Nuclear Summer

By Daniel Eisenberg With Reporting By Hilary Hylton/Austin, David S. Jackson/Los Angeles And Michael Weisskopf And Adam Zagorin/Washington

Three Mile Island. Chernobyl. And don't forget The China Syndrome. With their long, notorious track records of burning money and spewing toxic waste, it's hard to imagine that nuclear power plants could ever again be hot properties. But in Vernon, Vt., some of the nation's largest energy companies are battling to gobble one up. The Vermont Yankee plant, a 28-year-old nuclear war-horse, has become the target of a bidding war.

With the price of oil and natural gas escalating, concerns about global warming rising and electricity markets deregulating, these onetime white elephants are starting to look more like cash cows. The Vermont battle, in fact, is just the latest stop on an industrywide shopping spree that is fueling a nuclear resurgence. By the end of the decade, new nuclear power plants could be sprouting up right here at home: the Nuclear Regulatory Commission (NRC) has already approved the next generation of supposedly cheaper, safer plant designs.

While California braces for a summer of rolling blackouts and New York City prays that the lights stay on, Washington is helping ignite a fire under nuclear power. As part of the hotly debated national energy plan that he unveiled last week, President George Bush called nuclear energy "a major component" of any solution. Critics, not surprisingly, say the comeback of the $43 billion-a-year industry is a step in the wrong direction that will threaten the environment as well as public health and safety. Nor did the Administration's unexpected recommendation to take another look at reprocessing spent nuclear fuel get a particularly warm reaction.

Over the past few years, the nuclear industry's top players, led by Entergy and Exelon (formed by the merger of Philadelphia-based PECO Energy and Chicago native Unicom), have shelled out nearly $4 billion to purchase 15 of the nation's 103 operating plants--including such unlikely prizes as the surviving sister unit of Pennsylvania's infamous Three Mile Island No. 2 reactor. These new nuclear powers, which also include Duke Energy, Southern Co., Dominion Resources and Constellation Energy, have reversed years of mismanagement and cost overruns to turn the plants into the reliable, profitable atomic engines they were meant to be.

Their secret? They're better operators than the former owners, publicly owned utilities, and they can use economies of scale to their advantage. Despite the fact that no new plants have been ordered in almost a quarter-century, the nuclear power sector still accounts for 20% of the nation's electricity supply. During the past decade, output has increased 25%, equivalent to building 23 new 1,000-megawatt plants. And the beat will go on: the initial 40-year licenses of a small but growing number of units are being renewed for an additional two decades.

As for new plants, Exelon is already working on the next generation, exemplified by a helium-cooled, pebble-bed test reactor it is helping build in South Africa that, theoretically at least, wouldn't ever need to be shut down for refueling and is practically meltdown-proof. Of course, the company would still have to find a place in the U.S. to put it. Many homeowners would sooner burn coal in their own fireplace than live next to a reactor. So rather than try to find converts, the industry hopes to construct new facilities on existing sites, in communities that already depend on plants for jobs.

Not surprisingly, the no-nukes crowd, once radiated, is more than twice shy. Nuclear power plants may not, as the Bush Administration has pointed out countless times, emit greenhouse gases, but they carry with them their own, very real environmental risks. Most important, there is the matter of where to put all that spent fuel--40,000 metric tons, at last count--that has to be stored for thousands of years. For the moment, most of it is being kept in on-site storage pools, a costly and--according to many observers--risky proposition.

"[Radioactive waste] is still the Achilles' heel of the industry," says Edward Smeloff, director of the Pace University Law School Energy Project. In California, for instance, a new nuclear plant can't even be licensed until the feds come up with a permanent solution. The Energy Department is scheduled to decide later this year whether to go ahead with the controversial proposal to bury the waste deep within Yucca Mountain in Nevada. But with the state's congressional delegation fiercely opposing the idea, the fight could easily drag on for years. If the site could be built, it would still be necessary to find a safe way to move all the fuel there without unduly imperiling the nation's crucial freight rails.

The Administration's proposal to reexamine nuclear recycling makes watchdogs even more nervous. Such reprocessing aims to reduce waste by separating plutonium from spent uranium fuel and reusing it as a power source. But this practice hasn't been done in the U.S. since the 1970s, and opponents say it could help put bomb-grade plutonium in the wrong hands.

Even the improvements that the industry never tires of trumpeting--more efficient, longer-running plants--do little to comfort antinuclear activists. "They're running these reactors hotter and longer," says Paul Gunter of the Nuclear Information and Resource Service. Last year the Indian Point 2 plant, part of a trio of upstate New York reactors Entergy recently bought for around $1 billion, was temporarily closed down after radioactive water leaked from a ruptured steam tube. Just as the plants are getting older and more prone to problems, critics assert, the nrc is letting operators police themselves.

Still, when it comes to safety, there's no denying that the industry has made great strides. The annual number of protective automatic shutdowns at each reactor, for instance, has fallen tenfold in the past 16 years, to 0.5. Exelon and Entergy have a lot more riding on their vast nuclear portfolios than an old-line utility with one measly reactor and a guaranteed rate of return. By pooling the expertise of a much larger, dedicated staff and spreading out the fixed costs, they've been able to reduce the length of refueling outages from 100 days to 40 and to keep plants running nearly 90% of the time, compared with an average of around 60% to 65% during the 1980s.

With the value of existing plants rising dramatically, companies like Exelon and Entergy can no longer snap them up on the cheap. That's a rationale for building new ones. If that were to happen, though, Wall Street could lose its radioactive crush. The past generation of nuclear plants ran way over budget, taking more than a decade to finish and ultimately costing around $5 billion each. Back then, utilities could tack that onto customers' bills. But today shareholders may not be happy to take that risk.

Designers of new plants in nuclear-friendly regions say they can now minimize that construction risk. Much like the so-called cookie-cutter model in France, where nuclear power accounts for 80% of the electricity, any new generation of nuclear plant in the U.S. would have to be based on a standard design instead of the current hodgepodge of complicated configurations. Westinghouse Electric's new, simplified unit, for instance, is modular and can practically be put together on an assembly line, relying more on natural forces like gravity and less on moving parts.

Sounds great in theory. But as Exelon Nuclear chief Oliver Kingsley puts it, "I do think Wall Street will be a little skeptical until we have a bit of a track record." It had better not be anything like their previous one, or nuclear power won't stay hot for very long.

--With reporting by Hilary Hylton/Austin, David S. Jackson/Los Angeles and Michael Weisskopf and Adam Zagorin/Washington