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February 5, 2018
Price-Anderson Act: Nuclear Power Industry Liability Limits
and Compensation to the Public After Radioactive Releases
Since the establishment of the nuclear power industry in the
self-insurance system. In the secondary layer, any damages
1950s, the issue of how to handle nuclear accident liability
from a nuclear incident exceeding the $450 million
has been regularly debated in Congress. From the
available under the primary layer are to be assessed equally
beginning, it was argued that commercialization of nuclear
against all 100-megawatt-and-above power reactors. These
energy would require liability limits for electric utilities and
assessments, called “retrospective premiums,” are currently
reactor suppliers. Congress responded in 1957 by passing
capped at about $121.3 million per reactor.
the Price-Anderson Act, which added Section 170 of the
Atomic Energy Act of 1954 (42 U.S.C. 2210). The law
Figure 1. Price-Anderson Insurance Layers
established accident liability limits for the nuclear industry
For damage to the public from nuclear incidents
and a mechanism to ensure that damage compensation
would be readily available within those limits. The Price-
Anderson liability system, despite many major amendments
over the years, is still largely in place today.
Critics of the Price-Anderson Act contend that its liability
limits protect the nuclear power industry from paying the
full cost of potential major accidents. Those critics view
Price-Anderson as an unjustified subsidy for nuclear power
that distorts energy markets. However, supporters of the
Price-Anderson system contend that it provides an assured
source of damage compensation that might not be available,
or be paid as quickly, under the normal tort process.
Nuclear Power Accident Liability
The Price-Anderson Act authorizes the Nuclear Regulatory
Source: Created by CRS with information from NRC.
Commission (NRC), which issues licenses for building and
operating nuclear reactors, to limit the liability of its reactor
Note: Some figures are rounded.
licensees for radioactive damages to members of the public.
The liability limit is set at the maximum insurance available
Total damage payments available under the secondary
to the nuclear power industry, as described below. NRC
insurance layer equal the maximum retrospective premium
indemnifies (protects) its reactor licensees against damage
($121.3 million) multiplied by the number of covered
awards above that limit. Reactor licensees indemnified by
reactors. According to NRC, 102 commercial reactors,
NRC retain that coverage as long as they continue to
including three that are permanently closed, are currently
operate, although the liability limits may increase over time.
covered by the retrospective premium requirement. (NRC
Price-Anderson’s authority for NRC to indemnify
can exempt shutdown reactors from the retrospective
additional reactors periodically expires and has been
premiums after their spent fuel has sufficiently cooled.) For
extended four times, most recently through 2025 by the
each nuclear incident, therefore, Price-Anderson’s primary
Energy Policy Act of 2005 (P.L. 109-58). NRC’s
and secondary layers currently would provide up to $12.8
regulations for Price-Anderson are at 10 C.F.R. 140.
billion in public compensation. That total includes $121.3
million in retrospective premiums from each of the 102
Under Price-Anderson, the owners of commercial reactors
currently covered reactors, totaling $12.4 billion, plus the
must assume all liability for nuclear damages awarded to
$450 million in insurance coverage carried by the reactor
the public by the court system, and they must waive most of
that suffered the incident. On top of those payments, a 5%
their legal defenses following a nuclear incident that results
surcharge may also be imposed on the retrospective
in a severe radioactive release (“extraordinary nuclear
premiums, raising them to $127.3 million per reactor and
occurrence”). To pay such damages, Price-Anderson
the total available compensation to about $13.4 billion (see
established two layers of insurance for licensed reactors
Figure 1). Under Price-Anderson, the nuclear industry’s
with at least 100 megawatts of electric generating capacity
liability for an incident is capped at that amount, which
(all current U.S. commercial reactors). For the primary
varies over time depending on the number of covered
insurance layer, each licensed reactor must be covered by
reactors, the amount of available insurance, and an inflation
the maximum liability insurance commercially available,
adjustment. Payment of any damages above that liability
which was raised from $375 million to $450 million on
limit would require congressional approval under special
January 1, 2017. The secondary layer is a nuclear industry
procedures in the act, which does not specify the source.
https://crsreports.congress.gov
Price-Anderson Act: Nuclear Power Industry Liability Limits and Compensation to the Public After Radioactive Releases
The retrospective premiums would be paid at an annual rate
would ultimately be paid by the federal government.
of no more than $19.0 million per reactor, to limit the
However, the law also allows DOE to issue penalties on its
potential financial burden on reactor owners following a
contractors for safety violations, and contractor employees
major accident (and also potentially slowing damage
and directors can face criminal penalties for “knowingly
payments to the public). With 102 covered reactors, total
and willfully” violating nuclear safety rules. For nonprofit
annual retrospective premium payments would be capped at
contractors, civil penalties imposed for violating safety
about $1.9 billion. The caps on total and annual
rules are limited to the amount of management fees paid
retrospective premiums are adjusted for inflation every five
under that contract.
years.
Continued Need and Adequacy
Since Price-Anderson was enacted, no nuclear incidents
The Price-Anderson Act’s limits on liability were crucial in
have caused damage to the public above the primary layer
establishing the commercial nuclear power industry in the
of insurance. The 1979 partial meltdown of the Three Mile
1950s. The nuclear power industry still considers them to
Island 2 reactor in Pennsylvania resulted in the largest
be a prerequisite for any future U.S. reactor construction.
number of claims, with damage payments totaling about
Supporters of the Price-Anderson system contend that it has
$151 million, according to the National Association of
worked well in ensuring that nuclear accident victims have
Insurance Commissioners. Dozens of other commercial
a secure source of compensation, at little cost to the
reactor incidents over the years have resulted in far smaller
taxpayer. Opponents contend that Price-Anderson
payments.
inappropriately subsidizes the nuclear power industry by
Small Modular Reactors
reducing its insurance costs and protecting it from some of
the financial consequences of the most severe conceivable
Price-Anderson specifies that a nuclear plant consisting of
accidents. For example, the 2011 Fukushima disaster
multiple small modular reactors (SMRs) would be
involved simultaneous radioactive releases from three
considered a single reactor in determining its retrospective
reactors and required financial intervention by the Japanese
premiums (although no such plants have yet been built).
government. Damages to the public are expected to reach at
The electric generating capacity of the entire plant must be
least $57 billion, according to media reports. A similar U.S.
no more than 1,300 megawatts, and each SMR must have a
nuclear incident involving three reactors at a single site
capacity of 100-300 megawatts. Therefore, in the event of a
would have a liability limit of $41.66 billion ($450 million
severe release, a power plant with six 120-megawatt SMRs
for the primary layer and $13.44 billion in the secondary
would be liable for retrospective premiums of up to $121.3
layer for each of the three reactors). Any compensation
million (the amount for a single large reactor), rather than
above that amount would be determined by Congress.
$727.8 million (the amount for six large reactors, excluding
the 5% surcharge).
International Liability Agreement
The first, and so far only, SMR design to be submitted for
The U.S. government is party to an international liability
NRC certification was from NuScale Power on December
system that, among other purposes, covers U.S. nuclear
31, 2016. The NuScale design would consist of up to 12
equipment suppliers conducting foreign business. The
reactors of 50 megawatts (electric), all immersed in a single
Convention on Supplementary Compensation for Nuclear
pool of water. Because the NuScale SMRs are below 100
Damage (CSC) entered into force April 15, 2015, after
megawatts of electrical generating capacity, they are subject
being ratified by five countries with a total of 400,000
only to the primary layer of liability insurance. Under NRC
megawatts of thermal nuclear power capacity (about
regulations, the primary layer for a reactor from 10-100
133,000 megawatts of electric generating capacity).
megawatts would be set by a formula that includes reactor
CSC implementing language for the United States was
capacity and local population density but would be no more
included in the Energy Independence and Security Act of
than $74 million. One liability insurance policy of up to $74
2007 (P.L. 110-140, Section 934). That provision specifies
million would cover all 12 reactors at a single NuScale
that the CSC does not change the liability and payment
plant. Total liability for reactors under 100 megawatts
levels already established by the Price-Anderson Act. Each
(electric) is limited to $560 million. The federal
party to the convention is required to establish a nuclear
government would pay for any damages to the public above
damage compensation system within its borders analogous
the required liability insurance coverage, up to the $560
to Price-Anderson. For any damages not covered by those
million limit (Atomic Energy Act §170 b. and c.). NRC has
national compensation systems, the convention establishes
been studying whether higher coverage should be required.
a supplemental tier of damage compensation to be paid by
DOE Nuclear Contractors
all parties. P.L. 110-140 requires the U.S. contribution to
the supplemental tier to be paid by suppliers of nuclear
The Price-Anderson Act also covers contractors who
equipment and services, under a formula to be developed by
operate Department of Energy (DOE) nuclear facilities.
DOE. Supporters of the convention contend that it will help
P.L. 109-58 set the liability limit on DOE contractors at $10
U.S. exporters of nuclear technology by establishing a
billion per incident within the United States, to be adjusted
predictable international liability system.
for inflation every five years. The most recent inflation
adjustment, in 2013, increased the limit to $12.7 billion.
Mark Holt, Specialist in Energy Policy
Price-Anderson authorizes DOE to indemnify its
contractors for the entire amount of their liability, so that
IF10821
damage payments for nuclear incidents at DOE facilities
https://crsreports.congress.gov
Price-Anderson Act: Nuclear Power Industry Liability Limits and Compensation to the Public After Radioactive Releases
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https://crsreports.congress.gov | IF10821 · VERSION 4 · NEW