SECTION 1 : INTRODUCTION
1.1 Circumstances Leading Up to the Audit
1. Prior to the privatisation of the electricity generation industry, the operators of nuclear installations were primarily government-owned organisations: they had expertise, financial security and considerable technical resources. The operators - the nuclear Licensees - were characterised by their high technical competence which was in keeping with their responsibility for safety under UK law (Reference 1). It is also consistent with the non-prescriptive nature of the UK regulatory regime. The same characteristics of expertise, financial security and technical resources are still required of any new organisation requesting a licence.
2. The UK nuclear generating industry has evolved from the former Central Electricity Generating Board (CEGB) and the South of Scotland Electricity Board (SSEB). Over recent years the industry has been restructured. HSE's Nuclear Installations Inspectorate (NII) has responded by assessing the proposals for each stage of major change to ensure that standards of safety are not compromised.
3. Under the restructuring of the industry in 1996, the Advanced Gas cooled Reactor (AGR) power stations and the single Pressurised Water Reactor (PWR) power station passed into the private sector. A holding company, British Energy plc (BE), was formed with wholly owned subsidiaries (Nuclear Electric and Scottish Nuclear) responsible for operating the AGR and PWR power stations. These subsidiaries (not the holding company) were granted new licenses for the nuclear station sites in line with HSE's policy that the user of a site must hold the licence (Reference 4). Nuclear Electric and Scottish Nuclear were subsequently renamed British Energy Generation Limited (BEGL) and British Energy Generation (UK) Limited (BEG(UK)L).
4. Licensing involves a detailed consideration of all the factors that establish prospective Licensees are capable of fulfilling their duties and responsibilities as a user of a nuclear licensed site. Licensees need to have in place the policies, structures, systems and resources necessary to ensure that safety is not, and will not be, compromised. The licensing of British Energy's subsidiaries is explained in more detail in Reference 2.
5. Prior to the granting of new Licences in 1996, NII undertook a series of inspections to establish that the companies as constituted had sufficient staff and material resource and adequate systems and structures to be able to continue to discharge the responsibilities of a nuclear Licensee. While the situation was considered acceptable for the purpose of granting licences, there were issues which the NII decided would require to be checked as the experience of running the companies developed. Such issues were the level of resource in certain specialist areas and the extent and nature of their use of contractors.
6. The total numbers of Nuclear Electric and Scottish Nuclear staff were being reduced in the run up to privatisation, in part as other companies were being split off as part of the restructuring process. Shortly after restructuring in 1996, Nuclear Electric and Scottish Nuclear each instigated a systematic programme of staff reductions. The downsizing process was known as 'Vision 2000' within Nuclear Electric and 'Route 21' within Scottish Nuclear. In 1997 and early 1998, NII undertook a series of inspections on the Licensees' arrangements for managing their staff reductions. The process was amended in the light of NII's findings. NII was satisfied that, if applied rigorously, the outcome of the Management of Change process should lead to staff numbers sufficient to ensure that safety performance would not be compromised. However, the inspections highlighted a number of areas needing further consideration and/or action by the Licensees. These were progressed to an agreed position with the Licensees in early 1998, with NII intending to undertake a follow-up inspection later in the year.
7. Prior to the follow-up taking place, British Energy approached NII with proposals to integrate Nuclear Electric and Scottish Nuclear into a single Licensee. As part of these proposals, the intended structure of the new Licensee was to be demonstrated as acceptable by an interim period of operation using the new integrated structure, leading to licensing. It was recognised that the licensing process could be protracted because of other factors such as renegotiation of discharge authorisations.
8. British Energy proposed a target date of 1 January 1999 to move to the integrated position. In essence the proposal involves the bringing together of the technical management and resources across both Licensees with the concomitant loss of some of the existing management team. At a late stage in the discussions with NII, British Energy divulged there were commercial obstacles which made transfer to a single Licensee unattractive in the short term. The period of delay could not be accurately defined, and it was suggested that it could be some years before the commercial situation would allow a cost effective integration.
9. In spite of the obstacles British Energy still wished to proceed with the integration of the technical teams on the proposed date. They proposed to run the two companies using an integrated management and central technical team to service the operating stations. NII agreed to the integration at Board level, and with respect to certain non-safety related corporate functions. However, because of concerns about safety performance in BE, NII withheld agreement to full integration pending an audit of the two Licensees. The audit was intended to fulfill two main objectives, namely to determine if downsizing of the Licensees had reduced their capability to deliver acceptable safety performance, and to provide a baseline against which to judge future changes (notably integration).
10. NII was concerned with the performance of the two Licensees because of a variety of problems. These included the quality of recent Periodic Safety Review (PSR) submissions, the inability of the Licensees to deliver promised PSR modifications to programme, the inability to offer longer term commitments in areas such as research and the quality of some technical advice. These problems were followed up individually, but the frequency and consistency of the observed problems started to suggest a systemic underlying weakness.
11. Experience, both national and international, indicates that downsizing and contractorisation can have a detrimental effect on safety performance which is not always immediately obvious. However, it should be emphasised that NII has for some time recognised the increasing trend in industry to transfer work to contractors including management activities. NII is not opposed to contractorisation per se, provided it does not undermine the ability of Licensees to fulfill their responsibilities and the safety interfaces with contractors are properly defined and managed.
12. This report highlights good points found during the audit, then focuses on the key issues we found and makes recommendations for action by the Licensees. The report starts by outlining the terms of reference and methodology for the audit and the legal requirements of the Licensees.
1.2 Terms of Reference for the Audit
13. The terms of reference given to the audit team were:
To audit the capability of British Energy's two nuclear Licensees - British Energy Generation Limited (BEGL) and British Energy Generation (UK) Limited (BEG(UK)L) - to continue to discharge their responsibilities in the light of staffing reductions from the Vision 2000 and Route 21 processes;
To report to HM Chief Inspector of Nuclear Installations.
14. The audit team comprised a core of 10 nuclear inspectors, led by a Superintending Inspector from NII. The core team was supplemented when required by other nuclear inspectors and also had the assistance of an inspector from HSE's Operations Unit. The focus of the audit was the BEGL headquarters and technical centre at Barnwood, Gloucester and the BEG(UK)L centre at Peel Park, East Kilbride. The audit addressed the key safety areas - Corporate Management, Engineering Division, Health Safety and Environment Division, and Operations Division.
15. Some of the team members had been involved in the previous inspections of British Energy in 1996 (for privatisation) and in 1997/98 (for the management of change process) and were familiar with the Licensees' key documentation such as Management of Change procedures, the Safety Management Prospectus and the Company Manual. The team also comprised members who had experience of similar audits at other Licensees (eg Dounreay). The audit approach was based upon collecting information by interviewing personnel at all levels, and checking the findings against relevant documentation provided by the Licensee. The key difference compared with the previous inspections in 1997/98 was that this audit focused on the outcome and implications of downsizing rather than the process for managing change.
16. As part of the preparations, one team had visited a station prior to starting the audit to examine the interface between the station and the central functions. NII site inspectors had also undertaken some preliminary work on sites to identify any issues that the team should pursue prior to the start of the audit.
17. In addition to the Licensee's corporate functions, the audit also included organisations providing significant technical support to the Licensee. Following on from and informed by the time spent within the Licensees, members of the audit team visited some of the principal contractors used by either BEGL or BEG(UK)L. This enabled us to examine the relationship between the Licensees and principal contractors from both ends and, in particular, to establish how the Licensees were meeting the 'intelligent customer' requirement (see Section 3.3).
18. Any audit is a sampling process and this was no exception. However, at some levels within BEGL and BEG(UK)L we interviewed all the staff. At others we interviewed sufficient staff to ensure we had a representative cross section of staff views across all the Divisions which we judged had a significant impact on the safe operation of the Licensees' nuclear facilities. Whenever we find problems based on a sampling approach, it is incumbent upon the Licensees to demonstrate there are no inherent weaknesses in their approach.
19. The standards against which we judged adequacy are all published material, either in the form of legislation, in a White Paper or in HSE documents which set out good practice in the management of safety, and what is expected of a nuclear site Licensee. References 1and 3 to 6 are the principal documents. Other references are shown at appropriate points in the text. We have used Reference 5 as a basis to collate and analyse information collected during the interviewing.
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