Bloomberg News

Nuclear Power’s $750 Million Reprieve Doesn’t End Dilemma (1)

November 20, 2013

Nuclear Cooling Towers

The three-judge appeals court panel said the U.S. Energy Department failed to come up with an adequate evaluation for the nuclear waste fee, which is paid into a fund that has grown to more than $29 billion since the first money was collected in 1983. Photographer: Andrew Harrer/Bloomberg

Nuclear power plant operators won a significant victory yesterday when a federal appeals court said the U.S. should stop collecting $750 million a year for a spent-fuel repository it has never built.

Left unsettled is an issue that has vexed the industry and political leaders for decades: where to dispose of 70,000 metric tons of atomic waste now in temporary storage at power plants across the country.

“There’s nothing in this opinion that’s going to move a single fuel rod a single foot from where it’s sitting now,” Peter Bradford, a former Nuclear Regulatory Commission member and professor at Vermont Law School, said in a phone interview.

The U.S. Court of Appeals in Washington ruled that the Energy Department must take steps to suspend collection of the nuclear-waste fee from utilities because the government has provided no alternative to a canceled project at Yucca Mountain in Nevada, for which the funds are collected.

Exelon Corp. (EXC:US), the largest nuclear-power operator in the U.S., would benefit most from the decision, Hugh Wynne, a New York-based York-based analyst for Sanford C. Bernstein & Co., wrote in a note to clients today. The company in 2012 paid $168 million into the fuel-disposal fund, lowering operating earnings by 4.7 percent, he said.

Other Beneficiaries

Other beneficiaries of the decision include Entergy Corp. (ETR:US) of New Orleans, Public Service Enterprise Group Inc. (PEG:US) of Newark, New Jersey, and FirstEnergy Corp. (FE:US) of Akron, Ohio. For companies such as Duke Energy and Southern, which operate in states where electricity costs are built into regulated rates, consumers may benefit because the fee wouldn’t be included in their monthly bills, according to Wynne.

The three-judge appeals court panel said the Energy Department failed to come up with an adequate evaluation for the waste fee, which is paid into a fund that has grown to more than $29 billion since the first money was collected in 1983.

The agency’s assessment of disposal costs was “so large as to be absolutely useless to be used as an analytic technique,” Circuit Judge Laurence Silberman wrote in the seven-page decision. He said the department’s presentation reminded the court of a line from the musical “Chicago,” which says, “Give them the old razzle dazzle.”

Niketa Kumar, an Energy Department spokeswoman, would only say the agency was reviewing the decision.

Zero Fee

“The court’s ruling reinforces the fundamental principle that the federal government’s obligation is to carry out the law, whether or not the responsible agency or even the president agrees with the underlying policy,” Ellen Ginsberg, general counsel for the Nuclear Energy Institute, said in a statement. The Washington-based industry group represents reactor owners including Exelon and Southern Co. (SO:US) of Atlanta and Duke Energy (DUK:US) Corp. of Charlotte, North Carolina.

The ruling directs the department to ask Congress to change the fee to zero until it complies with the Nuclear Waste Policy Act, which established Yucca Mountain as the nation’s nuclear-waste repository, or until lawmakers enact an alternate plan to store spent fuel. It is now managed by reactor owners at about 75 operating and closed reactors throughout the U.S.

Government Incentive

Industry specialists said the decision may provide some incentive for the government to address lingering waste-storage options.

“The impetus would be on the government,” Donald Hoffman, president of the American Nuclear Society, a professional group whose members include engineers and scientists, said in a phone interview. “They won’t be able to collect the fee until they move forward with a plan to establish a high-level waste repository.”

Congress in 1987 designated that a repository be built under Nevada’s Yucca Mountain, about 100 miles (161 kilometers) northwest of Las Vegas. Research and excavation on the project has already cost taxpayers and the industry about $15 billion according to the Government Accountability Office.

The project is opposed by Senate Majority Leader Harry Reid, a Nevada Democrat, and in 2010 President Barack Obama cut its funding. He also established a panel to consider alternatives, which suggested developing one or more temporary sites while the search for a permanent solution continued.

Meanwhile, the Energy Department continued to collect the fee.

Industry Victory

Margaret Harding, an industry consultant based in Wilmington, North Carolina, said the court’s decision is a victory for the nuclear industry because it forces the administration to start thinking more seriously about spent-fuel disposal options -- including Yucca Mountain.

“The courts are drawing an ever tighter circle on the executive branch and demanding that they face the issue” she said in an e-mail, acknowledging that Reid will prevent a bill funding Yucca from reaching the Senate floor.

Officials from Reid’s office didn’t respond to a request for comment on the court’s ruling.

Even if the administration were to propose a repository, Congress would have to agree to fund it and alter budget rules to guarantee access to the waste fund.

“Congress has to act and overcome the conflict,” Warren “Pete” Miller, a former Energy Department assistant secretary for nuclear energy in the Obama administration, said in a phone interview.

U.S. Nuclear Regulatory Commission on Nov. 18, at the direction of a federal court, ordered its staff to complete a safety review for the Yucca project.

Geologic Repository

“These last two court renderings are supportive of moving forward on a long-term geologic repository at Yucca Mountain,” Representative John Shimkus, an Illinois Republican who has championed the Yucca project, said in a phone interview.

The Energy Department has 45 days to ask for a re-hearing on yesterday’s decision, after which time it must submit a proposal setting the fee at zero to Congress. Lawmakers have 90 days to act on the request, according to Jay Silberg, an attorney at Pillsbury Winthrop Shaw Pittman LLP, who argued the case for the National Association of Regulatory Utility Commissioners.

If Congress doesn’t act, Silberg said, the fee would default to the department’s court-ordered proposal: zero.

The current waste disposal charges remain in effect until the congressional process runs its course, he said.

In the long run the Energy Department “still needs to have a strategy” for management of nuclear waste, Dale Klein, a former NRC chairman, said by phone. “There’s no Plan B.”

The case is National Association of Regulatory Utility Commissioners v. U.S. Department of Energy, 11-1066, U.S. Court of Appeals for the District of Columbia (Washington).

To contact the reporters on this story: Brian Wingfield in Washington at bwingfield3@bloomberg.net; Andrew Zajac in Washington at azajac@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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