Sunday, 6 June 2010

Chris Huhne warns of £4bn black hole in nuclear power budget
Wed, 2 Jun 2010

Energy secretary blames predecessors for avoiding tough decisions in 'classic example of short-termism'.

Britain is facing a £4bn black hole in unavoidable nuclear decommissioning and waste costs, Chris Huhne, the energy and climate change secretary disclosed tonight. The decommissioning costs over the next four years revealed by officials to Huhne are so serious that he has already flagged the crisis up to the cabinet.

The revelation places an unexpected burden on his department's £3bn annual budget ahead of difficult spending negotiations this summer. "As you can imagine, this is a fairly existential problem. The costs are such that my department is not so much the department of energy and climate change, as the department of nuclear legacy and bits of other things," Huhne told the Guardian.

The additional costs derive from slowly rising expenditure on nuclear decommissioning, and falling income due to the closure of ageing power plants, Huhne said. Huhne disclosed that in current financial year the Nuclear Decommissioning Authority's budget is expected to be in balance.From 2011-12, the deficit suddenly rises to £850m, in 2012-13 the gap increases further to £950m and then to £1.1bn in the two subsequent years.

The black hole is equivalent to wiping out one-sixth of the overall cuts in public spending identified by the Treasury with such fanfare last week. But Huhne insisted: "I do not think it is possible for anyone responsibly to stand aside and say we are not going to deal with it. We just have to, but what we are effectively paying for here is decades of cheap nuclear electricity for which we have suddenly got a massive postdated bill." The revelation will also hand further ammunition to those who say a new generation of nuclear power stations in Britain will end up being more expensive than the industry claims.

Huhne – a Liberal Democrat and nuclear sceptic – refused to make that argument directly, saying instead it just underlined the need to ensure that any new nuclear stations had watertight agreements that debar all public subsidy. In any case there are growing signs that the nuclear new-build timetable is slipping as costs rise. Huhne, already in talks with the Treasury about the black hole, said it was very hard to avoid the expenditure: "There are genuine nuclear safety issues here that means it has to be paid for."

If the Treasury refuses to shoulder the full costs, Huhne's department would inevitably have to make cuts with possible implications for energy efficiency and climate change programmes. Huhne revealed that as soon as he discovered the problem, he travelled to Sellafield nuclear plant in Cumbria and concluded: "There is no way of dealing with this, but by making sure this expenditure goes ahead." Since the NDA was formed in 2004, the clean-up of legacy nuclear facilities has been paid for with a mix of funds – roughly half in direct government grants and half generated commercially by the NDA – and allocated in three-year cycles.

Huhne said: "My predecessors avoided taking tough decisions when they should have done and the result is that it is much more expensive to deal with than if we had dealt with it in a timely manner back in the 70s and 80s. A lot of it is spent fuel, and was not dealt with at the time. It is a classic example of short-termism. I cannot think of a better example of a failure to take a decision in the short run costing the taxpayer a hell of a lot more in the long run."

The Liberal Democrats oppose new stations, but have said they will abstain in any key Commons votes on the issue so long as their Conservative coalition partners ensure no new station enjoys any overt or hidden public subsidy. Huhne said: "New build is clearly more efficient, there is less waste, and the decommissioning can and should be designed in, but … we need to make sure all the costs are properly dealt with."