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            COMMISSION DECISION         

of 4 April 2006         

on the State Aid which the United Kingdom is planning to implement for the establishment of the Nuclear Decommissioning Authority

(notified under document number C(2006) 650)

(Only the English text is authentic)

(Text with EEA relevance)

(2006/643/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to the provision(s) cited above (1) and having regard to their comments,

Whereas:

1.   PROCEDURE

2.   DETAILED DESCRIPTION OF THE AID

3.   GROUNDS FOR OPENING THE PROCEDURE

4.   COMMENTS FROM INTERESTED PARTIES

Electricité de France (EDF)

British Energy plc (BE)

Greenpeace

5.   COMMENTS FROM THE UNITED KINGDOM ON THE OPENING OF PROCEDURE

6.   REPLIES FROM THE UNITED KINGDOM TO COMMENTS FROM INTERESTED PARTIES

EDF's comments

BE's comments

Greenpeace's comments

7.   ASSESSMENT

7.1.   Euratom treaty

7.2.   Aid within the meaning of Article 87(1) of the EC Treaty — Application of the polluter-pays principle.

7.3.   Aid within the meaning of Article 87(1) of the EC Treaty — Absence of aid to BNFL.

7.3.1.   Analysis under the first reference system (decommissioning costs as investment costs).

7.3.2.   Analysis under the second reference system (pollution costs as operating costs).

7.4.   Aid within the meaning of Article 87 (1) of the EC Treaty — Presence of aid to the NDA

7.5.   Compatibility assessment of the aid to the NDA under the EC Treaty

7.5.1.   Magnox power plants

7.5.2.   THORP

7.5.3.   SMP

7.5.4.   Springfields

7.5.5.   Drigg

7.6.   BNFL as temporary SLC

8.   CONCLUSION

HAS ADOPTED THIS DECISION:

Article 1

1.   The establishment of the Nuclear Decommissioning Authority by the United Kingdom, notified to the Commission on 22 December 2003, which consists in the transfer to the Nuclear Decommissioning Authority of British Nuclear Fuels Limited's Magnox nuclear power plants, physical assets of the Capenhurst, Driggs, Sellafield and Springfields sites, financial assets linked to these sites, and responsibility for covering their nuclear liabilities does not include State aid within the meaning of Article 87(1) of the EC Treaty to British Nuclear Fuels Limited.

2.   The establishment of the Nuclear Decommissioning Authority as described in paragraph 1 includes aid within the meaning of Article 87(1) of the EC Treaty to the Nuclear Decommissioning Authority which is compatible with the common market and the objectives of the Euratom Treaty, subject to compliance with the conditions set out in Articles 2 to 9 of this Decision.

Article 2

As soon as expenditure corresponding to the nuclear liabilities referred to in Article 1 exceeds GBP 15 100 000 000 at March 2005 prices, the United Kingdom shall submit enhanced additional reports to the Commission demonstrating that the expenditure is restricted to meeting the liabilities referred to in that Article, and that proper steps have been taken to limit expenditure to the minimum necessary to meet those liabilities. Such reports shall be submitted yearly.

For the purpose of calculating amounts at March 2005 prices the United Kingdom shall use the reference and discount rate published by the Commission for the United Kingdom, updating this rate every five years.

Article 3

1.   The United Kingdom shall require the Nuclear Decommissioning Authority and Site Licensee Companies for power plants to undertake not to offer to supply non-domestic end-users who purchase electricity directly from the Nuclear Decommissioning Authority and Site Licensee Companies for power plants on terms where the price of the energy element of the contract with the users is below the prevailing wholesale market price. However, in exceptional market circumstances, where the objective tests set out in Article 4(1) are satisfied, the Nuclear Decommissioning Authority and Site Licensee Companies for power plants may, while such exceptional circumstances continue to prevail, price the energy element of the contract at below the prevailing wholesale market price in good faith where necessary to enable the Nuclear Decommissioning Authority and Site Licensee Companies for power plants to respond to competition, under the conditions set out in Article 4.

2.   The United Kingdom shall report to the Commission each year on the compliance of the Nuclear Decommissioning Authority and Site Licensee Companies for power plants with this condition.

Article 4

1.   Exceptional market circumstances shall be deemed to exist if:

2.   If either test is fulfilled, the Nuclear Decommissioning Authority and Site Licensee Companies for power plants may sell new contracts for up to [...] to end-users for contracts at prices below the prevailing wholesale market price on the condition that such pricing behaviour is a commercial necessity during such a period of exceptional market circumstances.

3.   A period of exceptional market circumstances shall not exceed [...]. In order for a subsequent period of exceptional market circumstances to commence, either Test A or Test B must again be satisfied.

Article 5

1.   The United Kingdom shall require the Nuclear Decommissioning Authority to undertake that the Nuclear Decommissioning Authority and Site Licensee Companies for the Thermal Oxide Reprocessing Plant (THORP) and the Sellafield Mox Plant (SMP) will not supply spent fuel reprocessing and storage services or manufacture of MOX fuel supply contracts at prices less than the relevant projected incremental costs of supply. Such incremental costs shall include related incremental operating costs and any related incremental costs of decommissioning and waste management, and shall comprise such costs as projected shortly before the commencement of the contract.

2.   Paragraph 1shall not be applied to contracts entered into before the date of this decision or to contracts where formal offers approved by the Nuclear Decommissioning Authority and the United Kingdom's Department for Trade and Industry have been issued to customers and are under negotiation before this date, or to contracts entered into after that date pursuant to a Letter of Intent entered into before that date.

Article 6

The United Kingdom shall submit a yearly report on the implementation of Articles 3 to 5. The report shall in particular state whether exceptional market circumstances existed in the year concerned and specify the conditions of the resulting contracts. The report shall also state whether contracts were signed in application of the provisions of Article 5(1) in the year concerned, and indicate the conditions of these contracts. The report shall also comment, where applicable, on the evolution of the estimated future cash flow of the assets that were transferred by British Nuclear Fuels Limited to the Nuclear Decommissioning Authority. It will also comment on whether the Nuclear Decommissioning Authority achieved its goal to recover the share of the nuclear liabilities of the power plants that are attributable to the Nuclear Decommissioning Authority, and the reasons why it could not if it did not.

Article 7

This Decision is addressed to the United Kingdom of Great Britain and Northern Ireland.

Done at Brussels, 4 April 2006.

For the Commission

Neelie KROES            

Member of the Commission

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(1)OJ C 315, 21.12.2004, p. 4.

(2)  See footnote 1.

(3)  This does not include British Energy's liabilities, although this company has been classified by the British Office of National Statistics as a public sector company after its restructuring.

(4)  Note: in all Tables, totals may not exactly match the sums of items because of rounding.

(5)  Unlike the other magnox plants, these two power plants feature some non-commercial liabilities since they were originally military power plants.

(6)  Values are discounted at 5,4 % nominal.

(7)OJ C 37, 3.2.2001, p. 3.

(8)  In view of the date of notification of the Measure, the applicable guidelines would be the ones that were published in OJ C 288 of 9.10.1999, p. 2.

(9)  Commission Decision 2005/407/EC of 22 September 2004 on the State aid which the United Kingdom is planning to implement for British Energy plc (OJ L 142, 6.6.2005, p. 26).

(10)  The United Kingdom later on submitted updated figures demonstrating that, according to the United Kingdom, more than 100 % of the liabilities are covered.

(11)  Article 305(2) of the EC Treaty lays down that ‘the provisions of this Treaty shall not derogate from those of the Treaty establishing the European Atomic Energy Community’.

(12)  Ruling of the Court of Justice of 10 December 2002 in Case C-29/99.

(13)  See in particular the Community guidelines on State aid for environmental protection (OJ C 37, 3.2.2001, p. 3) in this respect. This approach has also been upheld by the Court in its judgment of 20 November 2003 in Case C-126/01.

(14)  It must be noted however that, in many Member States with a nuclear industry, the question of successive owners of plants is theoretical since all plants have always been owned by a single operator.

(15)  In this framework, an economically efficient power plant is deemed to be one that generates enough revenue to cover all its costs, including all decommissioning costs.

(16)  Commission Decision in State aid case N 34/90. Letter SG(90)D/2049.

(17)  See http://www.defra.gov.uk/environment/consult/mox/ for all reports submitted in this public consultation.

(18)  Due to the differences between the discount rates used by consultants and the Commission reference rate, the Commission could only compare reasonable orders of magnitudes and not exact figures.

(19)  These estimates of electricity prices are in the range of GBP 28MWh to GBP31MWh). As a reference, April 2006 baseload prices are GBP 54,48 MWh and annual 2007 baseload prices (calculated as the average of summer and winter prices) are GBP 53,75/MWh (Source: United Kingdom authorities quoting Platts European Power Daily, 8 February 2006).

(20)  This estimate is referred to as Lifecycle Baseline 2.

(21)  Sums may not match perfectly because of rounding.

(22)  See 2003 Financial Report of the United States Government, p. 11 http://fms.treas.gov/fr/03frusg.html.

(23)  GAO Report to the Chairman and Ranking Minority Member, Subcommittee on Energy and water Development, Committee on Appropriations, House of Representatives Nuclear Waste July 2005.

(24)  Except THORP and SMP, which are treated separately.

(25)  See footnote 9.

(26)  See footnote 8.

(27)  See footnote 9.

(*1)  Business secret.

(28)  See OECD/NEA, ‘The Economics of the Nuclear Cycle’, 1994, which is one of the most complete studies on this aspect to that date.

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