US utilities claim billions

22 July 2004

On 12 July owners of three shutdown nuclear plants in New England are due to begin a seven-week trial against the US Department of Energy (DoE), seeking hundreds of millions of dollars in compensation.

The three cases, known collectively as the Yankee cases, are among 64 lawsuits utilities and nuclear plant owners have filed against DoE since 1998. The cases seek to recover money the plant owners have expended, or plan to expend, for managing spent fuel after the 1998 deadline imposed by the 1982 Nuclear Waste Policy Act. The Act required DoE to sign a contract with each nuclear generator that obligated the generator to pay a fee of one tenth of a cent per kilowatt-hour of nuclear-generated electricity into the federal Nuclear Waste Fund. DoE, in turn, was required to take title to the spent nuclear fuel (SNF) and begin removing it from power plant sites by 31 January 1998.

The generators argue in their lawsuits that they are now paying twice for spent fuel management: they pay into the federal fund and they pay for interim measures to manage the fuel until DoE removes it from their plants. The lawsuits seek to recoup costs for building dry storage facilities, reracking spent fuel pools, providing funds for the Private Fuel Storage LLC (a consortium developed to site a multi-utility storage facility), or simply to cover the added cost of having the fuel in their pools after the 1998 deadline.

Collectively, the lawsuits expose DoE to billions of dollars in damages. In most cases, claimants have not specified a dollar amount of damages. However, total claims for the minority of cases that do specify a damage amount already exceed $4 billion, according to the Nuclear Energy Institute, the US nuclear industry trade association.

Utilities filed the damage cases in the US Court of Federal Claims in Washington, DC, the lead US court for lawsuits involving monetary claims against the federal government. About a third of the cases were filed in January 2004, just before the end of the six-year statute of limitations.


EACH CASE IS UNIQUE


Each case is unique and each claimant estimates its costs differently, Jerry Stouck, a partner with the law firm of Spriggs & Hollingsworth and lead attorney for the plaintiffs in the three Yankee cases, told NEI. Spriggs & Hollingsworth represents nine of the claimants.

Jay Silberg, a senior partner in the Washington, DC-based law firm of Shaw Pittman, which represents about a third of the utility plaintiffs, agreed they were unique cases and said all are likely to be heard separately or in small groups by different Claims Court judges. Since no judge’s decision is binding on succeeding Claims Court cases, conflicting opinions from different judges are possible, Silberg said. All Claims Court decisions can be appealed to the US Court of Appeals for the Federal Circuit, which will set binding precedents for related cases.

The Yankee cases involve reactors that have been shut down and decommissioned, or are being decommissioned, but continue to rack up costs for on-site dry storage of spent fuel. The reactors are Yankee Rowe in Massachusetts, Connecticut Yankee and Maine Yankee. The cases are Yankee Atomic Electric Co v United States, Connecticut Yankee Atomic Power Co v United States and Maine Yankee Atomic Power Co and Maine Public Utilities Commission v United States.

HEAVEY POST DEADLINES COSTS

The Yankee cases will be the first cases to come to trial in which significant costs were incurred after the 1998 deadline, and “are likely to set a precedent for other cases where costs are already incurred,” Stouck said.

Yankee Rowe, shut down in 1992, is being decommissioned and will be completely dismantled by June 2005, Yankee Atomic spokesperson Kelley Smith told NEI. The plant’s 533 spent fuel assemblies have been removed from the fuel pool, loaded into dry casks and stored at an on-site independent spent fuel storage installation (ISFSI). Cask loading was completed in June 2003. The ISFSI houses 15 NAC-MPC casks containing SNF and one cask containing greater-than-class-C (GTCC) waste, a high-activity, non-fuel waste that also is destined for repository disposal under US law.

Yankee Atomic filed its original Yankee Rowe damage claim in 1999, seeking $71 million in damages through 2010, the year DoE now says it will open a repository at Yucca Mountain, Nevada. In March 2003 the company amended its claim to seek $191 million for costs through 2010, citing increased operational costs and enhanced security measures required since 11 September 2001. The new claim also includes an additional $40 million for fuel storage from 2010 to 2020, an estimate that had to be included in the company’s filing with the Federal Energy Regulatory Commission.

Connecticut Yankee, shut down in 1996, will be decommissioned by the end of this year and dismantled by late 2006. This year, the plant began transferring its 1019 fuel assemblies to NAC-MPC casks at an on-site ISFSI and will complete the transfer by the first half of 2005, Smith said. Ultimately, the ISFSI will house 40 spent fuel casks and three GTCC casks.

Maine Yankee shut down in 1997 and completed transfer of its 1434 SNF assemblies to NAC-UMS casks in February 2004. Its on-site ISFSI houses 60 SNF casks and four GTCC casks, said plant spokesman Eric Howes. Plant decommissioning will be completed in mid-2005.

In looking to future cases, Stouck said that a reasonable way to think about potential damage claims is to look at the costs of dry storage. Building an ISFSI costs $50 million to $80 million and operating an ISFSI costs $6 million to $8 million per year, he said. Costs will continue to increase until DoE removes the fuel.

APPEALS LIKELY

The court has already decided one case. On 21 May, Judge Robert Hodges Jr found that Indiana Michigan, owner of the DC Cook plant, was not entitled to damages based on a combination of legal and factual grounds. A key factor in the judge’s decision was the plaintiff’s use of partial breach of contract as the basis for its damage claim. The plaintiff could not argue the DoE totally breached the contract, because that would imply that neither the contract nor contractual obligations any longer existed. DoE has not abandoned its obligations to take the spent fuel, it is just not meeting those obligations on time, Silberg said.

The judge agreed that DoE breached its contract by not accepting spent fuel by 31 January 1998. However, since most of the plaintiff’s costs were incurred prior to January 1998, he found that there was no breach of contract at the time the costs were incurred. The plaintiff, therefore, is not entitled to damages under a partial breach of contract claim.

The company has until 26 July to file an appeal, which is likely to address the Claims Court’s failure to adequately consider several factors, Silberg said. These include DoE’s congressionally guaranteed monopoly on spent fuel disposal in the USA.

A plaintiff who claims damages from a partial breach of contract must demonstrate a serious, good faith effort to mitigate the damage from the contract breach. In most civil contract disputes, the damaged party can limit its losses by changing vendors, which is not possible with spent fuel disposal services.

Indiana Michigan, therefore, had to demonstrate efforts to mitigate damage by other means, including reracking the fuel pool, joining the PFS consortium and procuring HI-STAR dry casks. All of these require long lead times. Indiana Michigan argues that, had it waited until DoE was actually in breach of the contract to begin procurement, it would have exhausted the plant’s on-site storage capacity before alternatives could be put in place.

JUDGE OFFERS GUIDANCE


Claims Court Judge Charles Lettow took a different approach than Hodges in a 2 June pre-trial ruling on a separate case. Tennessee Valley Authority (TVA) accepted the government’s arguments on spent fuel acceptance rates, limited spent fuel deliverables and other issues, but argued that even with these limitations, it was still entitled to damages for the cost of dry storage at two sites.

Judge Lettow agreed that the government was liable and denied a federal motion to remove GTCC waste from consideration under DoE’s standard contract with utilities. The judge also provided a roadmap outlining how generators could recover future damages and stated that for plaintiffs with claims already before the court (virtually all US nuclear plant owners), the clock on the six-year statute of limitations would start when damage (cost) was actually incurred.

Silberg noted that Hodges “had some language indicating the same [position on future damages], but was not very precise.” Unlike Indiana Michigan, the TVA case does not deal with the question of pre-1998 damages, Silberg said.

Judge Lettow, however, rejected TVA’s motion for a summary judgment based on factual issues, and ordered that the case proceed to trial. TVA is likely to go to trial in 2005, Silberg said.

So far, the court has scheduled two trials: the Yankee cases in July and Commonwealth Edison for two weeks beginning 24 November. Southern Nuclear Operating Company, Georgia Power, and Alabama v United States, is tentatively scheduled for next summer, but the court has not set a date, Silberg said.


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