Nuclear Levy (Hansard, 26 February 1990)

§ 1. Mr. Harry Barnes
To ask the Secretary of State for Energy what is his estimate of the earliest year in which the nuclear levy could be abolished; and if he will make a statement.

§ The Secretary of State for Energy (Mr. John Wakeham)
I announced on 12 February that the initial non-fossil fuel obligation would be set for the period 1990–91 to 1997–98. The fossil fuel levy will be required for at least the same period, although I expect the rate to decline significantly over that time.

§ Mr. Barnes
How does the Secretary of State hope to reduce the subsidy, let alone abolish it? How will greater efficiency be introduced into the nuclear energy industry, 2 which is secretive, bureaucratic, technically complex and highly dangerous? Will it be done by reducing safety standards?

§ Mr. Wakeham
First, it will not be achieved by a reduction in safety standards. Secondly, whatever may have been the practice in the past, the arrangements that we are bringing into force will be much more open, allowing for greater public scrutiny. Nuclear electricity is vital to ensure security of supply. As nuclear power still costs more than fossil power, the levy is needed so that the extra costs can be identified and fairly shared out.

§ Dr. Michael Clark
Does my right hon. Friend agree that critics of the nuclear levy should bear it in mind that in the past, perhaps for very good reasons, coal has been subsidised? If subsidies were beneficial to that industry, is not a subsidy for the nuclear industry appropriate now?

§ Mr. Wakeham
I have some sympathy with my hon. Friend. The nuclear industry is required, properly, to pay the costs of disposing of its own waste, so it is not quite on a level playing field with other energy producers. It is important to make a proper comparison.

§ Mr. Dobson
How does it benefit electricity consumers for the right hon. Gentleman to insist that nuclear power stations —the most expensive in the system —must run continually?

§ Mr. Wakeham
Anyone who knows about the electricity industry, as the hon. Gentleman does, will appreciate that nuclear power stations, being base load capacity, are more economic if run full time. The major part of the cost of a nuclear reactor is its capital cost rather than its running costs.

§ Mr. Hannam
Will my right hon. Friend confirm that he included the nuclear levy in the price increases that he announced recently? With distribution and transmission costs varying across the country, will boards need to impose a range of electricity price increases in the future?

§ Mr. Wakeham
Yes, I can confirm that, as I announced recently in the House the average price increases for all customers will be below the rate of inflation and will 3 include customers' contributions to the nuclear levy. My hon. Friend is right that there will be a variation in the prices levied by area boards, but that is a matter for them. Prices will vary from area to area, as they have in the past. Some boards have greater costs because their customers are few and far between and a large cable network is expensive. Other boards have a traditionally low rate of return and have further to catch up.
As I said, the precise figure to be charged is a matter for each board, but domestic electricity price increases, which I believe particularly interest my hon. Friend, will range from 8 to 9 per cent. with perhaps two or three boards increasing their charges by a higher percentage. However, I expect that, overall, increases will range from 3 to 8 per cent., with the average being less than 6 per cent.

§ 4. Mr. Barron
To ask the Secretary of State for Energy what is his estimate of the fossil fuel or nuclear levy in 1991–92, 1992–93 and 1993–94.

§ Mr. Wakeham
The rate of the levy will depend on the terms of the nuclear contracts. Those will ensure that the nuclear levy follows a declining profile. I therefore expect the rate of levy to decline significantly over the next eight years.

§ Mr. Barron
In relation to contracts, is it true that the nominee directors of Nuclear Electric have been advised not to start trading as a plc until they have some guarantee from the Treasury about the costs of reprocessing and decommissioning?

§ Mr. Wakeham
That is not a correct statement of affairs. Any director of any company has to satisfy himself that the company conforms with all the requirements of the Companies Acts before it starts trading, and the nominee directors of Nuclear Electric are no exception. They will want to see that Nuclear Electric is set up on a proper basis, as I do. All will be revealed in due course.

§ Mr. Colvin
Does my right hon. Friend agree that in calculating those levies we must compare the cost of generation by nuclear power with the cost of coal or other fossil fuels? Nuclear power generation involves long-term costs, but we shall know the cost of coal generation only at the end of the three-year contracts with British Coal. When my right hon. Friend makes that comparison, will he take into account the cost of flue gas desulphurisation, during the next three years at least, and the possible cost of cheap coal from overseas, which is low in sulphur?

§ Mr. Wakeham
The question of which fuel the generators use to generate electricity and, in practice, which mix of fuels will be a matter for them at the end of the period. Obviously, there will be competition between British coal, gas and oil and imported coal. The Government are committed to the implementation of the European directive on desulphurisation, and they will ensure that the fossil fuel generators, when they are floated, will be able to meet their obligations under the directive.