MPs today slammed the £12.5bn sale of the British Energy to EDF in 2009, saying the sale did not guarantee EDF building new nuclear stations without public subsidy.
The government’s stake in British Energy was 36%, giving the Chancellor a £4.4bn windfall. Centrica later bought a 20% stake in British Energy.
However, the house of commons Committee of Public Accounts (PAC) say EDF may simply decide not to build new plant, and the government has made no allowance for this.
In their report, the PAC say the department for energy and climate change (DECC) did not secure a binding commitment from EDF to build new nuclear power stations or look at whether EDF has built new nuclear stations in the past without public subsidy.
The sale made EDF the front runner to build new nuclear power stations, as it bought not just the remaining nuclear plant but adjoining land that has since been approved for new nuclear plant.
Edward Leigh MP, Chairman of the Committee of Public Accounts, said: “DECC has no guarantee that EDF, the company to whom it sold its stake in British Energy, will build new nuclear power stations without public subsidy.
“Given that there is a clear risk that EDF will not build them, with or without such subsidy, the Department needs to say sooner rather than later how the country’s increasing energy demands would be met under those circumstances,” he said.
The PAC report says a number of factors: “including planning decisions, could result in EDF abandoning its plans to build new nuclear powers stations, with or without public subsidy.”
MPs said they were not convinced DECC’s: “reliance on a rapid acceleration in renewable energy to fill any gaps in future energy supplies is adequate, but note the Department is working with the Treasury to determine whether the current configuration of the United Kingdom’s energy market is fit for purpose for the longer term.”
Leigh went on to say: “It is of concern, to say the least, that the Department does not know how much nuclear generating capacity will be needed to meet our future energy needs. This Committee is not convinced by the Department’s reliance on the market and a rapid acceleration in renewable energy to fill any gaps in future energy supplies.
“This highlights a systemic weakness in the approach of the Department and the Shareholder Executive to monitoring and managing risk. When selling strategically important assets, like its stake in British Energy, the Department should carry out systematic and timely assessments of risk – particularly where residual, and serious, liabilities might fall to the public purse,” he said.
The £4.4bn from selling British Energy was allocated to the Nuclear Liabilities Fund, to decommission British Energy’s existing power stations, invested in the National Loans Fund. The PAC say this will have low returns, and: “could affect the ability of the Fund to cover British Energy’s liabilities. We found, just as the Committee concluded in its three previous reports on British Energy, that there are still weaknesses in the monitoring and management of the risks relating to these liabilities.”
The PAC said the £4M fee paid to bankers UBS to broker the deal was: “unacceptable”.