nuclear-news

Obama’s nuclear loan guarantee throwing good money after bad

“No doubt, this is a bad deal for the American people who have been put on the hook for a project that is both embroiled in delays and cost overruns and to a company that has publicly stated that it does not need federal loans to complete the project,” Allison Fisher, Outreach Director, Public Citizen’s Energy Program said. “This is a classic case of throwing good money after bad – an unnecessary and unconscionable decision to make with taxpayer money.”  

Why is the Obama administration using taxpayer money to back a nuclear plant that’s already being built? BY STEVEN MUFSON, WP, 21 Feb 14,  If nuclear power is such a good idea, why does it need financial help from U.S. taxpayers?

This week, Energy Secretary Ernest Moniz announced that the Obama administration would extend a $6.5 billion federal loan guarantee to cover part of the cost of building two new reactors at Southern Co.’s Alvin W. Vogtle site. Thursday he went to Waynesboro, Ga. to finalize the deal. Another $1.8 billion in guarantees could come soon.

The impact: Southern’s Georgia Power subsidiary, which owns 46 percent of the project, will save $225 million to $250 million because the loan guarantee will reduce interest costs. Instead of borrowing from a commercial bank, Southern can now borrow at rock bottom rates from the government’s Federal Financing Bank. And you, gentle reader, the taxpayer, take on all the risk if the project goes bust. Does the name Solyndra ring a bell?

If that’s not enough, Southern is also getting help from the federal production tax credit and other federal incentives that will ultimately save the company an additional $2 billion or so, Southern’s chief executive Tom Fanning said on a Jan. 29 conference call about earnings.

“This is a deeply subsidized project that will cost the taxpayers a lot,” said Ken Glozer, a former Office of Management and Budget senior official who is president of a consulting firm OMB Professionals.

The company also says that it will pass along the savings in financing costs to Georgia electricity ratepayers, but those ratepayers are already footing a large chunk of the reactors’ construction costs. Usually ratepayers only pay such costs once a generating station is in operation, not while it’s being built. In December, the Georgia Public Service Commission approved a three-year plan to spread out $465 million in rate increases, according to Wells Fargo Securities analysts. Southern said customer rates once the units are in service would rise between 6 and 8 percent, less than the 12 percent increase originally projected for capital costs.

Congress tried to do its part by approving in the 2005 Energy Policy Act a $17.5 billion program of nuclear loan guarantees.

But even with that help, building a nuclear plant is extremely expensive, and for a single utility, even a large one, to undertake such a project means betting the farm, as former Duke Energy chief executive Jim Rogers once put it. Moreover, costs rose since 2005. While Congress envisioned helping half a dozen reactors or more, the program is now expected to cover only three or four.

Then, if those challenges weren’t enough, the industry was hit by the recession, competition from low natural gas prices, and the Japanese earthquake and tsunami that destroyed three reactors at the Fukushima plant and fanned safety concerns worldwide.

February 23, 2014 - Posted by Christina Macpherson | Uncategorized