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Atomic Rollercoaster

New Ground 64
Spring 2003

Much of SERA’s recent campaigning has focused on influencing the Energy White Paper, including nuclear policy. This industry has been hardly out of the news, leaving even seasoned observers wondering what will happen next. Mark Johnston looks at the British Energy crisis.

 Following the 2002 general election, Tony Blair was in confident mood. The government needed to respond to a weighty Royal Commission report on climate change that called for 60% cuts in carbon dioxide pollutants. Ministers also questioned security of energy supplies, as older power stations reached the end of service. So the prime minister created a special team inside the Cabinet Office to come up with a plan.

As the energy issue came to the fore, SERA and other environmental groups quickly prioritised the looming threat. After six months of hard work and public sparring between the many different interests, Blair’s energy review team published its report in February 2002. Catching many by surprise, the review gave a strong backing to renewable and energy efficient options, which of course left the nuclear industry disappointed. But the report did ambiguously call for the nuclear option to be "left open."

Over roughly the same period, the disastrous saga of the Sellafield complex was entering a new phase. Following fifty years of bad decisions, accidents and cover-ups, the nuclear industry’s radioactive legacy was catching up with it. State-owned nuclear operator BNFL had secretly started to estimate how much it would cost to deal with the mess it was making. When the company totalled up its sums, it realised it didn’t have enough cash to meet the enormous bill. On Nov 29, 2001, BNFL called a special board meeting to declare itself bankrupt and went cap-in-hand to the government.

On the same day, Trade and Industry Secretary Patricia Hewitt was forced to explain to Parliament that the situation at BNFL was so serious a new quango would be needed to deal with "liabilities management" for a century or more. This agency, still being set up a year later, will need to spend over £1bn of public money every year on the decommissioning of nuclear sites. The total bill so far for both civil and military liabilities is £88bn.

Winter turned to summer, and the focus and pace of events shifted dramatically. Press reports began to reveal a crisis at the heart of British Energy (BE), the nuclear generator sold off by the Tories in 1996 and, with BNFL, the only other big nuclear player in the UK. The company at first denied there was a problem. But by early September, BE had effectively collapsed. Its share price plummeted and it too went cap-in-hand to the government for help. BE blamed everyone but itself for its predicament, including the electricity market, its suppliers (especially BNFL) and the government. In truth, it had simply run out of cash because of huge debts, bad business decisions and astronomical long-term nuclear liabilities it couldn’t pay for.

Ministers were caught by surprise. Their initial response was to buy time whilst considering what to do. They gave the company a three-month, £650m loan. BE’s fight for survival became the central drama in the nuclear debate. As a listed company, it had a much higher profile than the public-sector BNFL.

A rescue plan was unveiled by the DTI and BE on Nov 28, 2002. The plan offered a huge new public subsidy of more than £3bn over 10 years, with more to follow. Unnecessary and dangerous reprocessing at Sellafield would continue, now paid for by the taxpayer. If the plan succeeds (and there is some doubt that it will) then BE will remain in the private sector, paying dividends to its shareholders from the subsidies given to it by the taxpayer.

If BE survives 2003, what status it will have remains to be seen. BNFL has also, with an eye on the proposed legislation, begun fundamentally to change and restructure. One thing though seems certain: whilst the changes in the UK nuclear sector are not yet over, we will all still be paying for nuclear energy for a very long time.

Mark Johnston is co-ordinator of SERA’s Energy Group. Contact him at energy.sera@virgin.net.