The Politics of Regulation

In today's Washington Post, Steven Perlstein shares thoughts on the politics of regulation after Deepwater Horizon. The title gives you his main point: "Time for Industry to End Its War on Regulation."

Perlstein cites examples of oil, coal and financial regulators being too close to, or too cowed by, the industries they oversee. He believes regulation was too lax under the Bush administration and considers it laughable that industry observers would suggest that 16 months into the Obama administration, regulation has already become too tight.

Perlstein describes the value of regulation as helping stave off low-probability events that could have devastating consequences. In the financial sector, he acknowledges that regulation may "trim profits" for the businesses involved, but insists we remember the benefit associated with this cost:

The big flaw in the business critique of regulation is not so much that it overstates the costs, but that it understates its benefits - in particular, the benefits of avoiding low-probability events with disastrous consequences. Think of oil spills, mine explosions, financial meltdowns or even global warming. There is a natural tendency of human beings to underestimate the odds of such seemingly unlikely events - of forgetting that the 100-year flood is as likely to happen in Year 5 as it is in Year 95. And if there are insufficient data to calculate the probability of a very bad outcome, as is often the case, that doesn't mean we should assume the probability is zero.

Mr. Perlstein assumes that in the absence of regulation, businesses would reach a different - and inappropriate - conclusion than would regulators about the events worth guarding against and the measures necessary to prevent or mitigate them. This fits the Hollywood stereotype of evil businessmen conniving to maximize profit without regard for the consequences, but falls short of the reality we have seen in our industry. The professionals operating U.S. nuclear plants maintain a high regard for the public good, starting with protecting workers and the environment. Many live close to the plants in which they work and know their families would be among those affected by a wrong decision made at their plant.

Perhaps in a sign of things to come, Mr. Perlstein closes with a call for business to stop fighting government regulation:

It's time for the business community to give up its jihad against regulation. We can all agree that there are significant costs to regulation in terms of reduced sales and profits, stunted job growth and even, from time to time, stifled innovation. But what we should have learned from recent disasters is that the costs of inadqueate regulation are even greater. Strong and efficient conomies require strong and effective government oversight.

We agree on the importance of a strong, credible regulator in assuring public safety and confidence in potentially hazardous industries. While Mr. Perlstein argues for business to accede to whatever level of regulation government decides, we believe it is vital for regulation to be commensurate with risks and consistently applied. That takes input from the regulated businesses and careful weighing of benefits and burdens on all stakeholders.

Fluor Invests in NuScale

You know, it’s kind of sad that no one is willing to invest in nuclear energy anymore. Wait, what? NuScale Power celebrated the news of its company-saving $30 million investment from Fluor Corp. Thursday morning with a press conference in Washington, D.C. Fluor is a design, engineering and construction company involved with some 20 plants in the 70s and 80s, but it has not held interest in a nuclear energy company until now. Fluor, which has deep roots in the nuclear industry, is betting big on small-scale nuclear energy with its NuScale investment. "It's become a serious contender in the last decade or so," John Hopkins, [Fluor’s group president in charge of new ventures], said. And that brings us to NuScale, which had run into some dark days – maybe not as dark as, say, Solyndra, but dire enough : Earlier this year, the Securities Exchange Commission filed an action against NuScale's lead investor, The Michael Kenwood Group. The firm "misap...

Wednesday Update

From NEI’s Japan micro-site: NRC, Industry Concur on Many Post-Fukushima Actions Industry/Regulatory/Political Issues • There is a “great deal of alignment” between the U.S. Nuclear Regulatory Commission and the industry on initial steps to take at America’s nuclear energy facilities in response to the nuclear accident in Japan, Charles Pardee, the chief operating officer of Exelon Generation Co., said at an agency briefing today. The briefing gave stakeholders an opportunity to discuss staff recommendations for near-term actions the agency may take at U.S. facilities. PowerPoint slides from the meeting are on the NRC website. • The International Atomic Energy Agency board has approved a plan that calls for inspectors to evaluate reactor safety at nuclear energy facilities every three years. Governments may opt out of having their country’s facilities inspected. Also approved were plans to maintain a rapid response team of experts ready to assist facility operators recoverin...

Nuclear Utility Moves Up in Credit Ratings, Bank is "Comfortable with Nuclear Strategy"

Some positive signs that nuclear utilities can continue to receive positive ratings even while they finance new nuclear plants for the first time in decades: Wells Fargo upgrades SCANA to Outperform from Market Perform Wells analyst says, "YTD, SCG shares have underperformed the Regulated Electrics (total return +2% vs. +9%). Shares trade at 11.3X our 10E EPS, a modest discount to the peer group median of 11.8X. We view the valuation as attractive given a comparatively constructive regulatory environment and potential for above-average long-term EPS growth prospects ... Comfortable with Nuclear Strategy. SCG plans to participate in the development of two regulated nuclear units at a cost of $6.3B, raising legitimate concerns regarding financing and construction. We have carefully considered the risks and are comfortable with SCG’s strategy based on a highly constructive political & regulatory environment, manageable financing needs stretched out over 10 years, strong partners...

NEI Nuclear Notes

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