parties incurred in excess of the amount covered by private insurance, resulting from an atomic facility incident. Such indemnification should only be available for amounts in excess of amounts of insurance required by the Atomic Energy Commission based on its evaluation of the hazards involved. If the amount of private insurance available from year to year is less than the amount required by the Atomic Energy Commission, the indemnification should take effect at that point.

To its maximum capacity, except as provided above, private insurance should be utilized in providing coverage of the liability of reactor operators and suppliers of component parts, and within such capacity, Government indemnification or intervention is opposed.

The Government's participation should avoid duplication of services and agencies; therefore, the Atomic Energy Commission should administer the Government's program. The Commission should be empowered within legislative standards stated as explicitly as possible under the circumstances to negotiate for, and utilize fully, on the basis of reasonable cost, the services and facilities of the insurance industry in the issuance of agreements and the investigation and settlement of claims.

In general, S. 715 (H. R. 1981) seems to effectively meet the urgent need to remove deterrents to development of atomic energy and the national chamber favors its enactment. We offer a suggestion for improvement in the legislation, which we believe necessary to avoid an undesirable effect, yet in no way altering the fundamental purposes of the bill.

One of the criteria for determining the amount of financial protection to be required by the Atomic Energy Commission is the "cost and terms" of private insurance. This appears in section 4, adding section 170 (b) to the Atomic Energy Act of 1954, as amended. This provides that the AEC shall consider the cost and terms of private insurance as one of the factors in determining the amount of financial protection required. This would put the AEC in position to have a serious impact on insurance ratemaking procedures. These functions are already fully regulated by the various State insurance supervisory agencies. House Report No. 2531 of the 84th Congress, 2d session, on H. R. 12050 stated on page 11:

"*** The reference to the cost of insurance in this subsection is not intended to encourage the Commission to undercut the amounts of private insurance provided at reasonable rates. Since the program is so new, and no rates are yet established, the Commission must be in a position to set the amount of financial protection required at an amount lower than amount of private insurance offered if the rates appear high and all other factors indicate a lower amount is appropriate. Instead, it is merely to give the Commission a chance to look at the economics of the operation of the particular kind of reactor in deciding the amount of financial protection which may be required." [Italic added.]

This criterion would place upon the Commission authority-possibly a responsibility-to sit in judgment as to what shall constitute "reasonable rates. Rates are established by procedures conforming to the requirements of State law, and without Federal intervention, as here suggested. This should remain undisturbed and, therefore, the national chamber recommends deletion of this part (1) of the criteria in the added section 170 (b).

In the light of the foregoing, the national chamber strongly urges enactment of S. 715 and H. R. 1981 to stimulate the private development of atomic energy. Cordially yours,

CLARENCE R. MILES.

Hon. CARL T. DURHAM,

COMMONWEALTH EDISON Co.,
Chicago, Ill., March 20, 1957.

Chairman, Joint Committee on Atomic Energy,

Washington, D. C.

DEAR MR. DURHAM : I appreciate your invitation of March 12, to make a statement on H. R. 1981 and S. 715 relating to governmental indemnity for third-party liability arising out of reactor hazards.

Members of your committee who are familiar with my previous testimony on this subject know that we of Commonwealth Edison Co. and nuclear power group were strongly in favor of the Joint Committee indenmity bill introduced at the last session of Congress. We have not changed our minds.

We were deeply disappointed last summer when the bill did not come up for consideration. We felt that the bill afforded a sound and workable solution to the problem of the catastrophe risk. We feel the same way today.

The present Auderson-Price bill is substantially the same as last years' bill. We urge favorable consideration of this legislation at the earliest possible moment.

I have these further comments:

First, we recommend no changes in the indemnity legislation as now proposed.

Second, the tentative premium rates quoted by the insurance industry to cover the ordinary third-party liability ticks are considerably higher than we had anticipated in figuring the economics of our project. For example, the initial annual premium would be $250,000 for $50 million of liability coverage. However, we plan to try to live with the rates as quoted. We are taking this position because we believe that if our plant turns out to be as safe as we are conviced it will be, we have full confidence that the rates will be greatly reduced as operating experienced is gained.

Third, our safety studies confirm our long-standing belief that the possibility of a major nuclear incident is extremely remote insofar as our project is concerned. Most experts seem to agree that, regardless of the type of reactor, the chances of a major nuclear incident are substantially zero. For example, the members of the committee who saw the recent dedication at Argonne National Laboratory witnessed a demonstration of the self-limiting features of the boilingwater type of reactor.

In order to accelerate the atomic power program, we strongly recommend that the indemnity bill be passed at once. The bill is so important to the public interest and has such universal approval that it should be considered strictly on the basis of its own merits and not be tied up with any other legislation. Sincerely yours,

WILLIS GALE, Chairman.

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.,
New York, N. Y., March 21, 1957.

Hon. CARL T. DURHAM,
Chairman, Joint Committee on Atomic Energy,

Washington, D. C.

DEAR MR. CHAIRMAN: I have noted with interest your announcement of March 12 indicating further consideration by the Joint Committe of proposed legislation for governmental indemnity against reactor hazards.

When I appeared before your committee last year on May 16 I said that we would welcome such legislation and would be glad to cooperate in any procedure established by Congress. We later expressed support of S. 3929. I am advised by counsel that H. R. 888, S. 715, and H. R. 1981 of the current Congress are substantially the same as that bill which was favorably reported by the committee last year.

It is evident that enactment of the proposed legislation becomes more important as the time approaches for operation of power reactors not owned by the Government.

Respectfully yours,

Hon. CARL T. DURHAM,

H. R. SEARING, Chairman of the Board.

EDISON ELECTRIC INSTITUTE,
New York, N. Y., March 28, 1957.

Chairman, Joint Committee on Atomic Energy,
Congress of the United States, Washington, D. C.

DEAR MR. DURHAM: The committee on atomic power of the Edison Electric Institute notes from the Joint Committee's announcement of March 12 that the Joint Committee currently is conducting hearings with respect to proposed legislation providing for governmental indemnity against reactor hazards.

On May 16, 1956, Mr. E. L. Lindseth, on behalf of the Edison Electric Institute and its committee on atomic power, made a statement before the Joint Committee in support of legislation providing for governmental indemnity. We understand that the bills currently under consideration by the Joint Committee on the subject of governmental indemnity are essentially the same as

the bill which was favorably reported by the Joint Committee in 1956. We continue our belief that enactment of the proposed legislation is necessary and would have a favorable effect on the progress of the power industry in developing and building nuclear power reactors. Accordingly, we are pleased to advise that we favor enactment of the proposed legislation for governmental indemnity against reactor hazards.

Respectfully yours,

E. H. DIXON, Chairman.

NATIONAL ASSOCIATION OF INSURANCE AGENTS,
New York, N. Y., March 25, 1957.

Re Amendments to the Atomic Energy Act of 1954-S. 715 and H. R. 1981, 85th
Congress, 1st session

Hon. CARL T. DURHAM,

Chairman, Joint Committee on Atomic Energy,

United States Congress, Washington, D. C.

DEAR MR. CHAIRMAN: This representation is made on behalf of the National Association of Insurance Agents, a voluntary membership association numbering in excess of 32,000 insurance agency members. Included in this membership are over 100,000 individuals, duly licensed by the respective States, who are proprietors, partners, or corporate principals in the firms and corporations which comprise said insurance agency members. This organization is comprised of independent businessmen who specialize in the production and servicing of policies of fire, casualty, surety, marine, and all other lines of general insurance for clients ranging from the smallest householder or automobile owner to the largest industrial corporation.

A number of insurance agencies are vitally interested in the development of insurance coverage for commercial uses of atomic energy. While development of atomic energy has not as yet reached the point of universal concern to all members of this association, it is expected that in years to come this form of energy will affect virtually all insurance agents, as it will the general public as a whole.

This association commends the efforts of the Joint Committee on Atomic Energy in encouraging the widespread development of commercial nuclear energy, and most earnestly recommends to the Joint Committee that it continue its recognition of the vast and universal potential of nuclear energy and its future effect upon all segments of the American economy.

In this connection, we urge that in your consideration of S. 715, introduced by Senator Anderson, and H. R. 1981, introduced by Representative Price, there be inserted a provision in section 170g, or in some other appropriate place, authorizing the Atomic Energy Commission to use the facilities and services of insurance agents and brokers to the extent that it may be necessary or desirable to utilize such services, and that reasonable compensation be authorized for such services.

Agents and brokers who consummate and maintain insurance protection for companies which are directly concerned with commercial uses of atomic energy are accustomed to deal with the entire insurance program of a particular assured. In doing so these agents and brokers become familiar with a good many facets of the practical operation of the firms which they insure. It is entirely conceivable that the Atomic Energy Commission may, in certain cases, have a real need for the services of these agents and brokers.

It is recognized, of course, that there would be no prohibition to use the services of agents and brokers in any bill such as the Anderson bill, S. 715, and the Price bill, H. R. 1981. However, since the authorization to use the services of private insurance companies and insurance adjustment organizations is specifically spelled out in S. 715 and H. R. 1981, we believe that it would also be in order to provide authorization for use of the facilities of agents and brokers to the extent necessary or desirable in the opinion of the Commission.

This organization believes that such a permissive authorization would be in the best interests of the Atomic Energy Commission and of the insuring public. Your consideration of this recommendation will be deeply appreciated.

Yours sincerely,

ROBERT E. BATTLES, President.

STATEMENT OF CLYDE T. ELLIS, GENERAL MANAGER, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION

Mr. Chairman and gentlemen of the committee, my name is Clyde T. Ellis. I am general manager of the National Rural Electric Cooperative Association. NRECA is the national service organization representing 92 percent of the operating rural electric systems in the United States (including Alaska). systems serve about 3,823,678 farm families and rural establishments.

These

It is the responsibility of our association to assist our member rural electric systems in securing adequate insurance protection at the lowest possible cost. I appreciate the opportunity afforded by the Joint Committee to appear before you to discuss the atomic reactor insurance problems which we are encountering.

INTEREST IN ATOMIC POWER

Our interest in atomic power projects and the insurance protection of these projects is extremely great. Our loads are doubling every 5 years, thus creating ever-increasing need for a greater power supply. Our atomic energy study group received final approval from AEC on March 18, 1955. There have been several meetings of the full study group with officials of the Army Corps of Engineers, the AEC, and private industry, to discuss the work they are doing in the development of power reactors. Members of the group also made visits to various AEC installations such as Oak Ridge, Argonne, Arco, and Shippingport, Pa. We feel that the activities of the study group have been responsible for bringing to the attention of the rural electric systems the new developments of the rapidly changing field. We also feel that the study group has been responsible to a great extent for the proposals which were received from the rural electric systems by the AEC under their small-scale demonstration power reactor program.

The three current proposals submitted by rural electric cooperatives under AEC's small-scale program are evidence that the rural electric systems are tremendously interested in atomic power. These three cooperatives are:

(1) Rural Cooperative Power Association, a federated generation and transmission cooperative at Elk River, Minn., which submitted a proposal for a 22,000kilowatt boiling water reactor;

2. The Wolverine Electric Cooperative, a federated generation and transmission cooperative at Big Rapids, Mich., which submitted a proposal for a 10,000-kilowatt aqueous homogenous reactor; and

3. Chugach Electric Association, Inc., a distribution cooperative at Anchorage, Alaska, which submitted a proposal for a 10,000-kilowatt sodium-cooled, heavy water moderated reactor. These rural electric cooperatives are in some of our highest cost power areas. These high power costs, of course, account in a large part for the keen interest of our systems in atomic power.

HAZARDS AND PROTECTION

We have disagreed in the past, as previous testimony will show, with the conclusions reached by the McKinney panel in the section entitled "Hazards, Protection, and Insurance" and with previously introduced House and Senate bills because we believed that the Government must assume some of the risk involved in the operation of atomic power reactors, and that such reactor plants must not face an insurance premium cost which will make such operations infeasible.

As in the past, the National Rural Electric Cooperative Association at their annual meeting, in March 1957 endorsed a resolution concerning the need for insurance protection from atomic energy (copy attached). This resolution States that the National Rural Electric Cooperative Association is in favor of Federal insurance legislation that will protect the entire electric utility industry against "catastrophic limits beyond which insurance carriers cannot insure at a reasonable premium." Further, the resolution recommends that the Federal Government provide for steps to be taken to assure that insurance costs be kept within limits that will not discriminate against consumer-owned electric utilities by making their projects infeasible.

In view of the fact that the wording of H. R. 1981 as introduced in the House of Representatives by Congressman Price on January 5, 1957, and S. 715 as introduced in the Senate of the United States by Senator Anderson on January 17, 1957, is identical, my comments will refer to both bills.

We certainly agree with the wording of section 170, "Indemnification and limitation of liability," paragraph (b), which states in part that the amount of

financial protection required shall not exceed the amount of liability insurance available from private sources since this section takes into consideration: 1. The cost in terms of private insurance;

2. The type, size and location of licensed activity and other factors pertaining to hazard; and

3. The nature and purpose of the licensed activity.

We also approve paragraph (c) which agrees to indemnify and hold harmless the licensee and other persons indemnified from public liability, arising from nuclear incidents, which is in excess of the amount of financial protection required in amount of $500 million in aggregate for all persons indemnified in connection with each nuclear incident. We feel that this is certainly an improvement on the previous limitation to “twice the capital cost of the reactor”.

We also agree with the intent of paragraph (e) which grants the Commission or any person indemnified the right to apply to the appropriate district court of the United States upon a showing that public liability from a single nuclear incident will probably exceed the limit of liability imposed by this section. This entitles the Commission or persons involved to such orders as may be appropriate for the enforcement of the provisions of this section, including an order limiting the liability of the persons indemnified, orders staying the payment of claims and the execution of court judgments, orders apportioning the payments to be made to claimants, orders permitting payments to be made before final determination of the total claims, and an order setting aside a part of the funds available for possible latent injuries not discovered until a later time.

We look with favor upon paragraph (f) which states that facilities licensed under section 104, and for construction permits under section 185, the Commission is authorized to reduce the fee of $30 per year per thousand kilowatts of thermal energy capacity charged for facilities licensed under section 103. Since this section does take into consideration such factors as:

1. Type, size and location of facility involved, and other factors pertaining to hazard; and

2. The nature and purpose of the facility;

we feel that the rural electric systems will not face a prohibitive insurance premium cost for the required protection.

I would now like to make some general comments on H. R. 1981 and S. 715, and some specific comments on the possibility that could arise which would eliminate the rural electric cooperatives from participation in the atomic energy program either through denying them adequate insurance protection or offering them insurance at rates which would be prohibitive.

First, let me say that we agree with the tacit assumption being made by everyone concerned with this problem that a Government insurance program appears to be a necessity if any nuclear powerplants are to be constructed.

Second, I believe that we should not overlook the possibility of approaching this insurance problem another way. As several people suggested in testifying before your committee last year, and as Mr. Gail L. Freer, personnel and insurance director of the Rural Cooperative Power Association, said in testifying before your committee this week, we might entertain the idea that the Federal Government assume the entire nuclear accident risk on private projects during some initial period, until adequate experience could be gained. When this time is reached, the insurance industry could take over the entire job of insuring against nuclear accidents, at rates which would not be prohibitive.

Such an approach as we suggest above seems to be the most straightforward solution.

We have some reservations, too, concerning the increase in power the Atomic Energy Commission would have added to its already enormous powers. Under this legislation the AEC will have the authority to tell each licensee how much private insurance he must carry, subject only to some nebulous criteria. I understand that the AEC has already proposed an amendment to S. 715 which would eliminate from section 170 (b) the cost and terms of private insurance as one of the criteria to be considered by the Commission in establishing the amount of private insurance to be carried by a licensee.

If the approach outlined in S. 715 is adopted to solve the liability insurance problem, we would strongly oppose this AEC amendment, for the reasons that private insurance costs are a very important factor in determining the economic feasibility of small- and intermediate-size nuclear powerplants being contemplated by consumer-owned electric utilities which do not operate as do the privately owned utilities-on a cost-plus basis.