No clue on status of loan guarantees

Department of Energy is mum after promising awards just before the holidays

Warren Miller

Less than a month ago, the Department of Energy (DOE) was giving strong signals that a long-running impasse with the Office of Management & Budget (OMB) had been resolved on the pricing of premiums for federal loan guarantees for new nuclear power plants. An ebullient Warren (Pete) Miller, DOE Assistant Secretary for Nuclear Energy, (right) was quoted Dec 17 in wire service reports that "we will have loan guarantees by the end of the year."

That time has come and gone. Today, Jan 5, a spokesman for DOE told this blog the agency is "still crossing t's and dotting i's."

Asked if the dialog with OMB had been resolved, the spokesman would only say the agency is not ready to announce the winners of the loan guarantees. This outcome is a puzzle since last November Secretary of Energy Steven Chu announced a new director of the loan guarantee program.

It has been an open secret since last Spring that DOE has a short list of four projects which have passed the agency's rigorous standards for due diligence and market readiness. However, on Dec 24, just one week after Ass't Sec. Miller voiced considerable optimism, another DOE official threw cold water on the prospects for any awards in 2009.

What other issues are in the mix?

Daniel PonemanThe New York Times reported that Daniel Poneman, Deputy Secretary of Energy, (right) said the DOE's negotiations with energy companies on loan guarantees for "first mover" reactors "still has some distance to cover."

According to the newspaper, DOE and OMB remained at odds over the credit subsidies that nuclear developers would have to pay up front to cover the risk of a loan default.

"We have worked with, and continue to work with OMB very cooperatively, on trying to get these things resolved ... . It's obviously mission-critical to figure out if the [project] transactions will work. It's not surprising that this would be a number that gets pretty closely scrutinized. We're getting close, but we're not done."

Poneman is an expert on nonproliferation issues which creates a question of why he's involved in the loan guarantee issue. There's been criticism of the Obama administration's work on the loan guarantee program from nonproliferation experts like Sharon Squasonni at the Carnegie Endowment who has written several highly critical reports. Of course, it's impossible to say whether they are influential. It would be helpful if Ms. Squasonni would get some of her facts straight. For instance, Ameren would be surprised to learn there are no commercial nuclear reactors in Missouri.

Congressional impatience surfaces

As DOE and OMB remain locked in a stalemate, Congress is getting frustrated as evidenced by a letter sent from six Senators, including Idaho's Sen. Mike Crapo, to Peter Orszag, the director of OMB.

There's a lot of pent up impatience in the letter. While the language is couched in the parlance of congressional budget technicalities, the message is clear. Get the lead out and get the job done. How could that not be more clear?

Secretary Chu has few good options if OMB is keeping the loan guarantees bottled up. Going over the head of the budget agency to the White House is a risky step which could backfire. Chickens could come home to roost in future bureaucratic tangles.

Also, there remains the question of whether OMB is digging in its heels on its own initiative or if there is White House pressure showing up on this front. It may take a White House intervention to clear out the tangled issues that have yet again shown the at best lukewarm support for nuclear energy coming from the Obama administation.