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 H.R. 45, the Nuclear Waste Policy Act of 1999, and on the
specific issues raised by the Committee in its letter of invitation,
including our views on the United States Department of Energy’s (DOE)
December 1998 viability assessment, the DOE’s site characterization
efforts at Yucca Mountain, and the implications of recent Federal court
decisions on the DOE’s obligations under the Nuclear Waste Policy Act of
1982.
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 NARUC is to serve the public interest by seeking to
improve the quality and effectiveness of public regulation in America.
More specifically, 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 NARUC. In 1983,
shortly after the passage of the 1982 Act, NARUC established policies
and procedures on the high-level nuclear waste program with the goal of
protecting the interests of our Nation’s consumers. Sixteen years later,
we are still at it.
The Consumer
Interest and Concern in the Nation’s Nuclear Waste Program
Let me begin by outlining the interests and concerns of the consumers
of electricity and the membership of NARUC regarding the DOE’s Civilian
Radioactive Waste Management program. This program has been a source of
deep concern and enormous frustration to our nation’s utility ratepayers
and regulators for many years for two primary reasons. Our first concern
is the huge 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 fifteen 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. 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 to their electric
utilities on the generation of electricity from nuclear generation
stations. These are the fees that go directly from the utilities into
the Nuclear Waste Fund to the tune of $15 billion. Now utility
ratepayers are being asked to pay a third time -- for expanded on-site
storage as a result of the DOE’s failure to meet the deadlines
prescribed in the Nuclear Waste Policy Act.
The second reason for our concern also relates to consumer costs. The
effective management and permanent disposal of nuclear waste are
essential to minimize 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-four policy resolutions on
the nuclear waste program, including eleven that specifically encourage
legislative revisions to the program. Today, 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 H.R. 45 for
undertaking the task of developing a workable legislative solution, and
we welcome the efforts of this Committee to address the concerns of the
millions of U.S. ratepayers that financially support this program.
NARUC’s
Review of the Department of Energy’s Viability Assessment
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. The viability assessment, released in December 1998 presents the
results of DOE’s study to date. While the assessment is generally framed
by the DOE as a technical document, it nonetheless 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." In
its concluding observations, the DOE indicates that its 15 years of
extensive research has validated the expectations of the scientists that
first suggested that remote desert regions of the Southwest would be
well-suited for a geologic repository. The assessment further suggests
that engineered barriers and natural barriers can be expected to reduce
radiation exposures to future populations, even after as much as 300,000
years, to natural background levels that exist today.
Our review of the assessment leads us to conclude that the provisions
in Section 204 of H.R. 45, 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" are necessary and appropriate. 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 passed) 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.
DOE’s
Characterization of the Yucca Mountain Site
The DOE’s characterization of the Yucca Mountain site has been marked
by delay. While we are encouraged by the recent progress made by the DOE
in its Yucca Mountain site characterization efforts, NARUC has long been
of the opinion that the repeated delays in meeting the program deadlines
are rooted in the Department’s inefficient management and problems in
controlling its contractors. In 1986, a commissioner from Michigan first
testified before Congress on NARUC’s behalf to warn of contractor
control problems in the program, and lack of procedures to control
excess program costs. And it’s not only State regulators that have
noticed. The General Accounting Office has consistently taken DOE to
task for its lack of contractor control.
Our policy on nuclear waste legislation calls for fundamental program
improvement. As the attached policy resolution states, NARUC urges
Congress to improve the efficiency of the licensing process of the
high-level nuclear waste repository without compromising health, safety,
and environmental factors. Congress should encourage greater private
sector participation in implementing certain aspects of the Federal
program, such as management and implementation of the multipurpose
container system, construction and operation of the centralized interim
storage facility and implementation of the transportation system.
We are even willing to advocate fundamental changes to this program.
If the DOE is unable to meet its deadlines, despite new legislation and
financial assistance, Congress should consider removing the authority
and responsibility for implementing the Civilian Radioactive Waste
Management Program from the DOE and locate it in a new, single purpose
federally chartered corporation. This point is still relevant today. If
after the passage of legislation such as H.R. 45, the DOE continues to
miss the deadlines imposed under law, then Congress should consider
taking the steps necessary to complete this important project by using a
new, more efficient organization.
Implications of
Federal Court Decisions on DOE’s Obligations Under the
NWPA
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.
Allow me to explain.
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 dreadful 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’ decision. In State of
Michigan v. Dept. of Energy (No. 98-225), the Court refused to hear
an appeal filed by 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 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.
NARUC’s position on the effect payments of such damages will have 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))
The Need for
Legislation
I think all of our comments made here today, as well as all of the
legal actions and delaying activities concerning this program leading to
this moment, point directly toward the need for legislation to 1)
accelerate acceptance, 2) strengthen the repository program, and 3)
protect the consumers by assuring fee revenues are spent on the program.
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. Without passage of this
legislation, the ratepayers payments into the Fund will likely continue
to rise, the on-site storage costs will continue to rise, and the DOE
will continue a program of non-performance marked by a strategy of
continuing delays.
Nor can we turn to the courts for answers. Court actions are
expensive, slow and incomplete, while Congressional action is one shot
and comprehensive. Only legislation by the U.S. Congress will provide
the greatest likelihood of achieving a successful resolution to this
matter.
Conclusion
In conclusion, it is imperative that Congress enact H.R. 45 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.