United States: Nuclear Utility Awarded More Than $50 Million For Partial Breach Of Contract Claim

Last Updated: January 13 2010
Article by Richard W. Oehler

On December 18, 2009, the U.S. Court of Federal Claims issued an opinion awarding more than $50 million to Perkins Coie's client, Wisconsin Electric Power Company (WE), in its claim against the U.S. Department of Energy (DOE) for the partial breach of a contract to accept and dispose of spent nuclear fuel (SNF) and high-level waste (HLW) from WE's Point Beach Nuclear Power Plant. See http://www.uscfc.uscourts.gov/opinions_decisions_general/Published (http://tinyurl.com/yz7z8zw)

The WE litigation is one of numerous lawsuits filed by utilities against the DOE for its failure to begin accepting and disposing the utilities' SNF/HLW by January 31, 1998, as required by the Nuclear Waste Policy Act (NWPA), 42 U.S.C. §§ 10101-10270, and the standard contracts that the NWPA required the utilities to enter into with DOE.

Prior to 1977, utilities had assumed that their SNF would be reprocessed. After President Jimmy Carter effectively halted the reprocessing of SNF in 1977, the NWPA was passed in 1983, affirming the federal government's responsibility to provide for the permanent disposal of SNF/HLW. In return for the government's performance, the NWPA required the nuclear utilities to pay for the costs of such disposal through an initial fee based on electricity generated by each utility's nuclear reactors prior to April 7, 1983, and through continuing fees based on subsequent generation. These fees are deposited into the Nuclear Waste Fund (NWF). As of September 30, 2009, the utilities' payments and credited interest to the NWF totaled $30.2 billion.

The DOE, however, has failed to accept any SNF or HLW and, given the current administration's position that it will not proceed with Yucca Mountain, it is uncertain how the government intends to deal with spent fuel. At the same time, there appears to be renewed interest in the construction of nuclear plants in the United States. Currently, there are more than 15 applications for more than 25 new reactors under active consideration before the Nuclear Regulatory Commission. While long-term storage or disposal of SNF/HLW obviously is an issue for nuclear plants that requires the cooperation of the federal government, the generation of nuclear power does not result in the generation of emissions that cause global warming. Nuclear power can also generally provide substantial base power generation at an attractive price per megawatt.

While the government has settled several of the spent fuel lawsuits, it has also chosen to litigate many of these cases. In the WE case, there was a trial in Washington, D.C., that lasted more than five weeks during which 27 witnesses testified and hundreds of exhibits were entered into evidence. The focus of the trial was on past damages that WE had incurred to mitigate the DOE's partial breach because, prior to trial, the court had determined that the DOE had partially breached its contract with WE.

WE's past damages consisted of the costs that it incurred in providing for alternative storage of its spent fuel. These damages primarily included costs for constructing a dry storage facility, purchasing casks for the storing and transporting of spent fuel, loading spent fuel into these casks, and obtaining approval to incur these dry storage costs from the Public Service Commission of Wisconsin. In its decision, the U.S. Court of Federal Claims awarded WE more than 96% of its claimed "nominal," or non-finance-related damages to mitigate DOE's breach.

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