Health and Safety
Executive / Commission
Regulatory Impact Assessments: Radiation
1 The objective of the regulations amendment is to recover the costs incurred by the HSE in the process of considering nuclear reactor design proposals. This objective will be achieved through charging vendors for the costs that have been placed upon HSE through the need to assess their design.
2 As a preliminary to licensing vendors designing nuclear reactors provide the HSE with their designs for consideration. As part of the assessment process various costs are likely to be incurred by the HSE. These may be in the form of additional man hours spent, administrative costs, and so on. These additional costs to HSE (and ultimately society) are a direct consequence of a new design being submitted. If approval were to be carried out through the private market then costs would be charged back to the firm. The proposal for amending the health and safety fees regulations (2007) will allow HSE to charge these additional costs incurred back to the industry. This proposal should not have a direct effect upon the level of health and safety enjoyed by the public, however it should free up HSE resources to be used in other areas of business.
3 The underlying economic rationale for intervention is that of the polluter pays principle. In this case the vendor proposing a nuclear reactor design is causing a cost (that of the assessment process) which would be effectively borne by the taxpayer through diverting HSE’s resources from other avenues of public benefit. (e.g. such as health and safety prosecutions, policy development, analysis etc). HSE reviews designs for new reactors in order to reduce the degree of both risk and information asymmetry suffered by society.
4 HSE assessment of designs for nuclear reactors is a preliminary to mandatory licensing and is likely to have reputational benefits for the industry, adding credibility to their design proposal which may be of benefit not only within the UK market but also abroad.
5 Reactor vendors are expected to provide HSE with designs for assessment. This is of benefit to the industry as credibility is added to the quality of designs submitted. As the new regulation amendments refer to the costs of assessing new designs for nuclear installations two options have been identified:
6 The proposed option 2 is a small amendment to the health and safety fees regulations (2007) and would come into immediate effect.
7 In this impact assessment we consider the costs to be those costs incurred by HSE in the process of assessing a design. We consider the benefits to be those costs averted by charging back to industry for the work carried out in the assessment of a design.
8 Costs and benefits under option 1 (do nothing) will be zero. HSE will continue to incur the costs associated with assessing designs. The costs and benefits under option 2 are outlined below.
9 Estimates of costs and benefits provided in this RIA are given in the form of current prices and are not discounted. The proposed charging of fees back to industry will come into effect in 2007 and will have an associated one off cost to industry. Benefits will come into immediate effect after the regulation amendments. Any additional future designs submitted would have costs and benefits required to be expressed as discounted net present values (NPVs).
10 The following assumptions will be used in the assessment of costs and benefits:
11 Assumptions made on the number of applications made is key to the level of overall costs and benefits estimated within this impact assessment. This assumption is sourced from the Nuclear Industry Association (NIA) website.
12 The Nuclear sector is the only sector that will be affected by the proposal under option 2 in this impact assessment. Costs incurred by HSE in the approval of nuclear reactor designs will be transferred to the submitter of the new design. Consultation with industry has confirmed that industry is happy to incur these costs..
13 Benefits are assumed to be equal to the costs saved, as HSE will be able to divert resources elsewhere. There will effectively be a transfer of costs to industry.
14 Under option 2 more resources will be available to HSE. It is expected that this could lead to health and safety benefits through HSEs other activities however this is impossible to quantify without knowing how these resources would be employed.
15 If one fatality were to be prevented then this would lead to a benefit of approximately £1.4m in today’s prices. This estimate is taken from the HSEs appraisal values available at: shown in Table 1 below [2]. In this impact assessment we have not attempted to estimate the benefits of injuries and illnesses averted.
| Human cost | Lost output | Resource costs | Total | |
|---|---|---|---|---|
| Fatality | £940, 800 | £493, 300 | £850 | £1,435,000 |
| Major injury | £17,200 | £15,700 | £5,600 | £38,500 |
| Other reportable injury (O3D) | £ 2,500 | £2,500 | £500 | £5,500 |
| Minor injury | £200 | £100 | £50 | £350 |
| Average case of ill health | £4,600 | £2,800 | £800 | £8,300 |
16 There will be no environmental benefits associated with the fees regulations amendments.
17 As outlined above there will be a saving to the HSE equal to the costs of carrying out an assessment however this is not considered to be an economic benefit as it is a transfer of cost to the industry. It is unlikely that any impact upon the level of inward investment in the UK as the total costs charged back to industry will be small relative to the size of the potential market for the products of nuclear installations. The nuclear industry provides over 16% of the world electricity [3].
18 The exact costs are difficult to ascertain as each application will be different and thus costs will vary proportionately to the amount of work that they require. The amount of HSE resources used will be dependant upon:
19 Industry has agreed through consultation that HSE’s costs incurred (including those of services contracted out to third parties) during a design assessment will be charged back to those submitting designs. Costs reasonably incurred shall be limited to £6m in total per design submission. If we assume an assessment takes 3 years to complete and costs are spread evenly over this period then the total cost for a single submission discounted at a rate of 3.5%[4] would be £6m in NPV terms. For all 3 assumed design submissions this would equate to a total cost of £17m in NPV terms. Note that these cost estimates are a very rough approximations and lie at the upper end of the scale of total costs.
20 Estimates of costs are based upon salaries of band 2 and band 3 inspectors and an estimated number of 45 staff years per application. It is assumed that there will be 3 applications.
21 An upper limit of cost of 6m will be incurred by the industry per application, £17m in NPV terms for all of the assumed design submissions.
22 There would only be a negligible administrative cost associated with sending out an invoice that would be incurred by HSE. This cost would rise proportionately with the number of applications that were made.
23 There will be no cost to society other than those costs which may be passed on to consumers. Although the potential earnings from the sale of HSE assessed nuclear reactor designs are likely to be very large and the costs recouped by HSE will be relatively small, it is possible that some if not all of these costs will be passed on to consumers.
24 We are uncertain of the costs estimated as their size is dependant upon the complexity of the application and the quantity of design submissions.
25 Due to the large cost associated with building a nuclear installation it is perceived that there will be no small firms being charged for this service by HSE.
26 There will be no impact upon domestic, nor international, competition as costs are not considered to be large enough to be a barrier to entry.
27 Enforcement of the regulations amendments will be through state law.
28 The amendments to the regulations will take immediate effect.
I have read the Impact Assessment and I am satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impact of the leading options.
Signed by the responsible Minister
(William McKenzie)
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Date………7 June 2007……………………...