By Peter A. Bradford
Over the last half century, the government has repeatedly kept information secret because it would be embarrassing.
President Obama wants the federal bureaucracy to reform this harmful tradition. The Department of Energy website proclaims, “From his first day in office, President Obama has pushed to make the federal government more open and more accessible to the American people. The Department of Energy is proud to be doing our part.”
But DOE’s definition of “doing our part” seems to entail subverting the President’s directive. The agency is pulling a cloak of secrecy over complex government financial transactions already lacking in transparency.
The federal government has offered taxpayer funded loan guarantees for new nuclear reactor construction. These guarantees mean that you and I will repay the lender if the project developers cannot. The first guarantee, for $8.3 billion, has been conditionally offered for two Georgia reactors. More guarantees are proposed — at a total of $54.5 billion — which would amount to more than $500 for every American family. Some in Congress want unlimited nuclear loan guarantees, which would translate to unlimited taxpayer exposure.
But will those American families know the criteria for issuing these loan guarantees? Not on your life. They won’t even be told what fee is being charged to compensate them for taking on the default risk.
According to the DOE, the size of the subsidy payment will be determined through “a negotiation” involving the Office of Management and Budget, the DOE and the loan guarantee recipient. The secret final figure will be determined by a “consensus” of this “partnership.”
That information is “proprietary” and “will remain confidential.” It will not be made public to avoid a situation where one recipient has grounds to complain that it didn’t get a fair deal compared to another recipient. Apparently DOE would like to be able to charge nuclear developers a low fee without any backtalk from developers of renewable energy or energy efficiency projects that might be charged several times as much.
Few, if any, new reactors will be built without taxpayer-backed loan guarantees because the financial risk is more than private lenders are willing to take on.
The nuclear industry is advocating for a fee of 1 percent of the guarantee. (For the $8.3 billion federal guarantee for the Georgia reactors, that would mean a payment of $83 million.) For every $100 that an average American family is risking, the Treasury would collect $1.
But what are the chances of a default? Half of all the reactors that receive U.S. construction permits were cancelled before completion. More than half of those completed cost at least twice the original estimate. Cost estimates for new reactors have tripled in the last decade; while nuclear power’s major low carbon competitors continue to fall.
Even in the heyday of the now notorious “credit default swap,” knowledgeable investors wanted no part of insuring against nuclear default, especially with fees of $1 per $100 at risk. No wonder DOE, which has a poor record of managing credit support programs, intends to keep the criteria and the fee secret.
But who is really hurt by this secrecy? First would be the public, who will not be able to quantify the extent to which the government has exposed American families to this uncompensated risk. Second, are the builders of other forms of power generation and energy efficiency, who will not be able to prove what now seems very likely: that DOE intends to charge less for guarantees to highly risky nuclear ventures than it will charge for loan guarantees to more secure renewable ventures. Third, are the state utility regulators, who may be unable to set rates based on actual costs if loan guarantee recipients can use DOE’s cloak of secrecy to claim that they cannot disclose those costs in a public forum.
Secretary Steven Chu’s Openness Directive on the DOE web page concludes, “I encourage you to review the information on these pages and share your ideas with us. I look forward to reading your thoughts and to incorporating them into our effort moving forward.”
Please take him at his word.
Bradford is a former commissioner of the US Nuclear Regulatory Commission and former chair of the New York and Maine utility regulatory commissions. He is currently an Adjunct Professor at the Vermont Law School.
Copyright © 2010 by the American Forum. 7/10
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