Debate over nuclear legal challenge heats up

1002 words/10 December 2009/European Daily Electricity Markets/EURODE/English/(c)2009 Heren Energy Ltd

A top energy lawyer has dismissed the possibility of a legal challenge against UK nuclear industry “subsidies”.
The anti-nuclear lobby in the UK has repeatedly raised the possibility of a legal challenge, with supporters including Liberal Democrats shadow energy secretary Simon Hughes, on the grounds that alleged financial assistance may be an infringement of EU competition laws (see EDEM 20 October 2009).
The seven areas of subsidy were identified in the report Nuclear Subsidies, published last month by the influential pressure group Energy Fair. These were:
limitations on liabilities
underwriting commercial risks
protection against terrorist attack
the cap on short- to medium-term costs of disposing of nuclear waste
a cap on long-term costs of disposing of nuclear waste
the cost of decommissioning nuclear plants being ring-fenced
institutional support for the nuclear industry.
But Paul Rice, energy chief at law firm Pinsent Masons, told ICIS Heren that such subsidies did not exist: “They are not subsidies as such, and indeed, all costs are going to be borne by the private sector,” he said.
Energy Fair said in a statement that it had “received legal advice that the subsidies for nuclear power may well be illegal under EU competition laws”.
But Paul Rice disagrees. “Limitations on liabilities do not exist,” he said. “There is no subsidy with regard to issues such as cost over-runs whatsoever, and there is no underwriting of commercial risk. This is going to be borne wholly by the private sector.”
Rice added that the rules in place related to liability only cover industrial and commercial responsibility in the event of an “incident”.
 What is in place is to do with the channelisation of liability towards the operator, which reflects international convention,” he said. “The law makes it immediately identifiable who would be liable in the event of an incident but there is no commercial subsidy.”
Rice said that liability in the event of “a nuclear occurrence” was “the only thing that might be akin to a subsidy... [but] you’re talking about hundreds of millions, if not billions of pounds. In this situation, the operator is liable up to a point, but above that point, the government is liable. It’s completely common globally.”
Waste disposal
The controversial issue of nuclear waste disposal has also been raised repeatedly by the anti-nuclear lobby, as debate continues over the most effective disposal methods, and government plans are not yet set in stone.
Speaking to ICIS Heren, a spokesman for Simon Hughes said: “Until you have a method of nuclear waste disposal, no one knows what the costs will be. Yet we have to dispose of it, because containing it will cost £1.3bn a year.”
However, Rice said that these costs would also be covered by operators as a contractual necessity through the funded decommissioning plan (FDP), and overseen by the nuclear liabilities financing assurance board (NLFAB), an independent body under the UK’s Department for Energy and Climate Change (DECC).
“NLFAB will work out the unit price for future disposal of waste to a geological facility,” Rice said. “The whole cost of the financing and the construction of that facility is going to be met by the private sector.“That cost is going to have to be ring-fenced from the outset,” Rice added, “so even if the companies go insolvent, the pot of money will be available for the government to call upon.” Rice added that FDP would also cover the long-term costs of waste disposal.
“Operators will not get permission to build any new nuclear capacity unless they have got an FDP in place,” he said. “That FDP will cover the cost of decommissioning the plant and the cost of disposing of all the waste.”
But the Liberal Democrats remained stoic in their nuclear opposition. “After 40 years the British nuclear industry still has no scientifically proven, properly researched method of disposing of its waste,” Hughes’ spokesman told ICIS Heren. “Until they do so, it is absurd for the government to say that it has any idea of what the real costs of nuclear will be.”
Generation costs
The cost of power generation is a further point of contention within the nuclear debate. A recent Citigroup report into the corporate risks concluded that three of the risks faced by developers – construction costs, power prices, and operational costs – were so large and variable that “individually, they could each bring even the largest utility company to its knees financially”.
Hughes’ spokesman added: “until the government addresses such risks then investors shouldn’t be investing in nuclear power”.
But the government has repeatedly stated that it will not subsidise the industry. “As we have always said, we don’t think there should be any nuclear industry subsidy,” a DECC spokesman told ICIS Heren. “We believe it can pay for itself,” (see EDEM 20 October).
Last month the government approved 10 of 11 sites put forward as possible locations for the next generation of UK nuclear reactors (see EDEM 9 November 2009).
Further, the newly established independent Infrastructure Planning Commission will start considering energy project applications in March 2010. It aims to reduce the time taken for major infrastructure projects to receive consent from 100 weeks to 35 weeks (see EDEM 23 October 2009).
French operator EDF has said it intends to have the first of a new generation of nuclear reactors online in the UK by 2017, despite passions running high within the anti-nuclear lobby.
“Nuclear power is dirty, dangerous and ridiculously expensive,” Hughes said.
But this argument, along with any talk of EU law infringements, appears unlikely to suffice. With momentum building towards the UK’s nuclear future, any chance of a legal challenge against alleged subsidies based on competition law – whether viable or not – may soon be obsolete.
“I can’t see a legal challenge on the basis of the points that have been raised,” Rice said. “But maybe someone else has other ideas.” JS