The builders of the first new U.S. nuclear power plant in more than a generation – barely under construction but already over budget – are nearing an agreement with the Department of Energy for a massive federal loan whose cost assumes the industry will suffer almost no defaults over the next three decades.
It is the first of a number of new nuclear power plants on the drawing boards that are angling to take advantage of the loan program, which is an obligation of the U.S. Treasury subject to the debt limit.
At the same time, the electric utilities building the nuclear power plants, which are mostly in the Deep South, have lobbied Republican-led legislatures in the region to pass or consider laws that would require consumers to pay for the loans long before the plants generate a single kilowatt-hour of electricity.
The issue, which is causing controversy in at least a half dozen state legislatures, is called “construction work in progress” or CWIP, a financing technique that caused electricity rates to soar in the 1970s when the last generation of nuclear plants built in the U.S. went far over budget. Higher construction costs from increased safety standards in the wake of the 1979 near nuclear meltdown at Pennsylvania’s Three Mile Island put an end to nuclear power plant construction for over 30 years.
Rising electricity demand, allegedly safer designs, industry lobbying and the allure of a non-carbon-polluting source of energy has triggered a “nuclear renaissance” in recent years. The 2005 Energy Act, signed into law by President George W. Bush, authorized $18.5 billion in loans for new nuclear construction.
Since the law passed, however, the Great Recession has flattened the growth of electricity demand, and natural gas has emerged as a less costly alternative. Yet a number of new nuclear plants, mostly planned before the downturn, are proceeding.