WIREDGOV

Clean up fund is precondition for new nuclear - Hutton

DEPARTMENT FOR BUSINESS, ENTERPRISE AND REGULATORY REFORM News Release (2008/040) issued by The Government News Network on 22 February 2008

New nuclear power station operators will be required by law to set aside money from day one of generating electricity for their eventual decommissioning and waste costs, Business Secretary John Hutton made clear today.

Draft guidance published today sets out how clauses in the Energy Bill requiring operators of new nuclear power stations to meet the full cost of decommissioning and their full share of waste management costs would work.

Companies would be required to:

* Demonstrate detailed and costed plans for decommissioning, waste management and disposal, before they even begin construction of a nuclear power station;

* Set money aside into a secure and independent fund from day one of generating electricity; and

* Have additional security in place to supplement the Fund should it be insufficient, for example, if the power station closes early.

In ensuring these safeguards, the Secretary of State will draw on expert advice from the soon to be established Nuclear Liabilities Financing Assurance Board.

Mr Hutton said:

"Last month I invited energy companies to bring forward proposals for new nuclear power stations and we are already taking steps to facilitate this. It is in the national interest that the energy industry is able to invest in secure low carbon energy sources.

"But it is also in the national interest that we take every step to ensure that the taxpayer is protected from the clean up costs down the line. The Energy Bill and the guidance published today make clear that companies are liable by law to meet their full costs.

"Let me be clear - full means full. Funds will be sufficient, secure and independent, it will be a criminal offence not to comply with the approved arrangements and we are taking powers to guard against unforeseen shortfalls."

The draft guidance, published for consultation, will assist businesses in understanding their obligations under the Energy Bill, and what is required for a Funded Decommissioning Programme to gain approval.

Included is an indicative timeline by which the Government expects to publish its updated estimates of the costs of decommissioning and managing and disposing of the waste from new nuclear power stations, and therefore be in a position to set a fixed unit price for disposal of intermediate level waste and spent fuel. This fixed unit price will be set at a level over and above expected costs and will include a significant risk premium, to provide the taxpayer with material protection.

We consider that a decision by an operator to proceed in principle with building a new nuclear power station and therefore to request from the Government a fixed unit price for waste disposal in a Geological Disposal Facility could come as early as mid 2009.

Notes for editors:

1. This consultation on the draft guidance will end on the 16 May 2008 and follows the publication of the White Paper on Nuclear Power on 10 January 2008. The White Paper announced the Government's formal response to the consultation on the future of nuclear power, that it would be in the public interest to allow energy companies the option of investing in new nuclear power stations.

2. Under the Energy Bill, operators of new nuclear power stations must produce a Funded Decommissioning Programme for approval, which consists of two parts: a Decommissioning and Waste Management Plan and a Funding Arrangements Plan.

3. "Full decommissioning costs" are the costs for: dismantling the plant at the end of its operational life; and, returning the site to a condition agreed with the regulators (likely to be a state suitable for restricted use, industrial or recreational).

4. The "full share of waste costs" means: The costs that are directly attributable to disposing of new build waste in a geological disposal facility; and, a contribution towards the fixed costs of building a geological disposal facility.

5. The first set of draft guidance (Part 1 - Decommissioning and Waste Management Plan Guidance) will assist businesses in setting out and costing the steps involved in decommissioning a new nuclear power station and managing and disposing of radioactive waste and spent fuel in a way which Ministers may approve.

6. The second set of draft guidance (Part 2 - Funding Arrangement Plan Guidance) will assist operators in setting out acceptable proposals for how sufficient funds will be accumulated to meet the costs identified and sets out the guiding principles against which the Government will assess the funding proposals submitted by nuclear operators for approval under the Energy Bill.

7. The guidance flows from the clauses in the Energy Bill and can only be finalised after Royal Assent of the Bill. The consultation on draft guidance runs from today until 16 May 2008.

8. This guidance is statutory and will be laid before Parliament to ensure transparency. As guidance it cannot compel, but taken together, it is intended to set out the matters which the Secretary of State may take into account in determining whether to approve or approve with modifications, or modify a Funded Decommissioning Programme.

9. This guidance is expected to be of interest to nuclear operators as they will be responsible for submitting Funded Decommissioning Programmes, ensuring that financial security is provided, and, taking the technical steps set out in the approved Funded Decommissioning Programme as necessary. The guidance is also expected to be of interest to other stakeholders, including environmental organisations, investors, regulatory and consumer bodies and local communities.

10. Dr Tim Stone, a senior financier with experience of major capital investment projects, was appointed in January 2007 to advise the Secretary of State for BERR and the Chief Secretary to the Treasury on financing the costs of decommissioning, waste management and waste disposal for new nuclear power stations. The clauses in the Bill and the draft guidance published today for consultation are the result of this work.

11. Full documents are available for comment at http://www.berr.gov.uk

12. The Department for Business Enterprise and Regulatory Reform helps UK business succeed in an increasingly competitive world. It promotes business growth and a strong enterprise economy, leads the better regulation agenda and champions free and fair markets. It is the shareholder in a number of Government-owned assets and it works to secure, clean and competitively priced energy supplies