US Senate Stimulus Bill Opens Nuclear Loan Guarantee Door

January 29, 2009

Dow Jones &  Company, Inc.

The Senate economic recovery bill as passed through the
Appropriations Committee earlier this week opens the door for
potentially $ 50 billion in loan guarantees for the nuclear-power
industry.
However, the House-passed version doesn't include loan guarantees
for nuclear power and Capitol Hill watchers say the provision stands a
good chance of being cut in the final legislative process.

Although the legislative language leaves open the types of
technology eligible for a government loan guarantee (as long as they
substantially reduce greenhouse gases), some environmentalist
organizations opposed to nuclear power are concerned that the measure
could be used to fund new generation.

Many nuclear-power investors say that, because of construction
and liability costs, companies such as Exelon Corp. (EXC) and General
Electric Co. (GE) can't build new generation without government
guarantees or funding.

The Congressional Budget Office has also said that the risk of
default on the loan guarantees, given a raft of legal, procedural and
environmental hurdles, exceeds 50%.

Energy economists and analysts say, however, that the country
will find it extremely difficult to meet greenhouse-gas reduction
goals without a major new fleet of nuclear generation, particularly if
environmental regulations and a premium on emitting carbon dioxide
curbs new coal- fired power.

The natural gas industry warns that, even with major savings in
energy efficiency, reliance on its cleaner-burning fossil fuel will
push prices up to levels prohibitive for industries such as
manufacturing and chemical sectors.

Even if the measure passes the winnowing process on the Senate
floor and as senior lawmakers from both chambers debate the final
package, projects would still face approval from the new Secretary of
Energy, Stephen Chu. The physics professor-turned-politician has
expressed apprehension of investing government funds into nuclear
power, preferring research and development of advanced reactor designs
and resolving the radioactive-waste issue.

Also, some of the legislators likely to play a key role in
advising negotiators on the final recovery bill package are staunch
opponents of nuclear power. Rep. Henry Waxman, D-Calif., and Rep. Ed
Markey, D- Mass., have said they would be opposed to new nuclear loan
guarantees. Both lawmakers were central in drafting the House-passed
energy portions, which didn't include provisions for nuclear.

"The disparity will be resolved in conference committee after
each house passes its own legislative language," environmental
organization Friends of the Earth said in an email.

Under current law, the U.S. Department of Energy has the ability
to guarantee around $18.5 billion in loans for new nuclear generation,
but the industry said the total amount for applications for current
projects on the books would total more than $100 billion.

-By Ian Talley, Dow Jones Newswires; 202-862-9285;
[email protected]