The Nuclear Power Issue

Ever since the Federal government set up the AEC to subsidize and promote commercial nuclear power, debate has raged over the safety and economics of "the peaceful atom." In recent months that debate has taken on a new urgency with the advent of legislative and ballot-box campaigns in 20 states to restrict the building and operation of nuclear power plants. The initial confrontation occurs this month in California, where voters will be faced with Proposition 15, the "Nuclear Safeguards Initiative." In brief, this proposed law would:

1. Impose limits on the percent of capacity at which existing nuclear plants can operate, unless Congress repeals the Price-Anderson Act;

2. Set up a commission of 15 members to study the effectiveness of present nuclear safety and waste-disposal systems, at an annual cost to the taxpayers of $800,000; and

3. Ban the construction of new nuclear plants (28 of which are planned in California over the next 20 years) unless safety and waste-disposal standards are approved by 2/3 of both houses of the legislature.

One's first reaction on reading this proposal may well be outrage. What business does the state legislature have trying to make technical and economic decisions as to the feasibility of power plants? Haven't we already had enough bad experience with self-proclaimed experts making our energy problems worse by interfering in the operations of private enterprise? One recalls the horrendous obstacles put in the way of the Alaska oil pipeline, the hysterical opposition to strip mining, the political restrictions on offshore oil drilling, etc. Consequently, one listens with well-founded skepticism as the Ralph Naders recite a litany of scary half-truths about nuclear power. Surely, decisions as to the adequacy of safety standards and the economic viability of nuclear power—issues about which honest questions remain in the minds of many scientists, engineers, and economists—are best decided in the marketplace, by those who have to pay for the power plants and shoulder the liabilities. Only…in the case of nuclear power, what we are faced with is something vastly different from the normal marketplace situation.

One could argue, for starters, that the reported "costs" of nuclear power are considerably understated, due to the billions spent by the AEC over the past 25 years to develop the technology. But much of this is a "sunk cost," and since the technology is already here, we'd be fools to throw it away simply because it was developed with tax money. Of far greater importance, however, is the fact that, unlike coal and oil-fired power plants, nuclear power plants are not fully insured. In fact, the Federal government, via the Price-Anderson Act, specifically limits the liability of all parties for any one nuclear accident to $560 million (of which the power companies pay for only $125 million via private insurance, while the taxpayers pick up the tab for the other $435 million). Government studies estimate that the damages from a worst-case nuclear accident could total from $5 to $15 billion.

The history of Price-Anderson illustrates its crucial role in nuclear power development. In the 1950's the AEC and potential reactor producers were desperately trying to convince electric utilities to install nuclear reactors. But the insurance industry made it clear that because of the unknown risks involved, it would not provide liability insurance. A Columbia law professor, Arthur Murphy, was hired by the reactor trade group, the Atomic Industrial Forum, to draft legislation that would largely exempt utilities and reactor manufacturers from liability. The result was the passage in 1957 of the Price-Anderson Act. It was extended in 1965 and again last December. In each case, the electric utility industry, the nuclear reactor builders, and the insurance industry lobbied extensively for its passage, arguing that no nuclear power plants would be built without this limitation of liability.

What this means is that despite government and industry claims about the safety of nuclear power, insurance companies (which insure oil tankers, 747s, etc.) are unwilling to provide full coverage at rates that the utilities are willing to pay. Sen. Mike Gravel estimates that it would cost about $20 million per power plant per year to obtain $6 billion in liability coverage. Being legally exempted from having to provide normal liability coverage constitutes a tremendous subsidy to the nuclear power industry, and completely distorts any cost comparison between nuclear and conventional power plants (which are fully insured). This subsidy is at the expense, not only of the taxpayers in general, but particularly of the victims of any large-scale nuclear accident, who would be denied their right to sue for damages. Normally, a claimant could sue the power company and proceed against those controlling its assets (which are generally worth far more than $560 million).

In normal free-market operations, the existence of legal liability for a corporation's actions is one of the principal deterrents to reckless or irresponsible activities. Full legal liability is implicit in our usual discussions of free-market activity. Because of Price-Anderson, nuclear power plants stand outside the free market as special creations of government. The Price-Anderson Act is a travesty, a misuse of the law by the powerful at the expense of ordinary citizens. It should be repealed, the sooner the better. But, as noted above, Congress last December voted to extend the Act for 10 more years, and defeated amendments that would have allowed victims to sue utilities and reactor manufacturers if damages in an accident exceeded $560 million. Thus, the question arises: given the refusal of Congress to act, is a state measure like Proposition 15 justified?

On the one hand Proposition 15 represents a gross, political intrusion into private industry, complete with new regulations and increased taxes. On the other hand, it can be argued that such a drastic action, by California and other states, may be the only way to bring enough pressure on Congress so that it will act responsibly and repeal Price-Anderson. What we are faced with, sad to say, is a very mixed bag—a bad law which may be the only practical way to repeal another bad law. There are times when, faced with a choice between two evils, the only moral course is to choose neither. Many honest people may find Proposition 15 to be such a case. All one can do in such a case is to await the outcome and attempt to utilize it for good.

If we really need nuclear power, as supporters like Edward Teller assure us we do, then we must be willing to pay the full cost, including the true cost of liability insurance. If nuclear power plants are as safe as their backers tell us, then repeal of Price-Anderson would not be catastrophic. On the other hand, if these power plants are really so dangerous as to be uninsurable, then it would be far better to realize it now (whatever the short-term disruption), when they supply only a tiny percentage of our electric power, rather than 25 years from now when we are largely dependent on them. Repeal of Price-Anderson would provide the acid test of the free market that we urgently need.