TESTIMONY OF STEVE C. GRIFFITH, JR. DUKE POWER COMPANY ATOMIC INDUSTRIAL FORUM, INC. AND EDISON ELECTRIC INSTITUTE ON THE PRICE-ANDERSON ACT BEFORE THE SUBCOMMITTEE ON ENERGY AND THE ENVIRONMENT COMMITTEE ON INTERIOR AND INSULAR AFFAIRS June 11, 1984 My name is Steve C. Griffith, Jr. I am Senior Vice President and General Counsel of Duke Power Company. I appear before you on behalf of the Atomic Industrial Forum (AIF), the American Nuclear Energy Council (ANEC) and the Edison Electric Institute (EEI). I serve as Chairman of the Joint AIF/EEI Task Force on Price-Anderson Legislation. AIF is an association of over 500 domestic and overseas organizations interested in the development of peaceful uses of nuclear energy. Its members include electric utilities, manufacturers, architect-engineers, mining and milling companies, financial institutions, government entities, labor unions and others involved in nuclear industry matters. ANEC represents more than 100 organizations having an interest in nuclear power, including privately, publicly, and cooperatively-owned utilities, manufacturers, architect Testimony June 11, 1984 engineers, and various other firms involved in the nuclear electric power industry and its supporting fuel cycle. EEI is the association of investor-owned electric utility companies and its members generate about 76% of the electricity in the United States. Members of AIF, ANEC, and EEI have made substantial commitments to the use of nuclear energy in the generation of electricity. Duke Power Company is currently operating five nuclear units and plans on bringing a sixth unit on-line this year and a seventh in 1986. The nuclear electric power facilities presently in operation have, on the whole, resulted in significant economic savings to consumers. Nuclear power, despite recent economic problems for a small number of units under construction, can be economically competitive in many areas of the country with available alternative sources of commerical electric power. Nuclear power can also help to reduce dependence upon imported petroleum. Preservation of the nuclear option is essential to achieving and maintaining energy independence for the United States. My testimony today will address the background of the Price-Anderson nuclear insurance, indemnity, and liability law contained in section 170 of the Atomic Energy Act. I will also respond to the principal recommendations of the Nuclear Regulatory Commission (NRC) in its report to Congress pursuant to Subsection 170 p of the Atomic Energy Act, as amended in 1975. Decade (NUREG-0957). In addition, I will address briefly and B. BACKGROUND The original Price-Anderson law, as enacted in 1957, had the dual purposes of assuring compensation to the public in the event of a major nuclear accident and of removing the potential liability obstacle to private sector investments in nuclear power. The potential liability problem was specifically found by the Joint Committee on Atomic Energy to be a principal factor tending to frustrate the realization of the goals of the 1954 Atomic Energy Act, which had sought, for the first time, to make full use (under a licensing rather than government contract regime) of the free enterprise system in encouraging the widespread industrial applications of atomic energy for peaceful purposes. The potential liability problem and, equally important, the potential chaotic situation for claimants following a large nuclear accident, were pointed out in the 1956 Testimony June 11, 1984 study by the Legislative Drafting Research Fund of the Law School of Columbia University entitled, Financial Protection Against Atomic Hazards. The potential liability obstacle was removed by the enactment of the Price-Anderson amendments to the Atomic Energy Act in 1957. The original Price-Anderson law provided $500 million in government funds and required that private financial protection (which as a practical matter equated to nuclear liability insurance) be maintained in the maximum amount available, then $60 million. Thus, the original Price-Anderson amendments limited liability to the sum of government indemnity and private insurance, which remained at $560 million. Both the private insurance and the government indemnity were "omnibus" in nature, so that not only the named insured (or the person with whom an indemnity agreement was executed) was covered, but any other person who might become liable would thereby become an insured (or a person indemnified). This "omnibus" feature had important implications for claimants in situations where the only person liable under current legal principles might be underinsured, uninsured or even judgment-proof. The "omnibus" approach to coverage also had important implications in terms of economic efficiency and maximizing insurance capacity. For example, all subtier contractors and suppliers, as well as nuclear steam supply system vendors, architect-engineers, and constructors were covered under Testimony June 11, 1984 a single liability policy and a single indemnity agreement. insurance premiums and indemnity fees were paid for by the electric utility licensee. The The various principal contractors and their subtier vendors and suppliers did not need to buy insurance against this risk and include redundant nuclear liability insurance premiums or liability risk factors in their pricing. Moreover, despite the unusual nature of the risk from the insurance underwriting perspective, (i.e., postulated accidents with very low probability, potentially very large consequences and no actuarial data), the insurers were able to provide what was then an unprecedented amount of capacity. This was because the insurable financial exposure for a single facility could be identified in advance and the risk insured through a single policy. The potential for pyramiding of claims arising out of the coverage of a large number of related and unrelated parties involved in design, construction or operation of a single facility could thus be avoided and the maximum capacity of the industry could be committed and would be available no matter what private party, in privity with the licensee or not, turned out to be liable. The original Price-Anderson law also provided for the outlines of a system of claims administration and retained the flexibility to provide by additional legislation for further measures such as direct appropriations to pay claims in excess of |