Insuring Nuclear Safety

The Three Mile Island accident has led to a welcome reassessment of the system which supposedly makes sure that nuclear power plants are designed, built, and operated safely. And while all five major studies of how TMI happened have concluded that nuclear power generation should continue, their findings on safety mechanisms are cause for alarm.

The most important study was that of the President's Commission, headed by John Kemeny. What it found was a Nuclear Regulatory Commission that is incompetent to the task. Prior to TMI, "there was no systematic method of evaluating [plant operating] experiences and looking for danger signals of possible generic safety problems." Supervision of safety issues is "confused, inadequate, and haphazard." The mind-set of those supervising nuclear safety is dangerously flawed; an attitude of complacency prevailed before TMI.

These findings were echoed two months later by the Rogovin report, commissioned (at a cost of $3 million) by the NRC itself. The NRC, it concluded, is "not so much badly managed as it is not managed at all." There are "many institutional disincentives to safety." Once again, Rogovin found "an attitude of complacency pervaded both the industry and the NRC."

What about the myriad NRC rules and regulations? According to the Kemeny report, "The existence of a vast body of regulations by the NRC tends to focus industry attention narrowly on the meeting of regulations rather than on a systematic concern for safety." Added the Rogovin report, many utilities "regarded bare compliance with NRC minimum regulations as more than adequate for safety."

If those charges sound disturbingly familiar, well they should. Precisely this same tale of bureaucratic incompetence, inability to identify potential hazards, and the substitution of mountains of regulations for meaningful safety efforts applies in full measure to the Federal Aviation Administration (see "Is This Any Way to Run an Airway?" REASON, Jan. 1979). The most recent assessment of the FAA, by the General Accounting Office, found that the agency lacks "effective systems for identifying safety hazards, a comprehensive planning process to address safety issues, an adequate system for planning and approving individual safety programs, a proper system of controls to govern the implementation phase of safety projects, or sufficient evaluation of safety programs and projects."

Yet in the light of these facts, what remedy did both Kemeny and Rogovin urge? The replacement of the independent Nuclear Regulatory Commission, made up of five commissioners, with a nuclear regulatory agency, headed by a single administrator and located in the executive branch of the government. In other words, an agency modeled explicitly after the FAA! Among those supporting a nuclear agency modeled after the FAA and EPA is consumer advocate Ralph Nader. "You always want to go that way," he told reporters last fall. "That's how you focus responsibility and accountability."

Yet what Nader, Kemeny, and Rogovin have all missed is the underlying reason for the failure of our nuclear safety regulatory system. It is not the lack of a dictatorial administrator or adequate funding. It is rather, as Adam Reed points out in this month's cover story (p. 16), the lack of the feedback mechanism provided in other fields by the insurance industry. In other complex, risky process-control operations (oil refineries, chemical plants, etc.), insurance company safety experts work cooperatively with plant designers, builders, and operators to ensure that the very best safety technology is employed. They have every reason to do so—their own money is at stake. And those who don't cooperate fully pay the price in higher accident risks and higher insurance premiums.

In the nuclear industry—as Dr. Reed makes disturbingly clear—this vital feedback of information has not existed. Because the government has assumed responsibility for safety standards and inspection (and has taken on the principal insurance role, as well), what exists instead is an adversary relationship. Utilities must obey every jot and tittle of NRC regulations—or else. The stick (of NRC license revocation) has been substituted for the carrot (of lower insurance rates). And the tragic results are that bureaucratic minimum standards become maximum standards, and even those are evaded at times, since the NRC must prove violations in order to take action.

No, the answer is not to replace a commission bureaucracy with an agency bureaucracy. It is, instead, to turn the safety standard-setting and enforcement process over to the private sector—just as has always been done in the other process-control industries. By abolishing the NRC and repealing the government insurance program (the Price-Anderson Act), normal market mechanisms would come into play. A safety standard-setting organization, reporting to the insurance industry, would motivate compliance with state-of-the-art standards by appealing to the self-interest of reactor designers, builders, and operators.

Impractical? Fanciful? Guess again. In January the prototype of just such a mechanism was created by the utility industry. A new organization called the Institute for Nuclear Power Operations was set up in Atlanta with an $11 million annual budget. INPO is developing safety criteria for the operation of nuclear power plants. It will provide operator training courses and emergency management capabilities. And it will conduct an annual inspection-audit of each participating nuclear power plant.

But the key to making INPO work is the link with insurers. Two such links are in prospect. The first, about to be implemented, will link compliance with INPO inspection and recommendations with eligibility to participate in an insurance pool to cover the cost of replacement power in the event a reactor is disabled. Up till now no such insurance has been available, but the pool has just been organized on an industry-wide basis.

Once this INPO-insurance link is functioning, the next step—already being considered by insurers—would be to use INPO audits for setting rates for liability and property damage insurance. That would close the loop which decades of federal regulation have left gapingly open.

The scientific consensus supports nuclear power as a practical, efficient, and potentially safe method of producing electricity. What is urgently needed is to create an institutional framework that will motivate the effective use of the best available safety technology. The present bureaucratic framework has failed to do the job. A private, marketplace framework could do it, as it is already doing for oil refineries and chemical plants. The time to act is now.