The Mackerron Report
The NLF Trustees welcome the report commissioned by the Department for Energy and Climate Change (“DECC”), “Evaluation of nuclear decommissioning and waste management”, published on 2 March 2012. Written by Professor Gordon Mackerron of Sussex University, the report sets out and evaluates the history of the UK approach to nuclear decommissioning, waste management and clean up.
We are pleased to note the comment of the Secretary of State for DECC that the report underlines the Government’s commitment to deal with the UK’s nuclear legacy and to ensure that the nuclear new build programme learns every lesson from past mistakes. He has also said that “we will not place a costly new millstone around the neck of future generations”.
The report, which can be downloaded from DECC’s website, examines the work of the Nuclear Decommissioning Authority (“the NDA”), the NLF and other bodies involved in the decommissioning and waste management of the UK civil nuclear industry. The NLF Trustees are pleased to endorse Professor Mackerron’s observation that “the turning point” in the previous history of delay, was the publication of the Government White Paper “Managing the Nuclear Legacy” in 2002 and the consequential establishment of the NDA.
The executive summary to the report acknowledges the important role of the NLF and the synergies that can be gained by the NLF and the NDA working with others whose responsibility it will be to manage the liabilities generated by new build (page 5)
We have noted comments in the report regarding Fund adequacy. It is an important part of the duties of the Trustees to seek to ensure that there are sufficient monies accumulated within the Fund to finance all the decommissioning and waste management costs that will fall to it. Paragraphs 8.21 and 8.22 (page 96) of the report are relevant in this regard –
“8.21 The current valuation of the NLF of £8.6 billion is around double the current liability estimate of £4 billion (discounted), though its current rate of accumulation is significantly less than the discount rate applied (3%). The undiscounted value of the fund is around £12 billion. Whether the fund will be able to meet all the BE liabilities will depend on a range of factors (in addition to whether the current approach to its investment regime is maintained), including the variation in UK interest rates, the extent of any life extensions to the AGR fleet, and the degree to which the scale of the liabilities can be successfully managed.
8.22 The risk is that if the fund is insufficient, the advantages of the (segregated) funding model would be lost, there would be a reputational impact in terms of the nuclear sector having been seen not to have “paid its way”, and future taxpayers would need to pick up the remaining liability. However, Government sees value, particularly in the present macro-economic climate, in using the NLF to reduce the amount of borrowing that the public sector needs to undertake in the short term, thus somewhat reducing future taxpayer liabilities. It is beyond the scope of this report to assess the relative merits of these approaches to the NLF’s investment policy”.
Furthermore, the executive summary which sets out the main lessons from the study concludes with the following –
“Current policy requires the NLF to invest almost wholly in the National Loans Fund, offering relatively low returns but at the same time reducing the Government’s overall debt in the short-term. This approach has implications for the likelihood that the fund will be able to cover all relevant liabilities in the longer term”.
We believe that the report is a useful and timely assessment of the history of decommissioning and waste management in the UK and provides helpful lessons that can benefit everyone engaged in this important work. For our part, we will continue to engage with Government, the NDA, EDF and others to ensure that the Fund fulfils its purpose.
Lady Balfour of Burleigh
For and on behalf of the Nuclear Liabilities Fund