Nuclear bomb-(03.11.02)

It looks increasingly likely that the EC Competition commission will rule that UK government support for British Energy is illegal. Whilst there are obvious social reasons for rescuing British Energy, decommissioning being obvious, it is clear that any financial support will distort the energy market.

The government through its regulators spent much time setting up its energy trading arrangements, and its this efficient market behaviour that has highlighted the public subsidy that has been indirectly supporting inefficient electricity producers for many years. Inflexible large scale coal and nuclear producers cannot hide through artificial price supports any longer.

This is not to say that public policy does not need a nuclear industry. Any support though needs to be made through the market arrangements directly rather than through artificial public subsidy. Whilst a return to the nuclear and coal levy that consumers used to burden may not appear to be the best solution, at least it is a solution which stood the test of time for many years before the trading arrangements came into place. The cost of this, overcapacity in the industry, could be tackled through a subsidised program of closures with the levy phased out over a similar number of years.