Angela Hepworth gave evidence.

I welcome our witness for the first session this afternoon, which can last for half an hour. Angela Hepworth is the corporate policy and regulation director at EDF. Perhaps, for the record, you would be kind enough to introduce yourself. If you want to say anything about the Bill by way of introductory remarks, please do so.

Angela Hepworth:

I am Angela Hepworth. I am the corporate policy and regulation director for EDF Energy. I look after our interaction with Government and with regulators in the UK, and I am also managing the company’s work on Brexit, and in particular Euratom.

Q 46 Good afternoon, Angela. I would like to ask you a general question, if I may. Do you agree that a nuclear safeguards Bill is an essential step for the UK in preparing for its exit from Euratom?

Angela Hepworth:

I do agree. Maybe I can say something about our industrial perspective and what it means to us in the UK.

As I am sure you know, we own and operate the eight existing nuclear power stations in the UK, which provide 20% of the UK’s electricity-generating capacity. We also have plans to build a new nuclear power station at Hinkley Point C and then follow-on nuclear power stations. As part of that, it is vital for the existing nuclear fleet and for our new build projects that we are able to import fuel, components, services and information for the nuclear power stations. That is absolutely essential. We have a supply chain that depends on having access to those things from Europe and further afield.

In order to do that, it is essential that there is a functioning safeguards regime in place that is approved by the International Atomic Energy Agency. At the moment, as you know, that is provided by Euratom. When Euratom is no longer providing that, it is essential that we have a domestic regime that will support our ability to import those things. We see it as essential to have a safeguarding regime and therefore essential to have the Bill, to give the necessary powers to put that regime in place.

Obviously EDF works beyond our borders. If your business ends up having to work across multiple safeguarding regimes, what likely complications will that cause for youQ ? Do you do that already?

Angela Hepworth:

In terms of our UK operations, we will be operating within a UK safeguarding regime. We understand that the Government’s intention is to keep the arrangements from an industry perspective quite similar to the existing arrangements that apply with Euratom. The Bill provides powers to put that regime in place. We have not seen the detail of how those arrangements will operate, but we are very keen to. We are happy, in principle, working under a domestic safeguards regime in the UK, as we have been happy working under a Euratom safeguards regime.

What do you see as the biggest risks to the industry of leaving EuratomQ ?

Angela Hepworth:

On the safeguards regime first, our concern is about the amount that has to be done to have the safeguarding regime in place in time. As I say, in principle we are very happy with the idea that a domestic regime should be established, rather than the Euratom safeguards regime, but we are conscious that there is a lot to do in the time available to get that regime in place. It is not the principle of it; it is the timing and the implementation.

Likewise, we are conscious that the other key components that we need to have in place include a replacement agreement with Euratom, which would cover issues relating to the ownership of nuclear material, and our future trading relations with Europe for nuclear materials. Obviously, that is subject to the negotiations that are going on in Brussels at the moment. I have regular contact with the officials who are leading those negotiations, and we are fully aligned with the objectives they are perusing. Again, it is subject to the success of those negotiations.

There are other key things that have to be put in place. We will need nuclear co-operation agreements with key third countries. I have been told that the negotiations are under way and are progressing well. Again, our concern is the timing and how it fits with the timing of putting a safeguards regime in place. Those agreements cannot be finalised until there is certainty about the domestic safeguards regime, so it is about the timing of getting all of that done.

The other key issue for us is the movement of people. We are an international business, and the nuclear industry is an international industry. We rely on having access to experts from Europe and further afield. The roles in the company that most draw on skills from overseas are engineering roles—we are reliant on being able to draw in engineers. Building Hinkley Point will require a workforce of 25,000 people. We are doing an awful lot to try to build up skills in the UK, but we expect that, to deliver Hinkley, we will need to be able to draw on workers from overseas. I would not expect that to be solved within the Euratom arena, but that is a key issue for us as a nuclear operator.

We also have to ensure that we have got an export control regime in place and support for nuclear R and D. Those are the key issues for us relating to Euratom.

May I ask you about the Euratom costs relating to safeguarding, which may not go to Euratom but to the Office for Nuclear Regulation as a result of the transfer of responsibility for safeguarding from Euratom to ONR? I understand that EDF Energy already pays into ONR as a contribution to its general costs, but does not pay anything to Euratom for safeguarding. Is that right?

Angela Hepworth:

That is right. We have to distinguish what we pay for from the ONR at the moment. As a nuclear operator, we are required to comply with certain safety and security regulations, and we pay for the ONR’s role in inspecting our stations to ensure we comply with our obligations. That is absolutely right, and we expect that to continue. There is a distinction to be drawn between that and compliance with the safeguarding regime, which is the responsibility of a member state. At the moment, the UK Government pays for that to be done via its contributions to the EU budget. As that is a member state responsibility, it is clear to us that it should be the UK Government who meet those costs in the future, rather than look to the industry to cover them.

Q At present, the UK Government’s responsibility is absorbed into the £14 billion per annum net rebate that goes to the annual overall EU budget.

Angela Hepworth:

As I understand it, it is funded via the EU budget contribution. That is how it is funded at the moment.

Q So, given the fact that it will be a contribution to ONR in the future for that new purpose, which, as we have heard, will require additional inspectors and other things, you would anticipate, or hope, that it would be separated out in practice among the various moneys that go to ONR generally at the moment.

Angela Hepworth:

I think the cost should be met by the UK Government, given that it is discharging a UK Government responsibility.

Q Do you think that that separation out ought to be in legislation? Obviously, in this Bill we are trying to make sure we have got absolutely everything right, as far as transition is concerned. Is that something you think can be dealt with by discussion, or do you think it perhaps ought to be laid down?

Angela Hepworth:

I think we would welcome the assurance; whether that is provided on the face of the Bill or separately is less of a concern to us.

You mentioned some of the things that need to happen after the Bill is introduced to make sure that we have a safeguarding regime for the UK. Can you prioritise those for us, once the Bill has been introducedQ ?

Angela Hepworth:

It would be first and foremost the responsibility of the ONR to put the safeguarding arrangements in place—if that is the element that you are particularly concerned about. I know that one of the early activities they are undertaking is recruitment of the experts that they need in order to do that. They need to be able to do that and to put in place the processes and systems that they need to be able to discharge those responsibilities. What we would welcome as an operator is a timetable from the Government and the ONR that sets out exactly what steps need to be taken and when, in order to have a regime operational at the point where the UK leaves Euratom.

You laid out your concerns about the pace and timescale for the replacement requirements for leaving Euratom. You said there was a lot to be done to discover what ownership details were there, their future trading relationships and the nuclear co-operation agreements with third parties and, obviously, workers from the EU. Assuming a date of leaving Euratom of March 2019, when is the latest date that you would say would be required for you to have clarity on those agreements going forwardQ ?

Angela Hepworth:

I think it is really a process of increasing confidence. It is not so much that there is a particular date where you need to have everything signed and sealed, but we need to have a process between now and the exit date where we have confidence about the regime that will be in place at that date. We would very much support having a transitional or implementation phase, with as much continuity in the existing arrangements as possible. If that could be confirmed early, that would be a great benefit to the nuclear industry, to give them the confidence that they will have continuity in the existing arrangements for a period after the exit date.

Q So first of all, give them that confirmation of continuity, and also how long would you like to see that transition period last?

Angela Hepworth:

I do not think that is a question I can answer. We would like a period of transition. I think that is probably a question for the Government—what they think is appropriate in the circumstances, given what needs to be done within that timeframe.

I am surprised that you do not have an idea of what you might require as part of the industry—that you might not have an idea of how long you might need as a run-in time to adjust to new regulations.

Angela Hepworth:

I think it is more a question of understanding the timeline from the Government and the ONR that they need to have these arrangements in place. Speaking from an industry perspective, we welcome certainty and stability. An early signal that there would be a period of continuity after the Euratom exit date where the arrangements for trade would continue to apply would be very reassuring.

To declare my interest, my husband and various other family members work at Sellafield in my constituency of Copeland. I have heard loud and clear that there is a need for a critical path for us all to have sight of, to understand how this process is running, and also the transition period. I think it would be helpful to understand what outcomes we would need from that transition period from other countries outwith Europe, but also for us to understand how it is necessary for other countries to have this in place. How do other countries rely upon the UK to continue with their business in the nuclear industryQ ?

Angela Hepworth:

If we are thinking about countries outside the EU, there are a number of countries where it is either illegal or a policy requirement that they have a nuclear co-operation agreement in place if they are going to export nuclear material. The countries that the UK Government have rightly prioritised for negotiating agreements are the US, Canada, Japan and Australia. In each case the UK Government will need to negotiate a nuclear co-operation agreement with that country to enable the trade.

Why does it matter? For example, our Sizewell B power station relies on Westinghouse technology, so we rely on our links with the US in order to be able to operate and maintain that power station. If we wanted to import a part from America, or to draw on expertise and services from America for that power station, there has to be a nuclear co-operation agreement in place between the UK and the US in order to do that. As we understand it, the US will not agree a nuclear co-operation agreement unless the UK has a safeguards regime in place, which is one reason we see the Nuclear Safeguards Bill as a key priority, to put that in place. Each of those countries will have its own internal processes in order to agree nuclear co-operation agreements.

As I understand it, for example, in the US it will have to be agreed by the President and it will have to go through Congress. We have been telling Government we would like to see, as an industry, a timeline that sets out for our benefit the steps that need to be taken in order to put a safeguards regime in place, to get it approved by the IAEA, to conclude the negotiations with third countries, but also the ratification processes for those countries, in order to understand the end-to-end process and how those various components interact, so that we can have the safeguards regime in place and also the nuclear co-operation agreements with those third countries. Then, as I said, we need a future agreement with Euratom: there needs to be an agreement in place, negotiated between the UK and Euratom, which explains the framework for nuclear trade going forward once we have left Euratom.

Q We have heard examples of how we need it; are there examples of why other countries need it in place, for their own benefit?

Angela Hepworth:

Yes; there is a nuclear supply chain across the EU and the UK is a great opportunity for those countries. For example, two-thirds of the value of the construction of Hinkley Point will go to companies in the UK but that leaves one-third of the value of the construction going to countries from further afield. Many of those are companies in Europe but, for example, there are companies in the US and Japan which are also involved in the Hinkley Point supply chain. It is in the interests of those companies and countries to have future co-operation agreements which enable them to participate in the supply chain. The UK has great opportunities for international companies: there is supporting the operation of the existing nuclear fleet; there is the nuclear new build programme; there is decommissioning coming up. So there should be real opportunities for other companies to be involved in the UK supply chain if we can get those agreements in place.

On the same theme, in your evidence you very diplomatically describe the challenge that we face, even if the Bill proceeds in a timely manner. The legal and practical challenges to the Government and the ONR to put the necessary arrangements and resources in place remain Q significant. I guess that what you are trying to say, in code, is that that is not really very doable by March 2019.

Angela Hepworth:

I am not saying it is not doable; I am saying it is challenging. You heard first-hand from Dr Mina Golshan of the ONR this morning about the practical steps that need to be taken. There is an awful lot that it needs to do in terms of recruitment and having systems and processes set up. We are mindful of the fact that that is a challenge in the time available. That is one reason we support an implementation or transitional phase.

Q You would find it helpful to have that in the Bill?

Angela Hepworth:

Again, we are looking for assurance and clarity. I am less concerned about whether that is set out in the Bill or not; it is assurance and clarity that the industry is looking for.

Q From the point of view of EDF’s operations across the world, what is your view on whether, and in what form, association with Euratom might be a reasonable proposition for the future, and on whether the associations already in existence might fit the bill as possible models for UK association with Euratom?

Angela Hepworth:

In terms of a future relationship, EDF Energy has been clear from the outset that far and away the best outcome for the UK nuclear industry would be to remain in Euratom. That remains, we think, the right answer for the UK nuclear industry. Assuming that that is not possible and that we have to look at a future agreement, the models of association agreements in place now are limited to engagement in research and development programmes. That is valuable, but it does not address the key issue that we are concerned about, which is the movement of nuclear materials. What we are most concerned about in all of this is our ability to move nuclear fuel, nuclear components, information and services. The current framework of association agreements would not meet that need. If that were going to solve the key issues, we would need to think of some different model of association.

You say under “Issues to be addressed”:Q

“The UK Safeguards Bill says little about what a new regime will look like.”

You also say that if there were any changes or amendments to regulation,

“Neither EDF nor the wider UK nuclear industry are…included as statutory consultees”.

Do you think that the current consultees include the wider sector, or are they quite limited?

Angela Hepworth:

As I understand it, the Bill says that the ONR and such other people as are deemed appropriate must be consulted. We would welcome consultation with the broader nuclear industry.

Unless there are any other questions from colleagues, I will say thank you very much indeed for your time. You have been extremely helpful and clear, and have added a lot to our deliberations over the next couple of weeks.