The financing system for nuclear waste management

On September 1, 2018, the Debt Office received increased responsibilities within the financing system for managing the disposal of nuclear waste products. The responsibilities previously held by the Swedish Radiation Safety Authority (SSM) have been transferred to the Debt Office. In short, this means that the Debt Office now holds the overall responsibility for ensuring the nuclear power industry’s payment liability and the proper functioning of the financing system.

The Debt Office is to audit various cost calculations and uncertainty analyses submitted by the nuclear power industry every three years. Based on this documentation, the Debt Office will then submit proposals to the Government concerning the size of both the fees to be paid to the Nuclear Waste Fund and the collateral.

The previous tasks of assessing the financial sustainability of pledged collateral, which entails the fact that it may not be claimed for several decades, will be incorporated into the new responsibilities.

The system protects taxpayers

In the early 1980s, the Government adopted a special financing system for the costs of safely managing spent nuclear fuel in the future, decommissioning nuclear reactors and conduct research and development within this area.

The system was created so that nuclear waste management will be financed by the nuclear power industry instead of by taxpayers. This is regulated in the Financing Act (Act [2006:647] on Financial Measures for the Management of Residual Products from Nuclear Activities) and the Financing Ordinance (Ordinance [2017:1179] on Financial Measures for the Management of Residual Products from Nuclear Activities).

Permit holders are responsible for costs

Those with a permit to conduct nuclear activities, as issued to nuclear power stations and other facilities under the Nuclear Act (Act [1984:3] on Nuclear Activities), are obligated to implement and finance the measures required to ensure the safe management and final storage of the operation’s residual products. Permit holders shall also carry out and finance the safe decommissioning of facilities and demolition after operations have ceased. All nuclear power companies and other permit holders responsible for fee payments are to assume full liability for all their respective costs.

Accordingly, these permit holders are to pay a nuclear waste fee to the Nuclear Waste Fund. The fee is determined every three years for the coming three-year period. The fee level is calculated separately for each permit holder so that the calculated total future fees, together with the reserved funds, are equivalent to the calculated total future costs for the permit holder. The fee is charged in the form of a specific amount per kWh of electricity supplied by a permit holder. The fee may also be set as an annual amount in SEK, such as in the case of a party that is required to pay fees but which no longer produces electricity. The Government determines the size of the fee following a proposal by the Debt Office (previously a proposal by SSM).

Parties liable to pay a nuclear waste fee shall also pledge collateral to the central government for the costs that the fee is supposed to cover, but which are not covered by the deposited and reserved funds. In the case of nuclear power stations, further collateral shall also be pledged for costs that may arise due to unforeseen events.

Nuclear power companies have formed the jointly-owned Swedish Nuclear Fuel and Waste Management Company (SKB), which is tasked with managing radioactive waste. The company also calculates the remaining costs for the programme. The remaining costs of the Nuclear Waste Programme are calculated to be approximately SEK 106 billion.

The nuclear waste fee is paid to the Nuclear Waste Fund

The fees are paid to the Nuclear Waste Fund, which is a government authority with its own board but no employees. On behalf of the board, the Legal, Financial and Administrative Services Agency handles the bureaucratic tasks and asset management of the fund.

Each permit holder has a share in the fund. The share’s size is calculated continuously based on the permit holder’s contributions, obtained disbursements, and the yield on the investments. If there are reserved funds remaining after all costs for a particular permit holder have been covered, then the remaining amount shall be reimbursed to the payer.

The capital in the Nuclear Waste Fund is invested in the financial markets. The fund has previously been limited to investing in an account at the Debt Office as well as Swedish government bonds and covered Swedish mortgage bonds. In addition to these, there is also now the possibility to invest in Swedish and foreign shares and other interest-bearing financial instruments. Furthermore, derivative financial instruments are used to limit the risks and streamline the management.

The balance of the Nuclear Waste Fund amounted to SEK 67.2 billion at the end of 2017. Since the financing system was established in 1982, SEK 50 billion has been paid into the fund and SEK 36 billion has been paid out to cover costs. The yield of the fund has amounted to a total of SEK 54 billion. The remaining costs for the entire Nuclear Waste Programme are calculated to be approximately SEK 106 billion.

Deposited funds may be used for certain purposes

Payers may use reserved funds from fee payments to finance costs that have formed the basis of the fee calculation and which are also regulated by legislation in the area. The funds from fee payments may also be used to cover certain costs for research and development, supervision by government authorities, case management, asset management, etc., as well as support to municipalities. The Debt Office (previously SSM), and in some cases the Government, determine payments from the fund.