Examination of Witnesses (Questions 40-59)
DR IAN
ROXBURGH, MR
JAMES MORSE
AND MR
MARK HIGSON
25 FEBRUARY 2008
Q40 Angela Browning: It would be
very interesting to see what the analysis has been at the beginning
in recovery costs of contamination decommissioning for one project
that is going on at Sellafield because one would have hoped that
same approach would have applied right across the industry; it
clearly has not.
Mr Morse: There are portions of
the estimate and the work which are applicable and read across
to other sites but each of these are individual facilities, each
with their own particular characteristics and their design and
construction. A few were built with decommissioning in mind; many
of the other facilities of course go back to the 1940s and 1950s
where there are no parallel operations. So elements of the work
yes, but as whole facilities no.
Q41 Angela Browning: I wonder if
we could have a note just to have a look at what the approach
has been in terms of longer term recovery of contamination costs
compared to the Sellafield site generally.[1]
Mr Morse: I am sure that is possible.
Q42 Phil Wilson: On page eight of
the summary, paragraph eight talks about the partnerships and
relationships that have been settled where you have to manage
going forward with the Health and Safety Executive's Nuclear Directorate,
yourself obviously and other parent bodies. How optimistic that
these kind of new relationships are actually going to work going
forward and what are you doing to make sure that that does happen?
Dr Roxburgh: I have made it clear
to everybody who works at the NDA since day one that our most
valuable asset is not our people, it is our relationship with
the regulators and the world more widely. Without their confidence,
trust and support the more innovative approaches that we would
like to see introduced over time will not be possible. I personally
enjoy very good relationships with my equivalent peers across
the regulators and indeed in the trade unions. We have a number
of fora where we can get together, where we can consider the more
difficult issues of the day and share a common agenda. The NDA
has been going through a process of becoming the intelligent client—that
is the way I try to describe it—where we have been down
in the weeds trying to understand the detail. I think we have
now successfully become the intelligent client; we are now trying
to become far more strategic and to put more emphasis behind the
programme. As part of that change we have not only restructured
ourselves but we are inviting the regulators and others to consider
how we need to restructure the committees and the fora that we
actually use to make sure we are on the same page.
Q43 Phil Wilson: On page 10, paragraph
1.3 it says that the cost for the remaining life is around £73
billion at 2007 prices and it goes on to say that this "does
not reflect the anticipated revenue from these sites". Does
that mean that that figure of £73 billion could be less than
that because of the potential revenue you are going to get from
the sites?
Dr Roxburgh: People talk about
the NDA's commercial income but in reality the cost of acquiring
that income is more or less the same as the income itself. You
might then say, "Well, why do you bother?" We bother
because there would be significant remaining fixed costs attached
to those assets for many years even though they were not operating
and therefore not bringing in an income. That is the real answer.
Q44 Phil Wilson: So that figure of
£73 billion will be £73 billion at today's costs; it
will not be less than that.
Dr Roxburgh: I think that what
the paragraph is saying is that you start with £73 billion
and if you take off the £12 billion of operating the commercial
assets it drops down to £61 billion. All I am saying is that
the £12 billion of commercial income is more or less offset
by £12 billion of costs.
Q45 Phil Wilson: I would like to
ask one or two questions about the White Paper. With the new generation
of nuclear power stations in prospect what lessons should we draw
from trying to decommission the first generation of nuclear facilities?
Dr Roxburgh: I think the points
that my colleague Mark was making earlier are very pertinent.
New stations are being built with a view to decommissioning. It
is a requirement before a station can be commissioned that the
Government is satisfied that it has a plan which is practical
in terms of decommissioning. In terms of the generic licensing
that the regulator is currently undertaking, the ability to decommission
safely and with low dose is part of that consideration. Traditionally
I do not think that has been top of the priorities. We do also
have the current arrangement called the Nuclear Liabilities Fund
which is a fund that underpins the eventual decommissioning of
the eight British Energy sites, the seven AGRs and the PWR at
Sizewell. I see no reason to suppose that that fund is not well
established, is not sound or that it is not capable of proper
assurance when people want to draw money from it to actually commence
decommissioning. We have actually got an interim stage between
where the NDA is with its great mix of military and other issues
through to what is now something that is planned from day one.
Q46 Phil Wilson: Mr Higson, with
the current decommissioning estimates being so unpredictable how
will you know what funds should be set aside for cleaning up any
new generation of nuclear facilities? How will you make those
calculations?
Mr Higson: The first point I would
make is that it is the responsibility of the nuclear operator
to adequately estimate and provide for the decommissioning, albeit
that it has to be in accordance with a decommissioning plan approved
by the Secretary of State and the Secretary of State has to be
satisfied that it is funded on a prudent basis. I think the most
important lesson we have learned from the past, just to emphasise
the point, is that unlike many of the facilities—particularly
at Sellafield—there needs to be a clear plan for the decommissioning
before you even start. Secondly there needs to be a clear arrangement
for funding that plan. There must be some degree of uncertainty
around the actual, precise cost of decommissioning and that is
why there are provisions that the funding should be based on prudent
assessment of those costs and should target, for example, a higher
level of cost than the central estimate of decommissioning and
that there should be arrangements regularly to update that, analogous
I think to a pension fund where the liability is constantly to
be reviewed and where your assets also need to be reviewed. And
if the fund is showing any signs of falling behind the best estimate
that is made as the years go forward then steps need to be taken
to put that right. The details of how that is operating should
be produced in a draft guidance which has recently been published
and made available.
Q47 Mr Dunne: I feel it is unusual
for this Committee to have in front of it a Report where there
is so much uncertainty both around the scale of the task that
you are facing and also around the manner in which the Government
is supporting your efforts. You refer to the supply chain of distributors
that you expect to get from the new arrangements, could you explain
to us what that means in the context of decommissioning? What
is the supply chain you are talking about?
Dr Roxburgh: We have discovered
through our own research that there is actually no dedicated decommissioning
supply chain. There are a few small specialist nuclear companies
but in general at the moment in the United Kingdom you are borrowing
from other people's supply chains: oil and gas, mechanical, electrical,
civil engineering. We are optimistic that a world class management
which is incentivised to reduce costs because that is the way
it earns its money is going to focus on the supply chain. Indeed,
if you look at all the really big turnarounds in sectors over
the years—whether it is aircraft or cars, for example—it
has not so much been at the factory where the answer has arrived
(although that is important), it has been in the supply chain;
it has been a strategic change in the supply chain.
Q48 Mr Dunne: How many contractors
do you expect to bid for the individual facilities that we are
looking to decommission?
Dr Roxburgh: We have set out in
our strategy that we believe that at least three credible bidders
are required for us to be satisfied that we have a genuine competition.
For Sellafield we have four.
Q49 Mr Dunne: Is three the minimum
you need?
Dr Roxburgh: We believe three
justifies a proper competition with real competitive tension.
We are conscious through constantly engaging with the supply chain
that there are certain criteria that they wish to see before they
will bid. Bidding is expensive and it is their money that they
are spending. There are many other opportunities around the world
and, as I have indicated, this supply chain can go and bid for
Crossrail or a North Sea oil rig just as readily as for our work
so we need to be competitive.
Q50 Mr Dunne: Are all four of these
potential bidders private sector entities?
Dr Roxburgh: They are.
Q51 Mr Dunne: Are any of them UK
owned entities?
Dr Roxburgh: The leads are all
foreign but there are UK companies involved.
Q52 Mr Dunne: One aspect of uncertainty
is some of the plants which are within your list to be decommissioned
are continuing to operate—there is a helpful table on page
11, table 2—and one of these plants is one which I am particularly
interested in at Wylfa in Anglesey because it supplies power to
the largest employer in my constituency. It is currently due to
be decommissioned in about a year's time in spring 2009. Is it
part of your responsibility to assess whether there is scope to
extend the operating life of any of these facilities?
Dr Roxburgh: We have had a long
conversation with the community and its representatives and indeed
Anglesey Aluminium over the past year and a half on these very
issues. There is currently a study going on to establish whether
or not in regulator space, whether in technical terms and whether
in business model terms a case can be made to continue operation.
Q53 Mr Dunne: Will you be the body
that determines that?
Dr Roxburgh: Ultimately it will
be the regulator. If we cannot make a safety case, even if we
had a business case, then we could not press it.
Q54 Mr Dunne: What is your role in
that?
Dr Roxburgh: Our role is as the
owner. We would not want to invest 200 million to lose 300 million
even though that kept it going. Government at one level might
want to take a different view; we are always subject to direction
like anybody else, we are servant of Parliament and government.
Q55 Mr Dunne: I would be very keen
to pursue that, perhaps in a separate forum, because it is important
to my constituency. You referred to the deep geological repositories
and I believe a consultation is currently underway with local
authorities seeking volunteers. Have you had any offers?
Dr Roxburgh: The actual formal
process does not commence until May when a White Paper, following
on from the Managing Radioactive Waste Safely Initiative, should
hit the bookstands. Having said that, there are a number of local
authorities who are without prejudice trying to establish whether
or not subject to what the White Paper says they would want to
engage in conversation with government. Government has advised
on what we might call a division of labour in this. Government
has kept to itself the role of finding a community. It has a reconstituted
CoRWM Committee that would advise government on the technical
aspects and whether or not a community volunteering has a safe
and suitable site. Assuming that is the case then the NDA's role
would be to design, get regulatory approval, construct and operate
the repository.
Q56 Mr Dunne: If there are no volunteers
forthcoming will government have the power to acquire facilities
to construct?
Dr Roxburgh: The whole emphasis
of the Committee on Radioactive Waste Management's findings over
a number of years was that volunteerism and compensation should
drive the agenda. I see no reason to suppose that that is not
going to continue.
Q57 Mr Dunne: Perhaps Mr Higson would
like to comment on what happens if there are no volunteers.
Mr Higson: I do not think it would
be right to speculate. I think we are confident that we set up
an arrangement following CoRWM aimed at working in partnerships
with communities who want to come forward and we have every reason
to believe that there will be one or more communities who are
willing to enter into that dialogue. The whole thrust of CoRWM
was that the old top down approach was actually inappropriate
for this area.
Q58 Mr Dunne: Communities may well
enter dialogue but once the local population become aware of what
they are talking about they may cease that dialogue quite quickly
in which case you will need a plan B.
Mr Higson: We have set out a process
of taking this forward and I think it is very important that we
should actually run with it. It would be wrong to speculate what
would happen if no community came forward.
Q59 Mr Dunne: I think it is essential
that the Department formulates a fallback because it seems highly
likely that that may be required.
Mr Higson: I think you will appreciate
the difficulty of doing that.
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