April 23, 2014 2:42PM # Risking Taxpayer Dollars on DOE Loan Guarantees By [Nicole Kaeding](https://www.cato.org/people/nicole-kaeding) --- SHARE In February, I [highlighted](https://www.cato.org/blog/another-6-billion-energy-loan-guarantees) the Department of Energy’s issuance of a $6.5 billion loan guarantee to build a nuclear power facility in Georgia. At the time, the project was behind schedule with cost overruns, and the project’s owners had already secured private financing. Yet DOE issued the loan guarantee anyway. Now we’ve learned that DOE’s actions were even more foolish than previously thought. DOE waived the credit fees charged to the company—which are meant to offset the risk to taxpayers—when it issued the loan. According to the [*Washington Examiner*](http://washingtonexaminer.com/energy-department-scraps-millions-in-fees-for-nuclear-loan-guarantee/article/2547590): > “Developers of a Georgia nuclear project didn’t have to pay millions of dollars in fees designed to prevent risk for taxpayers when it secured $6.5 billion in loan guarantees from the [Energy Department](http://washingtonexaminer.com/section/energy-department) in February, the agency confirmed Tuesday to the *Washington Examiner*. > > > The DOE calculated a zero dollar “credit [subsidy](http://washingtonexaminer.com/section/subsidies) fee,” which protects taxpayers if developers default, for electric utility Georgia Power — a subsidiary of Southern Co. — and Oglethorpe Power Corp. to spur completion of two large, next-generation [nuclear reactors](http://washingtonexaminer.com/section/nuclear-power) at the Vogtle power plant in Waynesboro, Ga.” This isn’t the first time that DOE has been criticized for the handling of its loan guarantee programs, and thus risking losses to taxpayers. In 2012, the Government Accountability Office [said](http://www.gao.gov/assets/590/589210.pdf), “if DOE underestimates these costs \[credit subsidies\], taxpayers will ultimately bear the cost of default.” GAO [said](http://www.gao.gov/assets/590/589210.pdf) that DOE did not follow its own processes for handling applications “potentially increasing the taxpayer’s exposure to financial risk from an applicant’s default.” Energy loan guarantee programs should be eliminated, but closing them doesn’t seem likely under the current administration. But you would think that even this administration would favor DOE following sound lending practices to try and minimize taxpayer losses. ##### Related Tags [Energy and Environment](https://www.cato.org/research/energy-environment), [Tax and Budget Policy](https://www.cato.org/tax-budget-policy), [Department of Energy](https://www.cato.org/department-energy), [Downsizing Government](https://www.cato.org/downsizing-government) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).