THE ENERGY BILL HR 6: A GIFT THAT KEEPS ON TAKING
A BILLION DOLLAR BUDGET BUSTER AT TAXPAYER EXPENSE
A number of cost assessments
exist for HR 6, the energy bill which failed to pass the Senate in 2003 but
which will likely resurface in some incarnation in 2004. Senate Majority Leader
Bill Frist (R-TN) has promised he would raise this budget-busting Frankenstein
once again and Senate Energy Committee Chairman Pete Domenici reportedly has
been searching for a way to bring the bill to the Senate floor, perhaps with
some changes intended to reduce the bill?s burgeoning costs.
One cost estimate from
Friends of the Earth totals the entire HR 6 boondoggle at about $70 billion. The
nuclear section alone totals at least $15 billion, including a controversial tax
credit for new reactor construction. In fact, this tax credit could total a lot
more (see below). It is not surprising
that the nuclear power industry receives such largesse in this misguided energy
bill. The industry trade and lobby organization, Nuclear Energy Institute,
had contact with Vice-President Cheney?s energy task force 19 times?reportedly more
than any other interest group or trade industry.
Even the lowest potential cost
of the tax credit is an unnecessary hand-out to what is an established and mature
sector of the energy industry. That nuclear power has failed the economic test
despite having received the lion?s share of federal energy research and
development funds over the past several decades should indicate that it is less
deserving of federal assistance?not that taxpayers should continue to provide
bail-outs.
The nuclear tax breaks contribute
further to breaking the federal bank, which makes this energy bill potentially subject
to several budget points of order?one of the obstacles Sen. Domenici is trying
to overcome. HR 6 would make both the Finance Committee and the Energy and
Natural Resources Committee overrun their FY 2004 budgets. Additionally, since
the Federal budget is already in deficit, the costs in this bill must be offset
but currently are not.
HR 6 continues the ignoble
legacy of giving taxpayer money to dirty nuclear power while virtually ignoring
much-needed sustainable energy technology which is viable for energy production
today. While renewable technologies would receive $6.4 billion in incentives
from the bill, a good chunk of this actually goes to dirty technology like
coal, oil and nuclear in addition to sources called renewable which are not,
like incinerators.
Historically, wind, solar and
nuclear received about $150 billion (1999 dollars) in cumulative federal subsidies
over about 50 years (1943-1999). Of this amount, 95% (145.5 billion) went to
subsidize nuclear power. More importantly, the largest part of this investment
per kilowatt hour to nuclear was in its beginning years, giving it a distinct
advantage over other safer energy technologies. (Renewable Energy Policy Project)
It has been 30 years since a
nuclear power station was ordered and not subsequently cancelled due to nuclear
power?s danger and expense. If passed, HR 6 would impart an unfair advantage to
an energy source we can?t afford.
Specifics in HR 6
HR 6 includes a 1.8 cent per
Kwh production tax credit (PTC) for electricity produced from nuclear power.
This credit is worth at least $6 billion to the industry and likely will total more:
as much as $19.5 billion. This estimated range of tax breaks comes from a
potential loophole in the bill language which, if history is any guide, would
be used by the industry to full advantage. [The] value of this subsidy will
effectively shift half or more of the capital costs of new plant construction
from investors to the taxpayer, introducing severe inter-fuel distortions into
electricity markets.? (Earthtrack).
This range?far above that
estimated by the Joint Committee on Taxation–exists for two reasons:
1.?The JCT
assumes an annual cap of $125 million on revenue losses from all new reactors. However, the statutory language strongly suggests
that that the $125 million caps the tax credit a single reactor can get in a year, but that all reactors together
may claim up to $750 million annually.?
This would mean a revenue loss to the government of $6 billion over the
life of the provision, between 36 and 47 times higher than JCT is currently
showing.
2.JCT assumed that a maximum of 6,000 MW of
nuclear capacity is eligible for the tax credits during the life of this provision.? Again, a careful reading of legislative
language suggests instead that this cap may well be annual.? While 1310 (b)(2)
states “The national megawatt capacity limitation shall be 6,000
megawatts,” 1310(b)(1) provides context on how this national limit is to
be used:
The amount of credit which would (but
for this subsection and subsection (c)) be allowed with respect to any facility
for any taxable year shall not
exceed the amount which bears the same ratio to such as amount of credit as —
This is critically
important. If the cap is annual, it can be reassigned to new reactors as the
eight-year eligibility of the first wave of facilities runs out. Plant
timelines would without a doubt be structured to take advantage of this financing
since the tax credit would cover half or more of the expected total capital
cost for a new reactor.
Under these parameters,
rather than a tax credit of $750 million per year for eight years, the treasury
losses would extend much longer: from the time the first wave of facilities
comes on line through 2028, costing taxpayers as much as $15 billion on a
revenue loss basis. The tax losses are sensitive to assumptions made about when
the first set of reactors comes on line. However, under any plausible scenario,
current estimates by JCT are far too low in representing the total cost of this
provision. (Earthtrack)
In addition, this is nearly
the same tax credit as given to certain renewable energy sources, implying that
nuclear power is as valuable to society as clean energy, when it clearly does
not begin to address our current energy problems to the degree renewables and
energy efficiency would. After 60 years of subsidies, its time to cut the purse
strings and let nuclear power fend for itself.
In addition to the PTC this
bill would:
*Renew Price Anderson: ?Subsidizing the liability cost of commercial
nuclear power plants provides nuclear electricity with a price subsidy of
approximately 2.5 cents for each kWh of electricity generated according to economist
Anthony
Heyes, one of the people who has looked at this issue in most detail.? This subsidy is larger than the federal
supports given to renewable energy sources, but comprises but one of the many
ways the federal government subsidizes the costs and risks of nuclear power.?
(Earthtrack)
*Extend the ability to hide
profits in a fund meant for a specific task (decommissioning) so they aren?t
taxed ($1.4 billion).
*Encourage nuclear material
proliferation. ($865 million).
*Continue research and
development programs ($49 million)
*Give $1.1 billion to
construct a single reactor to create hydrogen.
*Pay for Security: ?Clearly
boosting the security of the nuclear fuel cycle is warranted.? However, these costs do not exist with other
types of energy supply, and it is important that the costs of increased
security be recovered from the recipient sectors.? Only in this way will energy markets seek out
newer, less security-intensive methods to meet our energy needs.? (253 million
for 2004-08). (Earth Track)
Cindy Folkers, February 2004
Nuclear Information and Resource Service
6930 Carroll Avenue, #340
Takoma Park, MD 20912
301-270-6477, cindyf@nirs.org, www.nirs.org
Earthtrack ?Understanding
the Nuclear Production Tax Credit Section 1310, HR 6 Conference Committee
Version, 11/18/2003?; Doug Koplow. http://www.earthtrack.net/earthtrack/library/HR6,%20Nuclear%20tax%20credit.doc
Renewable Energy Policy
Project ?Federal
Energy Subsidies: Not All Technologies Are Created Equal? (July 2000)