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Bush's Policy On Nuclear Power: Will Somebody Please Limit My Liability?
Meir Carasso

Can a dying nuclear power industry be resuscitated? Only if government subsidies cover the astronomical liabilities involved. Letting The Price-Anderson Act expire could be the nuclear industry's coup de grace. Why should Congress extend Price-Anderson?

In his second week in office, Bush established the National Policy Development Group to "develop a national energy policy designed to help the private sector (!) ... promote ... production and distribution of energy for the future." (Emphasis mine. See Dick Cheney's Report, submitted on May 16, 2001, Overview, p.viii.) As a consequence of this incredibly inappropriate charter for a national policy, it was not a surprise to read Bush's policy on nuclear power, whose main purpose is to "support the expansion of nuclear energy in the US as a major component of our national energy policy". Among the extensive government involvements spelled out there is the subject of this article: "support legislation to extend the Price-Anderson Act".

Notice the hypocrisy in Bush's policy. This is the same person who only a few months ago said he was guided by a "vision" of government that is "whenever possible, market based". Yet over the last twenty-three years the market has been saying NO to nuclear power. No new nuclear plants were ordered since 1978. It is now clear that when it comes to corporate America, Bush's policies are anything but market based; his policy aims to resuscitate this dying industry with corporate welfare on a massive scale.

Congress passed the Price-Anderson Act in 1957, three year after passing the Atomic Energy Act of 1954, when it became apparent that civilian nuclear power would not develop unless corporate liability in case of a nuclear accident was somehow limited. The result was The Price-Anderson Act. It limits nuclear corporate liability.

Today, because of the astronomical liability that could result from a power plant accident, insurance companies on the open market still refuse to insure the owner for the entire liability cost. They agreed to cover only the first $200 million. The Act requires that a nuclear owner buy this much coverage on the open market, and contribute an additional $83 million to a private insurance pool.

The Act is due to expire on August 1, 2002. It has been necessary since the inception of civilian nuclear power because a nuclear plant is so dangerous that private insurance carriers will not cover its entire liability. Here are some of the consequences of the Act, should it be extended.

-To the public and to homeowners: I asked my State Farm homeowners insurance agent if my home and the people in it were covered in case of a nuclear accident. He said they are not, and sent me a copy of my policy where he had highlighted -- "LOSSES NOT COVERED: Any nuclear radiation, or radioactive contamination." He also said that this is a standard clause in practically all insurance policies of this kind. State Farm cannot provide nuclear accident coverage because the liability of nuclear accidents was itself not fully covered by insurance. Willy-nilly, as a homeowner, the Price-Anderson Act makes me liable also!

-To industry in general: In spite of renewed nuclear industry statements of the safety and reliability of nuclear power plants, they have not been able to convince insurance executives of the safety of their plants. But no other industry has the luxury of operating without full coverage. As part of the cost of doing business, industry in general is fully liable for any loss, whether it is covered by insurance or not. Typically industry pays the full premium that is necessary to cover whatever liability they may incur. When the nuclear industry gets its liability limited, as is the case under this Act, it is getting a massive government subsidy. Practically speaking, Price-Anderson enables the nuclear industry to "externalize" this cost, to pass its unpaid balance to all taxpayers. In this way the subsidy it gets under the Act distorts the workings of the competitive energy market and makes nuclear electric power appear - but only appear - cheaper than it really is.

The next time somebody says "Nuclear power is competitively priced" as Dick Cheney's report says on page 5-16, you'll know better. It is not. "Competitive" means in a competitive market. Nuclear power cannot compete so long as its economics continue to be "sweetened" by massive government subsidies, and limiting the industry's liability is a case in point.

-Nuclear power plant safety. Whenever the nuclear industry is asked if it can make its plants safer, they respond with a rhetorical, "How safe is safe enough?" The answer in our economic system is that it has to be safe enough to be insurable. This is the minimum cultural criterion that all industrial plants and processes have to pass successfully before they can be deemed legitimate, and ready to enter the competitive market. When private insurance companies refuse to sell insurance to a nuclear power plant beyond a nominal amount, this is decisive action that says, what you are doing is so dangerous that I cannot sell you insurance beyond the first $200 million, at ANY premium.

-Who pays? When a manufacturer pays his insurance premium, he covers that cost by selling his product at a higher price. Eventually the consumer of that product will pay the manufacturer for that cost. If the Price-Anderson Act gets extended, should a nuclear accident occur and damage to life and property exceed the limited liability it offers, the uncovered cost will have to be born either by the victims themselves, or by the US government: meaning you and I as taxpayers. The Price-Anderson Act makes all of us the de-facto "insurers" of the ailing nuclear industry.

The Price-Anderson Act will expire on August 1, 2002. In spite of propaganda promoting nuclear power, recently joined by Bush and Cheney, it is a fact that electric utilities in the US ordered the last new nuclear power plant back in 1978, some 23 years ago. None have been ordered since then, and for good reasons. Rather, they selected from other alternatives, including natural gas, conservation and renewable energy options, and coal.

The remote possibility of resuscitating a dying nuclear industry (more on this in subsequent articles) cannot happen unless there is an extension of the Price-Anderson Act. Do you want the US government to continue underwriting the insurance for the industry that gave us Three Mile Island?

Meir Carasso received a Ph.D. degree in Engineering from the University of California in Berkeley. During his 33-year professional career, he worked for the US and California governments and in private industry. He lives in Boulder, Colorado and volunteers his time to selected projects.