U.S. Sens. Jim Risch (R-ID) and Ruben Gallego (D-AZ) on Feb. 10 introduced the Accelerating Reliable Capacity (ARC) Act, which would authorize federal backstop authority to help utilities and reactor operators cover cost overruns of advanced nuclear reactor projects.
Importantly for public power utilities, the legislation includes language, added at the request of APPA, that would address an issue that can arise when entities partner with a federal agency on a project seeking a loan guarantee.
LPO projects are generally blocked from receiving other federal benefits like grants, loans, sales contracts, etc. (a denial of double benefit; no “double dipping”).
The legislation clarifies that partnerships with a federal power marketing administration or the Tennessee Valley Authority, or projects owned or under the control of these entities, would not preclude LPO financing for a project and would not trigger a denial of double benefit.
Despite broad interest in deploying new nuclear energy generation, significant cost overruns and schedule delays have stymied widespread commercial deployment of both traditional and next-generation nuclear designs.
To help address these issues, the ARC Act would allow qualified advanced nuclear reactor projects access to enhanced financing terms and limited cost overrun protection through a new Accelerating Reliable Capacity Program and Fund to be administered by the Department of Energy (DOE) Office of Energy Dominance Financing (also known as the Loan Programs Office (LPO)) and overseen by the Secretary of Energy.
The bill would authorize $3.6 billion of funding for the new program.
• Advanced nuclear reactors are defined as a nuclear fission reactor with significant improvements compared to reactors operating in the United States on December 27, 2020. These additional improvements could include additional inherent safety features, lower waste yields, improved fuel and material performance, and increased tolerance to loss of fuel cooling, among others.
• To qualify, a project must be capital-intensive and connected to the grid, have a loan from the Federal Financing Back (FFB) that is twice the size of insurance coverage, and a loan guarantee through DOE.
• The Secretary, advised by a working group that includes industry and technical experts, would oversee the program and verify project readiness. The Secretary would review the cost, labor, and schedule estimates to ensure project readiness and provide ongoing project oversight.
• DOE would execute due diligence for a project through its existing loan guarantee program, verify the project delivery plan, and administer the financial actions of the program.
• After the oversight and readiness requirements are met, enhanced financing terms would apply to the DOE loan guarantee.
• In cases of high, unexpected cost escalation, a cost share would be tabulated and applied to the loan balance at the FFB after the project is placed in service, with the loan subsequently being restructured to reduce the cost of debt.
• To calculate that cost share, ARC Program coverage is structured so that the first 120 percent of the expected qualified project cost is the borrower’s responsibility. After which, 50 percent of additional project expenses are eligible for coverage up to 30 percent of the initial project cost estimate or $1.2 billion, whichever is less. The enhanced financing terms for a qualified project include a tranched loan guarantee up to 200 percent of the verified cost estimate.
Risch introduced the ARC Act last Congress (S. 5421).
The version introduced this Congress varies from S. 5421 in a few areas, notably removing the ARC Act of 2024’s appropriations and tax provisions related to “normalization” opt-out.
Specifically, under current law, the value of tax credits to public utilities must be paid out to customers over time, i.e., normalized, rather than immediately paid when realized.
The ARC Act of 2024 would have allowed public utilities to opt out of normalization of tax credits related to certain advanced nuclear qualified projects. The ARC Act of 2026 includes no such provision.
The ARC Act of 2026 also allows smaller projects to access funding. Under the ARC Act of 2024, funding would have only been available for projects costing $2.5 billion or more.
