Nuclear Regulatory Commission: Preliminary Observations on Its	 
Process to Oversee the Safe Operation of Nuclear Power Plants	 
(19-JUN-06, GAO-06-888T).					 
                                                                 
The Nuclear Regulatory Commission (NRC) has the responsibility to
provide oversight to ensure that the nation's 103 commercial	 
nuclear power plants are operated safely. While the safety of	 
these plants has always been important, since radioactive release
could harm the public and the environment, NRC's oversight has	 
become even more critical as the Congress and the nation consider
the potential resurgence of nuclear power in helping to meet the 
nation's growing energy needs. Prior to 2000, NRC was criticized 
for having a safety oversight process that was not always focused
on the most important safety issues and in some cases, was overly
subjective. To address these and other concerns, NRC implemented 
a new oversight process--the Reactor Oversight Process (ROP). NRC
continues to modify the ROP to incorporate feedback from	 
stakeholders and in response to other external events. This	 
testimony summarizes information on (1) how NRC oversees nuclear 
power plants, (2) the results of the ROP over the past several	 
years, and (3) the aspects of the ROP that need improvement and  
the status of NRC's efforts to improve them. This testimony	 
discusses preliminary results of GAO's work. GAO will report in  
full at a later date. GAO analyzed program-wide information,	 
inspection results covering 5 years of ROP operations, and	 
detailed findings from a sample of 11 plants.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-888T					        
    ACCNO:   A55659						        
  TITLE:     Nuclear Regulatory Commission: Preliminary Observations  
on Its Process to Oversee the Safe Operation of Nuclear Power	 
Plants								 
     DATE:   06/19/2006 
  SUBJECT:   Internal controls					 
	     Nuclear powerplant safety				 
	     Nuclear powerplant security			 
	     Nuclear powerplants				 
	     Regulatory agencies				 
	     Inspection 					 
	     NRC Reactor Oversight Process			 

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GAO-06-888T

                 United States Government Accountability Office

GAO                       Testimony Before the Subcommittee on Oversight   
                             and Investigations, Committee on Energy and      
                             Commerce, U.S. House of Representatives          
For Release on Delivery   NUCLEAR REGULATORY COMMISSION                    
Expected at 4:00 p.m. EDT 
Monday, June 19, 2006     
                             Preliminary Observations on Its Process to       
                             Oversee                                          
                             the Safe Operation of Nuclear Power Plants       
                             Statement of Jim Wells, Director Natural         
                             Resources and Environment                        

                                  GAO-06-888T

                         NUCLEAR REGULATORY COMMISSION

Preliminary Observations on Its Process to Oversee the Safe Operation of
Nuclear Power Plants

What GAO Found

NRC uses various tools to oversee the safe operation of nuclear power
plants, including physical plant inspections and quantitative measures or
indicators of plant performance. To apply these tools, NRC uses a
riskinformed and graded approach-that is, one considering safety
significance in deciding on the equipment and operating procedures to be
inspected and employing increasing levels of regulatory attention to
plants based on the severity of identified performance problems. The tools
include three types of inspections-baseline, supplemental, and special.
All plants receive baseline inspections of plant operations almost
continuously by NRC inspectors. When NRC becomes aware of a performance
problem at a plant, it conducts supplemental inspections, which expand the
scope of baseline inspections. NRC conducts special inspections to
investigate specific safety incidents or events that are of particular
interest to NRC because of their potential significance to safety. The
plants also self-report on their safety performance using performance
indicators for plant operations related to safety, such as the number of
unplanned reactor shutdowns.

Since 2001, NRC's ROP has resulted in more than 4,000 inspection findings
concerning nuclear power plant licensees' failure to comply with
regulations or other safe operating procedures. About 97 percent of these
findings were for actions or failures NRC considered important to correct
but of low significance to overall safe operation of the plants. In
contrast, 12 of the inspection findings, or less than 1 percent, were of
the highest levels of significance to safety. On the basis of its findings
and the performance indicators, NRC has subjected more than three-quarters
of the 103 operating plants to oversight beyond the baseline inspections
for varying amounts of time.

NRC has improved several key areas of the ROP, largely in response to
independent reviews and feedback from stakeholders. These improvements
include better focusing its inspections on those areas most important to
safety, reducing the time needed to determine the risk significance of
inspection findings, and modifying the way that some performance
indicators are measured. NRC also recently undertook a major initiative to
improve its ability to address plants' safety culture-that is, the
organizational characteristics that ensure that issues affecting nuclear
plant safety receive the attention their significance warrants. GAO and
others have found this to be a significant shortcoming in the ROP.
Although some industry officials have expressed concern that its changes
could introduce undue subjectivity to NRC's oversight, given the
difficulty in measuring these often intangible and complex concepts, other
stakeholders believe its approach will provide NRC better tools to address
safety culture issues at plants. NRC officials acknowledge that its effort
is only a step in an incremental approach and that continual monitoring,
improvements, and oversight will be needed to fully detect deteriorating
safety conditions before an event occurs.

                 United States Government Accountability Office

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss our ongoing review of how the
Nuclear Regulatory Commission (NRC) oversees the safe operation of the
nation's 103 operating commercial nuclear power plants, which provide
about 20 percent of U.S. electricity. The safety of these plants, which
are located at 65 sites in 31 states, has always been important, as an
accident could result in the release of radioactive material and
potentially harm public health and the environment. NRC is responsible for
issuing regulations, licensing and overseeing plants, and requiring
necessary actions to protect public health and safety, while plant
operators are responsible for safely operating their plants in accordance
with their licenses. NRC's oversight has become even more critical as the
Congress and the nation consider the potential resurgence of nuclear power
in helping to meet the nation's growing energy needs. No new orders for a
plant have been placed since the 1979 accident at the Three Mile Island
plant, but in the face of concerns about aging plants, energy security,
global warming, and the ever increasing need for energy to fuel the
nation's economy, nuclear power is resurfacing as a principal option. An
accident could threaten public confidence in nuclear power just as it
begins to emerge from the shadows of the Three Mile Island accident. It is
critical that NRC be able to ensure that nuclear power plants are operated
safely and that public confidence about their safety is high.

Prior to 2000, NRC was criticized for having a safety oversight process
that was not always focused on the most important safety issues and in
some cases, regulatory activities were redundant, inefficient, and overly
subjective. While its new process-which NRC refers to as the Reactor
Oversight Process (ROP)-is similar to its prior process in that the
oversight activities largely consist of physical plant inspections, the
inspections now focus on more important safety issues and the goal is to
make assessments of plants' safety performance more objective,
predictable, and understandable. The unexpected discovery, in March 2002,
of extensive corrosion and a pineapple-size hole in the reactor vessel
head-a vital barrier preventing a radioactive release-at the Davis-Besse
nuclear power plant in Ohio led NRC to re-examine its safety oversight and
other regulatory processes to determine how such corrosion could be
missed. Based on the lessons learned from the event, NRC made several
changes to the ROP. NRC continues to annually assess the ROP by obtaining
feedback from the industry and other stakeholders such as public interest
groups, and incorporates this feedback and other information into specific
performance metrics to assess its effectiveness.

Page 1 GAO-06-888T

We are preparing a report to you and other Members of the Congress later
this year on (1) how NRC oversees nuclear power plants to ensure that they
are operated safely, (2) the results of the ROP over the past several
years in terms of the number and types of inspection findings, and (3) the
aspects of the ROP that need improvement and the status of NRC's efforts
to improve them.1 To examine how NRC oversees plants, we reviewed NRC's
regulations, inspection manuals, and other guidance documents; interviewed
NRC headquarters and regional officials and regional and onsite
inspectors; visited the Salem and Hope Creek nuclear power plants; and
attended several public meetings covering various nuclear power plant
oversight topics. To examine the results of the ROP over the past several
years, we analyzed NRC data on nuclear plant safety for 2001 through 2005,
the years since implementation of the ROP for which data were available
for the full year, and discussed our analysis with NRC officials. We
assessed the reliability of this data and determined that the data were
sufficiently reliable for the purposes of our report. To examine areas of
the ROP that need improvement and the status of NRC's efforts to improve
them, we reviewed NRC documents, including annual selfassessment reports;
interviewed officials from NRC and outside stakeholder groups; and
attended several key public meetings covering proposed changes to
oversight procedures. We also reviewed various external evaluations of the
ROP, including our prior reports and those of the NRC Inspector General.
Additionally, we selected a nonprobability sample of 6 nuclear power sites
(totaling 11 plants) that provided coverage of each of NRC's four regional
offices and varying levels of plant performance and NRC oversight since
2000. We reviewed relevant inspection reports and assessment documents and
interviewed NRC and industry officials at each site to examine how NRC
applies the ROP to identify and correct safety problems. We are conducting
this work in accordance with generally accepted government auditing
standards. We performed the work reflected in this testimony from July
2005 to June 2006.

Physical security, which is also covered by the ROP, is not included in
this review. For information on NRC's physical security, see GAO, Nuclear
Power Plants: Efforts Made to Upgrade Security, but the Nuclear Regulatory
Commission's Design Basis Threat Process Should Be Improved, GAO-06-388
(Washington, D.C.: Mar. 14, 2006).

Page 2 GAO-06-888T

To date, our work indicates the following:

     o NRC uses various tools to oversee the safe operation of nuclear power
       plants, including physical plant inspections of equipment and records
       and quantitative measures or indicators of plant performance such as
       the number of unplanned shutdowns. NRC uses a graded and risk-informed
       approach-that is, one considering safety significance in deciding on
       the equipment or operating procedures to be inspected and employing
       increasing levels of regulatory attention to plants based on the
       severity of identified performance problems-to apply these tools. All
       plants receive baseline inspections, which are inspections of plant
       operations that are conducted almost continuously by NRC inspectors
       usually located at each nuclear power plant site. When NRC becomes
       aware of a performance problem at a plant, it conducts supplemental
       inspections, which expand the scope of baseline inspections. NRC
       conducts special inspections to investigate specific safety incidents
       or events that are of particular interest to NRC because of their
       potential significance to safety. The plants also self-report on their
       safety performance using performance measures or indicators in
       quarterly reports submitted to NRC. Plants' quarterly reports of
       performance indicators are verified by NRC's on-site inspectors. NRC
       analyzes each of its inspection findings to determine the finding's
       significance in terms of safety, and applies increasing levels of
       oversight based on the number and level of risk of the findings
       identified.
          * Since 2001, NRC's ROP has resulted in more than 4,000 inspection
            findings concerning nuclear power plant licensees' failure to
            comply with regulations or other safe operating procedures. About
            97 percent of these findings were for actions or failures NRC
            considered important to correct but of very low significance to
            overall safe operation of the plants. For example, a finding of
            very low risk significance was issued at one plant after a worker
            failed to wear the proper radiation detector and at another plant
            because the operator failed to properly evaluate and approve the
            storage of flammable materials in the vicinity of safety-related
            equipment. In contrast, 12 of the inspection findings, or less
            than 1 percent, were of the highest levels of significance to
            safety. For example, NRC issued a finding of the highest risk
            significance at one plant after a steam generator tube failed,
            causing an increased risk of the release of radioactive material.
            Similarly, there were 156 instances, or less than 1 percent, in
            which data reported for individual performance indicators were
            outside NRC's acceptable category of performance. On the basis of
            its findings and the performance indicators, NRC has subjected
            more than three-quarters of the 103 operating plants to oversight
            beyond the baseline inspections for varying amounts of time. Over
            the past 5 years, 5 plants have been subject to the highest level
            of NRC oversight that still allows continued
          * operations. According to NRC officials, the results of its
            oversight process at an industry or summary level serve as an
            indicator of overall industry performance, which to date
            indicates good safety performance.
     o NRC has improved several key areas of the ROP, largely in response to
       independent reviews and feedback from stakeholders, including its
       regional and on-site inspectors, usually obtained during NRC's annual
       selfassessment of the oversight process. These improvements include
       better focusing its inspections on those areas most important to
       safety, reducing the time needed to determine the risk significance of
       inspection findings, and modifying the way that some performance
       indicators are measured. For the most part, NRC considers these
       efforts to be refinements rather than significant changes. One
       significant shortcoming in the ROP that we and others have found is
       that it is not as effective as it could be in identifying and
       addressing early indications of deteriorating safety at nuclear power
       plants before problems develop. In response to this concern, NRC
       recently undertook a major initiative to improve its ability to
       address plants' safety culture-that is, the organizational
       characteristics that ensure that issues affecting nuclear plant safety
       receive the attention their significance warrants. NRC and others have
       long recognized that safety culture attributes, such as attention to
       detail, adherence to procedures, and effective corrective and
       preventative action, have a significant impact on a plant's safety
       performance. NRC is taking action to improve how it incorporates
       safety culture into the ROP by redefining and increasing its focus on
       more qualitative and cross-cutting issues or aspects of plant
       performance-including a safety conscious work environment, human
       performance, and problem identification and resolution-and developing
       new requirements to more directly assess safety culture at poorer
       performing plants. Some of its actions have been controversial.
       Although some industry officials have expressed concern that these
       changes could introduce undue subjectivity to NRC's oversight, given
       the difficulty in measuring these often intangible and complex
       concepts, other stakeholders believe this approach will provide NRC
       better tools to address safety culture issues at plants. NRC officials
       acknowledge that this effort is only a step in an incremental approach
       and that continual monitoring, improvements, and oversight will be
       needed to fully detect deteriorating safety conditions before an event
       occurs.

NRC is devoting considerable effort to overseeing the safe operation of
the nation's commercial nuclear power plants, and its process for doing so
appears logical and well-structured. This does not mean that NRC's
oversight is perfect. However, NRC is also demonstrating that it is aware
of this fact and is willing to make changes to improve. Its efforts to
continuously obtain feedback and consider the need for improvement to

Page 4 GAO-06-888T

                                   Background

the ROP are important as nuclear power plants age and the nation considers
building new plants. In this regard, its safety culture initiative may be
its most important improvement to the ROP. As we complete our work, we
will be examining whether NRC needs a more formal mechanism to assess the
effectiveness of this initiative, including incorporating stakeholder
feedback and developing specific measures to assess its performance. It
has been more than 4 years since Davis-Besse, and it appears that NRC is
now taking concrete actions to begin incorporating safety culture into the
ROP.

I would also like to point out that the ROP is a very open process in that
NRC provides the public and its other stakeholders with considerable
specific and detailed information on its activities and findings with
regard to safety at individual plants. However, to ensure or foster even
greater public confidence in safety oversight, as we complete our work, we
will be examining whether NRC can make this information more meaningful by
providing industry-wide or summary data for key components of its
oversight process. This information may provide a useful measure of
overall industry performance and allow for comparisons between the safety
performance of a specific plant to that of the industry as a whole.

NRC is an independent agency of over 3,200 employees established by the
Energy Reorganization Act of 1974 to regulate civilian-that is,
commercial, industrial, academic, and medical-use of nuclear materials.
NRC is headed by a five-member Commission. The President appoints the
Commission members, who are confirmed by the Senate, and designates one of
them to serve as Chairman and official spokesperson. The Commission as a
whole formulates policies and regulations governing nuclear reactor and
materials safety, issues orders to licensees, and adjudicates legal
matters brought before it.

NRC and the licensees of nuclear power plants share the responsibility for
ensuring that commercial nuclear power reactors are operated safely. NRC
is responsible for issuing regulations, licensing and inspecting plants,
and requiring action, as necessary, to protect public health and safety.
Plant licensees have the primary responsibility for safely operating their
plants in accordance with their licenses and NRC regulations. NRC has the
authority to take actions, up to and including shutting down a plant, if
licensing conditions are not being met and the plant poses an undue risk
to public health and safety.

Nuclear power plants have many physical structures, systems, and
components, and licensees have numerous activities under way, 24-hours a
day, to ensure that plants operate safely. NRC relies on, among other
things, its on-site resident inspectors to assess plant conditions and the
licensees' quality assurance programs such as those required for
maintenance and problem identification and resolution. With its current
resources, NRC can inspect only a relatively small sample of the numerous
activities going on during complex plant operations. According to NRC, its
focus on the more safety significant activities is made possible by the
fact that safety performance at plants has improved as a result of more
than 25 years of operating experience.

Commercial nuclear power plants are designed according to a "defense in
depth" philosophy revolving around redundant, diverse, and reliable safety
systems. For example, two or more key components are put in place so that
if one fails, there is another to back it up. Plants have numerous builtin
sensors to monitor important indicators such as water temperature and
pressure. Plants also have physical barriers to contain the radiation and
provide emergency protection. For example, the nuclear fuel is contained
in a ceramic pellet to lock in the radioactive byproducts and then the
fuel pellets are sealed inside rods made of special material designed to
contain fission products, and the fuel rods are placed in reactors housed
in containment buildings made of several feet of concrete and steel.

Furthermore, the nuclear power industry formed an organization, the
Institute of Nuclear Power Operations (INPO) with the mission to "promote
the highest levels of safety and reliability-to promote excellencein the
operation of nuclear electric generating plants." INPO provides a system
of personnel training and qualification for all key positions at nuclear
power plants and workers undergo both periodic training and assessment.
INPO also conducts periodic evaluations of operating nuclear plants,
focusing on plant safety and reliability, in the areas of operations,
maintenance, engineering, radiological protection, chemistry, and
training. Licensees make these evaluations available to the NRC for
review, and the NRC staff uses the evaluations as a means to determine
whether its oversight process has missed any performance issues.

NRC Uses Various Tools and Takes a Graded and Risk-Informed Approach to Ensuring
the Safety of Nuclear Power Plants

NRC uses various tools to oversee the safe operation of nuclear power
plants, generally consisting of physical plant inspections of equipment
and records and objective indicators of plant performance. These tools are
risk-informed in that they are focused on the issues considered most
important to plant safety. Based on the results of the information it
collects through these efforts, NRC takes a graded approach to its
oversight, increasing the level of regulatory attention to plants based on
the severity of identified performance issues. NRC bases its regulatory
oversight process on the principle and requirement that plant licensees
routinely identify and address performance issues without NRC's direct
involvement. An important aspect of NRC's inspections is ensuring the
effectiveness of licensee quality assurance programs. NRC assesses overall
plant performance and communicates these results to licensees on a
semiannual basis.

During fiscal year 2005, NRC inspectors spent a total of 411,490 hours on
plant inspection activities (an average of 77 hours per week at each
plant). The majority of these inspection efforts were spent on baseline
inspections, which all plants receive on an almost continuous basis.
Baseline inspections, which are mostly conducted by the two to three NRC
inspectors located at each nuclear power plant site, evaluate the safety
performance of plant operations and review plant effectiveness at
identifying and resolving its safety problems.2 There are more than 30
baseline inspection procedures, conducted at varying intervals, ranging
from quarterly to triennially, and involving both physical observation of
plant activities and reviews of plant reports and data. The inspection
procedures are risk-informed to focus inspectors' efforts on the most
important areas of plant safety in four ways: 1) areas of inspection are
included in the set of baseline procedures based on, in part, their risk
importance, 2) risk information is used to help determine the frequency
and scope of inspections, 3) the selection of activities to inspect within
each procedure is informed with plant-specific risk information, and 4)
the inspectors are trained in the use of risk information in planning
their inspections.

2

Certain baseline inspections may also be done by regional staff because of
their expertise in particular aspects of plant operations.

Page 7 GAO-06-888T

For inspection findings found to be more than minor,3 NRC uses its
significance determination process (SDP) to assign each finding one of
four colors to reflect its risk significance.4 Green findings equate to
very low risk significance, while white, yellow, and red colors represent
increasing levels of risk, respectively. Throughout its application of the
SDP, NRC incorporates information from the licensee, and the licensee has
the opportunity to formally appeal the final determination that is made.

In addition to assigning each finding a color based on its risk
significance, all findings are evaluated to determine if certain aspects
of plant performance, referred to as cross-cutting issues, were a
contributing cause to the performance problem. The cross-cutting issues
are comprised of (1) problem identification and resolution, (2) human
performance, and (3) safety consciousness in the work environment. To
illustrate, in analyzing the failure of a valve to operate properly, NRC
inspectors determined that the plant licensee had not followed the correct
procedures when performing maintenance on the valve, and thus NRC
concluded the finding was associated with the human performance
cross-cutting area. If NRC determines that there are multiple findings
during the 12-month assessment period with documented cross-cutting
aspects, more than three findings with the same causal theme, and NRC has
a concern about the licensee's progress in addressing these areas, it may
determine that the licensee has a "substantive" cross-cutting issue.
Opening a substantive cross-cutting issue serves as a way for NRC to
notify the plant licensee that problems have been identified in one of the
areas and that NRC will focus its inspection efforts in the cross-cutting
area of concern.

When NRC becomes aware of one or more performance problems at a plant that
are assigned a risk color greater-than-green (white, yellow, or red), it
conducts supplemental inspections. Supplemental inspections, which are
performed by regional staff, expand the scope beyond baseline inspection
procedures and are designed to focus on diagnosing the cause of the
specific performance deficiency. NRC increases the scope of its
supplemental inspection procedures based on the number of greater-than-

3

Minor issues are defined by NRC as those that have little actual safety
consequences, little or no potential to impact safety, little impact on
the regulatory process, and no willfulness.

4

The SDP essentially evaluates how an inspection finding impacts the margin
of safety of a plant. The impact is largely evaluated through the use of
information on operating experience and risk estimates calculated using
probabilistic risk assessment (PRA).

Page 8 GAO-06-888T

green findings identified, the area where the performance problem was
identified, and the risk color assigned. For example, if one white finding
is identified, NRC conducts a follow-up inspection directed at assessing
the licensee's corrective actions to ensure they were sufficient in both
correcting the specific problem identified and identifying and addressing
the root and contributing causes to prevent recurrence of a similar
problem. If multiple yellow findings or a single red finding is
identified, NRC conducts a much more comprehensive inspection which
includes obtaining information to determine whether continued operation of
the plant is acceptable and whether additional regulatory actions are
necessary to address declining plant performance. This type of more
extensive inspection is usually conducted by a multi-disciplinary team of
NRC inspectors and may take place over a period of several months. NRC
inspectors assess the adequacy of the licensee's programs and processes
such as those for identifying, evaluating, and correcting performance
issues and the overall root and contributing causes of identified
performance deficiencies.

NRC conducts special inspections when specific events occur at plants that
are of particular interest to NRC because of their potential safety
significance. Special inspections are conducted to determine the cause of
the event and assess the licensee's response. For special inspections, a
team of experts is formed and an inspection charter issued that describes
the scope of the inspection efforts. At one plant we reviewed, for
example, a special inspection was conducted to investigate the
circumstances surrounding the discovery of leakage from a spent fuel
storage pool. Among the objectives of this inspection were to assess the
adequacy of the plant licensee's determination of the source and cause of
the leak, the risk significance of the leakage, and the proposed
strategies to mitigate leakage that had already occurred and repair the
problem to prevent further leakage.

In addition to its various inspections, NRC also collects plant
performance information through a performance indicator program, which it
maintains in cooperation with the nuclear power industry. On a quarterly
basis, each plant submits data for 15 separate performance indicators.
These objective numeric measures of plant operations are designed to
measure plant performance related to safety in various aspects of plant
operations. For example, one indicator measures the number of unplanned
reactor shutdowns during the previous four quarters while another measures
the capability of alert and notification system sirens, which notify
residents living near the plant in the event of an accident. Working with
the nuclear power industry, NRC established specific criteria for
acceptable

Page 9 GAO-06-888T

performance with thresholds set and assigned colors to reflect increasing
risk according to established safety margins for each of the indicators.
Green indicators reflect performance within the acceptable range while
white, yellow, and red colors represent decreasing plant performance,
respectively. NRC inspectors review and verify the data submitted for each
performance indicator annually through the baseline inspection process. If
questions arise about how to calculate a particular indicator or what the
correct value should be, there is a formal feedback process in place to
resolve the issue. When performance indicator thresholds are exceeded, NRC
responds in a graded fashion by performing supplemental inspections that
range in scope depending on the significance of the performance issue.

Under the ROP, NRC places each plant into a performance category on the
agency's action matrix, which corresponds to increasing levels of
oversight based on the number and risk significance of inspection findings
and performance indicators. The action matrix is NRC's formal method of
determining what additional oversight procedures-mostly supplemental
inspections-are required.5 Greater-than-green inspection findings are
included in the action matrix for a minimum of four quarters to allow
sufficient time for additional findings to accumulate that may indicate
more pervasive performance problems requiring additional NRC oversight. If
a licensee fails to correct the performance problems within the initial
four quarters, the finding may be held open and considered for additional
oversight for more than the minimum four quarters.

At the end of each 6-month period, NRC issues an assessment letter to each
plant licensee. This letter describes what level of oversight the plant
will receive according to its placement in the action matrix performance
categories, what actions NRC is expecting the plant licensee to take as a
result of the performance issues identified, and any documented
substantive cross-cutting issues. NRC also holds an annual public meeting
at or near each plant site to review performance and address questions
about the plant's performance from members of the public and other
interested stakeholders. Most inspection reports, assessment letters and
other materials related to NRC's oversight processes are made publicly
available through a NRC website devoted to the ROP. The website also

NRC officials can also increase or decrease oversight in ways not in
accordance with those specified by the action matrix by requesting a
deviation. This provision is intended for rare instances when the
oversight levels dictated by the action matrix are not appropriate to
address a particular performance problem and a more tailored approach is
required.

Page 10 GAO-06-888T

includes plant-specific quarterly summaries of green or greater inspection
findings and all the performance indicators.

NRC Has Continually Identified Problems at Nuclear Power Plants but Few Have
Been Considered Significant to Safe Operation of the Plants

The ROP has identified numerous performance deficiencies as inspection
findings at nuclear power plants since it was first implemented, but most
of these were considered to be of very low risk to safe plant operations.
Similarly, there have been very few instances in which performance
indicator data exceeded acceptable standards. As a result, few plants have
been subjected to high levels of oversight.

Of more than 4,000 inspection findings identified between 2001 and 2005,
97 percent were green. While green findings are considered to be of "very
low" safety significance, they represent a performance deficiency on the
part of the plant licensee and thus are important to correct. Green
findings consist of such things as finding that a worker failed to wear
the proper radiation detector or finding that a licensee did not properly
evaluate and approve the storage of flammable materials in the vicinity of
safety-related equipment. NRC does not follow-up on the corrective action
taken for every green finding identified; rather, it relies on the
licensee to address and track their resolution through the plant's
corrective action program. NRC does, however, periodically follow-up on
some of the actions taken by the licensee to address green findings
through an inspection specifically designed to evaluate the effectiveness
of the licensee's corrective action program. NRC officials stated that
green findings provide useful information on plant performance and NRC
inspectors use the findings to identify performance trends in certain
areas and help inform their selection of areas to focus on during future
inspections. In contrast to the many green findings, NRC has identified 12
findings of the highest risk significance (7 yellow and 5 red), accounting
for less than 1 percent of the findings since 2001. For example, one plant
was issued a red finding- the highest risk significance-after a steam
generator tube failed, causing an increased risk in the release of
radioactive material.

Similar to the inspection findings, most performance indicator reports
have shown the indicators to be within the acceptable levels of
performance. Only 156, or less than one percent of over 30,000 indicator
reports from 2001 to 2005, exceeded the acceptable performance threshold.
Four of the 15 performance indicators have always been reported to be
within acceptable performance levels. In addition, 46 plants have never
had a performance indicator fall outside of the acceptable level and only
three plants reported having a yellow indicator for one performance
measure; no red indicators have ever been reported.

On the basis of its inspection findings and performance indicators, NRC
has subjected more than three quarters of the 103 operating plants to at
least some level of increased oversight (beyond the baseline inspections)
for varying amounts of time. Most of these plants received the lowest
level of increased oversight, consisting of a supplemental inspection, to
followup on the identification of one or two white inspection findings or
performance indicators. Five plants have received the highest level of
plant oversight for which NRC allows plants to continue operations, due to
the identification of multiple white or yellow findings and/or the
identification of a red finding.6 One plant received this level of
oversight because NRC determined that the licensee failed to address the
common causes of two white findings and held them open for more than four
quarters. One of these findings involved the recurrent failure of a
service water pump because the licensee failed to take adequate corrective
action after the first failure.

NRC inspectors at the plants we reviewed indicated that, when plant
performance declines, it is often the result of ineffective corrective
action programs, problems related to human performance, or complacent
management, which often results in deficiencies in one or more of the
cross-cutting areas. In assessing the results of the ROP data, we found
that all plants subjected to NRC's highest level of oversight also had a
substantive cross-cutting issue open either prior to or during the time
that it was subjected to increased oversight inspections.

Overall, NRC's oversight process shows mostly consistent results from 2001
to 2005. For example, the total number of green findings at all plants
ranged from 657 to 889 per year and the total number of other findings
ranged from 10 to 30 per year with no strong trend (see fig. 1).

NRC has one additional oversight category for plants with unacceptable
performance. Plants placed into this category are not permitted to
operate.

Page 12 GAO-06-888T

                   Figure 1: ROP Inspection Findings by Year

Only in the area of cross-cutting issues-or inspection findings for which
one or more cross-cutting issues was associated-is an increasing trend
evident (see fig. 2). According to NRC, the reason for this increase is
due in part to the development of guidance on the identification and
documentation of cross-cutting issues and its increased emphasis in more
recent years.

           Figure 2: Trend of ROP Findings with Cross-Cutting Issues

According to NRC officials, the results of its oversight process at an
industry or summary level serve as an indicator of industry performance,
which to date indicates good safety performance. On an annual basis, NRC
analyzes the overall results of its inspection and performance indicator
programs and compares them with industry level performance metrics to
ensure all metrics are consistent and takes action if adverse trends are
identified. While NRC communicates the results of its oversight process on
a plant-specific basis to plant managers, members of the public, and other
government agencies through annual public meetings held at or near each
site and an internet Web site, it does not publicly summarize the overall
results of its oversight process, such as the total number and types of
inspection findings and performance indicators falling outside of
acceptable performance categories, on a regular basis.

NRC Continues to Make Improvements to its Reactor Oversight Process in Key Areas

NRC has taken a proactive approach to improving its reactor oversight
process. It has several mechanisms in place to incorporate feedback from
both external and internal stakeholders and is currently working on
improvements in key areas of the process, including better focusing
inspections on areas most important to safety, improving its timeliness in
determining the risk significance of its inspection findings, and
modifying the way that it measures some performance indicators. NRC is
also working to address what we believe is a significant shortcoming in
its oversight process by improving its ability to address plants' safety
culture, allowing it to better identify and address early indications of
deteriorating safety at plants before performance problems develop.

According to NRC officials, the ROP was implemented with the understanding
that it would be an evolving process and improvements would be made as
lessons-learned were identified. Each fall NRC solicits feedback from
external stakeholders, including industry organizations, public interest
groups, and state and local officials, through a survey published in the
Federal Register. NRC also conducts an internal survey of its site,
regional, and headquarters program and management staff every other year
to obtain their opinions on the effectiveness of the ROP. Additionally,
NRC has in place a formal feedback mechanism whereby NRC staff can submit
recommendations for improving various oversight components and NRC staff
meet with industry officials on a monthly basis-in addition to various
meetings, workshops, and conferences-to discuss oversight implementation
issues and concerns. NRC staff also incorporates direction provided by the
NRC Commissioners and recommendations from independent evaluations such as
from GAO and the NRC Inspector General. The results of these efforts are
pulled together in the form of an annual self-assessment report, which
outlines the overall results of its outreach and the changes it intends to
make in the year ahead.

According to NRC officials, the changes made to the ROP since its
implementation in 2000-including those made in response to the Davis-Besse
incident-have generally been refinements to the existing process rather
than significant changes to how it conducts its oversight. In the case of
Davis-Besse, NRC formed a task force to review the agency's regulatory
processes. The task force's report, issued in September 2002, contained
more than 50 recommendations, many associated with the ROP. Among the more
significant ROP-related recommendations were those to enhance the
performance indicator that monitors unidentified leakage to be more
accurate, develop specific guidance to inspect boric acid control programs
and vessel head penetration nozzles, modify the inspection program to
provide for better follow-up of longstanding issues, and enhance the
guidance for managing plants that are in an extended shutdown condition as
a result of significant performance problems. NRC program officials told
us that the task force's most significant recommendations were in areas
outside of the ROP, such as improving the agency's operating experience
program. According to NRC, it has implemented almost all of the task
force's recommendations.

Other modifications that NRC has recently made or is in the process of
making include the following:

     o NRC recently revised seven of its baseline inspection procedures to
       better focus the level and scope of its inspection efforts on those
       areas most important to safety. These revisions resulted from a
       detailed analysis in 2005 of its more than 30 baseline inspection
       procedures. The effort involved analyzing the number of findings
       resulting from each of its inspection procedures and the time spent
       directly observing plant activities or reviewing licensee paperwork,
       among other things.
     o NRC has efforts underway to improve what it refers to as its
       significance determination process (SDP). An audit by the NRC
       Inspector General, a review by a special task group formed by NRC, and
       feedback from other stakeholders have pointed to several significant
       weaknesses with the SDP. For example, internal and external
       stakeholders raised concerns about the amount of time, level of
       effort, and knowledge and resources required to determine the risk
       significance of some findings. Industry officials commented that
       because most inspection findings are green, one white finding at a
       plant can place it in the "bottom quartile" of plants from a
       performance perspective. Therefore, industry officials explained,
       licensees try to avoid this placement and will expend a great deal of
       effort and resources to provide additional data to NRC to ensure the
       risk level of a finding is appropriately characterized. This can add
       significant time to the process because different technical tools may
       be used that then must be incorporated with NRC's tools and processes.
       The delay in assigning a color to a finding while the new information
       is being considered could also affect a plant's placement on NRC's
       action matrix, essentially delaying the increased oversight called for
       if the finding is determined to be greater-than-green. NRC developed a
       SDP Improvement Plan in order to address these and other concerns and
       track its progress in implementing key changes. For example, NRC
       introduced a new process aimed at improving timeliness by engaging
       decision-makers earlier in the process to more quickly identify the
       scope of the evaluation, the resources needed, and the schedule to
       complete the evaluation.
     o NRC is also taking actions to improve its performance indicators.
       These actions are partly to address concerns that the indicators have
       not contributed to the early identification of poorly performing
       plants to the degree originally envisioned as they are almost always
       within acceptable performance levels (green). There have been several
       cases where plants reported an acceptable performance indicator and
       performance problems were subsequently identified. For example, NRC
       inspectors at one plant noted that while performance indicator data
       related to its alert and notification system in place for emergency
       preparedness had always been reported green, the system had not always
       been verified to be functioning properly. On the other hand, industry
       officials believe that the high percentage of indicators that are
       green is indicative of plants' good performance. Several plant
       managers told us that they closely monitor and manage to the
       acceptable performance thresholds established for each indicator, and
       will often take action to address performance issues well before the
       indicator crosses the acceptable performance threshold. Because NRC
       inspectors verify indicator data once a year, a potential disagreement
       over the data might not surface for up to a year after it is reported,
       and it may take even longer to resolve the disagreement with the
       licensee. Similar to delays with the SDP, a delay in assigning a color
       while the disagreement is resolved could affect a plant's placement on
       NRC's action matrix, and delay the increased oversight called for if
       the indicator is determined to be greater-than-green. NRC plans to
       work with the industry to review selected indicator definitions to
       make interpretation more concise and reduce the number of
       discrepancies. To date, NRC has focused significant effort on
       developing a key indicator to address known problems with the
       performance indicators measuring the unavailability of safety systems.
       NRC is also in the process of changing the definition for several
       other indicators, in addition to considering the feasibility of new
       indicators.

I would now like to discuss what we believe is one of NRC's most important
efforts to improve its oversight process by increasing its ability to
identify and address deteriorating safety culture at plants. NRC and
others have long recognized that safety culture and the attributes that
make up safety culture, such as attention to detail, adherence to
procedures, and effective corrective and preventative action, have a
significant impact on a plant's performance. Despite this recognition and
several external groups' recommendations to better incorporate safety
culture aspects into its oversight process, it did not include specific
measures to explicitly address plant safety culture when it developed the
ROP in 2000. The 2002 Davis-Besse reactor vessel head incident highlighted
that this was a significant weakness in the ROP. In investigating this
event, we and others found that NRC did not have an

Page 17 GAO-06-888T

effective means to identify and address early indications of deteriorating
safety at plants before performance problems develop.7 Largely as a result
of this event, in August 2004, the NRC Commission directed the NRC staff
to enhance the ROP by more fully addressing safety culture.

In response to the Commission's directive, the NRC staff formed a safety
culture working group in early 2005. The working group incorporated the
input of its stakeholders through a series of public meetings held in late
2005 and early 2006. In February 2006, NRC issued its proposed approach to
better incorporate safety culture into the ROP. NRC officials expect to
fully implement all changes effective in July 2006.

NRC's proposed safety culture changes largely consist of two main
approaches: first, clarifying the identification and treatment of
crosscutting issues in its inspection processes and second, developing a
structured way for NRC to determine the need for a safety culture
evaluation of plants. NRC has developed new definitions for each of its
cross-cutting issues to more fully address safety culture aspects and
additional guidance on their treatment once they are identified. For
example, the problem identification and resolution cross-cutting area is
now comprised of several components-corrective action program, self and
independent assessments, and operating experience. NRC inspectors are to
assess every inspection finding to determine if it is associated with one
or more of the components that make up each of the cross-cutting areas.
Inspectors then determine, on a semi-annual basis, if a substantive
cross-cutting issue exists on the basis of the number and areas of
crosscutting components identified. If the same substantive cross-cutting
issue is identified in three consecutive assessment periods, NRC may
request that the licensee perform an assessment of its safety culture. The
intent is to provide an opportunity to diagnose a potentially declining
safety culture before significant safety performance problems occur.

Under its approach, NRC would expect the licensees of plants with more
than one white color finding or one yellow finding to evaluate whether the
performance issues were in any way caused by any safety culture
components, and NRC might request the licensee to complete an independent
assessment of its safety culture, if the licensee did not

GAO, Nuclear Regulation: NRC Needs to More Aggressively and
Comprehensively Resolve Issues Related to the Davis-Besse Nuclear Power
Plant's Shutdown, GAO-04-415 (Washington, D.C.: May 17, 2004).

Page 18 GAO-06-888T

identify an important safety culture component. For plants where more
significant or multiple findings have been identified, the NRC would not
only independently evaluate the adequacy of the independent assessment of
the licensee's safety culture, but it might also conduct its own
independent assessment of the licensee's safety culture.

Some of NRC's proposed actions regarding safety culture have been
controversial, and not all stakeholders completely agree with the agency's
approach. For example, the nuclear power industry has expressed concern
that the changes could introduce undue subjectivity to NRC's oversight,
given the difficulty in measuring these often intangible and complex
concepts. Several of the nuclear power plant managers at the sites we
reviewed said that it is not always clear why a cross-cutting issue was
associated with finding, or what it will take to clear themselves once
they've been identified as having a substantive cross-cutting issue open.
Some industry officials worry that this initiative will further increase
the number of findings that have cross-cutting elements associated with
them and if all of the findings have them they will lose their value.
Industry officials also warn that if it is not implemented carefully, it
could divert resources away from other important safety issues. Other
external stakeholders, on the other hand, suggest that this effort is an
important step in improving NRC's ability to identify performance issues
at plants before they result in performance problems. Importantly, there
will be additional tools in place for NRC to use when it identifies
potential safety culture concerns. NRC officials view this effort as the
beginning step in an incremental approach and acknowledge that continual
monitoring, improvements, and oversight will be needed in order to better
allow inspectors to detect deteriorating safety conditions at plants
before events occur. NRC plans to evaluate stakeholder feedback and make
changes based on lessons learned from its initial implementation of its
changes as part of its annual self-assessment process for calendar year
2007.

Mr. Chairman, this completes my prepared statement, I would be happy to
respond to any questions you or the other Members of the Subcommittee may
have at this time.

GAO Contact and Staff Acknowledgments

For further information about this testimony, please contact me at (202)
512-3841 (or at [email protected]). Raymond H. Smith, Jr. (AssistantStaff
Director), Alyssa M. Hundrup, Alison O'Neill, and Dave Stikkers made key
contributions to this testimony.

  (360730) Page 19

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