NAO warns on £5bn nuclear risk

Taxpayers have been left with a "significant risk" on their hands because of the Government's decision to transfer British Energy's £5.1bn of nuclear liabilities into a state-run fund, Parliament's spending watchdog will say today.

A report from the National Audit Office (NAO) will also criticises the Department of Trade and Industry for failing to run a proper competition when selecting advisers to help with restructuring after the nuclear power generator went bust in 2002. Only one of the four firms used was selected through a competitive process.

Under the rescue deal brokered by the then Trade and Industry Secretary Patricia Hewitt, two thirds of British Energy's free cash flow goes back into the nuclear liabilities fund.

When British Energy was re-listed on the stock market in January of last year, the NAO calculated the liabilities at £4bn and the potential contribution from British Energy at £3.8bn, leaving the taxpayer with a £233m net loss. But by February this year, that loss had turned into a £2.46bn benefit as a result of the rise in electricity prices and British Energy's profitability.

Sir John Bourn, the head of the NAO, said: "The scale of the net liability to be borne by the public purse will depend crucially on British Energy's performance in future years."