Proposal: Fund NRC by a fee on each kw-hr generated by nuclear energy
NRC is an independent safety regulator working for the US public
Its services mainly benefit customers that in electricity service areas that include nuclear power plants as suppliers
Customers will benefit by cost efficient, effective safety regulations that enable continuous improvement in plant operations and performance.
Customers will benefit by cost efficient, effective safety reviews for new technologies that offer the promise for even greater improvements in performance, fuel efficiency, waste reduction, security and reliable safety features or systems
Existing nuclear plants produce approximately 780 billion kilowatt-hours of electricity each year
The NRC annual operating budget today is approximately $950 million. It is paid, not directly by customers, but by the regulated entities. The vast majority of the NRC’s budget comes from companies operating existing nuclear power plants.
This results in a situation where established suppliers in a market can influence the ability of an independent regulatory agency to approve new entrants into their market. Elected officials tend to pay attention when large companies complain about the unfairness of charging them for “services” that they are not using. Only a small portion of the operating companies are currently interested in advanced nuclear reactors or SMRs, for example.
The current fee system also means that the regulatory body does not believe that it should better serve nuclear energy customers by enabling increased nuclear electricity production at lower costs.
That does not mean lower requirements or scrutiny; it means implementing changes that reduce redundancy, eliminate excessively long comment periods, streamline obstructionist hearing processes, and eliminate — without a costly, time-consuming, uncertain “exemption process” — rules that are specifically written for a particular technology.
Fund the activities of the Nuclear Regulatory Commission with a designated tax on nuclear generated electricity. One to two mils per kilowatt hour (0.1-0.2 cents) would be sufficient.
This has been shown to be an effective and logical way to collect revenues to pay for public services and infrastructure generated by using nuclear energy. It is the way that the Nuclear Waste Fund has accumulated a balance of $30 billion. It is similar to the way that highways are funded by collecting taxes on gasoline and diesel fuel and the way that the FAA and TSA are funded by fees added to airline tickets.
Any excess fees collected should be allowed to accumulate — perhaps with a certain carryover limit — because NRC expenses aren’t well suited for an annual budget cycle.
The customers for the service — in this case, the portion of the public served by nuclear generated electricity — are the ones who should pay the agency providing the service.
It’s always been kind of a wry joke inside the nuclear industry that regulated entities are required to pay for “the services” provided by someone who comes and inspects your work, adds new requirements, questions every statement, reviews every program, and imposes fines if errors or emissions are found.
This is a “half-baked” BFO concept with a lot of details to flesh out. You have to expect materials like this sometimes when you visit a blog offered to the public by an opinionated and not terribly disciplined thinker.
Comments are welcome. Revisions to the original post should be expected.
Gotta go finish my chores.
Interesting. Here are some questions that I that I think may be helpful.
1. Wouldn’t this proposal still favor existing actors over new entrants? The NRC may not be inclined to do the necessary work to regulate new reactor designs and new fuel designs as these new entrants would not be funding the regulatory system.
2. Wouldn’t this tax lead the NRC to favor the construction of larger and larger sized reactors?
A1): Not as much as now in that currently new entrants are charged for the engineering work that the NRC uses to review their work but the NRC engineers have no incentive to work efficiently. Since there is no benefit for success, they can just pile on the hours, higher and deeper.
A2): Not really. It should encentivize them to approve systems that require the least NRC oversight with the greatest output. Larger reactors are one path, but modular reactors with inspections at the factory and regional oversight of the same factory built units rather than oversight at each and every reactor seems reasonable too. More energy out per unit oversight.
1. If the NRC favored existing reactors over new reactors, eventually there wouldn’t be sufficient reactors to pay for the NRC’s budget. It would be in the NRC’s interest to ensure that it is constantly bringing online new power plants to increase revenues. Arguably, this does create a perverse incentive for the NRC to apply lax regulation in order to increase the tax base.
2. It would lead the NRC to favor increasing nuclear kWh generated, by whatever is the path of least resistance. That could be SMRs, potentially – maybe by buildings lots of SMRs rapidly, more kWh’s of new generation might come online per year than building larger reactors. Difficult to say for sure one way or the other. I think if I were the head of the NRC, I’d be under pressure to try to get all applicants through the approval process as quickly and cheaply as possible so as to broaden my tax base quickly.
Which, is why this is probably a bad idea – because it creates a conflict of interest within the NRC itself, because it’s charter is to ensure safety, but it’s funding model would pressure it to approve new plants to increase the kWh’s being generated.
I don’t agree it automatically creates a conflict of interest within NRC. I agree it might create a perception of such for people who want to see it as such. But then I don’t agree regulations directly create (or equate to) safety either. They may create an envelope for the concept, but safety in any endeavor resides in the knowledge, experience base, and integrity of the people working the endeavor, not the regulations. And I will give the NRC the benefit of believing in the integrity of their Staff.
That said, it annoys me when the NRC Public Affairs group says on the NRC Blog page, that so-and-so plant will be safe during a predicted weather event because the NRC inspectors will be there. No, that plant is safe because of the plant people who will be there, NRC or no NRC.
The problem with the current NRC budget system (for the next year) is it requires a crystal ball, and nobody has one. A few years back they geared up for about 20 new license applications, that never happened. I do agree something needs to change, but I was taught do what’s right.
It’s possible the NRC would do a fine job with such a funding model, but it just seems to create the conditions – the fiscal incentives – for the NRC to gradually decrease it’s standards. That’s just a fact, because it becomes absolutely true that the budget of the agency is directly tied to kWh’s generated, and so there is going to be reward for growing kWh’s generated, and less reward for less kWh’s generated.
Much of human behavior can, sadly, be directly attributed to the system of incentives in place to drive that behavior. Just look at how that affects different businesses differently, based on the incentives that the board of directors and CEO put in place.
I had the same thoughts as well about a perceived conflict of interest. For example, if the number of reactors decreases, the general public may not accept a reduced NRC budget (i.e., a reduced level of safety), unless one could argue that most of the expenses scale with generation.
I think the only thing that people would agree to would be to independently determine NRC’s overall need (budget), but then divide that budget based on kW-hrs. In other words, the fee per kW-hr would be determined each year by dividing the (independently determined) NRC budget by the total number of kW-hrs generated. There would be a bit of uncertainty in the total collection…
One advantage of this system is that it would reduce the economic burden on smaller reactors somewhat, those reactors being the ones that are having the most economic difficulty (and are at the greatest risk for closure). And of course, the benefits to SMRs would be enormous; in fact necessary for them to be viable.
It’s possible the NRC would do a fine job with such a funding model, but it just seems to create the conditions – the fiscal incentives – for the NRC to gradually decrease it’s standards.
NRC employees are government workers who are compensated with a fair, reasonably generous wage scale and fixed, predictable benefits. They do not have a bonus structure tied to the agency’s budget or fee income. Their culture and motivational system is based on instilling pride in mission accomplishment with the mission being as follows:
The NRC licenses and regulates the Nation’s civilian use of radioactive materials to protect public health and safety, promote the common defense and security, and protect the environment.
I believe that nuclear generated kilowatt-hours are a reasonable measure for how well radioactive materials are being used to protect public health and safety, promote the common defense and security and protect the environment. I do not see any conflicts of interest.
Quote from the NRC website: “… the NRC is required, by law, to recover about 90 percent of our budget authority directly from the industry that we regulate. This means the American taxpayer only foots the bill for 10 percent of the agency’s budget. The NRC received a bit more than $1 billion for FY 2012, so the amount we will recover in fees by Sept. 30 is approximately $909.5 million.”
So its small beans to raise licensing fees 11% or so and fully fund the US NRC by the nuclear industry. That way, they’re cutting their own budget when an existing plant chooses to decommission, economically forcing them to downsize in sync with industry contraction. Elegance in policy.
I imagine the kw-hr proposal is to exempt college, universities, and other small non-power reactors – not many would object.
One of my side businesses is writing NRC License exams. The $268 per NRC man hour makes it fairly easy to compete quite profitably on price.
I would like to see nuclear power used for some process heat in addition to generating electricity. These process heat nuclear power plants need to be regulated.
My energy plan would including doubling nuclear electricity in the US during the next 20 years. New types of plants and new plants take a while to build, no fees from generated electricity would be collected until after the plant is planned and built.
I prefer the hourly fee but think the fee should be used only for the NRC. A dedicated fund. You work. You get paid. You spend it. Any extra funding would be hammered out by congress or not.
I would like to see nuclear power used for some process heat in addition to generating electricity. These process heat nuclear power plants need to be regulated.
Perhaps a fee based on thermal power would be more appropriate. That is already the basis for many regulations and tech specs.
In general, I don’t like to pay for anything “by the hour.”
Paying by thermal power capacity is OK for a running plant.
When would NuScale, for example, first pay anything to the NRC?
When would a new plant start and end payments?
New plants begin paying when they start generating. Admittedly, this is effectively a loan/investment by government in anticipation of a long string of future payments.
Sort of like educating the public, investing in medical research, or funding “pure” research
Rod: It may be “half-baked”, but there is a DELICIOUS smell coming from the oven!
I admit it, I just LOLed.
I love the idea, but a life-long liability to the NRC engineer to prevent undersighting the industry should also be included.
Great comments so far…
I agree that the fees need to be looked at and revised. I believe part of what is going on here is driven by NuScale and SMRs. Take NuScale and compare it to an ESBWR. One has 12 reactors and has 600 MWe of capacity, the other is one reactor with 1500 MWe of capacity. In the currently regime, I believe the NuScale would have 12 times the fees of the ESBWR.
One comment I would have about the proposal is what if the NRC shuts down a reactor for safety reasons? It would not be generating, thus no fees? That does not seem right. What about fees pre-startup and post-shutdown? How would these be handled?
There are solutions to these. Why not a fee based on MW of capacity (thermal or electrical)? Are there reasons a 600MW – 12 reactor facility should be charged more than a 600 MW – 1 reactor facility? We could address those too.
This is currently being addressed by an NRC proposed rule. A 12 – unit NuScale design licensee will not pay 12 fees if the rule is adopted. The proposed rule is in ML15310A398 (NRC ADAMS). At a glance it looks like a reasonable approach, however it has to happen.
I will also add you should try to find that document with the currents comments included. It might be an eye opener to see just who is complaining about it. No surprise, can’t stand the potential competition.
One comment I would have about the proposal is what if the NRC shuts down a reactor for safety reasons?
There would be no direct link between any individual plant and the NRC’s safety function. There are 100 plants and 365 days per year. It would be difficult for anyone to claim that the fee income would influence a shutdown order.
It MIGHT discourage imposition of lengthy shutdowns for “punishment” or “culture” reasons if the safety issue has been satisfactorily resolved.
@Rod I want to make sure you did not misinterpret my comment. What I am saying is that if a plant were shut down they would still be taking up NRC resources, and yet not paying any fees because they were not producing electricity. It does not seem right to make generating plants pay for the regulation of a plant that is not generating.
I respect your point about punishment.
What I am saying is that if a plant were shut down they would still be taking up NRC resources, and yet not paying any fees because they were not producing electricity. It does not seem right to make generating plants pay for the regulation of a plant that is not generating.
Plants that are shut down are not generating any revenue. For those in markets that are traditional electricity monopolies with defined territories and regulated rates of return, the customers are paying for all of the company’s expenses while their do whatever they need to do to “get out of jail” and get the plant running again. Under current conditions, plants that have challenges — often due to circumstances beyond their control — must pay additional NRC fees that also must come from ratepayers.
Those MAY contribute to a permanent shutdown decision instead of patiently working to fix the problem and restore the plant to operating condition.
I think it is reasonable to have a system in place where all nuclear generated electricity is providing the resources for the NRC to perform its safety mission. Their budget shouldn’t be seen as coming from one plant or another at any particular time.
@Rod We are clearly coming at this from different directions, and I am not sure we will ever agree. The principal of a rate regulator is “cost-of-service”. If there is a cost to serve a customer, then the customer should bear that cost of being served, without subsidy. If some customers require more NRC “service” than those customers should pay more, at least in the eyes of a rate regulator.
I still think that a well run plant that operates at a high capacity factor might pay too much for regulation in a per MWh environment, and a plant that runs poorly and at a low capacity factor would pay too little. A fair question is, how imbalanced would it be, and would it be worth being concerned about. Maybe it could be like customer electricity rates, with a fixed monthly charge and then an additional per MWh production charge. That could provide some balance to the equation.
Looks like I, mostly, agree with you Rod. Last July I wrote (of Britain’s regulator: ONR) “UK Government framed legislation such that a large fee, probably about £40 million, is charged up front for reactor approval … A better system would’ve seen the approval fee mostly paid for by a tiny tax on nuclear power, with an up front fee of, say 10% of approval costs. That would force immediate costs on the vendor of ~ £4 million.”
Last November, not last July!
Just curious, what fraction of EPA’s budget comes from regulated industries? Or other agencies for that matter?
How about having the tax payer pay for most of NRC’s costs, or a t least a much larger fraction?
@jim This is also an interesting idea. I do not know the answer to your EPA question, although my impression is that emissions permits are fairly costly. Closer to the electricity industry I am fairly certain that the hydros bear the complete cost of their FERC regulation and that none of the FERC hydro compliance costs come from taxpayers.
All utilities recover all compliance costs from ratepayers – or they’re losing money.
Simple as that.
One of the benefits of a molten salt reactor is that it can be safe without a lot of the structures and systems required by water cooled reactors. This makes for simpler designs and less expensive construction. But it also simplifies regulation. There’s no need to review the design for the containment dome, or observe the construction of the containment dome, or periodically inspect the containment dome, if there is no containment dome.
Is there some way to add a complexity adjustment to your per-MWh tax?
@Jim Van Zant
No. In my opinion, it’s small enough to be a “no never mind” while still providing necessary resources for the function of regulation.
Besides, what portion of current regulatory effort is expended on the tasks you identified as unnecessary? Are you certain that your preferred design will not introduce new, time consuming issues that are not associated with today’s reactors?
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