Compared to the Vogtle Nuclear Power Plant, Soyndra's Loan Was "Small Potatoes"
The Solyndra loan represents just over 1 percent of the $39 billion in loans generated by the Department of Energy (DOE) loan program. But that program – originally put in place by the Bush administration in 2005, and expanded as part of the 2009 stimulus act – has targeted dozens of companies across a wide swath of industries, including wind, geothermal and solar power, nuclear generation, energy efficiency projects, biofuels, and advanced vehicles. The DOE loan program specifically mentions the Vogtle Nuclear Power Plant. President Obama and DOE Secretary Steven Chu announced the award of the conditional loan guarantees to Georgia Power on February 16, 2010.
So we turn our attention to the Vogtle Nuclear Power Plant, and to the exposure of taxpayers brought on by the DOE. It turns out that DOE lent the owners of the Vogtle Nuclear Power Plant (Southern Company, Oglethorpe Power Corporation, the Municipal Electric Authority of Georgia, and Dalton Utilities) $8.33 billion, about 15 times the amount lent to Solyndra, to expand (build two new units) at Vogtle. The additions of units 3 and 4 are expected to produce approximately 3,500 jobs during construction and 800 permanent jobs once the units begin operation.
Now we learn that after more than a year and a half of stonewalling by DOE, the Southern Alliance for Clean Energy (SACE) continues to press ahead with its Freedom of Information Act (FOIA) litigation so that U.S. taxpayers can learn the full extent of the risks to which they are exposed in the massive commitment of $8.33 billion in conditional federal loan guarantees to Southern Company and their utility partners. It appears that the power companies had to put up almost no money, paying a credit subsidy fee of as little as 0.5 or 1.5 percent of the total loan guarantee. Further, this loan is an expensive gamble on a technology with a long history of bankrupting utilities and soaking ratepayers. There is an extremely high risk that taxpayers will be on the hook if the Vogtle loan guarantee proceeds. The loan guarantee is an up-front bailout that will enable Southern Company to make an uneconomic investment.
Private lenders declined to finance new reactors because of the substantial risk that the investment will fail. In 2003, the Congressional Budget Office (CBO) estimated that the chance of a loan for new nuclear reactor construction resulting in default would be “very high – well over 50 percent.” The Obama administration’s proposed loan guarantee would transfer this risk onto American taxpayers, who would pay up to $8.33 billion in the event that Southern Company and its partners run into trouble. The original two reactors at the plant took almost 15 years to build and came in 1,200 percent over budget. Southern Company shareholders had to endure $1 billion in losses. The design of the new reactor has not been finalized, and is still undergoing review at the U.S. Nuclear Regulatory Commission (NRC). As a result, Southern Company’s cost estimates for the two new reactors are speculative.
The DOE loan guarantees are expected to save Georgia Power’s customers millions in interest costs annually over the expected life of any guaranteed borrowings. So that means that all of us non-Georgia Power customers must participate whether we want to or not. Sounds like a subsidy to me.
BTW, the intent of this article is NOT to debate the pros and cons of nuclear energy. Its only intent is to document the risk exposure that Obama and the DOE have forced upon taxpayers.
But that’s just my opinion.