NUCLEAR SAFETY FALLOUT

By ERIC POOLEY

Chief executives don't often confess corporate sins in public. But during a recent hearing at the suburban Maryland headquarters of the Nuclear Regulatory Commission, an electric-utility boss named Bruce Kenyon did just that. Kenyon, a respected nuclear-industry veteran with a raspy voice and a cocksure style, last fall became president, CEO and designated savior of Northeast Utilities' nuclear division, which operates five commercial reactors in New England. "At the time I arrived, [Northeast] was as close to a dysfunctional organization as I have ever encountered," he told the NRC. "The fundamental problem was leadership."

Strong words--yet Kenyon was, if anything, soft-pedaling the situation. Before he joined Northeast, the utility had become known as a nuclear scofflaw, an industry rogue that for years cut operating costs by ignoring NRC regulations, allowing chronic hardware problems to go unrepaired and harassing employees who raised safety concerns--employees such as George Galatis, the engineer whose crusade to clean up the company landed him on the cover of TIME one year ago this month ("Blowing the Whistle on Nuclear Safety," March 4, 1996). Galatis' most alarming discovery was that the NRC knew about Northeast's dangerous game but for years did nothing to stop it.

TIME's special report focused national attention on the NRC's failure to enforce its safety rules at Northeast's Millstone Station in Waterford, Connecticut. Then something extraordinary happened. Where past agency chiefs had routinely ignored such criticism, NRC chairman Shirley Ann Jackson, who had taken the job just 10 months before this scandal broke, called the TIME story "a wake-up call" and "a learning moment." Revving up its inspection program at Millstone, her agency found such pervasive noncompliance that it ordered all three plants there to shut down for sweeping repairs. A year later, Northeast is facing $1 billion in shutdown costs; the Millstone plants remain idle, with thousands of compliance problems still to be resolved; and a fourth Northeast reactor, Connecticut Yankee, has been permanently mothballed.

In their fight to win back public trust, both Kenyon and Jackson have shaken up their moribund organizations. Many of the senior Northeast and NRC officials identified in the original TIME story have either retired or been forced to resign. This spring, as the Justice Department concludes an investigation into alleged criminal misconduct by Northeast--illegal operation of Millstone 1, violation of environmental laws--indictments are possible and more departures likely. The NRC has become a more aggressive regulator, displaying new teeth in January when it added eight plants to its "watch list" of problem reactors, a move the industry protested as "political" and nuclear critics applauded. "Jackson is the toughest chairman we've seen," says Bill Magavern, director of the Critical Mass Energy Project at Ralph Nader's Public Citizen watchdog group. "But she's fighting mighty economic pressures."

The Millstone scandal began when Galatis blew the whistle on Northeast's 20-year habit of breaking safety rules during routine refueling operations at Millstone 1--moving all of the radioactive fuel rods into the plant's spent-fuel storage pool even though the pool, crowded with thousands of old fuel rods, was licensed to handle the full core only on an emergency basis. To save precious off-line minutes, Northeast would start moving the fuel so quickly after shutdown that the heat melted a worker's protective boots.

As Galatis saw it, the fuel pool needed a beefed-up cooling system to make full-core offloads safe. The company brought in consultants to discredit him, but they ended up agreeing with Galatis. Incredibly, NRC inspectors and senior staff members had long known about the plant's refueling practice but "didn't realize" it was a violation, according to an NRC inspector-general report. James Taylor, the agency's executive director for operations, and William Russell, director of nuclear-reactor regulation, had been aware of Millstone's declining safety standards for at least five years but took no action. So Galatis took action of his own.

His public crusade rocked the nuclear industry just as it was entering the brave new world of electricity deregulation. States around the country will soon allow price competition among rival energy providers, with customers free to choose the utility that offers the lowest rates. To prepare for this era of rate slashing, which could begin in New England next year, utilities have been laying off workers and trimming maintenance costs. But Northeast's troubles illustrate the long-term price of such short-term savings: after reporting a $76.4 million loss for the fourth quarter of 1996, the utility barely broke even for the year, reporting net income of $1.8 million, down from $282.4 million in 1995. With Northeast stock trading at about $12 a share--half its 1995 level--company chairman Bernard Fox has decided to retire. Kenyon, who was forced to negotiate a $314 million line of credit for the company last fall, admits Northeast could go bankrupt early next year if it doesn't get at least one plant running by then. "I don't know exactly where the cliff is," he says, "but it's out there. If we don't get these units up and running, the ball game's over."

To transform Northeast's "culture, values, processes and standards--and get the plants safely back online," Kenyon says, he has brought in new managers from leading utilities around the country. He hired a former Northeast whistle blower named Paul Blanch to work on a revamped employee-concerns program, created a dedicated "recovery team" for each plant and asked the demoralized and skeptical Millstone rank and file to help him weed out problem managers. (Both an NRC Special Project Office and an "independent corrective-action-verification team" of industry consultants will oversee the work; plant restart will require a commission vote.) This reorganization, Kenyon declares, "constitutes the largest management turnaround in the history of the nuclear industry."

He has a challenger for that distinction in Jackson, the NRC head who has spent the past year conducting a painful public examination of her agency. At a forum in August near the Millstone site, she recited the chief complaints against the NRC--among them, that the agency let safety problems go uncorrected, gave Northeast the names of confidential whistle blowers and "failed to act in a timely and responsible way on serious and meritorious allegations...There is truth in all those charges," she confessed.

Candor alone won't restore confidence in the NRC, which since its inception in 1974 has been accused of being too cozy with the industry it regulates. During a House oversight subcommittee hearing last fall, Representative Edward Markey of Massachusetts compared the agency to "Sergeant Schultz in the old Hogan's Heroes TV show, wandering through the barracks ignoring obvious violations and saying, 'I see nothing, I hear nothing.'" Senator Joseph Biden of Delaware has asked the Government Accounting Office for a sweeping assessment of NRC effectiveness. The report, due in May, is expected to be scathing. Among its findings, sources say, is that the NRC has allowed virtually all of the 110 commercial reactors in the U.S. to operate out of compliance with their NRC-approved designs. Biden calls Jackson "a breath of fresh air" but wants an independent safety board to oversee her agency "because we do not know who will hold this job in the future."

The industry says this routine non-compliance--plant hardware and procedures that don't conform to NRC-approved licensing documents--hasn't cut safety margins. For years the documents were regarded as historical material, not as living guidebooks, says Joe Colvin, president of the Nuclear Energy Institute, the industry lobbyist. "It was a fuzzy area," he says, that neither the regulator nor the licensees paid much attention to. The post-Millstone emphasis on "rigid" compliance, another N.E.I. official has complained, "is almost as bad as NRC's reaction to Three Mile Island." Inside the agency, a rift developed between Jackson and the senior staff that had let things slip. Jackson ordered a safety and compliance review of all U.S. nuclear plants, offering utilities a two-year amnesty to correct problems they identify. "We must demonstrate vigilance, objectivity and consistency," she says. "I don't accept the argument that compliance is somehow at odds with safety."

Taylor and Russell, the top NRC officials who made that argument--and let Millstone happen--are gone. The regional administrator for New England has been demoted, and all of the Millstone resident inspectors have been reassigned. Yet some of Jackson's critics remain unimpressed. Chief among them is Galatis, a tenacious and deeply religious man who spent three years trying to get Northeast and the NRC to abide by NRC rules. To force the issue he had to go public, filing a petition that asked the NRC to suspend Millstone's license.

Northeast eventually made the fuel-pool cooling-system changes Galatis demanded, but the NRC rejected his plea for it to suspend the company's license, insisting that "the relative safety significance" of the fuel-pool issue "is low," a conclusion disputed by a host of industry-watchdog engineers. The "pervasive noncompliance" that Galatis uncovered, the agency admitted, did pose a potential threat to public safety. The NRC informed Galatis in December that its long-term shutdown of Millstone "constitutes a partial grant of the petitioner's requests." The agency is delaying a decision on enforcement actions until the U.S. Attorney's office in Connecticut winds up its investigation.

Although he made a bigger bang than any other nuclear whistle blower, Galatis feels more like a victim than a hero. He behaved honorably, and the industry responded by killing his career. "After the TIME article appeared, I became a target," he says. "People hated me. I'd walk into the cafeteria at Millstone and sit down at a table, and everyone else would get up and leave. I felt marked, shunned, fearful." He got anonymous phone calls and installed a caller-ID system, which traced them back to Millstone. At night in his car he was sure people were following him. Yet occasionally, when no one else was around, other engineers would approach him, tell him he was right, pull out a copy of his TIME cover and ask him to autograph it. But they always made him promise not to tell anyone.

After Galatis' allegations were corroborated by NRC investigators, he encountered only more contempt from management. The prevailing attitude was best summed up, he says, by the supervisor who took him aside and said, "The NRC's only beating us up because of the publicity. This will all blow over." In June, Galatis and George Betancourt, another Northeast engineer who backed him, accepted severance agreements. Galatis moved to Massachusetts and enrolled in Gordon-Conwell Theological Seminary. He expects to enter the ministry.

Like many current and former Northeast workers interviewed by TIME, some of them whistle blowers and others just quietly disgusted, Galatis is convinced that despite appearances, nothing has changed at Northeast or the NRC. Galatis' lawyer, Ernest Hadley, has filed a new petition on behalf of a Millstone engineer named Al Cizek, alleging more wrongdoing and calling on the NRC to suspend Millstone's license if Northeast racks up more safety violations. These skeptics believe the NRC's new vigilance is mostly for show. As evidence, they point to a February working lunch between Northeast's Kenyon and the NRC's new executive director, Joe Callen. According to a Northeast memo describing the meeting, Callen told Kenyon that "the overwhelming concern of the NRC is that [it does] not become an obstacle to restart"--a troubling concept to those who believe safety should be the chief concern. Kenyon says the memo is misleading because it "fails to put what was said in proper context." The NRC insists that safety is its priority and that Callen was merely talking about having enough inspectors available.

"These people don't get it," says Galatis. "They're focused on getting the plants up, not on fixing the problems." If Jackson really wanted to change the way her agency operates, he says, she could have started with a simple thank-you during a private meeting with him last July. That didn't happen. Instead, Galatis says, "she wouldn't show emotion or admit mistakes. I was still the enemy."

Near the end of the meeting, Jackson mentioned Galatis' enrollment in divinity school. Maybe the whistle blowing, she suggested, was "a calling" for him.

"It was a calling," Galatis replied. "God called me to intercede."

From now on, Galatis won't be around to keep an eye on Northeast. It will be up to Jackson, Kenyon and others like them to make sure that nuclear safety doesn't depend on divine intervention.