The government's decision to bail out British Energy in 2002 has left the taxpayer with £5.1bn of liabilities, according to a new report.
A National Audit Office assessment published on Friday found that the Department of Trade and Industry's move was risky due to the "volatile" nature of the electricity market.
Despite being privatised in 1996, the nuclear power operator had to be subsidised six years later to avoid it going into administration.
But since then its liabilities have increased by more than five times, parliament's spending watchdog found.
Auditor general Sir John Bourn said the DTI must make sure British Energy provides good value for its investment.
"The Department of Trade and Industry intervened when British Energy could no longer meet its debts," he said.
"As a result the taxpayer is responsible for underwriting a large and uncertain liability.
"The scale of the net liability to be borne by the public purse will depend crucially on British Energy's performance in future years.
"It is therefore vital that the department keeps close scrutiny to ensure the taxpayer's position is safeguarded."
A spokesman for the ministry said it had been right to step in.
"Our overriding objective in restructuring British Energy was to maintain nuclear safety and security of electricity supply," he insisted.
"The successful completion of the restructuring secured these objectives and a future for BE whilst safeguarding the interests of taxpayers.
"If the company had fallen into administration, all of its nuclear liabilities would have fallen to government anyway, the company could not have updated liabilities estimates in the time available, and we could not walk away from them.
"Moreover our financial analysis showed that to make the company viable we would need to remove these liabilities.
"That's why we took direct responsibility for meeting some of those historic spent fuel liabilities."
But Conservative spokesman Charles Hendry said the report raises "questions about how nuclear power can work in a free market, and about the relationship between government and the nuclear industry in bearing risk and securing supply".
"Had British Energy gone into administration the state would have had to step in or the lights would have gone out, and someone would still have had to safeguard the waste," he said.
"The ups and downs of British Energy are a valuable case study when considering the future of nuclear power, which is one of the key objectives of our energy review."
And Greenpeace claimed the report showed why nuclear power was not a cost-effective option for Britain's future energy needs.
"Taxpayers' money should instead be spent on building a modern decentralised energy system for the UK, a system which can cut energy use and CO2 emissions and provide secure, cheap energy for the future," campaigner Jean McSorley said.
