Price-Anderson Act: Nuclear Power Industry Liability Limits and Compensation to the Public After Radioactive Releases

Since the establishment of the nuclear power industry in the 1950s, the issue of how to handle nuclear accident liability has been debated often in Congress. From the beginning, it was generally asserted that commercialization of nuclear energy would require liability limits for electric utilities and reactor suppliers. Congress responded in 1957 by passing the Price-Anderson Act, which added Section 170 of the Atomic Energy Act of 1954 (42 U.S.C. §2210). This section has since been extended and amended several times. The law established accident liability limits for the nuclear industry and a mechanism to ensure that damage compensation to the public would be readily available within those limits. Authority to indemnify newly licensed reactors under the Price-Anderson liability system was extended by 40 years to December 31, 2065, by the Further Consolidated Appropriations Act, 2024 (P.L. 118-47).

Critics of the Price-Anderson Act contend that its liability limits protect the nuclear power industry from paying the full cost of potential major accidents. Those critics view Price-Anderson as an unjustified subsidy for nuclear power that distorts energy markets. However, supporters of the Price-Anderson system contend that it provides an assured source of damage compensation that might not be available, or be paid as quickly, under the normal tort process.

Nuclear Power Accident Liability

The Price-Anderson Act requires the Nuclear Regulatory Commission (NRC), which issues licenses for building and operating nuclear reactors, to limit the liability of its reactor licensees for any radioactive damages to members of the public. The liability limit is set at the maximum insurance available to the nuclear power industry, as described below. NRC indemnifies (protects) its reactor licensees against damage awards above that limit. Reactor licensees indemnified by NRC retain that coverage as long as they continue to operate, although the liability limits may increase over time, as discussed below. Price-Anderson's authority for NRC to indemnify additional reactors periodically expires and has been extended five times, most recently in 2024, as noted above. NRC's regulations for Price-Anderson are at 10 C.F.R. Part 140.

Because Price-Anderson covers nuclear damage claims, all property and liability insurance policies in the United States exclude nuclear accidents. Under Price-Anderson, the owners of commercial reactors must assume all liability for nuclear damages awarded to the public by the court system, and they must waive most of their legal defenses following a nuclear incident that results in a severe radioactive release ("extraordinary nuclear occurrence"). To pay such damages, Price-Anderson established two layers of insurance for licensed reactors with at least 100 megawatts of electric generating capacity (i.e., all current U.S. commercial reactors). For the primary insurance layer, each licensed nuclear plant site must be covered by the maximum liability insurance commercially available, currently $500 million per site. The secondary layer is a nuclear industry self-insurance system. In the secondary layer, any damages to the public from a nuclear incident exceeding the $500 million available from the individual reactor's insurance under the primary layer are to be assessed equally against all 100-megawatt-and-above power reactors. These assessments, called "retrospective premiums," are currently capped at about $158.0 million per reactor.

Figure 1. Price-Anderson Insurance Layers For damage to the public from nuclear incidents

Source: Created by CRS with information from NRC and 10 C.F.R. §140.11(4). Note: Some figures are rounded.

Total damage payments available under the secondary insurance layer equal the maximum retrospective premium ($158.0 million) multiplied by the number of covered reactors. According to NRC, 95 commercial reactors are currently covered by the retrospective premium requirement. For each nuclear incident, therefore, Price-Anderson's primary and secondary layers currently would provide up to $15.5 billion in public compensation. That total consists of the $158.0 million in retrospective premiums from each of the 95 currently covered reactors, totaling $15.0 billion, plus the $500 million in primary insurance coverage for the nuclear plant site where the incident occurred. On top of those payments, a 5% surcharge may also be imposed on the retrospective premiums, raising them to $165.9 million per reactor and the total available compensation per incident to about $16.3 billion (see Figure 1). Under Price-Anderson, the nuclear industry's liability for an incident is capped at that amount. The total cap varies over time depending on the number of covered reactors, the amount of available primary insurance, and an inflation adjustment required under current law every five years. Payment of any damages above that liability limit would require congressional approval under special procedures in the act, which does not specify the source of the funds.

The retrospective premiums would be paid at an annual rate of no more than $24.7 million per reactor, to limit the potential financial burden on reactor owners following a major accident (and also potentially slowing damage payments to the public). With 95 covered reactors, total annual retrospective premium payments would be capped at about $2.3 billion.

Since Price-Anderson was enacted, no nuclear incidents have caused damage to the public above the primary layer of insurance. The 1979 partial meltdown of the Three Mile Island 2 reactor in Pennsylvania resulted in the largest number of claims under Price-Anderson, with damage payments totaling about $71 million in current dollars, according to NRC. Dozens of other commercial reactor incidents over the years have resulted in smaller payments.

Small Modular Reactors

Price-Anderson specifies that a nuclear plant consisting of multiple small modular reactors (SMRs) would be considered a single reactor in determining its retrospective premiums (although no such plants have yet been built). The electric generating capacity of the entire plant must be no more than 1,300 megawatts, and each SMR must have a capacity of 100-300 megawatts. For example, in the event of a severe release, a power plant with six 120-megawatt SMRs would be liable for retrospective premiums of up to $165.9 million (the amount for a single large reactor, including the 5% surcharge), rather than $995.6 million (the amount for six large reactors, including the surcharge).

NRC is currently reviewing an application for an SMR standard design certification submitted by NuScale Power on December 31, 2022. The NuScale design would consist of up to 6 reactors of 77 megawatts (electric), all immersed in a single pool of water. Because the NuScale SMRs are below 100 megawatts of electrical generating capacity, they are subject only to the primary layer of liability insurance. Under current NRC regulations, the primary layer for a reactor under 100 megawatts (electric) would be set by a formula that includes reactor capacity and local population density, but would be at least $4.5 million and no more than $74 million (10 C.F.R. §140.12). For example, one liability insurance policy of up to $74 million would cover all six reactors at a single NuScale plant. Total liability for reactors under 100 megawatts (electric) is limited to $560 million. The federal government would pay for any damages to the public above the required liability insurance coverage, up to the $560 million limit (Atomic Energy Act §§170(b)-(c)). NRC has been studying possible options for higher coverage for reactors under 100 megawatts.

DOE Nuclear Contractors

The Price-Anderson Act also covers contractors who operate Department of Energy (DOE) nuclear facilities. P.L. 109-58 set the liability limit on DOE contractors at $10 billion per incident within the United States, to be adjusted for inflation every five years. The most recent inflation adjustment, in 2023, increased the limit to $16.6 billion.

Price-Anderson authorizes DOE to indemnify its contractors for the entire amount of their liability, so that damage payments for nuclear incidents at DOE facilities would ultimately be paid by the federal government. However, the law also allows DOE to issue penalties on its contractors for safety violations, and contractor employees and directors can face criminal penalties for "knowingly and willfully" violating nuclear safety rules. For nonprofit contractors, civil penalties imposed for violating safety rules are limited to the amount of management fees paid under that contract. DOE's Price-Anderson authority—as with NRC's authority—was extended through 2065.

Continued Need and Adequacy

The Price-Anderson Act's limits on liability were crucial in establishing the commercial nuclear power industry in the 1950s. The nuclear power industry still considers them to be a prerequisite for any future U.S. reactor construction. Supporters of the Price-Anderson system contend that it has worked well in ensuring that nuclear accident victims have a secure source of compensation, at little cost to the taxpayer. Opponents contend that Price-Anderson inappropriately subsidizes the nuclear power industry by reducing its insurance costs and protecting it from some of the financial consequences of the most severe conceivable accidents. For example, the 2011 Fukushima disaster involved simultaneous radioactive releases from three reactors and required financial intervention by the Japanese government. Damages to the public have exceeded $90 billion, according to media reports. A similar U.S. nuclear incident involving three reactors at a single site would have a liability limit of $47.8 billion ($500 million for the primary layer plus, for each of the three reactors, $15.8 billion in the secondary layer, including the 5% surcharge). Congress would determine any additional compensation.

International Liability Agreement

The United States is party to an international liability system that, among other purposes, covers U.S. nuclear equipment suppliers conducting foreign business. The Convention on Supplementary Compensation for Nuclear Damage (CSC) entered into force April 15, 2015.

CSC implementing language for the United States was included in the Energy Independence and Security Act of 2007 (P.L. 110-140, Section 934). Each party to the convention is required to establish a nuclear damage compensation system within its borders analogous to Price-Anderson. For any damages not covered by those national compensation systems, the convention establishes a supplemental tier of damage compensation to be paid by all parties. P.L. 110-140 requires the U.S. contribution to the supplemental tier to be paid by suppliers of nuclear equipment and services, under a formula that is under development by DOE. Supporters of the convention contend that it will help U.S. exporters of nuclear technology by establishing a predictable international liability system. The U.S. nuclear industry has expressed concern over how DOE would allocate any CSC assessments.