Nuclear Regulation: Strategy Needed to Regulate Safety Using Information
on Risk (Letter Report, 03/19/99, GAO/RCED-99-95).

Pursuant to a congressional request, GAO examined various issues related
to the safe operation of commercial nuclear power plants, focusing on:
(1) some of the challenges that the Nuclear Regulatory Commission (NRC)
and the nuclear power industry could experience in a competitive
environment; (2) issues that NRC needs to resolve to implement a
risk-informed regulatory approach; and (3) the status of NRC's efforts
to apply a risk-informed regulatory approach to two of its oversight
programs--plant safety assessments and enforcement.

GAO noted that: (1) Congress and the public need confidence in NRC's
ability to ensure that the nuclear industry performs to the highest
safety standards; (2) as the electric utility industry is restructured,
operating and maintenance costs will affect the competitiveness of
nuclear power plants; (3) competition challenges NRC to ensure that
safety margins are not compromised by utilities' cost-cutting measures
and that the decisions utilities make in response to economic
considerations are not detrimental to public health and safety; (4) NRC
has not developed a comprehensive strategy that could move its
regulation of the safety of nuclear plants from its traditional approach
to an approach that considers risk information; (5) in addition, NRC has
not resolved certain basic issues; (6) some utilities do not have
current and accurate design information for their nuclear power plants,
which is needed for a risk-informed approach; (7) neither NRC nor the
nuclear utility industry has standards that define the quality or
adequacy of the risk assessments that utilities use to identify and
measure risks to public health and the environment; (8) furthermore, NRC
has not determined the willingness of utilities to adopt a risk-informed
approach; (9) according to NRC staff, they are aware of these and other
issues and have undertaken activities to resolve them; (10) in January
1999, NRC released for comment a proposed risk-informed process to
assess the overall safety of nuclear power plants; (11) this process
would establish industrywide and plant-specific safety thresholds and
indicators to help NRC assess plant safety; (12) NRC expects to phase in
the new process over the next 2 years and evaluate it by June 2001, at
which time NRC plans to propose any adjustments or modifications needed;
(13) in addition, NRC has been examining its enforcement program to make
it consistent with, among other things, the proposed process for
assessing plant safety; (14) the nuclear industry and public interest
groups have criticized the enforcement program as subjective; and (15)
in the spring of 1999, NRC staff expect to provide the Commission with
recommendations for revising the enforcement program.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-99-95
     TITLE:  Nuclear Regulation: Strategy Needed to Regulate Safety 
             Using Information on Risk
      DATE:  03/19/99
   SUBJECT:  Nuclear powerplant safety
             Electric utilities
             Safety standards
             Safety regulation
             Inspection
             Nuclear powerplants
             Strategic planning
             Competition
IDENTIFIER:  NRC Nuclear Plant Safety Program
             
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Cover
================================================================ COVER


Report to Congressional Requesters

March 1999

NUCLEAR REGULATION - STRATEGY
NEEDED TO REGULATE SAFETY USING
INFORMATION ON RISK

GAO/RCED-99-95

Risk-Informed Regulation

(141218)


Abbreviations
=============================================================== ABBREV

  GAO - General Accounting Office
  NEI - Nuclear Energy Institute
  NRC - Nuclear Regulatory Commission

Letter
=============================================================== LETTER


B-281928

March 19, 1999

The Honorable Joseph R.  Biden, Jr.
United States Senate

The Honorable Joseph I.  Lieberman
United States Senate

In the United States today, 103 operating nuclear power plants supply
electricity to about 65 million households, meeting about 20 percent
of the nation's needs.  Now, the entire electric utility industry is
faced with an unprecedented development:  the economic restructuring
of the nation's electric power system, from a regulated industry to
one driven by competition.  The economics of plant operations will
play a critical role as the nation moves to electricity deregulation
and nuclear utilities compete for the first time with other forms of
electricity generation. 

To maintain safety in this changing environment, the Nuclear
Regulatory Commission (NRC) has been moving from its traditional
regulatory approach, which was largely developed without the benefit
of quantitative estimates of risk, to an approach--termed
risk-informed regulation--that considers relative risk in conjunction
with engineering analyses and operating experience to ensure that
plants operate safely.  NRC believes that a risk-informed approach
would reduce unnecessary regulatory burden on utilities and their
costs, without reducing safety.  In some cases, NRC believes such an
approach could improve safety.  NRC differentiates between
"risk-informed" and "risk-based" regulation, noting that the latter
approach relies solely on the numerical results of risk
assessments.\1

You asked us to examine various issues related to the safe operation
of commercial nuclear power plants.  As agreed with your offices,
this report addresses (1) some of the challenges that NRC and the
nuclear power industry could experience in a competitive environment,
(2) issues that NRC needs to resolve to implement a risk-informed
regulatory approach, and (3) the status of NRC's efforts to apply a
risk-informed regulatory approach to two of its oversight
programs--plant safety assessments and enforcement.\2


--------------------
\1 Risk assessments systematically examine complex technical systems
to identify and measure the public health, environmental, and
economic risks of nuclear plants.  They attempt to quantify the
probabilities and consequences of an accident's occurrence.  By their
nature, risk assessments are statements of uncertainty that identify
and assign probabilities to events that rarely occur. 

\2 On Feb.  4, 1999, we testified on some of these issues before the
Committee on Clean Air, Wetlands, Private Property, and Nuclear
Safety, Senate Committee on Environment and Public Works (see Nuclear
Regulatory Commission:  Strategy Needed to Develop a Risk-Informed
Safety Approach (GAO/T-RCED-99-71)). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The Congress and the public need confidence in NRC's ability to
ensure that the nuclear industry performs to the highest safety
standards.\3 As the electric utility industry is restructured,
operating and maintenance costs will affect the competitiveness of
nuclear power plants.  Competition challenges NRC to ensure that
safety is not compromised by utilities' cost-cutting measures and
that the decisions utilities make in response to economic
considerations are not detrimental to public health and safety. 

NRC has not developed a comprehensive strategy that could move its
regulation of the safety of nuclear plants from its traditional
approach to an approach that considers risk information.  In
addition, NRC has not resolved certain basic issues.  First, some
utilities do not have current and accurate design information for
their nuclear power plants, which is needed for a risk-informed
approach.  Second, neither NRC nor the nuclear utility industry has
standards that define the quality or adequacy of the risk assessments
that utilities use to identify and measure risks to public health and
the environment.  Furthermore, NRC has not determined the willingness
of utilities to adopt a risk-informed approach.  According to NRC
staff, they are aware of these and other issues and have undertaken
activities to resolve them. 

In January 1999, NRC released for comment a proposed risk-informed
process to assess the overall safety of nuclear power plants.  This
process would establish industrywide and plant-specific safety
thresholds and indicators to help NRC assess plant safety.  NRC
expects to phase in the new process over the next 2 years and
evaluate it by June 2001, at which time NRC plans to propose any
adjustments or modifications needed.  In addition, NRC has been
examining its enforcement program to make it consistent with, among
other things, the proposed process for assessing plant safety.  The
nuclear industry and public interest groups have criticized the
enforcement program as subjective.  In the spring of 1999, NRC staff
expect to provide the Commission with recommendations for revising
the enforcement program. 


--------------------
\3 Nuclear Regulation:  Preventing Problem Plants Requires More
Effective NRC Action (GAO/RCED-97-145, May 30, 1997), Nuclear
Regulatory Commission:  Preventing Problem Plants Requires More
Effective Action by NRC (GAO/T-RCED-98-252, July 30, 1998), and
Performance and Accountability Series:  Major Management Challenges
and Program Risks:  Nuclear Regulatory Commission (GAO/OCG/99-19,
Jan.  1999). 


   BACKGROUND
------------------------------------------------------------ Letter :2

NRC is responsible for ensuring that the nation's 103 operating
commercial nuclear power plants pose no undue risk to public health
and safety.  According to one study, as many as 26 of the nation's
nuclear sites are vulnerable to shutdown because production costs are
higher than the projected market prices of electricity.\4 The
analysis also estimates that 39 plants whose operating licenses are
scheduled to expire by 2020 will seek to extend their licenses. 

Since the early 1980s, NRC has been increasing the use of risk
information in the regulatory process.  For example, in 1986, the
agency issued safety goals that, according to NRC staff, supported
the use of risk analyses in making regulatory decisions.  In August
1995, NRC issued a policy statement advocating certain changes in the
development and implementation of its regulations through a
risk-informed approach.  Under such an approach, NRC and the
utilities would give more emphasis to those structures, systems, and
components deemed more safety significant.  The following example
illustrates the difference between NRC's traditional approach and a
risk-informed approach:  One nuclear utility identified about 635
valves and 33 pumps that must be operated, maintained, tested, and
replaced at one plant, according to NRC's traditional regulations. 
However, about 515 valves and 12 pumps present a low safety risk
while 120 valves, 21 pumps, and 25 components present a high safety
risk.  Under a risk-informed approach, NRC has approved the utility's
concentrating on the elements presenting a high safety risk while
continuing to comply with NRC's traditional regulations for the
remaining elements but at less frequent intervals. 

Early in calendar year 1998, the Nuclear Energy Institute (NEI)
contracted with the Center for Strategic and International Studies to
examine NRC's regulatory processes.\5

NRC, the Union of Concerned Scientists, and others are members of the
steering committee for the study.  The Center's review focuses on
answering three questions:  What is NRC's safety expectation?  Are
NRC's rules and regulations properly focused on safety?  Are NRC's
processes focused on safety?  According to the Director of NRC's
Office of Nuclear Regulatory Research, the steering committee for the
study discussed whether the Center would define "an acceptable level
of safety." Recognizing that providing such a definition is a
difficult and challenging task that NRC and others have attempted
over the years, the study's steering committee believed that the
Center should focus instead on how safe NRC expects commercial
nuclear power plants to be and how consistently NRC applies that
expectation to the plants.  The Center expects to issue its report in
April 1999. 


--------------------
\4 World Energy Service:  U.S.  Outlook, Standard and Poor's (Apr. 
1998). 

\5 NEI includes members from all utilities licensed to operate
commercial nuclear plants in the United States, as well as nuclear
plant designers, major architectural/engineering firms, fuel
fabrication facilities, materials licensees, and other organizations
and individuals involved in the nuclear energy industry.  NEI
establishes unified policy for the nuclear industry on such matters
as generic operational and technical issues. 


   COMPETITION PRESENTS A
   CHALLENGE FOR NRC
------------------------------------------------------------ Letter :3

Commercial nuclear power plants will continue to generate electricity
for some time in the future.  NRC issues a plant operating license
for 40 years.  After 20 years, a utility can apply to extend the
license for an additional 20 years.\6 Table 1 shows the time frames
during which the existing plant licenses could expire. 



                                Table 1
                
                    License Expiration Dates for the
                  Existing Generation of Nuclear Power
                                 Plants

                                Number of licenses  Number of licenses
Period                           that could expire           remaining
------------------------------  ------------------  ------------------
2005-2010                                        8                  96
2011-2015                                       35                  61
2016-2020                                       15                  46
2021-2025                                       26                  20
2026 and beyond                                 20                   0
======================================================================
Total                                        104\a
----------------------------------------------------------------------
\a Includes Browns Ferry Unit 1.  Although this plant has not
operated since 1985, the owner (Tennessee Valley Authority) has not
announced plans to permanently shut down and decommission the plant. 

Source:  United States Nuclear Regulatory Commission Information
Digest, NUREG-1350, Vol.  10 (1998). 

The Energy Policy Act of 1992 has resulted in the restructuring of
the nation's electric power industry and the emergence of competition
in the business of electricity generation.  As the electric utility
industry is restructured, operating and maintenance costs will affect
the competitiveness of nuclear power plants.  Competition challenges
NRC to ensure that utilities do not compromise safety through
cost-cutting measures.  As of February 1999, 18 states had
implemented plans to restructure the electric utility industry by
enacting legislation or adopting final orders.  In the 13 states that
have enacted legislation, utilities operate 34 nuclear power plants
that produce between 20 percent and 59 percent of the states'
electricity.  In the 5 states that have adopted final orders without
enacting legislation, utilities operate 17 nuclear plants that supply
between 15 percent and 74 percent of the states' electricity.\7

Competition will pose difficult issues for some nuclear utilities,
and efforts to achieve economies of scale will spur the growth of
nuclear operating companies as a means of minimizing overhead and
maximizing institutional experience.  Other cost reduction efforts
being pursued by the industry include mergers, acquisitions, the use
of contract operators, and spin-offs of generating assets.  For
example, Alabama Power Company and Georgia Power formed a
subsidiary--Southern Nuclear Operating Company--to operate six plants
for the utilities.  In addition, in July 1998, AmerGen Energy
Company, a joint venture formed in 1997 by PECO Energy Company and
British Energy, announced plans to purchase Three Mile Island 1 from
GPU Nuclear Corporation.  Furthermore, Duke Power bought Pan Energy
(a gas company) as a means of diversifying its operations.  Given the
added economic pressures competition is likely to bring, NRC will
need to continue to be vigilant to ensure that the decisions
utilities make primarily in response to economic pressures are not
detrimental to public health and safety. 

NRC, NEI, and many utility executives believe that the key for
nuclear plants to compete is efficient plant operations.  To achieve
such efficiency, NRC and NEI believe that fewer and fewer companies
will operate more and more of the existing nuclear plants. 
Consolidation will allow companies to achieve economies of scale in,
for example, their refueling and engineering staffs.  Some experts
believe that in the future only 5 to 10 companies will operate all
nuclear power plants to ensure cost efficiency and survive in a
competitive environment. 


--------------------
\6 On Apr.  8, 1998, Baltimore Gas and Electric applied to NRC for
license extensions for its two Calvert Cliffs plants, and on July 7,
1998, Duke Power applied for extensions for its three Oconee plants. 
Southern Nuclear expects to apply for an extension for its Hatch
plant in 1999. 

\7 The status of the states' electric utility deregulation activity
was derived from Status of Electric Industry Restructuring by State,
published by the Energy Information Administration.  The percentage
of electricity generated by nuclear power plants was derived from
Electric Power Monthly (Jan.  1999), published by the Energy
Information Administration.  The data shown are as of Oct.  1998. 


   NRC HAS NOT RESOLVED MANY
   ISSUES NEEDED TO IMPLEMENT A
   RISK-INFORMED REGULATORY
   APPROACH
------------------------------------------------------------ Letter :4

NRC staff estimate that it could take 4 to 8 years to implement a
risk-informed regulatory approach and are working to resolve many
issues to ensure that the new approach does not endanger public
health and safety.  Although NRC has issued guidance for utilities to
use risk assessments to meet regulatory requirements for specific
activities and has undertaken many activities to implement a
risk-informed approach, more is needed to

  -- ensure that utilities have current and accurate documentation on
     the design of each plant and its structures, systems, and
     components and safety analysis reports that reflect changes to
     the design and other analyses conducted after NRC issued the
     plant's operating license;

  -- ensure that utilities make changes to their plants on the basis
     of complete and accurate design and safety analysis information;

  -- determine whether and what aspects of NRC's regulations should
     be changed;

  -- develop standards on the scope and detail of the risk
     assessments needed for utilities to determine that changes to
     their plants' design will not negatively affect safety; and

  -- determine the willingness of utilities to adopt a risk-informed
     approach. 


      INACCURATE AND UNRELIABLE
      DESIGN AND SAFETY ANALYSIS
      INFORMATION CAN IMPEDE NRC'S
      EFFORTS TO CONSIDER RISK
      INFORMATION
---------------------------------------------------------- Letter :4.1

Whether NRC uses a traditional or a risk-informed regulatory
approach, it must have current and accurate documentation to oversee
nuclear plants.  These documents include the (1) design of the plant
and of the structures, systems, and components within it and (2)
safety analysis reports that reflect changes to the design and other
analyses conducted (including those related to the process that
allows utilities to change their plants without obtaining NRC's
approval) since NRC issued the operating license.  To effectively
implement a risk-informed approach, NRC must have confidence that
each plant's design reflects current safety requirements and that
accurate baseline information exists for each plant.  Without such
information, neither NRC nor the utility can determine the safety
consequences of making changes to the plant. 

For more than 10 years, NRC has questioned whether utilities have
accurate, available, and current information on the design of their
plants.  Inspections of 26 plants completed early in fiscal year 1999
confirmed that (1) some utilities had not maintained accurate design
documentation; (2) with some exceptions, NRC had assurance that
safety systems would perform as intended at all times; and (3) NRC
needed to clarify what constitutes design information.  NRC staff
expect to recommend an approach to the Commission in June 1999 to
clarify design information and seek approval to obtain public
comments on the recommended approach.  NRC staff could not estimate
when the agency would complete this effort but said that the agency
would oversee design information issues using such tools as safety
system engineering inspections. 

In addition, in 1993, NRC found that Northeast Nuclear Energy Company
for many years had taken actions at its Millstone Unit 1 plant that
were not allowed under its updated safety analysis report.  Since
that time, NRC has not had confidence that some utilities update
their safety analysis reports as required following analyses and
changes that modify the existing descriptions or create new
descriptions of facilities or their operating limits.  Failure to
update the reports results in poor documentation of the plants'
safety bases.  As a result of the lessons learned from Millstone and
other initiatives, NRC determined that additional guidance is needed
to ensure that utilities update their safety analysis reports to
reflect changes to the design of their plants, as well as the results
of analyses performed since NRC issued the plants' operating
licenses.  On June 30, 1998, the Commission directed the staff to
work with NEI to finalize the industry's guidelines on updating
safety analysis reports, which NRC could then endorse in a regulatory
guide.  NRC expects to endorse the guidelines by the end of September
1999. 

Furthermore, for more than 30 years, NRC's regulations have provided
a set of criteria that utilities must use to determine whether they
may change their facilities (as described in their safety analysis
reports) or procedures or conduct tests and experiments without NRC's
prior approval.  The finding in 1993 that Millstone Unit 1 had taken
actions that were not allowed by its updated safety analysis report
led NRC to question this regulatory framework.  As a result, NRC
staff initiated a review to identify the short- and long-term actions
needed to improve the change process.  For example, in October 1998,
NRC published a proposed regulation on plant changes in the Federal
Register for comment; the comment period ended on December 21, 1998. 
NRC requested comments on criteria for identifying changes that
require an amendment to a plant's license and on a range of options,
several of which would allow utilities to make changes without NRC's
prior approval, despite a potential increase in the probability or
consequences of an accident.  NRC expects to issue a final rule in
June 1999.  In addition, in December 1998, NRC staff provided their
views to the Commission on changing the scope of the regulation to
consider risk information.  NRC's memorandum that tracks the various
tasks related to a risk-informed approach did not show when NRC would
resolve this issue.  According to NRC staff, they will develop a plan
to implement the Commission's decision after it is received. 


      MAKING ITS REGULATIONS RISK
      INFORMED WILL BE A CHALLENGE
      TO NRC AND THE INDUSTRY
---------------------------------------------------------- Letter :4.2

Until recently, NRC did not consider whether and to what extent it
should revise its regulations pertaining to commercial nuclear plants
to make them risk informed.  Revising the regulations will be a
formidable task because, according to NRC staff, the regulations are
inconsistent and a risk-informed approach would focus on the safety
significance of structures, systems, or components, regardless of
where they are located in a plant. 

NRC staff and NEI officials agree that the most critical issues in
revising the regulations will be to define their scope (that is,
whether the regulations will consider risk, as well as the meaning of
such concepts as "important to safety" and "risk significant") and to
integrate the traditional and risk-informed approaches into a
cohesive regulatory context.  After defining the scope of the
regulations, NRC can determine how to regulate within the revised
context.  In October 1998, NEI proposed a phased approach to revise
the regulations.  Under this proposal, by the end of 1999, NRC would
define "important to safety" and "risk significant." By the end of
2000, NRC would use the definitions in proposed rulemakings for such
regulations as those on the definition of design information and the
environmental qualification of electrical equipment.  By the end of
2003, NEI proposes that NRC address other regulatory issues, such as
the change process, the content of technical specifications, and
license amendments.  After 2003, NEI proposes that NRC address other
regulations on a case-by-case basis. 

NRC staff agreed that the agency must take a phased approach when
revising its regulations.  The Director, Office of Nuclear Regulatory
Research, said that if NRC attempted to revise all provisions of the
regulations simultaneously, it might accomplish very little.  The
Director said that NRC needs to address one issue at a time while
concurrently working on longer-term actions.  He cautioned, however,
that once NRC starts, it should commit itself to completing the
process.  In January 1999, NRC staff presented their proposal to the
Commissioners.  At that meeting, the Chairman suggested a more
aggressive approach that would entail a risk-informed approach for
all relevant regulations across the board.  NRC's memorandum tracking
the various tasks involved in implementing a risk-informed approach
did not show when the agency would resolve this issue. 


      VARIATION IN THE QUALITY OF
      UTILITIES' RISK ASSESSMENTS
      RAISES QUESTIONS ABOUT THE
      FEASIBILITY OF IMPLEMENTING
      A RISK-INFORMED APPROACH
---------------------------------------------------------- Letter :4.3

NRC and the industry view risk assessments as one of the main tools
for identifying and focusing on those structures, systems, or
components of nuclear plant operations having the greatest risk.  Yet
neither NRC nor the industry has a standard that defines the quality,
scope, or adequacy of risk assessments.  NRC staff are working with
the American Society of Mechanical Engineers to develop such a
standard. 

However, this issue is far from being resolved.  The Society is
developing the standard for risk assessments in two phases.  The
first phase would address assessments of the probability of accidents
initiated by a certain set of events internal to the plant; the
second phase would address accidents initiated by events external to
the plant, such as earthquakes, or occurring while the plant is shut
down.  NRC staff estimate that the agency would have a final standard
for the first phase by June 2000 but could not estimate when the
second phase would be complete.  To ensure consistency with other
initiatives, in December 1998, NRC staff sought direction from the
Commission on the quality of risk assessments needed to implement a
risk-informed approach.  In the meantime, the lack of a standard
could affect NRC's efforts to implement a risk-informed regulatory
approach.  According to NRC staff, they recognize that limitations
exist with risk assessment technology and are working, and will
continue to work, to enhance the technology. 

In addition, in the past, operational data needed to enhance the
quality of risk assessments were not available for some critical
structures, systems, or components.  Utilities had to extrapolate the
information from like systems in other industrial applications. 
Today, the reliability and availability of data for performing risk
assessments are enhanced in many areas by almost 40 years of
operational experience.  Much of this information is disseminated to
other utilities, partly because, in a regulated environment, the
utilities do not compete with one another for market share. 

However, under the approaching deregulated environment, nuclear
utilities will compete for market share--with each other as well as
with other generators of electric power.  As a result, the utilities
may no longer want to share proprietary operational data previously
available to upgrade the quality of risk assessments.  NRC has
already acted as a clearinghouse to disseminate the results of
examinations undertaken at its direction to determine each plant's
vulnerabilities to severe accidents.  For example, in December 1997,
NRC reported on improvements made to individual plants as a result of
the utilities' examinations, the collective results of the
examinations, plant-specific design and operational features, the
modeling assumptions that significantly affected estimates of how
frequently the reactor core is damaged and how well the plant
contains radiation, and the strengths and weaknesses of the models
and methods used by the utilities to perform the examinations. 
However, NRC does not plan to collect and disseminate this
information on a regular basis. 


      A RISK-INFORMED APPROACH MAY
      NOT BE ADVANTAGEOUS FOR ALL
      NUCLEAR UTILITIES
---------------------------------------------------------- Letter :4.4

In December 1998, NRC staff recommended that implementation with
revised risk-informed regulations be voluntary, noting that it would
be very difficult to show that requiring compliance would increase
public health and safety as required by the backfit rule.  The staff
also noted that requiring compliance could create the impression that
current plants were less safe.  The staff's recommendation did not
indicate the number of utilities that would be interested in a
risk-informed approach.  In commenting on a draft of this report, NRC
said that the number of utilities likely to operate under
risk-informed regulations would depend on economic judgments the
utilities would make once the Commission clarifies the details of a
risk-informed regime.  In January 1999, the Commissioners expressed
concern about a voluntary approach, believing that it would create
two classes of plants operating under two different sets of
regulations.  Nevertheless, in commenting on a draft of this report,
NRC said that compliance would be voluntary. 

Our discussions with officials from 10 utilities that operate 16
nuclear plants and NRC documents showed that utilities may be
reluctant to shift to a risk-informed regulatory approach for various
reasons.  First, the number of years remaining on a plant's operating
license is likely to influence the utility's views.  NRC acknowledged
that if a plant's license is due to expire in 10 years or less, then
the utility may not have anything to gain by changing from the
traditional approach.  Second, considering the investment that will
be needed to develop risk-informed procedures and operations and to
identify safety-significant structures, systems, or components,
utilities may question whether a switch will be worth the reduction
in regulatory burden and cost savings that may result.  Third, design
differences and age disparities among plants make it difficult for
NRC and the industry to determine how, or to what extent, a
standardized risk-informed approach can be implemented across the
industry.  Although utilities built one of two types of
plants--boiling water or pressurized water reactors--each has design
and operational differences.  Thus, each plant is unique, and a
risk-informed approach would require plant-specific tailoring. 


         UTILITIES ACKNOWLEDGE
         THAT UNCERTAINTIES EXIST
-------------------------------------------------------- Letter :4.4.1

Utility officials with whom we spoke confirmed the issues discussed
above and revealed the range of views held by them.  The official of
a small, single-unit utility said that because a limited number of
years remained on the plant's license, the utility would not be able
to realize many benefits from a risk-informed approach.  An official
from another utility told us that the company has been focusing its
attention on replacing steam generators and did not know if it could
find the resources needed to comply with a risk-informed approach. 
Another official said that the utility has a risk assessment that
works for that plant but is less detailed and costly than risk
assessments prepared by some utilities for newer, larger plants. 
Several officials said that their utilities were planning to use risk
assessments more in the future than in the past and that any changes
to the plants or operating procedures would have to demonstrate
benefits through a cost/benefit analysis. 

Another official said that the utility wants to move cautiously in
applying risk assessments at its plants because it does not want to
undo some other aspects of their operations that could affect safety. 
Several officials noted that they are monitoring the actions that NRC
eventually takes concerning a graded quality assurance pilot project
implemented at the South Texas nuclear power plant.  According to
staff, NRC approved the pilot project, but the utility has not
realized the expected benefits because of constraints imposed by
other regulations.  NRC staff said that they will address the
constraints if the agency takes a risk-informed approach to its
regulations.  Other utility officials said they have a "living" risk
assessment that is updated frequently.  They said that their
utilities have used the assessment to support applications for
license amendments and to determine the impact of NRC's inspection
findings on the plants. 


      NRC DOES NOT HAVE A STRATEGY
      TO IMPLEMENT A RISK-INFORMED
      APPROACH
---------------------------------------------------------- Letter :4.5

Since the early 1980s, NRC has been increasing the use of risk
information in its regulatory process.  NRC staff estimate that it
will be at least 4 to 8 years before the agency implements a
risk-informed approach.  However, NRC has not developed a strategy
that includes objectives, time lines, and performance measures for
such an approach.  Rather, NRC has developed an implementation plan,
in conjunction with its policy statement on considering risk, that is
a catalog of about 150 separate tasks and milestones for their
completion.  It has also developed guidance for some activities, such
as pilot projects in the four areas where the industry wanted to test
the application of a risk-informed approach.  Furthermore, in August
1998, the Executive Director for Operations identified high-priority
areas--including risk-informed regulation, inspection, enforcement,
and organizational structure--and provided short- and long-term
actions and milestones to address each of the areas.  NRC has revised
the schedules for completing some of the identified actions several
times since August 1998. 

Given the complexity and interdependence of NRC's requirements as
reflected in regulations, plant designs, safety documents, and the
results of ongoing activities, it is critical that NRC clearly
articulate how the various initiatives will help achieve the goals
set out in its 1995 policy statement supporting risk-informed
regulation.  Although NRC's implementation plan sets out tasks and
expected completion dates, it is not a strategy with goals and
objectives.  Specifically, it does not

  -- ensure that short-term efforts are building toward NRC's
     longer-term goals or link the various ongoing initiatives;

  -- help the agency identify the staffing levels, training, skills,
     and technology needed--or the timing of those activities--to
     implement a risk-informed approach;

  -- provide a link between the day-to-day activities of program
     managers and staff and the objectives set out in the policy
     statement; and

  -- address the manner in which NRC would establish baseline
     information about the plants to assess the impact on safety of a
     risk-informed approach.  Establishing such a baseline may be
     particularly important because NRC, NEI, and the Union of
     Concerned Scientists do not believe that the agency can
     demonstrate the industrywide impact of implementing such an
     approach.  Therefore, if NRC subsequently determines that it
     wants or needs to demonstrate the impact of a risk-informed
     approach on safety, the agency will have to do so on a
     plant-by-plant basis. 

A comprehensive strategy could also enhance NRC's efforts to comply
with the Government Performance and Results Act of 1993.  The Results
Act requires federal agencies to develop goals, objectives,
strategies, and performance measures in the form of a 5-year
strategic plan, an annual performance plan, and, beginning in fiscal
year 2000, an annual program performance report assessing the
agency's success in achieving the goals set out in the prior year's
performance plan.  The annual performance plan would give NRC the
opportunity to clearly specify the actions it will take to achieve
its risk-informed strategy and the resources, training, and other
skills needed to do so.  The annual assessment report would give the
Congress and the public an opportunity to determine the extent to
which NRC has achieved its goals. 

In a December 1998 memorandum, NRC staff said that once the
Commission provides direction on whether and how to apply a
risk-informed approach to the regulations and guidance on the quality
of risk assessments, they would develop a plan to implement the
direction provided.  The staff did not estimate how long it would
take to complete the plan. 


   THE STATUS OF NRC'S ASSESSMENT
   AND ENFORCEMENT PROCESSES: 
   MANY UNRESOLVED ISSUES REMAIN
------------------------------------------------------------ Letter :5

The nuclear industry and public interest groups have criticized NRC's
plant assessment and enforcement processes, saying that they lack
objectivity, consistency, and predictability.  As part of its
risk-informed initiatives, in January 1999, NRC proposed a new
process to assess overall plant safety using industrywide and
plant-specific safety thresholds and performance indicators.  NRC is
also reviewing its enforcement process to ensure consistency with the
direction recommended by the staff for the assessment process and
other programs. 


      NRC IS TRYING TO MAKE ITS
      PLANT ASSESSMENT PROCESS
      MORE OBJECTIVE AND
      TRANSPARENT
---------------------------------------------------------- Letter :5.1

In 1997 and 1998, we noted that NRC's process to focus attention on
plants with declining safety performance needed substantial revisions
to achieve its purpose as an early warning tool and that NRC did not
consistently apply the process across the industry.\8

We also noted that this inconsistency has been attributed, in part,
to a lack of specific criteria, the subjective nature of the process,
and the confusion of some NRC managers about their role in the
process.  NRC acknowledged that it should do a better job of
identifying plants deserving increased regulatory attention and said
that it was developing a new process that would be predictable,
nonredundant, efficient, and risk informed. 

In January 1999, NRC proposed a new safety assessment process that
includes seven "cornerstones."\9 For each cornerstone, NRC will
identify the desired result, important attributes that contribute to
achieving the desired result, areas to be measured, and various
options for measuring the identified areas.  Three issues cut across
the seven cornerstones:  human performance, safety consciousness in
the work environment, and problem identification and resolution.  As
proposed, NRC's plant assessment process would use performance
indicators; inspection results; utilities' self-assessments; and
clearly defined, objective thresholds for making decisions.  The
process is anchored in a number of principles, including the beliefs
that (1) a certain level of safety performance could warrant
decreased NRC oversight, (2) performance thresholds should be set
high enough to permit NRC to arrest declining performance, (3) NRC
must assess both performance indicators and inspection findings, and
(4) NRC will establish a minimum level of inspections for all plants
(regardless of performance).  Although some performance indicators
would apply to the industry as a whole, others would be plant
specific and would depend, in part, on the results of utilities' risk
assessments.  However, as stated earlier, the quality of risk
assessments vary considerably among utilities. 

NRC expects to use a phased approach to implement the revised plant
assessment process.  Under this approach, it plans to begin pilot
testing the use of risk-informed performance indicators at 13 plants
in June 1999, fully implement the process by January 2000, and
complete an evaluation and propose any adjustments or modifications
needed by June 2001.  Between January 1999 and January 2001, NRC
expects to work with the industry and other stakeholders to develop a
comprehensive set of performance indicators to more directly assess
plants' performance relative to the cornerstones.  When it is
impractical or impossible to develop performance indicators, NRC
plans to use its inspections and utilities' self-assessments to reach
a conclusion about plants' performance.  NRC's proposed process
illustrates an effort by the current Chairman and other Commissioners
to improve NRC's ability to help ensure the safe operation of the
nation's nuclear plants, as well as address the industry's concerns
about excessive regulation.  By ensuring consistent implementation of
the process ultimately established, the Commissioners would further
demonstrate their commitment to this process. 


--------------------
\8 Nuclear Regulation:  Preventing Problem Plants Requires More
Effective NRC Action (GAO/RCED-97-145, May 30, 1997) and Nuclear
Regulatory Commission:  Preventing Problem Plants Requires More
Effective Action by NRC (GAO/T-RCED-98-252, July 30, 1998). 

\9 The seven cornerstones are initiating events; mitigation systems;
barrier integrity; emergency preparedness; and public, occupational,
and physical protection. 


      NRC'S ENFORCEMENT PROCESS
      REMAINS IN A STATE OF FLUX
---------------------------------------------------------- Letter :5.2

NRC has revised its enforcement policy more than 30 times since
implementing it in 1980.  These revisions reflect changing
requirements, regulatory policy, and enforcement philosophy. 
Although NRC has attempted to make the policy more equitable, the
industry has had long-standing problems with it.  Specifically, NEI
believes that the policy is not safety related, timely, or objective. 
Among the more contentious issues are NRC's practice of aggregating
lesser violations for enforcement purposes and NRC inspectors' use of
the term "regulatory significance."

To facilitate a discussion of the enforcement program, including
these two contentious issues, NRC asked NEI and the Union of
Concerned Scientists to review 56 enforcement actions that it had
taken during fiscal year 1998.  For example, NEI reviewed the
enforcement actions on the basis of specific criteria, such as
whether the violation that resulted in an enforcement action could
cause an off-site release of radiation, on-site or off-site exposures
to radiation, or damage to the reactor core.  Overall, the Union of
Concerned Scientists concluded that NRC's enforcement actions were
neither consistent nor repeatable and that the enforcement actions
did not always reflect the severity of the offenses.  According to
NRC staff, they met with various stakeholders in December 1998 and
February 1999 to discuss issues related to the enforcement program. 

NRC inspectors' use of the term "regulatory significance" is an
issue, according to NEI and the Union of Concerned Scientists,
because inspectors use the term when they cannot define the safety
significance of a violation.  Then, when a violation to which the
term has been applied results in a financial penalty, the utility
does not understand the reason for the financial penalty and cannot
explain to the public whether the violation presented a safety
concern. 

NEI has proposed a revised enforcement process.  NRC is reviewing
this proposal, as well as other changes to the enforcement process,
to ensure consistency with the draft plant safety assessment process
and other changes being proposed as NRC moves to risk-informed
regulation.  NRC staff expect to provide recommendations to the
Commission in March 1999 on the use of the term "regulatory
significance" and in May 1999 on the consideration of risk in the
enforcement process. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Effective regulation, whether traditional or risk informed, needs to
be anchored in information that adequately describes the design and
safety parameters of a plant, changes to the plant's design and
operations that affect safety, and assessments that define the
structures, systems, or components that are safety significant.  Yet
NRC does not have assurance that this information is available and
accurate.  Although the Nuclear Energy Institute, speaking for the
industry, has embraced the risk-informed approach as a solution to
overregulation by NRC, some utilities do not see the benefits of a
risk-informed approach because they consider it too costly or
inappropriate for the size and age of their plants.  Since NRC has
stated that compliance will be voluntary, the agency will be
regulating under two different systems--a situation that will
compound challenges in an already complex regulatory environment. 

In addition, NRC has no comprehensive strategy to guide the process
of moving to a risk-informed regulatory approach.  A strategy would
provide NRC and the industry with a framework for implementing a
risk-informed approach.  This framework would identify the
interrelationships of the various components, establish time lines,
and define goals and performance measures.  Such a strategy would
identify the costs and benefits of a risk-informed approach, indicate
which utilities would be regulated in a risk-informed environment,
and provide information on the cost and approach for NRC's future
regulation.  The strategy could also provide a mechanism to foster
continued information sharing so that the quality of risk assessments
and NRC's risk-informed initiative would not suffer in a competitive
environment. 

NRC's new approach to assessing nuclear plant safety performance
should provide valuable lessons and insights as NRC changes more of
its processes and regulations to consider risk information.  But
whatever processes NRC ultimately adopts must be consistent, visible,
and clear.  The need for clarity in NRC's processes may be even more
important today than it has been in the past.  In a competitive
environment, utilities will not always be able to pass the costs of
regulatory compliance on to consumers.  Yet because of concerns about
the risks of catastrophic accidents, the public will continue to
pressure NRC and the industry to explain their actions.  A clearly
defined strategy would help both NRC and the utilities address the
public's concerns. 


   RECOMMENDATION
------------------------------------------------------------ Letter :7

To help ensure the safe operation of plants and the continued
protection of public health and safety in a competitive environment,
we recommend that the Commissioners of NRC direct the staff to
develop a comprehensive strategy that includes but is not limited to
objectives, goals, activities, and time frames for the transition to
risk-informed regulation; specifies how the Commission expects to
define the scope and implementation of risk-informed regulation; and
identifies the manner in which it expects to continue the free
exchange of operational information necessary to improve the quality
and reliability of risk assessments. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

We provided a copy of a draft of this report to the Nuclear
Regulatory Commission for its review and comment.  Although the
Nuclear Regulatory Commission did not comment on our recommendation,
the agency stated that its strategic plan and 1995 policy statement
specify its goals and objectives to implement a risk-informed
approach and that its efforts are supported by the planning,
budgeting, and performance management process.  The Nuclear
Regulatory Commission also noted that it has issued regulatory
guidance documents to implement the strategic plan, policy statement,
and 1986 safety goals.  The Nuclear Regulatory Commission said that
it actively supports the development of risk assessment standards and
will continue to develop methods and tools to improve the
assessments.  In addition, the Nuclear Regulatory Commission said
that we did not sufficiently recognize its many ongoing risk-informed
initiatives and progress.  We did not change the report to recognize
the agency's concerns because we believe that we provided sufficient
information on the status of its and/or the nuclear industry's
activities for each of the initiatives that we discussed. 

The Nuclear Regulatory Commission also commented that the report
raises issues that it, the nuclear industry, and other stakeholders
are addressing.  We acknowledge that the agency has identified and is
working to resolve the issues addressed in the report, as well as
many other initiatives.  However, given the complexity and
interdependence of its efforts, we continue to believe that the
Nuclear Regulatory Commission needs a comprehensive strategy that
includes clearly defined goals and objectives; clear links between
and among its various initiatives; identified staffing levels,
training, skills, and technology needs; and a link between the
day-to-day activities of program managers and staff.  Without such
information, the Nuclear Regulatory Commission does not have a
mechanism to ensure that its short-term efforts are building toward
its longer-term goals and to help staff understand when and if
activities will affect them.  In addition, such a strategy would flow
from--and not duplicate--its strategic planning efforts and planning,
budgeting, and performance management process to help ensure that the
agency is moving in the right direction. 

The Nuclear Regulatory Commission provided several clarifying
comments that we have incorporated, where appropriate.  The agency's
letter and our response to its specific comments are provided in
appendix I. 


---------------------------------------------------------- Letter :8.1

As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 14 days after the date of this letter.  At that time, we will
send copies to the Honorable Shirley Ann Jackson, Chairman, Nuclear
Regulatory Commission; the Honorable Greta Joy Dicus, the Honorable
Nils J.  Diaz, the Honorable Edward McGaffigan, Jr., and the
Honorable Jeffrey S.  Merrifield, Commissioners, Nuclear Regulatory
Commission; and the Honorable Jacob Lew, Director, Office of
Management and Budget.  We will make copies available to other
interested parties on request. 

We conducted our work from May 1998 through February 1999 in
accordance with generally accepted government auditing standards. 
Appendix II provides details on our scope and methodology. 

If you or your staff have any questions about this report, please
call me on (202) 512-3841.  Other major contributors to this report
are listed in appendix III. 

Victor S.  Rezendes
Director, Energy, Resources,
 and Science Issues




(See figure in printed edition.)Appendix I
COMMENTS FROM THE NUCLEAR
REGULATORY COMMISSION
============================================================== Letter 



(See figure in printed edition.)



(See figure in printed edition.)


GAO'S COMMENTS

The following are GAO's comments on NRC's letter dated March 5, 1999. 

1.  We have not included NRC's suggested language in the report.  NRC
says that all utilities have sufficiently current and accurate
information to support a risk-informed, but not a risk-based,
approach.  Yet NRC found as late as several months ago that some
utilities did not have complete and accurate design information. 
Until NRC resolves this issue, we do not believe that a foundation
exists upon which to move forward with a risk-informed approach. 

2.  We did not state that regulations do not provide reasonable
assurance of adequate protection to the health and safety of the
public.  Our conclusion is based on the fact that NRC has not
resolved many fundamental issues needed to implement a risk-informed
approach.  Therefore, we have not changed our report. 


OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix II

Senators Joseph R.  Biden, Jr., and Joseph I.  Lieberman asked us to
examine various issues related to the safe operation of commercial
nuclear power plants.  On the basis of discussions with their
offices, we agreed to answer the following questions:  What
challenges will the Nuclear Regulatory Commission (NRC) and the
nuclear industry experience in a competitive environment?  What
issues does NRC need to resolve to move forward with risk-informed
regulation?  What is the status of NRC's efforts to apply a
risk-informed regulatory approach to two of its oversight
programs--plant safety assessments and enforcement? 

We reviewed prior General Accounting Office reports; relevant
sections of the Atomic Energy Act of 1954, as amended; and NRC
regulations, staff requirement memorandums, and various analyses
provided by the Executive Director for Operations or other offices
for the Commission's consideration.  We also reviewed NRC's responses
to questions resulting from the July 1998 hearing before the
Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear
Safety, Senate Committee on Environment and Public Works. 

To determine the pressures that the nuclear industry will experience
in a competitive environment, we reviewed Standard and Poor's World
Energy Service:  U.S.  Outlook (Apr.  1998) and the Nuclear Energy
Institute's (NEI) Nuclear Energy:  2000 and Beyond--A Strategic
Document for Nuclear Energy in the 21st Century (May 1998).  We also
examined NRC's Office of Inspector General's June 1998 report on the
results of the safety culture and climate survey conducted in the
fall of 1997.  In addition, we obtained the Energy Information
Administration's Status of Electric Industry Restructuring by State
and Electric Power Monthly (Jan.1999).  We also met with officials
from Energy Resources International, Inc., and reviewed an October
1998 report, Impacts of the Kyoto Protocol on U.S.  Energy Markets
and Economic Activity, to obtain views on the future of nuclear
power. 

To determine the issues that NRC needs to resolve to move forward
with a risk-informed approach, we reviewed comments that NRC received
on its May 1997 proposed regulatory guidance on the process that
allows utilities to change their plants without NRC's prior approval
and on its October 1998 proposed regulations for implementing the
change process.  We also reviewed various analyses prepared by NEI,
including guidelines for the conduct of safety evaluations required
by the change process.  We contacted 10 utilities that operate 16
nuclear plants to obtain their views on a risk-informed regulatory
approach.  We selected the utilities on the basis of information
provided by NRC on the quality of their risk assessments, as well as
discussions with NRC staff.  We attended meetings held by the
Advisory Committee on Reactor Safeguards on risk assessment and the
change process, a public workshop held by NRC on its risk-informed
regulation (July 22, 1998), and meetings held by the Commission in
July 1998 and November 1998 with various stakeholders, including NEI,
the Union of Concerned Scientists, the World Association of Nuclear
Operators, and utility officials.  We also attended the January 1999
briefing by NRC staff to the Commissioners on their proposed approach
to making the regulations that apply to nuclear power plants risk
informed.  We met with staff responsible for NRC's initiatives
related to design information, safety analysis reports, the change
process, and risk-informed regulation, as well as with knowledgeable
representatives of NEI, the Union of Concerned Scientists, and Public
Citizen's Critical Mass Energy Project. 

To determine the status of NRC's efforts to make its plant safety
assessments and enforcement programs risk informed, we attended a
public workshop held by NRC on its proposed process (from Sept.  28,
1998, through Oct.  1, 1998) and meetings held by the Commission in
July 1998 and November 1998 with various stakeholders, including NEI,
the Union of Concerned Scientists, the Institute for Nuclear Power,
and utility officials.  In addition, we reviewed NRC's January 1999
proposed plant safety assessment process, as well as an Assessment of
the NRC Enforcement Program (NUREG-1525, Apr.  1995), the NRC
Enforcement Policy Review:  July 1995 - July 1997 (NUREG-1622, Apr. 
1998), and the General Statement of Policy and Procedures for NRC
Enforcement Actions (NUREG-1600, Rev.  1, May 1998).  We also
reviewed NEI's proposal related to a risk-informed, performance-based
assessment, inspection, and enforcement process.  We met with staff
responsible for NRC's initiatives related to plant safety assessments
and enforcement, as well as with knowledgeable representatives of
NEI, the Union of Concerned Scientists, and Public Citizen's Critical
Mass Energy Project. 


MAJOR CONTRIBUTORS TO THE REPORT
========================================================= Appendix III

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION WASHINGTON,
D.C. 

Vondalee Hunt
Gary Jones
Mary Ann Kruslicky
Michael Rahl


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