Groups: Negative Court Ruling in Georgia Throws DOE's Nuclear Loan Guarantee Bailout Program Into Question

/PRNewswire/ -- The only taxpayer-backed loan guarantee bailout to be offered for new nuclear reactors - $8.3 billion for two reactors at Plant Vogtle in Georgia - should be rescinded now that the project was dealt a setback in a decision by a Georgia judge that state officials illegally certified the project, according to the Southern Alliance for Clean Energy (SACE) and Public Citizen.

The groups also noted that, despite the push in Congress for more controversial loan guarantees for new nuclear reactors, the other two leading contenders for such bailouts - the South Texas Project at Bay City on the Gulf Coast (114 miles from San Antonio and 90 miles from Houston) and Calvert Cliffs in Maryland - are more unsettled than ever and now pose an even greater risk to U.S. taxpayers.

As such, the groups also said that Department of Energy (DOE) should refrain from offering any new loan guarantees to nuclear projects before overhauling its evaluation process.

DOE has stated that the $10 billion remaining in loan guarantee authority is only sufficient for one of the two projects and has requested another $9 billion in the appropriations supplemental to cover the second project. In its FY2011 budget request, the Obama Administration has already requested $36 billion in loan guarantee authority, a tripling of the nuclear loan guarantee program.

The groups detailed the setbacks at the Georgia project and other two federal bailout candidates as follows:

VOGTLE

Last Friday, the Southern Alliance for Clean Energy won its lawsuit in Fulton County Superior Court that aimed to protect Georgians from unfair utility costs in connection with the proposed construction of two new nuclear reactors at Vogtle near Waynesboro, Georgia. The Court found that the Georgia Public Service Commission acted illegally in violation of Georgia state law. The Commission's approval last year during the certification process for the proposed new Vogtle reactors was put into question.

At Friday's hearing, Judge Wendy Shoob heard SACE's allegation that the Georgia Public Service Commission (PSC) erred as a matter of law by failing to make findings of fact and conclusions of law as required. Specifically, the group alleged that the PSC did not provide the required written justifications for its findings that would "afford an intelligent review" by the courts. The PSC instead relied on statements void of any reasoning. The Court ruled in favor of SACE and found that the PSC acted illegally in violation of Georgia state law by failing to make all appropriate findings and to support those findings with a concise and explicit statement of the facts. Just prior to the decision, Southern Company had yet to accept the conditional guarantee and had requested another month to decide. On Wednesday, the Court issued the final order, remanding the case back to the PSC. (See http://www.cleanenergy.org/images/testimony/FinalOrderPetitionforJudicialRevie w050510.pdf for more information.)

Stephen Smith, executive director of the Southern Alliance for Clean Energy, said: "This ruling raises further concerns over the Obama Administration's controversial decision in February to award an $8.3 billion taxpayer-financed conditional loan guarantee for Southern Company's proposed Vogtle project, the first to be offered one in the country. Given this decision and the economic risks to U.S. taxpayers of this project, DOE should rescind its offer of a loan guarantee. DOE needs to re-evaluate its 'due-diligence' procedures before offering any other loan guarantees. For example, how can a loan guarantee be offered before a reactor design is even certified as safe by the Nuclear Regulatory Commission?"

SOUTH TEXAS PROJECT

The estimated cost for two NRG proposed reactors in Texas has risen from $5.8 billion in 2006 to a reported $18.2 billion at the end of 2009. As a result, the City of San Antonio pulled out of 85 percent of its investment in the project, leaving a void of as much as 33 percent of the project without investors.

Karen Hadden, executive director of the Sustainable Energy and Economic Development (SEED) coalition, said: "The South Texas nuclear reactor is an economic disaster waiting to happen. The costs have trebled since the plant was proposed, NRG's credit is just one notch above a junk bond rating, NRG's partner sued them for fraud and no one wants to buy shares due to the fast-rising costs. The federal government may foolishly put taxpayer money behind the South Texas Project, but it can't force anyone to buy the resulting overpriced power. Since Texas is deregulated, this plant will have to sell excess energy into the market. Expensive nuclear power must compete against cheaper and plentiful efficiency, wind and natural gas. As a result, the power it produces won't be too cheap to meter -- instead it will be too expensive to sell. If we give this turkey loan guarantees -- taxpayers will get stuck with the bill."

CALVERT CLIFFS

In 2007, the cost estimate for the proposed new reactor at Calvert Cliffs was $5 billion. Since then, UniStar has been reluctant to provide any public cost estimates for construction of the proposed Calvert Cliffs-3 reactor, but in August 2008 hearings before the Maryland Public Service Commission, CEO George Vanderheyden acknowledged that the company's estimates are on the "upper end" of the $4,500 - $6,000 per kilowatt (kWh) level. For a 1600 megawatt reactor such as Calvert Cliffs-3, that would mean construction costs of about $9.6 billion. Even that high figure is likely to be low, since the Pennsylvania utility PPL has posted an estimate of $13-15 billion for precisely the same reactor design at Bell Bend in PA.

Additionally, the original drive for Calvert Cliffs preceded the recent decline in demand for power in the region. Power purchase agreements have yet to be established for Calvert Cliffs. Though "demand for power" does not need to be demonstrated by the reactor owner, demand for power in the region has dropped off due to the market downturn, obviating most or all of the need for Calvert Cliffs.

Allison Fisher, organizer for Public Citizen's Energy Program, Public Citizen said: "Taxpayers should be outraged that they are being put on the hook for a reactor design that has been plagued with huge delays and cost overrun. The same reactor is currently under construction in Finland and France. Both projects have been plagued with delays and cost overruns. The Finnish project is three and a half years behind schedule with a 75 percent cost overrun thus far."

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New Loan-Guarantee Bailout for New Nuclear Reactors Puts U.S. Taxpayers at Risk as Department of Energy Hands Over Billions of Dollars

New Loan-Guarantee Bailout for New Nuclear Reactors Puts U.S. Taxpayers at Risk as Department of Energy Hands Over Billions of Dollars to 'Poster Child for Cost Overruns'

/PRNewswire/ -- First it was insurance companies, then it was banks and that was followed by auto companies. Now, the federal government is putting U.S. taxpayers and utility customers at new risk under a controversial U.S. Department of Energy (DOE) loan guarantee program that is slated to award $18.5 billion, with Atlanta-based Southern Company predicted to be first on the list for program funds to build two new nuclear reactors at Plant Vogtle in Waynesboro, Georgia.

Ironically, the DOE's "top choice" for the nuclear reactor loan guarantees, which are backed by U.S. taxpayers in the event of defaults, is the very same Plant Vogtle that helped to kill the previous nuclear power boom in the United States in the 1970s and 1980s. Huge cost overruns at the original Plant Vogtle - which escalated from $660 million for four reactors to a whopping $8.87 billion for two - likely played a role in putting the brakes on nuclear expansion plans pursued decades ago in the United States.

Will history repeat itself on Plant Vogtle cost overruns?

Higher bills and costly delays may already be in the works at Plant Vogtle. According to news accounts in early December 2009: "The proposed construction of two new nuclear reactors at Plant Vogtle near Waynesboro could likely have cost overruns and possibly face delays, according to testimony released by the Georgia Public Service Commission. The group monitoring the progress of the new reactors is also being denied access to crucial information about the process, and Georgia Power is not revising economic evaluations based on a variety of factors that include a reduced demand for electricity and cheaper alternatives to nuclear energy, the document says."

Such developments for the proposed new Plant Vogtle reactors could parallel the current fiasco in San Antonio, Texas, where another would-be DOE loan guarantee is facing local rejection of a new reactor project that is plagued with a $5 billion cost overrun that amounts to 27 percent of the initially projected budget.

Dr. Stephen A. Smith, executive director of the Southern Alliance for Clean Energy, points out: "Nuclear power is most certainly not the best path to clean and low-cost energy for the United States. Instead, the first step should be reducing our energy consumption in this country and efficiently using the energy that we do consume, not spending hundreds of billions of Americans' hard-earned dollars on risky new nuclear reactors that will pad the pockets of the nuclear industry even more. Utilities are doing everything they can to shift all of the risks onto ratepayers and U.S. taxpayers. Why? Because the utilities can't afford to do it any other way. The proponents for new nuclear reactors are essentially proponents for more taxpayer-funded bailouts for irresponsible corporations that continue to make bad energy decisions."

Mark Cooper, senior fellow for economic analysis at the Institute for Energy and the Environment at Vermont Law School, says: "2010 will be the seventh year of the so-called 'Nuclear Renaissance,' but it is shaping up to be a lot like the U.S. nuclear industry of the 1980s, a decade of no new orders, multiple delays and cancellations, hefty defaults, and emerging cheaper alternatives. Of 26 new nuclear reactor license applications submitted to the Nuclear Regulatory Commission since 2007, 19 have been cancelled or delayed and every private sector project has suffered a downgrade by credit rating agencies. The reality is that capital markets will not finance new reactors because demand growth has slowed, reactors cost much more than available alternatives and they face too many technology, marketplace, and policy risks; so nuclear advocates have demanded a massive increase in direct federal subsidies to bail the industry out. What we are looking at is the prospect of 'nuclear socialism' that could only go farther if it involved outright state ownership of the industry."

(For more comments from Cooper and other experts on how loan guarantees will not fix the insurmountable obstacles in the path of a so-called new nuclear "renaissance" in the United States, go to http://www.psr.org/nuclear-bailout/nuclear4.pdf.)

What is the alternative to new nuclear reactors? Stephen Smith says, "We need to fully embrace renewable energy and energy efficiency and conservation. Unlike nuclear reactors, solar and wind are truly clean - they are emission free when they're producing electricity, no carbon, no deadly nuclear waste that remains highly radioactive longer than human civilizations have even existed. And don't forget that clean renewable energy creates jobs, lots of jobs, and lots of jobs right here in the United States. Energy efficiency is far, far cheaper than building new nuclear reactors and helps reduce carbon emissions immediately, all while saving consumers and businesses money. And this can be done right here in the Southeast."

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