The invisible hand of our free market economy has been hard on the commercial nuclear industry. According to the Energy Information Administration, “Existing U.S. nuclear power generating plants operate under increasingly competitive market conditions brought on by relatively low natural gas prices, increasing electricity generation from renewable energy sources, and limited growth in electric power demand.” Consequently, several nuclear power plants have closed prematurely.
Last year, Oyster Creek Nuclear Generating Station closed, reducing the number of operating nuclear power reactors in the United States to 98. More plants are expected to close this year. However, since the VC Summer project collapsed in 2017, only two nuclear power reactors (Vogtle project) remain under construction.
In an effort to encourage the development and construction of new nuclear power plants, a network of subsidies is available for advanced nuclear projects. Even with subsidies such as federal loan guarantees and tax breaks, nuclear construction projects continue to be plagued with schedule delays, cost overruns, and expensive bailouts by taxpayers and ratepayers. In fact, instead of serving as a means of risk reduction, subsidies have acted as a gateway for the transfer of risk, from corporations and utilities that build and operate nuclear plants, to unsuspecting taxpayers and ratepayers.
For example, construction began in 2013 on two advanced nuclear reactors in Georgia (Vogtle project). Commercial operation was expected to begin in 2017. The initial project cost estimate was $14 billion.
The project has been plagued with cost overruns and schedule delays; moreover, the project is supported with $12 billion in taxpayer-backed loan guarantees. The current project cost estimate to completion is $27 billion with a revised operational date of 2022. According to a 2018 article by The Atlanta Journal-Constitution, “The [Vogtle] project, which currently costs $200 million a month, is expected to cost ratepayers nearly $4 billion in financing costs and income tax expenses upon completion.”
Unfortunately, the old adage, “If at first you don’t succeed, try, try again” is a common theme with this industry, especially if taxpayers and ratepayers bear the financial risk. As I mentioned in a November op-ed, the Idaho Falls City Council entered into a high-risk investment to develop and construct a first-of-a-kind advanced nuclear power plant that has never been built and operationally tested. The project is referred to as the Carbon Free Power Project (CFPP) – also known as the Small Modular Reactor (SMR) project. All council members present voted in favor of the CFPP and the associated contract.
A closer look at the CFPP contract, tainted with obscure fill-in-the-blank budgets and questionable terms, reveals that the project consists of two basic phases – “licensing and development” and “construction.” According to Idaho Falls Power Board of Directors meeting minutes, the preliminary project cost estimate is $4.8 billion, apparently putting Idaho Falls Power ratepayers on the hook for at least $80 million. Fortunately, the City of Idaho Falls has the option to “walk away” from the contract during the licensing and development phase for several reasons, including project cost. Unfortunately, the contract does not include a “walk away” option during the construction phase — the Achilles heel of nuclear power plant projects.
So, who is responsible for protecting the interests of ratepayers? Idaho Falls Power is a self-regulated municipal electric utility. The Idaho Falls Power Board of Directors consists of Idaho Falls council members that are elected to represent Idaho Falls residents. Furthermore, the board of directors has a fiduciary duty to act in the best interest of ratepayers. Is entering into a high-risk investment through an open-ended contract acting in the best interest of Idaho Falls Power ratepayers?