The U.S. Uranium Enrichment Services Program

Testimony was given concerning the current status of the U.S. uranium enrichment program and Department of Energy (DOE) uranium enrichment contracting practices which have been designed to improve the program's viability. Due to foreign competition, reduced consumer demand, and concern over nuclear proliferation, health, and safety issues, there has been a steady deterioration of the U.S. uranium enrichment program. On January 18, 1984, DOE instituted a new type of enrichment contract to stem the decline in its share of the worldwide enrichment market. GAO examined the provisions of this contract and believes that one provision, a guaranteed 10-year $135 per separative work unit ceiling price, could hinder DOE ability to recover its enrichment costs over a reasonable period of time. DOE is also planning to: (1) reduce the production levels planned for 1985; (2) defer construction of a gas centrifuge enrichment plant; and (3) decrease research and development in some areas. While these initiatives could provide improved efficiency and budgetary savings, GAO has not fully evaluated the merits of these actions. GAO found that accounting modifications which DOE has planned would result in transferring enrichment costs currently being recovered from the enrichment customer to the Government and raise questions regarding the program's full-cost recovery requirement. GAO believes that the executive branch and Congress will need to reexamine the purpose and structure of the program to reexamine the Nation's objective for serving the uranium enrichment markets and to provide adequate flexibility in pricing policies to allow effective competition.