Tuesday 8th March 2022
(2 years, 9 months ago)
Grand CommitteeNuclear Energy (Financing) Act 2022 View all Nuclear Energy (Financing) Act 2022 Debates Read Hansard Text Amendment Paper: HL Bill 89-I Marshalled list for Grand Committee - (4 Mar 2022)
Lord Oates (LD)
My Lords, I will speak briefly on this group, particularly to Amendments 2 and 9 in the name of the noble Lord, Lord McNicol of West Kilbride, which I have also signed. I also support the amendments in the name of the noble Lord, Lord Vaux. Like the noble Baroness, Lady Bennett, I come at this from a different perspective from him, but it surely must be right that we are able to identify and verify the ultimate ownership.
As the noble Baroness, Lady Wilcox, set out, Amendments 2 and 9 seek to ensure that a nuclear power station cannot be owned or part-owned by a company controlled by a foreign state and being operated for investment purposes. However, I was a little surprised to hear her say that the amendment would cover EDF, because that was not my understanding. My understanding was that the amendments would not cover EDF, which is not operating for investment purposes, and that is why
“and operating for investment purposes”
is critical in the definition—but it would cover China General Nuclear Power Group, which does operate for investment purposes. I understood that was why the amendment was tabled and drawn in that specific way, but we can perhaps discuss that further later.
The main point here is the general concern that has been expressed on all sides of the Committee about the involvement of the Chinese state in critical national infrastructure, particularly nuclear. As we know, it currently has a 35% stake in Hinkley C and will have a proposed 20% stake in Sizewell C if that goes ahead. So I imagine that, regardless of our wider views on nuclear, we are all concerned about this issue and need some clarity from the Government on their position on this. I hope that the Minister will be able to tell us how the Government intend to proceed with regard to these matters and also answer the important questions asked by the noble Lord, Lord Howell.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
First, I thank everyone who contributed to this important and well-structured debate. I also pay tribute to the noble Baroness, Lady Wilcox, for her valuable contributions and for stepping in at the last moment to substitute for the noble Lord, Lord McNicol; having picked up a difficult and complicated subject at such late notice, she did extremely well in moving the amendment.
This group includes Amendments 2, 9, 11, 19, 22 and 24, originally tabled by the noble Lords, Lord McNicol, Lord Oates and Lord Vaux. They have been grouped together because they all address in different ways the ownership of nuclear companies that ultimately may benefit from the RAB model. Let me be clear at the outset, as I was at Second Reading, that the Government emphatically do not support investment in our critical infrastructure at the expense of national security. There is no compromising on that point and I hope to reassure all noble Lords who have spoken during this discussion shortly.
The general purpose of this Bill is to broaden our options when financing new nuclear projects and to widen the pool of potential investors; that is widely understood. It is our expectation that doing this will reduce our reliance on state-owned developers to finance the construction of new nuclear power stations. So I do not consider that Amendment 11 and, as a consequence, Amendment 22 are necessary, for the reason that designation is a robust and transparent process. I make a similar case with regard to Amendment 24. The Committee can be assured that appropriate and robust due diligence will be carried out through to the financial close of every single project, in particular following a capital raise where the financing structure of the project may change as new investment is introduced.
I assure noble Lords—particularly my old sparring partner, the noble Lord, Lord Foulkes—that the Government have strong oversight of foreign ownership in nuclear projects as a result of the National Security and Investment Act, which includes a wide-ranging ability to call in for assessment qualifying acquisitions if, in our opinion, there are any national security concerns. These are wide-ranging powers. The noble Lord will be aware that we deliberately did not define “national security” during the passage of what became that Act to give ourselves a wide range of flexibility on this subject.
I should add that the Secretary of State may also apply any conditions that he deems appropriate to the designation of a nuclear company—conditions that, if not met, may lead to the company having its designation revoked. Let me also stress—I made this point in a letter to the noble Lord, Lord McNicol—that it is the Government’s intention to take a special share in the Sizewell C project, assuming that the negotiations are successful and the project proceeds to a final investment decision.
I note the intention of the noble Lord, Lord Vaux, that we should legislate for this sort of safeguard, but I caution him that it is right that the terms of the special share should be negotiated as a commercial agreement, according to the circumstances of every particular RAB project. The projects might be different when they are negotiated, so I think that imposing constraints in primary legislation would be too severe.
Baroness Wilcox of Newport (Lab)
I have started so I will finish. Amendment 10 would require the Secretary of State to gain assurances about the delivery of a project before designating a nuclear company to undertake it. We hope that a designated nuclear company will not fail and that projects will be delivered without a hitch, but experience teaches us that complex infrastructure projects often encounter bumps in the road. There will always be scenarios that cannot be planned for but the aim of this amendment is to ensure that the Government can demonstrate the existence of contingency plans for the most obvious obstacles.
Amendment 16 is designed to probe plans for promoting the production and capture of hydrogen as part of nuclear power generation. Various methods are outlined in the UK hydrogen strategy but the next steps are limited to awaiting further innovation and developments in the 2020s. Have the Government assessed the potential benefits of utilising by-products from nuclear processes, and have they now modelled costs and other impacts?
Amendment 29 would require the Secretary of State to lay before Parliament a statement outlining the steps taken to prevent further charges being imposed on revenue collection contracts when cost caps are revised. We understand that the Government would not necessarily want to rule out imposing further charges on consumers if it is the only way a project can come to fruition, but I hope that the Minister can clearly state today that it is by no means the department’s preferred option.
Finally, Amendment 38 would bring legacy benefits within the scope of Amendment 37 in the name of the noble Lord, Lord Oates. Many legacy benefits remain active. If we were to insulate recipients of universal credit from additional costs, that same protection should be extended. Again, I am sure that the Government will not want to rule anything out, but I hope that the Minister can demonstrate how they will shield the least well-off from relevant levies on energy bills. They are a constant source of worry and concern given the cost-of-living issues we face at this time and will face in future.
Lord Callanan (Con)
I thank everybody who has spoken in yet another wide-ranging debate on energy policy—I definitely have all my lines ready now for the next time we have Oral Questions in the House. At the risk of agreeing with almost everybody, I just want to say that what we need in this country is a diverse mix of supply—yes, we need new nuclear; yes, we need more renewables; yes, we need interconnectors; yes, we need pump storage—which is the best way to keep bills low and supply reliable. It is absolutely not a question of renewables or nuclear; government policy is that we need both.
There is a long list of amendments in this group. They have been tabled respectively by the noble Baroness, Lady Bennett, and the noble Lords, Lord Foster, Lord Teverson, Lord Oates and Lord McNicol. We have taken them together because they are of similar intent and similar subject matter.
Let me start by replying to the noble Lord, Lord Foster, and his comments on the designation statement. He is of course right that the department is still developing the statement, given that we do not want to pre-empt any of the debates we are currently having in Parliament on this Bill; the noble Lord would be one of the first to criticise us if we decided all these things in advance. We want to listen to what parliamentarians say and gather all opinions before finalising the statement.
Before coming on to the individual amendments, let me remind the Committee of the commitment we made in the 2020 energy White Paper to bring at least one large-scale nuclear project to a final investment decision by the end of this Parliament, subject to value for money and all the relevant approvals. I thank my noble friend Lord Howell and the noble Baroness, Lady Worthington, for their thoughtful contributions setting out all the considerations that we need to take into account when making decisions about the value for money of new nuclear projects.
The Bill has been introduced with this objective in mind. It seeks to introduce a funding model that can lower the cost of finance for the large-scale nuclear that most of us agree we need; help to invigorate the UK nuclear industry; encourage, ideally, investment from British institutional investors and pension funds; and support our desire—shared by everyone, I think—for a decarbonised, resilient energy system.
Amendments 7 and 8 seek to clarify the types of company that may benefit from the nuclear RAB model. Amendment 7 would severely inhibit our ability to achieve the objectives I have just set out by restricting those able to benefit from the RAB model to not for profit, co-operatives, community-interested companies or companies wholly owned by a UK public authority. I understand the political intent of the amendments tabled by the noble Baroness, Lady Bennett, but I point her to the brilliant examples of energy companies that have been set up by a multiplicity of local authorities across the country in recent years. Without exception, every one of them has gone bankrupt, with considerable costs to local taxpayers. These things are not as easy to do in the public sector as the noble Baroness might imagine. If it was so easy and simple, all those companies would be prospering and returning funds to the taxpayer. In fact, a number of—mainly Labour—local authorities have lost millions of pounds for local taxpayers in attempting to do things better than the market. Public is not always good.
With regards to Amendment 8, I am pleased to confirm that Clause 14 already provides that “a company” means a company that is registered under the Companies Act 2006 in England and Wales or Scotland. The amendment is therefore unnecessary.
On Amendment 23, I can confirm to the noble Baroness, Lady Bennett, that, irrelevant of ownership, if a designated nuclear company ceases to meet the designation conditions set out in the Bill, the Secretary of State has the power to revoke its designation. Provision is already made for this in Clause 5(1); for that reason, the noble Baroness’s amendment is unnecessary.
Amendments 6, 10 and 29 seek to tackle scenarios whereby a nuclear station may not be built or suffer from cost overruns, or there are issues with its generation output. Those things can happen in the real world but all these scenarios are fairly unlikely to occur. The approvals process for nuclear projects, of which designation for the purposes of the RAB model will form a part, is designed precisely to ensure that the Secretary of State must be sufficiently confident that the proposed project would be able to complete construction. In due course, we will publish a statement to provide details of exactly how the Secretary of State expects to determine whether the designation criteria have been met.
Once construction is under way, we will want to make sure that the project company is incentivised to manage its costs and schedule. It will be overseen by Ofgem as the independent regulator. However, in the unlikely and remote circumstance that a project looks as though it may exceed the cap on construction costs set out in its modified licence, it is important that there is a mechanism in place to allow additional capital to be raised to ensure completion of the project. The aims of that, of course, are to ensure that consumers can continue to benefit from their investment and to minimise the risk of sunk costs.
With regard to Amendment 6 and the first part of Amendment 16, I assure the Committee that the RAB model will be designed to ensure that the appropriate incentives are placed on the company to maximise plant availability. Nuclear reactors have an extremely good record of availability and delivery but we want to make sure that that is maintained. On broader generation capacity security, I draw the Committee’s attention to the Great Britain security and quality of supply standard and the Great Britain capacity market. Both these essential tools ensure that security of supply is met in GB and that we have resilience in the day-to-day operation of the GB electricity system should generation outages occur.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
There is a Division in the House. The Committee will adjourn and resume as soon as agreed after the Members present have voted.
Lord Callanan (Con)
Moving on to the second part of Amendment 16, the Government are in full agreement that nuclear could have a role in low-carbon hydrogen production. I was delighted to discuss this in a meeting with the noble Baroness, Lady Worthington, earlier this week—or was it last week? I have lost track of when it was. Of course, this could potentially include the Sizewell C project if it goes ahead. It is for this reason that the Government are looking to stimulate private investment in new low-carbon hydrogen production. We have consulted on the appropriate hydrogen business model, and we included a lot of this in the UK’s first hydrogen strategy, which was launched in August last year.
However, as I made clear to the noble Baroness, I do not consider that this Bill is the right place for such an amendment. The purpose of the Bill is to facilitate investment in the design, construction, commissioning and operation of nuclear energy generation projects. It is therefore more appropriate, in my view, that hydrogen production specifically should be taken forward using a different vehicle. It is for this reason, and those given previously with regard to incentivising plant availability, that I am not in a position to accept Amendment 16.
Prior to turning to the next amendments, let me address the questions asked by the noble Baroness, Lady Worthington, and confirm for her benefit that any payments received by a nuclear company above its allowed revenue would not be received by the Treasury. Instead, they would be returned to the suppliers who were levied in the first place. They who would then have the choice of whether to refund the payments to consumers in a competitive market situation. As the noble Baroness mentioned, the process is similar to the CfD model under which consumers will ultimately benefit from a cheaper system.
Amendments 4, 13, 37 and 38 were tabled by the noble Lords, Lord Foster, Lord Teverson, Lord McNicol, and the noble Baroness, Lady Bennett. Each amendment addresses the important subject of consumers and value for money. On Amendments 37 and 38, I of course agree on the importance of protecting vulnerable consumers from increases in their energy bills, but let me reassure all noble Lords that the need to protect consumers’ interests is very much at the heart of the Bill. The nuclear RAB model will be regulated by Ofgem, whose principal objective, as enshrined in statute, is to protect the interests of all existing and future consumers, including consumers who are claiming universal credit and other legacy benefits.
Ofgem is also a statutory consultee for significant decisions in the Bill relating to whether a nuclear company should benefit from the RAB model. In addition, the Bill requires the Secretary of State to have regard to the interests of existing and future consumers when making any modifications to a nuclear company’s licence. So I make it clear that the Government intend to protect all our most vulnerable energy consumers in what is a very difficult market at the moment, given the record high gas prices, but we believe that Amendments 37 and 38 are not the best way of ensuring this and that a more holistic strategy for supporting vulnerable energy customers is preferable, as the noble Lord, Lord Wigley, commented in the debate.
The Government are taking a number of actions to help low-income households. I will list them for the Committee. They include the warm homes discount, which provides eligible households with a £140 discount, and the Chancellor confirmed on 3 February the Government’s plans to expand the scheme by almost one-third, raising the number of beneficiaries from 2.2 million vulnerable households to more than 3 million. We are further supporting consumers through the cold weather fund and the household support fund. I think that those measures are a more appropriate way of protecting vulnerable consumers, and I hope that I have been able to reassure noble Lords who tabled these amendments that the design of the RAB model and the revenue stream that will flow from that are such that the interests of vulnerable consumers are and will be the highest priority for us.
On Amendments 4 and 13, I stress to the Committee that we have sought to establish a transparent designation process that requires the consideration of whether designation of a nuclear company is likely to result in value for money. This process requires the Secretary of State to prepare draft reasons for designation, to consult on those reasons with specified persons, including independent regulators such as Ofgem, and to publish a designation notice setting out the final reasons for designation. This final notice would include designation against the criteria of being likely to result in value for money, which the noble Lord, Lord Foster, asked about in the debate.
Given all that, I am confident that the process is sufficiently transparent. Through consultation with Ofgem we will ensure that consumer impacts are fully taken into consideration and accounted for. Value for money is and always will be a core part of government approvals beyond the designation of a nuclear company as a designated company’s licence conditions are negotiated and as part of any capital raised for a project. Therefore, I hope the noble Lords who tabled Amendments 4 and 13 will not press them.
Finally, on Amendment 26 from the noble Lord, Lord Foster, let me gently point out that the amendment would remove the obligation for the Secretary of State to have regard to whether the nuclear company has appropriate incentives. I am not sure that that was the intention of the noble Lord, so perhaps he will have another look at it and will feel able not to press it because ensuring that projects have appropriate incentives forms a vital part of the RAB model. We have learned from the experience of projects in the US—the noble Lord quoted them to me at one of our meetings—and elsewhere that incentivising developers to deliver to cost and schedule will be important to ensure value for money for consumers. As the noble Lord, Lord Foster, questioned in the debate, we expect that such incentives will include an appropriate risk-sharing mechanism between consumers and the nuclear company and its investors. We would not expect the bill payer to bear all the risk.
We expect that incentives would be included in the modified licence conditions for the nuclear company, and so would be consulted on and published as set out under the provisions of the Bill. These incentives would be overseen by Ofgem in its role as the independent regulator.
In conclusion, I hope I have been able to satisfy noble Lords on all these measures and provided the appropriate reassurance that the Bill introduces a robust and transparent process for the approval and awarding of the benefits of a RAB model to nuclear companies, and that there are appropriate checks and incentives in place to protect consumer interests—which should be at the forefront of our thinking. Therefore, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Foster of Bath (LD)
My Lords, I am enormously grateful for the opportunity to listen to so many noble Lords who have contributed to the debate. It has been a masterclass in what we mean by value for money. I am enormously grateful; I have learned a great deal about whether or not we should be just using commercial accounting or incorporating opportunity costs. Should we define opportunity costs in the way that the noble Baroness, Lady Bennett, and others have defined them? It has been incredibly illuminating.
My amendment was very simple indeed. The Government said they were going to do an assessment; all I wanted them to do was publish it. I am enormously grateful that I got the support of the noble Baroness, Lady Worthington, for that. Sadly, despite all the Minister subsequently said, we have not yet heard whether the value for money assessment is or is not going to be published—and, if it is, when that would be.
We then come to the interesting issue of the amendments surrounding the designation process. I am enormously grateful to the noble Lord the Minister, who enables me to sit down while we vote again.
Lord Foster of Bath (LD)
As I was saying, we come to the second string of things that were debated, in relation to the criteria surrounding the designation process. We heard something wonderful: a Government who admit that they are a listening Government. “The reason we haven’t published the designation criteria is that we are listening to what you lot have got to say.” Well, I say to the Minister that by the end of this evening at 8.45 pm he will have heard what has been said not only in the other place but in this place, so presumably there will be the opportunity to draft the designation criteria in time for the further stages of the Bill. So I hope that, before I sit down, he will intervene on me and make a clear promise that we will get at least a draft of the designation criteria before the final stages of this Bill are passed. I happily give way to the Minister.
Lord Callanan (Con)
Like all government documents, they will be published at the appropriate time, and I will be sure to let the noble Lord know when that is.
Lord Callanan (Con)
I will start with Amendments 5 and 27, laid by the noble Lords, Lord Foster, Lord Wigley, Lord Oates and Lord Teverson, and the noble Baroness, Lady Bennett. It will not surprise the Committee to know that I have reservations about how these amendments would operate in practice. On Amendment 5, for example, the requirement to publish estimates of the costs payable by consumers at the point of designation would risk undermining the independence of Ofgem, which has responsibility for determining a nuclear company’s allowed revenue in accordance with its modified generation licence.
Moreover, the obligations to report on the price of electricity, or the minimum floor price, referred to in Amendment 27, simply do not align with the reality of how we expect the RAB model to operate in practice. Under the model, there is no minimum floor price. Ofgem, in its role as the regime’s economic regulator, will need to determine the revenue the project is entitled to receive, in accordance with its modified electricity generation licence.
Finally, on decommissioning costs, we already have robust legal requirements in place in the Energy Act 2008, which require an operator to have a funded decommissioning programme in place before construction can commence on a new nuclear project. This must set out the operator’s costed plans for dealing with decommissioning and waste management. For these reasons, I am unable to accept the amendments.
Turning to the comments made earlier in the debate by the noble Lord, Lord Wigley, under the RAB model, the regular price reviews would provide an opportunity to assess the performance of the FDP, and adjustments to the operator’s allowed revenue can then be made should any potential deficiency in the fund be identified. This will deal with the noble Lord’s concern, minimise any chances of a fund shortfall and ensure the operator retains its responsibility to meet the costs of decommissioning so they do not fall on local communities. I hope that this provides the reassurance that the noble Lord was seeking.
Amendments 12, 18, 25 and 32, from the noble Lords, Lord McNicol, Lord Foster, Lord Oates and Lord Teverson, and the noble Baroness, Lady Bennett, are aimed at obliging the Secretary of State to publish various pieces of information related to the functioning and implementation of the RAB regime. I fully understand noble Lords’ desire for more information, but think this is already addressed in the Bill.
On the publication of licence modifications, Clause 6(9) already provides that modifications made under Clause 6 would not come into effect unless a revenue collection contract was entered into with the nuclear company. Publishing them as soon as reasonably practicable will provide adequate opportunity for scrutiny.
On Amendment 12, the Bill already obliges the Secretary of State to publish a statement setting out how they expect to determine whether the designation criteria have been met. This statement will provide further explanation as to how the Secretary of State expects to determine whether the development of a project is “sufficiently advanced”. While, as I said, we will publish a statement in due course, I can tell the noble Lord, Lord Foster, and the Committee that we would expect it to include consideration of a number of factors, including, for example, the progress of the prospective project through the important planning process.
On Amendment 18, where it is assessed that it would be appropriate for development funding to be included in the calculation of a nuclear RAB company’s allowed revenue, this would in turn be reflected in the company’s modified licence. Outside of the RAB structure, the Government may choose to provide development funding to projects to mature technologies and de-risk the development and construction phases. However, as this is not intended to be funded through the RAB scheme, it would be inappropriate to include information requirements about it in the Bill. They will be published in other quarters.
On Amendment 25, Clause 6(2) already states that the licence modification powers can be used only for the purpose of facilitating investment in the design, construction, commissioning and operation of nuclear energy generation projects. The Secretary of State may not exercise the powers for any other purpose. This is aligned with the consideration that the amendment discusses. I believe that the transparency processes already included in the Bill, the obligation to publish a statement on the designation criteria and the opportunity for scrutiny before the designation and licence modification powers may be exercised render these amendments unnecessary.
The final amendment on transparency is Amendment 28 from the noble Lords, Lord Foster and Lord Oates. It seeks to make the licence modifications necessary to implement the RAB model for a nuclear company contingent on approval by the House of Commons of a report about consumer bill impacts.
Bringing a project to the point where licence modifications can be made is likely to require significant investment. I submit that making a project subject to a parliamentary vote at that very late stage of licence modification would add huge uncertainty to the outcome of developers’ investment. This additional uncertainty would make it very much harder to bring forward projects —which is possibly the purpose of the amendment—and lead to either an absence of new projects or the costs of financing being raised significantly to take account of the increased risks. That would inevitably result in much worse value for consumers. The amendment could therefore defeat the policy objective of the Bill: to secure financing for new nuclear projects in a way that could deliver better value for money for consumers.
To reiterate, in rejecting the amendments put forward, the Government are not attempting to hide from challenge or scrutiny. Through this Bill, we have created a clear and transparent process for implementing the RAB model. It will allow for the voices of experts and stakeholders to be heard and appropriate consultation to be carried out. That will help ensure that the model works for the industry and, above all, for consumers. I therefore hope that noble Lords will not press their amendments.
Lord Oates (LD)
My Lords, I will speak briefly as time is marching on. I think the Minister told us that the reason why Amendment 5 would not work is basically that the Government cannot tell us how much this will all cost the consumer, which is one of our key worries about this means of financing.
On Amendment 12 and the definition of “sufficiently advanced”, my noble friend Lord Foster raised a number of specific issues in relation to Sizewell C and asked whether, in view of those, the project would be regarded as sufficiently advanced. The Minister notably did not answer that question but repeated his previous statement that the Government will publish the designation criteria “in due course”. Again, what he is telling us is that the Government will not tell us what those are before they expect noble Lords to vote on the Bill. As my noble friend said, whatever one’s views for or against nuclear power, that is surely not a way to do legislation.
I hope that the Minister will consider carefully all the issues that have been raised in this group. If you are pro nuclear, I would have thought that transparency was a good thing, but, certainly, I hope that he will consider these issues and come back with some clearer answers for us on Report. With that, I beg leave to withdraw my amendment.
Baroness Wilcox of Newport (Lab)
I am grateful to the noble Lord, Lord Oates, for tabling these amendments, which bring us back to transparency. We are sympathetic to the argument that, generally, information should be made public unless there is a compelling reason for that not to be the case. However, we understand that these are arrangements with commercial partners and that this reality needs to be reflected in the final transparency provisions.
Lord Callanan (Con)
I realise that time is getting on, so I will be as brief as possible. I thank the noble Lords, Lord Oates and Lord Foster, for Amendments 33, 34, 35 and 36. As most of the material is similar, I will take them together, starting with Amendments 33 and 36.
By way of background, I will explain the purpose of Clause 13. Four amendments have been tabled to it, but I reassure noble Lords and my noble friend Lady Neville-Rolfe that this clause is in no way designed to act as a “free pass” for the Government. It is a narrowly drawn provision, allowing for the exclusion of specific, sensitive, commercial and national security information only. I want to be upfront and clear about that. From looking at their detail, I do not believe these amendments will achieve what I suspect is noble Lords’ goal to increase transparency. Actually, they could cause extra confusion.
Amendment 33 makes the publication of relevant material the “primary duty” of the Secretary of State, and so would effectively place transparency above the protection of national security. I submit that this is intuitively wrong; it would be dangerous to subordinate national security concerns to publication concerns.
Amendment 36 would require the Secretary of State to make statements to Parliament about the seriousness of the potential impact of the release of information on the commercial interests of companies and how this is balanced against the public interest in disclosure. This creates ambiguity around the protection of commercial interests, which could have a serious impact on the ability of a project to raise the necessary investment. It would either make it harder to bring forward new projects or, alternatively, raise the cost of financing those projects; either way would result in worse value for consumers. I submit that it also goes against a basic tenet of commercial negotiations and operations: that an investor’s commercial interests will be treated respectfully and confidentially.
Amendments 34 and 35 similarly seek to restrict what information can be excluded from publication or disclosure under Part 1 on the grounds of national security or prejudicing commercial interests. Similar to the previous amendments, the suggestions made in these amendments would add unnecessary and unhelpful ambiguity to an otherwise straightforward provision. Again, this would introduce additional uncertainty for both the Government and potential developers.
Looking first at the addition of “in exceptional circumstances”, there is no obvious legal understanding or definition of what such circumstances would be. This would create uncertainty as to when the provision could be used and what information could be redacted. The circumstances in which Clause 13 applies are already sufficiently set out in its subsection (2). Similarly, given that “seriously” has no clear definition in this context, I submit that the addition of this term would add to the uncertainty and ambiguity about whether legitimate commercial interests would be respected for potential investors. I think that it would make them less likely to go on to be involved in projects.
I understand the desire for increased transparency behind these amendments, but I hope that, given the legal uncertainty of the wording used, I have been able to reassure noble Lords that the Government have no intention of hiding any information that we do not strictly need to in order to respect commercial confidences, so I hope that noble Lords will feel able to withdraw or not press their amendments.
Lord Oates (LD)
My Lords, I thank the Minister for his reply. I am afraid that I am not entirely reassured by it, because there is a lot of talk in this Bill about protecting commercial interests but there seems to be little about protecting consumers’ interests. This Bill imposes burdens on consumers, and it is only right that they have available to them information to understand how decisions are made.
I will certainly go away and think about the points that the Minister made. I make it clear that the aim of this amendment was not to compromise the Secretary of State’s ability to exclude material on grounds of national security; I fully accept that that may well be necessary. It may be that the current Minister would not use this test to withhold large amounts of material, but that certainly seems possible, and I think that there needs to be a much firmer test to protect the consumer. No doubt we will come back to these amendments, or versions of them, on Report. In the meantime, I beg leave to withdraw my amendment.
Lord Foster of Bath (LD)
My Lords, very briefly, there are two amendments in my name and that of my noble friend Lord Oates. I think we are all conscious that things can go wrong and there may need to be procedures to pick things up and move forward. We accept that might be the case. Sadly, it is the case for Taishan 1, as I mentioned before; after only a couple of years, it suddenly went offline. They do not even know what is wrong with it, and somehow they have to pick up the pieces.
I absolutely accept that there is a need to have procedures in place, such as a special administration regime. I merely suggest in Amendment 40 that, if that is the case and action needs to be taken, there should be a report covering the issues I have referred to in the amendment—the liabilities associated with the nuclear company, the estimated cost of getting it going again if it has been temporarily shut down, the lifespan of the nuclear power station and so on. It seems fairly straightforward.
Of course, the Minister will say that he cannot do it because that would be providing information which is somehow sensitive or commercial and it should not be done. In those circumstances, I cannot see anything commercial or sensitive about it, and it is something the public need to know; they will find someone else to do it or find a way of supporting the existing company to carry on doing it. It will be the taxpayer’s money, and the taxpayer has a right to know what it will be used on. That is why, in Amendment 43, I am basically saying that any payments that would come out in that process ought to be approved by an independent body—in this case I have suggested, perhaps slightly surprisingly, that the House of Commons should have the opportunity, as the elected body, to decide whether or not the money proposed to be spent is being spent wisely. With that, I look forward to the Minister’s response.
Lord Callanan (Con)
My Lords, I thank noble Lords for their brevity. I know that time is getting on, so I will attempt to be as brief as possible in providing noble Lords with the information that they properly seek.
Amendments 39, 40 and 43 from the noble Lords, Lord Foster, Lord Oates and Lord McNicol, have been grouped because they all relate to the special administration regime set out in Part 3. I remind the Committee of the purpose of the SAR. It is imperative that in the—hopefully, vanishingly—unlikely event of an insolvency we would be able to act quickly to ensure that a plant could commence or continue electricity generation. That gives an important protection to consumers. The special administrator has a duty, as per the Bill, to achieve this objective as quickly and efficiently as is reasonably practicable. I must add that these are powers that we hope never to have to use, but I agree with the noble Baroness, Lady Wilcox, that it is important to prepare in case we do. There is a very low probability of insolvency under a RAB model, but we need to prepare just in case.
It is for these reasons that I cannot accept Amendment 39. If the rescue of the company cannot be achieved, the special administrator will need to consider all options for a transfer, including, very possibly, a transfer to a publicly owned company. This may be supported by the Secretary of State where it would provide clear value for money for both consumers and taxpayers. The amendment implies that the special administrator would consider a transfer to a publicly owned company only if a transfer to a privately owned company were not feasible, so we would simply want to have more flexibility, or rather give more flexibility to the administrator in those circumstances.
It is essential that the administrator and the Secretary of State retain the ability to act quickly if all options to achieve the objective of the special administration have been exhausted. It is highly likely that in meeting their objectives, the administrator will consider various ownership structures for the project and their various relative merits. In placing a new reporting requirement on the Secretary of State to make this assessment and to publish it before acting, the amendment could frustrate this process and potentially delay exit from administration, which could cause additional cost to both consumers and taxpayers.
Lord Foster of Bath (LD)
The Minister just said that publishing a report could frustrate the way forward. Can he explain with an example how that would happen?
Lord Callanan (Con)
This is not a direct example, but, of course, the special administration regime has recently been used in the case of one particular energy company. I do not need to go into the specific example, but I was aware of a lot of the discussions that went on before it. Some of those were extremely commercially confidential because, of course, discussing possible outcomes results in potentially prejudicial publicity and might perhaps bring about the objective that we did not want. The company eventually went into a special administration regime, and information was published as soon as practicable about that. It is important in those circumstances to retain the flexibility. The Secretary of State’s discretion to act expediently would obtain the best outcome for consumers and taxpayers during the special administration.
Amendments 40 and 43 seek to place an additional reporting requirement on the Secretary of State which we consider would also impede the ability of the special administration to achieve its objective. In the case of Amendment 40, I remind the Committee that a special administration is a court-administered procedure and, in the circumstances, a nuclear administrator would be an appointee of the court. It is therefore important that we retain the established process and do not seek to put in place reporting requirements which could oblige the Secretary of State potentially to publish commercially sensitive material, which would then jeopardise a transfer. I cannot, of course, seek to predict the court process, but it is possible that that some aspects of the information that Amendment 40 seeks to have published would also be publicly available, such as through companies publishing their financial statements.
In the circumstances, should any licence modifications be made by the Secretary of State during the administration, the legislation determines that such modifications will—correctly—need to be published, except for any matters which are commercially sensitive or would be contrary to the interests of national security.
There are already statutory arrangements in place with regard to the costs of decommissioning in the Energy Act 2008. This requires an operator to have in place an approved funded decommissioning programme— as already discussed—before construction on a new project can commence. I expect that, as was done for Hinkley Point C, the FDP for any future projects would be published along with relevant supporting documentation —again, apart from material of a sensitive nature.
Turning to Amendment 43, again, I am unable to accept this amendment, because it would risk the ultimate operability of the special administration regime and consequently risk consumers being unable to realise the benefit of the plant they have helped to build. As we have seen during the recent energy supplier crisis, it is imperative, as in the example that I just gave to the noble Lord, Lord Foster, that a fully operational special administration regime can be stood up in the quickest possible timeframe to protect consumers. This includes allowing for requisite funding from the Secretary of State to be provided efficiently. In addition, if insolvency occurred when perhaps the House was not sitting, I am sure that the noble Lord would accept that this would also cause unnecessary further delay.
The amendment would also cause a level of uncertainty that could deter potential administrators from undertaking the appointment under the special administration regime. The administrator would need to be assured that funding would be available from day one of the SAR to ensure its operability and ability to deliver its objectives, which of course are to continue or commence the generation of electricity. If there are delays in accessing the required funding, that could result in outages and problems with security of supply. In the case of a nuclear power station, there are also safety considerations. Any lapse in funding could result in some safety-critical expenditure not being met.
I thank noble Lords for all their amendments and in particular for their consideration of these matters with regard to the special administration regime. I hope that I have been able to provide appropriate reassurance that we hope never to use the regime, but it is there to serve the crucial purpose of protecting the interests of consumers. We need to make sure in that case that it is fully operable, efficient and able to meet its objective that energy generation will commence or continue in the unlikely event of an insolvency. I hope therefore that the amendments will not be pressed.
Baroness Wilcox of Newport (Lab)
I thank the Minister for his reply and recognise the points that he has made regarding SARs. Nevertheless, I still feel that greater safeguards need to be in place. However, at this point, I beg leave to withdraw the amendment.