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Federal loans fuel push for coal power plants

By ASSOCIATED PRESS
Published May 14, 2007


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WASHINGTON - A Depression-era program to bring electricity to rural areas is using taxpayer money to provide billions of dollars in low-interest loans to build coal plants even as Congress seeks ways to limit greenhouse gas emissions.

That government support is a major force behind the rush to coal plants, which spew carbon dioxide that scientists blame for global warming.

The beneficiaries of the government's largesse - the nation's rural electric cooperatives, which are nonprofit organizations owned by their customers - plan to spend $35-billion to build conventional coal plants over the next 10 years, enough to offset all state and federal efforts to reduce U.S. greenhouse gas emissions over that time.

The Office of Management and Budget wants to end loans for new power plants and limit loans for transmission projects in the most remote rural areas. But the powerful National Rural Electric Cooperative Association deployed 3, 000 members on Capitol Hill last week to push Congress to keep the program intact, arguing that the loans for new coal plants are needed to keep electricity cheap and reliable in rural areas.

In his fiscal 2008 budget, President Bush asked Congress to tighten lending rules for rural co-ops. Reps. Allen Boyd, D-Monticello, and Frank Lucas, R-Okla., are gathering signatures for a letter asking that the low-cost government loans be continued.

Among those asking for federal loans is the Seminole Electric Cooperative in Tampa. It plans a $1.8-billion, 750-megawatt coal plant that would boost the utility's generating capacity by 60 percent. The co-op applied for a $1.4-billion loan. If approved, the interest rate for the heavily indebted co-op, which Standard & Poor's says has less than a month's worth of cash, would be as low as the rates for the most rock-solid corporate bonds.

The money comes from the Agriculture Department's Rural Utilities Service, an outgrowth of the Rural Electrification Administration created in 1935 by President Franklin Roosevelt to bring electricity to farms. More than 70 years later, the goal of providing electricity to rural areas has long been accomplished, but the federal government is still making the subsidized loans. And many of the areas served by co-ops are actually densely populated, critics say.

Glenn English, chief executive of the National Rural Electric Cooperative Association, said rural areas still need help to meet growing power demands at reasonable costs and that burning coal makes sense. He said per capita income of co-op members and consumers is 15 percent below the national average.

[Last modified May 14, 2007, 01:18:12]


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