NEGATIVE COURT RULING IN GEORGIA THROWS DOE’S NUCLEAR LOAN GUARANTEE BAILOUT PROGRAM INTO QUESTION
U.S. Nuclear Reactor Projects In Line for Loan Guarantees Pose Major Risks to U.S. Taxpayers.
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 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.
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. Given this, the Southern Alliance for Clean Energy, Sustainable Energy and Economic (SEED) Coalition and Public Citizen believe the Department of Energy (DOE) should overhaul its evaluation process before offering any new loan guarantees to nuclear projects .
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 following are details on the setbacks at the Georgia project and other two federal bailout candidates:
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/FinalOrderPetitionforJudicialReview050510.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 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.”
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.”
Southern Alliance for Clean Energy (http://www.cleanenergy.org) has been a leading voice for energy reform to protect the quality of life and treasured places in the Southeast for more than 20 years. Founded in 1985, SACE is the only regional organization primarily focused on developing clean energy solutions throughout the Southeast.
The Austin, TX-based Sustainable Energy and Economic Development Coalition (http://www.seedcoalition.org) is an alliance of individuals, businesses, and organizations advocating sustainable energy strategies for Texas, including the use of renewables and conservation. SEED also educates the public about the economic, environmental, and health benefits of a sustainable energy strategy. SEED tracks relevant policy-making and legislative processes and informs the public of opportunities to voice their opinions.
Public Citizen (http://www.publiccitizen.org) serves as the people’s voice in the nation’s capital. Since its founding in 1971, Public Citizen has delved into an array of areas, but its work on each issue shares an overarching goal: To ensure that all citizens are represented in the halls of power. For nearly four decades, Public Citizen has proudly championed citizen interests before Congress, the executive branch agencies and the courts.