CAB128-94_A1b — Page 174

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THE SECRETARY OF STATE FOR ENERGY said that in July the Government had announced that the Magnox power stations would remain in the public sector when the electricity industry was privatised. This decision had proved hard to implement, mainly because National Power (NP) had made difficulties about splitting their staff and might have tried to argue that the arrangement would not provide enough assurance on safety. The decision not to privatise Magnox had affected the market's perception of nuclear power more generally, and had, in particular, made it much more difficult for NP to make satisfactory arrangements for financing the construction of Pressurised Water Reactors (PWRS). At the same time, the estimates of PWR costs had escalated, and it now appeared that eled ty from PWR stations would cost more than twice as much

ity from fossil fuelled stations. NP had therefore told hat they could finance the PWRS only if the Government underwrote virtually all the risks. Privatisation on this basis was unacceptable. He had therefore concluded that in the circumstancos nuclear stations, not just the Magnox stations, must be retained in the public sector.

The company which would be set up to run them should provide a positive cash flow and make a spectable return on assets.

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He had also reviewed the nuclear programme itself. Flotation of the electricity industry would not be possible unless the Government said firmly what its plans were for the PWRS after Sizewell B. The case for these stations had rested largely on grounds of diversity and security of supply. But greater competition would now bring in more independent generators using mainly gas; the life of the ox stations could be extended; the capacity to burn oil had nased; and there was scope for considerable transfers of nuclear based electricity from Scotland and France. He had therefore decided that the Non Fossil Fuel Obligation for the year 2000 should be set at a level which did not require the correction of new nuclear stations beyond Sizewell B. The Government should however say that it would review the prospects for clear power when the Sizewell B station neared completion in 1994

These decisions were essential if the Government was to achieve its objective of privatising the electricity industry during this Parliament. They would also keep down electricity prices, and would not close the nuclear option for the long term. If Cabinet agreed, he would announce them in a statement to Parliament that afternoon. That statement would also say that the Chairman of the new nuclear company would be Mr Collier, at present Chairman of the United Kingdom Mic Energy Authority. Lord Marshall, the Chairman-designate was considering his position, and had agreed that this cou indicated.

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