For a guy who proclaims the wonders of our free enterprise system and is viewed as the wisest of investors, Warren Buffett apparently is feeling a bit clammy when it comes to his MidAmerican Energy Company idea to build a nuclear power plant in Iowa.
First, MidAmerican last year convinced the legislature to have customers cough up $15 million for a 3-year study of the idea of building a nuclear plant in the state.
And, now his MidAmerican lobbyists are trying to convince legislators to have customers guarantee immediate recovery of all costs for construction of a nuclear power plant.
Never mind the 3-year study isn't complete (we suspect we know what it will say based on the intense lobbying going on in Des Moines). And, never mind there is no cost estimate or even an approved Nuclear Regulatory Commission design for the type of reactor being discussed.
The legislation is needed, according to MidAmerican, so private investors can be attracted to the nuclear project.
The very idea no private investor would venture a dime without a ratepayer guarantee should tell state legislators to run, not walk, away from this latest MidAmerican bill.
The regulatory process whereby the utility must obtain plant construction approval through public hearings and cannot charge ratepayers until a facility is placed in service should not be bypassed just because it involves a nuclear plant. In fact, a nuclear plant should involve more, not less, scrutiny and deserves full regulatory oversight by the Iowa Utilities Board.
Allowing upfront cost-shifting to ratepayers sends the wrong signal to the utility and investors. Why be concerned about expenditures which can be billed immediately to utility customers? Even if the plant ends up being a white elephant and not being built, utility customers will make the company whole.
There are good reasons nuclear plant construction projects have a difficult time attracting private capital these days. Building a nuclear plant is very expensive, can be very time-consuming to obtain regulatory approval, and comes with an uncertain environment for future operation.
Artificially removing risks for private investors and forcing customers to guarantee costs and investment returns is bad public policy. If the market, MidAmerican and Mr. Buffett don't believe the return to investors is worth the risk, customers should not be forced to underwrite such a highly speculative venture.
