COMMONS

Public Accounts Committee publishes report on Nuclear Decommissioning Authority: managing risk at Sellafield

04 February 2013

Chair of the Public Accounts Committee Rt Hon Margaret Hodge MP makes statement as Committee publishes Nuclear Decommissioning Authority: Managing risk at Sellafield: Twenty-fourth Report of Session 2012-13

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

"An enormous legacy of nuclear waste has been allowed to build up on the Sellafield site. Over decades, successive governments have failed to get to grips with this critical problem, to the point where the total lifetime cost of decommissioning the site has now reached £67.5 billion, and there’s no indication of when that cost will stop rising.
The Nuclear Decommissioning Authority believes that its decommissioning plan is credible but it has not been sufficiently tested and uncertainties remain – not least around what precisely is in the waste that lies in the legacy ponds and silos.
It is unclear how long it will take to deal with hazardous radioactive waste at Sellafield or how much it will cost the taxpayer. Of the 14 current major projects, 12 were behind schedule in the last year and five of those were over budget. Furthermore, now that Cumbria County Council has ruled out West Cumbria as the site of the proposed geological disposal facility, a solution to the problem of long-term storage of the waste is as far away as ever.
Taxpayers will have to foot the bill. Private contractors who gain contracts take no risk because of the uncertainties that persist. The Authority needs to determine when it will have enough certainty over costs to transfer risk to the private sector.
Taxpayers are not getting a good deal from the Authority’s arrangement with Nuclear Management Partners. Last year the consortium was rewarded with £54 million in fees, despite only two out of 14 major projects being on track. All payments to Nuclear Management Partners and, indeed to its constituent companies, need to be strictly controlled and determined by the value gained, so that payments are not made where companies have not delivered.
Public money to the tune of £1.6 billion is being spent at Sellafield each year. This is an area of considerable deprivation with high unemployment. We are looking for there to be clearer ambition that spending on this huge scale contributes to creating jobs and supports sustainable growth in the region and the UK."

Margaret Hodge was speaking as the Committee published its 24th Report of this Session which, on the basis of evidence from the Department of Energy and Climate Change, the Nuclear Decommissioning Authority and Sellafield Limited, examined the management of risks at Sellafield.

The Nuclear Decommissioning Authority (the Authority), an arm’s-length body of the Department for Energy and Climate Change, was set up in 2005 with the specific remit to tackle the UK’s nuclear legacy. Sellafield is the largest and most hazardous site in the Authority’s estate and is home to an extraordinary accumulation of hazardous waste, much of it stored in outdated nuclear facilities. It is run for the Authority by Sellafield Limited, the company licensed by regulators to operate the site. In November 2008, the Authority contracted with an international consortium—Nuclear Management Partners Limited—to improve Sellafield Limited’s management of the site, including the development of an improved lifetime plan.

Over several decades, successive governments have been guilty of failing to tackle issues on the site, allowing an enormous nuclear legacy to build up. Deadlines for cleaning up Sellafield have been missed, while total lifetime costs for decommissioning the site continue to rise each year and now stand at £67.5 billion. It is essential that the Authority brings a real sense of urgency to its oversight of Sellafield so that the timetable for reducing risks does not slip further and costs do not continue to escalate year on year.

The Authority believes it now has a credible plan for decommissioning Sellafield and expects Sellafield Limited to start retrieving hazardous waste currently held in legacy facilities in 2015. Nonetheless, given the track record on the site and given that only 2 of the 14 major projects were being delivered on or ahead of schedule in 2011-12, we are not yet convinced that this date will be met or that sufficient progress is being made. Basic project management failings continue to cause delays and increase costs, while doubts remain over the robustness of the plan, in particular whether the Authority is progressing the development of the geological disposal facility as quickly as possible.

The Authority has a cost reimbursement contract with Sellafield Limited and all bar one of the major projects at the site involve a cost reimbursement contract between Sellafield Limited and its subcontractors. This means that taxpayers —rather than Sellafield Limited or its subcontractors—bear  the financial risks of delays and cost increases. This contracting approach may be the best option while the plan and individual projects contain significant uncertainties, but the Authority has yet to work out how and when it will start to transfer more risk to the private sector.

More immediately, we are not yet convinced that taxpayers are getting a good deal from the Authority’s arrangement with Nuclear Management Partners. All payments to Nuclear Management Partners and, indeed to their constituent companies, need to be strictly controlled and determined by robust, verified assessments of the value gained, so that payments are not made which would seem to constitute a reward for failure. Furthermore, the costs of seconding staff from Nuclear Management Partners’ parent companies appear excessively high, especially given the wage rates in the local economy.

Finally, an enormous amount of public money - some £1.6 billion - is spent at Sellafield each year.  Such public expenditure can secure substantial wider economic benefit in what is an area of high need and deprivation, for example through support for businesses, job creation and skills development in the region and in the UK. But there needs to be a clearer ambition for what this investment can achieve and a proper process for measuring and monitoring its actual impact.

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