Schedule
2
Decommissioning of
energy
installations
Question
proposed, That this schedule be the Second schedule to the
Bill.
Malcolm
Wicks:
Once the new offshore transmission regime goes
live—currently expected at the end of 2009—all projects
that connect to shore via lines of 132 kV or above will be covered by
the new licensing regime. This means that some projects that have
already been built or are currently under construction will need to be
subject to the new tendering process for offshore transmission
licences.
To date, the
sub-sea cables and associated equipment that will convey electricity
from offshore generating stations to the shore have been developed by
generator-developers. Careful consideration has therefore been given to
the specific arrangements that will need to be put in place for
offshore projects that are already completed, will be completed or will
be well developed by the time the new regime goes live. Ofgem will be
running a competitive tender process to select the holders of offshore
transmission licences in respect of these transmission
assets.
For these
projects, once an offshore transmission licensee has been selected
under the tender exercise, any transmission-related property, rights
and liabilities held by the generator-developer or other relevant asset
owner must be transferred or made available to the offshore
transmission licensee within a reasonable time. This will enable the
licensee to perform its licensed and statutory obligations and convey
the electricity generated to the onshore network. Schedule 2 enables
the authority, in certain circumstances, to make a scheme transferring
property, rights and liabilities from the existing owner to the
successful bidder for the offshore transmission
licence.
We expect
that it will be in the relevant parties’ interest to reach a
commercial agreement as to the terms of the transfer. In most cases,
therefore, we would not expect the authority to be asked to use the
powers set out in the schedule to make a property scheme. However, the
power to make a property scheme will help to ensure the efficient and
timely transfer of property, rights and liabilities from the owner of
the assets, usually a generator-developer, to the successful bidder for
the offshore transmission licence if they cannot reach an agreement
through commercial negotiations. This will provide certainty
and reassurance to tender participants for certain transitional
projects. It will also help ensure that the parties involved are not
placed under undue pressure by a third party seeking unreasonable
commercial advantage. I shall highlight a few key
features of the property scheme. The authority may make a scheme only
upon application and the scheme provisions must be necessary or
expedient for the offshore transmission licence holder to perform its
functions. There are also provisions in the schedule covering
compensation, protecting third-party interest and an appeals
mechanism.
We believe
that the compulsory property scheme will be used only in a small number
of circumstances, and consider that the existence of the powers will
now encourage parties to seek fair commercial negotiations where
otherwise they might not do so.
Question put and agreed
to.
Schedule 2
agreed
to.
Clause
41
Duty
to submit a funded decommissioning
programme
Malcolm
Wicks:
I beg to move amendment No. 25, in
clause 41, page 37, line 5, at
end insert—
‘(c) activities
preparatory to the matters mentioned in paragraph
(b);’
The
Chairman:
With this it will be convenient to discuss
Government amendment No.
26
Malcolm
Wicks:
We now turn to a series of clauses that relate to
nuclear energy—and I hope, with your permission Mrs.
Humble, that before I go into the details of this amendment, the
Committee might find it helpful if I briefly set out the context behind
this
chapter.
The
Chairman:
Order. The Minister may make a very brief
introduction because there are several clauses all on the nuclear
programme, but I advise that it is a brief introduction so that it does
not generate a wider-ranging debate on the clause. Members will have
the opportunity to discuss individual matters in each of the following
clauses.
Malcolm
Wicks:
I will be brief.
We are creating a framework for
ensuring that the operator of a new nuclear power station is
responsible for, and makes prudent provision to meet, the full costs of
decommissioning and their full share of waste management costs. By full
decommissioning costs, I mean the costs of dismantling the nuclear
power station at the end of its generating life, removing all station
buildings and facilities and returning the site to a state agreed with
the regulators and the planning authority, and the release from the
control of the nuclear site licence. This is likely to be a state
similar to greenfield, depending on the state of the site before the
construction of the station. By full share of waste management costs, I
mean the costs that are directly
attributable to disposing of new-build higher activity waste in a
geological disposal facility, a contribution towards the fixed costs of
constructing such a geological disposal facility, a significant risk
premium over and above those costs—to take account of
uncertainties around the cost of constructing such a facility and the
time when it will be able to accept new-build waste—and the cost
of waste pending transfer for
disposal. Amendment
No. 25 will ensure that an operator will have to set out, as part of
the decommissioning and waste management plan, what activities they
would undertake by way of detailed technical and operational planning
for the decommissioning and waste management and disposal activities
that take place once the station has ceased generating electricity for
the final time. It is important that this activity can be regulated as
part of the funded decommissioning programme, because it will ensure
that the operator starts to think in detail in advance about how those
decommissioning activities will take place. As clause 41 is drafted,
the operator will be required to set out in its decommissioning and
waste management plan how it will account for the decommissioning and
waste management and disposal activities throughout the life cycle of
the station. By making this amendment, the Government want to ensure
that the operator of a new nuclear power station also makes provision
for, and sets out, the preparatory activities associated with
decommissioning and clean-up of the power
station.
2.45
pm
Amendment No.
26 allows the Secretary of State, if needed, to make an order that will
mean that the preparatory activities specified in amendment No. 25 can
become designated technical matters. A designated technical matter is
one that must be provided for in the independent fund for
decommissioning and waste management. It is also therefore, by
definition, an activity on which an operator can spend resources from
the independent fund. The effect of amendment No. 26 is to ensure that
not only will preparatory activities to the decommissioning and
clean-up of a power station be regulated, but that the operator must
make financial provision for those activities when the station is
generating electricity. I ask hon. Members to consider these technical
amendments.
Dr.
Ladyman:
I gave my hon. Friend advance notice that when we
came to this chapter, I would probe him on the rather draconian
attitude that it seems to be taking. Will he explain, either now or
later, what the final sentence clause 41(5) means? It
states,
“and for the
purposes of paragraph (a) a nuclear installation is not to be regarded
as being operated at a time when it is being
decommissioned.”
As
something that is being operated cannot be decommissioned, that seems
an unnecessary statement. Does that imply that the decommissioning
programme has to include the long-term storage of the waste and the
results of decommissioning a power plant, and for how long does the
decommissioning programme have to allow for that waste to be
stored?
The
Chairman:
The hon. Gentleman’s intervention seems
to relate to a clause stand part debate rather than to the amendment
that the Minister has just moved. Perhaps the Minister will consider it
as part of the clause stand part
debate.
Malcolm
Wicks:
I am grateful to my hon. Friend for asking that
question, and there will be opportunities to give him an appropriate
answer.
Amendment
agreed
to.
Amendment
made: No. 26, in clause 41, page 37,
line 9, after ‘(5)(a)’ insert ‘or
(c)’.—[Malcolm
Wicks.]
Question
proposed, That the clause, as amended, stand part of the
Bill.
Malcolm
Wicks:
Where a person applies for a
nuclear site licence and intends to construct a new nuclear power
station—by “person” we mean a corporation as
well—that person must give written notification to the Secretary
of State of the application. They must also prepare and submit a funded
decommissioning programme for approval.
In brief, the clause requires a
programme to address three key matters. First, it requires that the
funded decommissioning programme must make provision for the technical
matters involved in the treatment, storage, transportation and disposal
of hazardous material during the operation of a nuclear site and for
decommissioning and cleaning up of a site once that station has ceased
generating
electricity.
Secondly,
it requires operators to set out estimates of the
costs of taking the steps in relation to “designated technical
matters”. These matters are decommissioning, waste management
and waste disposal, which take place once the station has been shut
down for the last time, plus certain additional decommissioning related
activities that are undertaken during the generating life of the
station. The Secretary of State may specify the latter category of
designated technical matters by affirmative order, which comes under
clause 41(6)(a). Designated technical matters must be costed by the
operator and paid for from the independent
fund.
Thirdly,
operators are required to set out details of the security that they
will put in place to meet the costs of these designated technical
matters—we have just passed an amendment that relates to that.
Not all the matters relating to a decommissioning programme will be
designated as technical matters. In other words, even though the
operator will be expected to provide details of all the steps necessary
to decommission the installation and clean up the site, he will not be
required to provide cost estimates for all those steps, nor to provide
security to meet all those
costs.
As regards
waste and decommissioning-related activities undertaken during
electricity generation but that are not designated, the
Secretary of State will expect payments to be made from operating
expenditure at the time these expenses are incurred. An example of this
could be packaging and disposal of low-level waste during the operation
of a power station. At this time, the operator will have ready access
to sufficient moneys to meet such costs. These costs will therefore not
be subject to regulation, although the activities to which they relate
will be. More information on this point is set out in the guidance, and
we are currently consulting on that.
In our nuclear White Paper which
was published in January, we said that the Government had determined
that
“independent funds,
outside of the control of nuclear operators, should be created to
accumulate and manage payments from the operator to meet the full costs
of decommissioning and a full share of waste management
costs.”
Mr.
Swire:
Can the Minister tell the Committee whether this is
a new stricture on the operators, or has this always happened in the
past when licences have been granted? Can he also tell us how long a
new-build nuclear power station is likely to last? Further, in relation
to the separate fund he just mentioned, is he talking about a
hypothecated fund, a deposit made by those who are granted licences to
be put in an escrow account, given the fact that anything might happen
over the period of
operation?
Malcolm
Wicks:
I shall return to the hon. Gentleman on the first
point. I gave a fantastic answer to his planning question earlier while
he was absent, but I cannot immediately give him a fantastic answer to
that point. I also want to make sure that I fully understood the
question about whether this is a new power. We have not built any
nuclear power stations in recent times. Our main concern here is to
ensure that the companies pay the full cost—over the whole life
cycle of nuclear generation and decommissioning—and that there
is a properly protected fund that is separate from the normal accounts
of the company and that can be used for this purpose in due course.
That is the nature of our policy.
Charles
Hendry:
Is it not the case that the distinction is that
the last nuclear power stations to be built were constructed by the
industry when it was nationalised? Therefore, by definition, the
Government would have taken on responsibility for the waste at the time
those stations were being planned and built. The difference now is that
one is looking at the private sector to do that and therefore new
obligations on the industry are necessary to make sure that they
dispose of its own waste and cover the associated
costs.
Malcolm
Wicks:
I am grateful to the hon. Gentleman—that is
the essence of the point. The Government certainly now take on the
responsibility of the nuclear legacy—for disposing of that waste
and for funding its disposal. It is a different ball game. When it
comes to moving forward that will depend on private sector
investment.
Dr.
Ladyman:
Before my hon. Friend moves
on—
Malcolm
Wicks:
I do not think I have moved on, but I am quite
happy not to be moved on.
Dr.
Ladyman:
I think my hon. Friend just moved on. I will just
play back to him what I think he said so that he can clarify it to me.
I think he said that when one of these new power plants is operated,
the person operating it will be making money, so we know that they will
have this money to manage the site. We are not too worried about that,
but when he turns the plant
off, he stops making money. We must therefore ensure that he has some
money put aside to cover the long-term costs. The question is how long
do we expect him to plan for those long-term costs. We have just been
through a chapter dealing with carbon capture and storage and we said
that there will come a time when the state takes responsibility for the
liability. At what point will the state be liable for radioactive
waste? I believe that the state should take responsibility for it at
some point.
Malcolm
Wicks:
I better understand my hon. Friend’s
concern. Our principle and endeavour is to ensure that companies pay
the full costs of the nuclear energy facility that they have brought
into being. That includes their forecasts of final deep geological
disposal. We are consulting on where that deep geological disposal
might be, but we intend for the operators to pay the full costs. Deep
geological disposal will not only be there for the legacy of nuclear
waste, which is a state responsibility, but it will have to be bigger
to ensure that it can take the new waste too. The operator will pay the
full costs of extra space, and it will also be charged to ensure that
it also pays for some of the infrastructure of the disposal facility.
Once that is done, the responsibility of the company ends and that of
the state takes over. Has that helped my hon.
Friend?
Dr.
Ladyman:
It is very helpful. Let me ensure that I
understand it. The operator will have paid something towards the cost
of creating the depository and the cost of transporting the material
and putting it safely there. At the point at which the waste is put in
the long-term depository, the liability ends and the state takes
over.
Malcolm
Wicks:
Yes, that is our plan.
The hon. Member for East Devon
asked how long a nuclear plant might exist for. Our planning assumption
is 40 years. That might be a conservative assumption for the purpose of
cost estimates, and it would be open to new-build operators to suggest
and make the case for alternative station lifetimes in their funded
decommissioning programme. The Secretary of State will consider
alternatives on a case-by-case basis. However, the planning assumption
is 40 years.
Martin
Horwood:
In terms of the operation of the site, is not the
planning assumption for the current generation of nuclear power
stations that the sites will remain contaminated and will effectively
still be in the process of final decommissioning for something closer
to 100 years?
Malcolm
Wicks:
I answered the question because I was asked how
long the nuclear reactor might be up and running. As I said, our
planning assumption is 40 years, and I have explained that there could
be some flexibility around that. It might be a conservative assumption.
Of course, after that, it will take much longer for the site to return
to an original greenfield state—that brings us to a range of
technical issues about interim storage and so on. The hon. Gentleman is
right to imply that once the generator is switched off, things do not
magically return to normal the next day.
Dr.
Iddon:
The hon. Member for Cheltenham
implied that the site would be left contaminated. That is surely not
the point; it would not be left contaminated by radioactive
waste.
Malcolm
Wicks:
Of course, it will not be left contaminated, but I
was conceding the point that, after 40 or 50 years, there will be a
period before the site can safely be returned to greenfield or
whatever. That will be for a number of years and there are issues about
interim storage and so on However, obviously no one will leave the site
contaminated; that would not be allowed. Both the hon. Member for
Cheltenham and my hon. Friend were right—I am feeling
generous.
I was asked
about the new regime. The hon. Member for Wealden helped me to answer
the question. The Health and Safety Executive requires operators to
make provision for decommissioning activities. This is part of licence
condition 35, as the hon. Gentleman knows and as it says here helpfully
and in some detail. These new provisions make it a requirement for
operators to set aside funds to decommission the plant and manage
waste.
3
pm
All that has
been so exciting, I am trying to remember where I was. I think I was
trying to make a
speech on clause stand part. This is what I was about to
say—after those very useful interruptions. As set out in draft
guidance, independent funds are the primary form of security that the
Secretary of State would expect to see put forward in a programme to
meet the operator’s decommissioning, waste management and waste
disposal costs in accordance with clause 41(7)(c). Clause 41(8) allows
the Secretary of State to charge a fee to the person submitting the
programme. This will allow the Secretary of State to recover the costs
of considering the programme, including obtaining advice to verify
certain aspects. It is important that the Secretary of State can rely
on this verification because of the level of detail that will be
expected in a programme. Where the licence holder of a
power station changes, the prospective licence holder will have to
submit a programme to the Secretary of State for approval. The
prospective licence holder must obtain approval before he takes over
the operation of the station. This will ensure that there is a funded
decommissioning programme covering the station at all
times.
Debate
adjourned.—[Alison
Seabeck]
Adjourned
accordingly at one minute past Three o’clock until Tuesday 4
March at half-past Ten
o’clock.
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