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The Price of Power
Atomic Energy's Free Ride
by David Lapp
The 1992 Energy Policy Act guarantees that the U.S. government will continue to massively subsidize the nuclear power industry well into the next millennium. Given the opportunity to force nuclear companies to pay the cost of enriching the uranium that fuels their plants, Congress instead capped the companies liability for cleaning up uranium enrichment facilities at an amount far below the expected cost of decontamination. Given the chance to make the industry pay for disposal of its waste, Congress took steps to ensure that a proposed government-operated, government-subsidized radioactive waste dump at Yucca Mountain, Nevada will go forward.
Government subsidies and caps on liability are nothing new for the nuclear industry. It has been coddled since its founding almost 40 years ago and would almost certainly have shut down were it not the beneficiary of federal largesse.
Over the last four decades, the nuclear industry has been an enormous drain on the U.S. public treasury. Fiscal Fission: The Economic Failure of Nuclear Power, a Greenpeace study released last December, estimates that federal outlays from 1950 to 1990 for nuclear power totaled $97 billion in 1990 dollars. This estimate relates to costs of R&D and regulation, construction costs, uranium enrichment program costs and costs of the nuclear waste fund. It does not take into account costs associated with insuring the nuclear industry against accidents, costs relating to environmental damage, state government appropriations to the industry or federal appropriations to non-nuclear agencies that benefit the nuclear industry.
The cost of four decades of nuclear subsidies cannot be measured solely in monetary terms. Government subsidies have made nuclear power artificially competitive with cleaner energy sources like renewables and efficiency and have diverted research and development (R&D) away from alternative energy sources. "Without all this federal money going to nuclear power, we would have much greater implementation of efficiency and renewable energy technologies," says Peter Grinspoon, director of Greenpeace's energy program. "I believe we would have a much cleaner environment."
History of reliance
The nuclear industry has relied on government support from its infancy. When the private nuclear industry was created in 1954, following President Dwight Eisenhower's notorious Atoms for Peace speech and proposals for allowing private ownership of nuclear materials, it built on a foundation of government-created scientific and technological knowledge. Democrats and organized labor unsuccessfully opposed the legislation to create a private nuclear industry, contending that it would unfairly subsidize big business. "The people of the United States have already invested over $12 billion in the course of acquiring the technical and scientific knowledge concerning the production of atomic energy," warned Benjamin Sigal of the Congress of Industrial Organizations (CIO). "If the proposed amendments are adopted, ... the know-how will be placed at the disposal of a few fortunate companies."
The government continued to pour money into nuclear power R&D throughout the 1950s and beyond, and it was not until 1973 that industry spent more on nuclear power than the government, according to the Greenpeace report. Congressional Research Service analysis estimates R&D support at $39.8 billion (in constant 1982 dollars) for the period between 1948 and 1990. Factoring in the substantial costs of regulating the industry, Cora Roelofs of Komanoff Energy Associates (KEA), the consulting firm that authored the Greenpeace report, estimates total R&D support to be $59.7 billion as of 1990.
Covering the cost of a meltdown
In 1957, Congress eliminated the first major roadblock to the development of nuclear power -- paying for the high risks to the public of a major accident. Responding to the demands of companies like General Electric that were unable to obtain commercial insurance for nuclear energy projects, Congress passed the Price-Anderson Indemnity Act, which limited the liability of the nuclear industry in the event of a major nuclear accident. (The law also indemnifies suppliers and vendors of commercial nuclear facilities such as General Electric, Westinghouse and Bechtel -- even if their negligence or willful misconduct causes a nuclear accident.)
Under the most recent amendments to Price-Anderson, utilities are required to maintain $200 million in insurance to cover public liability. If claims for an accident exceed that amount, each nuclear utility is required to contribute up to $63 million for each reactor they operate. This arrangement caps the liability of any given utility at $200 million, and of the entire industry at under $7 billion.
Estimates of the costs of a major nuclear accident vary, but virtually all analysts agree that the $7 billion made available by nuclear utilities falls far short of meeting the human health and property damages that would result. The General Accounting Office (GAO) estimated in 1987 that, under average weather conditions, losses from a major nuclear accident could be as high as $15 billion. A 1982 analysis by the Sandia National Laboratory for the Nuclear Regulatory Commission (NRC) found that, under a worst-case scenario, financial losses (not including on-site damages) could range from $56 billion to $314 billion. The possibility of a large-scale accident occurring is not remote; the NRC itself estimates there is a 45 percent chance of a major "core melt" nuclear accident occurring in the United States within the next 20 years.
Several environmental and public interest organizations have attempted to estimate the annual value of Price-Anderson to nuclear utilities. A 1987 report by Public Citizen "conservatively" estimates that in the absence of Price-Anderson, utilities would pay at least $1 billion and possibly over $5 billion for commercial insurance each year -- if they found willing insurers. A 1984 study by the National Audubon Society estimated the cost at $10 billion annually.
Although the government does not transfer taxpayer dollars directly into the nuclear industry's coffers, "Price-Anderson is an important benefit because all of a sudden industry has a predictable price put on something that it previously didn't know how to handle," says Doug Koplow, a consultant studying energy subsidies for the Alliance for Safe Energy (ASE). "Alternative forms of energy don't have those uncertain risks. A free market would place a premium on avoiding these types of risks, which would certainly [make it] more difficult [for fission power] to compete."
Others place even greater importance on the liability cap. "Without Price-Anderson the nuclear industry would have gotten nowhere," says Roelofs. "There was an essential barrier to the marketplace because nuclear power was too risky for any person to want to invest."
Feeding nuclear utilities
Even before passing Price-Anderson, the federal government assumed responsibility for providing nuclear utilities with a steady supply of nuclear reactor fuel -- enriched uranium. Although the Department of Energy (DOE) is required by law to set the price of enriched uranium "on the basis of recovery of the Government's costs," the DOE's enrichment enterprise sets its uranium price far below cost.
According to a 1989 GAO study, the DOE has failed to collect over $11 billion in past costs accumulated largely by underselling its enriched uranium. Since the DOE sells approximately one-third of its uranium to non-U.S. companies, taxpayer dollars also subsidize foreign nuclear programs.
"Taxpayer losses are real and mounting daily," concludes Stopping a Budget Meltdown, a 1990 study on the enrichment program by the National Taxpayers Union. Charles Montange, the author of the study, says taxpayer losses from the program increased dramatically in 1984 when Reagan's DOE overhauled the program, guaranteeing a subsidized price for enriched uranium. "Reagan cut prices nuclear utilities were paying with no cost recovery," says Montange.
As part of the overhaul, the DOE permanently closed its enrichment facility in Oak Ridge, Tennessee and curtailed operations at two of its other plants run by the Martin Marietta Corporation in Paducah, Kentucky and Portsmouth, Ohio. According to Jim Bird, a DOE official at Oak Ridge, the enrichment enterprise will pay $160 million this year to the Tennessee Valley Authority (TVA) for electricity it will not use. The payment is part of a $1.8 billion settlement with the TVA to fulfill electricity contracts developed after nuclear utilities lobbied for greater enrichment capacity, based on hopes of having 1,000 reactors in operation by the year 2000. (There are now 108 reactors in operation.) The DOE also began selling enriched uranium out of its stockpile at a fraction of its market price. It booked these sales as a savings which it passed to nuclear utilities.
The DOE's charges for enrichment services have also failed to include the future costs of decommissioning, or dismantling, the enrichment facilities -- costs one DOE contractor estimates at $16 to $36 billion. Congress eliminated the possibility of taxpayer recovery of decommissioning and past uranium costs in last fall's energy bill, which requires utilities to pay only $2.25 billion of decommissioning costs. "The net effect of the uranium enrichment provisions in the energy bill was similar to Chapter 11 bankruptcy," says Montange. "Taxpayers will bear essentially all unrecovered, decommissioning and cleanup costs."
The enrichment process also carries high indirect environmental costs. Sixty-seven percent of the cost of running the enrichment facilities comes from operating three huge coal-burning power plants built exclusively to supply electricity for the enrichment facilities, according to the DOE's Bird.
"All you have to do is go within 15 miles of these power plants and you can see a large brown plume of sulfur dioxide going up into the air, headed right for the northeast," says David Kinloch, a utility analyst and member of the Paddlewheel Alliance, an environmental group active in Ohio and Kentucky. According to Kinloch, in 1990, 10.7 million tons of coal were burned to power the enrichment facilities, resulting in the release of 661,000 tons of sulfur dioxide and 195,000 tons of nitric oxides into the air. These plants release 22 million tons of carbon dioxide, the primary greenhouse gas, each year.
Not only does the government help provide the nuclear industry with its most important input, it also massively subsidizes the disposal of its unwanted waste output. Under the Nuclear Waste Policy Act of 1982, utilities are required to pay only 0.1 cent per kilowatt-hour of nuclear-generated electricity into a federal fund to cover costs of nuclear waste disposal, and the DOE takes possession of the highly radioactive waste.
A June 1992 GAO report estimates that unless the fee is raised, DOE will spend $4.1 billion (in 1988 dollars) more than it collects to dispose of high-level waste. The subsidy will be even greater if, as is likely, the DOE's one planned repository is insufficient for the 87,000 metric tons of waste which currently operating plants are expected to generate in their lifetime. The GAO report points to yet another potential financial problem, warning that the financial conditions of 11 of the 17 utilities that owe one-time fees of $2 billion to the waste fund "cast serious doubt on their ability to pay."
The DOE's disposal plans have sparked intense public opposition because of the environmental dangers they pose. The DOE proposes to store the waste for tens of thousands of years in Yucca Mountain in Nevada, risking environmental and health impacts of unknowable magnitude. In a 1990 article in Science magazine, Stanford University geologist Conrad Krauskoph wrote, "No scientist or engineer can give an absolute guarantee that radioactive waste will not some day leak in dangerous quantities from even the best of repositories." Nicholas Lenssen of the Worldwatch Institute says that radioactive waste disposal of this type "is nothing more than calculated risk."
Objections from the Environmental Protection Agency (EPA) were a significant obstacle to DOE's Yucca Mountain plans because the EPA could find the risk of contamination too high to allow the plan to go forward. Congress removed this hurdle in the 1992 Energy Bill, however, by usurping the EPA's authority to set health standards for radiation exposure at the Yucca Mountain waste dump and transferring it to the non-governmental and unaccountable National Academy of Sciences.
Reaping the benefits
The nuclear industry has reaped numerous other benefits, many of which are difficult to calculate. "Many of the subsidies for the nuclear industry are not in the tax code, making them hard to quantify despite their tremendous value," says Dawn Ehrlenson, who directs a tax project for Friends of the Earth. Other subsidies and benefits relate to:
- Nuclear plant decommissioning. Nuclear utilities are required to set aside funds for dismantling reactors after ceasing operation. Public Citizen reported in 1990 that utilities on average had operated reactors for about one-third of their expected lives, but had allocated only 14 percent of decommissioning funds.
Moreover, true decommissioning costs have been drastically underestimated. Last summer, for example, the owners of the Yankee Rowe nuclear reactor raised the estimated cost of dismantling the reactor to three times what had been placed in its decommissioning trust fund. Even Yankee Rowe's new figure is a "dubious estimate, because no one knows what it will cost in two or five years to get rid of high-level nuclear waste," says Jeff Sosland of the Nuclear Information & Resource Service (NIRS). Skyrocketing decommissioning costs could be paid by ratepayers, shareholders or taxpayers.
- Investment and accelerated depreciation tax credits. Investment tax credits especially benefit utilities because of the capital-intensive nature of nuclear programs. KEA estimates tax breaks to the nuclear industry were worth $26.1 billion (in 1990 dollars) from 1950 to 1990.
- Bailout of public utilities. Many utilities obtained tax-exempt municipal bonds for nuclear power plant construction by forming partnerships with rural electric cooperatives and municipal utilities, according to ASE's Koplow. Some of these loans pushed rural cooperatives and municipal utilities into bankruptcy, forcing taxpayer bailouts.
- Federal power agency losses. The Bonneville Power Administration and the TVA -- federally owned sellers of wholesale electricity -- "invested heavily in nuclear and lost heavily in nuclear," says Koplow.
- State expenditures. Taxpayers also have paid for nuclear energy through their state taxes. For example, the New York Low-Level Radioactive Waste Siting Commission budgeted $900,000 for a public relations campaign "to convince New York State residents that low-level nuclear waste facilities are not harmful," according to a public relations industry trade newsletter.
Legislators on the dole
Environmental and public interest groups have long attempted to force nuclear utilities to pay their share of the costs of nuclear power and to divert government spending toward clean energy sources. Their efforts have been hampered by the nuclear industry's grip on Congress, a result of the industry's hefty and across-the-board campaign contributions to House and Senate members. "The people who benefit from government support invest at least a portion of that support to ensure the support continues," says Koplow. Nowhere was the power of the industry's political influence more evident than in last fall's energy bill. The nuclear industry was able to claim major victories on uranium enrichment, nuclear plant licensing and high-level waste disposal. Montange attributes the taxpayer "bailout" of the industry's uranium enrichment costs to the influence of nuclear utilities over key legislators.
According to License to Spend, a 1992 report by NIRS and the U.S. Public Interest Research Group on nuclear power industry campaign contributions, Representative Dan Rostenkowski, D-Illinois, chair of the House Ways and Means Committee and a key player in the bill's uranium enrichment title, has received $104,000 from nuclear industry political action committees (PACs) since 1985. But Rostenkowski was not even among the top recipients of nuclear PAC contributions. The report, based on Federal Election Commission figures, shows that only three members of the Senate and seven members of the House took no money from nuclear industry PACs since 1985.
Nuke's uncertain future
Despite the billions of dollars in taxpayer subsidies of the last four decades, the nuclear industry is in deep trouble. "Nukes face a new crisis: competitive markets," asserts the headline to a recent article in Public Utilities Fortnightly, a trade publication. No new reactors have been ordered in over a decade, in part because of high costs associated with construction, operation and maintenance, skepticism on the part of Wall Street financiers about decommissioning costs and public opposition to nuclear energy. Ratepayer costs from 1984 to 1990 jumped considerably to average 8.08 cents per kilowatt hour.
To survive, the nuclear industry must overcome the doubts of Wall Street, state utility regulators and the public. Industry officials hope environmental concerns over fossil fuels will spur the comeback of nuclear energy. "Renewable energy and nuclear power have much in common," writes Richard Myers, a vice-president of the U.S. Council for Energy Awareness, the nuclear industry trade association, in a recent issue of the association's magazine. "[They] both have passed through similar developmental cycles ... Today, the nuclear power industry, well-schooled by this experience, with a realistic sense of its strengths and weaknesses, stands at the threshold of maturity, ready for a new generation of plants."
Whether the nuclear CEOs will be able to salvage the industry based on the environmental ploy or other schemes depends largely on their ability to ensure a continuing flow of public subsidies into the industry's coffers. Decades of experience have demonstrated conclusively that nuclear power is simply too unsafe, too inefficient and too expensive to be commercially viable on its own.