LICENSE RENEWAL

In your testimony, you talk at length about the need for license renewal. Certainly, this would be quite valuable for maintaining our current supply of electricity from nuclear.

QUESTION 10a:

Do you believe that legislation is necessary to make this happen?

ANSWER:

I do not believe legislation is required to make it happen. What I do believe is essential, however, is the recognition of its importance in any legislation that is proposed regarding national energy security. As the Atomic Energy Act provides the basis for our focus on nuclear energy, the National Energy Security Act should provide the basis for our future license renewal activities. If the committee were to incorporate in its record of hearing or committee deliberation that the renewal of licenses of existing nuclear power plants is an important strategic element of our future energy security, that would be very helpful in terms of the future public dialogue on the subject. It stakes a position of leadership necessary for the success of license renewal.

Although license renewal is not specifically a part of the legislative agenda for S.341 I felt that it was important for the committee to be aware of this facet of our national energy security. I appreciate your interest in this subject.

QUESTION 10b:

Does the NRC need additional legislative authority to renew existing operating licenses?
ANSWER:

The NRC has the legislative authority from the Atomic Energy Act of 1954 to renew the licenses of existing nuclear power plants. As you are aware, NRC is now in the process of promulgating the rules that would govern the renewal of licenses. In my opinion, the National Energy Security Act would be more complete if it made reference to the importance of our existing nuclear plants as part of that national energy security through the license renewal process. How that is best done, I would leave to your deliberations.

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QUESTION:

Does the NRC need to be encouraged to pursue this issue aggressively?

ANSWER:

Nuclear Regulatory Commission Chairman Carr has stated that license renewal is his number one priority and he has followed through on his position. The Nuclear Regulatory Commission staff will be issuing a final rule in June 1991. What we need to be assured of is that this rule and its promulgating regulatory guidance and standard review plans do not make this process so unworkable that utilities, for the same reasons that they do not build new nuclear plants, will choose not to renew the licenses of existing ones. Although progress is being made in this area, we do have some concerns that the policy guidance of the commissioners will not be implemented by the staff.

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QUESTION 10d:

In your opinion, is the NRC rulemaking process satisfactory?

ANSWER:

The NRC has not yet issued its final license renewal rule, but is expected to do so this summer. Yankee previously commented extensively on both the draft rule and the staff's draft regulatory guidelines for implementation of the rule. I remain concerned that the NRC, after a tremendous amount of industry involvement, will issue a final rule that fails to acknowledge that the issuance of a renewal license involves a far more limited scope than that associated with the issuance of a new license.

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Consumers
Power

POWERING

MICHIGAN'S PROGRESS

General Offices: 212 West Michigan Avenue, Jackson, MI 49201 (517) 788-1111

March 22, 1991

Frederick W. Buckman
President and

Chief Operating Officer

The Honorable J. Bennett Johnston, Chairman
Committee on Energy and Natural Resources
United States Senate

Washington, DC 20510-6150

Dear Mr. Chairman:

Thank you for allowing me to testify before your Committee on S. 341 on March 5, 1991. The country will benefit greatly from your leadership on national energy policy.

In your letter to me of March 8, 1991, you and other members of the Committee asked several follow-up questions to which I am happy to respond.

QUESTIONS FROM SENATOR JOHNSTON

THE PROCESS LAID OUT IN TITLE XII

1.

In his testimony, Mr. Young identifies three main problems with the provisions of title XII -- that DOE is already doing most of the things envisioned under section 12005; that it is too early expect a utility to order a nuclear plant, even with the benefits of section 12005; and that direct federal government participation in a demonstration project would be inappropriate.

This a fairly strong rejection of title XII.

a.

b.

Do you believe that DOE can do everything necessary to revive the
nuclear option without any endorsement or encouragement by Congress?

No. Revival of the nuclear option requires strong public
endorsement as expressed by the Congress of the United
States. We must remember that the Department of Energy
(DOE) is viewed as an advocate and is focused on research
and development rather than commercialization.

What parts of title XII, if any, do you think would be helpful in ensuring that advanced reactor designs will be available when needed?

Section 12005 is needed for the short term and section 12006 is needed for the long term.

A CMS ENERGY COMPANY

c.

What could be done to make title XII more useful?

As I said in my testimony, the next (advanced) reactor will most likely be an independent power producer (IPP) with several partners. Consequently, we need reform of the Public Utility Holding Company Act (PUHCA) as envisioned in Title X of S. 341.

UTILITY PARTICIPATION IN A DEMONSTRATION PROJECT

2. Why wouldn't it be attractive to a utility to participate in a demonstration project that received 50% federal funds?

3.

4.

Even with 50% government participation (a critical factor) there still exists a perception of high risk. To reduce this risk, even for the 50% private participation, there needs to be multiple owners, technology development and a licensing process that improves the likelihood that investors will receive an appropriate return on their investment.

Similarly, why wouldn't it be attractive to a utility to participate in a project under section 12005, the so-called institutional demonstration?

It is attractive but there is still a perception of high risk which must be addressed. Utilities are not likely to participate in a project where the use of licensing approval is high, the duration of engineering, construction and licensing is long, or the ability to finance is in question.

Last year, DOE offered to assist a utility to obtain a license as part of a demonstration project, but got no volunteers. Why was there so little interest among the utilities in this program?

There is still a perception of very high risk because of public acceptance, the waste problem and regulatory uncertainty. Regardless of their desire to pursue the nuclear option, utilities are still driven by financability and return on investment.

FUTURE ORDERS OF NUCLEAR PLANTS

5. How much of the estimated 150 to 250 gigawatts of new electrical capacity needed over the next two decades do you expect will be supplied by nuclear power?

6.

Probably no more than 20% with nothing, or very little, on line before the millennium.