US LLC Rules Allow Nuclear Power Companies To Take Profits, Dump Risk On Taxpayers
As we have watched the Fukushima Daiichi disaster ruin lives and slowly bankrupt TEPCO, it made many in the US look at what could happen here. In the situation in Japan there was one bit of luck in the people’s corner. TEPCO as a big corporate entity had large assets and many businesses besides power generation. Even with these broad assets TEPCO is quickly running out of cash and compensation payments have just started. The remaining costs will fall to the Japanese public to pay them.
In the US that bit of luck does not exist. US nuclear power plants mostly exist in a legal “get out of jail free” land of LLC (Legal Liability Corporation) ownership. While big energy conglomerates like Entergy own the bulk of the commercial nuclear power plants in the US, these plants are owned by individual LLC companies that have one asset, the power plant. Through a network of LLC companies and holding companies these energy giants are able to suck all the profits out of these nuclear power plants but shoulder none of the risk if something goes bad.
The US has a nuclear accident liability law, Price-Anderson. This law sets up a limited fund that all licensed nuclear plant owners would pay into in the event of an accident. They only pay premiums into this fund after an accident happens. Under this law each plant is required to have $300 million in liability insurance that would pay before Price-Anderson would kick in. Proving any other sort of cash reserves, ability to pay for an extended outage or an accident (including Price-Anderson premiums) has been largely voluntary by the power companies. Even when proof of financial assets is asked for by the NRC it is calculated based on projected income estimates done by the power company. The NRC admits they are out of their expertise when it comes to finance and also does no investigation to assure these estimates have any basis in fact.
The NRC has also complained repeatedly that deregulation of the energy industry is causing a lack of safety and maintenance to become a large problem as companies try to extract as much profit as possible up and out of these LLC companies to the parent company, leaving insufficient money to safely operate these nuclear plants. Many of these plants in LLC situations are among the aging reactor fleet from the 1960’s & 1970’s. As these plants ask for operating license extensions from the NRC, financial soundness is not part of the review.
If a nuclear power plant has a major accident, is found to have an expensive damage situation or is facing decommissioning the LLC that owns it can file for bankruptcy and walk away. The parent company has no financial risk or liability. The NRC has expressed doubt about being able to “pierce the corporate veil” in court and has diverted into settlements every time it has run into this issue with an aging plant facing a financial crisis. The NRC also has no special standing in a bankruptcy case where they can compel Price-Anderson premium payments or for the nuclear power company to pay funds towards decommissioning. It is not totally clear where the decommissioning trust fund lies as these funds are “sold” along with the plant when a new company takes over a nuclear power plant.
So who pays for a nuclear accident or an abandoned nuclear plant? The ratepayers and taxpayers. The details of Price-Anderson put the taxpayer as the ultimate final party to pay the bill in a disaster. Decommissioning is another area highly exploited by these power companies. Ratepayers are forced to pay the cost of decommissioning any nuclear plant in their state or service area through billing fees or taxes. This money goes into a trust fund. Those trust funds are then invested into the “stock markets” via various securities and financial instruments. The money in the trust fund it at risk as it could be lost all or in part if the investments fail or turn out to be bogus like Enron and many other Wall Street disasters. This is another situation where the power companies try to have it both ways, keep the profits, dump any liability onto the public. If a decommissioning trust fund does not have enough money in it the remaining funds will come from the taxpayers to decommission the plant. If there is a surplus in the trust fund after decommissioning, companies like Entergy will try to keep what is left for themselves as pure profit. This is exactly what Entergy tried to do when it bought Vermont Yankee. They failed to get this deal with Vermont ratepayers money, but did get to keep any future surplus money from 45% of ratepayers that live outside of Vermont. These situations where ratepayer money becomes an asset of a power company encourages them to both put off decommissioning to allow more money to be paid into the fund and to cut corners on decommissioning. The ability to siphon off any surplus money in the decommissioning trust fund without risk if the fund is insufficient encourages risky investment of the ratepayer money in the fund.
If Fukushima happened in the US? The people would pay the bill. The loopholes in the US system cause the bare bones payments of Price-Anderson to be potentially unpaid or under-funded. In the US the people would be assuming almost all the costs. In Japan they are finding that even with TEPCO’s large pool of assets, the costs are so massive that those assets cover just a tiny fraction of the costs.
Many thanks to tippytoe, Elaine and everyone else who contributed to the research on this.
Read the entire report on how the US public is put at risk by nuclear LLC companies at Riverkeeper.org
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