Nuclear Reaction

Of the three atomic reactors housed in Buchanan, New York's Indian Point Nuclear Complex (35 miles north of Manhattan), only one is garnering much attention these days: the beleaguered Indian Point 2 plant, which suffered a series of accidents, from minor to potentially major, during the last year and a half. The plant's apparent fragility worries activists, especially since it's next in line to be bought by Entergy Nuclear, one of the fastest-growing for-profit nuclear management companies in the country.

Activists are worried that in the rush to sell off power plants to private operators, regulators are allowing deals to go through with too little scrutiny and too few safeguards. Opponents of the IP2 sale had hoped that a Nuclear Regulatory Commission report, released this month, would at least slow down the sale of the creaky reactor. Instead the NRC, which conducted a three-week investigation of IP2 last December, declared it fully operational and safe, pausing briefly to chide current owner Con Ed for falling behind with routine repairs.

But the fight to derail the sale of IP2 isn't over yet. Concerned parties have turned their attention to a little-noticed but nevertheless landmark NRC hearing scheduled for March 13 in White Plains. The forum will address the sale of the Indian Point 3 atomic reactor, which for the past several decades has been owned and operated by the New York Power Authority (NYPA). Although the sale of IP3 to Entergy Nuclear is basically a fait accompli (the company has been running the plant since last November), activists hope their criticisms may goad the NRC to take a tougher stance—if not on the Indian Point sales, then on other deals down the road.

"This is the first time the public has ever gotten an NRC hearing on the sale of a reactor," exults Tim Judson of Citizens Awareness Network, the group that petitioned for the meeting. (Neil Sheehan, a spokesperson for the NRC, says the agency "routinely holds meetings in its Washington headquarters," but concedes this is the first time the NRC has gone into a concerned community and invited testimonials.) Even though it's unlikely to change the final outcome, CAN has experts ready to present grievances about the small print in Entergy Nuclear's two recent atomic acquisitions from NYPA: the Fitzpatrick nuclear reactor in Oswego County and the aforementioned IP3 plant.

Entergy Nuclear and NYPA worked out their deal for both reactors last March. NYPA made no bones about wanting to unload them as quickly as possible. Its board of trustees rapidly approved the $967 million sale, as did the Federal Energy Regulatory Committee (FERC). The only thing still missing is the NRC's stamp of approval, which it appeared to be tacitly giving when it transferred the plants' operating licenses to Entergy management and allowed the company to take over day-to-day operations last November. The NRC usually takes six to eight months to review a reactor sale.

CAN originally petitioned for a hearing on the NYPA/Entergy sale back in July, and as winter grew near with no concrete response from the NRC, activists began to despair. Which is why the NRC's surprise January announcement that there would be a public forum left activists euphoric—as well as curious to know what caused the NRC's about-face. One hypothesis: The NRC felt obliged to air anxieties inspired by California's energy crisis, which was precipitated when California's newly deregulated power providers jacked up prices so high the utilities began crying bankruptcy—and turning down the lights.

However, that's a less than illuminating theory for some. "New York is not poised to become the next California," says Kyle Rabin, an energy specialist with Environmental Advocates, an Albany-based nonprofit watchdog organization. He would prefer to think the NRC scheduled the hearing because it has genuine concerns about Entergy Nuclear's finances—a theory CAN also endorses.

"We've posited all along that Entergy Nuclear is financially unable to operate these two reactors safely," says CAN's Judson, "and the NRC apparently saw enough proof to at least hear our argument."

As part of its deal for IP3 and Fitzpatrick, Entergy Nuclear will pay NYPA $108 million a year in financing and nuclear fuel payments for the next seven years—and $20 million a year for other expenses for eight years after that. Activists fear that kind of fiscal pressure will mean the profit factor—not the human factor—will drive Entergy Nuclear's approach to safety issues.

The NRC's Sheehan acknowledges that one of the issues the agency wants to study carefully is Entergy Nuclear's plan to set up two limited liability companies to run IP3 and Fitzpatrick. In layman's terms, that means these subsidiaries can't stick their hands into Entergy Nuclear's deep pockets every time something goes wrong. This protects Entergy Nuclear—which claims to be the largest nuclear management company in the U.S., with revenues topping $11 billion—from financial ruin, but doesn't do much to reassure the public. This is a fairly common strategy in the deregulated nuclear industry, but Ed Smeloff, director of Pace University's energy project and a speaker at the hearing, doesn't like it. "Let's say one of these plants unexpectedly goes down for 60 days," he argues, which isn't that unusual with temperamental reactors. "Payroll expenses alone could be $15 million a month, not to mention the $500,000 a day these companies lose by being off-line. I'm not convinced they've got the money to shut down when unexpected safety hazards present themselves."

The party line about deregulation is that it actually increases reliability, because for-profit companies can't afford to be off-line for long periods of time. Recent NRC data suggest plants with good safety records suffer significantly less downtime. Carl Crawford, Entergy's manager of nuclear communications, says the company budgets for expected shutdowns—such as seasonal refueling—and looks for ways to cut costs without cutting corners. And he says it spends plenty on research and new technology—precisely so it can avoid those nasty glitches that impact the bottom line.

As the players get set to square off next week, underdog CAN is going to lead with its biggest gun—the convoluted agreement between Entergy Nuclear and NYPA about the plants' billion-dollar decommissioning fund.

"Normally," explains Sheehan, "when there is an operating license transfer, the decommissioning fund gets handed over to the new owner, and they assume responsibility for it." Every nuclear reactor in the U.S. has one of these funds, created by years of ratepayer and owner contributions. At the end of a reactor's lifespan, this money should be used to "decommission" the site—in other words, to clean up hazardous radioactive remains. But reactors are now being bought by private companies, which means Uncle Sam applies a sizable capital gains tax every time a fund changes hands. Until now, Entergy Nuclear has convinced the IRS to waive the tax, but the IRS is carefully avoiding setting permanent policy. Perhaps suspecting that its lucky streak might be over, Entergy Nuclear decided to ask NYPA to "hold" the Fitzpatrick and IP3 fund out of the IRS's reach—and activists believe some of the long-term payments to NYPA are in exchange for the favor.

This is unorthodox by anyone's standards, even the NRC's. "We definitely want to gather more information about this agreement," says Sheehan. "We've never seen this before, and so obviously it bears investigating." According to CAN, if the fund continues accruing interest at its expected rate, it will contain upwards of $1.9 billion by 2015 (since IP3's current operating license is good for another decade, decommissioning won't start much before then). The NRC estimates $1.1 billion will be needed to clean up the site. What happens to the estimated $800 million left over? Does it go into NYPA's pocket? Or does it go into Entergy Nuclear's? Or will it be returned to ratepayers—the people who paid into the fund for so many years?

The NRC doesn't have any answers yet—and until next week's hearing Entergy Nuclear isn't talking. "We haven't thought about how or when we'll decommission," says Crawford, "because it's at least 10 years away." The NRC says Entergy Nuclear will likely ask to extend IP3's license for another 20 years, in which case decommissioning will be delayed even further. Under federal law, the company has 60 years to finish cleaning up. Nobody knows how big the fund will be by then.

Given the uncertainties, CAN hopes the NRC will at least send Entergy Nuclear back to the financial drawing board before handing over Fitzpatrick and IP3. And it hopes that if there are new guidelines, they may also be applied to Entergy's deal with Con Ed for IP2. Ultimately, says Rabin of Environmental Advocates, CAN and other activists are performing a vital public service by asking the questions that should be coming from FERC and the NRC. "We're only saying to go slow and investigate these sales carefully," he insists. "After all, Entergy Nuclear is just a company, and it makes mistakes like any other."

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