Sizewell B Power Station (Hansard, 22 May 1990)

§ Viscount Ullswater
My Lords, my right honourable friend the Secretary of State for Energy has just received from Nuclear Electric plc the latest progress report on Sizewell B. Detailed discussions on the report will be held with the company in the near future.

§ Lord Hatch of Lusby
My Lords, is the noble Viscount aware that the Secretary of State received the report last Wednesday and that it showed that, according to latest estimates, Sizewell B will now cost well over £2 billion at 1987 prices, compared with the figure the Government gave in the past (which was given to me by the noble Viscount) of £1.8 billion also at 1987 prices? Is the Minister further aware of the criticism being made by the all-party Energy Select Committee of another place of the conduct of the Department of Energy in not monitoring the rapid steep rise in the cost of building nuclear power stations?

§ Viscount Ullswater
My Lords, the management of Nuclear Electric plc is responsible for all aspects of the project. Naturally, as a shareholder, my right honourable friend the Secretary of State for Energy is keenly interested in the progress of the project. He will be discussing the report in detail with the top management of the company.

§ Lord Stoddart of Swindon
My Lords, on the basis of the new costs for Sizewell B, can the noble Viscount state, or has he been advised, what the price per unit will be for electricity generated in Sizewell B?

§ Viscount Ullswater
My Lords, the implication of the review of electricity costs from the station will need to be considered with the company. Nuclear Electric plc has already signed a contract with the public electricity supply companies until 1998. That should cover the first four years of Sizewell B's active life. The price that Nuclear Electric receives for its output is determined by the contract, not by the cost of the output. Consumers therefore will not be affected.

§ Lord Williams of Elvel
My Lords, if Sizewell B's first four years are contracted out at a fixed price, as I understood the noble Viscount to say, on that price will Sizewell B, on the capital costs now 755 announced, be profitable or unprofitable? If it is profitable, what will be the return on capital employed?

§ Viscount Ullswater
My Lords, as I said, Nuclear Electric plc has a contract with public electricity supply companies for eight years. Nuclear Electric plc negotiated that contract in the knowledge of its latest estimates on the cost of output from Sizewell. If estimates of cost of output were to change, so would the rate of return earned. That is a commercial risk which the management of Nuclear Electric plc had to take into account when negotiating the contract.

§ Lord Williams of Elvel
My Lords, I am sorry to press the noble Viscount. I am sure that he is aware that the rate of return will be calculated on the capital cost of the project. If the capital cost goes up on a fixed price, does that not mean that the rate of return comes down? At what point does the rate of return become negative?

§ Viscount Ullswater
My Lords, I do not think that we should be obsessed with the short term. Apart from the diversity and environmental contribution of nuclear energy, a lot can happen to the price of electricity over the 40-year life of a nuclear power station. It would be a brave man who speculated on the relative economies of fossil and nuclear generation of energy over that period.

§ Lord Hatch of Lusby
My Lords, will the noble Viscount again advise the House whether the figure which I quoted and which has been widely quoted—over £2 billion—is the latest estimate made by Nuclear Electric pic? If it is, despite what the noble Viscount says regarding the cost of electricity will that not automatically increase the nuclear levy on the privatised companies?

§ Viscount Ullswater
No, my Lords. The noble Lord spectulates in his own way regarding the price. I have already answered his secondary question concerning the cost of electricity from Sizewell B.