Monday, July 30, 2007

How a Well Connected Industry Gets a Free Ride

I love the business of business, especially entrepreneurship. However, nothing is worse than a free ride on our tax money. In the NY Times article, "Energy Bill Aids the Expansion of Atomic Power Plants," there's a little known provision tucked into an energy bill that has government guarantees for the nuclear power industry. Essentially, the "Department of Energy would be allowed to guarantee 100 percent of the loans and up to 80 percent of the total cost to build a reactor." That's to the tune of $25 billion!

What? So utilities get guaranteed loans. No risk for them. Pay too much, pick the wrong technology, overestimate the market - hey no problem. We the taxpayer will take care of you. All of us entrepreneurs have to schlep on bended knee to investors and banks who assess their investments based on risk. But the nuclear industry gets a free ride. How wonderful is this? Be an industry exec and get paid a lot to take no risk.

I'm all for incentives and sometimes a subsidy if it is in the national interest. Nuclear is a part of the energy equation - especially in a carbon threatened world. However, this is absolute bunk.

No risk, no return - last I checked that's the difference between business and government. If companies like GE and Exelon need a free ride, then there should be a price for it. If you need a government guarantee to do business, then you need to take a government salary. Or you need to give up a commensurate amount of equity warrants to the Social Security trust fund. If the taxpayer is going to fully guarantee a loan to build a reactor, then there needs to be equity upside for the risk the taxpayer is taking in return for our risk and the lower interest rate from lenders.

Now don't start me on how big money has bought our politicians...

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