Swiss operators count cost of decommissioning reform

08 November 2019

The operators of Switzerland's nuclear power plants have criticised a reform of regulations for decommissioning and waste disposal funds, which they say will disproportionately increase their costs and thus reduce their ability to invest in the country’s energy sector. The reform, which takes effect on 1 January, includes a reduced yield from the two funds and also removes a 30% safety margin.

Mühleberg nuclear power plant (Image: ENSI)

The country has five nuclear reactors generating up to 40% of its electricity, but in June 2011 its parliament resolved to phase out nuclear power gradually. Although no timetable has been set for closure of the units, the environment ministry in April 2017 estimated that the cost of their decommissioning and waste management will be CHF24.6 billion (USD24.7 billion). Operators Alpiq, Axpo and BKW have been making annual contributions to the decommissioning and waste management funds since 1985 and 2002, respectively.

This week, the Federal Council passed a revision of the Decommissioning and Disposal Fund Ordinance (SEFV), adjusting the investment return and the inflation rate used to measure the annual fund contributions. In addition, the flat-rate safety margin of 30% introduced in 2015 will be cancelled from the SEFV because, the Federal Council says, the new methodology for determining the probable decommissioning and disposal costs, which was first applied to the 2016 cost study, already includes cost implications for forecast inaccuracies and risks. As a result of the amendment to the regulation, the annual contributions to the two funds will increase from the current level of around CHF96 million to an estimated CHF183.7 million.



Alpiq said the revision signals "deterioration" of the framework conditions for the viable operation of Switzerland's nuclear power plants.

"It spells additional costs, will tie up funds for decades as well as marginalise the operators in the fund management bodies," the company said. "The only logical change in light of the new cost classification, which discloses the opportunities, risks and planning uncertainties in a methodically clear and comprehensive way, is the elimination of the 30% safety margin. On the other hand, the decision to lower the actual yield from 2% to 1.6% for the decommissioning fund and the waste disposal fund, respectively, will result in the operating companies having to pay significantly more into the funds over the next few years."

Lausanne-based Alpiq owns 40% and 27.4%, respectively, of Kernkraftwerk Gösgen-Däniken AG and Kernkraftwerk Leibstadt AG. Both are run as 'partner power plants', meaning their entire energy production is transferred to the shareholders and in return they reimburse a proportionate share of the annual costs that are incurred. If the partner power plants are unable to raise sufficient funds via third parties, Alpiq says the shareholders would have to secure the requisite financing and would then lack the funds for other investments.

The SEFV revision has "far-reaching consequences", Axpo said, and in the short term may lead to additional payments into the funds of up to CHF250 million.

"The details on the implementation of the ordinance and the timing and modalities of the additional payments are still open," the company noted, but it "feels obliged" to adjust the parameters of its provisions for post-operation, decommissioning and disposal of the Beznau nuclear power plant. The Baden-headquartered company is working out the financial implication of the adjustment on its operating results, but expects it to be "in the high two-digit million range".

It is "inappropriate" to reduce the actual yield of the funds, it added, because it "ties up unnecessarily substantial additional funds", harming investment in the planned restructuring of Swiss energy supply. With this week's decision, the Federal Council has also "disregarded the result of the consultation, in which a clear majority of the cantons had spoken out against the present revision".

Berne-headquartered BKW said it is considering a "judicial response" to the amendment, which it says "burdens nuclear power plant operators with millions in additional fund contributions - with no increase in safety, with a commitment for decades and with no opportunity of a refund in the event of surplus coverage of funds". It added: "This decision is harmful to the economy. Companies will lack the means to restructure the Swiss energy system, which voters have called for." For its Mühleberg nuclear power plant, the additional contributions will be about CHF100 million, it said.

Although it welcomed the decision to cut the 30% flat-rate safety margin, BKW said it can't understand why the government has reduced the notional yield for the decommissioning and waste disposal funds from 2% to 1.6%.

"Since their establishment, the average returns for both funds have been well above 2% (decommissioning fund: 3.78%, disposal fund: 2.94% as at end 2018)," the company said. "Both funds have performed well since then, together finishing 2018 at about CHF150 million above target. By the end of September 2019, the annual return for the funds was more than 10%."

The revision will "tie up money that is urgently needed for the energy future of Switzerland", it said.

"In particular, it reduces the earmarked funds for the development of Swiss electricity production by the amount required for the reserve payments mandated by the Federal Council. This may have an impact on investments for planned hydroelectric plants, such as the Trift power plant and the raising of the Grimselsee dam. BKW is affected particularly by this amendment since the decommissioning of the Mühleberg nuclear power plant means it will have to pay additional reserve payments by 2022. For nuclear power plants of longer planned duration, these payments are spread over a longer period," it said.

Lowering of the interest rates will be "additionally aggravated", it said, by the Federal Council’s decision to "proscribe reimbursement from oversubscribed funds for decades", which "equates to an expropriation of nuclear power plant operators". BKW is considering legal action against the decision, saying it "regrets the Federal Council's failure to consider the numerous reservations against the amendment raised in the consultation process".

The amendment to the SEFV will impact BKW's 2019 financial results, "with a one-off effect in the low double-digit millions", it said.

The Swiss Federal Council is the seven-member executive council that constitutes the federal government of the Swiss Confederation and serves as the collective head of state and of government of Switzerland.

Researched and written by World Nuclear News