Remarks of
Thomas F. Farrell II
Chief Executive Officer - Dominion Energy
to the
Nuclear Energy Assembly
May 23, 2001
Thank you, and good morning. It’s a privilege to join my colleagues on
this panel. And I appreciate the opportunity to share my views about the future
of nuclear power.
The last speaker on a panel always has a unique challenge.
Even though the subject matter may not be exhausted, the audience probably is.
So I’ll keep my remarks to the point.
You’ve already heard about the many advantages of nuclear:
high capacity factors, excellent safety record, low operating costs, non-existent
emissions. Those pluses, combined with growing electric demand, tight supply
and escalating natural gas prices, could provide the impetus for a nuclear renaissance.
But not so fast. We must guard against irrational exuberance.
Before we can declare victory – and certainly before Dominion, at least,
builds any new nukes -- we must clear some big hurdles. They include:
Resolution of the waste disposal issue;
Renewal of Price-Anderson;
Continued funding for advanced reactor research and demonstration;
Predictable and reliable licensing for new plants;
Acceptable financial risks, including no delays resulting
from frivolous lawsuits;
Workforce recruitment and training;
And increased public support for a new round of building.
Each one of those areas poses significant challenges for
the industry. Progress is needed on all fronts before we can expect to tilt
the balance toward new nuclear construction.
Despite those concerns, Dominion is bullish on nuclear. We
are and will continue to be a top nuclear player in competitive energy markets
– witness our recent acquisition of the Millstone station in Connecticut.
The addition of Millstone increases Dominion’s nuclear
generation by more than 50 percent, to about 5,400 megawatts of capacity.
Low operating costs at our North Anna, Surry and Millstone
stations help us get maximum value from our generation portfolio. So it’s
safe to say that nuclear figures prominently in our current and future generation
plans.
Maintaining a diversity of fuel supply is critical if we’re
to have stable and reliable electric supply.
Dominion is a big believer in not putting all our eggs in
one basket. We currently get about 30 percent of our generation from coal, 25
percent from nuclear, 20 percent from gas and oil, about 8 percent from hydropower,
and another 20 percent we purchase.
In our view, balance is the key. Over-reliance on any one
fuel source is risky. For the foreseeable future, we have only three economic
ways to generate large volumes of power: fossil fuels, nuclear and hydro.
Natural gas is the undisputed darling of the power generation
sector right now. But the time is right to get nuclear – and coal for that
matter – back into the picture. We’re encouraged that the Bush administration
and a number of key Congressional leaders feel the same way.
Congress could help by leveling the playing field. Financial
incentives are needed to place investments in new nuclear plants on a par with
other technologies and fuel sources.
Tax credits and other incentives long available to developers
of clean coal and renewable technologies should be extended to nuclear plant
developers. Otherwise, investment capital won’t flow in nuclear’s
direction.
New nuclear units will take 6 or 7 years to build. Tax credits
would help offset some of the high, up-front construction costs. And in a competitive
environment, accelerated tax depreciation schedules will be critical as well.
Virtually alone in the business world, the electric and gas
industry is subject to extended tax depreciation schedules. That must change
– not just for nuclear, but for all types of generation.
Before we get too far down the road to new construction,
however, we need to deal with some unfinished business. Number one, that means
wrapping up the high-level waste issue.
If an award were given for foot-dragging, we all know who
to nominate. The Department of Energy has a statutory obligation to accept the
waste and create a final repository. Period.
Congress needs to muster its political courage and do what’s
in the national interest. We probably know more about Yucca Mountain than any
other piece of real estate on the planet. Knowledge isn’t the problem.
What’s needed, in the words of my chairman, is a dose of political testosterone
to move things forward.
Second, we need more improvements to the license renewal
process – especially as the industry consolidates and competitive pressures
grow.
Constellation’s Calvert Cliffs station and Duke Power’s
Oconee station have already cleared this hurdle. A number of other applications
are in the pipeline, with more to follow.
Dominion, for example, plans to file license renewal applications
for our Surry and North Anna stations in the near future. And we’re evaluating
license renewal for Millstone, the newest member of our nuclear family.
The NRC deserves credit for working with our industry to
expedite the license renewal process to ensure that our nation continues to
get maximum value from its nuclear stations. But we need assurance that the
process won’t get stalled… and that future applicants will have the
opportunity to benefit from lessons learned as we go along.
Twenty-four months for the review of a license renewal application
was excellent for the first two out of the gate. But it shouldn’t be for
the rest of the field. We understand that 18 months is now the target. That’
s real progress. We think even more is possible.
In regard to predictable and efficient licensing, the NRC
took a major step forward when it issued its Part 52 in the early ‘90s.
Excluding the three new design certifications, however, the process still needs
to be demonstrated.
As with most things, the devil is in the details. So we won’t
know exactly how Part 52 works until someone gets an early site permit or a
combined construction and operating license.
That’s why Dominion is participating in NEI’s task
force on future plants. And why we’re involved in talks with the NRC to
explore how this process would work and how it could be improved.
For example, we should be able to use previously gathered
data at existing sites to speed up the early site permitting process. Why re-invent
the wheel if we don’t have to? The shorter the time to market for new units,
the more viable the nuclear option will be.
Similarly, we should get credit for existing and well-established
programs without endless and redundant review. I’m talking about areas
like security, training and radiological protection.
The NRC has already certified three new light-water reactor
designs. Other advanced light-water reactor and gas reactor designs now under
development may apply for design certifications down the road.
As with license renewal, future design certifications should
take less and less time… and cost less and less as we reap the benefits
of experience.
We also favor eliminating anti-trust, "need for power"
and alternative siting reviews for new units. In a competitive environment,
the market – not regulators – should decide whether it’s appropriate
to build new plants. We’re pleased that Chairman Meserve shares this view.
Overall, we’re encouraged by the discussions we’ve
had to date with the NRC about streamlining the licensing process and achieving
greater regulatory certainty.
More meaningful dialogue and reform must occur as we head
into deregulation – which will bring new plant designs, new project financing
structures and a host of other changes that reflect the industry’s shift
to merchant status.
The NRC and industry share a significant challenge: making
sure we have the resources and technical skills needed – in the form of
engineers and other specialists – to meet our respective obligations and
turn the best laid plans into reality.
As I said earlier, we’re encouraged by the positive
steps already taken by the NRC under Chairman Meserve’s leadership. But
to paraphrase Robert Frost, we have miles to go before we sleep.
The nuclear industry tends to emphasize nuts and bolts issues.
But it’s not the technical and engineering challenges that concern Dominion.
It’s the political and societal ones that do.
Nuclear operators are a highly skilled group when it comes
to the laws of nature. It’s the laws of the land that usually trip us up.
In the 1970s and ‘80s, lengthy project delays, endless
intervention and appeals, escalating construction costs, safety rules that changed
in mid-stream – all combined to chip away at nuclear’s credibility
– and the industry’s willingness to invest in new plants.
Limits on allowed litigation and intervention are essential
if we’re to have predictable and efficient licensing. The NRC – not
the courts – should have the final say on all issues related to licensing.
And there should be no further judicial review.
The Part 52 process improves the outlook for more timely
and disciplined public hearings and reduced risk for the license applicant.
In its two completed license renewal cases, for example,
the NRC provided strong guidance to the hearing boards. Similar guidance should
inform early site permit and combined operating license hearings. And recent
recommendations by the NRC’s legal staff in support of more informal hearings
is a move in the right direction.
Overall, today’s regulatory environment is more stable.
The new licensing process – though still untested – looks promising.
But Hollywood darlings and fringe advocacy groups cannot be given leverage to
stop commercial operations. Six or seven years to build a nuclear unit is long
enough. As I said earlier, delays brought about by frivolous lawsuits must not
be permitted.
The industry has demonstrated that nuclear units can be operated
safety and economically – year after year. We must continue to focus on
operating excellence and guard against complacency. Nothing would hurt our credibility
with Wall Street and the general public more than a decline in current operations.
We simply must keep the performance bar high if nuclear is to succeed going
forward.
Recent public opinion polls are encouraging. They show that
many Americans are rethinking their position on nuclear power in light of concerns
about global warming and California-style electricity shortages.
One thing is certain. The NIMBY, or Not-In-MY-Backyard phenomenon,
is alive and well in America. In fact, NIMBY has morphed into the BANANA syndrome:
Build Absolutely Nothing Anywhere Near Anybody.
That leads me to my final point, which is mainly addressed
to those in the industry.
We’re not the only ones hoping for a revival, you know.
The activist community is gearing up yet again to refocus its attention on nuclear
power.
And sadly, too many Americans still get their scientific
information from fringe environmental groups and their celebrity spokesmen –
people skilled at commanding media attention and disseminating their views.
Our industry shares responsibility for this public relations
failure. We lost the PR battle after Three Mile Island and again after Chernobyl
– and we haven’t regained the high ground.
We simply haven’t done enough to counter sensationalism
and hysteria with sound science. And the science is clearly in our favor –
more now than ever if you believe that greenhouse gases are a concern. We also
have failed to explain to the public in clear English how nuclear power works…
and how to weigh its risks against its rewards.
At a minimum, our industry must do more to build grassroots
awareness of the important link between nuclear power and a clean environment…
between reliable, low-cost electricity and jobs and economic growth.
We must make ourselves heard above the din of noisy extremists
who rely on scare tactics and mis-information. Unfortunately, that approach
succeeds more than it fails. Far too many Americans still fear nuclear technology
– despite its many advantages.
I’m hopeful the American public will come to grips with
its conflicted views – not only about nuclear power but about energy in
general. We must find common ground that addresses the nation’s energy
needs and its commitment to environmental protection.
I’m not big on predictions – that’s why God
created economists and meteorologists. But I will venture this: If our nation
cares about having stable, reliable, clean and affordable electric supply in
the future, we must include nuclear in the mix.
The advantages of the technology are clear. The nation’s
need is real. There’s no time like the present.
