Bloomberg News

U.K. Will Reject EDF Nuclear Deal That Puts Burden on Consumers

November 06, 2012

The U.K. government is prepared to walk away from a deal with Electricite de France SA over plans to build the first nuclear plant in the country since the 1980s if the power price demanded by the utility is too high.

The government would “absolutely” refuse a deal that placed too great a burden on consumers, Energy Minister John Hayes said today in London. He held talks yesterday with Vincent de Rivaz, chief executive officer of EDF’s local unit.

Britain and EDF are negotiating the terms of a contract that would guarantee the price of power generated at Hinkley Point in Somerset. The U.K. is trying to encourage investors to build new atomic plants to meet the 110 billion pounds ($176 billion) of investment required to replace an aging fleet of stations, without adding to consumer bills already set to rise.

“As I looked into the eyes of Vincent de Rivaz yesterday, I told him that the government will always put the national interest first,” Hayes said at the Energy and Climate Change Committee hearing in Parliament. Both sides are entitled to walk away under the terms of their contract, he said. EDF’s de Rivaz said Oct. 23 more progress and a compelling business case were needed before it makes a final investment decision on Hinkley.

Hayes, who was appointed in September, told de Rivaz he wants to know what the deal might look like by the beginning of December, “such that the terms can be agreed by the end of the year,” he said. Yesterday’s meeting was “productive and positive,” Hayes said.

Price for Power

A guaranteed price for power offered through so-called contracts for difference has been proposed to help speed up low- carbon investment in the electricity market. The plans have faced criticism from groups including Greenpeace which says guaranteed prices amount to a subsidy for the nuclear industry.

Hayes today reiterated that “there should be nothing available for nuclear that’s not available for other technologies”.

The industry has laid out plans for 16 gigawatts of reactors by 2025, though there is no government target. Hayes said more investment will be required beyond what companies such as EDF and Hitachi Ltd., the Japanese company that agreed to buy nuclear venture Horizon last month, are planning in order to reach that scale.

The Energy Bill, which had been due to be published earlier this month, still has unresolved matters, Hayes said. Those include amendments required after Prime Minister David Cameron pledged Oct. 18 to use the legislation to ensure consumers get the lowest tariffs for their power, according to Hayes. “It won’t be a different bill in essence” to what was published in draft form in May, he said.

Yesterday, low-carbon energy industry groups including the Carbon Capture and Storage Association, the Nuclear Industry Association and RenewableUK, wrote to Energy Secretary Ed Davey calling for the Bill to be put through as quickly as possible “to ensure that investment is urgently realized”.

To contact the reporter responsible for this story: Sally Bakewell in London at Sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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