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Commissioner John Strand's Testimony on S. 608, the Nuclear Waste Policy Act of 1999
03/23/99 Washington, DC
Mr. Chairman and Members of the Committee:
Good Morning. I am John Strand, Chairman of the Michigan Public Service Commission and Chairman of the Subcommittee on Nuclear Issues - Waste Disposal of the National Association of Regulatory Utility Commissioners, commonly known as NARUC. I am here today to testify on behalf of NARUC. I am grateful for the opportunity to provide NARUC’s views on S. 608, the Nuclear Waste Policy Act of 1999.
The NARUC is a quasi-governmental nonprofit organization founded in 1889. Within its membership are the governmental bodies of the fifty States engaged in the economic and safety regulation of carriers and utilities. The mission of the NARUC is to serve the public interest by seeking to improve the quality and effectiveness of public regulation in America. More specifically, the NARUC contains the State officials charged with the duty of regulating the retail rates and services of electric and gas utilities operating within their respective jurisdictions. These officials have the obligation under State law to assure the establishment and maintenance of such energy utility services as may be required by the public convenience and necessity, and to ensure that such services are provided at rates and conditions which are just, reasonable, and nondiscriminatory for all consumers.
With respect to the Federal Nuclear Waste program, no other organization representing the public interest has been involved with a fair resolution of this critical issue longer than the NARUC. In 1983, shortly after the passage of the 1982 Act, the NARUC established policies and procedures on the high-level nuclear waste program. Our years of experience and active interest in the federal program lead us to conclude that we can no longer afford delays – the need for Congress to fix this program is immediate.
The DOE’s Civilian Radioactive Waste Management program has been a source of deep concern and enormous frustration to our nation’s utility ratepayers and regulators for many years. Our primary concerns are financial. First, we are concerned over the enormous amounts of money that have been collected from utility ratepayers to pay for the waste program despite the fact that no waste has yet been moved from civilian reactor sites. Nationally, utility ratepayers pay approximately $600 million per year into the Nuclear Waste Fund, only a small portion of which, approximately sixteen cents on the dollar, is actually appropriated for the program. This Fund, which is supported solely by the Nation’s electricity consumers, has accumulated more than $15 billion since 1983. State regulators have a compelling interest in the cost-effectiveness and success of the program because of our fiduciary responsibilities to the utility ratepayers.
We have recently heard from the DOE that there won’t be enough money available to fund both a centralized interim storage facility and complete the work necessary to open a permanent repository as scheduled in 2010. DOE made these statements in testimony given on February 10, 1999 before the House Subcommittee on Energy and Power. As you can imagine, we have a number of concerns about these statements.
While we absolutely agree that sacrificing the development and opening of the permanent repository in order to get an interim facility built and operating is an unacceptable outcome, we don’t agree with the characterization that there isn’t enough money to do both. The DOE qualified their February testimony by stating that their analysis is based on historical appropriations patterns. Therein lies perhaps the biggest part of the problem. When only sixteen cents of every dollar going into the Nuclear Waste Fund is being applied toward its intended purpose, its not hard to conclude that there isn’t enough money to do both interim storage and the permanent disposal program. The DOE statement also ignores the fact that the unspent balance of the Nuclear Waste Fund currently exceeds $8 billion.
In other words, the problem isn’t that there is not enough money or time to build and operate both an interim storage system and the permanent repository, the problem is that the money the Nation’s electricity consumers have paid into the Nuclear Waste Fund is not going toward the job as specified in the Nuclear Waste Policy Act, as amended. This is a problem that only the Congress can fix and we appeal to you to pass legislation that will preserve ratepayer’s money for its intended purpose: safe, timely, central interim storage and permanent disposal of spent fuel and high-level radioactive waste from commercial nuclear power plants.
Yet another concern relates to consumer costs. The effective management and permanent disposal of nuclear waste are essential to minimizing the life cycle costs of the existing nuclear plants that generate about 20 percent of the electricity used in the United States. Cost increases for expanding on-site storage, reactor decommissioning and centralized disposal of nuclear wastes increases the costs of nuclear energy overall, which in turn, can have a significant adverse affect on energy costs to consumers. This problem is becoming particularly acute as the nation heads into an era of competitive markets in the electric utility industry. Moreover, nuclear generation provides significant air emission benefits that will be jeopardized if the unresolved waste problem renders these plants uneconomic.
Since 1984, the NARUC has passed twenty five policy resolutions on the nuclear waste program, including eleven that specifically encourage legislative revisions to the program. Back in 1992, NARUC passed a policy resolution (copy attached) that asked Congress to ensure that utility ratepayer funds are used for their intended purpose by enacting legislation that removes the nuclear waste program’s budget from the Federal Budget. That request was reiterated nine times in subsequent resolutions. I have also attached, for your review, the most recent NARUC resolution addressing the nuclear waste program adopted February 24, 1999. Today, the budget for the nuclear waste program continues to languish in the appropriations process with ratepayer payments into the Nuclear Waste Fund held hostage. Perhaps worse yet, we are still without the fundamental policy framework necessary to ensure that the Federal Government accepts and disposes of nuclear wastes in a timely and efficient manner. The NARUC commends the sponsors of S. 608 for undertaking this critical task of developing a workable legislative solution, and we welcome the efforts of this Committee to address the concerns of millions of U.S. ratepayers who financially support this program.
At this time, the NARUC has not taken a formal position on the recent proposal by Secretary Richardson to have the DOE take legal title to the utilities spent fuel at reactor sites until a repository is opened. The NARUC would like to reserve judgement on the proposal until we hear some more specifics on this approach from the DOE. However, what we know about the proposal raises a number of serious concerns.
First, there are some very important details that the DOE has not yet addressed, such as how it would be funded and at what cost; how much of the cost of implementing this proposal is in addition to the exorbitant costs that the program has already incurred; when it would be implemented and how long will it take to implement? We do not yet understand how the electricity consumers will benefit from the proposal. In fact, it appears that the chief beneficiary would be DOE. If the devil is in the details, then we need to hear them.
Second, we can’t tell if the DOE has even considered such State and local issues as the effects on property taxes and environmental permitting. Also, we don’t see how nuclear plants with limited spent fuel storage capacity will benefit by this proposal. The continued operation of these plants will be jeopardized by DOE’s failure to remove the waste.
And finally, at least on the surface, the Secretary’s proposal fails our simple three-part test. First, it doesn’t move the waste. Second, it doesn’t preserve ratepayers’ funding for its intended purpose, and third, it doesn’t protect the ratepayers from future cost increases created by the delay in taking the waste or from the inefficient use of the Nuclear Waste Fund.
Let me put it another way; utility ratepayers have paid for the storage of nuclear waste at nuclear power plants through the rates paid to cover the capital costs of planned on-site storage.
Ratepayers have also paid for the Federal nuclear waste management and disposal program run by the DOE through the 1 mil per kilowatt hour fee they pay on the generation of electricity from nuclear generation plants. These are the fees that go directly into the Nuclear Waste Fund and have accumulated to the tune of $15 billion. Ratepayers are now paying a third time - - for expanded on-site storage as a result of DOE’s failure to meet the deadlines prescribed in the Nuclear Waste Policy Act. The DOE Secretary’s proposal to take title to the waste at the power plants, but not move it, seems to rely on the ratepayers paying a fourth time! I ask you, when can the ratepayers of this country expect to get performance for their money?
We are hopeful that there is more to the DOE’s proposal than is apparent. We hope to hear that this is just one component of a larger plan to address the deficiencies of the program, and somehow, electricity consumers, utilities, everyone, not just DOE will benefit from their actions.
The NARUC is encouraged by the results of DOE’s Viability Assessment of a Repository at Yucca Mountain. The viability assessment, released in December 1998, presents the results of DOE’s study to date and it concludes "that Yucca mountain remains a promising site for a geologic repository and that work should proceed to support a decision in 2001 on whether to recommend the site to the President for development as a repository." The DOE has been studying a site at Yucca Mountain, Nevada, for more than 15 years to determine whether it is a suitable place to build a geologic repository for the nation’s high-level radioactive waste.
Our review of the assessment leads us to conclude that the provisions in Section 204 of S.608, which authorize and direct the Secretary of Energy to "design, construct, and operate a facility for the interim storage of spent nuclear fuel and high-level radioactive waste at the interim storage facility site" make sense. In our "Resolution Regarding Guiding Principles for Legislative Changes to the Nuclear Waste Policy Act," (attached hereto) NARUC called for the DOE to begin to take possession and remove high-level radioactive waste and spent nuclear fuel to meet its (now expired) January 31, 1998 deadline for complying with its legal obligation as soon as possible. The resolution further urged the U.S. Congress to designate the location of one above-ground, centralized, interim storage facility for spent nuclear fuel and that such site not be limited by the location or licensing of a permanent repository.
In sum, the viability assessment leads us to believe it is time to get on with siting, designing, and constructing an interim storage facility as soon as possible.
The implications of the recent Federal court decisions are quite clear: It is now up to Congress to fix to this program. In the litigation swirling around this program, we have reached a judicial deadlock. In terms of the costs of the program, failure to enact this legislation could result in the Federal government paying huge damages to the utilities, damages that could run well into billions of dollars.
In 1995, the States and the utilities were compelled to file suit against the DOE by the Department’s final interpretation of the 1982 Act, in which the DOE concluded that it had no obligation to accept nuclear wastes from civilian reactors, absent a final repository. Given the Department’s record in its site characterization efforts, this position by the DOE was entirely unacceptable. In the first case that was decided by the U.S. Court of Appeals for the D.C. Circuit (Indiana Michigan Power Co., et al v Dept. of Energy, 88 F. 3d 1272 (D.C.Cir. 1996), the Court of Appeals concluded that the Nuclear Waste Policy Act of 1982 "creates an obligation in DOE, reciprocal to the utility’s obligation to pay, to start disposing of the SNF [Spent Nuclear Fuel] no later than January 31, 1998" and that the statutory obligation to commence disposing of SNF no later than January 31, 1998, is "without qualification or condition." The same Court, in November 1997 in Northern States Power Co., et al v Dept. of Energy, 128 F.3d 754 (D.C.Cir. 1997) reaffirmed DOE’s unconditional obligation to begin to dispose of spent nuclear fuel by the statutory and contractual deadline, and found that utility and State petitioners had a clear right to relief, that DOE had a clear duty to act, and that petitioners should pursue "potentially adequate remedies" under the Standard Contract to address DOE’s avoidable delay. In February 1998, both State and utility parties in Northern States filed motions with the Court of Appeals to enforce the Court’s decisions in Indiana Michigan and Northern States, due to DOE’s failure to undertake any action to comply with its obligations. In an unpublished order issued in May 1998, the Court of Appeals determined that despite its earlier holding that DOE has an unconditional obligation under the Act to begin acceptance on January 31, 1998, the Act "does not itself require performance." Accordingly, the Court declined "to requir[e] the DOE to perform under the contract." The Court did not, however, overturn its earlier holding that in construing its obligation under the contract to dispose of SNF, DOE could not claim that its failure to perform is an unavoidable, non-compensable delay under the standard contract.
In November of last year, the Supreme Court refused to hear two competing appeals of the Court of Appeals. In State of Michigan v. Dept. of Energy (No. 98-225), the Court refused to hear an appeal of the States that the Court of Appeals should have provided additional remedies for DOE’s failure to meet the statutory deadline, including an order to begin waste acceptance. In United States v. Northern States Power Co., (No. 98-384), the Court refused to hear DOE’s appeal of the Court of Appeals’ ruling that its failure to comply was inexcusable. By the Supreme Court’s election, without comment, to not take up these cases, the final Court of Appeals rulings stand.
The short summary of these court decisions is this: DOE is legally obligated to begin taking waste by a now expired deadline, but the Act itself doesn’t yet require specific performance by DOE. The practical result at this time is a deadlock that can only be corrected by Congressional action.
In the recent Court of Federal Claims decision in the Yankee Atomic case, the Court determined that the DOE is liable for monetary damages for its breach of its waste disposal contracts. The only question that remains is the determination of the amount of damages. At least eleven other Court of Claims actions are still pending. If each of these cases results in determinations that the DOE is liable, and the plaintiffs are able to prove their estimates of damages, then the DOE could be liable for several billion dollars. The NARUC’s position on the payments of such damages on program funding and whether any such payments should come out of the Nuclear Waste Fund is outlined in the attached policy resolution: DOE must be prohibited from using the Nuclear Waste Fund or prospective fee collections for paying costs or damages incurred by utilities, ratepayers, and by State and local governments, as a result of DOE’s failure to comply with its obligations. Rather, any costs or damages should be paid out of a Federal judgement fund.
To put it bluntly, it would be an outrage if DOE were able to pay for its damages out of the Nuclear Waste Fund. In effect, it would be requiring the ratepayers to pay for DOE’s failures. Moreover, the statute suggests that the Nuclear Waste Fund cannot be used for anything other storage and disposal activities and not the payment of damages. See, 42 U.S.C. § 10222(d)
It is absolutely critical that the Congress pass legislation to fix the Federal nuclear waste program. The legislation is needed for two overriding reasons: 1) to provide the DOE with clear policy direction to ensure that the Federal Government accepts and disposes of nuclear wastes in a timely and efficient manner, and 2) to stop the hemorrhaging of ratepayers’ money in all facets of the program.
We are not confident in the DOE’s year 2010 projection for taking waste for disposal. That may be a gross understatement. If the DOE were to announce today that they were pushing back the projected opening of the repository to 2020, I’m afraid that we would be suspicious of that date too. This program has been marked by delay after delay. In fact, the strategy of the DOE seems to be one of finding ways to delay taking nuclear waste. Our concerns are not unfounded. In the history of this program, the DOE has met only one deadline, and that, not surprisingly, was the deadline for arranging the contracts with the utilities that began the flow of money from the ratepayers into the Nuclear Waste Fund. The ratepayers have upheld their end of the deal by paying for all of the on-site storage of civilian nuclear waste and by paying more than $15 billion into the Nuclear Waste Fund.
If finding ways to limit the Federal Governments liability is an objective, we have the answer. Get the waste moving to a Federal interim storage site. All of the liability for damages that the Federal Government is currently exposed to comes from the DOE’s non-performance under the law and in the standard contracts. Delay strategies simply make matters worse. Moving the waste is the only honest solution.
In conclusion, it is imperative that Congress enact S. 608 as expeditiously as possible. State regulators who labor to protect consumers from economic exploitation stand ready to work with the Congress, the Department of Energy and all other affected stakeholders to refocus our waste disposal policies. The Nation’s electricity consumers deserve to see progress in a waste disposal program in which they are already hugely invested. At this very late date, we must not once again fail them.
Thank you for your time and attention. I would be pleased to answer any questions you might have.