, we do not 
intend to wait for the completion of the demonstration plant in South 
Africa to begin the licensing process to build a number of PBMR's in 
this country. We would intend to submit a license application for early 
site permitting in 2002, followed by an application for a combined 
construction and operating license in 2003 after the detailed design is 
completed in South Africa. We believe that the licensing process, under 
the best of circumstances, could be completed in twenty-six months; but 
in reality, the time required is unknown as there are a number of 
technical and legal issues that will need to be resolved. I will come 
back to the legal issues in a moment.
Reasons for Exelon's Interest in the PBMR
    Both Illinois and Pennsylvania are at the forefront of the 
deregulation of the electric utility industry. As a result, Exelon has 
been able to learn about the market dynamics of the deregulated 
marketplace very quickly. To be able to compete in the deregulated 
wholesale power markets, which have distinctly unique regional 
characteristics, new generation sources must be able to meet several 
criteria. Specifically, new plants must be able to be permitted and 
brought on-line quickly, in thirty-six to forty-eight months at the 
most, and they must be able to compete with gas-fired combined cycle 
power plants on a total cost basis in the 3 to 3.5 cents per kilowatt-
hour range. They must be small enough so that as their capacity is 
added to the market, an oversupply situation is not created in the 
region that drives prices down below the producers' marginal costs. 
They must also meet the environmental constraints of the region. We 
don't believe that the currently available designs of light water 
reactor nuclear power plants can meet all of these criteria. We believe 
that the PBMR is the only reactor currently under development that may 
be able to meet the needs of this deregulated marketplace in the next 
five years. We intend to find out if it can.
Description of the PBMR
    The PBMR is a small nuclear power plant that would produce 
approximately 125 megawatts of electricity per module with four of 
these modules being able to fit on a football field. Each module has a 
high temperature gas-cooled reactor that heats helium under pressure to 
approximately 900 degrees Celsius, which turns a gas turbine connected 
to a generator. The helium then returns to the reactor. This direct 
cycle allows higher efficiencies than existing nuclear plants and also 
significantly reduces the amount of water required for plant cooling 
over other power plants. The coupling of a gas turbine directly to the 
helium reactor has only recently been made possible through advances in 
gas turbine technology
    The reactor core is comprised of about three hundred thousand fuel 
spheres that are approximately the size of billiard balls. Each sphere 
contain approximately 14,000 coated particles of 9% enriched Uranium 
235, each 0.5 millimeters in diameter. The coating on each particle is 
designed to contain the radioactive gases produced by nuclear fission 
and can withstand extremely high temperatures. As a result of the 
reactor and fuel designs, the fuel cannot melt under any conditions, a 
significant safety improvement over existing reactor technology. The 
reactor and fuel designs have been demonstrated through years of 
testing in Germany where the Pebble Bed Reactor was invented in the 
early 1970's. The South Africans are utilizing the German fuel and 
reactor technology for the PBMR and would be the suppliers of the fuel 
to be used in our reactors. The ceramic nature of this fuel also make 
it insoluble in water which is significant in that it can't leach into 
ground water when stored underground in a spent fuel repository.
Regulatory Hurdles
    As I mentioned before, the expected length of the process that we 
will face to license the first set of PBMR's is difficult to determine. 
While the technical issues will be complex, there are legal hurdles 
that appear to be more difficult to resolve. Specifically, there are a 
number of regulations that were promulgated when it was anticipated 
that only regulated electric utilities would build nuclear plants. 
These regulations never foresaw the dawn of a deregulated power 
generation market and are now obsolete. If Exelon proceeds with 
building PBMR's, they will be merchant nuclear power plants that will 
not be in a regulated utility rate structure. The financial risk of the 
plant will rest on the shareholder, not the ratepayer.
    The financial burden imposed on small, modular plants by these 
inappropriate regulations clearly has the potential to make the 
economics untenable. Some of the key regulations which need to be 
addressed include the financial protection requirements of 10 CFR Part 
140, the decommissioning funding requirements of 10 CFR Part 50.75, the 
antitrust review requirements of 10CFR Part 50.33a, the annual fees on 
a per reactor basis in 10 CFR Part 171, and the large emergency 
planning zone requirements in 10 CFR Part 50.54(m).
    In addition to the above regulations, the licensing process which 
we would follow under 10 CFR Part 52 to obtain a combined construction 
and operating license for these plants has never been utilized. As a 
result, we expect that there will be a steep learning curve for both 
the U.S. Nuclear Regulatory Commission staff and ourselves on how to 
execute this process with resultant high costs and delays. We will also 
need to work with the NRC staff to develop the technical licensing 
framework for the PBMR as the existing regulations are written for 
light water reactors. Regulations will need to be developed for gas 
reactors, also at additional costs and potential delay.
Potential Role for Public Funding
    Exelon believes strongly that the development of the design and the 
cost to commercialize and build the PBMR should be borne by the PBMR 
partners. It is anticipated that the partners will invest upwards of 
$600 million of their own money to make the PBMR commercially viable 
with Exelon investing a significant additional amount to license and 
build the first PBMR's. There are, however, a number of first of a kind 
costs that Exelon will bear as the first licensee for this new 
technology that will flow directly to government agencies such as the 
NRC in the form of licensing fees and the national laboratories as 
consultants to the NRC. As stated earlier, we expect that the costs of 
licensing this technology will be higher than normal because of the 
unproven nature of the 10CFR Part 52 licensing process and the need to 
create a gas reactor licensing framework. The technical expertise 
needed to review the PBMR application does not currently exist either 
in the NRC or in the national labs and will need to be developed. We 
believe it is appropriate for some level of government funding to be 
provided to fund the work of government agencies in these areas.
Summary
    In conclusion, as the shortage of electricity supplies in several 
areas of the country looms large with the approach of summer, we must 
find ways to cut through the morass of archaic legal and procedural 
impediments to building new environmentally benign sources of 
electricity. This is an issue of urgent national priority.
    Nuclear power has earned the right to be counted among this 
country's most viable options as a future power source. It has achieved 
an outstanding safety record and serves as a stable and abundant 
domestic source of electricity which emits no air pollutants or 
greenhouse gases. If we're able to make the PBMR commercially viable 
and cost competitive, we will have at least one potential solution to 
our future energy needs.

    Mr. Norwood. Is it Longenecker?
    Mr. Longenecker. It is Longenecker.
    Mr. Norwood. I would like to introduce John R. Longenecker 
to the committee, Longenecker & Associates, Management 
Consultants from Del Mar, California. Thank you for taking your 
time to be here, and please take 5 minutes.

                STATEMENT OF JOHN R. LONGENECKER

    Mr. Longenecker. Mr. Chairman, thank you.
    I want to thank you for the opportunity to address the 
subcommittee on the issues involved with the----
    Mr. Norwood. Pull the mike just a little closer.
    Mr. Longenecker. [continuing] on the issues involved with 
the U.S. nuclear fuel cycle. Living in California, I understand 
very well the importance of secure energy supplies, and the 
reliable, economic supply of nuclear fuel is certainly 
essential to the future energy security of the United States.
    Today, however, that supply is endangered. U.S. nuclear 
fuel cycle companies are being challenged by a range of factors 
that include excess capacity because there were fewer reactors 
built than the fuel cycle companies planned originally. Also, 
the sale of Russian highly enriched uranium, U.S. HEU blending, 
and sale of inventories including those of USECs challenge 
these industries.
    With respect to uranium enrichment, Mr. Chairman, a very 
severe situation exists in the United States, where USEC is 
operating uneconomic, 50-year old plants, has no proven 
technology to replace them, and relies on Russian HEU blending 
and resale to meet more than half of all of its commercial 
customer needs.
    Constructing new, cost-competitive, enrichment capacity in 
the United States as soon as possible is critical to the future 
of all parts of the U.S. nuclear fuel cycle and must be a top 
priority. There is a very strong linkage between a healthy 
uranium enrichment business and the health of the uranium 
conversion and fuel fabrication industries in this country.
    Now, the Russian highly enriched uranium agreement is 
certainly a key market factor. We all realize that maintaining 
political and financial stability for the Russian HEU agreement 
is essential for the fulfillment of our international policy 
objectives.
    However, the U.S. Government should carefully consider 
several aspects of that agreement, including the assignment of 
the role of the executive agent of the Federal Government on 
behalf of the--to the United States Enrichment Corporation as 
its sole agent. Second, how the billion dollar trading profits 
that have already accrued and will continue to accrue from that 
agreement should be allocated. And, third, whether it is in the 
best interest of the United States to allow USEC to broker 
additional supplies of enriched uranium from Russian commercial 
enrichment plants.
    Now, it is my firm belief that government subsidies for 
non-competitive companies and trade sanctions against foreign 
competitors will not build a sustainable basis for the 
continued use of nuclear power in the United States. It is 
particularly alarming that the anti-dumping action brought by 
USEC against its European competitors who have deployed low-
cost technology over the past few decades could increase fuel 
cost to U.S. ratepayers by $650 million to $1.2 billion per 
year.
    This suit has also created uncertainty about the assurance 
of supply under existing import contracts to many U.S. 
utilities.
    Mr. Chairman, I strongly believe that the United States 
must define a comprehensive strategy to maintain viable, 
competitive, nuclear fuel supplies for this country for the 
decades ahead. The roles in implementing a long-term strategy 
to keep the U.S. nuclear industry competitive must be clear and 
must include substantial participation by both the government 
and private sector with the private sector taking the lead. 
Once the private sector has proposed its solution the 
government can then determine whether and how to support it.
    Now, thus far, Mr. Chairman, I have spoken only to the 
front end of the fuel cycle. As part of its overall nuclear 
fuel cycle strategy, I believe the government must place top 
priority on assuring that a permanent disposal mechanism for 
used fuel is implemented as soon as possible. Later this year, 
the Department of Energy will issue its site recommendation for 
the Yucca Mountain project, and this recommendation must be 
acted on promptly and a path forward defined and funded as soon 
as possible.
    Mr. Chairman, in summary, if the government and private 
sector evaluate the nuclear fuel supply situation in the United 
States and decide that reliance on non-U.S. sources is 
acceptable due to the high costs and risks involved in 
developing or maintaining our own domestic industry, that is 
okay.
    However, an immediate public policy debate is warranted on 
how best to assure that that doesn't happen by sheer neglect. 
We need a competitively priced nuclear fuel supply source in 
the United States or abroad to provide reliable low-cost 
electricity to our nations.
    I thank you, and I would be pleased to respond to your 
questions.
    [The prepared statement of John R. Longenecker follows:]
 Prepared Statement of John R. Longenecker, Longenecker & Associates, 
                      Inc., Management Consultants
    Mr. Chairman, thank you for this opportunity to address the 
Subcommittee on Energy and Air Quality on the issues involved with the 
US nuclear fuel cycle. I have been involved with nuclear energy and 
nuclear fuel cycle issues for more than 28 years, and previously 
managed DOE's uranium enrichment business as Deputy Assistant Secretary 
of DOE, and later as the first Transition Manager of USEC.
    Today, parts of the nation, including my home state of California, 
are experiencing electricity shortages, with rolling blackouts that 
disrupt business and productivity in some of the nation's key high-tech 
industrial regions. Nuclear power currently represents about 20% of 
electrical power consumed in the US, and any uncertainty regarding the 
reliable and economic supply of fuel to US nuclear power plants could 
pose a serious threat to our nation.
    My key conclusions regarding the US nuclear fuel cycle industry are 
as follows:

1. A reliable, economic supply of nuclear fuel is essential to the 
        future energy security of the United States. That supply in 
        endangered.
2. US nuclear fuel cycle companies are being challenged by a range of 
        factors including the sale of Russian HEU, US HEU, and USEC's 
        inventories of natural and enriched uranium.
3. A very severe situation exists in the uranium enrichment business, 
        where the US is operating 50-year-old plants, has no proven 
        technology to replace them, and relies on Russian HEU blending 
        to meet more than half of all customer deliveries. Constructing 
        new, cost competitive enrichment capacity in the United States 
        as soon as possible is critical to the future of all parts of 
        the US nuclear fuel cycle industry.
4. Maintaining political and financial stability for the Russian HEU 
        Agreement is essential for the fulfillment of international 
        policy objectives.
      However, the US government should carefully consider (a) the 
        assignment of the role of Executive Agent on behalf of the US 
        government, (b) how the billion dollar trading profits from 
        brokering Russian enriched uranium should be allocated, and (c) 
        whether it is in the best interests of the United States to 
        allow USEC to broker additional supplies of enriched uranium 
        from Russian commercial enrichment plants.
5. Government subsidies for non-competitive companies and trade 
        sanctions against foreign competitors do not build a 
        sustainable basis for the continued use of nuclear power in the 
        United States. It is particularly alarming that the antidumping 
        action brought by USEC against its European competitors could 
        increase fuel costs to US ratepayers by $650 million to $1.2 
        billion per year, and has created uncertainty about assurance 
        of supply under existing import contracts.
6. The United States must define a comprehensive strategy to maintain 
        viable, competitive nuclear fuel supplies for this country for 
        the decades ahead. The roles in implementing a long-term 
        strategy to keep the US nuclear industry competitive must be 
        clear, and must include substantial participation by both the 
        government and private sector, with the private sector taking 
        the lead.

                               BACKGROUND
    The nuclear fuel cycle market is restructuring and consolidating. 
This restructuring has had some painful effects, exacerbated by the 
sale of Russian Highly Enriched Uranium, US HEU, and USEC's inventories 
of natural and enriched uranium.
    Maintaining political and financial stability for the Russian HEU 
Agreement is essential for the fulfillment of international policy 
objectives. The US government's goal must be to assure that the 
Agreement's supply contract stabilizes delivery arrangements for the 
next 15 years.
    The viability of the Agreement must not be jeopardized if newly 
negotiated pricing terms or conditions in the contract fail to assure 
the continuity of deliveries.
    However, the Russian HEU contract is only one part of the equation. 
The United States must have an overarching objective to define a 
comprehensive strategy to maintain viable, competitive nuclear fuel 
supplies for this country for the decades ahead. Short term fixes and 
band-aid approaches must be avoided.
    Today's highly competitive market is no surprise to anyone who has 
followed the nuclear fuel markets over the past 20 years. We have known 
for more than a decade that due to the construction of fewer nuclear 
power plants than originally projected and HEU blending, nuclear fuel 
supply exceeds demand in every sector. We have also known for more than 
25 years that US gaseous diffusion uranium enrichment technology would 
become economically obsolete and would need to be replaced. However, 
today the US lacks any plan to address the key nuclear fuel cycle 
issues both in the near term and in the long term.
    In the context of assuring reasonable nuclear fuel supply at 
competitive prices, I believe that the US must assure that it is not 
totally reliant on non-US sources for its fuel. However, in order to 
survive, US fuel supply companies themselves must be competitive. 
Government subsidies for non-competitive companies and trade sanctions 
against foreign competitors do not build a sustainable basis for the 
continued use of nuclear power in the United States.
    For example, the antidumping action brought by USEC against its 
European competitors in late 2000, has created significant market 
uncertainties, and could increase fuel costs to US ratepayers by $650 
million to $1.2 billion per year.
    In the final analysis, US citizens end up paying the bill for such 
actions, either though higher taxes or higher electricity rates. The US 
nuclear fuel businesses must be able to compete head-to-head in the 
world nuclear fuel market.
    To develop a comprehensive nuclear fuel cycle strategy will require 
collaboration among the Congress, the Administration, industry, labor, 
state governments, and other constituencies. The ultimate goal must be 
to have a competitive, stable, viable nuclear fuel supply for this 
country. Reliability of supply and price are crucial elements in this 
plan. More specifically, we must assure that nuclear fuel prices do not 
suffer a shock similar to that experienced with natural gas prices 
recently. Fuel prices must be stable and predictable if the nation is 
to rely on nuclear power as part of its supply mix for the future.
    The roles in implementing a long-term strategy to keep the US 
nuclear industry competitive must be clear, and must include 
substantial participation by both the government and private sector. 
The nuclear power industry must not and will not rely on the government 
to implement a solution. The private sector should take the lead. 
However, the government also has a key role to play. This role should 
be defined after the private sector plan is defined.
    A key policy debate revolves around the Russian HEU Agreement. At 
present the Russian HEU contract is under re-negotiation and will 
expire on December 31, 2001. The contract has already generated 
substantial profits for the exclusive US Executive Agent, USEC. Under 
USEC's proposed ``market based'' revision to the supply contract with 
Tenex, the Russian Executive Agent, trading profits are estimated to be 
$1 billion or more over the next 10 years. USEC has also sought 
Administration approval to import and resell an additional one million 
SWU per year from Russian commercial enrichment facilities.
    Since this is a government-to-government agreement, and the 
Executive Agent is selected by the US government, there needs to be an 
open dialogue regarding whether and how profits generated by this 
government created franchise are allocated to promote the long-term 
viability of the nuclear fuel cycle industry.
    More specifically, should this billion-dollar benefit accrue solely 
to USEC, for use at its discretion, or should the US government have 
some say in how the trading profits from this government-to-government 
agreement are utilized?
    As part of this dialogue, consideration should be given to 
establishing a second Executive Agent that would purchase a portion of 
the low enriched uranium derived from HEU now being blended in Russia. 
Such action could increase the assurance of continuity of the Russian 
HEU Agreement, allow USEC to take advantage of its low marginal costs 
by increasing production at Paducah and thereby enhance its near term 
profits and viability by lowering its average GDP production costs.

                           URANIUM ENRICHMENT
    Today, USEC is the only North American supplier of uranium 
enrichment services, and the long-term future of this business is 
highly uncertain. USEC is the high cost supplier in the market, and 
enrichment operations at the GDPs in the future will operate at a loss. 
USEC utilized only about 29% of its nameplate GDP capacity in 2000 (see 
Table 1), and over the next year will supply a majority of its 
customers needs from Russian and US HEU blending. This situation led to 
the decision to close the Portsmouth GDP in 2001, and at some point in 
the future will lead to the closure of the Paducah GDP. Trading profits 
from the Russian HEU agreement and sale of natural and enriched uranium 
inventories provide essentially all of USEC's cash ($150-200 million 
per year) that is used to pay for dividends, capital upgrades, R&D, and 
sales, general and administrative costs.
    USEC is finding it more profitable to operate as a trader of 
blended HEU rather than as a primary producer. This approach appears to 
lead inevitably to USEC exiting the market as a primary producer. As a 
result, constructing replacement enrichment capacity in the US should 
be the key focus for the next few years.

                      Table 1--Worldwide capacity, sales and production of separative work
----------------------------------------------------------------------------------------------------------------
                                                      Nominal
                                                    Production    Estimated 2000    Percent of       Estimated
                                                  Capacity (MSWU/  Sales (MSWU/     Total 2000       Capacity
                                                       year)           year)           Sales        Utilization
----------------------------------------------------------------------------------------------------------------
USEC (2 GDPs)...................................            18.5            11.0             32%            *29%
COGEMA..........................................            10.8             7.1             20%             66%
TENEX...........................................            14.0             8.5             24%             61%
URENCO..........................................             4.8             4.8             14%            100%
Other...........................................             3.4             3.4             10%            100%
                                                 ---------------------------------------------------------------
Total...........................................            51.5            34.8            100%            56%
----------------------------------------------------------------------------------------------------------------
* 5.5 million SWU supplied by Russian HEU

    A reality of the uranium enrichment industry is that prices have 
been declining since 1985. This decline was driven by the deployment 
and gradual improvement of centrifuge technology, primarily in Europe. 
The continuing decrease in prices should have been no surprise to 
anyone, since the Department of Energy (see Figure 1) Office of Uranium 
Enrichment, the predecessor to USEC, predicted this trend in 1984.
    DOE committed to Congress and to its customers in 1985 to deploy 
AVLIS technology to meet this challenge. As shown in Figure 1, DOE was 
reasonably accurate in its price projections. Also as predicted by DOE, 
Urenco added new enrichment capacity to the market with production 
costs well below those of the US gaseous diffusion plants.
    However, after an investment of about $1.5 billion, DOE did not 
deploy AVLIS, instead transferring all rights to the technology to 
USEC. In 1994, USEC announced plans to deploy AVLIS, and proceeded to 
price aggressively in the market, only to cancel those plans in 1999 
when it faced financial problems. USEC's credit rating was downgraded 
to below investment grade (junk bond status) within 18 months of 
privatization.
    USEC's continued reliance on GDP technology in 2001 is not driven 
by the competitiveness of GDP technology, but rather by its lack of a 
proven technology to replace the GDPs. The high costs of GDP operation 
have been recognized for years. In fact, the US Atomic Energy 
Commission announced in the mid-1970s that its three GDPs were soon to 
be economically obsolete. Thus, 25 years later we should not be 
surprised that the Portsmouth GDP is closing, and that the closure and 
replacement of the Paducah GDP is a reality that must be planned for.
    What is surprising, and in fact astounding to many in the world, is 
that despite the expenditure of more than $7 billion dollars of US 
government funds on centrifuge and AVLIS technology development and 
deployment over the past 40 years, the United States today is still 
operating economically obsolete 50-year old gaseous diffusion plants. 
In 1994, USEC announced its plans to have an AVLIS plant operating by 
2002. If USEC had succeeded in this plan, it would have very different 
future prospects than it has today.
    The solution to the future competitiveness of the US uranium 
enrichment industry was and still is the deployment of new, cost 
competitive enrichment capacity. Low cost technologies have been 
developed and deployed by non-US enrichment companies over the past 
three decades, while the US has failed to follow through on past 
commitments to deploy new low cost enrichment technologies. It is 
ironic that the same companies who followed through with the investment 
in advanced technologies and new enrichment capacity over the past 
decades, now face trade sanctions in the US. In addition, US utilities 
face supply uncertainties due to these possible sanctions.
    However, even with proven technologies, there are risks inherent in 
building any new enrichment capacity in the US. These include market 
risks, regulatory risks, and actions by governments such as trade 
restrictions. Assuming that these risks can be managed, Urenco and 
Russian centrifuge technologies are the low cost proven production 
options, and absent trade restrictions, are poised to dominate the 
market for the foreseeable future. The question is whether the US will 
cede this business to foreign suppliers.
    The US DOE has proposed a revival of its centrifuge technology 
program, but after being out of the centrifuge R&D arena for the last 
15 years, the US has no proven advanced gas centrifuge (AGC) design, 
limited design infrastructure, and no production infrastructure. 
Although the US has a strong history in AGC development, the time, 
costs and risks involved with developing a competitive design, proving 
it, and deploying may be much less financially attractive than simply 
relying on proven designs and equipment.
    One path forward could be a private sector initiative to construct 
an enrichment plant using proven technology, while the US government 
pursues advanced technologies for the long term, either centrifuge or 
laser, in an attempt to define an option that is substantially cheaper 
than today's centrifuge plants. However, if the government decides to 
pursue such an option, it must be soundly based to assure that the end 
result will be a substantial economic advantage. If there is not a high 
probability of such an advantage, government funds should not be spent.
    The workers in the uranium enrichment industry have done a great 
job keeping the US competitive for decades. However, with 50 year-old 
GDP technology, they can only do so much. Furthermore, workers know 
that there is no long-term future in working at economically obsolete 
facilities. They need to know the path forward, or they will soon be 
forced to move to other industries with the obvious loss of technical 
expertise and skills.
    Although it sometimes gets masked by rhetoric, the uranium 
enrichment business is all about producing SWUs cheaper than you sell 
them. If the US keeps this focus, it will have an economically viable 
production base at the end of the decade.

                                URANIUM
    Natural uranium is a critical element of the nuclear fuel cycle. 
For the past several years, world production of uranium has been 
substantially less than world demand.
    The difference between production and consumption was made up from 
HEU blending, enrichment of depleted uranium tails and inventory sales. 
The largest single inventory seller was USEC, who sold about $100 
million worth of inventories that it obtained from DOE prior to 
privatization, in its fiscal year 2000 to raise cash for its 
operations.
    The countries with rich ore deposits today dominate the world 
uranium market. Providing a measure of supply security to US utilities, 
Canada, with its vast low cost reserves, is the world's largest 
producer of uranium. As shown in Table 2, Australia was second, and 
former Soviet Union countries were the third largest producer of 
uranium in 1999.
    US production was a small portion of world requirements, a 
situation that is unlikely to change substantially even as prices 
recover, due to relatively low uranium ore grades and high mining 
costs.
    A summary of 1999 uranium production follows:

                    Table 2--1999 Uranium Production
------------------------------------------------------------------------
                                                       Production %  Of
                                                       World Production
------------------------------------------------------------------------
Canada..............................................                 27
Australia...........................................                 19
Former Soviet Union.................................                 18
Central Africa......................................                 10
Southern Africa.....................................                 12
United States.......................................                  6
Other...............................................                  8
------------------------------------------------------------------------

    World uranium prices in the spot market hit an historic low in real 
terms in 2000, at about $7/lb before recovering to the current level of 
about $8.20/lb. Prices have been strongly impacted by Russian HEU 
blending and inventory sales. At present, about one third of world 
uranium requirements are met from inventory sales and HEU blending.
    Although most uranium is delivered to utilities under long-term 
contracts at prices higher than spot market prices, inventory sales 
have lowered even long-term prices.
    Shown below in Table 3 are the spot prices for uranium over the 
past decade. At present, spot uranium prices in the US market are about 
$8.20/lb, with long-term prices at about $9.75/lb. Outside the US 
market, which restricts the importation of Russian uranium, spot prices 
are substantially less at about $6.75/lb.
    Overall, the uranium market is expected to be challenging over the 
next five years as USEC and other inventory sales and Russian HEU 
blending continues. As these inventories are depleted, primary producer 
sales will increase and prices should recover.

     Table 3--Spot U3O8 Price Trends 1990-2000--In Restricted Market
------------------------------------------------------------------------
                                                        Price/lb U3O8 US
                                                                $
------------------------------------------------------------------------
1990..................................................          9.73
1991..................................................          8.73
1992..................................................          8.55
1993..................................................         10.10
1994..................................................          9.37
1995..................................................         11.36
1996..................................................         15.50
1997..................................................         12.09
1998..................................................         10.42
1999..................................................         10.20
2000..................................................          8.37
------------------------------------------------------------------------

                               CONVERSION
    The conversion of uranium concentrates into uranium hexafluoride 
(UF6) for enrichment by GDP or centrifuge is commonly called 
conversion. Although conversion represents a small portion of total 
nuclear fuel cycle costs, it is an essential component. Worldwide 
consumption in 2000 was about 52 M kg/year, as compared to installed 
production of 63.2 M kg/year.
    The principal suppliers of conversion services now include 
ConverDyn in the US, Cameco in Canada, BNFL in the UK, Cogema in 
France, and Minatom in Russia. Over the past decade, the worldwide 
conversion capacity decreased with the closing of the Sequoyah Fuels 
facility in Oklahoma, reducing the number of conversion suppliers in 
North America from three to two. In addition, BNFL announced recently 
that it would withdraw from the business in 2006, with Cameco assuming 
ownership of its operations. Capacities of these plants are shown 
below.

             Table 5--Worldwide Uranium Conversion Capacity
------------------------------------------------------------------------
                                                                Plant
                                                               Capacity
                                                               MTU/year
------------------------------------------------------------------------
United States......................  ConverDyn.............       14,000
Canada.............................  Cameco................       12,500
China..............................  CNNC..................        1,000
France.............................  Comurhex..............       14,350
Japan..............................  PNC...................           50
South Africa.......................  AEC...................        1,000
United Kingdom.....................  British Nuclear Fuels,        6,000
                                      Ltd..
Russia.............................  Minatom...............       14,000
India..............................  DAE...................          295
Total..............................  ......................     *63,195
------------------------------------------------------------------------
*(consumption 52,000)

    Due to excess supplies and aggressive selling of 
inventories by entities including USEC, conversion prices 
decreased to about $5.75/kg in 1996, and to about $2.50/kg in 
2000. However, recently conversion prices have recovered, and 
now stand at about $4/kg for spot sales and $4.50/kg for long-
term contracts.
    In the future, as inventories are depleted, the conversion 
industry should stabilize. However, even though US customers 
can take some comfort from having two North American suppliers, 
further industry consolidation is possible.

                         Disposal of Used Fuel

    As part of its overall nuclear fuel cycle strategy, the 
government must place top priority on assuring that a permanent 
disposal mechanism for used fuel is implemented as soon as 
possible. Later this year, DOE will issue its site 
recommendation for the Yucca Mountain Project. This 
recommendation must be acted on promptly, and a path forward 
defined and funded as quickly as possible.
    Without some certainty on the disposal mechanism for used 
fuel, no additional nuclear power plants will be built in the 
United States.

                                Summary

    In summary, now is the time for action to address the 
critical issues in the supply of nuclear fuel cycle to US power 
plants in a manner that is technically and financially sound. 
Due to a range of factors, the future of US nuclear fuel supply 
is in doubt. The situation is somewhat more secure for uranium 
and conversion services due to the existence of competitive 
supply sources in Canada, but the long-term prospects of USEC, 
the only North American supplier of enrichment services, are 
highly uncertain.
    The current US situation results from market factors, 
resource limitations, and in some instances from management 
misjudgments. However, the reasons why we arrived at this 
dysfunctional state are not as important as where we go from 
here to address the problems.
    If the government and private sector evaluate the nuclear 
fuel supply situation and decide that reliance on non-US 
sources is acceptable due to the high costs and risks involved 
in developing or maintaining a competitive US industry, that's 
okay.
    However, an immediate public policy debate is warranted on 
how best to assure the flow of competitively priced nuclear 
fuel to provide reliable low cost electricity to our nation.
    Thank you for your attention.
    [GRAPHIC] [TIFF OMITTED] T1505.030
    
    Mr. Norwood. Thank you, sir, for your time and generosity.
    I would like to now introduce to the committee Ms. Anna 
Aurilio, Legislative Director for U.S. PIRG in Washington, DC.
    Ms. Aurilio?

                    STATEMENT OF ANNA AURILIO

    Ms. Aurilio. Thank you, Mr. Chairman. Thanks for the 
opportunity to speak this afternoon.
    My name is Anna Aurilio. I am the Legislative Director for 
the state Public Interest Research Groups. We are non-profit, 
non-partisan, consumer and environmental advocacy groups active 
across the country.
    We have a long history of working on--working to shift the 
country away from polluting energy sources such as fossil and 
nuclear and toward energy efficiency and clean renewable energy 
sources. Today I am going to focus primarily on our concerns 
with nuclear power.
    We believe that nuclear power is unsafe, uneconomic, 
generates waste for which there are no sound solutions, and 
should not be promoted as a future energy source. First of all, 
nuclear power is unsafe. All aspects of the nuclear fuel cycle 
pose tremendous risk to human beings and the environment.
    For example, uranium mining has caused illness and death in 
workers. There is a new type of uranium mining now being used 
in some areas called in situ leaching. I can't think of an 
easier way to contaminate precious and scarce groundwater 
supplies out in the west.
    Nuclear fuel from reactors after it comes out of a reactor 
is perhaps the most lethal material that we have ever generated 
on this earth. Just a few seconds of exposure can cause death. 
Commercial nuclear power in this country has generated by 
radioactivity 95 percent of the waste that future generations 
will have to deal with.
    Now, nuclear power plants are very complex. And, thus, the 
threat of an accident is certainly something that people should 
be concerned about. Obviously, two of the most tragic examples 
were the accident at the Chernobyl nuclear reactor and at Three 
Mile Island here in this country.
    We are very concerned about the safety of the reactors 
operating in this country, and we are astonished that the 
industry and the Nuclear Regulatory Commission, instead of 
taking another look at aging issues because reactors are 
deteriorating with age more quickly than expected, particularly 
reactor pressure vessels and steam generator tubes are 
deteriorating more quickly than expected--and I have talked to 
some of the scientists that did some of the initial 
calculations.
    We are astonished that the agency and the industry are 
pushing to relax safety standards instead of trying to figure 
out how best to protect the public.
    Let me give you an example of something that happened in--
last year as an example of why the Nuclear Regulatory 
Commission has standards and requirements that are just too 
lax. In the early 1990's, the Commission proposed standards for 
steam generator tubes. They were never implemented. Instead, 
the industry has voluntary self-regulation for the most part.
    In February 2000, the Indian Point Nuclear Generating 
Station located just 24 miles from New York City had an 
accident where a steam generator tube blew and released 
radioactive steam. Now, the company was supposed to have 
replaced these tubes, which is quite expensive, in 1993 but 
never did thanks to NRC's lax oversight. Again, a reactor this 
close to such a large population on the Hudson River poses a 
severe threat. Regulations should be increased and enforced, 
not loosened.
    The second issue I would like to cover is that even though 
capacity factors may be going up, nuclear power is still 
unreliable. I was very amused to see on the NEI website a press 
release saying that increased capacity could fuel California's 
energy shortage, and yet, on February 3 of this year, the San 
Onofre Nuclear Generating System had a breaker fire that has 
caused it to be down for the past several weeks.
    In fact, it is loss of this generation that is in part, 
because it is unexpected, due to the rolling--causing the 
rolling blackouts that California has currently been 
experiencing.
    Nuclear power is uneconomic. I was pleased to see that the 
Energy Information Administration has got some more realistic 
examples of nuclear generating costs. It is incredible to us 
that the industry seems to shamelessly revise history and 
pretend that it has transformed itself into a cost-effective 
energy source, and yet it continues to ask for taxpayer and 
ratepayer handouts.
    Just a couple of things to raise the uneconomic nature of 
nuclear power. In 1986, DOE looked at initial estimates of 
costs for 75 reactors. It was $45 billion. The final cost to 
construct those reactors was $145 billion.
    I guess I will conclude right now, because I am sure you 
will have questions.
    [The prepared statement of Anna Aurilio follows:]
 Prepared Statement of Anna Aurilio, Legislative Director, U.S. Public 
                        Interest Research Group
    Good afternoon, my name is Anna Aurilio and I'm the Legislative 
Director of the U.S. Public Interest Research Group, or U.S. PIRG. U.S. 
PIRG is the national office for the State PIRGs, which are 
environmental, good government and consumer advocacy groups active 
around the country. Thank you for the opportunity to speak today.
    The state PIRGs have a long history of working for a clean 
affordable energy future. Our goal is shift from polluting and 
dangerous sources of energy such as nuclear and fossil energy to 
increased energy efficiency and clean renewable energy sources.
    Today I will be addressing nuclear energy issues. Nuclear power is 
unsafe, unreliable, uneconomic and generates long-lived radioactive 
wastes for which there is no safe solution. It should be phased out as 
soon as possible and should not be encouraged as a future energy 
source.
    Since the late 1970's, the PIRGs have worked to protect the public 
from unsafe, expensive nuclear reactors. PIRGs successfully opposed the 
construction of several nuclear power plants because of cost, safety 
and nuclear waste concerns. For example, in 1982, litigation by 
MASSPIRG helped cancel the proposed Pilgrim 2 nuclear power plant. In 
1983, NJPIRG helped cancel the proposed Hope Creek nuclear power plant. 
CoPIRG worked for the creation of the Office of Consumer Counsel (OCC) 
in 1984. The OCC was key in protecting ratepayers from being burdened 
with ``stranded costs'' in the St. Vrain nuclear power plant case.
    During reauthorization of the Price-Anderson Act, the PIRGs 
successfully advocated for lower taxpayer liability in case of a 
nuclear accident. From 1993 through 1995, PIRG helped shift more than 
$500 million in nuclear and fossil R &D spending to efficiency and 
renewable programs. During that time, we helped convince Congress to 
eliminate funding for two extremely expensive advanced reactor 
programs, the gas-cooled reactor and the Advanced Liquid Metal Reactor, 
saving taxpayers at least $5.6 billion.

                        NUCLEAR POWER IS UNSAFE.
    Nuclear power poses an unacceptable threat to humans and the 
environment. All aspects of the nuclear fuel cycle pose a risk to 
humans and the environment. Uranium mining and enrichment has caused 
sickness and death in workers and has generated tons of mining and 
enrichment wastes, which continue to threaten nearby communities. 
Current uranium mining practices include ``in-situ'' leaching, which 
pollutes precious aquifers in the arid West. Irradiated fuel from 
nuclear reactors is perhaps the most toxic material generated by 
humans. Unshielded, it delivers a lethal dose of radiation within 
seconds. According to the Department of Energy, 95% of the radioactive 
waste (by radioactivity) in this country has been generated by 
commercial nuclear reactors.
    Nuclear power plants are very complex and contain enormous amounts 
of potential energy in the fuel at the core of the reactor. The most 
tragic example of the dangers posed by this technology is the 1986 
accident at the Chernobyl reactor in the Ukraine. The explosion and 
core meltdown at Chernobyl released radiation that generated a plume 
encompassing the entire Northern Hemisphere 1. Here in the 
U.S., in addition to the partial core meltdown at Three Mile Island in 
1979 which forced the evacuation of nearly one hundred fifty thousand 
people, there have been four other nuclear accidents in the U.S. 
involving at least partial core meltdown.2
---------------------------------------------------------------------------
    \1\ OECD Nuclear Energy Agency report ``Chernobyl Ten Years On, 
Radiological and Health Impact'', November, 1995.
    \2\ Public Citizen website http://www.citizen.org/Press/pr-
cmep84.htm
---------------------------------------------------------------------------
    The potential consequences of a serious accident are staggering. A 
1982 study by the Sandia National Laboratories found that a serious 
accident at a U.S. nuclear reactor could cause hundreds to thousands of 
deaths in the near term.3 In 1985, in response to a question 
posed by Representative Markey, an NRC commissioner responded that 
there was a 45% chance of a severe nuclear accident in the following 
twenty years.
---------------------------------------------------------------------------
    \3\ Union of Concerned Scientists, Nuclear Plant Safety: Will the 
Luck Run Out? December 15, 1998
---------------------------------------------------------------------------
    We are therefore very concerned about the safety of nuclear 
reactors currently operating in this country. We are astonished that 
the industry and the regulatory agency have been lobbying for a 
relaxation of safety standards and oversight and limiting the public's 
access to these processes. We are concerned that utility deregulation 
and new ownership of reactors may increase risks of accidents because 
of increased pressure to run the plants closer to the margin. This risk 
is heightened by the fact that the 103 operating reactors around the 
country are deteriorating with age more quickly than expected. Even 
Vice President Cheney acknowledged the aging problem on the television 
show ``Hardball'' (March 21): ``[T]oday nuclear power--produces 20 
percent of our electricity, but that's going to go down over time--
because some of these plants are wearing out.''
 current regulation is inadequate to protect public health and safety.
    For example, one aging-related problem is reactor embrittlement. 
Cracks in the reactor vessel caused by constant neutron bombardment 
could lead to a meltdown. When problems were found, the Nuclear 
Regulatory Commission (NRC) simply changed the safety margins and 
allowed the utilities to recalculate their compliance. Steam generators 
are also susceptible to premature degradation. The failure of as few as 
ten tubes can lead to a reactor meltdown, yet the NRC has inadequate 
steam generator tube standards. For example, the Indian Point 2 nuclear 
power plant is located 24 miles north of New York City, along the 
Hudson River. It had been scheduled for steam generator tube 
replacement in 1993, yet this never happened thanks to increasingly lax 
NRC requirements. On February 2, 2000, a tube ruptured, releasing 
radioactive steam.
    There is a consistent pattern and history of lax NRC enforcement 
and oversight ranging from fire prevention to worker fatigue. The 
agency is focused on increasing the industry's profitability, not 
protecting humans and the environment. In fact a recent letter to this 
subcommittee from the NRC's Chairman Meserve reveals an agenda focused 
on, among other things: wresting control of certain radioactive 
materials regulation from the Environmental Protection Agency (EPA); 
limiting the scope of NEPA (National Environmental Policy Act) review 
for new power plants; and promoting new nuclear power plant siting. 
None of these changes will lead to increased public health and safety. 
In fact, the NRC has been battling with the EPA for years over 
radiation standards. NRC's proposed standards are consistently less 
protective than the EPA's.
                      nuclear power is unreliable.
    Complex and often mis-managed nuclear power plants are subject to 
frequent fires, leaks and other accidents. For example, the Nuclear 
Energy Institute's website boasts that ``Increased Nuclear Output Would 
Satisfy California's Residential Demand.'' 4 It fails to 
mention a February 3 fire at the San Onofre Nuclear Generating Station 
that has shut the plant for weeks and is a key factor in current 
rolling blackouts in California.
---------------------------------------------------------------------------
    \4\ http://www.nei.org/doc.asp?docid=724
---------------------------------------------------------------------------

                      NUCLEAR POWER IS UNECONOMIC.
    Nuclear power would not exist in this country today if it weren't 
for enormous subsidies paid for by ratepayers and taxpayers. Originally 
touted as being ``too cheap to meter'', nuclear power plants are still 
too expensive for America. The nuclear industry has received the vast 
majority of energy research and development funding, a special 
taxpayer-backed insurance policy known as the Price Anderson Act, 
unjustified electric rates from state regulators, enormous and 
unwarranted bailouts in state deregulation plans, taxpayer-funded 
cleanup of uranium enrichment sites plus a giveaway of the Uranium 
Enrichment Corporation, and an ultimately taxpayer-funded nuclear waste 
dump. Many of the issues I raise here are described in more detail in 
the Green Scissors report (www.greenscissors.org) released by U.S. 
PIRG, Taxpayers for Common Sense and Friends of the Earth.
    It is incredible that the nuclear industry shamelessly revises 
history to pretend that it has transformed itself into a cost effective 
energy source. Yet the industry continues to ask for more handouts.

   TAXPAYER DOLLARS SHOULD NOT BE USED FOR MORE NUCLEAR RESEARCH AND 
                          DEVELOPMENT FUNDING.
    According to the Congressional Research Service, nuclear research 
and development has gotten more than 60%, or $66 billion in energy 
research and development funding from 1948-1998. Led by Representative 
Markey and others, Congress wisely killed funding for the gas-cooled 
reactor and the breeder reactor, saving taxpayers at least $5.6 
billion.
    Now proposals to revive research programs to develop these 
uneconomic and dangerous reactors are creeping into the Department of 
Energy's budget. Supporters of the gas-cooled reactor proposed for 
South Africa may tout its cost. They do not highlight the fact that the 
design cuts costs by not building containment. The breeder reactor 
supporters ignore the dismal failure of France's breeder reactor 
program and the chance of a reactor explosion if the coolant (usually 
highly reactive sodium) leaks.

                   PHASE OUT THE PRICE ANDERSON ACT.
    The industry is also lobbying for an extension of the Price 
Anderson Act, which is due to expire in 2002. This law, passed in 1957 
and amended in 1988 provides a taxpayer funded insurance for the 
nuclear industry in the event of an accident. We believe that this 
insurance program is an unwarranted taxpayer subsidy to the nuclear 
industry that has no parallel in any other industry. During 
reauthorization of the Price Anderson Act, PIRG and others successfully 
fought for lower taxpayer liability in the event of an accident.
    The American public is being barraged by misleading NEI ads touting 
the safety and positive economics of nuclear power. Yet the February 28 
letter from NRC Commissioner Meserve to Chairman Barton states, 
``[W]ithout the framework provided by the Act, private-sector 
participation in nuclear power would be discouraged by the risk of 
large liabilities.'' The Federal Trade Commission has said that NEI's 
``advertising campaign touting nuclear power as environmentally clean 
was without substantiation.'' Several reactors are extending their 
operating licenses through a process which cuts out the public and 
essentially rubber-stamps the renewal application. If these plants are 
safe and economical enough to get a license extension, they shouldn't 
need a taxpayer-backed insurance plan.

 PROTECT CITIZENS FROM UNJUSTIFIED RATE INCREASES AND BAILOUTS AT THE 
                              STATE LEVEL.
    We realize that this committee does not have jurisdiction over 
state deregulation and rate-making. However, in analyzing current 
electricity problems, it is important to recognize the magnitude of the 
ratepayer subsidies enjoyed by this industry and the role these 
subsidies have played in blocking competition and propping up 
economically marginal nuclear power plants.
    In the 1980's, the PIRGs successfully blocked unjustified rate 
increases for nuclear power mismanagement. As states across the country 
restructured their electricity markets, the promise to consumers was 
that these changes would provide competition among electricity 
providers. Instead, utilities lobbied, and for the most part received, 
an unjustified ratepayer-funded bailout of their uneconomic 
investments, usually nuclear power plants. The PIRGs, free market, and 
other consumer and environmental groups in several states fought back 
against these requests for ``stranded cost'' recovery. We argued that 
these bailouts were unjustified and unfair to consumers and would 
hamper efforts to shift towards clean energy. According to a report 
released in 1998 with the Safe Energy Communication Council entitled 
``Ratepayer Robbery'' we estimated these bailouts could total more than 
$112 billion for just eleven states. There is strong evidence that 
without these bailouts, almost half of the nuclear power plants would 
have shut down. Instead, aging plants have been given a new lease on 
life, are in some cases, still shielded from market forces. Some have 
been sold at rock-bottom prices to new owners who have every incentive 
to run them close to the margin.
 curb taxpayer costs for nuclear waste and index the fee to inflation.
    The nuclear industry is the only industry that we are aware of 
which has a government program to guarantee disposal of lethal waste. 
We agree with the industry that the DOE has mismanaged the program. 
However, our solution is stop spending money on the program and insure 
that enough money is collected now to adequately cover future costs of 
a sound waste disposal program. A 1998 financial review commissioned by 
the State of Nevada concluded that the funding shortfall for the 
program would range from $12 to $17 billion in 1996 dollars. We urge 
that the Nuclear Waste Fund Fee be indexed to inflation so that there 
will be adequate funds to cover the ultimate cost of nuclear waste 
disposition.

   THERE IS NO CURRENT SOUND SOLUTION FOR THE NUCLEAR WASTE PROBLEM.
    Nuclear waste is one of the most dangerous substances created by 
humans. This waste remains dangerous for at least a quarter of a 
million years (based on the decay of Pu-239). One would expect that 
policies for dealing with this lethal material would be based on sound 
science and protecting public health. Instead nuclear waste policies in 
this country have been based on political expediency. The incredible 
problems faced by citizens living near former DOE weapons sites, such 
as Hanford, Washington should be a lesson to those who want to ignore 
science and public health.
    We believe that the current project should be stopped, as the 
proposed dump site at Yucca Mountain cannot meet current standards for 
containing the waste. In 1998, PIRG and more than one hundred 
environmental, consumer and safe energy organizations petitioned then-
Energy Secretary Richardson to disqualify Yucca Mountain because it 
would not meet current standards for containing the waste. Instead, DOE 
is in the process of weakening the current site guidelines, a clear 
case of changing the rules when science gives the answer that is not 
wanted.
    We are pleased that President Clinton vetoed dangerous nuclear 
waste legislation last year. This legislation would have interfered 
with EPA's ability to set radiation standards and would have 
prematurely moved nuclear waste to Yucca Mountain, unnecessarily 
risking the lives of millions of Americans who live along the transport 
routes. We are concerned that there are ongoing efforts by both the 
Department of Energy and Nuclear Regulatory Commission to weaken 
radiation standards for the site. We are also concerned that EPA's 
ongoing review will lead to a standard that will not adequately protect 
Nevadans who live near the site.
    We urge this committee to re-examine nuclear waste policy and 
develop a public, fair process based on sound science and protecting 
the public for deciding the ultimate fate of this extremely dangerous 
material. No country in the world has a permanent solution to this 
problem. The U.S. should reject its current mismanaged program that 
relies on changing the rules when the science isn't favorable to the 
industry's solution. Instead, we should show leadership by developing a 
solution focused on sound science and protecting the public.

                               CONCLUSION
    Nuclear power is unsafe, uneconomic, unreliable and generates waste 
for which there is no sound solution. It is a failed technology of the 
past and would not exist were it not for enormous and unjustified 
government subsidies and policies. The U.S. should do everything it can 
to protect the health and safety of the public as well as our 
pocketbooks. Nuclear power should be phased out as quickly as possible 
and replaced by energy efficiency and clean renewable energy.

    Mr. Norwood. Thank you, Ms. Aurilio. We appreciate your 
being here and your time.
    Let me start the questions simply by maybe trying to set 
the record straight. I am sorry my friend, Mr. Markey, is not 
here, but he brought up the question of stranded cost in terms 
of deregulation of electricity.
    And I think it is fair for the record to note that though 
the economics have gotten much better, not all power plants are 
the same, and the one we happen to have was built under Jimmy 
Carter's 21 percent interest rate. So it is a little different 
scenario when you had to spend that much, and were forced to 
build the plant, incidentally.
    Mr. Hutchinson and others, let me follow up on a question 
Mr. Largent asked to the earlier panel, particularly the 
gentleman from DOE. And the question was, why don't we 
reprocess spent nuclear fuel in this country? And he gave a 
very short answer. He simply said, ``Well, that is too 
expensive.'' Do you agree with that? Is that the correct answer 
to the question Mr. Largent posed to him?
    Mr. Hutchinson. It is not economical in this country at 
this time. That doesn't mean it might not be at some time in 
the future. That is why I think----
    Mr. Norwood. Is it economical in France?
    Mr. Hutchinson. I don't know.
    Mr. Norwood. I mean, I danced on those rods that Senator 
Domenici--well, is it economical in Britain?
    Mr. Hutchinson. Well, I know there is discussion going on 
in Britain today as to whether they will continue to reprocess 
fuel due to economics. But, clearly, it is not economical in 
this country, but that doesn't mean it might not be at some 
time in the future, which is why I think, you know, R&D in this 
area is important, to preserve that option.
    Mr. Norwood. Well, should we move forward with mixed oxide 
plants reprocessing in this country?
    Mr. Hutchinson. I don't think we ought to eliminate any 
possible source of energy.
    Mr. Norwood. Why I am confused is that I am told by the 
Brits 5 years ago that they did not use any of their tax 
dollars for their energy department in Britain, because they 
made so much money reprocessing fuel for Japan. Does anybody 
want to comment on that? Anybody want to say that is incorrect?
    Mr. Hutchinson. I am not----
    Mr. Norwood. If you know it is, I need to know. You know 
these British. They may have tricked me.
    Mr. Longenecker. Mr. Chairman, could I try an answer to 
that, please?
    Mr. Norwood. Yes, Mr. Longenecker.
    Mr. Longenecker. Back in the early days when Mr. Barton and 
I first met about 20 years ago, in the Department of Energy, 
you will recall at that time uranium prices were about $40 a 
pound and projected to go at this time to maybe $70 to $100 a 
pound. Reprocessing spent fuel and separating out the reusable 
uranium and plutonium at $70 a pound uranium would make 
economic sense.
    At that time, the French and British were processing 
industries, were planned, and we began an industry here in the 
United States. Today uranium prices are about $8 a pound, and 
that is due to a number of finds of very rich reserves in 
Canada and Australia, and other factors.
    Uranium is a finite resource, and so we have to think about 
the mined uranium and plutonium that is in that spent fuel. 
Mixed oxide makes sense in this country today because it is a 
good way of getting rid of the excess plutonium that we have 
around the country that is very expensive to store.
    I think proceeding with mixed oxide technology now builds 
the technology base, and later we have the option, if uranium 
reserves are finite and the Nation and the world continues to 
rely on nuclear, to go get that and reprocess it. So I think 
that the question as to whether you permanently dispose of 
material in Yucca Mountain or whether you preserve the option 
to retrieve it later is a very important one.
    Mr. Norwood. Ms. Aurilio, I only have a minute, and I do 
have a question I particularly wanted to ask you. If nuclear 
power, which, of course, does not emit any Greenhouse gases is 
phased out, with what would you propose we replace the 20 
percent of the Nation's power supply that we would lose?
    Ms. Aurilio. I believe that the future of this country is 
going to lie in becoming more energy efficient, and we have 
been perplexed as to why the Bush Administration seems to be 
ignoring energy efficiency, which can save consumers money, 
avoid pollution----
    Mr. Norwood. So you think if we are all more efficient we 
can do away with the 20 percent of energy that nuclear power 
presents?
    Ms. Aurilio. It is certainly conceivable. And then the 
other piece of it in terms----
    Mr. Norwood. Now, you are going to be ready to prove that, 
aren't you?
    Ms. Aurilio. In terms of new generating capacity, wind 
energy is actually quite economical, and I want to just draw a 
contrast. This week in Germany, farmers in Germany are 
blockading the streets because they don't want the reprocessed 
fuel to be driven through their farmlands and potentially 
contaminate their farmlands, while in Iowa farmers are getting 
$2,000 a year per wind turbine to put wind turbines on their 
farms. They still farm----
    Mr. Norwood. Let me interrupt to ask you the last part of 
this question before the time runs out. If you believe that 
renewables could perhaps replace that 20 percent, I know you 
wouldn't sit here and tell me that unless you knew what the 
cost of that would be to the nation.
    Don't count hydropower, hydroelectric power. Just what 
would it cost this Nation's economy to switch from nuclear to 
renewables to pick up that 20 percent? I don't know if 
conservation is going to get the job done. They are working on 
it in California.
    Ms. Aurilio. Yes. I actually think that it has to be a mix 
of conservation and renewables.
    Mr. Norwood. Tell me what the cost is.
    Ms. Aurilio. Right now, wind energy plants are at about 4 
to 6 cents a kilowatt hour, and some are as low as 3 cents per 
kilowatt hour. So I actually think that trying to revive the 
nuclear industry will bankrupt this country, whereas going 
toward energy efficiency, conservation, and renewable energy is 
the way of the future.
    Mr. Norwood. So renewables, if we go that way, it will 
bankrupt this country.
    Ms. Aurilio. No, that is not what I said at all, sir.
    Mr. Norwood. Well, say it again, then.
    Ms. Aurilio. I said wind energy right now is going at 4 to 
6 cents a kilowatt hour.
    Mr. Norwood. Yes.
    Ms. Aurilio. The best wind sites are actually as low as 3 
cents a kilowatt hour. I heard the person from Energy 
Information Administration actually say that the costs of new 
nuclear power plants were at least 6 cents a kilowatt hour, so 
I would say that wind is actually cheaper. And by her charts, 
it is cheaper than new nuclear energy.
    Mr. Norwood. So you would think we would get out there and 
build some windmills right now.
    Ms. Aurilio. In fact, in Iowa, as I said, they are building 
windmills. In Colorado, wind came in at less than the cost of a 
new gas-fired power plant, and the utility is building 
windmills.
    Mr. Norwood. Well, the private investment, the magnitude of 
that, is gigantic. There is no question about it. And it has 
got to be questionable, in my mind, if we did away--let us just 
say tomorrow we closed all nuclear power plants which shuts off 
20 percent of the electricity to this country and replaced it 
immediately with wind. Somebody better be very, very right when 
they make a statement like that. Otherwise, it is going to 
cause this country a great deal of trouble.
    With that, I yield back the balance of my time. And, Mr. 
Strickland, you are up.
    Mr. Strickland. Thank you, Mr. Chairman.
    Mr. Longenecker, I have a question regarding new 
technology. I think you indicated USEC has an aging expensive 
technology. Given USEC's financial condition, do you foresee 
USEC employing a new uranium enrichment technology in the next 
few years?
    Mr. Longenecker. No.
    Mr. Strickland. That being the case, what alternatives are 
there for us as a government, and what do you think the likely 
outcome will be, using your best judgment?
    Mr. Longenecker. Well, as I said, this is a good job for 
the private sector. There are a lot of good technologies out 
there. There are a lot of very highly qualified nuclear 
companies in the United States and in the world. And in my 
estimate, because that is our job is to follow this industry, 
we project that you could build in the United States a new 
uranium enrichment plant using proven European technology in 
about 5 years with NRC licensing.
    Russian technology would take slightly longer, and, you 
know, there are some--within a decade, you might also be able 
to implement some other options that are currently being worked 
on in research and development. But I would say there are a 
number of options that can be implemented within a decade, and 
the company that does it needs to have a strong financial 
background and access to the technology, neither of which USEC 
has at this time.
    Mr. Strickland. What role do you think the government 
should most appropriately play in the development of a new 
technology, if any?
    Mr. Longenecker. The difficulty that I have in defining 
that is I think you need to wait for the private sector 
solution to come forward. If someone wants to build a plant in 
the United States, they may do it with no government support 
whatsoever. And I think it behooves us to wait until that 
private sector solution has been developed.
    If you think about it, in 10 years, if it is a government 
solution--what worries me about the government trying to do 
this was 10 years is five Congresses and three Presidential 
elections and 10 annual budgets. And as you well know, the 
United States in the 20 years that I have been involved in this 
industry has spent $7 billion, as I say in my testimony, on 
centrifuge and laser, and we have no new capacity to show for 
it.
    So if this is a critical time, then I would put my money on 
the private sector this time around, and let them define what 
government support they need.
    Mr. Strickland. Mr. Sproat, I would like to ask you about 
your involvement or your company's involvement in the Pebble 
Bed technology. And the question I have, have you looked at the 
implications of the fuel that you are going to need, or I 
understand that you are going to need for this technology?
    Is the fact that we perhaps will not have the enrichment 
capacity at a level that you would need a hindrance or a 
detriment in your decision to move forward and to invest in 
this technology?
    Mr. Sproat. I think, Mr. Strickland, the answer to that is 
we are clearly looking at that. With this technology, there are 
a number of unresolved issues, the economics being one of them, 
at this stage of the game. And it would certainly be a factor 
in our decision. However, as Mr. Longenecker said, that we 
believe there may be some private sector solutions to the 
enrichment issue.
    I think as you pointed out earlier today, that we are going 
to require, if we proceed with the project, 8 to 9 percent 
enrichment in that fuel. And right now we have no currently 
available domestic sources for that. And that first fuel would 
probably come from South Africa with an enriched feed stock 
from Russia.
    Mr. Strickland. Isn't it true, though, that you could get 
that fuel from the current plant in Ohio, if necessary?
    Mr. Sproat. I believe so. It would need to be relicensed, I 
believe, for the higher enrichment levels. Let us put it this 
way, we would certainly prefer to have a domestic source of 
enriched feed stock for this plant.
    Mr. Strickland. Yes. And if I am not misled, I believe the 
Portsmouth plant is currently licensed to enrich up to 10 
percent.
    Mr. Sproat. It may be. I am just not sure.
    Mr. Strickland. In terms of the utility industry or 
industries, is there concern--and if there is concern, how 
great is that concern--that we are not paying sufficient 
attention to making sure that we have a domestic, economic, 
reliable source of enriched uranium?
    Mr. Sproat. There is a very large concern to that effect. 
The large nuclear generating utilities don't want to be in a 
position where they are held hostage to a single supplier, and 
where we don't have some alternatives. And we also want to make 
sure we have an economically competitive source of enriched 
feed stock for the fuel, so that is a major concern of ours 
right now.
    Mr. Strickland. Thank you.
    Thank you, Mr. Chairman.
    Mr. Barton. Thank you, Congressman.
    The Chair would recognize himself. My first question to the 
panelists that tend to be generally supportive of nuclear 
power--what action, if any, does this Congress and the Federal 
Government need to take in this session to make the nuclear 
option a real option?
    Mr. Hutchinson. As I have said in my remarks, we look 
forward to the study being completed at Yucca Mountain. That 
recommendation will be made----
    Mr. Barton. So a high-level waste bill that the President 
signs.
    Mr. Hutchinson. We would support and favor repeal of the 
PUCA Act. There are a handful of utilities that that impacts. 
My utility is one of those.
    Mr. Barton. That is kind of utility generic as opposed to 
nuclear power specific. Anything else?
    Mr. Hutchinson. We certainly want to know that the 
regulatory processes going forward are dependable, timely, sort 
of thing, so we need to be sure that that is----
    Mr. Barton. So there are some things that the NRC, in terms 
of their process----
    Mr. Hutchinson. Well, the NRC is looking at that process 
and is, you know, I think doing an admirable job at this point 
of identifying areas that they can improve in. The license 
renewal is an example of that. In our view, it has gone very 
well.
    Mr. Barton. Mr. Tollison or Mr. Sproat or Mr. Longenecker, 
other than a high-level waste bill, is there any other specific 
legislative action that is specific to the nuclear industry 
that you would recommend?
    Mr. Tollison. Well, we do need renewal of the Price-
Anderson Act. That is----
    Mr. Barton. Reauthorization of Price-Anderson.
    Mr. Tollison. [continuing] very important. And the sooner 
and the better.
    Mr. Barton. Okay. Mr. Sproat or Mr. Longenecker?
    Mr. Sproat. Mr. Chairman, I would say that one of the 
issues that Dr. Travers referred to earlier regarding the loss 
of technical expertise within the NRC and the national labs I 
think is a very key issue in terms of making sure--
particularly, say, if we bring in new advanced nuclear 
technologies, making sure that we have people in the Federal 
Government who have the capabilities to review those 
technologies and are qualified to review them I think is very 
key.
    I also think that a couple of the issues are brought out in 
my testimony regarding the fact that a number--the regulatory 
framework in this country was written in anticipation of a 
regulated utility industry building nuclear power plants, and 
we are clearly moving away from that into a deregulated 
marketplace where there will be merchant nuclear power plants. 
And some of the key top-level regulatory guidance or regulatory 
requirements need to be looked at and revised to recognize that 
changing marketplace.
    Mr. Barton. My next question, assuming a perfect world--you 
always hear in marketing a perfect world, and assume a perfect 
world; you never get it, but in all of the classes I took in 
business school the first assumption was perfect world and 
perfect knowledge.
    Where would nuclear power be economical to consider as an 
option, again, if you take all of the political and 
environmental issues off the table? New nuclear power plants at 
3 cents a kilowatt hour, 4 cents, 5, 6, at the generation, 
where is it a real economic option compared to coal or natural 
gas?
    Mr. Sproat. Well, if I could answer that, just to give you 
a benchmark. As we are evaluating the Pebble Bed Modular 
Reactor, we are evaluating against gas-fired combined-cycle gas 
turbine plants that assume long-term gas prices of about $3.50 
per million BTU. And we think that if we can produce a power 
plant that has all-in costs at between 3 and 3.5 cents a 
kilowatt hour, we will not only be able to compete but we will 
be able to earn a significant return for our shareholders.
    Mr. Barton. ``All-in'' means construction and operations.
    Mr. Sproat. And operating and decommissioning funding and 
spent fuel disposal.
    Mr. Barton. Okay. Does everybody tend to agree with that? 
Mr. Longenecker?
    Mr. Longenecker. Mr. Chairman, as you know, living in 
California where we are paying about 20 cents a kilowatt hour 
in San Diego, and finding it very difficult to----
    Mr. Barton. When you can get it.
    Mr. Longenecker. [continuing] when we can get it, and 
finding it very difficult to find wholesale sources at 6 cents, 
a much higher threshold would apply.
    Mr. Barton. You know in California there is a state law. 
You couldn't build in a nuclear power plant in California, even 
if it was economical, until we get a solution to the waste 
issue.
    Mr. Longenecker. Yes, sir. But I was addressing your 
question of if another plant could be----
    Mr. Barton. In a perfect world, perfect----
    Mr. Longenecker. Yes. Let me also add on your legislative 
question, on December 31 of this year, Mr. Chairman, the 
Russian highly enriched uranium agreement expires.
    And I think it does warrant, as I said in my overview 
remarks, some look by Congress on who the executive agent 
should be, whether that continues to remain with USEC or 
whether it should be allocated, some of that, to another 
executive agent, because the stability of that agreement, 
keeping that material off the market and putting it to use in 
nuclear power plants is a very, very important aspect of 
international policy for this country.
    Mr. Barton. Okay. Mr. Sproat, on the Pebble Bed Reactor, 
what is the main advantage to your company of considering that? 
Is it the size of it, the modularity of it, the passive safety 
design of it? I mean, what is the--what is it that attracts 
your company to looking at that design as compared to some of 
the designs that the NRC--the next generation that they have 
already certified?
    Mr. Sproat. I think, Mr. Chairman, you summarized some of 
the key characteristics. It is--because of its small size, it 
can be built--once we have it--have the design certified by the 
NRC, we believe it can be built in approximately 24 months per 
unit as opposed to between 5 to 7 years per unit for a 
conventional size nuclear power plant.
    Small capital investment required. Each unit would probably 
require between $110 to $125 million per unit as opposed to 
several billion dollars per unit. So the capital risk is much 
lower. And with that lower capital cost, we do believe it has 
the potential--and this is a key issue for us that we have not 
resolved yet--is that if we can bring it in in that 3 to 3.5 
cents per kilowatt hour, the economics will make it----
    Mr. Barton. Of the next generation designs that the NRC has 
already certified, none of them are that size? They are all 
bigger?
    Mr. Sproat. All of them are larger. They would take longer 
to build. They require a larger capital investment. And the 
lowest price we believe we can get for an all-in cost out of 
that technology is somewhere in the neighborhood of about 6 to 
7 cents a kilowatt hour.
    Mr. Barton. How do you answer the question about the 
enrichment of the fuel for the Pebble Bed Reactor? It is a lot 
higher enrichment----
    Mr. Sproat. Right.
    Mr. Barton. [continuing] required than what is commercially 
available right now, I am told, on the market.
    Mr. Sproat. That is correct.
    Mr. Barton. How do you answer that question?
    Mr. Sproat. Well, I think our--right now, as I said, we 
don't have a domestic source for that enrichment. We would like 
to get one, and we are exploring a couple of different options.
    Mr. Barton. I mean, is it technically feasible----
    Mr. Sproat. It is absolutely technically feasible.
    Mr. Barton. [continuing] and within all the various 
national security protocols?
    Mr. Sproat. Yes.
    Mr. Barton. To get that highly enriched----
    Mr. Sproat. It is technically feasible, as well as, you 
know, there--we haven't explored, but another possible option 
is downblending of military fuel into a lower----
    Mr. Barton. And who would actually--I am told you would 
actually have to build an enrichment plant to do that. Is that 
true or not true? And if it is true, who would build it? Would 
that be a private sector company, or would it be----
    Mr. Sproat. We are exploring some options that are 
primarily focused on the private sector.
    Mr. Barton. Okay.
    Mr. Sproat. But I am really not prepared to talk about 
that.
    Mr. Barton. My time has expired, but I want to ask Ms. 
Aurilio a question. I looked at your bio and it is pretty 
impressive. You have got a physics degree from Amherst, and you 
have got an environmental engineering degree from MIT. So that 
is--that impresses me, since I am an engineer with an MBA and a 
registered professional engineer.
    So I am going to assume that you are more than just another 
pretty face coming before this subcommittee, that you actually 
have a brain and you are very committed to what you believe in, 
and you have spoken very eloquently.
    Now, in the answer to Congressman Norwood's question, you 
talked about Three Mile Island and Chernobyl. What was the 
containment structure at Chernobyl?
    Ms. Aurilio. The containment structure at Chernobyl was 
inadequate to contain the accident and----
    Mr. Barton. Isn't it true that there was no containment 
structure?
    Ms. Aurilio. And it was inadequate, and that is exactly 
what the problem with the PBMR is.
    Mr. Barton. The second question--wait a minute. They didn't 
have one. Do we have any reactor in the United States in the 
commercial power generation that doesn't have a containment 
structure?
    Ms. Aurilio. No, we don't.
    Mr. Barton. Okay.
    Ms. Aurilio. But the PBMR is saying that they are going to 
cut capital costs by not having a containment structure.
    Mr. Barton. Well, now, I didn't ask that. I am just--you 
are a physicist and you are an environmental engineer, and you 
put Chernobyl on the table. So you have an--at least I have an 
obligation, if we are going to have a record on Chernobyl, let 
us have a record. There was no containment structure at 
Chernobyl.
    What was the design of the reactor at Chernobyl? Was it a 
lightwater reactor? Was it a high pressure reactor? Or was it a 
design that we have not even built since the research stage in 
this country, something called a hot graphite reactor?
    Ms. Aurilio. It was a graphite moderated reactor, known as 
the RBMK.
    Mr. Barton. Right. Now, isn't that inherently one of the 
least safe reactors? Do we have any of those types of designs 
even being thought about in this country?
    Ms. Aurilio. We don't, but the PBMR----
    Mr. Barton. All right.
    Ms. Aurilio. [continuing] would also be graphite moderated.
    Mr. Barton. So isn't it a little unfair--it is no 
requirement that people that testify be fair. I mean, just to 
be honest about it. The whole point of this is to develop a 
record, but it is at least somewhat disingenuous to say the 
word ``Chernobyl'' as if that would even be a possibility.
    It is a different design, a very poor design. It was poorly 
manufactured. There was no containment. The operators weren't 
very well trained. Totally different than what we are talking 
about. Wouldn't you agree with that?
    Now, you can still be against nuclear power. You are not 
unique in that. But somebody with your background, as smart as 
you are, should try to be a little less disingenuous. Is that a 
fair statement, or is that an unfair statement on my part?
    Ms. Aurilio. With all due respect, Mr. Chairman, I believe 
nuclear fission reactors are inherently unsafe.
    Mr. Barton. I understand that.
    Ms. Aurilio. The Chernobyl reactor is a different design 
than U.S. reactors are, but we have played around with a lot of 
different designs in this country. And we have some grave 
safety concerns about the proposed PBMR reactor.
    Mr. Barton. No. Have you had a chance--you and your group--
to look at this Pebble Bed? Because I am told that just the 
inherent design of it, it is much more passively safe, that 
it--you know, whereas the Chernobyl reactor was very passively 
unsafe.
    So isn't what Mr. Sproat and his group doing at least 
moving in the right direction, if you assume that nuclear 
power--and you don't--but if you assume that nuclear power 
should be an option at some point, would you at least agree in 
your group that they are moving in the right direction in terms 
of safety?
    Ms. Aurilio. I believe that the PBMR will not turn out to 
be a safe or economical reactor. We are still studying up on 
the reactor. We have grave concerns that as currently designed 
it, too, has no containment.
    Mr. Barton. But in concept----
    Ms. Aurilio. But if you would let me finish, because what I 
have been seeing in the literature is that the containment 
would be the fuel itself. And we have grave concerns because 
right now the company, BNFL, which is one of the partners which 
would be involved also in making the fuel, we believe, they 
have been accused by both Germany and Japan of falsifying data 
for manufacturing fuel for reactors in Germany and Japan.
    So we have very, very big concerns as to why you would want 
to build a reactor that lacks containment. And Commissioner 
Merrifield of the NRC did express some questions about that 
recently as well. And then why you would want to rely on 
manufacturing, which, as you know, it is never 100 percent 
perfect----
    Mr. Barton. I understand that. But at least it is a good 
idea----
    Ms. Aurilio. [continuing] to contain radioactivity.
    Mr. Barton. [continuing] to build it. I mean, your group's 
position that we can get there with conservation and renewable, 
you know, the renewable exclusive of hydro is .2 of a quad, .2 
of 1 percent of a quad. In other words, compared to the hundred 
quads that this country used, it is just orders of magnitude 
below what you would need to replace the existing power supply.
    So if you are acting or attempting to act responsible, you 
know, nuclear power, if we can get these next generation 
technologies that are much safer and much more fail-safe, so 
that if things go wrong the system automatically shuts itself 
down, which is my understanding of this Pebble Bed Reactor--and 
I could be totally wrong on that--that is at least a step in 
the right direction. That is my only point.
    I am not trying to convert you. You know, that would be 
stupid on my part. It would be unfair on my part. But give the 
industry credit and the private sector credit for at least 
attempting to listen to the concerns that we both share.
    Ms. Aurilio. But if it is so safe, then why do they need 
Price-Anderson coverage for these reactors as well?
    Mr. Barton. That is a decision that was made before I was 
even born, quite frankly.
    Ms. Aurilio. It doesn't cover these types of reactor 
designs. I mean, in reauthorization, if it is so safe and 
economical, perhaps the industry could pay for it itself, then, 
pay for insurance coverage----
    Mr. Barton. We may give you or your associates a chance to 
testify on that at the appropriate time. That is a valid 
question.
    I am going to go to Mr.--let us see, we have already--Mr. 
Strickland has asked questions. We are going to go to Mr. 
Shimkus. Isn't that right? Yes.
    Mr. Shimkus. Thank you. But, Mr. Strickland, you wanted to 
make a comment to the chairman on your plant, and I want to 
give you that opportunity.
    Mr. Strickland. Yes. And then I promise the chairman I will 
be finished for the day.
    Mr. Barton. No, it is okay.
    Mr. Strickland. Two things just for the record, Mr. 
Chairman. If the information that I have is accurate, and I 
believe it is, the answer to your question, where would we get 
the fuel with the higher assay, we currently have a plant that 
is licensed to enrich uranium up to 10 percent. And within the 
next 2\1/2\ months, we are going to be placing that facility in 
an inoperable condition. So we can do it now, but 2\1/2\ months 
from now we will not be able to do it.
    And the second thing for the record, I have a report that 
was sent to the Congress from the Department of Energy entitled 
``Report to Congress on Maintenance of Viable Domestic Uranium 
Conversion and Enrichment Industries,'' and I was wondering if 
we could enter that into the record.
    Mr. Barton. Without objection, so ordered.
    [The information referred to follows:]
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    Mr. Strickland. Thank you, Mr. Chairman.
    And thank you, my colleague.
    Mr. Barton. Mr. Shimkus?
    Mr. Shimkus. Thank you.
    Let me--Mr. Sproat, and others may comment on it, you 
identified a concern of mine that refers to, in essence, a 
brain drain out of the NRC, especially with new technology that 
may come online, especially with, as I mentioned to the 
previous panel, the relicensing aspects of a lot of plants in 
the future. Can you just reiterate that? And then I will let 
any of the other panelists talk about that.
    Mr. Sproat. One of the things that we are--as we are 
looking at the various issues we will face with trying to 
license the Pebble Bed Modular Reactor--and just for the record 
we will have a containment. The design requirements may be 
different, but there would be a containment building.
    It is very clear that the gas reactor expertise that 
existed in the national labs and the NRC back in the 1960's and 
1970's and early 1980's has pretty much dissipated. And as a 
result, we are facing the possibility of coming into the 
government with an application for this technology, if we 
decide to do that, where they will be really technically 
deficient in being able to review that technology.
    And the NRC management recognizes this. In our discussions 
with them, they believe they need to get their staffs educated. 
And one of the things we are discussing with both the 
Department of Energy and the NRC is to have an independent 
third-party such as MIT or some other university develop the 
appropriate courses to give to the various government employees 
to get them educated in the technology, so that they could 
learn more about it prior to the actual licensing effort 
starting.
    Mr. Shimkus. Would anyone else want to add if they have a 
concern on the NRC? Mr. Tollison?
    Mr. Tollison. The concern about the demographics of the NRC 
staff that Mr. Travers introduced is shared somewhat by the 
industry. In other words, the average age of the nuclear 
professionals in the industry is in the high forties, so over 
the next several years a lot of people will be--a lot of very 
qualified people will be coming into the retirement age zone.
    And so there are several initiatives underway to revitalize 
the pipeline of new people coming into the industry to operate 
the existing fleet until the end of life, and that end of life, 
as you have heard today, in many plants will extend an 
additional 20 years. In fact, as we speak, there is a workshop 
going on in Florida right now that includes the universities 
and the utilities and the public relations people to discuss 
the best strategy and approaches for revitalizing the pipeline.
    And the NRC, in part, will be the beneficiary of that, 
because that would create a supply of young graduates who are--
who have an education that would support regulating and 
licensing current plants and future plants.
    Mr. Shimkus. Thank you.
    Let me go to Ms. Aurilio. On your submitted testimony, on 
page 5, you have a quotation attributed to the Federal Trade 
Commission that says, ``NEI's advertising campaign touting 
nuclear power as environmentally clean was without 
substantiation.'' Could you give me a source for that?
    Ms. Aurilio. Yes. I will have to get it to you in writing.
    Mr. Shimkus. Because as far as we understand, the Federal 
Trade Commission has made no such statement. So if you could 
substantiate that, we would appreciate it, just for 
clarification.
    The other thing, in the testimony you--actually, in the 
submitted testimony, you mentioned specific standards that are 
not--that will not be met at Yucca Mountain. What are those 
standards?
    Ms. Aurilio. What I talked about in my testimony, what you 
might be referring to, is that we are concerned that the 
Nuclear Regulatory Commission is trying to take control over 
setting the standards, which Congress gave EPA. Is that what 
you are referring to?
    Mr. Shimkus. But you are not referring to any specific 
standards that are set right now that science makes 
determinations that you believe Yucca is not going to be able 
to make----
    Ms. Aurilio. There are Department of Energy guidelines as 
to the suitability of Yucca Mountain. In 1998, PIRG and many 
other groups petitioned Department of Energy to withdraw Yucca 
Mountain as a nuclear waste dump site, because we felt it would 
not meet the current guidelines. But the most----
    Mr. Shimkus. And what are the current guidelines?
    Ms. Aurilio. The guideline of most concern--I don't have 
the cite off the top of my head, but the guideline of most 
concern would be that there would not be significant 
radioactive waste migration along the paths of most likely 
leakage from the mountain. And we felt that given the existing 
data that we had at that time that the mountain would not meet 
that criteria.
    Mr. Shimkus. And I would respectfully submit that we don't 
know any of that right now. And the issue is, if you want to 
establish some standards which are going to require--or you 
want the DOE or the NRC or the EPA to meet, we ought to know 
what those standards are.
    Ms. Aurilio. But DOE had some standards at the time, and 
their now revising it downward is the problem. And it said 
there should be no significant----
    Mr. Shimkus. So you would accept the previous standards.
    Ms. Aurilio. There is different stages of the----
    Mr. Shimkus. What standards would you accept? I guess that 
is the question.
    Ms. Aurilio. There is different stages of the process. What 
we said in 1998 was, given the science that currently existed--
for example, there was new evidence to indicate that plutonium, 
which is relatively insoluble, could actually migrate pretty 
quickly offsite because it could attach itself to other 
particles. So that would be of concern.
    There was enough information, given new scientific data, 
that there could be considerable migration off the site of 
radioactive waste. That did not meet DOE's current guidelines.
    In terms of what we would want to see out of a final 
repository for nuclear waste--and, again, our premise is there 
is no sound solution yet that has been found. We would want the 
waste to be isolated for human beings and the environment for 
the hazardous lifetime of the waste.
    Mr. Shimkus. I think we will be very pleased with Yucca 
Mountain and its meeting not just NRC standards but whatever 
comes out as far as the EPA standards. Having visited there 
yesterday, I am very supportive.
    And I would just ask a final question, Mr. Chairman, if I 
may.
    Mr. Barton. You have got as much time as you----
    Mr. Shimkus. In the issue of doesn't Yucca Mountain--back 
to the industry folks. Doesn't Yucca Mountain also present a 
possible asset for us in the future? If we have high-level 
nuclear waste stored, and we don't have the ability, it is not 
economically feasible at this time to reprocess that.
    But could you not make an argument that there is an asset 
there stored and buried that at times can be pulled out and 
reprocessed once the ability to reprocess becomes economically 
feasible?
    Mr. Sproat. If I could, I will try and answer that. 
Absolutely that is the case. I think one of the fallacies in 
the discussions on Yucca Mountain so far is the broad 
assumption that we are going to put it in the ground and it is 
gone forever. Clearly----
    Mr. Shimkus. And Senator Domenici mentioned that, and I was 
surprised that he said just close it up. And I don't expect it 
to be closed----
    Mr. Sproat. Well, that is the current game plan that DOE is 
offering. However, I think the reality is is that nobody can 
say with certainly exactly how the repository will perform over 
10,000 years.
    But you can certainly start to put waste in that repository 
and leave it in a retrievable form and see how the repository 
operates over the next 50 years, 100 years, 150 years, and gain 
much greater certainty about what the long-term performance of 
the repository will be before you close off that option of 
making it--of closing off the repository and not making that 
fuel retrievable for whatever purpose; say, if the repository 
is not operating in the correct way, or you wanted to take that 
fuel out and start reprocessing it for economic reasons.
    Mr. Shimkus. Thank you, Mr. Chairman. I will yield back my 
time.
    Mr. Barton. Thank you.
    Mr. Strickland, did you have one final question or any 
comment?
    Mr. Strickland. No, thank you, Mr. Chairman.
    Mr. Barton. Okay. I have just a few wrap-up questions. Mr. 
Sproat, at what time do you expect the developer of the Pebble 
Bed Reactor to bring forward an application for certification 
to the NRC?
    Mr. Sproat. The current project schedule is that the 
partners will make their decision by the end of this year as to 
whether or not----
    Mr. Barton. ``The partners'' being?
    Mr. Sproat. Being Exelon, BNFL, SCOM in South Africa, and 
IDC in South Africa. We will make our decision about whether to 
proceed with the final design and the construction of the 
demonstration plant in South Africa. We will make that decision 
by the end of the year.
    The government of South Africa also needs to make a 
decision about approving the construction of that demonstration 
reactor, and we expect that to occur first quarter of 2002. 
Once that decision is made, at that point in time, then, we 
would intend to begin the preparation of a combined 
construction operating license application for a set of PBMRs 
in this country--not one, but a string of several, number yet 
to be determined, and location yet to be determined.
    And we would expect to submit that application for the 
combined construction operating license probably in the second 
half of 2003, and we would probably precede that with an early 
site permitting application for a site or several sites 
sometime in late 2002.
    Mr. Barton. And the site or several sites, would they 
likely be sites of existing nuclear power plants?
    Mr. Sproat. They would most likely be sites of existing 
nuclear power plants because the site--we already have a site 
characterized. The transmission capability to get the power out 
would already be there.
    Mr. Barton. Okay. Now, the other three witnesses that are 
supportive of the nuclear option, is it your general agreement 
that the next generation of nuclear reactors, if any, that are 
ordered are going to be of the smaller variety as opposed to 
the large, 500 or larger megawatt variety that are currently 
certified?
    Mr. Hutchinson. I don't think I would necessarily agree 
with that.
    Mr. Barton. You wouldn't agree with that.
    Mr. Hutchinson. No. I think you could see--there is a 
possibility you could see an existing design that is already 
approved on the shelf, built----
    Mr. Barton. And some of those are being built overseas.
    Mr. Hutchinson. Right.
    Mr. Barton. And are in operation, so you would have some 
certainty in operation.
    Mr. Hutchinson. Built in Japan--right, and in Korea, in 
some of those places. It will be driven by what the industry 
can finally get comfortable with it, the time to market 
question, and construction costs. And I think given that those 
have times and costs that compete with combined cycle gas 
turbines, whatever that turns out to be, that you--then, that 
is where you will see----
    Mr. Barton. Okay. Mr. Tollison?
    Mr. Tollison. Our focus at INPO is on the safety and 
reliability of the existing fleet, and my only comment on your 
question would be I think the success of the demonstration 
reactor down in Cape Town would be a big factor in how we 
eventually go----
    Mr. Barton. Okay.
    Mr. Tollison. [continuing] as an industry.
    Mr. Barton. Mr. Longenecker?
    Mr. Longenecker. Mr. Chairman, I would say that the size of 
the reactor that is going to be ordered is highly dependent on 
the company that is building it, what their supply mix is. All 
of the arguments about small being, you know, modular, simple, 
cheap, and you can add to it, is true. When you build a large 
one, you do have the concern when it is out of service you have 
lost a large chunk of your capacity.
    But for companies that have a very substantial generating 
capacity where this does not represent a significant portion of 
it, the large plants like the Japanese are looking at, economy 
of scale is still true. And I think probably you will see a mix 
of them depending, again, on the company that is ordering them 
and their specific needs and reliability concerns.
    Mr. Barton. Okay. My final question, I am going to go back 
to the gentlelady from PIRG. Let us assume that I totally agree 
with you, that I have just been blown away, I understand the 
logic, I have had a Damascus Road experience, and I am totally 
a true believer now, that you have so impressed me--and your 
group--that I just can't wait to help you. Okay? Now that is a 
big assumption, but let us assume that.
    You said something to Mr. Shimkus that kind of set me back. 
You know, let us say that next week I put in a bill to close 
down all of the existing nuclear reactors. In a time-certain, 
we are going to pay off the stranded costs, we are going to 
figure out a way to build windmills and import power from 
Canada and take up the slack for the existing plants.
    You still have all this high-level waste scattered out all 
over the country. And I come to your group and I say, ``Solve 
that problem. I will guarantee you no future problem.'' I am a 
true believer now, you know, but help me solve the existing 
waste problem. What is your solution?
    Ms. Aurilio. Well, I wish I had a solution, and I wish that 
the industry had had a solution before they built the reactors. 
In fact, some of the earlier scientists who developed nuclear 
energy, like Enrico Fermi and Robert Oppenheimer, even said, 
``Don't build these commercial plants until you have solve the 
waste problem.''
    Mr. Barton. No, but that cat is out of the bag.
    Ms. Aurilio. I agree. I agree.
    Mr. Barton. Cloning has occurred. Okay? We can't debate 
whether there should be cloning. It has occurred.
    Ms. Aurilio. Yes.
    Mr. Barton. So what do we do to solve the----
    Ms. Aurilio. And I think the scenario that you set up in 
terms of phasing out these plants as quickly as possible is 
something that gives the public a good starting point.
    Mr. Barton. You are still not answering my question. You 
are too smart. You know, I am going----
    Ms. Aurilio. I am giving you a starting point.
    Mr. Barton. No, no. I want a--you don't have to give it to 
me today, obviously. But it is not valid to just say there is 
no solution. Okay?
    Ms. Aurilio. I can tell you about a process that we could 
use to come to a solution.
    Mr. Barton. Man made the problem; man can solve the 
problem. Now you can have it spread out in 102 locations or 50 
locations or one location or somewhere in between. You can put 
in an interim basis, a permanent basis, you can reprocess it, 
you can shoot it to the moon, you can put it under the ocean. 
But you can't just say there is no solution. That is not 
viable. This Congress can't just throw up its hands and say, 
``The PIRG says there is no solution. So we are not even going 
to worry about it.''
    Ms. Aurilio. So our solution is to minimize the amount of 
waste that ultimately has to be dealt with, which is your 
starting point, and then starting out with a fair and honest 
process, which I don't believe the history of nuclear waste 
policymaking in this country has been, and involving the public 
at every step of the way to make a decision, because this is 
some of the most dangerous material we have ever created.
    I don't think any country in the world has a permanent 
solution to this problem, and the solutions that we have seen 
coming out of the industry rely on changing the goalposts every 
time the science shows us.
    Mr. Barton. Yes. You are a very good testifier. Okay? You 
are very good at not answering the question and getting your 
political commentary on the record. And, again, that is 
acceptable. But we can't be for no solution. Mr. Boucher and 
Mr. Waxman, Mr. Markey, right on down the road, on the Democrat 
side, can't be for no solution, nor can myself and Mr. Largent, 
Mr. Pickering, Mr. Burr, Mr. Norwood, all the way down to Mr. 
Radanovich and Ms. Bono. We can't be for no solution. Okay? We 
can't study it for another 20 years.
    Ms. Aurilio. Why not?
    Mr. Barton. Because it is there.
    Ms. Aurilio. It is there, and it is going to stay there, 
and they are going to generate more of it.
    Mr. Barton. We have the technology. So your solution is 
just to study it for 20 more years.
    Ms. Aurilio. My solution is to make sure that we protect 
the public and the environment and future generations, and the 
things that I have seen coming out of the industry so far don't 
do that. They change the goalposts every time that science 
shows them it is not going to contain the waste.
    Mr. Barton. Well, you know, it is a funny thing but in a 
different era, a different issue, you know, when we find bad 
actors or we find something that is a potential problem, we 
don't leave it spread out. We put it together.
    There is a jail in Ellis County, in Waksahatchee, all the 
bad guys and girls in Ellis County go to that jail. If they are 
really bad guys, they go to Huntsville. And if it is a Federal 
problem and they are really, really bad guys, they go to a 
Federal--we concentrate where we can control it, watch it, 
monitor it, do all of the good things that your group supports.
    There is no other issue that I am aware of in this country 
where the solution is, a) not to do anything, or b) leave it 
spread out. I don't want a convicted felon in my backyard in a 
bird cage. I want it in Ellis County or Huntsville or the 
Federal penitentiary.
    Now, you can be against Yucca Mountain. You can be against 
the process. That is totally acceptable. But at some point in 
time, to be responsible--and I am not just talking to you. I am 
talking to the whole group that you represent--needs to come 
forward with some solution.
    And the likelihood is--I wasn't here for Senator Domenici. 
I didn't get to hear his testimony. But the likelihood is we 
are going to put a high-level nuclear waste bill on the 
President's desk sometime in this calendar year. So if your 
group has got potential solutions, come forward.
    And, you know, I think on a bipartisan basis we are going 
to be very open to all of the potential safeguards and 
transportation issues and local impact issues, and all of that. 
But just to say, ``Don't do anything,'' you know, that dog 
won't hunt anymore. It is pretty well gone.
    Ms. Aurilio. I don't think that is what I was saying. I was 
saying minimize the amount of the waste and then come up with a 
fair and public process, which so far has not existed, for 
making the decision.
    Mr. Barton. Okay. That is fair enough.
    I want to thank the panel. The Chair would ask unanimous 
consent that the statement of the Uranium Producers of America 
on this issue be made a part of the official record. Is there 
objection? Hearing none, so ordered.
    Gentlemen and lady, we want to thank you. We may have 
questions for the record. We would ask that you put them back 
in. We do plan to move legislation in the very--in this 
Congress on this issue.
    This hearing is adjourned.
    [Whereupon, at 4:28 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
  Responses for the Record of Edward F. Sproat III, Vice President of 
               International Programs, Exelon Corporation
    Question 1. Do you believe it is important for the nuclear utility 
industry to have a domestic source of uranium enrichment services? If 
not, why not? What about conversion services?
    Response. One of the primary advantages of nuclear fuel has been 
the presence of a reliable and competitive nuclear fuel market. If 
nuclear power is to continue to be competitive with other electric 
generation technologies, nuclear fuel supply--both enrichment and 
conversion--must remain both reliable and competitive.
    Clearly, a domestic source of enrichment services can furnish a 
high degree of reliability. At the same time, reliability is not merely 
dependent upon the geographic location of the enrichment service 
provider. Enrichment companies must also be financially viable and able 
to provide assurances of their long-term viability. Today, the market 
for enrichment services is truly global in nature, and many foreign 
suppliers of enrichment services have proven to be highly reliable.
    It is equally important for the nuclear industry to have a fair and 
competitive source of supply for enrichment services. Effective risk 
management dictates that nuclear plant operators diversify their 
sources of fuel supplies, particularly in the face of increasing 
competition and consolidation. Regardless of the price, no company will 
want to rely on a single source to meet 100 percent of their fuel 
enrichment needs.
    In our view, as long as the nuclear fuel markets are reliable and 
competitive, a domestic enrichment capability--while perhaps 
preferable--is not essential. As the nuclear industry seeks to compete 
in an increasingly deregulated and competitive electric industry, it is 
difficult to justify subsidizing enrichment service providers using 
inefficient and obsolete technology merely because they are located in 
the United States. We believe as a matter of policy that the interests 
of consumers would be better served if USEC were subject to the rigors 
of a competitive market for enrichment services rather than given 
continued protection as a monopoly service provider.
    Question 2. In the past there has been a glut in nuclear fuel 
available to the US, but that appears to be changing rapidly, with US 
dependence on a single plant providing less than half of US 
requirements, and the remaining supply coming from Russia. Does the 
nuclear utility industry have any concerns about the reliability of 
nuclear fuel supplies in the future in view of the fact that there have 
been 5 interruptions in shipments of nuclear fuel from Russia in the 
past 5 years?
    Response. We do have concerns about the wisdom of depending on a 
limited number of suppliers for an essential service. While the 
disruptions in Russian supply to date have had little actual impact, it 
is not clear what impact future disruptions might have following the 
closure of USEC's Portsmouth facility. If Cogema and Urenco were forced 
from the US market as a result of USEC's trade actions, the 
consequences of any disruption in either Russian or USEC supply would 
be magnified.
    Question 3. What are your views on the anti-dumping case brought by 
USEC? How do you reconcile USEC efforts to raise SWU prices with the 
need to make the Paducah plant viable as a domestic source of 
enrichment services? Wouldn't a domestic enrichment plant be consistent 
with the view that we need a domestic supply?
    Response. USEC has brought antidumping and countervailing duty 
actions against enrichment service providers in Europe, which now 
supply about 20 percent of the U.S. market. The purpose of the 
antidumping and countervailing duty laws is to counteract sales of 
dumped or subsidized goods, not services. Though enrichment suppliers 
such as USEC and the European enrichers contract with the utilities for 
the service of enriching uranium owned by the utilities, USEC is asking 
the Commerce Department and the International Trade Commission to treat 
the enrichment services contracts as contracts for the sale of low-
enriched uranium (LEU). However, as described in a letter submitted to 
the Commerce Department by the Ad Hoc Utilities Group, the trade laws 
do not cover sales of services, such as uranium enrichment contracts. 
The imposition of punitive duties on sales of services would be both 
contrary to U. S. law and internationally unprecedented.
    Contrary to USEC's recent claims, the imposition of duties has the 
potential to significantly impact ratepayers and the future 
competitiveness of nuclear power. USEC is seeking duties of 39 to 73 
percent. Since the value of LEU used by utilities is $1.7 billion per 
year (on the basis of current market prices), the resulting increase in 
utility fuel costs ranges from $650 million to $1.2 billion annually.
    USEC attempts to minimize the potential impact of its trade action 
by understating the relative cost of enrichment. With NEI's definition 
of production costs as a basis, fuel represents roughly one third of 
production costs and enrichment represents roughly one half of fuel 
cost, so enrichment actually represents roughly 17 percent of nuclear 
production costs---not 10 percent as claimed by USEC. But even this 
analysis understates the potential impact of USEC's trade action, 
because U.S. Customs assesses duties on the value of imported 
products--in this case LEU. Given that LEU represents roughly 80 
percent of the total value of nuclear fuel, roughly 27 percent of 
nuclear production costs are subject to higher costs from duties.
    Through its trade actions, USEC seeks to impose prohibitive duties 
on its only competition in the U.S. market. If USEC is successful, 
proven and reliable suppliers may be effectively excluded from 
participating in the U.S. market, thereby eliminating vital competition 
in the supply of this critical service, on which the nuclear generators 
depend.
    USEC's efforts to raise SWU prices are necessary only from their 
own perspective. In Exelon's view, as long as the nuclear fuel markets 
are reliable and competitive, a domestic enrichment capability--while 
perhaps preferable--is not essential.
    Question 4. While I know your industry benefits from low SWU prices 
in the short-term, has the industry reached a consensus on what you 
would do if we lose all domestic supply and Russian shipments were 
interrupted for a protracted period of time?
    Response. Exelon cannot speak for the nuclear utility industry, but 
we are not aware of any such consensus. We believe that simultaneous 
loss of domestic supply and interruption of Russian shipments is an 
unlikely scenario. In this extremely unlikely case, it is probable that 
certain actions would be taken by the U. S. government to assure that 
there was an adequate supply of enrichment services beyond that 
available from other foreign suppliers. Many of the contracts currently 
held by USEC are backed by US government performance guarantees that 
were extended by the USEC privatization act. Government Actions could 
include allowing Russia to sell low enriched uranium directly into the 
U.S. market by modifying the Suspension Agreement currently in place, 
restarting the Portsmouth GDP under DOE control, or both.
    Question 5. In a matter of a few months, the restrictions on the 
ownership of USEC stock will permit investors to hold more than 10% of 
its stock. There has been some concern that efforts to maximize share 
price could result in the liquidation of USEC's assets. Could you 
explain what provisions the nuclear utility industry has in place to 
assure deliveries of nuclear fuel in such a circumstance if the Paducah 
plant were also closed as part of such liquidation?
    Response. Maximization of USEC's share price is not likely to lead 
to liquidation of the company. Liquidation is likely if the share price 
or market valuation is less than the value of USEC's inventories.
    Exelon cannot speak for the nuclear utility industry. Although an 
entity in control of USEC could make the decision to cease operating 
the Paducah facility, there are still contracts with USEC that require 
fulfillment. If the contracts were not abided by, the new entity would 
face protracted legal actions from the customers.
    In the event that the Paducah plant were closed and USEC ceased to 
function as an entity, it is possible that the U. S. government could 
take over operation of the facility until an alternative could be 
established to provide for enrichment demand no met by supplies 
available from foreign suppliers.
    Question 6. Are utilities such as yours considering the deployment 
of advanced uranium enrichment technologies?
    Response. Exelon is considering many alternatives with respect to 
its nuclear fuel supply.
    DOE recently communicated to Congress that the United States needs 
an advanced enrichment technology development program to sustain its 
uranium enrichment industry in the long-term. While research on several 
domestic technology initiatives is ongoing, it is unlikely that these 
research initiatives will result in the commercialization of an 
advanced technology prior to the retirement of USEC's remaining gaseous 
diffusion plant. The best means of assuring an uninterrupted transition 
to a competitive domestic source of enrichment is through the 
construction of a new plant by the private sector using existing 
centrifuge technology. The United States should encourage private 
sector initiatives in this regard.
    Question 7. Do utilities such as yourselves believe that USEC 
should remain as the exclusive executive agent for the brokering of the 
blended down highly enriched uranium from Russia. If not, what role to 
you see for nuclear power plant operators such as your company?
    Response. No. Exelon does not believe that USEC should remain as 
the exclusive executive agent for brokering the blended down Russian 
HEU. Exelon believes that an alternate executive agent or agents would 
provide competition that would be beneficial to the U.S. market as well 
as Russia.
    USEC has suggested that the appointment of additional executive 
agents for Russian HEU would cause USEC to shut down its remaining 
domestic production facility. However, we believe that the appointment 
of additional executive agents would forestall the retirement of USEC's 
remaining production facility, not accelerate it.
    Given that USEC's sales have been relatively constant, use of the 
Russian HEU material has directly displaced domestic production. 
Effective risk management dictates that utilities diversify their 
sources of fuel supplies, particularly in the face of increasing 
competition and consolidation. For this reason alone, it is unrealistic 
for USEC to expect to maintain greater than 70 percent of the U.S. 
enrichment market. Given the increasing pressures on utilities to 
manage risks, USEC's continuation as the sole executive agent at a time 
when the volume of its sales may be dropping due to utility 
diversification can only have the effect of reducing domestic output. 
Additional executive agents would reduce USEC's access to Russian 
supplies and prompt USEC to increase its domestic output.
    More importantly, the deeply discounted prices USEC is seeking in 
its recently proposed HEU Agreement amendment threaten to introduce 
greater revenue uncertainties for the Russians. The most critical 
element to the HEU Agreement's future stability is the revenue received 
by Russia. Russia must be paid fair prices, which can best be assured 
through the bidding of multiple executive agents. This would also 
ensure that an alternative exists in the event one agent is unable to 
perform for financial or other reasons. Given the importance of this 
supply to U.S. nuclear generators and their customers, it is essential 
that immediate steps be taken to ensure its future reliability.
    Question 8. If the utilities served as an executive agent for the 
Russian HEU deal as a way to reduce their fuel costs by eliminating 
USEC as a middleman, would you be willing to direct those savings into 
maintaining operations at Paducah until new technology was deployed?
    Response. As the nuclear generators seek to compete in an 
increasingly deregulated and competitive electric industry, it is 
difficult to justify subsidizing a particular enrichment service 
provider merely because it is located in the United States. It is also 
not clear to us that operations at Paducah require a subsidy.
    Question 9. I know you disagree with the Energy Information 
Agency's view that construction of new nuclear power plants in the U.S. 
for the foreseeable future is unlikely. What would it cost to build a 
nuclear power plant using the best and proven technology available 
today?
    Response. Current ``extensions'' of Light Water reactor plants 
(AP600, AP100, ABWR, etc.) are estimated to cost between 3.5 and 5.1 
cents/kWh to build and operate. These estimates may be optimistic, as 
no one has licensed or built such a plant and we expect that the 
licensing and construction of these plants will take between six and 
eight years each.
    For reasons outlined in my written testimony, Exelon believes that 
a small, modular reactor such as the Pebble Bed Modular Reactor (PBMR) 
is best suited for operation in a deregulated marketplace. Preliminary 
studies estimate that the PBMR could be built and operated for a total 
cost of 3.2 to 3.8 cents/kWh and constructed in less than 24 months 
once the design has been certified by the Nuclear Regulatory 
Commission.
                                 ______
                                 
    Responses for the Record of John R. Longenecker, Longenecker & 
                Associates, Inc., Management Consultants
    Question 1. How much SWU does the US use each year, and how much of 
this is imported from Russia at present?
    Response. In the year 2000, US nuclear power plants consumed 10.4 
million SWU. Of this total demand, about 53% was supplied by Russian 
HEU blending.
    Question 2. If we all agree that it is in our best interest to 
dismantle Russia's nuclear arsenal and bring in 5.5 million SWU per 
year from that source, do you believe the federal government should 
subsidize that arrangement in the interest of national security?
    Response. No. I believe that the objectives of the US-Russian HEU 
agreement can be achieved without subsidy by the US government. Under 
the current Russian HEU contract, USEC realizes trading profits of 
about $100 million per year. As the agreement is renegotiated to 
provide for future deliveries, market-based arrangements with multiple 
executive agents could provide continuity of supply without subsidy. 
Since the HEU deal is a government-to-government agreement, I believe 
that the most significant US government role is to facilitate the 
smooth continuation of the contract to whatever extent that it can.
    Question 3. In your opinion, how long can USEC operate the Paducah 
plant and still turn a profit based on their existing and anticipated 
contracts with the nuclear utilities?
    Response. The answer to your question depends on the average price 
of SWU in the market. Today USEC is the high cost producer in the world 
market based on its failure to follow through on its earlier 
commitments to deploy new lower cost enrichment capacity. In the 
future, the production costs at Paducah are likely to exceed the cost 
of buying Russian SWU, and the costs of any of the other primary 
enrichment producers. Realizing this, USEC is attempting to increase 
prices to US customers by its trade action against European suppliers 
of enrichment services.
    A better alternative is for the US to build new, cost competitive 
domestic enrichment capacity as soon as possible. The high costs of 
production from the Paducah GDP, and its economic obsolescence should 
stimulate a market response to build cost competitive capacity either 
in the US or abroad. I strongly support building new enrichment 
capacity in the US, but realize that regulatory and other conditions 
would have to be conducive for this to occur.
    While new enrichment capacity is being constructed, I assume that 
the US will continue to need production from Paducah due to limits on 
Russian imports, and the limited supply capability in Europe.
    Question 4. Since the Russians have interrupted SWU deliveries on 
five occasions in the last five years, can we consider the Russian SWU 
a reliable source?
    Response. Reliability is certainly a major issue in nuclear fuel 
supply. Although there are concerns regarding future changes in Russian 
policy, infrastructure failures and the like, overall, I believe that 
the Russian supply of blended HEU will continue to be reliable. The US 
currently is dependent on Russian SWU, but the Russians also depend 
strongly on the funds provided by the US for those SWU.
    However, future short-term disruptions are possible, and I believe 
that the key is for the US to factor potential problems into 
negotiations on the Russian HEU deal, and also to find a way to bridge 
any short-term disruptions.
    Question 5. Do you agree with the DOE assessments that although the 
Russian HEU agreement is a very important proliferation agreement, it 
should not be considered a secure source of energy supply for our 
nation's nuclear power plants due to a number of unresolved issues in 
the Agreement's implementation? What contingencies should be in place 
to provide enrichment services domestically, and does the government 
have a role in paying for a portion of this energy security as part of 
enabling the non-proliferation benefits of selling the imported uranium 
supplied under the HEU Agreement with Russia?
    Response. Reliability of supply issues exist, and the first 
priority of the US government should be to stabilize the Russian HEU 
agreement. One way of doing so would be to name a second executive 
agent. This can be done at no cost to the government. Having multiple 
executive agents would offer greater assurance of continuity of 
deliveries by providing greater financial incentives to the Russians 
through competition.
    The trading profits from selling Russian HEU to utilities are 
derived from an exclusive franchise granted by the US government. 
Congress should examine whether this exclusive franchise should 
continue to reside with USEC, and what benefit the country will derive 
from the billion dollars in trading profits that the executive agent is 
likely to realize over the next decade.
    USEC appears to have enough inventories to bridge a supply 
disruption of at least 6 months. However, additional US government 
actions could also be taken, although they would require government 
funding. For example, DOE could make its surplus US HEU inventories 
available for blending in the event of a Russian supply disruption. 
Plans could be put in place that would allow the blending of HEU in US 
based facilities to begin with a short lead-time.
    Another alternative, although quite expensive, is for DOE to create 
a strategic stockpile of enriched uranium. This could be done by 
accelerating the rate of Russian HEU blending, down blending US HEU, or 
by operating the Portsmouth GDP for some period of time after June 
2001. If such a stockpile is created, DOE should agree to keep the 
material off the market, and only make it available in case of 
disruption.
    Question 6. Do you believe is it important to have a domestic 
source of enrichment services?
    Response. Yes, this is vitally important to our national energy 
security. The US government should act to assure that it facilitates 
and does not inhibit private sector efforts to construct new cost 
competitive enrichment capacity in the US as soon as possible. I 
believe that this can be done by the private sector in 5 to 6 years. 
The private sector should pick the technology to be deployed, and in 
the near term this likely would involve non-US technology.
    Continued development of US technology by DOE, possibly for long-
term deployment, may be justified. However, the near term priority must 
be on constructing new enrichment capacity to replace the economically 
obsolete US GDP capacity.
    Question 7. The GAO in a December 2000 report questioned the 
benefits of proceeding forward with the proposal to import an 
additional 1 million SWU of enriched uranium from Russia that is 
produced in their commercial uranium enrichment plants. in addition to 
the 5.5 million SWU per year brought in under the non-proliferation 
agreement. What happens to the economics of the Paducah plant if 
Russian commercial SWU is brought into the US and production is cut, 
say from 5 to 4 million SWU/year?
    Response. In round numbers, assuming the availability of low cost 
power for production at Paducah of 5 million SWU per year, unit costs 
of production, excluding R&D, administrative, dividends and interest 
costs, would be about $95/SWU. If production at Paducah were 4 million 
SWU per year, unit costs of production would increase to about $105/
SWU. Allocating USEC's R&D, administrative, dividend and interest costs 
to arrive at a breakeven price adds roughly another $15 to these 
numbers. As I stated before, USEC's production costs are above those of 
any of the major primary enrichment suppliers, and this points out the 
need for new, low cost enrichment capacity in the US.
    Since the US likely will require the operation of the Paducah plant 
to meet domestic fuel needs, absent a decision to lift restrictions on 
the commercial sale of Russian SWU in the US, our country needs new 
competitive enrichment capacity as soon as possible. This should be the 
main US priority.
    Question 8. Do you believe that USEC has a viable business model to 
sustain it for the long run as a domestic nuclear fuel producer? If 
not, what should be done to assure that there will be a domestic 
uranium enrichment industry over the next 3-5 years? What steps should 
Congress take to encourage this, if any?
    Response. In my opinion, USEC does not have a viable business 
strategy to sustain it for the long term. USEC is increasingly becoming 
a trader of blended Russian HEU. In fact, it realizes trading profits 
of approximately $100 million per year from this Executive Agency, and 
will meet about 75% of its 2001 deliveries to US utilities using 
Russian SWU.
    Since USEC lacks a proven low cost enrichment technology, its 
future strategy appears to rely mainly on obtaining import restrictions 
on its European competitors to obtain an effective monopoly position in 
the US market, and on generating trading profits from the brokering of 
Russian HEU. To assure that there is a viable US industry in the 
future, I would suggest that Congress provide support, as needed to 
private sector plans as they evolve to build new uranium enrichment 
capacity in this country.
    Question 9. Won't the trade action by USEC extend the life of the 
domestic industry for a few more years, if successful?
    Response. The United States needs a reliable, diverse, economic 
supply of enrichment services to sustain a competitive nuclear power 
option and to ensure future energy security. USEC's initiatives 
including its antidumping action against European enrichment suppliers, 
work against these objectives and are creating significant 
uncertainties and unnecessary financial costs for nuclear operators and 
customers
    Today, although USEC supplies almost 70% of the US market, it seeks 
import duties of up to 73% on its lower cost European competitors, 
price reductions for Russian supplied SWU from HEU, and increased 
Russian SWU imports as a means of survival.
    If USEC won its trade case, it would effectively be granted a 
monopoly on the US enrichment market, and could raise prices by the 
maximum allowed by the duties imposed on European enrichers. It is 
clear that imposition of duties would increase the cost of enrichment 
services from European suppliers, possibly excluding them from the US 
market, and would allow USEC to increase its prices to US utilities 
accordingly.
    Even if USEC acted as a ``benevolent monopolist'', and did not 
raise prices to the maximum extent possible, US utilities would still 
end up paying hundreds of millions of dollars per year in higher 
nuclear fuel costs. Clearly, the financial impacts of such action would 
be significant both to US electricity customers and to the US economy 
as a whole. Furthermore, these hundreds of millions of dollars would 
accrue solely to USEC and its shareholders, providing USEC a financial 
windfall from successful litigation rather than from efficient, 
competitive operations.
    In addition, there is no certainty that USEC would use its windfall 
from the trade sanctions to construct new enrichment capacity in the 
US. Specifically, USEC has no proven advanced technology, and its 
credit rating has been downgraded to junk bond status, making it 
unlikely that it could obtain financing to deploy any new enrichment 
technology that it might acquire. The stark reality is that under 
USEC's plan, US utilities and electricity customers could pay USEC 
billions in increased fuel costs over the next decade and still have 
just one 60-year-old GDP operating in this country.
    In summary, unfounded trade sanctions on foreign uranium enrichment 
services suppliers will not assure a sustainable uranium enrichment 
industry in the United States. Trade sanctions would be bad for our 
nation's economy, and may serve as a distraction from the critical task 
of building new competitive US enrichment capacity. Rather than 
pursuing trade actions, the US should be focusing on implementing a 
credible plan for building new, low cost enrichment capacity in the US 
so that we can compete in global markets.