Pilgrim’s Shutdown: Little m&o Yields Big O&M

October 15, 2015 | 1:13 pm
Dave Lochbaum
Former Contributor

The recent announcement that the Pilgrim nuclear power plant would be closed by 2019, thirteen years before its operating license expires in 2032, is but the latest reminder that m&o results in O&M.

O&M is an acronym used by the nuclear industry. It stands for the operating and maintenance costs associated with running a nuclear power plant.

M&O is an acronym used by me. It stands for the management and oversight applied to a running nuclear power plant.

There’s a strong connection between the two acronyms beyond their using the same letters and symbol.

Effective management and oversight is essential to minimize operating and maintenance costs:

M&O = o&m

In other words, ineffective management and oversight is the surest way to increase operating and maintenance costs unnecessarily:

m&o = O&M

The Cost of m&o

In June 2008, Dorian Conger, General Manager at Conger & Elsea, made a presentation before an industry audience on the consequences of performing poorly. The Nuclear Regulatory Commission rates performance every three months and assigns reactors to one of five columns in its Action Matrix. Column 1, or the Licensee Response Column, is where reactors meeting NRC’s expectations are placed. As performance declines, reactors move into Columns 2, 3, and 4.

Using experience from reactors that had gotten into, and then out of, Columns 2, 3, and 4, Conger reported the estimated costs of the remedial efforts to move back up toward Column 1. The remedial efforts include not only the bill for fixing safety shortcomings, but also the bills for the inspections conducted by the NRC to verify successful remediation.

Conger’s data showed that the cost of being bad is not good. Dropping into Column 2 was estimated to cost one to two million dollars to return to Column 1.

The cost of returning from Column 3 was steeper—$10 to $20 million.

And the cost of poor performance dropping a reactor in Column 4—as Pilgrim recently earned—was estimated to carry a price tag of $100 to $300 million.

The NRC put Pilgrim into Column 4 because its owner, Entergy, “had not adequately evaluated the causes of [unplanned shutdowns] and that some corrective actions had not been completed as intended or were closed out prematurely.” In this case, it was m&O, that is, ineffective management (by Entergy) and good oversight (by the NRC). But both are needed for strong financial and safety outcomes.

The Value of M&O

Effective management and aggressive oversight can avoid spending millions of dollars remediating poor performance. Yes, it costs more now to achieve and sustain M&O than it does to perform poorly and overlook it. But history has shown, again and again, that it is an investment that reaps larger dividends. We do not need any more lessons.

We need instead to act upon the many lessons to date and equip every nuclear plant operating in the U.S. with M&O. Or even with M&O, for that matter. The alternative is very high costs that a reactor may not be able to bear, as happened at Pilgrim.