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Love is Hate, War is Peace, and Nuclear Power is Green:

The Coming Nuclear Revival

by Paul Fenn

There is growing concern among environmentalists that a revival of nuclear power may be on the way, financed by the "stranded costs" bailouts of electric deregulation and marketed in Orwellian fashion as the "solution" to Global Warming.

Most recently, the nuclear industry's lobbying arm, the Nuclear Energy Institute (NEI), ran an advertisement in the March 1999 Atlantic Monthly touting the environmental benefits of nuclear energy, featuring a cute owl saying "thanks" to the nuclear industry for fighting global warming, and claiming that "nuclear power plants have accounted for 90 percent of U.S. electric utility greenhouse gas reductions since 1973." Several of the claims in the ad repeated language from the NEI's first green nuclear ad campaign in 1998, branded misleading by the United States National Advertising Division (NAD), leading environmental activists to push the Federal Trade Commission to prosecute the NEI.

The nuclear industry appears unrepentant, however. It is bullish on the future of nuclear power. And the government, however hesitantly, appears to be going their way. In contrast to Germany's coalition government, which has adopted a policy of shutting down all its nuclear power plants and to phase out fossil fuel generation such as coal, the United States government appears to be preparing for a revival of the domestic nuclear power industry in the name of reducing fossil fuel consumption.

The shift is alarming to many observers who thought nuclear power was "dead" in America. Prior to deregulation, nuclear power was regarded as defunct for two reasons. First, public opinion opposes nuclear power development; second, but perhaps more importantly, nuclear power plants are so expensive to build that the price of their electricity is uncompetitive.

This may all be changing, however. Nuclear industry officials say that "stranded costs" bailouts legislated in state deregulation laws have breathed new life into many reactors by reducing their "nuclear debt." As a new breed of nuclear operators emerges, the industry is seeking reclassification of nuclear power as environmentally friendly, is winning reduced federal oversight of reactors, and is initiating a bold new marketing campaign to "green" the public image of nuclear power.

According to nuclear energy officials themselves, the "stranded cost" bailouts enacted by the California legislature ($28 bil) and other states passing electric restructuring laws have strengthened the "competitiveness" of many of the nation's nuclear power plants. "With their nuclear debt eliminated, utilities with strong operating records are getting a new lease on life," said Marvin Fertel, senior VP at the NEI: "It's a whole new world from a business standpoint."

In February, the Washington International Energy Group's Energy Industry Outlook indicated a growing electric industry confidence in nuclear generation, with 51% saying nuclear can compete, up from 42% in 1998.

The industry's new confidence in nuclear is caused largely by dramatically discounted reactor prices resulting from the effective refinancing of many reactors under state deregulation laws.

Two recent examples are the sales of the Three Mile Island Unit 1 in Pennsylvania and Boston Edison's Pilgrim reactor in Massachusetts. Both states'recent deregulation statutes mandate that tens of millions of dollars in ``stranded costs'' -- the amount between what the plants were valued on the utilities' books and the actual sale price -- will be paid by ratepayers, no matter from whom they purchase electricity.

Nationally, the result is expected to be a fire sale of nuclear plants. Boston Edison is selling its Pilgrim nuclear reactor and fuel, whose book value is set at $700 million, to emerging "national nuclear operator" New Orleans-based Entergy for only $80 million. A critical parameter in the deal is the fact that Massachusetts' deregulation law provides that Entergy will get an additional $40 million in ``transitional payments'' from customers through the year 2000. AmerGen, a joint venture led by PECO, will purchase the still-functioning Three Mile Island Unit 1 reactor from GPU for less than 20 cents on the dollar -- for only $23 million plus another $77 million for the fuel already contracted. The plant's book value is $600 million.

The rapid purchase of Three Mile Island Unit 1, neighbor to the empty shell of Three Mile Island Unit 2, site of the nation's worst nuclear accident 20 years ago, has led some observers to predict a quick sale and consolidation of the nuclear industry in coming years from 43 owners to 10 or fewer.

Environmentalists flinch at this prospect, as deregulation in many states was sold to voters on the claim that competitive markets would result in the early decommissioning of uncompetitive nuclear plants. Some environmental advocates, such as the Natural Resources Defense Council (NRDC), still maintain that deregulation will be the death knell of the nuclear industry, and continue to urge other environmental groups to support deregulation. Other anti-nuclear activists, such as Greenpeace advisor Harvey Wasserman, are seeing red. "Electric restructuring with the stranded costs bailout has essentially meant the public refinancing of nuclear power plants on behalf of their private, deregulated owners," said Greenpeace advisor Harvey Wasserman. "We now have the worst of both worlds."

Meanwhile, nuclear industry chiefs are seeing green. They say nuclear plants are solid financial risks in a time when regulators and lawmakers are seeking ways to reduce greenhouse gas emissions from coal, natural gas and oil plants. According to Don Hintz, chief nuclear officer with Entergy, "global warming is the wild card in nuclear's future." He says that if the US government strengthens its position on global warming, nuclear power development could be revived. "Most of the other forms of generations, like wind and solar, haven't made a dent in helping" the US meet its emissions-reduction goals, said Hintz.

To make a bad story worse, the nuclear industry is working to undermine efforts to establish minimum renewable energy standards, known as the Renewable Portfolio Standards (RPS), in the deregulated industry. Rather than support the standard, which could dramatically increase investment in wind, solar, and other non-polluting energy sources and truly help the US meet its emission reduction goals, the NEI has proposed that the RPS be replaced by the "Non Fossil Fuel Obligation" (NFFO), which would include nuclear power among "non-fossil fuel" energy sources required by law. "Nuclear power would be reclassified as environmentally friendly alongside solar power and wind," said Wasserman.

"If you shut down all of the nuclear plants in this country, or a large percentage of them, there is no way the [Clinton administration would] be able to make good about meeting the Kyoto protocol," said Roger Gale, president of Washington International Energy Group.

While the White House was initially "reluctant to embrace nuclear power" because of concerns such a step would alienate environmental supporters, this sentiment appears to be shifting. A senior U-S official said late last year that nuclear energy is essential if the U-S is to meet its 7% reduction target from the Kyoto protocol.

"The industry is proposing that we trade global warming for years of radioactive waste and the ever-present threat of a reactor meltdown," said Mike Mariotte, executive director of the DC-based Nuclear Information and Resource Service. "That's a devil's trade."

The cult of competition appears to be encouraging a nuclear revival in other ways. The Clean Air Act introduced Emission Reduction Credits, or "pollution credits" trading systems in order to create incentives for electric utilities to reduce greenhouse gas emissions from fossil fuel plants. Instead, these credit systems appear to be an incentive for more nuclear development. British Energy Plc executive Peter Hollins has remarked that if tradeable pollution permits are introduced in the power generating industry, it would be economically viable to construct new nuclear power capacity in the United Kingdom. After the British government pledged to cut CO2 emissions by 20 percent, a parliamentary committee recently said it looked doubtful it could meet this goal without a significant nuclear component.

With no apparent sense of irony, Hollins suggested that nuclear power is well-suited to an increasingly environmentally conscious world. "What is required is tradeable carbon permits which would have the effect of stimulating sources of electricity which do not release carbon dioxide," he said at the Institute of Economic Affairs' annual conference on electricity. "Under these conditions new nuclear build would rapidly become economic."

"One might logically expect nuclear chiefs to push their poison as a cure for global warming," said Wasserman. "It is far more disturbing to see government bureaucrats so narrowly focused on Global Warming that they would consider nuclear power a solution. We might as well solve world hunger with cannibalism."

Meanwhile, the nuclear industry is moving to find ways of reducing the operating costs of nuclear plants -- such as cutting managerial staff and pushing for decreased federal regulation of plants -- in order to enhance their "price competitiveness." A group of Midwestern utilities, including Northern States Power Co., Wisconsin Electric Power Co. and Wisconsin Public Service, has recently formed a joint nuclear operating company to operate seven nuclear generating plants at five locations in the Midwest. The nuclear management company would create a senior management team to consolidate operations and control costs at the generating plants, including Northern States Power's Monticello Plant and the two-unit Prairie Island Plant; Wisconsin Electric's two-unit Point Beach Nuclear Plant; the Kewaunee Nuclear Power Plant.

The NEI is moving to reduce federal safety oversight of nuclear reactors in order to reduce the cost of management. Traditionally, the federal regulators required prior approval for all Quality Assurance changes reflecting a "reduction in commitment" by the plant owner. Claiming that excessive federal oversight costs the industry "in excess of $1 million (sic) per year" -- a strangely low figure in the nuclear industry -- the NEI is proposing to remove a traditional NRC criterion for actions requiring federal approval, employing a looser rule for management changes that impact Quality Assurance. The Nuclear Regulatory Commission (NRC) recently announced it will accept and regard as "noncontroversial" a NEI proposal to loosen federal oversight of Quality Assurance changes by nuclear plant owners.

Perhaps the overarching irony of this story is that, while the the Nuclear industry remarkets its energy as green, the NEI is pushing Congress to pass a bill that would override the ability of states and localities to protect their communities so that 100,000 shipments of nuclear waste from dozens of power companies all over America can be shipped across our nation's roads and rails to Yucca Mountain, Nevada. The industry has poured $15.5 million into campaign coffers to persuade our Congress to pass the Nuclear Waste Policy Act of 1999 (HR-45), a bill that would void Environmental Protection Agency standards for development of the Nevada dump, slash environmental protections for Yucca Mountain area communities, and nullify local and state governments seeking to protect their residents from nuclear hazards. According to Public Citizen, the radioactive waste, which will travel within a half mile of 50 million Americans over the next 30 years, is stored in "inadequately tested" casks.

"Contrary to the hopes of many that deregulation "competition" would lead to the crumbling of nuclear power, it appears that maybe it is the contrary," said Rob Sargent of the Massachusetts Public Interest Group (MASSPIRG). "In Massachusetts, it is quite clear that the deregulation scheme has given Pilgrim, our last operating plant, a new lease on life."

"Between climate, the bailouts and the noises we are beginning to hear from the industry, the administration and Congress, the future appears to be looking brighter (or less grim) for nuclear power."

Copyright (c) 1999 by the American Local Power Project.