Back from the Dead

Corporate Research E-Letter No. 13, June 2001

Back from the Dead:  
The Resurgence of the Nuclear Power Industry   

by Philip Mattera

For the past two decades the nuclear power industry in the United States has existed in the category of the living dead. Intense public opposition, especially in the wake of the Three Mile Island disaster in 1979, put a decisive halt to the industry's expansion. There hasn't been a single new order placed for a U.S. nuke since Jimmy Carter was president. Around 100 nuclear power plants have continued to operate, generating about 20 percent of the country's electricity, but it’s been widely assumed that most would be shut down when their initial licenses expired. The environmental movement thought it had driven a stake through the heart of the industry.

What a difference a new energy scare makes. The Bush-Cheney Administration has used the electric power crisis in California to justify a proposal for a major expansion of generating capacity, and the nuclear industry lobbied the White House and Congress to make sure their plants would be part of the master plan. The effort paid off. Declaring nukes to be "a clean and unlimited source of energy," the Cheney energy program called for a series of pro-nuke measures, including an accelerated process for relicensing existing reactors and permitting new ones. The Administration also expressed support for reauthorization of the Price-Anderson Act--the 1957 federal legislation that limits the damages that can be collected in lawsuits linked to a major nuclear accident--which will soon expire. 

In truth, the attempted resurrection of the nuclear power industry did not begin with Dick Cheney's energy task force. For the past couple of years the proponents of nukes have been quietly mounting an ideological offensive.

At the center of their argument are two bold claims about the environment and safety. In an era of concern about global warming, the industry promotes nuclear reactors as an energy source that does not produce greenhouse gases. The industry also asserts that traditional reactors are safer than ever, while it promotes a new technique--pebble-bed-reactor technology--that is said to drastically reduce the chances of a meltdown.

Shopping for Three Mile Island 

The industry has also undergone a major structural change. At one time, just about all nuclear power plants were operated by electric utilities to serve the power needs of their customers in a specific geographic area. The spread of deregulation has separated power plant ownership from power marketing, making it possible for a handful of companies to begin accumulating a portfolio of nukes in different parts of the country. The deregulation deals in many states also allowed utilities to recoup “stranded costs,” the huge debts they had run up constructing nukes in years past, from customers. This made the nuclear plants a lot more financially attractive.

Some of the first significant signs of change in the nuclear power game appeared in 1999, when reactor ownership changes began to occur for the first time in the industry’s history. Entergy Corp., a utility holding company and power marketer based in New Orleans, purchased the Pilgrim plant in Massachusetts from Boston Edison. AmerGen Energy Inc., a joint venture of PECO Energy (the Philadelphia area electric utility) and British Energy PLC agreed to purchase Three Mile Island 1 (whose sister reactor was involved in the infamous partial meltdown 20 years earlier).

AmerGen also acquired the Clinton plant in Illinois that year and the Oyster Creek plant in New Jersey the following year. Entergy continued the buying spree in November 2000 with the purchase of the Indian Point 3 and FitzPatrick plants from the New York Power Authority. In March of this year Dominion Resources completed the purchase of the Millstone Power Station in Connecticut from Northeast Utilities for a record price of $1.3 billion. The price per megawatt paid by Dominion for one of the reactors was eight times the going rate of just a few years ago.

A remarkable situation--a bidding war for a nuke--occurred after the Vermont Yankee plant was put up for sale in 1999. AmerGen initially said it would pay $23 million for the reactor and later upped that to $40 million. After Entergy made an offer, AmerGen ended up increasing its bid to $93 million. The Vermont Public Service Board decided recently that it could get an even higher price by holding a public auction.

There have also been changes at the corporate level. In September 1999 Unicom Corp., parent of Chicago’s Commonwealth Edison, and PECO Energy Co. announced plans to merge. The marriage resulted in the creation of Exelon Corp., a giant electric utility holding company that is the nation’s largest operator of nuclear power plants.  Entergy was planning to merge with FPL Group, parent of Florida Power & Light, but the deal was called off in April.

The Nuclear Regulatory Commission, never known for exercising aggressive oversight, encouraged the nuke resurgence by agreeing to an expedited process when Baltimore Gas & Electric, owner of the Calvert Cliffs nuke in Maryland, submitted the first request ever for a license renewal. In 1999 the NRC granted a 20-year extension of the plant’s operating license without even holding a public hearing. If the Bush Administration has its way, the renewal process will continue to be a smooth one for the nuke operators.

Although the White House and Wall Street have embarked on a new love affair with nuclear power, the critics of the industry remain unenamored. Public Citizen’s Critical Mass Energy & Environment Program has continued to publish reports warning of the dangers of nuclear power and the shortcomings of federal regulation. An August 1999 report documented more than 500 cases over a three-year period in which nuclear plants reported that they had operated outside the safety parameters of their licenses.

There are issues of cost as well as safety. Public Citizen pointed out recently that states that rely heavily on nuclear power continue to pay substantially higher electricity rates than in other parts of the country. Nuclear power would be even more uncompetitive with other energy sources were it not for the enormous levels of federal subsidies the industry has received since its inception. A recent report entitled “Financing Disaster,” released by the Nuclear Information and Resource Center and organizations in seven other countries, describes export subsidies the United States and other major industrial nations are using to promote the spread of nuclear power to places such as China.

The nuclear industry clearly believes that its two decades as a pariah are coming to an end. The Nuclear Energy Institute is confident enough to run magazine ads headlined “Clean Air is So 21st Century.” Featuring a photograph of a teenage girl riding a scooter and talking on a cell phone, the ad declares: “Our generation is demanding lots of electricity…and clean air.” It remains to be seen whether a generation too young to remember Three Mile Island can be persuaded to sell its energy soul to the nuclear devil.

Top Nuclear Power Operators 

1. Exelon Corp. (includes AmerGen joint venture) (headquarters: Chicago)
17,632 megawatts; 17.0 percent of U.S. total

2. Entergy Corp. (New Orleans)
9,018 megawatts; 8.7 percent of U.S. total

3. Duke Energy Corp. (Charlotte, NC)
7,518 megawatts; 7.3 percent of U.S. total

4. Tennessee Valley Authority (Knoxville, TN)
6,015 megawatts; 5.8 percent of U.S. total

5. Southern Company (Atlanta)
5,907 megawatts; 5.7 percent of U.S. total

Totals for Top Five

46,090 megawatts; 44.5 percent of U.S. total

Source: RDI of Boulder, Colorado; published in the Wall Street Journal, May 2, 2001.

Nuclear Power Plants Owned by the Top Five Operators  

Information Sources

U.S. Energy Information Administration
www.eia.doe.gov

Nuclear Information and Resource Service
www.nirs.org

Public Citizen Critical Mass Energy & Environment Program
www.citizen.org/cmep

Nuclear Energy Institute (trade association)
www.nei.org