Three Mile Island:
The Financial Fallout
EMD-80-89: Published: Jul 7, 1980. Publicly Released: Aug 7, 1980.
- Full Report:
The nuclear accident at the Three Mile Island powerplant triggered a number of serious problems for the General Public Utilities Corporation, and affiliated companies, including a near financial crisis as they moved to purchase high-cost replacement power to maintain service to their customers. The companies must spend $500-600 million to decontaminate and repair the damaged nuclear reactor and related facilites while continuing to fund an additional $2 to 3 billion in capital expenditures to insure reliable electric service to their customers. GAO explored the financial alternatives for meeting the large costs and whether federal and state regulatory agencies effectively dealt with the situation. The corporation, through its extensive interconnections with other utility systems, was able to buy power to replace that lost from the Three Mile Island reactors, but the largely oil generated power had a high cost. This high cost of replacement power was not initially included in customers' utility rates and the companies had to find outside funding. Rate increases were finally approved by state regulatory agencies but the actual costs made it difficult for the companies to meet current expenses. Reduced earnings will likely affect the companies' ability to pay clean-up costs and maintain reliability. Regulatory controls over these activities are fragmented among three federal and two state agencies and provide no clear direction for planning clean-up, additional capacity requirements, and methods of financing.
The financial stability of the General Public Utilities system has been seriously affected by the results of the accident but recent state regulatory decisions have temporarily alleviated the system's cash flow problems and maintained the system's solvency. Removal of the Three Mile Island units from the companies' rate base considerations has an adverse impact on earnings needed to assure the system's future financial viability and the continuation of reliable power supplies. The Three Mile Island-2 accident has severely limited the system companies' ability to obtain funds from the capital market. The loss of earnings capability raises questions as to the system's ability to fund Three Mile Island-2 clean-up costs and needed generating capacity. Federal regulatory agencies have done little to expedite the system's recovery from the accident. Further examination of the Three Mile Island aftermath is warranted.
Recommendation for Executive Action
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Recommendation: The Secretary of Energy should undertake a detailed study of the General Public Utilites system regarding its future role as a provider of electric power, the financial considerations involved in ensuring the system can fill such a role, the ways in which finances best can be obtained, and the relationships of the various state and federal regulatory agencies with respect to the system's current problems. The Chairman, Nuclear Regulatory Commission (NRC) and the Chairman, FERC, should cooperate and contribute to this study to the fullest extent possible. Given the wide range of studies either completed or underway on a number of issues to be considered by the study, GAO believes the report should be presented to Congress no later than February 1, 1981, including a statement of any specific actions to be taken by the utilities or any of the federal agencies and any recommendations to Congress. NRC should move as quickly as possible, while taking all necessary steps to protect the public health and safety, to consider and act on the question of restarting Three Mile Island unit 1. The Chairman should cooperate fully with the Secretary of Energy in the study of the General Public Utilities system and its needs and provide all possible assistance in fully developing the regulatory responsibilities of the Commission as they relate to the restart, clean-up, and recommissioning of the nuclear units.