Nuclear Industry Lobbies to Preserve Tax Credit; Opposes Similar Wind Incentive

Nuclear Reactor Photo Credit: Martin Divisek/Bloomberg

The nuclear industry is lobbying to preserve and modify a tax credit that could be worth billions of dollars when new nuclear reactors under construction are placed in service amidst efforts by Republicans to end energy subsidies and an upcoming tax reform process that could place the tax incentive at risk.

The industry's effort to keep the nuclear production tax credit is leading to criticism as companies such as Exelon Corp. ask Congress not to reinstate a similar tax credit received by the wind energy industry.

The 1.8 cent per kilowatt hour nuclear credit, created by energy legislation enacted in 2005, can be received by companies that started construction on nuclear reactors by January 2014 and are placed in commercial operation by 2021, according to the Internal Revenue Service.

Only two companies—Southern Co. and Scana Corp.—have reactors under construction that could qualify for the credit, which is yet-to-be-used, according to analysts.

Chicago-based Exelon, the largest operator of nuclear reactors in the U.S., is among the leaders of a fight to allow the wind industry's lucrative 2.3 cent per kilowatt hour tax credit to remain expired and has argued the credit “distorts” competitive wholesale energy markets.

Tyson Slocum, director of the energy program at activist group Public Citizen, called the effort “hypocritical.”

“Subsidies for those guys are terrible and un-American, and subsidies for us are essential for fighting climate change and keeping the lights on,” Slocum said in an interview. “It all comes down to lobbying on self-interest that doesn't involve consistency. It's just whatever is in the interest of your particular corporate self interest.”

The Washington-based group is opposed to the nuclear production tax credit, but it supports the wind production tax credit, Slocum said.

$1 Million Spent on Lobbying.

Exelon spent over $1 million lobbying on issues related to tax policy, as well as a range of other topics, in the third quarter of 2014, according to lobbying disclosure forms that were required to be filed this month, but David Brown, Exelon's senior vice president of federal government affairs and public policy, said the nuclear production tax credit wasn't among them.

“We have not had a single meeting on that issue,” Brown said in an interview. “We are not lobbying for any production tax credit, and we've been pretty consistent in that.”

The Nuclear Energy Institute, a Washington-trade group that is chaired by Christopher M. Crane, Exelon's president and chief executive officer, reported spending tens of thousands of dollars in the third quarter lobbying on tax issues, including the nuclear production tax credit.

Mitch Singer, a spokesman for the Nuclear Energy Institute, said in an e-mail to Bloomberg BNA that the organization represents dozens of utilities and the group doesn't oppose the wind production tax credit.

'Different Opinions' Cited.

“Individual member companies may have different opinions,” Singer said.

Overall, the nuclear production tax credit could cost taxpayers as much as $6 billion, according to Taxpayers for Common Sense, a Washington-based watchdog group, which is opposed to both the nuclear and the wind production tax credits.

We definitely would not want to see it [the nuclear PTC] expanded or extended,” Autumn Hanna, a senior program director at the group, said in an interview. “There are so many other subsidies the industry has received for decades; we are absolutely opposed to the nuclear production tax credit.”

By contrast, a two-year extension of the wind production tax credit being sought by the wind industry would cost an estimated $13.4 billion. The credit, which first started as a temporary measure in 1992, expired at the end of 2013.

The nuclear credit, which is limited to 6,000 megawatts, was created during the so-called nuclear renaissance, when the construction of new nuclear projects was expected to flourish, said Patrick Rafaniello, a lobbyist with Rafaniello & Associates, who has lobbied on the issue for Cayce, S.C-based Scana.

Deal Was Made Between Congress, Industry.

Instead, factors such as near record low natural gas prices and competition from wind energy power have made many new nuclear projects uneconomic.

“We are lobbying to make sure that if Congress acts on tax credits, they don't take this one away,” Rafaniello, who formerly served as chief of staff to former Rep. Bill Brewster (D-Okla.), told Bloomberg BNA. He added he sought to “continue a bargain that was made between Congress and the industry” when the bill that included the tax credit, the Energy Policy Act of 2005, was written.

Scana's South Carolina Electric & Gas Co. expects to spend $10 billion constructing two nuclear reactors that are expected to be completed around the end of the decade, Rafaniello said.

However, a former Senate Finance Committee staffer said some nuclear companies were lobbying to change the nuclear production tax credit to let a electric co-ops be allowed to allocate their pro rata share of the credit to private partners. The wind industry's credit allows such sharing, but the nuclear industry's doesn't, said the staffer who didn't want to go on the record talking about non-public discussions.

Modification Sought.

The proposal would simplify the credit and also make it easier for tax-exempt owners of advanced nuclear power facilities to allocate the credit to other entities who are able to use the credit to offset their federal income tax liability,” according to a summary of the proposal obtained by Bloomberg BNA that is being sought by “public power entities” that are co-owners of the nuclear plants being developed by Scana and Vogtle.

Southern Co. and Scana didn't reply to a request for comment.

The American Wind Energy Association (AWEA), a Washington-trade group that represents utilities such as Florida-based wind farm developer NextEra Energy Inc., said it doesn't take a position on “incentives that apply to other sources.”

All forms of energy receive federal incentives,” Rob Gramlich, the group's senior vice president for government affairs and public affairs, said in a statement provided to Bloomberg BNA. “AWEA lobbies for an extension of the renewable energy Production Tax Credit because it has been so successful in driving down costs and creating economic development in American manufacturing and in rural communities across the country.”

Voted Off Board.

The association voted Exelon off its board in 2012 because of the company's opposition to the wind production tax credit .
Brown, of Exelon, said “there is an enormous distinction between the nuclear PTC and the wind PTC.”

The Nuclear PTC was put into place because a nuclear plant had not been built in 20 years,” Brown said. “The primary purpose was to jump start a nascent industry. It's just patently absurd to claim the wind industry is not mature.”




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