The groundwork is being laid for the emergence of super-electric utilities, as a strategy for an economically beleaguered nuclear industry to survive an increasingly competitive market by consolidating more reactors under fewer utilities. Nuclear utilities operating aging and historically poor performing nuclear power stations, often outside of federal safety regulations, are the first candidates for this consolidation.
In the industry's own terms, to meet competitive markets through a conglomeration of more reactors under fewer owners, it is "essential" and "paramount" to change tax law to provide the corporate buyers and sellers of nuclear power stations relief from tax liabilities incurred during license transfers. Specifically, the utilities are looking to avoid tax liabilities associated with the transfer of large decommissioning funds set aside to clean up reactor sites after the reactors are permanently closed.
"The issue is whether U.S. taxpayers should reward the nuclear industry's poor performers and safety violators with tax incentives used to grease the skid for quick reactor sales at bargain basement prices," said Paul Gunter of Washington, DC-based Nuclear Information and Resource Service. Gunter was referring to the industry initiative to amend current tax code on utilities looking to get out of losing nuclear power propositions by selling their reactors to larger generating and transmission entities for pennies on the dollar of original construction cost.
Since 1984, U.S. tax policy has provided tax-deductible status for contributions made into "qualified funds" allocated to clean up radioactively contaminated nuclear power station sites once closed. Interest from the investment of these funds is taxed as income. These "qualified funds" are regulated through public utility commissions. If a nuclear power station is sold from one regulated public utility to another public utility the tax status of the decommissioning fund is unaffected. When the reactor is sold to a non-regulated utility, such as a corporate entity outside state jurisdictions or a foreign ownership, as in the case of Amergen, there is no longer a public utility commission to set electric rates or a cost of service amount. The decommissioning fund is thus transferred into a "non-qualified fund" which under current IRS law subjects the selling utilities to higher corporate capital gains tax. Under federal regulations, all utility decommissioning funds must be segregated from company assets and outside the utility administrative control to ensure that the funds are available and directed towards actual decommissioning operations. The selling utilities would need to pay this tax from general revenue funds and thus constitutes a disincentive to reactor sales. General Public Utility Nuclear in selling Three Mile Island has opted to remain the holder of decommissioning funds rather than pay tens of millions of dollars in taxes.
While the Nuclear Regulatory Commission recognizes that the current tax law if applied will not diminish the amount in the decommissioning funds, a number of reactors under its oversight are currently so marginal to safe performance that any added tax burden might affect further safe operation. The federal agency in supporting the industry argument for a tax break states that an exemption is needed in order to ensure that "negative tax treatment" of nuclear utilities does not result in situations where "opportunities to enhance plant performance and improve safety could be missed." NRC goes on to say that "transfers may tie up additional funds through tax liability that would otherwise be applied to improve the margin of safety, fewer safety enhancements may be possible."
"Rather than provide for aging nukes in such marginal safety condition that they need a tax shelter, the NRC should shut them down before the public is forced into fallout shelters," Gunter concluded.