Vogtle nuclear loan guarantee drags into fifth round of delays

Aerial image of Plant Vogtle Nuclear Generating Station - photo credit to High Flyer. The photo shows the operating Units 1 and 2, as well as the construction site for proposed new Units 3 and 4.As reported by Platts, and conveyed in a Friends of the Earth press release, the December 31, 2013 U.S. Department of Energy deadline for finalization of the $8.3 billion federal taxpayer backed nuclear loan guarantee for Vogtle 3 & 4 has been extended yet again, for a fifth time, until the end of January, 2014.

As reported by FOE: "Freedom of Information Act requests and litigation revealed that the credit subsidy fee offered to Southern Company ranged from 0.8 to 1.5 percent. The credit subsidy fee is supposed to insulate against default, but the fee offered to Southern Company is woefully inadequate to cover the risks involved in major nuclear construction. According to the Nuclear Regulatory Commission, 32 percent of reactor construction is cancelled before any electricity is produced."

Watchdog groups have long called for a credit subsidy fee commensurate with the risk of the nuclear new build proposals. Congressional auditors reported several years ago that new reactors, historically, have had a 50% risk of cancellation and potential default. The Vogtle 3 & 4 nuclear loan guarantee puts 15 times more taxpayer money at risk than did the Solyndra loan guarantee scandal, which had a significantly lower risk of default than does Vogtle 3 & 4.

Vogtle 1 & 2 were the poster children for cost overruns in decades past, coming in with a price tag 1,300 percent higher than originally estimated! Vogtle 3 & 4's price tag has also skyrocketed over the past several years.

The only way that Vogtle 3 & 4 have proceeded this far is that Georgia lawmakers made legal what is illegal in most states: the gouging of ratepayers on their electricity bills with "Construction Work in Progress" (CWIP) surcharges for the building of the new reactors. This makes ratepayers unwilling investors, who receive no share of the profits that are made -- at who are put at risk of losing every penny invested, if the project ever goes belly up. Ratepayers in Florida just experienced this at the Levy new build site -- $1.5 billion lost, and nothing to show for it.

Thus, the Vogtle 3 & 4 CWIP and federal loan guarantee subsidies join a half-century of ratepayer and taxpayer subsidies to the nuclear power industry, as documented by Union of Concerned Scientists in 2011, to the tune of tens to hundreds of billions of dollars.

Wall Street investment firms knew better than to invest in nuclear construction projects, even before Three Mile Island Unit 2 melted down in 1979. The only way they will now, is to have the ratepayer and taxpayer safety nets of CWIP and federal loan guarantees in place first. That way, the ratepayers of Georgia, and the American people, will shoulder all the risks, not the Wall Street investment firms. Not even the business partners pushing Vogtle 3 & 4 would have much, if any, "skin in the game." Economists speak of "moral hazard" -- this is moral hazard, with catastrophic radioactive risks!

Given the Obama administration offered the $8.3 billion nuclear loan guarantee nearly four years ago, and now this latest delay, concerns continue to mount that the project is a financial house of cards, and will ultimately leave taxpayers holding the bag. Nuclear Watch South has called for taxpayers to express their concerns to decision makers, as has Beyond Nuclear.

"Thank you, Tallahassee, for making us pay so much for nothing"

Tampa Bay Times Business Columnist, Robert Trigaux, has let Florida state legislators and the Public Service Commission have it "for passing a law forcing Duke Energy customers to pay up to $1.5 billion in higher rates for a long proposed nuclear power plant in Levy County that will not be built...And no, Florida customers, you're not getting any of that money back."

Trigaux continues "The real reason the witless sheep in Tally let this happen is that power companies wanted to shift both the cost and the risk of building a nuclear plant on to its customers and off of its shareholders...Nowhere in the country do you see big Wall Street firms or banks lending billions of dollars to electric utilities for nuclear plants. The risk is too high. The recent history of building nuclear plants is plagued with fantastic delays and enormous cost overruns."

His column is an excellent exposé on "advance fee recovery" or CWIP -- Construction Work in Progress -- which is illegal in most states. In Indiana in the 1980s, for example, Citizen Action Coalition successfully sued the Hoosier State's would-be nuclear utilities for making illegal CWIP charges on ratepayers' electricity bills. The court ruled the utilities had to return hundreds of millions of dollars to ratepayers. Two nuclear power plants, at Bailey and Marble Hill, were stopped dead in their tracks.

In 1976, Kay Drey -- now a Beyond Nuclear board member -- helped lead a statewide referendum making CWIP illegal in Missouri, a law, enacted through grassroots democracy at its best, that still stands. In Iowa, Mike Carberry, of Green State Solutions and Friends of the Earth, has helped lead an environmental/ratepayer coalition which has successfully fended off nuclear lobbyists at the state capital for several years, blocking legalization of nuclear CWIP.

But CWIP has been made legal in several southeastern states, thanks to nuclear industry lobbyists' sway over state legislators and governors' mansions there. Floridians have now learned the hard way why nuclear CWIP is a really bad idea. But Georgians and South Carolinians are beginning to learn the same hard lesson. Even Georgia's Republican governor has suggested that Southern Co. shareholders should eat some of the major, all-too-predictible cost escalations at Vogtle 3 & 4; South Carolinians have seen a half-dozen rate increases in just the past few years, all going towards keeping up with Summer 2 & 3's skyrocketing pricetag.

"Worst Week Since Fukushima: 4 Setbacks in 3 Days are Latest Stumbles for Nuclear Power Industry"

Wall Street still won't touch nuclear power investment risks. And, since nuclear power loan guarantees have been largely blocked at the federal level, the nuclear power industry's long-trumpeted "Renaissance" is now a headlong retreat.

Former NRC Commissioner Peter Bradford, and energy economist Mark Cooper, both of the Vermont Law School, as well as Dan Hirsch of the Committee to Bridge the Gap, held a telephone press conference yesterday on the subject of "WORST WEEK SINCE FUKUSHIMA: 4 MAJOR SETBACKS IN 3 DAYS ARE LATEST STUMBLES FOR U.S. NUCLEAR POWER INDUSTRY." An audio recording of the news conference has been posted online.

The four setbacks in three days include: 1) the cancellation of two proposed new reactors at South Texas Project, because they violate U.S. law against foreign ownership of nuclear power plants; 2) Southern California Edison's threat that if NRC does not allow it to restart operations at its crippled San Onofre nuclear power plant, it will permanently shutdown both reactors there; 3) Duke Energy's cancellation of two proposed new atomic reactors at its Shearon Harris nuclear power plant in North Carolina; and 4) Florida's amendment to its previously highly permissive "advance cost recovery" or "Construction Work in Progress" law, via which ratepayers have been gouged to pay for proposed new reactors, when there is no guarantee the proposed new reactors will ever actually get built or generate electricity.

Peter Bradford also added the May 7th shutdown of Dominion's Kewaunee atomic reactor in WI -- despite the 20 years of operating license still left to it -- as another example of the "worst week since Fukushima" for the U.S. nuclear power industry.

Nuclear Relapse? Canceled! Nuclear power? Game over!

Peter BradfordWall Street turned its back on investing in nuclear power before the 1979 Three Mile Island meltdown, and will not invest again -- unless all financial risks are shifted to taxpayers and/or ratepayers -- explains Peter Bradford in the Bulletin of Atomic Scientists.

As reported by ScienceDaily in an article entitled "U.S. May Face Inevitable Nuclear Power Exit,"  the Bulletin of Atomic Scientists (BAS) has concluded its three part "Nuclear Exit" series with a look at the United States. The previous two installments examined the nuclear power phase-out in Germany, and the nuclear power status quo in France.

The BAS U.S. coverage features former U.S. Nuclear Regulatory Commission Commissioner, Union of Concerned Scientists board member, and Vermont Law School professor Peter Bradford's "How to close the U.S. nuclear industry: Do nothing," which concludes that, without massive taxpayer or ratepayer infusions, almost all proposed new reactors will not happen, and currently operating reactors will permanently shutdown by mid-century, unless the NRC rubber-stamps 80 years of operations (as opposed to the current, already risky 60).

In a section entitled "Picturing a U.S. phase-out," Bradford writes:

"The countries that have recently decided to phase out nuclear energy have done so by governmental fiat, complete with statutory deadlines both for individual reactors and for nuclear power in general. But no such sweeping action is really necessary in countries that have chosen to procure power generation through market mechanisms. The US experience demonstrates that absence of governmental intervention will create a glide path, determined in part by how long a country is prepared to allow its oldest reactors to operate, but in fact by the interplay between gas-driven electricity prices and the point in time at which older plants must make significant capital investments." (emphasis added)

Bradford points out that "By this standard, units at Crystal River and San Onofre--currently closed by major equipment failures--appear to be serious shutdown candidates, though they may survive, because they are located in Florida and California, respectively, states in which regulators can override market verdicts and impose their repair costs on customers."

In fact, Duke/Progress has thrown in the towel on Crystal River, announcing that it is now permanently shutdown. And Friends of the Earth, along with a groundswell of grassroots anti-nuclear activism in southern California, is doing all it can to keep San Onofre Units 2 and 3 shutdown for good, as well.

A spokesman for Dominion Nuclear admitted that the "purely economic reasons" which led to the utility's decison to close its Kewaunee atomic reactor on the Lake Michigan shoreline in Wisconsin -- the first atomic reactor shutdown announcement in 15 years in the U.S. -- was the inability to make needed, major safety repairs andturn a profit, given the competitive electricity market.

And Entergy Nuclear's brand new CEO, Leo Denault, admitted to Reuters that numerous of his "dirty dozen" atomic reactors -- especially the merchant plants (those in deregulated, competitive electricity markets) -- face tough economic challenges, due to costly upkeep (a.k.a., essential safety-significant repairs and component replacements).

Reuters reported: "[Denault] said some plants are in the more challenging economic situations for a variety of reasons, including 'the market for both energy and capacity, their size, their contracting positions and the investment required to maintain the safety and integrity of the plants.'" (emphasis added)

At its Palisades atomic reactor on the Lake Michigan shore in southwest Michigan, Entergy has chosen to foregonumerous major, needed repairs (such as replacing the badly corroded reactor lid; replacing the deteriorated steam generators, for the second time in the plant's history; dealing with the worst embrittled reactor pressure vessel in the U.S.; making needed fire protection upgrades, etc.) for six long years now, apparently in order to "balance the books" -- that is, to prioritize profits (and executive salaries, and shareholder returns) over public safety.

UBS Investment Bank equity analyst: 'Unlikely' Entergy will continue Vermont Yankee

A Bathtub Curve for Nuclear Accidents (compliments of David Lochbaum, Union of Concerned Scientists), so-called because of its shape. While the 1979 TMI meltdown and 1986 Chernobyl explosion were examples of "break-in phase" disasters, the 2000 Indian Point steam generator tube rupture, and the 2002 Davis-Besse reactor lid corrosion hole scandal, are examples of "break-down phase" near-misses.The Brattleboro Reformer has reported that UBS Investment Bank equity analyst Julien Dumoulin-Smith has issued a white paper concluding that it may not be in Entergy's best financial interests to continue to operate its Vermont Yankee (VY) nuclear power plant. The article reports that Entergy stock has been given a "neutral rating" by UBS; that a number of Entergy's smaller, "merchant" atomic reactors, especially VY and FitzPatrick in Upstate NY, are not likely to generate much profit in the next two years, and by 2015-2016 run projected deficits. At VY, this is due to the expiration of purchase price agreements, as well as new taxes levied by the State of Vermont (recently upheld by a federal court against a legal challenge by Entergy), which since Feb. 2010 has officially called for VY's permanent shutdown.

"How profitable is the nuclear segment? It's not very. Entergy's nuclear portfolio doesn't generate a lot of cash," said Dumoulin-Smith.

"Notably, we believe both its NY Fitzpatrick and Vermont Yankee plants are at risk of retirement given their small size," stated the report.

Other relatively small sized, single unit, "merchant" reactors owned/operated by Entergy include the problem-plagued Palisades in Michigan, and Pilgrim in Massachusetts.

Dominion Nuclear's recently announced plan to close its small, old, single unit Kewaunee atomic reactor in Wisconsin, due to "economic reasons," has led to widespread speculation about the next domino to fall. A Dominion spokesman let slip that the utility was no longer able to afford needed major safety repairs at the four decade old reactor, deep into its "break-down phase" (see "Bathtub Curve of Nuclear Accidents," referring to the graph's shape, above left, compliments of David Lochbaum, Nuclear Safety Project Director, Union of Concerned Scientists).

Kewaunee's announced closure, and the rumors at VY and FitzPatrick, comes despite the fact that the U.S. Nuclear Regulatory Commission (NRC) has rubberstamped 20-year license extensions at the four decade old reactors.