The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)

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I beg to move, That the Bill be now read a Second time.

I want to start by apologising the House for the fact that I will be unable to stay for all of the debate as I am taking the train to Glasgow to be there for energy day at COP and will therefore miss the wind-ups. I have informed Mr Speaker of this, and those on the Opposition Front Bench. The Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Mid Norfolk (George Freeman), the Minister for Science, Research, and Innovation, will be here for the debate and he will respond for the Government.

Two weeks ago, on 19 October, the Government published their net zero strategy. It is our vision for a decarbonised economy in 2050 and the policies and proposals that will keep us on course to reach net zero emissions through our five-year carbon budget. It is a strategy that puts the UK on a trajectory to meet carbon budget 6, a 78% reduction in emissions compared with 1990 levels by 2035, as the Prime Ministers reminded us earlier today. These kinds of ambitious goals are vital as we host COP26. Integral to achieving carbon budget 6 is our new ambition to fully decarbonise the power sector by 2035. This will mean that the UK is entirely powered by low-carbon electricity, subject to security of supply. Of course our electricity system must be resilient and affordable, as well as low-carbon. It will predominantly be composed of wind and solar but, as last year’s energy White Paper made clear, a low-cost, reliable system means that renewables will be complemented by technologies that provide power when the wind is not blowing or the sun is not shining. Large-scale nuclear power plants are the only proven technology available today that is deployed at scale to provide continuous, reliable and low-carbon electricity. Our electricity system needs nuclear power.

Greg Hands

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Of course I will give way. Perhaps the hon. Gentleman could explain why the SNP is so resolutely opposed to continuing the strong nuclear tradition in Scotland.

Greg Hands

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The hon. Gentleman is right, and we are looking at that technology, but I stress what I just said about deployment at scale. We need something that can be deployed at scale to provide the bulk of our electricity when the sun is not shining or the wind is not blowing. We are always open-minded on other new technologies, but the most important thing is what can be deployed at scale. The measures in this Bill are critical for ensuring we have the option to bring forward further nuclear capacity.

Twelve of the UK’s 13 current nuclear reactors, representing approximately 85% of our nuclear capacity, are scheduled to close by 2030. Although Hinkley Point C is under construction, additional nuclear is likely to be needed in a low-cost 2050 electricity system. That is why we have committed to bring at least one further large-scale nuclear project to final investment decision by the end of this Parliament, subject to value for money and all relevant approvals.

Greg Hands

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I have good news for my right hon. Friend, which is that the regulated asset base model that we are introducing here can be used for further nuclear power plants, including small modular reactors and other key nuclear innovations. He will also know that, in the net zero review, we launched a £120 million fund for new nuclear innovations, which will allow us to increase our nuclear commitments and capabilities beyond the existing commitment to one new plant having its investment case in this Parliament.

Greg Hands

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My hon. Friend makes a good case for supporting this Bill, which will allow the financing options to expand our nuclear power base. I appreciate his support for Hinkley Point, as the MP for a nearby area.

Greg Hands

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No, actually. In fact, the ability to add levies or extra payments on to bills is already in place for multiple technologies. It is not there for nuclear alone. The broad concept exists for other technologies, too.

Greg Hands

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I will make a bit more progress.

The Chancellor’s spending review backs this commitment by providing £1.7 billion to enable the investment decision, alongside a new £120 million future nuclear enabling fund to tackle barriers to deploying new nuclear technology.

Greg Hands

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I will make a bit more progress.

However, it is clear that we need a new funding model to support the financing of large-scale and advanced nuclear technologies. Under the existing mechanism to support new nuclear projects, the contracts for difference scheme, developers have to finance the construction of a nuclear project and only begin receiving revenue when the station starts generating electricity. That was the right model to use for Hinkley Point C, given that it was the first nuclear project to be built in the UK for a generation.

Greg Hands

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I am going to make more progress.

But the lack of alternative funding models has led to the cancellation of recent potential projects, such as Hitachi’s project at Wylfa Newydd in Wales and Toshiba’s at Moorside in Cumbria. We have digested the lessons from Hinkley Point C; it is time to provide these alternatives.

Greg Hands

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I am going to make some more progress.

This legislation will facilitate financing of additional nuclear capacity through implementing a regulated asset base model and additional measures to mobilise private capital into new projects. At this point, I will give way to the very patient Member from north Wales.

Greg Hands

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I think the right hon. Gentleman is a supporter of the Bill and the approach being taken by the Government, because exactly this new financing model will allow us a greater diversity in our nuclear projects. It will allow us to bring in more private sector finance. I know he is a long-standing Labour MP, so perhaps he might want to reflect on Labour’s role in those lost opportunities over the years.

Greg Hands

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Let me finish responding to the first intervention first. I was reading the 1997 Labour manifesto the other day. We remember those days when they came in as “new Labour”, and their manifesto said:

“We see no economic case for the building of any new nuclear power stations.”

The right hon. Gentleman has been here a long time, so perhaps he would like to say why he was a backer of the 1997 Labour manifesto.

Greg Hands

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The right hon. Gentleman said he was first elected in 2001, but my guess is that he was a supporter of the 1997 manifesto. What says supports what the Government have been doing here for some time, which has been to increase our nuclear capacity and make sure the financing models are in place to support the funds. I am surprised he voted against the Budget last week, with its £1.7 billion made available for new nuclear. Perhaps he might explain to his constituents why he was against that Budget.

Greg Hands

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I, too, do not often agree with Tony Blair, but it was good to see his conversion in the end, albeit that it took him 10 years. I have always been a passionate supporter of nuclear power, right since I was first elected in 2005, which was round about the time of that Labour volte-face. I was a strong supporter of Labour’s changing its view at that time; it is just such a pity that there was a lost decade before it came to that view.

Let me move on—

Greg Hands

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No, I am going to make some progress. I have already given way to the hon. Gentleman.

The Bill could help to get new projects off the ground throughout Great Britain, including, potentially, the Sizewell C project in Suffolk, which is the subject of ongoing negotiations between EDF and the Government, as well as potential further projects, such as on the Wylfa site in Wales.

Greg Hands

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I visited my hon. Friend’s constituency with her two or three weeks ago—in fact, it was my first ministerial visit under my new portfolio—and I was impressed by the commitment to hydrogen in the area and to our new approach to energy overall. The most important thing to understand about this Bill is that it enables future nuclear projects and a diversity of financing models, with greater access to private sector finance in particular, so that we are less dependent on overseas developers as we go forward. That is the most important thing to take away. I would of course be delighted to come back to Hartlepool to see what it has to offer in this policy space.

Greg Hands

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I think my right hon. Friend is referring to small modular reactors, the technology behind which the Government have put their support. The ability to finance them will start to come in, and I would hope to speak further on that with my right hon. Friend.

Greg Hands

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The Bill does not change the planning process, but it does change the investment case and the ability to bring in private sector investment, particularly institutional funds, including British pension funds, that are currently put off or find it difficult. It also affects the ability to bring in private institutional investors from overseas—we have seen the difficulties at Wylfa and at Moorside. In that sense, my hon. Friend will find the Bill of great encouragement in respect of future nuclear builds in his constituency.

Greg Hands

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I am going to make a bit more progress. I have taken a lot of interventions, and the time for this debate has been a little curtailed.

The Government are introducing this Bill at a time when the cost of energy is on all our minds. We are committed to making the transition to low-carbon power affordable to households and businesses. Nuclear is part of a low-cost future electricity system and helps to reduce our exposure to volatile global gas prices. The measures in the Bill mean that we can keep nuclear in the mix at a lower cost than would otherwise be the case.

Under the Bill, the Secretary of State will be able to designate a company to benefit from a RAB model, provided that it satisfies certain criteria. This will empower the Secretary of State to insert new conditions into the company’s electricity generation licence to permit the company to receive a regulated revenue in respect of the design, construction, commissioning and operation of a nuclear project. A RAB model allows a company to charge consumers to construct and operate new infrastructure projects. It allows the company’s investors to share some of the project’s construction and operating risks with consumers, overseen by a strong economic regulator. That in turn significantly lowers the cost of capital, which is the main driver of a nuclear project’s cost to consumers.

Greg Hands

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I will make a little more progress.

RAB is a tried and tested method that has successfully financed other large UK infrastructure projects. The introduction of a special administration regime will prioritise the plant’s opening and continuing to operate in the unlikely event of a project company’s insolvency. That will protect consumers’ investment in the plant and ensure that they realise the plant’s benefit. Members should know that this legislation is not specific to one project, as I have already said, and could be applied to nuclear projects across Great Britain.

Greg Hands

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I will make progress.

The RAB model could open up opportunities for British companies and our closest

partners to develop new projects and technologies, including the Wylfa Newydd site in Anglesey and small modular reactors, as well as the Sizewell B project.

Greg Hands

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I will make more progress. I have taken a lot of interventions.

The legislation will also make technical changes to the regime of funded decommissioning programmes, removing barriers to private financing of nuclear projects in support of our nuclear energy ambitions. That section will not apply in Scotland.

Members will be pleased that this new funding model will reduce our reliance on overseas developers for financing new nuclear projects. It will substantially increase the pool of potential private investors to include British pension funds, insurers and other institutional investors.

The funding model will require consumers to pay a small amount on their bills during the construction of a nuclear project. These payments from the start of construction will avoid the build-up of interest on loans that would otherwise lead to higher costs to consumers in the future.

Greg Hands

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I have given away enough.

Members will be reassured that a project starting construction in 2023 will add only a very small amount to the average dual-fuel household bill during this Parliament, and, on average, less than £1 per month during the full construction phase of the project.

Greg Hands

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I will give way to the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil) because I have not given way to him yet in this debate and I miss him from the International Trade Committee.

Greg Hands

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As I have outlined, the Bill is about nuclear. Creating a more diverse potential finance base is exactly what it is about. It is not biased in favour of one technology vis-à-vis another, but, as a Government, we have been absolutely clear about the important, growing role that nuclear will play. On Hinkley Point C, we think that that was the right model for the decision at that time. I think the hon. Gentleman’s problem is with nuclear as a whole rather than specific problems at a nuclear plant. The United Nations Economic Commission for Europe said:

“International climate objectives will not be met if nuclear power is excluded”.

I think his policy is to exclude nuclear power in its entirety.

Members will be reassured that a project starting construction in 2023 will add only a very small amount to the average dual-fuel household bill during this Parliament—on average less than £1 per month during the full construction phase of the project. I believe that these bill impacts are proportionate, given the benefits that nuclear offers our electricity system. Ultimately, nuclear power will deliver a lower-cost system for consumers compared with reliance on intermittent power sources alone. The RAB model will make new nuclear projects cheaper. Our analysis has shown that using this funding model for a nuclear project could produce a cost saving for consumers of more than £30 billion, compared with funding projects through a contract for difference.

Greg Hands

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No, I am going to make more progress.

That saving equates to more than £10 a year for an average domestic dual-fuel bill throughout the life of a nuclear power station, which can operate for 60 years.

The UK has a pioneering history in nuclear energy. We were the first country in the world to set up a civil nuclear programme, back in 1956. There are proud communities—I see many Members who represent them here today—who have been working in the industry for more than 60 years. Creating new nuclear projects will support this important sector and help to level up the UK. The civil nuclear sector is already a major provider of high-value, high-skilled jobs across the entire country. It employs approximately 60,000 people, with nearly 90% of those jobs based outside of London and the south-east. New nuclear projects will be important sources of economic opportunity for the whole country. Hinkley Point C has already created well over 10,000 job opportunities. Future nuclear projects bring with them significant opportunities for training the future nuclear workforce through apprenticeships and training schemes to increase skills.

This legislation will vary in application across the UK. The Government are undertaking close joint work with other stakeholders on the potential options for nuclear at the Wylfa site. The RAB model could play a key role in funding any future project there.

Greg Hands

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No; I am going to have to finish.

Members will know that the Scottish Government have a different position with regard to new nuclear projects. To be clear: this Bill will not alter the current approval process for new nuclear, nor the responsibilities of the devolved Governments. Nothing in this Bill will change the fact that Scottish Ministers are responsible for approving applications for large-scale onshore electricity-generating stations in Scotland. The steps taken in this Bill will mean that Scottish consumers will benefit from a cheaper, more resilient and lower-carbon electricity system, so it is right that Scottish consumers should contribute towards the construction of new projects.

Northern Ireland is part of the single electricity market with the Republic of Ireland. As such, energy users in Northern Ireland will not pay towards nuclear projects financed through the RAB.

Taken as a whole, the Bill will ensure that consumers across Great Britain will benefit from a cheaper, more resilient and lower-carbon electricity system that is funded in a fair and affordable way. I hope that Members will agree that this is an important and timely piece of legislation. Recent increases in gas prices have demonstrated the key role that reliable low-carbon power through nuclear has to play in our transition to net zero.

The Bill is a unique opportunity to deliver a trinity of benefits, as it will: help us to create a resilient low-carbon energy system; deliver value for money for consumers; and deliver and create thousands of well-paid jobs across the country. I hope that Members will take the next step towards net zero and levelling up the whole UK. I commend the Bill to the House.

The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (George Freeman)

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Just to correct the record, it does not at all mean I am not going to answer the hon. Gentleman’s question. It means that I will do it in the usual way, when I wind up at the end of the debate.

The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (George Freeman)

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It is a pleasure to follow the hon. Member for Greenwich and Woolwich (Matthew Pennycook), and I want to thank him and all hon. Members who have spoken in this important debate. We have had more than 15 speeches and a number of important interventions. I also want to thank the right hon. Member for Doncaster North (Edward Miliband) for his constructive approach to this important piece of legislation.

In the seven minutes available to me to wrap up the debate, I want to try to deal with as many of the points that have been made as possible. First, I would like to remind the House of what the Bill really signifies and what it does. The net zero strategy, published earlier this month, sets out our vision for a decarbonised economy by 2050. This will see the power sector fully decarbonised by 2035, with nuclear power playing a key role alongside renewables. As the Prime Minister set out from the Dispatch Box earlier today, he and the Cabinet are putting every effort at COP into delivering that international leadership to that end.

This Bill creates a new funding model for future nuclear projects that will support our transition to a secure, resilient and affordable low-carbon electricity system. The measures in the Bill are critical to ensuring that we have the option to bring forward further nuclear capacity, delivering a system that is lower in cost for consumers than if we relied on intermittent power sources alone. While consumers will contribute to the cost of new nuclear projects during their construction, analysis shows that lowering the cost of financing new nuclear will save roughly £30 billion over the life of this refinancing, compared with relying on existing mechanisms.

It is good to hear that the Opposition will, sensibly, not vote against the Bill tonight. I would be surprised if any Member decided to vote against it—

George Freeman

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No, I will not give way. I am under time pressure and I need to deal with all the points that have been raised—[Interruption.] I have at least half an hour of questions to answer, not least from the hon. Member himself.

The Bill will make it easier to attract, and reduce the cost of, capital. However, a number of points have been raised by hon. Members. I pay tribute to my right hon. Friend the Member for Kingswood (Chris Skidmore), who raised the urgency of tackling the downscaling and ending of the existing nuclear fleet, the urgency of getting this new financing in place and the role of nuclear in levelling up in Somerset and elsewhere in the country. My hon. Friend the Member for Gloucester (Richard Graham) powerfully set out the importance of tidal. My hon. Friend the Member for Morecambe and Lunesdale (David Morris) set out the importance of the nuclear cluster in his constituency and the importance of the 24/7 supply of nuclear for reliability, resilience and baseload.

My hon. Friend the Member for Bolton West (Chris Green) highlighted the role of nuclear in developing apprenticeships and skills, and the role of this model in funding fusion. My right hon. Friend the Member for Beckenham (Bob Stewart) and my hon. Friend the Member for Workington (Mark Jenkinson) raised the question of security. My hon. Friend the Member for South Cambridgeshire (Anthony Browne) made a very powerful speech on the failures of the environmental movement, which has put such irrational fear in the way of the nuclear industry, setting us back two decades.

My right hon. Friend the Member for Vale of Glamorgan (Alun Cairns), the former Secretary of State for Wales, powerfully made the case that Wales stands to benefit substantially but we need to get the cost and the risk assessment right. He also highlighted the role of small modular reactors. My right hon. Friend the Member for Clwyd West (Mr Jones) highlighted the role of the Welsh cluster, and my hon. Friend the Member for Waveney (Peter Aldous) highlighted the role of Lowestoft in this industry in tackling coastal regeneration. I should also like to thank my hon. Friend the Member for Ynys Môn (Virginia Crosbie), who has been a formidable campaigner for energy in her constituency and the whole of north Wales, and my hon. Friend the Member for Bury North (James Daly).

Given the extraordinary benefits of this extraordinary sector—60,000 people employed in the UK, with 90% of those jobs not in London and the south-east but across the country; each worker in the nuclear sector contributing an average of £96,000 gross value added to the economy, 73% higher than the rest; and a median salary of approximately £45,000—it is extraordinary why anyone would oppose it, particularly hon. Members from Scotland, which has huge potential. The local economic impacts are huge: look at Hinkley Point and its well over 10,000 job opportunities and more than 3,600 British companies in its supply chain. Overall, the project is on course to create 25,000 jobs.

It is even more extraordinary to hear Scottish nationalist party Members when it is not just Conservatives, not just the nuclear industry and not just Her Majesty’s Opposition who favour it. Sir David Attenborough himself said:

“I do not question the use of nuclear energy as a way of solving our energy problems in the short term”

until we can solve

“the problems of storage and transmission of power.”

The UN Economic Commission for Europe said:

“International climate objectives will not be met if nuclear power is excluded.”

If that is not good enough for SNP and Liberal Democrat Members, Zion Lights, former Extinction Rebellion activist and founder of Nuclear for Net Zero, said:

“renewables alone would require unfeasibly massive amounts of storage”—

which we do not have—

“to keep the lights on… we are in a climate emergency and need all the clean energy we can build right now”.

That includes nuclear.

The GMB, Unite and Prospect trade unions are all strongly in favour. I could not put it better than Charlotte Childs, the GMB national officer:

“Our environment, our economy and our communities need Ministers and MPs to back new nuclear.”

I hope all will tonight. Even a member of the Green party, Josh Stringfellow of the Kingston Green party, said:

“As Greens we trust the science on climate change. As Greens we should also trust the science on nuclear”.

Across the board, there is recognition that we will not hit net zero unless we accelerate our investment in new nuclear. This Bill provides the framework for reducing the cost of capital and increasing our options for private investment, which makes it all the more extraordinary that we have had the opposition we have. The hon. Member for Southampton, Test (Dr Whitehead), in a thoughtful speech, mentioned a decade of dither and delay. I assume he means from 1997 to 2007, when the then Labour Government completely turned their back on the nuclear industry.

Interestingly, the Scottish nationalists like to have their cake and eat it. The hon. Member for Kilmarnock and Loudoun (Alan Brown) is opposed to nuclear power but, of course, Scottish consumers will benefit from being on the grid. They will benefit from the baseload, resilience and security it gives us. I hear loud and clear his call, and the call of others including my hon. Friend the Member for Gloucester, for more investment in tidal. I reassure the House that we are looking at making sure contracts for difference provide strong support for that sector.

The hon. Member for Richmond Park (Sarah Olney), in a thoughtful speech, set out the importance of supporting net zero, which makes it all the more strange that the Liberal Democrats seemingly have an almost religious objection to nuclear energy. I was a Parliamentary Private Secretary in the Department of Energy and Climate Change when both the right hon. Member for Kingston and Surbiton (Ed Davey) and Chris Huhne were Secretary of State, and it was they who put in place the contracts for difference funding mechanism for nuclear, which did not work and which we are now having to sort out. It is easy to oppose with the benefit of hindsight, but the truth is that this is urgent and the Bill provides the basis for it.

The hon. Member for Richmond Park is right that household insulation is important, which is why we provided an additional £1.75 billion in the Budget to upgrade the homes of those on low incomes through the social housing decarbonisation fund and the home upgrade grant. The Government are consulting right now on raising the standards for home insulation in new houses that are built.

A number of Members mentioned wave and tidal, and I am delighted to confirm that not only is this Department funding great science and research in tidal, wave and other renewables but that at the global investment summit last week I visited wind and tidal technologies and we secured nearly £9 billion of private investment in the international renewables sector. We are actively considering whether we should ringfence tidal technologies in the next round of CfD, and it will be eligible under pot 2.

The hon. Member for Kilmarnock and Loudoun challenged the £30 billion cost saving. The full analysis and methodology is set out in the impact assessment accompanying this Bill, and I confirm the current contract ensures that consumers will not pay for any overruns at Hinkley Point C.

The hon. Member for Edinburgh North and Leith (Deidre Brock) mentioned radioactive waste, and the truth is that we have been producing and managing radioactive waste perfectly successfully, without accident or danger to health and safety, for decades. Some 94% of the waste is very low level, and the Government, like previous Governments, have a strong plan for a geological disposal facility.

A number of colleagues raised the issue of national security. I want to make it clear that the Bill is not concerned with making it difficult for any particular country or company to apply. The quality of the bids will be considered in due course by the Secretary of State, with full accountability to Parliament. The Bill does not determine any future nuclear project’s ownership structure; it simply creates a new financing model that broadens our options for new nuclear.

As a package, the legislation before Members will help to end our reliance on overseas developers for finance, which has led to the cancellation of nuclear projects in the UK. Instead, the Bill ensures that our new nuclear power plants can be financed by British pension funds and institutional investors. However, this is not about shutting out individual companies or countries, and the Government have already taken significant powers through the National Security and Investment Act 2021.

A number of colleagues have raised the issue of the scrutiny of risk assessment, and I want to reassure Members that the Secretary of State will be required to act transparently and with full disclosure to the House. I close by thanking Members from across the House for their contributions, highlighting that I hope very much that the Scottish nationalists will not divide the House tonight on something that Scottish voters will benefit from. I strongly believe that this new funding model acts in the interests of the whole of this country, and I commend this Bill to the House.

Question put, That the Bill be now read a Second time.

The Lord Commissioner of Her Majesty's Treasury (Craig Whittaker)

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I beg to move—[Interruption.]

The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)

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Thank you, Ms Fovargue. It is a pleasure to serve under your chairmanship. I look forward to working with Committee members as we scrutinise this important and timely Bill. To begin, I want to briefly remind Members of the purpose and background of the Bill.

As all Members will agree, it is vital that the UK continues to lead the world in tackling climate change. That is why we have committed to a 78% reduction in emissions compared with 1990, as well as fully decarbonising our power sector by the year 2035, which will mean ensuring that the UK is entirely powered by low-carbon electricity, subject to security of supply. To deliver that, we will need new nuclear power plants, which are the only proven technology deployed at scale to provide continuous, reliable, low-carbon electricity.

Greg Hands

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I am speaking in a general sense about nuclear being a proven technology, deployed at scale. That has been the case since 1957 or ’56, with the very first nuclear power plant in the world here in the United Kingdom at Calder Hall just by Windscale.

However, it is clear that we need a new funding model to support the financing of large-scale and advanced nuclear technologies. The Bill will deliver that, in the form of the regulated asset base model. I am sure the Committee will discuss the detail throughout our sittings, so I do not intend to go into the minutiae now, but I want to outline the Government’s position that this is the best way of delivering new nuclear projects while delivering value for consumers.

I am glad that the Opposition recognised that point through their support for the Bill on Second Reading. That support has been reiterated today by Her Majesty’s official Opposition, if not by the Scottish National party. I am grateful for their useful contributions on Second Reading and look forward to further discussions in Committee. Similarly, I recognise the interesting points raised by the SNP in that debate. I recognise that the SNP has a principled—if, in my view, irrational—objection to new nuclear projects. Nevertheless, I am pleased to subject the Bill to the SNP’s careful scrutiny as well.

I hope that as we move through Committee and the rest of proceedings on the Bill, we can work in collegiate and co-operative ways, considering the individual clauses of the Bill to ensure that it can meet its objectives. I think that was the position laid out by Her Majesty’s loyal Opposition at the start of the debate.

I turn to amendment 1, tabled by the hon. Members for Southampton, Test and for Greenwich and Woolwich. It is linked to amendment 2 to clause 2, and I am happy to debate both together. The amendments seek to insert as a criteria for designation that the company is not wholly or partially owned by a foreign country. I want to touch briefly on the implications that the proposed definition could have for the wider policy of financing nuclear projects in this country.

If the definition as drafted could rule in all companies that were seen to be controlled by state sponsors, it could thereby rule them out of eligibility for a RAB. The RAB allows us to bring new sources of financing into nuclear projects and reduce our reliance on overseas developers, but it is not credible to introduce a blanket exclusion on developer participation in RAB companies, many of whom are to some degree state-sponsored, including some of our closest international partners. One has already been named during proceedings on the Bill and in Committee this morning.

I am sure that the intention of the hon. Members does not lie in that direction, as that could make it much harder to bring new, appropriate projects to fruition. We should never forget that the Bill’s purpose is to make it more possible to finance nuclear projects in the future, not less so. However, I welcome the focus on national security in one of the UK’s key infrastructure networks, a point made by Her Majesty’s Opposition. We will no doubt focus on that matter fully in our consideration of all the amendments.

I will take the points raised in turn. The hon. Members for Southampton, Test and for Greenwich and Woolwich both asked what the £1.7 billion in the Budget and spending review is made up of. We had an extensive debate on the Budget—I think it was four days in all—and there was a chance to examine this, but I will now reiterate the purpose of the money.

Greg Hands

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To be fair, I also listened carefully to Sizewell C’s evidence, and the company will be as aware as we are that this is an active negotiation. I was not in any way surprised that Sizewell C’s representative did not wish to be drawn on the question of exactly where the £1.7 billion would be deployed. We have outlined in the Budget document the sorts of areas that would be in scope. None the less, this is an active financial negotiation.

Greg Hands

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I do not think the hon. Gentleman is correct. It is not fair to conclude that the evidence from Sizewell C was incorrect, or that it was ill-informed in any other way. This is an active commercial negotiation. We have laid out the parameters of the £1.7 billion, and is in no way surprising that our negotiation partners may not wish to comment on what they think it is likely to be spent on. After all, it is taxpayers’ money, which will be deployed by this Government to move forward a nuclear project.

Greg Hands

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I would say two things in response. First, Sizewell C may not feel it is appropriate to comment on the deployment of taxpayers’ money. Secondly, I know from long experience of Government that often the best way of securing taxpayers’ money in a negotiation is not to reveal too much about what approach the Government might be taking. We have laid out in the Budget document, which was quoted by the hon. Member for Southampton, Test, what we think is going to be in scope—what the £1.7 billion might be spent on.

The hon. Member for Greenwich and Woolwich asked a more general question about China. He asked whether this was about sending a message to China, or words to that effect. The answer is no. The UK welcomes foreign investment in our infrastructure, but as we have always said, that should not come at the expense of our national security. It is already the case in UK law that all investment involving critical nuclear infrastructure is subject to thorough scrutiny and needs to satisfy our robust national security and other legal and regulatory requirements. The National Security and Investment Act 2021 also strengthens our powers to act should we need to.

Greg Hands

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I thank the hon. Gentleman for that intervention. Of course, the final investment decision has not yet been taken on Sizewell C. All the relevant parts of the NSI Act will be in place—he is right to say that it got Royal Assent this year—but that final decision has yet to be taken.

The hon. Gentleman asked about Chinese involvement at Hinkley. May I be absolutely clear? The Bill is not reopening that decision. Hinkley Point C is vital to reducing our reliance on fossil fuels and exposure to volatile global gas prices. CGN is a partner in financing and building that important project. There is no involvement by any Chinese company in any major contract at Hinkley, including the instrument and control system.

As for Sizewell, to be clear, this Bill does not determine the ownership structure of Sizewell C or any other future nuclear project. That is another really important point to understand about the Bill. The Bill increases our options for financing nuclear projects, ending our reliance on overseas developers for finance—we are not excluding overseas developers—which has led to the cancellation of other nuclear projects in the UK. It will ensure that our own new nuclear power plants can be financed by, for example, British pension funds and institutional investors—often from our closest partners. That is the purpose of it.

Greg Hands

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I thank the hon. Gentleman for that intervention. Looking at the amendments, amendment 2 states that

“the nuclear company is not wholly or in part owned by a foreign power”

and amendment 1 states that owned by a foreign power means

“owned by a company controlled by a foreign state and operating for investment purposes.”

To be frank, I have a different interpretation, or at least I am not fully seeing his interpretation as being what he has in the amendment. The amendment strikes me as being worded in such a way that it could, for example, include nuclear operators from some of our closest partners. I look at what I see in front of me, rather than necessarily what Her Majesty’s loyal Opposition say that something might mean.

Greg Hands

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As I have made clear, we think that the Bill adequately addresses these issues, particularly in combination with the National Security and Investment Act, so I do not see it as necessary for us to make any further clarification. Ultimately, the Bill is about bringing in more financial options for future nuclear power, not cutting them.

The hon. Member asked about Bradwell. To reiterate, that is not a decision for now. CGN does not have regulatory approval for its reactor, nor has it submitted any applications to build a nuclear plant in Essex. We are in negotiations for Sizewell C, as the most advanced nuclear project in the UK.

Greg Hands

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The hon. Member is correct that this is about future nuclear projects, but I stress two things. The original question from the hon. Member for Greenwich and Woolwich was about the future of Bradwell. I am reflecting on the specifics in relation to Bradwell. Of course, nuclear projects going forward are what the Bill is all about, but I will not comment on specific projects potentially going into a RAB process, because that, as we will discover later, is a properly defined process, set out with approvals from the Secretary of State after consultations. The Secretary of State will make essentially two determinations: will the project provide value for money, and is it sufficiently advanced? It would not be proper to comment on whether a specific project that we discuss today will have the ability in future to meet the two most important criteria laid out in the Bill.

Let me say a few extra things about amendment 2. The legislation gives the Secretary of State the power to designate a nuclear company and to modify the company’s licence subsequently to include RAB conditions. The Bill requires the Secretary of State to consider the two criteria that I just mentioned when deciding whether to designate a nuclear project. The two criteria are that the development of a project is sufficiently advanced to justify the designation and that the project is likely to result in value for money.

The amendments seek to include additional criteria for the Secretary of State to consider before designating a project. As I said, amendment 2 requires that a nuclear company may not be owned by a foreign power. I have already raised concerns about the unintended consequences of that for our ability to pursue new nuclear projects in this country.

Greg Hands

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The National Security and Investment Act is also involved, so I do not think it would be appropriate for me to prejudge that process. I would ask whether the project is at a sufficiently advanced stage, whether it is likely to result in value for money and also whether it fulfils the other criteria set out in the Government’s current legislative approach.

I will not go over the consequences again. It is enough to say that I think the amendments could threaten our ability to bring forward new nuclear projects, even with our closest international partners. I nevertheless appreciate the attention paid by Opposition Members to the protection of the UK’s core infrastructure; we are wholly aligned on its importance and centrality. Although we welcome inward investment to the UK civil nuclear sector, we recognise the need to ensure that that investment is subject to appropriate scrutiny and is in the interests of our national security.

To reassure Members, I will focus on the robust protections that we have in place to control who invests in our critical infrastructure, which gets to the heart of many of the interventions by Opposition Members. Under the National Security and Investment Act, the Government will have significant oversight of acquisitions of control in a nuclear project.

Significantly, the Government will be able to intervene in any qualifying transaction, including an acquisition that would take the holdings to 25% or more of the shares or votes in an entity, or an acquisition of material influence over an entity. Such qualifying transactions would be subject to a national security assessment and would require the approval of the Secretary of State for Business, Energy and Industrial Strategy to proceed. That is a very tough condition on the sort of involvement that is at the heart of the interventions made by Opposition Members.

The Act also provides the Government with the ability to call in any acquisitions for assessment if there are national security concerns. From that assessment, the Secretary of State can order the prevention or alteration of the acquisition. The final funding model of any nuclear project would also be subject to full scrutiny from the UK Government prior to a final investment decision.

As currently drafted, both amendments would appear to violate the commitments we made in article 129 of the trade and co-operation agreement with the European Union, in which we agreed that we would treat investors from the EU no less favourably than UK investors. There may be multiple views within the Committee about that agreement with the European Union—the hon. Member for Kilmarnock and Loudoun voted against it in the hope of no deal—but those of us who support it believe that that article is important. The discrimination that the amendment appears to propose towards some of our closest partners and operatives in the nuclear sector would therefore be undesirable policy-wise and could put us in a difficult position.

I hope that I have convinced Members that the Government take seriously the need to ensure the security of our nuclear energy assets, including who can invest in them, and that the amendments as currently drafted are not workable. I ask the hon. Member for Greenwich and Woolwich to withdraw the amendment.

Greg Hands

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I think we have already had the debate, but I will say briefly that the clause defines the key terms referred to in part 1 of the Bill. Subsection (2) defines a “nuclear company” as one that holds an electricity generation licence granted by the authority for a nuclear energy generation project. The authority is the Gas and Electricity Markets Authority, the governing body of Ofgem.

The clause goes on to make a distinction between an ordinary licensed company and one that has been designated by the Secretary of State to benefit from a RAB through having its licence modified by the Secretary of State. Subsection (4) defines a “relevant licensee nuclear company”. To become one such, it is necessary for the company to have had its licence modified by the Secretary of State to insert RAB special conditions and to amend the licence terms. It is also necessary for the company to have entered into a revenue collection contract with a revenue collection counterparty, so that RAB funding may flow to the company’s project.

Greg Hands

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I will write to the hon. Gentleman on that specific issue, perhaps this afternoon. I need to check whether Sizewell C has such a licence. I will get back to him.

Those steps in the clause are necessary to make clear the different stages that a company goes through under the RAB model.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Designation of nuclear company

Amendment proposed: 2, in clause 2, page 2, line 14, at end insert—

“(c) the nuclear company is not wholly or in part owned by a foreign power.”—(Matthew Pennycook.)

This amendment prevents the Secretary of State designating a nuclear company owned or part-owned by the agents of a foreign power.

The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)

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Welcome back to the Chair, Ms Fovargue.

I believe that the intent of the amendment is already captured in the approvals framework for the regulated asset base. That includes the process for designating a project and then modifying its licence, and wider due diligence on the project. The Government simply would not allow a company to enter into a RAB revenue collection contract if there were cause to doubt the ability of the company to complete construction, a point made slightly more pithily by my hon. Friend the Member for Bridgend in his intervention on the shadow Minister, the hon. Member for Southampton, Test. We expect to say more about how the Secretary of State will make this judgment in our statement on the designation criteria, which we will publish in advance of any consultation on designation.

Before considering the matter of licences, let me return to the question asked earlier by the hon. Member for Kilmarnock and Loudoun. Sizewell C does have a licence, as within the terms of clause 1(2). He said that he could not find the link to the licence on the Ofgem website, so I will commit to write to him, copied to the Committee, with that link.

Designation is very much the first step in the process of amending a developer’s licence to include the RAB conditions. At the point of designation, no commitments have been made; a project will be under development, and further negotiation is required between the developer and the Government. The process is open and transparent and includes consultation at several stages, meaning that a project will be designated only at an appropriate point.

Let me deal with the points raised about various RAB projects in the United States. It is not unreasonable to look at foreign experiences, but it is important to separate the experience of another country in developing and delivering a nuclear power plant from what part of that experience was due to a RAB model. There were several unique circumstances linked to the failure of the South Carolina Virgil C. Summer project, which was referred to, and the parent company, including—[Interruption.] I beg your pardon?

Greg Hands

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I thank the hon. Gentleman for that intervention—I think it was an intervention—from a sedentary position. As the Energy Minister, I have to be aware of what is going on in the world of nuclear globally, so no, I did not look it up during lunchtime, actually; I have looked into this and other US plants. The failure of the Virgil C. Summer project—I think that is the one he was referring to—and the parent company included arrests and a conviction for fraud. There were also issues linked to design and supply chain immaturity, as well as a lack of experience with the construction of new nuclear projects. Those issues are pretty far removed from its status as a RAB project. I do not think those risks in South Carolina are applicable to the UK.

Greg Hands

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Broadly speaking, the answer is yes. I think that all of those factors, if known at the time, would be considered when the Secretary of State makes the designation. That is the point. Of course they would be factors, were they to be known. I cannot put myself in the shoes of the governor of South Carolina—if indeed it was the governor of South Carolina who made the decision—but if he were or had been of the opinion that the project could not have been completed, he would surely not have made the designation at that time. I am slightly hesitant to stray into the politics of South Carolina, but doubtless the governor was of the opinion at that time that the project would have been completed. The hon. Gentleman uses South Carolina as an example, but I do not think that his amendment would have helped the governor make that decision.

This is not just a question of the factors, which are already covered in the Secretary of State’s determination of a RAB designation. The timing is also important. A project has to go through many stages and approvals post designation of a RAB. To include the hon. Gentleman’s additional definition at this stage might be premature, though I doubt it is needed at all, for the reasons pithily put by my hon. Friend the Member for Bridgend about the chances of the person making the decision being of the view that the project might not be completed. If that were the case, I think it would be a highly material fact in determining whether to designate a RAB. I do not believe that this amendment is necessary in order to meet the laudable objectives that Opposition Members seek to achieve. I therefore ask the hon. Gentleman to withdraw the amendment.

Greg Hands

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Just to probe the hon. Gentleman on this, if I may, one of the criteria is whether the project is sufficiently developed to warrant a RAB. At what point does he think that the fact that the person making the decision might not necessarily think it would be completed would mean that they do not think it is sufficiently developed to start the process? Surely, if they did not think it was going to finish, they would not think it was ready to start either?

Greg Hands

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This clause, through subsection (1), gives power to the Secretary of State to designate by notice a nuclear company to benefit from a RAB. The later provisions of this part mean that the designation power can only be exercised with appropriate protections and transparency of decision making. Subsection (3) sets out the criteria a company must meet to be eligible for designation: that the Secretary of State must be of the opinion that, as previously debated, the nuclear project is sufficiently advanced to justify the designation, and that designating the company in relation to the project is likely to result in value for money. In considering value for money, it is expected that the Secretary of State will take into account considerations such as the cost to consumers and the impact on our net zero obligations. As set out in clause 3, the Secretary of State will be obliged to publish details on the process that he will follow when assessing whether the criteria are met.

The eligibility criteria offer important protections for consumers and taxpayers. A company can have access to a RAB only when the Secretary of State is convinced that it is a good project and sufficiently advanced, and where the likelihood of cost overruns is remote. The Secretary of State will also need to consider whether using the RAB to fund the project is likely to represent value for money.

Greg Hands

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I disagree with the hon. Gentleman. I think that the process and the checklist is set out pretty well. If he would like, I can run through how the process works when we get to the later clauses and look at the specifics of the process. It might appropriate to take him through that.

When considering value for money, the Secretary of State is expected to have regard to the cost to consumers, future security of supply and our decarbonisation targets. The Secretary of State can designate multiple nuclear companies at any given time, so more than one project can be designated for a RAB at the same time, but the designation criteria, project status and likely value for money will be applied individually to each project.

Greg Hands

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I thank the hon. Gentleman for that varying and detailed speech on clause 2. I will try to deal with each of his points. First, he raised a series of additional factors that could be considered by the Secretary of State. He might have tabled an amendment, for example, on what those additional factors might be. I do not think I have seen any amendments tabled by the Scottish National party, but he might have perhaps tabled one in the same way that the official Opposition did as a test. My initial response is that the additional factors he raised would be covered by the two criteria on whether it is value for money and sufficiently advanced, so his additional criteria would be encompassed by the two processes that are already there. Perhaps he can table an amendment to deal with where he would specifically like something added.

The hon. Gentleman asked about the £1.7 billion. We have been clear, while remaining consistent with the fact that this is a commercial negotiation, that the funding is to bring a project to a final investment decision in this Parliament, subject to value for money and all relevant approvals. That could include development stage funding to support the maturation of the project to de-risk it. It could also include some Government investment at the point of a transaction, helping to mobilise other private sector capital. It is already laid out in detail in the Budget document. It was debated at Budget, and I reiterate it today. That there is a limit to how much additional information I can put out on something when ultimately the background is that it is a commercial negotiation.

Greg Hands

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I am not going to add anything on the £1.7 billion, which is a separate process and a separate factor to the Bill. I have nothing further to add. I have given sufficient detail of where the £1.7 billion might be spent. Where it will be spent is properly a matter for which the background is the commercial negotiation.

The hon. Gentleman mentioned delays at Hinkley Point C. He is in danger of arguing with himself at times. At one point he argued that we had not brought a nuclear project to a final investment decision, or we had brought only one in the last decade. Then he said that we should wait to make a decision on Sizewell C until we had Hinkley Point up and running. It sounds to me as if he wants to have it both ways—

Greg Hands

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He is saying we are either moving too quickly or too slowly. Ms Fovargue, it reflects back to the starting position. If the hon. Gentleman does not mind me saying it, I think he is opposed to nuclear power per se. I suspect he is less interested in whether it is going too quickly or too slowly, to be frank, and it would be helpful if he gave us a straight view as to whether we are being too quick or too slow.

Greg Hands

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I thank the hon. Members for Southampton, Test and for Greenwich and Woolwich for amendment 4, which amends the clause governing the process by which the Secretary of State can designate a company. As part of the process, the Secretary of State must consult a named list of persons, including the authority, Ofgem, the Office for Nuclear Regulation and the relevant environment agency. The Secretary of State will also be able to consult, of course, such other persons as they deem appropriate at that time. The amendment would require the Secretary of State to publish the reasons for consulting those persons not named in the legislation.

Of course it is important for us to be transparent, and I welcome the intention of the amendment to increase transparency and accountability throughout the process, but it might help if I set out the intention of the consultation requirement in clause 3. The Government have agreed a set of persons that they feel must be consulted: the Office for Nuclear Regulation, Ofgem, the relevant environmental agencies and the devolved Administrations in the event that all or part of one of the plants be located in one of the devolved nations of the United Kingdom. The ones who must be consulted include the key regulatory bodies for nuclear generators in Great Britain.

Alongside that, for each designation, there may be other relevant parties that the Secretary of State thinks it is reasonable to consult to inform the draft reasons for designation. That sort of provision is standard practice. The clause is modelled closely on existing consultation obligations in the Energy Act 2013, which allows the Secretary of State to consult other persons without the requirement to publish a justification.

I do not seek to reject the amendment because of concerns about transparency. The designation process takes several important steps to ensure transparency, including the publication of a statement on how the designation criteria will be assessed and the publication of the designation notice.

The hon. Member for Southampton, Test says that those consulted ought to be relevant, but I think that the Secretary of State will consult only with those who ought to be relevant rather than, in the terms of the hon. Member for Southampton, Test, a random set of people off the street. The way that governmental processes work is that consultations are supposed to be with people who are relevant. I do not think that including a relatively unprecedented amendment to publish a statement about why it is relevant to consult those persons will help the transparency or the understanding of the decision made by the Secretary of State.

I hope that I have shown hon. Members that the legislation already takes the necessary steps to ensure transparency and that the amendment would go against the established precedent for this kind of provision, which has generally worked well for big Government infrastructure decisions. I therefore ask the hon. Member for Southampton, Test to withdraw the amendment.

Greg Hands

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Let me lay out the purpose of clause 3, which is to set out the procedure that the Secretary of State must follow to designate a nuclear company for the purposes of the nuclear RAB model. The clause requires the Secretary of State to undertake various transparency and consultation obligations before a company is designated.

The clause sets out the process. By putting the process in the Bill, the Government are showing their commitment to transparency and openness when designating a company. Prior to the designation of any company, subsection (1) requires the Secretary of State to publish a statement setting out the procedure they expect to follow in determining whether to designate a nuclear company and how they expect to determine that the designation criteria are met.

The Government anticipate that a nuclear company with a generation licence, and which thinks that its project should be funded through a RAB, would approach the Secretary of State. The Secretary of State will then assess the project against the factors set out in the statement, before consulting expert bodies on the designation. That provides opportunities for those directly affected by the potential designation, or with special expertise relevant to the decision, to provide their views on the matter. That includes the Gas and Electricity Markets Authority, the governing body of Ofgem—I will refer to it generally as Ofgem in the course of this debate, for the sake of time—whose primary statutory duty is to protect the interests of consumers.

Greg Hands

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I thank the hon. Members for Kilmarnock and Loudoun and for Aberdeen North for their contributions on clause 3. I will try to deal with their points.

It is important to understand the different parts of the process and the transparency involved in the process. The rules are published first; then comes the rationale for the designation, which is consulted on. It is standard practice in a consultation, of course, to take into account the results or the responses made to the consultation. Perhaps the hon. Member for Kilmarnock and Loudoun was trying to characterise it as superfluous or part of a process that would not add any additional information, but a Government consultation is there specifically to seek out and find more information. We then publish the final rationale for the designation. I hope that is helpful in setting out a little of the process involved.

The question about stating the length of the consultation is one that would be appropriate to the project itself. Let us not forget that we are trying to design a process here that would take into account a number of different possible future nuclear power stations. It would be difficult for us today to be prescriptive about the length of time that a consultation should take. We have set out those who we think must be consulted, and we have also left it open for the Secretary of State to consult other interested parties, which is quite reasonable considering that this legislation is supposed to encompass various forms of future nuclear power plants. We would be in danger of becoming too prescriptive about things such as the length of the consultation and the earlier amendment about stating reasons for particular people to be consulted.

Greg Hands

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The hon. Gentleman makes a fair point, and he is right that that is the purpose of this clause. None the less, the purpose of the clause is also to allow designation for a potential variety of timeframes within those projects, so it is still important not to be over-prescriptive, for example with the suggestion that we lay out today what the length of time for a consultation should be.

In terms of the costs, the whole purpose of the Bill is to reduce costs. The hon. Member for Kilmarnock and Loudoun is probing on the costs and what they actually mean, but the point is that this is a reduction in the costs that would otherwise be the case under a contract for difference model. That is ultimately getting to the heart of the Bill. I appreciate that he is against nuclear power, but he would surely have to recognise that the Bill is about reducing the costs of nuclear power. That is the purpose of the Bill. He says it is going to be very expensive—we acknowledge that it can be very expensive, and the purpose of the Bill is to make it less expensive.

Greg Hands

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My hon. Friend makes a very strong point—one made by quite a few people who were in Glasgow just two weeks ago. Ironically, in Scotland, making that argument strongly were not just the UK Government, but countries from all over the world. They were making the argument for nuclear power being part of our low-carbon future.

The powers of the Scottish Government are unchanged. The Bill makes provisions for the Secretary of State to consult named persons and organisations prior to the specification of any project under a nuclear RAB, and to consult those persons or organisations before he or she amends a projects licence to insert RAB conditions. Ministers in devolved Administrations will be captured—in scope, I should say; not physically—by this consultation.

Greg Hands

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The hon. Gentleman is inviting me to go down a hypothetical road. The devolved Administrations have powers in other areas, and if the devolved Administration was strongly minded about having a nuclear power plant in that particular part of the UK, it is difficult to envisage circumstances in which the UK Government would proceed to do that. I hope that gives him enough reassurance.

I will deal with the point made by the hon. Member for Aberdeen North. On the question of a project near a border, it is reasonable then that the UK Government would consider the appropriateness of consulting with the devolved Administration. I return to my earlier point about specifying those who must be consulted and those who the Secretary of State would think it reasonable to consult. That would be within the scope of who the Secretary of State would think it reasonable to consult.

Greg Hands

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I thank the hon. Lady for that intervention. The point strikes at the heart of what a Government Minister is doing. I think she is asking what happens if a Government Minister behaves entirely unreasonably. The way our constitutional settlement works is that if a Minister is behaving entirely unreasonably, he or she is answerable to Parliament. If Parliament believed the Secretary of State to be unreasonable or acting in a way contrary to the intention of the Act, people would find ways of getting the Secretary of State to explain. I think the hon. Lady was trying to suggest that the Secretary of State might arbitrarily decide to go through with something—

Greg Hands

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I am not going to give way again, because I have set out clearly that the Secretary of State is ultimately accountable to Parliament, and Parliament would find a way of examining the reasons that he or she laid out under this clause.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4

Expiry of designation

Greg Hands

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The House has adjourned.

Greg Hands

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Amendments 5 and 6 would seek to reduce the length of time a designation remains valid from five to four years and they would reduce the period for which the Secretary of State may extend the designation notice for a designated nuclear company to four years.

First, I thank the Opposition for their consideration of this matter. The hon. Member for Southampton, Test spoke to his amendment in a probing way—trying to get to the bottom of why the period should be five years rather than some other period. I am glad that the Opposition recognise the importance of the designation notice period and the fact that it should strike the right balance between providing enough time for the Government and the company to undertake all the processes necessary to inform a decision on licence modifications without leaving a designation in place for an unreasonable length of time. That is, as it were, the exam question here.

I believe that we have achieved that balance in the Bill. Currently, if negotiations on a project are successful and a relevant licensee nuclear company becomes party to a revenue collection contract, the power of the Secretary of State to modify its licence ceases, of course, outside some limited circumstances. That is vital to give investors confidence that the Secretary of State does not have an open-ended power to further amend the generation licence.

On the other hand, if negotiations are not successful after a project has been designated—the point here is to give enough time for those negotiations to be successful—it is necessary for the Secretary of State’s modification powers to lapse rather than continue indefinitely, so a sunset clause to the designation is also needed. That sits alongside the provisions in the Bill that revoke designation if the designation’s criteria or conditions are no longer met.

However, a decision to take a financial close on a nuclear power station may not happen overnight; robust processes must be followed, extensive due diligence must be carried out and there must be rigorous negotiations to ensure value for money for both the consumer and taxpayer. That is the case with many large infrastructure projects.

Take the negotiations at Hinkley Point C as an example: discussions and eventual negotiations on the project took a number of years to complete. I believe therefore that a five-year window is a reasonable period to expect negotiations to have run their course, recognising that a project for RAB must be suitably advanced to be designated in the first place—that goes back to the earlier debates. That window provides time for negotiations to achieve a successful outcome without providing the Secretary of State with licence modification powers for an inappropriate period. The ability to extend the designation presents a backstop provision that allows the designation to be continued when the designation criteria continue to be met and negotiations are ongoing—in other words, it builds a certain amount of flexibility with a positive decision to extend negotiations. It is therefore appropriate that the extension period should mirror the initial designation period.

I do not consider that the amendments would provide any enhancement to that rationale. I did not hear any specific argument for four years rather than five years, so I am minded to continue with five years. I consider the provisions within this clause, which will permit the Secretary of State to revoke a designation notice at any point if he considers that the criteria are no longer met, mitigates the risk that negotiations—or, indeed, the modification power—will continue for longer than they should. I therefore invite the hon. Gentleman to withdraw his amendment.

Greg Hands

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Clause 4 sets out the circumstances in which the designation of a nuclear company would expire. As set out in subsections (1) and (2) of the clause, the designation of a nuclear company will be limited to a period of five years from the date of the project designation. If a designation expires, the Secretary of State must publish the details of that fact under the provisions in subsection (5). However, the Secretary of State will have the power under subsection (3) to extend the designation period before the five-year period lapses.

Subsection (4) of the clause requires that prior to granting an extension for a maximum of five years, the Secretary of State would need to consult the company, the authority, the ONR, the relevant environment agency, and the devolved Governments if relevant. Before exercising that power, the Secretary of State would also need to continue to be satisfied that the criteria for designation are met. This would allow for any circumstances in which the negotiations with the designated company and engagement with the financial markets last beyond the five-year designation period, but the Secretary of State believes that the project both represents value for money and is sufficiently advanced to warrant a RAB.

The designation will also expire if the company enters into a contract with a revenue collection counterparty. That is to provide confidence to investors that once the RAB licence conditions have been inserted into the company’s electricity generation licence, the Secretary of State will no longer be able to modify that licence except in the limited circumstances set out in clauses 7 and 35 of the Bill. This is a proportionate approach that balances the need for investor certainty with the ability to flexibly apply the RAB model to individual projects. On that basis, I commend the clause to the Committee.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

Revocation or lapse of designation

Greg Hands

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Clause 5 provides the Secretary of State with the power to revoke the designation of a nuclear company and sets out the applicable circumstances and procedure for doing so, as well as the circumstances and procedure whereby a project designation could lapse. The revocation power is tightly constrained by subsection (1). It applies only where a nuclear company ceases to hold a generation licence in respect of the nuclear project for which it was designated or it no longer meets the designation criteria. It is important that only the right projects are able to benefit from a RAB where they are sufficiently advanced and likely to provide value for money.

As set out in subsection (2), revocation of a designation would follow a similar process to project designation. The Secretary of State must prepare draft reasons, consult the named persons and publish a revocation notice, where relevant; they can attach additional conditions to a designation notice, as set out in subsection (3). If a company fails to comply with the conditions set out in the designation notice, the Secretary of State will notify the company that it has failed to comply, which will result in the designation lapsing. Such a notice must be published by the Secretary of State under subsection (5).

Such a model is a common feature of similar RAB models. The procedures envisaged allow time for consideration and consultation before any decision to revoke is taken. Given that the ability to continue to meet any of the conditions attached to designation is within the control of the company, there is no consultation requirement for the Secretary of State before a designation lapses.

Taken together, these routes to ending a designation provide an important layer of protection for consumers before a designated company enters into a RAB. In essence, they allow for a designation to end in any circumstance where it is no longer appropriate for a company to benefit from a RAB before project funding begins.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Licence modifications: designated nuclear companies

Greg Hands

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As the hon. Gentleman says, this amendment addresses the process for modifying a designated nuclear company’s licence, particularly which documents should be published before the power is exercised. We recognise that designating a nuclear company and subsequently modifying its licence is a significant decision. That is why the legislation lays out a clear process, which provides transparency and builds confidence in the decisions that the Secretary of State will make when exercising these powers. The process in the Bill is strongly based on existing licence modification powers; it is well precedented.

The amendment obliges the Secretary of State to publish a document setting out how the licence modification would facilitate investment in nuclear projects before modifications are made. I do not believe that is necessary. The Government have already set out a clear process and strong transparency provisions in the legislation. Currently, the Secretary of State is required to consult named persons prior to making any licence modifications, and must then publish the details of any modifications as soon as reasonably practicable after they are made, with material excluded only when necessary—for example, for purposes of commercial confidentiality or national security.

Greg Hands

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The process is as described. It is based on a very good precedent on these sorts of licence modifications. This would not be the first Bill to come along to look at how to modify a licence, and we have based that entirely on existing precedents. There is nothing unusual in this process or this structure.

The approach of consultation followed by publication is well precedented, as I said, in other licence modification powers. We think that the amendment proposes an unnecessary additional process. Moreover, the consultation provisions will allow expert voices to input on whether the licence modifications are effective in facilitating investment, which, of course, is exactly the purpose of the clause. I therefore hope that the hon. Gentleman will withdraw the amendment.

Greg Hands

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Amendment 9 addresses how the interests of consumers, which are vital in this process, will be taken into account and what the consequences of that would be. In the Bill as currently drafted, the Secretary of State must have regard to a number of matters when modifying a designated company’s licence. That includes the UK’s net zero ambitions and the interests of existing and future consumers in relation to the future cost and security of electricity supply.

The amendment requires the Secretary of State also to have regard to the prospect of consumers recouping what I think the shadow Minister described as their “investment” at the end of the construction phase. I appreciate hon. Members’ enthusiasm for ensuring that consumers will benefit from any RAB project, and, in that sense, I welcomed their support on Second Reading. However, the amendment is not compatible with how the RAB model works.

The hon. Member for Kilmarnock and Loudoun got to the heart of this: the amendment would make RAB effectively inoperable. It treats consumers as investors, but they are not investors. Consumers will benefit from a new nuclear power station. He and I might disagree on whether that should have happened in the first place, but none the less, the benefit to consumers is in electricity rather than in a return on any investment.

Fundamentally, the amendment misunderstands how the RAB model will work. The RAB model will mean that consumers contribute to meeting project costs from the start of construction and reducing the cost of capital, which is the main driver of project costs. That is why we are seeking consumers’ contribution. What they get in return is a nuclear power station that produces low-cost, low-carbon electricity.

Greg Hands

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I thank the hon. Gentleman for that lengthy intervention. I think that a bill payer’s contribution is not an investment. The objective is to lower the cost overall to the consumer. That is why we have the figure of £30 billion or more, or £10 a year per bill payer. The consumer’s objective is not to become an investor and get a return on that investment, but to have a future source and availability of low-cost, low-carbon electricity—that is, through a nuclear power station.

Greg Hands

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That is a wider debate around nuclear, which I would contest. Obviously, it is an active debate: first, how expensive is nuclear, and secondly, how expensive is it relative to other forms of power generation? Those are active parts of political debate.

Greg Hands

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Can I just deal with the hon. Lady’s first intervention? We are seeking to give effect to Government policy, which is to support the roll-out of more nuclear power. How do we do that in a financially reasonable and more cost-effective way for both consumers and the taxpayer? That is the purpose of the Bill within the confines of having already agreed as a Government that nuclear power is going to be the way forward in providing a large part of Britain’s electricity.

Greg Hands

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Again, I thank the hon. Member for that intervention. The cost of different forms of power generation is a very interesting part of the energy debate. Obviously those costs move around and will be based on any number of factors, including global market prices and the cost of extracting and producing particular forms of energy. Nuclear’s advantage is its ability to provide a steady, constant baseload, which is not always the case with some of the other technologies the hon. Lady is comparing it with.

I hope I am not digressing too far, but when it comes to offshore wind, the UK has had enormous success. We have the world’s largest capacity. None the less, when the wind is not blowing and the sun is not shining, we have to have something else to provide that baseload. That is the purpose of nuclear power. The Bill is about making it more cost-effective and reasonable for consumers. That is the Government’s position.

I hope I have convinced hon. Members that this amendment would not achieve their goals of helping consumers. The concept of consumers investing in a plant and then recouping their money somehow is incompatible with the RAB model. There are mechanisms in place to give confidence that any RAB project will successfully lead to the means of delivering large amounts of stable, low-carbon energy to consumers. I hope the hon. Member will withdraw the amendment.

Greg Hands

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I will try to speed up a little. As we know, the clause allows the Secretary of State to make the necessary licence modifications to apply a RAB model to a designated nuclear company. Subsection (2) clarifies that the effect of a licence modification is that the company would benefit from being able to receive an allowed revenue to construct, build, commission and operate a new nuclear power plant. Subsection (3) requires that the power be exercised only in relation to a nuclear company that is designated in accordance with the provisions of the Bill.

Licence modifications will not take effect unless the nuclear company whose licence has been modified subsequently enters into a revenue collection contract with a revenue collection counterparty, as set out in subsection (9). The modifications will be subject to negotiation between the Government and the nuclear company. It is therefore not possible to describe the exact modifications that would be required; however, subsection (5) highlights possible examples, such as the revenue that a company is allowed to receive, how that revenue is to be calculated, and the kinds of activities that may be undertaken by the company.

When making any modifications to a licence, subsection (4) requires the Secretary of State to take into account both our commitment to decarbonising the power sector and the interests of existing and future consumers with respect to the cost and supply of electricity. Alongside that, and to ensure that any RAB project is financeable, the Secretary of State, when making modifications under the clause, must have regard to the costs incurred in delivering the project and the need for the company to finance that activity. Together, those obligations will ensure that the modification powers are used so that the project contributes to a transition to a low-carbon, low-cost energy system.

As set out in subsection (3), the power to make modifications to a licence will last while the designation for a nuclear company is in effect. That is important to allow the Secretary of State to make modifications to the licence to take into account developments in negotiations and engagements with the financial market. When making any modifications in that period, the Secretary of State will need to continue to take account of the consultation that he undertook with all bodies named in clause 8. In addition to the modification of the designated nuclear company’s licence, subsections (7) and (8) allow him in very limited circumstances to modify the standard conditions of generation licences if necessary. The Secretary of State can make those modifications only if he considers it appropriate for consequential, supplementary or incidental purposes.

Greg Hands

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I thank the hon. Member for his contribution. The Government are satisfied that the amount of information included in the Bill is sufficient. Far be it from me to suggest that Members table amendments, but perhaps he might seek to do so if he wants to see more transparency and more information. I realise I was not quite right earlier in saying that the SNP had not tabled any amendments; I know that it has tabled some new clauses. If he wants additional publications, he might table some amendments on Report to be a little more precise about what additional information he thinks the Secretary of State should publish.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Licence modifications: relevant licensee nuclear companies

Greg Hands

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I will speak for a little longer than I might ordinarily do, because this is an important question of consumer protection. I will try to deal with all the points raised by the hon. Member for Southampton, Test.

Amendment 11 would limit the ways in which the Secretary of State could exercise the powers under clause 7. As we know, clause 7 allows for a nuclear company’s allowed revenue to be increased should its financing cap be exceeded in construction, but only in certain circumstances and where a clear procedure is followed. The amendment seeks to prevent the Secretary of State from creating any additional recourse to consumer funding in the exercising of his or her powers under the clause. Amendment 12 proposes that the Secretary of State should be transparent about the funding of a nuclear RAB project were they prohibited from funding an extension to the allowed revenue through a revenue collection contract.

First, I draw the House’s attention to the remoteness of the scenario under which the Secretary of State may choose to exercise the power under clause 7. Under a RAB model, the licence would determine a risk-sharing mechanism, whereby construction cost overruns up to the agreed financing cap are shared between investors and consumers. We expect that any RAB structure will ensure that financial incentives are in place to ensure the company’s investors manage project costs and schedules. The financing cap will be based on robust risk analysis, including best-practice, reference-class modelling, and set at a level that is sufficiently remote that there is a very low chance that it would be reached.

However, in the event that the financing cap is reached, investors would not be obliged to provide the capital to complete the project and this risks considerable sunk costs to consumers if the project is discontinued. Given the size and importance of the project, the Government consider it crucial that there is a mechanism in place to allow the additional capital to be raised to ensure completion of the project, and that decisions to extend the project’s revenue rest with the Secretary of State.

I would emphasise at this point that any decision taken by the Secretary of State to adjust the allowed revenue is one that is subject to a robust process of scrutiny and transparency. The Secretary of State could exercise the power to extend the allowed revenue only following consultation with the licensee, the ONR and Ofgem, which, I remind the Committee, has as its primary statutory duty the need to protect the interests of existing and future consumers with respect to the cost and security of the supply of electricity.

In exercising the power, the Secretary of State must continue to have regard to those matters detailed in clause 6(4), which includes the interests of existing and future consumers with respect to the cost of supply of electricity. As is consistent with our approach across the Bill, we have sought to ensure a transparency process whereby the Secretary of State is required to publish a statement setting out the procedure to be followed when exercising this power. That is set out in subsection (6).

Greg Hands

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I thank the hon. Gentleman for moving his amendment. It is important that we consider that the scenario is remote; before allowing any project to have a RAB, we will obviously have conducted robust due diligence, using best practice benchmarking analysis to set the financing cap at a remote level. The project’s investors will be incentivised to control costs below that level and will be penalised for project overruns. We are clear that this power of modification should be exercisable only during the construction of the plant, and have sought to do this in clause 7(4). This determines that this power cannot be exercised at any point once construction has been completed. For the purposes of this clause, we have defined the construction phase in clause 7(5).

The amendment would provide further qualification to the definition of the end of a project’s construction phase. It seems to make it explicit that the purpose of the construction phase of the nuclear project is to build a plant that will contribute electricity to the national grid, and that might appear fair enough. However, the clause is intended to cover both the period of construction and the testing of the plant, to ensure that it can operate commercially to provide power. An early part of this testing is the connection of the plant to begin to provide power to the national grid. However, there is further testing that follows, to ensure that the plant can operate effectively throughout its life. We consider it appropriate that the option to increase funding to complete the project should run until all testing completes.

In a nutshell, I think the cut-off point proposed by the hon. Member for Southampton, Test is too early in the process. The point at which the power station connects to the national grid is not the point at which one can have 100% confidence in the project from there. Therefore, I thank the hon. Gentleman for his interest and concern, and of course we would not wish to see consumers being penalised, but unfortunately I think he strikes the wrong point in the process at which this clause would kick in. I urge him to withdraw the amendment.

Greg Hands

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Clause 7 provides the Secretary of State with the power to modify the allowed revenue of a relevant nuclear company where that is required to complete the construction of the nuclear RAB project.

I stress that this is a narrow power. Subsection (2) makes it clear that it can be exercised only where the expenditure to complete construction is likely to exceed a cap under the licence and to make modifications to the allowed revenue of the company. Subsection (4) means the power can only be used before the completion of construction, the point at which the plant is ready to enter commercial operations. That refers back to our previous debate. That is the right point at which this power ceases to be exercisable. The use of the power is at the discretion of the Secretary of State.

Greg Hands

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The financing cap will be set out at the beginning of the project by the Secretary of State. It will be available to be scrutinised. The purpose of the power in the clause relates to what happens in the event that we approach the financing cap.

The clause would have relevance in the very unlikely situation that, during construction, the project is likely to breach its financing cap under a RAB. The financing cap is the point at which investors are no longer required to put money into the project. What happens then? The cap is set at a remote overrun threshold. This means that before committing to a company having a RAB, the Secretary of State should be confident that the prospect of costs hitting that threshold is really very unlikely. Under the RAB licence, mechanics will be in place to incentivise investors to minimise costs and schedule overruns, such as overrun penalties. That will ensure that the breach of the financing cap is a remote risk.

When deciding whether to exercise the powers, subsection (3) means that the Secretary of State will need to have regard to the achievement of carbon targets and the interests of consumers, and whether the company is able to finance its activities. Those are the same considerations as when deciding whether to amend the company’s licence to insert the RAB conditions in clause 6. Given the strategic importance of a new nuclear plant, and the wider considerations, such as our need to secure resilient low-carbon energy, it is more appropriate that such a decision is made by the Secretary of State in this instance.

The Secretary of State is also the most appropriate person to balance the interests of consumers, taxpayers and investors. It is not about putting additional burdens on consumers. The RAB is designed to protect consumers by giving them a more cost-effective nuclear power plant, as shown by the steps that we have taken in the Bill. That includes robust due diligence before the final investment decision to be confident that the project will be effectively managed, incentives on the project in construction, penalties for investors in any overrun scenario, and the option for the Government to step in if the project hits extreme overruns.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Procedure etc relating to modifications under section 6 or 7

Greg Hands

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Amendment 13 addresses how soon the Secretary of State should be obliged to publish the details of any modification made under the relevant powers, as already referred to. We think the clause already provides a clear and transparent process, which includes consulting the named parties before exercising these powers and modifications, and then publishing medications made

“as soon as reasonably practicable”

after the fact. Of course, publication can exempt matters that are commercially sensitive or that relate to national security.

The purpose of the amendment is to remove the obligation on the Secretary of State to publish the details of any modifications as soon as practicable after they are made. The Secretary of State would therefore not be subject to an express time obligation on when the details of the modifications must be published. I welcome the Opposition’s focus on ensuring transparency throughout the process of setting up a RAB for a project. We recognise that decisions to modify licences are important, and we believe it is necessary to provide a transparent decision-making process in legislation, as the Bill seeks to do.

I believe the amendment would reduce transparency, not increase it. I do not consider that it will help us to achieve the objective of a clear and transparent decision-making process. Removing the express obligation on the Secretary of State to publish details of any modifications as soon as reasonably practicable could result in uncertainty about when they should be published, which might cause the Secretary of State to unnecessarily delay the publication informing the public, stakeholders or industries of the modifications made. I hope that the hon. Members for Southampton, Test and for Greenwich and Woolwich will agree with that position; the amendment would reduce transparency, not increase it. I therefore ask that amendment 13 be withdrawn.

Greg Hands

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Briefly, clauses 9 to 14 lay out pretty clearly the direction of travel. No amendments have been tabled, so I assume there is contentment across the Committee with the clauses as they stand. They are perfectly drafted, though I say so myself, and I therefore urge the Committee to agree that they stand part of the Bill.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clauses 10 to 14 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mark Fletcher.)

The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)

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Welcome back to the Chair, Ms Fovargue. For the benefit of colleagues, I will speak briefly on the clause, which introduces part 2 of the Bill, and what that is all about. The clause gives a power to the Secretary of State to make regulations about revenue collection contracts, which operate between a revenue collection counterparty and a designated nuclear company, referring back to part 1. Contracts will require the revenue collection counterparty to collect payments from Great Britain electricity suppliers and pass them to the licensee nuclear company so that it can receive its allowed revenue. Subject to consent being given, we expect the Low Carbon Contracts Company to take on the role of the counterparty.

Clauses 16 to 24 set out in further detail what the regulations may cover in relation to the contracts. They could include, for example, the duties of the counterparty, the amounts that electricity suppliers must pay and how the authority will enforce the contract. The legislation will enable payments to flow in the opposite direction if necessary, such as in circumstances where the nuclear company receives more than its allowed revenue. The regulations will ensure that the nuclear company can receive its allowed revenue in a consistent and stable flow. Importantly, the regulations throughout this part are based on existing regulations governing the revenue model under the contracts for difference regime, taking precedent from the Energy Act 2013. Regulations relating to clauses to 16 to 22 and the first regulations made under clauses 23 or 24 will be made using the affirmative procedure. They will therefore be subject to a greater level of scrutiny, as we know, as such statutory instruments must be approved by a resolution of both Houses of Parliament.

Greg Hands

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I thank both hon. Gentlemen for their contributions. I will try to be as helpful as I can. Rather than setting any hares running, it is essentially a very similar process to how contracts for difference work under the Energy Act 2013. There is nothing essentially different here, other than the fact that it is about nuclear power generation and has the RAB model. What we are talking about in this part of the Bill is essentially the same process that is being used for contracts for difference under the 2013 Act. I am always slightly reluctant when an Opposition Member asks whether we have a shared understanding. It strikes me as often being slightly dangerous to give a blank cheque on that. My understanding of the process, and I think the Opposition would agree, is that it is essentially the same process that we have been using for contracts for difference through the collection company.

Greg Hands

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Here there will be a frequent resetting, which is likely to be twice yearly, in terms of the amount of money that has been collected, followed by a reconciliation at the end of the period, but a lot of the detail will be set out in the draft regulations. The hon. Member for Kilmarnock and Loudoun asked what expertise the Secretary of State has to negotiate such a deal. As I said, this has been a tried-and-tested methodology over the past eight years. When we say “the Secretary of State”, we mean that the individual who is the Secretary of State is the decision maker, but acts with the advice of a group of excellent officials at the Department for Business, Energy and Industrial Strategy. That is the normal way in which any reference to a Secretary of State is made in primary legislation. As I say, the legislation is very much based on the Energy Act 2013 and how it looks at the contracts for difference regime.

Greg Hands

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The regulations will be subject to the affirmative procedure, which, as the hon. Gentleman knows, will mean a debate in a Committee Room like this, and the potential to take the legislation to the Floor of the House and have a Division of the House of Commons. In that sense, the scrutiny available to Members of Parliament—if that is what he is referring to—is considerable. That is why the regulations will be subject to the affirmative procedure. I think it is reasonable for Parliament to see the regulations when they are made, although we do not envisage that further technical changes to those regulations will be subject to the affirmative procedure. As laid out in later clauses, those changes will be subject to negative procedure. I hope that the Committee will agree to clause stand part.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16

Designation of a revenue collection counterparty

Question proposed, That the clause stand part of the Bill.

Greg Hands

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The power in clause 16 will enable the Secretary of State to designate an eligible and consenting company or public authority to be the revenue collection counterparty for revenue collection contracts. As stated earlier, the Government intend that the Low Carbon Contracts Company should fill that role. The counterparty will be responsible for collecting payments from electricity suppliers and making payments to the relevant licensee nuclear company, as well as collecting any payments from the licensee and making payments back to electricity suppliers.

Unlike contracts for difference, the authority will be solely responsible for determining amounts to be paid to or by the revenue collection counterparty, and would be responsible for communicating that to the counterparty. That responsibility is facilitated by regulations making provision to require information to be shared by the authority, a revenue collection counterparty, and the national system operator under clause 23, on information and advice. The power to designate a counterparty will commence at the point of Royal Assent to support the Government’s aim of bringing at least one large-scale nuclear project to the point of final investment decision within this Parliament.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17

Duties of a revenue collection counterparty

Greg Hands

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As the hon. Gentleman outlined, the amendment addresses what the regulations relating to revenue collection contracts may or must contain. The amendment relates to the duties of the revenue collection counterparty in clause 17. The counterparty will be the body responsible for channelling funds between the designated nuclear company and suppliers. Currently, the Bill gives a discretionary power to make regulations that can ensure that the revenue collection counterparty, first, enters arrangements or offers to contract for the purpose of a revenue collection contract; secondly, must, may or may not do certain actions; and thirdly, undertakes or does not undertake actions specified in the regulations or the direction by the Secretary of State. The legislation further clarifies, for example, that the directions may cover, among other things, the enforcement, variation or exercise of right under a revenue collection contract. Amendment 14, moved by the hon. Member for Southampton, Test, seeks to make it obligatory that the revenue collection contracts will cover these areas whenever they are made. I welcome the hon. Member’s engagement with the detail of the revenue collection regulations, which will play a key role in the functioning of the RAB. However, I do not believe that the approach suggested by the amendment improves our arrangements for the regulations.

First, it is the Government’s intention that the regulation made to establish the RAB revenue stream would likely contain all of the topics set out. Obliging them to be included would be unnecessarily restrictive at a point where we are still developing the structure of the regulations, which will be brought forward by the affirmative procedure in due course. It is therefore important that the power remains discretionary, to allow for sufficient flexibility as we progress the policy. Secondly, the amendment seeks to override the original intention of the clause, which was to provide an indicative, non-exhaustive list of what the regulations may cover. That approach is precedented by the Energy Act 2013, particularly in section 21, as well as in other clauses in this Bill. It is entirely regular to use the word “may” for things that we think will be likely to be included.

Finally, as currently drafted, the amendment appears to be in conflict with subsection (3), because the change from “may” to “must” is not reflected there—subsection (3) builds on the subsection that amendment 15 addresses. That leads to an inconsistency in drafting, where subsection (2) would state that the topics “must” be covered, whereas subsection (3) limits it to “may”. I welcome the hon. Member’s scrutiny of, and engagement with, the detail of the revenue provisions in part 2 of the Bill; I recognise the Opposition’s concerns around ensuring that regulation is sufficiently robust. However, I do not believe that the amendment is the way to achieve that, and I hope that hon. Members will withdraw it.

Greg Hands

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Clause 18 builds on clause 17. Subsection (1) explicitly gives the Secretary of State the power to direct a revenue collection counterparty to offer to contract with a designated nuclear company on terms specified in the direction. Those terms will be the outcome of negotiations between the Government and the project company. This power is again replicated from the contract for difference, namely section 10 of the Energy Act 2013, but has been adapted to account for the nature of the revenue collection contracts as a bespoke arrangement.

Regulations can set out the circumstances in which a direction to contract can or must be made, as well as the terms that may or must be attached to the direction. If the Secretary of State does not have the ability to specify when a contract should be offered under the legislation, there could be delays in the offering of a contract to a project company. That could damage investor confidence and slow progress on the project at a crucial time.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19

Supplier obligation

Greg Hands

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As has been stated, amendment 15 looks to make provision to exclude from the RAB charge those consumers who are eligible for the warm home discount scheme. I understand the good motive and the effect of what the hon. Member for Southampton, Test is proposing. For background, the warm home discount is a Government initiative to take £140 from the energy bills of consumers who receive the guarantee credit element of pension credit, or who are on a low income and receive certain means-tested benefits. We have already proposed increasing the value of the rebate to £150 per annum in any case.

As we have discussed, if a new project is funded through the RAB model, suppliers will be obliged to pay towards it. It is expected that the suppliers will pass these costs on to consumers. While I do not intend to go back over the arguments in favour of the RAB model, we believe the arrangement will facilitate private investment while also reducing the costs of delivering new nuclear projects. I understand the Opposition’s desire to protect consumers on the lowest incomes, which is what the Government are already doing. The Opposition are proposing to increase that element of protection. Of course, these consumers can spend a disproportionate amount of their income on energy costs. As we all know, energy bills are regressive.

However, a large-scale project funded under the scheme will add, at most, a few pounds a year to typical household energy bills during the early stages of construction and less than £1 per month on average during the full construction phase of the project. The Government have taken a number of actions to protect low-income households from energy costs, as laid out in our updated fuel poverty strategy. That includes not only the warm home discount but cold weather payments and the household support fund.

Greg Hands

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The hon. Gentleman makes an interesting point, but I do not think the amendment in any way answers his question. In fact, if I have understood the amendment correctly, it would probably make those who are not on the warm home discount pay even more, so I am afraid he is making a speech against the amendment, however inadvertently.

As set out in the heat and buildings strategy late last month, we will also publish a fairness and affordability call for evidence to set out the options for energy levies and the obligations to help rebalance electricity and gas prices and to support green choices, with a view to taking decisions in 2022. We are looking at the totality of how these schemes work, then looking at the consultation and then taking decisions on the wider nature of these schemes next year. It is right that broader conversations about how to deal fairly with customers’ bills are dealt with as part of this process, rather than by taking a narrower approach for each technology and funding scheme, which the amendment seeks to do.

As we know, the legislation obliges the Secretary of State to have regard to consumer interests and costs when setting up the RAB. As part of that, the Secretary of State will monitor any cumulative impact from multiple RABs being in operation.

Greg Hands

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The hon. Gentleman asks a fair question, which I would answer in a couple of ways. First, this issue is best considered in the round as part of the process we have outlined, with the consultation and decisions to be made next year. Secondly, the actual amount would depend very much on the nuclear project in question. What we have shown is that we believe the RAB model will make bills overall less expensive to the consumer by roughly £10 a year for an average dual-fuel bill payer, as the hon. Gentleman has rightly pointed out. However, that amount will ultimately depend on the size and scope of the nuclear plant that is proposed. I think a better way to deal with this issue is to deal with it in the round, in the way the Government are proposing. I stress that the RAB is designed to save consumers money over the life of the plant; that is one of the key reasons why we are proposing it.

I am grateful to the hon. Member for Southampton, Test for tabling this carefully considered amendment and for raising the important issue of energy costs for low-income households. Nevertheless, I hope that I have shown both that the Government are already taking action to help this group and that this clause forms part of a wider conversation about how we transition our energy system away from fossil fuels in a way that is fair and affordable for all. I therefore hope that the hon. Gentleman will withdraw his amendment.

Greg Hands

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I thank the hon. Members for Kilmarnock and Loudoun and for Aberdeen North for tabling their amendment. Of course the Government welcome all Opposition parties tabling amendments; that does not necessarily mean that we will agree with the aforementioned amendments, but it is a useful process to test and probe the Bill, and I think our publics would like to see a process whereby all Opposition parties tabled amendments to test the Government’s proposition. I fully buy into that process, but I do not happen to agree with this amendment.

The amendment addresses how the interests of suppliers and their customers should be considered when making provision in regulations for the supplier to pay the revenue collection counterparty. It would also require the Secretary of State to have regard to the other liabilities of electricity suppliers—the hon. Member for Kilmarnock and Loudoun talked with topicality about that—as well as to the impact that collateral requirements will have on a supplier’s operation. I thank the hon. Gentleman and the hon. Lady for ensuring that the Government consider the impact on suppliers and consumers when establishing the RAB revenue stream.

I reassure Members that the Government intend to act in a way that effectively manages the payment obligations on suppliers and, through them, consumers. We do not believe, however, that the amendment is the best way of ensuring that. First, the provision of collateral by electricity suppliers is a form of security that has been administered very successfully in the contract for difference regime. As I said on clause 15, the regime seeks to replicate that tried-and-tested regime, which has functioned effectively to bring investment into new energy projects for the last eight years.

We have been clear that in designing the RAB revenue stream we are seeking to replicate many of the provisions of contracts for difference to help to provide a familiar and workable framework for suppliers, but it is not just about supporting investment. We will protect suppliers from paying unreasonable amounts of collateral and ensure that overpayment of collateral is returned to suppliers.

Greg Hands

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The protection in the Bill is through the regulation of the process and the oversight, for example by the authority, in this case Ofgem, which will ensure that any amounts paid to the generation company are reasonable. The hon. Gentleman is right to ask who will set the parameters, the Secretary of State or the regulator. The Secretary of State sets the initial licence conditions; however, it is the authority, in this case Ofgem or its equivalent, that will ensure that any amounts are reasonable and in the interests of existing and future consumers. That is very much in the Bill.

Greg Hands

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That is a reasonable request. I am saying that this is a tried-and-tested process that has been there throughout the contract for difference regime. Paying in collateral, and the way that collateral operates, is something that has been around for decades, but if it is helpful I am happy to write to the hon. Lady and copy in members of the Committee to explain in more detail how it works in the CfD regime and the Energy Act 2013. I should also make it clear that the Bill provides a framework for the RAB revenue stream and requires that the detail of suppliers’ payment obligations is set out in the secondary regulations that will need approval from both Houses. Ahead of that, and as required by the Bill, we will publish and consult on the draft regulations. We will include British energy suppliers within the consultation, so they will have the opportunity to feed in any views from an energy supplier perspective.

In the context of protecting our most vulnerable energy consumers, which was the subject of the previous amendment, I refer Members to my comments in that debate setting out the numerous actions that the Government are taking to help low-income households, including the warm home discount, cold weather payments and the household support fund. I hope that I have assured the hon. Member for Kilmarnock and Loudoun that the design of the RAB revenue stream will ensure that the interests of consumers are protected and that mechanisms are in place to protect suppliers from disproportionate requirements that would affect their ability to operate. As such, I believe that the amendment is unnecessary, and I hope that he will withdraw it.