Written by atheo
Obama’s provision of $54 billion in loan guarantees to the nuclear industry will cost Americans much more than the probable 50% default rate that the Congressional Budget Officeanticipates. While the federal government will guarantee the profits of investors, rate payers will suffer the inevitable rate hikes.
Higher electric rates will appear, not when plants begin operating, but years, if not decades, before they come on line. Several states allow customers to be billed for expensive new nuclear plants in advance. Naturally, these are the states where the initial, new, entirely untested, plants are proposed for construction. This arrangement further reduces investor exposure to cost over-runs or rising interest rates that are imposed due to the downgrading of credit ratings for facilities with deteriorating economic prospects.
It should be noted, that relieving investors of exposure to risk results in the elimination of incentives for sound management.
Although ‘prudence’ on the part of utility managers is a legal requirement, once sunk costs are waiting to be recovered it becomes quite elastic. Good money is thrown after bad. Rate payers, whose dollars are committed , will have little to no oversight, or input, into the administration of their investment dollars.
