Subject:        Recent Speeches by Chairman Jackson

           United States Nuclear Regulatory Commission
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                       Washington, DC 20555
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No.   S-98-31


                  Challenges as Opportunities:
     Regulatory Activities in the Face of Industrial Change

                               by

               Dr. Shirley Ann Jackson, Chairman
               U.S. Nuclear Regulatory Commission

          American Nuclear Society 1998 Winter Meeting
                        Washington, D.C.
                       November 16, 1998


Good morning.  I am pleased to participate in this plenary session of the
ANS 1998 winter meeting.  While the theme of this session is "Challenges
and Opportunities for Nuclear Science and Technology," I find it helpful
to think of challenges as opportunities.  The recent focus on the
mitigation of global warming, culminating in the Kyoto Protocol, has given
renewed emphasis to the need for emissions-free electrical generation. 
This naturally leads to a consideration of the role of nuclear power,
since it is an emissions-free electrical generation source.  In fact,
there has been a push to provide nuclear generation with a "level playing
field," as various emissions trading schemes emerge, both nationally and
internationally.

These considerations would appear to portend a brighter future for nuclear
power and the use of nuclear technology worldwide.  This suggests a need
and an opportunity for the optimization and continued use of existing
nuclear generating facilities, and the construction and use of new reactor
technology. However, all of this is occurring against the backdrop of
several continuing challenges: the economic deregulation of electric
utilities, the continued non-resolution of the disposition of spent fuel
and high-level waste, and public perception of the safety of nuclear
technology, including nuclear power which may be improving here, but which
is rooted in less positive governmental attitudes toward it in some
countries abroad. 

Economic Deregulation of Electric Utilities

The Energy Policy Act of 1992 included provisions that enabled wholesale
competition in electricity generation.  In 1996, the Federal Energy
Regulatory Commission (FERC) issued two rules promoting wholesale
competition through open access transmission.  The final rules are known
as FERC Orders 888 and 889.  Rule 888 requires that a public utility will
provide transmission services to its wholesale competitors on the same
terms as it provides those services to itself.  Rule 889 supports
wholesale competition by requiring that the availability and cost of
transmission be public, current, and posted on the Internet via a common
database.  

This movement transitioned quickly from the wholesale to the retail
environment.  At the Federal level, several bills were introduced in the
104th and 105th Congresses.  Although no proposed Federal legislation has
yet become law, many States already have moved to deregulate the retail
electricity generation market.  The States of California, New Hampshire,
Pennsylvania and Rhode Island have been leaders in enacting rate
deregulation and restructuring legislation. Most recently, Connecticut,
Illinois, Massachusetts and Virginia have enacted such legislation. In the
most recent election (November 4, 1998), voters in California and
Massachusetts defeated ballot propositions aimed at repealing state laws
on electricity deregulation.  

This evolving environment presents several challenges from a nuclear
regulatory perspective. They are:

The need for a continued, more sophisticated focus on safety in
nuclear operations in a
     manner which allows nuclear generators to operate successfully in a
     more competitive market.  This requires the consistent use of
     maturing risk assessment methodologies, including probabilistic risk
     assessment (PRA).

Electrical grid reliability

The need to respond to new business/ownership arrangements

         License Transfers
         Decommissioning Funding Assurance

License renewal

I now will speak to each of these challenges in turn.

The Use of Risk Assessment in Nuclear Operations and Nuclear Regulatory
Activities

The use of  risk assessment in a nuclear activity is a systematic method
for addressing these questions:  What can go wrong?  How likely is it? 
What are the consequences?  A typical probabilistic risk assessment (PRA)
at a commercial nuclear power plant considers the probability and effects
of individual component failures, and of human performance, on the ability
of that facility to avoid damage to the reactor core in the event of an
accident.  The results of such analyses provide useful insights into
individual plant vulnerabilities, and can define the importance of one
system relative to another.  One output of such an analysis is what we
refer to as "core damage frequency," (that is, the probability of an
initiating event followed by a series of safety system failures which
would lead to core damage on a per reactor-year basis).  The analysis
becomes very useful in assessing the effects of proposed changes to the
facility; that is, changes in core damage frequency due to a proposed
change provide an indication of the risk significance of the proposed
change. 

This form of analysis allows the NRC to focus greater attention on the
issues of greatest safety significance, while reducing unnecessary
regulatory burden for our licensees.  Insights into risks presented by
proposed changes to licenses of operating facilities have allowed us to
approve extensions to allowed outage times for safety-related equipment. 
These extensions allow for more effective maintenance planning, reduced
outage scopes, and fewer unnecessary plant transients necessitated by the
inoperability of equipment that is of low overall risk significance. At
pilot facilities, risk information has been used to make fundamental
changes in the way the plants are operated and maintained.  For instance,
at the South Texas Project, a graded system of Quality Assurance has
redirected licensee attention toward components and activities that
present the greatest risk.  At Surry, Arkansas Nuclear One, and Vermont
Yankee, the NRC has nearly completed risk-informed in-service inspection
program reviews, which will allow these facilities to conserve effort and
realize reductions in radiation exposure in their inspections of
safety-related systems and components. 

The NRC also has turned its attention to the application of risk
information to overall performance assessment, inspection, and enforcement
at commercial nuclear power facilities. In a recent and ongoing effort,
the NRC, with the active cooperation of its stakeholders, is developing a
new plant assessment process.  The new process is built on "cornerstones
of safety."   Which represent central elements of reactor safety, such as
minimizing transients, preventing accidents, ensuring the capability to
mitigate accidents, ensuring an adequate level of radiological protection
to both nuclear workers and the public, and ensuring that adequate
radiological safeguards are in place.  Risk information can then be used
in determining what is important to inspect in a nuclear plant, and what
can be monitored through the use of performance indicators.  

Based both on objective performance data and specific inspection findings,
the new performance assessment will be more objective, and more focused,
than our existing assessment processes.  It will produce more predictable
regulatory responses to observed performance weaknesses.  I am encouraged
by the level of support these efforts have received from the nuclear power
industry, and from public interest groups.  

For completeness, I will note that when the subject of risk-informed
regulation shifts from the power reactor area to fuel fabrication, waste
disposal, and other non-reactor fields, implementation becomes more
difficult.  In the power reactor arena, there are a relatively small
number of licensees (less than one hundred); and fundamentally, 2 types of
power reactor technology boiling water reactors and pressurized water
reactors supported, in the US, by 4 major vendors.  Non-reactor materials
users number approximately 20,000 NRC and NRC Agreement State licensees
and comprise approximately 40 different activities, devices and systems
ranging from devices which employ low-activity sealed  sources to large
fuel-cycle facilities or a geologic repository for high level waste
disposal.  The power reactor industry has one basic product electricity
and is supported and organized by owners' groups and industry
organizations, such as NEI.  Nuclear materials licensees provide
everything from radiography services to fuel assemblies for power
reactors, which limits the potential for overall unification. This level
of diversity complicates considerably the NRC effort to risk-inform
nuclear materials regulation.

Nonetheless, the Commission directed the NRC Office of Nuclear Material
Safety and Safeguards (NMSS) to examine the extent to which risk-informed
and less prescriptive regulation can be applied to non-reactor nuclear
activities in a manner similar to that employed with the power reactor
industry. relating the sophistication of the analytical method for
determining risk to the risk presented by specific nuclear materials
activities will be important in establishing a more risk-informed
regulatory process.  a broader range of licensee and regulator
circumstances, such as the impact of NRC actions on its Agreement States,
will have to be considered.

There have been some examples of the successful application and use of
risk information outside the power reactor arena. For example, the NRC has
encouraged the use of Integrated Safety Analyses (ISAs) in fuel cycle
facilities.  Such analyses involve the identification of safety hazards at
a given facility, analysis of the how those hazards may result in
accidents, and classification of the components relied upon to prevent or
mitigate the accidents. While much more qualitative than the PRAs
performed for operating reactors, these methodologies represent structured
and worthwhile tools in the effort to identify and address risk.

Electrical Grid Reliability

In recent years, NRC probabilistic risk assessments have made it clear
that a "Station Blackout" at a nuclear power station is a major
contributor to core damage frequency.  The term "Station Blackout" is
used, in the nuclear power industry, to refer to an event in which a loss
of offsite power is coupled with the inability of the onsite emergency
diesel generators to provide vital power to plant safety equipment.  While
the estimated frequency of these events is very low, because of the
potential consequences, the possibility of a Station Blackout is an area
of NRC focus. 

The analysis of power reactor experience in this area shows that nuclear
generating stations are robust in design and operational standards,
allowing them to help stabilize the electrical grid. However, analysis
also makes clear that nuclear generating stations are vulnerable to grid
disturbances, and especially to loss-of-offsite-power events.  Grid
reliability governance must take account of these factors.  Standards of
performance, operational criteria, and training of personnel all must be
addressed, especially as Independent System Operators (ISOs) are
established in response to deregulation.  The NRC has established a grid
reliability action plan to address concerns regarding the impact of
utility deregulation on the reliability of the electrical grid in
supplying offsite power to nuclear power plants.  As part of the plan, 
the NRC has been working with other agencies with jurisdiction over grid
reliability to address our concerns.

The DOE has created a working advisory committee on the reliability of the
U.S. electric system. Just last month, this task force submitted a final
report to the Secretary of Energy.  The report recommended that Federal
legislation be considered to clarify the authority and responsibility for
setting reliability standards, and that the FERC should review the policy,
standards, governance, and organization of reliability entities.  The
report also identified the need to take planning and operating actions
that support the unique power requirements of critical facilities such as
nuclear power plants.  The task force has issued two position papers one
related to technical transmission issues, and the other addressing [the
roles and responsibilities of] Independent System Operators.   Grid
reliability was discussed at a recent Senate Energy Committee hearing on
electricity pricing abnormalities. The NRC will continue its coordination
with the DOE and other agencies, and will continue to monitor closely the
impact of electric utility restructuring and evolving legislative
initiatives on grid reliability. 

Responding to New Business and Ownership Arrangements

On August 19, 1997, the Commission issued a final policy statement on
electric utility restructuring and deregulation.  The policy statement
indicates that the NRC will continue to conduct its financial
qualifications, decommissioning funding, and antitrust reviews; will
identify all direct and indirect owners of nuclear power plants; will
establish and maintain working relationships with rate regulators
(including the FERC and the State PUCs); and will reevaluate the adequacy
of our regulations in this area. NRC staff guidance has been developed for
antitrust reviews, licensee financial qualification reviews, and
decommissioning plan reviews.

     License Transfers

     We also have seen an increase in license transfer applications,
     primarily as a result of corporate restructuring actions in
     anticipation of electric utility industry deregulation.     To
                                     ensure that license transfers are
                                     conducted effectively and promptly,
                                     the NRC has issued a proposed rule
                                     (which will become final in December
                                     1998) that would provide uniform
                                     rules of practice for handling
                                     hearing requests associated with
                                     license transfer applications.  The
                                     adjudicatory process will be
                                     streamlined by allowing more informal
                                     hearings for license transfers.

     Corresponding guidance documents have been developed for NRC staff
     review of license transfer applications, including the establishment
     of technical and financial qualifications of purchasers, and the
     evaluations of foreign ownership and control limitations.

     Decommissioning Funding Assurance

     Under the Atomic Energy Act, the NRC has general authority to
     regulate the decommissioning of the nuclear facilities and materials
     that it licenses.  NRC decommissioning regulations have required
     power reactor licensees either to set aside funds periodically in
     external trust fund accounts or to provide third-party guarantees for
     estimated decommissioning costs.  

     As such, by the time a licensee permanently ceases operations at the
     end of its licensed term, the total amount of funds estimated as
     needed to complete decommissioning is expected to be available.  In
     the emerging environment of electric utility restructuring, the NRC
     has had to reevaluate certain aspects of these provisions for
     decommissioning funding assurance, including the NRC definition of
     "electric utility," the potential impact of new ownership
     arrangements, and the problem of above-market or "stranded" costs.  

     On September 22, 1998, the NRC amended its regulations on
     decommissioning funding for nuclear power plants to reflect the
     conditions expected from rate deregulation.  The amended rule, which
     will take effect later this month, modifies the NRC decommissioning
     regulations in four areas.  

          It identifies which licensees may use the external sinking fund
          method of financial assurance for decommissioning exclusively,
          and identifies additional financial assurance mechanisms that
          may be used for decommissioning.  

          It permits nuclear power plant licensees to take credit on
          earnings for prepaid decommissioning trust funds.

          To keep the NRC informed of licensees' decommissioning fund
          status, it requires licensees to report periodically to the NRC
          on the status of their decommissioning funds and on any changes
          to their external trust agreements.    It adds a definition of
          "Federal Licensee" to further clarify the issue of which
          licensees may use statements of intent.

     License Renewal

     Some nuclear power companies have decided that, in addition to
     optimizing the operation of existing plants, extending the license
     terms of these plants from 40 years by an additional 20 years makes
     good business sense.  The NRC currently is reviewing license renewal
     applications from Baltimore Gas 

Electric Company and Duke Energy for their Calvert Cliffs and Oconee nuclear plants, respectively. We expect more. The Commission has issued a policy statement laying out its expectations for a focused review of these and other license renewal applications, built upon our license renewal regulations: 10 CFR Part 54 (for technical issues) and 10 CFR Part 51 (for environmental reviews). Case-specific orders for both of the existing applications have been issued by the Commission-laying out an adjudicatory schedule aimed at completing the license renewal process in 30-36 months. Spent Fuel and High-Level Waste The Nuclear Waste Policy Act of 1982 and the Nuclear Waste Policy Amendments Act of 1987 specify a detailed national program for deep disposal of spent fuel and HLW in a geologic repository. Under these statutes, the Department of Energy (DOE) was given responsibility for characterizing a repository site, developing a design, and for constructing, operating, and eventually sealing, a repository. The Amendments Act directed the DOE to investigate only one potential location for this repository at Yucca Mountain, Nevada. In 1992, the Energy Policy Act directed the Environmental Protection Agency (EPA) to develop environmental standards specifically for the proposed repository at Yucca Mountain, that are to be based on, and consistent with, recommendations of the National Academy of Sciences. Under existing law, the NRC is obligated to implement the environmental standards for Yucca Mountain, to consult with the DOE prior to licensing, to comment on the adequacy of the DOE site characterization activities, and, if warranted, to issue a license to the DOE to construct and operate the repository. To implement the site-specific health and safety standards mandated by the Congress, the NRC is developing its own implementing regulations, which will specify the licensing criteria for the proposed repository at Yucca Mountain. The primary responsibility for safety and demonstration of compliance with environmental standards rests with the DOE. The NRC task, prior to issuing a license, will be to determine that reasonable assurance exists for compliance with applicable standards and regulations. The DOE has completed a 5-mile exploratory tunnel into Yucca Mountain. DOE scientists now are using the exploratory studies facility to assess the viability of the site as a permanent repository. We understand that the DOE viability assessment is to be submitted to the President and the Congress later this year. As a part of its pre-licensing role, and to prepare for the evaluation of the repository license application, the NRC intends to review the technical basis of the DOE viability assessment. The focus of this review, as well as of the NRC HLW regulatory program as a whole, is the NRC attempt to understand (and, eventually, to resolve) those key technical issues most important to performance of a high-level waste repository. As we work toward this objective, the NRC will continue to provide early feedback to the DOE on potentially significant site, design, or assessment issues as they are identified during site characterization. In addition, we will complete the development of regulations for geologic disposal at Yucca Mountain, and continue to maintain our capability for regulating the transportation and storage of spent nuclear fuel. The Future Looking to the future, in May 1997, the NRC certified the General Electric Advanced Boiling Water Reactor (ABWR) design and the ABB-Combustion Engineering System 80+ design. Both the ABWR (a 1,350-megawatt boiling water reactor) and System 80+ (a 1,400-megawatt pressurized water reactor) are evolutionary designs that incorporate features to prevent and mitigate the effects of severe accidents. These certifications marked the final step in a 10-year effort that encompassed the development and promulgation of 10 CFR Part 52 (a regulation forming the basis for a streamlined licensing process for new reactors), the implementation of the design certification process, and, overall, the most rigorous technical and safety reviews ever performed for a nuclear plant design. The goals of this process included standardization, enhanced safety and reliability features, and a more stable and predictable licensing process. In September of this year, the Final Design Approval (FDA) for the AP600 design (a 600-megawatt pressurized water reactor) was presented to Westinghouse Electric Company. The issuance of this FDA marks the completion of a 9-year technical review phase, and signifies the NRC readiness for initiation of the design certification rulemaking phase. This safety review was particularly challenging for the NRC staff because the AP600 uses many design features that are not found in current operating reactor designs. It is one of the first designs submitted for NRC review to rely primarily on passive systems, using basic forces such as gravity, natural circulation, and stored energy for plant safety and accident mitigation. Even given the advantages of these next-generation designs, the timing and likelihood of renewed demand for nuclear construction in the U.S. remains unclear. The design certification process, however, has been effective in providing enhancements to safety in design, drawing from experience in a manner that will increase the efficiency of the licensing process, and has positioned the NRC for change. Conclusion As the twenty-first century rapidly approaches, the nuclear industry, especially the nuclear power industry, faces a complex spectrum of challenges and opportunities. The ability to address these challenges will determine the likelihood of the challenges being or becoming opportunities. This also undergirds the continuation of public confidence in the safe use of these technologies. Thank you for your attention, and please accept my best wishes for a productive meeting.