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Monday, December 28, 2009 - 12:17pm

Southern Company Up for Billions

Updated: 4 years ago.
Southern Nuclear Operating Company, a division of the Atlanta-based Southern Company, is in line to get federal loan guarantees for the construction of two new nuclear reactors. Preliminary site work on the reactors began this summer. (Photo courtesy of Southern Nuclear Operating Company)

The U.S. Department of Energy will soon announce the recipients of $18.5 billion in federal loan guarantees for construction of new nuclear reactors, and Southern Company apparently is a leading contender, according to industry watchers.

Southern Nuclear Operating Company, a division of the Atlanta-based Southern Company, is currently seeking approval to build two new nuclear reactors at Plant Vogtle in Waynesboro.

The company is well-positioned for the guarantees because of strong assets and community support for the reactors, says Michael McKenna, president of MWR Strategies, a consulting company that has also lobbied Congress on behalf of Southern.

"I think Southern has proceeded along the course that they're going to get loan guarantees, and that's how they're thinking about their financing for the plant," says McKenna. "I think if they didn't get the loan guarantees, it would be difficult to re-work the financing in a way that makes sense."

The guarantees would make it easier for Southern to get loans more easily and cheaply to pay for the reactors, and would also cover project costs for utility companies if they default. Industry analysts say the new Vogtle reactors could be the first approved by the federal government in decades.

Opponents of the reactors, however, fear that the guarantees will place an enormous risk on taxpayers.

"You're socializing the risks, but you're privatizing the profits, where the utility companies get to keep the profits from all the rates of return," says Stephen Smith, director of the Southern Alliance for Clean Energy.

The state legislature in March approved a controversial increase on electricity rates to help pay for the plant expansion while work is in progress, instead of waiting until after the reactors are completed. Again, Georgia Power, a division of Southern Company that owns a majority share in Vogtle, argues the rate increase will save money, while environmental groups argue that ratepayers could be stuck with higher rates whether construction is completed or not.

Huge cost overruns plagued construction of nuclear reactors in the 1970s and 80s. At Plant Vogtle, costs for the first two reactors skyrocketed from $660 million to $8.87 billion. Those problems, along with fears of a nuclear accident, brought reactor construction in the U.S. to a halt for decades.

Preliminary site work on the site of the new reactors began this summer at Plant Vogtle, after the U.S. Nuclear Regulatory Commission approved a limited work authorization. Southern Company is still awaiting approval from the NRC to build and operate the new reactors.

Stephanie Mueller, a spokeswoman for DOE, declined to comment on the loan guarantee applicants, or when recipients would be announced. People monitoring the industry, meanwhile, say they expect an announcement to come before the end of this week.

A spokeswoman for Southern Nuclear Operating Company also declined to comment until after the DOE names the recipients.

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