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Utility Rates Going Up To Pay for Nuclear Plant Construction PDF Print E-mail
Written by Gerald L. Rudolph   
Monday, 07 July 2008
South Carolina Electric & Gas wants to boost rates 37% by 2019 to cover its share of two nuclear reactors costing $10 billion. The utility can cover the cost of the plants from customers regardless of whether the plant is finished or not, thanks to your state legislators. The bill allowing utilities to pass the financial risk of building new nuclear plants to customers passed in 2007 (The State Article )( Free Times Article )

But the financial risk of construction costs are not the only risks being passed to the public. Our U.S. Congresspeople are doing their part in assuring we assume risk unwanted by utilities.

The Resource Conservation and Recovery Act (RCRA) of 1976 was written on the premise that the generator of waste was responsible for the waste from "cradle to grave", that is from the generation to it's final disposal. Any liabilities coming from that waste is carried by the generator.  This means a company could not transfer ownership of waste it created to someone else, either a stranger in  a pickup truck or a reputable company, and wash its hands of the risk. If years later, someone became ill from the waste someone created or if property became devalued, the original generator of the waste would be responsible. However, the nuclear industry is the only exception of which I am aware. The Department of Energy (meaning the public) assumes ownership and responsibility for this waste as it leaves the premises of the power plant.

Another cost to the public comes from the Price-Anderson Act (wikipedia article here ).  This law limited the liability of the nuclear industry for accidents to $10 billion. I think it was raised to either $12 or $15 billion more recently. For comparison, one conservative estimate of the cost of Katrina is $200 billion which is similar to the cost of the three-mile island accident. Some nuclear accidents could dwarf even Katrina. Everything above the $12 to $15 billion would be covered by you and me and the rest of the taxpayers and the cost of that should be estimated and included in our cost estimates for nuclear power.

The risks related to accidents or to health and environmental costs related to waste may or may not be low, but they are certainly not zero and the costs of the public assuming this risk should be included. If an automobile insurance company considers me a higher risk than the general public, then they charge me more. At some point, they might decide I am such a risk that they will not insure me at any price.

Companies who do not (or can not) insure themselves through a third party (i.e. are self insured) are not in the long run more profitable simply by not having an insurance cost on their books. In the case of nuclear energy, however, they actually are more profitable because our congress has subsidized them by passed their cost of their self-insurance to us.

Actuarial science has algorithms that lead insurance companies to independent, objective assessments of risk. These algorithms include an estimate of the probability of an event occurring times the cost should the event occur. The algorithms are not as simple as probability times cost because of such things as multiple possible events, changing probabilities with time, etc. that make the calculations more complicated (see actuarial science article in wikipedia ). But the mathematical science is there to be used. The science of estimating risk provided by actuarial science should be used to calculate the estimated cost to the public of assuming these risks. That cost is being ignored in industry statements about costs.

But the situation is worse than actuarial methods alone would suggest.

(The following is a quote from mathematician David Gurr)


I would like to add that things are even LESS rosy than a typical actuarial analysis would indicate.  For small bets with favorable odds, gambling is sensible.  For very large bets with the VERY same odds, gambling is definitely not sensible due to the "break the bank" phenomenon.   When you lose a large bet you have zero chance of placing another bet.  If you lose one large bet you loose all future bets for all time -- an infinite loosing streak. Thus for large enough bets, all bets are losing propositions no matter what the odds.  And thus no insurance company will back you, no matter how high your premiums.
...

Nuclear proponents like to cite "average" safety rates that ignore "outliers" such as Chernobyl.  But for statistical phenomena that have "long tails", the outliers are in practice, the most important part of the statistics.  Unfortunately, for a nuclear power plant, there are very very few good outliers  (discovery of neutrinos) but a good number of disastrous ones (take your pick).

So if one does a statistical analysis taking this into account, the long term "average" benefits of large scale nuclear power are likely to be dominated by the consequences of things that are not part of "the engineering analysis".  These include criminal stupidity (Chernobyl), catastrophic failure due to "unrelated" catastrophic failure (earthquake from unknown fault-recent failure in Japan due to known fault), intentional catastrophe (war or terrorism), unintended side effect (nuclear proliferation).

To date the environmental degradation due to all nuclear activities is still quite small relative to other human activities.  But taking this fact and converting it to "statistics" of this quality is {{fill in the blank}}.  The insurance companies are not chomping at the bit to insure nuclear power.  Ergo they don't believe their statistics.  Why should any one else do so?

Both your state and national legislators are passing all risks, financial and otherwise, to the public. Contact your state legislator and ask how they voted on S 431. The link to the house version is there. Write the PSC and tell them you do not want rates raised to pass the financial risk of new nuclear plants to the public. The official deadline has passed for comments on an application by SCE&G for construction and operation of a nuclear facility at Jenkinsville, but they will still post comments if you hurry.
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3.25 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."
 
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