Solving the US spent fuel problem?

To date, US electric utilities have been bearing the burden of the extraordinary delays in the US waste management programme. Since enactment of the Nuclear Waste Policy Act of 1983, they have been paying a fee of 0.1 cents per kWh on nuclear electric generation into the Nuclear Waste Fund, which now totals more than $17 billion, including accrued interest. Meanwhile, the Energy Department is decades behind schedule in finding a place to store spent fuel, which now resides at more than 100 US nuclear plants.

Under the law, the DOE was supposed to begin removing spent fuel from reactor sites on 31 January 1998. That deadline was set in spent fuel contracts the law required each utility to sign with the DOE. As a result of the DOE’s failure to meet the deadline, plant owners have been forced to keep their spent fuel on site, building dry storage casks when they run out of pool space.

The DOE’s excuse is that it has no alternative but to continue storing the spent fuel at reactor sites since a permanent underground repository, such as the one proposed for construction at Yucca Mountain in Nevada, will not be ready to receive it until at least 2010. In 2001, the Department is expected to recommend to the White House that Yucca Mountain be selected as a site for the repository, but that step is only the start of a torturous siting and permitting process.

Despite the delays, the Clinton Administration has twice vetoed bills to build an interim above-ground storage site adjacent to Yucca Mountain, where spent fuel could be stored until the permanent repository is ready to receive it. While the legislation has twice passed both the House and Senate overwhelmingly, the White House has been able to sustain its vetoes.

The impasse has created a schism among plant owners about what to do. Some favour a lawsuit against the federal government, while others eschew litigation in favour of negotiation. After the DOE reneged on its contractual obligation in January 1998, 11 utilities filed suit in the US Court of Federal Claims, a special tribunal that hears claims for monetary damages against the federal government. But while their claims that the DOE was legally – indeed morally – obliged to take the spent fuel, have consistently been upheld, the Court has dismissed their multibillion dollar lawsuits. The Court said the utilities’ contracts allowed only one method of seeking redress: to file administrative claims under a contractual clause that allows compensation for ‘unavoidable delays’ in the DOE’s schedule for disposing of spent fuel.

On 20 July, with the prospects for both legislative and judicial relief looking dim, PECO Energy of Philadelphia became the first utility to reach a settlement with the DOE. PECO Energy (which will soon become Exelon, when its merger with Commonwealth Edison is complete) was not among the 11 utilities that had filed suit.

The settlement agreement, which was initiated by PECO Energy and took about 10 months to negotiate, amends the utility’s spent fuel contract with the DOE for the two-unit Peach Bottom station in Pennsylvania. It allows PECO Energy to reduce its payments into the Nuclear Waste Fund in compensation for all demonstrable costs directly associated with extended spent fuel storage at Peach Bottom. The DOE estimates that savings to PECO could reach $80 million over the next 10 years. In September, the utility pocketed what would have been a quarterly payment into the Nuclear Waste Fund of more than $4 million, an act it expects to repeat for the next four to six quarters.

DEALS OR LITIGATION

Both the DOE and PECO Energy called the deal satisfactory. Although PECO Energy’s Ward Sproat says neither party got everything it wanted out of the negotiations, he stresses that the agreement enables PECO Energy to recover costs that were being borne by shareholders more quickly, and with greater certainty, than through litigation. Sproat stresses that the agreement reflects PECO Energy’s desire neither to bankrupt the Nuclear Waste Fund nor to require DOE to raise the 0.1 cent/kWh fee.

Both DOE and PECO Energy said the agreement was a prototype that could set a precedent for similar settlements with owners of all other plants. Indeed, PECO Energy itself will account for up to 20 operating and shut down units, following its merger with Commonwealth Edison. Sproat said PECO Energy plans to review how well the Peach Bottom settlement works out, then decide whether to use it as a basis for seeking similar settlements for its other plants. Spent fuel contracts for each plant would have to be amended separately.

Ivan Itkin, the DOE’s director of civilian radioactive waste management, projects that negotiating similar settlements with all US utilities would result in a loss of revenue to the Nuclear Waste Fund of only about $2-3 billion. Itkin told Congress the loss would be manageable, given the $48 billion life-cycle cost of the programme, but some utilities disagree and worry that diverting money from the Nuclear Waste Fund could delay the DOE’s repository programme.

Meanwhile, the appeals court’s 31 August decision may change the picture, not only for the four utilities whose cases were immediately reinstated, but also for other US nuclear utilities.

A three-judge panel of the appeals court reinstated lawsuits by Xcel (formerly Northern States Power), Maine Yankee Atomic Power, Connecticut Yankee Atomic Power and Yankee Atomic Electric. In its opinion, the court stated that the ‘unavoidable delays’ clause was only meant to cover routine types of scheduling delays; the utilities have every right to sue for damages resulting from programmatic delays in the waste management programme in the US Court of Federal Claims .

Senator Frank Murkowski (Republican-Alaska), chairman of the Senate Energy Committee and one of the co-sponsors of the nuclear waste legislation vetoed by President Clinton, says the appeals court ruling changes everything. Whereas the burden of delays in the US waste management programme has fallen on utilities and their ratepayers, now the federal government, and ultimately the taxpayer, face the possibility of a huge liability judgment.

No one knows yet how large the federal liability might be. The four utilities which were the immediate beneficiaries of the appeals court ruling are seeking about $1.9 billion in damages. If many other nuclear plant owners that so far have been reluctant to sue DOE take advantage of the appeals court decision to file similar damage claims, the federal liability could go much higher.

At a hearing in late September before the Senate Energy Committee, Murkowski said the DOE’s liability could be $38.3-60.9 billion, and could go as high as $80 billion if the DOE never fulfills its obligation and 25% of US nuclear plants were forced to close down, forcing utilities to build replacement power facilities.

But it is not at all clear yet how many utilities will pursue litigation. “Some utilities may choose to work with the DOE as PECO Energy did. Others may decide that it is in their best interest to seek relief in federal claims court,” says Robert Bishop, general counsel at the Nuclear Energy Institute. ”They will do whatever they believe is in their customers best interest.” Nevertheless, in Murkowski’s view, there is a big impetus now for Congress to try yet again to enact legislation to create an interim, above-ground storage site for spent fuel in Nevada. Then the DOE could begin taking spent fuel and avoid lawsuits.

“The government won‚t avoid all of the damages, but it can mitigate a lot of the damages simply by moving the fuel,” says Jerry Stouck, an attorney in the Washington, DC, office of Spriggs & Hollingsworth and the lead attorney in the litigation. And that’s what US utilities want most of all.