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The UK/Ireland Nuclear Free Local Authorities were bitterly disappointed, but unsurprised, to hear recently British Government confirmation that it has decided to go ahead with the controversial Regulated Asset Base funding model for future nuclear power projects.
The government is proposing to use the RAB model to pay for the cost of constructing a new power plant at Sizewell C in Suffolk and for a fleet of so-called Small Modular Reactors to increase nuclear generating capacity three-fold to 24 GW by 2050 in line with the Energy Security Strategy published by Boris Johnson in April of this year.
To the NFLAs RAB should be renamed ROB as it is akin to daylight robbery. The RAB model de-risks nuclear projects for contractors and operators as, rather than requiring them to find the finance upfront, all electricity customers instead face an additional levy on their bills to meet the cost of building the new plants; all of which, based on historic precedent, will be delivered late and way over budget. The public will also have to meet the costs of any delays, which are likely to be considerable.
Responding to a consultation on the proposals launched by the Department of Business Energy and Industrial Strategy in August, the NFLA called for RAB to be scrapped and for nuclear operators to source money for new construction projects from the private sector, rather than electricity customers.
The NFLA is especially concerned at the unfairness of levying elderly customers who are unlikely to see any ‘benefit’ from the nuclear power generated, given that construction of any new plant is likely to take at least a decade, or levying poorer households, who are already at risk of fuel poverty. The NFLA called for elderly and poorer households to be exempted. The proposal is also particularly iniquitous when applied to Scottish customers, who will be taxed despite the Scottish Government refusing to countenance new nuclear plants for the nation.
The government published its response on 14 December stating that it will go ahead with the proposals, with only a vague and unsubstantiated recognition that ‘support for vulnerable groups would be best tackled holistically.’
Commenting on the response, NFLA Steering Committee Chair, West Dunbartonshire Councillor Lawrence O’Neill said:
“It is outrageous that British Government ministers want to press ahead with a scheme that imposes a criminal tax to pay for their nuclear delusion on the poorest, oldest and most vulnerable customers, and doubly criminal when imposed on customers living in Scotland where we as a nation certainly do not want to entertain it.
“Nuclear power projects are notorious for coming in late and way over cost, Hinkley Point C being a case in point. RAB simply takes away the risk to prospective nuclear operators of raising initial finance in the commercial lending market and finding the extra money needed to meet cost overruns and delays and transfers it onto electricity consumers who are already struggling to pay overinflated energy bills.
“The most immediate beneficiary EDF Energy will be laughing all the way to the bank as it picks up the subsidy to build Sizewell C collected from British taxpayers then pays the resulting profits from its future operations back to its owner, the French Government”.
Ends//….
Notes to Editors
The submission made by the NFLA to the BEIS consultation reads:
New Nuclear Projects team
Department for Business, Energy and Industrial Strategy
3rd Floor, 1 Victoria Street, London SW1H 0ET
5 August 2022
NFLA Response to consultation on revenue stream for the nuclear RAB model
Dear BEIS Colleagues,
I would like to respond as Chair of the Steering Committee on behalf of the Nuclear Free Local Authorities.
I would like initially to direct some general comments of our position on the Nuclear RAB model, and then specifically respond to Questions 16 and 17 on its impact on Britain’s oldest and poorest citizens.
We are opposed to new civil nuclear power projects in the UK. They are too expensive; take too long; are too dependent on foreign reactor designs, finance, operators and uranium; come with operational risks; invariably contaminate the land and seas surrounding them; generate toxic radioactive waste that lasts for tens of thousands of years; and (as we have seen in Ukraine) are tempting targets vulnerable to attack by hostile states, cyber criminals or terrorists.
With a build time that is always over one decade from ground-breaking, any new civil nuclear plants will in any case come far too late to address the immediate needs of the British public for affordable energy and the need to reduce greenhouse gas emissions to address rising temperatures and climate change.
Instead, only investment in a combination of renewable energy generation and storage solutions, coupled with investment in retrofitting of insulation and energy efficiency measures in our housing stock and public buildings can do this.
In our view, put simply, nuclear represents no solution for our population or our planet, and the present government’s vainglorious obsession with new nuclear will become a rabbit hole into which yet more countless billions of taxpayers’ hard-earned money will be pointlessly shovelled.
Consequently, you shall be unsurprised to hear that the NFLA is completely opposed to the Regulated Asset Base model, or indeed any model which places the financial risk of building new commercial nuclear stations onto the taxpayer.
Commercial operators are in this for-profit and, like any profit-focused business, they should be obliged to seek finance in the commercial market, or in the case of EDF Energy source it from their solitary shareholder, the French state. They should also be obliged to absorb the burden of cost overruns themselves.
If nuclear businesses represent an attractive prospect to investors then surely they would have no difficulty raising the finance in the commercial market, and if such businesses have not provided for the possibility of cost overruns in their initial budget calculations (and the history of new nuclear projects should absolutely forewarn them they should) then, clearly, they were naïve and negligent in ‘doing their sums’ in the first place!
The Regulated Asset Base (or RAB) would more aptly be described as ROB, because daylight robbery is what it represents.
For the reality is that Government ministers already know that new nuclear is not an attractive investment to the market and they already know that new nuclear projects will invariably be delivered way behind schedule and way over budget (Hinkley Point C being a case in point), so RAB is a dressed-up mechanism to hugely reduce the risk placed upon commercial enterprises building and commissioning new nuclear power plants by passing along the invariable cost overruns to electricity consumers through a ‘nuclear tax’ on their electricity bills.
It is outrageous that any such ‘tax’ is being contemplated at a time when many British households are already facing bills that have risen exponentially in recent months, following the removal of the price cap, and that will rise still further with the onset of the cold weather of autumn and weather. The average energy bill was reported to be £1,400 in October 2021; research by Cornwall Insight has predicted that average bills will rise to £3,359 by October of this year.[1]
Worldwide nuclear energy is by far the most expensive way to generate electricity. Hinkley Point C, if, and when, it eventually comes on-stream, will achieve notoriety in producing the most expensive electricity in the history of Britain. In 2012, it agreed with the government a scandalous index-linked strike price of between £89.50 – 92.50 per MWH; that figure with inflation now stands at £106.12.[2] Contrast this to the recent Contracts for Difference round where some offshore wind projects came in as low as £37.35 per MWH.[3]
Hinkley Point C will according to current estimates cost at least £26 billion to build, but as this is based on 2015 costings to be truly representative this figure needs to be uprated with inflationary pressures in the last seven years. Government estimates that Sizewell C, the first new nuclear project that would be delivered with financial support from British taxpayers through the RAB, could cost between £26.3 and £43.8 billion and take anything from 13-17 years to build.
Based on the higher figures for cost and build time of Sizewell C, the University of Greenwich Business School estimated that each taxpayer would pay an additional £431.90 towards the costs over the duration of the project, or £2.12 per month.[4] However, this is based on a conservative inflation rate of only 2%, and the reality is that the Consumer Prices Index (CPI) rose by 9.1% in the 12 months to May 2022, with hard-pressed bill payers challenged day-to-day by shocking hikes in petrol prices and food stuffs on supermarket shelves.[5] And this is only the charge to taxpayers for one plant with two reactors; this government’s ambitions are to build up to eight new reactors before 2050 with all the rampant attendant costs.
In the NFLA’s view, there will never be any justification for imposing this tax on customers, and it would be criminal to do so at this time when so many of our citizens are in such dire financial straits.
With reference to Questions 16 and 17, the NFLA feels it is particularly wrong to impose RAB upon our oldest citizens, even though many of them will not even be alive when Sizewell C or any other new nuclear power plant is eventually commissioned, given that it will take probably 15 years to complete. The NFLA also feels that, as older citizens and recipients of Universal Credit and other mean-tested and legacy benefits are often most vulnerable to cold and to fuel poverty, the government must make an earnest effort, either to ensure that individuals in such groups are exempted from being charged the levy by energy suppliers in the first place (and we do not support passing this onto other customers), or to devise a mechanism to reimburse them promptly in full for the levy.
I thank you for considering this submission made on behalf of the NFLA. We shall look forward to seeing the results of the consultation in due course. Please direct any replies to the NFLA Secretary, Richard Outram, by email to richard.outram@manchester.gov.uk.
Yours faithfully,
Councillor David Blackburn,
Chair of the NFLA Steering Committee
The endnotes to the NFLA submission
The government’s reponse to the consultation can be found at this link:
