Testimony of Joe F. Colvin
President and Chief Executive Officer
Nuclear Energy Institute
before the U.S. Senate Environment and Public Works Committee
Clean Air, Wetlands, Private Property and Nuclear Safety Subcommittee
July 30, 1998

Mr. Chairman, Ranking Member Graham and distinguished members of the subcommittee, my name is Joe Colvin. I am president and chief executive officer of the Nuclear Energy Institute. The Institute is responsible for setting policy on matters affecting the nuclear energy industry, including federal regulatory practices that influence day-to-day operations of nuclear power plants. NEI represents more than 275 companies, including every U.S. utility licensed to operate a commercial nuclear reactor, their suppliers, fuel fabrication facilities, architect and engineering firms, labor unions and law firms, radiopharmaceutical companies, universities and international nuclear organizations.

I would like to thank the committee for considering the nuclear energy industry's views on this matter, particularly in light of the industry's long-standing recommendation for comprehensive reform of Nuclear Regulatory Commission's regulatory regime. As the industry's policy leader, NEI is committed to ensuring the continued, safe operation of more than 100 nuclear power plants amid a changing marketplace. Today, the focus is on nuclear power plant regulations, but concerns about reform are issues that apply to all licensees.

My testimony will provide a historical account of NRC's attempts at reform, but more importantly reiterate the need for a new regulatory process that continues to protect public health and safety, but is more efficient, less intrusive and less costly. The shift to a new regulatory framework should recognize the appropriate balance of risk insights and safety, and lessons learned from four decades of consistently improved performance.

The safety, reliability and economic performance of U.S. nuclear power stations have improved dramatically during the past two decades, yet the NRC's regulatory programs and oversight have failed to recognize these changes. Assessment, inspection and enforcement policies are inconsistent with the industry's high level of performance. The NRC's comprehensive regulatory approach remains focused on an old paradigm-the assumption that licensees will not maintain compliance or make required safety improvements unless enforcement actions are taken routinely in response to noncompliance. Recent operating and safety statistics prove otherwise. By any set of standards, including the NRC's Office for Analysis and Evaluation of Operational Data, the industry's safety record supports a fundamental change in the NRC regulatory process. The agency, however, operates under an outdated regulatory process that is mired by conflicting regulatory interpretations that often circumvent the formal rulemaking process. NRC enforcement action focuses on strict compliance, and its inherently subjective concept of "regulatory significance" is misplaced and has the potential to adversely affect safety. The commission also suffers from chronic delays in issuing licenses and responding to other industry petitions.

The NRC must undergo comprehensive regulatory reform that includes safety-focused regulations, consistent guidelines for meeting these regulations, efficient inspections to verify compliance, and a balanced enforcement program to respond to noncompliance. In doing so, the agency should adopt the best practices and efficient processes identified and in use at other federal agencies that have undergone similar reform. The NRC has already begun this effort in some aspects of its regulatory scheme, and the industry commends the commission's work, under the leadership of Chairman Shirley Ann Jackson, on many fronts, such as license renewal rule. There also are signs that the NRC is considering revamping its highly subjective plant assessment process to one based on objective criteria.


Nuclear energy is America's leading source of emission-free electricity, supplying nearly 20 percent of our power at a competitive price. The industry has more than 40 years of operating experience in the United States and is the global leader in nuclear safety. Since the early 1970s, nuclear power has strengthened the diversity and security of our energy supply, powered economic development and helped raise our quality of life. More than 435 nuclear power plants produce 17 percent of the world's electricity. Nuclear energy's clean air benefits also are a significant factor in many developed countries' plans to meet emissions reductions outlined in the Kyoto Protocol.

The nuclear energy industry consistently has supported the NRC's mission as a strong and credible regulator. Safety is and always will be the industry's first priority, and a strong, credible regulator is essential to instill public trust and confidence in our industry. But effective and efficient regulation that protects public health and safety should be accomplished through a regulatory approach that focuses on safety and allows industry and the NRC to allocate resources to those areas most important to safety.

As the United States makes the transition to a competitive market for electricity production and distribution, our most significant business uncertainty is not the cost of fuel, such as natural gas, or changing environmental requirements on emissions that may increase the cost of, or limit production from, fossil fuel sources. The most significant area of uncertainty is the NRC's inconsistent, outdated regulatory process, its drain on the agency budget and utility resources, and its failure to focus directly on regulations that are most important to protecting public health and safety.

As states confront the dual challenges of industry competition and stringent emissions reductions requirements, energy officials increasingly are recognizing the "hidden value" of the continued operation of emission-free energy sources. Nuclear energy's transition to a competitive market will depend, in part, on the NRC's ability to adapt to the same changing environment and how swiftly the agency responds to nuclear power plant license transfers and other licensee petitions to the agency.

History, however, demonstrates that the agency is slow to change. At its best, the agency has shown a willingness only to embrace short-term, piecemeal reform. At its worst, the agency has not responded to numerous, independent recommenda-tions for integrated, systemic change. The NRC also has undertaken a number of self-assessments and industry reviews, but none have resulted in significant change in NRC process or culture.

Congress has the opportunity to provide the necessary impetus for change through ongoing oversight and guidance that would sustain fundamental reform of the NRC's regulatory process. Just as the industry has made a significant transition in the way it operates in a competitive market, the NRC must replace an outdated regulatory framework with one that is safety-focused and responsive. As part of this need for fundamental change, Congress should ensure that the agency is successfully on the path of implementing meaningful reforms. NRC's past reluctance to initiate a self-directed reform program demonstrates this need for continued congressional oversight. Given the onset of electricity competition, reform of the regulatory process must be accomplished without delay.

Regardless of the transition to a competitive electricity market, the NRC-like all federal agencies-is obligated to provide the least intrusive, most efficient and most cost-effective regulation commensurate with protecting public health and safety. The NRC has an obligation to electricity consumers and the industry to follow the lead of other federal agencies in undertaking reform that reflects today's business environment.

For example, the Federal Energy Regulatory Commission (FERC) announced on June 10 that it recently completed a four-month study about how to streamline the agency's procedures to keep pace with rapid industry changes. The agency intends to enhance the timeliness of its decisions and focus more resources on market issues. FERC Chairman James Hoecker describes the reform effort as "our way of acting strategically to make regulation efficient and beneficial where it is required and less intrusive or even unnecessary where it is not ...The commission must embrace the culture of customer service and advanced technology into which regulated companies are swiftly being drawn."1 FERC intends to implement operating changes in phases during the next two years.

Congressional Recognition of Need for Regulatory Reform

The industry applauds this committee's oversight, including today's hearing to examine a sensible, meaningful approach toward reform of the NRC's regulatory process. We encourage your ongoing direction of the commission's regulatory reform activities. Similarly, Senate appropriators have undertaken a broad examination of the regulatory process as part of the federal budget review. The Senate Appropriations Committee in June sent a strong message to the NRC about persistent weaknesses in its implementation and enforcement of regulatory requirements.

The committee noted that six major reviews of the agency since 1979 have revealed common criticisms, including: "the NRC's approach to regulation is punitive rather than performance based, licensees are forced to expend considerable resources on regulations that are not related to safety, the NRC is unnecessarily prescriptive, licensees fear retribution for criticism, there are not specific criteria for important NRC actions such as placing a reactor on the watch list, and the NRC focus on paper compliance is not related to and can distract from safety activities."

The committee added that it "is concerned that the NRC has done little to respond to these reviews and believes that a major review should be undertaken to improve the efficiency of the NRC and the manner in which it oversees public health and safety." As part of this review, NRC was directed to issue monthly reports on the progress of its licensing and regulatory duties.

More telling, perhaps, of the committee's dissatisfaction is its recommendation to limit extension of the agency's user fee to one-year increments, rather than the NRC-requested five-year authorization. The NRC's authority to assess licensees for 100 percent of budgetary expenses expires in fiscal year 1998. The industry supports the one-year reauthorization to provide an opportunity for continuing oversight until Congress is satisfied with improvements in the regulatory system.

The nuclear energy industry applauds the Senate appropriators' vigilance and also urges this committee to support the one-year reauthorization of NRC's user fee collections until the agency successfully implements regulatory reform. Congress also should require the NRC to measure its success at implementing overall regulatory reforms and regularly report its progress to this committee.

NRC Reform: A History of False Starts

An unacceptable lag time has developed between the understanding that regulatory reform must take place at the NRC and a serious attempt to accomplish it. Nearly 20 years have past since the first NRC review recommended the need for a shift in the agency's regulatory process.

In 1979, the President's Commission on the Accident at Three Mile Island provided one of the first accounts of the need for regulatory improvement. The so-called Kemeny commission was appointed by President Carter to review the accident at the Three Mile Island nuclear power plant.2 One of its conclusions-that "NRC tends to focus industry attention narrowly on the meeting of regulations rather than on a systemic concern for safety"-remain relevant today.

The Kemeny Commission also noted "a preoccupation [by NRC] with regulations...We are convinced that regulations alone cannot assure safety. Indeed, once regulations become as voluminous and complex as those regulations now in place, they can serve as a negative factor in nuclear safety."

At least five other independent reviews of the NRC's regulatory practices echo the Kemeny report's conclusions. The agency's own internal examinations also have found fault with NRC practices. For example, a 1981 Regulatory Impact Survey by senior NRC management reviewing the safety impact of regulatory activities determined that, "notwithstanding the competence and good intentions of the [NRC] staff ...the [slow] pace and nature of regulatory actions have created a potential safety problem of unknown dimensions."3

A chronology of recommendations to reform the regulatory process and false starts on the part of NRC at reform are attached to this testimony (Attachment A). These recommendations include:

} An Oct. 15, 1986 letter from the chairman of the Advisory Committee on Reactor Safeguards to the NRC chairman. The ACRS chairman said that NRC staff "has a tendency to regulate in an economically wasteful fashion."

} A Nov. 24, 1989 letter from the chairman of the Advisory Committee on Reactor Safeguards to the NRC chairman addressed coherence in the regulatory process. The letter described a "problem of the regional administrators, who sometimes have practices that differ from each other, and from headquarters. In the end, it is the regional administrators with whom a licensee has the most contact, and who embody NRC in the field, and there are too many cases in which their dicta go well beyond the policies set by the commission [NRC]."

} A 1989-90 Regulatory Impact Survey found that "licensees acquiesce to NRC requests to avoid poor numerical Systematic Assessment of Licensee Performance ratings and the consequent financial and public perception problems that result, even if the requests require the expenditure of significant licensee resources on matters of marginal safety significance."

} A 1992 National Academy of Sciences study concluded that "an obstacle to continued nuclear power development has been the uncertainties in the Nuclear Regulatory Commission's licensing process."

} A 1994 industry study conducted by Towers Perrin found that NRC's regulatory practices did not increase the safety margin at nuclear power plants. Nuclear licensees also reported an increase in "pressure to take actions not required by regulation."4

A chart attached to this testimony (Attachment B) further demonstrates that NRC's regulatory weaknesses have been repeatedly identified for reform through independent reviews.

Regulatory Process In Need of Systemic Improvement

NRC's regulatory programs and enforcement policy are inconsistent with the industry's high level of operating performance. As a result, agency and industry resources are consumed by matters that have low safety significance, including a dramatic rise in enforcement actions where there is no tie to safety.

The industry applauds the commission's work on many fronts, such as the license renewal rule, and there are signs that the NRC is considering revamping its highly subjective plant assessment process to one based on objective criteria. Nonetheless, immediate, fundamental changes in policy and culture are necessary to ensure that a tightly focused regulatory system is established and effectively implemented.

At every turn, NRC's regulatory procedures are overly prescriptive-a process rooted in the 1950s, when knowledge about nuclear safety and nuclear plant operating experience was evolving. In 1979, regulations for operating nuclear power plants were complex and prescriptive. Rather than heeding the Kemeny Commission's recommendations, the regulations and regulatory requirements have become even more complex today.

The complexity of regulatory requirements stems in part from the different vehicles NRC uses to issue guidance. However, NRC's informal, subjective guidance imposes obligations on licensees without undergoing the notice and comment procedures established by the Administrative Procedures Act. These practices include:

} Issuing informal guidance through generic NRC communications that utilities feel obligated to follow, and confirmatory action letters that provide specific recommendations to plant operators concerning corrective action. These letters and guidance ultimately become regulatory obligations.

} Examples of NRC's subjective practices include determining which plants should be placed on the watch list and rating plants through the systematic assessment of licensee performance.

These practices often are confounded by conflicting interpretations from NRC's regional offices. At an NRC roundtable discussion earlier this month, Dr. Zack Pate, chairman of the World Association of Nuclear Operators, said "Headquarters and regional personnel routinely, every day, indeed every hour, impose requirements on the plants that the Commission or the EDO or other senior managers would not support if in each instance you knew what was happening. Time and time again over these past 18 years that I have been observing, when such examples are brought to the attention of an individual commissioner or the EDO, you [NRC management] find the situation to be just as unreasonable as I do, but this continues. The Towers-Perrin study, conducted some four years ago, illustrates this problem quite clearly, even dramatically."

The NRC's regulatory inconsistencies also contradict the Clinton Administration's regulatory reform initiative. Executive Order 12866, issued in 1993, envisions a federal regulatory system that "protects and improves health, safety, environment and well-being without imposing unacceptable or unreasonable costs on society."

Far More Burden, No More Benefit

NRC's emphasis on strict adherence to requirements that lack safety significance has created a regulatory environment that suffers from a lack of prioritization. Licensees are penalized based on regulation to a zero-defect threshold at a time when industry safety reliability and economic performance are at an all-time high.5 Regulating to a zero-defect threshold results in a broad spectrum of requirements that presumably are equally important, and ultimately, detract from the important safety mission.

The regulatory disconnect also is recognized by Wall Street. A June report from Moody's Investor Service takes note of the NRC's heavy regulatory burden and its bearing on the industry's future. "Despite safety performance records that are at an all-time high, continued close scrutiny by the Nuclear Regulatory Commission also represents a challenge for all nuclear utilities."6

Another industry concern stemming from NRC's varying guidance mechanisms is that regulation should be consistent with NRC's backfit rule, which requires that new interpretations of existing regulations or newly issued regulations must be reviewed under 10 CFR 50.109 to determine if they are necessary to preserve adequate protection or to bring a plant into regulatory compliance. If neither of those conditions are met, then NRC regulations require backfits to undergo a cost-benefit analysis demonstrating that such an action will result in a substantial increase in public safety and be cost beneficial.

The methods used to determine the cost-benefit analysis by the NRC can, and have, justified nearly any new regulation imposed by the agency. For example, the NRC takes "averted on-site costs" into consideration in the cost-benefit calculation of a new regulation. This, in effect, is an assumption of the economic loss to a licensee due to a plant shutdown-the cost of replacement power, labor, etc., that could be incurred if such a regulation was not in place. This "benefit" is then used to justify the imposition of a new regulation that could not be justified otherwise. This results in the licensee committing budget and resources to implement a regulation not needed for safety.

Equally troubling to NRC licensees is the lack of relative priority given to non-safety related compliance issues by the agency staff both at headquarters and in the regions. There is widespread agreement by the industry and the commission that nuclear safety would be enhanced by a more objective prioritization of available resources based on the objective safety significance. There is a high level of safety in the industry today. And while the industry certainly can accomplish the most important safety goals, it should not be required to devote the same level of resources to non-safety significant requirements.

The agency's inconsistent approach to the regulatory process and shifting interpretation of some regulations makes it difficult for utilities to consistently prioritize activities subject to NRC regulation. Adopting a performance-based regulatory framework would permit utilities to focus resources on areas that are most important to the continued protection of public health and safety.

No Margin For Error

The industry recognizes that the NRC has conducted a number of reviews of the enforcement policy during the past four years,7 with the intent of improving its effectiveness and implementation. While some productive changes have resulted from NRC's redesign, the agency continues to isolate its review of the enforcement process from overall reform. Yet in order for NRC's enforcement procedures to be truly effective, they must be part of an integrated, comprehensive regulatory framework. That framework must include safety-focused regulations, consistent guidelines for meeting these regulations, efficient inspections to verify safety-based compliance and a balanced enforcement program to respond to noncompliance when it affects safety.

Despite the industry's long-standing recommendation to reform the enforcement process, NRC remains wedded to the view that unless enforcement action is taken, licensees will not take steps to maintain safety. This approach is not only outdated based on industry performance, but it also is rooted in the agency's assessment process, which focuses in part on the number and types of violations NRC or licensees report.

In the past two years, the industry has witnessed a sharp spike in the total number of violations, despite improvements in industry safety trends. For example, NRC imposed 50 percent more industry violations (1,519) in 1997 than a year earlier. This increase belies the performance of the industry and underscores the disconnect between the inspection process and the NRC's goal of assuring adequate safety in the sense that the industry spends significant time on areas of compliance that have a relatively low impact on safety. This process of responding to low-level violations must be revamped so that the industry and NRC can maintain their focus on safety significant issues.

The Union of Concerned Scientists (UCS) told the commission recently that the largest problem with inspection enforcement and assessment is tied to "how the NRC classifies the plant's performance, or how it predetermines the plant performance. If a plant is in good standing, then it gets good inspections. It gets good enforcement action, and it gets good performance assessment. If the NRC places that plant into the regulatory distress category, then all these things drop off the board, and there's a step change virtually overnight into the other category." UCS safety engineer David Lochbaum told the commission that "the plant's status did not change overnight, just the NRC's perception of that plant. What in the past apparently was written up as a non-cited violation is now being cited as a violation. The standard shouldn't change. If there were problems before, they should have been reported as problems before. If they're not problems today, they shouldn't be reported as problems today. There's something wrong with that kind of performance."

Response to Violations with Low Safety Significance

Of the 1,519 violations in 1997, 1,417, or more than 90 percent, fell into the category of least safety significance-severity level IV. Often, these violations have little relevance to a plant's overall performance. The following examples illustrate these flaws:

} In May 1997, NRC inspectors noticed three-ring binders resting above a main control room panel at a nuclear plant and issued a level IV violation.8 According to the NRC, the binders could have posed a potential safety problem if they became dislodged during an earthquake.

} Another utility was cited because a diesel generator proved to be more robust than regulatory guidelines required.9

} NRC issued a level IV citation to a nuclear plant for failing to mark a procedure in an operations manual with a double asterisk.10

Despite their relatively low safety significance, severity level IV violations nonetheless demand a timely response. A timely response, however, demands resources. And a plant operator has no choice but to divert these resources away from matters that may be of greater safety concern. In effect, the NRC is managing a plant's priorities when it issues severity level IV violations with a train of paperwork and corrective action.

The industry believes other flaws exist within NRC's enforcement procedure, such as the aggregation of violations.

Combining and Elevating Violations

The NRC often aggregates violations that it believes arise out of the same circumstances or that share common root causes and combines them to impose a violation of a higher severity level. For example, several relatively minor violations can become a severity level III candidate.

In 1997, the NRC significantly increased its practice of aggregating minor violations, thereby elevating or "escalating" the level of violations, industry data demonstrates. The number of aggregated violations cited in an escalated action was almost three times that of 1990. Many licensees believe that aggregation is used to unduly inflate the perceived significance of problems that are of themselves not safety-related.

A November 1997 aggregated violation illustrates this point.11 NRC cited a nuclear power plant where a control switch on a backup emergency diesel generator was improperly positioned. The utility received six separate procedural violations relating to the failure to correct the switch position error and record it in an operating log. Collectively, the violations became a severity level III violation.

In another case, during a period between July 1994 and July 1995, a utility's salt service water system recorded temperatures that exceeded the design bases. The NRC did not identify those temperature changes until 1997, when the agency issued seven violations to the utility. At no time prior to the citation's issuance had NRC notified the plant that the agency determined its temperature variations were in excess of plant requirements. The violations were combined and escalated to a severity level III violation, which includes a $55,000 fine.

The NRC's use of aggregation is problematic because of its inherent subjectivity and the discretion it inserts into the enforcement process. Are minor problems linked? Should they be aggregated? Do they reflect a broad performance problem? These are questions that have less to do with the actual violations and their consequences, and more to do with individual perceptions of licensee programs, processes and performance.

Licensing Reviews and Staff Changes Mired in Bureaucracy

NRC requires agency approval prior to a wide range of industry activities. Many, such as licensing applications and corporate license transfers, are accepted as priorities for review. Other requests, such as those seeking code relief for plant repairs, rank low in NRC consideration.

However, industry experience proves that a priority in the queue doesn't necessarily translate into timely review. Despite NRC pledges of expedience, many industry requests are subject to unreasonable delays. Such inaction can prevent private companies from safely meeting the needs of the marketplace-often at considerable expense. As a result of delay in the NRC licensing process, Louisiana Enrichment Services, L.L.P. withdrew its application after spending $34 million and more than seven years participating in the licensing process.

The Louisiana company in April withdrew its NRC application for a license to construct and operate the Claiborne Enrichment Center. "The inability of the licensing process to operate in a predictable, efficient and timely manner" was the driving factor in abandoning the fuel enrichment project, LES President Roland Jensen told the NRC. LES had filed its application with the NRC on Jan. 31, 1991, with the expectation of operating the nation's first privately owned nuclear fuel enrichment facility by 1996.

The NRC failed to resolve LES's licensing issues in a timely manner despite the fact that Congress, as part of the Energy Policy Act of 1992, amended the Atomic Energy Act expressly for that purpose-to mandate a streamlined, one-stage licensing process for uranium enrichment facilities.

Evidence of NRC inaction abounds in other areas.

Portland General Electric Co. is awaiting an NRC decision on its application to ship a reactor vessel with internal components intact to a low-level radioactive waste disposal facility in Hanford, Wash.12 The company submitted its application in the summer of 1996 in hopes of meeting a summer 1998 shipment date. After significant delays on NRC's part, PGE has been forced to delay its shipment until 1999.

Portland General Electric proposed the shipment to significantly limit worker exposure to radioactive elements within the reactor vessel that otherwise would be dismantled for shipping. In addition, PGE's proposed method-a practice the Navy routinely uses in shipments13-would save $14 million in decommissioning costs.

Today, PGE still awaits NRC action.

In the past, the NRC also has been slow to authorize nuclear plant license transfers. An NRC decision on Georgia Power Co.'s request to transfer its Vogtle power station license to the Southern Nuclear Operating Co. as part of a corporate reorganization took more than four years.14

Both companies are subsidiaries of the Southern Company. The transfer did not entail a change in Vogtle's staff or management structure.

The Vogtle experience serves as fresh evidence that the NRC's licensing procedures are in need of revision to respond to today's high level of plant operating performance and the emerging business climate. The NRC must instill proper focus and discipline to its licensing procedures for commercial nuclear facilities. In a competitive market, electric companies' success will be measured in part by the speed with which they can respond to business decisions. NRC's license transfer process must strike a balance between the need to ensure corporate resources are adequate to safely operate a nuclear power plant and the new business paradigm in the electricity market.

As retail competition emerges, more electricity generation facilities of all types will be bought and sold, thereby requiring a timely license review to keep pace with industry changes. For example, GPU Nuclear, Inc. announced earlier this month that it has reached agreement in principle to sell Three Mile Island (TMI) Unit 1 to AmerGen Energy Co., jointly owned by PECO Energy Co. and British Energy. The sale-the first of an operating nuclear plant in the United States-will require regulatory approval and license transfer. Several agencies, including the NRC, will review the sale during the next 12 to 24 months.

Similar transactions of electric generating facilities are expected to follow as the retail market continues to evolve.

Creating Regulatory Burdens At Safety's Expense

Safety is the nuclear energy industry's top priority, and we recognize the statutory responsibility that the NRC has to assure adequate protection of public health and safety. However, the industry is concerned that the NRC has created a regulatory environment in which the agency's overly conservative, compliance-oriented approach compromises attention to safety.

In a 1997 audit, the NRC's Office of Inspector General recognized a conflict between the commission's goal of focusing on issues of greatest safety significance and actual resources devoted to verifying license compliance with regulations of limited safety benefit.15 The report, which focused on NRC events surrounding refueling practices at Northeast Utilities' Millstone Unit 1 that were outside of the plant's design bases, concluded that the commission should adopt a risk-informed, performance-based regulatory system-that is, a system that measures an acceptable level of risk and weighs plant performance or outcomes accordingly.

Concerns at Millstone prompted the NRC in October 1996 to seek assurances that all nuclear power plants were operated and maintained in accordance with their design bases. Licensees were given three months to respond.

NRC's request carried the weight of a formal rule and utilities worked diligently to respond to the detailed request for information ranging from engineering design and configuration control processes to a plant's procedure for identifying problems and implementing corrective actions.16

While the agency estimated the letter would require a licensee's staff to spend 400 hours to respond to the letter, licensees devoted an average of 2,000 staff hours per plant, according to industry estimates. As one utility told the NRC, "We have expended considerable efforts to collect, compile and evaluate data." One licensee assigned a 30-member team that spent 15,000 man hours responding to risk significant systems reviews-only one of the five areas in which NRC requested information.17 Another utility reviewed 105 separate plant systems to assure conformance with the design bases.18

In addition to the time devoted to respond to the letter, some utilities said their efforts to verify conformance with design bases requests and reconcile deviations cost millions of dollars.

Indeed, the NRC Inspector General's audit said, "NRC needs to recognize the cost to verify compliance with regulatory requirements may not produce commensurate safety benefits."

More importantly, however, the exercise revealed virtually no safety significant findings while diverting valuable plant resources from increasing plant safety.

A survey by the NRC's Office of Analysis and Evaluation of Operational Data (AEOD) further supports this point. AEOD reviewed 1997 design bases events covered under 10 CFR 50.72 and 10 CFR 50.73. Of the 296 events recorded, only two events could have had an impact on-and an extremely low probability of affecting -public health and safety. What's more, 28 percent of the events cited occurred at the Millstone, Point Beach and Crystal River plants, which were shut down at the time.

This type of regulation continues to focus on compliance and prescriptive procedures about how outcomes should be achieved at plants, rather than the actual outcomes. The industry strongly supports the NRC's attempts to move toward risk-informed, performance-based regulation that would focus on plant results and sharpen the safety focus. To that end, the agency must expedite its transition to this new regulatory system.


Recent events concerning NRC enforcement, compliance, reporting and licensing procedures have demonstrated persistent weaknesses in the agency's regulatory system. The NRC's regulatory procedures clearly are broken and are in desperate need of a fix.

In order to regulate more effectively, the NRC must undergo fundamental reform so that agency activities are more attuned to the experience and improvement gained from 40 years of nuclear energy operation and the rapid changes affecting the industry it regulates. NRC Commissioner Edward McGaffigan accurately portrayed the need to revamp the regulatory process during a 1997 meeting of all NRC employees. "The old model of a ponderous industry dealing with ponderous state utility commissions and a ponderous regulator [is] not going to be viable for very much longer," Commissioner McGaffigan said.

Just as the industry has made a significant transition in the way it operates in a competitive market, the NRC must replace an outdated, ineffective regulatory framework with one that is objective, safety-focused and responsive. The agency can achieve these goals by adopting risk-informed and performance-based concepts in its regulatory.

Under risk-informed regulation, the NRC would use nuclear power plants' operating experience and analytical tools, such as the probabilistic safety assessment (PSA), to match design and operational issues with their relative importance to public health and safety. The NRC currently employs a prescriptive and deterministic regulatory approach that does not rely on plant operating experience or PSAs.

NRC's new regulatory culture also should embrace a performance-based approach-that is, regulation that focuses on results as the primary means for oversight-not procedures. Performance-based regulation demonstrates the following attributes:

} Measures of plant and license performance;

} Objective criteria to assess performance, such as performance history; and

} Flexibility for licensees to determine how they can best meet the performance criteria.

While the NRC must immediately undertake fundamental change, Congress should take the following steps:

} Authorize the agency's budget in one-year increments until the committee is satisfied that the agency is successfully implementing meaningful reforms. Long-standing issues and problems have been identified in six major reviews since 1979, but the commission has not responded to these reviews. The NRC's program should include benchmarks to measure the progress that the agency is making the transition to a more effective agency.

} Congress should require that the NRC report its progress at regular intervals, and Congress should hold regular oversight hearings to ensure reform is undertaken expeditiously.

} Congress should require an independent study of the effectiveness of NRC programs, as well as management and staff.

The industry is committed to working with the commission in a partnership that is built on trust, cooperation and the common goal of protecting public health and safety. In recent months, the commission has demonstrated a good-faith effort to move forward with critical reform. The industry is encouraged by these actions and offered the NRC eight areas of regulatory improvement. A similar version of the suggested improvements is attached to this testimony (Attachment C).

Nuclear power is one of our most important energy sources, and will be even more vital as we strive to meet future energy and environmental goals that are inextricably linked. In the same context, the NRC-like most other federal agencies-must undergo fundamental change in the way is regulates our industry so that it is focused on those regulations that are important to safety and responsive to emerging issues. This reform is vital for the nuclear industry will continue to provide broad benefits to society, including electricity for 65 million American households that rely on these facilities to produce their electricity.

1 Federal Regulatory Commission news release, "Commission Plans Major Changes to Keep Pace With Regulated Industries," June 11, 1998.

2 "Report of the President's Commission on the Accident at Three Mile Island," October 1979.

3 NUREG-0839, 1981: "A Survey by Senior NRC Management to Obtain Viewpoints on the Safety Impact of Regulatory Activities from Representative Utilities Operating and Constructing Nuclear Power Plants."

4 "Nuclear Regulatory Review Study," Final Report, p. 3.

5 For example, in 1997, the median value for unplanned automatic shutdowns at nuclear power plants was 0 per 7,000 critical hours, down from 7.3 in 1980, according to the 1997 World Association of Nuclear Operators Performance Indicators.

6 Moody's Investor Service, Special Comment, "Restructuring Reduces Fallout from Deregulation for Nuclear Utilities," June 1998.

7 The latest revisions to the enforcement policy, NUREG-1600, "General Statement of Policy and Procedure for NRC Enforcement Actions," were published May 13 in the Federal Register.

8 NRC Inspection No. 97-06, May 16, 1997. Instead of instructing the plant operator simply to move the binders, the inspector cited the plant. The utility had failed to conduct a written evaluation to ensure that the binders did not involve an "unreviewed safety question."

9 NRC Inspection No. 97-11, Aug. 8, 1997. In performing its standard loading test of an emergency diesel generator, a utility operated the generator at a capacity greater than 4,700 kilowatts, even though guidelines specify the generator should have operated at less than 4,700 kw, but greater than 4,450 kw during an allotted period.

10 Years before, the plant had committed to NRC to mark the procedure with a double asterisk as a reminder to operators that they must read the procedure step by step when they perform it. When the operations manual was revised, an administrative assistant inadvertently left off the double asterisk. The plant was fined for not meeting a regulatory commitment.

11 NRC Inspection No. 97-10, Nov. 7, 1997.

12 Portland General Electric Co. submitted an application for exemption from Part 71 to ship the Trojan reactor vessel with internals intact to the Hanford low-level waste disposal site.

13 The Navy conducts approximately nine shipments of reactor vessels a year to the Hanford disposal facility.

14 An intervenor used the license transfer proceeding to address a complaint about management at the electric company. The licensing authority allowed this to sidetrack the transfer process and destroy the discipline of the process.

15 OIG/97A-01, NRC Needs Comprehensive Plan to Resolve Regulatory Issues, Aug. 21, 1997.

16 Oct. 9, 1996 NRC letter: "Request for Information Pursuant to 10 CFR 50.54(f) Regarding Adequacy and Availability of Design Bases Information."

17 Feb. 12, 1997, North Atlantic Energy Service Corp. response to NRC request for Seabrook Station's reply to 10 CFR 50.54(f) letter.

18 Feb. 8, 1997, Florida Power Corp. response to 10 CFR 50.54(f) letter for Crystal River Unit 3.