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Energy Bill

I thank the noble Lord for the amendment because it gives the Government the opportunity to clarify certain matters. It has to be said that in the intervening period since his first discussions with Ministers and officials, there have been attempts at clarification. Those of us who were fortunate enough to attend the investors’ conference held two weeks ago heard Dr Tim Stone, the advisor to John Hutton, deal with some of these points. As I recall, the full cost concept does not necessarily mean full cost for ever and a day; rather, it will be subject to redefinition over time. In the context of decommissioning, storage and repository, the financing for legacy waste will have to cover the cost of the repository—that is, the NDA will be responsible for the construction of the waste facility and the storage of the old legacy waste. The waste created as a consequence of the new build will obviously be stored over time. In the initial stages, the cost of storage in the repository will be deemed to be full cost because that will be the original price. However, as time progresses and as the expertise of the decommissioning agent, whichever private company it is, improves, so the marginal cost will diminish. Therefore, in some respects, full cost means initial full cost but over time it will diminish. I am looking through my mental notes as I speak but my impression is that the companies that run the powers stations—the ones that are in first—will probably have to pay a bit more, and in effect they will probably charge more for their electricity, but as their expertise and experience are developed, so they will benefit from lower costs. Therefore, over the lifetime of this project—I admit that it is a very long lifetime—it is likely that the costs will even out. It is not certain that the new investors in new-build power stations will necessarily be punished in perpetuity because over time the costs will even out. I realise that, although I have declared interests in the register, I have not declared them here and I not sure whether I should have done so. I act as an adviser to the Washington Group and I am the chairman of the Nuclear Industry Association, so I think that I should put that on the record. The noble Lord, Lord Jenkin, raised questions concerning the company that will carry out the clean-up work, but that will depend on the terms of the contract that the NDA enters into with it. However, I understand that a number of companies—I do not refer just to the one which employs me and to which I give assistance—have said, ““We think that, once we get into the operation, we will be able to discover economies. We will be able to change the nature of the work pattern, which may well have stood BNFL in good stead in the past””. Indeed, it could be argued that as BNFL’s functions are being removed and it is being dismantled, it has not been that successful in a number of areas. However, if the new companies are successful—as has been said, some of them have extensive international records of achievement—they may well find that, because of their commercial acumen, they are able to create elbow room, which enables them to take on additional work and derive benefit from that. Frankly, the concept of doing the job for less than had been anticipated is only one part of this. In some respects, doing the job for less money merely liberates resource, which affords opportunities for investment in other matters related to the broader contract, meaning that the work can be done that much more efficiently and quickly. Therefore, there is an element of internal dynamics in the financing of these contracts. It would therefore be unfortunate to concentrate just on the idea that somehow by doing it more efficiently we can save money and pay it back. A number of ambitious companies want to expand their activities through the self-financing of their own efficiencies. My understanding is that the economics of decommissioning is still fairly vague, because we do not know what the terms of the contracts will be—indeed, we might never know every dot and comma. Decommissioning and the work that the NDA will be allocating in the next three weeks might well enable the successful company to expand its role, rather than just take the money out, which would be regrettable. We would want the company to be encouraged to do more, rather than just do as much as it is saying. That would be a win-win situation for UK plc, for the companies involved and for the important task of getting rid of the waste.