Congress Ponders Guaranteeing Nuke Energy Construction Loans

August 8th, 2011
in econ_news

Econintersect:  The Congressional Budget Office (CBO) produced a study on the costs and rationale for government involvement in expanding nuclear energy output in the USA.

Among the goals often posited for federal energy policy are to enhance energy security by diminishing the nation’s reliance on foreign oil, to meet a growing demand for electricity, and to reduce greenhouse gas emissions by encouraging investment in clean energy production and technologies.

Follow up:

To help further such objectives, the Energy Policy Act of 2005 (Public Law 109-58) established incentives to encourage private investment in innovative technologies, including advanced nuclear energy facilities.  Much of the support for such investment is provided under title XVII of that legislation, which offers federal loan guarantees for the construction of nuclear power plants and other types of “alternative” energy facilities.

The CBO concluded that since the  government would charge sponsors a fee that is meant to recover the guarantee’s estimated budgetary cost, that the overall costs to the taxpayers should be zero.  However, what was interesting in this study was a look at the chances of default.

The USA's public utilities credit ratings are surprisingly low as a group.  Although government guarantees allow utilities to finance at lower prices - still, the charges to the utility for the goverment providing the guarantee should vary based on the credit rating.

The study also provided historical default rates based on credit ratings.

source: CBO

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