DOE played favorites with Vogtle nuke loan guarantee, group alleges

Thursday, May 17, 2012 7:02 PM ET Exclusive

DOE played favorites with Vogtle nuke loan guarantee, group alleges

By Matthew Bandyk

The U.S. Department of Energy demonstrated favoritism by helping Southern Co. subsidiary Georgia Power Co. secure a "below-market rate" loan guarantee to build two new reactors at the Vogtle nuclear power plant, according to the Southern Alliance for Clean Energy, citing a document obtained through the Freedom of Information Act and released May 17.

"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," Southern Alliance said in a statement statement.

A Jan. 15, 2009, letter letter, one of many documents obtained by the group, reveals that then-DOE Loan Programs Office Executive Director Jonathan Silver told Georgia Power Assistant Treasurer Earl Long that his office estimated the credit subsidy fee that the utility would have to pay to receive the loan guarantee would be in the range of $17 million to $52 million, or about 0.5% to 1.5% of the utility's guarantee total of $3.46 billion.

The loan guarantee was awarded awarded to Georgia Power and two of its partners in the project in February 2010, but the final conditions are still under negotiation under negotiation with the DOE.

Southern Alliance said other documents indicate that Georgia Power's partners were offered much higher credit subsidy fees, despite having smaller ownership shares in the new nuclear units. According to the statement, Oglethorpe Power Corp.'s fee was 2.5% to 4.3%, or $70 million to $132 million, and the Municipal Electric Authority of Georgia's fee was 5% to 11.1%, or $108 million to $180 million. The city of Dalton, Ga., also is a Vogtle partner.

In addition, Southern Alliance said the 0.5%-to-1.5% fee for Georgia Power was insufficient to cover the risk of default if the Vogtle project ran into problems. "The DOE should carefully study the experience of the first wave of nuclear power when scores of plants were canceled, for relevance to Vogtle," Institute for Energy and Environmental Research President Arjun Makhijani said in the statement. "That experience suggests that the probability of default due to non-completion could be far greater than 10%."

In 2010, Constellation Energy Group Inc. pulled out pulled out of its federal loan guarantee deal with the DOE after being told it would have to pay an 11.6% credit subsidy fee, leaving EDF Group to search for a new partner to build the Calvert Cliffs 3 nuclear reactor.

The documents were released as part of a settlement that Southern Alliance reached with the DOE following two years of litigation over exactly how much information the agency had to supply. The U.S. District Court for the District of Columbia in March ruled ruled that the DOE would have to disclose some information, including information about the credit subsidy fee, but not all of what Southern Alliance had requested.

The group avoided an appeal of that ruling and received more documents than it would have, such as information about the initial loan guarantee term sheets, as a result of the settlement, Turner Environmental Law Clinic Director and Southern Alliance legal representative Mindy Goldstein said.

According to Goldstein, the group is not finished seeking the release of confidential documents related to the Vogtle loan guarantees. She said that on April 27 she filed a new Freedom of Information Act request to find out if the credit subsidy fee has increased since 2009.

"There will usually be differences between preliminary credit subsidy estimates and the final determination of credit subsidy cost. These differences may be material," Silver said in his 2009 letter to Georgia Power.

Southern Co. spokesman Jeffrey Wilson declined to confirm if the numbers cited by the Southern Alliance were accurate, or if the credit subsidy fee has increased. The negotiations with the DOE over the final loan guarantee should be resolved in the next few months, he said, but they remain confidential. "Completion of Vogtle units 3 and 4 is not dependent upon receipt of the loan guarantees," he said.