The following essay is from the 2025 Summer edition of When Free to Choose, Northwood’s signature publication dedicated to exploring the importance of free enterprise
The Three Mile Island meltdown was the worst American commercial nuclear accident in our nation’s history. Yet at the same time, it is the only commercial nuclear accident in U.S. history, with no one being physically harmed and the plant remaining operational. Primarily, this can be attributed to the creation of the Institute of Nuclear Power Operations (INPO) following the meltdown, a unique and effective private-sector solution to address nuclear power safety.
What makes INPO unique from its bureaucratic twin, the Nuclear Regulatory Commission (NRC), is how it creates an incentive for nuclear power plants to pursue continuous safety improvements and surpass rigorous regulatory standards. Every 18 to 24 months, plants are evaluated by INPO and rated on a scale of 1 to 5, with an INPO 1 given to plants who, literally, set the standard of “Excellence” for the industry. However, the same plants must surpass their own safety standards through continuous improvements during the next evaluation period to maintain their INPO 1 status and could receive a lower rating otherwise. Furthermore, plants that receive an INPO 5 are forced to shut down. Thus, rather than requiring plants to meet a static, minimum standard that the NRC sets, INPO constantly raises the bar (and often inadvertently leads the way for subsequent NRC regulation).
Economically, this effectively solves a critical market failure that has the potential for disastrous results that could result from complacency by simply meeting minimum (although still rigorous) static regulatory requirements. Nuclear power plants are required by law to have an insurance policy to operate (and they would be insane to operate without one, regardless), and their insurance premiums also fluctuate based on their INPO rating — meaning a plant’s investment in safety directly affects their bottom line. A consistently high rating results in lower premiums and a higher net income, and a consistently low rating results in higher premiums and a lower net income; with an INPO 5, no insurers will cover the plant, meaning it will be forced to shut down by law. In other words, while the NRC indicates which plants are “good” after meeting regulatory standards (and most operational plants are rated “good”), INPO determines which of these “good” plants are the best, which allows nuclear plant insurers to adequately determine risk and set appropriate rates.
Thus, INPO internalizes a negative external cost by working through the price system, rather than around it, meaning that holding nuclear plants to the highest, continuously improving safety standard is in the best interest of their bottom line. And, while other countries have faced catastrophic nuclear disasters such as Chernobyl or Fukushima, the US nuclear industry has maintained a perfect record since the formation of INPO, having zero nuclear disasters or accidents since Three Mile Island.
About the Author
Corbin Landrey is a student from League City, Texas, who is studying accounting and business analytics at Northwood University. Outside of the classroom, he is involved in Northwood’s Business Professionals of America Chapter. Corbin authored the above piece for the 2025 Summer edition of When Free to Choose, Northwood University’s signature publication dedicated to promoting free-enterprise thought leadership. Click here to subscribe to When Free to Choose at no cost.
