Uranium Enrichment Services Pricing

Present law requires the Department of Energy (DOE) to recover the government's cost for uranium enrichment services over a reasonable period of time but prohibits DOE from including factors in its enrichment services charge which would otherwise be included if uranium enrichment was a private enterprise. Thus present law guarantees that any DOE enrichment services charge will constitute a subsidy. In 1967, there was no market place for uranium enrichment services. At that time, the Atomic Energy Commission was the supplier of enriched uranium to the free world for use in nuclear powerplants. Today two European consortia and the Soviet Union are competitors. When the price to be charged for these services was established in 1967, the legal basis for setting the enrichment services charge was for the recovery of reasonable compensation rather than the present legal basis for recovery of the government's costs. The charge was established following analysis of unit costs averaged over various periods and charges projected for possible situations of private ownership of enrichment plants. In 1967, there was no basis for asserting that a subsidy was being provided to the domestic or foreign nuclear industry. Based on the present law limiting the basis for the charge for recovery of the government's costs and the fact that DOE is providing enrichment services at lower prices than the industry would probably pay in a private market, GAO believes that the enrichment services charge constitutes a subsidy.