NEI LAWYERS COMMITTEE MEETING

Nuclear Energy Institute March 11, 2013 • Washington, DC

Introduction and Welcome

J. Bradley Fewell Vice President and Deputy General Counsel

Exelon Generation Company, LLC (Chairman, NEI Lawyers Committee)

Administrative Matters

Ellen C. Ginsberg Vice President, General Counsel and Secretary

Nuclear Energy Institute

Keynote Address

Margaret Doane, Esq. General Counsel

U.S. Nuclear Regulatory Commission

Remarks of Margaret M. Doane General Counsel

Nuclear Regulatory Commission March 11, 2013

5

Issues affecting new reactors Issues affecting operating reactors Issues regarding high-level waste Issues affecting materials licenses Agency-wide issues

Many issues are cross-cutting: ◦ Fukushima ◦ Waste confidence ◦ Vendor compliance ◦ Financial qualifications

6

Implementation of Fukushima lessons learned

Financial qualifications for applicants

SMRs – licensing framework

Vendor compliance with QA and safety culture requirements

Emerging Issues ◦ ITAAC closure and hearing ◦ Construction changes

7

Implementation of Fukushima lessons learned ◦ Filtered vents

Relicensing on hold due to waste confidence

State regulation and possible preemption

8

Waste Confidence ◦ Status ◦ Timetable ◦ Approach

Use of funds appropriated for Yucca Mountain

Interim offsite SNF storage ◦ DOE ◦ PFS ◦ New Mexico

(2/26/13 letter from Eddy-Lea Energy Alliance)

9

Sharp increase in ISR projects

Compliance with NHPA for uranium recovery

projects

10

Sequestration/Continuing Resolution

Hiring and retention of high-quality staff Effective communication with public

11

Massachusetts v. NRC (Pilgrim) Beyond Nuclear v. NRC (Seabrook) Brodsky v. NRC (Indian Point) Entergy v. Shumlin (Vermont Yankee)

Additional cases: Aiken County Shieldalloy v. NRC

12

Allegations concerning incorporation of conclusions of Fukushima Task Force into NEPA analysis

NEPA does not require agency to wait for

conclusions that may be reached in the future Future safety regulations stemming from

Fukushima will be applied

13

Is wind power an alternative to relicensing? Alternatives must be capable of supplying

baseload capacity Near-term viability is adequate predictor of

future energy alternatives

14

What degree of public participation is required when the agency issues prepares an EA and issues a FONSI?

Unsettled area of law Assuming that CEQ regulations apply, NRC

must, at a minimum, explain why public participation is not required.

15

Preemption a major issue in many states Waiting for Second Circuit decision (and

possibly beyond) New paradigm since Pacific Gas decided ◦ what interests do states continue to have in

regulating a deregulated electricity market?

16

Meeting on January 31, 2013

Commission directive to issue ANPR on interlocutory review

Intervenor community continually has interest

in improving Part 2 due to prescriptive nature

17

General Counsel and Deputy

Two Associates, each supervising AGCs: 1. Licensing & Regulation

(a) Legal Counsel (b) Reactors & Materials Rulemaking (c) HLW/Fuel Cycle & Nuclear Security

2. Hearings, Enforcement & Administration (a) Materials Litigation & Enforcement (b) New Reactor Programs (c) Operating Reactors (d) Administration

Solicitor

18

Fukushima Update

Joseph Pollack Vice President, Nuclear Operations

Nuclear Energy Institute

Fukushima Actions Update • Filtering Strategy

- Severe Accident Capable Vent - External vs. Internal Filtering

• Seismic - Augmented / Expedited Approach - First Submittal September 12, 2013

• Flooding - Integrated Assessments - First Group of Plants Submittal March 12, 2013

• Flex and Regional Response Centers

BREAK

Current DOE Nuclear Activities

Ben McRae, Esq. Assistant General Counsel for Civilian Nuclear Programs

U.S. Department of Energy

Nuclear Energy: The Business Environment in 2013

Richard Myers Vice President, Policy Development,

Planning and Supplier Programs Nuclear Energy Institute

Outline

U.S. nuclear power plant performance U.S. electric sector: Key trends

0

20

40

60

80

100

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

U.S. Nuclear Plant Performance U.S. Nuclear Capacity Factor, Percent

2012 • 63 refueling outages

in 2012 (65 in 2011)

• Tied for fewest scrams in a year (62)

• Crystal River and Fort Calhoun shut down all year

• San Onofre 2 and 3 shut down for steam generator repairs

Sources: Energy Information Administration, Nuclear Regulatory Commission

89.6% in 2006 91.8% in 2007 91.1% in 2008 90.5% in 2009 91.2% in 2010 88.9% in 2011 86.4% in 2012 (est.)

∼89.2% without Crystal River 3, Fort Calhoun and San Onofre

Snapshot of U.S. Nuclear Plant Economic Performance

In 2012, total generating costs increased 5.5% - From $32/MWh in 2007 to $44/MWh in 2012

Fuel costs in 2012 increased 4.8% from 2011 Operating costs in 2012 increased 2.2% from 2011 $8.5 billion in capex in 2012

- 9% increase from 2011 ($7.8 billion)

Source: Electric Uti l ity Cost Group

2012 Nuclear Cost Summary ($/MWh)

Category Number of Plants / Sites Fuel Capital Operating

Total Operating (Fuel

+ Operating)

Total Generating (Fuel + Capital +

Operating)

All U.S. 61* 7.35 12.96 23.86 31.20 44.17

Plant Size

Single-Unit 26 7.52 13.17 29.85 37.37 50.54

Multi-Unit 35 7.22 12.81 19.40 26.62 39.44

Operator

Single 12 8.02 10.12 26.28 34.29 44.42

Fleet 49 7.18 13.66 23.26 30.45 44.11

Source: Electric Uti l ity Cost Group

* Excludes Crystal River 3, Fort Calhoun, San Onofre 2 and 3, Kewaunee

Total Generating Cost 2010-2012 (Fuel + Capital + Operating)

Average in 2012 $/MWh

Quartile Generating Cost

Q1 28.22

Q2 33.00

Q3 40.94

Q4 62.36

Source: Electric Uti l ity Cost Group

U.S. Nuclear Plant Generating Costs: Comparison with Market Prices

($/MWh)

$28.22 $33.00 $40.94

$62.36

20

25

30

35

40

45

50

55

60

65

Quartile 1 Quartile 2 Quartile 3 Quartile 4

NEPOOL

PJM West

ERCOT-Houston Indiana

Palo Verde

PJM West: $46.49 NEPOOL: $42.54 ERCOT-Houston: $36.39 Indiana: $34.52 Palo Verde: $29.65

Nuclear plant costs: Electric Utility Cost Group. Market prices are weighted average day-ahead prices from Intercontinental Exchange (ICE).

Key Trends in 2012

• 2012 electricity consumption down 0.3% - Still not back to pre-recession (2007) demand

• Natural gas spot prices: - bottomed out at $1.95/MMBtu April 2012

• Gas displaced 220 billion kWh of coal-fired generation in 2012

• 9,000 MW of coal-fired capacity retired - average 28% capacity factor

• Wholesale spot prices across most regional power markets at 10-year low

Rapid Capex Growth in Electric Sector

Source: Edison Electric Institute

43.0 41.1 48.4

59.9

74.1

84.2 84.2 84.8 86.6

100.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012p

p = projected

$ Billions

Rate Case Volume Remains High

Source: Edison Electric Institute

15 11

14

23 20

28 24

34

48 46 42

66

55 50

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Looking Forward: Beyond 2013

• Approx. 70,000 MW retired 2012-2017 - Approx. 40,000 MW of coal-fired capacity

• Most regional power markets do not need new resources before 2017 - ERCOT the exception; critical summer reliability

concerns

• In 2013, gas-for-coal substitution will reverse

U.S Natural Gas Resource Base: Yes, It’s Real … But

Source: IHS CERA

Lower-48 Gas Rig Count Has Collapsed

Source: Baker Hughes

300

500

700

900

1,100

1,300

1,500

1,700

2009 2010 2011 2012

Rigs

Approx. 600 rigs to maintain current production level

It’s A Cold, Cruel World: Northeast Natural Gas, Electricity Prices

(Gas in $/MMBtu, Electricity in $/MWh)

Price for 4-day weekend (Sat.-Tues.)

Source: Energy Information Administration

Day-Ahead Spot Gas Price 1.22.2013* 1.23.2013 1.24.2013 1.25.2013

New England $12.34 $21.25 $29.94 $34.25

New York City $16.03 $20.75 $33.96 $36.00

Day-Ahead On Peak Electricity Price 1.22.2013 1.23.2013 1.24.2013 1.25.2013

New England $143.37 $200.74 $226.84 $260.51

New York City $146.80 $173.10 $224.96 $253.36

Electricity Prices in New England (Day Ahead Spot: 1/31 – 2/20)

0

100

200

300

Source: Intercontinental Exchange

Natural Gas-Fired Generators Dwarf Other End Users

38

Residential

Industrial

Commercial

Power

Comparison of Gas Utility (LDC), Power Plant Loads and Pipeline Capabilities

Source: Electric Power Research Institute, Natural Gas for Electric Generation: The Challenge of Gas and Electric Industry Coordination, September 1992.

0 200 400 600 800 1000

Typical 20" Pipeline

Washington Natural Gas (Seattle)

Boston Gas

1,370 MW CCGT

1,270 MW CT

Wash. D.C. Gas Light

Atlanta Gas Light

Typical 36" Pipeline

(MMCFD)

Daily Equivalent of Peak LDC and Power Plant Gas Loads for Large Diameter Pipelines

Pipeline LDC Generating Unit

U.S. Generating Capacity Additions: The Last 15 Years

New Generating Capacity: 1996 - 2011

Coal 20,500

Gas 324,500

Nuclear 1,300

Oil 7,200

Renewables 52,300

Hydro 1,100

Source: Energy Information Administration

Planned Generating Capacity: What’s Wrong With this Picture?

Planned (151,689 MW)

2012 2013 2014 2015 2016 2017 2018 2019 Total

Coal 0 1,161 2,754 2,580 134 2,810 1,240 0 10,679

Nuclear 0 0 0 0 0 0 0 0 0

Gas 727 5,041 8,372 14,659 10,736 565 754 0 40,854

Wind 8,944 11,073 4,483 5,405 1,950 550 650 500 33,554

Under Construction (46,484 MW)

2012 2013 2014 2015 2016 2017 2018 2019 Total

Coal 3,409 997 1,200 0 0 0 0 0 5,606

Nuclear 0 0 0 1,270 1,117 2,234 1,117 0 5,738

Gas 3,789 7,988 4,549 524 624 0 0 0 17,474

Wind 8,641 2,091 121 20 0 0 0 0 10,872

Source: Ventyx Velocity Suite

Nuclear Energy: A Solid Value Proposition

Clean Air Compliance

Value

Grid Stability

Forward Price

Stability

Fuel and Technology

Diversity

Anchor the Local

Community: Jobs, Tax Base

Update on Federal Pre-Emption Developments

Randolph Moss, Esq. Partner

WilmerHale

Update on Cyber Security

William Gross Senior Project Manager, Security

Lawyers Committee Meeting March 11, 2013 • NEI

Presentation Overview

• Overview of the cyber threat

• Threats to business units and power systems

• What is being done

The Cyber Threat - Quote

“Now, we know hackers steal people’s identities and infiltrate private emails. We know foreign countries and companies swipe our corporate secrets. Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions, our air traffic control systems. We cannot look back years from now and wonder why we did nothing in the face of real threats to our security and our economy.”

(POTUS, SOTU, 02/12/2013)

Cyber Threat Actors and Consequences

Chinese Actors

Theft of IP, PII, Secrets

Grid Disturbance Sabotage Denial of

Service (DOS)

Extremist Groups

Hacktivists Nation States

Soviet Bloc Actors

The Cyber Threat Actors

Chinese Actors

Theft of IP, PII, Secrets

Grid Disturbance Sabotage Denial of

Service (DOS)

Extremist Groups

Hacktivists Nation States

Soviet Bloc Actors

Chinese Actors Loose affiliation with government Objective: Steal EVERYTHING Focus has been on corporate secrets Skill: Playing with their “F” game. Attacks are loud, easy to detect. Worry: Capabilities have not been tested. Could be hired by other actors.

The Cyber Threat Actors

Chinese Actors

Theft of IP, PII, Secrets

Grid Disturbance Sabotage Denial of

Service (DOS)

Extremist Groups

Hacktivists Nation States

Soviet Bloc Actors

Soviet Bloc Actors Corporate affiliation with government Objective: Financial Focus has been on bank access and PII Skill: Attacks are quiet, difficult to detect. Worry: Substantial capabilities. Russia not an ally. May collude with other actors.

The Cyber Threat Actors

Chinese Actors

Theft of IP, PII, Secrets

Grid Disturbance Sabotage Denial of

Service (DOS)

Extremist Groups

Hacktivists Nation States

Soviet Bloc Actors

Hacktivists No real affiliations. Objective: Political message Focus on DOS or incriminating information Skill: None, but subject to membership Worry: Business disruption or grid disturbance.

The Cyber Threat Actors

Chinese Actors

Theft of IP, PII, Secrets

Grid Disturbance Sabotage Denial of

Service (DOS)

Extremist Groups

Hacktivists Nation States

Soviet Bloc Actors

Nation States Particularly those unfriendly to U.S. Objective: Cyber attack as means of war Skill: Capabilities vary, but a heavy focus on building. Active recruitment of people, skills. Worry: Could challenge our prevention capability.

The Cyber Threat Actors

Chinese Actors

Theft of IP, PII, Secrets

Grid Disturbance Sabotage Denial of

Service (DOS)

Extremist Groups

Hacktivists Nation States

Soviet Bloc Actors

Extremist Groups Same general worry as nation states. These folks are actively building their cyber attack capability.

Threat Objective, Target, and Public Policy Cyber

Threats

Business Assets

Generation Assets

Theft of IP, PII, Secrets, DOS

FERC DHS

(EO/PD21) NRC

Objective

Target

Policy

Grid Disturbance Sabotage

Safety, Security, EP

Systems

Threat Objective, Target, and Public Policy Cyber

Threats

FERC DHS

(EO/PD21) NRC

Objective

Target

Policy

99% of attacks are here.

The basis for a lot of the recent hysteria is here...

Systems, vulns, and

protection measures are very different here…

1% of attacks are here.

But public policy is focused here…

And here…

Key Players and Activities – Nuclear

Internet Accessible Control Systems - US

Policy Implications for Nuclear Facilities

• Nuclear Regulatory Commission - Power reactors – 10 CFR 73.54 - Other facilities – evaluating (SECY-12-0088)

• Executive Order and Policy Directive 21 (PD21) • FERC/NERC

- Iterations of the Critical Infrastructure Protection (CIP) Reliability Standards.

Executive Order/Policy Directive 21

• Four objectives - Information sharing - Framework for standards development and adoption - Critical infrastructure identification - Privacy

• NRC not directly impacted - Will likely be engaged and participate

• Establishes key actions to be performed - Many actions due within 1 year.

• Unclear of what the results will be

Nuclear Plant Cyber Implementation

• Address Essential Attack Vectors to the Plant - Assemble team and identify assets – DONE - Network isolation (wired/wireless) – DONE - Portable media and equipment – DONE - Enhance insider mitigation – DONE - Security controls on essential assets – DONE

• To Be Done – By date approved by NRC - Implement controls on other assets - Programmatic elements to maintain program

Questions?

William Gross (202) 739-8123 wrg@nei.org

Other Business

Adjourn

NEI LAWYERS COMMITTEE MEETING

Nuclear Energy Institute March 11, 2013 • Washington, DC