Saturday, February 02, 2008

Enron Debt- Nukes Decommissioning

Calder Hall- that's the easy bit done

Next week we'll update our estimate of the real national debt- ie the one that includes not just what they declare, but also all the off-balance sheet Enron items.

One element is the liability to clean up all those old nuclear power stations. And as luck would have it, we've just had a useful update from the National Audit Office.

Their report on the Nuclear Decommissioning Authority tells us the latest estimate of total costs is £73bn:

We should note that's a cash figure. Elsewhere the NAO estimates it's equivalent to around £61bn at 2007 prices. We also need to note it's an undiscounted figure. In the NDA's own accounts, they reckon the discounted liability is "just" £30.6bn, based on the Treasury's authorised discount rate of 2.2%.

Tyler is always very suspicious of government numbers that are anything other than simple cold hard cash: "funny money" has a long and disreputable history. But in this case, given that some of these liabilities are over 100 years into the future (no, honestly, they are), in principle some discounting is required.

Against that, the estimated costs are escalating alarmingly. They've already increased by 30% in less than four years, which is equivalent to a 7.3% pa growth rate. So the liabilities are growing much faster than the discount rate.

Given all the uncertainties we'll stick with the simple £73bn cash liability.

And remember- to all intents and purposes, there are no assets to back this liability. It's pay-as-you-go, with whole enterprise fully guaranteed by taxpayers and the vast bulk of the money set to come from them.

Before we move on, here's another interesting chart. It shows how the £73bn breaks down between the various types of nuclear power stations. As we can see, the big money is for decommissioning Sellafield. That of course was Britain's original nuke, and the place where a young Queen Elizabeth starred in that famous 1956 newsreel of her opening Calder Hall.

Now as we know, the cost of nuclear decommissioning is one of the arguments the hippies use against any future nukes. There is doubtless something in the argument, but let's remember that Sellafield was a huge Quatermass style experiment controlled by scary commissars and government boffins. Unlike modern utility companies they didn't have to think about long-term decommissioning (so they didn't). Their main concern was national prestige and building bombs.

PS Once more unto the breach news. Another weekend, another visit to Stratford. This weekend Mrs T and I are off to see Henry V. It will be fascinating to see how Geoffrey Streatfield handles some of the very best known of Shakespeare's set pieces. We've just reviewed dear dear Larry's D Day interpretation, and dear dear Ken's outstanding 1989 version. Mr S will have to go some.

Also note that the Arts Council funding row (see this blog) has now been settled by the Council wimping out on those "tough decisions"- a full frontal assault by the Queen's Own Luvvies overwhelmed their defences. Excellent fun watching the BBC and Channel 4 news coverage explaining how despite the flipflop, there were still Winners and Losers. Funny how they didn't mention taxpayers as being among the losers... despite the fact that the entire £600m pa is coming from them.

Oh for a muse of fire:


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