Federal Gov't Has Turned Nuclear Waste Into Another Debt

Norris McDonald at Yucca Mountain

The Nuclear Waste Policy Act of 1982 has created another unfunded liability, starting with a $25 billion ratepayer fund gone astray and $16 billion or more in estimated legal judgments to compensate utilities for their storage expenses. The costs of the ultimate disposal project also are sure to rise, with no plan in sight to replace the now-canceled plan to entomb the waste at Nevada's Yucca Mountain.

When the federal government took responsibility for nuclear-waste disposal three decades ago, the 1982 law required nuclear utilities to shoulder the cost through an annual fee paid to the federal government. The fee was to be deposited in a newly created Nuclear Waste Fund that the U.S. Department of Energy could tap to fund the storage project. The fee, which ultimately comes from nuclear-electricity customers as a surcharge of 1/10th of a cent per kilowatt hour, now amounts to about $750 million a year. Counting past expenditures and interest earned, the fund's balance is about $25 billion.

But that cash doesn't really exist. Since the Balanced Budget and Emergency Deficit Control Act of 1985, Congress and successive administrations have changed the plan so that the fees paid by utilities essentially are treated like taxes and go into the government's general coffers.
The project's funding arrangement is fundamentally broken and reforming it is absolutely essential.

It sounds like there's a piggy bank and there's all this money that is available for a future nuclear] repository, but there isn't. Congress has spent it on other things. The $25 billion amounts to little more than a federal IOU that will need to be repaid. At the same time, the nuclear-waste program was required to compete with other programs for annual appropriations from Congress. The bottom line: Spending on the program is counted against the deficit, instead of the self-funding intended in the original law.

Because the government failed to start taking spent fuel as promised beginning in 1998, utilities are suing it to cover their additional storage costs. Federal officials have estimated it will cost $16.2 billion to pay legal judgments owed to utilities by 2020—assuming the U.S. is able to start taking waste from utilities starting then—and $500 million a year after that.

One of the panel's proposals was to cut the annual fees collected from utilities to match the level of federal spending on the program. Uncollected funds would go into utility-run trust funds, to be tapped when needed for the waste project. That would put the project onto sounder fiscal footing, the panel said, but would add to the near-term federal deficit because some of the utility fees wouldn't be counted as current revenue. Still, the panel draft report said, "the bill will come due at some point," because the government is contractually bound to remove the spent fuel.

The Department of Energy is being sued with plaintiffs seeking to suspend collection of the annual fees utilities pay into the waste fund, believing that there is no need to pay a fee if you're not getting a program for it.

Other legal challenges to President Obama's decision to kill Yucca Mountain are pending. The Energy Department in 2008 estimated that building the Yucca Mountain facility and then transferring waste to it would cost $83 billion in 2007 dollars, on top of the $13.5 billion already spent.  If the plan is dead and the government has to find a new site, the ultimate cost almost certainly will rise. (WSJ, 8/9/2011)