Chu downplays industry default risk on nuclear plant loans

Energy Secretary Steven Chu on Tuesday downplayed the risk that power companies will default on large government-backed loans to fund construction of the first new nuclear power plants in decades.

Some environmental and watchdog groups have attacked loan guarantees for building new reactors because they leave taxpayers on the hook if the companies default.

Activists have pointed to a 2003 Congressional Budget Office estimate that the default rate could surpass 50 percent.

But Chu – speaking to reporters after President Obama announced loan guarantees for Southern Company – called that figure far too high.

“We don’t believe the chance of default is 50 percent. We believe it is far less than that,” Chu said. He cited Energy Department and Nuclear Regulatory Commission efforts to smooth out the regulatory process for new reactors.

“We are looking at ways we can build these reactors on time and on budget,” Chu said.

Obama today announced that the Energy Department is conditionally offering utility giant Southern Co. $8.3 billion in loan guarantees to build two new reactors in Georgia.

And Chu said that commitments to other companies planning new reactors are on the way, although he did not provide a timeline. “We are working as hard and fast as we can,” Chu said.

The Energy Department may currently offer $18.5 billion worth of loan guarantees for nuclear plants, including the Southern Co. support.

But the fiscal year 2011 White House budget request proposes a tripling of support to over $54 billion, which Chu estimated would fund between seven and 10 new reactors.