By Hannah Northey and Kristi E. Swartz, E&E News reporters Published: Thursday, April 12, 2018
Utilities developing the nation’s first nuclear reactors in decades didn’t have to pay fees designed to prevent taxpayer risk when they secured a $3.7 billion government-backed loan from the Trump administration, new records show.
When Energy Secretary Rick Perry approved a second conditional DOE loan guarantee for a Southern Co. subsidiary and other firms building the Vogtle reactors in Georgia last year, the agency did not require them to pay potentially tens of millions of dollars in “credit subsidy fees,” according to documents obtained by E&E News through the Freedom of Information Act.
DOE said the decision to make the fees nil for Southern Co. subsidiary Georgia Power and Oglethorpe Power Corp. was based on an Office of Management and Budget calculation that takes into account the developers’ creditworthiness and ability to pay back the loan, as well as the expectation there would be no loss from granting the loan.
The agency waived the same fees in 2014 under the Obama administration when former Energy Secretary Ernest Moniz approved an $8.4 billion loan guarantee for the same project near Waynesboro, Ga. (Greenwire, April 21, 2014).
Nuclear advocates and analysts say the calculation is accurate and expected given the parent company’s size and standing in regulated markets.
But critics counter that taxpayers and Georgia’s utility customers could be exposed to significant financial risk with little or no consequence for Vogtle’s owners or Georgia Power’s shareholders. They also point to the recent cancellation of the V.C. Summer nuclear plant in South Carolina and the demise of the engineering firm Westinghouse Electric Co. as proof no company is too big to fail.
“Georgia Power has put less money down to build its new nuclear power plants than the average American does to buy a home,” said Mindy Goldstein, director of the Turner Environmental Law Clinic and Environmental and Natural Resources Law Program at Emory University School of Law.
While Georgia Power has said construction of the Vogtle reactors is ahead of the company’s new schedule, the project has seen its share of challenges. Vogtle’s original price tag in 2008 was roughly $14 billion, for example. The reactors are now five years behind their original schedule with a total cost of $27.1 billion.
Liz Coyle, executive director for the consumer group Georgia Watch, said customers in the Peach State could ultimately be on the hook.
“The DOE’s determination of $0 credit subsidy cost might very well signal their understanding that Georgia’s electric customers are the backstop for default since the owners and the Georgia Public Service Commission have agreed that customers will be forced to pick up the tab no matter how high the cost,” said Coyle.
Georgia Power spokesman Jacob Hawkins said that not having to pay a credit subsidy saves its customers money. The utility would be able to recoup that fee from customers through rates, he said. Hawkins said being exempt from paying the credit subsidy is a testament to Georgia Power’s strong credit rating, which stems from a “constructive regulatory environment.”
Loan guarantees
The Trump administration has walked a fine line of calling for more nuclear power even as the president proposed to eliminate the loan guarantee program in his most recent budget proposal.
With that background, Southern Co. has both advised the administration and lobbied for federal support for new reactors.
The company’s CEO, Tom Fanning, has repeatedly said that finishing the project in Georgia is critical for national security.
“It’s clear to us, and it’s clear to D.C. … continuing to maintain a viable presence in nuclear development was a national security issue,” Fanning said in a recent interview with E&E News.
While Vogtle is moving forward, other loan guarantees sought under the Energy Policy Act of 2005 from DOE have not materialized.
For example, Constellation Energy Group — now a division of leading nuclear power generator Exelon Corp. — backed away from plans to build a reactor in Maryland after DOE asked for an initial $880 million upfront payment in fees, an amount calculated by OMB, to protect against a potential project default.
Activists have for years called on DOE to divulge the details of the loan guarantees, namely the credit subsidy fees — an amount that represents the “price tag” nuclear developers must pay to the federal government to cover the risk that a project is not completed and that the government may have to repay the project’s lenders.
Critics have been quick to point to Vogtle’s difficulty meeting timelines and budget goals. And the company’s main contractor, Westinghouse, went bankrupt a year ago. Georgia Power and the public power companies needed to secure a number of financial incentives to finish the reactors, whose price tag was well above $20 billion.
A key piece was payment from Westinghouse’s parent, Toshiba Corp., of $3.7 billion in parent guarantees. Without that piece, “it would have been exceedingly difficult to go forward,” Fanning said.
He frequently touts Perry’s support of the Vogtle project, while maintaining the Energy secretary is just one of the key Washington players.
Oglethorpe Power executives also recently touted federal government support when discussing details of their conditional loan guarantee, which they hope to close on by the end of the second quarter.
“This brings a lot of value to our members,” said Betsy Higgins, Oglethorpe Power’s chief financial officer, during a quarterly presentation Monday.
The loan guarantee comes with conditions. For example, DOE needed to approve a December agreement with Toshiba that let the utilities cash in the rest of the company’s payment.
Toshiba’s guarantee is a part of the security package that underlies those loan guarantees, so agency approval is needed.
DOE is reviewing some amendments to the project, including making Bechtel Corp. a major contractor, Higgins said Monday. Right now, Oglethorpe cannot draw on its current loan guarantee until that review is finished.
“The spigot has been turned off for new advances,” she said. “We expect these conditions to be met by the end of the second quarter.”
Oglethorpe expects to draw on the first DOE loan through the end of 2019 and then start on the second amount. It would use that money through the end of 2022, when Vogtle’s reactors are supposed to start producing electricity.
The Municipal Electric Authority of Georgia is also pursuing an additional loan guarantee for up to $415 million.
An April 11 filing about Vogtle said MEAG continues to negotiate with DOE and includes boilerplate language about the loan guarantee’s uncertainty.
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