Examination of Witnesses (Questions 20-39)
DR IAN
ROXBURGH, MR
JAMES MORSE
AND MR
MARK HIGSON
25 FEBRUARY 2008
Q20 Chairman: The people who bid
for Sellafield or get the contract will be covered by this, will
they?
Dr Roxburgh: They will be, yes.
Further in the contract, by the time they have been in place for
18 months, they must have scrubbed through the lifetime plan numbers
and given us their own view on how they can again be improved.
Q21 Chairman: It says here at paragraph
4.18, "At Sellafield, of the site's eighty operating units,
only seven identified that they had been able to build efficiency
savings made in 2006-2007 into their 2007 lifetime plan submissions".
That does not sound very impressive.
Dr Roxburgh: I will turn to my
colleague in a moment, but one of the things we did from day one
was to introduce an efficiency fee target for the sites, albeit
the PSA target did not require us to do that until year two of
our life. We have to date saved over £300 million and a significant
chunk of that has actually come from Sellafield.
Mr Morse: We certainly recognise
the challenge in those numbers from NAO and agree with them. There
are two real explanations. One is that a number of those initiatives
were one-off projects within that year. That really speaks to
a longer term solution. Currently our efficiencies and our costs
are on a one year ahead basis. We would like to move to something
that is three to five years ahead. That is not necessarily an
issue about funding but more about programme management philosophy.
We see the water industry under their own programmes where they
have a five year target for efficiency savings; ours are still
on a one year basis. When we can get to the longer horizon then
we will see those being built in by instinct by the contractors.
We certainly recognise the challenge there.
Q22 Chairman: Mr Higson, we had this
White Paper last month from HM Government, Meeting the Energy
Challenge, and were told in this that the energy companies—we
are hoping we are going to get nuclear power stations built—will
be able to meet the full cost of decommissioning. Given the answers
that I have received today about the existing estimate and its
unreliability, can we be at all confident that these energy companies
can possibly be able to meet these costs?
Mr Higson: I think an important
point to bear in mind about the £73 billion costs estimated
by the NDA is that £16 billion relate to the decommissioning
of nuclear reactors. That is £16 billion on 11 sites and
26 reactors. A large part of the variation and a large part of
the amount of £73 billion relates to facilities which are
legacy facilities and will have no part in the future of nuclear
power. For example, the silo which is featured on the front cover
of the NAO Report until relatively recently there was no plan
for actually cleaning it up and that is something that the NDA
has brought to the party. The second point I would like to make
is that going forward there has to be a clear waste management
and decommissioning plan, a plan approved by the secretary of
state before the power station and can operate. Modern reactors
are designed with decommissioning in mind. I think the further
point is that there is actually real experience internationally
now accumulating on the actual cost of decommissioning reactors.
If we put that together with a mechanism for ensuring that the
costs of decommissioning are scrutinised regularly, there will
be quinquennial reviews and there will be a duty on the company
to ensure that the decommissioning fund is adequate to cover the
costs, if all of those things are put together that is a very
reasonable package.
Q23 Chairman: You can say, on behalf
of Parliament, hand on heart, "I give a commitment that the
energy companies will be able to meet the full costs of decommissioning
new nuclear power stations". If you want to plead the Fifth
Amendment I quite understand.
Mr Higson: The Government's proposals
are to put in place everything that is reasonable to ensure the
tax payer does not pick up the cost.
Q24 Chairman: I am not sure that
that is an answer to the question.
Mr Higson: You cannot get an absolute
assurance.
Q25 Chairman: I put it to you that
we have absolutely no assurance whatsoever given the escalating
costs that we have been talking about for the last 15 minutes.
You have virtually plucked a figure out of the sky and you cannot
say with any degree of certainty that the energy companies will
be able to meet the costs. You will long be gone and so will I
but it is very likely that some future Public Accounts Committee
will be discussing how the tax payers will be picking up the tab
once again. That is the truth.
Mr Higson: We have put in place
every possible protection.
Chairman: I am sure you have put in every
possible protection but you will have to be a lot more convincing.
I will let my colleagues carry on and maybe you can do better.
Angela Browning?
Q26 Angela Browning: To begin with,
Mr Higson, in the last Parliament this Committee took an evidence
session on the subject of alternative energy and in the course
of that discussion I very clearly remember asking about the possibility
of replacing our nuclear reactors with new ones. At that stage
everything had come to a halt because we were approaching an election
and this was a very hot topic about whether there was going to
be a commitment to proceed with new build. Can I just ask you,
how much has that political decision to delay making such an announcement
affected the decommissioning of the existing nuclear power stations?
Mr Higson: I do not see there
is a connection.
Q27 Angela Browning: The reason I
am asking is because whether we decided to replace or not one
would have thought, knowing particularly for example that the
Magnox reactors were getting to the end of their natural life,
there was a very timescale—it was even debated in precise
terms of years in this Committee and that would have been three
or four years ago—and I have difficulty in understanding
why you are having such difficulty in identifying the costs associated
with decommissioning and giving clearer answers. You have had
a lot of time to get all these ducks in a row, have you not?
Mr Higson: I am not sure that
we are having difficulty with the costs of decommissioning. We
set up a process, which will ensure that they are transparent
and subject to public scrutiny, in the consultation document published
earlier this year. We have actually set out our estimates of what
the costs of decommissioning nuclear power stations will be. We
have a process going forward to ensure that they are subject to
the best possibly public scrutiny. I think that is a very substantial
protection.
Q28 Angela Browning: Why are we not
doing as well as other countries? America have decommissioned
seven of theirs; Germany are making good progress. If we had all
this forward planning and our costs were much better organised,
as you are saying they were, why are we behind other countries?
Mr Higson: I am talking here about
estimating the cost of new nuclear power stations. The issue of
how quickly we decommission the Magnox stations is an issue about
the priorities and the overall budget for the NDA.
Q29 Angela Browning: Is it possible
that these old Magnox stations, the sites that they are on, would
be used for any new build?
Mr Higson: As we said in the nuclear
White Paper we do expect that focus from potential new nuclear
operators to be on existing nuclear sites, so yes.
Q30 Angela Browning: How does that
read across and impact on the decommissioning of the old reactor
that is on site then?
Mr Higson: The decommissioning
needs to proceed.
Q31 Angela Browning: If you are building
on one site and you decommissioning on the site is there nothing
to take into account in terms of costs et cetera?
Mr Higson: Those would be issues
that the NDA will need to consider most carefully in the coming
weeks and months and it will need to take a view on what is the
right way of making its sites available.
Q32 Angela Browning: If you were
to put a new reactor on a site of an old Magnox, let us just take
Hinkley Point which I have visited a couple of times and I am
looking at figure 15 on page 33 where there has obviously been
some difficult with the Ponds which has increased the cost over
the expected budget. What would be the situation if you were to
put a new reactor onto the Hinkley site? Would that affect the
costs and the project of decommissioning in some way?
Mr Higson: I will answer as much
as I can and then I will turn to Dr Roxburgh. My understanding
is that the site that is available for potential construction
of a new nuclear power station is actually in large measure owned
by British Energy. Dr Roxburgh might want to comment on the impact
that a nearby construction site might have on the costs of decommissioning.
Q33 Angela Browning: Before Dr Roxburgh
answers, could I just come back to the point I made about the
comparison between the UK and other countries who clearly have
been getting on with this. Has there been much contact between
the UK Government and other countries knowing this was a major
project we needed to embark on?
Dr Roxburgh: There are similar
reactors in Japan and there are some early reactors in France
with similar characteristics to our Magnox fleet. In both those
countries they have a programme which is ahead of ours. The site
I went to in Japan was looking to decommission over a period of
17 years and there is a policy in France that their first five
reactors coming off line hopefully would be back to grass within,
say, 25. The issue in the United Kingdom is not a lack of will,
it is an issue of technicality. Within our Magnox fleet we have
something approaching 58,000 tons of graphite which is contaminated
with carbon-14. At the moment we have no disposition to that,
in other words if we take it out of the reactor where it is quite
safe and properly contained we have nowhere else to put it without
building other concrete nuclear stores. That is at additional
cost and extra dose for the workforce to take it out, put it in
those new stores and in due course you will want to take it out
of those stores and put it into a repository. I am optimistic
that once it is clear as to exactly when and where we are to have
a deep geological repository these issues can be revisited. Indeed
we make the point in out approved strategy that we can only make
the business plan if indeed we can find this final disposition.
Q34 Angela Browning: I wonder if
I could just bring you onto page 33 and come back to this chart
we have here. If we look at where efficiency fees have been paid
as a percentage of the budgeted costs which the Chairman referred
to earlier on, can you just give us some broader indication of
why there is such a differential between the top and the bottom
on that graph?
Mr Morse: In one sense it represents
the different attitude on those sites towards the task in hand.
Q35 Angela Browning: Could you explain
what you mean by "attitude"?
Mr Morse: Culture, organisation,
structure, the number of sites still organised in a very disciplined
way.
Q36 Angela Browning: Please do not
tell me we have nuclear power stations on sites that are not disciplined
in the way they deal with things. You surely did not mean that.
Mr Morse: No, I did not. What
I meant is in functional organisation. The best performing sites
are kind of project types, so a multi-discipline team addressing
the single objective. That is in fair measure of what we have
seen across the sites. Of course the measure of efficiencies against
our yearly targets has earned value which is an estimate of the
work to be done in that year and then the cost of completing that
work. Again some sites are more innovative and work more effectively
than others do. They are all coming up the curtain; that is part
of the process of having the lifetime plan that we get compliance
and we get comparison between sites; comparison drives efficiency,
aided of course by our competition principle.
Q37 Angela Browning: Can I just ask
you about Sellafield? I see that is down at the bottom here. It
is some years since I have visited Sellafield—I have been
there twice in the past—and the last time I was there my
understanding was that the facility that we have there had the
potential for re-processing other countries' nuclear waste and
storing it longer term. Can you enlighten us as to whether that
is still the case and what the possible financial impact of that
storage is? In other words, is that still being paid for by the
countries of origin?
Mr Morse: You are referring to
the THORP oxide reprocessing plant which has contracts running
for probably about another five or six years, depending on its
performance. The contracts that were set up in the late 1980s
and early 1990s that funded THORP and funded that reprocessing
are still flowing through.
Q38 Angela Browning: The cost of
cleaning that facility up, is that calculated and recovered in
the costs that we charge to other countries to reprocess or is
this an unknown quantity down the track for the Sellafield site?
Mr Morse: THORP is one of the
most modern facilities across the NDA's 19 sites and as such was
built with decommissioning in mind. There is an estimate for that
decommissioning and that estimate has been revised in the previous
lifetime plan submission. As to the recovery and the accountancy
around the decommissioning estimate I would have to take some
further advice on that.
Q39 Angela Browning: The reason I
am asking is that there seems to be a marked difference between
our approach say to THORP which is clearly a very important commercial
operation and in calculating and recovering in our estimates the
cost of the contamination over a long period of time. You seem
to have been quite clued up on doing that but perhaps not in general
about the nuclear sites themselves.
Mr Morse: I am fairly sure that
the THORP contracts include an element of the decommissioning
cost.
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