Nuclear Regulatory Commission: Preventing Problem Plants Requires More
Effective Action by NRC (Testimony, 07/30/98, GAO/T-RCED-98-252).

GAO discussed how the Nuclear Regulatory Commission (NRC) oversees the
nuclear power industry, focusing on: (1) how NRC defines nuclear safety;
(2) some of the causes for weaknesses in how NRC oversees nuclear plants
that have problems; and (3) the challenges ahead for NRC safety
regulation.

GAO noted that: (1) its 1997 report points out that Congress and the
public need confidence in NRC's ability to ensure that the nuclear
industry performs to high safety standards; (2) while GAO's report did
not make judgments about the safety of nuclear plants or the
appropriateness of NRC's current regulatory structure, the many safety
problems identified at plants GAO examined raised questions about
whether NRC's regulatory program was working as it should, and GAO made
recommendations to strengthen it; (3) NRC assumes plants are safe if
they operate as designed and follow NRC's regulations; (4) however, all
three facilities GAO examined--the Millstone Nuclear Power Station in
Connecticut, the Salem Generating Station in New Jersey, and the Cooper
Nuclear Station in Nebraska--were operating outside their approved
designs; (5) NRC reasoned that these plants were still safe because the
many safety features and systems built into a plant's design provide an
adequate margin of safety; (6) NRC has found other plants that are not
operating as designed and is exploring the reasons that the licensees
have not maintained current information on their design changes and have
not examined the impact of such changes on the safe operation of plants;
(7) the three nuclear plant facilities that GAO examined had
long-standing safety problems, and NRC did not take aggressive action to
ensure that the licensees fixed their safety problems in a timely way;
(8) these problems ranged from failures of equipment to work properly
when tested, to weaknesses in how licensees' conducted their maintenance
programs; (9) NRC staff repeatedly extended the amount of time allowed
the plants' operators to make corrective actions; (10) furthermore, NRC
was slow to place plants with declining performance on its Watch List,
which is a tally of plants whose declining performance trends require
closer regulatory attention; (11) NRC faces many challenges to make its
regulatory program work as effectively as it can, particularly in light
of major changes taking place in the nuclear industry; (12) according to
one utility industry study, as many as 37 of the nation's nuclear sites
are vulnerable to shutdown because production costs are higher than the
projected electricity prices in the market; (13) decisions that NRC will
be making include how safe is safe, and what should be the nuclear plant
regulatory approach of the future; and (14) NRC's regulatory approach
needs to be anchored in goals and objectives that are clearly
articulated, and performance measures that hold NRC managers as well as
licensees accountable.

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

 REPORTNUM:  T-RCED-98-252
     TITLE:  Nuclear Regulatory Commission: Preventing Problem Plants 
             Requires More Effective Action by NRC
      DATE:  07/30/98
   SUBJECT:  Nuclear powerplant safety
             Energy industry
             Safety regulation
             Inspection
             Electric utilities
             Quality assurance
             Accountability
             Safety standards
             Fines (penalties)
IDENTIFIER:  Salem Generating Station (NJ)
             Millstone Nuclear Power Station (CT)
             Cooper Nuclear Station (NE)
             NRC Watch List
             
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Cover
================================================================ COVER


Before the Subcommittee on Clean Air, Wetlands, Private Property, and
Nuclear Safety, Committee on Environment and Public Works, U.S. 
Senate

For Release
on Delivery
Expected at
9 a.m.  EDT
Thursday
July 30, 1998

NUCLEAR REGULATORY COMMISSION -
PREVENTING PROBLEM PLANTS REQUIRES
MORE EFFECTIVE ACTION BY NRC

Statement of Gary Jones, Associate Director,
Energy, Resources, and Science Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-98-252

GAO/RCED-98-252T


(141240)


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

  NRC -

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to testify on how the Nuclear Regulatory Commission
(NRC) oversees the nuclear power industry.  Among other things, NRC
is responsible for ensuring that the operation of the nation's 103
commercial nuclear power plants occurs in a manner that adequately
protects public health and safety.  Identifying nuclear plants with
safety problems and making sure that their owners--the
licensees--correct safety problems promptly are essential to NRC's
safety mission.  This becomes even more critical as NRC begins to
regulate safety in an environment of electricity deregulation. 

Our testimony is based on our May 1997 report about preventing
problems at nuclear power plants.\1 Our testimony discusses how NRC
defines nuclear safety, some of the causes for weaknesses in how NRC
oversees nuclear plants that have problems, and the challenges ahead
for NRC safety regulation. 

In summary, our 1997 report points out that the Congress and the
public need confidence in NRC's ability to ensure that the nuclear
industry performs to high safety standards.  While our report did not
make judgments about the safety of nuclear plants or the
appropriateness of NRC's current regulatory structure, the many
safety problems identified at plants we examined raised questions
about whether NRC's regulatory program was working as it should, and
we made recommendations to strengthen it.  Specifically we found
that: 

  -- NRC assumes plants are safe if they operate as designed and
     follow NRC's regulations.  However, all three facilities we
     examined--the Millstone Nuclear Power Station in Connecticut,
     the Salem Generating Station in New Jersey, and the Cooper
     Nuclear Station in Nebraska--were operating outside of their
     approved designs.  NRC reasoned that these plants were still
     safe because the many safety features and systems built into a
     plant's design provide an adequate margin of safety.  However,
     changes made to plants over time, such as replacing components
     with different parts and reconfiguring systems, can alter a
     plant's design, thus potentially affecting how certain safety
     systems might work in an emergency.  NRC has found other plants
     that are not operating as designed and is exploring the reasons
     that the licensees have not maintained current information on
     their design changes and have not examined the impact of such
     changes on the safe operation of plants.  Ambiguity over "how
     safe is safe" arises because NRC does not have an effective way
     to quantify the safety of plants that deviate from their
     approved designs.

  -- The three nuclear plant facilities that we examined had
     long-standing safety problems, and NRC did not take aggressive
     action to ensure that the licensees fixed their safety problems
     in a timely way.  These problems ranged from failures of
     equipment to work properly when tested, to weaknesses in how
     licensees' conducted their maintenance programs.  As a result,
     the plants' conditions worsened, reducing safety margins.  NRC
     staff repeatedly extended the amount of time it allowed the
     plants' operators to make corrective actions.  In addition,
     although nuclear industry and NRC officials agree that the
     competency of a nuclear plant's management is a critical factor
     in safety performance, in the early 1990s, NRC eliminated
     management assessment in streamlining its inspection guidance. 
     Furthermore, NRC was slow to place plants with declining
     performance on its "Watch List," which is a tally of plants
     whose declining performance trends require closer regulatory
     attention.

  -- NRC faces many challenges to make its regulatory program work as
     effectively as it can, particularly in light of major changes
     taking place in the nuclear industry.  As the electric utility
     industry deregulates, safety margins may be compromised when
     licensees cut costs to stay competitive.  According to one
     utility industry study, as many as 37 of the nation's nuclear
     sites are vulnerable to shutdown because production costs are
     higher than the projected electricity prices in the market. 
     Decisions that NRC will be making include how safe is safe, and
     what should be the nuclear plant regulatory approach of the
     future.  NRC's regulatory approach needs to be anchored in goals
     and objectives that are clearly articulated, and performance
     measures that hold NRC managers as well as licensees
     accountable. 


--------------------
\1 Nuclear Regulation:  Preventing Problem Plants Requires More
Effective NRC Action (GAO/RCED-97-145, May 30, 1997). 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

Commercial nuclear plants in the U.S.  operate in 31 states and
provide about 20 percent of the nation's electricity.  Five states
(Connecticut, New Jersey, Vermont, South Carolina, and Illinois) rely
on nuclear power for about half of their electricity.  NRC licenses
the construction and operation of nuclear power plants, which are
owned and operated by both public and private utility companies;
develops, implements, and enforces the rules and regulations that
govern nuclear activities; inspects facilities to ensure compliance
with legal requirements; and conducts research to support its
programs.  NRC's fiscal year 1998 budget authorization is $472.8
million, and it has requested $488.6 million for fiscal year 1999. 
Its staff of about 3,000 is responsible to five Commissioners
appointed by the President and approved by the Senate.  About 55
percent of NRC's professional staff are dedicated to nuclear reactor
activities. 


   NRC DOES NOT PRECISELY DEFINE
   NUCLEAR PLANT SAFETY
---------------------------------------------------------- Chapter 0:2

Determining the safety of plants is difficult because NRC does not
precisely define it.  Instead, NRC presumes that nuclear plants are
safe if they operate within their approved designs (design basis) and
meet NRC's regulations.  However, NRC's regulations and other
guidance do not provide either the licensees or the public with the
specific definitions and conditions that define the safety of a
plant.  As a result, NRC does not have an effective way to quantify
the safety of plants that deviate from their approved designs or
violate regulations.  Determining a plant's safety condition is,
therefore, a subjective judgment. 

NRC reasons that the many safety features and systems built into a
plant's design provide an adequate margin of safety, even when some
of them are not working properly.  System redundancies--the
duplication of a plant's safety systems, structures, and
components--provide in-depth protection to help prevent an accident
from releasing radiation to the public.  This concept, also known as
defense-in-depth, forms the foundation of NRC's confidence that
nuclear plants are safe, even those that may be shut down for safety
problems. 

The conditions found at Millstone in 1996, however, challenged NRC's
confidence that it can rely on licensees to ensure that the plants
are operating within their approved design basis.  A special NRC
inspection team found a number of significant equipment problems and
concluded that the licensee had not consistently met its license and
regulatory requirements.  NRC's inspectors were unaware of the extent
of these problems--some of which were not reported by plant
managers--and thus discovered that the Millstone plants were
operating outside their design bases.  As a result of the conditions
found at Millstone and at other nuclear plants, NRC is now
reemphasizing the need to determine if plants are still operating
within their design bases.  The safety significance of design basis
issues are hard to quantify because NRC does not precisely define
safety.  Perceptions of safety levels and risk are subjective and are
not always consistent from inspector to inspector.  Several current
and former NRC inspectors told us that they cannot easily distinguish
a safe plant from an unsafe one, and that the guidance on when to
shut down a plant does not cover all situations. 

NRC has incomplete knowledge about the extent to which nuclear plants
are operating within their design basis.  Since the mid- to
late-1980s, NRC has found that some licensees were not documenting
changes made to their plants that could affect their approved design
basis.  However, it was not until October 1996, after the problems
were discovered with Millstone, that NRC required licensees to
certify that their plants were operating within the plant's design
basis.  To follow up on licensees' certifications, as of May 1998,
NRC had inspected 16 sites to verify that the plants were operating
under the terms and conditions of their licenses.\2 Generally, NRC
found that some utilities had not maintained current information on
the design basis and had not examined the impact of modifications on
safe plant operations.  NRC identified significant problems during
these inspections, including instances in which licensees had not
properly tested safety related components, and had made errors in
their analyses for how emergency cooling systems would work during a
potential accident.  NRC has concluded that the majority of the
problems resulted from errors in the original design or from design
modifications, inadequate testing, and discrepancies in
documentation. 


--------------------
\2 These represent sites that NRC has identified for follow up
inspections. 


   NRC IS NOT EFFECTIVELY
   OVERSEEING PROBLEM PLANTS
---------------------------------------------------------- Chapter 0:3

Identifying and correcting safety deficiencies are among the
licensees' most important responsibilities, and these are a major
focus of NRC's nuclear plant inspection program.  NRC's regulations
require that nuclear plants have an effective program to "assure that
conditions adverse to quality .  .  .  are promptly identified and
corrected." And NRC places importance on evaluating plants'
corrective action programs to ensure that they will lead to timely
correction of the identified problems.  For the three facilities with
a history of poor performance that we examined (Millstone, Salem, and
Cooper), we found that the licensees failed to fix their substantial
and recurring safety problems in a timely manner.  Most of these
problems were equipment failures.  At Salem, for example, an air
control system and a water pump motor had not worked properly for
over 6 years.  NRC allowed these licensees repeated opportunities to
correct their safety problems, by relying on licensees' corrective
action plans that were never fully completed, by accepting
management's promises to fix problems (though these promises were not
always met), and by using enforcement actions too late to effect
change.  For example, some of the problems causing the 1994/1995
shutdown of the Cooper Nuclear Station dated to the plant's first
start-up in 1974--problems Cooper's management should have addressed
years earlier, according to the NRC inspectors we interviewed.  An
NRC audit reported that the plant managers were ï¿½living with
problems, not fixing themï¿½ and that ï¿½ineffective self-assessmentï¿½ and
a ï¿½weak corrective action programï¿½ characterized operations. 
However, NRC allowed Cooper to restart its reactors after the
1994/1995 shutdown on the basis of the licensee's promises to fix
these recurrent problems and contingent upon Cooper's monitoring of
its own progress.  After showing improvements over several months,
the plant's performance quickly declined.  Then NRC discovered that
many of the safety problems that Cooper's management had promised to
correct had not been corrected. 

Another tool NRC uses to obtain compliance with its regulations is
its enforcement program of fines and sanctions, which is designed to
correct violations promptly, deter future violations, and encourage
licensees to operate their plants safely.  However, NRC was very slow
imposing fines on the three plants we examined.  Salem's fines were
levied by NRC well after the plants were in periods of significant
decline, and at the time our report was issued, NRC still had not
completed its enforcement action against Millstone for violations
that were first discovered in 1995.  NRC can also prevent shutdown
plants from restarting until all of their safety deficiencies are
addressed, but this action sometimes has occurred long after plants'
deficiencies were documented. 

We recommended that NRC aggressively act on identified problems and
then document what it will do if safety problems go uncorrected. 
NRC's Chairman has complained about the consequences of NRC's
patience with some problem licensees, adding that the Commission is
reviewing its internal processes to strengthen its ability to
identify and act on licensees' corrective action programs.  NRC
officials agree that they need to do a better job of making licensees
fix their problems, and will bring licensees' unresponsive to
corrective actions to the attention of NRC's senior managers. 


      MANAGEMENT COMPETENCY IS
      CRITICAL TO SAFETY
-------------------------------------------------------- Chapter 0:3.1

The nuclear industry and NRC officials widely agree that the
competency of a nuclear plant's management is perhaps the most
critical factor in safe performance.  NRC's audits and reviews
frequently cite management weaknesses as the major cause of the
declining performance at nuclear plants.  For example, NRC cited a
ï¿½poor management safety culture,ï¿½ ï¿½weak management oversight of
engineering programs,ï¿½ a "fragmented approachï¿½ to resolving problems,
and a failure to provide an ï¿½adequate level of oversightï¿½\3 as
underlying causes for deteriorated conditions at Cooper.  Similarly,
safety problems found at the LaSalle and Zion nuclear plants in
Illinois in January, 1997, were attributed by NRC to weak management
processes and a lack of management's involvement. 

Yet, despite the importance of competent management, NRC does not
have an effective process for ensuring that licensees maintain it for
their nuclear plants.  NRC does not assess management in its plant
inspection program, and individual inspection reports specifically
avoid any references to management's competency.  NRC's references to
management weaknesses are usually made retrospectively, and often
only after a licensee admits to such deficiencies, or by NRC audit
teams or special investigations--long after the NRC has lost the
opportunity to give an early warning about potential management
weaknesses.  NRC's guidance to its inspectors once contained a
management assessment component, but this was eliminated in the early
1990s when NRC streamlined its inspection process. 

Although NRC's regulations do not require the evaluation of plant
management before a license to operate a nuclear plant can be issued,
NRC must determine if the prospective licensee is "technically and
financially qualified to engage in the activities authorized by the
operating license." Because such qualifications could also reflect on
a licensee's overall ability to manage a facility competently and
safety, we recommended that NRC assess management competency and
performance as part of its inspection process.  A 1996 report to NRC
by Arthur Andersen also points out the importance of evaluating
management, particularly for NRC to be effective in actively
assessing plant performance.  The report recommended that NRC hire
experts or train staff to evaluate management's performance and
changes in management. 

NRC agrees that management's competency is critical to a licensee's
operational safety performance and told us that its existing
evaluation processes draw conclusions about the effectiveness of
licensees' management.  NRC staff have proposed options to assess the
performance and competency of licensees' management, which include
changes in inspection procedures, more staff training, and use of
consultants.  But the Commission rejected these options in June 1998,
and instead directed NRC staff to continue with the current practice
of inferring licensee performance from existing plant inspections and
other routine assessments.  The Commission also withdrew resources
specifically directed at developing a systematic method to assess
licensees' competency and management.  While we are continuing to
study NRC's rationale for its decision as part of our ongoing work,
we continue to believe that evaluating licensees' management
competency as part of plant inspection would provide an important
early warning of potentially unsafe practices. 


--------------------
\3 Supplemental Plant Performance Review, NRC (95-04, Oct.  3, 1995). 


      EARLY INTERVENTION COULD
      RESULT IN FEWER PROBLEM
      PLANTS
-------------------------------------------------------- Chapter 0:3.2

NRC's process to focus attention on those plants with declining
safety performance--the semiannual Senior Management Meeting--needs
substantial revisions to achieve its purpose as an early warning
tool.  NRC collects enormous amounts of information on nuclear
plants, both from its own inspectors and from the nuclear plant
licensees.  Taken together, these sources provide NRC with a database
to measure and monitor plants' safety conditions and safety
performance.  Despite this database, NRC has been slow to identify
and place problem plants on its "Watch List." The Watch List is NRC's
tally of plants whose declining performance trends require closer
regulatory attention.  Yet, the List is an important early warning
tool for NRC to target its regulatory emphasis, allowing small
problems to be corrected before they lead to costly shutdowns. 

The Salem and Millstone plants were under discussion by NRC for 3 to
4 years before they were placed on the Watch List in 1996 and 1997,
respectively.  NRC discussed the Cooper facility as a problem plant
but never placed it on the Watch List, even though it was eventually
shut down for safety reasons.  As of May 1997, when we did our
analysis, 41 plants, or more than a third of the nation's nuclear
power plants, had been placed on the Watch List by NRC since 1986. 
Twenty-four plants had been on the list for 2 or more years. 
However, about half of the plants on the Watch List were known by NRC
to be poor performers long before being listed.  Moreover, the Arthur
Andersen report identified 10 plants that were not placed on the
Watch List but whose performance indicators were similar to those
that are listed. 

This inconsistency has been attributed, in part, to the lack of
specific criteria for making decisions on a consistent basis, the
subjective nature of the process, and some NRC managers' confusion
about their role in the process.  Industry and private interest
groups alike have criticized NRC for not having specific criteria
with which to decide when plants should be placed on the Watch List. 

NRC acknowledges that it should do a better job of identifying plants
deserving attention for and listing on the Watch List.  NRC is
developing a new process for assessing plants' performance.  Among
other things, the new process would eliminate the Watch List,
replacing it with a process that would include a decision model or
criteria so that, according to NRC, its actions are predictable,
informed regarding risk, simple, nonredundant, and efficient.  NRC
expects to publish the proposed process for comment early in August
1998, and hopes it will be in place by 1999. 


   CHALLENGES NRC FACES REGULATING
   IN AN EVOLVING ENVIRONMENT
---------------------------------------------------------- Chapter 0:4

At the heart of safe operations is holding the licensees accountable
for fixing their plants' problems more promptly and addressing
management issues more directly.  However, changing NRC's culture
will not be easy.  The need to ensure that NRC's regulatory program
works as effectively as it can is extremely important, particularly
in light of major changes taking place in the nuclear industry. 

NRC officials are concerned that as the electric utility industry is
deregulated, safety margins may be compromised as licensees cut costs
to stay competitive.  As an example, an independent auditor's review
of the Millstone plant in 1996 noted that the need to trim costs in
the face of future competition resulted in managers' choosing to
defer maintenance and allow backlogs of corrective actions to grow,
eventually creating a situation that led to a shutdown and several
hundred million dollars worth of repairs. 

Several estimates have been made about the number of plants that
might no longer be economically competitive.  A private research
report concluded that because competition will result in lower
electricity prices in the future, as many as 37 of the nation's
nuclear sites are vulnerable to shutdown because production costs are
higher than the projected electricity prices in the market.\4
Together, these sites represent over 40 percent of the U.S.  nuclear
generating capacity. 

For those plants that will continue to operate, NRC reports that the
nuclear industry has matured to the point that plants have been in
operation long enough for aging to be a major issue that can affect
cost and safety.  Aging, which affects all of a plant's systems and
components, can bring conditions causing safety concerns that, if not
appropriately addressed, could require licensees to shut down plants. 
Already, two plants have formally requested a license extension and
others plan to operate beyond their original 40 year operating lives. 

NRC is moving to "risk-informed" and "performance based" reactor
regulation, which aims to focus regulatory resources on areas of the
highest safety significance and its regulatory framework more results
oriented.  It is also making changes to the Senior Management Meeting
process.  These changes illustrate an effort by the current Chairman
and Commissioners to improve NRC's ability to help ensure safe
operation of the nation's nuclear power industry as well as address
industry concerns regarding excessive regulation. 

Questions that NRC will be facing include how safe is safe, what will
the future NRC regulatory approach be, and what level of resources
will be needed to regulate the Department of Energy's nuclear
facilities?  Whatever NRC decides in answering such questions needs
to be anchored in goals and objectives that are clearly articulated
and performance measures that hold NRC managers as well as licensees
accountable.  In addition, NRC needs reliable information on which to
determine safe operations, training for its staff, and an enforcement
structure that clearly lays out a range of sanctions that it will
impose on the basis of the potential seriousness of the safety
problems found. 

A framework within which NRC can accomplish its missions has been
provided by 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 strategic and
performance plans.  In our review of NRC's first annual performance
plan, which covers the program activities set out in its fiscal year
1999 budget,\5 we noted that the plan could provide a clearer picture
of the intended performance across NRC and better discuss the
strategies and resources the agency will use to achieve its
performance goals.  For example, nuclear reactor safety is a
"strategic arena" in NRC's strategic plan.  While the plan lists
specific strategies NRC will use against licensees that fail to meet
regulatory standards, including halting operations if licensee
performance falls below an acceptable level\6 , NRC has not developed
specific criteria for "acceptable." Moreover, the performance plan
does not provide confidence that the agency's performance information
will be credible.  The development of strategic and performance plans
is a dynamic process.  As the Congress and NRC gain more experience
in setting goals and measuring results, better information will be
available to evaluate progress towards improving NRC performance. 


--------------------
\4 Nuclear Power Plant Shutdowns and Implications for Future Natural
Gas Demand, Washington International Energy Group (Feb.  1997). 

\5 Results Act:  NRC's Annual Performance Plan for Fiscal year 1999
(GAO/RCED-98-195R, May 27, 1998)

\6 Only once has NRC issued an order to shut down an operating plant,
at Peach Bottom, Penn.  in 1987.  On other occasions, NRC has issued
such orders only after the licensees had suspended operations. 


-------------------------------------------------------- Chapter 0:4.1

Mr.  Chairman and Members of the Subcommittee, this concludes our
statement.  We would be pleased to respond to any questions you may
have. 


*** End of document. ***