March 17, 2006
Duke Energy Should Be Denied Taxpayer Subsidies to Build New Nuclear Reactors; Better Alternatives Exist
WASHINGTON, D.C. – Duke Energy’s plan to apply for a construction and operation license to build two new nuclear reactors at a site owned by Southern Co. in Cherokee County, S.C., should not be permitted to come to fruition, Public Citizen said today. Duke is angling to receive billions of dollars in taxpayer subsidies to defray the costs of applying for a license as well as operating the plants; it should not be given a government handout for the application, the organization said. Nor should the government issue a license. Not only does nuclear power pose a threat to public health and safety, but Duke Energy has a track record that indicates it has been dishonest with consumers.
No new reactors have been ordered in the United States for 30 years, and for good reason. Nuclear power is extremely expensive and not economically viable in the marketplace – no nuclear power plant has operated without taxpayer money since the nuclear power industry was born. It also poses a public safety and national security threat and creates dangerous highly radioactive waste, for which no country in the world has a solution, and will not be effective in addressing climate change.
Further, Duke Energy has one of the worst track records of energy companies in the United States when it comes to manipulating markets and cheating consumers. Duke Energy has been forced to pay $257 million to settle allegations of market manipulation and other misdeeds in the past three years. Consider:
- In September 2003, the U.S. Commodity Futures Trading Commission fined Duke Energy $28 million for manipulating natural gas markets.
- In December 2003, the Federal Energy Regulatory Commission fined Duke Energy $2.5 million, resolving an investigation into allegations that Duke engaged in market gaming practices during the California energy crisis.
- In July 2004, the California attorney general announced a $207.5 million “electricity price-gouging settlement” with Duke Energy for the company’s role in ripping off the state’s consumers during the energy crisis that led to forced blackouts and almost bankrupted California, harming many small businesses and consumers.
- The California Independent System Operator (CAISO) in 2001 rescinded $14.4 million in payments Duke Energy had received after the company did not make its power plants available for the California market. The CAISO then issued a $4.5 million fine against Duke for failing to follow California market rules during a declared system emergency.
- In July 2005, the Securities and Exchange Commission imposed a cease-and-desist order on Duke Energy because Duke’s internal accounting controls were insufficient to ensure that its traders properly recorded their trading activities. As a result, Duke Energy illegally classified $56.2 million of the company’s speculative power and natural gas trading operations.
If Duke is permitted to proceed with its proposal, taxpayers could be on the hook for cradle-to-grave subsidies, including:
- half the cost of applying for the license, estimated at as much as $45 million per application for pre-approved reactor designs;
- “risk insurance” to pay the industry for delays in licensing, which could be up to $500 million each for the first two plants;
- taxpayer-backed loan guarantees for up to 80 percent of the cost of a project, potentially costing taxpayers more than $2 billion per plant; and
- production tax credits of 1.8-cents for each kilowatt-hour of nuclear-generated electricity from new reactors during the first eight years of operation, estimated at a total of $5.7 billion in revenue losses to the U.S. Treasury through 2025.
For these reasons, we urge the government to deny Duke Energy federal dollars to subsidize the exorbitant costs of building new reactors and ultimately deny the company a license.
Renewable energy is a viable alternative to nuclear power and conventional fuels, and can meet the country’s energy needs without the burdens of carbon emissions or radioactive waste. In addition to renewable technologies themselves, using energy more efficiently is an important part of moving to a clean energy future. The increase in energy demand Duke predicts can be met much more safely and effectively by efficiency measures than through building new nuclear plants.