Georgia nuclear power plant could be Solyndra redux, report says
A report by two energy-consulting firms says the US government has not protected US taxpayers well enough against the risks of federal loan guarantees to a new nuclear power project.
Construction of the first newly licensed US nuclear power plant in decades could become a "Solyndra-like" debacle thanks to billions in federal loan guarantees whose terms appear too weak to protect taxpayers, according to one group’s analysis of internal documents released by the US Department of Energy.
The two-reactor $14 billion Vogtle plant being built in Georgia is seen as a test of the US nuclear industry's planned "renaissance" with a new nuclear reactor design and updated construction processes all aimed at cutting time and costs.
But two Massachusetts-based energy-consulting firms, Earth Track and Synapse Energy Economics, say the $8.3 billion in federal loan guarantees backing the project were crafted with excessively favorable financial terms for the recipient companies, weak federal oversight, and possible political interference in the loan-guarantee process.
The two firms analyzed hundreds of Energy Department e-mails and financial documents released earlier this month to the Southern Alliance for Clean Energy (SACE), a green-energy watchdog group that won access to them in a Freedom of Information Act lawsuit.
Officials for the Obama administration and Southern Company, the company that will operate the plants, say there's nothing improper going on.
In their report, Earth Track and Synapse say the documents reveal:
- "Potentially troubling" conversations between political appointees and borrowers over loan terms and getting the deal done.
- Credit subsidy payments, the amount that companies pay in compensation for the government loan guarantees, that appear far too low to offer adequate protection to taxpayers in the event of a default.
- An "over-reliance on external contractors" for key risk evaluations.
- Continued tinkering with credit subsidy assessment tools even after credit subsidy estimate letters were sent to borrowers, leaving taxpayers with more risk than necessary.
“Despite widespread redactions, the documents released indicate significant problems with the DOE’s loan guarantee process," said Doug Koplow, report author and founder of Earth Track in a statement.
Under the category of "political interference," the report cites one e-mail from DOE staff revealed tight timelines to “move our first nuclear power deal forward.” Other e-mails showed direct contact between Vogtle project borrowers and Secretary of Energy Steven Chu. And a 2010 e-mail from Jonathan Silver, then-executive director of loan programs at the US Department of Energy, noted that “We didn't deal with shaw" – the company slated to do much of the reactor construction – "The white house did.”
The discussions represent "a potentially troubling blurring of financial risk review, political discussion, and potential modification of loan terms," the report says.
In a conference call, Mr. Koplow said there is no evidence of wrongdoing or any "smoking gun." But the e-mails do suggest, they say, that high level figures in the administration were in a position to exert political influence.
The Department of Energy was unable to respond by press time to a request for comment. But one administration official, speaking on condition of anonymity because he was not authorized to speak to the press, said there's no impropriety in the documents.
"These are people who just don't like nuclear power," he says. "What they're doing is throwing out a buzz word, Solyndra, to get attention. Let's just throw out that word. They're throwing accusations out there, but these decisions were made on the merits by career officials. The idea that Secretary Chu would want to be monitoring this deal – there's nothing wrong with that."
Southern Company officials say the process is routine.
"Loan guarantees were developed to provide an incentive for new nuclear development in the U.S.," writes Tim Leljedal, a Southern Company spokesman in an e-mailed statement. "There continues to be constructive dialogue in the Vogtle 3&4 loan guarantee negotiations between the company and the Department of Energy. We are committed to financing options that will serve the best interests of our customers, and – as long as the terms and conditions of DOE loan guarantees serve those interests – we will continue pursue that option."
"Details of the ongoing negotiations remain confidential," he adds.