Even local Republicans are turned off by degree of corporate welfare for nukes...

[kristopher]

Nuclear power: Learn from Florida’s mistakes
By Sen. Mike Fasano

I understand that the Iowa General Assembly is considering legislation to allow early cost recovery for new nuclear power generation. I write to share how we in Florida learned the hard way that such legislation is bad for consumers and bad for our state and why I went from being a supporter of similar legislation to the prime sponsor of legislation to repeal it.

As a staunch advocate for consumers here in Florida, I believe that protecting our citizens’ pocket books, particularly in these trying economic times, is of the utmost importance. In Florida, allowing utilities to recover the costs of a new nuclear power plant before the plant was even placed in service has been unfair to consumers and bad public policy.

Allowing utilities to charge customers for new power plant construction work in progress will hurt already strapped Iowa consumers. Florida’s experience promises large increases in electric bills. According to Progress Energy filings with the Florida Public Service Commission, an average Progress customer could see an estimated increase of nearly $50 per month by 2020 from the Levy County project capital additions. People with bigger homes or business will pay even more.

I am a conservative, pro-business legislator. In 2006, the Florida Legislature passed a bill — SB 888 — that included provisions allowing utilities to charge ratepayers for new power plant construction costs before a plant is put in service. This bill is similar to provisions being considered now in Iowa to allow advanced cost recovery.

I voted for our legislation in 2007...

http://thegazette.com/tag/florida-state-sen-mike-fasano/

If you aren't familiar with this fission industry strategy for shifting risk to the public, you might want to google 'Construction Work In Progress, also known as 'CWIP'.

[TheWraith]

1. Um, a company raising their prices to account for new spending isn't "corporate welfare."

You might want to revisit the dictionary.

[bananas]

3. In this case it is, and it's been banned by many states because it's so irresponsible. nt

[kristopher]

4. Rasing prices? Raising prices on what? That implies a delivered product that we don't have.

If someone wants to build a wind farm and sell the electricity, they are required to risk their funds building the wind farm BEFORE they start charging for electricity.

CWIP programs are consumer rape of the first order.

You asked for an example of you supporting cockamamy pronuclear schemes - well here it is.

[TheWraith]

6. Damn, you're still smarting from me proving you wrong days ago?

That you would grab onto something so pathetic? It must really have burned you. Never mind the fact that you're moving the goalposts so far in the effort to deliver a "win" that they're not even in the same town anymore--you seem to be redefining "support," "nuclear," and "schemes." :eyes:

The fact remains that the OP is full of it. "Corporate welfare" implies that they're getting something from the government or the taxpayers, which they aren't. But truth isn't the point, the point is to try and pretend like nuclear power gets tons of subsidies that it doesn't, and that therefore it's somehow evil because it's not quite as cheap as coal. Never mind the fact that nobody on the other side wants to apply that standard to wind and solar power, which get many times the subsidies that nuclear does, for vastly less energy output.

[kristopher]

7. Answer: Make a lot of misleading statements that are irrelevant.

Question: How does someone try to divert a topic when they are wrong?

Since you are trying to change the subject, I'll stay focused. This link provides both pro and con arguments and serves as a starting point.
http://www.citact.org/newsite/modules.php?op=modload&name=News&file=article&sid=272


This is the CBO estimate predicting greater than a 50% default rate for nuclear power plants.

For this estimate, CBO assumes that the first nuclear plant built using a federal loan guarantee would have a capacity of 1,100 megawatts and have associated project costs of $2.5 billion. We expect that such a plant would be located at the site of an existing nuclear plant and would employ a reactor design certified by the NRC prior to construction. This plant would be the first to be licensed under the NRC’s new licensing procedures, which have been extensively revised over the past decade.

Based on current industry practices, CBO expects that any new nuclear construction project would be financed with 50 percent equity and 50 percent debt. The high equity participation reflects the current practice of purchasing energy assets using high equity stakes, 100 percent in some cases, used by companies likely to undertake a new nuclear construction project. Thus, we assume that the government loan guarantee would cover half the construction cost of a new plant, or $1.25 billion in 2011.

CBO considers the risk of default on such a loan guarantee to be very high—well above 50 percent. The key factor accounting for this risk is that we expect that the plant would be uneconomic to operate because of its high construction costs, relative to other electricity generation sources. In addition, this project would have significant technical risk because it would be the first of a new generation of nuclear plants, as well as project delay and interruption risk due to licensing and regulatory proceedings.

Note the price - $2.5 billion was to be only for the first plants. Future plants were, according to the assumptions provided by the nuclear industry, expected to have lower costs as economy of scale resulted in savings. In fact, since the report was written (2003), the estimated cost has risen to an average of about $8 billion. Wonder what that does to the “risk is that … the plant would be uneconomic to operate because of its high construction costs, relative to other electricity generation sources”?

Does that risk diminish or increase when the price rises from $2.5 billion to $8 billion? Well, investors think it rose, because the government had to raise the loan guarantees to 80%, and lend the money from a government development bank. So instead of 50% we as taxpayers are at 80% exposure, and still it isn't enough; which is why they need to put the ratepayers on the hook for the rest with CWIP.

The CBO also goes into what happens after those plants default, saying, "Assuming the nuclear plant is completed, we expect it would financially default soon after beginning operations, however, we expect that the plant would continue to operate and sell power at competitive market rates."

What that means is that the ratepayers are still going to be on the hook for the 20% that they took on as unwilling investors, but they don't have the government to bail them out and depreciate their independently financed portion of the asset.

Those "competitive market rates" BTW will now be set to keep renewable competition from getting established. In case you doubt this 'crowding out effect' on renewables, we can then look at Cooper's paper from last year where the effect is well documented.
Policy Challenges of Nuclear Reactor Construction, Cost Escalation, and Crowding Out Alternatives
Lessons from the US and France for the Effort to Revive the U.S. industry with Loan Guarantees and Tax Subsidies
http://www.vermontlaw.edu/Documents/IEE/20100909_cooperStudy.pdf

[kristopher]

9. Where did you go?

You seemed awfully sure of your beliefs; was the additional information sufficient to show that the CWIP practice is, in fact, a method of shifting risks from investors and vendors to ratepayers?

[madokie]

10. A tail between legs comes to mind

[bananas]

2. This kind of financing was banned for good reason. nt

[kristopher]

5. That hasn't stopped them.

As indicated in the OP the latest round of Republican state take-overs is pushing this through in several states. The disillusioned (R) in the OP tells why - he was acting on bad information. I'd love to hear a detailed account from him of where that bad information originated, wouldn't you?

[kristopher]

8. Cooper paper explaining CWIP

Risk, No Reward for Taxpayers and Ratepayers: The Economics of Subsidizing The 'Nuclear Renaissance' With Loan Guarantees And Construction Work In Progress
Mark Cooper(November 2009)

...II. ASSESSING THE ECONOMIC RISK OF NUCLEAR REACTORS
A. THE IMPORTANCE OF PROPERLY ALLOCATING RISK

The recent meltdown of the financial sector is a stark reminder of the important role that the allocation of risk plays in the economy. Financial institutions made loans that were too risky and created products that were so complex they could not properly evaluate or price their risk, while failing to keep adequate assets on their balance sheets to weather the storm when the loans went into default and the obligations could not be paid. The magnitude of the failure to properly allocate and price risk was so great that the federal government felt compelled to bail the banks out, rather than risk a complete collapse of the banking system. Allowing parties to shift risk in this way and thereby avoid responsibility for it, is considered a “moral hazard” that induces irresponsibly risky behavior. That is exactly what the nuclear industry is trying to do with its campaign to secure loan guarantees and payments for construction work in progress.

Consumers generally receive goods and service when they pay for them. Companies invest in the plants and equipment and pay for the materials and labor necessary to produce the goods and services that they then sell to consumers and recover their investment, as well as the cost of production, in the prices they charge. They raise the funds to start the business and keep it going in capital markets by issuing stock to equity owners and bonds to debt holders. Equity owners are paid a rate of return on their investments, which reflects the risk they take, to induce them to buy stock in the company. The bondholders demand to be paid interest in exchange for lending money to the companies and they have the first claim on the assets of the company, should the company fail. The more risky the investment, the higher the rate of return and interest that is demanded by stockholders and bondholders.

The nuclear industry is seeking to alter this process in two ways. First, it wants the federal government to guarantee the loans they need to build the nuclear reactors. If the government guarantees the loans, then the industry will be able to sell the bond at a lower interest rate, since the chance that the government will not make good on the debt obligation, should the project or the company fail, is small. However, the government guarantee means the Treasury, and therefore taxpayers, are on the hook for the value of the loans should they go bad.

Second, the nuclear industry wants consumers to pay for the reactors before they are producing power – to pay construction work in progress – and provide assurance that all costs will be recovered, even if the reactors never come online. The utilities insist that the construction work in progress charged to ratepayers also include the return on equity that the utilities normally earn by taking the risk of building the plant, even though they have shifted the risk to ratepayers. If the plant is not built or suffers cost overruns, the ratepayers will bear the burden.

Thus, both of

http://www.vermontlaw.edu/Documents/11_03_09_Cooper%20All%20Risk%20Full%20Report.pdf.