Consultation on Funded Decommissioning Programme …webarchive.nationalarchives.gov.uk/+/http:/ ·...

Consultation on Funded D

issioning Program

uidance for New

Nuclear P

ower S

tations

Printed in the UK on recycled paper containing a minimum of 75% post consumer wasteDepartment for Business, Enterprise and Regulatory Reform. www.berr.gov.uk

First published February 2008. © Crown copyright. Pub 8702/0.2k/02/08/NP. URN 08/637

7504-BERR-Nuclear Waste Decommissioning-COVER 20/2/08 16:55 Page 1

Consultation on Funded Decommissioning Programme Guidance for New Nuclear Power Stations

FEBRUARY 2008

THE ENERGY BILL 2008

Consultation on Funded D

issioning Program

uidance for New

Nuclear P

ower S

tations

Consultation on Funded Decommissioning ProgrammeGuidance for New Nuclear Power Stations

FEBRUARY 2008

THE ENERGY BILL 2008

7504-BERR-Nuclear Waste Decommissioning-COVER 20/2/08 16:55 Page 1

Printed in the UK on recycled paper containing a minimum of 75% post consumer waste Department for Business, Enterprise and Regulatory Reform. www.berr.gov.uk

First published February 2008. © Crown copyright. Pub 8702/0.2k/02/08/NP. URN 08/637

The energy Bill 2008 Consultation on Funded Decommissioning Programme guidance for new nuclear Power Stations

Introduction

•ExecutiveSummary 3

•HowtoRespond 5

Section 1: Background

•TheGovernment’sconclusiononthefutureofnuclearpower 9

•FormationoftheNuclearLiabilitiesFinancingAssuranceBoard(NLFAB) 11

Section 2: Fixing a price and schedule for the disposal of intermediate level waste and spent fuel (higher activity waste) from new nuclear power stations

•Fulldecommissioningcosts 13

•Fullshareofwastemanagementcosts 14

•Roadmaptosetoutanindicativetimelineforpublicationofcostestimatesforwastemanagement,disposalanddecommissioningandafixedunitpriceforwastedisposal 18

Section 3: Financing decommissioning, waste management and waste disposal from new nuclear power stations

•SettingaframeworkthroughtheEnergyBill 27

•RegulationsundertheEnergyBill 32

•GuidanceundertheEnergyBill 34

•IndicativeprocessforsubmittingandfollowingaFundedDecommissioningProgramme 37

Contents

Section 4: Decommissioning and Waste Management Plan guidance 41

Section 5: Funding Arrangements Plan guidance 81

Annex A: Reporting requirements 118

Annex B: The Consultation Code of Practice Criteria 121

1 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,URN08/525,January20082 EnergyBill,Session2007-08,Bill5307-08

Why is BERR conducting this consultation?

It was announced in the Nuclear White Paper 20081 that, in parallel with the Energy Bill2, the Government will publish for public consultation two sets of draft guidance on what an approvable Funded Decommissioning Programme should contain. This consultation document contains both sets of draft guidance and seeks views on the guidance.

Issued on: 22February2008

Respond by: 16May2008

Enquiries to: GuidanceConsultation,NuclearUnit DepartmentforBusiness,EnterpriseandRegulatoryReform Bay125,1VictoriaStreet,LondonSW1H0ET

Tel: 02072153331

Fax: 02072152842

Email: DecomGuidance@berr.gsi.gov.uk

Introduction

executive Summary

ThisconsultationfollowsthepublicationoftheWhitePaperonNuclearPower1 inJanuary2008,whichannouncedtheGovernment’sformalresponsetotheconsultationonthefutureofnuclearpower.

TheNuclearWhitePaper2 3statedthat:

“The Government believes it is in the public interest that new nuclear power stations should have a role to play in this country’s future energy mix alongside other low-carbon sources; that it would be in the public interest to allow energy companies the option of investing in new nuclear power stations; and that the Government should take active steps to open up the way to the construction of new nuclear power stations. It will be for energy companies to fund, develop and build new nuclear power stations in the UK, including meeting the full costs of decommissioning and their full share of waste management costs.”

TheGovernmentalsoconfirmeditscommitmenttoputinplacelegislative3 arrangementstoensurethatoperatorsofnewnuclearpowerstationshavesecurefinancingarrangementsinplacetomeetthefullcostsofdecommissioningandtheirfullshareofwastemanagementcosts.ClausesintheEnergyBill20084createtheframeworkforthis.TheEnergyBillwillrequireanyoperatorofanewnuclearpowerstationtohaveaFundedDecommissioningProgramme,approvedbytheSecretaryofState,inplacebeforeconstructionofanewnuclearpowerstationbeginsandtocomplywiththisprogrammethereafter.TheFundedDecommissioningProgrammepreparedbytheoperatorofanewnuclearpowerstationmustinclude:

provisionforthestepsnecessarytodecommissiontheinstallationand●●

manageanddisposeofhazardouswaste;

anestimateofthecostsoftakingthosesteps;and●●

detailsofanysecuritytobeprovidedinrelationtothosecosts.●●

ItwasalsoannouncedintheNuclearWhitePaperthat,inparallelwiththe4 EnergyBill,theGovernmentwouldpublishforpublicconsultationtwosetsofdraftguidanceonwhataFundedDecommissioningProgramme(FDP)shouldcontain.

3 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,URN08/525,January20084 EnergyBill,Session2007-08,Bill5307-08

5 ThisguidancewillassistoperatorsinunderstandingtheirobligationsundertheEnergyBill,andwhatisrequiredforanapprovableFundedDecommissioningProgramme.TheguidanceisnotintendedtobeundulyprescriptivebutinsteadtosetoutprincipleswhichtheSecretaryofStatewillexpecttoseesatisfiedintheFundedDecommissioningProgrammepreparedbyanoperator.Theguidancegivesinformationonwaysinwhichtheoperatormightsatisfythoseprinciples.

6 Thefirstsetofguidance(DecommissioningandWasteManagementPlanguidance)willassistoperatorsinsettingoutandcostingthestepsinvolvedindecommissioninganewnuclearpowerstationandmanaginganddisposingofhazardouswasteandspentfuelinawaywhichtheSecretaryofStatemayapprove.ThisguidancealsosetsoutthecostmodellingmethodologytheGovernmentexpectstousetogenerateitsownprudentestimatesofthecostsofdecommissioning,wastemanagementandwastedisposalfornewnuclearpowerstations.

7 ThisconsultationdocumentalsocontainsaRoadmapthatsetsoutanindicativetimelineunderwhichtheGovernmentexpectstopublishitscostestimatesandtobeinapositiontosetafixedunitpriceforwastedisposal.ThisRoadmap(setoutinSection2ofthisdocument)isincludedforinformationonlyandviewsarenotrequestedonit.

8 Thesecondsetofguidance(FundingArrangementPlanguidance)willassistoperatorsinsettingoutacceptablefinancingproposalstomeetthecostsidentified.ItsetsouttheGuidingPrinciplesagainstwhichtheGovernmentwillassessthefundingproposalssubmittedbyoperatorsaspartoftheirFundedDecommissioningProgrammeforapprovalundertheEnergyBill.

Consultation Questions

Question 1

Do you agree or disagree that the Funded Decommissioning Programme guidance adequately sets out what an approvable Funded Decommissioning Programme should contain in order to meet the government’s objective that operators of new nuclear power stations meet the full costs of decommissioning and their full share of waste management costs? What are your reasons? Do you have any other comments on the two sets of guidance?

Question 2

Does the draft guidance contain sufficient information to enable operators of new nuclear power stations to understand the matters that their Funded Decommissioning Programme should contain?

Question 3

Do you agree or disagree that the Base Case sets out a realistic and prudent way to estimate the potential costs of waste management and decommissioning. What are your reasons?

Question 4

Do you agree or disagree that the Funding Arrangements Plan guidance sets out a prudent way to ensure that operators make adequate provision for meeting their liabilities? What are your reasons?

how to respond

Wewanttohearfrommembersofthepublic,industry,financialandother9 institutionsthatmaybeinvolvedinthefinancingofnewnuclearpowerstations,non-governmentalorganisationsandanyotherorganisationorbodywithaninterest.

Weareseekingviewsonthedraftguidancebeforeitisfinalisedfollowing10 RoyalAssentoftheEnergyBill.ThedraftguidanceissetoutinSections4and5ofthisdocument.Sections1-3areforinformationandwearenotseekingcommentsonthesesections.

Theconsultationbeganon22February2008andwillcloseonFriday16May11 2008.

Aresponsecanbesubmittedbyletter,faxoremail(emailpreferred)to:12

Guidanceconsultation,NuclearUnitDepartmentforBusiness,EnterpriseandRegulatoryReformBay125,1VictoriaStreet,London,SW1H0ETTel:02072153331Fax:02072152842Email:DecomGuidance@berr.gsi.gov.uk

Additional points about this consultation

Whenresponding,pleasestatewhetheryouarerespondingasanindividual13 orrepresentingtheviewsofanorganisation.Ifyouarerespondingonbehalfofanorganisation,pleasemakeitclearwhotheorganisationrepresentsand,whereapplicable,howyouassembledtheviewsofmembers.

ThedeadlineforresponsesisFriday16May2008.14

Confidentiality and Data Protection

YourresponsemaybemadepublicbyBERR.Ifyoudonotwantyourname15 orallorpartofyourresponsemadepublic,pleasestatethisclearlyintheresponse.Anyconfidentialitydisclaimerthatmaybegeneratedbyyourorganisations’ITsystemorincludedasageneralstatementinyourfaxcoversheetwillbetakentoapplyonlytoinformationinyourresponseforwhichconfidentialityhasbeenspecificallyrequested.

Informationprovidedinresponsetothisconsultation,includingpersonal16 information,maybesubjecttopublicationordisclosureinaccordancewiththeaccesstoinformationregimes(theseareprimarilytheFreedomofInformationAct2000(FOIA),theDataProtectionAct1998(DPA)andtheEnvironmentalInformationRegulations2004).

Ifyouwantotherinformationthatyouprovidetobetreatedasconfidential,17 pleasebeawarethat,undertheFOIA,thereisastatutoryCodeofPracticewithwhichpublicauthoritiesmustcomplyandwhichdeals,amongstotherthings,withobligationsofconfidence.

Inviewofthisitwouldbehelpfulifyoucouldexplaintouswhyyouregard18 theinformationyouhaveprovidedasconfidential.Ifwereceivearequestfordisclosureoftheinformationwewilltakefullaccountofyourexplanation,butwecannotgiveanassurancethatconfidentialitycanbemaintainedinallcircumstances.

TheDepartmentwillprocessyourpersonaldatainaccordancewiththeDPA19 andinthemajorityofcircumstancesthiswillmeanthatyourpersonaldatawillnotbedisclosedtothirdparties.

Additional copies

Youmaymakecopiesofthisdocumentwithoutseekingpermission.An20 electronicversioncanbefoundat:http://www.berr.gov.uk/energy/nuclear-whitepaper/consultations/page44523.html

Help with queries

Pleaseemail21 DecomGuidance@berr.gsi.gov.ukortelephone02072153331.

Ifyouhavecommentsorcomplaintsaboutthewaythisconsultationhasbeen22 conducted,theseshouldbesentto:

VanessaSinghateh,ConsultationCo-ordinatorDepartmentforBusiness,EnterpriseandRegulatoryReformBetterRegulationTeam1VictoriaStreetLondonSW1H0ETE-mail:vanessa.singhateh@berr.gsi.gov.ukTel:02072152293Fax:02072152235

TheGovernment’sCodeofPracticeonConsultationissetoutatAnnexB.23

Next Steps

TheresultsofthisconsultationexercisewillbepublishedontheBERR24 website.

Followingthisconsultation,andaftertheEnergyBillhasachievedRoyal25 Assent,theGovernmentwillfinalisethetwosetsofguidancepublishedhereindraftandwilllaythembeforeParliamentasStatutoryGuidance.

ItiscurrentlyenvisagedundertheEnergyBillthattheSecretaryofState26 willmakeanumberofordersaftertheBillhasachievedRoyalAssent.Furtherinformationissetoutinparagraphs3.22–3.33.

Section1:Background

Thissectionsetsoutthebackgroundtotheguidancewhichisthesubjectof1.1 theconsultation,tosetitinthewidercontextoftheGovernment’senergystrategyandtodescriberelevantpoliciesonmanagingradioactivewastesafely.Itisprovidedhereforinformationonly.

The government’s conclusion on the future of nuclear power

TheNuclearWhitePaper1.2 5setouttheGovernment’sformalresponsetotheconsultationonthefutureofnuclearpower.Itstateditsoverallconclusionasfollows:

“The Government has taken its decision to allow new nuclear power stations 1.3 to be built against the very challenging backdrop of climate change and threats to our energy security. The Government’s conclusion is that nuclear power is:

Low-carbon – helping to minimise damaging climate change●●

Affordable – nuclear is currently one of the cheapest low-carbon electricity ●●

generation technologies, so could help us deliver our goals cost effectively

Dependable – a proven technology with modern reactors capable of ●●

producing electricity reliably

Safe – backed up by a highly effective regulatory framework●●

Capable of increasing diversity and reducing our dependence on any one ●●

technology or country for our energy or fuel supplies.

On this basis, the Government believes that it is in the public interest that new nuclear power stations should have a role to play in this country’s future energy mix alongside other low-carbon sources; that it would be in the public interest to allow energy companies the option of investing in new nuclear power stations; and that the Government should take active steps to open up the way to the construction of new nuclear power stations. It will be for energy companies to fund, develop and build new nuclear power stations in the UK, including meeting the full costs of decommissioning and their full share of waste management costs6.”

5 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,URN08/525,January20086 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,URN08/525,January2008

IntheNuclearWhitePapertheGovernmentsetoutitsconclusiononwaste1.4 anddecommissioning:

“Having reviewed the arguments and evidence put forward, the Government believes that it is technically possible to dispose of new higher-activity radioactive waste in a geological disposal facility and that this would be a viable solution and the right approach for managing waste from any new nuclear power stations. The Government considers that it would be technically possible and desirable to dispose of both new and legacy waste in the same geological disposal facilities and that this should be explored through the Managing Radioactive Waste Safely programme. The Government considers that waste can and should be stored in safe and secure interim storage facilities until a geological facility becomes available.

Our policy is that before development consents for new nuclear power stations are granted, the Government will need to be satisfied that effective arrangements exist or will exist to manage and dispose of the waste they will produce.

The Government also believes that the balance of ethical considerations does not rule out the option of new nuclear power stations7.”

TheNuclearWhitePaperalsosetoutaGovernmentstatementontheMRWS1.5 processandgeologicaldisposal8.

IntheNuclearWhitePaper,theGovernmentconfirmeditscommitmentto1.6 putinplacelegislativearrangementstoensurethatoperatorsofnewnuclearpowerstationshavesecurefinancingarrangementsinplacetomeetthefullcostsofdecommissioningandtheirfullshareofwastemanagementcosts.ClausesintheEnergyBillcreatetheframeworkforthisrequirement.ThiswillbeachievedbyrequiringanyoperatorofanewnuclearpowerstationtohaveaFundedDecommissioningProgramme,approvedbytheSecretaryofState,inplacebeforeconstructionofanewnuclearpowerstationbeginsandtocomplywiththisprogrammethereafter.

TheGovernmenthasdeterminedthatindependentfunds,outsideof1.7 thecontrolofoperators,shouldbecreatedtoaccumulateandmanagepaymentstomeetthefullcostsofdecommissioningandfullshareofwastemanagementcosts.Thisapproachwouldbetransparentandwouldbeconsistentwiththepolicyofensuringthatoperators,nottheGovernment,takefullresponsibilityformeetingthecostsofdecommissioning,wastemanagementanddisposal.

TheSecretaryofStateforTradeandIndustry(nowSecretaryofStatefor1.8 Business,EnterpriseandRegulatoryReform)appointedDrTimStone,aseniorfinancierwithexperienceofmajorcapitalinvestmentprojects,inJanuary2007,toadvisetheGovernmentonfinancingthecostsofdecommissioning

7 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,page99,URN08/525,January20088 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,Box3,page94,URN08/525,January2008

andwastemanagementanddisposalcostsfornewnuclearpowerstations.DrStonereportstotheSecretaryofStateforBusiness,EnterpriseandRegulatoryReformandtheChiefSecretarytotheTreasury.

Formation of the nuclear liabilities Financing Assurance Board (nlFAB)

IntheNuclearWhitePaper,theGovernmentannounceditsintentiontocreate1.9 anewindependentadvisorybody,theNuclearLiabilitiesFinancingAssuranceBoard(NLFAB).ThisnewboardwillprovideindependentscrutinyandadviceonthesuitabilityoftheFundedDecommissioningProgrammessubmittedbyoperatorsofnewnuclearpowerstations,preparedwiththeaidoftheguidancewhichisthesubjectofthisconsultation.

TheNLFABwilladvisetheSecretaryofStateforBusiness,Enterpriseand1.10 RegulatoryReformonthefinancialarrangementsthatoperatorssubmitforapproval.TheNLFABwillalsoprovideadvicetotheSecretaryofStateontheregularreviewsandongoingscrutinyoffundingarrangements.

TheNLFABisexpectedtoconsistofexpertsfromrelevantfieldssuchas1.11 currentorformerfundmanagers,pensiontrustees,actuariesandnuclearspecialists.TheboardmemberswillbeappointedbytheSecretaryofState.

TheNLFABwillbeapurelyadvisorybodyandwillhaveatightlydefined1.12 scopefocusedsolelyonadvisingwhetherthefinancialarrangementsputinplacebyoperatorsfordecommissioningandwastemanagementanddisposalaresufficientlyrobust.TheadviceoftheNLFABwithrespecttoFundedDecommissioningProgrammeswillbemadepublic,buttheSecretaryofStatewillretainresponsibilityfortheactualapproval(orrejection)ofprogrammes.

Itisexpectedthat,inscrutinisingtheFundedDecommissioningProgrammes,1.13 theNLFABwillmakeuseofexistingregulators’expertise.

Forinformation,wesetoutinTable1anindicativetimetableforthecreationof1.14 theNLFAB.

Table 1: Indicative timetable for creation of the Nuclear Liabilities Financing Assurance Board

Q22008 PublicationoftheNLFABTermsofReference

Q2/Q32008 Beginrecruitingprocess

Q42008/Q12009

FormationofNLFAB

Initialmeetingoftheboard

AvailabletoadviseSecretaryofStatefollowingthesubmissionofFundedDecommissioningProgrammesbyoperators

Section2:Fixingapriceandscheduleforthedisposalofintermediatelevelwasteandspentfuel(higheractivitywaste)fromnewnuclearpowerstations

ThissectionsetsoutbackgroundinformationontheGovernment’spolicy2.1 tosetafixedunitpriceforoperatorsofnewnuclearpowerstationsfordisposalofintermediatelevelwasteandspentfuel,andaschedulefortheGovernment9totaketitletoandliabilityforthesematerials.Thissectionisforinformationonlyandviewsarenotsoughtonitaspartoftheconsultation.FurtherinformationonmanyoftheissuesraisedinthissectionisincludedinSections4and5ofthisdocument,whichpresentthetwosetsofdraftguidanceforconsultation.

Full decommissioning costs

TheNuclearWhitePapersetdownthat2.2 “It is the Government’s policy that the owners and operators of new nuclear power stations must set aside funds over the generating life of the power station to cover the full costs of decommissioning and their full share of waste management and disposal costs10.”

Toprovidefurtherclarification,theGovernmentconsidersthatfull2.3 decommissioningcostsarethecostsof:

dismantlingthenuclearpowerstationattheendofitsgeneratinglife●●

removingallstationbuildingsandfacilitiesandreturningthesitetoastate●●

agreedwiththeregulatorsandtheplanningauthorityandreleasedfromthecontrolofthenuclearsitelicence.Thisislikelytobeastatesimilarto“Greenfield”,dependingonthestateofthesitepriortoconstructionofthestation.

9 InthissectionreferencestotheGovernmentinthecontextofsettingafixedunitpriceforwastedisposalandaschedulefortakingtitletoandliabilityforsuchwasteshouldbereadasreferencestocentralGovernmentandotherbodiesactingonbehalfofandfundedbycentralGovernment.

10 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,URN08/525,January2008

Operatorswillberequiredtoproducerobustestimatesofthecostsof2.4 decommissioningandtoensurethatsufficientfundsaresetasideinanindependentFundtomeetthecostsastheyfalldue.

Full share of waste management costs

Toprovidefurtherclarification,theGovernmentconsidersthatanoperator’s2.5 fullshareofwastemanagementcostsis:

thecoststhataredirectlyattributabletodisposingofnewbuildhigher●●

activitywasteintoageologicaldisposalfacility;

acontributiontowardsthefixedcostsofconstructingsuchageological●●

disposalfacility;

asignificantriskpremiumoverandabovethesecoststotakeaccountof●●

uncertaintiesaroundthecostofconstructingsuchafacilityandthetimewhenitwillbeabletoacceptnewbuildwaste;and

thecostofmanagingthatwastependingdisposal(orpendingtransferfor●●

disposal).

Separately,operatorsarealsoresponsibleforthefullcostofdisposingoflow2.6 levelwasteinadisposalfacilityandmanagingthiswastependingitsdisposal.

TheGovernmentismodellingthefinancialimpactofaddingwastefromnew2.7 nuclearpowerstationstoageologicaldisposalfacilitythatwouldotherwisebedesignedtoholdonlytheUK’sexistingnuclearwasteinventory.Ourmodellingtakesintoaccounttheadditionaldirectcosts;forexample,throughneedingtoconstructadditionalundergroundcavernstoacceptwastefromnewnuclearpowerstations.Wewillthenconsiderwhichotheritemsofcosttheadditionofwastefromnewnuclearpowerstationsmightaffectlessdirectly.Inthisway,wewillbeinapositiontoensurethatthepricethatoperatorspayfordisposaloftheirhigher-activitywastesintheGovernment-providedgeologicaldisposalfacilityreflectstheirfullshareofthecostsofaddingwastefromnewnuclearpowerstationstothisfacility.Thesecostswillincludeaproportionofthefixedcostsofbuildingageologicaldisposalfacility.Weareworkingonamethodologytodeterminehowthefixedcostsofbuildingageologicaldisposalfacilityshouldbeapportionedtoandsharedbetweenoperatorsofnewnuclearpowerstations.Ourmethodologyfordefiningthe“fullshareofcosts”willaddresstheissueofquantifyingtheseindirectcostsindeterminingthecontributionthatoperatorsofnewnuclearpowerstationsoughttomake.

TheRoadmap,inparagraphs2.25–2.32andTable2,setsoutanindicative2.8 timelineforwhenmoredetailonhowtheGovernmentwilldeterminethecontributionsthatoperatorsshouldmaketomeettheirfullshareofwastemanagementcostsisexpectedtobeavailable.Theindicativetimelinealsoshowswhenweexpecttobeinapositiontopublishupdatedestimatesofthetotalcostsofwastemanagement,disposalanddecommissioning,andamethodolodgyforestablishingafixedunitpriceforthedisposalofintermediate

levelwasteandspentfuel.Theindicativetimelineisbeingincludedforinformationonlyandwearenotseekingcommentsonitthroughthisconsultation.

Clarity on the costs for disposal of waste and spent fuel from new nuclear power stations in a Government facility

IntheNuclearWhitePaper2.9 11,wesaidthatpotentialinvestorsinnewnuclearpowerstationsneedclarityonthemaximumamountthattheywouldbeexpectedtopayfortheGovernmenttotakeresponsibilityfortheirfuturewasteinageologicaldisposalfacility.Thiscostcertaintywouldenablethemtotakeinvestmentdecisionsandseekfinancing.Energycompanieshaveindicatedthattheywouldbepreparedtopayasignificantriskpremiumoverandabovetheexpectedcostsofdisposingofwasteandspentfuel,inreturnforhavingthecertaintyofafixedupperprice.

TheGovernmentwouldexpecttosetafixedunitpricebasedontheoperator’s2.10 projectedfullshareofwastedisposalcostsatthetimewhentheapprovalsforthestationaregiven,priortoconstructionofthestation.TheGovernmentwouldexpecttosetafixedpriceperunitofintermediatelevelwasteorspentfuelfordisposal,toensurethattheamountthatoperatorspayisrelativetotheamountofwasteorspentfueltheyproduce.Thispricewillbesetataleveloverandaboveexpectedcostsandwillincludeasignificantriskpremium.Thisriskpremiumshouldhelptoensurethattheoperatorbearstherisksarounduncertaintyinwastecostsandwillprovidethetaxpayerwithmaterialprotectionagainsttheeventualitythattheactualcostsofgeologicaldisposalexceedtheprojectedcosts.Shouldtheactualcostsofprovidingthewastedisposalserviceprovelowerthanexpected,theselowercostswillnotbepassedontonuclearoperators,whowouldhavegainedfromcertaintyofafixedpriceandwouldnothavebeenexposedtotheriskofpriceescalation.

ThefixedunitpricetheGovernmentwillsetforoperatorsforwastedisposal2.11 willreflectthemostuptodateestimatesofcostsavailableatthedatewhenthepriceissetandthelevelofcertaintytheGovernmenthasonthosecosts.Consequently,dependentuponthedateofthenuclearpowerstation’sconstruction,operatorsofdifferentpowerstationsmaybesetdifferentfixedunitpricesforwastedisposal.Thefixedunitpricewillbeescalatedovertimeinlinewith,forexample,inflation.

Thefixedunitpricewillbeforthedisposalofintermediatelevelwastefrom2.12 operationsanddecommissioningandofspentfuel.Thedisposaloflowlevelwastewillnotbepartofthefixedunitpriceservice.Operatorswillberesponsibleformakingtheirownarrangementsforthedisposaloflowlevelwastefromoperationsanddecommissioningandwillberequiredtomeetthesecostsfromoperationalexpenditureforoperationallowlevelwaste,andfromtheFundfordecommissioninglowlevelwaste.

WeanticipatethatoperatorswillrequestthattheGovernmentprovide2.13 themwithafixedunitpriceatthetimetheyseekapprovalfortheirFundedDecommissioningProgramme.Thiswilloccuralongsidetheregulators’licensingandpermittingprocesses.Atthistime,theSecretaryofStatewouldusethecostmodellingmethodologyithasdeveloped,togetherwithinformationfromtheNDA’sparametriccostmodellingworkontheestimatedcostsofdisposalfacilities,todeterminethefixedunitprice,includingtheappropriateriskpremium.Thecostmodellingmethodologyisdescribedingreaterdetailatparagraphs4.5.1–4.5.39andfurtherinformationonwhenweexpecttobeinapositiontosetafixedunitpriceforoperatorsissetoutintheRoadmapparagraphs2.25–2.32andTable2.Tohelpfutureoperatorswiththeirplanning,theGovernmentwouldexpecttogiveoperatorsanon-bindingindicativepriceatanearlierdatethanwhentheGovernmentwouldbewillingtoprovidethemwithafinalfixedunitprice.

Clarity on when operators will be able to pass title to and liability for their waste and spent fuel to the Government

Potentialinvestorsinnewnuclearpowerstationsalsoneedcertaintyoverthe2.14 dateatwhichtheywilltransfertitletoandliabilityfortheirintermediatelevelwasteandspentfueltotheGovernmentfordisposal.

TheGovernmentwillagreetotaketitletoandliabilityforanoperator’swaste2.15 accordingtoaschedulethatwillbeagreedatthesametimeastheoperator’sFundedDecommissioningProgrammeisapprovedandalongsidesettingafixedunitpriceforthewastedisposalservice.Wewouldexpectthescheduletobealignedtotheestimatesforavailabilityofdisposalfacilities(whateverthoseestimatesareatthetimeoperatorscometotheGovernmentforafirmviewonafixedunitprice).Weexpectthattransferoftitleandliabilitywouldnotbeginuntilaftertheoperator’sdecommissioningprogrammehasotherwisebeencompleted.Firmestimatesofdatesforconstructionofdisposalfacilitiesarenotyetavailable;howevergreaterclaritywillemergeastheManagingRadioactiveWasteSafely(MRWS)programmeproceeds.

Aswithsettingafixedunitprice,tohelpoperatorswiththeirplanning,2.16 theGovernmentwouldexpecttogiveoperatorsanon-bindingindicativescheduleatanearlierdatethanwhentheyapproachtheGovernmentforfirmagreement.TheschedulefortheGovernmenttotaketitletoandliabilityforintermediatelevelwasteisexpectedtobedifferenttotheschedulefortakingtitletoandliabilityforspentfuel.

Inreturnforgivingoperatorscertaintyoverwhentheywilltransfertitletoand2.17 liabilityfortheirwasteandspentfueltotheGovernment,wewillsettheleveloftheriskpremiumtotakeaccountoftherisktotheGovernmentthattheconstructionofdisposalfacilitiesisnotcompletebythedateordatesspecifiedintheagreedschedule.Thisriskpremiumwillbebuiltintothefixedunitpriceforthewastedisposalservice.

Ifgeologicaldisposalfacilitiesarenotavailablebythedatesagreedinthe2.18 schedule,theGovernmentwouldexpecttotaketitletoandliabilityforthewasteaccordingtotheagreedscheduleandwouldexpecttocontinuestoringitonthesitewhereithashithertobeenstoreduntildisposalfacilitiesareavailable.WeexpectthatthisstoragewillbeonthesiteofthepowerstationasassumedintheBaseCase(seeparagraph4.1.9).ThiscouldmeanthattheGovernmentmayneedtosecurethelicensingofthepartoftheoperator’ssitewheretheinterimstoresarelocated.Inthiscase,theoperatorshouldbeabletopursuede-licensingoftheremainderofitssitewiththeregulators.Operatorsmaywishtoconsiderthispossibilitywhenconsideringthedesignoftheirsite,andinparticularwhetherservicesfortheirinterimstoreswillbesharedwiththerestoftheirsite.TheGovernmentwouldmeetcostsformaintainingtheinterimstoresduringthisperiodfromtheriskpremiumincludedinthefixedunitprice.TheGovernmentwillexpecttobasethescheduleonconservativeestimatesoftheavailabilityofgeologicaldisposalfacilities,tominimisetheriskthattheGovernmentwillneedtotaketitletoandliabilityforanoperator’sintermediatelevelwasteandspentfuelbeforedisposalfacilitiesareavailabletodisposeofthesematerials.

Conversely,iftheoperatorisnotinapositiontosenditswastefordisposal2.19 inaccordancewiththeagreedschedule,itwillremainresponsible(includingfinancially)formaintainingtheongoingmanagementofthewasteuntilitisinapositiontodisposeofthewasteandtheoperatorofthedisposalfacilityisabletofindanothertimeslottoreceivethatwaste.

TheBaseCasereferredtoatparagraph4.1.9assumesa40yeargeneratinglife2.20 fornewnuclearpowerstations.ThisisasensibleassumptionandoperatorswouldbeexpectedtotakeaccountofitintheirFundedDecommissioningProgramme,althoughitwillbeopentooperatorstosuggestalternativestationlifetimes.IfoperatorswishtomodifytheirProgrammeduringthegeneratingperiodtoextendthelifeofthestationbeyondthat40yearperiod,thenaswellasneedingtheagreementoftheregulatorstothechangeandtheapprovalofSecretaryofStatetomodifytheirProgramme,theywillneedtorevisitthescheduletodetermineandhavetheSecretaryofStateapprovewhentheGovernmentwilltaketitletoandliabilityforthewaste.

Althoughweexpectthatarevisedschedulewouldbeagreedwiththeoperator2.21 atthetimeoftheapplicationforastation’slifeextension,weexpectthat,ifdisposalfacilitiesareavailable,theintermediatelevelwasteandspentfuelfromthefirst40yearsofoperationswouldbesentfordisposalatthetimeagreedintheoriginalschedule.Decommissioningwasteandtheadditionalspentfuelfromtheextendedstationlifetimewouldbedisposedofoncethestationhasbeendecommissionedandaccordingtodatesagreedaspartoftherevisedschedule.

Ifnodisposalfacilitieswereavailableatthistime,thewasteandspentfuel2.22 fromthefirst40yearsofoperationswouldremainintheoperator’sinterimstoresuntildisposalfacilitiesareavailableandthestationhascompleteditsextendedgenerationperiodandhasbeendecommissioned.Ifdisposal

facilitieswerestillnotavailableatthistime,theGovernmentwouldexpecttotaketitletoandliabilityfortheoperator’swasteandspentfuelatthispointinaccordancewithparagraph2.18.

TheGovernmentmayalsowanttosetanewpriceforthedisposalofthe2.23 additionalspentfuel.Itwouldexpecttodothisatthetimetheoperatorseeksapprovalforthemodificationstoitsprogramme.Anewpricewouldbeset,basedonthemostuptodateestimatesoftheactualcostsofdisposal.Wearenotrulingoutthepossibilitythatoperatorsmaywishtonegotiateupfrontapriceforwastefor,say,60yearsofoperation;forexample,bytakinganoptionontheadditional20yearsworthofspentfuel.ThiswouldrequiretheapprovaloftheSecretaryofState.

Theapproachdescribedabovetosetafixedunitpriceforthedisposalof2.24 intermediatelevelwasteandspentfuelandtoagreeaschedulefortheGovernmenttotaketitletoandliabilitytothesematerialswillbetestedwiththefinancialindustryandwillbesubjecttoensuringcompliancewithEUStateAidlaw.

roadmap to set out an indicative timeline for publication of cost estimates for waste management, disposal and decommissioning and a fixed unit price for waste disposal

Theindicativetimelinebelowsetsoutwhenfurtherdetailonthecostsand2.25 paymentsforwastemanagement,disposalanddecommissioningfornewnuclearpowerstationswillbepublished.Thistimelineisforinformationonlyandwearenotseekingcommentsonitthroughtheconsultation.

Updated estimates of the likely total costs for waste management, disposal and decommissioning

Toderiverobustupdatedestimatesofthecostsofwastemanagement2.26 anddecommissioningfornewnuclearpowerstations,theGovernmentisdevelopingacostmodelthatwillenableittoproducearangeoflikelycosts,aswellasgivingtheGovernmentinformationonthelevelofcertaintyofthosecosts.Paragraphs4.5.1–4.5.39setoutforconsultationthecostmodellingmethodologythattheGovernmentproposestousetodevelopestimatesofthesecosts.

Operatorsofnewnuclearpowerstationswillbeexpectedtocalculatetheir2.27 owncostestimatesforwastemanagement,disposaloflowlevelwasteanddecommissioningforinclusionintheDecommissioningandWasteManagementPlan(DWMP)theywillsubmittotheSecretaryofState.OperatorswillalsobeexpectedtosubmittotheSecretaryofStatetheirestimatesofthevolumesofintermediatelevelwasteandspentfuelthattheirstationwillproducethroughoutitsgeneratinglifeandfromdecommissioning.Operators’ownestimateswilldifferfromthoseproducedbytheGovernment

astheywillbespecifictothenuclearpowerreactordesign,siteandotheroperationaldecisionsoftheoperator,ratherthangeneric.

Wearenotsettingoutcostestimatesatthisstage.Theindicative2.28 timelineinTable2setsoutwhenweexpecttobeinapositiontopublishupdatedestimatesofthetotalcostsofwastemanagement,disposalanddecommissioning.

A methodology for establishing a fixed unit price for the disposal of intermediate level waste and spent fuel in a geological disposal facility

AssetoutintheNuclearWhitePaper2.29 12andinparagraphs2.9–2.13ofthisconsultation,theGovernmentwillprovidecertaintytooperatorsofnewnuclearpowerstationsonthecostsofdisposingoftheirintermediatelevelwasteandspentfuel,bysettingafixedunitpriceforthisservice.Inreturnforthiscertainty,theGovernmentwillincludeinthefixedunitpriceasignificantriskpremiumsetoverandaboveexpectedcoststohelpensurethattheoperatorbearstherisksarounduncertaintyinwastedisposalcostsandtoprovidethetaxpayerwithmaterialprotection.

TheGovernmentexpectstodeterminetheappropriatelevelforthefixed2.30 unitprice,drawingonthecostmodellingworkcarriedoutbyBERRandbytheNuclearDecommissioningAuthority(NDA).Weplantopublishfurtherinformationonthemethodologywewillusetodeterminethefixedunitprice,assetoutinTable2.

A methodology for determining the contributions that operators should make to meet their full share of waste management costs

TheGovernmenthasstatedaspolicy2.31 13thatoperatorsofnewnuclearpowerstationsmustsetasidefundsoverthegeneratinglifeofthepowerstationtocovertheirfullshareofwastemanagementanddisposalcosts.

Weareworkingonamethodologytodeterminehowthefixedcostsof2.32 buildingageologicaldisposalfacilityshouldbeapportionedtoandsharedbetweenoperatorsofnewnuclearpowerstations14.Theindicativetimelinesetsoutwhenweexpectthismethodologytobeavailable.Thismethodologywillhelpdeterminethecontributionswhichoperatorsshouldmaketomeettheirfullshareofthecostsofwastedisposal.Determinationofanoperator’sfullshareofwastedisposalcostswillinformthefixedunitpricethattheGovernmentwillsetfordisposalofintermediatelevelwasteandspentfuel.

12 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,URN08/525,January200813 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,URN08/525,January200814 ThisbreakdownofcostspresupposesdisposalofhigheractivitynewbuildwasteinaUKgeologicaldisposal

facilitybuiltbyoronbehalfoftheGovernment.IntheeventthatalternativewastedisposalstrategieswereputforwardbyoperatorsandwereacceptabletotheSecretaryofStateanassessmentofthefullshareofwastedisposalcostssoincurredwouldfalltobedeterminedonacasebycasebasis.

Table 2: Indicative timeline for publication of cost estimates for waste management, disposal and decommissioning and a fixed unit price for waste disposal

Indicative ActionDate

2008 ● Publish for consultation: cost modelling methodology Q1–Q2 for estimating the costs of waste management, disposal

and decommissioning, and Funded Programme guidance.

2008 ● DeFrA to publish White Paper on Managing Q2–Q3 radioactive Waste Safely and invite communities to

express an interest in discussions about potential involvement in the siting process.

● nDA develop their parametric cost modelling exercise so that outputs can be incorporated in Berr’s cost modelling.

● Methodology to determine how the fixed costs of building a geological disposal facility should be apportioned to and shared between operators of new nuclear power stations is expected to be made available.

2008 ● Publish consultation responses and government Q3–Q4 response on the Berr website. ● Develop further refined cost estimates. ● Undertake an external peer review of Berr’s

cost model. ● Test the price methodology for establishing an

indicative fixed unit price for the disposal of intermediate level waste and spent fuel with the financial industry.

2008 Q4– ● Publish finalised guidance on an acceptable Funded 2009 Q1 Decommissioning Programme. ● Publish cost model with our updated estimates of

total costs for waste management, disposal and decommissioning.

● Publish methodology for establishing an indicative fixed unit price for the disposal of intermediate level waste and spent fuel.

Mid – ● earliest date for a possible operator to request a fixed late 2009 unit price for the disposal of intermediate level waste

and spent fuel.

Clarity on what is included in the fixed unit price for disposal of intermediate level waste and spent fuel

ThefixedunitpricethattheGovernmentwillsetforoperatorsofnewnuclear2.33 powerstationsfordisposingoftheirintermediatelevelwasteandspentfuelwillbebasedonanestimateofthecostsofdisposingofthesematerialsinageologicaldisposalfacility.Thiscostingwillincludethefollowingitems:

Estimateofcostsofdisposingofintermediatelevelwasteinageological●●

disposalfacility15;

Estimateofcostsofdisposingofspentfuelinageologicaldisposalfacility●●16;

Significantriskpremiumtocover:●●

theriskthattheeventualcostsofbuildingageologicaldisposalfacility●O

todisposeofintermediatelevelwasteandspentfuelarehigherthanestimated;and

theriskthatgeologicaldisposalfacilitiesarenotavailablewhenrequired●O

bytheagreedschedulefortheGovernmenttotaketitletoandliabilityforthewaste.

Table3givesfurtherdetailontheitemsthatwillbepaidforfromtheFundand2.34 thosewhichareincludedinthefixedunitprice.

15 Thisestimateincludesacontributiontowardsthefixedcostsofconstructingageologicaldisposalfacility.16 Thisestimateincludesacontributiontowardsthefixedcostsofconstructingageologicaldisposalfacility.

Table 3: Summary of principal costs streams and how they will be met 1718

Cost How cost will be met Included in fixed unit price?

Decommissioningthestation IndependentFund No

LowLevelWaste(LLW)

PackaginganddisposalofLLW●●

fromoperations,includingtransport

Packaginganddisposalof●●

LLWfromdecommissioning,includingtransport

OperationalExpenditure

IndependentFund

IntermediateLevelWaste(ILW)

Conditioningandpackagingof●●

operationalILW

Buildingandmaintenanceof●●

interimstoresforILW17

decommissioningILW

Transportofoperationaland●●

decommissioningILWfordisposal

Disposalofoperationaland●●

decommissioningILW

IndependentFund

SpentFuel(SF)

Operationoffuelpondsduring●●

thegeneratinglifeofstation

Operationoffuelpondsafter●●

interimstoresforSF18

TransportofSFfordisposal●●

EncapsulationofSFfordisposal●●

DisposalofallSF●●

IndependentFund

17 Iftheinterimstoresarebuiltaspartofthestationconstruction,thecostsoftheirconstructionwillnotbemetfromtheFund.

Non-radioactivehazardouswaste

●● Managinganddisposingofnon-radioactivehazardouswastefromoperations

●● Managinganddisposingofnon-radioactivehazardouswastefromdecommissioning

IndependentFund

Planning

●● Decommissioningplanningbeforestartofgeneration

●● Pre-closuredecommissioningplanning

●● Anyplanningcarriedoutduringdecommissioning

IndependentFund

OtherCosts

●● Allothercostsassociatedwithoperatingthesiteuntilendofitsgeneratinglife.Thesecostsinclude,butarenotnecessarilylimitedto,thoseassociatedwithmaintainingtheinfrastructurenecessaryfortheoperatortobeaholderofanuclearsitelicence19

●● Allothercostsassociatedwithoperatingthesiteafterendofitsgeneratinglifeanduntilthesitelicenceissurrendered.Thesecostsinclude,butarenotnecessarilylimitedto,thoseassociatedwithmaintainingtheinfrastructurenecessaryfortheoperatortobeaholderofanuclearsitelicence20

IndependentFund

19 Thesecostsarelikelytoincludethecostsofsecurityforthesite,sitemonitoring,ongoingmaintenanceatthesite(otherthanmaintenanceoftheinterimstoresforintermediatelevelwasteandspentfuel)andliaisonwiththeregulators.

Ifconstructionofgeologicaldisposalfacilitiesisnotcompletewhenrequired2.35 bytheagreedschedule(asdescribedinparagraph2.18),theGovernmentmighthavetotaketitletoandliabilityforanoperator’swastebeforedisposalfacilitiesareavailable.InthesecircumstancestheGovernmentwouldneedtocarryoutotherwastemanagementactivities.Thesemightinclude:

maintainingsafeandsecureinterimstoragefromthepointatwhich●●

theGovernmenttakestitletothewasteuntilitcanbedisposedofinageologicaldisposalfacility;

conditioningandencapsulatingSFinaformsuitablefordisposal(weassume●●

thatitwillnotbepossibletodothisinadvanceofdisposal);

re-licensingpartofthereactorsitetoenabletheGovernmenttotaketitleto●●

theinterimstores;

transportingILWandSFtothegeologicaldisposalfacility;●●

thepossibilitythattheGovernmentmayhavetopaytocleanupany●●

contaminationonthesiteoftheinterimstores,ortore-packagethewasteorre-buildthestores;

decommissioningtheinterimstoresandcleaninguptheresidualsite.●●

Someofthese,suchasthecostsoftransportofwasteandspentfuel,the2.36 encapsulationofspentfuelandthedecommissioningoftheinterimstorewillbecostsforwhichtheoperatorwillhavemadeprovisionintheFund(seeTable3),butnotaspartofthefixedunitprice.Inthecircumstancessetoutabove,theamountsthatoperatorshavebudgetedforthesecosts(setoutintheDecommissioningandWasteManagementPlanthathasbeenagreedwiththeSecretaryofState)willpasstotheGovernmentwhentitletoandliabilityforthewastetransfers,tocoverthecostsofperformingtheseservices(andoperatorswillbeexpectedtomakeprovisionundertheirapprovedFundedDecommissioningProgrammetoenablethistransfertotakeplace).Otherpotentialcosts,suchaspayingforfurthermaintenanceofwasteorspentfuelininterimstoresorthere-packagingofthewasteorre-buildingofthestores,willbemetbytheGovernment,butwillhavebeenfactoredintotheriskpremiumaddedtothefixedunitpricetocovertheriskthatconstructionofdisposalfacilitiesisnotcompletebythetimerequiredbytheagreedschedule.

TheGovernmentwouldalsoexpecttoreducetheriskofincurringthesecosts2.37 byensuringthatduediligenceiscarriedoutattheoperator’sinterimstorebeforetakingtitletoandliabilityforthewasteandspentfuelinthestore.TheduediligenceexercisewouldprovidetheGovernmentwithreassurancethattheinterimstorehasbeenconstructedandmaintainedaccordingtotherequiredspecificationandthattheoperatorhasmetitsobligationsinrelationtowastepackagingandstorage.ThecostsofthisexercisewouldbemetbytheoperatorfromcontributionsitwillhavemadetotheFundforthispurpose.TheGovernmentwouldnotexpecttoagreetotaketitleorliabilityinaccordancewiththetermsofthescheduleuntilanyremedialworkthatisfoundtobenecessaryhasbeencarriedoutattheoperator’sexpense.

Schedule of Payments for the waste disposal service

Weexpectthatthemoneystocoverthefixedunitpriceforthewaste2.38 disposalservicewillbepaidtotheGovernmentastitletoandliabilityforeachoperator’swasteistransferredtotheGovernment.However,weareconsideringwhethertheremaybeacaseforsomeofthisamounttobepaidtotheGovernmentduringthepowerstation’sgeneratinglife.IftheGovernmentdeterminesthatthiswouldbenecessary,wewouldagreeascheduleofpaymentswitheachoperatoratthesametimeastheFundedDecommissioningProgrammeisapproved.ThiswouldensurethatoperatorsareabletodesigntheirFundandinvestmentpoliciessothatearlypaymentscanbemadeduringthegeneratinglifeofthestationwhilstalsoensuringthattheFund,takingintoaccountanticipatedgrowth,wouldreachthetargetamount(adjustedtoreflecttheinterimpaymentsmadeinrelationtowastedisposal).TheoperatorwillberesponsibleformakinggoodanyshortfallorriskofshortfallintheaccumulatedfundsheldbytheFund.

TheGovernmentwillexpecttoretainthepowertotaketitletoandliabilityfor2.39 intermediatelevelwasteand/ortospentfuelbeforetheendofthegeneratinglifeofthestation,ifadisposalroutebecameavailableduringthatperiod.TheGovernmentwouldexpecttodiscusswithoperatorsinindividualcasestodeterminearrangementsthatwouldensurethattheirwasteFundwasadequatetofundpaymentsatthistime.

TheGovernmentwouldexpecttoenterintoanagreementwiththeoperator,2.40 oncethefixedunitpriceforthewastedisposalservice,theschedulefortheGovernmenttotaketitletoandliabilityforthewasteandspentfuelandascheduleofpaymentshavebeenset.ThisagreementwouldcoverissuessuchastheabortorterminationcoststhatwouldbepayablebytheoperatorifitlaterchosenottousetheGovernmentwastedisposalservice.

Section3:Financingdecommissioning,wastemanagementandwastedisposalfromnewnuclearpowerstations

Setting a framework through the energy Bill

TheEnergyBillwasintroducedtoParliamentinJanuary20083.1 21.TheGovernmentintendstoensurethattheoperatorsofnewnuclearpowerstationsmeetthefullcostsofdecommissioningandtheirfullshareofwastemanagementanddisposalcosts.ItwilldothisbyimposingnewlegaldutiesonoperatorsinthisregardandcreatingnewpowersfortheSecretaryofStatetoensurethatoperatorsmeetthosedutiesundertheEnergyBill.

AsintroducedtoParliament,theclausesintheEnergyBill:3.2

RequireoperatorsofanynewnuclearpowerstationstosubmitaFunded●●

DecommissioningProgrammeforapprovalbytheSecretaryofStateforBusiness,EnterpriseandRegulatoryReform.TheFundedDecommissioningProgrammemustsetout:

thestepsoperatorswilltaketodecommissiontheinstallation,cleanup●O

thesiteandmanagewaste(includingspentfuel)producedduringitselectricitygeneratinglifeandthroughitssubsequentdecommissioning;

theestimatedcostsoftakingthesesteps;●O

howoperatorsintendtomeetthosecosts;and●O

detailsofthefinancialsecuritytobeputinplacetomeetthecosts●O

identified.

GivetheSecretaryofStateapowertoapprovetheFunded●●

DecommissioningProgramme,approveitsubjecttomodificationsorconditionsortorejectit.

ImposeadutyonoperatorstocomplywiththeFundedDecommissioning●●

Programmebymakingitanoffenceiftheyfailtodoso.

21 EnergyBill,Session2007-08,Bill5307-08

GivetheSecretaryofStatepowers:●●

torequireinformationfromtheoperator,anypersonsresponsibleforthe●O

Fund,andanyotherpersonswithobligationsundertheprogrammetofindoutwhethertheyarecomplyingwiththeprogramme.

wheretheoperator,thepersonsresponsiblefortheFundoranyother●O

personswithobligationsundertheprogrammearenotcomplyingwiththeprogramme:

toobtaininformationfromotherbodiescorporate“associated”with●N

theoperator(toenabletheSecretaryofStatetoconsiderwhethertoimposeobligationsonsuchpersons);and

todirectpersonsinbreachtotaketheactionnecessarytobring●N

themselvesbackintocompliance.

EnabletheSecretaryofStatetorequireoperatorsandpersonsresponsible●●

fortheFundtocarryoutregularreviewsoftheFundedDecommissioningProgramme.

GivetheSecretaryofStatepowerstoapprovemodificationstotheFunded●●

DecommissioningProgrammethatmightbeproposedbythenuclearoperatorfromtimetotimeand,incertaincircumstances,torequiremodifications.

GivetheSecretaryofStatepowerstomakeguidanceandregulationsthat●●

setoutwhatanapprovableFundedDecommissioningProgrammemaycontainandtherebyassistoperatorsinunderstandingtheirobligationsundertheBill.

Seektoensurethatforwastemanagementliabilitieswhichariseduring●●

thestation’selectricitygeneratinglife,thereisflexibilityintermsofwhatwillberegulatedforfinancialpurposes.Thisisbecauseitmaybesufficienttopermitoperatorstopayforsomeofthesecostsfromtheirrevenue(forexample).

TheEnergyBillalsoensuresthatoperatorsmustinformtheSecretaryofState3.3 ofanymaterialamendmentsormodificationstoaFundedDecommissioningProgrammeandseekapprovalforthem.TheEnergyBillgivestheSecretaryofStatepowerstoensurethatpersonsresponsibleformanagingaFund(forexample)mustinformtheSecretaryofStateofanymaterialchangestosuchaFund.Ineachcase,modificationstotheprogrammewhichdonotfallwithinthescopeofanyregulationsmadeunderclause46willrequireapprovalbytheSecretaryofState.

ItalsogivestheSecretaryofStatepowerstoimposeobligationsunder3.4 theFundedDecommissioningProgrammeonbodiescorporate,whichareassociatedwiththeoperator(e.g.theparentcompanyoftheoperator).

TheclausesintheEnergyBilldonotdetractfromtheoperator’sunderlying3.5 dutiesundertheexistinglawtodecommissionandcleanupthesiteonwhichthenuclearpowerstationstands.ThesedutiesflowfromthesitelicenceissuedtooperatorsofallnuclearpowerstationsunderSection1ofthe

NuclearInstallationsAct1965bytheHealthandSafetyExecutive(HSE).UnderSection4ofthatActtheHSEhasthepowertoattachconditionstosuchlicences,anditisinthiswaythattheoperatorisunderanexistinglegaldutytodecommissionanyplantorprocessonthesitewhichmayaffectsafety.

TheEnergyBillisprincipallyconcernedwithensuringthattheoperatormakes3.6 prudentfinancialprovisiontocoverthedischargeofthesedutiessafelyandresponsibly.DespiteallthatfollowsintheguidanceconcerningthecreationofanindependentFundandthedutiesofthatFund(e.g.toverifycostestimatesandtoinvest,accumulateanddisbursemoniesfortherelevantpurpose)theoperatorremainsunderalegaldutyintheEnergyBilltoensurethatprudentfinancialprovisionremainsinplace.Wheretheprovisionsandprotectionsanticipatedintheguidance(whichtheSecretaryofStatewouldexpecttoseesetoutinanapprovedprogramme)donot(inindividualcases)generatesufficientmoneysbytherelevantdatetoenabletheoperatortodischargeitsdutiesinthisregard,theoperatorremainsliabletoundertakethosedutiesandtoensurethatithassufficientmoneystoenableittodoso.

Enforcement of the approved Funded Decommissioning Programme

AfteraFundedDecommissioningProgrammehasbeenapproved,ifthere3.7 isabreachoftheprogramme,theSecretaryofStatewouldexpecttousetheinformationgatheringpowersconferredonhimundertheEnergyBilltofindoutmoreinformationaboutthebreachbeforetakingfurtheraction.OncethisinformationhasbeengathereditisintendedthattherebeaflowofcommunicationsbetweentheoperatorandtheSecretaryofStateinanattempttotrytoremedythebreachinaninformalmanner.

Wheresuchanapproachprovesunworkableorisinappropriateforother3.8 reasons(e.g.becauseoftheurgencyorseriousnessofthecase)theSecretaryofStateisrequiredtoconsultwiththeHSE,theEnvironmentAgency(EA)inEnglandandWalesand,ifnecessary,theDepartmentofEnvironmentforNorthernIreland(DOENI)beforeimposingadirectionrequiringthepersontocomplywiththeprogrammeorremedytheeffectofanyunlawfulconduct.

Thedirectionislikelytorequiretheoperatorofthepowerstationtocomply3.9 withanobligationorremedythebreachandwillsetouttheconditionsastohowitistoberemediedandthetimeframeinwhichtheremedyistotakeplace.Wherethedirectionisnotcompliedwith,theSecretaryofStatemayapplytotheHighCourtforanordercompellingtheoperatortocomplywiththedirection.Wherethisorderisgrantedandnotcompliedwiththenormalpenaltiesforcontemptofcourtwouldapply.TheSecretaryofStatemayalsoinitiateaprosecution(althoughinsufficientlypressingorseriouscaseshemightinitiatesuchproceedingspriortotakingallthestepsreferredto).

Protecting the Taxpayer

TheGovernmenthasconfidenceinthesafety,securityandenvironmental3.10 frameworkfortheUK’snuclearpowersector.

Anumberofindustries–forexampleoilandgasproduction–have3.11 associatedlong-termdecommissioningcostsandpotentialenvironmentalimpacts.However,theGovernmentrecognisesthathealthandsafetyandenvironmentalconsiderationsandthenecessarilyverylong-termnatureofnuclearwastedisposalrequireparticularlyrobustarrangementstoensurethatthetaxpayerdoesnotpaythecostsofnuclearwasteanddecommissioning.ThatiswhytheGovernmentiskeentoputinplaceoneofthemostrobustregulatoryframeworksintheworldtoensurethatnucleargeneratorswillmeetthesecostsinallcrediblecircumstances.

Itisimpossibletoeradicateallrisk.TheGovernmentcannotruleoutthe3.12 possibilitythattherecouldbeextremecircumstanceswheretheGovernmentcouldbecalledupontostepintoprotectthepublicandtheenvironment22.

TheEnergyBillrequirestheSecretaryofStatetoexercisehispowersto3.13 approveFundedDecommissioningProgrammeswithaviewtoensuringthatthearrangementsputinplacebyoperatorsareprudent.TheBillandGuidanceprovidenumerousstringentlayersofprotectiontoensurethatthetaxpayerdoesnotpayforwasteanddecommissioningcostsundernormalcommercialoperation,butalsointheeventofanunlikelyscenario,suchastheearlyclosureofthepowerstationortheinsolvencyofthepowerstationoperator.Theselayersofprotectionareasfollows:

Firstly,itwillbeacriminaloffencetooperateanewnuclearpowerstation3.14 unlessthereisanapprovedFundedDecommissioningProgrammeinplace.Inthissituationthecompanywhichoperatesthestationwillbeliablefortheoffenceaswillofficersofthecompanywheretheactsconcernedarecommittedwiththeconsentorconnivanceofthosepersonsorareattributabletotheirneglect.

Operatorsandpersonsresponsibleforthemoneyssetasidebytheoperator3.15 willbeexpectedtoobtainindependentadviceabouttheaccuracyofcostestimates(forexample)providedbytheoperatorpriortosubmissionoftheProgrammetotheSecretaryofState.ThatProgrammemustbeapprovedbytheSecretaryofStatewhomustdosowithaviewtoensuringthatitmakesprudentprovisionfordecommissioningandcleanupofthestationandthesiteonwhichitstands,includingthefinancialprovisionforthoseactivities.WeareestablishingtheNuclearLiabilitiesFinancingAssuranceBoard(NLFAB)toensuretheSecretaryofStatehasaccesstoexpertadvicewhenheconsiderswhethertoapproveaProgramme.

22 IntheunlikelyeventofamajorincidentGovernmentwould,ofcourse,stepinifnecessarytoprotectthepublicandtheenvironmentinaccordancewithit’sInternationalObligations,althoughtheseliabilitiesarenotwithinthescopeoftheEnergyBill.However,insofarassuchanincidentgaverisetoaliabilityinrelationtothecostsofdealingwithwastemanagementanddecommissioning,theBillisintendedtoensurethisliabilitydoesnotfallonthetaxpayer.

Secondly,itwillbeanoffencetofailtocomplywithsuchProgrammes(for3.16 whichthecompanyanditsofficersmaybeliable)andtheSecretaryofStatewillhavethepowertoissueadirectiontopersonsinbreachoftheprogrammetobringthemselvesintocomplianceandremedytheeffectsoftheirconductwherenecessary.Whereapersonfailstocomplywithadirection,theSecretaryofStatemayapplytotheHighCourtforanordercompellingthatpersontodoso.Wherethepersonfailstocomplywithacourtorderthatpersonwouldbeincontemptofcourtwhichispunishablewithafineorimprisonment.ProvisionoffalseinformationtotheSecretaryofStatebyanoperator,officersoftheoperator,personsresponsibleformanagingtheFundoranyotherpersonswithobligationsundertheProgrammeisacriminaloffence.

Thirdly,thedraftguidancestipulatesthatthefundingarrangementsunderthe3.17 ProgrammemustincludeproposalsforcontributionsbythepowerstationoperatortoanindependentFundfromdayoneofgeneration.Thecontributionsmustaimatatargetamountwhichisatleast100percentoftheinflation,riskanduncertaintyadjustedvalueoftheoperator’spredictedliabilitiesandtheSecretaryofStatewillexpecttoapproveanappropriatecontingencyinthetargetamountfortheFund.TominimisetheriskofanyshortfallintheFund,therewillbe:

ProvisionforregularmonitoringoftheliabilitiesandtheFundand●●

re-assessmentoftheexpectedcosts,feedingthroughtoincreasesinthecontributionstotheFundifnecessary.Reviewsofthedecommissioningandwasteliabilitieswillbeverifiedbytrusteesrelyingonindependentadvicefromthirdpartieswherenecessary,submittedtotheSecretaryofState(whomaytakeadvicefromNLFAB)andpublished.

ProvisionbytheoperatortomanageandmitigatetheriskthattheFund●●

isinsufficientforwhateverreason(e.g.becausethepowerstationclosesearly,beforeallthecontributionstotheFundhavebeenmade).SecurityagainstsuchriskmaytaketheformofanupfrontendowmenttotheFundtogetherwithaprovisiontofrontloadcontributionsduringtheearlyyearsofthepowerstation’sgeneratinglifecombinedwithadditionalsecurityapprovedbytheSecretaryofState,forexampleinsurance,financialinstrumentsorparentcompanyguarantees.Moredetailissetoutinparagraphs5.10.1–5.10.7.

Fourthly,theEnergyBillwillgivetheGovernmentthepowertoimpose3.18 obligationsoncorporatebodiesassociatedwiththeoperatorforexampleparentcompaniesorsistercompanies,if(forexample)theoperatorfailstocomplywiththeprogrammebutalsowhereitisnecessarytosecurethatprudentprovisionismadefordecommissioningandwastemanagement.

Finally,theGovernmentexpectstheFundtobedomiciledintheUKandthe3.19 EnergyBillwillprovideastatutoryprotectionfortheindependentFundintheeventoftheinsolvencyoftheoperatorinrelationtoclaimsbroughtbyitscreditors.

Intheextremecircumstancethattheseverallayersofprotectionsetoutinthe3.20 EnergyBillwerejudgedunabletomeetactualoranticipatedcosts,thentheGovernmentwouldneedtoconsiderwhetheritwasnecessarytostepintoprotectthepublicandtheenvironment.Inthosecircumstances,thealternativeoptionswouldbe,orwouldhavebeen,extensivelyexplored,includingthepossibilityoffindingasuitablebuyerforthepowerstationwhereappropriate.InterventionbytheGovernmentwouldbealastresortandtheGovernmentwouldinanyeventexpecttocallfirstonthemoneysetasidebytheoperatorintotheFund.

ItisbecausetheEnergyBillandguidancewillputinplacenumerousstringent3.21 layersofprotectionandcontingencyarrangementsthattheGovernmentconsidersitveryunlikelythattheoperationofnewnuclearpowerstationswillgiverisetocircumstancesinwhichthepublicpurseiscalledupon.

regulations under the energy Bill

TheBillalsocontainspowerstomakeregulationsinanumberofareas3.22 includingthepreparation,content,implementationandmodificationofFundedDecommissioningProgrammes.

Thepurposeoftheregulationsintheareasreferredtowouldbetosetout3.23 thematterswhichtheFundedDecommissioningProgrammemustaddress(inordertogainapprovalbytheSecretaryofState)aswellasaframeworkthatwouldenableoperatorstounderstandtheirobligationsunderaFundedDecommissioningProgrammemorefully.

TheBillallowstheSecretaryofStatetosetouthowfeeswhichhehasthe3.24 powertochargetheoperatorundertheclausesaretobedeterminedandwhentheywillberequiredtobepaid.ThesecouldincludecertaincostsincurredbytheNLFABinassessingprogrammessubmittedbyoperators.

TheBillalsoallowsregulationstobemadewhichsetoutthecircumstances3.25 inwhichtheSecretaryofStatemaydis-applytheprocedureformodifyinganapprovedFundedDecommissioningProgrammeassetoutintheBill.TheGovernmentisnotconsultinginthisdocumentontheinformationwhichfollowsinrelationtowhattheseregulationsmightcontain,anditisincludedforinformationonlyhowever,youarewelcometocommentonwhatissetoutbelowifyouwishtodoso.

TheGovernment’scurrentintentionistosetamaterialitythresholdwhereby3.26 anoperationalortechnicalchangetoapowerstationwhichmateriallyincreasestheoperator’scostestimatesofdecommissioningliabilitiesortheamountofwastedisposalliabilitieswouldrequirethesubmissionofaproposaltomodifytheFundedDecommissioningProgrammetotheSecretaryofStateforapproval.

TheGovernment’scurrentthinkingisthatanincreaseintheoperator’s3.27 decommissioningliabilitiesasaresultofanoperationalortechnicalchangebymorethanacertainpercentage(fivepercentforexample)ofthenetpresentvalue(adjustedforinflation)ofthethencurrentestimateoftheoperator’sdecommissioningliabilitieswouldbeconsideredmaterial.TheGovernmentisalsoconsideringamaterialitythresholdinrelationtoanincreaseintheamountofwastedisposalliabilities.

SuchamodificationoftheFundedDecommissioningProgrammewould3.28 requiretheapprovaloftheSecretaryofStateinaccordancewiththeprocedurelaiddowninclauses44and45oftheEnergyBill.Paragraphs5.6.12–5.6.13containfurtherinformationinthisregard.Thisinformationhasbeenincludedinthedraftguidancebecause(howeverthelimitiscalculatedorformulated)itisexpectedtoformanimportantpartoftheoperator’sdutiesinrelationtoreviewandreportinghenceitisusefultorefertoittherealso.Inclusionisnotintendedinanywaytounderminethestatementmadeinparagraph3.25.

Asreferredtoinparagraphs5.6.1–5.6.16andAnnexA,theoperator3.29 willbeexpectedtoprepareanannualreportsettingoutoperationalandtechnicalchangestothesitewhichhaveaneffectonthecostestimatesofdecommissioningliabilitiesortheamountofwastedisposalliabilitiesincludedintheFundedDecommissioningProgramme.TheGovernmentisconsideringonlyrequiringthoseoperationalortechnicalchangeswhichincreasethenetpresentvalue(adjustedforinflation)ofthethencurrentestimatesofthecostsofthedecommissioningliabilitiesbymorethanacertainpercentage(1percentforexample)tobereportedintheannualreport.TheGovernmentisalsoconsideringademinimisreportingthresholdinrelationtoanincreaseintheamountofwastedisposalliabilities.

Regulationsmaysetoutwhatcriteriawouldneedtobemetwhenobtaining3.30 advicefromindependentthirdpartiesinrelationtotheapprovalormodificationofaFundedDecommissioningProgrammeinorderfortheSecretaryofStatetorelyonthatthirdpartyadvice.ThiswouldenabletheSecretaryofStatetorelyonadviceinrelationtocostestimatesorotherfinancialmattersundertheprogrammewhichisprovidedbypartiesindependentoftheoperatorandtheSecretaryofStatebutobtainedbytheoperator.ItwouldalsoenablehimtorelyonadviceobtainedbythepersonsresponsiblefortheFund.RegulationswouldsetoutthecircumstancesinwhichtheSecretaryofStatewouldrelyonthatadvicebutthesemightincludewhentheprogrammeisinitiallyapproved,whentheSecretaryofStateisconsideringaproposedmodificationfromtheoperator,orwhenheisconsideringtheregularreportssubmittedbytheoperatorortheFund.

RegulationsthatformpartoftheChapteroftheBillonthedecommissioning3.31 andclean-upofnuclearsiteswillbemadeusingthenegativeprocedure.

ThisBillalsocontainsanordermakingpowerthatwillenabletheSecretaryof3.32 Statetodesignate,bywayofaffirmativeprocedure,whichtechnicalmattersaredesignatedtechnicalmatters.ThepowerenablestheSecretaryofStatetodesignatecertainstepsbywayofwastemanagementanddisposal,whichareundertakenduringthegeneratinglifetimeofthestationas“designatedtechnicalmatters”.Designationmeansthattheoperatorwillberequiredtoprovidecostestimatesinrelationtotheseactivities,anddetailsofthesecurityputinplacetocoverthem,aswellasdetailsofthetechnicalstepstobetakentomanagethewasteconcerned.OperatorsarerequiredtoprovidetotheSecretaryofStateforapprovaldetailsofallthetechnicalstepstobetakentomanagewaste,decommissionanddisposeofwasteundertakenthroughoutthelifeofthestationbothwhenitisgeneratingelectricityandsubsequently.

Theregulationssetoutabovewillbemadeaspartoftheimplementationof3.33 theEnergyBillin2009.

guidance under the energy Bill

WestatedintheNuclearWhitePaper3.34 23ourintentiontopublishforpublicconsultationtwosetsofdraftguidanceonwhatanapprovableFundedDecommissioningProgrammeshouldcontain.Sections4and5ofthisdocumentcontainthisdraftguidanceforconsultationwhichwillassistoperatorsinunderstandingcertainoftheirobligationsundertheEnergyBill.TheFundedDecommissioningProgrammeconsistsoftwoparts,aDecommissioningandWasteManagementPlanandaFundingArrangementsPlan.

Thefirstsetofguidance(theDecommissioningandWasteManagement3.35 PlanguidancesetoutinSection4)willassistbusinessesinsettingoutandcostingthestepsinvolvedindecommissioninganewnuclearpowerstationandmanaginghazardouswasteandspentfuelinawaywhichtheSecretaryofStatemayapprove.ThisguidancealsosetsoutthecostmodellingmethodologytheGovernmentexpectstousetogenerateitsownprudentestimatesofthecostsofdecommissioning,wastemanagementandwastedisposalfornewnuclearpowerstations.

ThisconsultationdocumentalsocontainsaRoadmapthatsetsoutan3.36 indicativetimelineunderwhichtheGovernmentexpectstopublishitscostestimatesandtobeinapositiontosetafixedunitpriceforwastedisposal.ThisRoadmap(setoutinparagraphs2.25–2.32andTable2)isincludedforinformationonlyandviewsarenotrequestedonit.

Thesecondsetofguidance(TheFundingArrangementPlanguidancesetout3.37 inSection5)willassistoperatorsinsettingoutacceptableproposalsforhowsufficientfundswillbeaccumulatedtomeetthecostsidentifiedandsetsouttheGuidingPrinciplesagainstwhichtheGovernmentwillassessthefundingproposalssubmittedbynuclearoperatorsforapprovalundertheEnergyBill.

ThisguidanceisstatutoryandwillbelaidbeforeParliamenttoensure3.38 transparency.AsguidanceitcannotcompelbuttakentogetherisintendedtosetoutthematterswhichtheSecretaryofStatemaytakeintoaccountindeterminingwhethertoapproveorapprovewithmodifications,ormodifyaFundedDecommissioningProgramme.

Future development of the guidance

Bothsetsofguidancewillbeamendedasappropriatetotakeaccountoffuture3.39 changesincircumstances.

Thereareanumberofindividualrequirementssetoutintheguidance3.40 thateachoperatorwillneedtoaddressinitsFundedDecommissioningProgramme.Inassessingaprogramme,theSecretaryofStateandhisadvisors,theNuclearLiabilitiesFinancingAssuranceBoard,willconsiderwhetheritadequatelymeetstheSecretaryofState’sobjectiveofensuringthattheoperatorhassufficientandsecurearrangementsinplaceastestedagainsttheprinciplesoutlinedintheguidanceitself.TheSecretaryofStaterecognisesthatcircumstanceswillvaryforeachoperatorandthatdifferingapproachesmaybeappropriate.Assuchtheguidanceisnotintendedtobeprescriptive.

Scope of the duty to obtain an approved Funded Decommissioning Programme

Geographical scope

TheclausesintheBillextendtoEngland,WalesandNorthernIreland.This3.41 meansthatpersonsapplyingforanuclearsitelicencetoinstalloroperatenewnuclearpowerstationsonsitesinthosepartsoftheUKwouldberequiredtosubmitaFundedDecommissioningProgrammeforapprovalbytheSecretaryofState(andwouldbesubjecttotheotherprovisionsinthispartoftheBill).

SofarasScotlandisconcerned,ifthereisachangeinpolicytowardsnew3.42 nuclearpowerstationsthere,theGovernmentwouldseektoextendtheprovisionsintheEnergyBilltoScotlandattheearliestavailableopportunity.

Categories of installation covered by scope

Onlypersonswhoapplyforasitelicencetoinstalland/oroperateanew3.43 nuclearinstallationforthepurposeofgeneratingelectricitywillberequiredtosubmitaFundedDecommissioningProgrammeforapprovalbytheSecretaryofState(andsubjecttotheotherprovisionsinthispartoftheBillasnormal).

TheGovernmentrecognisesthatinduecourseenergycompaniesmaycome3.44 forwardwithproposalstodevelopothernuclearinstallationsandfacilitiesthatwillbothsustainandsupportthedevelopmentofagrowingnuclearenergysector.Shouldthesectordevelopinthisway,theGovernmentwouldseektoensurethatdevelopersofinstallationsorfacilities,whichareconstructedfora

purposeconnectedtothegenerationofelectricitybynuclearpowerstations,covertheirfulldecommissioningcostsandfullshareofwastemanagementcosts.TheEnergyBillgivestheSecretaryofStateapowertoextendtheclausesintheEnergyBilltosuchinstallationssoastoensurethisobjectiveismet.

ThepowersintheEnergyBillshouldenabletheSecretaryofStateto3.45 extendtheclausestoanewfuelfabricationplantforexample,sincethepurposeofsuchafacilitywouldseemtobeconnectedtothegenerationofelectricity.Thepowercouldnotbeusedinrelationtothosehospitalswhichuseradioactivematerialsfordiagnosticandcurativepurposes,orresearchfacilitieswhoseactivitiesarenotconnectedtoelectricitygeneration.

Categories of waste included in the scope

TheDecommissioningandWasteManagementPlansectionoftheFunded3.46 DecommissioningProgrammemustcoverallcategoriesofhazardouswasteandspentfuel.

TheFundingArrangementsPlansectionoftheFundedDecommissioning3.47 Programmemustcoveralldecommissioningandwastemanagementandwastedisposalcostswhichareincurredaftertheendofgenerationplusanywastecoststhatariseduringgenerationasspecifiedinanordermadeunderclause41(5)oftheEnergyBill.

Ongoingwastemanagementcostsduringthegeneratinglifetimeofthestation3.48 (whicharenotspecifiedinanorderunderclause41(5))mustbemetbytheoperatorfromitsoperationalexpenditure,andnotfromtheFund.

Residual Liabilities

Theownerofapowerstationatthetimeofitsdecommissioningwill3.49 normallyberesponsibleforanyresidualliabilitybeyondthatidentifiedintheDecommissioningandWasteManagementPlan.TheGovernmentisnotremovingthatresidualliabilityfromtheowner.Asregardsthirdpartyclaimsattributabletotheownerortheoperatorofthepowerstationorsite,thesewillbeamatterforthegenerallawandwillbeunaffectedbytheFundedDecommissioningProgramme.

indicative process for submitting and following a Funded Decommissioning Programme

Chart1setsoutanindicativeprocessforthesubmission,approvalandregular3.50 reviewofaFundedDecommissioningProgramme.ItaimstoexplainhowdecisionpointsfortheapprovalofaFundedDecommissioningProgrammefitwiththelicensingandauthorisationprocessoftheregulators.ThechartalsoexplainshowthelicensingandauthorisationprocesswouldfeedintotheproposednewplanningregimecurrentlybeingconsideredaspartofthePlanningBill24.

24 PlanningBill,Session2007-08,Bill7107-08

Financing arrangements Licensing & Authorisationprocess

Operator initiates discussions with BERR (NLFAB advising) and outlinesplanned project timetable, including

preliminary proposals on FundedDecommissioning Programme

HSE/EA Generic design assessmentcompleted around 2011

Formal approval of FundedDecommissioning Programme by SoS

(following advice from NLFAB and regulators)

Construction

Commission stationCommence electricity generation

Operator starts contributing to the Fund

Assessment by SoS (with advice of NLFAB)of the Fund’s performance in accumulatingsufficient funds to finance the D&WM costs

(Re)approval of modifications to theprogramme by SoS (if necessary)

Quinquennial in-depth review of Funded Decommissioning Programme

(DWMP and FAP) and report to SoS. Fund to confirm/revise contribution schedule

Notification (and submission of modifiedprogramme, if necessary) to SoS in theevent of significant changes between

stipulated reviews

Annual report on size and performanceof the Fund by Fund

Annual review by the operator of the DWMP

HSE: Grant Licence to install/operateEA: Issue environmental permits and

radioactive waste disposal authorisation

HSE (following consultation with EA) issue Consent for Active Commissioning

HSE perform periodic review ofdecommissioning strategy

EA perform periodic reviews of permitsand authorisations

Site specific assessment commences

HSE/EA:Assess regulatory submissions (safety/

security/environmental/radioactive waste)

HSE: Discretionary stakeholderengagement

EA: consultation

HSE/EA: minded to accept regulatorysubmissions from prospective operators

(including advising proposed InfrastructurePlanning Commission (IPC) of this position)

Detailed discussions betweenOperator, BERR (with NLFAB advice)

and Regulators leading to outlineFunded Decommissioning Programme

Submission including supportinganalysis and documentation, of outline Funded Decommissioning Programme

to SoS

Development of detailed FundedDecommissioning Programme

Detailed discussions with BERR(NFLAB advising) and Regulators and

those responsible for the Fund

Fixed unit price and schedule for transfer of title to waste set.

Schedule of payments to Government (if needed) provided to operators

Those responsible for Fund approve arrangements prior to formal submission

to SoS of detailed Funded Decommissioning Programme

Indicative fixed unit price and scheduleprovided to operators for long term waste

disposal in geological repository. Indicative schedule of payments to Government

provided to operators (if needed)

Chart 1: Indicative process for submitting and following a Funded Decommissioning Programme

Formal approval of FundedDecommissioning Programme by SoS

(following advice from NLFAB and regulators)

Construction

Commission stationCommence electricity generation

Operator starts contributing to the Fund

Assessment by SoS (with advice of NLFAB)of the Fund’s performance in accumulatingsufficient funds to finance the D&WM costs

(Re)approval of modifications to theprogramme by SoS (if necessary)

Quinquennial in-depth review of Funded Decommissioning Programme

(DWMP and FAP) and report to SoS. Fund to confirm/revise contribution schedule

Notification (and submission of modifiedprogramme, if necessary) to SoS in theevent of significant changes between

stipulated reviews

Annual report on size and performanceof the Fund by Fund

Annual review by the operator of the DWMP

HSE: Grant Licence to install/operateEA: Issue environmental permits and

radioactive waste disposal authorisation

HSE (following consultation with EA) issue Consent for Active Commissioning

HSE perform periodic review ofdecommissioning strategy

EA perform periodic reviews of permitsand authorisations

Financing arrangements Licensing & Authorisationprocess

Operator initiates discussions with BERR (NLFAB advising) and outlinesplanned project timetable, including

preliminary proposals on FundedDecommissioning Programme

HSE/EA Generic design assessmentcompleted around 2011

Site specific assessment commences

HSE/EA:Assess regulatory submissions (safety/

security/environmental/radioactive waste)

HSE: Discretionary stakeholderengagement

EA: consultation

HSE/EA: minded to accept regulatorysubmissions from prospective operators

(including advising proposed InfrastructurePlanning Commission (IPC) of this position)

Detailed discussions betweenOperator, BERR (with NLFAB advice)

and Regulators leading to outlineFunded Decommissioning Programme

Submission including supportinganalysis and documentation, of outline Funded Decommissioning Programme

to SoS

Development of detailed FundedDecommissioning Programme

Detailed discussions with BERR(NFLAB advising) and Regulators and

those responsible for the Fund

Fixed unit price and schedule for transfer of title to waste set.

Schedule of payments to Government (if needed) provided to operators

Those responsible for Fund approve arrangements prior to formal submission

to SoS of detailed Funded Decommissioning Programme

Indicative fixed unit price and scheduleprovided to operators for long term waste

disposal in geological repository. Indicative schedule of payments to Government

provided to operators (if needed)

Section4:DecommissioningandWasteMangementPlanguidance

Contents

4.1 IntroductionandBackgroundtotheBaseCase

4.2 GenericDecommissioningandWasteManagementPlan(DWMP)–TheBaseCase

4.3 TheBaseCase–WorkingAssumptionsList

4.4 ClassificationofCostsarisingundertheBaseCase

4.5 MethodologyforCostCalculations

4.1IntroductionandBackgroundtotheBaseCase

4.1.1 ThisSectioncontainsguidanceforoperatorsofnewnuclearpowerstationstoassistthemindrawingupaDecommissioningandWasteManagementPlan(DWMP).TheDecommissioningandWasteManagementPlanisthatpartoftheFundedDecommissioningProgrammewhichaddressesthosemattersreferredtoinclause41(7)(a)and(b)oftheEnergyBill25(namelydetailsofthestepstobetakeninrelationtothetechnicalmattersandestimatesofthecostslikelytobeincurredintakingthosesteps).TogetherwithseparateFundingArrangementPlan(FAP)guidance,thisguidanceprovidesinformationonwhataFundedDecommissioningProgrammeshouldcontain.Thisguidanceissetoutindraftforconsultation.

4.1.2 ToensurethattheGovernmentcanhaveconfidencethatoperatorsofanynewnuclearpowerstationsmakeadequatefinancialprovisionwhichmeetsthefullcostsofdecommissioningandtheirfullshareofwastemanagementcosts,itwillbeimportanttounderstandthelikelycostsoftheseactivities.AstheNuclearWhitePaper26announced,theSecretaryofStatehasembarkedonaprogrammetodeterminerobustestimatesofthecostsofwastemanagement,disposalanddecommissioning.

4.1.3 UndertheEnergyBill2008,aspartofgainingapprovaltobuildanewnuclearpowerstation,operatorswillberequiredtosubmittotheSecretaryofStateaFundedDecommissioningProgrammeforapproval.Clause41(7)oftheEnergyBillsetsoutthematterswhichtheProgrammeisrequiredtoaddress.Clause41(7)(a)requiresapotentialoperatorofanewstationtosetoutdetailsofthestepstobetakenundertheprogrammeinrelationtowhataredescribedasthe“technicalmatters”.Thetechnicalmattersaredetailsofthemattersreferredtoinclause41(5)oftheEnergyBill(i.e.thedecommissioningoftheinstallation,cleaningupofthesite,andwastemanagementanddisposalactivitiesundertakenduringthegeneratinglifeofthestation).

4.1.4 Clause41(7)(b)requirestheFundedDecommissioningProgrammetocontainestimatesofthecostslikelytobeincurredinconnectionwithwhataredescribedasthedesignatedtechnicalmatters.ThedesignatedtechnicalmattersarethestepssetoutintheProgrammeandrequiredtobetakeninrelationto:

25 EnergyBill,Session2007-08,Bill5307-0826 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,URN08/525,January2008

decommissioningtheinstallation;●●

cleaningupthesite;and●●

suchaspectsofwastemanagementanddisposalactivitiesundertaken●●

duringthegeneratinglifetimeofthestationastheSecretaryofStatemayspecifybyorder27.

4.1.5 OperatorsshouldmeetthecostsofdesignatedtechnicalmattersfromtheindependentFundtheywillbeexpectedtosetupandthesematterswillbesubjecttoregulationundertheFundingArrangementPlan(FAP)theysubmitforapprovalundertheEnergyBill.(TheseissuesareexploredingreaterdetailintheFundingArrangementsPlanguidancealsoissuedforconsultationbytheSecretaryofStateundertheEnergyBill).TheSecretaryofStatewouldexpectthecostsoftechnicalmatters,whicharenotdesignated,tobemetbytheoperatorfromoperationalexpenditure.ThesecostswillnotbesubjecttoregulationundertheFAP,althoughtheactivitiestowhichtheyrelatewillstillbesubjecttoregulationundertheDWMP.Thecostsoftechnicalmatters,whicharenotdesignated,arecomparativelylow,andpaymentswillneedtobemadeatthetimetheseexpensesareincurred;thatisduringthegeneratinglifetimeofthestationwhentheoperatorshouldhavereadyaccesstosufficientmoniestomeetsuchcostswithoutreferencetotheFund.ItisalsoanticipatedthatsuchcostsmaybeincurredatregularintervalssoitisappropriatethatthesecostsshouldbemetfromoperationalexpendituretoavoidunnecessarycostandburdensarisingaroundpaymentofmoneysintotheFundonlytowithdrawthesamemoneysarelativelyshortperiodoftimelater(e.g.withinthesamefinancialyear).FurtherinformationontheSecretaryofState’sproposalsforthetechnicalmattersthatshouldbedesignatedtechnicalmattersissetoutinparagraphs4.4.1–4.4.4andTable6.

4.1.6 InthisguidancethatpartoftheFundedDecommissioningProgrammewhichconcernsthetechnicalmattersandthatpartoftheprogrammewhichsetsouttheestimatesofthecostslikelytobeincurredinconnectionwiththedesignatedtechnicalmattersaretogetherreferredtoastheDecommissioningandWasteManagementPlan(theDWMP).

4.1.7 TheSecretaryofStatewillexpecttheDWMPforthenewnuclearpowerstationtocoverthetechnicalwastemanagement,disposalanddecommissioningstepstobetakenoverthefulllifecycleofthestation,andincludeanestimateofthecostsassociatedwiththeoperator’sliabilitieswithregardtothesesteps.Thisisinadditiontoexistingregulatoryscrutinytoensuresafety,securityandenvironmentalprotectioninrelationtotheseaspectsofanuclearpowerstation,andisintendedtocontributetotheoverallobjectiveoftheFundedDecommissioningProgramme,ofensuringthatoperatorswillaccruesufficientfundstomeetthecostsofwastemanagementanddecommissioningastheyfalldue.

27 TheSecretaryofStatewouldexpecttomakesuchanorderinaccordancewiththetimingsetoutinparagraphs3.22–3.33

4.1.8 TheaimoftheDWMPshouldbetoensurethesafe,environmentallyresponsibleandprudentdecommissioningofthenuclearpowerstationandmanagementanddisposalofwaste.ByformingpartoftheprogrammerequiredtobeapprovedbytheSecretaryofState,itwillensurethatplanningfortheseactivitiesiscarriedoutpriortotheconstructionofthepowerstationandisbasedonestablishedtechniquesandsteps.TheDWMPshouldcontainaccurateanduptodateestimatesofthecostsoftakingsuchstepstoenablesufficientmoneystobeaccumulatedonbehalfoftheoperatortopayforsuchstepstobetaken.OurproposalsforreviewingandreportingagainsttheDWMParesetoutinparagraphs4.2.6–4.2.8andingreaterdetailinparagraphs5.6.1–5.6.16andinAnnexA.

Base Case

4.1.9 ToenabletheGovernmenttoestimatethepotentialcostsofwastemanagementanddecommissioningandtoensurethatoperatorsmakeadequateprovisionfortheirfunding,wearesettingoutameansbywhichwastemaybemanagedanddisposedofanddecommissioningcarriedoutthatwillbecostedbyoronbehalfoftheSecretaryofState.Wecallthisthe“BaseCase”.Itbuildsonexistingpolicyandregulationsforwastemanagementanddecommissioning.Italsomakesadditionalassumptionstoensurethatitrepresentsarealisticandprudentwaytoestimatethecostsofandcarryouttheseactivities.AsummaryofsomeoftheassumptionsunderlyingtheBaseCaseissetoutbelow.ReferenceshouldbemadetoTable5forthefulltextoftheassumptions:

Management and disposal of low level waste (LLW)

LLWfromoperationsanddecommissioningwillbedisposedofpromptly●●

afterithasbeengeneratedinasuitabledisposalfacility.

ForthepurposesoftheBaseCase,weassumethatdisposalwillbeatthe●●

facilitycurrentlyoperatinginWestCumbriaorasuccessorfacility.

Management and disposal of intermediate level waste (ILW)

ILWfromoperationsanddecommissioningwillbestoredinsafeandsecure●●

interimstoresassumedtobeonthesiteofthenuclearpowerstationuntildecommissioninghasbeencompletedandageologicaldisposalfacilityisavailabletotakethewaste.

ILWfromoperationsanddecommissioningwillbedisposedofina●●

geologicaldisposalfacility.TheGovernment’sviewisthatitwouldbedesirabletodisposeofILWfromnewnuclearpowerstationsinthesamegeologicaldisposalfacilitiesaslegacywasteandwewillexplorethisthroughtheMRWSprogramme.Thesizeofaprogrammeofnewnuclearpowerstationsandthespecificationofthesitechosenforthegeologicaldisposalfacilitymayimpactonwhetherallofthenewwastecouldbestoredinthesamedisposalfacilityaslegacywaste.WewillkeepthisunderreviewasworkontheMRWSprogrammecontinuesandwillensurethatourcostmodellingmethodologyisabletoaccommodatealternativescenarios.

TheGovernmentwillsetafixedunitpriceforthedisposalofILWanda●●

schedulefortakingtitletoandliabilityforthiswaste.Thiswillbesetinaccordancewiththeprocessdescribedinparagraphs2.9–2.24.

Management and disposal of spent fuel

Spentfuelwillbestoredincoolingpondsforaperiodoftime,followedby●●

storageinsafeandsecureinterimstoresonthesiteofthepowerstationuntildecommissioninghasbeencompletedanddisposalfacilitiesareavailabletoaccommodateit.

TheBaseCaseassumesthatspentfuelwillbedisposedofinageological●●

disposalfacility.TheGovernment’sviewisthatitwouldbedesirabletodisposeofspentfuelfromnewnuclearpowerstationsinthesamegeologicaldisposalfacilitiesaslegacywasteandwewillexplorethisthroughtheMRWSprogramme.Thesizeofaprogrammeofnewnuclearpowerstationsandthespecificationofthesitechosenforthegeologicaldisposalfacilitymayimpactonwhetherallofthespentfuelfromnewnuclearpowerstationscouldbestoredinthesamedisposalfacilityaslegacywaste.WewillkeepthisunderreviewastheworkontheMRWSprogrammecontinuesandwillensurethatourcostmodellingmethodologyisabletoaccommodatealternativescenarios.

TheGovernmentwillsetafixedunitpriceforthedisposalofspentfueland●●

aschedulefortakingtitletoandliabilityforthiswaste.Thiswillbesetinaccordancewiththeprocessdescribedinparagraphs2.9–2.24.

Type of fuel

TheBaseCaseassumesthatnewnuclearpowerstationswilluseuranium●●

oruraniumoxidefuel

TheNuclearWhitePapersetoutthatnewnuclearpowerstationsshould●●

proceedonthebasisthatspentfuelwillnotbereprocessed.Thusthebasecaseassumesthattherewillbenore-processingoftheuraniumfuel,andspentfuelwillbedisposedofafterithasbeenused.

Interim storage

Operatorswillbeobligedtoprovidesafeandsecureinterimstoragefacilities●●

thataretechnicallycapableofbeingmaintainedorreplacedtolastforatleast100yearsfromthetimewhenwasteorspentfuelisfirstemplacedinthem28.

Operatorswillbeobligedtoprovidethestoresastheyareneeded,subject●●

toagreementwithregulatorsandtheSecretaryofState.

Effect of reactor design on the Base Case

TheBaseCasefordifferentreactordesignswillbethesamewhereveritis●●

appropriate.

Itwillbebasedonasinglestationoperatingforanassumedlifeof40years.●●

Definition of decommissioning

Decommissioningbeginswhenthereactorisshutdownwithnointentionof●●

furtheruseforthepurposeofgeneratingelectricity.

Decommissioningendswhenallstationbuildingsandfacilitieshavebeen●●

removedandthesitehasbeenreturnedtoanendstatewhichhasbeenagreedwiththeregulatorsandtheplanningauthority.

Site end state

TheBaseCaseassumesthatthefinalsiteendstatewillbesuchthatall●●

stationbuildingsandfacilitieshavebeenremoved,thesitereturnedtoastateagreedwiththeregulatorsandtheplanningauthorityandreleasedfromthecontrolofthenuclearsitelicence.

Thisislikelytobeastatesimilarto“Greenfield”,dependingonthestateof●●

thesitepriortoconstructionofthestation.

4.1.10TheNuclearWhitePapersetouttheGovernment’sconclusiononwasteanddecommissioning:

“Having reviewed the arguments and evidence put forward, the Government believes that it is technically possible to dispose of new higher-activity radioactive waste in a geological disposal facility and that this would be a viable solution and the right approach for managing waste from any new nuclear power stations. The Government considers that it would be technically possible and desirable to dispose of both new and legacy waste in the same

28 ItshouldbenotedthatoperatorswillbeobligedtomaintaintheirinterimstoresuntilthedateordatesspecifiedinthescheduleagreedwiththeGovernmentforwhentheGovernmentwilltaketitletoandliabilityforeachoperator’sintermediatelevelwasteandspentfuel.Inanyevent,theGovernmentconsidersthatwastecanandshouldbestoredinsafeandsecureinterimstoragefacilitiesuntilageologicaldisposalfacilitybecomesavailable.

geological disposal facilities and that this should be explored through the Managing Radioactive Waste Safely programme. The Government considers that waste can and should be stored in safe and secure interim storage facilities until a geological facility becomes available.

Our policy is that before development consents for new nuclear power stations are granted, the Government will need to be satisfied that effective arrangements exist or will exist to manage and dispose of the waste they will produce.

The Government also believes that the balance of ethical considerations does not rule out the option of new nuclear power stations.29”

4.1.11 ThisconclusionhasinformedtheprovisionsintheBaseCasewhichoperatorsofanynewnuclearpowerstationswillbeexpectedtohaveregardtowhendevelopingtheprogrammetheywillsubmittotheGovernment.Therewillbeflexibilitytoallowoperatorstoproposeothereffectivewaysofdealingwithdecommissioningandwastemanagementiftheychoosetodoso.WeintendtheBaseCasetotakeeffectasguidanceissuedunderclause50(5)oftheEnergyBill.Operators’FundedDecommissioningProgrammeswillbeconsideredonacasebycasebasis.Whenconsideringwhethertoapproveanoperator’sprogramme,theSecretaryofStatewillhaveregardtowhetheritachievestheoveralloutcomeofensuringaprudentmeansforcarryingoutandestimatingthecostsofwastemanagement,disposalanddecommissioning.

4.1.12Aswellasmeetingcurrentregulatoryrequirements,eachoperator’sprogrammemustensurethatitsetsoutplansforthemanagementanddisposalofallhazardouswastestreamsandthatitincludesalltheelementsforwhichoperatorswillneedtomakefinancialprovision.OnceaprogrammeisapprovedbytheSecretaryofState,theoperatorwillberequiredtofollowit.Theoperatorwill,however,beallowedtoamendtheprogramme,subjecttoapprovalfromtheSecretaryofState.

4.1.13Operatorswillberequiredtoupdatetheprogrammetoreflectmodificationssuchasoperationalortechnicalchangestoanuclearpowerstationthatwouldhaveanimpactontheestimatesofdecommissioningcosts.Paragraph5.6.12setoutfurtherdetailonmodifyingaFundedDecommissioningProgrammeincludinginrelationtotechnicalaspects.

4.1.14Wehaveworkedwiththeregulators,theNDAandkeystakeholderstodeveloptheBaseCase.

Cost estimates

4.1.15TheBaseCaseisakeyinputtoourworktodeveloprobustestimatesofthecostsofwastemanagementanddecommissioningfornewnuclearpowerstations.Toprovidefurtherinputs,wehavecarriedoutanexercisetodevelop

ourunderstandingofthewasteinventoriesthatwouldbeproducedbydifferentgenericreactortypes,todeterminethevolumeandtypesofwastethatnewnuclearpowerstationscouldproduce.Toderiveestimatesofthecostsofwastemanagementanddecommissioningfornewnuclearpowerstationswearedevelopingacostmodelthatwillenableustoproducearangeoflikelycosts,aswellasgivingusinformationonthelevelofcertaintyofthosecosts.Ourcostmodellingmethodologyissetoutinmoredetailinparagraphs4.5.1–4.5.39.

4.2GenericDecommissioningandWasteManagementPlan(DWMP)–TheBaseCase

4.2.1 ThissectionsetsoutagenericlifecycleDecommissioningandWasteManagementPlan(DWMP)fornewnuclearpowerstations.ThisisalsoreferredtoastheBaseCase.Itshowstheprincipalphasesofthenuclearpowerstationlifecycle,andindicatestheirlikelytimescales.Theplanpresentedhereisgeneric,andservestwoprincipalfunctions:

ItsetsdownthekeypointswhichtheSecretaryofStatewouldexpecta●●

DWMPtoaddress;

ItactsasavehicletoenabletheSecretaryofStatetocalculatetherangeof●●

costsassociatedwithdecommissioningandhazardouswastemanagementanddisposal.ThiswillallowtheSecretaryofStatetoscrutiniseFundedDecommissioningProgrammessubmittedbyoperatorseffectivelywhenconsideringwhethertoapprovethem,toapprovethemsubjecttoconditionsormodifications,ortomodifythem30.

4.2.2 Itisbeingpublishedasguidancetofutureoperatorsofnewnuclearpowerstationsonthewastemanagement,disposalanddecommissioningstepsthattheGovernmentconsidersshouldbeincludedinandcostedaspartoftheDWMPthattheywillneedtosubmittotheSecretaryofStateforapproval.ThisincludesboththosestepswhichtheoperatorwillberesponsibleforcostingandthosestepsthatwillbeincludedinthefixedunitpricethattheGovernmentwillsetfordisposalofintermediatelevelwasteandspentfuel.ItisrecognisedthatDWMPsforindividualpowerstationswilldifferindetail,astheywillbebasedonaspecificreactordesignataspecificsiterunbyaparticularoperator.If,however,aDWMPbroadlyconformstothebasecasepresentedhere,theSecretaryofStatewouldexpecttoapproveit(orapproveitwithrelativelyminormodifications).Assetoutabove,clause42(4)oftheEnergyBillrequirestheSecretaryofStatetoexercisehispowersinrelationtotheapproval,approvalsubjecttomodificationsorrejectionofaFundedDecommissioningProgrammewiththeaimofensuringthatitmakesprudentprovisionforthetechnicalmattersincludingthedesignatedtechnicalmatters.Thusanoperator’sDWMPwillbeassessedagainstwhetheritachievesthe

30 TheformulationofthecostestimatesdoesnotdetractfromthedutywhichtheSecretaryofStateexpectspersonsresponsiblefortheFundshouldbeundertoverifycostestimates(asappropriate)putforwardbytheoperatorbothatthetimeoffirstapprovaloftheFundedDecommissioningProgrammeandpursuanttoperiodicreviewsassetoutintheFundingArrangementPlanguidance.

overalloutcomeofensuringaprudentmeansforcarryingoutandestimatingthecostsofwastemanagement,disposalanddecommissioning.

4.2.3 OperatorsofnewnuclearpowerstationswillbeexpectedtohaveregardtotheBaseCaseassetoutbelowwhendevelopingtheFundedDecommissioningProgrammetheywillsubmittotheSecretaryofState.However,therewillbeflexibilitytoallowoperatorstoproposealternativewaysofcarryingoutwastemanagement,disposalanddecommissioningiftheychoosetodoso.IfanoperatorputsforwardaDWMPbasedonanalternativetotheBaseCase,theonuswillbeontheoperatortojustifyitsproposalandtheSecretaryofStatewouldexpecttoconsiderDWMPsbasedonalternativestotheBaseCaseonacasebycasebasis.

Level of Detail required in DWMP

4.2.4 TheDWMPthatanoperatorsubmitstotheSecretaryofStateforapprovalmustcovereachstageofthepowerstation’slife,fromthepermittingstagethroughtodecommissioningandfinalsiteclearance.Itmustdescribeeachstageinsufficientdetailtodemonstratethattheoperatorhasarealistic,clearlydefinedandachievableplanfordealingwithallofthewastestreamsthatwillbeproducedbyitspowerstationandforremediatingthesiteafteruse.TheDWMPmustbesufficientlydetailedtoensurethateachelementofthedecommissioningandwastemanagementworkcanbecostedaccurately.TheSecretaryofStaterecognisesthattechniquesfordecommissioning,wastemanagementanddisposalmaychangeovertimeandthattheoperatormaywishtoprovidefurtherinformationonhoweachpartofitsplanwillbecarriedoutduringthegeneratinglifeofthestationortomodifyitsprogramme(subjecttoapprovalbytheSecretaryofState)fromtimetotime.

4.2.5 TheEnergyBillrequiresthatoperatorsseektheSecretaryofState’sapprovaltomodifytheirDWMP;forexample,ifnewadvancesintechnologyorestablishedpracticesmeanthattheywishtochangethewaytheywillcarryoutwastemanagement,disposalordecommissioning.OperatorswillalsobeexpectedtoseektheapprovaloftheSecretaryofStatetomodifytheirplantoreflectchangesintheregulators’requirements,whichaffectthewaytheywillcarryouttheseactivities.Equally,operatorsshouldseekhisapprovaltomodifytheirDWMPatanytimeduringoperationorastheirstationnearsdecommissioningiftheywishtoincludefurtherdetailontheirplanforthedecommissioningprocess.Inanycase,operatorswillneedtheapprovaloftheSecretaryofStatetomodifytheirDWMPandanychangessuggestedwillneedtobefullyjustified.

Review and Reporting

4.2.6 OperatorswillberequiredtoreviewtheirDWMPperiodicallytoensurethatitremainsuptodateandthatanychangestothecostestimatesasaresultofoperationalandtechnicalchanges,oranyotherchangesthatmayhaveoccurred,havebeenassessed.Operatorswillberequiredtoreportonsuch

changeswhichwillimpactonthecostestimatesintheirannualreportandwillberequiredtoconductare-assessmentoftheDWMPandcostestimatessetoutintheDWMPaspartoftheirquinquennialreportor,annuallywherethecumulativeeffectofundertakingsuchoperationalortechnicalchangesinanannualperiodwouldhaveamaterialeffectontheoperator’sliabilites.Inaddition,operatorswillberequiredtoreportonanadhocbasisanychangesthatwillaffectthecostestimatesoverandaboveamaterialitythreshold.OperatorswillberequiredtonotifytheSecretaryofStateofthatchangeandproposeforapprovalamodificationtotheDWMPtotakeaccountofsuchchange.

4.2.7 OperatorsmustalsodemonstratetotheSecretaryofStatethat,aspartoftheirbasicrecordkeepingstructure,theywillmaintainanaccuraterecordofthedesignof,atleast,thenuclearisland(s),andthepersonsresponsibleformanagingtheFundmustbesatisfiedwiththesearrangements.

4.2.8 Furtherdetailonproceduresforreviewingandreportingonanoperator’sFundedDecommissioningProgrammeissetoutinparagraphs5.6.1–5.6.16andinAnnexA.

Change of control/ownership of the operator

4.2.9 Wheretheidentityoftheoperatorchangesduringthelifetimeofthestation(whetherduringconstruction,electricitygenerationorsubsequently)theEnergyBillrequirestheFundedDecommissioningProgrammetobere-submittedforapproval,whichwouldincludetheDWMP.

4.2.10Paragraphs5.12.1–5.12.9containmoredetailaboutwhattheoperatorwouldbeexpectedtodoinrelationtothataspectoftheFundedDecommissioningProgrammewherethereisachangeofcontrolaffectingit.Thatsaid,whereachangeintheentityorentitieswhichcontroltheoperatoroccurs,theSecretaryofStatewouldnotexpecttorequirere-submissionoftheDWMP,savewherethechangeofcontrolledtochangestothestepswhichtheoperatorproposedtoundertaketodecommissionthestationandtomanageanddisposeofwasteandwhicharesetoutintheDWMP.

Relationship between the Base Case and regulatory requirements

4.2.11TheBaseCaseisbuiltonexistingpolicyandregulatoryrequirements;althoughitalsomakesadditionalassumptionstoensureitrepresentsacomprehensiveandprudentmeansofestimatingthecostsofwastemanagement,disposalanddecommissioning.

4.2.12TheemphasisonensuringthatsufficientfinancialprovisionismadetocovertheliabilitiesandthusencouragingpublicconfidencemeansthattheBase

Casemaydifferinsomecasesfromtheassumptionsandrequirementsofthesafety,securityandenvironmentalregulators.ThisisduetothedifferentobjectivesthattheSecretaryofStateandtheregulatorsareaimingtomeet.However,anydifferencesareintendedonlytoaddfurtherprotectionstoensurethatoperatorsmakeadequatefinancialprovisiontomeettheirliabilities.Theywillbuildonandshouldnotcontradictorweakentherequirementsoftheregulators,andoperatorswillalwaysbeobligedtosatisfytheregulatorsthattheirplansareacceptablebeforetheycanbeapprovedbytheSecretaryofState.

4.2.13Assetoutabove,wehaveworkedwiththeregulators,theNDAandkeystakeholderstodeveloptheBaseCase.

Waste Minimisation

4.2.14AspartoftheirDWMP,operatorswillbeexpectedtosetdownthestepstheywilltakethroughoutallofthestagesofthestation’slifetoensurethatwastevolumesandthecostsofwastemanagementanddecommissioningareminimisedthroughoutreactorlife;forexample,bycarefulsegregationofwastearisingsandbyminimisationofsecondarywastes31.Operatorswillbeexpectedtohaveregardtothewastehierarchyindeterminingthispartoftheirplan.

Structure of the DWMP

4.2.15Asstatedabove,theBaseCaseisbuiltonexistingpolicyandregulations,aswellasmakingadditionalassumptionstoensureitrepresentsacomprehensiveandadequatemeansofestimatingthecostsofwastemanagement,disposalanddecommissioning.TheSecretaryofStatewouldexpectoperatorstousetheseassumptionswhendevisingtheirDWMPsorifnottoexplainwhatassumptionstheyhavemadewhichtheSecretaryofStatemayapproveasheseesfit,byreferencetotheprudencethresholdlaiddownintheEnergyBill.

The Phases of the Base Case to be set out in the DWMP

4.2.16TheSecretaryofStatewouldexpecttheDWMPtobedividedintofourprincipalphases,whichareshownasatimelineinChart2.

Phase1–Preparationandpermitting–thoseactivitiesrequiredtoobtain●●

regulatoryapprovaltobeginconstructionofthepowerstation;

Phase2–Constructionandcommissioning;●●

31 Secondarywastesarethosewasteswhicharegeneratedunavoidablyaspartofthewastemanagementprocessitself.

Phase3–Operationofthestation,includinganyrefurbishmentrequired●●

duringthegeneratinglifeandmanagementofoperationalwastes;

Phase4–Decommissioning–dismantlingthestation,disposingof●●

remainingwasteandremediatingthesitetoaconditionagreedwiththeregulators.

4.2.17Totheextentpracticable,operatorswillbeexpectedtofollowthisoutlineofphasesinpreparingtheirDWMPs.

Phase 1 – Preparation and Permitting

4.2.18ThisphaseoftheBaseCasecoversthoseactivitieswhichmustbeundertakenbeforeconstructionofanuclearpowerstationcanbegin.Duringthisphase,potentialoperatorswill:

Generateasuiteofdetailed,station-specific,designdocuments;●●

Obtainregulatoryapprovalforthehealth,safetyandenvironmentalaspects●●

oftheproposednewbuild,andhencepermissiontobeginconstruction;

Makeasuccessfulplanningapplication;●●

PrepareaDWMPforsubmissiontotheSecretaryofStateandobtain●●

approvalforthatplan,aspartoftheFundedDecommissioningProgramme.

4.2.19AspartoftheirDWMP,operatorswillberequiredtosubmitestimatesofthecostsofwastemanagementanddecommissioning.Operatorswillalsoberequiredtoincludeintheirestimatesthecostsofwastedisposal.ToenabletheGovernmenttodeterminethecostsofdisposalforintermediatelevelwaste(ILW)andspentfuel,operatorswillneedtocalculatetheirexpectedILWandspentfuelinventoryfortheassumedgeneratinglifeofthestationandprovidethisinformationtotheSecretaryofState.TheGovernmentwillsetafixedunitpricetooperatorsfordisposalofthesematerials,aswellasascheduleforwhentheGovernmentwilltaketitletoandliabilityforthewasteandspentfuel(assetoutinparagraphs2.9–2.24).TheinformationonwasteinventoryandtheagreedfixedunitpricewillenableoperatorstopredictthewastedisposalcoststhattheywillneedtomeetfromtheFund.

4.2.20TheGovernmentisconsideringwhetherthereisacaseforsomeelementsofthisfixedunitpriceforthedisposalofintermediatelevelwasteandspentfueltobepaidtotheGovernmentduringthepowerstation’sgeneratinglife;forexample,tocoverthecostsofbuildingadditionalcapacityinageologicaldisposalfacilityastheyareincurred.IftheGovernmentconsidersthatthiswouldbenecessary,wewouldagreeascheduleofpaymentswitheachoperatoratsametimeastheFundedDecommissioningProgrammeisapproved.

4.2.21TheSecretaryofStatewillexpecttoretainthepowertotaketitletoandliabilityforintermediatelevelwasteand/ortospentfuelbeforetheendofthegeneratinglifeofthestation,ifadisposalroutebecameavailableduringthatperiodandifitwassensibletodoso.TheSecretaryofStatewouldexpecttodiscusswithoperatorsinindividualcasestodeterminearrangementsthatwouldensurethattheirFundwasadequatetofundpaymentsatthistime.

4.2.22FurtherinformationonsettingafixedunitpricefordisposalofILWandspentfuelcanbefoundinparagraphs2.9–2.13.

Phase 2 – Construction

4.2.23InthisphaseoftheBaseCasethepowerstationisconstructedandcommissioned.Duringthisperiodoperatorswillobtainalltheregulatoryapprovalsrequiredtobeginoperation.

Phase 3 – Operation

4.2.24Thebasecaseassumesa40yeargeneratinglifeforthereactor.Thisisconsideredtobeasensibleassumption,whichisinlinewithassumptionsmadeintheGovernment’scostmodellingworkpublishedalongsidetheEnergyReview32.

4.2.25IntheDWMPtheysubmittotheGovernment,operatorsshouldidentifyanyplannedoutagesforreactorrefurbishment.Anywastesarisingduringroutinemaintenanceorduringrefurbishmentareassumedtobemanagedinthesamewayaswastesfromroutineoperation.Further,anywastearisingfromemergencyrepairsorrefurbishmentsaretobemanagedinthesamewayaswastesfromroutineoperation.

4.2.26Theoperatorisresponsibleforensuringthatalltherequiredfacilitiesforthestorageandanynecessaryprocessingofoperationalwastesareavailableasandwhenneeded.

Operational Low Level Waste Management

4.2.27TheBaseCaseassumesthatlow-levelwastesarisingduringoperationwillbepackagedonsitebytheoperatoranddispatchedtoadisposalfacilitypromptlyaftertheyhavebeengenerated.Operatorswillberequiredtoensurethatanyfacilitiesneededforpackagingareavailableonsite,althoughitisassumedthatlow-levelwastewillnotbeconditionedonsiteandthatconditioningfacilitieswillthereforenotbeneeded.ThearrangementsforpackagingmustbeconsistentwiththosecurrentlyacceptabletotheUKregulators.Theoperatorisresponsiblefortransportofthewastetothedisposalfacility,althoughthetransfermaybeundertakenbyathirdparty,acceptabletotheUKregulators,

32 EnergyReview,The Energy Challenge,July2006

undercontracttotheoperator.TheBaseCaseassumesthattitletothewastewillpasstothedisposalfacilityoperatorwhenanindividualpackagehasbeentransportedtothefacility,andacceptedbythefacilityoperatorasmeetingtherelevantacceptancecriteria.ItisassumedthatlowlevelwastewillbedisposedofintheUK,andthatdisposalfacilitieswillbeavailablewhenrequired,atapricetobeagreedbetweentheplantoperatorandtheoperatorofthedisposalservice.Operatorswillberequiredtomeetthecostsofmanaginganddisposingofoperationallowlevelwaste.Thesecostswillbemetfromoperationalrevenues.

Operational Intermediate Level Waste Management

4.2.28TheBaseCaseassumesthatintermediatelevelwastearisingduringoperationswillbestoredinsafeandsecureinterimstoragefacilitiesonthesiteofthepowerstationpendingdisposalinthesamegeologicaldisposalfacilitiestobeusedforthedisposaloflegacyintermediatelevelwastefromourexistingnuclearfacilities.ThearrangementsforconditioningandstoragemustbeconsistentwiththosecurrentlyacceptabletotheUKregulators.

Spent Fuel Management

4.2.29TheBaseCaseassumesthatnewnuclearpowerstationswilluseuraniumoruraniumoxidefuel.TheNuclearWhitePapersetoutthefollowingconclusiononreprocessing:

“Having reviewed the arguments and evidence put forward, and in the absence of any proposals from industry, the Government has concluded that any new nuclear power stations that might be built in the UK should proceed on the basis that spent fuel will not be reprocessed and that plans for, and financing of, waste management should proceed on this basis.33”

4.2.30Forthisreason,theBaseCaseassumesthattherewillbenoreprocessingoftheuraniumfuel,andspentfuelwillbedisposedofafterithasbeenused.

4.2.31Spentfuelshouldbecooledonsiteincoolingpondsforanappropriateperiod,andthentransferredtoanonsiteinterimstorependingdisposal.

Non-radioactive Hazardous Wastes from operations

4.2.32TheBaseCaseassumesthatnon-radioactivehazardouswastesfromoperationswillbemanagedaccordingtoregulatoryrequirementsandcurrentpracticesandwillbedisposedofusingestablisheddisposalroutes.

4.2.33Theoperationalperiodendsatthepointatwhichdecommissioningbegins.

Phase 4 – Decommissioning

4.2.34TheBaseCaseassumesthatdecommissioningbeginswhenthestationisshutdownandceasesgeneratingelectricityforthelasttime.

4.2.35TheprincipalStagesofthedecommissioningprocessaredescribedinTable4.

Table 4: Outline of principal stages of decommissioning

De-fuelling De-fuellingreactorforthelasttimeandtransferringthe●●

resultingspentfueltothefuelpond.

Stage 1 Conditioningandpackagingofpotentiallymobile●●

wastes(e.g.spentresins)

Transferofconditionedwastestointerimstorageto●●

awaitfinaldisposal.

Stage 2 Demolitionofnon-essentialnon-radioactivefacilities●●

(e.g.turbinehallandadministrativebuildingsthatwillnotbeneededtomanagethedecommissioningprocess)

Transferofspentfuelremainingincoolingpondto●●

interimstore

Stage 3 Dismantlingofreactorandanyotherstructures●●

remainingonsiteandmanagementanddisposalofresultingwaste.

Disposalofintermediatelevelwasteandspentfuel●●

frominterimstores34.

Remediationofsite●●

De-licensing●●

4.2.36Decommissioningofthepowerstationandremediationofthesiteistheresponsibilityofthesiteoperator,andwillbeundertakeninaccordancewithastructuredprogrammeagreedwiththeregulators.Thisprogrammewillbesetoutintheoperator’sDWMPandsubmittedtotheGovernmentforapproval.Whilstdetailedplanswillbedecidedonasite-by-sitebasis;theBaseCaseassumesthattheprocesswillcomprisethefollowinggenericsteps.

De-fuelling the reactor and removal of spent fuel from site

4.2.37Thereactorwillbede-fuelled,andtheresultingspentfuelstoredincoolingpondsforanappropriateperiodoftimebeforebeingtransferredtotheinterim

34 IfdisposalfacilitiesarenotavailablefortheintermediatelevelwasteandspentfuelatthetimeofthescheduleagreedbetweentheGovernmentandtheoperatorforthedisposalofthesematerials,theGovernmentwouldtaketitletoandliabilityforthesematerialsandwouldexpecttocontinuetostorethemintheoperator’sinterimstore.Inthisscenario,theoperatorshouldbeinapositiontopursuede-licensingoftherestofthesite.Furtherdetailissetoutinparagraph2.18.

store,pendingtransferoftitleandliabilitytotheGovernment.Itisrecognisedthatfuelfromthelatterstagesofthereactor’slifemayhavetoremainonsiteforsomeyears,becauseoftheneedtoallowittocoolbeforetransportinganddisposingofitandthiswillbetakenintoaccount,alongwiththeestimatesofavailabilityofgeologicaldisposalfacilities,whentheSecretaryofStateagreesaschedulewithanoperatorfortheGovernmenttotaketitletoandliabilityfortheirspentfuel.Theoperatorisresponsiblefortheencapsulationandtransportofitsspentfueltothedisposalfacility.

Removal of operational and decommissioning intermediate level waste from site

4.2.38TitletoandliabilityforoperationalanddecommissioningintermediatelevelwastewillbetransferredtotheGovernmentaccordingtothescheduleagreedwhentheFundedDecommissioningProgrammeisapprovedandassetoutinparagraphs2.14–2.24.Thisshouldenablewastetoberemovedfromsitewhenanappropriatedisposalrouteisavailable.Beforetitleandliabilitytransfers,theoperatorwillbeexpectedtoensureallwastesareconditionedinawaywhichisconsistentwiththerequirementsofUKregulatorsatthetimethewasteisconditioned.Conditioningmaybeundertakenbyanotherorganisation,undercontracttotheoperator,providedthatthearrangementsareacceptabletotheUKregulators.Theoperatorisresponsibleforthepackagingandtransportofitsintermediatelevelwastetothedisposalfacility.

Removal of decommissioning low level waste from site

4.2.39LowlevelwastearisingfromdecommissioningisexpectedtobemanagedanddisposedofinthesamewayasoperationallowlevelwasteandtheBaseCaseassumespromptdisposal.

Non-radioactive Hazardous Wastes from decommissioning

4.2.40TheBaseCaseassumesthatnon-radioactivehazardouswastesarisingasaresultofdecommissioningwillbemanagedaccordingtoregulatoryrequirementsandcurrentpracticesandwillbedisposedofusingestablisheddisposalroutes.

Decommissioning facilities

4.2.41Theoperator’sDWMPwillberequiredtoensurethatallfacilitiesonsitearedecommissionedinaccordancewithastructuredplan,whichisacceptableto

theregulatorsandwhichshouldreducethehazardpresentedbythesiteinasystematicmanner.

Care and maintenance

4.2.42Thebasecaseassumespromptdecommissioningofthereactor,withmaintenanceofstoragefacilitiesforintermediatelevelwasteandspentfuelcapableoflastingforatleast100yearsfromwhenwasteorspentfuelisfirstemplacedinthem.ItisopentooperatorstoproposeacareandmaintenanceperiodintheirDWMPsubmissions,buttheinclusionmustbeagreedwiththeregulatorsandapprovedbytheSecretaryofStateaspartoftheoperator’sFundedDecommissioningProgramme35.

Site remediation

4.2.43Decommissioningendswhenallstationbuildingsandfacilitieshavebeenremovedandthesitehasbeenreturnedtoanendstatewhichhasbeenagreedwiththeregulatorsandtheplanningauthority.Thisislikelytobeastatesimilarto“Greenfield”,dependingonthestateofthesitepriortoconstructionofthestation.Theendstatemustbeconsistentwiththerequirementsforreleaseofthesitefromthecontrolofanuclearsitelicence.

35 Acareandmaintenanceperiodallowsthebenefitsassociatedwithradioactivedecay(lowervolumesofintermediatelevelwasteandreduceddoseratestodecommissioningoperators)toberealised.Promptdecommissioning,however,meansthatthesitecanbefullyremediatedonashortertimescale.Thebalancebetweentheseissuesmaybeconsideredbyoperatorswithreferencetooperationalaswellasdesign-specificconsiderations.

l Site

4.3BaseCase–WorkingAssumptionsList

4.3.1 ThecompletesetsofassumptionsunderlyingtheBaseCaseissetoutinTable5.Asummaryoftheassumptionsissetoutinparagraph4.1.9.Assetoutinparagraph4.1.11,theBaseCasedoesnotprescribethecontentsofaDWMP,sotherewillbeflexibilityforoperatorstosuggestandmakethecaseforalternativeapproachestowastemanagement,disposalanddecommissioningiftheychoose.TheSecretaryofStatewillconsidereachDWMPonacasebycasebasis,althoughifaDWMPbroadlyconformstothebasecasepresentedhere,theSecretaryofStatewouldexpecttoapproveit(orapproveitwithrelativelyminormodifications).

Table 5: Assumptions underlying the Base Case

Context and Decommissioning Strategy

ISSUE ASSUMPTIONS

Regulatory regime

Theregulatoryregimetobeappliedtowastemanagementanddecommissioningisthatinforceatthepresenttime.

Definitionsofwastecategorieswillremainunchanged.

DoselimitsforworkersandthepublicwillremainunchangedfromthosesetoutintheIonisingRadiationRegulations199936.

Definition of decommissioning and decommissioning costs

Decommissioningbeginswhenthereactorisshutdownwithnointentionoffurtheruseforthepurposeofgeneratingelectricity.

Decommissioningendswhenallstationbuildingsandfacilitieshavebeenremovedandthesitehasbeenreturnedanendstatewhichhasbeenagreedwiththeregulatorsandtheplanningauthority.

Costsfordecommissioningshouldbestructuredtoensurethatthecostsofmanagementandinfrastructureforthestationunderdecommissioningarefullyaccountedfor.

Demolitionanddisposalofwastemanagementfacilitiesareregardedaspartofthedecommissioningactivity.

36 Theseregulationscanbefoundat:http://www.statutelaw.gov.uk/content.aspx?LegType=All+Legislation&title=ionising&Year=1999&searchEnacted=0&extentMatchOnly=0&confersPower=0&blanketAmendment=0&sortAlpha=0&TYPE=QS&PageNumber=1&NavFrom=0&parentActiveTextDocId=2778898&ActiveTextDocId=2778898&filesize=189255

ISSUE ASSUMPTIONS

Care and Thebasecaseassumesnocareandmaintenanceperiodaftermaintenance thereactorhasbeenshutdownandbeforedecommissioning

takesplace.

Site end state Thefinalsiteendstatewillbesuchthatallstationbuildingsandfacilitieshavebeenremoved,thesitereturnedtoastateagreedwiththeregulatorsandtheplanningauthorityandreleasedfromthecontrolofthenuclearsitelicence(‘de-licensed’).

Thisislikelytobeastatesimilarto“Greenfield”,dependingonthestateofthesitepriortoconstructionofthestation.

Cost calculation Costsestimateswillbecalculatedonamoneyofyearbasis(Escalationand/ordiscountingtermswillbeappliedposttheinitialcostassessment)

Effect of reactor Thebasecasefordifferentreactordesignswillbethesamedesign on base whereveritisappropriate.case

Itwillbebasedonasinglestationoperatingforanassumedlifeof40years.

Decommissioning Decommissioningwillbeundertakenusingequipmentandtechniques techniquescurrentlyavailable.

Waste Management

ISSUE ASSUMPTIONS

Intermediate Level Waste (ILW) management and disposal

ILWfromoperationsanddecommissioningwillbestoredinsafeandsecureinterimstoresonthesiteofthepowerstationuntildecommissioninghasbeencompletedandageologicaldisposalfacilityisavailabletotakethewaste.

ILWfromoperationsanddecommissioningwillbedisposedofinageologicaldisposalfacility.ItwouldbedesirabletodisposeofILWfromnewnuclearpowerstationsinthesamegeologicaldisposalfacilitiesaslegacywasteandwewillexplorethisthroughtheManagingRadioactiveWasteSafely(MRWS)programme.Thesizeofaprogrammeofnewnuclearpowerstationsandthespecificationofthesitechosenforthegeologicaldisposalfacilitywillhaveanimpactonwhetherallofthenewwastecouldbestoredinthesamedisposalfacilityaslegacywaste.WewillkeepthisunderreviewastheMRWSprogrammeprogressesandwillensurethatourcostmodellingmethodologyisabletoaccommodatealternativescenarios.

Althoughthedateatwhichageologicaldisposalfacilitywillbeavailableisasyetuncertain,increasedcertaintyonplanneddateswillbecomeavailableastheManagingRadioactiveWasteSafely(MRWS)programmeprogresses.

Conditioningandpackagingwasteinaformsuitablefordisposalwillbetheresponsibilityofthestationoperator.

ItisassumedthatoperationalILWwillbeconditionedandpackagedassoonasreasonablyfeasibleafteritisproduced,andbeforestorageon-site.

ConditioningcostsforoperationalILWareregardedasoperationalcostsandwillnotbepaidforfromtheFund.

ConditioningcostsfordecommissioningILWwillbemetfromtheFund.

ISSUE ASSUMPTIONS

Intermediate Level Waste (ILW) management and disposal

TheGovernmentwillsetafixedunitpriceforthedisposalofILWandaschedulefortakingtitletoandliabilityforthiswaste.Thiswillbesetinaccordancewiththeprocessdescribedinparagraphs2.9–2.24.Shouldtheactualcostsofprovidingthewastedisposalserviceprovelowerthanexpected,theselowercostswillnotbepassedontonuclearoperators,whowouldhavegainedfromcertaintyofafixedpriceandwouldnothavebeenexposedtotheriskofpriceescalation.

ThefixedunitpricepayabletotheGovernment37willbebasedonaconservativeestimateofthecostsofdisposalofthewasteinaGeologicalDisposalFacility.Itwillincludeprovisionfor:

●● significantriskpremiumtocover:

●● theriskthattheeventualcostsofbuildingageologicaldisposalfacilitytodisposeofILWarehigherthanestimated;

●● theriskthatconstructionofgeologicaldisposalfacilitiesisnotcompleteattheagreedschedulefortheGovernmenttotaketitletoandliabilityforanoperator’sILW.

IfthesituationariseswhereconstructionofgeologicaldisposalfacilitiesisnotcompleteattheagreedschedulefortheGovernmenttotaketitletoandliabilityforwasteandtheoperatorhasotherwisecompleteditsFundedDecommissioningProgrammesatisfactorily,theGovernmentwouldtaketitletoandliabilityforanoperator’swastebeforedisposalfacilitiesareavailable.InthesecircumstancestheGovernmentwouldneedtoprovideotherwastemanagementservicesthatmightinclude:

●● payingforinterimstoragefromthepointatwhichtheGovernmenttakestitletoandliabilityforthewasteuntilitcanbedisposedofinageologicaldisposalfacility;

●● re-licensingpartofreactorsitetoenabletheGovernmenttotaketitletoandliabilityfortheinterimstores;

●● transportingILWtothegeologicaldisposalfacility;

●● thepossibilitythattheGovernmentmayhavetopaytocleanupcontaminatedlandonthesiteoftheinterimstores,ortore-packagethewaste/re-buildthestores;

●● decommissioningtheinterimstoresandtheresidualsite.

37 TheGovernment’spolicyonsettingafixedunitpriceforwastedisposalandaschedulefortakingtitletoandliabilityforthewasteissetoutinparagraphs2.9–2.24.Viewsonthispolicyarenotsoughtthroughthisconsultation.

ISSUE ASSUMPTIONS

Intermediate Someofthese,suchasthecostsoftransportofwasteandtheLevel decommissioningoftheinterimstorewillbecostsforwhichWaste (ILW) theoperatorwillhavemadeprovisioninFund,butnotaspartmanagement ofthefixedunitprice.Inthecircumstancessetoutabove,theand disposal amountsthatoperatorshavebudgetedforthesecosts(set

outinthecosteddecommissioningprogrammethathasbeenagreedwiththeSecretaryofState)willpasstotheGovernmenttocoverthecostsofperformingtheseservices.Othercosts,suchaspayingforfurthermaintenanceofwasteininterimstoresorthepotentialforneedingtore-packagethewasteorre-buildthestores,willbemetbytheGovernment,butwillhavebeenfactoredintotheriskpremiumaddedtothefixedunitpricetocovertheriskthatconstructionofdisposalfacilitieswillnotbecompleteattheagreedschedule.

Theschedulewillcontainanestimateddateorseriesofdatesforthetransferoftitleandliability.ThesedateswillbelinkedtotheestimateddateforavailabilityofdisposalfacilitiestoacceptILWfromnewnuclearpowerstationsfordisposalatthetimewhenthescheduleisagreed.Weexpectthatthedateswillbenosoonerthanthatforthecompletionofdecommissioninggivenintheoperator’sagreedFundedDecommissioningProgramme.If,intheevent,theFundedDecommissioningProgrammeisnotcompletedtoschedule,transferoftitletoandliabilityforILW,andallfinancialandotherresponsibilityforthewaste,willbedeferredandresponsibilitywillremainwiththeoperatoruntiltheFundedDecommissioningProgrammehasbeencompleted.

TheSecretaryofStatewillexpecttoretainthepowerfortheGovernmenttotaketitletoandliabilityforILWbeforetheendofthegeneratinglifeofthestation,ifadisposalroutebecameavailableduringthatperiod.TheSecretaryofStatewouldexpecttodiscusswithoperatorsinindividualcasestodeterminearrangementsthatwouldensurethattheirFundwasadequatetofundpaymentsatthistime.

ISSUE ASSUMPTIONS

Spent fuel (SF) Newnuclearpowerstationswilluseuraniumoruraniumoxidemanagement fuel.and disposal TheNuclearWhitePapersetoutthatnewnuclearpower

stationsshouldproceedonthebasisthatSFwillnotbereprocessed.Thusthebasecaseassumesthattherewillbenore-processingoftheuraniumfuel,andSFwillbedisposedofafterithasbeenused.

Spentfuelwillbestoredincoolingpondsforaperiodoftime,followedbystorageinsafeandsecureinterimstoresonthesiteofthepowerstationuntildecommissioninghasbeencompletedandageologicaldisposalfacilityisavailabletoaccommodateit.

Spentfuelwillbedisposedofinageologicaldisposalfacility.ItwouldbedesirabletodisposeofspentfuelfromnewnuclearpowerstationsinthesamegeologicaldisposalfacilitiesaslegacywasteandwewillexplorethisthroughtheManagingRadioactiveWasteSafely(MRWS)programme.Thesizeofaprogrammeofnewnuclearpowerstationsandthespecificationofthesitechosenforthegeologicaldisposalfacilitywillhaveanimpactonwhetherallofthespentfuelfromnewnuclearpowerstationscouldbestoredinthesamegeologicaldisposalfacilityaslegacywaste.WewillkeepthisunderreviewastheMRWSprogrammeprogressesandwillensurethatourcostmodellingmethodologyisabletoaccommodatealternativescenarios.

Althoughthedateatwhichageologicaldisposalfacilitywillbeavailableisasyetuncertain,increasedcertaintyonplanneddateswillbecomeavailableastheManagingRadioactiveWasteSafely(MRWS)programmeprogresses.

TheGovernmentwillsetafixedunitpriceforthedisposalofspentfuelandaschedulefortakingtitletoandliabilityforthiswaste.Thiswillbesetinaccordancewiththeprocessdescribedinparagraphs2.9–2.24.Shouldtheactualcostsofprovidingthewastedisposalserviceprovelowerthanexpected,theselowercostswillnotbepassedontooperators,whowouldhavegainedfromcertaintyofafixedunitpriceandwouldnothavebeenexposedtotheriskofpriceescalation.

ThefixedunitpricepayabletotheGovernmentwillbebasedonaconservativeestimateofthecostsofdisposalofthespentfuelinageologicaldisposalfacility.Itwillincludeprovisionfor:

ISSUE ASSUMPTIONS

●● significantriskpremiumtocover:

●● theriskthattheeventualcostsofbuildingageologicaldisposalfacilitytodisposeofspentfuelarehigherthanestimated;

●● theriskthatconstructionofgeologicaldisposalfacilitiesisnotcompleteattheagreedschedulefortheGovernmenttotaketitletoandliabilityforanoperator’sspentfuel.

IfthesituationariseswhereconstructionofgeologicaldisposalfacilitiesisnotcompleteattheagreedschedulefortheGovernmenttotaketitletoandliabilityforwasteandtheoperatorhasotherwisecompleteditsFundedDecommissioningProgrammesatisfactorily,theGovernmentwouldtaketitletoandliabilityforanoperator’swastebeforedisposalfacilitiesareavailable.InthesecircumstancestheGovernmentwouldneedtoprovideotherwastemanagementservicesthatmightinclude:

●● payingforinterimstoragefromthepointatwhichtheGovernmenttakestitletoandliabilityfortheSFuntilitcanbedisposedofinageologicaldisposalfacility;

●● conditioningandencapsulatingSFinaformsuitablefordisposal(weassumethatitwillnotbepossibletodothisinadvanceofdisposal);

●● re-licensingpartofreactorsitetoenabletheGovernmenttotaketitletoandliabilityfortheinterimstores;

●● transportingSFtothegeologicaldisposalfacility;

●● thepossibilitythattheGovernmentmayhavetopaytocleanupcontaminatedlandonthesiteoftheinterimstores,ortore-buildthestores;

●● decommissioningtheinterimstoresandtheresidualsite.

ISSUE ASSUMPTIONS

Someofthese,suchasthecostsoftransportofSFandthedecommissioningoftheinterimstorewillbecostsforwhichtheoperatorwillhavemadeprovisionintheirFund,butnotaspartofthefixedunitprice.Inthecircumstancessetoutabove,theamountsthatoperatorshavebudgetedforthesecosts(setoutintheFundedDecommissioningProgrammethathasbeenagreedwiththeSecretaryofStatewillpasstotheGovernmenttocoverthecostsofperformingtheseservices.Othercosts,suchaspayingforfurthermaintenanceofSFininterimstoresorthepotentialforneedingtore-buildthestores,willbemetbytheGovernment,butwillhavebeenfactoredintotheriskpremiumaddedtothefixedunitpricetocovertheriskthatconstructionofgeologicaldisposalfacilitieswillnotbecompleteinaccordancewiththeagreedschedule.

TheschedulewillcontainanestimateddateorseriesofdatesforthetransferoftitleandliabilitytotheGovernment.ThesedateswillbelinkedtotheestimateddateforavailabilityofdisposalfacilitiestoacceptSFfromnewnuclearpowerstationsfordisposalatthetimewhenthescheduleisagreed.WeexpectthatthedatewillbenosoonerthanthatgivenforthecompletionofdecommissioninggivenintheoperatorsagreedFundedDecommissioningProgramme.If,intheevent,theFundedDecommissioningProgrammeisnotcompletedtoschedule,transferoftitletoandliabilityforSF,andallfinancialandotherresponsibilityfortheSF,willbedeferredandresponsibilitywillremainwiththeoperatoruntiltheFundedDecommissioningProgrammehasbeencompleted.

TheSecretaryofStatewillexpecttoretainthepowerfortheGovernmenttotaketitletoandliabilityforSFbeforetheendofthegeneratinglifeofthestation,ifadisposalroutebecameavailableduringthatperiod.TheSecretaryofStatewouldexpecttodiscusswithoperatorsinindividualcasestodeterminearrangementsthatwouldensurethattheirFundwasadequatetofundpaymentsatthistime.

ISSUE ASSUMPTIONS

Low Level Waste (LLW) management and disposal

LLWwillbedisposedofpromptlyafterithasbeengeneratedinasuitabledisposalfacility.DisposalwillbeatthefacilitycurrentlyoperatinginWestCumbriaorasuccessorfacility.

ThecostsofoperationalLLWdisposalwillbemetfromoperationalexpenditure.

ThecostsofdisposingofdecommissioningLLWwillbemetfromtheFund.TheGovernmentwillnotsetafixedunitpriceforthedisposalofLLW,asitwillforthedisposalofILWandSF.

LLWdisposalfacilitieswillbeavailabletonewnuclearpowerstationswheneverrequired.

Packagingwasteintoaformsuitablefordisposalwillbetheresponsibilityofthestationoperator. ItisassumedthatLLWwillnotbeconditionedonsite.

TransportofLLW(andallassociatedancillarycostsincludingthecostsoftransportequipment)fromitspointoforigintotheLLWdisposalfacilitywillbetheresponsibilityofthestationoperator.

TitletoandliabilityforanLLWwastepackagewillpasstothedisposalfacilityoperatoratthepointatwhichthewastepackagehasbeendeliveredtotheLLWdisposalfacilityandacceptedbythedisposalfacilityoperatorasfulfillingtheappropriatewasteacceptancecriteria.

Non-radioactive hazardous waste management and disposal

TheBaseCaseassumesthatnon-radioactivehazardouswastesarisingasaresultofoperationsanddecommissioningwillbemanagedaccordingtoregulatoryrequirementsandcurrentpracticesandwillbedisposedofpromptlyusingestablisheddisposalroutes.

Thecostsofmanaginganddisposingofnon-radioactivehazardouswastefromoperationswillbemetfromoperationalexpenditure.

Thecostsofmanaginganddisposingofnon-radioactivehazardouswastefromdecommissioningwillbemetfromtheFund.

TheGovernmentwillnotsetafixedunitpriceforthedisposalofnon-radioactivehazardouswaste,asitwillforthedisposalofILWandSF.

Waste conditioning

Wastewillbeconditionedinamannerandonatimescalewhichisconsistentwithcurrentregulatoryrequirements.

ISSUE ASSUMPTIONS

Treatment of wastes arising as a result of reactor refurbishment

Thiswillbemanagedinthesamewayasoperationalwastesandpaidforfromoperationalexpenditure.

Provision of Operatorswillbeobligedtoprovidesafeandsecureinteriminterim stores storagefacilitiesthataretechnicallycapableofbeingmaintainedfor ILW and orreplacedtolastforatleast100yearsfromthetimewastespent fuel (SF) isfirstemplacedinthem.Iftheoperator’splanstatesthat

thestoreswillneedtobereplacedinordertolastforatleast100years,thentheoperatorwillneedtoincludeintheircontributionstotheFundprovisiontoreplacethestores.

Thecostsofbuilding(andpossiblyreplacing)interimstoresforILWandspentfuelwillbesetasideandpaidforfromtheFund,insofarastheyhavenotbeenbuiltaspartoftheconstructionofthestation.

Operatorswillbeobligedtoprovidethestoresforuseastheyareneeded,subjecttoagreementwiththeregulatorsandtheSecretaryofState.

4.4ClassificationofCostsarisingundertheBaseCase

Meeting the Costs of Waste Management, Disposal and Decommissioning

4.4.1 Itwillbeimportantforoperators(andothers)tohaveclarityonwhichcoststheSecretaryofStatewouldexpecttobepaidforfromtheFundandwhichmayberegardedasoperationalcosts,whichwouldnotbepaidforfromtheFund,andwouldnotberegulatedundertheFundingArrangementPlanbytheprovisionsoftheEnergyBill(althoughtheactivitiesnotpaidforfromtheFundwouldstillberegulatedbytheBillbyvirtueoftheirinclusionintheDWMP).Table6showswhichwastemanagementanddecommissioningcostswillbeexpectedtobedischargedfromtheFundandwhichwouldbeexpectedtobemetfromoperationalexpenditure.

4.4.2 TheEnergyBillrequiresthatoperatorsprovidetotheSecretaryofStatedetailsoftheirplansformanaginganddisposingofallwastes,whethertheirfinancingisregulatedbytheBillornot.Further,theBillrequiresoperatorsofnewnuclearpowerstationstosetasidesufficientfundstocovertheirfulldecommissioningcostsandtheirfullshareofwastemanagementcostsandprovidecostestimatesinrelationthereto.Sofarasthemattersreferredtointhe“operationalcosts”columninTable6areconcerned,forthereasonssetoutinparagraph4.1.5theSecretaryofStatedoesnotconsideritappropriatetoimposealegaldutyonoperatorsofnewnuclearpowerstationstoprovidecostestimates,nordetailsofthefinancialsecurityputinplace.

4.4.3 Thatsaid,theSecretaryofStatewouldexpectoperatorstoprovidehimwithcostestimatesforthemanagementofwastesthatwillbemetfromoperationalexpenditure(assetoutbelow)forinformation.Thiswillprovideconfidencethatthesecostshavebeengivenproperconsiderationbytheoperatoralongwithalltheothercostsofmanaginganddisposingofwasteanddecommissioningthroughoutthelifetimeofthestation.

4.4.4 Althoughwearenotspecificallyconsultingonthisissue,respondentstothisconsultationarefreetocommentonwhetherthereareotheroperationalwastecoststhatoughttobemetfromtheFund.AfterRoyalAssentoftheBill,theSecretaryofStatewouldexpecttomakeanordersettingoutthoseoperationalwastecosts(technicalmatters)thatwillbepaidforfromtheFund(i.e.makingthemdesignatedtechnicalmatters).

Table 6: Summary of principal cost streams and how they will be met

Decommissioningthestation IndependentFund No

LowLevelWaste(LLW)

PackaginganddisposalofLLW●●

fromoperations,includingtransport

Packaginganddisposalof●●

LLWfromdecommissioning,includingtransport

IndependentFund

IntermediateLevelWaste(ILW)

operationalILW

interimstoresforILW38

decommissioningILW

Transportofoperationaland●●

decommissioningILWfordisposal

Disposalofoperationaland●●

decommissioningILW

IndependentFund

SpentFuel(SF)

Operationoffuelpondsduring●●

Operationoffuelpondsafter●●

interimstoresforSF39

TransportofSFfordisposal●●

EncapsulationofSFfordisposal●●

DisposalofallSF●●

IndependentFund

39Iftheinterimstoresarebuiltaspartofthestationconstruction,thecostsoftheirconstructionwillnotbemetfromtheFund.

Non-radioactivehazardouswaste

●● Managinganddisposingofnon-radioactivehazardouswastefromoperations

●● Managinganddisposingofnon-radioactivehazardouswastefromdecommissioning

IndependentFund No

Planning

●● Decommissioningplanningbeforestartofgeneration

OperationalExpenditure N/A

●● Pre-closuredecommissioningplanning

IndependentFund No

●● Anyplanningcarriedoutduringdecommissioning

IndependentFund No

OtherCosts

●● Allothercostsassociatedwithoperatingthesiteuntilendofitsgeneratinglife.Thesecostsinclude,butarenotnecessarilylimitedto,thoseassociatedwithmaintainingtheinfrastructurenecessaryfortheoperatortobeaholderofanuclearsitelicence40

●● Allothercostsassociatedwithoperatingthesiteafterendofitsgeneratinglifeanduntilthesitelicenceissurrendered.Thesecostsinclude,butarenotnecessarilylimitedto,thoseassociatedwithmaintainingtheinfrastructurenecessaryfortheoperatortobeaholderofanuclearsitelicence41

IndependentFund No

4.5MethodologyforCostCalculations

Background

4.5.1 Toestimatethecostsassociatedwithdecommissioningandwastemanagementanddisposalliabilitiesinordertocomplywithclause41(7)(b)oftheEnergyBill,operatorswillneedtocosttheirDWMP.

4.5.2 TheGovernmenthasestablishedaBaseCase,whichdefinesaprudentlifecyclebaselineagainstwhichpotentialoperatorscanproducecostestimates.FurtherdetailontheBaseCaseissetoutearlierinthisguidance.

4.5.3 Thecostsofwastemanagement,disposalanddecommissioningwillbemetbytheoperatorfromoperationalexpenditureorfrompaymentstheywillmakeintoaFund.OperatorswillberequiredtoprovideestimatestotheSecretaryofStateforallthewastemanagement,disposalanddecommissioningcoststheywillmeetfromtheFund.TheGovernmentwillalsoexpectoperatorstoassessthecostsofwastemanagementitemsthatwillnotbepaidfromtheFundinasimilarlyprudentwayandstronglyencouragesoperatorstoincludethesecostsintheDWMPtheysubmittotheSecretaryofState.Paragraphs4.4.1–4.4.4andTable6setoutfurtherinformationonwhichcostsweexpectwillbemetfromoperationalexpenditureandwhichfromtheFund.

The need to model costs

4.5.4 ItisimportantfortheGovernmenttodeveloprobustupdatedestimatesofthecostsofwastemanagement,disposalanddecommissioningandtothisendwehavedevelopedamethodologytoallowustoestimatethesecosts.Operatorsofnewnuclearpowerstationswillbeexpectedtocalculatetheirowncostestimatesforwastemanagement,disposalanddecommissioning.Operators’ownestimateswilldifferfromthoseproducedbytheGovernmentastheywillbespecifictothereactordesign,siteandotheroperationaldecisionsoftheoperator,ratherthangeneric.However, thismethodologywillprovideoperatorswithanexampleofhowtheymightcalculatetheirowncostestimates;aswellasensuringthattheGovernment,theNuclearLiabilitiesFinancingAssuranceBoard(NLFAB)andthoseresponsibleformanagingoperators’Fundshaveabenchmarkagainstwhichtoassesstheestimatesproducedbytheoperators.

4.5.5 TheNuclearDecommissioningAuthority(NDA)isdevelopingaparametriccostmodelwhichtheywillusetogenerateupdatedestimatesofthecostsofgeologicaldisposal.CostestimatesfrombothBERR’sandtheNDA’scost

modelsrelatingtothedisposalofintermediatelevelwasteandspentfuelwill,together,enabletheGovernmenttosetaprudentfixedunitpriceforoperatorsforprovidingadisposalserviceforthesewastes.

4.5.6 Themethodologythathasbeendevelopedwillallowestimatestobemadeofwastemanagement,disposalanddecommissioningcosts,aswellasallowingtheassociateduncertaintiestobeestimated,andtherelativesignificanceoftheseuncertaintiestobeassessed.Themethodologyallowsthecalculationofthetotalsizeoftheliability,thespendprofileassociatedwithdischargingtheliability,andthusdiscountedcosts.Thisdocumentdescribesthemethodologyinoutline.

4.5.7 WearepublishingtheBERRcostmodellingmethodologyhereforconsultationtoseekviews.Wearenotsettingoutupdatedcostestimatesatthisstage.TheRoadmapinTable2setsoutanindicativetimelinetopublishingcostestimates,althoughthisdoesnotformpartofthisconsultationandisincludedforinformationonly.

Overview of methodology

4.5.8 Thetotalliabilityofoperatorsforwastemanagement,disposalanddecommissioningcanberegardedasfallingintofivebroadareas:

Themanagementanddisposalofspentfuel;●●

Themanagementanddisposalofintermediatelevelwaste;●●

Themanagementanddisposaloflowlevelwaste;●●

Themanagementanddisposalofnon-radioactivehazardouswaste;and●●

Decommissioningcosts–thosecostsassociatedwithdemolishingthe●●

powerstationandremediationofthesite,excludingwastemanagementcosts.

4.5.9 IntheirDWMP,operatorsmustsetdownaplanfordealingwithallareasofhazardouswastemanagement,disposalanddecommissioningfortheirpowerstation,asidentifiedintheBaseCase.

4.5.10Themethodologydescribedhereisdesignedtocalculateestimatesofthecompletecostsofwastemanagementanddecommissioning,althoughitalsoallowsfortheseparationofthosecoststhatwillbemetfromoperationalrevenuesfromthosethatwillfalltotheFund.

Spent fuel

4.5.11Thecostsassociatedwiththemanagementanddisposalofspentfuelresultfrom:

Thecostofstoringspentfuelincoolingpondsandthenininterimstores●●

duringthegeneratinglifeofthestationandafterthestationhasceasedgenerating,untiltitletoandliabilityforthefueltransferstotheGovernment;

Theconstructionandmaintenanceofinterimstorestoaccommodatethe●●

spentfueluntilitcanbedisposedof;

Thecostsoftransportingthespentfuelfordisposal;●●

Thecostsofencapsulatingthespentfuel;and●●

ThefixedunitpricepayabletotheGovernmentinreturnforprovidinga●●

wastedisposalservice.

4.5.12Allofthesecostsarecalculatedonthebasisofaninventoryforthismaterialandunitcost.Theinventoryofthestoreiscalculatedasfollows.Fuelisunloadedfromthereactorandtransferredtoapondwhereitisheldforaperiodtoallowheatgeneratedbythespentfueltofalltolevelsacceptableforstorage.Thisperiodwilldependuponthetypeandrateofburn-upofthefuel.Thecooledfuelisthentransferredtointerimstorage.Giventherateatwhichfuelisdischargedfromthereactor,andthelengthoftimethefuelisheldinthecoolingpond,theinventoryofthefuelintheinterimstorecanbecalculatedasafunctionoftime.

4.5.13Thecostsassociatedwithfuelstorageinagivenyearcanbecalculatedastheproductofthestoreinventoryandthecostofstorageforeachunitoffuel.Thisisexpressedasthecostperunitoffuelperyear.Thisunitcostincludesanallowanceforthecostofstoreconstruction,asitisassumedthatthestoreswillbeconstructedastheyarerequired,andforstoreoperationandmaintenance.Thetotalstoragecostcanthereforebecalculatedasthesumofyearlystoragecostsuptothepointwherethespentfuelisdisposedof.

4.5.14Theoverallcostofmanagingasingleunitofspentfueliscalculatedasthesumoftheunitcostsforstorage,encapsulation,transportationtothedisposalfacility,andthefixedunitpricepayabletotheGovernmentforprovisionofadisposalserviceperunitoffuel.Thetotalcostsassociatedwiththeseactivitiesforthepowerstationarethencalculatedastheproductoftheamountofspentfuelproducedduringthelifetimeofthepowerstationandthetotalunitcostfortheseactivities.

4.5.15ThecostsofencapsulationandtransportofspentfuelareassumedtobeincurredimmediatelybeforetitletoandliabilityforthespentfueltransferstotheGovernmentfordisposal.

4.5.16ThefixedunitpricepayabletotheGovernmentforthedisposalofspentfuelisassumedtobeincurredinaccordancewiththescheduleagreedbetweentheGovernmentandtheoperatorbeforethepowerstationisconstructed.Thefixedunitpricewillbebasedonanestimateofthecostsofdisposingofoperators’spentfuelinageologicaldisposalfacilityandwillincludethefollowingitems:

Theprojectedfullcostsofdisposingofspentfuelinageologicaldisposal●●

facility;

theriskthattheeventualcostsofbuildingageologicaldisposalfacilityto●O

disposeofspentfuelarehigherthanestimated;

theriskthatconstructionofgeologicaldisposalfacilitiesisnotcomplete●O

attheagreedschedulefortheGovernmenttotaketitletoandliabilityforanoperator’sspentfuel.

4.5.17ThefixedunitpricepayabletotheGovernmentisexpressedintermsofunitcost,multipliedbytheamountoffuelfordisposal.

intermediate level waste

4.5.18Totalcostsassociatedwiththemanagementanddisposalofintermediatelevelwastearecalculatedusingamethodologyanalogoustothatusedforspentfuel.

4.5.19Theinventoryofoperationalintermediatelevelwasteinstoreattheendofgenerationiscalculatedfromthegeneratinglifetimeofthereactorandtherateatwhichoperationalintermediatelevelwasteisgenerated.Aftertheendofgeneration,theinventoryofthismaterialinthestoreiscalculatedyear-on-year,basedontheinventoryattheendofgenerationandthesmallannualgenerationofintermediatelevelwastefromongoingoperationalactivities(forexample,wastesarisingfromongoingoperationsinthefuelpondsasthefinaltranchesoffuelarecooledandtransferredtotheinterimstore).

4.5.20Theinventoryofdecommissioningwastesinstoreiscalculatedyearonyearfromestimatesofthetotalvolumeofdecommissioningintermediatelevelwaste,thedurationofdecommissioningactivities,andthetimeframesfordecommissioningactivitiesinthedecommissioningplan.Wastesareassumedtobeconditionedpromptly,andtransferredtothestoreintheyearinwhichtheyaregenerated.

4.5.21Thecostsassociatedwiththestorageofintermediatelevelwasteinagivenyearcanthenbecalculatedfromtheinventoryofoperationalanddecommissioningwastesinstoreandthecostofstorageforeachunitofintermediatelevelwaste,expressedasthecostperunitofintermediatelevelwasteperyear.Thisunitcostincludesanallowanceforthecostofstoreconstruction,asitisassumedthatthestoreswillbeconstructedastheyarerequiredandfortheoperationandmaintenanceofthestore.Thetotalstoragecostcanthereforebecalculatedasthesumofyearlystoragecostsuptothepointwheretheintermediatelevelwasteisdisposedof.

4.5.22Thecostsforconditioningintermediatelevelwastearecalculatedyear-on-year,basedoncalculatedwastevolumestobeconditionedinagivenyearandthecostofwasteconditioningforeachunitofwaste.

4.5.23ThefixedunitpricepayabletotheGovernmentforthedisposalofintermediatelevelwasteisassumedtobeincurredinaccordancewiththescheduleagreedbetweentheGovernmentandtheoperatorbeforethepowerstationisconstructed.Thefixedunitpricewillbebasedonanestimateofthecostsofdisposingofoperators’intermediatelevelwasteinageologicaldisposalfacilityandwillincludethefollowingitems:

Theprojectedfullcostsofdisposingofintermediatelevelwasteina●●

geologicaldisposalfacility;

theriskthattheeventualcostsofbuildingageologicaldisposalfacilityto●O

disposeofintermediatelevelwastearehigherthanestimated;

theriskthatconstructionofgeologicaldisposalfacilitiesisnotcomplete●O

attheagreedschedulefortheGovernmenttotaketitletoandliabilityforanoperator’sintermediatelevelwaste.

4.5.24ThefixedunitpricepayabletotheGovernmentisexpressedintermsofthecostperunitofintermediatelevelwaste,multipliedbytheamountofthiswastefordisposal.

low level waste

4.5.25Lowlevelwasteisassumedtobedisposedofassoonasfeasibleafteritisgenerated,withouttheneedforsignificantinterimstorage.Thecostelementsassociatedwiththemanagementoflowlevelwastearetherefore:

Packaging;●●

Transporttoasuitabledisposalfacility;●●

Disposalinasuitabledisposalfacility.●●

4.5.26Operatorswillberequiredtoensurethatanyfacilitiesneededforpackagingareavailableonsite.Itisassumedthatlow-levelwastewillnotbeconditionedonsiteandthatconditioningfacilitieswillthereforenotbeneeded.

4.5.27Lowlevelwastearisesthroughoperationsandfromdecommissioningactivities.Theannualquantityoflowlevelwastearisingfromoperationsisbasedoninformationonrawwastearisingsprovidedbythereactordesigners42,coupledwithanassessmentofthechangesinwastevolumesbroughtaboutbythemanagementroutesenvisaged.

4.5.28Theannualquantityoflowlevelwastearisingfromdecommissioningiscalculatedyearonyearfromestimatesofthetotalvolumeofdecommissioning

42 ThisinformationhastodatebeenprovidedbythedesignersofthosereactorscurrentlybeingassessedthroughtheGenericDesignAssessment(GDA)process.FurtherinformationontheGDAprocessandthereactorsbeingassessedcanbefoundathttp://www.hse.gov.uk/newreactors/index.htm

lowlevelwaste,thedurationofdecommissioningactivities,andthetimeframesfordecommissioningactivitiesinthedecommissioningplan.

4.5.29Thecostforlowlevelwastemanagementinanyyeariscalculatedfromtheannualarisingsoflowlevelwasteandtheunitcostsforpackaging,transportanddisposal.

non-radioactive hazardous waste

4.5.30Non-radioactivehazardouswasteisassumedtobepackagedandtransferredtoasuitablecommercialcontractorfordisposalpromptlyafterithasbeengenerated.Paymentforthisserviceismadeatthepointatwhichwasteistransferredtothecontractor.Thisarrangementisdirectlyanalogoustothatdescribedaboveforlowlevelwasteand,assuch,thecostsofthedisposalofnon-radioactivehazardouswastearecalculatedinthesamewayasthecostsforlowlevelwaste.

Decommissioning and site remediation

4.5.31Thecostsofdecommissioningandsiteremediationarecalculatedfromengineeringestimates,andareimporteddirectlyintotheoverallcostcalculation.ThesecostsarephasedinaccordancewiththetimescalessetoutinthetimelineonthephasesoftheBaseCase,setoutinChart2.

The estimation of uncertainty in overall cost estimates

4.5.32 Themethodologysofardescribedallowscalculationofacentralestimatefordecommissioning,wastemanagementanddisposalcosts.Inordertoevaluateaninflation,riskanduncertaintyadjustedestimateofthesecosts,whichisconservativeandensuresthatrisktothetaxpayerisremote,itisnecessarytoestimateadistributionofcostswhichrepresents,asfaraspossible,theuncertaintiesinthecostestimates.

4.5.33Themethodologyusedtoestimatethepossiblerangeforthecostsidentifieskeyparametersforthecostcalculation,whichcouldincludewastevolumes,costsordates.Technicalexpertiseandjudgementisthenusedtoestimatepossiblerangesfortheseparametersandtoassignsimpledistributionstothem.ThedistributioninthesizeoftheliabilitiesisthencalculatedfromthedatabyMonteCarlomethods.

4.5.34Inthistechnique,themodelisrunmanytimesusingdifferentvaluesfortheinputparameters.Thevaluesforeachparameterarechosensothat,afterrepeatedruns,thesetofvalueschosenforeachinputparameterreflectsthedistributionassignedtoit.Thedistributionofresultsprovidesapictureofthedistributionoftheoverallliability.

4.5.35Usingthisinformationitispossibletodetermineacostestimatewhichwillcoverthecostsofdecommissioningandwastemanagementanddisposalwithahighdegreeofcertainty.

Using the cost estimates to set a fixed unit price for waste disposal

4.5.36Paragraphs2.9–2.13setoutthattheGovernmentwillsetafixedunitpricetooperatorsfordisposaloftheirintermediatelevelwasteandspentfuel,andwillincludeinthefixedunitpriceasignificantriskpremium.

4.5.37Assetoutabove,theGovernmentintendstouseBERR’sandtheNDA’scostmodellingworktodeterminetheappropriatelevelforthefixedunitprice.TheGovernmentwilltakeaconservativeviewofthecostestimatesfordisposalofintermediatelevelwasteandspentfuelandwillusethedistributionofcostsgeneratedbytheMonteCarloanalysistoassesstherisksassociatedwiththeestimates.ThisworkwillenabletheGovernmenttodeterminetheriskpremiumthatshouldbeaddedtotheconservativeestimatesofcoststoreachthefixedunitpricetheywishtosetforoperators.WewilluseasimilarmethodologytoinformtheprocessbywhichtheGovernmentwilldeterminetheappropriateamountthatshouldbeincludedintheriskpremiumtocovertheriskthatconstructionofdisposalfacilitiesisnotcompletebytheagreedschedulefortheGovernmenttotaketitletoandliabilityforanoperator’swasteandspentfuel.

4.5.38Thefixedunitpricesetforoperatorswillbedeterminedineachcasebyreferencetotheestimatesofcostsandthelevelofcertaintywehaveinthosecosts.Overtime,wewilldevelopagreaterunderstandingoftheactualcostsofdisposingofintermediatelevelwasteandspentfuel.ThisgreatercertaintyabouttheunderlyingcostsmayenabletheGovernmenttoreducethelevelofriskpremiumtheywillrequire.However,intheearlystages,weexpecttheriskpremiumwerequiretobesignificanttoreflectourlevelofcertaintyinthecostestimates.

4.5.39TheRoadmapinparagraphs2.25–2.32andTable2setsoutanindicativetimetableforpublishingthedetailedmethodologyforestablishingthefixedunitpriceforintermediatelevelwasteandspentfueldisposal.

Section5:FundingArrangementsPlanGuidance

Contents

5.1 ContentofFundingArrangementPlan

5.2 ObjectiveandGuidingPrinciples

5.3 Fundstructure

5.4 Fundgovernance

5.5 TargetvaluefortheFundandcontributionstotheFund

5.6 Reviewandreporting

5.7 Investmentpolicy

5.8 Payment/disbursementpolicy

5.9 WindinguptheFund

5.10 ProtectionagainstaninsufficientFund

5.11 Proposalsforremedialaction

5.12 Changeinownershiporcontroloftheoperatororsite

5.13 SecretaryofState’spowertomodifyaFundedDecommissioningProgramme

5.14 Glossary

5.1ContentoftheFundingArrangementPlan

5.1.1 ThisdocumentcontainsguidanceforoperatorsofnewnuclearpowerstationstoassistthemindrawingupaFundingArrangementPlan(FAP).TheFundingArrangementPlanisthatpartoftheFundedDecommissioningProgrammewhichaddressesthosemattersreferredtoinclause41(7)(c)oftheEnergyBill(namelythesecuritytobeprovidedinconnectionwiththeestimatesofcostsofthedesignatedtechnicalmatters).TogetherwithseparateDecommissioningandWasteManagementPlan(DWMP)guidanceinSection4ofthisdocument,thisguidanceprovidesinformationonwhatanapprovableFundedDecommissioningProgrammeshouldcontain.

5.1.2 TheFundingArrangementPlanshouldsetouttheoperator’sdetailedplansforoneormoreFundstodeliversufficientmoneystomeetitsdecommissioning,wastemanagementandwastedisposalliabilitiesidentifiedintheoperator’sDWMP,includingproposalstoensurethatrisksareadequatelymanagedsuchthattheFundissufficienttomeettheseliabilitiesastheyfalldue.

5.1.3 TheFundingArrangementsPlansectionoftheFundedDecommissioningProgrammemustcoveralldecommissioning,wastemanagementandwastedisposalcostswhichareincurredaftertheendofgenerationplusanywastecoststhatariseduringgenerationasspecifiedinanordermadeunderclause41(6)oftheEnergyBill.OngoingwastemanagementcostsduringthegeneratinglifetimeofthestationmustbemetbytheoperatorfromitsoperatingexpenditureandwouldnotthereforebeexpectedtobemetfromtheFund(seeTable6).

5.1.4 ItisforeachoperatortosetoutinitsFundingArrangementPlantheprecisedetailsforestablishing,contributingto,maintainingandadministeringtheFundanddisbursementsfromittogetherwithalloranyotherformsofadditionalsecuritytoaddressriskssuchastheinsufficiencyoftheFund.TheFundingArrangementPlanshouldfollowthemodelframeworksetoutbelowasfarasitispracticabletodoso:

1. BackgroundInformation

2. DescriptionofFundStructure

3. ExplanationofFundGovernance

4. TargetvalueforFundandcontributionscheduletoFund

5. ReviewProcess

6. FundInvestmentPolicy

7. PaymentandDisbursementPolicy

8. WindinguptheFund

9. FinancialsecurityagainstearlydecommissioningriskandFundinsufficiency

10.ProposalsforremedialactiontomakegoodanyshortfallintheFundduringstationgeneratinglife

11.Changeinownershiporcontroloftheoperatororsite

5.1.5 EachFundingArrangementPlanmustbesupportedbydetailedanalyses,reportsanddocumentationinrespectofthestructure,governanceandoperationalarrangementsoftheFundsuchastheSecretaryofStatemayrequest.

5.1.6 TheremainderofthisguidanceprovidesfurtherinformationtoassistoperatorsinpreparingandsubmittingtheirFundingArrangementPlanforapproval.

5.1.7 TheFundingArrangementPlanGuidanceusesanumberofdefinedterms.AGlossaryofthesetermsissetoutattheendofthisguidance(seeparagraph5.14.1).Pleaserefertotheglossaryforthedefinitionorexplanationoftermsusedinthisguidance.

5.2ObjectiveandGuidingPrinciples

5.2.1 Thissection,5.2,setsouttheObjectivethattheSecretaryofStatewillexpectthearrangementsundertheFundingArrangementPlantoachieveandtheGuidingPrincipleswhichhewillapplywhenconsideringwhethertoapprovethosearrangementsortomodifythem.TheSecretaryofState’soverridingconcernistoensurethatoperators,andnotGovernment,meetthefullcostsofdecommissioningandtheirfullshareofwastemanagementcosts.

Objective

5.2.2 AssetoutintheNuclearWhitePaper43,theSecretaryofStatewillrequirethefundingarrangementsundertheoperator’sFundedDecommissioningProgrammetoberobustandensurethatsufficientfundsaresetasideduringtheelectricitygeneratinglifetimeofthenewnuclearpowerstation,toensurethatoperatorsareabletomeetinfullasandwhennecessary:

thefullcostsofdecommissioningtheirinstallations;●●

theirfullshareofthecostsofsafelyandsecurelymanaginganddisposingof●●

theirwaste.

Itistheoperator’sdutytoensurethatthisobjectiveismet.

5.2.3 ToachievetheObjectiveinparagraph5.2.2,(alsosetoutinparagraphs3.49and3.55oftheNuclearWhitePaper),theSecretaryofStatewillexpectthatpriortothestartofcommissioninganewnuclearpowerstation,theoperatorwillcreateanindependentFundtoaccumulate,investandmanagepaymentsreceivedtomeettheabovecosts.Thesepaymentsmustbeaccumulated,investedanddisbursedassetoutintheFundedDecommissioningProgrammeandapprovedbytheSecretaryofStatebyreferencetotheGuidingPrinciplessetoutbelow.ItisthedutyoftheFundtoinvest,manageandaccumulatemoneysreceivedforthispurposetoenabletheObjectivetobemetandtoverifythatitisbeingmetorwillbemetfromtimetotimeduringthelifeoftheFundandbyformulatingcertainkeycomponentsoftheprogrammeatthetimeitisfirstsubmittedforapproval.

5.2.4 TheEnergyBillprecludestheSecretaryofStatefromapprovingaFundedDecommissioningProgrammewhichinhisviewdoesnotmakeprudentprovisionforthefullcostsofdecommissioningtherelevantpowerstationandthefullshareofrelatedwastemanagementcosts.TheSecretaryofState

43 MeetingtheEnergyChallenge,AWhitePaperonNuclearPower,URN08/525,January2008.

wouldnotexpecttoapprovearrangementswhichdidnotattheminimummakeprovisionforaccumulationofsufficientmoneysbymeansofpaymentsintoanindependentFund.

5.2.5 TheGovernmentrecognisesthattheremaybesituationswheretheFundisinsufficienttomeettheoperator’sliabilitiesinfull.Forexample,theliabilitiesmaycrystalliseearlierthanexpectedorcrystallisewhenexpectedbutwheretheFundisinadequatetomeetthecosts(e.g.becauseofare-assessmentinthecostoftheliabilitieswhichhasnotledtoincreasedcontributionscontrarytoparagraph5.5.10).Thisissueisdealtwithinmoredetailbelowinparagraph5.2.6.TheadditionalarrangementsputinplacebyanoperatortodealwithsuchriskswillbeconsideredforapprovalbyreferencetotheGuidingPrinciplessetoutbelowandreferencestotheFundbelowshouldnotbeconstruedasexcludingtheapplicationofthoseprinciplestosuchadditionalarrangements.

Approval criteria: Guiding Principles

5.2.6 Operators’proposalswillbeconsideredonacasebycasebasis.Whenconsideringwhethertoapprove,toapprovewithconditionsorwhethertomodifyaFundingArrangementPlanwhichhasalreadybeenapproved,theSecretaryofStatewillhaveregardtothefollowingGuidingPrinciples:

Independence of Fund●●

Theoperatormustensurethatthearrangementsrelatingtotheaccumulation,managementanddisbursementofmoneysnecessarytodischargeitsliabilitiesareindependentoftheoperatorandoftheGovernment,subjecttotheongoingmonitoringsetoutintheEnergyBillandinthisGuidance.

Independencemeanstheabsenceoftheabilitytocontrolanyaspectofthestructure,governanceoroperationoftheFundonceithasbeenestablished.

Sufficiency of Fund●●

TheoperatormustensurethattheFundisstructured,governedandoperated(includingasregardsthetimingaroundcontributionsandtheinvestmentpolicy)todeliversufficientmoneystodischargeinfulltheoperator’sliabilitiesasandwhentheyfalldue.

Inparticular,anoperatormustsetoutinitsFundingArrangementPlanthemechanismandinstrumentsitwillhaveinplacetoensurethatsufficientmoneysareavailabletopayfortheoperator’sliabilitiesiftheFundisinsufficient(forwhateverreason)toenablethoseliabilitiestobemetinfullontheirduedate.

TheSecretaryofStatewouldexpectsuchmechanismstobeputinplacetocoversituationswheretheFundisunder-fundedatthedatethestation

reachestheendofitsgeneratinglifetimeorprovesinadequatetomeettheoperator’sliabilitiesduringdecommissioning.Suchsituationsmightinclude,forexamplewhere:

thepowerstationhastobeclosedanddecommissionedearlyfor●O

technicalreasons;or

theoperatorbecomesinsolventbeforethestationhasreachedtheend●O

ofitsgeneratinglifetimeandnobuyercanbefoundforthestationwhoiswillingtomeettheoperator’sremainingliabilities;or

insufficientcontributionshavebeenmadetomeetre-assessed●O

decommissioningliabilities,wherethisre-assessmenthascausedanincreaseintheamountoftheliabilitythrough,forexample,timingorcostassumptionchanges;or

insufficientcontributionshavebeenmadeasaconsequenceoflower●O

thananticipatedinvestmentreturnsbeingachieved.

Restrictions on use of Fund assets●●

TheoperatormustensurethatthestructureandgovernanceoftheFundissuchthatneitheritnoranyoneelsemayusemoneysintheFundforanypurposeotherthandecommissioning,wastemanagementandwastedisposalinrelationtothestationtowhichthemoneysrelateevenintheeventofthereorganisation,forexample,oftheoperator,exceptintheeventofanysurplusoncedecommissioninghasbeencompletedandthefixedpriceforwastedisposalhasbeenpaid(seeparagraphs5.9.1–5.9.5).

Insolvency remoteness●●

TheoperatormustensurethattheFundisstructuredsothattheriskofasuccessfulchallengetotheFundintheeventoftheoperator’sinsolvencyortheinsolvencyofabodycorporatewhichisassociatedwiththeoperatorisminimised.

Preventing recourse to public funds●●

Theoperatormustensurethattheprospectoftheoperator’sliabilitieshavingtobemetinwholeorinpartfrompublicfundsisremoteatalltimes.

Transparency●●

TheoperatormustensurethatthearrangementsundertheFundingArrangementPlanaresuchthattheprocessofaccumulating,maintainingandmanagingfundssufficienttodischargetheoperator’sliabilities(distinguishingforthispurposedecommissioningandwastemanagementliabilities,andwastedisposalcosts)istransparentandvisibletotheSecretaryofState,stakeholdersandthewiderpublic.

Inparticulartheremustbetransparencybetween,andseparationandseparatereportingofthetwosetsofliabilitieswhichariseinrelationtodecommissioningandwastemanagementontheonehandandwaste

disposalontheotheraswellasthemoneysaccumulatedtomeetthecostsofeach.Thereshouldbenoelementorprospectofcross-subsidybetweenthetwo.

Inordertoachievethenecessarytransparencyasbetweenthesetwocategoriesofliabilitiesandthemoneysaccumulatedtomeetthem,anoperatormaydecidetocreatetwoormorefundsratherthanone.ReferencesinthisGuidancetoa“Fund”inthesingularshouldnotbereadasprecludingthispossibilityandanysuchproposalwouldbeconsideredbytheSecretaryofStateonitsmerits.

General

5.2.7 ThisguidancesetsouttheprinciplesthatanoperatorshouldadoptinestablishingaFund.ItisnotintendedtobeundulyprescriptiveastothelegalstructureandadministrativearrangementsfortheFund,nortosetouttherelativeadvantagesanddisadvantagesofpossiblevehicleswhichmaybecapableofdischargingthevariousfunctionsoftheFundtherebyachievingtheObjectiveandsatisfyingtheGuidingPrinciples.

5.2.8 TheremainderofthisguidancefocusesonspecificaspectsoftheFundingArrangementPlan.TheSecretaryofStatewillneedtobeprovidedwiththenecessaryinformationtosatisfyhimselfthatprudentfinancialprovisionhadbeenmadefortheoperator’sliabilities.Thatsaid,theSecretaryofStateisnotawareofanalternativefundingstructuretothatsetoutinparagraph5.2.3abovewhichwouldmeettheObjectiveandtheGuidingPrinciplestothesameextent.

5.3FundStructure

5.3.1 InordertogainapprovalforitsFundedDecommissioningProgrammetheoperatorwillbeexpectedtoproposeastructureforanaccumulatingFundwhichmeetsthecostsofdecommissioningandwastemanagementanditsfullshareofwastedisposalcosts,whichbestenablesittomeettheObjectivesetoutinparagraph5.2.2andwhichcomplieswiththeGuidingPrinciples.

5.3.2 Anystructureproposedmustbedemonstrablycapableofaccumulatingsufficientfundstomeettheoperator’sliabilitiesasandwhentheyfalldue.Itmustdeliveratalltimesindependencefromtheoperator,transparencyandrobustnessfromclaimsbytheoperator(forpurposesotherthaninconnectionwiththeObjective)orbytheoperator’screditorsintheeventoftheoperator’sinsolvencyortheinsolvencyofabodycorporatewhichisassociatedwiththeoperator.

5.3.3 AssetoutinguidanceonpreparingaDecommissioningandWasteManagementPlan,theoperatorwillberequiredtoestablishrobustestimatesforitsdecommissioningandwastemanagementliabilities.TheGovernmentwillsetafixedunitpriceforthedisposalofhigheractivitywastes.OperatorsmaydecidetocreateasingleFund,orestablishseparateFundsfor(a)theoperator’sdecommissioningand(b)theoperator’swastedisposalcosts.

5.3.4 EachoperatormaysetupasingleFundforeachnewnuclearpowerstationitoperatesorforafleetofnewnuclearpowerstations.Alternatively,anumberofoperatorsmaysetupindividualFundswithinanumbrellaFund.Inallcases,theremustbenoelementorprospectofoneFundbeingusedtomeetliabilitieswhichareproperlytheresponsibilityofanotherFund.Inanyevent,theremustbetransparency,separationandseparatereportingofthetwosetsofliabilities(decommissioningandwastemanagementontheonehandandwastedisposalontheother)andthemoneysavailabletomeetthecostsofeachforeachstation.AnysucharrangementswouldalsohavetomeettheObjectiveandtheGuidingPrinciples.

5.3.5 TheSecretaryofStatebelievesthattheObjectivecanbeachievedandtheGuidingPrinciplessatisfiedbyastructurewiththeattributessetoutbelow:

(A) A Fund established in the UK

EstablishingtheFundintheUK(thatistosayensuringitisdomiciledand●●

managedfromtheUK,whichforthispurposedoesnotincludeScotland44)wouldassistinmeetingtheprincipleinrelationtoinsolvencyremoteness.EstablishingtheFundelsewherewouldincreasethisriskbymakingtheFundvulnerabletochangesinlocalinsolvencylawaswellasdeprivingitoftheprotectionwhichtheEnergyBillseekstoconferonitintheeventoftheinsolvencyoftheoperator.Further,sincecertainformsofFundstructure(suchastrusts)arenotwidelyrecognisedincivillawjurisdictions,therearealsorisksthatthesekindsofstructurescouldbere-characterisedandthereforenotbesufficientlyinsolvencyremote.

(B) The Fund

TheFundcouldtakeanumberofformsincludingaspecialpurposevehicle●●

(suchasaprivatecompanylimitedbysharesorguarantee).Inorderforthatvehicletobeconsideredorphanedandsufficientlyremotefromtheoperator,itscreditorsandtheGovernment,thesharesormembershipofthatspecialpurposevehiclecould,forexample,ultimatelybeheldbyaUKtrustwhosetrusteesarewithinthejurisdictionoftheEnergyBill.

ThearrangementsunderwhichtheFundisestablishedshouldsetout●●

measurestoensureitslongevityandcontinuanceofthepurposeforwhichitwasestablishedincludingappropriatechecksandbalancesasregardsthesuccessionofdirectors,membersandtrusteeswithintheFundstructure.

(C) Activities of the Fund

Whilsttheoperatorisultimatelyresponsiblefordischargingitsownliabilities,●●

theFundshouldbeestablishedwiththeprimaryobjectiveofaccumulatingsufficientfundstomeettheseliabilities(andwithsufficientpowerstoachievethisend).

TheSecretaryofStatewouldexpectoperatorstodemonstrateinthe●●

FundingArrangementsPlanthattransferstotheFundcouldnotreasonablybeexpectedtobechallengedastransactionsatanundervalueorpreferences(ortheirequivalentinanyotherapplicablejurisdiction).

TheSecretaryofStatewouldalsoexpecttoseetheFund’sactivitiesring-●●

fencedfromtheoperatoranditscreditorsandtherebyinsulatedfromliabilitiesandobligationsowedtothirdpartiesbytheoperator.ConstitutionalormanagementrestrictionsapplicabletotheFundwillbeexpectedtoincluderequirementsto:

44 Thebodyresponsibleforinvesting,accumulatingandmanagingmoneysmustbeformedanddomiciledwithinEngland,WalesandNorthernIreland,butsee5.3.5(B)inrelationtothedomicileofatrustwherethisformspartofthestructureoftheFund.

havealimitedpurposeandactivities;●●

controlchangetothepermittedpurposeandactivities;●●

haveamajorityofdirectorsorotherpersonsinpositionsofauthoritywho●●

areindependentoftheoperatorsuchthattheoperatordoesnothaveeitherdirectorindirectcontrolof,orinfluenceover,theFund;

maintainitsownlegalidentity,independentoftheoperator,including●●

withrespecttomaintenanceofitsownseparatebooks,records,financialstatementsandaccounts;

notguaranteeorotherwisebeobligedforthedebtsofothers;●●

notpledgeitscreditforthebenefitofothers;●●

prohibitorrestricttheFundfromborrowingmoneysorissuingsecurities;●●

notpledge(orprovidesecurityinrespectof)itsassetsotherthantothe●●

Governmentormakeloansoradvances;

nothaveanyemployees;and●●

ensureanyrelationshipwithothersisonbonafide,arm’slengthterms.●●

(D) Ownership of the Fund

TheFundshouldbeindependentoftheoperatorandtheoperator’sgroup.Itshouldbeinsolvencyremoteandanyentitywithintheoverallstructure(includinganywithownership/membershipinterestsintheFund)shoulditselfalsobeestablishedasinsolvencyremote.

(E) Disbursement from the Fund

TheexpectationisthatdisbursementswillbemadefromtheFundupto●●

thevalueoftheassetsoftheFundtomeetrelevantdecommissioningandwastedisposalexpenditurecosts (seeparagraphs5.8.1–5.8.9).

GiventhepurposeoftheFundistoaccumulateandmanagemoneysfor●●

decommissioningandwastemanagementtheFundshouldnotbecapableofmakingdistributions,otherthantofulfilthisobjective,untilthoseliabilitieshavebeendischargedinfull.

AnysurplusintheFundremainingoncedecommissioningandwaste●●

managementactivitiesarecompleteandfullypaidforwillrequiretobedisbursedinaccordancewiththeobjectsorpurposesoftheFund.ThedestinationofthosemoneyswillneedtobeestablishedintheFundingArrangementPlan(seeparagraphs5.9.1–5.9.5).

Fund powers

5.3.6 TheFundingArrangementPlanshouldsetoutthepowersanddutiesoftheFund(andofthoseresponsibleforrunningitwherethisdistinctionarises)aswellasthepowersanddutiesoftheoperatorwhicharerelevantto

thepurposeoftheFundingArrangementPlan.Forexample,theFundingArrangementPlanshouldsetoutthepowersanddutiesoftherelevantpartiesinrelationto:

settingtherateof(financial)contributionstobemadebytheoperatortothe●●

investing,accumulatingandmanagingFundmoneys;●●

reportingtotheoperatorandtotheSecretaryofStateontheperformanceof●●

theFund(seeparagraphs5.6.1–5.6.16);and

disbursementofmoneys(seeparagraph5.8.1–5.8.9).●●

5.3.7 TheproposedFundstructureshouldenabletheobligationsandrestrictionsonitaswellasitspowersanddutiesinrelationtotheoperatortobesetoutinitsconstitutionaldocumentation,inamannersuchthattheseaspectscannotberevised,exceptwiththeapprovaloftheSecretaryofStatethroughthesubmissionofarevisedFundingArrangementPlan.

5.3.8 TheFundedDecommissioningProgrammewillbelegallybindingontheoperatorinthatfailurebytheoperatortocomplywithitwillbeacriminaloffence.However,elementsoftheFundedDecommissioningProgrammemaybereinforcedthroughcontractualagreementsbetweeninterestedparties,forexampleinrelationtowastedisposal.

5.4FundGovernance

5.4.1 TheSecretaryofStatewillwishtobesatisfiedthatsuitablearrangementsareinplaceforthegovernanceoftheFund.ThisincludesnotonlysucharrangementsfortheFunditself(i.e.thebodyresponsibleforinvesting,accumulatingandmanagingmoneysreceived)butalsoforanyentity(suchasatrust)withownership/membershipinterestsin,orcontrolof,theFund.

5.4.2 TheSecretaryofStatewouldexpecttoseethefollowingelementsincludedintheconstitutionalarrangementsorstructureoftheFundasregardsthoseresponsibleforthemanagementoftheFund:

acleardelineationofduties;●●

appropriaterestrictionsonpowers;and●●

provisionstoensurethattheyactwiththeappropriatelevelofskillandcare●●

intheperformanceoftheirfunctions.

5.4.3 Thegovernancearrangementswilldependonthefundstructureadopted.GovernanceoftheFundshould,however,bebythosewhoarecompetenttogovern,themajorityofwhommustbeindependentoftheoperator.GovernanceoftheFundisalsotobeindependentoftheGovernment.TheSecretaryofStatewouldthereforenotexpecttohaveanyroleintheappointmentprocessofthoseresponsibleforFundgovernancebeyondbeingsatisfiedthatboththeappointmentcriteriaandthecontinuingobligationsofthoseresponsibleforFundgovernance(whichoperatorsshouldincludeintheFundingArrangementPlan)delivertheexpectedlevelofindependenceandcompetence.

5.4.4 Theoperatormustnothaveeitherdirectorindirectcontrolof,orinfluenceover,theFund.TheSecretaryofStateisthereforeunlikelytobesatisfiedbyfundingarrangementswhichleavecontroloftheFundinthehandsoftheoperatororamajorityofpersonswhoarenotindependentoftheoperator.Iftheoperatorappointsnon-independentpersonstoagovernancerole,thentheymustbeinaminorityandtheirresponsibilitiesmustbeowedtotheFundregardlessofanyotherpositionthattheymayhold.

5.4.5 Independencecanbedemonstratedinanumberofways.Inallcases,thosepersonsappointedtoagovernancerole(withtheexceptionofthoseappointedinanon-independentroleinaccordancewithparagraph5.4.4)wouldbeexpectedtoaffirmtheirindependencebeforeacceptingthatappointment,andshouldbesubjecttoarequirementtomaintaintheirindependenceforthedurationoftheappointment.Thiswillincluderequiringthosepersonstoavoidanysituationinwhichthatpersonhas,orcouldhave,adirectorindirectinterestthatconflicts,orpossiblymayconflict,withhisdutiestotheFundinamannerconsistentwiththedutiesapplicabletodirectorsofanyEnglish

company.Inthecaseofindividuals,theSecretaryofStatewouldexpecttheindividualtobeindependentoftheoperatoraccordingtoprinciplesatleastasstringentasthosesetoutinPrincipleA.3.1oftheCombinedCodeonCorporateGovernance45.Withoutprejudicetotheforegoing,neitheranindividual(togetherwithhiscloserelativesandfamilytrusts)noracorporatebody(togetherwithitsassociates)shouldhold(directlyorindirectly)anyinvestmentintheoperatororanyofitsassociatedcompanieswhichgivesrise,orcouldbeperceivedtogiverise,toanactualorpotentialconflictofinterest.

5.4.6 Competencecanalsobedemonstratedinanumberofways.Inthecaseofindividuals,theindividualshouldbeademonstrablyfitandproperpersonwiththenecessaryeducation,experienceandskillstoholdtheposition.InthecaseoftheappointmentofacorporatebodytogoverntheFund,theSecretaryofStatewouldexpectthattheoperatorcoulddemonstratethatthecorporatebodyhastherequisitelevelofexperienceandresources(includingindividualswhocoulddemonstratethesamequalitiesdescribedabove)tomanagetherole.

45 CombinedCodeonCorporateGovernance,July2003.

5.5TargetvaluefortheFundandcontributionstotheFund

Target value for the Fund

5.5.1 TheoperatorwillberesponsibleformakinggoodanyshortfallorriskofshortfallintheaccumulatedmoneysheldbytheFund.

5.5.2 Fordecommissioningliabilities,tominimisetheriskthatthefundsaccumulatedareinsufficient,theFundwillbeexpected,basedonrobustassumptions,toaccumulateatleast100percentoftheinflation,riskanduncertaintyadjustedvalueoftheoperator’spredicteddecommissioningliabilities.TheSecretaryofStatewillexpectanassessmentofanappropriateriskbasedcontingencytobeincludedinthetargetFundvaluewhichtheFundwouldbeexpectedtoreassessregularly.IncludingsuchacontingencyinthetargetamountfortheFundwillmitigateagainstincreasesinthecostsoftheoperator’sliabilitiessetoutintheDecommissioningandWasteManagementPlanand/orinstanceswheretheFunddoesnotachievetheanticipatedgrowthonitsinvestments.

5.5.3 ThetargetamountfortheFundtomeetthecostsofwastedisposalwillbebasedonthefixedunitpricesetbytheGovernmentandtheagreedscheduleaccordingtowhichpaymentstotheGovernmentmustbemade.Similarly,theSecretaryofStatewouldexpectacontingencytobeincludedinthetargetvalueoftheFundaccruingtomeetthefixedunitpriceforwastedisposal,tomitigateagainstFundinvestmentreturnsbeinglessthananticipated.

5.5.4 TheSecretaryofStatewouldexpectthefirstpaymenttobemadetotheFundfromtheoutsetofgenerationofelectricity.

5.5.5 TheFundingArrangementPlanshouldsetouttheoperator’sproposalstoensurethatinreasonabletimebeforethedateonwhichthestationisexpectedtoceaseelectricitygeneration,therearemoneysintheFundwhich,havingregardtotheexpectedinvestmentperformanceoftheFund,willbesufficienttomeettheoperator’sliabilitiesasandwhentheyfalldue.

Contributions to the Fund

5.5.6 PaymentstotheFundshouldbeviewedasanessentialelementofoperationwhichmustbeservicedbeforedebt.

5.5.7 TosatisfytheSecretaryofStatethattheoperatorwillbecapableofmeetingtheObjective,theFundingArrangementPlanshouldsetoutthelevelofandscheduleforcontributionswhichtheoperatorwillmaketotheFundandthebasisonwhichmodificationstothecontributionschedulewillbedeterminedthroughthegeneratinglifetimeofthestation.TheSecretaryofStatewouldexpecttheFund(ratherthantheoperator)tosetthecontributionschedulewithintheapprovedinvestmentpolicydrawnupbytheoperator.

5.5.8 OperatorswillneedtoexplainthattheircontributionstotheFundaremadeinconsiderationofpotentialtaxliabilitiesthatwillbeleviedontheoperatorandtheFund.Inconsideringthetaxtreatment,itisrecommendedthatoperatorsconsidertheVATtreatmentofpaymentsbothintoandoutoftheFundaswellastheVATtreatmentofdecommissioningcostsandwhetheroutputVATisrecoverable.Fromacorporatetaxperspective,operatorsshouldconsiderthecorporateorincometaxtreatmentofthereceipts,paymentsandinvestmentincomeoftheFundandoperator.

5.5.9 ItwillalsobenecessaryforoperatorstoexplaintherationalefortheproposedFundinvestmentpolicyandhencetheassumptionsthathavebeenmadeaboutreturnsoninvestmentsmadebytheFund(seeparagraphs5.7.1–5.7.6).

5.5.10TheobligationtocontributetotheFundmustbelegallybindingontheoperatorandenforceablebythosewithresponsibilityfordischargingthefunctionoftheFund.TheFundingArrangementPlanmustsetouttheremedialstepstobetakeniftheFundbecomes,orisatriskofbecoming,under-fundedatanystage.TheFundingArrangementPlanmustalsosetoutthepowersthattheFundwouldhaveinthesecircumstancesandtheadditionaldutiesthatwouldariseontheoperator(seeparagraphs5.11.1–5.11.4).

5.5.11IntheFundingArrangementPlan,theoperatorshouldmakeproposalsforthelimitedcircumstancesinwhichcontributionstotheFundmaybereviseddownwards.ThesecircumstancesmayincludewheretheFund’sgrowthhasoutperformedexpectationsandtheactuariallyassessedvalueoftheFundissignificantlygreaterthanitstargetvalueatthatpointintimeandthepersonsresponsibleformanagingtheFundconsiderthatareductioninthecontributionratewouldnotbeimprudent.ItisnotexpectedthattheSecretaryofStatewouldagreetoarevisiondownwardsofcontributionstotheFund(whichislikelytoamounttoamodificationwhichwouldrequirehisapprovalunderclause46oftheEnergyBill)underanycircumstancesinthefirsttenorlastfiveyearsofanewnuclearpowerstation’sgeneratinglife.

5.5.12Oncealltheoperator’sliabilitiesrelatingtodecommissioningandwastemanagementandwastedisposalhavebeenfullydischarged,anysurplusmoneysheldbytheFundmustbedisbursedinaccordancewiththeobjectsorpurposesoftheFundwhichmaymeantheyarereturnedtotheoperator(seeparagraphs5.9.1–5.9.5).

5.5.13TheSecretaryofStateanticipatesthepreparation,revisionandapprovalofFundingArrangementPlansmaybeamulti-stageprocessinwhichoperatorswillhavetosatisfyhim46onanumberofconstituentpartsofaFundedDecommissioningProgrammeconsecutively.Itwillbeclearfromwhatissetoutabovethattheinvestmentpolicy(forexample)referredtoinparagraphs5.7.1–5.7.6,wouldneedtobedrawnupbytheoperatorbeforethecontributionschedulecouldbeformulated.Equally,theSecretaryofStatewouldexpecttheoperatortobeabletodemonstratetohissatisfactionthatthepersonsresponsibleformanagingtheFundwerecontentwiththearrangementssetoutintheFundingArrangementPlanbytheoperatorpriortohisdecidingwhethertoapproveitornot.Hewouldthereforeexpectthesepersonstobeidentifiedorappointedbeforeproposalsontheinvestmentstrategyandcontributionschedulearemade.TheSecretaryofStatewillexpectoperatorstomakeproposalsastohowfarinadvanceofthecommencementofelectricitygenerationthosepersonsresponsibleformanagingtheFundwillneedtobeappointedoridentified.ClearlyanychangestotheprogrammeinthelightofcommentsfromtheseappointeeswillneedtobeapprovedbytheSecretaryofState.

Contribution Disputes

5.5.14TheSecretaryofStateconsidersitimportantthattherelationshipbetweentheoperatorandtheFundrecognisesthatitistheFundthatshouldhavetherighttosetthecontributionschedulebasedupontheinvestmentpoliciesputforwardbytheoperatorapprovedintheFundingArrangementPlan.Notwithstandingthis,theSecretaryofStaterecognisesthepossibilityofdisputesarisingbetweentheoperatorandtheFundonothermatters,particularlygiventhenatureoftheliabilitiesandcostsinvolvedandthelengthoftimebeforethoseliabilitiesareexpectedtocrystallise.

5.5.15TheFundingArrangementPlanshouldthereforeincludeafullyscopeddisputeresolutionproceduretofacilitatethetimelyandcost-effectiveresolutionofdisputesbetweenpersonswithobligationsundertheFundedDecommissioningProgrammeinrespectofthosematters.

5.5.16Whateverform(orforms)ofdisputeresolutionarechosentheFundedDecommissioningProgrammeshouldmakeclearwhethertheprocedureandoutcomeisbinding;thescopeoftheprocedure(i.e.thedisputestowhichitrelatesifitdoesnotrelatetoalldisputes);andthetimescaleswithinwhichtherelevantstepshavetobetakenbytheparties.

46 TheSecretaryofStatewillcallontheadviceoftheNuclearLiabilitiesFinancingAssuranceBoard(NLFAB)inassessingtheconstituentpartsofaFundedDecommissioningProgramme.

5.6Reviewandreporting

5.6.1 Theoperatorwillbeexpectedtocalculateitsownestimatesofthecostsofmeetingitsdecommissioningliabilities.ThepersonsresponsibleformanagingtheFundwillbeexpectedtosatisfythemselvesasto:

theaccuracyoftheoperator’sestimatesofthecostsofmeetingits●●

decommissioningliabilities;and

thecontributionsandinvestmentreturnsnecessarytoaccumulateaFund●●

sufficienttosatisfyboththedecommissioningliabilitiesandthewastedisposalliabilitiesasandwhentheyarise.

records

5.6.2 TheoperatormustdemonstratetotheSecretaryofStatethat,aspartofitsbasicrecordkeepingstructure,itwillmaintainanaccuraterecordofthedesignof,atleast,thenuclearisland(s)andsuchrecordshouldbecontinuouslyupdatedtoreflecttechnicalandoperationalchangesto,atleast,thenuclearisland(s).ThepersonsresponsibleformanagingtheFundmustbesatisfiedwiththesearrangements.

5.6.3 Thissystemshoulddrawon“configurationcontrol”modelsfrom,forexample,processindustriesandtheaeronauticalsectors,andwillsupplementexistingrecordkeepingpracticesundercurrentrequirements.Theobjectiveof“configurationcontrol”istomanagetheevolutionoftheapproveddesignof,atleast,thenuclearisland(s)throughasystemicchangemanagementprocessandtheimplementationofoperationalandtechnicalchangestoensureaccuracyandconsistencybetweentherecordsand,atleast,thenuclearisland(s).

5.6.4 Suchasystemwillassistanoperatorinensuringithasinplacecomprehensive,transparentandeffectivearrangementsforassessinghowproposedoperationalandtechnicalchangesto,atleast,thenuclearisland(s)willimpacttheFundedDecommissioningProgrammebeforetheoperationalandtechnicalchangesaremade.

5.6.5 Theoperatorwillalsoberequiredtokeepandmakeavailableadetailedscheduleoftheanticipatedandactualwastearisings.

Annual report and Quinquennial report

5.6.6 TheoperatorwillbeexpectedtocarryoutbothannualandquinquennialreviewsoftheFundedDecommissioningProgrammereportsofwhichshouldbesubmittedtotheSecretaryofStateandpublished.ThereviewsshouldbecarriedoutwiththeaimofensuringthattheObjectivemaybeachieved,namelythattheDecommissioningandWasteManagementPlan,includingcostestimates,remainsaccurateanduptodateandreflectsthecurrentstateoftheplanttowhichitrelates;andthatthefundingarrangementsremaincapableofyieldingsufficientfundstomeetthedecommissioningliabilitiesandwastedisposalliabilitiesasandwhenthosefundsareneeded.

5.6.7 SetoutinAnnexAaredetailsofwhattheSecretaryofStatewouldconsidertobeanappropriateandpracticablemeansfortherelevantpersonstosatisfythemselvesthattheObjectivewasmet(atallmaterialtimes)throughanannualandquinquennialreportingstructure.TheSecretaryofStatewouldassesstheoperator’sproposalsforanannualandquinquennialreportingstructureonacaseonbycasebasiswithreferencetotheGuidingPrinciplesandinthelightoftheproceduresetoutinAnnexA.

5.6.8 Inanyevent,thepersonsresponsibleformanagingtheFundwillbeexpectedtotakeadvicefromsuitablyqualifiedexpertsoperatingunderappropriatelevelsofprofessionalindemnitycoverinreviewingtheoperator’sannualandquinquennialreportandinrelationtothereviewoftheFund.

5.6.9 TheNLFABwillprovideon-goingadvicetotheSecretaryofStateinconnectionwithallfundingarrangementsandmaybecalledupontoreviewsomeoralloftheinformationprovidedtotheSecretaryofStatebytheoperatorandthepersonsresponsibleformanagingtheFund.

5.6.10TheSecretaryofStatewouldalsoexpecttheannualandquinquennialreportstobepublished.OperatorsshouldsetoutintheirFundingArrangementPlantheirproposalsregardingpublication.TheGovernmentwillhaveregardtojustifiablesensitivitiesinrelationtoconfidentialityandtheextentofmaterialtobeplacedinthepublicdomainwhenconsideringoperators’proposalsregardingpublishingreports.

5.6.11Duringthedecommissioningphase,theoperatorandthepersonsresponsibleformanagingtheFundwillbeexpectedtoprovideannualreportsasoutlinedinparagraph5.8.5below.

Approval of material changes

5.6.12AllmodificationstoanapprovedFundedDecommissioningProgramme(otherthanthosetowhichregulationsmadeunderclause46oftheEnergyBillapply)requireapprovalbytheSecretaryofState.If,atanytime,aneventoccurswhichrequiresachangetobemadetotheFundedDecommissioningProgramme,subjecttoanymaterialitythresholdtobesetoutinregulations,

theSecretaryofStatewillexpecttheoperatorand/orthosepersonsresponsibleformanagingtheFundtopromptlynotifyhimofthatevent,providedetailsoftheeffectontheoperator’sliabilitiesofsuchaneventandthefinancialconsequencesofsuchachangeontheFundedDecommissioningProgramme,and,proposeforapprovalbytheSecretaryofStateamodificationtotheFundedDecommissioningProgrammetotakeaccountofthateventinaccordancewiththeprocedurelaiddowninclauses44and45oftheEnergyBill(seeparagraphs3.22–3.33).

5.6.13Ontheannualreview,wherethecumulativeeffectofoperationalortechnicaloranyotherchangesonthecostestimatesofdecommissioningliabilitiesortheamountofthewastedisposalliabilitiesinthepreviousyearisaboveamaterialitythresholdwhichwewouldexpecttobesetoutinregulations,thentheSecretaryofStatewouldexpecttheoperatorandthepersonsresponsibleformanagingtheFundtoproposeforapprovalbytheSecretaryofStateanymodificationtotheFundedDecommissioningProgrammenecessarytoupdatetheprogrammetotakeintoaccountthesechanges.

information

5.6.14Inadditiontotheinformationwhichheexpectstoreceiveassetoutabove,underclause49oftheEnergyBilltheSecretaryofStatehasthepowertoobtaininformationfromtheoperator,thepersonsresponsibleformanagingtheFundorotherpersonswithobligationsundertheFundedDecommissioningProgramme(forexample,bodiescorporateassociatedwiththeoperatorwhichhaveobligationsundertheprogramme).Underclause49(3)oftheBilltheSecretaryofStatemayonlyobtaininformationforthepurposeofenablinghimtodetermine:

whethertheFundedDecommissioningProgrammeisbeingcompliedwith;●●

whetheritwillbepossibleforobligationsundertheFunded●●

DecommissioningProgrammearisingatafuturedatetobecompliedwith;

whethertheFundedDecommissioningProgrammemakesprudent●●

provisioninrelationtothematterssetoutintheDWMPandtheFundingArrangementPlan.

5.6.15TheSecretaryofStatewouldalsoexpectthepersonsresponsibleformanagingtheFundtohaveappropriaterightstorequestandreceiveinformationfromtheoperator.

notification

5.6.16Inadditiontothenotificationrequirementsetoutinparagraph5.6.12,theSecretaryofStatewouldexpecttheFundingArrangementPlantoprovideappropriateprocedurestoensurethattheoperatorandthepersonsresponsibleformanagingtheFundreporttotheSecretaryofStateimmediately

onorpriortotheoccurrenceofanyofthefollowingevents(whetherornottheyresultinabreachoftheprogramme):

Changeofcontrolorownershipoftheoperator(seeparagraphs5.12.1–●●

5.12.9);

Changetothecontributionschedule;●●

Changeinthecreditratingofanoperator,oranyentityprovidingaguarantee●●

orothercreditsupportundertheFundedDecommissioningProgramme(seeparagraphs5.10.1–5.10.7);

Unplannedclosureoftheplant;●●

Changeintheinvestmentproposalorachangeofstrategy.●●

5.7Investmentpolicy

5.7.1 TheSecretaryofStatewouldexpecttheFundingArrangementPlantoincludeaStatementofInvestmentPrinciples(“SIP”)whichsetsouttheFund’sinvestmentpolicy,designedtoensurethemoneyswhichtheFundreceivesfromtheoperatorwillbeappropriatelyinvestedtogeneratethesumsnecessarytomeettheoperator’sliabilitieswhentheyfalldue.Asaminimum,theSecretaryofStatewouldexpecttheSIPtoincludetheFund’s:

investmentobjectives;●●

attitudetoriskandhowriskisdefined,measured,mitigatedandmonitored;●●

assetallocationstrategy,includingpermittedandprohibitedassettypesand●●

projectedinvestmentreturnsoneachassetclass.TheFundingArrangementPlanshouldsetoutthebasisfortheassetallocationstrategyandincludeaneconomicand/orstatisticaljustificationfortheprojectedinvestmentreturns;theinvestmentstrategyshouldsetoutlimitstoportfolioconcentrationineachassetclassandinanyindividualinvestments;

decision-makingauthorities,processesandproceduresregardinginvestment●●

decisions;

performancemeasurementcriteriaandbenchmarks;●●

policyonrealisinginvestments;●●

policyonexercisingrights(includingvotingrights)attachedtoinvestments;●●

policyontheextenttowhichsocial,environmentalorethicalconsiderations●●

aretakenintoaccountininvestmentdecisions;

mandatestoalladvisersandmanagersandassociatedfeeandliability●●

structures;and

reportingrequirements.●●

5.7.2 TheFundmustrecogniseandaddresstherisksassociatedwithitsinvestmentstrategy,including:

thelikelihoodofthestrategyunderperformingthetargetreturnbymorethan●●

5%inany3yearperiod;

theriskoffailingtomeetitsoverallobjectives;●●

sponsorcovenantrisk/countryrisk;●●

operatorcovenantrisk;●●

riskofinadequatediversificationorinappropriateinvestment(concentration●●

risk);

issuerrisk;●●

currencyandinterestraterisk;●●

liquidityrisk;●●

inflationrisk;●●

custodianrisk;and●●

organisationalriskofthemanagersandadvisers.●●

5.7.3 Inmakinginvestmentdecisions,theFundshouldactprudentlyhavingobtainedappropriateprofessionaladviceandwithdueregardtotheSIP.TheFundwillnotberestrictedfromdelegatinginvestmentdecisionstothosewiththeskills,informationandresourcestotakethemeffectively,butwillremainresponsibleforthedecisionstakenbyanydelegatedparty.

5.7.4 TheFundshouldtakeaccountofthesuitabilityofinvestmentshavingregardto:

thenatureoftheoperator’sfutureliabilities(especiallytheinfluenceof●●

inflation);

theexpectedduedatefordisbursementsbytheFund;●●

thefactthattheoperator’sliabilitiesareexpectedtobeinSterling;●●

thecertaintyofexpectedfuturedisbursementsfromtheFund;and●●

thefrequencyandlevelofcontributionstotheFund.●●

5.7.5 TheFundshouldreviewtheSIPonaregularbasisand,inthelightofchangingcircumstances,toensurethecontinuedappropriatenessoftheinvestmentarrangements.ChangestotheSIParelikelytoamounttoamodificationwhichwillrequireapprovalbytheSecretaryofStateunderclause45oftheEnergyBill.

5.7.6 ItisexpectedthattheSIPwillalso:

ensurethattheFundinvestmentstrategyisappropriatelydiversifiedto●●

reduceinvestmentriskandthattothisend,awidevarietyofassetclassesmaybeconsideredincludingnon-traditionalassetclasses;

definetherestrictedcircumstancesandthelimitedextenttowhichtheFund●●

mayinvestintheoperatorandtheprohibitionofcertaintypesofoperator-relatedinvestments;and

specifythattheinvestmentstrategyincludesagradualreductionin●●

investmentriskastheendofthegeneratinglifeofthestationapproaches.

5.8Payment/disbursementpolicy

Decommissioning and Waste Management liabilities

5.8.1 Evenwithacontingencyforriskanduncertaintybuiltin,itisimportantthatappropriategovernanceisexercisedbytheFundarounddisbursementsfromtheFund.TheFundingArrangementPlanshouldsetoutthedisbursementpolicyfortheFundtofinancetheoperator’sdecommissioningandwastemanagementliabilitiesincluding:

thegovernancearrangementsunderwhichmoneyswouldbedisbursedby●●

theFundinlinewiththeapprovedDWMP;

thepersonstowhompaymentwillbemade;and●●

themechanismformakingpayments.●●

5.8.2 TheFundingArrangementPlanshouldaddresswhenmoneysmaybedisbursedandagainstwhatmilestones.AdequatesafeguardsmustbeinplacetoensurethatmoneysarespentonlyoncostsforwhichtheFundedDecommissioningProgrammemakesprovisionandwhichshouldbeauditableandcertifiedaspayablebyreferencetotheFundedDecommissioningProgramme.

5.8.3 TheFundingArrangementPlanshouldsetouttheFund’sgovernancearrangementsforoverseeingthedisbursementoffunds.TheFundwillbeexpectedtoreviewprogressagainsttheDecommissioningandWasteManagementPlanonanannualbasisandtotheextentthatashortfallinfundingisanticipated,theoperatorwillbeexpectedtofundthedeficit.

5.8.4 TheoperatorwouldbeexpectedtodemonstratetothepersonsresponsibleformanagingtheFundthatithasappropriateproceduresinplaceforcheckingthatmoneysreceivedfromtheFundarebeingappliedagainstallowableDWMPcostsandthatmilestonesforachievingtheDWMParebeingmet.AnexampleofsuchaprocedurewouldbeaninternalauditoftheuseofmoneysfromtheFundagainstmilestones.

5.8.5 Attheendoftheyear,theoperatorshouldprovideanannualreporttothepersonsresponsibleformanagingtheFundsettingoutdifferencesbetweenthepaymentsfromtheFundandthereductionintheoperator’sliabilities.Whereanoperator’sexpendituredoesnotreducetheoperator’sliabilitiesbytherequiredamount,theannualreportshouldsetouthowtheoperatorintendstomitigatethisuseofadditionalfundingandshouldpropose,ifappropriate,amodificationtotheDWMP.

5.8.6 TheSecretaryofStatewouldalsoexpectthepersonsresponsibleformanagingtheFundtoreviewtheannualreportprovidedbytheoperatorandtoprepareanannualreportonwhethertheFundissufficienttomeettheexpectedcostsoftheDWMP,andtosetoutremedialstepstobetakenifnot.

long term waste disposal

5.8.7 AssetoutintheguidanceontheDWMP(seesection4),theGovernmentwouldexpecttosetafixedunitpricebasedontheoperator’sprojectedfullshareofwastedisposalcostsatthetimewhentheapprovalsforthestationaregiven,priortoconstructionofthestation.WeexpectthatthemoneystocoverthefixedunitpriceforthewastedisposalservicewillbepaidtotheGovernmentastitletoandliabilityforeachoperator’swasteistransferredtotheGovernment.However,weareconsideringwhethertheremaybeacaseforsomeofthisamounttobepaidtotheGovernmentduringthepowerstation’sgeneratinglife.IftheGovernmentdeterminesthatthiswouldbenecessary,wewouldagreeascheduleofpaymentsoutoftheFundwitheachoperatoratthesametimeastheFundedDecommissioningProgrammeisapproved.ThiswouldensurethatoperatorsareabletodesigntheirFundandinvestmentpoliciessothatearlypaymentscanbemadeoutoftheFundduringthegeneratinglifeofthestationwhilstalsoensuringthattheFund,takingintoaccountanticipatedgrowth,willreachthetargetamount(adjustedtoreflecttheinterimpaymentsmadeinrelationtowastedisposal).

5.8.8 Ifgeologicaldisposalfacilitiesarenotavailablebythedatesagreedintheschedule,theGovernmentwouldexpecttotaketitletoandliabilityforthewasteaccordingtotheagreedscheduleandwouldexpecttocontinuestoringitonthesitewhereithashithertobeenstoreduntildisposalfacilitiesareavailable.ThecostsofmaintainingtheinterimstoresduringthisperiodwouldbemetbytheGovernmentbutwillhavebeenfactoredintotheriskpremiumaddedtothefixedunitpricetocovertheriskthatconstructionofdisposalfacilitieswillnotbecompleteasrequiredbytheagreedschedule.

Change in ownership or control of the nuclear power station operator

5.8.9 Guidancecoveringachangeinownershiporcontroloftheoperatororthesiteissetoutinparagraphs5.12.1–5.12.9.TheFundingArrangementPlanmustberobustagainstanysuchchangeand,inparticular,mustsetoutsafeguardstoensurethatmoniesarenotimproperlydisbursedbytheFundinthisevent.

5.9WindinguptheFund

5.9.1 OperatorswillberequiredtosetoutwhenandbywhatmeanstheFundwillbewoundup.TheFundshouldbewounduponlywhen:

allliabilitieswhichitwasestablishedtosatisfyhavebeenfullypaidand●●

dischargedorifalternativearrangements,whichareacceptabletotheregulatorsandtheSecretaryofState,tomeetthoseliabilitieshavebeenputinplace;and

anysurplusmoneyshavebeendisbursedassetoutbelow.●●

5.9.2 AnysurplusintheFundremainingoncedecommissioningandwastemanagementandwastedisposalactivitiesarecompleteandpaidforwillrequiretobedisbursedinaccordancewiththeobjectsorpurposesoftheFund.TheGovernmentwillnotexpectanysurplusintheFundtobepaidtotheGovernment.

5.9.3 DependingonthestructureoftheFund,itisexpectedthatanysurplusmoneysheldbytheFundinrespectofdecommissioningliabilitiesmaybereturnedtotheoperatoroncedecommissioningiscompleteandallliabilitiesinrespectofdecommissioningandwastemanagementhavebeendischarged.

5.9.4 Operatorswillpayafixedunitpriceforwastedisposal.TheGovernmentwillbepaidthefullfixedunitpriceandanyshortfallintheFundmustbemadegoodbyoperators.Shouldtheactualcostsofprovidingtheserviceprovelowerthanexpected,theselowercostswillnotbepassedontonuclearoperators,whowouldhavegainedfromcertaintyofafixedpriceandwouldnothavebeenexposedtotheriskofpriceescalation.IfthemoneyssetasideintheFundforwastedisposalexceedthisfixedunitprice,GovernmentwillnotexpectthissurplustobepaidtoGovernment.ThesurplusmaybedisbursedinaccordancewiththeobjectsorpurposesoftheFund,whichmayincludebeingreturnedtotheoperatorafterthepaymentstotheGovernmenthavebeenmadeinfull.

5.9.5 Assetoutinparagraphs5.5.1–5.5.6,anyshortfallintheFundmustbemadegoodbytheoperator.

5.10 Protection against an insufficient Fund

5.10.1 As noted above, under the existing law, an operator is responsible for all the decommissioning liabilities, waste management liabilities and waste disposal liabilities that arise from the operation of new nuclear power stations. Each operator must ensure that its Funding Arrangement Plan is robust against change, including, for example, any change in regulatory requirements.

5.10.2 Thus, if (for example):

●● the site has to be decommissioned earlier than expected (including as a result of operator insolvency) and there is a shortfall in the accumulated Fund; or

●● during decommissioning the Fund proves inadequate to meet the operator’s decommissioning costs,

the operator is responsible for ensuring that additional funds are available to discharge those liabilities.

5.10.3 Under the provisions of the Energy Bill, the Secretary of State may impose obligations which arise out of the Funded Decommissioning Programme on persons associated with the operator (such as a parent company) including in a case where the operator fails to comply with its funding obligations under the programme. Furthermore, the Energy Bill provides that the obligations on an operator (or former operator) under a Funded Decommissioning Programme remain until the Secretary of State explicitly releases the operator from its obligations, even if it no longer holds a site licence. The Secretary of State would expect to use these powers with the aim of addressing the risks referred to above, for example, in a case where the operator was a member of a group of companies or a joint venture company and it alone was not capable of addressing these risks to the Secretary of State’s satisfaction.

5.10.4 In addition, each operator must satisfy the Secretary of State that effective and transparent arrangements are in place no later than day one of generation as part of the approved Funded Decommissioning Programme to ensure that the operator will meet its obligations to discharge its liabilities in full. In the Funding Arrangement Plan an operator must set out how it will manage and mitigate the risk that there are insufficient funds. An operator’s proposals will be assessed by the Secretary of State on a case by case basis, by reference to the Guiding Principles and the objective, to ensure that the risk of any recourse to public funds whatsoever remains remote at all times.

5.10.5 An upfront endowment to the Fund no later than day one of generation together with a provision to front load contributions to the Fund during the earlier years of the power station’s generating life may be an acceptable form of security against such risks where it was one amongst several elements of a proposal in this regard and provided it is structured on appropriate terms.

5.10.6 Alternative forms of security, such as insurance or financial instruments (from an appropriate financial institution) may be acceptable to the Secretary of State to make up a shortfall in the moneys held by a Fund. To the extent that products are not presently available in the market, the Secretary of State would expect operators to work with the financial and insurance industry to develop suitable protections.

5.10.7 Parent company guarantees, on their own, may not be an acceptable form of security as protection against an insufficient fund. The Secretary of State would expect to find a parent company guarantee acceptable where it was one amongst several elements of a proposal in this regard and where as a minimum, the parent company had an acceptable credit rating at the time the programme was first approved; arrangements are in place to monitor the credit worthiness of the parent company; and if the parent company’s credit rating should fall to an unacceptable level, the operator must immediately notify the Secretary of State and ensure supplemental arrangements, which are acceptable to the Secretary of State, are in place.

5.11Proposalsforremedialaction

5.11.1Theoperatorisunderadutyunderexistinglawtomeetalltheoperator’sliabilities,whichflowfromoperationofanewnuclearpowerstation(seeparagraph5.10.1).InadditiontotheregulatorysanctionsprovidedforinChapter1ofPart3oftheEnergyBillandinordertolimittheprospectofdisputebetweentheoperatorandtheFund,theSecretaryofStatewouldencouragetheoperatortosetoutinitsFundingArrangementPlanwhatstepsthatitwilltaketomakegoodbreachesoftheFAP(wheretheyarecapableofremedy)andwhat,ifany,stepspersonsresponsiblefortheFundmightalsotakeinsuchcircumstances.

5.11.2Forexample,theFundingArrangementPlanmightsetoutthestepswhichtheoperatorwouldtaketomakegood(perhapsuptoaspecifiedvalueoroveraspecifiedperiodoftime)contributionstotheFundwhichithadfailedtomake,orwhatsecuritytheoperatorwouldarrangetobeputinplacewheretheoriginalsecurityhadlapsedorwasnolongeravailable.

5.11.3TheSecretaryofStatewouldexpecttoseesetouttheroleofpersonsresponsibleformanagingtheFundinsuchcircumstances,andthepowersandresponsibilitiesthattheywouldhaveinordertoachievesuchoutcomes.TheFundingArrangementPlanshouldmakeplainhowmuchnoticewouldberequiredtobegivenbyeachparty(inwhatform)andthetimeframeswithinwhichactionwouldberequiredtobetaken.TheSecretaryofStatewouldnotexpecttoapproveproposalsforremedialactionunlesssuchactionwasrequiredtobetakenverypromptlysoastopreventdriftinasituationwhereabreachhadoccurred.

5.11.4NoneoftheseprovisionswouldrelievethedutyontheoperatortoinformtheSecretaryofStateofitsbreach.ProvidedtheproposalswereacceptabletotheSecretaryofStateandwereadheredto,theSecretaryofStatewouldtakeintoaccounttheextenttowhichtheremedialactionproposalswereadheredtowhendeterminingwhat,ifany,enforcementactiontotakeinrelationtosuchabreach.

5.12Changeinownershiporcontroloftheoperatororsite

5.12.1TheEnergyBillgivestheSecretaryofStatepowerstoimposeobligationsundertheFundedDecommissioningProgrammeonbodiescorporatewhichareassociatedwiththeoperator,forexampleparentcompaniesorsistercompanies,inordertoensurethatprudentprovisionismadeforthefinancingofdecommissioningandcleanup.

5.12.2TheFundingArrangementPlanmustsetouttheconsequencesofachangeincontroloftheoperatororsiteandthestepstobetakentoinformtheSecretaryofStateandgivehimtheopportunitytoapprove,approvesubjecttomodificationsorconditionsortorejectanychangestotheFundedDecommissioningProgrammeingoodtimepriortosuchachangeofcontroloccurring.

5.12.3Wheretheparentconcernedissubjecttoobligationsundertheprogramme,theFundingArrangementPlanshouldrequiretheoperatortore-submititsFundingArrangementPlanforapproval.Wheretheparentisnotundersuchobligations,itsFundingArrangementPlanneedonlyrequiretheoperatortore-submititsFundingArrangementPlanforapprovalwheretheSecretaryofStaterequiresittodosoinpractice.Incertaincircumstances,inparticularwherethechangeofcontrolleadstochangestotheDecommissioningandWasteManagementPlan,theSecretaryofStatewouldexpecttheFundingArrangementPlantoimposeanobligationontheoperatortore-submittheFundedDecommissioningProgrammeasawholeforapproval.

5.12.4Sofarassistercompaniesareconcerned(i.e.whereasaresultofatransactiontheywillceasetobeassociatedwiththeoperator)wheretheyaresubjecttoobligationsundertheprogramme,theFundingArrangementPlanshouldmakesimilarprovisionasforparentcompaniessubjecttoanobligation.WherethesistercompanyisnotsubjecttoobligationsundertheprogrammetheSecretaryofStatewouldnotexpecttheFundingArrangementPlantorequiretheoperatortoinformhimabouttheproposedchangesnortomakeprovisionforre-submissionoftheFundingArrangementPlanortheprogrammeasawhole.Where(ineithercase)thecessationoftherelationshipwiththeoperatorleadstochangestotheDWMP,theSecretaryofStatewouldexpecttheFAPtoimposeanobligationontheoperatortore-submittheFundedDecommissioningProgrammeasawholeforapproval.

5.12.5BreachofanobligationintheFundingArrangementPlantonotifytheSecretaryofStateofthechangeortosubmittherelevantpartsofthe

programme(orthewholeoftheFundedDecommissioningProgrammewhereappropriate)forapprovalwould(unlessthedefenceinclause53(2)oftheEnergyBillapplies)amounttoacriminaloffenceunderclause53oftheEnergyBill,whichispunishablewithafineorimprisonmentorfollowingconvictiononindictment,both.Wheretheoffencewascommittedwiththeconsentorconnivanceof,orwasattributabletoneglectonthepartofanofficeroftheoperator,thatofficer(aswellastheoperatoritself)isliabletocriminalprosecutionandsubjecttothesamepenaltiesastheoperator.

5.12.6BeforeapprovingtheFundingArrangementPlan(ortheFundedDecommissioningProgramme,asthecasemaybe),theSecretaryofStatewillexpectconfirmationfromtheFundthatitissatisfiedthattheproposedrevisedfundingarrangements,ifany,willcomplywiththeObjective.Forthispurpose,documentssubmittedinsupportoftheFundingArrangementPlanshouldsetoutthematterstowhichtheFundwouldhaveregardincomingtothatdecision.TheSecretaryofStatewouldnot,forexample,expecttoreleasethevendorfromitsobligationsundertheprogrammeiftheFundwerenotsosatisfied;andwouldnotexpecttheFundtoreleasethevendorfromitsobligationstotheFund.Wherenecessary,theSecretaryofStatemightimposenewobligationsonthevendor,theoperator,thepurchaseroranotherassociatedcompanyoftheoperatorasappropriatetoensurethattheObjectiveweremet.

5.12.7InapprovingtheFundedDecommissioningProgrammeanddeterminingwhethertomodifytoimposefreshobligationsoncertainparties(ornottoreleasepartiesfromobligationstowhichtheyarealreadysubject)theSecretaryofStatewillhaveregardtosuchmattersas:

theviewsoftheFundontheproposedfundingarrangements;●●

thefinancialstrengthoftheproposednewowner,orinvestors,and●●

thesupportthatitwillprovidetotheoperatortoensurethattheFundaccumulatessufficientfundstomeettheoperator’sliabilitiesundertheDecommissioningandWasteManagementPlan;and

thecurrentleveloffundingascomparedtocurrentestimatesofthe●●

operator’sliabilitiesandplansforfuturefundinglevels.

evidenceoffailurebyanyofthepartiestoadheretotheirobligationsunder●●

theFundedDecommissioningProgramme.

5.12.8Furtherinformationabouttheexerciseofthepowertomodifyincaseswhereachangeofcontrolorotherrelevantchangeoccursissetoutinparagraphs5.13.1–5.13.10.

5.12.9Assumingachangeofownershipofthesiteleadstoachangeintheidentityofthesitelicensee,theEnergyBillensuresthataFundedDecommissioningProgrammemustbesubmittedbythenewoperator(andapprovedbytheSecretaryofState)priortoitsstartingtooperatethestation.ItisacriminaloffencetofailtooperateanewnuclearpowerstationwithoutanapprovedFundedDecommissioningProgrammeinplace.

5.13SecretaryofState’spowertomodifyaFundedDecommissioningProgramme

5.13.1ThematterstowhichtheSecretaryofStatewouldhaveregardwhendeterminingwhethertoapprove(ortoapprovewithmodifications)aFundingArrangementPlanwhentheFundedDecommissioningProgrammeisfirstsubmittedforapprovalaresetoutinparagraphs5.1.1–5.12.9.InformationaboutsomeofthecircumstancesinwhichoperatorsarerequiredtosubmitmodificationsforapprovalbytheSecretaryofStatefollowingfirstapprovaloftheprogrammearesetoutinparagraphs5.6.1–5.6.16.Paragraphs5.13.2–5.13.10areprincipallyconcernedwithcaseswheretheSecretaryofStatemaychoosetoexercisehispowertomodifytheFundedDecommissioningProgrammeonceithadbeenapproved.

5.13.2Indeterminingwhether(andifso,onwhatterms)toproposeamodificationtotheFundingArrangementPlanortoapproveamodificationputforwardbytheoperatororanotherpersonwithobligationsundertheprogramme,theSecretaryofStatewouldhaveregardtothematterssetoutinthisguidance,andinparticularwhetherthemodificationisanecessary,appropriateorproportionatemeanstoensurethattheObjectiveismetandtheGuidingPrinciplescompliedwith.WhereoperatorsorothersuchpersonsconsiderproposingamodificationtotheFundingArrangementPlantheyshouldthereforeconsiderhowitaffectstheprospectsoftheObjectivebeingmetandcomplieswiththeGuidingPrinciples.

5.13.3ItisforoperatorstodeterminewhethertoproposeamodificationtotheprogrammeforapprovalbytheSecretaryofState(subjecttoanyregulationsmadeunderclause46oftheEnergyBillwhichrequireoperatorstoseektheapprovaloftheSecretaryofState)(seeparagraphs5.6.1–5.6.16).Modificationsproposedbytheoperatormightincludechangestocostestimatesorcontributionschedulestotakeaccountofchangestothestationorinvestmentreturns,butmightalsoincludechangestotheFundedDecommissioningProgrammetoaccountfortechnicaloroperationalchangestothestationwhichhavehadaneffectonthecostestimatesofdecommissioningliabilitiesortheamountofwastedisposalliabilities.

5.13.4TheSecretaryofStatecanenvisagerequiringmodificationsinthefollowingnon-exhaustivesituations.

5.13.5Wheretheoperatororanotherpersonwithobligationsundertheprogrammeisinbreachoftheirobligationsundertheprogramme.

TheSecretaryofStatewouldnotexpecttomodifyaFunded●●

DecommissioningProgrammeineverycasewhereapersonisinbreach.Inmanycasesitmaybesufficienttoensurethatthepersonbringsitselfbackintocompliancewiththeprogrammeandremediestheconsequencesofthebreach.TheEnergyBillgivestheSecretaryofStatevariedpowers(suchasthepowertoimposeadirectionunderclause54)toensurethisoutcome.

Equally,itmaybethatmerelyrequiringthepersontobringitselfbackinto●●

compliancewiththeprogrammewouldnotbeappropriate.Forexample,itmaynolongerbesufficient,appropriateorproportionatetoseektoholdapersontoallitsobligationsintheoriginalapprovedprogrammebecauseofachangeinthatperson’scircumstances.Alternativelyitmightbeappropriatetointroduceconditionstotheapprovaloftheprogrammerequiringcertainactiontobetakenoradherencetocertainobligationsintheprogramme.Breachofthatconditionmayresultinanoffenceunderclause43oftheEnergyBillifthestationcontinuestooperate.

5.13.6Whereachangeofcontroloftheoperator,orachangeofabodycorporatewhichisassociatedwiththeoperatorisproposed47.

Guidanceaboutwhatisexpectedfromoperatorsifthereisachangeof●●

controloftheoperatororofanotherpersonwithobligationsundertheprogrammeissetoutinparagraphs5.12.1–5.12.9,whichtouchontheissueofmodifications.

TheSecretaryofState’sprimaryconcerninsuchaneventualitywouldbe●●

toensurethattheFundingArrangementPlancontinuestomakeadequatefinancialprovisionfortheoperator’sliabilitiesirrespectiveofthechangeofcontrol.Inthecaseofachangeofcontrol,theSecretaryofStatemightproposemodificationsto:

adjusttheliabilityoftheoutgoingparentcompanyunderanyguarantee●O

orothersupportprovidedinrelationtotheoperator’sliabilitiestotakeaccountofthefinancialcircumstancesoftheincomingparentcompany;

releasetheoutgoingparentcompanyfromitsobligations;●O

imposeobligationsontheoutgoingparentcompanywherepreviouslyit●O

hadnone;

adjustexistingobligationsonotherparentcompanies(forexample,inthe●O

caseofajointventure)totakeaccountofthepositionoftheincomingparentcompany;

imposefreshobligationsonotherexistinggroupcompaniestotake●O

accountoftheincomingparentcompany’sposition;

adjustobligationsontheoperatoraccordingly.●O

47 Achangeintheidentityoftheoperatorisnotaddressedinparagraphs5.13.1–5.13.10,becauseclause41(2)(b)requiresanewoperatorofanexisting“new”stationtosubmitanewFundedDecommissioningProgrammeforapprovalinanyevent,thereforethepowersunderclause44etseqwouldnotarise(althoughmodificationswouldbepossibleunderclause42(a)).Inadditionclause60givestheSecretaryofStatethepowertoholdtheoldoperatortocertainobligationsundertheprogramme.

5.13.7Whereatechnicaloroperationalchangeincreasesthenetpresentvalueofthethencurrentestimateoftheoperator’sliabilitiesabovethematerialitythreshold.

Asisclearfromparagraph5.6.12,theSecretaryofStatewouldexpectthe●●

operatortoseektheSecretaryofState’sapprovaltoanymodificationstotheFundedDecommissioningProgramme(otherthanthosetowhichregulationsmadeunderclause46oftheEnergyBillapply)whichsuchchangenecessitatesinaccordancewiththeprocedurelaiddowninclauses44and45oftheEnergyBill.Wheretheoperatorfailstodoso,theSecretaryofStatemightproposethenecessarymodifications,notleasttoensurethattheoperatordoesnotremaininbreachoftheprogrammeindefinitely.

5.13.8Wheretheoperatorseekspermissionfromtheregulatorstoextendthelifeofthestationbeyondtheperiodoriginallyanticipated48.

AssetoutintheDWMPguidance,anoperatormayseektonegotiate●●

arrangementsattheoutsetwhichapply(forexample,towastedisposal)intheeventofalifeextension.Evenifitdoesnot,aproposaltoextendthelifeofthestationwouldnecessitateamendmentstotheFundedDecommissioningProgrammeforwhichtheSecretaryofStatewouldexpecttheoperatortoseekhisapproval.Wheretheoperatorfailedtodoso,theSecretaryofStatewouldexpecttoproposemodificationsasnecessaryhimself.

5.13.9ItispossibletoenvisageothercircumstanceswhichgiverisetoreasonabledoubtsabouttheabilityoftheoperatororanassociatedbodycorporatetodischargeitsobligationsundertheprogrammewheretheSecretaryofStatemayconsiderwhethertoproposeamodification.Examplesincludewherethecreditratingoftheoperatororofanassociatedcompanyisdowngradedandnoappropriatealternativesecurityiscapableofbeingputinplaceorputinplacesufficientlypromptly;wherethereisasignificantandmorethanshortlivedreductioninthenetassetvalueofsuchaperson;orwhereinsolvencyproceedingsaretakeninrespectof,orthreatenedagainst,suchaperson.

5.13.10Inallcases,theSecretaryofStatemayonlyapproveamodification(whetherproposedbyhimorbyanotherperson)ifhedoessowiththeaimofensuringthatprudentprovisionismadefortheactivitiesregulatedbytheEnergyBill(seeclause45(7)oftheEnergyBill).

48 Itisrecognisedthatthisscenarioislikelytofallwithinparagraph5.13.7abovebutisincludedfortheavoidanceofdoubt.

5.14Glossary

5.14.1Fortheavoidanceofdoubt,pleasenotethatthisglossaryonlyreferstotheFundingArrangementPlanguidance.

Associated companies–meansassociatedbodiescorporatewithinthemeaningofclause62oftheEnergyBill2008.

Commissioning–meanstheprocessduringwhichplantcomponentsandsystems,havingbeenconstructedormodified,aremadeoperationalandverifiedtobeinaccordancewithdesignassumptionsandtohavemettheappropriatesafetycriteria.

Contribution schedule–meansthescheduleofpaymentswhichtheoperatorisrequiredtomaketotheFundtomeettheoperator’sliabilitiesundertheFundedDecommissioningProgrammesubmittedtotheSecretaryofStateforapprovalandapprovedbyhim(see5.5).

Decommissioning–

(a) Decommissioningbeginswhenthereactorisshutdownwithnointentionoffurtheruseforthepurposeofgeneratingelectricity.

(b) Decommissioningmeansdismantlingthestationandremediatingthesiteincludingwastemanagementbutnotincludingwastedisposaltoaconditionagreedwiththeregulatorsandtheplanningauthority

(c) Decommissioningendswhenallstationbuildingsandfacilitieshavebeenremovedandthesitehasbeenreturnedtoanendstatewhichhasbeenagreedwiththeregulatorsandtheplanningauthority.

Decommissioning liabilities–meanstheliabilitieswhichariseinrelationtodecommissioningwhichincludethewastemanagementliabilitiesbutexcludethewastedisposalliabilities.

Decommissioning and Waste Management Plan (DWMP)–meansthatpartoftheFundedDecommissioningProgrammesubmittedtotheSecretaryofStatebytheoperatorwhichaddressesthematterssetoutinclauses41(7)(a)and(b)oftheEnergyBill.

Full share of waste management costs–meansthewastedisposalliabilitiesandthewastemanagementliabilities.

Fund–meansatrustorothervehicleconstitutedforthepurposeofaccumulating,managingandinvestingmoneysobtainedfromtheoperatorforthepurposeoftheObjectiveandincludes,asthecontextpermitsorrequires,anypersonwhichisamemberof,orisresponsibleforthemanagementofthatentity.

Fund assets–meansfinancialassetsheldbytheFundforthepurposeoftheObjective.

Funding Arrangement Plan–meansthatpartoftheFundedDecommissioningProgrammewhichaddressesthematterssetoutinclause41(7)(c)oftheEnergyBill.

Generating life time–meanstheperiodbeginningwiththedateonwhichthepowerstationfirstgenerateselectricity,andendingwiththedateonwhichthereactorisshutdownwithnointentionoffurtheruseforthepurposeofgeneratingelectricity.

Guiding Principles–meanstheprinciplessetoutinparagraph5.2.6whichtheSecretaryofStatemayapplywhenconsideringwhethertoapprove,approvewithmodificationsormodifyapreviouslyapprovedFundedDecommissioningProgramme.

Hazardous waste–hasthemeaningsetoutinclause63oftheEnergyBill.

Higher activity waste–meansintermediatelevelwasteandspentfuel.

Independent fund–meansaFundwhichcomplieswiththeprincipleofindependencesetoutinparagraph5.2.6above.49

New nuclear power station–anuclearinstallationconstructedafterthecommencementofclause41oftheEnergyBill2008towhichthatclauseapplies(otherthanbyvirtueofanordermadeunderclause58oftheBill).

Nuclear Island–includesanypartofthefacilityonarelevantsitewhichmightgiverisetoradioactivewasteorotherwiseaffecttheoperator’sliabilities.

Objective–meanstheobjectivesetoutinparagraph5.2.2.

Operator–thelegalpersonwhoholdsalicenceundertheNuclearInstallationsAct1965inrelationtothesitetowhichtheprogrammerelates,orwhohasappliedforsuchalicenceinrelationtosuchasite.

Operator’s liabilities–meansthoseliabilitiessetoutintheDWMPwhichtheFundisrequiredtomeetbeingthesumofthedecommissioningliabilitiesandthewastedisposalliabilities.

49 Paragraph5.3.5setsoutdetailsofavehiclewhichtheSecretaryofStateconsidersmaymeettheindependenceprinciple.

Radioactive waste–hasthemeaningsetoutinSection2oftheRadioactiveSubstancesAct1993.

Relevant site–meansthesitetowhichtheFundedDecommissioningProgrammerelates.

Target Value–meansthevalueorsumwhichtheFundisrequiredtoachieveunderthetermsoftheapprovedFundedDecommissioningProgramme.

Waste management–means:

(a) treating,storingandtransportinghigheractivitywastependingdisposalpursuanttothescheduleagreedwiththeGovernment;

(b) treating,storing,transportinganddisposingoflowlevelwaste;

(c) treating,storing,transportinganddisposingofnon-radioactivehazardouswaste;and

(d) planningundertakenduringthegeneratinglifeofthestationorsubsequentlywhichisnecessaryinordertocarryoutdecommissioning.

Waste disposal–meansdisposingofhigheractivitywasteproducedontherelevantsiteinthemannerandsubjecttoascheduleagreedwiththeGovernment50.

Waste disposal liabilities–meanstheliabilitytopaythesumchargedtotheoperatorbytheGovernmentinconnectionwithanapprovedFundedDecommissioningProgrammeinrelationtothedisposalbyGovernmentofhigheractivitywasteproducedontherelevantsite.

Waste management liabilities–meansthecostofcarryingoutwastemanagementinsofarasthecostofundertakingthoseactivitiesisrequiredtobemetfromtheFund51.

50 ForthepurposesofthisglossarythereferencestotheGovernmentinthecontextofsettingafixedunitpriceforwasteandaschedulefortakingtitletoandliabilityforsuchwasteshouldbereadasreferencestocentralGovernmentandotherbodiesactingonbehalfofandfundedbycentralGovernment.

51 Table6setsoutmoreinformationabouttheactivitieswhichtheSecretaryofStatewouldexpecttobepaidforbytheFund.

AnnexA:Reportingrequirements

Furthertoparagraphs5.6.1–5.6.16oftheFundingArrangementPlanguidance,belowistheannualandquinquennialreportingstructuretheSecretaryofStateconsiderswouldmeettheGuidingPrinciples.

Annual report

Theoperatorwillbeexpectedtoprepareanannualreport(promptlyfollowing1 theyeartowhichitrelates)settingoutoperationalandtechnicalchangestothesitewhichhaveaneffect,aboveademinimisreportingthresholdwhichwewouldexpecttobesetoutinregulations,onthecostestimatesofdecommissioningliabilitiesortheamountofwastedisposalliabilitiesincludedintheFundedDecommissioningProgramme.

Theannualreportshouldalsoincludedetailsofotherchanges(suchas2 licenceamendmentsorregulatoryrequirements),aboveademinimisreportingthresholdwhichwewouldexpecttobesetoutinregulations,thathaveoccurredoverthepreviousyearandwhichhaveaneffectonthecostestimatesofdecommissioningliabilitiesortheamountofthewastedisposalliabilitiesincludedintheFundedDecommissioningProgramme.Theannualreportshouldalsoincludeanexplanationoftheincreaseincostsforinflation.

Assetoutinparagraph5.6.13,ontheannualreview,wherethecumulative3 effectofsuchchanges(operational,technicalorotherwise)onthecostestimatesofdecommissioningliabilitiesortheamountofthewastedisposalliabilitiesisaboveamaterialitythreshold,whichweexpectwouldbesetoutinregulations,thentheSecretaryofStatewouldexpecttheoperatorandthepersonsresponsibleformanagingtheFundtoproposeforapprovalbytheSecretaryofStateanymodificationtotheFundedDecommissioningProgrammenecessarytoupdatetheprogrammetotakeintoaccountthesechanges.

Theannualreportpreparedbytheoperatorshouldbemadeavailabletothe4 Fundpromptlyafterithasbeenprepared.TheSecretaryofStatewouldexpectthepersonsresponsibleformanagingtheFundtoreviewtheoperator’sannualreporttosatisfythemselves,withreferencetotheinformationintheoperator’sannualreport,thatnomaterialchanges(operational,technicalorotherwise)haveoccurredinthepreviousannualperiod.TheFundwouldthenbeexpectedtoprepareandprovidetotheSecretaryofStatetheannualreportfromtheoperatorandanannualreportonthesizeandperformanceoftheFund.

5 ThepersonsresponsibleformanagingtheFundwillbeexpectedtotakeadvicefromsuitablyqualifiedexpertsoperatingunderappropriatelevelsofprofessionalindemnitycoverinreviewingtheoperator’sannualreportandinrelationtothereviewoftheFund.

6 TheSecretaryofStatewouldexpecttheannualreporttobedrawnupandsubmittedtohimpromptlyfollowingtheendoftheperiodtowhichitrelates.

7 TheSecretaryofStatewouldexpecttheannualreporttobeaddressedtohim.

8 Duringthedecommissioningphase,theoperatorandthepersonsresponsibleformanagingtheFundwillbeexpectedtoprovideannualreportsasoutlinedinparagraph5.8.5.

Quinquennial report

BoththeoperatorandthosepersonsresponsibleformanagingtheFund9 willbeexpectedtoprepareandpublishanin-depthreviewoftheFundedDecommissioningProgrammeonaquinquennialbasis.TheSecretaryofStatewouldexpecttheoperatortoberesponsibleforreportingonmatterswhichconcernedtheDecommissioningandWasteManagementPlan,andthepersonsresponsibleformanagingtheFundtoreportonmatterswhichconcernedtheFundingArrangementPlan.

TheSecretaryofStatewouldexpectthequinquennialreportstoaddressthe10 followingissues:

First,theoperatorshouldprovideadetailedsummaryofthechanges●●

(operational,technicalorotherwise)tothesitewhichhavehadaneffectonthecostestimatesofthedecommissioningliabilitiesortheamountofwastedisposalliabilitiesassetoutintheannualreportsforeachofthepreviousfiveyears.TheoperatorshouldalsocarryoutatechnicalreviewastotheadequacyofthearrangementssetoutintheDecommissioningandWasteManagementPlan,takingintoaccountforexample,newadvancesintechnologyorchangestoestablishedpractices.Theestimatesofthecostsofdecommissioningliabilitiesandtheamountofwastedisposalliabilitiesshouldbere-assessedinthelightofthechangesandthetechnicalreviewandtheoperatorshouldproposemodificationstothetheDecommissioningandWasteManagementPlantotakethesefactorsintoaccount.Theoperatorshouldsubmititsreportofthein-depthreviewoftheDecommissioningandWasteManagementPlantothepersonsresponsibleformanagingtheFundpromptlyafterithasbeenprepared.

Second,thepersonsresponsibleformanagingtheFundshouldbesatisfied●●

withtheadequacyandtheaccuracyoftheinformationintheoperator’sreportandtheproposedmodificationstotheDecommissioningandWasteManagementPlanandapprove,or,asnecessary,suggestmodificationstotheproposedamendmentstotheDecommissioningandWasteManagementPlan.

Third,thepersonsresponsibleformanagingtheFundshouldprovidea●●

detailedsummaryofthesizeandperformanceoftheFundbasedontheannualreportsforeachofthepreviousfiveyearsandtakingintoaccount,forexample,achangeininvestmentpolicyorsharepricefluctuationsaffectingthevalueoftheinvestments.ThepersonsresponsibleformanagingtheFundshouldalsocarryoutareviewoftheexpectedperformanceoftheFundandthelikelihoodthattheFundwouldgeneratesufficientmoneystodischargetheoperator’sliabilitiesinfullasandwhenthosemoneyswereneeded.

Fourth,theSecretaryofStatewouldalsoexpectthosepersonsresponsible●●

formanagingtheFundtoreviewtheFundingArrangementPlaninthelightofthechangesreferredtoandtoconsider,inparticular,what,ifany,modificationstotheFundingArrangementPlanwerenecessarytoensuretheFundmeetstheoperator’sliabilities.TheSecretaryofStatewouldalsoexpectthosepersonstoreviewandtakeintoaccountactualandexpectedinvestmentreturnsandexpectedstationlife.ThepersonsresponsibleformanagingtheFundwillbeexpectedtotakeadvicefromsuitablyqualifiedexpertsoperatingunderappropriatelevelsofprofessionalindemnitycover.

11 TheSecretaryofStatewouldexpectthequinquennialreporttosetout,atleast,there-assessedcostestimatesfordecommissioningliabilities,changestotheamountofwastedisposalliabilities,theexpectedadequacyoftheFundtomeetitsliabilitiesandmodificationstotheFundedDecommissioningProgrammefortheSecretaryofStatetoapprove.

12 TheSecretaryofStatewouldexpectthequinquennialreporttobedrawnupandsubmittedtohimpromptlyfollowingtheendoftheperiodtowhichitrelates.

13 TheSecretaryofStatewouldexpectthequinquennialreporttobeaddressedtohim.

14 Thequinquennialreviewwillreplacetheannualreviewfortheyearforwhichitisprepared.

AnnexB:TheConsultationCodeofPracticeCriteria

Thesixconsultationcriteria:

1 Consultwidelythroughouttheprocess,allowingaminimumof12weeksforwrittenconsultationatleastonceduringthedevelopmentofthepolicy.

2 Beclearaboutwhatyourproposalsare,whomaybeaffected,whatquestionsarebeingaskedandthetimescaleforresponses.

3 Ensurethatyourconsultationisclear,conciseandwidelyaccessible.

4 Givefeedbackregardingtheresponsesreceivedandhowtheconsultationprocessinfluencedthepolicy.

5 Monitoryourdepartment’seffectivenessatconsultation,includingthroughtheuseofadesignatedconsultationco-ordinator.

6 Ensureyourconsultationfollowsbetterregulationbestpractice,includingcarryingoutaRegulatoryImpactAssessmentifappropriate.

ThecompletecodeisavailableontheCabinetOffice’swebsite,addresshttp://www.cabinetoffice.gov.uk/regulation/consultation/index.asp

Consultation on Funded Decommissioning Programme …webarchive.nationalarchives.gov.uk/+/http:/ ·...

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