Third Report - The future of the Advanced Gas-cooled Reactors

Select Committee

Public Accounts Committee HC 118 20 May 2022

Report Status Government responded

Conclusions & Recommendations 31 items (10 recs)

Source View on Parliament website

Government Response (AI assessment · 31 of 31 classified)

Accepted 13

Deferred 5

Not Addressed 4

Rejected 2

Recommendations

10 results

2 Accepted

The estimated cost of decommissioning has nearly doubled since 2004–05 and there remains a significant...

Recommendation

The estimated cost of decommissioning has nearly doubled since 2004–05 and there remains a significant risk that the costs will rise further. The estimated cost of decommissioning the AGR stations, plus the PWR at Sizewell B, has increased from £12.6 … Read more

Government Response Summary

The Department, working with the trustees of the Fund, should ensure the estimates make explicit allowance for the risk of optimism bias and report back to the Committee on the new estimates when they are available. They will reflect the revised costs for defueling/deconstruction and uncontracted liabilities.

HM Treasury

3 Accepted

The terms of the 2009 sale of the nuclear stations agreed by the Department with...

Recommendation

The terms of the 2009 sale of the nuclear stations agreed by the Department with EDFE placed a disproportionate amount of risk for meeting future decommissioning costs on the taxpayer. The negotiations surrounding the sale of the stations to EDFE … Read more

Government Response Summary

The department agrees to respond by August 2022, but states that FDP policies for new nuclear stations already build upon lessons learned from the AGR stations, highlighting the Energy Act 2008 requirements and periodic reviews of sufficiency.

HM Treasury

4 Deferred

EDFE’s timetable for the closure of the stations will result in a significant reduction in...

Recommendation

EDFE’s timetable for the closure of the stations will result in a significant reduction in the UK’s generating capacity until new capacity comes online. In 2020, nuclear power accounted for 16% of UK electricity generation. The closure of seven nuclear … Read more

Government Response Summary

The government disagrees with the recommendation as drafted, stating that extensions of station lifespans are a matter for EDF and the relevant regulator (ONR). They will ask EDF to set out their plans for how they will work with the regulator to see if extensions are possible and will aim to provide further detail to the Committee by the end of 2022.

HM Treasury

5 Accepted

We are not convinced the Department has struck the right balance in incentivising the NDA...

Recommendation

We are not convinced the Department has struck the right balance in incentivising the NDA and EDFE to deliver safe and efficient defueling of the AGR stations on time while reducing costs. The Department has introduced financial incentives to encourage … Read more

Government Response Summary

The government agrees to write to the Committee by November 2022 outlining the governance and oversight for monitoring the impact of the incentive on delivery and how that indicates effectiveness of the mechanism.

HM Treasury

6 Accepted

Arrangements for transferring nuclear stations to NDA are worryingly under- developed, and there is a...

Recommendation

Arrangements for transferring nuclear stations to NDA are worryingly under- developed, and there is a risk that transfer negotiations between EDFE and NDA could drag on and increase the costs to the taxpayer. The first of the stations could transfer … Read more

Government Response Summary

The government agrees to provide a detailed transfer plan for Hunterston B by May 2023 and will share it with the committee, along with a summary of progress for other stations.

HM Treasury

7 Not Addressed

Given the scale and complexity of decommissioning the AGR stations, we are concerned that the...

Recommendation

Given the scale and complexity of decommissioning the AGR stations, we are concerned that the Department’s oversight of a complex set of governance arrangements is itself not subject to sufficient scrutiny and challenge. The Department is performing a variety of … Read more Given the scale and complexity of decommissioning the AGR stations, we are concerned that the Department’s oversight of a complex set of governance arrangements is itself not subject to sufficient scrutiny and challenge. The Department is performing a variety of roles with regard to the decommissioning of the AGRs: it negotiated the decommissioning agreements with EDFE and has an ingoing role in ensuring the agreements work in the interest of the taxpayer; it is the sponsoring department of the NDA but will need to ensure that both the NDA and EDFE work effectively, for example to ensure that a site licence is granted by the regulator to the NDA prior to the handover of each station; and it has existing relationships with EDFE in relation to new nuclear projects. However, the centre of government has yet to put in place arrangements that can provide assurance that the Department is discharging its various responsibilities appropriately and that the decommissioning programme is performing effectively. The Department told us there were no immediate plans to include the programme in the Government Major Projects Portfolio (GMPP), which provides independent assurance of government’s riskiest or costly projects, but it expects it to do so when the stations transfer to the NDA. In the meantime, the Department is developing metrics that would be akin to GMPP to provide assurance to HM Treasury and Cabinet Office. However, these metrics have not yet been developed. Recommendation: The Department should write to the Committee within the next six months setting out how it is assuring itself that it is discharging its oversight role effectively and detailing the current and future plans for reviewing the Department’s own performance. In addition, despite the Department’s assertions to the contrary, it should write to the Committee and explain why it shouldn’t place the programme on GMPP at an earlier stage in the transfer phase from EDFE to NDA so it can benefit from advice on Show less

Government Response Summary

The Clerk of the House and Clerk of Parliament will oversee the programme and manage short-term risks to value for money to avoid nugatory expenditure.

HM Treasury

11 Accepted

EDFE has recently brought forward the closure date for five out of the seven AGR...

Recommendation

EDFE has recently brought forward the closure date for five out of the seven AGR stations. EDFE told us it expects the stations to stop operating at their current closure dates but acknowledged that early closure was always a risk. … Read more

Government Response Summary

The government agrees to ensure the 2022 revaluation of decommissioning liabilities makes explicit allowance for the risk of optimism bias and will report back to the Committee on the new estimates by July 2023.

HM Treasury

14 Accepted

The Department told us it did have other rights to direct EDFE, for example it...

Recommendation

The Department told us it did have other rights to direct EDFE, for example it has the power to change decommissioning plans. If the Department, for example, identified material cost saving opportunities of more than £5 million it told us … Read more

Government Response Summary

The government refers to its response to recommendation 5, stating it needs to assure itself that the incentives are working and will act accordingly.

HM Treasury

21 Accepted

After the AGR stations are defueled EDFE will transfer the stations to NDA who will...

Recommendation

After the AGR stations are defueled EDFE will transfer the stations to NDA who will be responsible for completing the rest of the decommissioning process. The first 30 Qq 3, 7; C&AG’s Report para 1.2–1.3 31 Qq 3–5 32 Q … Read more

Government Response Summary

The government agrees to complete a feasibility study within 12 months and report back to the Committee regarding the future use of nuclear land.

HM Treasury

31 Acknowledged

Given the centrality of its role we asked the Department whether its own role was...

Recommendation

Given the centrality of its role we asked the Department whether its own role was subject to sufficient scrutiny and whether AGR decommissioning should be included in the Government Major Projects Portfolio. The Department told us that similar concerns had … Read more

Government Response Summary

The government agrees and states that monitoring, reporting, and assurance processes were put into place and will revert with further details and how these processes provide appropriate oversight and facilitate the necessary scrutiny and challenge. The department will also approach the IPA for their support.

HM Treasury

Conclusions (21) Observations and findings — click to expand

1 Conclusion Acknowledged

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Business, Energy & Industrial Strategy (the Department), the Nuclear Decommissioning Authority (NDA) and EDF Energy (EDFE) on the decommissioning of the UK’s fleet of Advanced Gas-cooled Reactor (AGR) nuclear power stations.1

Government Response Summary

The response provides background information on the UK's nuclear power stations, the Nuclear Liabilities Fund, and the decommissioning process, but does not address any specific recommendation.

8 Conclusion Acknowledged

The Committee has previously identified significant uncertainty regarding the estimation of decommissioning costs. We examined, for example, the NDA’s management arrangements for decommissioning the Magnox nuclear power stations in 2020 and identified significant difficulties estimating decommissioning costs. We concluded that the NDA did not have a full understanding of the …

Government Response Summary

The department agrees that there remains a significant risk that decommissioning costs will rise further and refers to their response to recommendation 2.

9 Conclusion Not Addressed

The estimated cost of decommissioning the AGR stations, plus the PWR at Sizewell B, increased from £12.6 billion in 2004–05 to £23.5 billion in 2020–21 in real terms. We asked the Department why the estimated cost of decommissioning the AGRs had increased to such an extent. The Department asserted that …

Government Response Summary

The government notes the cost increases and refers to its response to recommendation 2.

10 Conclusion Accepted

There remain significant uncertainties which if managed poorly could increase decommissioning costs further. The estimated cost of defueling the seven stations, for example, ranges between £3.1 billion and £8 billion depending upon how quickly they can be defueled and how soon defueling starts once a station closes after stopping electricity …

Government Response Summary

The government agrees with the recommendation to ensure estimates make explicit allowance for the risk of optimism bias as part of the 2022 revaluation. The department will respond by July 2023.

12 Conclusion Accepted

In 2015, the then Shareholder Executive, on behalf of the Department undertook a review of the arrangements with EDFE for decommissioning the AGR stations. It concluded that the existing agreements did not incentivise EDFE to look at more innovative or cost- effective ways to minimise decommissioning costs. Between late 2017 …

Government Response Summary

The government agrees with the Committee’s recommendation and will respond to the Committee by November 2022, outlining the governance and oversight for monitoring the impact of the incentive on delivery and how that indicates effectiveness of the mechanism.

13 Conclusion Accepted

A review commissioned by the Department during the negotiations suggested that the £100 million potential fee might not be enough incentive for EDFE to place greater focus on the AGR stations given the potential value of its other UK interests.20 We therefore queried whether the £100 million financial incentive was …

Government Response Summary

The government agrees with the Committee’s recommendation and will respond to the Committee by November 2022, outlining the governance and oversight for monitoring the impact of the incentive on delivery and how that indicates effectiveness of the mechanism.

15 Conclusion Acknowledged

The assets of the Fund have been created from the contributions made by the station operators, income from investments, capital injections from government and the proceeds from the sale of the Fund’s shares in British Energy. Despite EDFE extending the operating lives of all the AGR stations, its financial contributions …

Government Response Summary

The department agrees that the terms of the 2009 sale of the nuclear stations agreed by the Department with EDFE placed a disproportionate amount of risk for meeting future decommissioning costs on the taxpayer and refers to their response to recommendation 3.

16 Conclusion Accepted

We asked why, given the amount of uncertainty surrounding the costs, and concerns about the adequacy of the Fund to cover this, the risks of decommissioning were being entirely borne by the taxpayer. The Department said that the £100 million agreed with EDFE was a meaningful financial incentive to manage, …

Government Response Summary

The government refers to its response to recommendation 3, stating that the terms of the 2009 sale placed a disproportionate amount of risk on the taxpayer.

17 Conclusion Accepted

The Department emphasised that it was applying significant learning from the experience of decommissioning the Magnox and AGR stations. For new nuclear stations a funded decommissioning plan has to be in place before construction begins. The Department told us that it was “building from the start with decommissioning in mind” …

Government Response Summary

The department agrees with the committee’s recommendation and will respond by August 2022 and states that the funded decommissioning plan (FDP) policies in place to support the development of new nuclear stations already build upon what was learnt from the AGR stations. It highlights aspects of the Energy Act 2008 and the requirements for operators of new nuclear power stations.

18 Conclusion Accepted

Nuclear power contributed around 16% of the UK’s electricity in 2020. As at January 2022, five of the seven AGR stations and the Pressurised Water Reactor at Sizewell B are the only nuclear power stations in the UK currently generating electricity; two of the AGRs, Dungeness B and Hunterston B, …

Government Response Summary

The government refers to its response to recommendation 3, stating that the FDP policies in place to support the development of new nuclear stations already build upon what was learnt from the AGR stations.

19 Conclusion Rejected

The Department acknowledged there will be a production gap between existing nuclear stations closing and new ones coming online. However, it told us that it was not concerned about a lack of generating capacity during that period. It told us that the capacity market allowed electricity capacity to be bought …

Government Response Summary

The government disagrees with the recommendation to urgently review extending the lives of operating stations, stating that this is a matter for EDF and the relevant regulator. However, the department will ask EDF to set out their plans for how they will work with the regulator to see if extensions are possible in a safe, secure and cost-effective way, and will aim to provide further detail to the Committee by the end of 2022.

20 Conclusion Rejected

We asked whether there could be value in reusing the AGR sites, given the existing support in those communities for nuclear power. In particular, we asked the Department what work it was doing to give more clarity to the providers of small modular reactors about potential plans for these sites. …

Government Response Summary

The government disagrees with the recommendation to urgently review extending the lives of operating stations, stating that this is a matter for EDF and the relevant regulator. However, the department will ask EDF to set out their plans for how they will work with the regulator to see if extensions are possible in a safe, secure and cost-effective way, and will aim to provide further detail to the Committee by the end of 2022.

22 Conclusion Deferred

There are still some important aspects of transfer that are yet to be agreed. The NDA and EDFE recognise there are issues around transfer that will need to be agreed but believe they have sufficient time to sort out the remaining points.35 They established nine working groups in 2021 to …

Government Response Summary

The department agrees with the recommendation to provide a detailed plan and timetable for the transfers, with a target implementation date of May 2023, and proposes sharing the Hunterston B plan with the Committee.

23 Conclusion Deferred

The Department’s business case estimates that the transfer of the stations will cost £300 million, but given the uncertainties the cost and liabilities could be as large as £1.8 billion. The uncertainties include a potential need to update IT systems, the condition and nature of assets, and the cost of …

Government Response Summary

The department agrees with the recommendation to provide a detailed plan and timetable for the transfers, with a target implementation date of May 2023, and proposes sharing the Hunterston B plan with the Committee.

24 Conclusion Deferred

We were concerned by the number of issues still to be resolved in the time available. We enquired about progress regarding Hunterston B, the first station expected to transfer, especially as discussions around pension contributions can take time to sort out. The witnesses told us they were in discussion as …

Government Response Summary

The department requests a revised implementation date of May 2023 for the delivery of detailed transfer plans for AGR stations, starting with Hunterston B, and proposes sharing the Hunterston B plan with the Committee when completed, along with a summary of progress for the remaining stations.

25 Conclusion Deferred

We wrote to the Department and HM Treasury number of times (see Annex 1) after our evidence session and asked it to clarify what it had agreed with EDFE in terms of the land and buildings that will be transferred to the NDA, and how it planned to resolve any …

Government Response Summary

The department requests a revised implementation date of May 2023 for the delivery of detailed transfer plans for AGR stations, starting with Hunterston B, and proposes sharing the Hunterston B plan with the Committee when completed, along with a summary of progress for the remaining stations.

26 Conclusion Not Addressed

The long-term benefits of transferring the AGR stations into public ownership will depend on the ability of Magnox Ltd to deliver efficiencies from combining the stations with its existing portfolio of nuclear stations. The NDA told us it expected to deliver savings once the stations begin to transfer. The addition …

Government Response Summary

The government refers to its response to recommendation 6 regarding the risk that transfer negotiations between EDFE and NDA could drag on and increase costs.

27 Conclusion Not Addressed

Delivering the benefits intended from the new arrangements will require a clear long- term delivery strategy. The current EDFE approach for these stations involves putting reactor buildings into a state of care and maintenance lasting some decades to allow radioactivity levels to decay before starting deconstruction of the reactor. The …

Government Response Summary

The government refers to its response to recommendation 6 regarding the risk that transfer negotiations between EDFE and NDA could drag on and increase costs.

28 Conclusion Acknowledged

The AGR decommissioning programme is complex, and key organisations already have substantial portfolios of work. The NDA, for instance, already has a very heavy workload decommissioning the Magnox fleet and parts of the Sellafield site to which the AGRs will now be added. The NDA’s subsidiary, Magnox Ltd, is currently …

Government Response Summary

The department agrees that arrangements for transferring nuclear stations to NDA are worryingly under-developed, and there is a risk that transfer negotiations between EDFE and NDA could drag on and increase the costs to the taxpayer and refers to the response to recommendation 6.

29 Conclusion Acknowledged

The Department told us that following its experience of the Magnox contract, it had undertaken a full review to establish whether it had the right governance and it was now confident that this was the case. It also told us that the NDA has similarly taken “really important steps in …

Government Response Summary

The department agrees that its oversight of a complex set of governance arrangements is not subject to sufficient scrutiny and challenge and refers to the response to recommendation 7.

30 Conclusion Acknowledged

Decommissioning the AGR stations is an unusual programme compared with others in government as no single organisation has complete responsibility and authority for performance overall. The success of the programme will depend significantly on the ability of the Department, NDA and EDFE to work together effectively and resolve any problems …

Government Response Summary

The department agrees that its oversight of a complex set of governance arrangements is not subject to sufficient scrutiny and challenge and refers to the response to recommendation 7.