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Friday, February 22, 2008 5:59 PM ET
Nuclear production tax credit to be allocated by capacity, not plants


Developers of new nuclear power plants do not have to rush to get in line for the nuclear energy production tax credit, Nuclear Energy Institute President Frank "Skip" Bowman told the New York financial community Feb. 21.

Under guidance expected to be finalized this year, the tax credit will not be restricted to the first six new nuclear plants built.

"We've worked out a system" so that developers of new nuclear power plants do not have to rush to get their license applications in to the U.S. NRC in order to be eligible for the production tax credit for new nuclear generation, Bowman said. "As the law was originally written, it would have implied that only the first six plants to the table would get that production tax credit. In fact, we've figured out a scheme that will dole it out on a pro-rata basis, so there's no need for that rush," Bowman said.

To stimulate investment in new nuclear plants, the Energy Policy Act of 2005 provided a production tax credit of $18/MWh for up to 6,000 MW, worth up to $125 million in tax credits a year for eight years for 1,000 MW of capacity.

Richard Myers, NEI vice president for policy development, explained that the U.S. Treasury Department has set up a series of eligibility criteria for the distribution of tax credits to new nuclear power plant developers. Under the criteria, companies who file a construction and operating license application with the NRC by Dec. 31, 2008, and have a plant under construction by Jan. 1, 2014, will be eligible. The government will then take all the capacity that meets these criteria and put it in a pool. Tax credits will be distributed on a pro rata basis, depending on the nameplate output of the plants.

The Treasury Department issued the criteria in a guidance, which is expected to be formalized in a rulemaking this year, Myers said in an interview.

The Energy Policy Act also provided federal standby support, which includes $2 billion of risk insurance coverage for the first six new nuclear plants to be built in the United States. The insurance, intended to cover delays that result from licensing review issues or litigation, is capped at $500 million for the first two reactors and $250 million for the next four reactors built.

Bowman noted that 17 companies or consortiums are preparing license applications for as many as 31 new nuclear reactors. Five complete or partial applications for licenses were filed with the NRC in 2007 and another 11 to 15 are expected in 2008. However, Bowman anticipates that the nuclear renaissance in America will unfold "slowly and cautiously," with no more than between four and eight new plants coming online by 2016.

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