(excerpt from longer post to be found at Just Means, by Jim Hickey)
Burke County, Georgia is Old South country. ‘Dixie’ predominates at the top, but for most folks, eliminating slavish conditions and having some sort of decent life remains the primary priority. In coming posts about nuclear prospects, one of my focuses will be on communities like Waynesboro and Shell Bluff, Burke County towns which directly abut both the reactors currently at Plant Vogtle and those projected for completion in the next decade.
Today, however, we’ll be creating a replica of the nuclear electricity business model. From the perspective of the Federal Government, the utility industry, and quasi-public suppliers of power, the future simply glows with the necessity of radioactive power generation. This certainty, which flies in the face of both the focus on renewable energy that citizens favor and what our historical experience with this technology has shown us, might seem anomalous.
However, if we examine the structure and dynamics of the various elements of the nuclear industry, or in other words of the cost and benefits of the ‘nuclear fuel cycle,’ we might see things differently. Then, the decision to invest in these expensive and arguably dangerous behemoths begins to look like a pretty sweet deal, at least for the proponents of nukes who thereby gain access to a seemingly bottomless feedbag of public funds and taxpayer guarantees.
Let’s walk through the deal, from beginning to end. We’ll start with Uranium mining, we’ll end with the disposition of Depleted Uranium and other nuclear wastes.
At the outset, as is the case with any mineral wealth, the resources of the US Geological Survey are at a prospector’s beck and call; nothing unusual here, but worthy of note. Moreover, the Feds have repeatedly attempted to restore long standing mining subsidies, which remain a DOE priority still under the purview of Barack-the-Magnificent. Finally, the government readily signs off on letting Uranium tailing lie and generally accepts the grotesque degradation that accompanies the strip mine methods and the inevitable lung and organ cancers of deep-mining–although admittedly the situation now is vastly superior to that which prevailed a half century ago.
The enrichment process, like mining, also ships U-235 enriched metal to weapons makers; even more so than mining, these industries have benefited from and continued to depend on the DOE’s H-bomb programs. Once again, then, even as promises of ‘privatization’ about, the true costs of obtaining skinny fuel rods packed with Uranium pellets buffed up with the fissionable isotope are not borne by power producers, but by the citizens whose taxes originated the technology.
Permits, construction, and licensing are not so directly tied to the pork barrel as such. So-called ‘consumer advocate’ agencies like the Georgia Public Service Commission end up making sure that electricity suppliers begin recovering the monstrous expenses of building reactors five to ten years before the facilities go on line.
Not only that, but legislatures like the Georgia House and Senate ease the political path by making sure that just common folks have to foot this bill. “The bill was amended by lawmakers so that it exempts large business and industrial users from having to pay their part of this $1.6 billion in monthly fees — that load falls on residential and small business customers.”
As one senator observed wryly: the large users “got a deal.”
And, like ‘duh!’ Southern Company (and Duke Energy will likely do the same if it can overcome public opposition to its reactor dreams) is getting advance payment for remuneration capital costs that are already guaranteed by the government’s decision to cover any difficulty that the loans effect on Georgia Power‘s bottom line.
Promises of reprocessing are almost exclusively going to originate with the government if ever they come to pass, because otherwise Plutonium, which is both ‘critically’ fissionable in its basic isotopic form and the only element on earth more toxic than Uranium, would have similar access to the standard stream of commerce as coal or petroleum.
Above a trivial base level per reactor, all possible damages that could flow from a reactor accident are the responsibility of, let’s think now, who could it be?–oh, that’s right, of Jimbo and this blog’s readers and the other taxpayers of the United States. The Price Anderson Act, fifty five years into this era of ‘cheap’ and ‘safe’ power is still supposedly a necessity of doing nuclear business. Is that ‘business better?’ Getting the citizens to cover the insurance tab?
Downstream Depleted Uranium threatens human survival. Are utility companies and reactor manufacturers paying for this devastation? On the contrary, they benefit from the government’s continued wrongheaded policy of creating weapons out of this nasty metal that could easily undermine the genome of every mammalian species on the planet.
The situation is similar in regard to low level wastes and high level wastes, as we will see in even more detail in future installments.
When citizens considers the sum total of the ‘nuclear fuel cycle,’ unless they happen to draw their salaries from nuclear sources or otherwise lean in the industry’s direction as a matter of faith and belief, a discomfited reaction is likely. A certain one-sidedness is apparent, to say the least. A series of dumbfounded inquiries might result.
“You mean, I’m going to have to pay for these things up front?” Uh huh. “And then my tax dollars and subsidies are going to provide a ‘safety net’ at the back end?” Right again. “And all of the hazards and filth all along the way, I’m going to have to cover that too?” Bulls eye. “And I’m even on the hook in the event of a catastrophe; they can’t get insurance?” That’s exactly right. “And they even want me to subsidize any move in the direction of reprocessing, if they decide to go after the Plutonium?” Bingo again.
I point all of this out for a simple reason. Given the accuracy of this depiction–folks should check it out; I just wish that I were wrong–investing in nukes for those who don’t have ‘to foot the bill’ is a giant no-brainer, a license to print money, and ‘the best thing since sliced bread’ all rolled into one package.
And this is the basis for the conflicting interpretations about nuclear economics. If we take into account the cost of massive capital outlays–never has a reactor come in under budget, and generally cost overruns are more than 100%, the escalation of more than 1200% the last time that Plant Vogtle was on track a likely record—then nukes look a tad less rosy.
If we factor in the costs of clean-up at the front end, disposal (which is a cruel joke, really, from the perspectives of Iraqi parents or Gulf War survivors, who can attest that nothing about disposal got rid of the dangers) at the back end, then atomic energy begins to look a lot more than a little ragged, as an investment grade option.
If we then consider the potential downside that would result from a bad accident–“That’ll never happen” ought to be a mortal sin for any scientist, and it ought to have become absurd after the Titanic sank–which might kill thousands, tens of thousands, or more at the outset, and cause long lasting contamination over thousands of square miles, ‘boy oh boy,’ as one of my poker buddies would say in college before he folded, the proposition begins to look like a stinker for everybody but the principals, whose free ride is guaranteed.
HOW THE WORLD CAME TO REFLECT THIS BUSINESS MODEL
This article is going to give a broad overview of the historical situation. Later iterations will go more into detail, as specific reports reach the front of Jimbo’s queue. As in all such situations, untangling the way that years gone by have yielded the present is just as difficult as untying an intricate knot. On the other hand, only when we can both see the overall picture, and recognize the key junctures on the historical time line, will what is happening now make sense.
To start, we need to remember that a billion and a half people around the globe have no regular access to electric power. Within living memory, barely a one of our former cousins from the nineteenth century lived in an electrified environment. Before that, everybody was ‘in the dark,’ but for candles and lamps.
That only changed at the cusp of the twentieth century, when science and technology and consciousness and social and economic changes all came together, and folks like Thomas Edison, of whom we’ve heard, and Samuel Insull, whose name is new to most folks, began to provide the tangible basis for people to ‘flip a switch’ and have the power of a thunderbolt at their command.
And every time that such networks became possible, a new feeding frenzy took place.
What the historians termed “a natural monopoly” like a water supply or electric supply or other ‘utility’ or transportation company, an initial phase occurred in which everyone of means anticipated cashing in.
Then, using creative accounting and leveraged finance that parallel the machinations of Bernie Madoff, Enron, and so on down the list of ‘usual suspects,’ these enterprises imploded. Reformers would rail. Most states, even in the benighted South, formed simulacra of today’s ‘Public Utility Commissions’ and ‘Public Service Commissions,’ the participants in which would scold and moan that such perfidy could even be possible.
Roger Lowenstein reviews The Merchant of Power: Sam Insull, Thomas Edison, and the Creation of the Modern Metropolis and proffers a tiny sampling of the sort of assessment of our past that folks need to hear. “We tend to think the invention of the light bulb led directly to an illuminated world, but the truth is otherwise. …(M)oguls like Insull conceived of broadening the market for electricity by hawking appliances … .(B)y the Roaring Twenties, Insull was one of the country’s foremost power brokers. He controlled utilities in 5,000 towns in 32 states, as well as a network of electrified railroads coursing out from Chicago. .. Come the crash, some 65 of his enterprises were perched like the unlucky subjects of Yertle the Turtle: down they went. Insull fled to Greece, leaving 600,000 shareholders ruined. He returned to face federal prosecution and was likened to Al Capone.”
Can we be real, folks? We’ve heard it all before. What followed in the lee of devolution such as this, at least until recently, was ever some form of State or Federal reform. The entire utility structure that prevailed in the U.S. until the late 1990’s emanated from the New Deal.
A very much middle of the road history of this aspect of American life details the plundering and scheming that pervaded the development of pervasive power networks. He has no ideological agenda. He’s merely telling a set of good stories in such a way as to match the facts of what happened. He makes a crucial point:
|“During the early years of his presidency, President Roosevelt had the opportunity to transform forever the utility industry. Having public and political support behind him after the holding company abuses became widely known, he could have urged that state and federal power agencies (such as the Tennessee Valley Authority and the Bonneville Power Authority in the Pacific Northwest) assume the assets and activities of privately owned utility companies. But this was not what he did. Instead, the President sought to impose safeguards… . to preserve the sanctity of the private capitalist economy and not destroy it.”|
And those safeguards are what we had until five years ago, with the repeal of the Public Utility Holding Company Act(PUHCA), which financiers and other gambling wizards had been seeking to overthrow before the ink was dry from FDR’s signature. And this potent antipathy predominated in spite of the fact that PSC’s and PUC’s and other ‘consumer protection’ agencies almost always have bonded with and become indistinguishable from the corporate agenda.
For heaven’s sake, were I to attempt to be thorough, I might find imputations of predatory behavior on the part of ‘regulated’ utilities such as the Southern Company on literally thousands of occasions over the century. A cursory search turned up copious cases of such shady dealings, by firms from every state in the union.
Our own dear Southern Company, in 1991, faced the wrath of stockholders and consumers who accused it of racketeering. The District Court had granted summary judgment in the lawsuit, but a nearly unanimous appeals panel sent the case back for trial with these words.
|“In 1982, with the help of the accounting firm of Arthur Andersen & Company, both utilities allegedly devised schemes to cover up the wrongful accounting…fil(ing) requests for a change in accounting method with the IRS for the stated purpose of properly reflecting their spare-part inventories for federal tax purposes… .The utilities then allegedly established dual sets of books. … As the utilities reduced their inventory of previously expensed parts, deductions from the inventory listings on the secret books would be made, but deductions would not be made from the books kept for the IRS until it appeared advantageous to do so. … The practice continued until 1988 when an undercover investigator for the IRS unmasked the scheme. The improper accounting was profitable not only because it resulted in a reduced or deferred tax burden but because it influenced the rates the utilities could charge their customers. In both Alabama and Georgia, the utilities may charge only the rates established by the state Public Service Commission (“PSC”). The PSC sets the rate according to the profitability of the utility. The smaller the utility’s income appears, the more likely the PSC is to approve a rate hike.”|
So the system detailed in the introduction above was mainly the happenstance of a regulated environment. The fleecing of citizens’ pocketbooks has transpired under the watchful eye of ‘watchdogs’ that fell for the above scheme on several occasions, and obediently turns over rate hikes for reactors that will cost a lot more than we’re told. Then those reactors will receive subsidies or some other rationale may allow for loan coverage. And then the new owner can crow about how cheaply it can distribute clean and reliable nuclear electricity.
Now we’re ‘deregulating,’ much to the delight of the Southern Company and other owners of the grid. Of course, fiscal pros are salivating at the prospects of mergers and acquisitions and new bubbles to inflate. We can hear them in such outpourings as “Private Equity and the Repeal of PUHCA.”
“The repeal of the Public Utility Holding Company Act of 1935, effective Feb. 8, 2006, is likely to have a profound effect on investment in the electric utility sector. The elimination of PUHCA’s burdensome regulations and severe operational and geographic restrictions will encourage investment and acquisitions by a greater number of non-utility companies, including private equity firms and hedge funds that had previously been effectively precluded from investing in this industry. In addition, PUHCA’s repeal will now allow combinations among electric utility companies, opening up new investment opportunities for private investors.”
Hello, Sam Insull!
Precisely in this context, we are seeing the ‘new-generation nuclear’ guaranteed. It’s all a done deal. Whatever citizens have to say has no bearing on the outcome.
If we don’t feel at least a modicum of concern about what is coming down the pike in such places as Burke County, when we consider the sort of long contextual view that folks have here, then we’re just not paying attention.
As a Georgia business journalist recently explained one aspect of the ‘sweet deal’ that utilities and the nuclear establishment are receiving, “Why loan guarantees? Because six top investment firms told the Department of Energy in 2007 that they were unwilling to finance new reactors in light of the industry’s horrible financial track record,” Ellen Vancko, nuclear energy and climate change project manager for the Union of Concerned Scientists writes in an opinion piece for the New York Times. “Utilities don’t want to take that risk, either. But both would consider new reactors if taxpayers assumed the risk — in the form of federal loan guarantees.”
He continues that, “Based on the industry’s history of cancellations and defaults, both the Congressional Budget Office (2003) and the Government Accountability Office (2008) estimate that the average default risk on a federal loan guarantee for new construction could be as high as 50%.”
Leaving aside the noisome doom of Depleted Uranium, the small but real chance of horrifying annihilation as a result of accident, and all of the other health and safety concerns–not to mention ties to nuclear weapons and so on and so forth–the nuclear option has to seem much more akin to a con game than a business model unless one is on the inside. Then, as I’ve said, it’s a sweet deal indeed.
Money: Tracy Olson
Public Utility Commission timeline: Google
Plant Vogtle: GA Wand
Wind & Solar: Matt Montagne
Uranium Mine: Alberto OG
Underground Distributor system: public domain
Power pole diagram: public domain