On 7 February, the British Government (Treasury)
released 754 page document – excitingly entitled “Central Government Supply Estimates 2017-18” - detailing
changes to planned public expenditure since last Autumn’s Budget 2017.
At pages 162-64
you can find the Business, Energy and Industrial Strategy (BEIS) extra
expenditure requests and clarification of perceived liabilities. These include several
covering the privately-owned commercial nuclear industry sector. Below are the
sections on nuclear, and the most common
read-out message is how often the
liabilities for which the taxpayer is expected to take long term financial responsibility are
described as “unquantifiable.” That is
accurate, but what is omitted is the numbers are – based on accumulated experience
to date, likely to be astronomically huge.
This worryingly
unacceptable situation,- whereby one
industry (nuclear) of the electricity generating sector is being promised a massive future bailout from its liabilities- really
should be examined in detail by our elected Parliamentarians and peers in several relevant committees and in the Estimates
Debate on the floor of the Commons.
At House of Commons Business Questions on
8 February the following exchange took place between Pete Wishart SNP shadow House
business spokesperson and Andrea Leadsom, the
Leader of the House of Commons (ie government business manager who organises Parliamentary
allocation of time for debates etc)
Wishart: “When we return, we will have our new estimates debates. For the first time
in recent political history, we will actually debate estimates on estimates
day. What a novelty that will be!”
Leadsom: “I share his
delight at estimates being debated and being announced in the future business…”
It is essential MPs do their job properly and
forensically financially scrutinise the implications of these 2018 Estimates of
future expenditure.
Key extracts from Estimates
Part III: Note K
- Contingent Liabilities Nature of liability £'000 –
Hinkley Point C Funded Decommissioning Programme (FDP) and Waste Transfer
Contracts (WTCs):- The contract with NNB
Generation Company Limited (NNB) to build Hinkley Point C (HPC) nuclear power
plant includes a Contract for Difference between NNB and the Low Carbon
Contracts Company, an FDP and associated FDP documents including WTCs between
NNB and the core Department. The FDP and related documents including WTCs
require NNB to make prudent provision for their waste and decommissioning
liabilities. To meet their liabilities, the operator must set up a fund with an
independent governance framework and will pay into it so that it is on track to
fund the liabilities that arise from decommissioning and waste management. The
fund will report annually to the Secretary of State and a full review will be
conducted every 5 years to ensure that the fund is on track to meet all its
liabilities. If it is off track, the operator will be required to take
corrective action. These liabilities are strictly the operator’s responsibility
and the probability of taxpayers picking up these liabilities is remote.
(REALLY??!!-DL)
Alongside the
FDP, the Government has entered into 2 WTCs. These set out terms on which the
Government will take title to and liability for the spent fuel and intermediate
level waste (ILW) from the site after decommissioning in order to dispose of
the waste safely. The WTCs have generally been prepared in line with the
Government’s published waste transfer pricing methodology. Although the WTCs
provide a default price based on today’s best estimate, they allow the waste
transfer price to be set after a specified later date. The final price agreed
is subject to a cap, but the likelihood of the future costs exceeding the
agreed cap is considered remote. Unquantifiable
–
Nuclear: the Core Department has a
range of civil nuclear liabilities arising through its association with the
United Kingdom Atomic Energy Authority and British Nuclear Fuels Limited as
well as ensuring that the Government complies with its obligations under the
various international nuclear agreements and treaties. The amount and timing of
this overarching liability is not quantifiable.
Unquantifiable –
Nuclear
Liabilities Fund (NLF) - A constructive obligation was created in 2002 when the
Government undertook to underwrite the Nuclear Liabilities Fund in respect of
uncontracted and decommissioning liabilities of British Energy (now EDF Energy
Nuclear Generation Limited (EDFE)) to the extent that the assets of the Fund
fall short. The undiscounted estimated
liabilities of £19.9 billion (2015-16 £19.7 billion) have a present value of
£32.8 billion (2015-16 £33 billion) using the prescribed discount rate
from HM Treasury of negative 0.8% (2015-16 negative 0.8%). The value of the
Fund is £9.4 billion (2015-16 £9.2 billion) and is likely to increase in the
future from investment returns. It is hard to quantify the extent to which the
net position of the Fund might represent a contingent liability or asset given
the high level of uncertainty relating to estimation of cash outflows and
investment returns over a future period exceeding 100 years. In view of changes
to actual and expected interest rates and expected rates of inflation
experienced during the course of the year, the Trustees are currently reviewing
the Fund’s asset allocation to help ensure sufficient funding to meet expected
liabilities. On this basis, the Department believes it would not be appropriate
to consider this as either a contingent liability or asset. Unquantifiable –
The NDA has
non-quantifiable contingent liabilities arising from indemnities given as part
of the contracts for the management of the nuclear site license companies.
These indemnities are in respect of the
uninsurable residual risk that courts in a country which is not party to the
Paris and Brussels Conventions on third–party liability in the field of nuclear
energy may accept jurisdiction to determine liability in the event of a nuclear
incident. Indemnities are in place in respect of Magnox, LLWR and
Dounreay as set out in the relevant Parent Body Agreements. In addition,
indemnities are provided to the previous PBO’s of Magnox and Sellafield
covering the periods of their ownership. These are not treated as contingent
liabilities within the meaning of IAS 37 since the possibility of a transfer of
economic benefit in settlement is considered too remote. Unquantifiable
The Secretary of
State Investor Agreement (SOSIA) provides protections in certain scenarios
where the Hinkley Point C Nuclear plant is shut shown for reasons that are
political, or due to certain changes in insurance arrangements or certain
changes in law. Payments under the SOSIA would be expected in the first
instance to be made using funds from the Supplier Obligation but in certain
circumstances they could also come direct from the Secretary of State relying
on spending powers granted under the relevant Appropriation Act or, if payments
were to be made over a period longer than 2 years, seeking a new spending power
at the time. The payments
could be up to around £22bn excluding non-decommissioning operational
costs that may be incurred after any shutdown. However, the liability to make
payments under the SOSIA is almost entirely within the control of HM
Government.
Reprocessing and staff commitments:
STFC is responsible for Institut Laue-Langevin (ILL) staff-related commitments
and costs associated with reprocessing fuel elements. £16,000 –
