EU investigation throws BNFL liabilities plan into confusion

Government plans to transfer billions of pounds worth of liabilities from British Nuclear Fuels to a new decommissioning authority were thrown into doubt yesterday by a European Commission investigation.

Government plans to transfer billions of pounds worth of liabilities from British Nuclear Fuels to a new decommissioning authority were thrown into doubt yesterday by a European Commission investigation.

The authorities in Brussels launched an official state aid inquiry into the creation of a Nuclear Decommissioning Authority which will take over assets such as the Sellafield plant in Cumbria next April along with what green groups estimate is £42bn in liabilities.

The Commission says the UK's plan might break rules against state subsidies and therefore distort energy market competition. In a statement it said that the transfer will relieve BNFL of liabilities "that it should normally have met under the 'polluter-pays' principle". It added that this is likely to constitute state aid, which is forbidden in principle but can be permitted if it helps achieve other EU objectives.

Although the inquiry has no time limit, the agency launch will go ahead on 1 April 2005 under transitional arrangements. The Government says there are sufficient resources already set aside for decommissioning within BNFL to allow the agency to get on with its work without using government cash during the inquiry.

The Energy Minister, Mike O'Brien, said: "We believe the NDA is compatible with state aid rules. We understand the Commission's desire to investigate. But we have taken necessary steps to ensure that the NDA can get on with its job from 1 April using existing resources."

A spokesman for BNFL said it was too early to say whether the investigation would hold up the industry's restructuring.

Mark Johnston, from Friends of the Earth, argued: "These ad hoc investigations by the Commission are not enough. They will allow the European nuclear industry to continue cheating the market, selling power below cost, and then blackmailing taxpayers when old reactors are shut down. It represents a systemic failure to govern energy markets in line with Europe's overall political goals.

FoE says that £42bn worth of liabilities will be transferred from BNFL. It blames BNFL for failing to ensure that enough money was set aside to pay for dismantling reactors.

The NDA will be a public body in charge of managing most of BNFL's nuclear liabilities at 15 locations, including the massive Sellafield complex and 11 nuclear power stations, four of which are still operating.

BNFL said in June that clean-up costs rose at its Sellafield processing and production plant, one of the factors that led to a net loss of £194m.

In September the Commission launched legal action against the UK for failing to clean up more than a ton of radioactive waste at Sellafield.