Research & Commentary: The Price-Anderson Act

Published March 31, 2011

The generation of electricity through nuclear power carries risk. Although nuclear power has a safety record that compares well to other types of power generation worldwide, a catastrophic nuclear disaster could create billions of dollars in cleanup expenses and thousands of deaths.

Managing this risk is not an easy task, and when construction began on major nuclear power plants, their builders found insurance difficult or impossible to obtain in the private sector.

In 1957 Congress passed the Price-Anderson Nuclear Industries Indemnity Act, which authorized the federal government to “indemnify and hold harmless the licensee and other persons indemnified … from public liability … which is in excess of the amount of insurance.” The act created a substantial amount of private insurance protection paid for by companies that build and own nuclear power plants, while making the federal government responsible for damages in excess of the coverage available through the private insurance market. The act was renewed for 20 additional years in 2005.

Those who support the Price-Anderson Act say it’s the only way to insure the most extreme risks involved in nuclear power. They observe that the system it has set up imposes little or no cost on the U.S. Treasury and relies on private insurance for most types of accidents.

Critics of the act say the law creates a subsidy for the nuclear power industry and understates the risks involved with nuclear power. They also express concern that the act does not require reactors to carry adequate insurance, which they say results in taxpayers carrying much of the burden of risk in the event of a catastrophic accident.

The following articles examine the Price-Anderson Act from multiple perspectives.

Does the U.S. Subsidize Nuclear Power Insurance?
This paper from the Stanford Institute for Economic Policy Research asks three questions about the Price-Anderson Act: Does the U.S. government provide a subsidy to the nuclear power industry? If there is a subsidy, how large is it? And what might be the consequences of allowing the Price-Anderson Act to expire?

The Price-Anderson Act: Background Information, November 2005
This article from the American Nuclear Society provides background on the Price-Anderson Act and examines its benefits.

NRC’s Liability Insurance Requirements for Nuclear Power Plants Owned by Limited Liability Companies
This paper from the Government Accountability Office examines how different power companies purchase insurance and comply with Price-Anderson Act requirements and how compliance differs for limited liability companies.

Fact Sheet on Nuclear Insurance and Disaster Relief Funds
This fact sheet from the Nuclear Regulatory Commission discusses the Price-Anderson Act and how it was used in responding to the Three Mile Island nuclear accident.

Price-Anderson Act: The Billion Dollar Bailout for Nuclear Power Mishaps
This document from Public Citizen, a leading critic of Price-Anderson, defines the act as a subsidy for the nuclear industry and points out several flaws in the act, including the potential burden on taxpayers.

The Price-Anderson Act: Is It Consistent with a Sound Energy Policy?
This article from the Cato Institute contends that subsidizing nuclear power is not sound energy policy, recommending instead that the free market should determine whether the industry survives.

Can Nuclear Power Compete?
This article from the Cato Institute outlines the costs and risks associated with light water reactors. The author argues that when the government or society bears these costs or risks, it constitutes a subsidy to the nuclear industry.