or more advanced concepts for safe, reliable LMFBR plants that will be competitive with alternative electric power generation sources and therefore be commercially deployable by the private sector.

Question: Provide a detailed breakdown of how the $19 million in FY 1985 would be allocated, including a list of vendors.

Answer: A detailed breakdown of the FY 1985 allocation is not yet established. A large amount of the funding will be awarded to contractors based on the results of a competitive procurement process which is now underway. The competitive procurement will be directed at developing one or more advanced concepts for safe, competitive liquid metal fast breeder reactor plants that can be marketed and deployed by the private sector. The effort will include the development of plant concepts, including drawings, analyses, assessments, cost estimates, and schedules.

Question: What role will EPRI play in this program?

Answer:

Specific arrangements between DOE and EPRI are now being discussed with the intent of identifying their respective roles in the restructured program. EPRI, as a representative of the utility industry, will continue to play an important role in identifying utility requirements and providing technical and management assistance to the program.

Nuclear Fuel Cycle

Question: Provide your rationale for reducing the breeder nuclear fuel cycle program.

Answer: The reduction in the nuclear fuel cycle program is essentially due to deletion of funding for BRET, the Breeder Reprocessing Engineering Test.

Question: Why is no funding requested for the breeder reprocessing facility BRET?

Answer: Although the development of breeder reprocessing technology lags both fuel fabrication and reactor technology by a substantial margin, the Administration chose not to request funds for the BRET in FY 1985 due to higher priority requirements and a need for overall budget constraint. It is still the Department's plan to develop the capability for testing hot, prototype breeder reprocessing at an appropriate time in the future.

Uranium Enrichment Program

Question: The FY 85 budget request proposed some major surgery for the uranium enrichment program. Please explain in general terms for the Committee the need to reexamine the program and what major actions are proposed.

Answer: During the past 10 years, the United States position in the enrichment market has evolved rapidly from a monoploy to fierce competition. Our program and business practices have not kept pace with the changing market placing us at a disadvantage with

our competitors. Our recent analysis of the world market, our competitors, and excess inventories have led us to conclude that continuation of the present course will be catastrophic to the uranium enrichment enterprise. United States sales and revenues would drop sharply while costs soar, which would force prices still higher leading to further sales losses.

To remain competitive in the worldwide enrichment business, DOE has developed a strategy which responds to the current market conditions. The key elements of our strategy are the issuance of a new contract to our customers, offering more attractive prices, taking steps to dramatically improve relations with our customers, operating each element of the enterprise in a cost effective manner, and allowing the market to drive decisions on investments for new capacity and research and development. We will compete by keeping prices down in the near term, being reliable and responsive to customer needs, developing new technology, and bringing new lower cost capacity on line as soon as feasible.

New Uranium Enrichment Contract

Question: What is the utility reaction to the new contract?

In

Answer: Reaction to the new uranium enrichment Utility Services contract has been very encouraging. As of March 12, 1984, one utility has signed the contract and 12 others have formally submitted letters of intent to convert to the new contract. addition, many other customers have indicated a willingness and strong interest in converting. The total size of DOE's market which has expressed a desire to convert has now reached a level of 54 percent of DOE's total enrichment sales.

Gas Centrifuge Enrichment Plant

Question: I understand that the new strategy would slow and limit construction of the Gas Centrifuge Plant in Ohio (GCEP). Can you explain the actions proposed particularly with respect to the procurement of Set III machines which has been of particular concern to the committee?

Answer: Due to near-term reductions in enrichment demand and the potential for significantly enhanced economics from the introduction of the advanced gas centrifuge into GCEP, construction of the GCEP project will be slowed and limited to process buildings 1 and 2. Construction beyond these first two buildings will be determined by the market response to the new Utilities Service contract and the advanced technology decision, scheduled for May 1985. Consistent with this strategy, the production of Set III centrifuges will be slowed to a minimum sustaining level at the three centrifuge manufacturers. Our economic analyses indicate that it is preferable from both Government expenditure and industry viability standpoints to continue Set III production at a low rate, rather than to terminate and restart production of Set V centrifuges at a later date.

Enrichment Technologies

Question: With respect to the advanced enrichment technologies--Set V machines and the laser process--your budget Please outline reduces funding for these two new technologies.

your new development strategy. What are the total estimated savings from this new approach?

Answer: Our proposed advanced technology program development strategy is to demonstrate each of the technologies at significant scale, to complete evaluations of the reliability of various subsystems and to generate engineering data that will establish a reasonable estimate of production costs. Specifically, in the Advanced Gas Centrifuge (Set V) program, centrifuge machines with the potential of producing 600 SWU/machine year will have been tested for approximately 6 months as well as mechanical testing for more than one year to verify their technical performance. The fabrication of these centrifuge machines and their subsystems will provide a well defined cost estimate for the Set V machines.

In the Atomic Vapor Laser Isotope Separation program, enrichment runs at greater than half scale will be performed prior to the technology selection. Lifetime tests of essentially full sized laser and separator subsystems are underway now and these systems will have operated for approximately 25 percent of their expected life by May 1985. These tests, along with an updated preconceptual design should provide a sound estimate of capital and production costs for AVLIS. DOE believes that their funding levels are adequate to support a May 1985 selection.

Question: Do you envision problems with picking one of the advanced technologies in FY 85?

Answer: We believe a high confidence selection can be made in mid-FY 1985 provided that the AGC and AVLIS development teams are successful in providing the levels of demonstration that are planned.

Uranium Enrichment Power Costs

Question: High power costs for the Gaseous Diffusion plants are a concern to the Committee. Provide a breakdown of the power costs over the last 5 years and estimates for the next 5 years.

Answer: Unit power costs for each of the power suppliers are shown below. The costs for FY 1980 through FY 1983 are actuals. The FY 1984 and FY 1985 figures are our current estimates.

The TVA unit costs for FY 1981 through 1985 exclude capacity charges for power not purchased. Inclusion of these additional costs distort the TVA unit costs. For the next 5 years, we expect the unit costs to escalate at or slightly below the general rate of inflation.

Question: Describe the problem and any progress being made to obtain relief from TVA demand charges.

Answer: The Department is committed to evaluating all feasible ways of minimizing our total power costs from all three suppliers. With respect to disposing of the TVA power that is excess to our needs, TVA has taken the position that to allow DOE to dispose of the power would violate the TVA Act which prohibits TVA from being a direct or indirect source of power outside its region. We maintain that the Department has the right to dispose of any excess power by taking title to the energy and making a sale under authority of Section 161g of the Atomic Energy Act of 1954, as amended. The cited section authorizes the Department of Energy to directly dispose of property excess to its needs in order to implement its programs. In this regard, no specific exemption from Section 15d of the TVA Act is needed as the sale is by DOE, not TVA or its distributors.

It would, of course, be necessary for TVA to agree to the arrangement and deliver the power and energy to the perimeters of its service area. Discussions are continuing with TVA in order to arrive at a mutually acceptable resolution of this problem.

The Department is also searching for utilities that need power or could economically substitute the TVA power or power from other suppliers for power they currently obtain from other sources. cussions with TVA, EEI and OVEC are continuing.

Dis

Gaseous Diffusion Plant Operations

Question: Describe in more detail efforts to reduce outlays for GDP operation.

Answer: The DOE with the cooperation of the operating contractors for the three GDP's put in place in 1981 a comprehensive program aimed at increasing operating efficiency and reducing costs. Strict controls on outlays for capital equipment additions and replacement have been instituted. The contractors have established

quality awareness and involvement throughout the organizations in an effort to create cost awareness at all levels. GDP contractors have strong maintenance management programs to assure that the facilities are operated efficiently and that expensive and unnecessary fixes are avoided. The contractors efforts are reviewed periodically by DOE field office and headquarters program office personnel.

Since

These efforts have shown very positive results to date. FY 1981, the escalation of GDP operating cost have been significantly less than the cost price index for the period, even though wages and benefits were increased about 8 percent annually under existing labor contracts. During that period, costs have been about 6 percent lower than they would have been if escalated at the CPI rate. This is a major achievement when the higher costs of meeting increasingly more stringent requirements for safety, security and environmental protection are taken into consideration.

Question: Discuss the possible curtailment or closure of the most expensive GDP operations. Is this option under review and what conditions would trigger this action?

Answer: All capacity decisions, including the shut down of a gaseous diffusion plant, will be driven by response to the new contract. Acceptance of the new contract will provide the firm sales base needed before a decision can be made on when and which of the GDP's could be shut down. An assessment of GDP shut down will be completed in 1985.

Nuclear Waste Program

Question: In recent weeks, some utilities and the utility industry have become more critical of the Departments implementation of the Nuclear Waste Policy Act. The principàl criticism is the preoccupation with process at the expense of the deadlines laid out in the Act. Is the availability of funding (from utility revenues 1 mil per kilowatt hour fee) slowing progress? If so, should we consider increasing the utilities' fee?

Answer: As we proceed, we will be not only reviewing annually the adequacy of the fee, but will be continually monitoring program progress and the availability of funds. If at any point availability of funds constrains program progress, DOE will assess the available options, including borrowing from the Treasury or increasing the fee, as provided for in the Act.

Loss-of-Fluid-Test Program

Question: Briefly describe the international program on reactor response and safety at the LOFT facility.

Answer: In February 1983, under the auspices of the Nuclear Energy Agency of the OECD, the Organization for Economic Cooperation and Development, a consortium of nine countries, including the United States, formed to carry out the OECD-Loss-of-Fluid-Test or LOFT Program. At that time, the members pledged sufficient