Deregulation experiments with

Our respondents identified several areas that they believed might merit special attention as the U.S. Nuclear Regulatory Commission (NRC) prepares for deregulation of the nuclear power industry. In particular, respondents stressed three key lessons learned from the railroad industry s experience with deregulation ... 

Nevertheless, the new market order also opened up opportunities for utilities to deal with environmental problems. Experience from other countries with deregulated electricity markets showed that consumers are willing to pay extra for electricity with low environmental impact. A number of incumbent electric utilities, as well as newly emerging green power marketers, began developing green power products to differentiate themselves from other suppliers [11]. 

Therefore, the experiences of the aviation industry and the Federal Aviation Administration (FAA) with economic deregulation are potentially of interest to the nuclear power industry and the U. S. Nuclear Regulatory Commission (NRC). 

In examining the impact of economic deregulation on safety in the aviation industry, the literature surveyed in the previous chapter provides an excellent starting point. In particular, two books based on interviews with airline pilots, mechanics, FAA inspectors, accident investigators, and others (O Malley, 1993 Nance, 1986) provide first-hand perspectives on experiences in the aviation industry in the years after deregulation. These books serve as a useful supplement to the statistical analyses and other empirical data stunmarized in Chapter 2, and provide detailed information based on extensive interviews. 

The experiences of the airline industry with maintenance violations and falsification of records after deregulation, and the widespread concerns about under-reporting of safety problems identified in the rail industry interviews, raise another note of caution here. In particular, there is some indication that financial and union difficulties in the airline industry exacerbated the incentives for some airlines to cut comers on maintenance (Transportation Research Board, 1991, pg. 184). To the extent that deregulation causes similar stresses within the nuclear power industry, some companies may face similar incentives to ignore or under-report safety problems, and/or avoid regulatory sanctions by evasion rather than by enhanced maintenance efforts. This is consistent with the prediction that less effort may be devoted to issues that are perceived as gray areas, but can have unforeseen safety consequences. 

A number of the issues discussed above seem potentially relevant to the U.S. nuclear power industry. In particular, human performance is critical to safety in all three case study industries as well as in the U.S. nuclear power industry. This is partly because the effectiveness of many hardware-based safety features can be compromised or even negated by inappropriate human actions, but also in part because other (e.g., equipment-related) causes of safety problems have often been addressed more successfully than human performance. Therefore, in the remainder of this section, we discuss the experience of the U.S. nuclear power industry with respect to downsizing, use of contractors, and overall human capital (e.g., experience levels and qualifications), in addition to general human performance issues that may be associated with deregulation. Labor relations are discussed in detail in the next subsection. 

Corporate culture issues also appear to have played a part in the increased risk associated with some new entrants to the airline industry for example, Gray (1987, pg. 34) stated that Many new carriers have little notion of or experience in how an airline must be run. By contrast, corporate culture issues did not appear to pose as much risk in the new spin-off railroads established after rail industry deregulation, in part because they were largely staffed by experienced personnel from the larger railroads. In addition, because of intercormections between the new short-line railroads and the major rail carriers, the smaller railroads were generally required to meet certain minimal levels of safety performance. Similarly, the recent trend toward partnerships between the commuter air carriers and the major airlines may be associated with a reduction in the average risk of the commuter carriers. 

Even if the most competitive U.S. nuclear power plants are financially healthy after deregulation, some plants (especially those at which incremental electricity generation costs are at or above wholesale electricity prices) may experience financial difficulties, with possible adverse safety consequences. Companies in fmancial distress may have reduced incentives to invest in some types of safety measures, and/or increased incentives to cut comers. Therefore, financial difficulty may be an indicator of declining safety margins in the nuclear power industry. 

We identified a number of issues that have potential safety significance for the U.S. nuclear power industry under deregulation. The experience of the case study industries indicates that economic deregulation need not be incompatible with a reasonable safety record, especially in those aspects of safety that are positively related to productivity. However, safety clearly cannot be taken for granted after deregulation, since safety problems were observed in each of the three case study industries, as summarized in Table 9-1. 

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