Electricity bills 'need to rise to pay nuclear costs'

TAX and electricity bills will have to rise to pay for decommissioning ageing nuclear power plants, a Labour MP said yesterday after a powerful Commons select committee warned the Government to face up to the costs.

Alan Williams, a member of the Public Accounts Committee, said consumers would be paying a levy of 29 per cent on electricity from 1995 to 1999, to pay for the cost of taking out of service and making safe ageing nuclear power stations in the next century.

He was speaking after the PAC cast doubt on the industry's estimates of the cost of decommissioning, and warned ministers to face up to the possibility of higher costs, by establishing a separate 'visible, guaranteed fund' for making redundant nuclear power stations safe.

The report amounted to a heavy shot across the bows of the Department of Trade and Industry, which is preparing the terms of reference for a review of the nuclear power industry. DTI ministers are involved in a behind-the-scenes dispute with environment ministers and the Treasury, who are anxious to ensure that long-term costs are included in the review of whether the industry can be privatised.

The PAC said the cost of decommissioning had been faced only in recent years, when privatisation was likely. Estimates increased by 100 per cent, but had been reduced since privatisation was delayed. 'Such weaknesses in oversight have led to inadequate provisions for decommissioning costs in the industry's accounts and prices . . .

'It is clear that the charges which will fall on consumers and taxpayers to pay for nuclear decommissioning will be very large in future,' said the PAC, chaired by Robert Sheldon, a former Labour minister.

The Government was committed to paying about pounds 6bn towards decommissioning, and insisted no more would have to be met by the taxpayer from the 'nuclear levy' on electricity prices. But the PAC said the nuclear power companies, set up to prepare for privatisation, had invested their decommissioning money in their own businesses.

The report alarmed the industry. Nuclear Electric and Scottish Nuclear reacted vigorously, arguing that they had accurately calculated the costs of decommissioning and would have enough funds to carry it out.

John Collier, chairman of Nuclear Electric, said: 'We know exactly how to decommission all Nuclear Electric's power stations and it can be met from our own cash flows.'

He said that the company had been able to reduce its overall decommissioning liabilities from pounds 3.5bn to pounds 2.7bn by detailed engineering work. Nuclear Electric was on course to meet that liability without any need for subsidy or extension of the current levy on electricity bills since the funds were already being gathered, banked and earning interest.