Sizewell C Funded Decommissioning Programme: Contingent Liability

I am pleased to have laid a departmental minute describing the contingent liabilities arising from the signing of the funded decommissioning programme and Government support package for Sizewell C. Once operational, Sizewell C will deliver clean power for the equivalent of 6 million homes and support 10,000 jobs, representing a major boost for energy security, jobs and economic growth.

It is normal practice when a Government Department proposes to undertake a contingent liability of £300,000 and above for which there is no specific statutory authority, for the Department concerned to present to Parliament a minute, giving particulars of the liability created and explaining the circumstances.

Following the Government final investment decision on Sizewell C, and subject to satisfaction of the relevant conditions precedent, both the funded decommissioning programme and Government support package will come into force at the time of revenue commencement. This is when the revenue collection contract between Sizewell C and the revenue collection counterparty is entered into, giving effect to the regulated asset base mechanism under which Sizewell C will be funded.

The funded decommissioning programme sets out the operator’s intended approach to decommissioning of Sizewell C, including how costs will be met and the corresponding cost estimates. A funded decommissioning programme is required in statute as per the Energy Act 2008. The objective of the regime is, as per the funded decommissioning programme guidance 2011, to ensure that the risk of recourse to public taxpayer funds for the decommissioning of new nuclear assets is remote.

The Government support package respond to “high impact, low probability” risks that either investors or the supply chain cannot take or cannot price at a level that is good value for money for UK taxpayers or consumers, or it is not otherwise appropriate for consumers to take through the regulated asset base. The Government support package documents have been published on gov.uk.

The funded decommissioning programme at Sizewell C will be funded via the regulated asset base. The regulated asset base contains a series of protections that aim to minimise the risk that public funds will be required to meet decommissioning costs. However, in certain remote circumstances whereby all the protections afforded by Sizewell C’s economic licence fall away or a shortfall in the fund materialises, public funds could be used to contribute towards decommissioning costs and this liability would crystalise.

Based on best estimates by the Government Actuary Department, the maximum potential exposure from the liability is £12 billion—in 2022 terms. This has been estimated on a worse-case scenario whereby the Government were required to meet the full costs of decommissioning the Sizewell C power plant. The figure is based on the publicly available estimates contained in Sizewell C’s decommissioning and waste management plan. Due to the safeguards built into the funded decommissioning programme’s structure, it is highly unlikely that these full costs would ever crystalise.