Support for reactors builds

December 25, 2007

Lawmakers agree to increase funding for load program to guarantee the majority of nuclear plant construction costs. Big players such as Exelon stand to benefit from cheaper borrowing.

In a move designed to rally the nation's nuclear-energy revival, congressional lawmakers on Monday agreed to increase funding for a loan program to guarantee up to 80 percent of nuclear-reactor construction costs.

The legislation contains a two-year approval of the loan-guarantee program and directs the secretary of energy to provide $20.5 billion specifically for nuclear energy—$18.5 billion for nuclear reactors and $2 billion for uranium enrichment—as well as $10 billion for renewable energy and energy efficiency and $8 billion for clean-coal technology.



Nevada Republican Pete Domenici, ranking member of the Senate Energy and Natural Resources Committee, said the deal is part of the fiscal 2008 omnibus appropriations bill Congress is expected to approve this week.

"Attracting investors for clean-energy projects is challenging, so we should do what we can to help get their projects off the ground," Domenici said in a release.

Three companies already have submitted complete construction and operating license applications for reactors to the Nuclear Regulatory Commission, but none has committed to building plants. New plant construction is estimated to cost more than $5 billion, without a reliable loan-guarantee program.

Speaking Monday about the nation's economic health in Fredericksburg, Va., President Bush said nuclear energy was environmentally sound and new plants are needed to help satisfy increasing levels of demand. The 104 domestic operating plants generate about 20 percent of U.S. electricity.

"The administration is one step closer to issuing guarantees for loans for clean energy projects that will help reduce our dependence on foreign energy sources, boost economic competitiveness, and combat climate change," Department of Energy spokeswoman Megan Barnett wrote in an e-mail.

Environmentalists criticized the program for underwriting nuclear power plants at taxpayer expense.

"The whole point of it is to take risk off of the industry to launch them into the construction mode," said David Kraft, director of the Nuclear Energy Information Service in Chicago. "In essence, you're given a blank check whether you perform or not."

A February report by the Government Accountability Office found that 10 of the 14 borrowers defaulted during the previous Energy Department loan guarantee program during the 1970s and 1980s.

Companies such as Chicago-based Exelon Corp., the country's largest nuclear operator, would likely benefit from the program through more affordable bonds.

Without the loan guarantee program, bond issuers financing the construction of new nuclear plants would charge prohibitive interest rates, said Marilyn Kray, vice president of nuclear project development at Exelon. She said utilities are "highly unlikely" to default because of their risk-adverse mind-set.

Exelon picked a site in Texas to build a nuclear facility but has yet to file a completed license application with the government.

Dominion Resources Inc. last month became the third company to file a complete application for a new reactor, at its North Anna Power Station in Louisa County, Va., following the Tennessee Valley Authority, which in October applied for new reactors at the Bellefonte nuclear power station near Scottsboro, Ala.

In September, NRG Energy Inc. did what no energy company had done in 30 years when it submitted an application to build and operate reactors at its Bay City, Texas, power plant site. Constellation Energy Group Inc. filed a partial application earlier this year for a proposed new reactor in Lusby, Md.



No barrier to entry
Loan-guarantee applicants must pay a credit subsidy, or "risk premium," representing the value of the risk of loss to the government of each particular project. But the industry's trade group did not see that as a barrier to entry.

Nuclear Energy Institute spokesman Steve Kerekes called the fee a "new wrinkle," but said the increased funding is a "very positive development" that will help sustain the first handful of new plants. "From the beginning, we wanted a limited stimulus for a limited number of new plants for a limited time period," he said.

As the fees are collected, the loan-guarantee program will become self financing, Domenici said.

The industry has expressed concern about the untested regulatory approval process, environmental issues, waste management and the ability to produce electricity at a competitive price. Nuclear regulators say the review process for new plants will take up to 42 months.