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European Commission - Press release

State aid: Commission approves UK pricing methodology for nuclear waste transfer contracts

Brussels, 9 October 2015

The European Commission has found that the pricing methodology for waste transfer contracts to be concluded between the UK Government and operators of new nuclear power plants is compatible with EU state aid rules.

This methodology establishes the price that operators of new nuclear plants in the UK will have to pay for the underground disposal of their spent fuel and intermediate level waste in a planned UK geological disposal site. It aims at ensuring that it will be the nuclear power operators – and not taxpayers – who bear the cost of disposing their nuclear waste and that they set aside sufficient funds to cover their future liabilities.

Under the EU Treaty each Member State is free to determine its energy mix. The Commission's role is to ensure that when public funds are used to support companies, this is done in line with EU state aid rules, which aim to preserve competition in the Single Market.

The Commission's assessment showed that the UK pricing methodology makes sure that operators of new power plants will bear the disposal costs for their spent fuel and intermediate level waste.

The methodology will establish a waste transfer price that reflects actual disposal costs: It will be determined only when most of the currently unknown cost factors of the disposal facility have become clear (around 30 years after the start of electricity generation by the nuclear power operator). In particular, the price will cover all projected variable and fixed costs linked to the disposal of the spent fuel and intermediate level waste, as well as an appropriate risk premium to reflect possible cost increases after the setting of the price. The pricing methodology therefore involves no state aid within the meaning of the EU rules. Until the final price is determined, nuclear power operators will be periodically updated on expected costs and are under an obligation to set aside sufficient funds to cover their future liabilities.

Given the uncertainties at this stage concerning the waste transfer price to be paid, the UK considered it necessary to set a price cap, to provide some visibility of future liabilities to secure investors and financing. The Commission was able to conclude that the actual disposal costs are very unlikely to exceed the cap level. This is because the cap was set by UK authorities on the basis of very conservative projections for the maximum costs of waste disposal. In addition, operators will also have to pay a proportionate risk fee to benefit from the cap. Therefore, any potential state aid and distortions of competition due to the cap, if any, would remain very limited.
 

Background

The UK Government intends to build a geological facility for the disposal of spent fuel and intermediate level waste from existing and new nuclear power stations in the UK. The facility is expected to start operating around 2040. It is planned that intermediate level waste can be disposed at the facility from around that date. Disposal of spent fuel is expected to commence only around 2075 and extend until 2140. The facility will likely be the only geological disposal site in the UK in the foreseeable future.

The actual disposal costs for spent fuel and intermediate level waste in the UK are highly uncertain at the moment. This is because the site for the location of the facility has not been selected yet. Furthermore, the UK Government is expected to remain for a long time the only provider of the relevant disposal services. In order to be able to access financial markets and investors, the UK therefore saw the need to provide greater visibility on maximum cost exposure, also given the absence of alternative services, by estimating maximum costs and setting a cap on that basis at the outset of the waste transfer contract.

The non-confidential version of the decision will be made available under the case number SA.34962 in the State aid register on the DG Competition website once any confidentiality issues have been resolved. The State Aid Weekly e-News lists new publications of State aid decisions on the internet and in the EU Official Journal.

IP/15/5815

Press contacts:

General public inquiries: Europe Direct by phone 00 800 67 89 10 11 or by email


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