Nuclear Liabilities Financing Assurance Board

This article is part of the Nuclear Spin project of Spinwatch.

Background

Under the Energy Act 2008, operators of new nuclear power stations are supposed to have secure financing arrangements in place to meet the full costs of decommissioning and waste management, before construction of a new nuclear power station begins.

The Department of Energy and Climate Change created the Nuclear Liabilities Financing Assurance Board (NLFAB), to provide impartial scrutiny and advice on the suitability of these so-called Funded Decommissioning Programmes (FDP). The Board advises the Secretary of State on the financial arrangements that operators submit for approval, and on the regular review and ongoing scrutiny of funding.

The FDP must include:

• provision for the steps necessary to decommission the installation and manage and dispose of hazardous waste
• an estimate of the costs of taking those steps
• details of any security to be provided in relation to those costs

A new nuclear power station operator must produce a Funding Arrangements Plan (FAP) which sets out how the operator will meet the identified costs over the expected lifetime of the new nuclear power station, but also show how costs would be met in the event of early decommissioning, i.e. should the nuclear power station stop generating earlier than expected and liabilities crystallise early.

People

It is chaired by Dr Janet Morgan (also known as Lady Janet Balfour of Burleigh).

Board members are:

• Anne Baldock, Head of Projects, Allen & Overy LLP
• Antony Osborn-Barker, Director, JLT Pension Capital Strategies
• Norman Harrison, Director of Strategic Development, Babcock International
• Simon O’Regan, President of Mercer’s Global Retirement, Risk and Finance business
• Dr Anthony White, MBE, non-Executive Director, Senior Adviser on Climate Change, UK Energy Research Centre and Sussex University’s Energy Group
• Simon Carroll, Regulator, Swedish Radiation Safety Authority, Stockholm

Establishing NLFAB

At a meeting of global nuclear investors on 12th June 2008, the then Secretary of State for Business, Enterprise and Regulatory Reform, John Hutton, called for applications for membership of the NLFAB, to “give independent advice to the Secretary of State on the suitability of the financial element of the Funded Decommissioning Programmes for new nuclear power stations, to be submitted for approval by energy companies.”

Adverts appeared in the Press on 1st July for the Chair of NLFAB and six Board members. Candidates with expertise in fund management, economics, nuclear engineering, decommissioning and waste management, legal finance and the actuarial or insurance profession were sought.

Environment Agency request denied

The Environment Agency, in its submission on the Funded Decommissioning and Waste Management Programme Guidance Consultation, suggested that the Agency is represented on the Board because waste disposal will contribute a large element of the overall costs. Its request was not successful.

The Sceptics

Dieter Helm, Professor of Energy Policy at New College, Oxford, said the system effectively means utilities will pay for the state to absorb the risks of handling nuclear waste in exchange for payments into a fund. “It’s a fixed-price contract for the Government to take the waste. The Government absorbs the final-end risk,” he said. The Spectator said there is every risk that the public will end up footing the bill.

The Government left open the possibility of subsidizing reactors, despite its disclaimers. It said in ‘extreme circumstances’ it would be prepared to help meet the massive decommissioning and waste disposal costs — knowing full well that such extreme circumstances almost always attend decommissioning and waste disposal.

The Government indicated the ‘fair share’ for waste ‘disposal’ will be calculated as the proportion of space a nuclear operator’s radioactive waste takes up in any repository. But this overlooks the hundreds of millions spent on research and development for a repository, representing a huge hidden subsidy.

Foreign utility companies with reprocessing contracts with Sellafield appear to be paying around £201,000/m3 for intermediate-level waste. But if new reactor operators were to be charged the same it would cost them around £820 million per reactor. This fully commercial price would make disposal far too expensive, killing the prospects of any new reactors. Business models are assuming costs of only around £100m for waste management and decommissioning.

Gordon Mackerron, former chair of the Committee on Radioactive Waste Management (CoRWM), said this system proposed by BERR for funding decommissioning and waste management amounts to a hidden subsidy for new reactors. He attacked as “frankly not credible” Government assurances that new reactors would meet the full cost of waste management. The proposals to offer operators of nuclear reactors a fixed unit price for waste disposal is odd because we can only have a hazy idea at this stage what a waste repository will cost.

Stephen Thomas of Greenwich University said the Government is failing to adhere to its pledge not to subsidise the industry. He said past experience of the accuracy of nuclear cost estimates suggests that giving operators a fixed price now could prove costly to taxpayers more than 100 years into the future when this waste is actually being disposed of.

Bankruptcy

And what happens if an operating company is unable to meet its commitments to the nuclear decommissioning fund? The Government has taken liabilities off the nuclear private sector before - British Energy passed on its £5.3bn liabilities bill to the taxpayer - and the Energy Act 2004 contains powers which allow the Secretary of State to direct the NDA to take over financing of nuclear waste liabilities for private nuclear companies in the future should they be unable to meet their obligations.