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DHS Funding: Dueling for Dollars

The big-money question in securing critical infrastructures is: Who pays how much, and for what? Or, in the case of the electric power industry: Where do you draw the line between ratepayers and taxpayers?

Across the nuclear power industry, companies like Exelon will spend a total of $1 billion on post-9/11 security enhancements (mainly in the form of capital improvements and headcount growth) by the end of 2004, according to the Nuclear Energy Institute, a trade group representing nuclear power plant operators. Which means that nuclear power continues to head farther away from its early promise of being too cheap to meter.

"So far, in capital modifications, we've spent about $17 million, and there's significantly more to be spent," says Lane, whose company operates 17 nuclear reactors. In fact, $17 million isn't even the halfway mark. Recouping costs won't be easy, either. "In the regulated markets, some utilities have the ability to go to their utility commission and be reimbursed," he says. "We don't have that ability because we have to compete dollar for dollar for customers. This $17 millionwe would have been $17 million richer if we hadn't spent it."

Comments like thatespecially coming from corporations like Exelon (net income of $905 million in 2003)make POGO's Pete Stockton fume. "The industry simply doesn't want to spend the money to adequately protect [nuclear facilities], because the money comes right out of their pockets, and they'd much rather increase their salaries, to be quite crude, or up their stock," says Stockton, a senior investigator, who has a different take on the DBT than Lane does. POGO's research indicates that the current DBT threshold requires nuclear power plants to prepare for fewer than half as many terrorists as al-Qaida would plausibly organize. And companies are unlikely to prepare for more than the minimum required by law. "Clearly there's a disincentive to improve security," Stockton says.

Meanwhile, the Bush administration insists that market forces will fix most of the weaknesses in the nation's critical infrastructure and that private companiesnot the Department of Homeland Security and not taxpayersmust pay for these security costs out of pocket. Frank Libutti, DHS's undersecretary of the Information Analysis and Infrastructure Protection Directorate, said as much at a recent Washington policy forum (produced by CXO Media, CSO's parent company).

"I would say, point blank but in a kind way, when necessary [private companies] need to belly up in terms of putting money on the table," Libutti told gathered policy-makers and executives from a variety of industries.

Welcome to ground zero of perhaps the most contentious of all the debates about homeland security: Who pays?The Mother of All Critical InfrastructuresTo a behemoth like the Department of Homeland Security, the nuclear industry's DBT is but a small part of the story, one of many battle lines in the struggle to decide when the private sector's responsibility to protect its own facilities becomes a matter of national defense. The nuclear power industry is just a piece of the energy industry, which is itself but a piece of the nation's critical infrastructurethe public services, such as water, telecommunications and banking, that citizens rely on every day for their health and economic well-being. Most of the nation's critical infrastructure is controlled by private industry. Nevertheless, citizens expect the government (in particular DHS) to make sure that these services operate reliably and safely.