Nuclear Regulatory Commission
Challenges Facing NRC in Effectively Carrying Out Its Mission Gao ID: GAO-05-754T May 26, 2005The Nuclear Regulatory Commission (NRC) has the regulatory responsibility to, among other things, ensure that the nation's 103 commercial nuclear power plants are operated in a safe and secure manner. While the nuclear power industry's overall safety record has been good, safety issues periodically arise that threaten the credibility of NRC's regulation and oversight of the industry. Recent events make the importance of NRC's regulatory and oversight responsibilities readily apparent. The terrorist attacks on September 11, 2001, focused attention on the security of facilities such as commercial nuclear power plants, while safety concerns were heightened by shutdown of the Davis-Besse nuclear power plant in Ohio in 2002, and the discovery of missing or unaccounted for spent nuclear fuel at three nuclear power plants. GAO has issued a total of 15 recent reports and testimonies on a wide range of NRC activities. This testimony (1) summarizes GAO's findings and associated recommendations for improving NRC mission-related activities and (2) presents several cross-cutting challenges NRC faces in being an effective and credible regulator of the nuclear power industry.
GAO has documented many positive steps taken by NRC to advance the security and safety of the nation's nuclear power plants. It has also identified various actions that NRC needs to take to better carry out its mission. First, with respect to its security mission, GAO found that NRC needs to improve security measures for sealed sources of radioactive materials---radioactive material encapsulated in stainless steel or other metal used in medicine, industry, and research--which could be used to make a "dirty bomb." GAO also found that, although NRC was taking numerous actions to require nuclear power plants to enhance security, NRC needed to strengthen its oversight of security at the plants. Second, with respect to its public health and safety, and environmental missions, GAO found that NRC needs to conduct more effective analyses of plant owners' funding for decommissioning to ensure that the significant volume of radioactive waste remaining after the permanent closure of a plant are properly disposed. Further, NRC needs to more aggressively and comprehensively resolve issues that led to the shutdown of the Davis-Besse nuclear power plant by improving its oversight of plant safety conditions. Finally, NRC needs to do more to ensure that power plants are effectively controlling spent nuclear fuel, including developing and implementing appropriate inspection procedures. GAO has identified several cross-cutting challenges affecting NRC's ability to effectively and credibly regulate the nuclear power industry. Recently, NRC has taken two overarching approaches to its regulatory and oversight responsibilities. These approaches are to (1) develop and implement a risk-informed regulatory strategy that targets the most important safety-related activities and (2) strike a balance between verifying plants' compliance with requirements through inspections and affording licensees the opportunity to demonstrate that they are operating their plants safety. NRC must overcome significant obstacles to fully implement its risk-informed regulatory strategy across agency operations, especially with regards to developing the ability to identify emerging technical issues and adjust regulatory requirements before safety problems develop. NRC also faces inherent challenges in achieving the appropriate balance between more direct oversight and industry self-compliance. Incidents such as the 2002 shutdown of the Davis-Besse plant and the unaccounted for spent nuclear fuel at several plants raise questions about whether NRC has the risk information that it needs and whether it is appropriately balancing agency involvement and licensee self-monitoring. Finally, GAO believes that NRC will face challenges managing its resources while meeting increasing regulatory and oversight demands. NRC's resources have already been stretched by the extensive effort to enhance security at plants in the wake of the September 11, 2001, terrorist attacks. Pressure on NRC's resources will continue as the nation's fleet of plants age and the industry's interest in expansion grows, both in licensing and constructing new plants, and re-licensing and increasing the power output of existing ones.
GAO-05-754T, Nuclear Regulatory Commission: Challenges Facing NRC in Effectively Carrying Out Its Mission
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Testimony:
Before the Subcommittee on Clean Air, Climate Change, and Nuclear
Safety, Committee on Environment and Public Works, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Thursday, May 26, 2005:
Nuclear Regulatory Commission:
Challenges Facing NRC in Effectively Carrying Out Its Mission:
Statement of Jim Wells, Director, Natural Resources and Environment:
GAO-05-754T:
GAO Highlights:
Highlights of GAO-05-754T, a testimony before the Subcommittee on
Clean Air, Climate Change, and Nuclear Safety, Committee on Environment
and Public Works, U.S. Senate:
Why GAO Did This Study:
The Nuclear Regulatory Commission (NRC) has the regulatory
responsibility to, among other things, ensure that the nation‘s 103
commercial nuclear power plants are operated in a safe and secure
manner. While the nuclear power industry‘s overall safety record has
been good, safety issues periodically arise that threaten the
credibility of NRC‘s regulation and oversight of the industry.
Recent events make the importance of NRC‘s regulatory and oversight
responsibilities readily apparent. The terrorist attacks on September
11, 2001, focused attention on the security of facilities such as
commercial nuclear power plants, while safety concerns were heightened
by shutdown of the Davis-Besse nuclear power plant in Ohio in 2002, and
the discovery of missing or unaccounted for spent nuclear fuel at three
nuclear power plants.
GAO has issued a total of 15 recent reports and testimonies on a wide
range of NRC activities. This testimony (1) summarizes GAO‘s findings
and associated recommendations for improving NRC mission-related
activities and (2) presents several cross-cutting challenges NRC faces
in being an effective and credible regulator of the nuclear power
industry.
What GAO Found:
GAO has documented many positive steps taken by NRC to advance the
security and safety of the nation‘s nuclear power plants. It has also
identified various actions that NRC needs to take to better carry out
its mission. First, with respect to its security mission, GAO found
that NRC needs to improve security measures for sealed sources of
radioactive materials --- radioactive material encapsulated in
stainless steel or other metal used in medicine, industry, and
research--which could be used to make a ’dirty bomb.“ GAO also found
that, although NRC was taking numerous actions to require nuclear power
plants to enhance security, NRC needed to strengthen its oversight of
security at the plants. Second, with respect to its public health and
safety, and environmental missions, GAO found that NRC needs to conduct
more effective analyses of plant owners‘ funding for decommissioning to
ensure that the significant volume of radioactive waste remaining after
the permanent closure of a plant are properly disposed. Further, NRC
needs to more aggressively and comprehensively resolve issues that led
to the shutdown of the Davis-Besse nuclear power plant by improving its
oversight of plant safety conditions. Finally, NRC needs to do more to
ensure that power plants are effectively controlling spent nuclear
fuel, including developing and implementing appropriate inspection
procedures.
GAO has identified several cross-cutting challenges affecting NRC‘s
ability to effectively and credibly regulate the nuclear power
industry. Recently, NRC has taken two overarching approaches to its
regulatory and oversight responsibilities. These approaches are to (1)
develop and implement a risk-informed regulatory strategy that targets
the most important safety-related activities and (2) strike a balance
between verifying plants‘ compliance with requirements through
inspections and affording licensees the opportunity to demonstrate that
they are operating their plants safety. NRC must overcome significant
obstacles to fully implement its risk-informed regulatory strategy
across agency operations, especially with regards to developing the
ability to identify emerging technical issues and adjust regulatory
requirements before safety problems develop. NRC also faces inherent
challenges in achieving the appropriate balance between more direct
oversight and industry self-compliance. Incidents such as the 2002
shutdown of the Davis-Besse plant and the unaccounted for spent nuclear
fuel at several plants raise questions about whether NRC has the risk
information that it needs and whether it is appropriately balancing
agency involvement and licensee self-monitoring. Finally, GAO believes
that NRC will face challenges managing its resources while meeting
increasing regulatory and oversight demands. NRC‘s resources have
already been stretched by the extensive effort to enhance security at
plants in the wake of the September 11, 2001, terrorist attacks.
Pressure on NRC‘s resources will continue as the nation‘s fleet of
plants age and the industry‘s interest in expansion grows, both in
licensing and constructing new plants, and re-licensing and increasing
the power output of existing ones.
www.gao.gov/cgi-bin/getrpt?GAO-05-754T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Jim Wells at (202) 512-
3841 or wellsj@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to participate in the Subcommittee's
oversight hearing on the Nuclear Regulatory Commission (NRC). NRC has
the regulatory responsibility to ensure that the nation's 103 operating
commercial nuclear power plants are operated in a safe and secure
manner. These plants provide about 20 percent of the country's
electricity, but safety of their operations is paramount, given the
potentially devastating effects of a nuclear accident. While the
nuclear power industry's overall safety record has been good, safety
issues periodically arise that raise questions about NRC's regulation
and oversight of the industry and challenge its credibility for
guaranteeing the safety of the nation's aging fleet of nuclear power
plants. NRC plays an important role in protecting public health and the
environment through its regulation of the nuclear power industry and
other civilian use of nuclear material, and we commend the Subcommittee
for holding this hearing.
NRC was formed in 1975, to regulate the various commercial and
institutional uses of nuclear energy, including nuclear power plants.
NRC's mission is to regulate the nation's civilian use of nuclear
material to ensure adequate protection of public health and safety, to
promote the common defense and security, and to protect the
environment. NRC's activities include, among other things, licensing
nuclear reactors (including license transfers and operating experience
evaluation), reviewing plant safety procedures, imposing enforcement
sanctions for violations of NRC requirements, and participating in
homeland security efforts (including threat assessment, emergency
response, mitigating strategies, security inspections, and force-on-
force exercises). NRC also has regulatory oversight for the
decommissioning of nuclear reactors, including accumulating sufficient
funds to carry out decommissioning, and for the interim storage of
spent nuclear fuel --the used fuel periodically removed from reactors
in nuclear power plants.
The importance of NRC's regulatory and oversight responsibilities is
made readily apparent by recent events. The terrorist attacks on
September 11, 2001, and the subsequent discovery of nuclear power
plants on a list of possible terrorist targets have focused attention
on the security of the nation's commercial nuclear power plants. Safety
concerns were heightened by the discovery of a pineapple-sized cavity
in the carbon steel reactor vessel head, and subsequent 2-year
shutdown, of the Davis-Besse nuclear power plant in Ohio in 2002.
Additional safety concerns were raised by the discovery of missing or
unaccounted for spent nuclear fuel at three nuclear power plants.
Further, the decommissioning of some of the nations' aging nuclear
power plants raises the issue of whether NRC is ensuring that plant
owners are accumulating sufficient funds for decommissioning plants in
a way that best protects public health, safety, and the environment.
Over the past 2 years, we have issued a total of 15 reports and
testimonies on a wide range of NRC activities. (These reports are
listed in Appendix I). While our work has primarily focused on
identifying ways that NRC can strengthen its regulation and oversight
of the nuclear power industry, we have documented a number of
productive steps NRC has taken to improve its mission-related
activities. One example is the substantial effort that NRC has made in
working with the industry to enhance security at nuclear power plants
since the September 11, 2001, terrorist attacks. Another example is
NRC's considerable effort to analyze what went wrong at the Davis-Besse
plant in 2002, and to incorporate the lessons learned into its
processes. Today, my testimony will briefly summarize our recently
completed NRC work. Specifically, this testimony (1) summarizes GAO's
findings and associated recommendations for improving NRC mission-
related activities and (2) provides some observations on cross-cutting
challenges that NRC faces in being an effective and credible regulator
of the nuclear power industry.
This testimony is based on seven of our recently issued reports. The
other eight reports either address issues for which NRC is not the
primary federal agency - such as radioactive waste disposal and nuclear
nonproliferation --or concern internal NRC administrative matters --
such as fee recovery and information technology management. We did not
perform additional audit work in preparing this testimony. The work for
our previously issued reports was conducted in accordance with
generally accepted government auditing standards.
Summary:
While NRC has improved its operations in a number of ways in recent
years, GAO believes that the agency needs to take a number of
additional actions to better fulfill its mission of ensuring that the
nation's nuclear power plants and other civilian users of nuclear
material operate in a safe and secure manner. First, operations related
to NRC's security mission need to be improved. Specifically, we found
that NRC has not developed adequate security measures for sealed
sources of radioactive materials ---radioactive material encapsulated
in stainless steel or other metal used in medicine, industry, and
research ---which could be used to make a "dirty bomb." We also found
that despite taking numerous actions to respond to the heightened risks
of a terrorist attack, NRC's oversight of physical security at the
nation's commercial nuclear power plants could be strengthened. Second,
operations related to NRC's public health and safety, and environmental
missions need to be improved. Specifically, we found that NRC's
analyses of plant owners' contributions of funds for the
decommissioning of nuclear power plants, and its processes for acting
on reports that show insufficient funds, do not ensure that the
significant radioactive waste hazards that exist following the
permanent closure of a nuclear power plant will be properly addressed.
Further, we found that the issues surrounding the shutdown of the Davis-
Besse power plant reveal important weaknesses in NRC's oversight of the
safety of nuclear power plant operations. Finally, we found that NRC
has not taken adequate steps to ensure that power plants are
effectively controlling spent nuclear fuel, including developing and
implementing appropriate inspection procedures to verify plants'
compliance with NRC requirements.
NRC faces several cross-cutting challenges in being an effective and
credible regulator of the nuclear power industry. In response to the
agency's limited resources and its desire to reduce the regulatory
burden and cost on plants, NRC is taking two overarching approaches to
meeting its regulatory and oversight responsibilities: (1) developing
and implementing a risk-informed regulatory strategy that targets
industry's most important safety-related or safety-significant
activities, and (2) striking a balance between verifying plants'
compliance with requirements through inspections and affording
licensees the opportunity to demonstrate that they are operating their
plants safely. We believe that NRC must overcome significant obstacles
in implementing its risk-informed regulatory strategy across the
agency, especially with regards to developing the ability to identify
emerging technical issues and adjust regulatory requirements before
safety problems develop. We also believe that NRC faces inherent
challenges in balancing oversight and industry self-compliance,
especially with regards to positioning the agency so it is able to
identify diminishing performance at individual plants before they
become a problem. Incidents such as the 2002 shutdown of the Davis-
Besse plant and the unaccounted for spent nuclear fuel at several
plants raise questions about whether NRC has the risk information that
it needs and whether it is appropriately balancing agency involvement
and licensee self-monitoring. Finally, we believe that NRC will face
challenges managing its resources while meeting increasing regulatory
and oversight demands. NRC's resources have already been stretched by
the extensive effort to enhance security at plants in the wake of the
September 11, 2001, terrorist attacks. Pressure on NRC's resources will
continue as the nation's fleet of plants age and the industry's
interest in expansion grows, both in licensing and constructing new
plants, and re-licensing and increasing the power output of existing
ones.
Regulatory and Oversight Functions Vital to NRC's Mission Need to be
Improved:
Our recent analyses of NRC programs identified several areas where NRC
needs to take action to better fulfill its mission and made associated
recommendations for improvement. With respect to NRC's security
mission, we found that the security of sealed radioactive sources and
the physical security at nuclear power plants need to be strengthened.
With respect to its public health and safety, and environmental
missions, we found several shortcomings that need to be addressed.
NRC's analyses of plant owners' contributions could be improved to
better ensure that adequate funds are accumulating for the
decommissioning of nuclear power plants. By contrast, we found that NRC
is ensuring that requirements for liability insurance for nuclear power
plants owned by limited liability companies are being met. Further, to
ensure the safety of nuclear power plants NRC must more aggressively
and comprehensively resolve oversight issues related to the shutdown of
the Davis-Besse plant. Finally, NRC's methods of ensuring that power
plants are effectively controlling spent nuclear fuel need to be
improved.
Operations Related to NRC's Security Mission Could Be Improved:
In August 2003, we reported on federal and state actions needed to
improve security of sealed radioactive sources.[Footnote 1] Sealed
radioactive sources, radioactive material encapsulated in stainless
steel or other metal, are used worldwide in medicine, industry, and
research. These sealed sources could be a threat to national security
because terrorists could use them to make "dirty bombs." We were asked
among other things to determine the number of sealed sources in the
United States. We found that the number of sealed sources in use today
in the United States is unknown primarily because no state or federal
agency tracks individual sealed sources. Instead, NRC and the agreement
states[Footnote 2] track numbers of specific licensees. NRC and the
Department of Energy (DOE) have begun to examine options for developing
a national tracking system, but to date, this effort has had limited
involvement by the agreement states. NRC had difficulty locating owners
of certain generally licensed devices it began tracking in April 2001,
and has hired a private investigation firm to help locate them. Twenty-
five of the 31 agreement states that responded to our survey indicated
that they track some or all general licensees or generally licensed
devices, and 17 were able to provide data on the number of generally
licensed devices in their jurisdictions, totaling approximately 17,000
devices. GAO recommended that NRC (1) collaborate with states to
determine the availability of the highest risk sealed sources, (2)
determine if owners of certain devices should apply for licenses, (3)
modify NRC's licensing process so sealed sources cannot be purchased
until NRC verifies their intended use, (4) ensure that NRC's evaluation
of federal and state programs assesses the security of sealed sources,
and (5) determine how states can participate in implementing additional
security measures. NRC disagreed with some of our findings.
In September 2003, we reported that NRC's oversight of security at
commercial nuclear power plants needed to be strengthened.[Footnote 3]
The September 11, 2001, terrorist attacks intensified the nation's
focus on national preparedness and homeland security. Among possible
terrorist targets are the nation's nuclear power plants which contain
radioactive fuel and waste. NRC oversees plant security through an
inspection program designed to verify the plants' compliance with
security requirements. As part of that program, NRC conducted annual
security inspections of plants and force-on-force exercises to test
plant security against a simulated terrorist attack. GAO was asked to
review (1) the effectiveness of NRC's security inspection program and
(2) legal challenges affecting power plant security. At the time of our
review, NRC was reevaluating its inspection program. We did not assess
the adequacy of security at the individual plants; rather, our focus
was on NRC's oversight and regulation of plant security.
We found that NRC had taken numerous actions to respond to the
heightened risk of terrorist attack, including interacting with the
Department of Homeland Security and issuing orders designed to increase
security and improve defensive barriers at plants. However, three
aspects of NRC's security inspection program reduced the agency's
effectiveness in overseeing security at commercial nuclear power
plants. First, NRC inspectors often used a process that minimized the
significance of security problems found in annual inspections by
classifying them as "non-cited violations" if the problem had not been
identified frequently in the past or if the problem had no direct,
immediate, adverse consequences at the time it was identified. Non-
cited violations do not require a written response from the licensee
and do not require NRC inspectors to verify that the problem has been
corrected. For example, guards at one plant failed to physically search
several individuals for metal objects after a walk-through detector and
a hand-held scanner detected metal objects in their clothing. These
individuals were then allowed unescorted access throughout the plant's
protected area. By extensively using non-cited violations for serious
problems, NRC may overstate the level of security at a power plant and
reduce the likelihood that needed improvements are made. Second, NRC
did not have a routine, centralized process for collecting, analyzing,
and disseminating security inspections data to identify problems that
may be common to plants or to provide lessons learned in resolving
security problems. Such a mechanism may help plants improve their
security. Third, although NRC's force-on-force exercises can
demonstrate how well a nuclear plant might defend against a real-life
threat, several weaknesses in how NRC conducted these exercises limited
their usefulness. Weaknesses included (1) using more personnel to
defend the plant during these exercises than during normal operations,
(2) using attacking forces that are not trained in terrorist tactics,
and (3) using unrealistic weapons (rubber guns) that do not simulate
actual gunfire. Furthermore, at the time, NRC has made only limited use
of some available improvements that would make force-on-force exercises
more realistic and provide a more useful learning experience.
Finally, we also found that even if NRC strengthens its inspection
program, commercial nuclear power plants face legal challenges in
ensuring plant security. First, federal law generally prohibits guards
at these plants from using automatic weapons, although terrorists are
likely to have them. As a result, guards at commercial nuclear power
plants could be at a disadvantage in firepower, if attacked. Second,
state laws regarding the permissible use of deadly force and the
authority to arrest and detain intruders vary, and guards were unsure
about the extent of their authorities and may hesitate or fail to act
if the plant is attacked. GAO made recommendations to promptly restore
annual security inspections and revise force-on-force exercises. NRC
disagreed with many of GAO's findings, but did not comment on GAO's
recommendations.
In September 2004, we testified on our preliminary observations
regarding NRC's efforts to improve security at nuclear power
plants.[Footnote 4] The events of September 11, 2001, and the
subsequent discovery of commercial nuclear power plants on a list of
possible terrorist targets have focused considerable attention on
plants' capabilities to defend against a terrorist attack. NRC is
responsible for regulating and overseeing security at commercial
nuclear power plants. We were asked to review (1) NRC's efforts since
September 11, 2001, to improve security at nuclear power plants,
including actions NRC had taken to implement some of GAO's September
2003 recommendations to improve security oversight, and (2) the extent
to which NRC is in a position to assure itself and the public that the
plants are protected against terrorist attacks. The testimony reflected
the preliminary results of GAO's review. We are currently performing a
more comprehensive review in which we are examining (1) NRC's
development of its 2003 design basis threat (DBT), which establishes
the maximum terrorist threat that commercial nuclear power plants must
defend against, and (2) the security enhancements that plants have put
in place in response to the design basis threat and related NRC
requirements. We expect to issue a report on our findings later this
year.
In the earlier work, we found that NRC responded quickly and decisively
to the September 11, 2001, terrorist attacks with multiple steps to
enhance security at commercial nuclear power plants. NRC immediately
advised plants to go to the highest level of security using the system
in place at the time, and issued advisories and orders for plants to
make certain enhancements, such as installing more physical barriers
and augmenting security forces, which could be quickly completed to
shore up security. According to NRC officials, their inspections found
that plants complied with these advisories and orders. Later, in April
2003, NRC issued a new DBT and required the plants to develop and
implement new security plans to address the new threat by October 2004.
NRC is also improving its force-on-force exercises, as GAO recommended
in its September 2003 report. While its efforts had enhanced security,
NRC was not yet in a position to provide an independent determination
that each plant has taken reasonable and appropriate steps to protect
against the new DBT. According to NRC officials, the facilities' new
security plans were on schedule to be implemented by October 2004.
However, NRC's review of the plans, which are not available to the
general public for security reasons, had primarily been a paper review
and was not detailed enough for NRC to determine if the plans would
protect the facility against the threat presented in the DBT. In
addition, NRC officials generally were not visiting the facilities to
obtain site-specific information and assess the plans in terms of each
facility's design. NRC is largely relying on the force-on-force
exercises it conducts to test the plans, but these exercises will not
be conducted at all facilities for 3 years. We also found that NRC did
not plan to make some improvements in its inspection program that GAO
previously recommended. For example, NRC was not following up to verify
that all violations of security requirements had been corrected, nor
was the agency taking steps to make "lessons learned" from inspections
available to other NRC regional offices and nuclear power plants.
Operations Related to NRC's Public Health and Safety and Environmental
Missions Can Be Improved:
In October 2003, we reported that NRC needs to more effectively analyze
whether nuclear power plant owners are adequately accumulating funds
for decommissioning plants.[Footnote 5] Following the closure of a
nuclear power plant, a significant radioactive waste hazard remains
until the waste is removed and the plant site is decommissioned. In
1988, NRC began requiring owners to (1) certify that sufficient
financial resources would be available when needed to decommission
their nuclear power plants and (2) require them to make specific
financial provisions for decommissioning. In 1999, GAO reported that
the combined value of the owners' decommissioning funds was
insufficient to ensure enough funds would be available for
decommissioning. GAO was asked to update its 1999 report, and to
evaluate NRC's analysis of the owners' funds and the agency's process
for acting on reports that show insufficient funds.
We found that although the collective status of the owners'
decommissioning fund accounts has improved considerably since GAO's
last report, some individual owners were not on track to accumulate
sufficient funds for decommissioning. Based on our analysis and using
the most likely economic assumptions, we concluded that the combined
value of nuclear power plant owners' decommissioning fund accounts in
2000--about $26.9 billion--was about 47 percent greater than needed at
that point to ensure that sufficient funds would be available to cover
the approximately $33 billion in estimated decommissioning costs when
the plants are permanently closed. This value contrasts with GAO's
prior finding that 1997 account balances were collectively 3 percent
below what was needed. However, overall industry results can be
misleading. Because funds are generally not transferable from funds
that have more than sufficient reserves to those with insufficient
reserves, each individual owner must ensure that enough funds are
available for decommissioning their particular plants. We found that 33
owners with ownership interests in a total of 42 plants had accumulated
fewer funds than needed through 2000, to be on track to pay for
eventual decommissioning. In addition, 20 owners with ownership
interests in a total of 31 plants recently contributed less to their
trust funds than we estimated they needed in order to put them on track
to meet their decommissioning obligations.
NRC's analysis of the owners' 2001 biennial reports was not effective
in identifying owners that might not be accumulating sufficient funds
to cover their eventual decommissioning costs. In reviewing the 2001
reports, NRC reported that all owners appeared to be on track to have
sufficient funds for decommissioning. In reaching this conclusion, NRC
relied on the owners' future plans for fully funding their
decommissioning obligations. However, based on the owners' actual
recent contributions, and using a different method, GAO found that
several owners could be at risk of not meeting their financial
obligations for decommissioning when these plants stop operating. In
addition, for plants with more than one owner, NRC did not separately
assess the status of each co-owner's trust funds against each co-
owner's contractual obligation to fund decommissioning. Instead, NRC
assessed whether the combined value of the trust funds for the plant as
a whole were reasonable. Such an assessment for determining whether
owners are accumulating sufficient funds can produce misleading results
because owners with more than sufficient funds can appear to balance
out owners with less than sufficient funds, even though funds are
generally not transferable among owners. Furthermore, we found that NRC
had not established criteria for taking action when it determines that
an owner is not accumulating sufficient decommissioning funds.
We recommended that NRC (1) develop an effective method for determining
whether owners are accumulating decommissioning funds at sufficient
rates and (2) establish criteria for taking action when it is
determined that an owner is not accumulating sufficient funds. NRC
disagreed with these recommendations, suggesting that its method is
effective and that it is better to deal with unacceptable levels of
financial assurance on a case-by-case basis. GAO continues to believe
that limitations in NRC's method reduce its effectiveness and that,
without criteria, NRC might not be able to ensure owners are
accumulating decommissioning funds at sufficient rates.
In May 2004, we issued a report on NRC's liability insurance
requirements for nuclear power plants owned by limited liability
companies.[Footnote 6] An accident at one the nation's commercial
nuclear power plants could result in personal injury and property
damage. To ensure that funds would be available to settle liability
claims in such cases, the Price-Anderson Act requires licensees of
these plants to have primary insurance--currently $300 million per
site. The act also requires secondary coverage in the form of
retrospective premiums to be contributed by all licensees of nuclear
power plants to cover claims that exceed primary insurance. If these
premiums are needed, each licensee's payments are limited to $10
million per year and $95.8 million in total for each of its plants. In
recent years, limited liability companies have increasingly become
licensees of nuclear power plants, raising concerns about whether these
companies--which shield their parent corporations' assets--will have
the financial resources to pay their retrospective premiums. We were
asked to determine (1) the extent to which limited liability companies
are the licensees for U.S. commercial nuclear power plants, (2) NRC's
requirements and procedures for ensuring that licensees of nuclear
power plants comply with the Price-Anderson Act's liability
requirements, and (3) whether and how these procedures differ for
licensees that are limited liability companies.
We found that of the 103 operating nuclear power plants, 31 were owned
by 11 limited liability companies. Three energy corporations--Exelon,
Entergy, and the Constellation Energy Group--were the parent companies
for eight of these limited liability companies. These 8 subsidiaries
were the licensees or co-licensees for 27 of the 31 plants. We also
found that NRC requires all licensees for nuclear power plants to show
proof that they have the primary and secondary insurance coverage
mandated by the Price-Anderson Act. Licensees sign an agreement with
NRC that requires the licensee to keep the insurance in effect.
American Nuclear Insurers also has a contractual agreement with each of
the licensees that obligates the licensee to pay the retrospective
premiums to American Nuclear Insurers if these payments become
necessary. A certified copy of this agreement, which is called a bond
for payment of retrospective premiums, is provided to NRC as proof of
secondary insurance. Finally, we found that NRC does not treat limited
liability companies differently than other licensees with respect to
the Price-Anderson Act's insurance requirements. Like other licensees,
limited liability companies must show proof of both primary and
secondary insurance coverage. American Nuclear Insurers also requires
limited liability companies to provide a letter of guarantee from their
parent or other affiliated companies with sufficient assets to pay the
retrospective premiums. These letters state that the parent or
affiliated companies are responsible for paying the retrospective
premiums if the limited liability company does not. American Nuclear
Insurers informs NRC that it has received these letters.
In May 2004, we also issued a report documenting the need for NRC to
more aggressively and comprehensively resolve issues related to the
shutdown of the Davis-Besse nuclear power plant.[Footnote 7] The most
serious safety issue confronting the nation's commercial nuclear power
industry since Three Mile Island in 1979, was identified at the Davis-
Besse plant in Ohio in March of 2002. After NRC allowed Davis-Besse to
delay shutting down to inspect its reactor vessel for cracked tubing,
the plant found that leakage from these tubes had caused extensive
corrosion on the vessel head--a vital barrier in preventing a
radioactive release. GAO determined (1) why NRC did not identify and
prevent the corrosion, (2) whether the process NRC used in deciding to
delay the shutdown was credible, and (3) whether NRC is taking
sufficient action in the wake of the incident to prevent similar
problems from developing at other plants.
We found that NRC should have, but did not identify or prevent the
corrosion at Davis-Besse because agency oversight did not produce
accurate information on plant conditions. NRC inspectors were aware of
indications of leaking tubes and corrosion; however, the inspectors did
not recognize the importance of the indications and did not fully
communicate information about them to other NRC staff. NRC also
considered FirstEnergy--Davis-Besse's owner--a good performer, which
resulted in fewer NRC inspections and questions about plant conditions.
NRC was aware of the potential for cracked tubes and corrosion at
plants like Davis-Besse but did not view them as an immediate concern.
Thus, despite being aware of the development of potential problems, NRC
did not modify its inspection activities to identify such conditions.
Additionally, NRC's process for deciding to allow Davis-Besse to delay
its shutdown lacked credibility. Because NRC had no guidance for making
the specific decision of whether a plant should shut down, it instead
used guidance for deciding whether a plant should be allowed to modify
its operating license. However, NRC did not always follow this guidance
and generally did not document how it applied the guidance.
Furthermore, the risk estimate NRC used to help decide whether the
plant should shut down was also flawed and underestimated the risk that
Davis-Besse posed. Finally, even though it underestimated the risk
posed by Davis-Besse, the risk estimate applied to the plant still
exceeded levels generally accepted by the agency. Nevertheless, Davis-
Besse was allowed to delay the plant's shutdown.
After this incident, NRC took several significant actions to help
prevent reactor vessel corrosion from recurring at nuclear power
plants. For example, NRC has required more extensive vessel
examinations and augmented inspector training. I would also like to
note that, in April 2005, NRC proposed a $5.45 million fine against the
licensee of the Davis-Besse plant. The principal violation was that the
utility restarted and operated the plant in May 2000, without fully
characterizing and eliminating leakage from the reactor vessel head.
Additional violations included providing incomplete and inaccurate
information to NRC on the extent of cleaning and inspecting the reactor
vessel head in 2000.
While NRC has not yet completed all of its planned actions, we remain
concerned that NRC has no plans to address three systemic weaknesses
underscored by the incident at Davis-Besse. Specifically, NRC has
proposed no actions to help it better (1) identify early indications of
deteriorating safety conditions at plants, (2) decide whether to shut
down a plant, or (3) monitor actions taken in response to incidents at
plants. Both NRC and GAO had previously identified problems in NRC
programs that contributed to the Davis-Besse incident, yet these
problems continued to persist. Because the nation's nuclear power
plants are aging, GAO recommended that NRC take more aggressive actions
to mitigate the risk of serious safety problems occurring at Davis-
Besse and other nuclear power plants.
In April 2005, we issued a report outlining the need for NRC to do more
to ensure that power plants are effectively controlling spent nuclear
fuel.[Footnote 8] Spent nuclear fuel--the used fuel periodically
removed from reactors in nuclear power plants--is too inefficient to
power a nuclear reaction, but is intensely radioactive and continues to
generate heat for thousands of years. Potential health and safety
implications make the control of spent nuclear fuel of great
importance. The discovery, in 2004, that spent fuel rods were missing
at the Vermont Yankee plant in Vermont generated public concern and
questions about NRC's regulation and oversight of this material. GAO
reviewed (1) plants' performance in controlling and accounting for
their spent nuclear fuel, (2) the effectiveness of NRC's regulations
and oversight of plants' performance, and (3) NRC's actions to respond
to plants' problems controlling their spent fuel.
We found that nuclear power plants' performance in controlling and
accounting for their spent fuel has been uneven. Most recently, three
plants--Vermont Yankee and Humboldt Bay (California) in 2004, and
Millstone (Connecticut) in 2000--have reported missing spent fuel.
Earlier, several other plants also had missing or unaccounted for spent
fuel rods or rod fragments. NRC regulations require plants to maintain
accurate records of their spent nuclear fuel and to conduct a physical
inventory of the material at least once a year. The regulations,
however, do not specify how physical inventories are to be conducted.
As a result, plants differ in the regulations' implementation. For
example, physical inventories at plants varied from a comprehensive
verification of the spent fuel to an office review of the records and
paperwork for consistency. Additionally, NRC regulations do not specify
how individual fuel rods or segments are to be tracked. As a result,
plants employ various methods for storing and accounting for this
material. Further, NRC stopped inspecting plants' material control and
accounting programs in 1988. According to NRC officials, there was no
indication that inspections of these programs were needed until the
event at Millstone. At the time of our review, NRC was collecting
information on plants' spent fuel programs to decide if it needs to
revise its regulations and/or oversight. It had its inspectors collect
basic information on all facilities' programs. It also contracted with
the Department of Energy's Oak Ridge National Laboratory in Tennessee
to review NRC's material control and accounting programs for nuclear
material. NRC is planning to request information from plants and plans
to visit over a dozen plants for more detailed inspection. The results
of these efforts may not be completed until late 2005, over 5 years
after the incident at Millstone that initiated NRC's efforts. However,
we believed NRC has already collected considerable information
indicating problems or weaknesses in plants' material control and
accounting programs for spent fuel.
GAO recommended that NRC (1) establish specific requirements for the
way plants control and account for loose rods and fragments as well as
conduct their physical inventories, and (2) develop and implement
appropriate inspection procedures to verify plants' compliance with the
requirements.
NRC Faces Several Broad Challenges in Effectively Regulating and
Overseeing Nuclear Power Plants:
Based on our recent work at NRC, we have identified several cross-
cutting challenges that NRC faces as it works to effectively regulate
and oversee the nuclear power industry. First, NRC must manage the
implementation of its risk-informed regulatory strategy across the
agency's operations. Second, and relatedly, NRC must strive to achieve
the appropriate balance between more direct involvement in the
operations of nuclear power plants and self-reliance and self-reporting
on the part of plant operators to do the right things to ensure safety.
Third, and finally, NRC must ensure that the agency effectively manages
resources to implement its risk-informed strategy and achieve the
appropriate regulatory balance in the current context of increasing
regulatory and oversight demands as the industry's interest in
expansion grows.
NRC Must Manage the Implementation of Its Risk-Informed Regulatory
Strategy:
Nuclear power plants have many physical structures, systems, and
components, and licensees have numerous activities under way, 24-hours
a day, to ensure that plants operate safely. NRC relies on, among other
things, the agency's on-site resident inspectors to assess plant
conditions and oversee quality assurance programs, such as maintenance
and operations, established by operators to ensure safety at the
plants. Monitoring, maintenance, and inspection programs are used to
ensure quality assurance and safe operations. To carry out these
programs, licensees typically prepare numerous reports describing
conditions at plants that need to be addressed to ensure continued safe
operations. Because of the significant number of activities and
physical structures, systems, and components, NRC adopted a risk-
informed strategy to focus inspections on those activities and pieces
of equipment that are considered to be the most significant for
protecting public health and safety. Under the risk-informed approach,
some systems and activities that NRC considers to have relatively less
safety significance receive little agency oversight. With its current
resources, NRC can inspect only a relatively small sample of the
numerous activities going on during complex plant operations. NRC has
adopted a risk-informed approach because it believes that it can focus
its regulatory resources on those areas of the plant that the agency
considers the most important to safety. NRC has stated the adoption of
this approach was made possible by the fact that safety performance at
plants has improved as a result of more than 25 years of operating
experience.
Nevertheless, we believe that NRC faces a significant challenge in
effectively implementing its risk-informed strategy, especially with
regards to improving the quality of its risk information and
identifying emerging technical issues and adjusting regulatory
requirements before safety problems develop. The 2002 shutdown of the
Davis-Besse plant illustrates this challenge, notably the shortcomings
in NRC's risk estimate and failure to sufficiently address the boric
acid corrosion and nozzle cracking issues. We also note that NRC's
Inspector General considers the development and implementation of a
risk-informed regulatory oversight strategy to be one of the most
serious management challenges facing NRC.
NRC Must Balance Oversight and Industry Self-Compliance:
Under the Atomic Energy Act of 1954, as amended, and the Energy
Reorganization Act of 1974, as amended, NRC and the operators of
nuclear power plants share the responsibility for ensuring that nuclear
reactors are operated safely. NRC is responsible for issuing
regulations, licensing and inspecting plants, and requiring action, as
necessary, to protect public health and safety. Plant operators have
the primary responsibility for safely operating their plants in
accordance with their licenses. NRC has the authority to take actions,
up to and including shutting down a plant, if licensing conditions are
not being met and the plant poses an undue risk to public health and
safety.
NRC has sought to strike a balance between verifying plants' compliance
with requirements through inspections and affording licensees the
opportunity to demonstrate that they are operating their plants safely.
While NRC oversees processes, such as the use of performance measures
and indicators, and requirements that licensees maintain their own
quality assurance programs, NRC, in effect, relies on licensees and
trusts them to a large extent to make sure their plants are operated
safely. While this approach has generally worked, we believe that NRC
still has work to do to effectively position itself so that it can
identify problems with diminishing performance at individual plants
before they become serious. For example, incidents such as the 2002
discovery of the extensive reactor vessel head corrosion at the Davis-
Besse plant and the unaccounted for spent nuclear fuel at several
plants across the country, raise questions about whether NRC is
appropriately balancing agency involvement and self-monitoring by
licensees. An important aspect of NRC's ability to rely on licensees to
maintain their own quality assurance programs is a mechanism to
identify deteriorating performance at a plant before the plant becomes
a problem. At Davis-Besse, NRC inspectors viewed the licensee as a good
performer based on its past performance and did not ask the questions
that should have been asked about plant conditions. Consequently, the
inspectors did not make sure that the licensee adequately investigated
the indications of the problem and did not fully communicate the
indications to the regional office and NRC headquarters.
NRC Must Manage Agency Resources to Meet Increasing Regulatory and
Oversight Demands:
Finally, Mr. Chairman, I would also like to comment briefly on NRC's
resources. While we have not assessed the adequacy of NRC's resources,
we have noted instances, such the shutdown of the Davis-Besse plant,
where resource constraints affected the agency's oversight or delayed
certain activities. NRC's resources have been challenged by the need to
enhance security at nuclear power plants after the September 11, 2001,
terrorist attacks, and they will continue to be challenged as the
nation's fleet of nuclear power plants age and the industry's interest
grows in both licensing and constructing new plants, and re-licensing
and increasing the output of existing plants. Resource demands will
also increase when the Department of Energy submits for NRC review, an
application to construct and operate a national depository for high-
level radioactive waste currently planned for Yucca Mountain, Nevada.
We believe that it is important for NRC and the Congress to monitor
agency resources as these demands arise in order to ensure that NRC can
meet all of its regulatory and oversight responsibilities and fulfill
its mission to ensure adequate protection of public health, safety, and
the environment.
Conclusion:
In closing, we recognize and appreciate the complexities of NRC's
regulatory and oversight efforts required to ensure the safe and secure
operation of the nation's commercial nuclear power plants. As GAO's
recent work has demonstrated, NRC does a lot right but it still has
important work to do. Whether NRC carries out its regulatory and
oversight responsibilities in an effective and credible manner will
have a significant impact on the future direction of our nation's use
of nuclear power.
Finally, we note that NRC has generally been responsive to our report
findings. Although the agency does not always agree with our specific
recommendations, it has continued to work to improve in the areas we
have identified. It has implemented many of our recommendations and is
working on others. For example, with respect to nuclear power plant
security, NRC has restored its security inspection program and resumed
its force-on-force exercises with a much higher level of intensity. It
is also strengthening these exercises by conducting them at individual
plants every 3 years rather than every 8 years, and is using laser
equipment to reduce the exercises' artificiality. Another example
involves sealed radioactive sources. NRC is working with agreement
states to develop a process for ensuring that high-risk radioactive
sources cannot be obtained before verification that the materials will
be used as intended. NRC anticipates that an NRC-agreement state
working group will deliver a recommended approach to NRC senior
management later this year. In addition, NRC continues to work on its
broader challenges. For example, the agency intends to develop
additional regulatory guidance to expand the application of risk-
informed decision making, including addressing the need to establish
quality requirements for risk information and specific instructions for
documenting the decision making process and its conclusions.
We will continue to track NRC's progress in implementing our
recommendations. In addition, as members of this subcommittee are
aware, GAO has been asked to review the effectiveness of NRC's
activities for overseeing nuclear power plants, that is, its reactor
oversight process. An important part of that work would be to review
the agency's risk-informed regulatory strategy and its effectiveness in
identifying deteriorating plant performance as well as whether NRC is
making progress toward effectively balancing agency inspections and
self-monitoring by licensees.
Mr. Chairman, this completes my prepared statement. I would be pleased
to respond to any questions that you or other Members of the
subcommittee may have.
GAO Contacts and Staff Acknowledgements:
For further information about this testimony, please contact me at
(202) 512-3841 (or at wellsj@gao.gov). John W. Delicath, Ilene Pollack,
and Raymond H. Smith, Jr. made key contributions to this testimony.
[End of section]
Related GAO Products:
Nuclear Waste: Preliminary Observations on the Quality Assurance
Program at the Yucca Mountain Repository. GAO-03-826T. Washington,
D.C.: May 28, 2003.
Nuclear Regulatory Commission: Revision of Fee Schedules; Fee Recovery
for FY 2003. GAO-03-934R. Washington, D.C.: June 30, 2003.
Spent Nuclear Fuel: Options Exist to Further Enhance Security. GAO-03-
426. Washington, D.C.: July 15, 2003.
Nuclear Security: Federal and State Action Needed to Improve Security
of Sealed Radioactive Sources. GAO-03-804. Washington, D.C.: August 6,
2003.
Nuclear Regulatory Commission: Oversight of Security at Commercial
Nuclear Power Plants Needs to Be Strengthened. GAO-03-752. Washington,
D.C.: September 4, 2003.
Nuclear Regulation: NRC Needs More Effective Analysis to Ensure
Accumulation of Funds to Decommission Nuclear Power Plants. GAO-04-32.
Washington, D.C.: October 30, 2003.
Information Technology Management: Governmentwide Strategic Planning,
Performance Measurement, and Investment Management Can Be Further
Improved. GAO-04-49. Washington, D.C.: January 12, 2004.
Yucca Mountain: Persistent Quality Assurance Problems Could Delay
Repository Licensing and Operation. GAO-04-460. Washington, D.C.: April
30, 2004.
Nuclear Regulation: NRC Needs to More Aggressively and Comprehensively
Resolve Issues Related to the Davis-Besse Nuclear Power Plant's
Shutdown. GAO-04-415. Washington, D.C.: May 17, 2004.
Nuclear Regulation: NRC's Liability Insurance Requirements for Nuclear
Power Plants Owned by Limited Liability Companies. GAO-04-654.
Washington, D.C.: May 28, 2004.
Low-Level Radioactive Waste: Disposal Availability Adequate in the
Short Term, but Oversight Needed to Identify Any Future Shortfalls. GAO-
04-604. Washington, D.C.: June 10, 2004.
Nuclear Nonproliferation: DOE Needs to Take Action to Further Reduce
the Use of Weapons-Usable Uranium in Civilian Research Reactors. GAO-
04-807. Washington, D.C.: July 30, 2004.
Nuclear Regulatory Commission: Preliminary Observations on Efforts to
Improve Security at Nuclear Power Plants. GAO-04-1064T. Washington,
D.C.: September 14, 2004.
Low-Level Radioactive Waste: Future Waste Volumes and Disposal Options
Are Uncertain. GAO-04-1097T. Washington, D.C.: September 30, 2004.
Nuclear Regulatory Commission: NRC Needs to Do More to Ensure that
Power Plants Are Effectively Controlling Spent Nuclear Fuel. GAO-05-
339. Washington, D.C.: April 8, 2005.
FOOTNOTES
[1] GAO: Nuclear Security Federal and State Action Needed to Improve
Security of Sealed Radioactive Sources, GAO-03-804 Washington, D.C.:
Aug. 6, 2003.
[2] Agreement states are the 33 states that have entered into an
agreement with the NRC under subsection 274(b) of the Atomic Energy Act
(AEA) under which NRC relinquishes to the states portions of its
regulatory authority to license and regulate source, byproduct, and
certain quantities of special nuclear material.
[3] GAO: Nuclear Regulatory Commission: Oversight of Security at
Commercial Nuclear Power Plants Needs to Be Strengthened, GAO-03-752
(Washington, D.C.: Sept. 4, 2003).
[4] GAO, Nuclear Regulatory Commission: Preliminary Observations on
Efforts to Improve Security at Nuclear Power Plants, GAO-04-1064T
(Washington, D.C.: Sept. 14, 2004).
[5] GAO: Nuclear Regulation: NRC Needs More Effective Analysis to
Ensure Accumulation of Funds to Decommission Nuclear Power Plants, GAO-
04-32 (Washington, D.C.: Oct. 30, 2003).
[6] GAO, Nuclear Regulation: NRC's Liability Insurance Requirements for
Nuclear Power Plants Owned by Limited Liability Companies, GAO-04-654
(Washington, D.C.: May 28, 2004).
[7] GAO, Nuclear Regulation: NRC Needs to More Aggressively and
Comprehensively Resolve Issues Related to the Davis-Besse Nuclear Power
Plant's Shutdown, GAO-04-415 (Washington, D.C.: May 17,2004).
[8] GAO, Nuclear Regulatory Commission: NRC Needs to Do More to Ensure
that Power Plants Are Effectively Controlling Spent Nuclear Fuel, GAO-
05-339 (Washington, D.C.: Apr. 8, 2005).
