Posts Tagged ‘nuclear loan guarantees’

Energy Secretary Ernest Moniz announced on Wednesday, February 19th, that his agency approved a multibillion dollar taxpayer-backed loan guarantee for the first nuclear reactors to be built in the U.S. in more than 30 years.  We view this as a costly act of desperation for a failing project.

An $8.3 billion loan guarantee was conditionally approved four years ago for two new reactors at Southern Company’s Vogtle plant in Waynesboro, Ga.  Since then, negotiations around the terms of the loan guarantee have been extended five times. Secretary Moniz’s announcement – that the government has finalized terms with two of three companies – accounts for just $6.5 billion of the loan. With approval for $1.8 billion of the loan still pending, the agency is clearly attempting to give momentum to the stalled project.

The construction of the two new reactors at the Vogtle plant are 21 months behind schedule and $1.6 billion over budget.  The original two units at Vogtle resulted in 1000% cost overruns from the original $1 billion dollar estimate as well as decades-long set-backs and construction delays.  This not only calls into question the decision to underwrite this risky project with taxpayer dollars, but proves that the same issues that plagued reactor construction more than three decades ago have not been resolved.

Nuclear energy continues to be beset with safety issues and produces toxic wastes that we still don’t have a solution for – hardly a technology the government should be promoting and propping up with taxpayer funds.

We berate wall street for their high-risk investments, yet the Department of Energy seems to have little to no risk aversion for these types of loan guarantees.  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.

This is a classic case of throwing good money after bad.

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The House and Senate Energy Appropriations Committees are beginning to work on the FY 2012 federal budget. That means they are beginning to decide the fate of the loan guarantee program for new nuclear reactor construction.  The first vote in the House Appropriations Subcommittee on Energy is expected before June 2–within the next three weeks.

President Obama has asked that this program be increased by $36 Billion. That’s on top of the $10.2 Billion already in the program and the $8.3 already promised to Southern Company for construction of the Vogtle reactors in Georgia. Plus there is money for uranium enrichment plants in Idaho and Ohio.

Meanwhile, partly in response to the nuclear disaster at Fukushima, Japan–the world’s third and fourth largest economies–Japan and Germany are marching ahead with new energy policies that will focus on clean and safe renewable energy and energy efficiency.

According to a March 2011 poll conducted for the Civil Society Institute, 73% of the American people oppose federal loan guarantees for new nuclear reactors. An April 2011 ABC News/Washington Post poll found that 64% oppose new reactor construction entirely.

What you can do!  National Nuclear-Free Call-In Day, Wednesday, May 18. Please call your members of Congress and demand an end to the nuclear loan program. The members of the House and Senate Appropriations Committees are listed below. It is especially important that these members receive your calls. You can reach every member of Congress at 202-224-3121

House Appropriations Committee
    Republican Members:
    * Hal Rogers, Kentucky, Chairman
    * C.W. Bill Young, Florida
    * Jerry Lewis, California
    * Frank Wolf, Virginia
    * Jack Kingston, Georgia
    * Rodney Frelinghuysen, New Jersey
    * Tom Latham, Iowa
    * Robert Aderholt, Alabama
    * Jo Ann Emerson, Missouri
    * Kay Granger, Texas
    * Mike Simpson, Idaho
    * John Culberson, Texas
    * Ander Crenshaw, Florida
    * Denny Rehberg, Montana
    * John Carter, Texas
    * Rodney Alexander, Louisiana
    * Ken Calvert, California
    * Jo Bonner, Alabama
    * Steve LaTourette, Ohio
    * Tom Cole, Oklahoma
    * Jeff Flake, Arizona
    * Mario Diaz-Balart, Florida
    * Charlie Dent, Pennsylvania
    * Steve Austria, Ohio
    * Cynthia Lummis, Wyoming
    * Tom Graves, Georgia
    * Kevin Yoder, Kansas
    * Steve Womack, Arkansas
    * Alan Nunnelee, Mississippi

    Democrat Members
    * Norman D. Dicks, Washington, Ranking Member
    * Marcy Kaptur, Ohio
    * Pete Visclosky, Indiana
    * Nita Lowey, New York
    * José Serrano, New York
    * Rosa DeLauro, Connecticut
    * Jim Moran, Virginia
    * John Olver, Massachusetts
    * Ed Pastor, Arizona
    * David Price, North Carolina
    * Maurice Hinchey, New York
    * Lucille Roybal-Allard, California
    * Sam Farr, California
    * Jesse Jackson, Jr., Illinois
    * Chaka Fattah, Pennsylvania
    * Steve Rothman, New Jersey
    * Sanford Bishop, Georgia
    * Barbara Lee, California
    * Adam Schiff, California
    * Mike Honda, California
    * Betty McCollum, Minnesota

    Senate Appropriations Committee
    Democrat Members
* Daniel Inouye, Hawaii, Chairman
    * Patrick Leahy, Vermont
    * Tom Harkin, Iowa
    * Barbara Mikulski, Maryland
    * Herb Kohl, Wisconsin
    * Patty Murray, Washington
    * Dianne Feinstein, California
    * Dick Durbin, Illinois
    * Tim Johnson, South Dakota
    * Mary Landrieu, Louisiana
    * Jack Reed, Rhode Island
    * Frank Lautenberg, New Jersey
    * Ben Nelson, Nebraska
    * Mark Pryor, Arkansas
    * Jon Tester, Montana
    * Sherrod Brown, Ohio
Republican Members
    * Thad Cochran, Mississippi, Vice Chairman
    * Mitch McConnell, Kentucky
    * Richard Shelby, Alabama
    * Kay Bailey Hutchison, Texas
    * Lamar Alexander, Tennessee
    * Susan Collins, Maine
    * Lisa Murkowski, Alaska
    * Lindsey Graham, South Carolina
    * Mark Kirk, Illinois
    * Dan Coats, Indiana
    * Roy Blunt, Missouri
    * Jerry Moran, Kansas
    * John Hoeven, North Dakota
    * Ron Johnson, Wisconsin

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Even as the Japanese attempt increasingly frantic tactics to cool an overheated nuclear complex:  

  • U.S. officials warned the situation is deteriorating and challenged the Japanese government’s assessment of the radiation risks telling U.S. civilians and military personnel to stay at least 50 miles from the facility, in contrast to the 12-mile evacuation zone set by Japan.
  • The Nuclear Regulatory Commission Chairman Gregory Jaczko told lawmakers that the U.S. believed the damage at the Fukushima Daiichi nuclear power complex was even graver than Japanese officials had outlined in public; and
  • U.S. Energy Secretary Steven Chu told those same lawmakers that he believed a “partial meltdown” had occurred at the Japanese nuclear power plant and that the accident was “more serious” than the 1979 partial core meltdown at Three Mile Island in Pennsylvania.

In the meantime, Jonathan Silver, executive director of the Energy Department’s loan guarantee program affirmed that it will continue to finance nuclear projects in the United States during a presentation he made today at the Cleantech Forum conference in San Francisco.

Mr. Silver’s remarks followed Congressional testimony in Washington by Energy Secretary Steven Chu and Gregory B. Jaczko, chairman of the Nuclear Regulatory Commission. In the same testimony that cautioned the situation at the Fukushima Dai-ichi plant was more serious than Japanese officials were saying,  Dr. Chu said that the Obama administration continued to support nuclear energy, noting the president had requested that $36 billion be appropriated for the nuclear loan guarantee program.

The loan guarantee program has come under fire from all sides, with Congressional Republicans, questioning whether the department has spent its money wisely and moving to cut funding for the $71 billion program.

An audit released last week by the Energy Department’s inspector general found that poor record-keeping made it difficult to evaluate some loan decisions.  This is especially concerning when considering the high capital cost and high default rate of nuclear projects both here at home and internationally.

NRG’s South Texas Project (STP) proposed expansion near Bay City, TX is high on the list of projects being considered for a federal loan guarantee under this program.  Many of NRG’s financial partners on this project, Toshiba, Tepco (the operators of the doomed Fukushima Dai-ichi plant) and the Japanese government (through loan guarantees)  are probably looking at considerable contraints in being able to make substantial financial investments in projects outside of Japan for the foreseeable future.  Taxpayers should be concerned about issues with loan guarantee program’s ability to adequately assess the risks of their loan decisions.

The U.S. should immediately halt subsidies and instead focus on developing solar and wind power.

Take Action on Nuclear Subsidies

The administration must take off the blinders, look hard at what is going on in Japan and realize that yes, a catastrophe can happen here.

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Constellation Energy Group Inc. said last week it was pulling out of talks on a $7.5 billion loan guarantee to build a reactor at its Calvert Cliffs facility in Maryland.  Constellation Energy Group’s Chief Operating Officer Michael Wallace told the Energy Department that they felt the estimated $880 million the company would have to pay the Treasury Department was “shockingly high”.

Still, that’s only 12% of the loan guarantee, and only 7% of the estimated (pre-financed) cost of building a nuclear plant.  Compare that to low-risk lender qualifications for buying a home in this country and it doesn’t seem so shockingly high.  Traditionally lenders required a down payment of at least 20% of the home’s purchase price for a home mortgage, and to qualify for owner-builder construction loans, the down payment can be up to 30 percent of the requested loan amount.  Seems to me the industry is getting a better break than the American public right now.

A senior energy and environment analyst for a Milwaukee-based brokerage whined that the administration is offering terms no better than Constellation could get from private investors, yet we are not seeing private investors lining up to get a piece of this action-especially considering that these projects are projected to have a 50% loan default rate.

If the administration must support a nuclear renaissance, it is irresponsible of them to not consider limiting the risk that taxpayers will be stuck with should a nuclear utility default, and the Office of Management and Budget is doing just that by requiring these fees.

Constellation’s decision probably places NRG Energy Inc., a Princeton, New Jersey-based power producer, in the lead for the next loan-guarantee award.  However, if the fees are this large, it might be a victory that NRG and its partners will also not necessarily want, dooming that project too.

NRG is seeking a guarantee to add two units at its South Texas power plant in Matagorda County.  The company is also seeking to secure Japanese government financing, but that is also contingent upon the project securing the US loan guarantee.  Perhaps this is a project that needs to be doomed.  Clearly the building of nuclear plants are so high risk that the private sector appears unwilling to take on that risk, without the US government (read US taxpayer) bearing the brunt of the risk.  If they put it up to a vote, I certainly wouldn’t vote to put my money into such a high risk project, would you?


By promoting cleaner energy, cleaner government, cleaner cars, and cleaner air for all Texans, we hope to provide for a healthy place to live and prosper. We are Public Citizen Texas.

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A critical court ruling today rang the first chime in what could be the death knell of the so-called “nuclear renaissance,” starting with the failed expansion of the South Texas Project (STP).

This afternoon’s ruling by 408th District Court Judge Larry Noll that CPS Energy can safely withdraw from the proposed STP expansion project without losing all its investment offers the utility and the city of San Antonio the cue they’ve been waiting for to exit the national nuclear stage. Combined with the NRG Energy CEO’s announcement during a shareholder and press conference call this morning that NRG would “wind down the project as quickly and economically as possible” if CPS withdraws or STP does not receive federal loan guarantees, this news marks a major blow to those who claim nuclear power is a viable alternative to fossil fuel energy. The expansion project calls for two new nuclear reactors at a site with two existing reactors.

slide 8 of NRG's "STP 3&4 Nuclear Project and CPS Litigation" presentation given at shareholder and media conference call Friday, January 29, 2010 8:00 a.m. ET

These events give credence to the contention made over the past five years by opponents of nuclear power that it is a needlessly expensive and risky way to meet future energy needs.. In less than a year, the price of the STP nuclear expansion ballooned from around $5 billion to more than $18 billion. Given this case study of nuclear power’s failure, we must call into question the federal government’s decision to increase federal loan guarantees to support oversized, untenable projects that are already proving too risky for private investors.

Public Citizen calls on both CPS Energy and NRG Energy to stop throwing good money after bad with their nuclear expansion plans and halt the project. Thankfully, San Antonio Mayor Julian Castro intervened by putting the project on hold before costs jumped too far out of San Antonio’s reach. Given the court’s announcement that the city’s interests are protected, we hope San Antonio will take the next responsible step and bow out entirely.

Statement of Tom “Smitty” Smith, Director of Public Citizen’s Texas Office


By promoting cleaner energy, cleaner government, and cleaner air for all Texans, we hope to provide for a healthy place to live and prosper. We are Public Citizen Texas.

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A message from our director, Tom “Smitty” Smith:

efficient-homeToday the House and Senate are working to reconcile their different versions of the long-awaited economic stimulus package. The stakes are now higher than ever for Texans, who stand to gain from billions that could go toward developing renewable energy and efficiency in the state, reducing pollution from diesel engines, and cleaning up abandoned nuclear waste sites.

But as much as the state needs that massive investment in our energy future, there is a troubling side to the senate version of the stimulus package: Senators amended the stimulus bill to include $50 billion in loan guarantees for new nuclear plants in Texas and elsewhere in the nation.

If Congress needs a reminder why this is a bad deal, it should just ask Wall Street why it doesn’t loan money for nuclear reactors. According to the Congressional Budget Office, nuclear loans default at a rate of 50%. Banks learned long ago that these plants simply can’t be built on budget and aren’t viable without massive taxpayer subsidies. Texans are still paying for the last generation of over-budget nuclear plants each month in a hidden charge on their electric bills. (more…)

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