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The Nuclear Decommissioning Authority's Management of The House of Commons Public Accounts Committee The Nuclear Decommissioning Authority’s management of the Magnox contract Twenty-Eighth Report of Session 2019–21 Report, together with formal minutes relating to the report Ordered by the House of Commons to be printed 23 November 2020 HC 653 Published on 27 November 2020 by authority of the House of Commons The Committee of Public Accounts The Committee of Public Accounts is appointed by the House of Commons to examine “the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure, and of such other accounts laid before Parliament as the committee may think fit” (Standing Order No. 148). Current membership Meg Hillier MP (Labour (Co-op), Hackney South and Shoreditch) (Chair) Mr Gareth Bacon MP (Conservative, Orpington) Kemi Badenoch MP (Conservative, Saffron Walden) Shaun Bailey MP (Conservative, West Bromwich West) Olivia Blake MP (Labour, Sheffield, Hallam) Sir Geoffrey Clifton-Brown MP (Conservative, The Cotswolds) Barry Gardiner MP (Labour, Brent North) Dame Cheryl Gillan MP (Conservative, Chesham and Amersham) Peter Grant MP (Scottish National Party, Glenrothes) Mr Richard Holden MP (Conservative, North West Durham) Sir Bernard Jenkin MP (Conservative, Harwich and North Essex) Craig Mackinlay MP (Conservative, Thanet) Shabana Mahmood MP (Labour, Birmingham, Ladywood) Sarah Olney MP (Liberal Democrat, Richmond Park) Nick Smith MP (Labour, Blaenau Gwent) James Wild MP (Conservative, North West Norfolk) Powers Powers of the Committee of Public Accounts are set out in House of Commons Standing Orders, principally in SO No. 148. These are available on the Internet via www.parliament.uk. Publication © Parliamentary Copyright House of Commons 2020. This publication may be reproduced under the terms of the Open Parliament Licence, which is published at https://www.parliament.uk/site-information/copyright-parliament/. Committee reports are published on the Committee’s website and in print by Order of the House. Committee staff The current staff of the Committee are Bradley Albrow (Second Clerk), Jessica Bridges-Palmer (Media Officer), Ameet Chudasama (Committee Operations Manager), Richard Cooke (Clerk), Ben Shave (Chair Liaison), Rose Leach (Committee Operations Assistant) and Wafia Zia (Assistant Clerk). Contacts All correspondence should be addressed to the Clerk of the Committee of Public Accounts, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 5776; the Committee’s email address is [email protected]. You can follow the Committee on Twitter using @CommonsPAC. The Nuclear Decommissioning Authority’s management of the Magnox contract 1 Contents Summary 3 Introduction 4 Conclusions and recommendations 5 1 Understanding and managing the burden of nuclear decommissioning on the taxpayer 9 Uncertainty over the cost and timetable for decommissioning 9 Maximising the potential of assets 11 2 Meeting the future challenges of nuclear decommissioning 13 Shortages of the right skills 13 Departmental oversight and the new delivery model 13 Transparency about the scale and nature of the challenge 14 Formal minutes 16 Witnesses 17 Published written evidence 17 List of Reports from the Committee during the current Parliament 18 The Nuclear Decommissioning Authority’s management of the Magnox contract 3 Summary The cost of the long-term liability to decommission the UK’s civil nuclear sites now stands at £132 billion, though by its nature this estimate is inherently uncertain. Even the cost to take the Magnox sites to the care and maintenance stage of the decommissioning process is highly uncertain, with the Nuclear Decommissioning Authority (NDA) currently estimating that it will cost anything from £6.9 billion to £8.7 billion. The timetable for completing this work is similarly uncertain, with a current estimate of anything from 12 to 15 years. Past experience tells us that these estimates could increase further. Efforts to produce a reliable estimate are made more difficult by the historical legacy of decommissioning being an afterthought when the nuclear industry was established, and poor records of what hazardous materials are on the sites. In this context, the NDA faces a considerable challenge to produce a reliable cost estimate. However, lack of knowledge about the sites was a significant factor in the failure of the Magnox procurement and original contract, which seriously damaged the NDA’s reputation and has now cost the taxpayer in excess of £140 million, and it continues to be a major barrier to making progress. A further barrier is developing sufficient skills and capacity to decommission sites efficiently. That said, the UK nuclear industry possesses valuable technical skills and new technologies that could be better exploited to the benefit of the UK economy. The NDA also holds substantial assets in terms of land and employment opportunities that could be used to serve local communities. The Department for Business, Energy & Industrial Strategy recognises that its oversight of the NDA has been weak in the past and we welcome the steps it is taking to provide stronger oversight and improved governance. Implementing the recommendations of the Holliday inquiry into the Magnox contract and the Department’s ‘Tailored Review’ of the role of the NDA will be critical and the publication of these reports cannot come soon enough. We welcome the Department and the NDA’s commitments to improve performance over the next 10 years. We also look forward to reviewing the latest quarterly performance reports which the Department has offered to send us, and note there is an enhanced commercial assurance review to consider all future commercial decisions. We will hold the Department and the NDA to account for their progress in improving the transparency of the nuclear industry and making a success of the new delivery and governance approach. 4 The Nuclear Decommissioning Authority’s management of the Magnox contract Introduction The Nuclear Decommissioning Authority (NDA) is the government agency, sponsored by the Department for Business, Energy & Industrial Strategy (the Department), with responsibility for decommissioning the UK’s civil nuclear sites that are no longer producing electricity. The NDA’s estate includes 17 sites, 12 of which (10 power stations and two research facilities) had been managed by Cavendish Fluor Partnership (CFP) under a contract awarded in 2014 (the Magnox contract). In 2018 we reported on the catastrophic failure of the NDA’s procurement and management of this contract. We reported that the failure had cost the taxpayer around £122 million and that a lack of commercial skills in the NDA, compounded by inadequate knowledge of the Magnox sites, were key causes of the failure. The NDA negotiated the termination of the Magnox contract with CFP in 2017, with a consequent additional £20 million cost to the taxpayer to leave the contract. In September 2019, after a two-year contractual notice period, the NDA brought the Magnox sites under the management of its wholly owned subsidiary, Magnox Ltd. We took evidence from both the Department and the NDA on the termination of the Magnox contract. The evidence covered a wide range of topics relevant to the NDA and the Department’s management and oversight of the decommissioning of the UK’s nuclear sites. This report, therefore, covers both the decommissioning of the Magnox sites and broader strategic challenges facing the Department and the NDA. The Nuclear Decommissioning Authority’s management of the Magnox contract 5 Conclusions and recommendations 1. There remains significant uncertainty over the cost and timetable for decommissioning the Magnox sites and estimates continue to increase. The NDA acknowledges that it does not have full understanding of the condition of the 17 sites across its estate, including the 10 former Magnox power stations. Consequently, there is significant uncertainty about how long decommissioning will take and how much it will cost. The NDA considers that it now has its best estimates yet of the cost and timetable for taking the Magnox sites to the ‘care and maintenance’ stage of the decommissioning process, but the latest estimates cover a very broad range of outcomes. The NDA now estimates that it will cost between £6.9 billion and £8.7 billion, between £1.3 billion and £3.1 billion more than its previous estimate made in 2017, and will take between 12 and 15 years for the Magnox sites to reach the care and maintenance stage of the decommissioning process. Our past experience suggests these estimates will soon be out of date and that costs may increase further. Reliable estimates of the potential costs and duration of decommissioning each site are important to support decision-making about the most efficient ways to decommission the sites and the order in which they should be tackled. We are concerned that the NDA’s ambition to decommission more quickly and efficiently will be hindered by this perpetual lack of knowledge about the condition of sites. Recommendations: The Nuclear Decommissioning Authority should set out how it will develop a clearer means of reporting publicly on the level of uncertainty and risk across its sites. The Nuclear Decommissioning Authority should also set out how it will prioritise its work on its sites in order to decommission them in the safest and most efficient way. 2. The uncertainty affecting the Magnox sites reflects a wider uncertainty about the costs and timetable of decommissioning the whole civil nuclear estate. According to the NDA’s most recent estimates it will cost the UK taxpayer £132 billion to decommission the UK’s civil nuclear sites and the NDA estimates that the work will not be completed for another 120 years. The largest proportion of this cost is to clean up and decommission the NDA’s largest site at Sellafield, but the cost to decommission the NDA’s Magnox sites is also substantial, as is the liability associated with decommissioning the next family of nuclear power stations, known as the Advanced Gas-Cooled Reactors (AGRs).
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