Green Scissors Coalition Letter on the Civil Nuclear Credit Program: Draft Guidance for the Second Award Period
· Economic NeedThe nuclear industry has a long history of exaggeration when large subsidies are involved. State legislatures and Public Utility Commissions have sometimes learned too late that evidence justifying major bailouts was faulty or outright fraudulent. The CNC must not be another example in this long history. We are encouraged that the DOE is purportedly hiring a “Big Three” accounting firm to evaluate the economic claims of nuclear operators. This is a strong sign that the agency intends to subject industry claims to third-party verification. On the other hand, major private sector accountants are expensive and likely already employed by likely applicants of the CNC program. To save the taxpayer and mitigate potential conflicts of interest, we encourage the DOE to use existing federal capacity to vet claims about reactor economics. Although the DOE likely lacks the internal capacity, the Federal Energy Regulatory Commission (FERC) does not. It is stacked with the relevant technical staff and is the best equipped of any federal agency to review the operating costs of merchant generators and bidding behavior in competitive wholesale and capacity markets. If consulting with the FERC saves the taxpayer the cost of a major accounting firm and results in a higher level of third-party scrutiny, the DOE should consider the cheaper option.
· Operating CostsThis program represents a massive taxpayer expenditure and should not allow for funds to be siphoned towards the enrichment of reactor owners due to loose restrictions on eligible uses. Because the intent of the program is to provide an economic “bridge” for nuclear generators that are capable of continued, financially self-sustaining operation, we therefore encourage the DOE to use a definition of operating costs that includes only those portions of the owners’ costs attributable to the period of the CNC award, and that satisfies other certification criteria. For instance, capital costs that will be amortized after the CNC award, decommissioning costs, advocacy expenses and trade association dues, and relicensing costs should be excluded. In addition, costs arising from nuclear regulatory violations and corrective actions must be disallowed; DOE should review any violations and safety performance findings issued by the Nuclear Regulatory Commission for compliance with the certification criteria, and determine if the award should be discontinued and if any amounts must be recaptured. C. Emissions Impact Guidance The DOE is proposing to certify reactors based on the risk of premature closure increasing greenhouse gas (GHG) emissions. But this criteria too has the potential to be abused. The reality is that electricity markets are complex mechanisms that respond to a variety of endogenous and exogenous inputs. From economic growth and extreme weather events to fuel prices and the mining of cryptocurrency, it is simply not credible to ascribe every fluctuation in emissions to the retirement of individual reactors. That is why we encourage the DOE to set a high causal standard for connecting potential reactor retirements with increased GHG emissions. Choosing too narrow a timeframe over which to consider GHG emissions increases may misrepresent an overall positive trend in emissions reductions and result in some reactors receiving undeserved subsidies. A fairer temporal snapshot is likely the four year window of the CNC award itself, with the potential for net emissions increases considered across an appropriate regional jurisdiction, such as an RTO/ISO. This tough but fair standard would protect the taxpayer by preventing reactors whose closure would not increase GHG emissions from qualifying for credit payments. Section XI. Award Administration Information C. Oversight & D. Recapture The second cycle economic factor guidance requires applicants to include receipts from the Production Tax Credit (PTC) under 26 U.S.C. § 45U in their revenue streams, assuming that the PTC will begin in January 2024 and that prevailing wage requirements are met. As the deadline for submission of CNC Certification Application for the first round ended before the new 45U was established by the Inflation Reduction Act (IRA), DOE should request additional supporting documentation as the tax credit might affect revenue assumptions and no longer result in annual operating losses. And in the case that first cycle awardees are considered without factoring in 45U credit, DOE should audit all selected nuclear reactors and recapture the allocation of credits if the reactor no longer operates at an annual loss in the absence of the allocation of CNC awarded by DOE. Conclusion The DOE should ensure that the CNC program does not become a burden for taxpayers or a risk to the climate. Ultimately, the most important questions for decarbonizing the electricity sector are: how much can emissions be reduced, how quickly, and at what cost? If preserving merchant reactors is the most expensive option to achieve this goal, then taxpayers should not be subsidizing it. Therefore, we recommend that no CNC funding be allocated without an analysis of alternatives. If projections show emissions reductions would still be achieved more cheaply without the reactor within the four-year period of the CNC, then the intervention is imprudent for taxpayers and ratepayers alike. We appreciate this opportunity to provide input on the CNC and look forward to continued engagement with the DOE on the responsible administration of this program. Respectfully, The Green Scissors coalition Sarah Lutz Climate Campaigner Friends of the Earth Autumn Hanna Vice President Taxpayers for Common Sense Nan Swift Governance Fellow R Street Institute Matt Casale Environment Campaigns Director U.S. PIRG Lisa Frank Executive Director Environment America