BMWi: Opinion on Future of Provisions for Nuclear Power Decommissioning and Long Term Disposal Costs – Combination of Internal Funds and External Funds

An opinion commissioned by the Federal Ministry for Economics Affairs and Energy (BMWi) recommends revising the current system of provisions for decommissioning and disposal costs of nuclear power plants. It suggests extending liability after termination of a control and profit and loss transfer agreement, maintaining the decommissioning provisions at the operating company level in a special security  fund, and securing the provisions for long term disposal costs using an external fund model.

Lately, the announcement by E.ON, one of the major German nuclear power plant operators, to spin off conventional and nuclear power and other activities and focus on renewables, distribution networks and customer solutions, (again) sparked discussions on whether provisions made by nuclear power plant operators for nuclear decommissioning and waste disposal are sufficient  to cover costs.

The opinion concludes, based on the current legal situation, that factual as well as legal risks exist that financial provisions in the area of nuclear power made by the operating companies are not sufficient, and therefore, using a worst case analysis, it cannot be ruled out that the state sector might be faced with considerable costs for fully terminating the peaceful use of nuclear power including all follow-on costs. The opinion points out not to make a statement on the appropriateness of the amount of the financial provisions.

It furthermore states that a reform option, which in its view is highly likely to be legally secure due to it being designable in a proportionate way, is a combination model of an internal fund and an external fund, under which the costs for the decommissioning and dismantling would be secured by an internal fund, and the costs for the disposal of radioactive waste would be secured by an external fund in the form of a public law foundation.

The 152 page opinion was released on Friday, but was commissioned on 6 November 2014 and is dated 10 December 2014.

It will be interesting to see what the ministry will make of this legal opinion and how the nuclear power operators as well as their parent and other group companies will react, as the proposal would have obvious consequences for the financing of nuclear power companies and on how the nuclear power decommissioning and disposal reserves can be used within the group.

The debate on the future handling of nuclear power provisions comes on top of the proposed new obligation for conventional power generation to save an additional 22 million in CO2 emissions. Besides, BMWi reportedly opposes the idea of introducing a capacity market in which reliable sources of capacity receive payment alongside their electricity revenues to ensure that they deliver energy whenever needed if other sources, in particular the growing amount of intermittent renewable energy sources, do not deliver enough energy to satisfy demand.

Source: Federal Ministry for Economic Affairs and Energy

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