Energy Bill May Revive Nuclear Power in U.S.

WSJ.com - Energy Bill May Revive Nuclear Power in U.S.

Industry Still Faces Numerous Hurdles;
Is 'Great' Legislation Going to Be Enough?
By JOHN J. FIALKA
Staff Reporter of THE WALL STREET JOURNAL
July 28, 2005; Page A4

WASHINGTON -- The energy bill nearing passage in Congress could be the best news the nuclear-power industry has seen in many years. The question now is whether it will be enough good news to produce what the industry and the Bush administration both want: a genuine revival of nuclear power.

The bill contains at least $1.5 billion in direct subsidies to promote a new generation of nuclear power plants, plus the potential of billions of dollars more in government commitments to ensure that the plants will get financial backing on Wall Street. (See related article.)

"This is a great bill," said John Kane, a senior vice president for the Nuclear Energy Institute, which represents the utilities that run the nation's 103 operating nuclear power plants. He says the bill, which provides a legal foundation and financial incentives for new nuclear plants, "will set the stage for nuclear to play a role in supporting our future economic development."

The package took months of lobbying, including last-minute intervention by President Bush, who successfully pushed for a new government-backed insurance program -- "standby support insurance" -- that would protect plant owners against losses caused by delays in the lengthy regulatory approval process required to win a plant operating license.

Whether this will be enough to launch construction of plants promising to be safer, easier to operate and more secure against terrorist threats remains to be seen. No new nuclear plant has been proposed since the 1970s, and there is skepticism on Wall Street and elsewhere that the new models will ever get built.

Still, some utilities already familiar with nuclear power are moving ahead. "Congress is to be congratulated," said Curt Hebert Jr., executive vice president of Entergy Corp. The New Orleans company runs 10 nuclear plants that produce 52% of its electricity, and it hopes to be the first to license a new one, with site selection possible in October. No final decision has been made, he said, but the company is "optimistic and hopeful."


Entergy currently has invitations from counties in New York, Louisiana and Mississippi to locate a new plant there. "This is the opposite of NIMBY," he explained. "This is, please build the plant in my backyard." In rural areas hosting nuclear plants, he noted, the facilities represent a good portion of the tax base.

The nuclear plant Entergy is weighing would cost $2 billion to $2.5 billion. That is more than a similar coal or natural gas-fired plant, a factor he said the company is weighing against others, including the possibility that Congress may pass mandatory regulations on carbon dioxide over the next decade. Nuclear power plants don't produce carbon-dioxide emissions, which are thought to be a cause of global warming.

Nuclear power also will be a hedge against the possibility that the price of natural gas -- which fires some of Entergy's other plants -- will continue to rise. The downside, Mr. Hebert says, is that the plants take a long time to permit and build. If Entergy is first in line to build a new plant, as he hopes, the process could take a decade or more.

That is where the energy bill comes in. It extends the coverage of the Price-Anderson Act, which limits the liability for current nuclear-power-plant accidents to $9 billion each, to new plants. Its "standby support insurance" will ensure the first six plants to go through federal and state licensing processes can recover as much as $500 million for delays caused by regulatory logjams or lengthy legal challenges during construction.

It also provides production tax credits for the first half-dozen plants, giving them the same incentives as power produced by wind turbines, and it has $1.2 billion in tax write-offs to help offset the costs of funds needed to ensure that the plants can be safely torn down, or "decommissioned."

"At this point I think you could crawl out on a limb a little bit and say this will probably be what the industry needs to get started," Mr. Hebert says.

Not everyone is ready to get out on that limb, though. Theodore Roosevelt IV, a managing director of Lehman Brothers, said utilities already have started courting Wall Street, and bankers see the possibility of billions of dollars of new investments looming. "We're all talking about this and there is some enthusiasm," he said.

He added that financial analysts remain worried about an unresolved nuclear-waste problem and the proliferation of nuclear materials. They also worry about proliferation of government subsidies.

"I get nervous and cautious around subsidies. These things should be able to stand on their own two feet."

Nonetheless, he thinks Congress has started a process that others, especially those worried about climate change, may have to "think through." Mr. Roosevelt said that "we shouldn't have old nuclear taboos governing future policies."

Write to John J. Fialka at john.fialka@wsj.com