Westinghouse Electric filed for bankruptcy protection a few weeks ago. Westinghouse is the prime contractor, original equipment manufacturer, and financial guarantor of approximately $40 billion worth of nuclear construction. That construction is underway in Georgia and South Carolina. Depending on how it's measured, construction is approximately 50 percent complete. More than 50 percent of the money has been spent or committed.

Owners of these projects represent every utility operating in Georgia and South Carolina. Owners include every cooperative utility, municipal utility, and investor-owned utility operating in each state. By extension, every consumer living or working in either state will assume their pro rata share of construction liabilities.

Georgia utilities are also liable to the federal government for $8 billion in loan guarantees. These loans are in addition to any exposure to $2 billion in federal tax credit clawbacks.

Utilities and state regulators will be forced to make some tough decisions. Do they proceed with construction, do they abandon, do they defer, or do they implement some combination? There's no right answer.

Either way, it appears the states' captive customers will pay the price. If utilities proceed with construction, customers will face higher utility bills. In the first several years, those monthly invoices could be painful. However, over time, they will become palatable.

If utilities and regulators abandon construction, consumers will pay for all utilities' costs to date (this requirement is due to state Construction Work In Progress - CWIP policies). Unfortunately, captive consumers will gain nothing in return for their involuntary contributions.

Stakeholders are beginning to understand the depth of their predicament. Some are deeply concerned:

Unless there's a sovereign bailout, it's looking grim for utility stakeholders. It's difficult for the 10,000 or so highly skilled construction workers at both construction sites. It's sour for shareholders, communities relying on the plant's tax base, utility employees, state agencies, regulators, and consumers.

I take no delight in the Westinghouse meltdown. For me, nuclear power is an elegant solution to power industry challenges. It's clean, it's reliable, and, over the long term, it's economic. But, make no mistake. Nuclear power plants are sovereign assets.


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