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25 Regulation 26 (2002-2003)
Determining the Price of Price-Anderson

handle is hein.journals/rcatorbg25 and id is 252 raw text is: What is the cost offederal liability protection for nuclear power? Determining the Price of Price-Anderson By ANTHONY HEYES University of London HE NUCLEAR INDUSTRY HAS ALWAYS been a political hot potato. Though not always for the same reasons, it has gener- ated distinctly difficult questions for seri- ous policy analysts. We like its promise of cheap, clean electricity, but we do not real- ly know its downsides, let alone how to value and weight them in any sensible cost-benefit calculus. The U.S. government has contributed to that uncertaintyby removing a number of costly responsibilities from the nuclear power industry. For example, the government has taken on the responsibility for dealing with high-level radioactive waste. Probably the single biggest public image shadow hanging over the technology, though, is that associated with accident risk- the threat, real or imagined, that it might visit upon the United States a cataclysmic accident of dramatic scale. A Chernobyl- sized event could decimate the population of a city, leaving ster- ile large swathes of real estate, industrial and agricultural land, and capital. No technology is perfect. It could happen. In the United States - as in the United Kingdom, Canada, France, and a variety of other countries - accident risk has pri- marily been managed through regulation. In the states, the Price-Anderson Act has, to a substantial extent, removed lia- bility for offsite accident damage from individual operators. Creature of government As a society, we cannot turn our back on any activityjust because it imposes risks. All actions and inac- tions entail risk; that is inherent to the world we inhabit. What we could and should do is evaluate and take account of those risks in an appropriate way when making decisions, and create incentives and institutions for the management of those risks. In general, private investors can - if exposed to the full con- sequences of their actions -be relied upon to pick winners from Anthony Heyes is a professor of economics at Royal Holloway College, University of Lon- don. He can be contacted by e-mail at a.heyes@rhul.ac.uk. losers. But those decisions are not allowed in the nuclear power industry. The nuclear sector has been fortunate to attract sub- sidy - much of it implicit (like Price-Anderson) and amount- ing to tens, perhaps hundreds, of billions of dollars - through the decades. Certainly, if such support is to continue, people should expect a more cogent case to be made for its costs. WHAT IS PRICE-ANDERSON? The Price-Anderson Act of 1957 provides indemnity protection to the industry in the case of nuclear accident and establishes a no-fault insurance regime for compensation of public damages. There are two levels of protection. Each reactor operator must carry primary liability insurance to the value of $200 million. (That sum was last raised in the context of some 1988 amend- ments to the act.) Any damage done above the $200 million mark is assessed equally against all operators up to a current limit of about $88 million per reactor. With 103 reactors cov- ered, that generates a total ceiling on potential compensation from the nuclear power industry of about $9.5 billion. Now, $9.5 billion sounds like a lot of loot, and it is. But the credible estimates of the offsite damages imposed by a serious nuclear event in the United States range into the hundreds of billions of dollars. In the context of a worst-case nuclear acci- dent, $9.5 billion would be close to peanuts. The U.S. nuclear industry, then, is all but protected from being held responsible for any big nuclear accident that might happen. Lawmakers initially embraced Price-Anderson as a short- term protection for an infant industry - to provide some encouragement to see the fledgling activity up and running. Its anticipated life was 10 years, yet some 45 years later it lives on -both the House and Senate voted in 2002 to renew the act- and is regarded by many as close to a necessary condition for the continued health of the nuclear power sector in the United States. THE ECONOMICS OF EXTERNALITY Markets tend to work well when individual actors are responsi- 26 REGULATION WINTER 2002-2003

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