Federal Government Jeopardizes Billions in Loan Repayment by Authorizing Risky Energy Projects

The Sierra Club today voiced its concern that consumers could be faced with higher electric bills if the federal government continues to approve unsound investments in new coal-fired power plants across the nation. Already burdened with $36 billion in unpaid loans, the U.S. Department of Agriculture is now allowing rural utilities to take on billions of dollars in additional debt to build risky new coal-fired power plants, at enormous financial risk to taxpayers. Among those rural utilities is Prairie Power, Inc., which already has requested or received $385 million in loans or loan guarantees from the federal government. 

“In the past weeks families across the country have already seen their energy rates increase dramatically, in some cases almost double,” says Becki Clayborn, Regional Representative at Sierra Club. “Approving these loans will push rates even higher as both the cost of energy and the additional debt are pushed off on ratepayers.” Ratepayers in downstate Illinois already face higher electricity bills plus a 30 per cent increase in natural gas prices. 

The federal government, through the Department of Agriculture’s Rural Utilities Service, is approving rural utilities’ ownership in Prairie State Energy Campus and at least nine other new coal-fired power plants proposed by various rural utility cooperatives across the country. In every instance the government has failed to fully vet the plants’ potential impacts before authorizing their construction, ignoring key concerns like the financial risk associated with the coal plants’ contribution to global warming, adverse impacts on the environment and the availability of cleaner, cheaper alternatives. The government’s failure to fully evaluate the environmental risks of and alternatives to these new coal-fired power plants violates the National Environmental Policy Act.

“The federal government should not be approving massive amounts of new debt for Prairie Power, Inc.,” says Kathy Andria, conservation chair of the Kaskaskia Group of the Sierra Club. “The plant is already estimated to cost between $3-$4 billion, and the cost is likely to rise even higher given skyrocketing costs for building and operating new coal plants. We should be spending our money more wisely, especially in today’s economic climate.”

Environmental impacts play an integral role in a utility’s ability to repay its loans, a fact recognized by the nation’s largest banks, which already consider the cost of carbon dioxide pollution before granting loans. Other parts of the federal government, including the House Oversight Committee have also recognized the financial risks associated with failing to account for the cost of global warming pollution from new coal plants. The Committee has warned the Rural Utilities Service that future carbon regulations will make coal increasingly costly and that failing to consider those costs will place taxpayer dollars and ratepayers at risk.

In the past rural utility cooperatives have gone bankrupt rather than pass on cost increases to customers. If that were to happen in this situation, the American taxpayers will be left with billions of dollars in debt which is unable to be repaid. 

“Coal is a fuel of the past. Instead of looking for ways to use more of it—fueling our cars, our homes, our offices, we should be working to move beyond it to a cleaner energy future. There are real, affordable energy solutions, like efficiency and renewable energy that are ready today to meet our energy needs, without the financial, health and environmental risks associated with coal,” says Andria, “Wind, solar and geothermal are real solutions to our energy needs, plus they provide jobs—jobs to build the equipment and jobs to construct, operate and maintain the facilities.”