The current restructuring of the US electricity supply industry is focusing attention on the profitability of the existing commercial power supply which is facing significant challenges as retail competition and deregulation become more widespread. These challenges come mainly from the financial markets’ view of the industry’s safety and technical performances over the 20 years since the Three Mile Island accident, and the maturing of the licensing processes of the Nuclear Regulatory Commission to reduce undue burdens on plant licencees. The most significant technological issue facing the industry is probably the potential deployment of mixed-oxide (MOX) fuel in commercial reactors as a means of disposing of weapons grade material.

The domestic US (INPO) and international (WANO) organisations1 that track plant performances are reporting positive trends in the major indicators such as Capability Factors, Unplanned Automatic Scrams, Fuel Reliability, Collective Radiation Exposure, Solid Waste Generation, Industrial Safety Accident Rates, and Significant Events per unit (Figs 1 – 7). The trending of Significant Events is seen as particularly important as it shows the number of events decreasing from 2.38 per reactor unit in 1985 to 0.04 per unit in 1998. This represents a 60 fold reduction in 13 years. The industry has established goals for the year 2000 in all reporting categories. In the case of plant reliability the mean Capability Factor as a percentage of the maximum energy that the plant is capable of generating increased from 62.7% in 1980 to 81.6% in 1997 with a goal for 2000 of 87%. In addition the NRC has reported2 that the number of operational events at commercial nuclear plants in 1997 that could have led to a severe accident precursor causing damage to the reactor core was the lowest since 1970. No serious accidents were reported in 1997 and the five precursor events reported comprised equipment unavailability, loss of offsite power, and minor piping leaks. This declining trend suggests that the overall safety of commercial nuclear power plants is improving along with the performance indicators. It has long been held as a fact that the more productive units are generally those with the least regulatory problems.

INTERESTING THE MARKETS

Wall Street appears to be impressed by the progress that has been made in operating efficiencies and the reductions in operating costs. One of the factors in play has been the agreement of the regulator, NRC, to approve 5 – 10% increases in plant outputs within the existing licence framework. Financial analysts are stating that one of the key components in keeping nuclear power competitive is the ability to pay down the plant’s fixed or ‘stranded’ costs in the form of remaining loans and the equity raised to finance these loans. This removal of debt financing will significantly reduce the forward costs of generating electricity in the form of production costs (fuel plus operating and maintenance costs), incremental capital spending (plant upgrades including PWR steam generator replacements), administrative expenses and profits. Some utilities are using creative financing measures to recover capital investment costs on an expedited basis; for example, Pacific Gas & Electric and Southern California Edison are using a Competitive Transition Charge to recover capital costs at Diablo Canyon and San Onofre units so that by 2002-2004 power generation will be based on only the forward costs. Similarly, PECO Energy have written down the $3.1 billion debt for the Limerick plant by cutting common stock dividends by 44%.

These same analysts still express concerns about other nuclear industry issues such as the DOE’s failure to meet the 31 January 1998 contractual agreement for the 1 mill per kilowatt-hour sold fee from the utilities to start pick-up of spent nuclear fuel from reactor sites; the NRC regulatory process is perceived to be outdated and causing unnecessary costs and delays to the licencees; and the uncertainties associated with accurate estimates of plant decontamination and decommissioning.

However, these same analysts are also noting the advantages that nuclear energy enjoys over fossil plants based on its relative insensitivity to fuel prices and its avoidance of escalating environmental compliance requirements to meet the 1997 Kyoto Protocols. If the hurdles of plant licence extension can be overcome, any nuclear plant that has been fully depreciated over its initial 40 year licence period will be a formidable competitor in a deregulated market for a further 20 years if it remains safe, reliable and efficiently operated.

The nuclear energy industry is reporting3 that the economic value of the 104 US plants remaining competitive after retail competition shakedowns will be in the range of $77 billion to $101 billion and in a scenario where licence renewal becomes an option these figures change to $112 billion to $144.5 billion. Publications from financial analysts on Wall Street 4,5 echo similarly optimistic appraisals of the ability of the larger utility organisations that are evolving with the supply industry’s recent mergers, to be able to better control operating costs and having the means to recover stranded capital investment costs. The recent purchase of Three Mile Island unit 1 (See NEI Aug ‘98, p2) by AmerGen for $100 million, including $71 million for fuel contracts, equates to only 10% of the station’s book value and could indicate future bargains for successful plants. TMI 1’s Capability Factor over the last five years was 92.8% and in 1997 it completed an industry record of 617 days of uninterrupted operation.

Other perhaps unexpected voices are also sounding positive about the future need for nuclear power. Specifically, the Clinton administration, which has been at best ambivalent, recently stated6 that it would like to work with the Congress to make nuclear energy more significant in the years ahead, and the Department of Energy7 in the January 1999 release of the Draft National Energy Strategy states that a cornerstone of the policy includes maintaining a viable nuclear energy option. Also, for the first time in its history the labor federation, AFL-CIO is on record8 supporting the continued use of nuclear energy and several of the larger unions, including the Teamsters and the International Brotherhood of Electrical Workers, have announced support for the House of Representatives proposed legislation-HR-45 to reform the Nuclear Waste Policy Act of 1983 & 1987 to authorise a temporary spent nuclear fuel storage facility at the Nuclear Test Site in Nevada. These initiatives are seen as saving 70,000 union jobs and creating 10,000 new well paid jobs.

Polling public opinion has become a major preoccupation of the print and electronic media over the last 6 years and there are some interesting findings that are encouraging to the nuclear industry. For example, the response from 1000 college educated telephone contacts in January 19999 to the questions ‘should we keep our existing nuclear plants?’ and ‘should we renew licences of nuclear energy plants that continue to meet federal safety standards?’ were 76% and 87% positive respectively with a plus or minus 3% error. The same poll also revealed an interesting perception gap in the responses to questions ‘do you strongly favour or somewhat favour nuclear energy as one of the ways to provide electricity in the US?’ which resulted in a positive 65%, and the question ‘do you think that the people in your community are in favour or are opposed to nuclear power?’ the response to which was a negative 61%.

Much of the renewed interest in sustaining the nuclear energy option into the next century stems from its positive contribution to meeting US domestic Clean Air Act compliances and fulfilling the Kyoto Protocols for carbon emission targets. The administration’s leading environmentalist, Vice-president Al Gore, speaking at the Chernobyl Museum in Kiev last year, gave support, albeit qualified, to nuclear power’s role in the world’s energy supply, stating it should play a role if it is designed well, regulated properly and cared for meticulously. In graphical terms (Fig 8) the use of nuclear energy in the US avoids about 150 million tonnes of carbon emissions annually and accounts for 37% of the Clean Air Act reductions. The Kyoto Protocol requires the US to reduce carbon emission to 7% below 1990 levels by 2012. The Energy Information Agency, part of the US DOE, concluded in a 1998 report that to cut carbon emission levels to 3% below those of 1990 would not only require licence renewal for existing nuclear power plants, but an additional 41000 MWe of new carbon emission free generation would be needed by 2010.

CHANGING REGULATIONS

A critical factor in sustaining the nuclear power option in the US will be the continued progress in reforming the plant licensing regulatory process administered by the NRC. After the March 1979 accident at Three Mile Island (TMI) unit 2, the NRC faced severe criticism from the industry for their handling of the event and from the public which to some extent lost trust in the merits and safety of nuclear power. The TMI Action Plan10 scrutinised the roles of both the licencees and the regulator following industry investigations and Congressional hearings and as one result the NRC imposed new regulatory requirements that were mainly prescriptive. In the 20 years that have elapsed since the accident the nuclear industry has matured significantly and the plant performances reflect a continued trend of increased safety performance and higher plant reliabilities.

On the other hand the NRC is viewed as being somewhat static and reactionary to changes that would accelerate the regulatory process and save significant costs to the licence holders. The NRC commissioners at the March 1999 Regulatory Information Conference in Washington DC, titled ‘Days of Futures Past’, acknowledged the need for implementing regulatory reform and singled out several specific topics that would form the basis for the agency’s transition to a more risk-informed and performance based regulatory framework, including:

• Changes to Title 10 Codes of Federal Regulation (CFR) Part 50.59 for field changes without prior NRC approval.

• Maintenance rule changes to 10 CFR Part 50.65 for provisions of on-line maintenance operations to reduce refuelling shutdown durations.

• Reforming the reactor oversight and assessment process (Systematic Assessment of Licencee Performance-SALP, and ‘watch lists’).

• Use of alternative radioactivity source terms for accident evaluations.

• Changes to the NRC’s Enforcement Policy procedures.

• Other specific changes to 10 CFR Part 50 (Potassium iodide policy, decommissioning funding, interim spent fuel storage, financial assurance guarantees and licence fee structures).

The NRC has stated that where probabilistic risk assessment (PRA) analyses are used as part of the regulatory decision-making process, the PRAs should not be exclusively numeric; engineering judgment and operating experience, defence-in-depth and margins of safety should all be available as additional tools. Risk metrics are based on an increase in core damage probability and / or a large early release probability. The use of PRAs are seen by the NRC as a vital part of the licensing process and their functionality will be ensured by criteria standards being developed by the American Society of Mechanical Engineers (ASME) and the American Nuclear Society (ANS). The NRC ‘white paper’ published in March 1999 outlined the expectations of risk-informed and performance based regulations for nuclear safety through the expanded use of PRAs and other techniques that quantify and rank risk with performance-based regulatory oversight, emphasising measurable results over process and method.

The NRC is seen as taking a more pro-active role in certain emerging issues facing the nuclear industry, including:

• In response to the changing US electricity supply industry after deregulation, the NRC will focus on four general areas: 1) the impact of cost-competitiveness on safe nuclear operations; 2) electrical grid reliability; 3) the availability of funds for decommissioning; and 4) licence transfers.

• For over 10 years the NRC has been actively involved in the certification of new reactor designs under the regulations described in 10 CFR Part 52 and up to September 1998 three new designs had received Final Design Approval (FDA); the General Electric Advanced Boiling Water Reactor; ABB-Combustion System 80+ Pressurised Water Reactor; and the Westinghouse AP 600, a 600 MWe PWR with unique safety systems relying on passive energy in the form of gravity, natural circulation and stored energy to mitigate accident events.

• In April 1999 the NRC staff proposed significant changes to the SALP process for plant grading that had been in use since 1980 and has been criticised by plant operators as ineffective and to some extent obsolete. Specifically the staff are proposing to eliminate the SALP process in its present form for assessing plants at 18 month intervals, establishing ‘watch lists’ for plants performing poorly and carrying out plant reviews every six months. Instead the staff would perform an integrated annual review of each plant with information drawn from inspection reports, notices of violations, licence event reports and other information available to the NRC. This annual report would provide evaluations in six performance areas colour coded green, yellow and red in descending order of acceptance. The industry and specialist interest groups that track the nuclear industry’s safety performance, have given the proposals a mixed if not lukewarm reception. The NRC schedule is to issue these proposals for public comment in May 1999 with plans to implement the new process in January 2000.

In July 1998 the NRC hired the management consulting firm Arthur Andersen to assess the agency’s planning, budgeting and management performance and to study the Nuclear Reactor Regulation Office for its effectiveness and efficiency in regulating the 104 commercial nuclear plants; the initial assessment findings included11:

• NRC work is as much as 20% reactive, with assignments from the executive office being given priority over other on-going activities.

• The NRC needs to better develop its ownership for managing the outcomes of regulations and for carrying out its licensing functions.

• The NRC needs to set licencee performance expectations and standards in a form that is more widely understood.

• The NRC needs to track regulatory change initiatives more effectively.

The most politically charged issue facing the NRC is likely to be the licence renewals that have been submitted for six PWR units; BG&E’s Calvert Cliffs, units 1 and 2, Duke Power’s Oconee units 1, 2 and 3, and Entergy’s Arkansas unit 1. Calvert Cliffs is the lead applicant with the 40 year existing licences expiring in 2014 and 2016 and the NRC chairman Dr Shirley Jackson has stated that she considers a 25 month licence period for the first applicant to be workable if there are no adjudicatory proceedings. Special interest intervener groups opposing anything nuclear are currently marshalling their forces to sway local public opinion to contest the NRC’s decision to proceed without holding formal public hearings, which allow court challenges to NRC decisions. The NRC has said this decision will speed the licensing process, and provides opportunities for written comments and informal public meetings. For the Calvert Cliffs application the first public meeting was held on 6 April 1999 to discuss the NRC’s draft environmental impact statement.

The NRC has made specific changes to the environmental review process under 10 CFR Part 51, to eliminate the requirement that the operating plant licencee renewal application addresses the environmental impact of transporting spent nuclear fuel to the vicinity of the proposed permanent high level waste repository at Yucca Mountain, on the basis that these impacts would be better handled on an industry wide basis, and to add a requirement to address the impact of transportation on local services in the vicinity of the plant during the extended licence term.

LOOKING AHEAD

An informed snap-shot of the US nuclear energy industry in the early years of the 21st century might take the following form:

• Nuclear plant owners facing the options of sell, decommission or licence renewal, are likely to sell in states that have effectively deregulated and renew licences for those plants that are the best performers. The decommissioning decision will be largely dependent on the ability of the utility to gain favourable terms for the recovery of stranded costs in states where deregulation is being enacted.

• A nuclear energy component of 80 units providing less than 15% of electricity demand with units that have largely paid off over 75% of their debt and are operated by a relatively small number of nuclear management companies, such as, Alliant Energy, Duke Power, Entergy, PECO Energy, FP&L, PSE&G, PG&E, Southern Company and TVA in the federal sector.

• Depending on the success of licence renewal for PWRs, leading performance BWRs could follow the same track.

• A significant increase in joint ownership of plants including overseas entities with others following the trend set by the AmerGen purchase of TMI unit 1, with units such as Niagara Mohawks Nine Mile Point, Detroit Edison’s Fermi unit 2 and Vermont Public Service Corp. Vermont Yankee being immediate targets as utility single units. The April 15 announcement that AmerGen has reached an agreement to purchase Illinois Power’s Clinton BWR plant (See p2) is an example of this trend.

• The US nuclear steam system supply (NSSS) companies will be active in selling advanced nuclear reactor systems, such as ABWRs, to China, Indonesia, Japan and Turkey; any developments in new nuclear plant orders in the US are likely to be dependent on federal funding. The recent decision by Bill Richardson to use the TVA Watts Bar plant for tritium production could be an indicator of future government participation in commercial nuclear facilities.

• More widespread use of mixed-oxide (MOX) fuels in commercial power reactors.

• Technological advances in decontamination and decommissioning systems substantially reducing low-level waste volumes and disposal costs.

• Potential shift in public opinion on the merits and need for a significant nuclear component in the energy mix based on global warming effects, weapons grade material burning and the costs and availability of oil and natural gas.

• Consolidation of privatised fuel enrichment by USEC with the development and commercialisation of advanced technology in the form of AVLIS laser enrichment and an application for a MOX siting for a facility in the continental US licenced by the NRC.

• Significant litigation against the DOE, in the region of $50-100 billion, should it fail to meet the schedule for the proposed geologic repository at Yucca Mountain, Nevada.

• Success for the proposed privatised spent nuclear fuel storage facilities in Utah and Wyoming, dependent of DOE settlements of damages with utilities and overcoming possible vetoes by State Governors.