Summary of Strategies for Dealing with Deregulation. CHPCS Mini-Workshop, University of Wisconsin-Madison. September 24, 1999.

Attendees

• Vickie Bier, University of Wisconsin-Madison.
• Thomas Butler, University of Southern California.
• David Glyer, Christensen Associates.
• Robert Kastner, Northeast Utilities-Millstone Nuclear Power Station.
• Tony Muschara, Institute for Nuclear Power Operations.
• Constance Perin, Massachusetts Institute of Technology.
• Glenn Schinzel, South Texas Nuclear Project.

Reprioritization of Efforts

One strategy for dealing with deregulation in the aviation industry has been reprioritizing maintenance efforts to optimize cost-effectiveness. Similarly, the U.S. nuclear industry is moving toward risk-informed inspection, surveillance, testing, and maintenance. Rather than expecting fewer workers to do more maintenance with less resources, risk-informed preventive maintenance does less with less, but still ensures safety by targeting safety-significant tasks. Identifying these safety-significant tasks is facilitated by an expanding knowledge base, such as the aviation industry's, which depends on better probabilistic risk analysis (PRA).

It may be possible to similarly prioritize the human performance area. However, methods such as "stop, think, act, review (STAR)" and other nuclear industry error-avoidance programs may not be effective if applied equally to all actions: People cannot maintain high levels of vigilance on all tasks indefinately. Such methods may even reduce situation awareness if overused or applied improperly. Excessive focus on the individual steps of a procedure can detract from establishing an overall task concept and maintaining a questioning attitude in the event of unexpected plant responses.

Careful evaluation of which tasks are most safety-significant creates more effective pre-job briefings, similar to the more targeted "tailboards" suggested by Mary Waller and Derek Edmunds in their workshop presentation. In addition, greater awareness of which steps within a task are most safety-significant can lead to higher levels of vigilance when it will be most effective, as well as reduce levels of distraction and interruption.

Downsizing and Outsourcing

Virtually all plants are downsizing in response to regulation. How they downsize differentially effects safety. The most "humane" approaches (e.g., attrition or early retirement incentives) can result in the loss of highly knowledgeable and qualified employees. This may occur because the most experienced individuals are involved (e.g., only the most senior staff are eligible for early retirement), or because more highly qualified individuals have the best alternate job possibilities.

Therefore, some degree of targeted downsizing is advisable. Targets include laying off less-productive employees, or focusing incentives for earlier retirement on the areas that can best sustain the losses. Many plants use benchmarking to set staffing levels, modeling their staffing of particular functions on a plant with a reputation for being well-managed. However, some consideration should be given to the differences between plants, such as different levels of redundancy in key equipment.

Outsourcing, or increased use of contractor services, is another approach to downsizing. Use of contractors for periodic, occasional, or one-time tasks avoids supporting staffing and/or expertise when they are not needed.

In contrast, excessive use of contractors, especially for routine and ongoing work, reduces the ability to control and monitor that work. As a result, plant managers may become dependent on contractors to estimate time requirements or evaluate job results. In the extreme, a plant may eventually lose the expertise required to supervise and evaluate contractors, which is a concern in the United Kingdom nuclear industry.

Taking advantage of areas of commonality is another opportunity for downsizing and/or cost reductions. For example, companies that own several closely-located plants can adopt "mobil maintenance," with teams roving from site to site as needed.

Management of Change During Regulation

The upheaval and management distraction associated with deregulation can be thought of as an "unusual condition," that effects production and work processes just as an unusual physical configuration does. Many serious accidents have occurred in a wide variety of industries, including the nuclear industry, at precisely such times. Special care must be taken to ensure that the magnitude of deregulatory change, and the attendant distractions, do not create high-risk situations.

The flow of communication is critical to this effort. When management teams change rapidly due to downsizing, mergers or acquisitions, or reallocation to different departments or functions, it becomes especially important for managers to have adequate "face" time with the individuals they supervise. This enables managers who are new to a task to become acquainted with actual working conditions, and also makes them more approachable by others within the organization. Ensuring that managers "walk the talk" by effectively carrying out stated policies is also important in building and maintaining a strong safety culture during periods of rapid change.

Information Sharing

Technology transfer and information sharing provide another method by which organizations can improve both safety and cost-effectiveness. Active participation in the Institute for Nuclear Power Operations (INPO) and other such forums provides one opportunity for such information sharing.

Concerns were raised in the aviation industry that competition might interfere with information sharing. This could be either to cut costs, or to maintain company best practices as proprietary information in order to retain a competitive advantage.

However, deregulation also provides incentives to share information. Specifically, nuclear power plants can use shared information to compete more effectively with other sources of power. Even plants that are already star performers have an incentive to participate in information sharing. Not only will participation support continued improvement in their plants, it will ensure that other plants perform well enough to avoid costly regulatory interventions that may affect the entire industry. Therefore, INPO expects participation to remain strong even after deregulation.

Some organisations may also adopt a more entrepreneurial approach to information sharing. Selling services to others in the industry can provide effective information-sharing in a competitive industry.

Incentives for Safty Investment

Deregulation and competition are sometimes viewed as reducing the level of funds available for safety investments. While this can be true under some circumstances (see below), they can also create incentives to invest in safety.

Well-run power plants may be able to make higher returns on their investments after deregulation. This can create incentives for safety investment; owners of a highly profitable plant will generally wish to preserve the future value of that plant and avoid costly regulatory shutdowns.

The push toward life extension associated with deregulation to date also increases the incentive to invest in safety in order to ensure that profitable plants can be run as long as possible.

Organizations that own many nuclear power plants are more likely to invest in safety, because costly procedures associated with safety problems at one plant (e.g., NRC investigations, required back-fits) are likely to be required at all plants owned by the company. Thus the industry trend toward consolidation may have safety benefits.

However, the existance of economic incentives for companies to invest in safety does not ensure that those investments will be made. In particular, during times of rapid change management may have a learning curve for understanding the changing economic environment. Therefore, the initial transition to deregulation is likely to create greater risk due to decreased (cost-effective) safety investment than the later, postregulation period.

Disincentives for Safety Investment

Some aspects of deregulation can reduce the incentives for investing in safety. In particular, organizations on the verge of insolvency will be tempted to cut corners on safety, because if no accidents occur, they may avoid bankruptcy. This is consistant with evidence from the aviation and rail industries suggesting that companies in financial difficulties had poor safety records. The disincentive to invest in safety is greatest when companies assets are unlikely to be saleable, that is, in such poor condition or having such large liabilities that other companies would be unwilling to purchase them.

Similarly, plants that are about to be shut down (e.g., because they are not economically viable assets) may be vulnerable to under-investment in safety. There is little incentive to plant owners to preserve the productive life of their assets and plants may be operated by skeleton crews who perform only minimal maintenance.

Finally, the current regulatory treatment of stranded assets also discourages investment in safety by providing for the recovery of any difference between a plant's book value and it's market value. A company that fails to invest in maintaining a plant is decreasing market value, and therefore increasing what can be claimed in stranded assets.