Nuclear Decommissioning Agency and Nuclear Liabilities Fund (Hansard, 1 May 2003)

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)

The Nuclear Decommissioning Authority (NDA) is being set up to deal with the civil nuclear 123WA liabilities that relate to the public sector—specifically in relation to UKAEA, BNFL and Magnox sites. As explained in the White Paper, Managing the Nuclear Legacy, published in July 2002, the NDA (formerly referred to as the Liabilities Management Authority (LMA)) will be responsible for ensuring that these "legacy" sites are cleaned up safely, securely, cost effectively and in ways which protect the environment. Its role will be to develop an overall strategy for clean up of the sites for which it is responsible and to drive work forward.

The NDA will be funded directly by government through a statutory segregated account. The energy Minister announced on 3 April that, following consideration of responses to the White Paper, the Government had concluded that this represented the best way of satisfying its funding objectives, which had received almost universal support. In particular, the Government are determined to establish funding arrangements that, subject to appropriate budgetary and public expenditure controls: underline the Government's commitment to clean up and help to build public confidence in the NDA; give the NDA the flexibility required to drive forward the clean-up process effectively; and encourage competition for clean-up contracts by giving the market confidence that funding will be available to support substantial work programmes over the long term.

Legislation to set up the new authority will be brought forward at the earliest opportunity. As announced in the Queen's Speech last November, the draft Bill will be published in the course of the current Session.

The term "Nuclear Liabilities Fund" (NLF) refers to a proposed new funding mechanism for the nuclear liabilities belonging to the private sector company, British Energy. This fund would be set up as part of the company's restructuring. The proposal to set up the NLF was first announced in BE's detailed statement on restructuring on 28 November 2002. The NLF and the statutory segregated account to be set up for the NDA will be quite separate—the former deals with BE's liabilities, and is paid into by the company; the latter is for public sector nuclear liabilities and will be funded by government.

British Energy (BE) already pass into a ring-fenced fund, the "Nuclear Decommissioning Fund" (NDF), which was set up specifically as a means of funding the decommissioning of BE's nuclear stations once they have ceased generating electricity. The idea behind the NLF is to take the ring-fenced fund approach a step further to cover more of BE's nuclear liabilities, including their uncontracted nuclear fuel liabilities (such as dealing with spent PWR fuel at Sizewell B). The full details of how the NLF will work are still being drawn up, and it has not yet been decided whether the NLF will, in effect, be an extended and enlarged version of the NDF, or whether there will be a separate NLF running alongside the NDF. Either way, BE will make financial contributions towards meeting the cost of its own nuclear liabilities. The 124WA arrangements for these financial contributions are set out in the 28 November statement and are summarised in the following table:

	Financial Contributions
NDF value	The existing value of the NDF (valued at £332 million in BE's September interim accounts) will remain available to the NDF or new merged NDF/NLF.
New Bonds	At the point of restructuring, BE will issue £275 million of bonds to the NDF/NLF.
Decommissioning Payments	Each year BE will make a payment of £20 million towards decommissioning costs (but this payment will taper off as stations close).
PWR Fuel	BE will contribute £150,000 to the funds for every tonne of Pressurised Water Reactor (PWR) fuel loaded into Sizewell B. This is in line with the principle that BE should pay its own way going forwards.
Cash Sweep	BE will have to pay 65 per cent of available cash into the fund, subject to conditions.

In return, government will agree to underwrite the cost of BE's nuclear liabilities, to the extent that the funding of the NLF/NDF is not sufficient to cover these. The Government have already made clear that they wish to protect taxpayers' interests and avoid handing BE a "blank cheque". As part of this, the Government propose to put in place a series of controls and incentives to ensure that British Energy runs its nuclear power stations as though it were exclusively responsible for the discharge of its nuclear liabilities.

As the centre of public sector expertise on nuclear decommissioning, we would expect the Government to seek the NDA's advice on issues relating to BE's nuclear liabilities—particularly in the context of the controls on BE mentioned above.