Los Angeles Times
June 22, 2005

NUCLEAR INDUSTRY LAYS FOUNDATION FOR COMEBACK

By Ralph Vartabedian

CLINTON, Ill. -- Along the streets of this economically depressed
farming town, optimism is running high that a proposed nuclear power
plant could bring in new jobs, give a boost to local retailers and
increase taxes for schools.

The U.S. has not started a reactor project for 29 years, but President
Bush is calling for a new era of nuclear power, saying it would reduce
air pollution and dependence on foreign energy. If new reactors are
built, the first could go into Clinton or two other possible sites
nationwide.

"It is the best option for power," says Stan Winterroth, a high school
shop teacher in Clinton. "I don't agree with President Bush on
anything else, but I think he is right on the issue of nuclear power."

To promote his program, Bush is to visit Calvert Cliffs Nuclear Power
Plant in Maryland today. It will be the first time a president has
stepped inside a nuclear plant since Jimmy Carter rushed to Three Mile
Island in 1979 to calm public fears just after the reactor's partial
meltdown, industry officials say.

The Senate, meanwhile, is preparing subsidies and incentives for
utilities to build nuclear plants. The nuclear industry has poured
hundreds of millions of dollars into new technology in recent years.
And the Nuclear Regulatory Commission has hired scores of engineers to
accommodate an atomic renaissance.

But the sober reality of nuclear power is that the U.S. will move
slowly and cautiously, at best, because Wall Street financiers and the
nation's utility industry still have vivid memories of the legal,
financial and regulatory debacles that resulted from the building
binge of the 1970s.

Even with subsidies and other incentives, few expect any construction
to start within five years, and only a handful of plants are expected
to begin during the next 10 years.

Most utilities will wait to see whether the new regulatory system
works as advertised before they begin a more ambitious construction
effort. It could be two decades before additional nuclear power plants
have a significant effect on the U.S. energy supply.

"There is much more confidence in the new process, but not enough yet
to make a new investment," acknowledges Marilyn Kray, president of the
NuStart Energy Development, a consortium of nine utilities preparing
an application for a nuclear construction license. "Financiers are
saying they are not yet comfortable."

Still, the industry is taking preliminary steps under government
sponsorship. Three consortiums of utilities are getting $539 million
in taxpayer subsidies through the Energy Department to seek nuclear
construction licenses under the new regulatory system. By going
through the bureaucratic motions of applying for a license, the
utilities hope to gain confidence in licensing rules intended to
reduce delays and litigation.

Separately, three utilities have put in early site applications for
reactors at existing plants, including ones in Illinois, Virginia and
Mississippi. The early site approval system is another change meant to
reduce risks that projects will become mired in delays.

Sen. Pete V. Domenici (R-N.M.), the Senate's powerful energy broker
and a big force behind new nuclear power, argues in a recent book that
it is the only major source of electricity that does not contribute to
global warming by burning carbon-based fuels.

Largely unnoticed, existing nuclear plants have significantly
increased their generating capacity in recent years, adding the
equivalent of six plants of output, and have vastly improved their
reliability. At the same time, natural gas prices have soared.

Existing nuclear plants already produce electricity more cheaply than
coal or natural gas. A new nuclear plant would need to cost about $1.2
billion to compete effectively with coal, according to James K.
Asselstine, a managing director of Lehman Bros. But the first wave of
plants would cost an estimated $1.8 billion, assuming there were no
legal or regulatory delays.

As a result, utilities and Wall Street want government guarantees and
assistance, some of which are contained in a major energy bill now
before the Senate. The legislation also includes a renewal of the
Price-Anderson Act, which provides legal immunity in the case of a
meltdown or other nuclear accident.

Utilities also need resolution of the nuclear waste problem. There are
50,000 tons of high-level nuclear waste spread across the nation,
because the government's plan for an underground repository in Nevada
is tied up in political and legal knots.

Another factor is electricity demand. In the 1970s, the Energy
Department and utilities grossly overestimated electricity demand,
expecting it to double every 10 years. The faulty estimates helped
lead to massive overbuilding. Today, by contrast, they project that
electricity demand will grow by 50% during the next 15 years.

The lower estimates mean there is not enough demand for basic
generating capacity to justify new nuclear plants, Kray said.

No matter how hard the federal government tries to revamp regulations
and encourage utilities, however, the events of the 1970s and 1980s
are stark reminders that nuclear power is a politically and
financially risky proposition, still opposed by many
environmentalists.

"The industry is going to face just as much opposition to new reactors
as it did in the 1970s," said Kevin Kamps, an antinuclear activist at
the Nuclear Information and Resource Service in Washington.
"Everywhere the industry has talked about new reactors, new groups to
oppose them have sprung up. There are going to be large numbers of
people committing civil disobedience."

Though such protests hurt nuclear energy in the 1970s, the real
problem was economic.

After the Three Mile Island accident, the NRC demanded new safety
measures, stopping construction for years and triggering cost overruns
that drove up plant costs fivefold in some cases. As the debt mounted,
interest rates also soared to record levels. The industry had $18
billion in cost overruns that state regulatory commissions refused to
pass on to customers.

"It was a confluence of the worst imaginable conditions," recalls
Richard J. Myers, senior director for business and environmental
policy at the Nuclear Energy Institute, a powerful trade group for
nuclear utilities.

By 1985, 28 nuclear plants under construction were canceled, according
to Sam Walker, the regulatory commission's historian. The Shoreham
plant on Long Island completed construction but never generated a
single watt of commercial electricity. The Watts Bar plant in
Tennessee was under construction for 23 years.

"What has changed is our confidence in avoiding cost overruns," Myers
said. "Today, we don't sink a spade without having all of our
regulatory approvals in hand."

In 1992, Congress revised the nuclear plant licensing system. Under
the old system, a nuclear utility first had to apply for a
construction license and then seek a separate operating license after
completing the plant. It gave protesters two chances to tie up a
utility.

Now, a single license is granted at the beginning. But nobody is sure
the new system will not get just as bogged down.

"You can always to go federal court, as you know," commission Chairman
Nils Diaz told a Senate hearing in April on the future of nuclear
power.

Joe Egan, a veteran nuclear lawyer in Washington, argues that the new
licensing system is still untested in the courts. Under the new
system, a utility must prove that a completed plant exactly conforms
to the licensed design, a complex area of regulation that is likely to
undergo legal challenges, Egan said.

One advantage held by the nuclear industry is its tremendous advance
in technology.

The U.S. pioneered nuclear technology, building the first reactor at
the University of Chicago in 1942, and it remains a leader
internationally. General Electric Co. and Westinghouse Nuclear have
sold or licensed plants in Taiwan, Japan, South Korea and Europe while
the U.S. market was dead.

"You have to understand, this is not an industry that has stood still
for three decades," said Andy White, president of GE's nuclear
business.

GE and Westinghouse have new reactor designs that they promote as
safer and cheaper to build. They require at least 25% fewer pipes,
valves, pumps and cables than older generations. And they rely more on
natural circulation of water through convection and less on emergency
pumping systems.

"We will see new nuclear plants," said Ed Cummins, director of
Westinghouse's new reactor programs. "It will take 10 years before the
first one is operating. If it is a success, then you will see others."

A big question is whether the American public is ready. In Clinton,
seat of DeWitt County, the giant blue containment dome at the Exelon
Corp. plant looms on the horizon.

"It has been a long time since anybody has expressed concern to me
about buying a home here because of the power plant," said Jan
Utterback, a real estate broker in the town square. "The majority of
people in town see it as a positive."

Exelon is one of the few major employers left in town, according to
Mayor Roger Cyrulik. In recent years, three factories have closed,
eliminating 1,000 jobs. When the regulatory commission held a meeting
in Clinton this year to gauge sentiment, locals were strongly
supportive of a new reactor. But antinuclear groups brought in
busloads of Quakers, student activists and Unitarians. The meeting
dragged on for hours.

"The industry is careful in choosing economically marginalized places
for new reactors and making it a local issue," said Sandra Lindberg, a
professor at Illinois Wesleyan University, who started the group No
New Nukes. "This is much bigger than a local issue."

=====================================================

SIDEBAR

Nuclear energy in America

About 100 nuclear reactors are operating at power plant sites in the
United States, most of them east of the Mississippi River. There are
no commercial nuclear reactors in Alaska or Hawaii.

Nuclear progress

The last successful application for a nuclear plant license was filed
29 years ago, but much has changed since then. Lawmakers and the
nuclear industry think they have solutions to some, but not all, of
the problems.

*

Problem: The Nuclear Regulatory Commission had a two-step licensing
system, one for construction and one for operation. Antinuclear
activists used the system to cause delays, which added billions to the
cost of plants.

Solution: Congress changed the system in 1992 and created a combined
construction and operating license. Now environmentalists are supposed
to get one shot at stopping a nuclear plant.

*

Problem: Safety issues and bad construction practices added to serious
delays, as well as a loss of public confidence. The Three Mile Island
accident cast doubts on nuclear safety.

Solution: Reactor manufacturers created standardized designs that
improved chances of staying on schedule and within budget. New reactor
technology is simpler and relies on passive safety systems that reduce
chances of human error.

*

Problem: Utilities overestimated the growth in demand for electricity,
and started more plants than were needed.

Solution: The Energy Department has sharply scaled back projected
growth in demand, and now utilities are more cautious about starting
new construction.

*

Problem: Storage for lethal nuclear waste is lacking.

Solution: The federal government has promised to take ownership of the
waste, but about 50,000 tons remain spread across the nation. A
proposed dump in Nevada is mired in legal and political disputes.

*

Sources: Nuclear Energy Institute, Nuclear Regulatory Commission,
Times reporting. Graphics reporting by Ralph Vartabedian

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