American utility consumers face a compelling generational challenge: satisfy the need for a reliable power supply, at a reasonable price, while also reducing greenhouse-gas emissions and building...
stranded investments by the application of the most basic contract law to government policy. Hopefully, the hapless utilities will be remunerated in time to save their businesses.
Stephen Maloney is president of Devonrue LTD, a consulting firm to power and telecommunications companies.
The price tag on DOE inaction keeps increasing
If the DOE does not begin taking fuel in 1998, federal government inaction will cost the nation's nuclear utilities billions of dollars. As the length of the default increases so does the cost to consumers. For example, if the DOE does not accept fuel until 2030, cost for used fuel management could range from $34 billion to $56 billion, as the chart below illustrates.
Potential Federal Liability (in billions)
Utility used fuel management costs:
On-site storage $1.2 $1.2
Extended storage after plant shutdown $9.2 $18.4
Total fuel management costs $10.4 $19.6
Refund of past nuclear waste
fund payments $8.5 $8.5
Interest charges $15.0 $27.8
Total potential federal liability $33.9 $55.9
Source: Energy Resources International.
Figures are reported in constant 1997 dollars.
Federal inaction also could cost ...
s $1.2 billion (em for utilities to build stainless steel containers at the plant site in 34 states if federal storage facilities are not built;
s $9.2 billion to $18.4 billion (em for utilities to safely manage on-site fuel storage, at $4 million to $8 million per utility;
s $8.5 billion (em in relief payments made to utilities and electricity customers from the Nuclear Waste Fund;
s $15 billion to $27.8 billion (em for recovery paid to consumers in recognition of lost opportunity for alternative uses of money paid into the fund since 1983, plus interest.
(em Nuclear Energy Institute,
Winstar says it's unmistakable
The Law. Generally speaking, a private citizen cannot sue the federal government and recover damages for breach of promise. That would violate the government's "sovereign immunity." To prevail, the plaintiff must prove that the sovereign has waived its immunity in "unmistakable" terms.
The Issue. Has the DOE waived its immunity against a suit for damages for failure to accept nuclear waste for storage?
The Winstar Rule. In the case of U.S. v. Winstar Corp.,* decided July 1, 1996, the Supreme Court ruled that the new buyers of three failed savings and loans could recover damages after Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. That law had effectively "repealed" promises made by Federal Home Loan Bank Board that the buyers could treat any excess takeover price as "supervisory goodwill" and include that intangible amount as part of the new bank's minimum required capital reserve account.
The High Court ruled that in promising favorable accounting treatment, neither the bank board nor other federal agencies had circumscribed their authority to modify banking regulations or any other sovereign powers. Hence, the doctrine of unmistakability did not bar the suit.
The Implications. As applied to nuclear waste, Winstar might imply that utilities can sue the DOE (em the theory being that DOE's promises to accept nuclear waste have not otherwise restricted