Cost Recovery for Nuclear Installation Activities – A Guide

Introduction

This guide is intended to provide information to nuclear licence holders/licence applicants/potential licence applicants, generic design assessment requesting parties, and others with an interest in how the nuclear cost recovery schemes operate. It explains how charges are calculated, invoiced, and the process for handling queries and disputed invoices.

Chargeable Activities

Where the Health and Safety Executive (HSE) recovers the costs of its regulatory work, its policy and HM Treasury's guidance require recovery of the full cost of that work.

Office for Nuclear Regulation cost recovery activities are as follows:

• Nuclear regulatory licence activity.
• Generic design assessment of new nuclear reactors.
• Providing advice to potential licence applicants.
• Activity related to the enforcement of relevant statutory provisions.
• Nuclear Safety Research (NSR).
• Civil Nuclear Security (CNS) activities

Background to Chargeable Activity

Nuclear Regulatory Licence

HSE regulates the nuclear industry primarily through a licensing system established under the Nuclear Installations Act 1965 (as amended). All nuclear installations, as defined in the Act require a licence from HSE. This licensing regime is wide in scope covering the structure and resourcing of licensees' organisations, design, construction, commissioning, operation and decommissioning of plants and sites. The regime involves not only consideration of day-to-day operations but also radioactive waste management and decommissioning policies, strategies and plans. These conditions define the key areas, which encompass the management of safety, and each licensee is required to demonstrate its arrangements for complying with these conditions.

HSE delegates responsibility for operation of the licensing system under the provisions of the Act to HM Chief Inspector of Nuclear Installations who is also the Director of the Office for Nuclear Regulation (ONR) and agency of HSE.

The provisions of Section 24 of the Nuclear Installations Act 1965 (as amended) require HSE to recover its 'expenses' in charges to nuclear licensees, and license applicants for its work in support of the licensing regime.

Generic Design Assessment of New Nuclear Reactors

HSE and the Environment Agency (EA) have jointly developed a new Generic Design Assessment (GDA) process for assessing nuclear power station designs. The GDA is a structured, multi-step process, spread over several years, which allows the nuclear regulators to assess the safety, security and environmental implications of new designs before making an application to build a nuclear power station at a particular site.

HSE delegated responsibility for this work to HM Chief Inspector of Nuclear Installations who is also Director of the Office for Nuclear Regulation.

Regulation 16 (1) of the Health and Safety (Fees) Regulations 2010 (Statutory Instruments 2010 No. 579) provide for HSE to recover costs 'reasonably incurred by the Executive' in carrying out GDA work in charges to requesting parties, in advance of HSE receiving an application for a licence to build a new nuclear power station.

Provision of Advice to Potential Licence Applicants

The Health and Safety (Fees) Regulations 2010, which came into force on 6 April 2010, allow HSE to recover costs 'reasonably incurred by the Executive' in providing advice to a potential applicant for a licence under section 1(1) of the 1965 Act on any matter relating to a potential application for a licence.

Regulatory Statutory Provision

HSE is firmly of the view that all the costs of regulation of health and safety at high hazard sites should be subject to cost recovery because of the nature of the regulatory regimes needed for such high hazard sites. The rationale for this is that such sites require regular intervention by HSE through safety report assessment and regular inspection. Whilst a relatively small amount of inspector time is used to provide advice and cover the duty holder's compliance with wider health and safety regulations, this can be an indicator of a site's overall safety culture.

Nuclear Safety Research Levy

Responsibility for Nuclear Safety Research (NSR) transferred from the Department of Trade and Industry (DTI) to the Health & Safety Commission in 1990. With the agreement of HSC in 2002, the scope of the Programme expanded from one that focused only on civil nuclear reactor sites to one that in addition covered all civil sites being decommissioned, or involved in radioactive waste management.

Primarily, HSE has a duty to ensure that an adequate and balanced Programme of NSR continues in the UK. HSE uses its regulatory insights and interactions with the nuclear licensees to develop research strategies that ensure the research addresses relevant safety issues, contributes to safety standards and maintains important facilities and expertise. The NSR Programme is agreed each year, in consultation with HSE's key stakeholders.

The Nuclear Installations Act 1965, as amended by the Atomic Energy Act 1989, gives powers to HSE to recover the costs incurred wholly or partially in connection with the carrying out of research at the direction of HSE from the nuclear licensees.

Civil Nuclear Security (CNS)

The Secretary of State, through CNS, acts as the security regulator for the civil nuclear industry under regulations made under the Anti-terrorism, Crime and Security Act 2001, as well as under the Energy Act 2004, the extant security provisions of the Nuclear Installations Act 1965 (as amended) and, in respect of nuclear material, the Import of Goods (Control) Order 1954.

As the Regulator CNS is responsible for preventing the theft of nuclear material (and, on civil licensed nuclear sites only, other radioactive material), preventing sabotage of nuclear facilities or nuclear material in transit, safeguarding sensitive nuclear technology and information, thereby helping to prevent nuclear proliferation, and safeguard other protectively marked Government information held by the civil nuclear industry.

CNS regulates security activity in four distinct areas: Site Security; Transport Security; Information Security and Personnel Security.

• Site Security: Regulation of security measures for nuclear and other radioactive material and sensitive nuclear information at civil nuclear sites in the United Kingdom.
• Transport Security: Regulation of the movement of all civil nuclear material by road and rail throughout the UK and worldwide when carried on UK-flagged vessels.
• Information Security: CNS regulates the security of sensitive nuclear information, including any information relating to defence, national security or nuclear proliferation.
• Personnel Security: CNS provides a vetting service which conforms to the requirements of Regulations 9, 17(3) and 22(3) of NISR 03, and which is applied to all permanent employees and contractors working in the civil nuclear industry. CNS revalidates clearances at regular intervals

On 1 April 2007, the security activities of CNS and associated staff were transferred from the DTI (the Department for Business, Enterprise and Regulatory Reform from 28 June 2007) to the HSE. The HSE delegated responsibility for this work to HM Chief Inspector of Nuclear Installations who is also the Director of the Office for Nuclear Regulation (ONR) an agency of HSE.

CNS's regulatory costs are borne by the civil nuclear industry and for CNS's support to Other Government Departments.

Methodology Used for Calculating Charges

Nuclear Regulatory Licence, Generic Design Assessment of New Nuclear Reactors, Provision of Advice to Potential License Applicants and Activity Related to the Enforcement of Relevant Statutory Provision.

The charges applied to nuclear licensees, licence applicants, GDA requesting parties and potential licence applicants, under the provisions of the NIA Act 1965 (as amended) and the Health and Safety (Fees) 2010 Regulations are calculated by ONR in accordance with HM Treasury's Managing Public Money. The amount to be recovered is the full cost of all the resources used in carrying out that activity.

The total cost to be recovered extends beyond recovery of ONR-NII's costs ('Administration' and 'Programme' costs of circa £41.44m) to recovery of the costs incurred by the Executive contract management administration (for Nuclear Safety Support contracts), and an ONR-NII per capita HSE corporate overhead charge (IT, accommodation, HR etc) of £9.24m.
The principle, underlying the cost calculation, is to determine the total amount of operational costs to be recovered (excluding the Nuclear Safety Support ¹ (NSS) and Intermediate Level Waste² (ILW) Programme budgets) and then apportion the cost using the amount of 'Direct' ONR-NII inspector effort consumed by each site, licensee, licence applicant, requesting party, or potential licence applicant. For example if a licensee consumes 10% of ONR-NII's effort³, they will be charged 10% of the total costs incurred.

There are additional charges made for the recovery of any Nuclear Safety Support or Intermediate Level Waste costs incurred by site, licensee, licence applicant, requesting party, or potential licence applicant. Contracts let for NSS or ILW advice are in the main licensee/requesting party /potential operator specific, and therefore charges to licensees/requesting parties/potential operator reflect actual costs incurred plus a Programme management overhead charge; and for licensees recovery of the inspection costs of HSE's Field Operations Directorate (FOD) for conventional health and safety activity at a nuclear licensed site. FOD's activity is booked through HSE's work recording database and charged direct to licensee/site in hourly rates. HSE's Resources and Planning Directorate have calculated the hourly rate for this purpose which is currently £138.13 per hour.

Nuclear Safety Research (NSR) Levy

The charges applied to nuclear licensees, under the provisions of the NIA Act 1965 (as amended), are calculated by ONR.

The principle, underlying the cost calculation, is to determine the total amount of operational costs to be recovered (NSR Programme Costs, plus Programme management costs, net OECD Database receipts⁴) from nuclear licensees (at present EDF Energy Ltd. and Magnox Ltd.). Licensee charges are apportioned using a formula agreed with the nuclear industry and supplied by the ONR's Research Strategy Unit.

Civil Nuclear Security (CNS)

ONR is responsible for calculation of CNS charges.

The charges recovered are ONR-CNS's Administrative and Programme costs (circa £3.1m), an ONR-CNS per capita HSE corporate overhead charge (IT, accommodation, HR etc.) of circa £968k. ONR recovers 100% of ONR-CNS expenses.

The principle underlying the cost calculation is to determine the total amount of operational costs for the Inspectorate, Transport and Security Vetting activities and the number of hours worked5 on each of these activities.

Inspectorate charges are calculated using variable rates with Transport using fixed rates. For Vetting, CNS in-house vetting charges are by fixed rate determined by the level of security clearance required. The Defence Vetting Agency (DVA) carry out vetting activity for CNS under contract and these vets are re-charged to industry at cost plus a CNS management charge.

Administrative and Financial Arrangements

HSE is responsible for the administration of the charging scheme and will issue invoices, and receive payments for all chargeable activity. HSE will be responsible in the first instance, for debt recovery. Invoices will identify operational costs and total payable.

Invoices are issued quarterly, within thirty working days of end an operational quarter (with the quarters being April - June; July - September; October - December; and January - March). Payment will be due to HSE within thirty days of the date of invoice.

HSE will pursue outstanding debts and will actively do so in accordance with its own debt recovery procedures

HSE will prepare an annual Memorandum Trading Account which will be subject to scrutiny by HSE's Internal Audit and also externally by the National Audit Office.

Queries and Disputes Procedure

Separate guidance on HSE's procedures for handling queries and disputes is available on the HSE Website.

Contacts for Advice and Guidance

Should you need advice on the operation of the charging system or have a specific query, please telephone or write to HSE at:

Office for Nuclear Regulation Finance Team
Building 4S.3
Redgrave Court
Merton Road
Bootle
Liverpool L20 7HS
Telephone: 0151 951 4932

Footnotes

1. The NSS budget enables ONR to buy-in technical and scientific support from private consultancies, universities and others in order to fulfil its regulatory functions. This usually happens when the pressure for technical assessments exceeds our internal capacity, or when it is necessary to call on particular disciplines or facilities which are not available in-house. Back to reference of footnote 1
2. The ILW budget enables ONR to commission EA/SEPA to carry out work in relation to ILW conditioning proposals by its suitably qualified and experienced nuclear waste assessors and by consultants engaged by EA/SEPA. EA/SEPA charge HSE/ONR for this advice under a financial MoU with ONR recovering the costs from licensees. Back to reference of footnote 2
3. Inspector effort is recorded n a work-recording database and categorised as 'Direct' and 'Indirect' effort. Direct effort relates to time spent on work covering a specific site, licensee, license applicant generic design assessment, or potential operator. Direct effort accounts for most of an inspector's time. Indirect effort is time spent on specific HSE or ONR business, such as operational policy, international work, management tasks, administration etc. Back to reference of footnote 3
4. OECD databank receipts are fees paid for access to the NEA databank. Back to reference of footnote 4