Recommendation 3

The terms of the 2009 sale of the nuclear stations agreed by the Department with EDFE placed a disproportionate amount of risk for meeting future decommissioning costs on the taxpayer. The negotiations surrounding the sale of the stations to EDFE in 2009 were focused on maintaining operations, with less attention paid to meeting the costs of decommissioning. Although EDFE successfully extended the lives of all the AGR stations, which bolstered the UK’s capacity to generate electricity, there was no requirement to extend the contributions made by the operator to the Fund despite increasing decommissioning costs. The history of the AGR stations and the operation of the Fund provides important learning for government for planning and funding the decommissioning of new nuclear stations. For example, around the need for planning for decommissioning from the beginning of a new nuclear programme and having mechanisms in place to adjust operator contributions to any decommissioning fund in line with changes to the estimated costs of decommissioning. The Department expects the financial risk associated with decommissioning future nuclear power stations to be lower than that experienced with the Magnox and AGR programmes as the need for decommissioning will have been built into the design from the start. Recommendation: As proposals for building new nuclear stations are firmed up, the Department needs to learn lessons from AGR decommissioning for how the decommissioning of new nuclear stations will be funded, for example linking contributions more closely to reliable estimates of liabilities, and building in mechanisms for adjusting contributions from operators should estimates of liabilities increase. In addition, the Department should report to the Committee within three months about what decommissioning improvements have been built into Hinkley Point C and what proposals there are for the proposed new small modular reactors.