SENATE ENERGY, UTILITIES and COMMUNICATIONS COMMITTEE

 

Senator Christine Kehoe, Chair

Informational Hearing

A Status Report on Nuclear Power

 

December 10, 2007
San Diego, California

 

SENATOR CHRISTINE KEHOE: My name is Christine Kehoe, state senator for the 39th District, which we are sitting in right now. I want to welcome you to this informational hearing of the California Senate Energy, Utilities and Communications Committee. And I would very much like to thank all of you for joining us. We appreciate your interest. And I especially want to thank our witnesses who are expert in their areas. All have come from out of town (some from across the country) and we really appreciate your expertise.

Today’s hearing is historic. California’s last nuclear power plant started production in 1986. And the Senate Energy Committee hasn’t convened a hearing on the issue of nuclear power in California in at least

20 years. The issue is getting more attention each year. And I believe it’s time for the public and the Legislature to get an update on the status of nuclear power in our state.

As chair of the Senate Energy, Utilities and Communications Committee, I’m concerned about the adequacy of California’s electrical supply. I’m concerned about high electric rates here in San Diego and across the state. And like most Californians, I’m extremely concerned about global climate change.

Last year, California passed an ambitious law to lower greenhouse gases by 25 percent by 2020. The unprecedented bill brought national and even international attention to our fight for global warming solutions. I strongly supported that legislation and was encouraged when other states followed California’s lead. But in a state with 36 million residents and

23 million cars, reaching that greenhouse gas reduction target will be an enormous challenge. Reducing tailpipe emissions and depending more on solar and wind power will simply not be enough. That’s why I’ve called this public hearing. To meet California’s greenhouse gas emissions reductions will require bold innovation in new technology and new policy. Being open minded is a way of life in California and we need to examine all alternatives fairly and objectively in order to develop sound public policy.

This is a hearing for gathering information about nuclear energy and the industry. This is not a hearing on a particular bill or proposal. No votes will be taken. We will hear from experts, some who support nuclear energy and some who oppose it. I’m interested in learning more about whether or not the nuclear industry has overcome its historic problems with cost, safety, reliability, spent fuel storage and disposal. Several of these issues must be resolved (as required by current state law) before any more nuclear energy can be built in California.

We’ve got a lot of material to cover today. There are agendas available in the back of the room. I’d like to ask the witnesses to please keep your comments to 10 minutes, even a little bit shorter, and allow ample time for dialogue between the speakers and from the dais. And, also, for members of the public, most of the testimony that you’ll hear today from our witnesses is available on the Senate Energy Committee website. Just go to the California State Senate, click on Energy and you’ll see it there.

Once we’ve heard from all of our invited witnesses, we will have time to hear from members of the public. I’m very interested in hearing your thoughts. In order to speak, please sign up at the rear of the room with our sergeant and we’ll call you when it’s your turn.

And now, I’m delighted to introduce my vice-chair, Senator Bob Dutton, who first suggested this hearing, so we owe it all to him. And, Bob, if you care to make an opening statement please go right ahead.

SENATOR ROBERT DUTTON: Just briefly. I just want to thank you, Senator Kehoe, for calling this hearing on nuclear power. I think it’s very timely in light of all the things that we’re considering not only this year, but into the future of California and the country. So I think it’s very timely to get this kind of information before us.

And I want to thank everybody who is here today. I know we had some scheduling issues. We originally were going to have this a couple of months ago but, obviously, as everybody knows, with all the fires and everything else, it just became an impractical situation. So I appreciate everybody’s indulgence. I really want to thank you for taking the time once again to come here and share your thoughts and information with us. And I am looking forward to the information that we’re going to hear today. Thank you.

SENATOR KEHOE: Thank you, Senator Dutton. And I’d like to welcome Senator Ron Calderon. Senator Calderon, thanks for coming down. Any comments?

SENATOR RON CALDERON: Yes, thank you. I’m glad that there’s such interest in this issue. There’s no question it’s the cleanest way to produce energy in the world. What we’re here to find out today, is why we’re not doing more of it; what dangers are involved; what costs are involved? For all of us in California, I think we’re concerned about the seismic situation. The earthquakes that we have here in California creates a real risk for more energy plants and I think those issues are going to be addressed here today too. So, I’m glad to see that we’re looking into this and we’re looking at the reports that have been conducted due to legislation. And I’m here to answer any questions, and, of course, ask a lot as well. So, thank you.

SENATOR KEHOE: Thank you, Senator Calderon. I’m delighted that you’re here. And, I’d also like to now introduce Assemblymember Chuck DeVore, who has a keen interest in this issue. I know you have a statement.

ASSEMBLYMEMBER CHUCK: Thank you very much, Senator. First of all, thank you tremendously for sponsoring this hearing. I think it’s very important that California get all the cards out on the table and really analyze what the different options are and what the risks and benefits and rewards and costs are for all the different options.

I came to this issue last year when we passed three landmark bills out of the state Legislature. One that sought to double California’s renewable portfolio requirement as the percentage of electricity that we get from renewables accelerated the requirement by seven years (from 2017 to 2010), moving to 20 percent seven years earlier. We also passed a bill that prohibited the renewal of electrical contracts when those contracts are generated from traditional coal fired power. And, of course the third bill, which was just previously mentioned, was the Global Greenhouse Reduction Initiative which seeks to reduce California’s global greenhouse gas emissions by about 25 percent in the next 13 years, going down to 1990 levels at the time we expect the state to grow by about 7 million people, or 20 percent.

Now, I voted against all these measures because, frankly, I didn’t see how we could actually get there without having a new source of energy, such as nuclear power. And that’s why last year, actually, earlier this year, I introduced legislation which would have lifted California’s ban.

As I look at it, California is first in the country in terms of electrical efficiency. There is no other state that beats us as far as electrical efficiency. We’re third overall. And so, if we’re first in electrical and third overall in our use of energy, one has to look at the environment and say, “Well, wouldn’t you want goods and services to be produced here in California rather than in a place like Nevada or Utah or Texas or, much less, a place like China or India, where there’s significantly more CO2 and other global greenhouse gas emissions produced per GEP?” If you’re going to produce a service here in California, you’re going to do so with the least harm to the environment of any place in the world. And yet, for a company to decide to locate to California, you’ve got to look at the regulatory environment, the tax environment, the cost of energy, workers’ comp, the cost of land and housing, etc. And if we end up pricing a commodity, a basic commodity like electricity, too much higher than it is in the surrounding states, then what ends up happening is, businesses that tend to consume a lot of electricity will decide to locate elsewhere. And the irony is, then they’re going to do more harm to the environment then they would have done if they stayed here in California or built and expanded here in California.

So, I thought it was very important that we look at something like nuclear energy as a way to keep energy costs down and reduce global greenhouse gas emissions and that’s why I’m very pleased with this hearing.

Now, if you look….just to size things roughly, if you look at San Onofre with two older reactors, each year those two reactors save about

$1.3 billion worth of natural gas from being burned. Just those two reactors put together provide about 6 percent of California’s electricity. If we were to add four to five new reactors we could actually meet the Global Greenhouse Gas Initiative reductions within the electrical sector. The electrical sector produces about 20 percent of California’s global greenhouse gas emissions; about 51 are produced in the transportation sector. If we were to, instead, build 9 to 10 new reactors and really get innovative, we could reduce global greenhouse gas emissions by 25-and-a-half million metric tons a year; we could produce 20 percent more electricity; and we could off load global greenhouse gas emissions from the transportation sector to the electrical sector through electric vehicles and by using electrolysis to produce hydrogen.

And there are new technologies (they’re very exciting) using nano skill nickel and nickel foam to actually produce hydrogen from electricity at close to 100 percent efficiency. And in places like Florida, where they have very cheap electricity, you can get the per gallon per gasoline cost down to $2 a gallon if you make your hydrogen at night. You don’t need a lot of federal subsidies at two bucks a gallon. People are going to want to have a car that runs off of that sort of fuel at two bucks a gallon or equivalent. And so, this is the sort of thing that we need to look at in California.

One last point about spent nuclear fuel and what should be done with it: The Yucca Mountain is called the repository (not a waste dump) for a reason; because it is expected that you are going to go back in and pull some of that material out and use some of the fissionable material to generate electricity in the future. This is what the French do.

The French pull plutonium out of the spent fuel and they reprocess it and they turn it into electricity. This is happening in Russia today, where 37 metric tons of weapons grade plutonium is being turned into electricity in the fast neutron reactor. When you do that you use up the plutonium 239 and, therefore, you don’t have to store it for 200,000 years.

I was up at the UC Berkeley Nuclear Engineering Lab a month ago and they told me that when your reprocess, the remaining material returns to background radiation levels in only 300 years. That’s the direction that we have to go.

And I am just delighted that we have this hearing today; that we can take testimony from the current state of the industry, as well as by those who are concerned about nuclear power. And perhaps together we can work as Californians traditionally have done and really be part of the leading edge of the solutions for global greenhouse gas emissions.

Thank you.

SENATOR KEHOE: Thanks very much, Assemblymember DeVore.

We will begin our testimony with James Boyd, commissioner with the California Energy Commission, a state agency that monitors many aspects of our energy policy in California. So, Commissioner Boyd, please begin.

JAMES BOYD: Thank you. Good afternoon. Thank you, Chairman Kehoe and distinguished Senators and Assemblyman. It’s indeed a pleasure for me to be here. I serve as vice-chair of the Energy Commission and also serve as the state’s liaison officer to the Nuclear Regulatory Commission which, I think as you know, is the federal agency that regulates the safety of power plants in the United States.

To my left is Barbara Byron, who is the Energy Commission Senior Nuclear Policy Advisor. She’s our only policy advisor on the subject and I can’t go anywhere without her therefore. She co-chairs the Western Interstate Energy Board’s High Level Radioactive Waste Committee. She and I represent California on the Western Governors Association Nuclear Waste Transportation Technical Advisory Group. So, I have her here to answer any questions and to back me up.

You have my detailed prepared testimony. I don’t plan to read it to you but I will highlight certain points. I plan to give you an overview of the Energy Commission’s responsibilities and activities with regard to nuclear power. It is the first time in 20 years we’ve had this discussion. I’m going to summarize the major findings on nuclear power from the Energy Commission’s Integrated Energy Policy Reports, a fairly new energy strategy report published by our agency called upon by the Legislature (and the Senate initiated this after our electricity system collapsed); and, I’m going to briefly review issues related to the possible construction of new nuclear plants in California.

The Energy Commission has the primary responsibility for overseeing nuclear power plants, but the Federal Nuclear Regulatory Commission, as I said, has the U.S. wide responsibility. State governments, our own included, do retain some responsibility for regulating the non-radiological environmental impacts of these plants, such as impacts from the use of cooling waters, economic considerations for the states, and for assessing the role of nuclear power as part of the state’s energy supply.

The Energy Commission has no jurisdiction over any of the existing nuclear plants operating in California today; namely, Diablo Canyon and San Onofre. They were specifically exempted from the Energy Commission’s power plant licensing authority and from California’s nuclear waste laws enacted in 1976. However, the Energy Commission does have a number of obligations related to existing and new nuclear power plants in California.

As has already been indicated, under California law, no new nuclear plants can be permitted in California until the Energy Commission determines that a means for the permanent disposal or reprocessing of spent nuclear fuel has been demonstrated and approved by the federal government.

Secondly, the Energy Commission coordinates California’s official response to major proposals and activities related to federal programs for spent nuclear fuel transportation, disposal and reprocessing, and we include Yucca Mountain in that list of issues that we deal with.

Thirdly, Assembly Bill 1632 (which was authored by Assemblyman Blakeslee and passed by the Legislature and signed by the Governor recently) directs the Energy Commission to conduct a comprehensive assessment of both Diablo Canyon and San Onofre. This study, which has literally just begun, will be completed by November 2008.

And in that study we will assess, first, the vulnerability of California’s nuclear plants to a major disruption caused by a large earthquake or caused by plant aging. Secondly, potential impacts of such a disruption on the reliability of our electricity system on the public safety and on the California economy. Thirdly, we’ll look at the cost and impacts from nuclear waste accumulation on site at Diablo Canyon and San Onofre. And finally, we’ll look at other major policy issues related to the role of these plants in California’s electricity future.

The study will also compare the “cradle-to-grave” cost and environmental impacts from nuclear power with the cost and impacts of alternative baseload plants that could be used in California (and I would direct your attention to that. I’m not sure that that’s ever been done before).

The Energy Commission does produce an integrated energy policy report starting in 2003 and every other year—2003, ’05 and now ’07, are the first three of those reports in our history. We review the entire energy situation in the state and we make policy findings and recommendations.

In 2005 and again in 2007, the Commission’s energy policy review included a comprehensive assessment of nuclear power and nuclear waste management. And when we did this in 2005 it was the first time in at least 25 years that that issue had been addressed.

Panels of experts from around the country participated (many of them are here today) and gave their insights on California’s nuclear plants; the status of the federal waste disposal and reprocessing programs; and a wide range of issues affecting nuclear power, such as the economics, the problem of plant aging, security and, of course, environmental impacts.

The Energy Commission reports on nuclear power and all the transcripts from the many workshops that we held are available on our website which you can get the address from myself or from this testimony.

Our 2005 report reaffirmed the 1978 findings that a technology for the permanent disposal of high-level nuclear waste had been neither demonstrated nor approved. We found that the federal waste disposal program is plagued by technical uncertainties, legal challenges and managerial problems. As a result, California utilities must continue to expect to retain spent fuel in storage facilities at nuclear plant sites for an indefinite time to come.

We recommended that the state evaluate the long-term public safety and cost of accumulating nuclear waste at California’s operating plants (I believe Assemblyman Blakeslee included that in his legislation). We found that nuclear fuel reprocessing, where spent fuel is separated into high-level radioactive waste and reusable fuel, still remained more expensive than waste storage and disposal and has substantial adverse implications for U.S. efforts to halt the proliferation of nuclear weapons.

Our just completed (and I mean just last week) 2007 Integrated Energy Policy Report found that a renewed interest in nuclear power, which was just beginning to become evident in 2005, has become far more pronounced. And I think hence this hearing today. But, concerns regarding new construction costs and nuclear plant economics have surfaced more so than in the past. We concluded that while the federal government has proposed a major new reprocessing initiative, significant questions remain regarding reprocessing technologies.

A recent national academy’s panel concluded that the new federal reprocessing initiative, called the Global Nuclear Energy Partnership (or GNEC for short) was decades away from commercial development and too expensive.

Yes, there is a new interest in nuclear power and regarding the prospects for nuclear plants—for new ones. No nuclear plants, as you have indicated, have been built in California since, or in the nation, since the Three-Mile Island accident in 1979. There has been renewed interest in nuclear power that’s been spurred by, heavily, new federal financial incentives, a recognition of the continuing demand for electricity in this country, of course, as you’ve mentioned, the increased concerns about global warming and the cost and implications of dependence on fossil fuels, including natural gas and coal. An indication of this renewed interest in nuclear power is that there are something like 31 proposals for new nuclear plants in this country put forward by 17 different companies. However, new nuclear power developments still face a number of barriers.

First, waste disposal. As already indicated, California law prohibits new nuclear plant construction until a federal permanent waste disposal technology has been demonstrated and approved by the authorized federal agency.

The federal program, as you know, is focused on construction of a deep underground permanent repository at Yucca Mountain in Nevada. But the most optimistic estimate for when Yucca Mountain might open for business is 2017 (and I say the most optimistic). The director of the program has said that the date is more likely to be 2020, and now I hear 2021 discussed as most likely the earliest, and, frankly, it could slip even further.

In the absence of the repository, therefore, California must plan for continued accumulation and interim storage of high-level waste at our existing reactor sites as I’ve indicated.

A former U.S. nuclear regulatory commissioner has said that the Yucca Mountain program is deeply flawed and it may be time to rethink the project. And of the four criteria recommended by the International Atomic Energy Agency for a permanent geologic waste repository, the Yucca Mountain site meets only two.

Another subject is high construction costs. Just as in the ’70s and ’80s when the current generation of nuclear plants were planned and built, new plants face high construction costs and the resulting financial risk. During the ’70s and ’80s the costs and timeframe for building new plants greatly exceeded the anticipated budgets and schedules. For example, construction costs at Diablo Canyon were estimated at $320 million in 1968; the estimate was exceeded by more than $5 billion. Likewise, the initial 1971 estimates for San Onofre’s 2 and 3 was $436 million; that was exceeded by over $4 billion.

General agreement among industry experts (you’ll probably hear more about this today) at our recent workshops was that a new 1,600 megawatt nuclear plant would probably cost $4- to $6 billion.

There are siting challenges and this was referenced by the Senator. The earthquake safety considerations, particularly in California, present challenges for new nuclear facilities. California’s most seismically active areas are located along the coast. Diablo Canyon, for example, is located three miles from a major fault. Siting additional nuclear reactors along the coast, for instance, would be an extremely costly proposition due to the need to meet stringent seismic safety requirements.

Water for cooling: Water is gold in California, I think, as you know. Nuclear plants require more water for cooling than any other types of plants—2.5 billion gallons of water per day for Diablo Canyon alone. Daily operation of these once-through cooling systems at both Diablo Canyon and San Onofre have resulted in major allegations of serious impacts on marine ecosystems. Siting a new unit along the coastline would raise questions regarding additional impacts on the marine environment. Once-through cooling restrictions that are coming more and more into play, even for our conventional plants, could also limit siting options and increase construction costs.

A further hurdle for new nuclear plants in California would be the state’s policy for new energy resources. In 2003, California’s principal energy agencies adopted an energy policy that places high priority on improved energy efficiency. In other words, energy efficiency is job one in California, and we know much more can be done in that arena.

Secondly, we look to renewable and distributed energy resources (that is electricity produced close to where it’s used) to meet new electricity generation needs, and this policy has become the foundation for recommended state energy policies since 2003. While advanced nuclear reactor designs may be important resources in the long term, there likely are more cost-effective electricity resources and energy efficiency options in the near term.

Public support: Public support for nuclear power, though rising, remains soft in our view. A national poll conducted by the Massachusetts Institute of Technology earlier this year found that acceptance of nuclear power has indeed increased since 2002/2003 when we last looked, but the majority of the public still do not want to increase its use. Similar results have been found in California, even when combined with questions on global warming.

A recent poll of California adult residents found that

78 percent of Californians surveyed favor the state law that requires reducing greenhouse gas emissions to 1990 levels by the year 2020. But at the same time, a majority remains opposed to building more nuclear power plants.

Our 2007 Energy Policy Report concluded that in light of significant economic environmental and regulatory obstacles involved in developing new nuclear power plants, we do not expect significant contributions from new nuclear power plants towards meeting the state’s AB 32 greenhouse gas reduction goals by 2020.

In closing, I’d like to summarize the findings made by the Commission in its recent Integrated Energy Policy Report. And this report, the totally Integrated Energy Policy Report, was backed up by a separate document on just the subject of nuclear power, which I believe has been distributed to all of your offices.

SENATOR KEHOE: So, Commissioner, do you want to just move to the conclusions? And then I’d like to have you be the backstop. And then we’ll hear from industry and advocates and use you as an objective point of reference since you’re representing the CEC.

COMMISSIONER BOYD: I would do that.

SENATOR KEHOE: Alright.

COMMISSIONER BOYD: Let me just quickly summarize. And as I indicated in closing, first, we found what’s been stated here today already; that nuclear energy plays an important role in California’s current electricity supply. It supplies 13 percent of our baseload power.

As we’ve all indicated, the U.S. is experiencing a renaissance of sorts as this technology is increasingly being seen as a way of meeting the global warming challenge. However, in our view, it’s encouraged primarily by federal regulatory and financial incentives. People have been quoted as saying, were it not for the financial and regulatory incentives, they wouldn’t be even at the table discussing nuclear power. I think, as you know, about half of the nuclear plants in the U.S. have received 20-year extensions of their operating licenses.

As I’ve indicated, in this state we face a number of barriers which include high capital costs, uncertain construction timelines, regulatory risks associated with once-through cooling that we tend to use, and, of course, the waste disposal issue, and the ever present concerns about accidents and acts either of nature or terrorism.

The waste storage issue and the disposal issue continues to be the number one hurdle. And California customers have already paid a billion dollars to support federal efforts to develop Yucca Mountain and we really don’t know if and when, if at all, it’s going to open and, therefore, we have to continue to face the issues of storing those wastes on our own power plant sites.

The development costs have become a great concern of the Energy Commission. Internationally, Finland’s new plant under construction has experienced delays. Most recently, the opening of that plant has been postponed another two years and they are at least a billion dollars over budget already. So, while they’re inexpensive to run, they’re very expensive to build. And in the past, plant construction has required extraordinary rate payer guarantees to cover construction costs. And it looks like we’re back to the federal government permitting federal and very heavy guarantees to, again, cover the constructions costs.

We found that reprocessing remains more expensive.

And we do find, positively, that there’s definitely a greenhouse gas emissions benefit from nuclear plants if they can meet all the other tests that have to be dealt with, really a “cradle-to-grave” analysis, in dealing with AB 32 or in dealing with all that we do.

And we just commit, as an agency, to continue our somewhat neutrality and to assess the federal waste disposal issue. But, again, conclude that we don’t see this subject going anywhere in the near future.

Thank you. I will answer questions later and try to sum up.

SENATOR KEHOE: Just one right now, if you would, Commissioner. How often does the CEC review nuclear power issues? On a regular schedule? Other than you’re required to look at how the waste disposal issue is progressing?

COMMISSIONER BOYD: Well, as I indicated, in the 2005 Integrated Energy Policy Report, that was the first time the Commission had looked at the subject in over 25 years, and that’s basically due to the law in California with regard to settling the waste issue. Now, we looked at it again in 2007, and I expect that every two years in our Integrated Energy Policy Report, since this subject is uppermost in people’s minds, we’ll continue to take a look at the subject.

SENATOR KEHOE: So at least every two years?

COMMISSIONER BOYD: At least every two years.

SENATOR KEHOE: And then you’ve also got to respond to the Blakeslee bill?

COMMISSIONER BOYD: And the Blakeslee bill, indeed.

SENATOR KEHOE: Okay. Thank you very much; I appreciate that.

We will ask Mr. Rosenblum to come up here. And,

Mr. Rosenblum, before you get started let’s ask Mr. Keenan to come here too, and then we’ll hear from you two in succession as, sort of, the utilities point of view. And then we’ll go on to Marshall Cohen and Jim Harding and the other speakers. So, whenever you’re ready, go right ahead, Mr. Rosenblum.

DICK ROSENBLUM: Thank you, Senator Kehoe. And members of the committee, thank you. I’m Dick Rosenblum, Senior Vice President and Chief Nuclear Officer of Southern California Edison.

I put together a slide package. What I’ll try to do in order to meet your 10-minute desires is, go through those slides very, very quickly (they’ve been distributed in advance), and just hit the high points.

Let me start by just talking about what’s happening in San Onofre today. San Onofre consists of three units.

San Onofre Unit 1 is presently being decommissioned. It’s about

80 percent decommissioned and the decommissioning will complete next year.

San Onofre Unit 2 is currently refueling in a standard refueling process and we start up again in January.

And San Onofre Unit 3 is operating at full power today.

Before I talk about nuclear power specifically, I’d like to talk about the company as a whole because San Onofre is an integral part of our system. The company as a whole has been in business about 120 years. Our

4.8 million customer _________ on which we make a decision to run the plant or not. That the total cost of operating the plant is about one and three-quarter cents per kilowatt hour. And the difference in those two numbers is; we pay taxes whether we run the plant or not; we have people on site whether we run the plant or not, so those are all fixed costs.

SENATOR KEHOE: Isn’t that the same at a natural combined cycle plant?

MR. ROSENBLUM: It is, but at a nuclear plant the difference between the total cost and the dispatched cost or the incremental cost are very large. And the reason for that is, is the fuel is very inexpensive whereas, at, for instance, a combined cycle natural gas plant, the fuel is a very expensive part of every kilowatt hour. So by and large they would have very different numbers than we do and you can see them there.

I wanted to touch (just for a second) on what’s happening in our system. Although our customer growth is about 1.5 percent per year, about 77,000 customers on our 4.8 million, our peak has been growing for the last many years at about 5 percent per year. And the difference is really demographics. What we’re seeing is a migration from the cooler parts of our system, for instance in the L.A. Basin, out into the hotter parts of our system; Escondido, Temecula, Riverside, San Bernardino County, and moving from smaller homes to much larger homes. Although the homes are cheaper, the air conditioning load on those homes is very much higher. So we see very significant peak demand changing in our system, and we have to build our system and we have to acquire electricity to meet the peaks; that’s why that’s such an important number.

I’ve just shown here a little graphic of where San Onofre is in our system. You see Long Beach to the north and San Diego to the south. I’ll touch on that in a moment about why that’s important. And I’ll skip the rest of what’s here.

I was asked to comment briefly on Palo Verde. There are three units at Palo Verde. The operating agent is Arizona Public Service. And Southern California Edison is one of several co-owners; we own a little under

16 percent.

The five-year average capacity factors, these are baseload generating plants. That means, because of the very low incremental costs of generation, we run them as much as we possibly can.

You can see the numbers here—just slightly below 90 percent of the time the San Onofre units are operating or the Palo Verde units are operating. And that has improved over time. The industry average is slightly higher than this—right around 90 percent.

I was asked to comment on the NRC perspective. NRC has a methodology of grading nuclear plants using objective data. Down on the left there are 27 different things the NRC (Nuclear Regulatory Commission) looks at. They have a four-point grading scale (green being the best and red being the worst). And as you can see, for the last seven quarters San Onofre has had all green ratings from the NRC. So, we’re viewed as a good compliant and safe operator of a nuclear plant.

I’m going to touch on this very, very briefly because I know others will too. But, obviously, the operation of a nuclear plant, as has already been commented on, reduces our dependence on fossil fuels, increases our energy security because uranium can be a domestic source of energy, and the operation of San Onofre displaces the equivalent greenhouse gases of about 900,000 cars every single year.

You can also see on the left a distribution of the greenhouse gas impact from various other forms of generation. The left most bars for each category are, sort of, the high end of the normal range. The right hand bar for each category is the low end range of the category. And you can see nuclear with pretty much the best greenhouse gas profile of all of our options for generating electricity.

I said that I would talk a little bit about the system. San Onofre is not just a nuclear power plant for us; it’s part of our system. I’ve pointed out that the heavy concentration of load up in the Long Beach, Los Angeles, Orange County area; there’s a heavy concentration of load down in the San Diego area. There is very little generation between the two of those. San Onofre is a critical resource on our system not just because of the many megawatt hours it produces, not just because of the greenhouse it avoids, but because it adds other factors to the grid; the most important being system stability. That allows different things to occur on our system plants: to come on plants; to come off; big loads to come on and off without disturbing the system, and critically important because it provides what we in the business call “voltage support;” it allows us to import energy from long distances. So, renewables that come in from a long way off, hydro power that comes in from the Pacific Northwest, energy that comes in from Arizona, is facilitated by having the large, very stable generators at San Onofre.

We’re also part of our community. One of the attributes of Southern California Edison through our more than 100-year history, is that we serve at the pleasure of our community and we have to serve our society in order to be successful in our business. At San Onofre, we have about $200 million of direct economic benefit to our community; $20 million in property tax, much of which comes to the San Diego area. Those are things any business of our size would do. We also have about 2,000 people on site that are committed to our local communities and donate more than $300,000 every year to local charities, and donate more than 30,000 hours. One of our largest charities is the Semper Fi fund from the Marine Corps. This year we gave $73,000 to the Semper Fi fund in a campaign we just had.

I was asked to speak about steam generator replacement. Steam generators are very large components in the plant that isolate the nuclear part of the plant from the non-nuclear part of the plant. We will be replacing steam generators at San Onofre in the next couple of years (2009 and 2010), and those new steam generators will have about a 40-year design life.

We can also extend the life of San Onofre beyond its current licensed life, which is 2022, another 20 years, through a process called “license renewal.” That would take us out to about 2042, which is the reason for the design life of the steam generators.

Commissioner Boyd talked about once-through cooling. We do use once-through cooling at San Onofre. We’ve gone to great lengths to minimize the impact on the ocean environment. We take our water in from about 3,000 feet out in a way specially designed to minimize the number of fish entrained. We put the water back in the ocean about 20 degrees warmer through about 9,000 feet of diffuser pipe (think of it as kind of a sprinkler hose at your house) to minimize the impact of that warmer water. And in the actual ocean, within a very short distance, the temperature difference is no more than one to no more than two degrees.

SENATOR KEHOE: What’s the volume?

MR. ROSENBLUM: It’s a million gallons a minute in round numbers—about 800,000 to a million gallons a minute for each unit.

But more than that, we had a very extensive survey by a group called the Marine Review Committee of independent experts when we built the plant both before operation and after operation which determined the impact on the marine environment. We were committed to fully mitigate that impact. And we built artificial kelp reefs and are restoring some wetlands in order to completely mitigate the impact on the ocean environment of the operation of San Onofre.

Commissioner Boyd also talked about fuel storage. I was asked to comment on it. It’s obviously highly regulated by the Nuclear Regulatory Commission. Today, at San Onofre, it’s stored first in pools on site for three to five years, and after that in what’s called “dry cask storage.” You can see a picture of what dry cask storage at San Onofre looks like on the slide. These are basically big round drums with 24 fuel assemblies in them that are slid sideways into concrete vaults and cooled naturally with just the ambient air. Ultimately, the government will take title to the fuel and dispose of it at Yucca Mountain or in whatever other methodology is approved at the time.

Internationally, there are two technologies used—recycling (which has been mentioned) is used in about half the countries that have significant nuclear power investments, and geologic disposals such as our current public policy, is used in about the other half.

To conclude, San Onofre and nuclear power in California has been successfully serving our customers since 1968, when San Onofre Unit 1 first came online. San Onofre, today, provides both economic and greenhouse gas benefits to our customers and our society. We fully mitigate the marine impacts of our plant. And there are many collateral benefits of the very large generators at San Onofre which are critical to the operation of our system.

As a final concluding remark; I’d just like to point out that we are really fully experienced at Southern California Edison in the complete lifecycle of nuclear power plants, from building San Onofre Unit 1, to decommissioning it, to operating the current units.

Thank you very much.

SENATOR KEHOE: Thank you. I’d like to ask several questions. I’d like to move through them in as timely way as possible. And then,

Mr. Keenan, you can taper your remarks. If and when you differ with

Mr. Rosenblum just bring it up right away; and I have some additional ones for you.

In reading over the testimony from everyone, some questions have arisen for Mr. Rosenblum. So, Mr. Rosenblum, we’re going to start with you.

You described Edison’s energy costs and the costs of nuclear being pretty economical; how is that possible when the plants are so expensive to build? And in the case of San Onofre, you had all those overruns.

MR. ROSENBLUM: Well, it’s the ultimate cost of electricity that comes out of the plant as a combination of what it costs to build it plus what it costs to operate it divided by the number of kilowatt hours that come out. So although nuclear plants, or any baseload plant, tend to be very, very expensive, they produce overwhelmingly large quantities of electricity. So, they can be very expensive to build (and they are); when you divide it by the very large amount of generation, the cents per kilowatt hour is quite low.

SENATOR KEHOE: So, because it’s been online so long, the costs come down all the time?

MR. ROSENBLUM: And because it operates all the time because of the low cost.

SENATOR KEHOE: How are the costs of the nuclear plants recovered in rates?

MR. ROSENBLUM: Today, San Onofre is in what’s called “rate base,” which means the initial investment is depreciated every year over its 40-year life. So, every year, we get 1/40th of the capital cost of the plant back plus our operating cost with no profit, and then we get roughly, today, about a

10 percent return on whatever the undepreciated amount is. So, the consequence of that is, a rate based built plant, a regulated plant, will tend to have very high costs at the beginning of its life. It’s not at all depreciated. The full cost is in. You’ll get a lot of money at the front end. Later in the plant life it’s very, very inexpensive. San Onofre has pretty much reached that point; where most of the cost recovery for the initial construction has been completed and the remaining costs are very, very low.

SENATOR KEHOE: That system of rate recovery or rate charges, is that the way you see rolling out in the future; you’re going to do another nuclear plant; or would there be changes to that?

MR. ROSENBLUM: If we were going to do another nuclear plant in California, speaking for SCE, yes, I believe it would have to be done in the rate base just as it’s done today. It requires a large financial asset in order to be able to build a nuclear plant like this. It really would take our customer base to do that.

SENATOR KEHOE: How does rate from San Onofre compare to the cost from Palo Verde? How does each cost compare from the two different plants?

MR. ROSENBLUM: The costs are actually quite similar. The capital costs adjusted for inflation are fairly similar between the two plants and the generation from the plants is very similar. So, the costs are not dramatically different.

SENATOR KEHOE: Okay. Can we look at that page-8 slide again? You talked about capacity factor. Palo Verde is a little less reliable it looks like—just by a fraction; why is that? What do you attribute that to?

MR. ROSENBLUM: That’s right. San Onofre line there is 87 percent. The Palo Verde line is 83 percent. The difference at Palo Verde is almost entirely associated with a technical vibration problem they had in their plant last year that caused them to not be able to operate one of the three units for several months while they were repairing the problem. Other than that, one technical problem they’ve had in this window, their generation would be very similar to ours.

SENATOR KEHOE: Okay, I see. So then you expect that liability will improve? They’ve solved the vibration problem I understand?

MR. ROSENBLUM: Yes, they have. And today their generation is roughly the same as ours and right around the industry.

SENATOR KEHOE: And then, I don’t want to steal Mr. Keenan’s thunder, but how would you compare that to Diablo Canyon?

MR. ROSENBLUM: I think Diablo Canyon (I don’t know the numbers off hand) has a slightly higher capacity factor than at San Onofre. At San Onofre we must run the units during the summer because of our unique grid positioning, and so, we sometimes will take the unit off and not run it in either the spring or the fall for a period of time. That obviously reduces our capacity factor but it has the unit available at the critical time when our customers need it. In fact, we just had the unit off for about 35 days specifically to avoid refueling it next summer.

SENATOR KEHOE: So, Diablo Canyon can run more year round and you have a higher capacity factor because of that?

JACK KEENAN: We are a little bit higher than the numbers you’ve seen. We’ve worked on our fuel cycle to make sure our refuelings are out of the summer also, though it’s also very important and we just run a little bit higher. I’m obviously not as familiar with San Onofre as I am with Diablo.

SENATOR KEHOE: So, it sounds, just to a lay person’s ears, that you’ve got a slightly more efficient operation at Diablo Canyon.

MR. KEENAN: It sounds that way.

SENATOR KEHOE: Alright. Mr. Rosenblum, back to you. How do you compare the reliability of a gas fired plant to a nuclear plant?

MR. ROSENBLUM: The reliability of the gas fired plants, I would say, is fairly similar to a nuclear plant but they run considerably less than a nuclear plant. So, let me make a distinction here between reliability. In other words, if you needed to run it you could compare it to when you actually do run it for cost and other reasons. Our gas plants tend to be throttled down at night, for instance, because they’re more expensive than San Onofre and brought back up during the day. So, the actual amount of generation they have is somewhat less. The overall availability or reliability is roughly the same.

SENATOR KEHOE: So the nuclear plants are always going to be baseload…

MR. ROSENBLUM: That’s correct.

SENATOR KEHOE: Nuclear is the foundation of the baseload?

MR. ROSENBLUM: That’s correct.

SENATOR KEHOE: On page-9, you talked about the regulatory performance of San Onofre—your green sheet—is this operational safety? When you talk about regulatory performance, can you give us a little more detail?

MR. ROSENBLUM: It’s operational safety. It’s actually all aspects of safety. So in addition to the operation of the plant, they look at our preparedness to deal with an emergency; they look at many other factors at the plant. So, it’s really an overall view of the safety of the plant using objective numbers.

SENATOR KEHOE: And, on that NRC assessment, how does Palo Verde compare to SONGS?

MR. ROSENBLUM: Palo Verde would have today….depending on which unit, Palo Verde, one of these little blocks would be yellow and they would have one little block white, other than that, all the rest of them would be green.

SENATOR KEHOE: And what does that mean? In two of these categories you’re how many levels into the green?

MR. ROSENBLUM: Oh, I’m sorry. Thank you. It goes green, white, yellow and red, so they have one slightly off the all green, and one the next step over.

SENATOR KEHOE: Okay. Alright. Can you tell us a little bit more about the dry cooling issues at San Onofre? What do you think will happen? What are the prospects of dry cooling being imposed on San Onofre; and what would happen to the plant if that were to come to pass?

MR. ROSENBLUM: I can’t speak to the likelihood of dry cooling being imposed, I can tell you that it is not practical at San Onofre. The building of very large cooling towers at a coastal site would almost certainly not be acceptable. The economics of trying to build these very, very large very expensive energy inefficient cooling towers at San Onofre would probably not be cost-effective. And San Onofre is a very, very small site. It’s only

80 acres on a grant of Congress. There is simply no room to build cooling towers at San Onofre, which ultimately would be the restriction.

SENATOR KEHOE: But it would be feasible to run it dry cooled? You can design it that way?

MR. ROSENBLUM: It is technically feasible; it is not practical at our site.

SENATOR KEHOE: Alright. On future plans, when does your operating license expire for San Onofre? In fact, both of them, when do they expire at San Onofre and at Palo Verde?

MR. ROSENBLUM: San Onofre’s operating license expires, today, at 2022. We intend and fully expect to receive a 20-year extension to that, which would take us out to 2042. I don’t happen to have the Palo Verde numbers in front of me, but let me say off the top of my head, they would be about five or six years later.

SENATOR KEHOE: Okay. So, maybe 2028?

MR. ROSENBLUM: Yeah, 2025 to 2028 and then you can add the

20 years onto that. That would be approximately correct. And we can get the exact numbers.

SENATOR KEHOE: Do you have anything more to add on the waste disposal question? There doesn’t seem to be a solution forthcoming. Commissioner Boyd felt that….he himself didn’t, but recounted to us that the Nevada site has been bumped out again by several years. Your cement blocks there aren’t very reassuring as far as a long-term solution; so what does Edison think the future as a practical matter might hold?

MR. ROSENBLUM: Well, let me start off by saying that waste disposal has been achieved in other countries around the world and they are ultimately disposing of their fuel. It’s the French who recycle their fuel, or the British who have geologic disposal since, I think, about 1959. There are technical methods to dispose of waste; we just have to choose one.

The licensing issues at Yucca Mountain and the other issues are largely policy and political issues. I don’t mean that in a negative way; it’s public acceptance of having the facility in their backyard, literally.

In the long-term, this will be solved in my judgment. I think there will come a time not in the distant future when the importance of greenhouse gases and the critical nature of having nuclear power plants support greenhouse gas reduction will become the dominant issue and the country will develop the political will and the policy to ultimately dispose of waste.

My personal judgment is it will be a combination of Yucca Mountain and recycling. I’m sure the NEI spokesperson later in the day would have some more informed opinion.

SENATOR KEHOE: Okay. On the financing issue: Since the plants are so expensive to build and since, at least in our history, the tremendous cost overruns have been part of the problem, the utilities can recover any cost overruns in the rates, but if a third party is building a merchant generator or something, then the risk of higher cost is either borne by the developer or, I guess, under the federal energy bill now, some of the risk would be borne by the taxpayers; can you expand on that a little bit?

MR. ROSENBLUM: Whether a plant is built by a public utility or as a merchant generator or a private enterprise, the costs have to be recovered. And a point of fact; we develop our plants the same way. Southern California Edison doesn’t have our own employees go out and build a plant; we contract for it. So, it’s the same way everybody else would do it. The difference really is not very dissimilar to when you build a house. If you build a house and ask your builder for a fixed price, they’ll put a risk premium in because they know they’re taking the risk. If it’s higher, it’s within that risk premium that they’re going to charge you higher for building the house because they’re taking on the risk. If you build it in the rate base or on a cost plus basis, the builder will take that risk premium back out but now I’ve taken the risk. So in the end, they will come out basically the same. We all build them the same way; we simply have different methods of recovering the costs.

In order for a private entity to build a plant, they’re going to have to have some other party that is guaranteed to take the output. That’s called the counter party. It’s the person who is ultimately paying the bill. They’ll do that by contract. Any utility we simply devote to that resource to our customers; if it’s an inexpensive resource, our customers get the benefit; if it’s an expensive resource, obviously, they get the consequences of that too, but that’s simply the risk premium being monetized.

SENATOR KEHOE: So under what circumstances do you think Edison would consider investing in a new nuclear power plant now?

MR. ROSENBLUM: Now?

SENATOR KEHOE: Yes.

MR. ROSENBLUM: We would consider it now if the regulatory environment and the political environment supported it. We believe greenhouse gases are a critical issue and that nuclear has to be a piece of the solution. As soon as we have a regulatory environment that supported building a new nuclear plant and a political environment, a public policy environment, let me say, that supported one, we would certainly proceed.

SENATOR KEHOE: And then I think we will just close with you on discussion with some of the security issues—the terrorist attack, for instance. Because unlike Diablo Canyon, which the public has never seen, San Onofre is probably the most visible nuclear power plant in certainly my experience and it’s easily accessible by the freeway; it does seem to be vulnerable. What accounts for such a difference between the siting of the two different plants, they’re just kind of similar eras as far as design goes? And, would you say that protecting San Onofre from a terrorist attack is a lot harder than Diablo Canyon?

MR. ROSENBLUM: Both Diablo Canyon, I’m sure, and San Onofre, I’m absolutely certain, are very well protected against a terrorist threat. We simply do it because of the geographic environment we’re in, in different ways. And there’s a limited amount, I can say, but I would say that because of its location, the cost, the manpower required to protect San Onofre is somewhat higher than it is; in fact, I believe higher than any other plant in the United States. Roughly one out of every four people on site is one of our security staff. And we simply use different strategies to protect the plant. Nevertheless, both of us protect the plant against the exact same threat and both of us have passed very stringent tests both from the NRC, and from the Department of Homeland Security about the effectiveness and robustness of our security measures.

SENATOR KEHOE: In some of the reading I’ve done on the new plants, there is some thinking about whether they can be and should be designed to withstand a commercial airplane flying into them post 9/11 (I guess that comes to mind more often); could San Onofre withstand that?

MR. ROSENBLUM: Yes, absolutely, for several reasons. One, it would be very, very difficult for anything other than an expert fighter pilot to be able to actually hit San Onofre. You have driven past it. It’s built down into the cliffs. From three sides; east, the south and the north it’s virtually unapproachable by an airplane. Only from the west could it actually be approached from an airplane and there we have special measures to protect the plant. And the robustness of the plant is extremely high, in part, because of the high seismic standards at San Onofre.

SENATOR KEHOE: Thank you. I appreciate all that.

SENATOR CALDERON: Could I…

SENATOR KEHOE: Oh, absolutely. Senator Calderon?

SENATOR CALDERON: Thank you. First of all, how many plants would it take in California to reduce the greenhouse gas levels? I know our goal is 1990 levels, so how many plants would it take to really make a significant difference?

MR. ROSENBLUM: You mean nuclear plants?

SENATOR CALDERON: Nuclear plants.

MR. ROSENBLUM: I can’t really answer that question; I just don’t have the number in front of my mind. But let me try to answer it in a little bit different way. I think it’s going to take everything we can take. The Electric Power Research Institute did some very good modeling to reduce the greenhouse gases to below 1990 levels nationally by 2030. And what they showed was; that if we used the full spectrum of tools available to us—renewables, energy efficiency, new nuclear plants, increasing the efficiency of existing plants and building carbon sequestered coal plants, we can do that as a society. But it’s going to take all of that to be successful. So, I don’t view greenhouse gases as an issue of nuclear power, I view it as an issue that our society has to bring all of our tools to bear and then it can be done.

SENATOR CALDERON: Thank you. And you spoke about waste disposal solutions in the near future. Is it feasible whether we do it legislatively (I know it’s going to be a public policy issue) to continue producing and continue storing above ground waste until we reach that solution? I mean, what kind of risks are we looking at by doing that?

MR. ROSENBLUM: Absolutely. It’s feasible and it’s practical. The dry cask storage at San Onofre is designed for a hundred years. It’s undoubtedly capable of a much longer period of time. We have sufficient space on site to operate the plant not just through its existing life, but ultimately through a 20-year life extension and store the fuel on site. And the fuel storage at San Onofre is designed essentially to the same standards as the plant is. For instance, it’s designed to meet seismic standards. So, it’s very safe, it’s very practical, and it’s quite economical. That doesn’t mean that ultimately the federal government shouldn’t fulfill it’s responsibilities to take the waste.

SENATOR CALDERON: Two real quick questions. I know that they’re in people’s heads as well. Why are the projected costs so much off, or so far off from the actual cost of construction for a site—$300- to

$400 million to $4- or $5 billion?

MR. ROSENBLUM: I can’t speak for everybody, but let me speak about San Onofre. San Onofre Unit 1 was built in the mid 1960s and cost $90 million for about a 450 megawatt plant. When we projected the construction of San Onofre Units 2 and 3, we fundamentally projected the same sort of costs. In the time period, though, the design of the plants changed dramatically; changed from plants that were first generation to really second generation plants; went through the redesign pretty much continuously of Three-Mile Island period…

SENATOR CALDERON: So projections now would be pretty accurate?

MR. ROSENBLUM: Yes. I believe the projections now would be much better. But the last factor is, is it really depends on the nature of the economy. As the economy causes labor rates to go much higher, as raw materials get scarcer, the cost of all plants, including nuclear plants, will tend to go up. We can project what they are in today’s dollars; it’s very difficult to project what will happen over 10 years in an economy the size of ours.

SENATOR CALDERON: Thank you. And the last question is a white elephant question. I think we all want to know. You’ve indicated that you do your best to mitigate impact of the ocean water; what exactly is the impact of the warmed heated water going back into…

MR. ROSENBLUM: Well, in some, the impact is zero. I think we’re the only plant that I can think of that has ever had an extensive study that has concluded that there is, on some, no impact from the plant due to the offshore reefs and the other factors that we’ve done to mitigate the impact. So, on the entirety of the ocean the impact is zero.

SENATOR CALDERON: And impact means what? Certain species are leaving; they’re dying?

MR. ROSENBLUM: The critical issue that was studied is basically the entrainment and loss of larval fish, tiny, tiny little baby fish that are entrained in the plant. In the cooling water, when they go through the

20-degree heat up, they die. Now, most of those fish die anyway; that’s why the offshore reef, the fish hatchery and the wetlands restoration are put in place. Because that’s places where we can replace the fish that would ultimately have grown to adulthood.

SENATOR CALDERON: And you said the dry cooling process is just not feasible?

MR. ROSENBLUM: It is just not feasible on an 80-acre site. Let me just give you a point of reference. Palo Verde is 4,000 acres; ours is 80.

SENATOR KEHOE: Thank you. Mr. DeVore.

ASSEMBLYMEMBER DEVORE: Thank you, Senator. On Palo Verde, is Palo Verde dry cold then?

MR. ROSENBLUM: Palo Verde is dry cold; that’s correct.

ASSEMBLYMEMBER DEVORE: Could you address briefly….I understand that when Palo Verde was built there was some thought at the time that the U.S. would be reprocessing and using commercially generated plutonium as a fuel cycle. I’ve read that Palo Verde was designed from the start to be able to accept the reprocessed plutonium from eight commercial nuclear power plants. Number one, is that true? And number two, when you’re using plutonium in a mixed oxide fuel, a NOx fuel, what happens to that plutonium? Is it used up?

MR. ROSENBLUM: It’s a multi-part question and I always fail at multi-part questions, so let me try. First, yes, Palo Verde was initially designed for the use of reprocessed fuel. I can’t speak to the eight plants, but that sounds about right. They, in fact, have used in some test assemblies of mixed fuel that would look just like it was reprocessed fuel and they’ve done that successfully.

The last part of your question?

ASSEMBLYMEMBER DEVORE : The last part is, when you use plutonium and mixed oxide fuel, what happens to the plutonium?

MR. ROSENBLUM: The plutonium is used up, burned up, what we would call today and we remember from the alchemy age as transmuted. So, it’s broken apart into other physical substances and becomes a waste and that waste can then be further recycled or it can be buried in geologic disposals. So, it is a way of burning up plutonium. And in fact, using some of the Soviet Union’s used plutonium was one of the reasons it had test assemblies because it’s a way of disposing of plutonium.

SENATOR CALDERON: It’s a way of disposing plutonium. Very good.

ASSEMBLYMEMBER DEVORE: Senator Calderon, regarding the greenhouse gas emissions; my own studies have shown four to five reactors, that that only deals with the 20 percent of the emissions from the electrical sector; it does not address transportation or everything else. But four to five, you could displace coal and natural gas and get down to 1990 levels; just to put a rough order of magnitude on it.

SENATOR KEHOE: Just a couple of quick comments. That plutonium waste is radioactive waste; right?

MR. ROSENBLUM: It is radioactive waste mostly.

SENATOR KEHOE: Some of the following speakers are going to talk about some costs, and I’m sure Mr. Keenan will too. But some of the modern plants are also over budget and are experiencing cost overruns too, so I still would like to know more about that. And then we’ve read also about the supply chain being very tight, so I think there’s more detail on the financial end of this discussion that we haven’t gotten to yet. Mr. Keenan, you’ve been patient, why don’t you go ahead.

JACK KEENAN: Thank you very much. Good afternoon. I am Jack Keenan, Senior Vice President of Generation and Chief Nuclear Officer at PG&E. And I’m very pleased to be here today. Thank you for inviting me to talk to you about Diablo Canyon specifically. I’ll try very hard not to be repetitive in some of the things that Dick has talked about.

Diablo Canyon is also a 2-unit nuclear power plant in San Luis Obispo. I’m sure you’re all familiar with at least pictures of it because it’s pretty tough to see. We are on 12,000 acres in beautiful California coastline and we’re very proud of our environmental stewardship of these lands; and we’ve been recognized for that.

The two units together produce approximately 2,300 mega watts of electricity which will serve millions of households in our territory. This, for us, is approximately 20 percent of electricity that PG&E delivers to our customers produced at Diablo Canyon.

Diablo Canyon started up Unit 1 in ’85 and Unit 2 in ’86 and we have ranked among the best in the industry for the years that we’ve been operating in terms of safety and reliability. And as you know, the NRC (Nuclear Regulatory Commission) has licensed the plant to operate for

40 years.

First, I’d like to just say that at PG&E, safety is a core value for us. We focus on a responsibility there which is absolutely number one. And while we have an excellent safety record, we are constantly looking to improve, which is one of the things I believe has made Diablo Canyon so successful; is, we are never satisfied with our performance.

We have a significant emergency planning effort which, of course, involves the Nuclear Regulatory Commission (NRC), California Office of Emergency Services and local government led by the county of San Luis Obispo.

We are strong supporters of AB 292 by our local assemblyman, Sam Blakeslee, which was recently signed into law by the Governor, which certainly expands our preparedness for another 10 years. And we’ve worked with these agencies diligently to ensure that we’re prepared for the unlikely situation if we would have an event _________.

The last couple of years, particularly, have been strong performance at Diablo Canyon. We’ve made a number of significant improvements in addition to certainly the safety area first. Radiation exposure to our employees is down to record levels, low levels, which the whole industry is doing today. It’s an area we focus on.

The other thing I really want to emphasize that you’ll see in nuclear, this industry that really focuses hard on safety, employee safety, is really a tremendous focus for us. And even though we are an industrial facility, our safety rates at nuclear power plants is basically comparable and better to safety rates such as real estate agents and people working on Wall Street. So, focusing on the safety aspect from nuclear safety to personnel safety is what we do.

In 2006, Diablo Canyon produced 18.5 billion kilowatt hours, which is a record for us. Each year as our capacity factors have gone up we are setting new records. Last year we were about 95 percent capacity factor. We’re on target this year to potentially break last year’s record also. But the unit is very reliable, very safe and it’s baseload, as you’ve heard.

Costs: Our costs, and I’m not sure if these numbers are comparable to what you’ve just heard, but our total operating cost at Diablo Canyon are about three-and-a-half cents, so that is a number that we’ve been running pretty consistently as we’ve had depreciation and we’ve also invested in the plant. But we have some significant investments coming up in the future that will raise that slightly into the four-cent range, but that’s our total cost of energy coming out of Diablo Canyon.

One of the things I wanted to mention for us is that we’re able to….we have a pump storage facility in the mountains north of Fresno and basically we’re able, at night, when we have extra electricity from Diablo Canyon, to pump water back up. It’s a two reservoir system. And Helms facility is located in the center of the mountain, actually. And during the day when we have peak load, we’re able to run the water down through the turbines and get energy. And then at night when we have extra energy in the system primarily from Diablo, we’re able to reverse the turbines and pump the water back up. So we’re actually able to use Diablo Canyon plus more energy that we saved at night from Diablo Canyon, which works very well for us.

Again, in our performance, this past year we’ve had a very efficient refueling on our Unit 1. We did it in basically very good time in terms of the industry—30 days, which is refueling, which is very good overall. It was our most efficient refueling we’ve done on Unit 1 and it really helps us increase the capacity factor, because you do have to have the unit down to do maintenance and refueling on it, so that’s why the capacity factors aren’t 100 percent.

We also had a visit from the Institute of Nuclear Power Operations, which is an industry, sort of, self-regulating group which came up after TMI, which they look at the plant and they basically measure you against standards of excellence. It’s a little different than the NRC and we had a very good outcome on that where we received their highest rating.

And in addition, our NRC ratings are green, as you’ve seen.

A little bit on the fuel: All of our used fuel is still stored at Diablo Canyon. We are working on a storage facility. It’s a little bit different than what you saw on the picture. It’s dry cask storage. We should have that facility completed next year. And we have received approval from the NRC to store fuel in that facility in addition to CPC cost recovery, the California Costal Commission for the site work and local governments; it’s all been through the right areas for approval, so we’re looking at potentially loading fuel in that facility some time next year.

Also, we’ve talked enough about the DOE and understand what their commitment is.

At our Humboldt Bay site, we also have just completed, or are just completing, a dry cask storage facility there which we’ll also be looking at removing the fuel from our older Humboldt Bay plant and decommissioning that unit. And as you know, SMUD has transferred fuel into dry cask storage at Rancho Seco, so it’s been done a lot around the country and is certainly a very safe and reliable way to do it here.

We’ve talked a little bit today about seismic situation. I just wanted to mention that briefly; that nuclear power plants in general, and certainly Diablo Canyon, are really among the strongest industrial facilities in our country. We have an ongoing seismic program. We have a number of experts in that organization. And we’re continually looking to learn more and understand what’s going on in the seismic area and specifically around Diablo Canyon.

We understand the geological characteristics of Diablo Canyon. And our expert seismologist, Mr. Lloyd Kluff, is in extensive contact with state and local officials, specifically the California Seismic Safety Commission and many other folks. He is well renowned in the world for what he does in this area. And in fact, he just took part in the delegation that traveled to Japan to study the recent earthquake in Japan and the effects that had on their nuclear programs in Japan.

Just touching on security briefly; you’ve heard quite a bit on that already. But we have a significant security system in place and very well trained individuals. We had that in place before September 11, 2001. But I’m sure as you’re aware, since that time we have significantly improved what we do in that area based on the size of the force, the surveillance techniques that we had and the weaponry that we had in addition to training and qualification. And that’s about as general as I can get or as specific as I can get. I have to remain very general in that area. But I can assure you that the security is significant. And the Homeland Security has actually reported that the nuclear plants are by far the most secure industrial facilities in our country.

It’s important for us to continue to invest in our future and we’re doing that at Diablo Canyon.

We’ve recently replaced all of our low pressure turbines, which generate the electricity and they are more efficient. Actually, we’re generating more electricity because of that.

You heard the dry cask storage that we’re building in order to ensure we can store our plant well into the future to the life of the plant. And that in early 2008, we will be replacing the four steam generators in our Unit 2. They arrived on site just recently. You may have seen some of that in the papers. And this is the largest construction project that Diablo Canyon will have carried out since it was built. We plan on doing that in about a 60-day refueling outage—during the refuel outage. And we’re also preparing as much of the industry to replace our reactor heads which we will be doing that in ’09 and ’10.

So, economic benefits; there’s a lot in addition to the fact that we produce clean, safe reliable energy from Diablo Canyon. We provide the local area there about 1,400 permanent jobs—these are fulltime jobs. These employees, as you’ve heard from Dick, are significant on how they effect the community in terms of they’re volunteers; they’re very active in dedicating many hours of volunteerism to the community.

And again, on average, because of the professional nature of these jobs, the actual pay for these folks is about 60 percent higher than the average pay in the area.

Diablo Canyon is also the largest taxpayer; providing $27 million of state, local taxes to support the schools, libraries and public service.

Also, some studies have been done, actually, on Diablo Canyon and determined that it adds about $650 million to the county economy every year.

So in closing, I’d like to say that from an environmental point of view, you know that nuclear energy does not emit greenhouse gases. And we’re proud at PG&E to say that basically our own generation is 90 percent carbon free at PG&E and most of that comes from Diablo Canyon, and most of the rest of it comes from our extensive hydroelectric system that we operate. So Diablo Canyon, alone, prevents approximately 8 to 10 million tons of greenhouse gases a year….was generated by gas.

I’d like to make one comment just to help answer a question that was asked earlier about the cost in the ’80s of some of the plants that were built. It’s unfortunate that two plants here in California were two that overran, but there are actually many plants that were built in this country at much, much lower cost. And Dick has mentioned a couple of the reasons why the cost went up for a lot of these plants. But I bought one of my first houses and my second house maybe around 1981. I had a 15 percent mortgage rate. So if you start thinking about these plants that were in construction….in fact, a number of them were delayed due to the redesign of the plant and also due to the electric energy which was not growing as fast as predicted, so a lot of the plants were delayed. So, you have a lot of this money that was being loaned out, and the interest rates went from 4 and

5 percent to 15 percent. So, it’s a significant impact on the people building these plants.

I’m very familiar with many plants that were completed in the early ’80s basically for 100-, 200- maybe 300. Now the kind of estimates that you’ve heard, $2-, $3-, $400 million, they were completed at…

SENATOR KEHOE: So they were on target?

MR. KEENAN: They were on target and in the ballparks of what you’ve heard. We tend to hear about the ones, and there certainly were ones, as we know here in California, that went way over. But it really needs to be studied to understand that versus just thinking that all nuclear power plants are way over budget.

So I’d like to close by inviting any members of this committee, of your staff, that would like to come to Diablo Canyon to see professional and safe operations and a very secure facility. We’d love to have you come at any time and we’d work out something when you’re there. So I’d like to have you visit the site. I’d like to be there with you.

And with that, I’ll close and answer any questions that you may have.

SENATOR KEHOE: Thank you. You talked about the cost of power coming out of Diablo Canyon being about three-and-a-half cents a kilowatt hour? Going back to the capacity discussion; Diablo Canyon has higher capacity but the cost of your electricity is quite a bit higher than Edison’s if Edison’s is about one-and-a-half cents, one-and-three quarter cents, so what’s going on?

MR. KEENAN: Well, I’d have to ask a clarifying question….is yours total cost—depreciation, everything?

UNIDENTIFIED: I’m sure it does not have depreciation.

MR. KEENAN: See, I think that’s the difference. This is absolutely total cost—everything in terms of depreciating the plant and all that’s in there. I think that’s the difference.

SENATOR KEHOE: Okay, so you’re one-and-three-quarters was the power plant, you know, operation and all that, but it wasn’t depreciation. And yours is everything—operations and…

MR. KEENAN: And our number without depreciation is pretty similar to S.E.’s, so I think that’s the difference that we’re talking about here. It’s a little bit apples and oranges but ours is very similar. Our operating, maintenance, and fuel costs are right in the same ballpark as what you’ve heard from S.E.

SENATOR KEHOE: And has the cost of power coming out of the plant come down as the plants aged?

MR. KEENAN: The cost of the power has actually come down as capacity factors have gone up.

SENATOR KEHOE: Alright. Mr. DeVore, do you have something on this point? Then, Mr. Keenan, maybe you can give us a summary on the once-through cooling versus dry cooling at that site—at Diablo Canyon? Tell us what the impacts would be there.

MR. KEENAN: Well, I want to try to add something as to what you mean by dry cooling. Palo Verde you talked about, is (quote) “dry cooling,” but you still have to have a lot of water because its cooling towers and the water evaporates and you have to make up that water. I think that’s the type of cooling we’re talking about potentially going to in California. Dry cooling itself is basically completely infeasible at a nuclear plant—just not total dry cooling; I don’t think you can do that. But cooling towers, where you’d have to have somewhere in the order of, I believe it’s 20 million gallons a day or something like that, make up water. Don’t quote me on that. But it’s millions of gallons per day. That would create quite a challenge on the coast because the only place that water would be available would be from the ocean. So you’d be bringing in saltwater. And you’d actually be condensing the saltwater, so it would be very salty and you would have to discharge it in order to get rid of the salt and you’d also have some salt that would migrate into the area from the cooling towers. So I believe, what we believe, is the environmental impact from salt would be very, very significant if you went to cooling towers at a nuclear plant—very significant.

SENATOR KEHOE: Okay. In the interest of time I’m going to move onto our next speaker, who is, Marshall Cohen. So, Mr. Cohen, take it away.

MARSHALL COHEN: Thank you, Senator and committee. Good afternoon. My name is Marshall Cohen. And I’m with the Nuclear Energy Institute in Washington, D.C. I appreciate the opportunity to come back to California and speak to the committee and hope that I can provide some information that is useful. I’m sorry that I’m not an engineer. I’ll say that at the beginning. So maybe there will be some questions that I can’t answer, but I’ll make a very strong commitment to you that we can get you whatever additional information the committee would like as we proceed.

I have a presentation here of about 41 slides, which, obviously, I’m not going to agonizingly take you through every one….

SENATOR KEHOE: I’d like everyone to stick to 10 minutes if at all possible.

MR. COHEN: Right. So, what I’d like to do is just summarize a couple of things and, as I’ve been listening to the discussion and questions, highlight a couple of things particularly with respect to the nuclear waste issue. So, as I go through here, we all know, you’re certainly more aware of the demand for electricity that California is going to be facing as it goes ahead and a significant demand that, I think, nuclear….and our respective should have an opportunity to be on the table to help meet that demand.

The Nuclear Energy Institute basically looks at an energy policy for the United States that supports energy efficiency, including conservation, using renewable sources to the fullest extent possible, and using proven large-scale emission-free energy sources for baseload generation. And as you are well aware, there’s a lot of discussion in support about nuclear energy not only in the United States, but throughout the world, much of it now tying it to the impact or lack of impact, if you will, nuclear energy, on greenhouse gas emissions. Most notably and most recently, the United Nations Intergovernmental Panel on Climate Change referencing nuclear power as an effective greenhouse gas mitigation option, that certainly is true.

You’ve heard about the reliability and capacity factor of your two outstanding companies here in California. The industry, across the country, has done an incredible job of really creating a high capacity factor and reliability for nuclear energy as well as a very solid economic performance.

The cost of nuclear energy is low and one of the main reasons for that is that the fuel costs are substantially lower than the other major providers of energy in the United States.

And as Mr. Keenan said, these plants across the country are very, very safely run. You can see some data that’s here.

We mentioned a number of times the greenhouse gas, CO2, avoided emissions come from nuclear. Basically 75 or so percent of all the avoided emissions from energy in the United States come from the nuclear fleet of 104 plants.

There is some data in here on lifecycle and so forth.

Commissioner Boyd made reference to a MIT survey suggesting that there wasn’t support for nuclear. And while you all are more aware than any of us about everyone has their surveys and polls, we do have, through the Nuclear Energy Institute, we do survey the population of the United States several times a year _________ and our survey shows strong support for nuclear. This slide will show the kind of percentages that an October survey showed. Eighty-one percent of those surveyed showing nuclear has an important future role (supporting renewing licenses). And you can see some of the other data there. In addition, some more questions that we asked on that survey showed strong recognition by the public that nuclear plants are safe and secure.

And two very important questions I want to spend a little bit more time on with you, that nuclear waste can be safely stored at the plant sites, and that nuclear waste or spent fuel, as we’ve heard them call it, can be and should be stored in one or two volunteer sites around the country.

Let me talk about nuclear waste/nuclear fuel. It is stored now in about 39 sites around the country; stored similarly to what SONGS and Diablo Canyon have. They store it in dry casks. And we believe that it’s possible to change that. That, in fact, you can consolidate the dry cask and spent fuel from those sites into one or two sites around the country.

Commissioner Boyd made a statement that California needs to plan for continued storage—interim storage on site. And I would like to suggest, and in the context of your discussion on consideration of going forward, that that may not have to be the case. Our industry is looking around the country at the possibility of developing one or two (there’s no magic number), but for discussion purposes, one or two interim storage sites. And in fact, we have been out talking to several communities around the country that have expressed some interest in considering those types of _________ and I have on my desk in Washington some expressions of interest from communities in entering into discussions with the industry about how that might work. Now this is very preliminary and has, obviously, a long way to go, but it’s a very, very possible, at least in my view, this thing that could happen.

And I would like to suggest to you that as you proceed with your consideration of where California is going to go and what California is going to do, that perhaps reviewing that statement in statute that says there has to be permanent solutions before anything more can happen here in terms of nuclear, could be relooked at with respect to the potential of some interim storage sites. We believe that it’s possible. We have been taking people from communities and actually, legislators, state legislators from around the country, to see interim storage sites in some of the plants. And we’re beginning to see some interest and support at the state level, especially on the legislative side, for taking a continued look at that.

Senator Kehoe, you did make reference to these being cement blocks. They are more than that. They are pretty secure, very safe canisters that contain the spent fuel.

In the California Energy Commission’s hearing last June, the nuclear director for the Natural Resources Defense Council was specifically asked a question in the testimony about the safety of the spent fuel storage canisters in an earthquake (it’s in the transcript.) His reply was that you can’t change them. They’ll be fine. Nothing is going to happen to them.

So, again, we think that there’s some solutions here that are possible. They’re long-term, but shorter term, perhaps, than the ultimate evolution of what would happen with Yucca Mountain.

SENATOR KEHOE: The 39 sites, are those the interim sites you’re talking about?

MR. COHEN: Those are on reactors. They’re similar to the two you have; right.

SENATOR KEHOE: In Diablo?

MR. COHEN: Correct.

SENATOR KEHOE: Then, tell me, what are these interim sites? Is this proposal or are they really out there?

MR. COHEN: No, no. What I’m saying is, spent fuel stored in dry casks at 39 sites. We are looking at the possibility of consolidating those

39 sites into one or two sites. In other words, transporting the fuel to one or two sites around the country, and those would probably be NRC licensed facilities that would basically…

SENATOR KEHOE: Let me ask, that’s an easier discussion than Yucca Mountain, or a quicker discussion than Yucca Mountain?

MR. COHEN: It’s an interim step, however, Yucca Mountain or a repository is finally determined, and under federal law there has to be a repository…

SENATOR KEHOE: And do you have locations for those consolidated sites?

MR. COHEN: We are starting to talk to communities now.

SENATOR KEHOE: Okay, you’re starting. Thank you. I just wasn’t clear on that.

MR. COHEN: I’m sorry. It’s very preliminary but it’s a step forward. And our plan is to try to move that significantly over the next year where we may well have a couple of communities very interested in the possibility of proceeding with some license applications for interim storage.

SENATOR KEHOE: Okay.

MR. COHEN: It will take some time. But that is a good interim (and you can define interim in terms of a number of years) step with respect to handling the spent fuel. The other part of that (and it has been referenced a little bit) is the reprocessing. Reprocessing is done now in other parts of the country. We took some legislators to France about a month ago to see the reprocessing, including the chairman of the NEC High Level Waste Committee, and it was a very interesting trip and I think very educational for those individuals.

They do reprocessing now in other parts of the country, as I’ve said. It’s politically controversial here in the United States because of the plutonium issue. But again, the technologies are developing. There are solutions that are either existing if there is political will to look at them, or will be coming along at some point in the future. I think there will be a reprocessing. And it ties in some respects to the interim storage opportunity, because some of the industrial companies that we’re talking to about interim storage are companies that also understand and do reprocessing.

So, I have some pictures here on….an interim storage site that we consolidate to 39 would just be a larger type of site than this. These are two in the east right now. This is the one just up the road from us at SONGS. And I always include this picture to show this is a cask that has spent fuel, high level waste in it; it’s being moved to a storage pad. There are people walking around it. They are not wearing protective clothing. They don’t need to. It’s a very safe nuclear operation.

The question of when these discussions will proceed, the question of transportation will come up. I think the Energy Commission chairman made reference to that too. Spent fuel, used nuclear fuel, has been, is, and will be safely transported around the country without any issues. But again, there are experts and people and data to support this and to provide information as you consider in terms of your public policy.

SENATOR KEHOE: Okay. You’re just a little over 10 minutes.

MR. COHEN: I’m sorry. I also provided for you some information about what other states around the country have started to do in enacting legislation in some cases, and in some cases regulations to support the financing of the nuclear reactors. There are some concrete steps some states have taken and other states are considering that. Some data in here in terms of subsidies. A number of quotes from some important California elected officials as well as others.

And finally, we feel and we see a strong base of political and public support _____ essential part of U.S. electricity supply.

Currently, just for your information, applications have been submitted to the Nuclear Regulatory Commission by three companies for new reactors. And one company has submitted a partial application. You’ll hear more about that from Mr. Turnage. And we anticipate several new plants online in the 2015 and 2017 timeframe and significant construction after that. But there are clearly issues that need to be worked on.

Our industry is very committed to working with whoever is interested in a discussion of these issues, providing information, providing expertise, data and so forth.

Thank you.

SENATOR KEHOE: Thank you very much. Let me just go through a couple of things quickly and then we’ll go onto the next speaker. You showed some very economical numbers there, I think, on page-8, on the cost of electricity coming out of the plants. Now, do you have everything in there like SMUD’s Rancho Seco plant and plants that were never completed, like Washington State Public Power Authority? Or are these seen, maybe…

MR. COHEN: Other people put that together so I’ll find that out.

SENATOR KEHOE: If you could let us know, that would be great.

MR. COHEN: Sure.

SENATOR KEHOE: And then, I saw your little men there with the….polling on the public’s comfort with nuclear power. And I just wanted to point out, that now you’re in California and our Public Policy Institute did a July study that said 37 percent supported but 54 percent are still opposed. So, you know, those things float around.

MR. COHEN: Sure.

SENATOR KEHOE: I would like to hear more about how the federal legislation will be subsidizing nuclear power. Does that mean it’s still not economically viable? But I think some of our other speakers are going to address that, so rather than get bogged down right now, I’d like to have a few more people speak.

MR. COHEN: Sure. And again, you have a variety of companies and a variety of different regulatory and financial situations that will make individual decisions based upon the climate that they’re looking at and what might or might not be available to them in terms of there’s no guarantees—production tax credits or other things. But some of these companies are spending a lot of money right now in preparing license applications and it is not an inexpensive thing to do by itself. And even though they are saying publicly we’re not sure we’re finally committed to building, we may spend $50- to $100 million to submit a license application, so that’s pretty serious…

SENATOR KEHOE: $50- to $100 million just to get the application in?

MR. COHEN: Somewhere in there. It’s going to vary depending upon the company and the design they’re working with and so forth. But it is a lot of money to prepare a NRC license.

SENATOR KEHOE: Okay. As the other speakers give their testimony, I think that uranium costs, standardization of design, the financing, waste and reprocessing, if you want to kind of make sure you touch on all of those, I think that will help the committee get the information it needs.

So, Mr. Harding, I think you’re next.

JIM HARDING: Great. Good afternoon, Chairwoman Kehoe and Vice-Chairman Dutton and members of the committee. Thank you. My name, again, is Jim Harding. And I’m an Olympia, Washington based consultant on energy and environmental issues. I was recently the director of Power Planning and Forecasting for Seattle City Light. I grew up in the San Francisco Bay Area. I spent time on the WHOOPS Board when I was at the Seattle City Light—the Energy Northwest Board is what it’s now called. I had a mother in the Manhattan Project so I saw plenty of nuclear proponents early in life.

Most of what I learned about the economics of nuclear power was

30 or 35 years ago in California where utilities were considering over

30 reactors in this state by the year 2000. About 15 months ago I was approached by an outfit called the Keystone Center, based in Keystone, Colorado, to join an expert panel from all points of the compass, including the Nuclear Energy Institute, examining prospects and challenges for a nuclear renaissance.

At our first session we were treated to a presentation by the Electric Power Research Institute. EPRI came in and gave us a briefing on economics. They looked at 13 recent studies from the University of Chicago, the Department of Energy, from Czechoslovakia, from the World Nuclear Association, and the MIT study and they threw out the two outliers—the Czechoslovakia study and the 2003 MIT study for the simple reason that they were out there; it was not for any clear reason. They averaged the rest; assumed the plants could be placed into rate base and they’re output sold without price regulation in deregulated markets. And they made lots of money, but they made everybody on the panel laugh because that would be illegal in every jurisdiction that I’m familiar with in the United States. So, we had to throw out the EPRI study and instead we started with the MIT 2003 study which had the good judgment to use actual data from recently completed plants in Asia—primarily, South Korea and Japan. The data is not perfect. It’s not even close to being perfect. Accounting standards differ, some people don’t include key categories of cost in their calculations of capital cost. For example, admin in general, which is pensions and insurance for the people who work at the plant or executives who are involved in contributing to its success. But it’s the only data we had.

The next thing we had to do was to assess what’s happened since 2003. And the most important was to look at supply chain and balances and what some people generally called the “China Effect;” the huge increase in recent costs for copper, zinc, concrete, cement, everything that goes into a nuclear power plant—steel.

We asked EPRI to give us a slide of what they think has happened to construction costs since 2003. And as you can see, after years of being essentially flat, the increase has been quite dramatic since that time.

And if you look at this curve which is over a much longer term and yet compare it to the steepness of the 1970s when we had a pretty out of control inflationary economy, we’re steeper than the mid ’80s and late ’70s.

And the reasons: I think utilities are just starting to digest….I’m going to come back to that slide….I want to touch briefly on this one we heard a few minutes ago. This is from the Department of Energy study a number of years ago. We got it wrong no matter which year you look at and we got it wrong by a big margin. The middle was worse than the beginning but there’s no good record of estimating costs of nuclear power plants.

And there’s the spread over time. Obviously later ones were more expensive than earlier ones for reasons that have been discussed. We built some relatively inexpensive ones in the ’70s, but we built very few inexpensive ones in the ’80s and ’90s.

Diablo is pretty much in the middle. It is not an outlier.

Basically, the bottom line on the EPRI analysis on this issue is that to estimate 2006/2007 construction costs we had to move the MIT numbers which are in 2002, for the most part, to 2007. And so we escalated…

SENATOR KEHOE: Mr. Harding, can I just ask you a quick one? If you go back to the recent Japanese experience we’ve been hearing all about—the plants are expensive but the energy is relatively cheap; is this the price of energy when the plant opens?

MR. HARDING: No, that is the capital cost in 2007 dollars before you start construction.

SENATOR KEHOE: Before you start. So you could amortize it over 20 or 30 years and there would be a different number; is that valid?

MR. HARDING: Yes. This is sometimes called overnight cost. And I’ll get to economic jargon.

SENATOR KEHOE: It sounds a little high.

MR. HARDING: It’s certainly higher….well, it’s not too bad, but it is higher than many of the studies.

SENATOR KEHOE: Okay.

MR. HARDING: So, when Keystone completed its report (and I did both the economics chapter and the regulation chapter in that report; some of the proliferation and waste stuff) we concluded that the capital cost was not 1,800 or 1,900 that EPRI thought or EIA (Energy Information) thought. Our low case was 3,600 per kilowatt and our high case was 4,000. And we used what I think were conservative assumptions. The low number had no real escalation after 2007. Despite a curve, that doesn’t give you confidence and no real escalation after 2007. The high case included a continuation of that trend.

We used a five- to six-year construction period. There are very few reactors that got built five to six years in the United States. We assumed that Wall Street would ask for a slight premium on equity but would not downgrade debt of somebody trying to build a plant. We didn’t assume that regulators would have a cost cap. A cost cap would translate into higher premium on Wall Street for risk protection.

All the recent evidence that I’ve seen on this, tends to point to a worse situation for nuclear than you might get for other forms of heavy construction—bridges, runways. We’ve had an industry that’s been more _______ a nuclear industry, supply industry that’s been more _________ for 20 to 30 years since TMI and Chernobyl.

The number of what we call end stamp holders certified to be suppliers by the American Society of Mechanical Engineers has fallen drastically.

There’s only one forge in the world for the 9 to 12 large parts necessary for nuclear reactors. You might get another one in France. But right now, that’s a tight supply chain. That’s serious skilled labor, contractor limits. It’s a very complex undertaking to procure the cranes and the ships necessary to move these parts across the world.

And then, I’ll talk later about the problems in uranium supply.

In other words, lead times for components are four to six years—maybe longer. And when you have a tight supply chain in all of these categories, as an economist, what do I think? I think you’ve got a serious risk of monopoly pricing all along the way. And the more you try to build it in one area, the harder that problem gets. When TVA looked at doing a project at Bellafont, for example, they looked at skilled labor and they decided they could recruit from a 500-mile radius. They ran out of skilled labor within a 500-mile radius for a relatively fast construction period so they had to slow the construction period down. Imagine if you’re building three in the southeast. Those were ADI….all overlap. And I think we had that problem earlier in this industry. In fact, labor and material delays coupled with slowing growth rates were very key reasons that we had rapid cost escalation in the ’80s.

At the outset of our Keystone Center analysis, I think many utilities, southern companies certainly, thought that vendors—GE, Westinghouse, AREVA, would sign fixed price so-called turnkey contracts. I don’t know when we ended this project. I don’t think any of them thought that would happen for exactly these reasons. Vendors have less deep pocketbooks than utilities do. They can’t afford to lose a billion dollars as AREVA and Siemens seemed to be doing on the Poke Hill Whoato(?) III project in Finland. And so, I think you’re going to see utilities ask to bear, and ask their customers to bear, a significant share of potential cost escalation risk during construction.

This is the really weird situation in reprocessing and enrichment. Right now, we supplement our primary supply, which is the stuff that comes out of the ground, with lots of secondary inventories from U.S. government inventories and surplus highly enriched Russian uranium. The problem is, that stuff goes away and it goes away fast. And to meet existing demand we’re going to have to double worldwide uranium mining capacity and enrichment capacity and that doesn’t happen fast.

This issue came up earlier. The MIT study which had, I don’t think, a single person who’d call themselves a critic of nuclear power on the panel, looked at when uranium is cheap it doesn’t make sense to reprocess. Reprocessing, they found, could be four times more expensive per kilowatt hour than using natural uranium.

When the Keystone Center looked at this question we updated; uranium is ten times more expensive than it was; reprocessing is significantly more expensive. A closed fuel cycle, which is recycling, is two to three-and-a-half times more expensive than natural uranium. I could tell you, if I was on the WHOOPS Board, if I had to pay for reprocessing in the Pacific Northwest, that would put the life of my plant in jeopardy—that number. And remember, that Nuclear Energy Institute, Southern Company Entergy, lots of people were looking over my shoulders when this math was done.

We also commented….oops. Boy, that was a blooper. I want to come back to this. This is the bottom line. You heard a number of costs mentioned for the running costs of Diablo and San Onofre. The numbers are way lower because the plants been in rate base; gotten stranded cost recovery. The only thing left is the operating cost. I find that one quibble that I’ll have sometimes is there are some categories of cost; A&G, Net Capital Editions, some tax issues, the decommissioning, that people rarely include in their math, so one has to be very careful that you’re not comparing apples with monkey wrenches.

So, after the completion of our study, Moody’s and Standard and Poors both released analysis and both Moody’s and Standard and Poors had higher capital costs than we did. As I said, Energy Information was about 2,000; ours was 36- to 4,000 capital cost; S&P was 4,000; Moody’s was 5- to 6-. So if I use an updated low case and a Moody’s high case, I get a pretty big number for nuclear power—nine-and-a-half to fifteen cents a kilowatt hour. And I can take you back to the Standard and Poors analysis—they’re currently thinking that coal, gas, integrated gas _________ combined cycle, wind with and without carbon taxes is seven to nine. This is the Standard and Poors assessment for nuclear even with carbon taxes. It’s not that great. And if you go to the Moody’s number, it’s less great.

Let me emphasize, too, that this is lifecycle discounted 2007 dollars. If you put a twelve cent a kilowatt hour plant like that into rate base, your first year cost is about twice that—twenty-four cents a kilowatt hour. So you’ve got a serious rate shock question and a serious political problem for regulators. If it’s expensive, it’s going to have very high near-term rate impacts. And I think if these capital costs are right, even if you get loan guarantees, it’s not going to pencil out in Texas (although Joe and I will have that conversation later).

Anyway, thank you very much.

SENATOR KEHOE: Thank you. Can you tell us a little bit more about the Keystone Report? Who commissioned it? Who paid for it? Who participated? I think you said Mr. Cohen participated.

MR. HARDING: One of his colleagues participated. There were

27 members initially. Jim Richio of Greenpeace couldn’t do it any more so he left. But it was a very wide set of parties; PU Center on Climate, Environmental Defense, Entergy, Southern Nuclear Energy Institute, Florida Power and Light. I would say, all utilities that are seriously considering building projects.

SENATOR KEHOE: And who paid for it?

MR. HARDING: Many of those parties paid for it. So, I would just say that I got tremendous support for every….I expected to get some criticism for the work I did. There wasn’t one utility that had any criticism. If I got some, it was from this guy’s colleague.

SENATOR KEHOE: Okay. I just want to emphasize, it seems to me the way I understood it, that your costs for nuclear power are so much higher than the costs we heard talked about from the utilities today. Because you’re more of an all end scenario?

MR. HARDING: Well, this is for a new plant. If you look at that $4,000, for San Onofre right now and for Diablo Canyon, that number is probably pretty darn close to zero, maybe $200, $300, $400—it’s a tenth. And the lion’s share of the cost of a reactor is that capital cost.

SENATOR KEHOE: Do your numbers include federal subsidies?

MR. HARDING: No. But the utilities thought, on our panel, that if they are going to take a decision like this to a board of directors, they are not going to base it on the existence of subsidies. They have to make it work either way. Now, I would say that if you’re a merchant plant operating without rate base potential, there is no way that you can make it work without loan guarantees—no way. And I’m doubtful that you’re not going to bleed the taxpayer and your own whatever equity you have in the project at the high capital cost numbers in deregulated markets.

SENATOR KEHOE: Very good. Thank you. Mr. DeVore.

ASSEMBLYMEMBER DEVORE: A quick question regarding your lifecycle cost chart. Just in taking a real life example from San Onofre. You have two reactors; roughly 90 percent of the time they’re up. In a given one-year period they save about $1.3 billion in natural gas. Every 22 months they refuel with approximately $30 million of uranium. That tells me that in a 22-month period you’re going to save about $2.4 billion worth of natural gas versus $60 million worth of uranium. And I’m looking at your fuel line, your second line there, and the number I come up with is about .25 cents per kilowatt hour through the fuel alone which is under high case about eight times less than what you’re estimating—which, frankly, calls into question all your other numbers. And unless you can explain that to me in a nutshell, I don’t know where in the heck you’re getting your numbers from, because I’m basing mine on actual costs. Does it not take about

$30 million to refuel a reactor?

MR. HARDING: We should realize that the uranium that is being burned in today’s reactors was probably mined four or five years ago when uranium cost $30 a kilogram, $15 a pound. Today, the spot market price….well, I don’t know about today. Earlier this year the spot market price was not $30; it was $300.

ASSEMBLYMEMBER DEVORE: Before you go any further, let me stop you with that, because uranium is a tremendously abundant natural element on the earth. Spot market prices don’t really impress me. Because what happens with the free market is that the spot market price goes up by a factor of 10, there’s going to be a bunch of new uranium mines opening up around the planet to bring supply into line with demand. So if you’re telling me the root portion of your number at a factor of 10X is based on your recent spot market price for uranium, then me, as a policymaker, is going to look at this and go, okay, what is the signal to the market to go out and get more supply on the market, thereby driving the price back down to something more reasonable; maybe two or three times what it was a few years back; maybe five times, but certainly not 10 times. But the market is not going to stay dynamic or stay static and stay at 10 times value.

MR. HARDING: I understand that. I’ve looked closely at this problem. The person who has looked most closely at this is a professor at MIT named Tom Neff.

If you look at this chart, you see that a lot of people have long-term contracts. And that purple/mauve shows you how much is being bought on the spot market. The unfilled requirements go up in a real hurry real fast. In other words, utilities are going to get into the spot market big time. The contracts that most uranium miners have are fixed in cost, so they are not seeing any serious level of economic benefit from those sport market transactions.

I did a two-day presentation for Rio _______ Zincs Strategic Planning Group in Singapore earlier this year and they’re completely in agreement with this problem. It’s going to be very hard for them to expand rapidly, and they’re the second largest uranium miner in the world.

ASSEMBLYMEMBER DEVORE: So you’re telling me that the uranium mining industry is immune to the laws of supply and demand?

MR. HARDING: No. I’m just saying that this market is likely to be very tight with potential monopoly pricing power for a very long time based on the loss of the secondary supplies, the fact that it takes a long time to open a new mine, and the fact that contracts aren’t passing through spot market price to uranium miners in a way that gives them a big incentive to go out there and look for more.

ASSEMBLYMEMBER DEVORE: Based on my understanding of the commodities markets, though, you can develop a business model that would benefit from that spot price. I mean, there’s hedging devices, etc. I would just strongly caution you to assume a 10X increase when, point in fact, uranium is a tremendously abundant natural element. It’s pretty easy to find on this planet. Not to mention other fissionable products like thorium, which we haven’t even discussed yet.

MR. HARDING: Right.

ASSEMBLYMEMBER DEVORE: So, you know, I’m just saying that for my purposes, I question the number because I believe the market will respond and develop in more supply.

Thank you.

MR. HARDING: I’m not in disagreement with that. But one should also look at what’s happened in nickel—just across the board on commodities—70 percent price escalation per year for nickel and copper since 2003. I would expect the laws of supply and demand to do better than that. But it’s been rough.

SENATOR KEHOE: Thank you. Not to dismiss those comments, but I think there’s some business people coming up who maybe want to comment on the price of uranium, specifically Mr. Turnage. But, Mr. Zichella, you’re next and then Mr. Hirsch and Mr. Turnage.

CARL ZICHELLA: Thank you very much. Good afternoon.

SENATOR KEHOE: And you’re also welcome to respond to anything you’ve heard so far.

MR. ZICHELLA: Thanks. I leave more of the technical issues to the technical people.

SENATOR KEHOE: You don’t want to talk about thorium?

MR. ZICHELLA: I’ll talk a little bit about things, but what I really think we need to do right now is take step back and take a look at a bigger picture of what this decision we’re about to make, if we indeed were to make it, would mean and what our choices are that we need to compare it to.

Good afternoon, Madam Chair and members of the committee. I’m Carl Zichella, the Regional Field Director for the Sierra Club’s California-Nevada-Hawaii office. Our organization has been opposed to new nuclear power plants for 33 years primarily because of some of the waste problems that we’ve talked about and heard about.

Nuclear power is a spectacularly flawed technology. All of the major problems that have plagued this industry in decades past persist; the technology is too expensive, it takes too long to build, it’s byproducts are lethal, it’s operations are dangerous, there’s no solution in long term disposal of nuclear waste, and dealing with waste as some proposed with reprocessing, creates a huge security risk both for terror attack and proliferation.

The steam generators and pressurized water reactors are arguably the largest component parts failure in the U.S. industrial history. We’ve seen them fail at virtually every single reactor in the United States. They will cost them $700 million to replace at Diablo Canyon alone, and this is on top of all of the many other costs for construction, retrofit that we’ve already endured for Diablo Canyon, and the rate payers have mostly paid for it. It’s starting over again.

You mentioned previously that they’re going to have to do their reactor vessel heads next. Oh, these things don’t come cheap. They may have to cut a hole in a reactor containment building over at San Onofre. I’m not sure how they are going to do the steam generators there.

Decommissioning a nuclear power plant is by some estimates as expensive as building one in the first place, and that’s if you do it thoroughly and completely. That was originally envisioned by the NRC. And that’s assuming that there’s somewhere to ship the vast amounts of waste the process creates. Other than that, what’s not to like?

Despite the rhetoric about nuclear plant renaissance and reduced cost, etc, the actual record is not good.

From a recent report by Greenpeace on the economics of nuclear power published May 1, 2007: “There are currently only 22 reactors under active construction in the world. The majority (17) are being constructed in Asia and 16 of the 22 are being built to Chinese, Indian, or Russian designs. Construction started on five of the reactors over 20 years ago and consequently the likelihood of the reactors being built to their current timetable is open to question.”

If anything, the current experience in Finland underscores this because it’s worse than anyone had expected. And the utility which did promise a turnkey design, they’re taking a beating with the construction company (AREVA, I believe it is) is getting pounded.

“There are further 14 reactors on which construction has started but is currently suspended, 10 of which are in Central and Eastern Europe. This low level of nuclear construction provides little relevant experience on which to build confidence in cost forecasts.”

Nuclear boosters insist that we must build nuclear power to forestall climate change, but I submit that this is unlikely at best and not very bright, frankly. First of all, nuclear power is not an effective tool for climate change. It takes so long to build one (a decade seems to be the likeliest reasonable estimate if everything goes right, and this is an industry in which very little has gone right in construction) that by the time enough were deployed to actually replace coal plants (which would be where the primary benefits would be) it would be too late to make much of a difference. We are told that by the middle of the century we have to reduce our greenhouse gas emissions by about 80 to 90 percent, and we don’t have time to waste decades on a technology that will not actually do the job.

Allow me to quote Vice President Al Gore, whose name is universally taken in vain by nuclear proponents:

“I doubt that they (nuclear plants) will play a significant role in most countries as a new source of electricity. The main reason for my skepticism about nuclear power playing a much larger role in the world’s energy future is not the problem of waste disposal or the danger of reactor operator error or the vulnerability terrorist attack. Let’s assume for the moment that all three of these problems can be solved. That still leaves two serious issues that are more difficult constraints.

The first is economics; the current generation of reactors is expensive, take a long time to build, and only come in one size—extra large. In a time of great uncertainty about energy prices, utilities must count on great uncertainty on electricity demand and that uncertainty causes them to prefer smaller incremental additions to their generating capacity that are each less expensive and quicker to build than are large 1,000 megawatt light water reactors. Newer, more scalable and affordable reactor designs may eventually become available, but not soon.

Secondly, if the world as a whole chose nuclear power plants as the option of choice to replace coal-fired generating plants, we would face a dramatic increase in the likelihood of nuclear weapons proliferation. During my eight years in the White House, every nuclear weapons proliferation issue we dealt with was connected to a nuclear reactor program. Today, the dangerous weapons programs in both Iran and North Korea are linked to their civilian reactor programs. Moreover, proposals to separate the ownership of reactors from the ownership of the fuel supply process have met with stiff resistance from developing countries who want reactors. As a result of all these problems I believe nuclear reactors will only play a limited role.”

Proponents should be more careful about glibly saying Mr. Gore supports more nuclear plants.

Secondly, we need to select the most effective tool we can to address climate change. We don’t have unlimited time or resources with which to address it. Common sense tells us that with global warming we ought to select the cleanest, cheapest, fastest and safest way of confronting it (and that’s mirrored in the state’s loading order for resources, by the way, which emphasizes efficiency and renewable power). In our own lives and homes we would not choose the dirtiest, most expensive, slowest, and most dangerous way of solving a problem. Why should we suspend our reason in addressing climate change? As Amory Lovins once famously said, “Using nuclear reactors to boil water is the thermodynamic equivalent of using a chainsaw to cut butter.”

In the case of global warming; we don’t always need to boil water to fight it, but if we choose to, California can do it just fine with the sun. According to the Bureau of Land Management, there are more than 50 lease applications for solar thermal power plants in the Mojave Desert, which could supply approximately 10,000 megawatts of electricity. That’s roughly a quarter increase in state generating capacity. There are also over 70 lease applications for wind developments on BLM lands, and that’s not including other areas; that’s just BLM lands. Solar thermal can be built faster than nuclear plants and at a fraction of the cost. Solar can provide the most inexpensive and critical power we need—peak power—because it can store the heat it generates during the day in media like molten salt that can be released later. There are also an estimated 4,000 – 8,000 megawatts of wind energy capacity under development in the Tehachapi wind resource area, and that does not take into account geothermal power to help balance the load on power lines if needed. Just this past week, Oak Creek Wind Energy Development announced the largest single wind development California has ever seen—approximately 1,500 megawatts; it’s positively nuclear in size.

Why should we use nuclear power to combat climate change when we have cleaner, cheaper, faster, and safer alternatives we can pursue? Let’s say for the sake of argument that nuclear power is still on the table (and in truth it’s never been off the table, nobody’s wanted it) wouldn’t we want to use as little of this most expensive and dangerous of all energy sources to meet our needs? If we conserve, become more efficient in our homes and businesses, employ renewable and relatively non-controversial means of generation that produced no long-lived and dangerous waste, that are not in and of themselves terror targets, the fuel for which is perpetually free, wouldn’t we be better off? Doing these things has the added benefit of saving money, generating wealth and creating high-road employment. Let’s say for the sake of argument that we did all this and then found that we needed to do more? Wouldn’t we do the next cleanest, cheapest, fastest and safest things and so on? Eventually we might get to nuclear power, but by then we would need far less of it and we will have spent our limited resources on the most responsible and efficient way we could. We might even have the better reactor designs they keep promising and have kept promising for decades. Then again, given their record maybe not.

Another question to consider: While venture capital is flooding into renewable energy resources, which in full disclosure rely on relatively modest tax credits, nuclear power would be deader than a doornail without the massive federal subsidies it enjoys. In the absence of grotesque subsidies, private capital shuns nuclear power. It is among the greatest of ironies that so-called budget hawks trumpet support for this technology. A recent commentary in Forbes magazine lays this contradiction bare. Jerry Taylor and Peter Van Dore, who are not exactly liberals, wrote in an article entitled, Hooked on Subsidies, Why Conservatives Should Join the Left’s Campaign Against Nuclear Power:

“When it comes to politics, we don’t often find ourselves in agreement with Bonnie Raitt or Graham Nash. But now that they are campaigning against new nuclear plants, they’re our friends. Raitt, Nash and the Indigo Girls and other vocal rockers are attacking a provision in pending Senate legislation that would award what they call ‘massively expensive loan guarantees—potentially a virtual blank check from taxpayers for nuclear power plant construction.”

Even without new legislation there’s plenty of federal money being doled out. In September, NRG Energy, an energy wholesaler in Princeton, New Jersey, applied to the NRC for a license to build and operate a two-reactor nuclear plant near Bay City, Texas. The NRC is expecting 19 similar applications in the next 18 months. If approved, they will all be eligible for loan guarantees under the Energy Policy Act of 2005.

Pro-nuclear groups herald the coming flood of applications as proof that nuclear energy makes economic sense. Nonsense. The only reason investors are interested—government handouts. Absent those subsidies, investor interest would be zero.

A cold-blooded examination of the industry’s numbers bears this out. Tufts economist, Gilbert Metcalf, concludes that the total cost of juice from a new nuclear plant today is 4.31 cents per kilowatt hour, yet another estimate. That’s far more than electricity from a conventional coal-fired plant (3.53 cents) or a so-called clean coal plant (3.55 cents). When he takes away everyone’s tax subsidies, however, Metcalf finds that nuclear power is even less competitive (5.94 cents per kilowatt hour versus 3.79 cents and 4.37 cents, respectively.)

Nuclear energy investments are riskier than investments in coal or gas-fired electricity. High upfront costs and long construction times mean investors have to wait years to get their money back. The problem here is not just the cost per watt, several times that of a gas plant, but the fact that nuclear plants are big. Result: the upfront capital investment can be 10 to 15 times as great as for a small gas-fired turbine.” (That is from the article I previously mentioned)

Their point bolsters the aforementioned argument made by Vice President Gore. While renewable energy sources are admittedly expensive to build too, their fuel is free and their costs are going down rapidly. Solar thermal developers believe they can knock a penny off every kilowatt of capacity they install each year if they can get the power purchase agreements and modest tax credits in place to enable them to order their mirrors far in advance of their construction. California is the Saudi Arabia of concentrating solar power. Wind developers, already cost competitive with coal, think they can do likewise. Large scale photovoltaic projects believe they can also match these savings and point to a steady decline in collector costs as proof. Why, again, do we need nuclear power?

Madam Chair, I find it very hard to understand why anyone would believe the industry’s claims. At the beginning they claimed their energy would be too cheap to meter and nuclear waste was a problem they would get to in the fullness of time. I call this the Scarlet O’Hara Syndrome—“We’ll worry about that tomorrow.” Now they tell us that all their problems are behind us and that they are the answer to global warming. But consider this; virtually all the 104 nuclear plants in the U.S. are more than 20 years old and many are 30 years old. That means they are approaching or have reached the end of their design lives. We’ll be using less nuclear power not more because we cannot possibly build them fast enough to replace the ones we’re likely to have to shut down.

The Sierra Club believes that nuclear energy is a distraction in the deadly serious effort we must make to defeat global warming and avert the worst impacts humanity will face. Nuclear power cannot do the job. It is too costly, takes too long to deploy, is too controversial for most communities to accept, is too fraught with waste disposal, proliferation and national security threats to be a serious contributor. We need to focus all of our attention, innovation, investment and political will on deploying renewable energy supplies, and most importantly, using all forms of power more efficiently. Nuclear power has had its day; that day is over and it is time to move on.

Thank you for your consideration of our testimony.

SENATOR KEHOE: Thank you. You mentioned renewables and efficiencies a couple of times in your remarks and California has done a lot in both of those areas, especially in the efficiency area. And we have high standards, you know, the 20 percent goal that’s already in statute for renewables. How else can we respond for more energy?

MR. ZICHELLA: Well, there’s so much renewable potential out there and so much real capital investment interested coming into California, we have to really follow through on meeting the goals that we’ve set. Part of that is going to be the very difficult process of designating power line corridors. Environmental groups are going to have to participate in that process if we’re going to get that renewable power out in the Mojave Desert. There’s been a hopeful effort that helped free up a lot of capacity in the Tehachapi area. I think a lot of this is going to be making sure that utilities will buy this power; that the power purchase agreements can be made.

Also, the tax credits at the national level need to be extended for a reasonable duration of time so that the economies of scale can be realized by the generators. If they can order their mirrors out (it’s a very simple technology) for a decade in advance, they can bring down the cost of their generating very, very rapidly. So these are things that some of our….these are private things that can be done. Some of them are going to take a steady hand.

What’s happened to the silk renewable energy generators is the opposite of what’s happened to the nuclear power producers. They are tax credits. The incentives on which they rely go up and down every other year and you can see, if I had a chart to demonstrate for you, every time that those tax credits expire, the number of kilowatts installed by those industries drop by 50 percent. We need to have those out a long enough time where they can get the traction under them and establish the industries which, after all, is what subsidies are supposed to do. They’re not supposed to be a life support system.

SENATOR KEHOE: Okay. Thank you. Mr. DeVore.

ASSEMBLYMEMBER DEVORE: Thank you, Madam Chair. You mentioned proliferation a few times in your remarks. Are you saying that you believe that the United States is a nation viewed as a threat of proliferating? In other words, converting commercial plutonium into nuclear bombs?

MR. ZICHELLA: I do think that that’s a possibility. Of course it is. Every state that had a nuclear program has done so and our domestic nuclear program grew out of the military program. Of course it is.

ASSEMBLYMEMBER DEVORE: So you believe that separating plutonium from commercial spent fuel in the United States is, in fact, something that could contribute to the construction of additional plutonium based atom bombs here in America?

MR. ZICHELLA: That’s very possible; of course it is.

ASSEMBLYMEMBER DEVORE: Now, there’s some 37 metric tons of weapons grade plutonium in Russia right now that’s being rendered safe by being used to generate electricity in a fast neutron reactor. Do you not approve of this?

MR. ZICHELLA: I’m not so sure I approve of the technology (period). I don’t think these reactor designs are inherently safe. I think there are problems with having those materials. The Russians have not appropriately accounted for all their stockpiles. I think that their program is an utter mess.

ASSEMBLYMEMBER DEVORE: You’re not answering my question. To be very specific; if 37 metric tons of plutonium to 39 in Russia, you have similar stockpiles of plutonium here in America; and you heard earlier that Palo Verde, for example, was designed from the start to be able to convert that plutonium into electricity and in so doing, get rid of the plutonium. Do you not think that’s a good idea or would you rather try to store it for 200,000 years?

MR. ZICHELLA: As I just indicated in my testimony, Senator, I think it’s utterly unnecessary to do that. We don’t need to go that route at all to meet the needs and the challenges in front of us. In fact, it’s really not a very prudent step to take.

ASSEMBLYMEMBER DEVORE: What do we do with the existing plutonium?

MR. ZICHELLA: That’s a problem we’re going to have to eventually solve as a society. Part of the problem is that no state in this country wants a repository. You don’t have states fighting, despite what has been said previously, to have reprocessing plants built in their borders. The only reprocessing plants we have are on federal reservations. You’re not going to have a lot of commercial interest in that. You’re going to have a heck of a time finding any community that wants it.

ASSEMBLYMEMBER DEVORE: So we have to store it for 200,000 years.

MR. ZICHELLA: Well, I think that’s always been the problem. That was the challenge at the very beginning that’s never been solved.

ASSEMBLYMEMBER DEVORE: One last question. You talked about the cost of solar trough and photovoltaics. You said that the photovoltaics that we’ve seen a steady decline in PV cost. I recall a Wall Street Journal article that is actually contrary to that, where there was a 20 percent increase two years ago.

But regarding the solar trough; is it not true that PG&E is contracting to build about a 400-megawatt peak capacity field for roughly $500 million and if you extend that roughly to 1,500 megawatts and just assume

$1.5 billion for that 1,500 megawatt, isn’t it true, though, that you’re only looking at 30 percent capacity? In other words, when the sun is up you can generate electricity at the peak about 30 percent of the time; and if you actually compare the energy output with the nuclear power plant, you’ll actually see comparable capital costs for the same amount of electricity on a 24/7 basis?

MR. ZICHELLA: Well, I think the major difference is that you’ll find the fuel is perpetually free—it’s perpetually free. The maintenance is very simple. It’s a very simple technology. There is zero threat from terrorism. You don’t have to hire a security force that’s heavily armed to guard it and on, and on, and on. It’s not an apt comparison. But I will say that with some of the new thermal technologies, there is thermal storage being implemented now where heat can be released after time and mixed with a very small natural gas generator and you can have a complete baseload plant using the majority of fuel of which would be solar. I mean, these technologies are here now. They can be built in a year. You don’t have to wait ten years for them. You don’t have to deal with nuclear waste for 240,000 years. You don’t have to worry about being attacked because you’ve mixed oxide fuels onsite that you can make bombs out of. I mean, this is not a hard call to make. From a public policy standpoint, you have something that seems utterly ridiculous in its complexity and utterly elegant in its simplicity. What’s the problem here?

SENATOR KEHOE: Alright. We’re going to move on. Mr. Hirsch.

MR. COHEN: May I just correct one statement that was made?

SENATOR KEHOE: Alright.

MR. COHEN: In the context of the Department of Energy’s GNEP program and setting aside the controversies over GNEP itself, the fact is,

11 communities in the Unites States in about 9 or 10 states stepped forward and said they’d be very interested in working with the Department of Energy in hosting a reprocessing facility. So a sweeping statement that says nobody anywhere is interested in anything is just not accurate.

MR. ZICHELLA: And I think as you pointed out earlier, though, nobody has officially stepped forward. This is exploratory. Let’s see when the rubber hits the road on that.

One quick comment, if I may, to something that Mr. DeVore said about the cost of solar increasing. I mean, it’s a supply and demand issue.

SENATOR KEHOE: Photovoltaic system.

MR. ZICHELLA: Photovoltaics; supply and demand issue, as you aptly pointed out. The laws of supply and demand kicked in. What we had was a very massive increase in the demand for solar collectors in Germany and Japan which raised the cost up. That has now leveled out and the cost is decreasing. It’s not the cost. It was a supply issue that was very temporary.

ASSEMBLYMEMBER DEVORE: I’m not disputing that. But the fact is, you said and I quote, “state defined photovoltaic cost.” That is not true, which causes me, then, to think that your statements are a little over generalizing, a little sweeping. You just now admitted that that’s not the case.

Thank you.

MR. ZICHELLA: No, I’m sorry.

SENATOR KEHOE: Alright. I’m going to use my gavel for that. Because time is short and there’s two more speakers, you can do the one-on-one when we adjourn. Mr. Hirsch, do you want to come forward.

DAN HIRSCH: Chairman Kehoe, Co-Chair Dutton, Mr. DeVore, thank you very much for the committee’s invitation. For someone who has been involved in these issues for a while, this creates a reaction of kind of nuclear de ja vu all over again. These arguments have been raised by the industry….I’m going to try to bring us a little bit down to earth to remind people of why there’s been concern about nuclear power on the part of experts and the general public for decades and why these issues are still not resolved.

I, on my way driving down here, passed San Onofre. And I’m not going to pick on them, it’s just that I passed by. When I did, and if either of you passed by, you passed by about several thousand nuclear bombs worth of plutonium that they had produced and you passed by about 15 billion curies of radioactivity in one operating reactor alone. To put that into perspective, we measure permissible concentrations of radioactivity in the environment in pico curies. That’s a millionth of a millionth of a curie. Any reactor when it’s operating has in it about 15 billion curies. The long life component alone is about 1,000 times the long life radioactivity for the Hiroshima bomb and the spent fuel pool is about 10 times that. So the problem is you have to a) keep that radioactivity inside. It can’t get out by accident or by terrorist attack. A long life radioactivity, some of it is dangerous for half a million years. Our government has existed a little over 200 recorded civilization, less than 10,000. As a species, we’re about 100,000 years. We would have to be able to preserve that material from leaking into the environment for half a million years. It is beyond comprehension. The material is extraordinarily dangerous. Some highly unmixed uranium or plutonium the size of a grapefruit can take down a city. It took down Nagasaki. It could take down San Diego. Just a few pounds can yield the explosive power of 10 million times that of high explosive. And every year nuclear power plants, each one, produces about 100 new nuclear weapons worth of plutonium as it operates. A millionth of an ounce of plutonium if inhaled will cause lung cancer with a statistical 100 percent certainty.

If this were plutonium, I could divide it up equally and put it in every lung in the United States there would be enough to cause cancer in essentially everybody in the country. It is the most toxic material on earth second only, perhaps, by weight to some viruses. And yet, what you do when you run a nuclear reactor is you use the same materials and the same technology as you use to make nuclear weapons and that’s why nuclear power has always been ______________ the proliferation.

We are at the edge of going to war with Iran because they have been enriching uranium for their civil program they say. We know that if they enriched it further they could make weapons from it.

We had a conflict for years, which may or may not be resolved, with North Korea because they were reprocessing—the technology that

Mr. Devore has been encouraging. It spreads the bomb.

Let’s talk about the accident risk. When you have a reactor operating, the uranium fissions into very, very radioactive materials like cesium, strontium, indium(?) and so on; they’re very dangerous. They also produce a lot of heat. And so, even if you shut the reactor down you still need to keep cooling it for weeks or months thereafter or the fuel will melt. If the fuel melts, that radioactivity gets out. If it gets out into the environment, the amount of casualties that could be produced (for example, from San Onofre), the NRC estimate was 130,000 immediate casualties (Hiroshima, Nagasaki type radiation sickness and death); 300,000 cancers; 600,000 genetic effects. Now those numbers are 20 years old; if we redid them now we’d lower the genetic numbers and increase the cancer numbers. But that’s about a million health effects.

The AEC said decades ago, that if there were serious accidents at a reactor you could lose an area the size of Pennsylvania; ironic in terms of TMI which got within a half hour of a complete melt. And we’re talking about losing it for generations. So you have to prevent the cooling from ever being disrupted. It’s unlike any other technology. It’s like a car—a gas pedal welded to the floor and you have to drive it with the emergency brake. It’s always on. The heat is always there. It has to be constantly cooled. The fires—I drove by and there was all this blackened from the fire. Remember the concern that the power lines might go down? Do you know why the concern was? You think of power lines as something that gets the power out of a reactor. You need offsite power to bring the power into the reactor to run the pumps. If you can’t run the pumps, you can’t keep the coolant flowing. You have some backup diesel generators which fail off and sabotage and other places can’t run very long. If you lose the coolant from any of 100 different ways, you can get an extraordinary release of radioactivity unlike any other disaster we can contemplate. And that can happen not just by accident, but by intent—a terrorist attack.

Now, when Diablo Canyon was up for licensing, Governor Brown at the time intervened and had his security experts testify that that reactor and all reactors needed to be protected from at least a dozen terrorists. It was credible that you could have a dozen terrorist attacks. PG&E in its wisdom said “absolutely not. You will never have more than three terrorists. They’ll always be on foot acting as one team but no weapons greater than semi-automatic rifles.” The AEC agreed. The NRC agreed. And its design basis threat rules until two years ago, where you only had to protect a reactor against three terrorists and one insider. I have been urging for decades to increase that. They have increased it. It’s now five external attackers and up to two insiders; a fraction of the 19 we saw in 9/11. And I have petitioned, and eight state attorneys general have supported, requiring protection against air attacks. And the NRC lobbied by many of the entities that are here today, said absolutely not; there should not be a requirement that we have to have protection against air attack. A German study, a National Academy of Science study, others said that the reactors are vulnerable.

And by the way, it’s not the containment. That’s one of the problems. There are all kinds of certain soft targets outside of containment.

So, a terrorist can do by intent what an accident can do unintentionally—release extraordinarily large amounts of radioactivity. Many of the isotopes are long lived and would contaminate a state for generations. It also proliferates nuclear weapons.

In the 1970s, President Ford and then President Carter stopped reprocessing because having separated plutonium and commerce means that it can be easily stolen or diverted. Remember, it doesn’t take much to make a nuclear weapon. So if we are transporting tens of tons of plutonium in separated form throughout the country, the potential for diversion, the potential for theft is very great.

We also have a problem with high-level waste. And I want to make sure that you understand what that problem is. This material gives us 50 years of energy but it produces 500,000 years of waste. And that waste is so toxic that if a small fraction of it gets into groundwater, 100,000 years from now you could produces doses that are absolutely unacceptable. And we have not been able to find a way to dispose of it. Despite of what

Mr. Rosenblum says, there’s not a single country in the world that has opened and is running a high-level waste repository program—not a single one. Not England, they’re behind France. France doesn’t have it. And reprocessing doesn’t solve the problem; it just separates it into two parts. You still have to dispose of it. The French have not found a way to dispose of theirs either. And by reprocessing it you then produce the plutonium and commerce and you still have all this plutonium to deal with at the end of the day.

So, we need to remember our history. Your previous witnesses from the industry were a little modest. For example, you asked why the cost overrun at Diablo. Maybe they’re hoping we forgot. Let me remind you how we got to that cost overrun.

In the late 1960s, there was a hearing for the construction permit at Diablo before the Atomic Energy Commission. A small group called “Mothers for Peace” asked to put on a witness for one afternoon about a possible offshore earthquake fault. PG&E in its wisdom said absolutely not; don’t permit such testimony and the AEC Board voted 2-1 to not allow the testimony. Then Tom Pickford, then head of Nuclear Engineering at Berkeley, dissented and said, “What can it harm us to find out now if there’s an earthquake fault? It’s better find out now before you pour the concrete than afterwards.” But he was overruled. PG&E went ahead and built the reactor. And in the mid-1970s they discovered the Hosgri Fault; this massive earthquake fault offshore, just like the Mother’s witness was going to say. And it meant they had to go back and reconstruct the reactor; retrofit the reactor. Then, just as they had gotten the operating permit license it was discovered that the geniuses had used the blueprints for Unit-1 to fix up Unit-2 but the blueprints were mirror images of each other so they put the whip(?) restraints and pipe supports in all the wrong places. They had to go back and do that all again. That’s how you went from a few hundred million dollars estimate to a $5 billion in actual cost. Remember that we have had to shut down half the reactors in this state largely for seismic reasons.

There was once a definition of a nuclear power plant: that a nuclear power plant is a complex, technological device for locating earthquake faults in California. You build it and you’ll find an earthquake fault with a much larger capability than you thought before. Either you’re going to go bankrupt trying to fix it, or you’re going to risk having a meltdown that can cause vast consequences.

Now let me just end by saying, despite the apparent disagreement by all of us, at the end of the day I think we actually all agree, but they won’t tell you that. The nuclear industry agrees that the risk of accident is so great that it’s unacceptable. The professionals in the market, the insurance industry, refuses to insure the nuclear industry. It’s the only energy technology in the country that’s gone to Congress and demanded, now, decade, after decade, after decade by statute to be immunized from the liability of an accident. If there were an accident here at San Onofre, and the cloud came to San Diego and you tried to collect the damages, which is impossible, of course, to do anyway in terms of lives lost….$700 billion is what Sandia estimated a reactor accident could cause in damage. You would not be able to, because they’re not insured for more than a tiny fraction. They have gotten immunity from the government. So they tell you it’s safe. They tell the Congress it’s so dangerous we can’t get insurance and you have to immunize us. They tell you that it’s cheap. Admiral Strongs for the AEC in the ’50s said it would be too cheap to meter. The cost for the reactor would be so low that putting a meter on the house would be more than the cost of the electricity. And yet, it’s skyrocketed. We’ve been told that these are old cost overruns. It won’t happen again.

The first new reactor in Europe to be built since Chernobyl, this is by the company AREVA (we’re going to hear from their partner in a moment in Finland) is roughly $2 billion over budget and two years over scheduling. They just started it. There’s nothing different. So they promise it will be too cheap but they tell you it will be cheap. They give you numbers that leaves the construction costs out. They leave the past history out. Hope you’ve forgotten that past history. Forgotten what happened at WHOOPS. We called it “WHOOPS” for a reason. _______ bankrupt. That utility, TVA had to shut down eight of its reactors because they weren’t cost effective. They hope you forget all that. But they are telling the Congress it’s not cost effective. Wall Street won’t invest unless you subsidize us. So we’re getting one chunk of change from the Peoples Republic’s pocket as a rate payer and another huge chunk of change from their other pocket as a taxpayer. They slipped a line into the energy bill that just got taken out, fortunately, that would have given them up to $50 billion of loan guarantees—100 percent coverage of 80 percent of their cost. So the taxpayer, when these things go belly up, as so many did in the past, will be stuck with that cost. Wall Street won’t invest unless they can get immunization by Congress that when the loans fail, you and I pay. So they want us to pay when there’s an accident. They tell us it can’t happen but they tell the Congress it will—immunize them. They say it will be cheap. They say it can’t be cheap. No one will invest unless you subsidize us. And they say, “Don’t worry about the proliferation, we’ll have reprocessing and spread plutonium around the world like a nuclear Johnny Appleseed.”

The only way that works is if there is a form of amnesia; if we forget the past. If we forget that the high-level waste from the reprocessing at Hanford is still in tanks leaking at Hanford into the groundwater and moving towards the Columbia. If they ask us to forget that ________ times we did reprocessing the Savannah River in West Valley, New York, those three collectively, the largest environmental disasters in the entire country. They hope you forget. They hope there’s just a few of us who have been through it before who remember and have no say.

And the other proof that they don’t believe it’s safe, is they’ve also gone to NRC and gutted the safety hearing processes so there’s no longer the right to cross examination for the discovery for the right to challenge the design. Design is pre-approved. The site is pre-approved. There’s virtually no way that the Mothers for Peace could ever once again say, “You’ve got to fix this problem.” Even then they weren’t listened to, but now they won’t be able to speak. Again the industry says “We know that if there were a fair hearing process we couldn’t get approved if it was not safe.”

So, let me conclude with this for a moment and then maybe we can, afterwards have some discussion or I can answer your questions. There’s one other reason why this is disastrous. Not just that it’s proliferation attempts, not just that they’re nuclear terrorist targets, it amounts to a pre-in-place nuclear weapon. There are cities. It can’t blow up like a nuclear bomb, but it can release a thousand times the long-life radioactivity. And all you have to do is with small scale explosives and a little ground crew be able to disrupt the coolant.

There was a program at the NRC called OSRE (operational safeguards reactor evaluation) ____________ test, give the reactors six months advance warning to the day when they were going to do one of these tests and they would send in only three people. Half the reactors in the country failed those tests. The mock terrorists got in and would have been able to blow up and create a meltdown half the time. So the industry’s response was to go to NRC and ask them to eliminate the test. I mean, if I were an instructor, and my students were failing, the students would like me to get rid of the test. I would rather that they passed the test.

But, all of those reasons are reasons that we have to look at this in the cold light of day. But there is one other. We have a crisis. We have appointed the best experts, perhaps 10 years in which to solve the global warming problem. Carbon dioxide has a residency period of several centuries in the atmosphere. You have to stop it now or it will be too late.

Every time they ask you for $5 billion here and $5 billion there for another reactor—five, five, five, five—it’s not that you can have nukes and solar, nukes and efficiency; there’s only so many dollars. Taxpayers and rate payers only have so much money. So are you going to put your money into something that will fail like it did the last time, where all these reactors went under and didn’t get constructed; end up being so much more expensive than we thought before; and represent the most dangerous technology we have to supposedly deal with a problem which is the second most dangerous (global warming)? We will lose the opportunity to do those things that matter now if we do what they want—get the taxpayer subsidies, the loan guarantees and have to pay out all this money for the failed reactors instead of solving the global warming problem.

Thank you.

SENATOR KEHOE: Thank you. Your presentation on the downside of nuclear power, that is clear. You don’t see any future for it at all, or not a safe future for it. What about the 13 percent of electricity that we currently get in California; is it phasing out?

MR. HIRSCH: Look, I’m a realist.

SENATOR KEHOE: How would you handle it?

MR. HIRSCH: Germany, for example, is phasing; other countries are phasing out. The bottom line is, they have licenses. I think they should probably run through their license. And, we should put our money for every new plant into something that is renewable.

I do have a problem with…

SENATOR KEHOE: And you believe we can do it all with renewables and efficiency?

MR. HIRSCH: The L.A. Times editorialized a few weeks ago by pointing out that a hundred square miles of Nevada desert (and by the way, you’ve got nice deserts just east of here that we could use), 10 square miles on the side you could produce all the electricity you need for the United States from solar thermal. I mean, I do believe in nuclear. But I wanted to have a substantial exclusion zone. We have only a few hundred yards of San Onofre. I want 93 million miles. I want to use the nuclear reactor that is sending its energy onto this planet free every day. And no one has ever demonstrated. I guess the disposal of windmill blades or solar mirrors. So, yes we can do that. If we don’t, we’re dead because we’ll be drowning in plutonium.

But to get back to your question, I am troubled by the utilities and this state’s request for license extensions because they already will be

40 years old at the time their license expires. And I don’t know about you, but I would be nervous getting into a plane built in the late ’40s to take a trip across the Pacific. When a reactor operates, neutrons bombard its components and brittling them so it gets more and more dangerous.

SENATOR KEHOE: I can’t give you more time. You’re already way, way over. But if there are any questions otherwise we’re going to

Mr. Turnage. And you’re our last speaker and then we’re going to take some public testimony.

JOE TURNAGE: My name is Joe Turnage, by the way. I’m happy to be here. After that, I only have 10 minutes. I’m going to take my time and focus, kind of, the answer to one question. I’m a senior vice president of Constellation Energy Group. I’m also a senior vice president of UniStar, which is a joint venture between the world’s largest nuclear operator of electricity _________ and Constellation Energy.

And the question I want to, kind of, address is, how in the world can a board of directors proceed with new nuclear in the United States at this time?

A word about Constellation: We are the largest…

SENATOR KEHOE: If that is your question, I think Mr. Hirsch was the perfect lead-in.

MR. TURNAGE: Yes, he was. Both were pretty good. Constellation is the largest wholesale seller of electricity in the United States. It’s the largest retail seller of electricity in the United States. It’s a pretty substantive company. It has been very largely successful.

I joined the company in April of 2002. Since then, stock prices increased 400 percent.

What I’m going to describe is how a company that’s fundamentally risk verse, who really practices a great deal of diligence with regard to risk management, and it’s a merchant power generator; how do we get to where we are?

First of all, we appreciated, beginning in 2004, that there were a number of very important driving forces that could create the opportunity for new nuclear power to be deployed in the United States. One was the fundamentals of supply and demand. Just to give you, kind of, a ballpark figure….I think somebody asked this question earlier, the DOE indicated in a recent report that just to maintain the current share of the electric market at 20 percent nuclear that that would look like the need for 81,000 megawatts of new nuclear deployment by 2035. And that assumed plant life extension was available to most of the current operating plants.

Last year, 85 percent of the utility executives interviewed by Cambridge Energy Research Associates said we need new baseload capacity.

So, the fundamentals of supply and demand are driving us to consider particularly at 24 by 7 baseload generation. That’s true worldwide. Worldwide, there are 440 reactors in operation. Depending on how you count them, between 33 and 36 plants are under construction.

Second driver is the regulatory process. I won’t go into that. But the last time we built nuclear power plants in this country, if you recall, we secured a license to construct in separately and sequentially the license to operate. Under the current federal laws it will be one license to both construct and operate and that will be in hand before substantive commitments of large amounts of capital required to begin the construction.

The third major driver: I think there has been a shift in public perception becoming more and more available to nuclear power. It shows up in the MIT studies between 2002 and 2007. It shows up in a lot of the NEI stuff. I won’t repeat it.

But my experience with our sites has been….there’s been particularly an increase in public support in the local communities surrounding our plants. Our first unit is likely to be built in Calvert County at our Calvert Cliffs plant. And we enjoy very outspoken public support from the local community.

Driver #4: We’ve talked about it—global warming and greenhouse gases. I won’t go through that again. You’ve seen all the numbers.

Nuclear looks and lifecycles CO2 emissions comparable to renewables….my favorite quote about new nuclear comes from the Mississippi governor, Haley Barbour, who calls it a “clean, green generating machine.”

The other driver, and one which I think Jim Harding is right, one of which if we had not had we would not be here today, _________ for the consideration in new Nuclear Energy Policy Act of 2005. Driven by all of those other issues and particularly that of global warming, the Act passed with wide bipartisan support.

Recently, and this is a bit of an uptake to some presentation materials I provided to the California Energy Commission this past June. A couple of things have happened. One of the things that happened is that the final rules on the Home Guarantee Program are in effect. They do allow loan guarantees for up to 100 percent of debt for projects. It targets technologies (quote) “not in general use.” And so loan guarantees are expected to roll off when new technologies become in general use. That’s defined in the final rule—are three units for a technology operating for five years.

A comment about loan guarantees: Loan guarantees are important mostly to provide a platform for financing new nuclear plants. With loan guarantees, a merchant plant can’t seriously consider the opportunity to secure 80 percent debt, 20 percent equity financing (off balance sheet project financed). It would not have been possible without federal loan guarantees. And that’s important because remember that 81,000 megawatts of new nuclear we need just to maintain 20 percent? As an industry, the nuclear industry doesn’t have a big enough balance sheet to do that on balance sheet. If you add up the total market cap in the entire industry, it’s about half of that of Exxon/Mobile. So if we’re serious about nuclear’s role in CO2 emissions, if we’re serious about maintaining or increasing 20 percent of the electric market in this country, we have to figure out a way to leverage the equity of the current nuclear players to make that possible, and for that, we need loan guarantees. There’s just no other way to do it.

The final driver is actually that the safety has been enhanced for this current fleet. I’ll talk a little bit more about that.

The reactor that we’ve chosen to deploy is a reactor that’s evolved from the U.S. Westinghouse four loop designs. This reactor migrated to Europe. It was evolved by the French and the Germans and has now migrated again and is, in our view, just a very operationally friendly design. This is a plant, again, four loops. Each one is capable of maintaining the core at a cool condition following an accident. Because of that, you can ________ out a loop (one of these plants) to online maintenance. Because of that, consider refueling _____________ 11 days if that gives rise to higher capacity factors. It’s the most thermally dynamically efficient plant under consideration. It’s the one most neutronically efficient under consideration. It is the only reactor currently under consideration that’s explicitly designed to withstand a jet aircraft impact. There’s double containment. It’s a ___________. It’s designed so that in any acts and scenario there’s no detectable release of radiation to the public.

Given that set of driving forces, what happened was….and over the last several years….and after the enactment of the Energy Policy Act, Constellation Energy formed, this year, a joint venture with EDF (EDF again, the largest nuclear operator in the world).

Our nuclear steam supply system partner is AREVA. And our objective with AREVA and EDF is to deploy a fleet of at least four, and we’ve identified the four and where they’re going to be sited at this point in time—U.S. EPRs.

What’s driving that whole view is a notion of absolute standardization. One of the things that we did when we built units the last time around is avoid that totally. Every unit was unique. And we got into, kind of, first-of-a-kind risks every time we built a plant. So if you go back to Jim’s costs analysis of the last bill to the plants, you saw the consequence of every plant being a first of a kind plant. We’re seeing that today in the cost overruns in Finland. It’s the first of a kind deployment of a new technology. We did not want to be deploying serial number one of anything. We did not want to be the first to construct that unit of anything.

The second unit that would be U.S. EPR design, and one which we will replicate, is being built today in France by our partner (EDF) in ________ Ville. It’s about 150 miles from Omaha Beach. And we will have people on the ground working with the French to learn everything we can learn about effective deployment and construction practices so that we would build Unit-3 and it could be Unit-7 (the Chinese bought two of these reactors recently). We will have learned all we can learn about effective deployment.

Our turbine generator supplier, by the way, is Alstom, and so, if you think about the UniStar team, it has Constellation Energy. It currently operates a fleet of five nuclear plants. I’m going to suggest very capably, it has Electricite de France, the largest fleet operator in the world; it has AREVA, the largest supplier of nuclear products and services in the world. Some people think it is Westinghouse or GE; no, it’s AREVA. And Alstom will be the supplier of our turbine generators, the largest turbine generator supplier in the world.

And we’ve structured this company to be not a set of plants. At the heart of it, our setup project companies (remember that off balance sheet financial structure) will be owned by UniStar and other partners. So it’s a model that can accommodate partnerships with regulating utilities, partnerships with developers and we’re in the process of exploring the opportunity to deploy one of these plants with the president of a nuclear energy group in California.

Six driving forces. The Energy Policy Act has been created. The final rules and federal loan guarantee are in place. And we’re proceeding to manage the risk (which is what my company does well) down to an acceptable level.

We haven’t made a decision to build. There are still risks and we’ll talk a little bit about those. But we’ve made great progress.

In June, when I appeared before the California Energy Commission we did a bottom up analysis of the capital cost of the U.S. EPR. We knew pretty much the details of quantities and materials in these plants. We had a 19,000 line item description of ______. It’s being built in Finland. We went to our construction partner, Bechtel, and got their labor right data on productivity and cost and we did a bottom up analysis. In the end of 2005, and what the California Energy Commission saw was 1935 AKW overnight costs and I said “that’s wrong.” Today’s number is all the way up to 200,650 KW. And we’ll be doing another analysis this time with 30,000 line items of detail in first quarter of next year, and my guess is that cost will be considerably north of where it is now at 2,650.

SENATOR KEHOE: Over 3,000?

MR. TURNAGE: I would not be surprised if it were. But that’s not a trivial analysis. It takes a few hundred thousand dollars to do it, so we don’t do it every quarter.

What I want to do, though, is go through, a kind of, base case as an investor and suggest to you why as an investor in the face of that reality we’re still very, very interested in pursuing the option of building a nuclear plant. We won’t pull the trigger until those prices get firm. But we’re seeing a lot of _________________ sensitivities regarding that.

This plan is a big plan. It’s 1,600 megawatts. And I did an analysis assuming a 2016 commercial operation date. I assumed 30-year financing, 80 percent debt, 20 percent equity. I assumed federal loan guarantees were available. And by the way, in the final rule, if you do ask and receive

100 percent of your debt guarantee, the rate stipulated, there’ll be treasury bills plus one-eighth of a percent. I assumed that the cost of applying for a loan guarantee, called the “subsidy cost,” was one percent of the exposure to the taxpayer. That’s actually probably on the light side. The methodology for the calculation of subsidy cost is not finalized. It’s basically the product of the probability of default times the loss that the government would experience in the event of a default. One way to think about that latter term; it’s like if I had a plant, if I were in default of my debt, if somebody bought it for 75 cents on the dollar would that then be a profitable plan? In which case, the government would be exposed to 25 percent rather than

100 percent exposure. But that’s the analysis.

The people doing this analysis, by the way, in DOE, I met and spoke to, are extremely competent. They’re all seasoned people; not from DOE, who were pulled into the department from OPIC (oversea private investment corporation) and they have 25 to 30 years of experience in pricing risks and working with project financed loan guarantee mechanisms to do that.

I assumed in my analysis, by the way, that no production tax credits were available because I wanted to focus it in California. In California, no one would be able to go forward, at this point in time, with the new nuclear plan to receive any production tax credits. That ship has left the dock.

With a $2,650 KW overnight cost, my return on my investment is double digit—18 percent or so. That’s not a bad number. We would seriously consider investing in a project with that kind of internal rate of return. If the capital cost went to $3,500, the number is 15.3 percent. If there’s a one-year delay, no one is going to follow this, probably. But I do have this electronically labeled to everybody. The number is 16.7 percent. Pretty insensitive to fuel cost. As fuel costs go up by 20 percent, the number goes from 18 percent IRR to 17.8 percent; that’s why I can’t get very excited about what the price of uranium is going to be. Twenty percent higher O&M costs from 18 percent to 17.6 percent. I assumed in this a market clearing price of $60 a megawatt hour. In PG&M, where I live, last year the average 24/7 market clearing price was around 70; including capacity, it was around $79. In many gas dominated markets _________ number or $60 a megawatt hour is a reasonable ballpark. So it’s a very different way of looking at things. I’m looking at it as an investor; looking what the market clearing price could be and then calculating at the various scenarios whether, as my friend from the south says, “this dog hunts” as an investor. And hunt means I’ve got to get double digit rates of return. If the subsidy cost is not one percent but five percent, it goes down to 16.7 percent. If I cannot access a loan guarantee program, the authorizational limit is too low for example, zero, and loan guarantees are not available to me, my IRR would plummet from 18 percent to about 11 percent, and that would be a difficult decision to go forward. Jim maybe right, without access to loan guarantees my company would really have second thoughts about moving forward.

SENATOR KEHOE: Mr. Turnage, you’re just a little bit over

17 minutes. I’ll give you 30 seconds to wrap it up then Senator Dutton has a question for Commissioner Boyd. And then we have, also, 17 speakers from the public, so that’s going to take a little time. Senator Dutton? Is there a final comment?

MR. TURNAGE: We have a lot of challenges. We’ve not made a decision to go forward. We intend to. We have a line of site and closing them. And we’re enthusiastic about the opportunity.

There’s one final quote I’ll give from Jim Harding’s Keystone Center results. “With regard to overspent fuel that must be stored on an interim basis until an operating repository is available, the joint fact finding participants believe that spent fuel can be stored safely and securely in either spent fuel pools or dry cask on site. The group also agrees that centralized interim storage is a reasonable alternative for managing waste from decommissioned plant sites and could become cost-effective for operating reactors in the future.”

SENATOR KEHOE: Thank you. Senator Dutton.

SENATOR DUTTON: Real quickly: How much power do we consume here in California?

COMMISSIONER BOYD: Well, in the summer peak days we can get up to 50,000 plus megawatts.

SENATOR DUTTON: Yeah, but how much power do we need? Well, what I’m trying to get to, how much power do we produce here in California?

COMMISSIONER BOYD: We produce about 75 percent of that which we consume.

SENATOR DUTTON: Of which we consume. And when we consume this power from sources outside of California, we don’t really have any way of knowing how that power was generated; right?

COMMISSIONER BOYD: We do know.

SENATOR DUTTON: Oh, okay. So can you tell me how the other

25 percent is generated?

COMMISSIONER BOYD: Twenty percent of it is coal and the balance is hydro and nuclear and….

SENATOR DUTTON: Do you feel it might be prudent for us to, especially if we want to effect the war on global warming and reduce our greenhouse gases, do you think it might be wise for Californians, then, to want to invest and spend money and even pay more for their power in order to generate more than what we consume? Wouldn’t that be the responsible thing for us to do? Because, obviously, we don’t have control. We know we can get it from coal, I guess. I thought when it went into a big tub and you just….I didn’t realize you can separate the coal from everything else.

COMMISSIONER BOYD: You can tag the electron…

SENATOR DUTTON: I wasn’t aware of that. But what I’m getting around to, it seemed to me, and if we truly want to weave the way then, whether it be renewables or whatever we’re talking about, that we should have a plan, then, to make ourselves energy independent of everywhere else so that we know for sure….because we don’t allow coal plants to be built here even with the new technology. So I find it kind of funny that we would actually want to import that power.

COMMISSIONER BOYD: Well, it’s not a matter of we don’t allow it. We don’t have coal in California and the economics aren’t there. However, now in a constrained world, you’re right; the PUC rules don’t allow….I mean, the PUC has recommended that we eliminate importation of coal.

SENATOR DUTTON: Yeah, I seem to recall that bill that made it through the Legislature that we aren’t allowed to do that.

COMMISSIONER BOYD: _________ CO2. And that’s true. With the new rules and the new bill we have are implementing steps to do that. But up until today, we’ve allowed it.

SENATOR DUTTON: Okay. So are you currently developing a plan, then…

COMMISSIONER BOYD: We have a plan. It’s called Integrated Energy Policy Report ____Energy Action Plan between PUC and us and it is efficiency; it is distributed generation; it is renewables; and it is clean fossil fuel regeneration if that’s needed. And clean means, combined cycled natural gas, combustion, turbine. Quite frankly, nuclear is not on the menu of the state of California for meeting our AB 32 goals and objectives. And part of the reason is all we’ve heard today with regard to timeframes that are involved. And our great concern was the economics. You’ve heard a lot today.

SENATOR DUTTON: So the plan you have can have us get there and be totally independent? Are we going to be able to produce the energy that Californians are going to consume or are we still going to be dependent on getting energy from other sources?

COMMISSIONER BOYD: Well, this idea of being independent, if you mean the state of California is going to stand free as a nation ______________ electricity, we’re never going to get there. I mean, we operate as part of the western grid and we all cooperate in the operation of that grid…

SENATOR DUTTON: Okay, so is the western grid going to be able to achieve our timeline of where we’re trying to get to?

COMMISSIONER BOYD: The western grid is solid now and the western grid looks to be solid if we execute all the other plans we have which includes….and I would invite this committee to take a look….and, actually, I would invite the whole hearing _________ the Integrated Policy Report would help answer a lot of the questions that stand in the way to opening all of our other more conventional sources ______.

SENATOR DUTTON: Yes, I would like to get some information on it if I could. Thank you.

SENATOR KEHOE: Thank you, Senator Dutton. Mr. Harding, I know you have to go. Thank you very much for your time. You’re welcome to stay as long as you like, but I understand you have to catch a plane.

Mr. Cohen, you’re going to address something that has been said; correct?

MR. COHEN: Yes. I would like to…

SENATOR KEHOE: Very briefly. Then we’re going to public comment.

MR. COHEN: Very briefly. Thank you, Senator. I appreciate it. One, the suggestion was made that these plants are operating with 40 year old equipment—that’s not true. And I think whoever is interested takes the time to talk these fine gentlemen here who run these plants, they will tell you about the _______ program and how over 40 years they’ve been producing electricity for 40 years. But they’re not dealing with 40-year-old parts throughout the plants and would suggest issues of safety and so forth. So, with all due respect, get some facts on that.

Secondly, you know, you’re dealing here with hypotheticals and sweetened statements and theoretical statements _______ that, I witnessed, six months ago when I was here before the Energy Commission and I suspect that if I came back in six months I would witness the same debate.

What I would suggest for this committee to consider is that why not create a situation where you can get nuclear on the menu to consider? You create a climate here, a situation, where these companies, if they are so interested, if the economics in their mind works, because they are making the investments in whatever programs or however they want to do it, so they can come to the state of California with a proposal for a new nuclear reactor and then the hypotheticals get real. And then you can look at how they intend to deal with spent nuclear fuel; how they intend to deal, if it’s relevant, with seismic issues and all the other things that were brought up here. But until that sort of situation is created, with all respect, this strikes me as a debate that will just go on and on and on but nothing concrete with respect to producing additional electricity for Californians will be proposed to whoever the appropriate place is whether the issues can be considered in the right process, an NRC like process, and they’re going to have to go through that anyway. So that’s just a sort of concluding perspective from me.

Thank you.

SENATOR KEHOE: Thank you. Alright. Again, we want to thank all the witnesses for all the information. We’re going to move to public testimony. I have to, because of the time here, hold you to three minutes. If you could be shorter, I would really appreciate it. We know there’s going to be pros and cons, but just state your case. And we will start with Shirley Vaime. Then we’ll go to Rochelle Becker; then we’ll go to Andy Anderson, so be ready to come up. Then, Ralph Schulze.

SHIRLEY VAIME: Senator Kehoe, I defer to Rochelle Becker.

SENATOR KEHOE: Fine; it’s still three minutes. And then the next person is Rochelle Becker, then Andy Anderson and Rolf Schulze.

ROCHELLE BECKER: My name is Rochelle Becker ­­_______ Alliance for Nuclear Responsibility. And for 20 years during the seismic issue I was a spokesperson for the San Luis Obispo Mother’s for Peace. The workshop introduction stated that the threat of global warming has rekindled an interest in nuclear power which emits no greenhouse gases while producing electricity, creating a rift in the environmental community. This sentence is disingenuous.

California’s responsible 1976 nuclear ______ laws stated that no nuclear plants can be built in California until the Energy Commission determines that a means for permanent disposable spent waste has been demonstrated and approved. It’s very responsible.

When a bill and an initiative to overturn California’s nuclear safety laws was proposed earlier this year, Environment California, ___________, the Planning and Conservation League, Sierra Club, You Can, _________ Impact, Greenpeace, and the Southern California Ecumenical Council joined the Alliance for Nuclear Responsibility and immediately and publicly opposed these actions. This does not sound like much of a rift in the environmental consumer or religious community to me. These organizations have also actively opposed subsidizing of __________ nuclear industry unable to attract free market funding and demanding 100 percent taxpayer paid loan guarantees.

Also, this committee and the state should be clear that the American Heritage Dictionary first definition of the word “emit” is, “to give or send out matter or energy, isotopes that emit radioactive particles.” And this emission remains the other Achilles heal of a nuclear industry, the first being economics. Carbon is not mentioned in the American Heritage definition.

Another assertion in the introduction is that federal law is in favor of nuclear power. Numerous and substantial federal subsidies from liability to limitation to loan guarantees to produce subsidies have improved the nuclear power plant economics, electric customers and taxpayers. So it’s coming out of both of your pockets—taxpayer and rate payer pockets. Furthermore, the nuclear industry’s hope for $50 billion in taxpayer subsidies and 100 percent loan guarantees was tossed out of the congressional energy language just last week. It will not be included in the EPW bill and now has been reduced to about $25 billion. And Senator Domenici is trying to put it in the omnibus appropriation bill, which is a certain sign of desperation by an industry that cannot get the support of a free market for its nuclear (quote) “renaissance.”

California law on siting new reactors is responsible. Though American taxpayers have spent tens of billions of dollars to construct Yucca Mountain, the radioactive active storage site remains unable to resolve the scientific, technical and political issues and Yucca Mountain may never open. Reprocessing would not eliminate our need for a permanent geologic site and ________ the Academy of Science has said it was too expensive. They need a deep geologic site in France; they need one in Europe. They do not have one. In the meantime, waste from nuclear power plants is generally stored on site _____ pool at least for 100 years. These casks have a design license of 20 years. You are going to leave these on a seismically active and vulnerable coast for 100 years?

If global warming is really happening and nuclear power plants are having to be shut down because the water is too warm to cool them, and our coast is somewhat eroding from climate change and seismic issues are unresolved, how could you responsibly put one more nuclear power plant in this state or continue to operate the existing ____________?

Thank you.

SENATOR KEHOE: Thank you. Andy Anderson, followed by Rolf Schulze, followed by Steve Long and John Hutson. Andy.

ANDY ANDERSON: Thank you, Senator. My name is Andy Anderson. And I am the original emergency services coordinator for the city of Dana Point in south Orange County which is in the emergency planning zone for the Santa Monica nuclear generating station. I’ve served in that capacity since 1989 after which had retired from the Marine Corps after

28 years of uniform service, including three tours in Vietnam. I continue to be involved in the emergency planning at Santa Monica nuclear generating station and am intimately familiar with this plans and programs ____ formerly regulated and evaluated process through evaluating the offsite emergency response to a perceived accident at San Onofre nuclear generating station.

I’m very confident in the ability of the offsites to be able to respond and to ensure public safety if there were to be such an event, although I consider the possibility of that event to be extremely remote. While I am familiar, also, with emergency planning at Diablo Canyon, I do not have the level of familiarity that I do have with SONGS, but I feel equally confident at that site.

I’m very honored to…

SENATOR KEHOE: You’re talking about the public being protected?

MR. ANDERSON: Yes, Ma’am.

SENATOR KEHOE: Do you have any insights into….are the plants themselves secure? You know, the business about how many terrorists it would take to creep over the fence or whatever?

MR. ANDERSON: I have a lesser degree of that knowledge, but I am also extremely confident of the internal security processes and resources that are at San Onofre Nuclear Generating Station. I’m not familiar at all with the ones at Diablo Canyon.

SENATOR KEHOE: Thank you.

MR. ANDERSON: I would like to encourage the panel to consider that nuclear is an important piece of the puzzle in California. And it is a piece of the puzzle that should be utilized in coordination and conjunction with all of the other means of generating electricity that have been addressed this afternoon.

I support Mr. Cohen’s closing comments about how that puzzle should come together. And I would also like to offer for consideration of the panel that perhaps California ought not to have itself tied to certain federal requirements to be able to dispose, or if they have a comprehensive program for waste products. I would like to see California take a step similar to what we’ve done in other aspects, such as the automotive fuel standards and other EPA issues where we are essentially providing a more sensible program and approach and perhaps that is in conflict with some of the existing federal programs.

Thank you very much.

SENATOR KEHOE: Thank you. Rolf Schulze, followed by Steve Long, John Hutson, and David Weisman. Mr. Schulze, it’s good to see you.

ROLF SCHULZE: Thank you, Senator Kehoe, for having this hearing; it’s most enlightening. My wife, Jane Schulze, who is an inveterate newspaper clipper, provided some 100 copies of an item from yesterday’s New York Times which I would like to have you look at. In it, it says “Attorney General Anthony Cuomo of New York, has decided that the Nuclear Regulatory Commission denied an application to renew its license for the Indian Point power plant, the nuclear plant. It should be closed. It should be closed now.” He said it’s a catastrophe waiting to happen.

I know that nuclear power plants sound very seductive to the public. And I’m by no means an expert in the areas that were discussed earlier. And it does seem as if nuclear plants, of course, do not produce greenhouse gases as other plants do. However, it does pose a great problem in the amount of radioactive material that is being left behind. This is a terrible legacy that we are leaving to our children and our children’s children and on for half-a-million years. And as has been pointed out, this is nothing that we can depend on. We cannot produce any kind of containment for such materials. And sometimes while teaching, students would point out to me that there have been proposals to inject this into the tectonic plates—put it way under ground. I would remind them that a few years afterward it would probably be spewing out of a volcano somewhere and pollute us all again.

I think there are no ways in which you can safely store those materials. And after having visited the Ukraine in October, I was again reminded of Chernobyl and all of the costs that that mess put onto the country of the Ukraine. It’s, by my comparison with other countries, Poland, for sure, which is right next to it, the Ukraine has suffered terribly in its economy and in the legacy of Chernobyl.

And so, as a last item I will just point out that nothing ever made by human beings have lasted as long as it’s required to do. None of our machines or appliances has ever been without accidents. Three-Mile Island and, of course, Chernobyl, should remind everyone that nothing that we have produced will be without such accidents. And I would, obviously, ask that you take this into account when considering rebuilding or reactivating nuclear power plants.

Thank you very much.

SENATOR KEHOE: Thank you, Rolf. Steve Long, John Hutson, David Weisman. Steve Long? Okay, we’re saving time now. John Hutson.

JOHN HUTSON: My name is John Hutson. I’m also a Vietnam veteran. I was also with Caesar Chavez during his last fast. I’m also on the board of directors for the Marjorie Mason Center for Domestic Violence for Fresno, California. And I am president and CEO for the Fresno Nuclear Energy Group. And I have two words about why we want to build a nuclear power plant in Fresno.

Domestic violence in the state of California has gone down by

10 percent. In Fresno County domestic violence has gone up by 60 percent. And when you ask the Center for Domestic Violence why that is, it’s because of lack of job opportunities in Fresno. Seven of the nine metropolitan areas with chronic double digit unemployment in this nation are located in Fresno. Fresno has been coined as Appalachia West by the Brooking Institute in Washington, D.C.

Six-hundred-and fifty million dollars Mr. Keenan said Diablo Canyon puts into the community. Do you realize that a 60 percent increase in domestic violence what would happen to our opportunities in Fresno if we had $650 million?

Everybody in this state that lives on the coast think they have a right because they are on earthquake zones to say you can’t build a nuclear power plant. Well guess what? There’s no earthquake zones in Fresno, and we have waste water there that will—plenty of waste water, that will fill these plants and cool these plants and it’s not gold.

Some of these speakers (I have to use some terms coined from Will Rogers) some of these speakers against what we want to do in Fresno sound like they’ve been drinking too much water downstream from cattle crossings.

Now, what we want to do in Fresno is upgrade our community. We don’t have earthquake zones. We have poverty. We have pockets of poverty that some folks on the coast have not seen. All of California is not the same. I don’t see why we should be denied the right because of the moratorium put in place over 30 years ago that says that we can’t build a plant in Fresno. Thirty years ago, if you went into that same boardroom when they put that moratorium in place, probably the only electrical device they had was a coffee pot. I bet you if anybody in here took their cell phone and went back 30 years ago and looked at it, they would have said “That’s a devil worshipper right there. That thing takes pictures and everything else.” What’s that called? People, that supported in-vetro fertilization back then….the times have changed.

Fresno Nuclear, with the support of our community, wants to build a nuclear power plant in our community. We have the support of the community. It’s been passed by the city council.

I have, in my younger days, as the liberal democrat then, and I consider myself now, walked plenty of precincts for folks and even got thrown in jail because I wouldn’t maintain nonviolence in the picket lines in Delano with Caesar during the United Farm Workers movement. But this is different for us.

The way to improve our community is in influx of economics. That won’t happen unless we can build this nuclear power plant. We’re passionate about it. We support it. And I would encourage the committee to just give us a chance at it. It’s a different day. Fifteen percent less uranium in the new plants. And we believe they’re totally safe.

Thank you.

SENATOR KEHOE: Thank you for coming down to talk to us. David Weisman. And then, it will Nancy Casady, Derek Casady and Jay Akumar. Mr. Weisman, go right ahead.

DAVID WEISMAN: Good evening. David Weisman with Alliance for Nuclear Responsibility. On a related subject, I was the lone person, not a resident, of Inyo County to attend the one and only hearing held by the Department of Energy in the state of California on the current environmental impact statement on Yucca Mountain.

SENATOR KEHOE: Commissioner Boyd thanks you.

MR. WEISMAN: And I must say, Mr. Boyd, I invoked your name several times that evening saying “I have in my hand a letter from Mr. Boyd requesting that the Department of Energy hold hearings in Sacramento and other communities so that those on the affected transportation route would have a chance to comment.” Because whether this plant or the plants for waste are on temporary sites, whether it’s on 39 sites, 1 site, 2 sites, 12 sites, it has to get there somehow. And what this thing doesn’t know is that that map is a constantly shifting target, which may be good if you’re concerned about terrorism, but, bad if you’re a locality or a municipality whose routes will traveling through your county or city, _________ your emergency responders, your road widening, your railroad infrastructure. Now, this map seems to finally be coming into place and I must say, this brings up information Mr. Dutton may like to know. For example, that 12 percent of the nation’s waste is going to head your way through San Bernardino, Riverside and Orange County. Which exact rail lines they don’t know. Will it go up the Cajon Pass? They’re not exactly sure. Will it have to stop in Colton? They don’t know exactly. But the fact is, what they don’t have an answer is, who’s going to pay to train your emergency responders; who’s going to provide the equipment that might be needed in schools, public buildings and hospitals, many, first of all, within one mile of that route? These are questions the California state legislators have the right to ask. They have the right to ask, as Mr. Boyd did, that these hearings be held in the state of California. They have the right to ask that the Department of Energy o look at the population centers and choose, although I didn’t know….deferring it to the beauty of Lone Pine and the spectacular place that it is. It was a 7-hour drive for me as a member of a reactor community to be there.

And so, as legislators perhaps this upcoming year you may look to use the California legislative process to declare a joint resolution to somehow ask the Department of Energy, if they’re going to put the state of California at risk to receive or transport waste not generated here (and according to the latest map we get the waste from Arizona, both plants in Texas and whatever plant in Louisiana), then we have the right to know, again, who is going to do the infrastructure, and who’s going to pay for it? And this gets into the economic analysis as when they did under AB 1632. If you have a course for nuclear power, handling this waste, the transportation and its impact on our communities matters. And so, we’ll ask that during this coming year you use this opportunity to make some requests of the otherwise, shall we say, poorly behaved Department of Energy.

Thank you.

SENATOR KEHOE: Thank you for your participation. We appreciate it. Nancy Casady; followed by Derek Casady; followed by Jay Akumar. Welcome.

NANCY CASADY: Welcome. Hello. Derek is passing. He started out very angry when we came in, and after listening to the hearing, has decided that it’s been a very balanced presentation. And I’m here, personally, to thank you for including all the points of view.

As you know, I’m a passionate opponent of nuclear—both energy and weapons. And I think that the opportunity to consider the overwhelming evidence of the unanswered dangers in nuclear power plants has been well represented today in what may be characterized as a Dennis Vucinich moment. I’m here to seriously suggest another solution to greenhouse gas production. And that is our dependency on meat consumption. So if all of us could take very seriously the idea of reducing meat consumption as one of the pieces of the puzzle (if you will) to reducing greenhouse gases. The studies all show that actually cows produce more methane than cars.

Thanks.

SENATOR KEHOE: Producing steaks, beef, has greenhouse gas implications with the water and the grain and all that. But, it’s not an agricultural…

UNIDENTIFIED: So do solar panels.

SENATOR KEHOE: So do solar panels. Thank you, Nancy. Next is Jay Akumar, Ted Quinn, Beryl Flom and Laura Hunter, if you’re all still here. So, Jay first.

JAY AKUMAR: I’m a physicist with Lawrence Livermore National Lab but I’m here as a private citizen and an activist. And I’m actually a nuclear fusion researcher and, therefore, I’m familiar with nuclear fusion parts but not that familiar with nuclear fission ________background makes me understand all the issues in front of us.

I have heard both sides, and, in fact, I am somewhat of an interloper in this meeting. I just heard about it. ________________ just watch the proceedings. Having listened to it, I’m not convinced that both __________ and Jim Harding persuaded me, basically that the nuclear technology and the nuclear industry are hardly mature. It does not know what the costs are; it doesn’t seem to know what to do with the waste it produces; it has not even ________ technologies.

But on the other hand, it seems to be that the _________ side is also a little child. The only people who are dying in India aren’t from the chemical industry and nobody has died from a nuclear industry accident yet.

So, if one were to apply the same standards as the industry is being asked of in terms of accidents, they should probably ask how the chemical industry is doing and thereby _____ standards.

But having said all that, I just wanted to ask a few questions to both sides. Has the construction, has somebody included __________ asked this question; has someone included the carbon dioxide emission ___________ construction phase of nuclear reactors? In fact, this question is being asked of the nuclear fusion reactor that’s going to be built. The first one is going to be built in France. The first nuclear fusion reactor is going to be built in France probably. But this question is being asked of by the French and why are we not asking these questions?

Well, if the nuclear industry is so mature, how come the U.S. nuclear industry is not participating in some big way in international reactors? _I would like to know if that is true. Maybe I’m wrong. That they are and I don’t know about it.

The uranium mining is known to be one of the major toxic processes. And, in fact, that’s not been addressed in this meeting. Uranium mines are worse than gold mines. In fact, they create pools of toxic material. In India, people have been displaced hundreds of miles away from uranium mineral ________ and this is a serious problem. And unless all those people who say that uranium is plentiful, know that uranium is one of the most toxic materials. In fact, as we know, uranium bullets, uranium ____ bullets are a huge problem in both Iraq and all over the world.

So, my question is that, in fact, that this commission make a better….have better people or more balanced presentations which presents both sides of the issue at the same time without really undermining __________ hiding their own flaws __________ presenting other side’s points as well.

Thank you.

SENATOR KEHOE: Thank you very much. Commissioner Boyd, you have to be headed to the airport.

COMMISSIONER BOYD: Yes.

SENATOR KEHOE: Do you want to make any final comments before you leave? And then we’ll go to Ted Quinn and Beryl Flom.

COMMISSIONER BOYD: I want to answer the last gentleman to say, my call for “cradle-to-grave” _________ psychoanalysis earlier in the day is the respond to the issue of looking into carbon footprint or environmental footprint and the cost footprint of various technologies.

SENATOR KEHOE: So the whole lifecycle of the plant?

COMMISSIONER BOYD: This is what climate change is bringing to the world. We’ll look at the full lifecycle of everything and let the best one win. But we need to do that.

The only other comment I want to make is on the cost issue and it’s been repeated multiple times. The electricity cost for SONGS and Diablo Canyon is much more complicated than what was explained simply today and I would just urge you to look at the chapters in the 2005 and 2007 Integrated Policy Reports that attempts to get to the bottom of the costs. It’s a very convoluted rate process ___________ state try to handle the ______ cost of the nuclear industry, and it’s not that simple. So, I’m not sure electricity is as cheap as quoted.

I already talked about cost estimates.

And the standardized design issue you brought up, Madam Chair, earlier today, many of the cost estimates of the past were predicated on the idea that there would be standardized designs and more rapid permitting process and what have you. And other than Constellation, everything that’s come in the door so far, people are once again de-designing the ideas, and so, it’s going to take a long, long time to get them approved or to even understand what the issues are.

I already made my comment about climate change with regard to interim storage __________ dry cask storage on site. This is not the bargain the American people made many years ago when they agreed to the nuclear power industry in the United States. Spent fuel was supposed to stay fives years, more or less, at the sited plants. So, we really have a lot to look at _________. And perhaps interim storage at the sites is acceptable. I have no objection. We have approved the dry cask facilities at the various sites as the only option available at the moment. But when we do AB 1632, when we look into seismicity in California, we’ll once again address how comfortable we feel about that subject.

So, I think I’ll cut it off there. I kind of gave my conclusions earlier on because I knew we’d _________.

SENATOR KEHOE: Thank you, Commissioner. We appreciate your time. Your opening comments were very helpful.

COMMISSIONER BOYD: It’s been my pleasure.

SENATOR KEHOE: Mr. Quinn and then Beryl Flom, Laura Hunter.

TED QUINN: Thank you, Senator. Thanks to the community for focusing on this. I’m a nuclear engineer. I’ve spent 30 years in nuclear engineering. I’d just like to comment that I recommend the committee look further into the details and more specificity on comparing baseload sources of energy. I think comparing baseload, the recommendation is, a clean ___________, natural gas, combined cycle and nuclear are really a way to look at baseload. And ____________ and from the ISO would, I think, clarify, I’ll give the example; there are limitations of dispatching wind that we need to be respectful of in California. It can’t be dispatched without a backup power supply. I didn’t hear that today and would hear that when we compare baseload to energy.

Just two clarifications for Mr. Hirsch. I heard, I believe, 100 square miles of one location would solve all of the energy in the United States, is what I believe I heard him say. And when he did, it’s just the clarification I would provide respectfully to him is, it’s a 100 square miles, it’s solar is equal to one unit in San Onofre.

For Mr. Zichella, I wish he was here, the modest incentives for wind and solar in the 2005 Energy Policy Act, the request on production tax credit (and this is for nuclear) for a very limited amount, 6,000 megawatts to equal that of wind and solar for a limited time.

Thank you.

SENATOR KEHOE: Thank you. Beryl Flom. Beryl is not here so Laura, it’s up to you.

LAURA HUNTER: Thank you very much. My name is Laura Hunter. I’m with the Environmental Health Coalition. I want to thank you very much for holding the hearing here in San Diego so that we can attend. We don’t often get to do that. We’re members of the AB 32 Environmental Justice Advisory Committee for the state and also a member of our local SANDAG Energy Working Group.

I just want to make a couple of points and offer some ideas and thoughts that I hope the committee would follow up with. EHC is very opposed to expansion of nuclear power in the state of California. It’s unsafe at any location. There are other experts that can speak more effectively than I could. But I do want to point out that from an environmental justice perspective there is maybe no greater tragedy that has been pushed onto the native peoples of this country—poor communities, low-income, communities of color, by the mining, the storage, the transportation and basically the impacts on environmental justice communities have been very, very significant and that is, obviously, a concern to us.

In terms of the once-through pooling; that is a mega-devastating impact on our near shore marine environments. I was interested about the comment about SONGS has negative or no impact—not true. They had one event a number of years ago. They killed five tons of anchovies in just one single event. We have a crashing fisheries in our near shore area. We’re asking commercial and sport fisherman (undermining their ability to make a living) to stop fishing in certain areas because we’re losing the integrity of our marine life food chain. Just as an example, it’s not just the anchovy’s life, everything that lives in the near shore environment eats anchovies. So if you take out thousands and hundreds and millions of those, you’re going to affect the food chain. So these have very, very huge impacts.

In terms of the cost, I think you should….I hope you’ll struggle with if we’re going to spend $4- to $6 billion, where’s the best place to put that money? We would argue that the answer is not in nuclear facilities. And there’s an excellent report that came out; Bill Powers wrote it called “San Diego Smart Energy 2020.” We would also support an investigation of the piper and the loading order because there are many serious options that we really could take.

The preferred loading order, I would hope you would spend most of your time figuring out how we implement that. It may be the most visionary, important state policy that’s ever been passed. It makes us do the right things first. We should follow it. You can help. There’s a number of barriers in terms of rate structure. The rate structure doesn’t support the loading order. That could be fixed. And then these utilities could be making money doing efficiency, making money doing solar, which right now they’re really not allowed to. There’s lots of things on green building energy efficiency requirements that should be passed and we’re sorry about all the bills that got vetoed last year.

Lastly, I just want to say that more nuclear is not desirable. More nuclear is not necessary. It should not be part of our future. We have to talk about what do we want to subsidize and invest in? And something as dangerous and cost ineffective as nuclear is not it.

Thank you.

SENATOR KEHOE: Thank you, Laura. Next is Dr. Russell Duff, and then, Dr. Siegel and Bruce Marlow, who is the last speaker.

DR. RUSSELL DUFF: Thank you. I just wanted to say a few words. I’m not in this business. I’m a retired physicist. I spent years at Los Alamos, Livermore and in working with the Defense Nuclear Agency about aspects of nuclear energy.

I think that the whole question of Yucca Mountain is not really your concern but you should be aware of some things. Yucca Mountain is a few miles away from a test site. A major concern about Yucca Mountain is pollution—water seeping down, radioactivity getting down into our water table. ___________ many, many very large nuclear devices under the water table a few miles away from Yucca Mountain. _________ monitor the water table. The radioactivity doesn’t move. It has not moved into the monitored wells. There’s a lot of exaggeration in the concerns.

The country that has the most experience with nuclear explosions and radiation problems is Japan. They’re going nuclear. I think that tells us something. Our society accepts many risks and dangers—automobile accidents could kill thousands; smoking could kill thousands and tens of thousands; guns, we allow thousands and a thousand people to kill. Nobody was killed at Two-Mile Island. Nobody was seriously injured. I think that our policy people, our politicians, you and your colleagues, should have an overview, should realize that there are a variety of agendas. Various people have an economic, social; they all should be judged and balanced.

We need you folks and all our politicians to face up to problems that we face soon. Global warming is real. Rising sea levels alone, if we don’t do something about them very soon, are going to flood New York City, Boston, Savannah, half of Florida, New Orleans. We’re going to have problems much more serious than many that have been talked about possibly from nuclear waste.

SENATOR KEHOE: Thank you, Dr. Duff. Good points. Thank you. Dr. Edward Siegel.

DR. EDWARD SIEGEL: Yes, I’m happy to say I’m not the oldest person here. I got my Ph.D. in nuclear engineering at Michigan State in 1970. I worked at Westinghouse, _________, ______, and the ________. Just a list of references ________(inaudible) ____________ bankrupt over biochemistry engineering.

Okay, we talked about the nuclear renaissance. Renaissance indicates that you’re bringing back something wonderful ________ where I come from. _______________ the word is appropriate. I think that makes its point.

KUSI, there was an interview with Admiral Dennis Wilkinson Sunday morning—spectacular interview ___________ news director. Admiral Wilkinson, the builder __________ 89-years old. He made a comment that _____________(inaudible). He says, “Yes, if they build it right; design it right; and run it right. That’s capital I, capital F.

And __________ would be turning over in his grave if he seen what these clowns _________ reactors have done to his business.

Next, Jason ______has a web page which is not for public consumption which ______________.

Next, Lawrence Pringle, Nuclear Power From Physics to Politics 1979 _________. He knows what he’s talking about.

Next, look at the NRC press release 12/26/06 on ____ well problems.

And then here’s something on ___________

SONGS and Diablo Canyon ______________

San Onofre, Camp Pendleton ____________. You put two or three guys with mortars ______________________ break like potato chips.

Next point, article by Bill ________ from the New York Times ________ Union Tribune. Read about the Titanic ______ bolts ______

Someone mentioned something about uranium supply. You folks ______________.

Next, number eleven, ______________ no idea why they screwed up. They had some young schmuk (excuse my language) _____ 31, they used the wrong concrete. I mean, this is like you buying a car with paper mache wheels. You don’t have to be an Einstein for this.

Next, they mentioned AREVA and EDF. Some woman executive they hired to run it. It used to be the CEO of _______. There’s a great article ______________. Her idea was to put ______ logos on reactors and perfume them to make the look acceptable.

Next, __________ we heard someone talk about chemical reactions. ___________ refinery ___________ failure.

SENATOR KEHOE: And, Dr. Siegel, that’s three minutes. Thank you.

DR. SIEGEL: That’s alright. All things cheap being dangerous.

SENATOR KEHOE: Thank you very much. I appreciate you being here. Mr. Marlow, you are the cleanup player.

BRUCE MARLOW: Thank you very much. I’m the regional manager for AREVA in California in the western United States. And I’m also a Californian. I’ve been here since I was ______ old. I lived in northern California. This is my 35th year with AREVA in the nuclear power business. I started my career as a nuclear worker. I’ve been exposed to more radiation than you can get in this entire room if you lived on top of a power plant for the rest of your entire life _______________. Just so you know, I have three wonderful children.

I’d like to address __________ the construction project always takes a large hit about being behind schedule and see all the nuclear guys can’t get it right. Every one of these projects is unique, especially when you look at this is the first construction of the __________ plant with a multi-national workforce. We’re talking about something in the neighborhood of

30 different languages coming together in a country that sees very little sun and a lot of snow _______ has to have a special building around it in the winter time. And so there’s a lot being learned there. Our _______ project is on target ____ first six months. And by the time we get to America using the combined operating license process and the design team saying _____ unit you’ll see a lot of these programs just be built on schedule, on time, on budget because they’ll be preplanned. That’s why the number keeps changing. Everyone is trying to narrow it down so we don’t have the same challenges we had 30 years ago.

To give you an idea; if you wanted a nuclear power plant today in California, you could probably bring online in 2018. If you wait two years to get in the cue, it will be about 2025 and that could be an additional ten years wait—2035, because the world is going to build nuclear power plants whether California wants them or not. We expect to see more than 200 on the books in some kind of phase worldwide within the next 24 months. And beyond that, it gets even bigger. The inquires coming into AREVA and the workforce that we’re trying to generate and manufacture capacity is to meet that or it could be a challenge for us. So it’s a very large thing. And whether California can get around the emotional issues is really ______ issue, it’s about we actually are going to build them and it’s going to happen ____ proliferation and all the other issues.

Thanks.

SENATOR KEHOE: Thank you very much. I appreciate everybody’s attention and participation. And the hearing is adjourned.

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