Nuclear Reactor 2

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Q: I often hear that nuclear fuel has a low cost – lower than that of alternative energy sources.  But at what point is the cost of completing a nuclear facility, before the power even starts to flow, too high?  Who decides how to distribute the costs associated with the original construction once the facility is finished?

A: Such thorny questions are generally decided by the Federal Energy Regulatory Commission, the FERC.  The Commission may reason, for example, that since the facility had been constructed to meet the needs and serve the goals of the entire system, the allocation must rest not on the ‘needs’ of an individual company, but rather on some kind of principles of just, reasonable, non-discriminatory and non-preferential rates, whatever those principles may be.

In these deliberations, the FERC is generally implementing a prudent-investor rule – providing incentives for utilities to invest in necessary capacity-building by allowing them to charge rates that will provide a fair rate of return.  The Commission is supposed to achieve a reasonable balance between the consumers’ interest in fair rates and the investors’ interest in maintaining financial integrity and access to capital markets.

There is always the potential for conflict between the FERC and a state regulatory body.  In such a case, the state body must submit to the Supremacy Clause of the United States Constitution.  At those times, a state determination has been pre-empted.  Consistent with the Supremacy Clause, the state may then not conduct any proceedings that challenge the reasonableness of the FERC’s allocation.

By: Scott Baron,
Attorney at Law Advertorial

The law responds to changed conditions; exceptions and variations abound. Here, the information is general; always seek out competent counsel. This article shall not be construed as legal advice.

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