September 2001

From University of Wisconsin-Madison

Study urges caution in nuclear deregulation

MADISON - A study of deregulation's past impact on several safety-critical industries provides valuable insight into the factors affecting safety of deregulated nuclear power plants.

Recently a group led by Vicki Bier, a professor in the Departments of Industrial Engineering and Engineering Physics at the University of Wisconsin-Madison, completed a study for the Nuclear Regulatory Commission on deregulation and nuclear power safety.

Since electricity deregulation is only beginning to unfold nationally, Bier and colleagues James Joosten, a nuclear safety expert at Connect USA, and David Glyer, Jennifer Tracey and Michael Welsh, economists at Laurits R. Christensen Associates, Inc., looked to three other high-technology, safety-critical deregulated industries - the U.S. aviation and railroad industries, and the United Kingdom nuclear power industry-to gain insights into possible sources of risk.

On one hand, the study found no evidence that deregulation causes widespread safety lapses, and in the case of air and rail, the period after deregulation was associated with improved long-term safety records. But the speed of change after deregulation could create potential safety hazards, Bier says, and should be cause for vigilance in an industry that strives to avoid even a single serious accident.

According to the report, organizational changes- such as management, staff size, and corporate restructuring- are especially important to monitor. Such changes could adversely affect safety culture, and were associated with particular safety problems in other deregulated industries, Bier says.

Bier's study draws on information from more than 250 documents about the three case-study industries, as well as interviews from senior industry, regulatory and labor representatives. The study looked at factors such as financial pressures, equipment maintenance and aging, corporate restructuring and human-performance issues such as fatigue and downsizing.

"We found that the rate of change with deregulation can create safety problems, especially during a transitional period," Bier says. "Those transitions could come from very rapid downsizing, or with mergers and acquisitions- both of which can lead to reorganization of job functions and responsibilities, and to rapid changes and instability."

There also were clear statistical connections between financial pressures and poor safety records, especially in the air and rail industries, she says. But the cause and effect on this question is not entirely clear.

Other findings include:

-- Deregulation did not appear to cause equipment reliability problems in the case-study industries, Bier says, probably because the cost of neglected or deferred maintenance was perceived as greater under deregulation than it had been in a regulated environment. In fact, in some cases competitive pressures prompted the case-study industries to increase their investments in maintenance and seek to achieve higher levels of reliability.

-- For nuclear power, deregulation has dramatically increased interest in license renewal and plant life extension, but also led a few unprofitable plants to close.

-- Employment levels were dramatically reduced in both the rail and U.K. electricity industries after deregulation, leading to concerns about worker fatigue and increased use of overtime. A downsizing trend has also been seen in the U.S. nuclear power industry.

-- The NRC will maintain its safety oversight responsibilities under deregulation. However, the agency has had staffing and budget cuts of roughly 20 percent in the last seven years. The cuts are the same order of magnitude as those at the Federal Aviation Administration in the late 1970s, around the time of airline deregulation, which were cited as a safety concern at the time.

Since the Three Mile Island accident in 1979, Bier says the number of reported safety problems in the U.S. nuclear power industry has steadily declined. The decline reflects a significant performance improvement, but deregulation produces a new competitive playing field that already has triggered mergers and acquisitions, some plant closings, and a push to increase both the power capacity and life expectancy of plants. Bier says it is too soon to determine what impact these new challenges will have on the past trend of improving safety.

The nation's 103 nuclear plants supply about 20 percent of the nation's power, and safety is a paramount concern of the industry. Says Bier: "You can't afford to have one serious accident in any segment of this industry without it being disastrous (to the industry) as a whole."

The group's report to the NRC is titled, "Effects of Deregulation on Safety: Implications Drawn from the Aviation, Rail, and United Kingdom Nuclear Power Industries." It is available from the NRC as NUREG/CR-6735.












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