3

continued research, development, and demonstration of advanced reactor technology, jointly funded by the private and public sectors. Today's reactors are exceptionally complex because of the significant number of safety systems that were added piecemeal to existing reactor designs after the designs were approved -- and often after construction of the plants was completed. The design of most operating nuclear plants varied from utility to utility, and sometimes within the same utility on the same site. Advanced reactors, however, incorporate much simpler designs than the reactors in operation today, and rely on methods such as natural circulation, reduced power density, and materials characteristics to provide safety, leaving as little room for human error as possible. In addition, it is estimated that plants based on advanced reactors would cost approximately $1.2 billion to build, as compared to the $2.7 billion needed to construct a typical 1,000 megawatt power plant today.

Licensing Reform

Advanced reactor designs alone, however, are not enough. We must have a regulatory climate that will assure utility and investor confidence in the feasibility of operating advanced reactors. This confidence can be enhanced through the restructuring of the U.S. Nuclear Regulatory Commission's (NRC) present system for licensing nuclear power plants, which requires nuclear power plants to be licensed twice: first for construction and second for operation. This two-step system has allowed groups opposed to the use of nuclear energy to employ last-minute challenges to delay or block the startup of a completed plant. These delays have contributed to significant cost overruns. As the average construction and licensing schedule lengthened from 5 years during the 1970s to 14 years during the 1980s, average nuclear power plant costs rose from $400 million to more than $3 billion. In addition, many utilities were not permitted to recover these costs through their ratemaking practices.

In April, 1989, the NRC issued a major rulemaking to improve the licensing process. This rulemaking would have permitted the issuance of combined construction and operating licenses. At the end of last year, however, the U.S. Court of Appeals for the D.C. Circuit found that the NRC lacked sufficient statutory authority to limit the scope of a second, preoperational hearing. At the very least, legislation must be enacted to provide the NRC with this

4

authority. Reduction of licensing time will boost the confidence of the financial community, which must provide the capital needed for further growth of the nuclear industry. More importantly, a reduction in licensing time will benefit the electricity consumer by reducing the costs of construction for new nuclear power plants and reducing the costs of electricity generated from nuclear power. Ultimately, however, the use of standardized, advanced reactors will obviate the need for a second, pre-operational hearing since the safety of these designs will be certified by the NRC.

Two examples of how the current regulatory climate has restricted nuclear development in this country can be found with the Shoreham and Seabrook nuclear power plants.

Shoreham

The 820 megawatt Shoreham reactor on Long Island, New York was ordered in 1967 by the Long Island Lighting Co. (LILCO) Due to delays caused by changes in federal regulations following the Three Mile Island accident in 1979, litigation by anti-nuclear activists, and state and local refusal to participate in emergency planning activities, construction was not completed until 1986. By that time, total costs had skyrocketed to $3.7 billion.

Although licensed by the NRC to operate at full power, Shoreham has never been operated. In 1988, New York Governor Mario Cuomo and the state's Public Utilities Commission pressured LILCO to transfer ownership of Shoreham to the state, which plans to decommission the plant. The NRC must approve New York's plans to dismantle the plant, and has so far refused to do so. In the meantime, this completed plant, capable of generating enough electricity to meet nearly one-third of Long Island's electricity requirements, is standing idle. As a result, LILCO has been forced to import expensive Canadian electricity to meet demand, and has reopened the 112 megawatt Far Rockaway oil-fired plant, an old, inefficient power plant previously shut down in 1980.

Seabrook

The 1198 megawatt Seabrook reactor was ordered in 1972 by Public Service Co. of New

5

Hampshire. In March, 1990, the plant finally received a full operating license from the NRC, nearly four years after construction was completed. The delay was primarily caused by the State of Massachusetts' refusal to participate in emergency planning activities. In response to this obstructionism, the NRC issued a ruling permitting the approval of emergency plans, which are developed without local participation. Massachusetts contested this ruling in court. Seabrook's evacuation plans were eventually approved by the NRC, and the plant is now operating.

Delays in licensing Seabrook forced Public Service Co. of New Hampshire, the owner of a 36 percent share of Seabrook, into bankruptcy, and cost the utility's electricity customers between $250 and $300 million.

Uranium Enrichment

The availability of competitively priced uranium supplies for nuclear power generation is critical. DOE's Uranium Enrichment Enterprise (UEE) must be restructured to enable it to compete effectively with other suppliers. Since 1975, however, the UEE has gone from a position of near global monopoly in supplying enriched uranium to the non-communist world to a current market share of 45 percent. This share, which is made up primarily of commercial utilities, is maintained solely from long-term contracts, which will begin to expire in 1995. Because DOE's price for enriched uranium is more than double the spot market price, a growing number of U.S. utilities have indicated their intentions to reduce or cancel their future purchases. When this happens, the UEE's already-declining market share will deteriorate further.

The UEE must be restructured in a business-like manner to allow it to achieve success in an increasingly competitive market. The Chamber supports the establishment of a true business enterprise in the private sector. Government should not perform services for itself or others if acceptable privately owned or operated services can be made available. A private entity is the most viable form of business that could compete effectively in the global market, free of the administrative and financial controls that constrain the operational efficiency and financial flexibility of a government agency.

6

If the UEE is not restructured, the U.S. market will slip away to foreign competitors. With these lost sales overseas will go billions of dollars in positive cash flow that would otherwise have been returned to the United States. A healthy enterprise also would be able to set aside a portion of its revenues for future environmental restoration costs, decreasing the burden on U.S. taxpayers who would otherwise have to pay the entire cleanup bill should the UEE remain in the public sector.

High-level Waste

DOE must determine whether the Yucca Mountain site in Nevada is a suitable repository for high-level waste. Currently, most spent fuel is carefully contained in water-filled storage pools at 72 nuclear power plant sites. Utilities are seeking, and several have received, approval for dry storage of spent fuel from the NRC. This is only a temporary solution, however.

The Nuclear Waste Policy Act of 1982 provided a complete program and schedule to open the nation's first high-level waste repository. The initial completion target date of January, 1998 has already been postponed to January, 2010 because of political, not technical, difficulties. The American Physical Society, the NRC, and the National Academy of Sciences have all concluded that safe, high-level waste management is well within the capability of current science and engineering. Yet, Nevada state officials have refused to grant the necessary environmental permits to DOE to characterize the site, and numerous legal challenges are pending.

The contribution of nuclear power to the nation's energy future depends upon public confidence that high-level waste will be managed safely and reliably. DOE must secure access to Yucca Mountain as soon as possible to determine whether the site can provide the isolation necessary to protect the health and safety of the public and the quality of the environment.

Conclusion

Nuclear energy is the nation's second largest source of electric power, after coal. Yet no new nuclear plants have been ordered during the past 13 years. If nuclear power is to regain its attractiveness to electric utilities and their customers, a number of hurdles must be cleared,

7

including the certification of advanced reactor designs, simplification of the licensing process, and the determination of a safe high-level waste repository.

Nuclear energy is a proven source of electricity with an insignificant impact on the atmosphere. Anti-nuclear activists oppose the use of nuclear energy because of concerns about nuclear waste storage and plant safety. Some of these activists insist that global climate change is inevitable, yet refuse to recognize that nuclear energy is a viable alternative to the use of fossil fuels. They cannot have it both ways.

Energy is an engine of economic growth and the key to U.S. prosperity in a new era of fierce global competition. The nation's economy is based on access to affordable energy. To the extent that we fail to maintain an adequate supply of affordable energy, the price of virtually all U.S. goods and services will be needlessly high, and the nation will continue to lose ground to its international competitors in the global marketplace.

The United States clearly needs new electric generating capacity. Nuclear energy should provide a major share of that new supply.