Look Who’s Buying Nukes Now

When energy deregulation kicks in, consumers will have to sink $202 billion into paying off utility debts?almost half of it for nukes.

Image: Timothy Rice

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The accompanying photographs are from Timothy Rice’s series “Living With the Cloudmakers,” which documents the unsettling presence of nuclear power plants on the suburban American landscape.

Last fall, a public service announcement broadcast on televisions across California showed lead-foot drivers speeding by a motorcycle cop too busy pondering his new electric utility choices to take chase. But as electricity deregulation goes into effect in numerous states this January, most consumers will find one choice has already been made for them: They’ll be footing the bill for utility company debts.

These debts—called “stranded assets”—come to a staggering $202 billion total for the nation’s 3,050 utilities. Close to half of that, $86 billion, is unpaid debt on nuclear power plant construction. It’s a situation that has consumer advocates calling electricity deregulation the S&L bailout of the ’90s.

In California alone, consumers will pay the state’s big three utilities some $28 billion for stranded assets. A hefty chunk of that sum will cover the debts of nuclear power plants like Pacific Gas & Electric’s Diablo Canyon facility. (Completed in 1985, its construction was more than $4 billion over budget.) “It is a colossal sinkhole for consumers,” says Paul Gunter of the Nuclear Information and Resource Service.

The picture looks the same in other states, where officials are deregulating utilities faster than you can turn off the lights. Legislators in Illinois, Maine, Montana, Nevada, New Hampshire, Oklahoma, Pennsylvania, and Rhode Island have already passed deregulation legislation; bills are pending in numerous states including Colorado, New Jersey, Oregon, and Wisconsin.

The utilities say stranded assets are merely fees consumers have always paid (only under deregulation, consumers will pay them off faster). “Utilities made these investments in good faith for public benefits,” says PG&E spokesman Bill Sessa.

Many consumers will enjoy cheaper electricity. Californians, for example, will notice a 10 percent savings no matter who sells them their power. But consumer groups point out that to finance those front-end rate reductions and cover stranded assets at the same time, utilities are floating billions in public bonds—called “securitization” by deregulation experts. Anna Aurilio, a staff scientist with the U.S. Public Interest Research Group, says these bonds are nothing more than “a way [for utilities] to guarantee secure profits.”

According to Sessa, bonds are the only way utilities can cover rate reductions, refinance debt on aging power plants, and make a successful transition to a newly competitive industry. “There is still a net benefit to consumers,” he says. “They’re going to be paying less now because of deregulation and they’re going to be paying even less five years from now.” Indeed, utility executives argue that deregulation will force power generators to operate more competitively. But that, too, has nuclear watchdogs worried. “They’re reducing their margin of safety to increase their competitive edge,” says Gunter.

The Nuclear Regulatory Commission has already expressed some concern. Speaking in September at a symposium of nuclear engineers, NRC chair Shirley Jackson said safety assessments at several reactor facilities “have identified deficiencies that may stem from the economic pressure on a licensee to be a low-cost energy producer.”

Despite the risk, some environmentalists see deregulation as an opportunity to boost renewable-energy production, such as wind, biomass, and solar power, instead of nuclear and coal-fired plants. “If you’re going to reach a settlement with the utilities, you might as well get something for renewables,” says Ralph Cavanagh of the Natural Resources Defense Council. California’s restructuring deal, for example, includes $540 million for renewable energy.

Cavanagh is setting his sights on Washington, D.C., where Congress will consider a spate of deregulation bills this year, including one expected from the Clinton administration. But Washington insiders say Congress will likely focus on environmental concerns, leaving the issue of stranded assets up to states. And if California is any indication, nuclear bailouts will become a common feature on the American landscape.

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