During the discussions on the European directive on the internal electricity market, the European Commission (EC) argued that legislation concerning the use of nuclear decommissioning funds should be addressed under the Euratom Treaty, rather than under the electricity market directive (2003/54/EC). Adoption of this directive – on 26 June 2003 – was secured by adding two statements signalling the commitment of the European institutions to ensure that decommissioning funds would not be used in such a way as to distort the market:

Interinstitutional statement

The European Parliament, the Council and the Commission underline the need for Member States to ensure that adequate financial resources for decommissioning and waste management activities, which are audited in Member States, are actually available for the purpose for which they have been established and are managed in a transparent way, thus avoiding obstacles to fair competition in the energy market.

Commission statement

The Commission notes the importance of ensuring that funds established for the purpose of decommissioning and waste management activities, which relate to the objectives of the Euratom Treaty, are managed in a transparent way, and used only for the said purpose. In this context, it intends, within the scope of its responsibilities of the Euratom Treaty to publish an annual report on the use of decommissioning and waste management funds. It shall pay particular attention to ensuring the full application of the relevant provisions of Community law.

USE OF FINANCIAL RESOURCES

On 26 October this year, the EC published its first report on the use of financial resources earmarked for the decommissioning of nuclear power plants, COM(2004) 719. In order to compile the report, at the end of April 2004 the Commission sent a letter to the 14 member states that have nuclear plants asking for details of how financial resources earmarked for decommissioning were used. Between them, these countries have 155 operating reactors, of which around 50-60 are likely to be decommissioned by 2025. The following 14 countries were contacted: Belgium, Czech Republic, Finland, France, Germany, Hungary, Italy, Lithuania, the Netherlands, Slovakia, Slovenia, Spain, Sweden and the UK. However, the Commission said that the exercise failed to provide any additional information beyond what it already held. One country – Italy – did not respond to the letter.

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The options for using these resources are vast and could possibly give rise to anti-competitive practices

The report notes that across the 14 member states that have nuclear plants, there are widely differing situations, both in terms of decommissioning strategies and of the way financial resources are managed. Ten member states have chosen external management, where the decommissioning funds are separated from the accounts of the nuclear operator. The Commission believes that this situation offers the greatest transparency and, probably, the best guarantee as to the ultimate use of the funds.

In France and Germany, however, decommissioning funds are entered in the accounts of the electricity producers in the form of provisions. Such internal management of financial resources allows very flexible use to be made of resources and does not offer the same transparency as external management, the report notes. The options for using these resources are therefore vast and could possibly give rise to anti-competitive practices on the internal market in electricity.

The UK and Belgium have different modes of management. In Belgium, the funds were managed internally until 2003. Since the law of 11 April 2003 was enacted (on provisions created for the decommissioning of nuclear plants and for management of irradiated fissile materials from those plants), these resources have been held in the accounts of the nuclear operator in the form of provisions in which the state holds a ‘golden share’. This enables the state to enter a veto if it considers that the management of the resources is liable to compromise their security.

In the UK the two nuclear operators are in different situations. The financial resources of BNFL remain in internal accounts but are managed in a particular way that departs from the company’s general investment policy. These funds are due to be transferred to the Nuclear Decommissioning Authority when it becomes operational – due in April 2005. British Energy is currently undergoing restructuring and faces an uncertain future. A new decommissioning fund is due to be set up to which the state would contribute.

TOWARDS HARMONISATION

The Commission is now asking the member states to provide it with further information which it will use first of all to come up with a common framework and, in the longer term, to harmonise the methods by which decommissioning is financed in the European Union.

Until legislation on nuclear safety and management of radioactive waste is passed (see NEI October 2004, p6), the Commission intends to present a recommendation in 2005 asking the member states to ensure that sufficient financial resources – to be used solely for future decommissioning work – are set aside during the operating period of nuclear power plants, and that these resources are managed with complete transparency.

Steve Kidd December 2004 pq

Investors require a quick return on their money and the financial profile of a nuclear project does not fit in with this