Taxpayers aren't just guaranteeing loans for new Georgia nuclear reactors, they're also doing the lending

President Obama's announcement this week that his administration would provide $8.3 billion in loan guarantees to the Southern Company to build two new nuclear reactors in Georgia was somewhat misleading.

That's because taxpayers are not just guaranteeing the loans -- they're actually providing the loans.

"The idea that these are just loan 'guarantees' is fictitious: These are actual loans," says Michael Mariotte, executive director of the nonprofit Nuclear Information and Resource Service (NIRS). "Giant nuclear utilities will be raiding the federal treasury for money to build reactors, and they are expecting the taxpayers to bail them out if the project goes bad."

The Southern Company issued a press release following Obama's announcement that said the loans for the two new reactors at Plant Vogtle are expected to be funded by the Federal Financing Bank -- a little-known government corporation overseen by the U.S. Treasury Department that more typically makes loans to universities, rural electric co-ops and other small-scale projects.

UniStar Nuclear -- which is believed to be on the Department of Energy's shortlist of possible recipients of taxpayer assistance for its Calvert Cliffs nuclear reactor project in Maryland -- also said in its license application to the Nuclear Regulatory Commission that it expects the portion of debt for the project that would be guaranteed by the federal government to be financed through the FFB.

"Use of the FFB means that the loans themselves for new reactor construction will come from taxpayers, putting taxpayers in the risky business of both providing the loans and guaranteeing to themselves that the loans will be repaid," according to a statement from NIRS.

Earlier this month, the President announced plans to triple the budget for taxpayer-backed loan guarantees to build new nuclear reactors from $18.5 billion to $54 billion, an amount the Department of Energy says could support seven to 10 new reactors.

But the Obama administration seems unclear about the level of risk it's asking taxpayers to bear for new reactor construction. As Mother Jones reports, Energy Secretary Steven Chu admitted to reporters earlier this week that he was unaware of an analysis [pdf] by the nonpartisan Congressional Budget Office that found the chance of a default on the loans for new nuclear reactors are "very high -- well above 50 percent":

"I don't know of the CBO report," Chu told reporters during a conference call on Tuesday. "We don't believe the chance of default is 50 percent. We believe it's far less than that."

A DOE spokesperson later told the magazine that the 2003 CBO analysis was not "germane" to the current nuclear construction program, which the administration claims has undergone "rigorous financial analysis."

But the very fact that taxpayers are being asked to provide as well as guarantee loans for new reactors -- including projects like the one at Vogtle involving Westinghouse's problematic and still-unapproved AP1000 design -- is evidence that the financial risks are considered too great for the power companies and private banks to bear.

This fact was also acknowledged by U.S. Sen. Johnny Isakson (R-Ga.) on Tuesday during a visit to Dalton, Ga., in which he praised France's socialized nuclear power industry, the Chattanooga Times Free Press reports:

"If you go to France or most anywhere else in the world, government loan guarantees are a critical part of the financing," Sen. Isakson said. "The loan guarantee by the government gives some predictability to attract capital for the building of those plants."

Based in Atlanta, the Southern Company earned $1.65 billion in profits in 2009. The construction cost of the two new reactors by its Georgia Power subsidiary at the Vogtle plant near Waynesboro, Ga. is currently estimated at $14 billion.