Reactor Sales Are Said to Endanger Accident Payments
By Matthew L. Wald
New York Times
August 7, 2002

WASHINGTON, Aug. 6 - The sale of about two dozen nuclear power reactors around the country to a small number of companies has undermined the system Congress devised to ensure compensation for people hurt by a severe nuclear accident, according to an analysis commissioned by two antinuclear groups in New York.

Federal law requires reactor operators to buy $200 million in conventional insurance. It also provides for about $9.3 billion in additional coverage by requiring that after an accident, each plant pay $10 million a year, up to $88 million, to compensate victims.

When the law, known as the Price-Anderson act, was approved by Congress, the idea was to spread the risk among all reactors. But as a result of recent mergers and purchases, four companies now own so many reactors that their liabilities would be more than half a billion dollars each in case of accidents.

The study, which was commissioned by Riverkeeper, a Hudson River environmental group, and the STAR Foundation, a Long Island antinuclear group, points out that in many cases, the companies bought the reactors through limited liability subsidiaries that could declare bankruptcy and permit the parent corporations to walk away unscathed. It also says that the limited liability structure jeopardizes the money set aside for decommissioning the reactors at the end of their lives.

"Price-Anderson only works if those companies are reachable in the event of an accident," said Alex Matthiessen, executive director of Riverkeeper. "These limited liability structures seem specifically designed to put them beyond reach."

The report, prepared by Synapse Energy Economics and scheduled to be officially released on Wednesday by being posted on the World Wide Web at, details layer upon layer of corporate structures used in recent reactor purchases. Robert Alvarez, program director for the Star Foundation, said that most of the holding companies had no employees and were merely "shell corporations." He called them " Enron-style subsidiaries."

Representatives for the nuclear industry scoffed at the idea that the changes in ownership threatened the insurance system. Having nuclear plants concentrated in the hands of companies that specialize in running reactors has safety benefits, they said, and may also create greater financial responsiveness.

"If I'm a nuclear operator, I'm not going to undermine my core business to save $10 million a year," said Marvin S. Fertel, senior vice president at the Nuclear Energy Institute, a trade group. Failure to pay the fee for one reactor could jeopardize the licenses of the others, he said.

A typical 1,000-megawatt nuclear plant has fuel and operating expenses of $130 million to $140 million a year, he said, and a $10 million payment on top of that, in the unlikely event of a major accident, was a small increment.

In an introduction to the report, Peter A. Bradford, a former member of the Nuclear Regulatory Commission and a former head of the public service commissions in both New York State and Vermont, agreed that the consolidation of nuclear ownership might make for safer operation. But he said he thought it also "risks the shifting of accident and decommissioning costs from the plant owners to the general public because the relatively secure financial backing of substantial utilities companies has, in many cases, been replaced by a limited liability subsidiary whose only asset is an individual nuclear power plant."

Price-Anderson, established in 1957 by Congress, expired on Aug. 1. Provisions remain in force for existing reactors but new ones would not be covered. But that point is moot, since no new reactors have been ordered since 1978.

The insurance system established by the law could be crucial for people who live within a few miles of nuclear plants because commercial property insurance does not cover radiation accidents.

In creating the program, Congress set a cap on how much would be paid to any victims of a nuclear accident. The cap is periodically adjusted for inflation; it is now about $9.5 billion, with the money coming from the $200 million in conventional insurance and the $9.3 billion that would be paid by the nuclear industry after an accident.

Opponents say the cap is a subsidy to the nuclear industry; the industry asserts that the $9.5 billion is far more than would be available for a catastrophe at a chemical plant or some other industrial site. So far, they point out, payments have totaled only about $200 million.

Whatever the merits of the arguments on both sides, the emerging structure of the industry has clearly changed the underlying assumptions behind the building of nuclear power plants. Critics agree that having a single company operate 15 or 20 reactors is probably good for safety, since plants within a company share expertise more readily than plants owned by scattered utilities.

But they also say that the new owners may lack the deep pockets of the mammoth regulated utilities that built the reactors, making an insurance scheme more necessary.

The new legal structure is radically different from what came before. For example, the Indian Point reactors, in a suburb of New York City along the Hudson River, were sold by Consolidated Edison and the New York Power Authority to Entergy, a utility that built five of its own plants and has bought six more.

A spokesman for Entergy, Carl Crawford, said the structure had tax advantages. Asked if it also created a liability shield, he said, "It has that effect, too."

But, he said, "anyone who thinks that a company that would spend a billion and a half of its own dollars is going to shirk a $10 million a year insurance payment, that's just not reasonable."

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