STUDY SHOWS ELECTRIC DEREGULATION COULD FORCE EARLY RETIREMENT OF D.C. COOK AND MANY OTHER NUCLEAR PLANTS, CREATING UNFUNDED NUCLEAR WASTE LIABILITIES THAT COULD EXCEED $50 BILLION

Who will pay the billions of dollars required to decommission the nation’s nuclear power plants and to store their highly radioactive wastes for the next 250,000 years which will become unfunded liabilities if the electric utility industry is deregulated? This is the "bottom-line" question posed by a study released today in Indianapolis by the Citizens Action Coalition Education Fund.

Performed by Synapse Energy Economics, a consulting firm based in Cambridge, Massachusetts, the study shows that electric utility industry deregulation will force closure of many nuclear plants prior to their currently planned retirement dates, facing policy-makers in both Washington and Indianapolis with difficult and controversial choices regarding future funding of nuclear plant decommissioning and waste storage costs totaling as much as $54 billion nationally.

According to the study’s authors, Bruce Biewald and David White, "As the electric utility industry is deregulated, we will have to decide whether and to what extent specific generating technologies should be subsidized. As a general principle of competition, the owners of nuclear power plants should be required to bear their full costs, including accident risk, nuclear waste disposal, and the costs of dismantling the plants. The public policy implications are far-reaching, particularly through time."

Specifically, the study projects:

1. Of the 102 nuclear plants owned by the nation’s 51 investor-owned utilities, as many as 90 could be forced to close before their scheduled retirement dates as a result of the competitive pressures expected from electric utility industry deregulation. Under even the most optimistic assumptions, 20 plants will close early. In the most likely scenario, 34 units will shut down prior to the expiration of their licenses.

2. Because funding under current law assumes plants will run until their licenses expire, these economically-driven plant closures would create an unfunded liability for nuclear plant decommissioning totalling between $4.1 and $15.3 billion, with the "base case" estimate being $7.1 billion.

3. Early plant retirements will also create an unfunded liability for long-term storage of spent nuclear fuel from investor-owned plants that will be at least $1.9 billion, but could reach as much as $46.5 billion if economics forces early closure of most of those plants and a recent independent estimate of the total cost of the planned Yucca Mountain waste storage facility proves accurate.

In view of these projections, Biewald and White conclude: "The advent of competition and deregulation will inevitably force policy-makers and regulators to face the ‘bottom-line’ question that has troubled nuclear power from the earliest stages of its commercial development: who pays how much and for how long? The answer to this question will no doubt be controversial, but is nonetheless essential and unavoidable."

Among the 34 plants permanently closed in the study’s "base case" are both of the D.C.Cook units owned and operated by Indiana Michigan Power which supply power to customers in northeastern Indiana, including Ft. Wayne and South Bend. The Cook units have been temporarily closed since September, 1997 while problems with their safety systems identified by inspectors from the Nuclear Regulatory Commission are corrected.

Scheduled to retire in 2014 and 2017, the Cook units are projected in the Synapse study "base case" to close in 2001 On that assumption, the Cook units would generate an unfunded decommissioning liability exceeding $600 million and an unfunded waste storage liability that could be as low as $200 million, but as high as $1.0 billion depending on the ultimate cost of Yucca Mountain.

According to Chris Williams, the director of the Citizens Action Coalition Education Fund, "The Synapse study puts the spotlight on what has been a large,but hidden risk of electric utility deregulation. Nuclear power necessarily means decommissioning highly radioactive nuclear plants at the end of their operating lives and storing their even more highly radioactive wastes essentially forever. Decommissioning and long-term waste storage cost money, lots of money. Somebody has to pay these costs. Under current law, the customers of regulated utilities can and are forced to pay these costs because they have no choice. But, with competition and deregulation, this should no longer be the case because customers are supposed to have choice of supplier and should not be required to subsidize the continued operation of uneconomic plants, which the Synapse study shows many if not most of the nuclear plants will be."

"But, this leaves open the question of who will pay these nuclear waste costs after deregulation. Will it be the taxpayers through some special tax? Will it be future customers through what has been termed a "non-bypassable wires charge?" Or, like with Superfund, will it be past producers through a retroactive assessment in proportion to the amount of nuclear power they have generated?"

"This is an important public policy issue, with ramifications throughout the nation and here in Indiana. D.C. Cook is not located in Indiana, but 65-70% of its power is consumed and roughly the same proportion of its costs are paid by Hoosiers. And, the Synapse study projects that in the event of electric deregulation Cook is likely to generate an unfunded nuclear waste liability of as much as $1.6 billion. This would be additional to any "stranded costs" for the Cook plants themselves, which could approach another two billion dollars. Everyone in Indiana should be concerned with who will have to pay how much of these costs for how long."

"The Citizens Action Coalition Education Fund believes the right solution to this problem is clear. First, future producers of nuclear power who choose to sell it in a deregulated market should be responsible for ALL the costs of radioactive wastes associated with the power they produce and sell. Second, past producers of nuclear power should be responsible for any unfunded liabilities associated with past sales. Taxpayers should not be asked to subsidize the producers of nuclear power and customers should not be asked to bail out utilities which have made uneconomic and unwise investment decisions."