Nuclear Industry Seeking Tax Credit Extension

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By Ari Natter

July 27 — Nuclear power operators are lobbying to extend a lucrative but yet-to-be-used tax credit for new reactors as the industry faces an increasingly dim future in the face of low natural gas prices and other headwinds.

According to public disclosure forms, lobbying on the credit, known as the nuclear production tax credit, increased more than 36 percent in the second quarter of 2016 compared to the previous quarter, as the industry tried—unsuccessfully—to use the tax title of an unrelated aviation bill as a vehicle to modify the credit. Analysts say the credit, estimated to be worth as much as $6 billion, is unlikely to be fully used to encourage nuclear development in its current form.

At issue is a credit of 1.8 cents per kilowatt-hour of electricity produced by new nuclear power plants, according to the Nuclear Energy Institute, a trade group that represents nuclear reactors operators such as Exelon Corp. and Entergy Corp.

Because only nuclear power plants that are placed in service before January 2021 can qualify, a large portion of it is expected to go unused.

Racing to Meet Deadline

Only two companies—Southern Co. and Scana Corp.—have reactors under construction that could qualify for the credit, but both projects have been beset by delays calling into question whether they will be able to qualify for the credit.

Both Scana and the Southern Co. reported lobbying on the issue in the past quarter. The companies did not immediately respond to requests for comment.

“Part of the consideration to invest $10 billion is the tax credit,” Patrick Rafaniello, a lobbyist with Rafaniello & Associates, who has lobbied on the issue for Cayce, S.C.-based Scana, told Bloomberg BNA, referring to the expected cost of building the two nuclear reactors. “It’s baked into all of the estimates and analysis and what we promised the public utilities commission for the ratepayers.”

While Rafaniello was confident that Scana would meet the 2021 deadline to receive the credit, he said the House and Senate tax writing committees are considering allowing companies to receive the unused portion of the credit after its expiration.

In addition, Rafaniello and others said they were seeking a tweak to the credit to allow nonprofit public power co-owners of the plants to use the credit by allocating their pro rata share of the credit to private partners.

Extension Sought

Other organizations that lobbied on the credit include the American Public Power Association, which reported that it sought “including a fix to the nuclear production tax credit” in the Federal Aviation Administration bill as well as other vehicles.

The Arlington, Va.-based group represents community-owned utilities that have ownership stakes in both projects, including the Municipal Electric Authority of Georgia, which is a co-owner of the two Vogtle reactors under construction by Southern Co. subsidiary Georgia Power, and South Carolina-based utility Santee Cooper, which is a one-third owner of the Summer 2 and 3 plants that South Carolina Electric & Gas is building.

Desmarie Waterhouse, the American Public Power Association's vice president of government relations and counsel, said the group is lobbying to eliminate the 2021 placed in service requirement to receive the tax credit so that additional projects—including small modular reactors—can be eligible.

“In order to make sure that leftover credit will be of use, we want to extend the timeline,” Waterhouse told Bloomberg BNA.

The nuclear credit was created by energy legislation enacted in 2005 during the height of the so-called nuclear renaissance, when construction of new nuclear projects was expected to flourish.

Relic of Nuclear Renaissance

Instead, factors such as near-record low natural gas prices, competition from wind energy and stagnant electricity demand have made many new nuclear projects uneconomic and forced the early retirement of some existing reactors.

In a July 7 research note, Bloomberg New Energy Finance calculated that 55 percent—55 gigawatts—of the country's nuclear fleet looks unprofitable between now and 2019.

“Unless we see a dramatic uptick in wholesale power prices, capacity prices or clean energy incentives (inclusive of nuclear), we expect more retirement announcements in the coming months and years,” the report said.

The industry's lobbying on the credit also comes with comprehensive tax reform, Congress's broad look at redoing the entire tax code, on the horizon, and an unused credit could be seen as ripe for elimination to the detriment of Scana and Southern.

“These companies, and their partners in these two projects, based their decisions to build these projects partly on the production tax credit,” the Nuclear Energy Institute said in a fact sheet. “Eliminating the credit retroactively would seriously compromise both projects.”

To contact the reporter on this story: Ari Natter in Washington at anatter@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

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