April 24, 2014

Energy Department scraps millions in fees for nuclear loan guarantee

Developers of a Georgia nuclear project didn't have to pay millions of dollars in fees designed to prevent risk for taxpayers when it secured $6.5 billion in loan guarantees from the Energy Department in February, the agency confirmed Tuesday to the Washington Examiner.

The DOE calculated a zero dollar "credit subsidy fee," which protects taxpayers if developers default, for electric utility Georgia Power -- a subsidiary of Southern Co. -- and Oglethorpe Power Corp. to spur completion of two large, next-generation nuclear reactors at the Vogtle power plant in Waynesboro, Ga. Energy & Environment Publishing's Greenwire first reported the story.

Dawn Selak, a spokeswoman with the DOE's loan program office, said the agency calculated little risk of default based on a methodology devised by the White House Office of Management and Budget.

“These calculations are made using a standard methodology, consistent with guidelines followed across the federal government. In this case, it should be noted that the Vogtle project sponsors are well-established, sizable companies that are already heavily invested and wholly committed to the project," she said in an email.

Southern Co. declined to comment for the story.

Autumn Hanna, senior program director with spending watchdog group Taxpayers for Common Sense, called the move "absurd."

"If there is indeed zero risk, then they should not need a federal loan guarantee," she told the Examiner.

The fees were a political sticking point following the $535 million loan guarantee given to solar-panel maker Solyndra, which did not have to pay a credit subsidy fee as part of the loan program created in 2009 under the federal stimulus package. The company went bankrupt in 2011, leading to political attacks by Republicans on the House Energy and Commerce Committee and Oversight and Government Reform Committee.

Those committees -- chiefly, Oversight and Government Reform, chaired by California Republican Darrell Issa -- charged that Solyndra snagged the award as a payback for campaign contributions to President Obama. A House Republican-led probe, however, found those accusations to be unfounded.

Hanna said that she hopes lawmakers who raised concerns about Solyndra will do the same about the Vogtle nuclear loan guarantee.

"We've been saying all along this is the same program that brought you Solyndra," Hanna said. "We would like to see the lawmakers who raised strong concerns with the loan guarantee program continue to raise concerns."

The nuclear industry and the Obama administration hope that getting the twin 1.1-gigawatt Westinghouse AP1000 reactors across the finish line can jumpstart a U.S. nuclear power renaissance.

"We are working across the board to try to push the technology forward into the marketplace for all of our energy sources," Energy Secretary Ernest Moniz said in a February speech announcing approval of the $6.5 billion in loan guarantees. "The president did make it clear that he sees nuclear energy as a part of America's low-carbon energy portfolio, and of course it already is a major part."

The DOE has yet to finalize the final $1.8 billion tranche it conditionally approved in 2010 for the Vogtle project.

But approval of the loan guarantees in 2010 came as a boom in natural gas production had just gotten underway. That influx of natural gas has lowered prices and sparked construction of new natural gas-fired generators, all but sidelining U.S. nuclear construction and forcing early retirements of some reactors.

Georgia Power has stood by the project despite delays — the reactors are 21 months behind schedule — and cost overruns of $1 billion that now put the project's cost at an estimated $15.5 billion.

Charlotte Baker, an Energy and Commerce spokeswoman, told the Examiner, "We are continuing our oversight of the loan guarantee program and are looking into this issue." Oversight and Government Reform did not respond to a request for comment.

The news comes as the DOE has breathed new life into its loan guarantee program, which had lain relatively dormant in the Solyndra fallout.

On top of the nuclear loan guarantees, the agency announced earlier this month that it would revive an auto loan guarantee program for advanced vehicles. And last week it announced that it would offer up to $4 billion in loan guarantees for renewable energy and energy-efficiency technology.

House Republicans approved a budget earlier this month that would end the loan guarantee program. Aside from that, however, the GOP response to the Obama administration's push has been muted.

Tyson Slocum, director of consumer watchdog group Public Citizen's energy program, said he expected much of the same regarding the Vogtle project. He said allegations of cronyism, which were a top-line GOP criticism with Solyndra, wouldn't play in this case because Democrats would gain little by offering political handouts to an electric utility in conservative Georgia.

"The DOE waiver of the subsidy cost payment not only puts taxpayers at risk, but should also put to rest the Issa-led allegations that the Obama administration runs the loan guarantee program to play political favorites. Because I see no political gain for Democrats whatsoever in Georgia as a result," he told the Examiner.

The zeroed out fee stands in contrast to the $880 million it asked from Constellation Energy Group for a nuclear project in Maryland. That upfront fee pushed the utility to shelve the project.

The risk profiles, however, of the proposals for Constellation, which is now owned by Exelon Corp., and Georgia Power are different.

Constellation would have needed to sell its electricity in competitive markets. Georgia Power, though, operates in a regulated market, meaning its customers must purchase the power the eventual nuclear reactors produce and that it can charge them for other costs.

Jack Spencer, a nuclear expert and director of the Roe Institute for Economic Policy Studies at the Heritage Foundation, said that while he disagreed with the general idea of the loan guarantee program, the Vogtle reactors were still fairly low risk.

"I don't think this is a huge risk for the taxpayer, but that doesn't mean the government should be subsidizing the capital for them to build it," he told the Examiner.

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