Monday, October 1, 2012

Martin Podolan: Will the state strengthen the power of Javys to the detriment of nuclear safety and market economy?

The company Jadrová a vyraďovacia spoločnosť (Javys) administers strategic property of the State worth hundreds of millions of Euros. Nuclear safety and the development of nuclear energy sector in Slovakia depends on the State’s ability to provide for financial resources in particular for the area of management and storage of nuclear waste. It also depends on the ability to execute and plan for the permanent storage of such waste, which is from safety and finance view a key matter for the population and consequently also for the State.

However, at present, a series of inconspicuous steps is under way in Slovakia, through which this problem is to be "swept under the carpet“ and passed on to next generations. The market position of Javys is to be advantaged - by strengthening its monopoly. At the same time, certain conditions are to be legalised, under which there will be no efficient motivation, public control or real responsibility for planning or building a permanent repository of radioactive waste. What's the truth about it? How does Javys manage the State's property? What should the government do?

What exactly is Javys?

Javys is a joint-stock company in 100 percent State’s ownership which is exercising the shareholder's rights through the Ministry of Economy. The scope of business of Javys includes the decommissioning (i.e. dismantling and liquidation) of the closed nuclear power plants A1 and V1 in Jaslovské Bohunice and processing of various types of radioactive waste. At the same time, the temporary storage and permanent deposition of the nuclear waste produced during operation and decommissioning of nuclear power plants is an important activity of Javys. Javys is also to be responsible for the permanent storage of highly radioactive nuclear waste and spent fuel after the end of power plant's operation. However, the deep geological repositories for the waste have not been even designed yet and it is not known when they will be constructed. At the same time, the permanent deposition in a deep geological repository is to represent over one half of all financial expenses from all contributors to the so-called Nuclear Fund. In principle, this business is eternal because in technical terms, nuclear waste cannot be liquidated "once and for all": care must be taken of it constantly even after it has been permanently deposited. Moreover, the legislation prohibits depositing nuclear waste out of its country of origin, thus, the business of Javys is guaranteed and the company is not motivated to deposit the waste permanently.

How to finance such a business?

Slovakia's citizens are the main customer of Javys. Although the liquidation of the closed nuclear power plants A1 and V1 is provided for by Javys, the costs of it are reimbursed to a great extent by the National Nuclear Fund. The sources for this purpose flow to the Fund automatically - primarily from the citizens in the price of electricity. The company Slovenské elektrárne is another customer of Javys. It pays to Javys in particular for the processing of radioactive waste and spent fuel from its nuclear power plants. Both "customers" are forced to utilise the services provided by Javys because there is no other company with the necessary licences in Slovakia. This brings millions of Euros to Javys every year. (For example, in the Czech Republic, allegedly the liquid waste, from the company ČEZ, is exported for processing to Sweden because it is more economical.)

There is a risk that JAVYS will have conflicts of interests

In other countries with a nuclear programme, the activities, which are carried out by the company Javys today, are split to several independent companies. It is to prevent the conflict between the interest of economical processing and storage of radioactive waste on one hand and the interest in safe and permanent deposition on the other hand.

Similarly, in Slovakia, the Atomic Act requires expressly that radioactive waste is deposited by an entity "independent from the originator of radioactive waste ". This statutory requirement is logical and meaningful because the entity producing, treating, disposing and storing the waste can have other and sometimes even contradictory interests. The threat of conflict of interests at the level of Javys is huge because the company not only processes and stores the waste but it is also the originator of waste within the framework of its processing activities. Thus, Javys has a natural motivation to generate in Slovakia as much waste as possible in order to be consequently able to process and store it lucratively for the money from the State or Slovenské elektrárne. At present, Javys produces and is an originator of a great volume of waste within the scope of liquidation of its nuclear installations. Also, Javys has also produced a great volume of waste during the recent operation of the V1 power plant.

Since Javys runs a business in the area of nuclear waste disposal and is a producer of it, the construction of a permanent repository is not in its business interest. In its interest is rather the opposite, putting off its construction as long as possible.

Despite the obvious facts, at present, the State tries to fully legalise the monopoly creation and conflicts of interests in Javys. Through an amendment to the Atomic Act it proposes to cancel the mentioned conflict of interests and to allow that a nuclear waste depositor acts is one an the same entity together with an entity that produces and processes waste and also decommissions the closed nuclear power plants. It is a paradox that the State proposes to exclude from this activity the legal entities which operate nuclear power plants because by doing so, the State admits that the activity in the area of waste deposition has a conflict of interests with other activities in the area of nuclear energy use. As a result, a rarity would come into existence in Slovakia. This is because in highly-developed countries with nuclear energy, the standard is that a non-profit agency independent from other nuclear activities, is responsible for permanent storage of nuclear waste and for operation of deep geological repositories.

For A1 and V1 liquidation, the amount of € 2.2 billion is missing in the Fund

Another alarming fact is that at the beginning of this year, the amount of about € 2.2 billion was missing in the Fund for A1 and V1 liquidation in nominal prices. Such a amount represents roughly one half of the estimated public finance deficit for 2012. Fortunately, for a longer time, the company Slovenské elektrárne controlled by Enel has been subscribing sufficient amounts to the Fund for the liquidation of the power plants in operation – V2 and EMO12. If the Fund will administer the money of Slovenské elektrárne properly, the company should get to it when necessary.

Therefore, the problem lies in the huge deficit for the liquidation of state power plants – A1 and V1, because where there are no finances, there cannot be even safety. Apparently, the estimated deficit is not (and cannot be) accurate (it can be even higher) because the liquidation of a nuclear power plant usually takes several decades and because a deep geological repository for the permanent storage of highly radioactive waste and nuclear fuel has not been constructed or even planned yet. At the same time, Slovakia has decommissioned no nuclear power plant so far (the shutdown of the V1 power plant does not mean the decommissioning of it) and it lacks essential experience in this area. Even the European Court of Auditors lately has notified the Slovak Republic of the fact that the general estimates of decommissioning costs are not complete because key information about nuclear waste and about the equipment for waste treatment, temporary storage and permanent storage is still not available.

No problem for Slovakia

Despite of the above, Javys, governed by the State, has undertaken to liquidate A1 and V1 through a complex of many (including European) projects and local deals, whose subject is in particular to plan and execute the decommissioning of A1 and V1. The Nuclear Fund dared to estimate the total amount for the final liquidation and started obediently reimbursing the costs to Javys. The number of deals and projects has been increasing over time. As the management of both Javys and the Nuclear Fund has been changing over time, the ability to understand the spider-web of the deals and projects, and in particular the ability to understand whether the estimated amount is correct and whether the most economical strategy for A1 and V1 liquidation has been selected, has been decreasing. This non-transparency creates a great room for uneconomical activity, which can benefit more certain individuals than the State.

It is usual in the world that in order to decommission old nuclear power plants, the State organizes an international tender and selects a professional and experienced company, which will not only provide consulting but it will liquidate the power plants completely. Such a possibility has not been even discussed in Slovakia and Javys is expected to have the exclusive right to this activity. Therefore, it is correct to ask the question whom does it suit that the state A1 and V1 are liquidated for state money through a non-transparent net of projects and deals of a state company (Javys), from which private Slovak companies profit? Why aren't A1 and V1 completely liquidated on the basis of a transparent international tender?

Citizens will pay for state A1 and V1 liquidation as much as necessary

As we have already mentioned, the money for A1 and V1 disposal is collected by the Nuclear Fund in particular from the citizens and subsequently provided to Javys. On the contrary, Slovenské elektrárne itself contributes for the liquidation of its V2 and EMO12 plants, from its own profits.

Regardless of the estimated amount of A1 and V1 disposal costs, Javys can always request more money from the Fund and it can always reason it for example through increased safety demands and cumbersome technical argumentation. Because political appointees rather than real experts sit in the Fund and because the Fund allegedly does not employ any lawyer specialised in the area, it is obvious that the Fund will not be able to oppose professionally such requests of Javys and will pay to Javys the requested money in the end. However, the Nuclear Fund need not worry about this too much because as much money as Javys will ask from the Fund, will be subsequently obtained by the Fund though legal means from the citizens of this country (in the form of a special "tax" for supplied electric energy).

It is still not sure how much will really cost the disposal of A1 and V1. The Nuclear Fund need not worry about the effectiveness of the spending of resources. That is because it is sure that the costs will be finally paid by the citizens, regardless of the effectiveness of Javys operations. The public will not know about the uneconomical results because the essential activities of Javys are among classified (non-public) matters in accordance with the law.

Responsibility for the disposal of processing facilities is also absent

Besides the responsibility for the decommissioning of the closed nuclear power plants A1 and V1, Javys is also responsible for the decommissioning of the facilities used by it for nuclear waste processing, which will have to be liquidated one day too. Since Javys treats waste for Slovenské elektrárne in these facilities, this activity brings it annually millions of Euros. However, Javys itself need not save money in the Nuclear Fund for the disposal of such treatment facilities. According to the law, the Nuclear Fund must provide Javys with money from its own resources, which are provided to the Fund again by the citizens.

Thus, Javys can keep the whole profit from the operation of processing facilities, but for the disposal of them it does not need not pay to the Fund even one cent. In other words, Javys can earn millions of Euros by operating the facilities, however, it does not need to bear responsible for the disposal of them.

What next?

Nothing new needs to be made up, learning from the experience of the neighbouring countries will be enough. There are clear answers to the most questions asked:

1. To decentralise the monopoly. The government should split the assets of Javys so that all the nuclear waste repositories and storage facilities are owned by a new independent agency and Javys keeps on carrying out the activities concerning A1 and V1 liquidation. By doing so, the law and recommendations of international experts will be observed. At the same time, the relations between the entity storing/depositing the waste and the waste producer will get closer to market conditions. However, in order to reduce the possibility of abusing the interconnection between Javys and the newly established agency, the government should ensure that the companies are not controlled by the same ministry, which is a key factor in terms of security and effectiveness. These steps should bring an increased mutual control and subsequently savings for the State and finally also for the citizens.

2. To increase the effectiveness of A1 and V1 decommissioning. The government should achieve a more stable and effective way of A1 and V1 liquidation. USA companies are experienced in it, they have completed the process of decommissioning of nuclear power plants several times and where nuclear power plants used to be, there is a green meadow today. In Germany, they have also almost completed the decommissioning process of a power plant with VVER reactors. Therefore, the new government should organise an international tender for the completion of the A1 and V1 ongoing liquidation and to select as experienced company as possible. The government would then know better the amount of residual costs of disposal (including waste storage and deposition) and it would be surer that the liquidation is in the correct hands. A lower and short-term investment in the international tender could finally bring to the State a significant long-term saving and a clearer idea of costs and dates of total liquidation completion.

3. A state company should also save money. The government should force Javys to a greater responsibility for its economy. It should change the law so that Javys is also obliged to pay a part of its profit from the operation of processing facilities to the Nuclear Fund. Otherwise, there is a threat that again citizens will pay for the liquidation and Javys will use its profit for indefensible activities such as sponsoring, whose economical effectiveness is very doubtful.

4. To strengthen inspection. The government should tighten the regulation of the entire decommissioning process in order to make sure that the State's finances are managed economically. Therefore, it should strengthen the rights of the Nuclear Fund, which should check in advance also the reasonableness of conditions in individual tenders organised by Javys as well as the market level of prices of individual deals. It is not sufficient when the Nuclear Fund checks only the compliance of contracts concluded by Javys with the general budget of the Nuclear Fund, or the compliance of supplier’s invoices with the signed contracts.

5. To give rights to experts. The government should ensure that the mentioned institutions are managed by real experts. Therefore, it must allow also other affected entities (e.g. operators of nuclear installations, the public, representatives of employer associations or consumers) to appoint experts to the respective institutions. An inspiration can be found, for example, in Finland or in the Czech Republic, where the decision on appointees to the Nuclear Fund is not made only by politicians but also by the operators of nuclear installations and representatives of the public. Experts should be experienced in the area of nuclear energy and should come from local and international nuclear energy companies and not from political parties. Today, the appointees in Javys and in the Nuclear Fund are selected exclusively by the State (ministries, the Nuclear Regulatory Authority). This is exactly an area which creates room for politicizing the business. Therefore, the interest of the currently government to protect the interests of Slovakia will be best seen through Javys.

About the author
Martin Podolan, J.D. has been practicing law for 13 years. Originally, he worked in the USA for 6 years. Subsequently he obtained licences to perform advocacy in four countries (in the Slovak Republic, Czech Republic, England, in the state of New York) and is a member of bar associations in these countries. He is a specialist in the field of atomic law.

For the avoidance of doubt, the above text presents a personal opinion. At the time of its publication, this opinion was not officially endorsed or rejected by other private or state bodies.

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