Archived press release

Brussels to Probe British Energy Rescue

23 July 2003

The European Commission is expected to launch an investigation later today into whether the UK Government's rescue of nuclear generator British Energy (BE) is unlawful under European competition rules.

Papers to be sent to the British Government [1], and obtained by Friends of the Earth, reveal that the Commission suspects the deal to be unlawful state aid. Potentially unlawful provisions include:

• UK plans to relieve British Energy of liabilities for its nuclear waste (worth £3,298 million to BE);

• New contracts between BE and state-owned British Nuclear Fuels (BNFL) to vary the cost of nuclear fuel supply to BE according to the price of electricity - benefiting it by £140 million;

• New contracts between BE and BNFL to vary the cost of managing BE's spent nuclear fuel also according to the price of electricity - benefiting BE by up to £589 million;

• Transfer of ownership of BE's spent fuel from BE to BNFL (and eventually the taxpayer) - benefiting BE by £148 million;

• An agreement by BNFL to standstill payments owed it by BE until March 2004 - waiving interest on payments of £397 million - the conditions on these standstill payments are more favourable to BE than similar arrangements with its other creditors;

• Agreements by five local authorities to defer over £4 million of business rates payable by BE, without interest, for three months.

The Commission papers reveal for the first time the scale of the aid the taxpayer is being forced to give British Energy - details of which have been kept secret by Ministers in the past [2].

Yet the papers also reveal that the British Government knows the bankruptcy of BE would not have led to failures in electricity supply - the Government argued that any administrator of BE would keep its stations running [3].

Friends of the Earth nuclear campaigner Roger Higman said:

"Thank heavens for Brussels! Over four billion pounds of taxpayers' money is being spent to keep British Energy afloat when its bankruptcy would not have led to power cuts. So why did Ministers agree such a ludicrous deal? Once again, the nuclear industry has ripped the tax-payer off. "

Notes

[1] Commission paper C(2003)1744/5 "Aide d'Etat NN 45/2003 - Royaume-Uni - Aid in favour of British Energy plc" is due to be approved by the European Commission later today. It is available by e-mail from Friends of the Earth.

[2] Friends of the Earth wrote to Trade and Industry Secretary, Patricia Hewitt on 18 November and 11 December 2002, asking amongst other things, about the value of the liabilities to be transferred from BE to the taxpayer, the cost to the taxpayer of BE's new contracts with BNFL, the cost of BNFL taking title for BE's spent fuel and the cost to local tax payers of the deferment of rate payments. The reply received from Brian Wilson, on 6 January 2003, refused to reveal the cost of the new contracts, the transfer of title for spent fuel and the rate deferrals, on the grounds that these were matters for the companies and the local authorities. The information estimate given on transfer of liabilities omitted key details and underestimated its value by over £1 billion.

[3] para 175

"The UK authorities conclude from this line of reasoning that the restructuring plan and the aid it contains would have no effect on BE's competitors. They also not that this reasoning would not be affected in the exceptional case where BE would be put under administration. Indeed they submit that the administrator, as a rational economic actor, would notice that BE's plants' short run marginal costs are covered by market prices and would therefore operate them anyway." [our emphasis]

Friends of the Earth's letter to Patricia Hewitt (11 December, 2002) urged her to consider the option of taking British Energy into administration.

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Published by Friends of the Earth Trust