NDA beaten up over budget, again

6 March 2008

The UK Nuclear Decommissioning Authority’s (NDA’s) “fifth attempt” at a nuclear decommissioning budget has faced a barrage of criticism from MPs on the Westminster Public Accounts Committee.

The uncorrected transcript of the 25 February meeting, which is an as yet unapproved version of the session, shows MPs did not pull any punches when criticising the NDA’s rising budget and the implications it has for the reliability of new build cost estimates.

The criticism follows publication of an unfavourable report on the NDA entitled The Nuclear Decommissioning Authority: Taking forward decommissioning by the National Audit Office, and strong disapproval of the NDA’s draft business plan for 2008/2011 by the Environment Agency.

Current cost estimates stand at £73 billion. Committee chairman Edward Leigh asked NDA chief executive Ian Roxburgh: “We are talking about serious amounts of public money. This is now the fifth attempt, Dr Roxburgh. The estimates are still growing rapidly; should they not have stabilised by now?”

Roxburgh replied that establishing an agreed process across all sites and understanding the work required has contributed to the rise. He also said it had always been accepted that reaching a “final figure" would take a number of years.

Leigh persisted, saying the budget process was not “rocket science” and has expected costs such as engineering support, human resources, and financial services, which are also increasing rapidly. “This worries me because it suggests that perhaps you are not really in control of what is going on,” he said.

Roxburgh said he shared the chairman’s concern and pointed out that old nuclear sites were not set up to manage figures. He went on to say the UK government’s strategy was that only when you brought in “world-class management” would you get “absolutely world-class numbers”.

The NDA boss cited significant problems with the private sector supply chain’s figures as another factor in the spiralling costs and went on to praise the “first-class management” that resulted in the recent low-level waste repository competition process and its budget.

Leigh then went on to say the increase in near-term costs that resulted in a 41% lifetime cost increase suggested that the NDA was “not really in control” and the estimates “mean very little indeed”.

He pressed Roxburgh on the accuracy of the £73 billion figure, to which Roxburgh said the figure was reliable for the moment but would increase as understating increases. Roxburgh also said the NDA would not, in general, continue to use cost plus contracts and was implementing a new contract process.

The chairman then questioned the director of the Department for Business, Enterprise and Regulatory Reform (DBERR) Nuclear Unit, Mark Higson. Leigh asked how, given the unreliability of existing decommissioning costs, could anyone have confidence in the notion mooted in the recent UK government White Paper that energy firms would meet decommissioning costs?

Higson replied: “The government's proposals are to put in place everything that is reasonable to ensure the taxpayer does not pick up the cost.”

But Leigh went on to say there was “absolutely no assurance whatsoever”, given the NDA cost rises, that new build decommissioning costs would be met by private firms.

“You have virtually plucked a figure out of the sky and you cannot say with any degree of certainty that the energy companies will be able to meet the costs. You will long be gone and so will I but it is very likely that some future Public Accounts Committee will be discussing how the taxpayers will be picking up the tab once again. That is the truth,” he said.

Higson said every possible protection was in place but this didn’t reassure the chairman.

Committee member Angela Browning MP asked why there is such a difference across sites for efficiency fees that have been paid as a percentage of budgeted costs. NDA divisional director, assurance, James Morse denied it was due to some sites being undisciplined in the way they deal with things.

The little-discussed subject of what ‘plan B’ exists if no communities volunteer to host a deep waste repository was raised by committee member Philip Dunne MP.

Higson said it would be “wrong” to speculate on a situation where no community volunteers but Dunne said it is essential that the DBERR formulates a fallback position “because it seems highly likely that may be required”. “You may not want to tell us about it today but I urge you to think about one because I think you will need one in due course,” Dunne continued.

Committee member Austin Mitchell MP offered sympathy to the NDA for having to clean up what he saw as “one of the biggest cons in British history” – the result of a nuclear industry that had claimed it could produce cheap, competitive power from a British industry which led the world.

But Mitchell then alleged that the NDA was “perpetuating the con” by presenting the “reassuring face” of this confidence trick and pretending that a finite figure can be put on something which is going to escalate each year.

Roxburgh reiterated that the NDA is in the middle of a process, and that costs would increase as understanding increases. He continued: “As you bring in this world-class management I am satisfied that the numbers will first stabilise and, secondly, they will start to come down. I am quite convinced of that.”

Mitchell acknowledged that no funding model could anticipate some of the unexpected problems at certain nuclear sites. However, he hit out at the DBERR, saying: “The department is complicit in this because you want a finite figure put on this which you can accept because you want to say that the new [nuclear] programme, carefully costed, will not incur this kind of decommissioning cost, that the industry itself can pay for it. That, too, is a myth.”

Mitchell went on to say there would be a “massive rejection” of a deep waste repository and then questioned whether the NDA was being “exploited and conned” by site licensees, which decide what needs to be done and how much it will cost.

The chairman closed the meeting by commenting to Roxburgh: “You are obviously an extremely competent person doing an impossible job. I wish you well.”


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