May 23, 2012 [Atlanta, Ga.] – Late last week Southern Alliance for Clean Energy (SACE) successfully negotiated the release of hundreds of pages of secret nuclear loan guarantee documents to settle Freedom of Information Act (FOIA) litigation spanning nearly two years. These documents reveal that one of the nation’s largest utilities, Southern Company, was aggressively pursuing controversial federal nuclear loan guarantees at significantly below market rates.
One of the most substantial revelations revealed in the recently uncensored documents centers around the credit subsidy fee. The credit subsidy fee represents the “price tag” a utility must pay to the federal government for the loan guarantee, and it is calculated based on the borrower’s risk of default.
According to the uncensored credit subsidy cost documents which showed a 0.5-1.5% fee for Southern Company, their credit subsidy cost for their share of the $8.3 billion loan guarantee would be only $17 to $52 million. Southern Company’s largest subsidiary, Georgia Power, is majority owner. The uncensored documents also reveal that the other major utility partners were offered a conditional loan guarantee with substantially higher credit subsidy fees. Oglethorpe Power’s fee was 2.5-4.3% for a range of $70-132 million and MEAG’s fee was 5-11.1% for a range of $108-180 million. No one outside the nuclear industry itself has advocated for a subsidy fee as low as the one initially offered to Southern Company in the recently released documents.
“It is outrageous to learn that Southern Company was conspiring to secure below-market rate loan guarantees, which would have put billions of dollars of taxpayer money at risk, for a controversial nuclear plant in Georgia,” said Dr. Stephen Smith, executive director of Southern Alliance for Clean Energy. “It is still unclear why the Department of Energy (DOE) has entertained this level of favoritism to this particular company. More information needs to be revealed about any terms of the loan guarantees that have been proposed since the commitments were initially made in order to learn whether any undue influence was brought to bear on DOE to accept this high-risk venture on the backs of taxpayers.”
These documents provide crucial information related to the $8.3 billion U.S. taxpayer-financed nuclear loan guarantees that were conditionally committed to Southern Company and its utility partners in February 2010. The guarantees would support the utility companies’ efforts to build two new Toshiba-Westinghouse AP1000 design nuclear reactors at an estimated cost of over $14 billion at the existing Plant Vogtle site near Waynesboro, Georgia.
“We are extremely pleased to have negotiated a settlement for our client that finally provides those concerned with the loan guarantee program the information that should’ve been public from the beginning,” said Mindy Goldstein, director of the Turner Environmental Law Clinic, who represented SACE in the FOIA litigation. “The public can now meaningfully evaluate the loan guarantee offers and determine whether Southern Company was given preferential treatment at the risk of taxpayer dollars.”
“It is past time DOE start shedding light on the troubled loan guarantee program,” said Ryan Alexander, president, Taxpayers for Common Sense. “They are playing hide-the-ball with outdated and redacted materials that only get us so far in understanding the real risks taxpayers are assuming with these loan guarantees. The credit subsidy cost these documents reveal for the Vogtle project is absurdly low. It is now years out of date and little information on how it was justified is provided. This information shows that taxpayers should be even more worried about signing off on an $8.3 billion loan guarantee for the Vogtle reactor.”
“A one percent fee doesn’t even begin to reflect the risk of default,” declared Arjun Makhijani, president of the Institute for Energy and Environmental Research. “With rising costs of Vogtle, low natural gas prices, and declining growth rates for electricity, the risk of default is far greater. Taxpayers deserve to see the basis on which the ridiculously low fee for Southern Company was calculated. The DOE should carefully study the experience of the first wave of nuclear power when scores of plants were cancelled, for relevance to Vogtle. That experience suggests that the probability of default due to non-completion could be far greater than 10%.”
Recent news reports suggest the agency may have increased the credit subsidy fee from its initial offers. If true, this indicates that DOE may now believe investment in nuclear power plants is riskier than originally estimated. This possible increase in the credit subsidy fee by DOE could negatively impact the utilities’ ability to finance the reactor project as originally proposed. Just last week, concerned parties tracking the proposed expansion highlighted possible cost overruns nearing $900 million along with scheduling delays. SACE has filed a FOIA request to unearth what these new estimates are in order to understand what risks taxpayers still face.
“My organization urges that the loan guarantee for Plant Vogtle be terminated,” said Dr. Smith. “Despite this newly revealed information, and perhaps because of the ongoing controversies resulting from the nuclear accident at the Fukushima Dai-ichi complex in Japan, the terms of the updated loan guarantee deal are still being held in secret. We call for an investigation into this sweetheart deal and for all records of the negotiations and political influence to be made public. We believe this is a high-risk project, far from completion, that puts both taxpayers and ratepayers at risk. We believe there are safer, cleaner, more-cost effective alternatives to generating electricity.”
Criticism of the loan guarantee program has abounded for several years. Many reports by various government agencies have stated that the DOE has mismanaged the loan guarantee program. To view the newly released, uncensored documents that Southern Alliance for Clean Energy has made publicly available, go to http://www.cleanenergy.org/news-and-reports/policy-room/legal-documents/. # # # Southern Alliance for Clean Energy is a not-for-profit, non-partisan organization working to promote responsible energy choices that solve global warming problems and ensure clean, safe, healthy communities throughout the Southeast. www.cleanenergy.org