The Honorable Frank Church - 6 February 24, 1978 multiple operators would most likely result in higher We do not see the benefit of an evaluation by the Senate Subcommittee of the new contracting principles. They appear to be competitive with those of enrichment contracts offered by non-U.S. enrichment suppliers. We believe that centrifuge technology is sufficiently de- Comments on Statement of Ralph Bostian of EEI The statement reinforces the testimony presented by the Comments on Statement of Robert Alvarez of Environmental The Forum Committee finds the statement to contain a number of inconsistencies and misrepresentations. For example, it has not been a principal thrust of the Government's enrichment contracting and pricing policies and stockpiling program to backstop or encourage private enrichment ventures. Rather, the intent has been to establish the viability of the enrichment enterprise, whether government or private. Further, to say that "the basic operational policies and incentives" are intended in part "to enhance plutonium recycle" has no basis in fact and is contrary to Administration policy. To allege that the policies of the DOE enrichment division The Honorable Frank Church -7 February 24, 1978 We don't understand the statement that one reason "DOE We are not aware of any basis for the estimate that 55,000 MWe of nuclear capacity would be cancelled if permitted without penalty. A survey made by ERDA in mid 1977 indicated 16,000 MWe of ERDA domestic and overseas contracts would be cancelled. Some industry sources have indicated a number as high as 25,000 MWe. The charge that the "stockpile program is playing a major role in the continuing destablization of nuclear markets and the subsequent increase in proliferation problems" is incorrect. The concern expressed over unregulated mechanisms and third A decision to reopen the enrichment order book, particularly The Forum Committee appreciates this opportunity to supplement its initial statement. ETC/wsd Sincerely, Elli T. L Ellis T. Cox Chairman Committee on Nuclear Fuel Cycle EDISON ELECTRIC INSTITUTE 1140 CONNECTICUT AVENUE, N.W. • WASHINGTON, D.C. 20036 (202) 862-3800 February 24, 1978 The Honorable Frank Church, Chairman Washington, DC 20510 Reference: Your letter of February 14, 1978 Dear Senator Church The Institute appreciates the opportunity to offer additional comments on uranium enrichment for the record of your hearing. Our previously submitted testimony addresses many of the items covered by the testimony of other witnesses. However, the following comments are offered to supplement our prior submittal and to highlight specific areas. Responses to the questions enclosed with your letter are provided in Attachment A. Interrelated Aspects of Enrichment The testimony provided on the Department of Energy's uranium enrichment policy identifies the extensive interrelationship of many aspects of the activity. Decisions on one aspect of the enrichment operation have an affect on other aspects. Since each aspect may have a significant impact on the ability to provide an assured fuel supply for this Nation's nuclear power plants, all aspects should be addressed in concert rather than on a piecemeal basis. Decisions with regard to opening the order books and providing a variable tails assay option will have an effect on an assured fuel supply. Aspects of private industry participation in ownership and operation, pricing, contract terms and conditions, self-financing through borrowing authority or a revolving fund, enrichment capacity addition schedule, opening the order books, variable tails assay option and nominal tails assay level are all interrelated items and they should be reviewed together in sufficient detail by an independent control body to assure that the service is being offered and performed on a business-like basis with proper recognition of the interests of the rate paying public. A Congressional hearing appears to be in order to review all of the various aspects in concert. February 24, 1978 The Honorable Frank Church The Institute favors the opening of the order books and the provision for the variable tails assay option. However, assurances should be provided that current contract holders will not be adversely impacted by these decisions and detailed criteria on these policy changes should be presented for review and evaluation. New Enrichment Contract The new Adjustable, Fixed-Commitment (AFC) contract proposed by the Department of Energy (DOE) for uranium enrichment service is long overdue and should partially overcome many of the difficulties and inequities of the current Long-Term, Fixed-Commitment (LTFC) contract. Even greater flexibility is needed by utilities to permit a precise matching of the enrichment requirements for each power reactor. On balance, it appears from our preliminary review that both DOE and the utilities are more advantageously served with the new AFC contract form. DOE gains under the AFC contract appear to include more timely and accurate information on the total enrichment needs and a firm commitment for all of the enrichment requirements for each reactor. During April 1977, ERDA indicated to its enrichment customers that it would consider contract relief on their LTFC contracts on a case-by-case basis, the extent of which is yet to be defined 10 months later. These contract imbalances are a continuing significant problem that resulted directly from the LTFC contract terms. The Institute recommends that DOE should provide an option to all current LTFC contract holders to convert the current contracts to the new AFC contracts with a transfer of the original downpayment and with the establishment of feed delivery and enrichment service schedules in the new AFC contracts corresponding to the current utility needs. Since offsetting gains are achieved for both parties of the LTFC contracts, the conversion should be provided at no consequential costs to either party. Such a conversion of contracts could achieve a balancing of utility requirements at this time and a reduction in the overcommitment on the part of DOE for their enrichment facilities. Both the DOE enrichment commitments and the uranium supply market appear to be better matched with their physical capabilities if the LTFC contracts are converted to the AFC contracts using current utility needs. February 24, 1978 The Honorable Frank Church Department of Energy Testimony DOE referenced three ways, on page 9 of Mr ́Voigt's testimony, that the reduced separative work commitments could be used if relief was granted on current LTFC contracts. A fourth and perhaps better way to use the reduced commitment could be the reduction of the tails assay level for the DOE operation of the enrichment function. The Institute strongly believes that the enrichment function should be performed with conservation of the Nation's energy resources as a primary goal. Greater conservation of the Nation's limited resource of uranium is achieved by operating the enrichment plants at a tails assay level of 0.2 percent U, or lower. Current DOE plans call for a higher value of 0.25 percent U235. This could be effectively and advantageously lowered by DOE through contract conversion or contract relief and the timely addition of appropriate enrichment capacity. U235 235 DOE stated on page 11 of their statement that its enrichment capacity of 36.1 million SWU per year will serve the needs of about 335,000 megawatts of nuclear power at a tails assay of 0.25 percent U235. Using a 0.2 percent tails assay to achieve greaťer resource conservation is recommended by the Institute and would limit the nuclear power capacity that may be served to a quantity of about 12 percent lower, or 295,000 megawatts. Since DOE has contracts for 319,000 megawatts, they are already overcommitted without taking new contracts if the facilities are operated in a resource conservation mode. The original contracted limit established in 1974 was based on the recycle of energy values recovered from reprocessing spent fuel. Now that reprocessing has been indefinitely deferred, DOE is automatically overcommitted. Thus, DOE should permit the termination of any LTFC contract for plants that have been cancelled since the initiation of the enrichment contract. Since DOE/ERDA did not proceed with the addition of physical capacity on a timely basis to serve all of the LTFC contracts, only minimal costs have been encountered. Termination charges should reflect only the actual cost to the Federal Government for administering the contracts. Termination privilege should be extended only to cancelled plants and the corresponding utility down-payments, less actual costs, should be returned. Such relinquished commitments could be used to lower the tails assay of the enrichment operation, permit the acceptance of new orders or contribute to achieving the uranium enrichment criteria established in HR 8638 Nuclear Nonproliferation Act of 1978, as amended by the Senate. |