Oral Answers to Questions

Lord Whitehead Excerpts

Tuesday 4th July 2023 Commons Chamber

[Mr Speaker]

We come now to the shadow Minister.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The Minister is sort of right that there have been some onshore wind turbines built just recently—two since February 2022, so there is not much chance of community engagement there, to be honest. In December, the Secretary of State for Levelling Up, Housing and Communities promised that the onshore wind ban would be completely lifted by the end of April this year. Why have the Government broken that promise?

[Andrew Bowie]

I will take no lectures from the Labour party on developing renewable electricity. When Labour left office in 2010—[Interruption.] They do not like to hear this, but when Labour left office in 2010, less than 7% of the grid was accounted for by renewables. Now it is 43%.

[Dr Whitehead]

I think maybe the Government should take lessons from Labour. It is now generally understood that the Government consultation is likely to lead to only minimal relaxation of planning rules and that onshore wind will effectively remain banned. Tory peer Lord Deben, chairman of the Climate Change Committee, said of the consultation on Saturday that it is simply unacceptable that the Government are still discussing whether they are in favour of onshore wind or not when it is widely recognised as one of the cheapest forms of energy generation. He is right, is he not?

[Andrew Bowie]

I really wish the Labour party would stop talking down what we are doing on renewable electricity. I remind the House that the consultation on onshore wind finishes on 7 July.

Draft Electricity and Gas (Energy Company Obligation) Order 2023

Lord Whitehead Excerpts

Monday 3rd July 2023 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The draft order is, in general, an unexceptionable statutory instrument, as the Minister says. Essentially, it will extend what was provided for in ECO4 to a further group of people who would otherwise not be eligible for assistance under that scheme. The explanatory memorandum indicates that the extent of the total obligation—taking ECO4, ECO4+ and ECO4A together—will be increased from about £1 billion to £1.3 billion or £1.4 billion overall.

If I may reprise a debate that the Minister and I had in the recent Energy Bill proceedings, what we call something and what it legally is appear to be two different things to the Government these days. For the benefit of the Committee, my understanding is that ECO4+, ECO4A and the Great British insulation scheme are the same thing; they are just different names for one scheme. For the purposes of our discussion, I will call it ECO4A, the middle of the three definitions, which will reasonably clarify what we are talking about.

As I understand it, ECO4A extends the eligibility of a number of people for ECO in its present manifestation: a scheme that is running from now until 2026 and is, or has been, targeted at more vulnerable customers, particularly people receiving particular benefits. ECO4+ will continue with a general approach of targeting disadvantaged customers, but on a much wider scale than was previously the case. However, ECO4A will not change ECO’s rules on the eligibility of properties: a wider canvas of customers, but the same canvas of properties, will be eligible. That is where some of the big problems with ECO4 have manifested themselves so far.

There is certainly a general feeling in industry and elsewhere that ECO4 is beginning to fail. I understand that that is for two particular reasons. First, whether a property qualifies for assistance under either ECO4 or ECO4A is based on whether the measures can make a difference of two bands to the property. Most properties cannot achieve that very easily. A lot of work has gone into searching for properties and particularly for people who qualify for ECO4, but it has been found that the people qualify and the properties do not. Some 90% of found searches are proving impossible to proceed with under ECO. The high rate of aborted programmes adds an enormous cost to the companies that are seeking searches for people who can qualify for ECO4.

The second issue is the very substantial difference in the cost of materials, given interest rate increases and inflation, and the ability of the programmes to stay within the ECO cost parameters for the schemes. For example, loft insulation has proved 430% more expensive than the ECO4 and ECO4A methodology assumed. Cavity wall insulation is 372% more expensive, and external wall insulation is 147% more expensive. Companies are just not able to do the amount of work for the amount of money that the ECO4 costings assume. An obliged company is therefore not able easily to meet the obligation targets in the way the methodology for ECO4 assumes. The delivery of ECO4, in comparison with that of previous ECO iterations, is very seriously behind schedule.

What dismays me is that none of those problems has been recognised in the methodology for ECO4A. Indeed, as we can see from the draft order, that methodology is pretty substantially the same as that for ECO4, with the exception of one or two things about off-grid customers and various other matters.

My question to the Minister, at the end of all that, is what consideration he has given to changing the methodology for ECO4A so that it does not fall into the traps that ECO4 has already started to fall into. Perhaps ECO4 could be brought back into any new methodology, because the two schemes run in parallel up to 2026, and we could solve a number of the problems in implementation over the period.

I think I may know the answer. Informal sources tell me that a further SI might be on its way in the not-too-distant future and will seek to correct a number of those methodological problems as ECO4 goes forward. Is that the case? If something is indeed coming to correct the methodological problems, will the solutions apply to both ECO4 and ECO4A, bearing in mind that that has not happened today? If the answer to both those questions is yes, I will be fairly pleased. If the answer is, “I am not sure: maybe,” I think we need to look at that further.

Finally, if the Minister is looking at methodological issues, might he consider whether the issue of the eligibility of the number of homes—as opposed to people—for ECO4A could be substantially ameliorated with a methodology that puts the focus of ECO4A, and by implication ECO4, on reducing energy costs in homes, rather than heating costs only? A number of measures that seem evident to most of us are not actually allowed under the ECO4 methodology as a result of the distinction between heating and energy costs. For example, where a home needs to upgrade light fittings and wiring so that it can switch to LED lighting, that makes an enormous difference to energy costs, but it is not eligible under ECO4 because it is only about heating costs in-home. Perhaps when the Minister tables his new SI—if indeed he is going to—he will think about that, because it would be helpful in taking the progress of ECO4 and ECO4A in a positive direction.

Other than our disappointment in the lack of a new methodology to mend both ECO4 and ECO4A, the official Opposition have no objections to the draft order, because we need to make progress with energy efficiency as quickly as possible.

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[Andrew Bowie]

I thank both my counterparts. Obviously they have not spent enough time locked in a Committee Room over the past six weeks, so they wanted to come back for some more today. It is a pleasure to be back with them both this afternoon.

Improving the energy efficiency of our homes is the best long-term solution to reduce energy bills and therefore to tackle fuel poverty. That is why the Government have set a new and ambitious target to reduce final energy demand from buildings and industry by 15% by 2030, and are committed to ensuring that homes are warmer and cheaper to heat by investing £12 billion in Help to Heat schemes such as the home upgrade grant and the social housing decarbonisation fund. The Government remain committed to helping low-income and vulnerable households to reduce their fuel bills and heat their homes. The Great British insulation scheme will be a crucial element of that help over this winter and for years to come.

The hon. Member for Kilmarnock and Loudoun asked why a smaller number of all properties are projected to be insulated and why we are not focusing on solid wall insulation. The scheme will focus on the most cost-effective insulation measures to ensure that as many households as possible can receive support. Solid wall insulation remains eligible for the scheme, but as it is a high-cost measure, it is more likely to require a consumer contribution.

The Government are absolutely determined to reach our energy efficiency ambitions by 2030. We need to balance the ambition of the scheme with the impact of consumer bills and the ability for existing supply chains to deliver measures quickly. This Government are taking action now, led by the energy efficiency taskforce, and building on what has already been achieved through more efficient use of energy in the UK.

Let me address the points raised by the hon. Member for Southampton, Test. Why is the number of homes estimated to be upgraded through the insulation scheme lower than was originally estimated? Compared with the modelling undertaken for the consultation stage impact assessment, the final modelling has incorporated higher-measure cost assumptions. These updated cost assumptions were informed by independent surveys of installers and have been the primary factor in causing the estimated number of homes treated through the scheme to fall.

I accept the hon. Gentleman’s statement that ECO4A, ECO4+ and the GBIS are the same scheme. He asked whether a minimum of two standard assessment procedure band improvements would be required, which might create problems for the insulation scheme. The GB insulation scheme has no minimum improvement requirement; it will target the most cost-effective single measures to make the biggest difference to the most energy-inefficient properties.

Should we support fully those who are on the lowest incomes and are the most vulnerable? We want to extend support to a broader pool of households who are currently ineligible for support through existing schemes but are also likely to be struggling to pay higher energy bills. At least 20% of the obligation will focus on low- income households, targeting those on means-tested benefits, living in the least efficient social housing or referred by a participating local authority or energy supplier and considered to be on a low income or vulnerable. The remainder will be open to households in the lower council tax bands: A to D in England and A to E in Scotland and Wales, equivalent to EPC rating D to G.

Has a comparative assessment been made of the cost assumptions for the ECO4 scheme and of those set out in the Great British insulation scheme consultation? We are monitoring ECO4 delivery against the current cost assumptions and will consider changes if necessary. However, changing the cost assumptions may require either a change to the overall energy bill reduction target, the estimated funding scheme policy details or a combination of all three. Such changes would require public consultation, and possibly regulatory change.

[Dr Whitehead]

I think the Minister has just indicated, in his very last sentence, that another SI may be on its way. If so, what is the timescale?

Energy Bill [ Lords ] (Eighteenth sitting)

Lord Whitehead Excerpts

Committee stage
Thursday 29th June 2023 Public Bill Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The Minister said, “Watch this space”. It would be very helpful if he were to give us an outline of what the content of the space might actually look like.

[Andrew Bowie]

Far be it from me to spoil the enjoyment for hon. Members! I said this when we debated it last week, and I say it again: we continue to work on this. We continue to look at what more the Government can do to support community energy projects across the United Kingdom, and I will commit to provide an update on the next steps ahead of Report. I hope that is suitable for hon. Members. I do not believe that this new clause would add any value, so I encourage—indeed, I humbly beg—the hon. Member for Sheffield, Hallam to withdraw her new clause.

--- Later in debate ---

Brought up, and read the First time.

[Dr Whitehead]

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

It is a pleasure to serve under you, Mr Sharma, and I hope we will complete this Committee stage under your chairmanship today. New clause 88 involves a little bit of Energy Bill archaeology. I will explain what I mean by holding up a copy of the Energy Bill as it first appeared. Archaeology is necessary because it first appeared on 6 July 2022—we have been working on the Bill for that long.

Among the 270-odd clauses in the original Bill, clause 161 sought to extend the domestic gas and electricity tariff cap. Under the Domestic Gas and Electricity (Tariff Cap) Act 2018, the tariff cap has a defined life, and the original Bill would have amended the arrangements. The Act also introduced a carefully calibrated procedure to determine how long a cap should last. Ofgem is required to produce an annual report on the tariff cap and, if during that time market conditions have become more straightforward, it can recommend its removal. The report goes to a Minister, who then decides what will happen. This approach started in 2020. If Ofgem reports that market conditions have not returned to normal, the same procedure is carried out again the following year.

That process was time-limited to 2023. Quite clearly, market conditions have not returned to normal, so it is important to extend the mechanism. Essentially, that was what clause 161 in the original Bill did: it extended the arrangements to 2024 and 2025. Again, that was time-limited, with a sunset of 2025. As I recall, that important provision assured the industry and various others that the cap was being actively looked at. That gave a little bit of certainty to the industry, and its reaction was informed by the understanding that a reasonably objective test would carried out for the continuation or otherwise of the price cap.

I will roll forward rapidly to the end of September 2022 and the propitious day on which the right hon. Member for North East Somerset (Sir Jacob Rees-Mogg) became the Secretary of State for Business, Energy and Industrial Strategy. He lost no time in seeking to vandalise this provision by opportunistically inserting a stand-alone schedule to the Energy Prices Act 2022—which it had become necessary to pass—which addressed the enormous rise in prices, what Government intervention might look like and how it could be regulated.

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[Katherine Fletcher (South Ribble) (Con)]

I appreciate that the hon. Gentleman is trying to bring some colour to his remarks, but does he agree that alluding to acts of physical violence in something so important is not a brilliant plan?

[Dr Whitehead]

I would agree if that were not my metaphorical way. Of course I do not believe that the former Secretary of State for Business, Energy and Industrial Strategy is going to take the Minister into a cupboard and do him over; it is a metaphor that I hoped might convey some of the possible lingering influence of the right hon. Member for North East Somerset on our present considerations. I am sure that the Minister will want to put that lingering influence out of his mind when considering what to do today.

After all the work that has been done on getting this clause back into the Bill, I confidently expect the Minister to greet it with acclamation. He does not have to do any work on it now, because it is ready to go. He can proceed with a Bill he can be proud of through its remaining stages in this House.

[Andrew Bowie]

For the record, let me make it absolutely clear that I have only the greatest respect for my right hon. Friend the Member for North East Somerset and that he has never expressed any desire to take me into a cupboard and, metaphorically or not, do me over. We enjoy a very good relationship. Although we disagree on some points of principle, we are broadly in agreement on the general direction of travel that is needed for the betterment of this country. I put on record my thanks for his service in supporting the Government in the various offices in which he served.

I also thank the hon. Member for Southampton, Test for tabling new clause 88. I note that it reflects the clauses that were in this Bill when it was first published in July last year, as he has pointed out. However, I am sure that it will not have escaped his notice that a great deal has happened to energy prices since then. Last September, the Government announced a massive package of support for consumers. As part of the work to deliver that package, the Domestic Gas and Electricity (Tariff Cap) Act 2018 was modified by the Energy Prices Act 2022, which received Royal Assent on 25 October.

Those modifications were made so that the tariff cap could function both as a cap to ensure that prices are efficient and as the reference price for the subsidy payments to households under the energy price guarantee. Although energy prices have now fallen below the level at which energy price guarantee payments are being made, it will remain in force until the end of March 2024 to protect households from price spikes. To ensure that the support rates under the energy price guarantee could be set and delivered effectively and quickly, the Energy Prices Act removed the requirement on Ofgem to carry out a review and to produce a report and recommendation to inform annual decisions by the Secretary of State on whether to extend the cap. As a result, there is now no automatic end date for the cap and the Secretary of State will give notice of when the tariff cap will end, but that does not change the fact that the tariff cap was always intended to be a temporary measure. It remains so, for now; as stated in the Government’s energy security plan, we intend to consult later this summer on the future of the price cap. In the light of my remarks, I hope that the hon. Member for Southampton, Test will feel that he can withdraw the new clause.

[Dr Whitehead]

I thank the Minister for his remarks. Water has indeed flowed under the bridge since the original intentions of the Bill were set out, but I think he has rather missed the point that I was trying to make. We are not saying that there should not be a price cap or that there should be no protection against price spikes and so on, which is what the price cap does at the moment. Nor are we saying that the market has returned to normal. What we are saying is that there was a perfectly good procedure in place, which could work perfectly well under the present circumstances, to give confidence to industry and various others that the price cap would be considered fairly carefully during its progress. That has been replaced by an occult process whereby the Secretary of State just has an idea or does not have an idea.

The whole framework of proper discussion, proper argument, proper reporting and proper consideration has been knocked away. The Minister says that there will be consultation on the future of the price cap at some stage, but I think he will agree that that is not a proper substitute for the clear arrangements that were originally in place under the 2018 Act and that were supposed to be in place under the Bill.

That is the point that we are trying to make: not that under the present circumstances the price cap has somewhat changed its function in terms of being a back-up to other measures that are in place for pricing, but that the long-term issue of the price cap itself was previously under careful consideration and now is not. That is the fundamental difference between the legislation as it was and the legislation as it is now, on a half-baked, un-thought-out basis, in the medium term.

I am both encouraged and disappointed by what the Minister has had to say. We want it on the record that we would like the proper procedures for price cap management to be reinstated. We have produced a method that can and will work, which I think hon. Members will agree is probably superior to a half-promise that something might happen at some stage, with some consideration being given to consultation. On that basis, we would like to press new clause 88 to a vote, so that at the very least we can place it on the record that we think it important and that we are disappointed that the Government do not appear to have taken our argument on board.

Question put, That the clause be read a Second time.

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Brought up, and read the First time.

[Dr Whitehead]

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

The Committee will be delighted to know that I do not intend to detain it for any length of time on the new clause, which follows on from our earlier debate about the setting up of the independent system operator.

We think something is missing from the otherwise pretty comprehensive and good arrangement for the setting up, organisation and running of the independent system operator, which we completely support; although we would like to see the independent system operator playing more of a system architect role than is presently envisaged, in general we are absolutely for setting up the ISOP in the way that has been described. What ought to follow is at least a consideration of whether the arrangements between the ISOP and the distributed network operators, on which we tabled some amendments at the time, are sufficiently robust to enable a system operator function to operate at all levels of grid delivery. As I said a little while ago, there are decreasing distinctions between the lower-level grid operated by the DNOs and the high-level grid, which is the function of the National Grid ESO at the moment.

The possibility arises that it will be possible—more than possible—to establish regional independent system operators to perform, in conjunction with the ISOP, the same sort of function that is presently envisaged for the ISOP itself. That would be a slightly different function, inasmuch as the regional system operators could be responsible for what is increasingly likely to happen with regional balancing, ancillary services and other such things that are part of the emerging structure of the grid as a whole, as we move from a centralised to a much more decentralised grid arrangement.

RISOs, as I call them, would be able to play a substantial role in that. All new clause 88 suggests is that the Secretary of State produce a report on the advisability of establishing regional independent system operators. I called them RISOs a moment ago, but RISOs are actually duplicating machines favoured by those with left-wing tendencies producing leaflets; these would be RISOPs, which could be established to provide that important link arrangement between the high-level grid and the low-level grid for the future.

That is all, really, as far as the new clause is concerned. It does not require anything earth-moving to take place in the immediate future—just consideration of this arrangement. It may well be that just by raising the matter I will have put the thought in the Secretary of State’s mind that maybe we should consider going in that direction; it is certainly a direction the Opposition would consider going in if our roles on these Benches were reversed. My purpose in tabling new clause 89 was to raise the issue and see what the Minister has to say about it; I certainly do not intend to press it to a vote.

[Andrew Bowie]

For the record, may I point out that it is not just leaflet publishers of left-wing tendencies who are au fait with risograph printers? I have spent many hours standing by a RISO producing leaflets for those of centre-right tendencies.

I may be wrong but, according to my notes, this is the last new clause or amendment the hon. Member for Southampton, Test will speak to, so I thank him and the shadow team for the very collegiate way in which they have proceeded through Committee stage. I look forward to engaging with the hon. Gentleman again on Report and Third Reading, and indeed in the interim, when I am sure we will be corresponding. I thank all hon. Members for their contributions thus far.

New clause 89 speaks to the creation of a new set of bodies to deliver regional system operation and planning, and in many ways repeats the intentions of amendment 97, which the hon. Member for Southampton, Test tabled. As with that amendment, the new clause creates powers relating to the operation of distribution systems.

Ofgem has recently consulted on the future of local energy institutions and governance, with a focus on the creation of regional system planners specifically. That consultation closed on 10 May, and I suggest that this new clause prejudges the outcome of that work.

Alongside Ofgem, the Government will carefully consider the proposals we are consulting on. If we then proposed legislative or licence changes that affected the relationship between the ISOP and distribution networks, any additional functions accruing to the ISOP would be covered by the wording in clause 119(2)(b) and clause 134(3)(a). That is because those clauses allow for other functions to be conferred on the ISOP under, or by virtue of, legislation other than part 4.

I hope that puts the mind of the hon. Member for Southampton, Test at ease and that he feels able to withdraw his new clause.

[Dr Whitehead]

I have no further comments to make, other than to thank the Minister for his comments. There are indeed consultations under way through Ofgem, and I look forward to seeing what those have to say. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 90

Objections by planning authorities to applications for consent under section 36 or 37 of the Electricity Act 1989

“(1) Schedule 8 to the Electricity Act 1989 is amended as follows.

(2) Omit paragraph 2.

(3) In the cross-heading before paragraph 3, omit ‘by other persons’.

(4) In paragraph 3, omit sub-sub-paragraph (2)(a).”—(Alan Brown.)

This new clause would remove the ability of a local planning authority automatically to cause a public inquiry to be held by objecting to an application to the Secretary of State for consent under section 36 or 37 of the Electricity Act 1989, instead leaving Ministers to decide whether a public inquiry should be held.

Brought up, and read the First time.

[Alan Brown]

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

--- Later in debate ---

[Dr Whitehead]

I also have a 3,000-word speech, but I will not give it today. The Government amendments and clauses are wholly unexceptional, and are essential for the speed of the Bill. I have nothing further to add to what the Minister said.

[Alan Brown]

I will be brief. Amendment 114 is about getting the consent of Scottish Ministers before the passing of regulations. I could have tabled it to any number of previous clauses, but this is the most appropriate clause for it to relate to, because it relates to the regulations made under the whole Bill.

There has been talk of collegiate working—the two Governments working together—and the Minister said that he wants to find a different process, but there remain concerns that unless there is a firmed-up process, there is a risk that, somewhere down the line, policies and regulations will be proposed against the consent of Scottish Ministers.

The Scottish Government support the Bill; we are working together in these policy areas. It is not about trying to give the Scottish Government some sort of veto but about working together and ensuring that processes are in place that allow for not just consultation but taking the advice and wishes of the Scottish Government on board.

I know that the word “consent” always makes the Westminster Government very nervous, because they think it gives too much power to the Scottish Parliament, but it is not about that. It is not about political fights; it is about working together and ensuring that the wishes of the Scottish Government in respect of energy matters and considerations are taken on board.

--- Later in debate ---

[Andrew Bowie]

Thank you, Mr Sharma, for your excellent chairing of the Committee this morning, and thank you to Mr Gray, Dr Huq and Ms Nokes for their equally excellent chairmanship over the course of the Committee.

I pay special tribute to the Clerks and to my officials for their tireless work on what is quite a hefty piece of legislation. I also thank Members on both sides of the Committee for the constructive, thoughtful and insightful debate on this landmark Bill. I have already thanked the shadow Minister, the hon. Member for Southampton, Test, for his overall support, and for our way of working in Committee, which has been collegiate and good mannered—well, not good mannered. [Interruption.] Bad mannered! [Laughter.] Although we have not agreed on every detail, I thank him for his knowledgeable contributions.

The Energy Bill will provide a clear, more affordable and more secure energy system. It will liberate private investment, including in technologies, reform our energy system so that it is fit for purpose, and ensure its safety, security and resilience. I look forward to working with everyone present to take the Bill through Report stage and on to Royal Assent.

[Dr Whitehead]

I associate myself with the Minister’s remarks concerning your excellent chairing, Mr Sharma, and that of your colleagues the hon. Member for North Wiltshire (James Gray), my hon. Friend the Member for Ealing Central and Acton (Dr Huq) and my constituency neighbour the right hon. Member for Romsey and Southampton North (Caroline Nokes). I hope that you can convey to them the thanks of all Committee members for their excellent work in bringing the Committee to its conclusion.

I also thank, beyond the normal level of thanks, the Committee Clerks, who have been of tremendous assistance to me in bringing forward the sinews for debate by way of the amendments and new clauses, all in perfect order and debated accordingly. In my relatively long experience of taking Bills through the House, their work has been way beyond the call of duty, for which I am very grateful to them.

I believe the Minister is the record holder of fastest House of Commons runner in the London marathon ever.

[Andrew Bowie]

No—just in one year, I am afraid.

[Dr Whitehead]

I think it was ever, but perhaps we should have a rerun. It is rather appropriate that we have got through this marathon Bill in good order and in good time. The Minister is very substantially responsible, not least with his speed-reading skills, for managing us through that lengthy process, and I thank him for that. I also thank him for his good humour, collegiality and careful consideration of the points that we have put forward.

We of course do not agree with everything that has come out of the Committee, and we will pursue some of those things during the Bill’s later stages, but I hope that I can say on behalf of the whole Committee that, overall, we have between us delivered a Bill that fundamentally we pretty much agree on through to its next stages in relatively good order. That is not always the case in this place, and it is something we can all be quite proud of. That is the end of my thanks. I hope that everyone will be happy with having the afternoon off, now that we can move forward to Report stage.

[The Chair]

Not yet—in a few minutes. I call Alan Brown.

Energy Bill [ Lords ] (Sixteenth sitting)

Lord Whitehead Excerpts

Committee stage
Tuesday 27th June 2023 Public Bill Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

In his reply to my hon. Friend the Member for Bristol East, will the Minister expand briefly on his understanding of the meaning of the word “pause” in relation to the forcible installation of prepayment meters by energy companies? As far as I am aware, there is no time set for that, nor is it subject to any other actions that the Government may take. Is it the Minister’s understanding that the pause is strictly time-limited and that practices may start again at the end of it?

[Andrew Bowie]

The pause will be until Ofgem has finalised the review of supplier practice in relation to prepayment meter customers. That is what we expect, anyway, because in addition to what I have said this morning, the Secretary of State has told Ofgem to toughen up on energy suppliers and to investigate customers’ experiences of how their supplier is performing. Following that, Ofgem established a new customer reporting system for households to pass on their experiences of how they are being treated. We are approaching this across the board. We believe, however, that any ban on the forced installation of prepayment meters would risk a build-up of customer debt. Unpaid debts increase costs for all energy consumers and could pose a risk to supplier stability.

To address issues around the forced installation of prepayment meters, Ofgem has recently published a new code of practice, as I mentioned. The code has been agreed with energy suppliers to improve protections for customers being moved involuntarily to a prepayment meter. It ensures better protections for vulnerable households, increased scrutiny of supplier practices, and redress measures where prepayment meters were wrongly installed. It includes provisions to prevent involuntary installations for all high-risk customers, including those dependent on powered medical equipment, people over 85, and households with residents with severe health issues. It also includes a requirement for suppliers to reassess whether prepayment remains the most suitable and preferred payment method for a customer once they have repaid debts. Suppliers must agree to any request from a prepayment customer who is clear of debt to move off a prepayment meter.

The rules to which suppliers must adhere regarding the installation of prepayment meters are set out in the licence conditions set by Ofgem as the independent regulator. Ofgem will undertake a formal statutory consultation process to modify suppliers’ licence conditions in line with the code ahead of this winter. This will allow Ofgem to use its full enforcement powers to enforce compliance with the code, ensuring that consumers are protected and that the poor practices that we have seen will not happen again.

It is vital that, as the independent regulator, Ofgem continues to set the rules to which energy suppliers must adhere in licence conditions. New clauses 2 and 38 would risk taking that power away from Ofgem. Allowing the Government to set rules outside the licence conditions would threaten Ofgem’s independence and its ability to regulate suppliers effectively.

The Government have always been clear that action is needed to crack down on the practice of forcing people, especially the most vulnerable, on to prepayment meters. We will continue to work closely with Ofgem and industry to see that the code leads to positive changes for vulnerable consumers. I hope that hon. Members are reassured by my explanation and that they might feel able to withdraw their new clauses.

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Brought up, and read the First time.

[Dr Whitehead]

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

We come now to something that has run as a bit of a leitmotif through our discussions in Committee, which is the position of the North Sea Transition Authority—I was going to say the “so-called” North Sea Transition Authority, but I accept that it is the North Sea Transition Authority. However, as we have pointed out in previous debates, the name came about by means I am not entirely clear about, as opposed to being set in legislation.

In a previous debate, we discussed the circumstances under which somebody might go about their daily business calling themselves a particular appellation but find out that there were legal consequences to using a name that was not actually theirs, even though for daily purposes that name was reasonably accepted. That is the key point as far as the North Sea Transition Authority is concerned, because legally the North Sea Transition Authority is actually the Oil and Gas Authority. It is not just legally the Oil and Gas Authority; it is an authority that was effectively set up by the Energy Act 2016.

If we turn to the pages of the 2016 Act, we see a number of functions that the OGA must undertake. It is not the case that the OGA did not exist at all in any form prior to the 2016 Act’s passing into law; it was originally incorporated under the Companies Act 2006 as the Oil and Gas Authority Limited. The 2016 Act made a particular point of taking that limited company and transforming it by legislation. It states:

“The company originally incorporated under the Companies Act 2006 as the Oil and Gas Authority Limited is renamed as the Oil and Gas Authority.”

There it is in the legislation. The 2016 Act then made a number of transfers of functions from the OGA: the transfer of property rights, staff and so on. It is fairly clear from that that the Government at the time of the passage of the 2016 Act had a very real intention as to the function, activity and so on of the Oil and Gas Authority: they set it all out in the legislation. They were clear and specific on that. They were also clear and specific on what the OGA should be doing.

It was not just guidance on what the OGA should be doing; it was set out in the legislation under section 8, “Matters to which the OGA must have regard”. It needed to

“minimise public expenditure relating to, or arising from, relevant activities.”

It was concerned with the

“need for the United Kingdom to have a secure supply of energy.”

It had a function entitled “Storage of carbon dioxide”, and the OGA needed to

“work collaboratively with the government”.

By the way, regarding a debate we will come to later, the OGA also had at least an implied function with respect to the maximum economic extraction of oil and gas from the North sea. It was clear that the OGA had a number of things it should do, and that it was able to collect samples and regulate the oil and gas industry in the North sea, all within the overall umbrella of maximising economic recovery of that oil and gas in the North sea and elsewhere.

The OGA had a clear set of legal requirements and a clear set of duties and responsibilities, but the Government’s decision—I do not know whose decision it was, and it would be helpful if the Minister clarified that for me—that, henceforth, the OGA should be called the North Sea Transition Authority was, as far as I can see, conceived and carried out on no legal basis whatever. It was simply a device, which I guess aligned with the North sea transition deal, which was originally entitled the North sea oil and gas deal, whose title was, during discussions on the deal, so I understand, changed. That was when the Government had an industrial strategy, and this was put forward as a strategy for oil and gas in the North sea, although it also included elements of what we might say was a transition.

The North sea oil and gas companies undertook to change their position on flaring, for example, and undertook to do various things about the electrification of the North sea oil rigs and various other things. However, notably in the North sea transition document, there was no mention of, nor any agreement on, the management of production in the North sea, or indeed management of exploration or any other activities that were going on. This was a limited document that might be described as a North sea transition document, and an even more limited change to the name of the North sea OGA, which was renamed the North Sea Transition Authority. I presume that the name change arose from the basement of the Department for Business, Energy and Industrial Strategy as a nod in the direction of that particular document, but that is all.

The North Sea Transition Authority has done some mighty work in respect of its new function. It has changed its notepaper, I think—it has got that bit sorted out—but nothing else has happened as far as the authority is concerned. As the Minister saw just recently, and as I have periodically pointed out as the Committee has progressed, when the guidance notes and the notes published by the Department on various aspects of the Bill appear, we see that the North Sea Transition Authority is doing various things related to various aspects of the Bill. However, when we go into the clauses in the Bill, we see that it is not the North Sea Transition Authority that is doing those things, but the Oil and Gas Authority, because that remains the legal arrangement.

--- Later in debate ---

Following those explanations, I hope that the hon. Gentleman feels that he can withdraw his new clause.

[Dr Whitehead]

Indeed there is a feeling welling up in me that we are not able to proceed with the new clause, given that the Minister said—and I agree—that such a change cannot be made easily with a quick stroke of a pen, and that a number of other things need to be considered alongside that. I am pleased that he indicated that, as we speak, there are serious people with towels round their heads working through the implications and looking at how we can best do it. That was the intention of the new clause, but perhaps I was rather optimistic in thinking that the name change could be written in easily. I appreciate that it cannot.

I also appreciate that the transition authority has the green light from Government to start undertaking things relating to transition. It is beginning to pursue that, and that is all good, but I say gently to the Minister that at some stage we will need to push this together. If the gentlemen with wet towels round their heads—

[Andrew Bowie]

And ladies.

[Dr Whitehead]

And ladies, indeed. If they can undertake their work in a reasonable fashion, I hope we will have a solution that is good for all of us, as far as the transition is concerned. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 44

Maximum economic recovery in the North Sea

“(1) The Petroleum Act 1998 is amended as follows.

(2) Omit sections 9A to 9I.”—(Dr Whitehead.)

This new clause removes reference to Maximum Economic Recovery in the North Sea as placed into the Petroleum Act 1998 by section 41 of the Infrastructure Act 2015.

Brought up, and read the First time.

[Dr Whitehead]

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

New clause 44 concerns a similar legislative requirement—this time, not in the Energy Act 2016, but in the Infrastructure Act 2015. The 2015 Act—I know that hon. Members will have it at their bedsides at all times—contains what can only be described as a performative piece of legislation. Section 41 makes an extensive amendment to the Petroleum Act 1998, which worked perfectly well in supporting the development and activity of the North sea basin, to introduce a principal objective of

“maximising the economic recovery of UK petroleum”—

interestingly, that is not defined in the legislation—through

“development, construction, deployment and use of equipment,”

collaboration among various persons, and so on.

Section 41 also states that the Secretary of State

“must produce one or more strategies for enabling the principal objective to be met.”

There is a requirement on the Secretary of State,

“As soon as practicable after the end of each reporting period,”

to

“consider the extent to which, during that period, these persons have followed section 9C by acting in accordance with the current strategy or strategies,”

and to

“produce a report on the results of the consideration of that question.”

The section goes on to state what the report must contain, and to provide that the Secretary of State

“must publish, and lay before each House of Parliament, a copy of each report produced under this section.”

I have one initial question for the Minister: where are the reports? I have looked quite hard in the Library and various other places to find copies of the reports that the Secretary of State was supposed to produce in each reporting period, and to identify what considerations he or she made in terms of licence holders and operators under petroleum licences and so on. It is probably a case of me being a little remiss, but I cannot find those reports on the maximisation of the economic recovery of UK petroleum, several of which should have been produced by now, since they are supposed to be produced at the end of each two-year reporting period.

Far be it from me to suggest that the Secretary of State is in breach of his requirements under the 2015 Act. I am sure the Minister can put me right about whether the Secretary of State is in breach and either point me to the reports or, perhaps, suggest that they might be forthcoming. I hope the Minister has received inspiration that may enable him to address that point.

Even at the time, section 41 of the 2015 Act appeared to be rather strange in definitional terms. What would lead the Secretary of State to consider that the economic recovery of UK petroleum has been maximised? Is it the extraction of every last drop of petroleum and gas from the North sea—and, if so, over what timescale? It is unclear. Presumably, if economic circumstances change and make further North sea extraction economical, the Secretary of State and industry should start busily extracting everything that is economically extractable, even though in the future it may not be regarded as such.

Section 41 is a bit of a nonsense, and of course it is a much bigger nonsense now than it was, because the Government have solemnly agreed to our net zero targets and amended the Climate Change Act 2008. Indeed, the amendment of those targets was agreed after the 2015 Act was passed. We now have targets for our country’s future emissions, as well as legislation that essentially says that we are required to do the opposite of those targets through oil and gas extraction in the North sea.

As I am sure the Minister is aware, one important calculation in reaching net zero—indeed, the Government have introduced a net zero calculator—is whether at least some extraction of oil and gas from the North sea contradicts the net zero target. We have had a number of assessments, including from the Climate Change Committee and various other bodies, that maximising the economic extraction of oil and gas from the North sea would undoubtably bust our targets, and that we must be clear that at least some of it probably needs to be left there. If we sucked the North sea and other places dry of their oil and gas resources, depending on how we accounted for it, that would pretty much inevitably bust our ability to reach our targets. The objective to maximise economic recovery sits in stark contradiction to our overall emissions targets.

--- Later in debate ---

[Andrew Bowie]

I could not agree more that there are financial risks. That is probably why, just this morning, so many businesses expressed their worry at Labour’s Just Stop Oil plans, which were outlined a couple of weeks ago and which the former Labour leader of Aberdeen City Council described as even worse for an industry than the actions of Margaret Thatcher in the 1980s. That is from a member of the Labour party who resigned due to Labour’s policies on oil and gas.

[Dr Whitehead]

I would be grateful if the Minister withdrew that comment about Labour’s “Just Stop Oil plans”. There are no Labour Just Stop Oil plans. Indeed, Labour has condemned the activities of Just Stop Oil protesters, because Labour does not wish just to stop oil. We specifically said this morning that we do not wish to do that, and that we see a substantial role for the North sea oil and gas industry out to 2050. We would support that future, so I hope the Minister will not resort to these easy gibes and will address the issue rather more seriously today. That would be helpful.

[Andrew Bowie]

I should probably turn to the new clause, but I welcome the welcome and support that the hon. Gentleman—and now, it seems, the Labour party—will give to our offshore oil and gas industry. He should probably inform the members and founders of Just Stop Oil who have donated so much money to his party.

The objective of maximising economic recovery in the North sea forms the basis of the North Sea Transition Authority’s regulatory functions, and removing them could significantly undermine its ability to operate as intended. It would also lead to a significant lack of clarity about the authority’s regulatory role. Maximising the economic recovery of oil and gas need not be in conflict with the transition to net zero, and the North Sea Transition Authority is already doing a great deal of work to support an orderly transition that delivers on our climate commitments and supports workers.

In December 2020, in accordance with section 9A of the Petroleum Act 1998, the North Sea Transition Authority published a revised strategy, titled “The OGA Strategy”.

[Dr Whitehead]

Ah!

[Andrew Bowie]

It is rather ironic, given what we have just been discussing. Through the revised strategy’s central obligation, the North Sea Transition Authority must

“secure that the maximum value of economically recoverable petroleum is recovered from the strata beneath relevant UK waters; and, in doing so, take appropriate steps to assist the Secretary of State in meeting the net zero target”.

The strategy therefore already provides a basis for the North Sea Transition Authority’s ongoing work to help drive the energy transition.

Under the revised strategy, the North Sea Transition Authority has also introduced new expectations for how North sea oil and gas assets will be managed in the least polluting way, and it will consider the full societal carbon cost when taking decisions. The North Sea Transition Authority will continue to work with Government, industry and other regulators to help accelerate the move to net zero while meeting the UK’s energy demands and need for energy security.

Section 9D of the Petroleum Act 1998, on reports by the Secretary of State, was repealed by paragraph 10 of schedule 1 to the Energy Act 2016, which means the repeal happened before any reports needed to be produced.

I pay tribute to our offshore oil and gas industry, particularly Offshore Energies UK and its “Vision 2035” plan, which means the North sea will become the world’s first net-zero basin. With these explanations, I hope the hon. Gentleman feels able to withdraw his new clause.

[Dr Whitehead]

I thank the Minister for clarifying the position on reports, because I must admit that I had not read that paragraph of the 2016 Act. It rather underscores my point that this is a performative piece of legislation. There were requirements to report, but the Government presumably realised that they were even sillier than the original imposition on the 1998 Act and decided, one year later, that reports would not be necessary. It could have been a bit embarrassing if the reports came out, so they decided that the reports were not necessary. I thank him for that clarification, but he is rather speaking to my point instead of his.

I am very disappointed that the Minister has sought to characterise our debate as one side of the Committee being against oil and gas and the other side being in favour; he thereby swerves the important point raised by my hon. Friend the Member for Sheffield, Hallam. On the overall position that maximum economic extraction could lead us—

Energy Bill [ Lords ] (Fourteenth sitting)

Lord Whitehead Excerpts

Committee stage
Thursday 22nd June 2023 Public Bill Committees

Clause 270 disagreed to.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

On a point of order, Mr Gray. May I ask for clarification of the voting process on clause 271 and Government new clause 52? As I am sure all Committee members are aware, new clause 52 will effectively replace clause 271, with the consent of each side. However, although we will be voting on clause 271 stand part today, we will not be voting on new clause 52 until the end of the Committee’s business. We could therefore conceivably end up with clause 271 being dropped but not replaced by new clause 52. Is it within procedure to retain clause 271 but assume that new clause 52 will replace it in due course, or are there other ways of doing it?

[The Chair]

The hon. Gentleman makes an interesting point, but he is of course not correct.

[Dr Whitehead]

It was a question.

[The Chair]

Well, I am answering the question in that case. The answer is that I will put the Question on clause 271 now and, depending on what the majority decides, it will either remain in the Bill or be removed. At the end of consideration, we will come to new clause 52. If there is a majority for it, it will be added to the Bill. If there is not, it will not. The two are not conditional on each other; they are entirely separate.

Clause 271

GEMA general duties relating to climate change

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

--- Later in debate ---

[Andrew Bowie]

I now return to part 4 of the Bill, which relates to the independent system operator and planner, or ISOP.

Clause 132 introduces schedule 7. The purpose of the schedule is to empower the Secretary of State to make transfer schemes to create the ISOP and give it the capacity to carry out its functions. As discussed already, the ISOP will be founded on the existing capabilities and functions of National Grid Electricity System Operator and, where appropriate, National Grid Gas. That will require several transactions between Government, National Grid plc and other relevant parties, because the property that the ISOP requires is not currently owned by a single entity. The transfers could include matters such as personnel, IT systems, physical assets, methodologies, models, data, and other resources and inputs used by the existing entities in performing their functions.

Schedule 7 sets out a set of principles, procedures and expectations in relation to the transfer scheme that will help provide clarity to affected parties. For example, it outlines that the Government are required to consult the transferor or transferors when the transfer scheme power is expected to be used. Not all the detail of the scheme can be determined in advance, so the Bill also includes a small number of time-limited powers to make regulations, which include regulations to provide further details to all parties, including third parties, on procedures for agreeing and paying compensation.

Government amendment 19 makes a minor procedural amendment to clause 275, to include the Treasury in the list of persons that can make regulations under the Bill. Amendment 20 clarifies that, because regulations under paragraph 9 of schedule 7 deal with financial matters, they can only be annulled in the House of Commons.

Clause 133 introduces schedule 8, which relates to pensions. As part of the transfer of functions, some employees will transfer into the ISOP. The purpose of the schedule is to allow the Secretary of State to separate the pension arrangements of the ISOP and to provide scope for various forms of reorganisation that may be appropriate in the light of the transfer. That includes making provision for the responsibility for the affected employees’ qualifying pension schemes and protecting the value of their benefits during the transfer. In exercising powers, the Secretary of State must ensure that the arrangements made for each employee’s pension provision is, in all material respects, at least as good immediately after any transfer-related changes are made as they were before that point.

Clause 134 grants the Secretary of State the power to provide financial assistance to the ISOP—that is, to draw on the financial resources available to Government in the kind of circumstances when the existing electricity system operator and gas system operator would have relied on the financial strength of their corporate group to raise capital sums. The Secretary of State will have the power to set conditions on the financial assistance provided, which may include conditions about repayment with or without interests or other return. In the highly unlikely situation that the ISOP faces financial difficulty, the power would also allow the Secretary of State to step in and avoid any disruption to the electricity and gas sectors.

Finally, clause 135 removes the barriers, in section 7 of the Electricity Act 1989 and section 7B of the Gas Act 1986, to payments raised in one sector being used to benefit consumers in the other. It also introduces a provision, in each Act, to expand licence holders’ statutory duties and require them to have regard to the interests of consumers of the other energy sector where directed by their licence. The removal of such barriers is fundamental, because it will enable the ISOP to co-ordinate and ensure strategic planning across the energy sector more effectively.

[Dr Whitehead]

We come to a part of the Bill that we should have discussed a couple of weeks ago: clauses 132 to 139. When we discussed the rest of the business relating to the ISOP, these debates were moved by the Government towards the end of the consideration of later clauses in the Bill. At the time, I thought that was because there was some blockbusting new clause that the Government were thinking of introducing, which was not quite down the slipway at that point. I thought it would appear when we considered the clauses today.

I was disappointed to see that nothing has appeared. There are two Government amendments that were there previously, and nothing in the way of new clauses. I assume the reason for discussing the provisions now—although the Minister may have an interesting explanation up his sleeve—may well be because Ofgem has just produced a consultation—[Interruption.] No, the Minister is shaking his head. In any event, had the Minister consulted with Ofgem about whether it was going to produce a consultation on transfers and various other things, then he would have found that they have produced a consultation, “Funding the transition to a Future System Operator”, which was published today. The Minister will understand that not a great deal of time has elapsed since the publication of that consultation.

That consultation is very relevant to the provisions we are discussing. If the Minister did think the consultation would be published in time, it would have been helpful of him to bring that to the Committee’s attention. Apparently, however, there are different reasons for discussing these provisions later in the Committee cycle than planned.

A headline in Utility Week said the full costs of the transition to a future system operator could come to about £392 million. I read that headline but I am too mean to go behind the paywall of Utility Week to read the rest of the article. I sought out the Ofgem consultation instead and got the full picture. The consultation indicates that this level of cost for the transition is accurate. In clauses 132 to 139, provision is given for the bringing together of the various agencies’ present responsibilities for what would be the new independent system operator. That extends beyond just taking the National Grid ESO away from National Grid and putting it into ISOP. It involves other agencies—the Minister is absolutely right.

In this instance, however, the prime issue of the transition is of course the ESO itself. At the moment and for a long time, the ESO has had a relationship with National Grid involving separation by Chinese walls. It was, in effect, owned by National Grid and so was part of the National Grid family of companies, but over the recent period, since the ESO was set up, its operation has been separated from that of National Grid. Previously, we have discussed the extent to which the Chinese walls were strong enough for what ESO was doing in relationship to what National Grid might be doing—for example, potential conflict on interconnectors, with National Grid owning at least part of an interconnector while ESO was planning for interconnectors overall.

The fact that the separation will take place and that the business of the ESO will be transferred fully into the ISOP is important. That will complete the process of setting up the ISOP properly, so that it can operate fully independently from day one—in Committee, we have expressed strong interest in ensuring that. However, with the Ofgem consultation, the issue of compensation for those transfers arises to some extent. According to the consultation, part of the transfer arrangements relates to transferring personnel across and part to what assets and so on will be transferred. What is not entirely clear in the consultation is also alluded to in the provisions in the group, in particular schedule 7.

Paragraph 8 of schedule 7, headed “Compensation”, appears to start talking about compensation in general terms for, as it were, the loss to National Grid of its ownership of the ESO, as well as of the various things relating to the transfer of assets and individuals. Compensation would be couched in two parts: literally, which desks and pot plants are going over to the ISOP, with personnel and various other things, and what the compensation for that is, presumably; and compensation for the fact that the ESO was part of the National Grid corporate family and no longer will be.

I am not clear whether the provision on compensation encompasses that consideration. If so, what might that consideration be? Do the Government have a figure in mind for compensating National Grid for its losing ESO to the ISOP? Is that facilitated through these clauses or a separate arrangement to be arrived at? In other words, do the clauses deal just with compensation relating to bodies, pot plants and desks, or with compensation more widely?

--- Later in debate ---

[Andrew Bowie]

Inspiration has arrived.

[Dr Whitehead]

Good.

As I was saying, this is potentially important, because the clauses in this part of the Bill relate to the Secretary of State’s ability to provide the ISOP with finance. Will the ISOP undertake the job of providing the compensation due under the clause—presumably it would be provided with money by the Government to do that—or will the Government deal with that separately before the ISOP is set up?

There is also an important point about compensation for the loss of the ESO to the ISOP. It would seem inappropriate for the ISOP to pay compensation to National Grid, given its removal from National Grid in the first place. I therefore assume that other mechanisms will be in place to provide that compensation. If that compensation is paid, there are provisions in the Bill allowing for such payments to be recovered by companies involved in the process in the course of their activities. [Interruption.] I will pause for a moment while the Minister consults his Whip.

[The Chair]

There is no need to pause. Please crack on.

[Dr Whitehead]

This is something I specifically want the Minister to say something about. It is important that we get it right.

Assuming that compensation is given for the loss of the ESO and the companies concerned can recover that, do the Government intend for the ISOP to have a part in the mechanism whereby costs are recovered through standing charges on bills? As the Minister knows, standing charges are substantially made up of a combination of charges for TNUoS and DUoS—transmission network use of system and distribution use of system—and a balancing charge, and, as he and other hon. Members will know, standing charges are increasing substantially as a proportion of our electricity bills. They are now about 25% of our energy bills.

It looks as if the compensation, if it can be recovered by somebody—I assume it could be recovered one way or another by National Grid in its network charges, or by the ISOP in what it eventually contributes to the standing charge—will eventually work its way into the standing charge, and hence on to customers’ bills. That makes it important to understand what the Government have in mind about what compensation should be paid to National Grid for the loss of ESO and its transfer to the ISOP.

It may be that there has been a nice agreement that no one will pay anyone compensation, and National Grid will just hand over ESO to the ISOP. I suspect that is not the case, but I have not seen anywhere—and it is not explicit in the consultation—what the level of compensation might be, who will pay it, how it might be transferred to bills and standing charges, if necessary, and how the process overall might work. It would be helpful if the Minister could give us an understanding of all that. It would certainly enable us to better judge schedule 7, as it relates to the process of how those transfers take place and what their consequences are.

[Andrew Bowie]

On the question of why we have returned to these clauses, I am sorry that I was unable to turn up today with a blockbuster moment for the Committee. I know they were all expecting it and waiting with bated breath. Unfortunately, it is a simple matter of procedure. We temporarily skipped over the remaining clauses in part 4 to ensure that the necessary Ways and Means motion could be agreed by the House. I am pleased to confirm that the resolution was obtained on Tuesday, allowing us—I was expecting a “Hear, hear!”—to continue with clauses 132 to 139.

The Ways and Means resolution was necessary as a result of provisions that confer power on the Treasury to make regulations setting out the way taxes have effect in connection with a transfer of assets from one body to another. It was impossible to proceed with debate on the clauses until the motion was passed by the House. That has now been done, so we can proceed.

On the consultation that was published this morning, I cannot mandate when Ofgem publishes its consultations, so unfortunately that was not a consideration. However, we note that the Ofgem consultation launched today, and I will of course consider it in detail. I am happy to provide hon. Members with more detail in writing should they wish.

The hon. Member for Southampton, Test spoke about transfers. The Bill provides multiple steps for agreement on the value of compensation: first, simple agreement between parties—in this case the Secretary of State, National Grid and the owners of National Gas—secondly, in a situation of non-agreement, the joint appointment of an independent valuer to assess the value of the assets to be transferred; or, thirdly, as a fall-back option, the appointment of an independent valuer by the Secretary of State on behalf of both parties. The framework of considerations to be made by the independent valuer will be set out in regulations to be made under the Bill.

The entire process is an ongoing commercial transaction, so the Government are limited in the extent of the information they can provide at this point, although I recognise the importance of the hon. Gentleman’s questions. I will respond specifically to his point about the standing charge and his worry that that could have an effect on bills. We do not expect costs to rise at all as a result of the establishment of the ISOP. The ISOP will be funded by Government, and its ongoing operations will continue to be supported by funding from the network balancing charges at a level determined through a price-control mechanism, much like the current gas and electricity system operators are. However, we expect the ISOP to enable a long-term reduction in costs compared with the status quo.

--- Later in debate ---

[Dr Whitehead]

I think the Minister just said that he expects compensation to be included in network charges, which means that in the end it will go on standing charges for customers. There will be an effect on customers’ bills.

[Andrew Bowie]

I reiterate that we are not expecting any increase in customers’ bills as a result of the creation of the ISOP. There will be no increase. We expect the ISOP to enable a long-term reduction in costs, so its creation will have the opposite effect on customers’ bills. Future network decisions will be built on the expert and impartial advice of the truly whole-system body that many in the industry and outside it have been calling for for some time.

[Dr Whitehead]

I appreciate that the Minister cannot tell me—presumably because of an ongoing discussion relating to commercial companies—what the compensation for National Grid is likely to be. However, I assume that, in stating that he cannot tell me, he has confirmed that that will be part of the transfer arrangements. I was trying to distinguish between the compensation for pot plants and desks, and compensation for the loss of the ESO by National Grid.

That leads us to an unsatisfactory position in which we do not know how much the compensation will be. Presumably, we have to take it on trust that the Government will be fairly rigorous about ensuring that the compensation is proportionate to the actual loss, but I am not sure how it will be determined. Sorry, Mr Gray, this is a long intervention.

[The Chair]

No, it is a speech. The Minister finished, and therefore the hon. Member is making a speech.

[Dr Whitehead]

Good, I can go on forever then. I was trying to make my remarks as brief as possible in order to accommodate the Minister’s previous comments, so I will just round them off.

We do not know the detail of the procedure for determining compensation, we do not know even what ballpark figure the Government have in mind for compensation to National Grid for the loss of the ESO, we do not know what strategies the Government might adopt in their negotiations on what the compensation might consist of, and we do not know whether there is any process of arbitration if National Grid, for example, thinks that the compensation it receives is not the right amount, or what mechanisms—perhaps under the Bill—would enable the final amount to be determined to the satisfaction of all sides.

We do know that some compensation may find its way on to network charges, one way or another. Therefore, it is important for the economy and the effectiveness of network charges that we at least have a ballpark figure for the sort of compensation that might be considered. If the Government are minded to provide huge amounts of money in compensation to National Grid, that might have an inflationary effect on network charges; if they have a more robust view of what the compensation should look like, that would have a lesser effect on charges. Either way, as I think the Minister will agree, we are in a position of some fog.

As the Bill makes progress we legislate for all this to happen, we still do not have a clear handle on what those procedures will look like or the money that might be involved. I do not know whether the Minister will respond to this speech, but I think that he should be able at least to write to us about the procedure and the arrangements. Ideally, that would include further and better particulars on the range of compensation, while not giving away anything commercially sensitive. Alternatively, he could take His Majesty’s loyal Opposition into a position of trust and get around a table with us to talk these things through, so that, between us, we are clear about how they might proceed.

--- Later in debate ---

[Andrew Bowie]

Clause 136 ensures that when carrying out various functions in relation to the ISOP under the Bill, the Secretary of State and Ofgem must have regard to their principal objective and general duties as defined in the Electricity Act 1989 and the Gas Act 1986. The principal objective of the Secretary of State and Ofgem can be characterised as protecting the interests of existing and future electricity and gas consumers. General duties include promoting effective competition in the energy sector, having regard to security of supply and securing a healthy energy market.

It is relatively common to extend the application of those principles where a new Act gives new, freestanding functions to the Secretary of State or Ofgem. The clause states that the Secretary of State must have regard to the principal objective and general duties when carrying out new functions relating to designation under clause 120 or when making an order that an existing transmission licence becomes the ISOP’s electricity system operator licence.

Clause 137 introduces schedule 9, which contains necessary consequential amendments to the Gas Act and Electricity Act to enable the ISOP and its licensable activities to be integrated into the existing framework of the energy system regulated by Ofgem.

Clause 138 contains provisions on the interpretation of terms used in part 4 of the Bill. I draw hon. Members’ attention in particular to subsection (3), which is intended to make it clear that whenever part 4 includes a proposition about the ISOP’s functions, that is to be understood as applying to any and all of the ISOP’s functions, whether provided by the Bill, by other legislation, or as functions ancillary to them.

Clause 139 concerns the limited regulation-making powers in part 4. Government amendment 18 is consequential on Government amendment 20, which we have already discussed. It ensures that regulations made by the Treasury under schedule 7(9) are not subject to the negative procedure. As these are financial regulations, the intention is for them to be laid before the House of Commons only and approved by the House of Commons alone.

[Dr Whitehead]

These measures are essentially consequential on those we have already discussed. I have no particular comment to make on them other than to say hooray; I am happy to let them go through undiscussed.

Question put and agreed to.

Clause 136 accordingly ordered to stand part of the Bill.

Clause 137 ordered to stand part of the Bill.

Schedule 9 agreed to.

Clause 138 ordered to stand part of the Bill.

Clause 139

Regulations under Part 4

Amendment made: 18, in clause 139, page 122, line 32, at end insert—

“(2) Subsection (1) does not apply to regulations under paragraph 9 of Schedule 7.”

This amendment excludes regulations made by the Treasury under paragraph 9 of Schedule 7 from the provision about negative procedure in Parliament made by clause 139. This is consequential on Amendment 20.—(Andrew Bowie.)

Clause 139, as amended, agreed to.

New Clause 8

Key definitions

“(1) This section applies for the purposes of this Chapter.

(2) ‘Carbon storage licence’ means a licence granted, or having effect as if granted, by the OGA under section 18(1) of the Energy Act 2008 (and references to a ‘licensee’ are to a person who holds such a licence).

(3) ‘Exploration operator’, in relation to a carbon storage licence, means a person who is responsible for organising or supervising—

(a) the carrying on of exploration, within the area within which activities are authorised under the licence, with a view to, or in connection with, the carrying on of activities within section 17(2)(a) or (b) of the Energy Act 2008, or

(b) the establishment or maintenance in a controlled place (as defined in section 17 of the Energy Act 2008) of an installation for the purposes of such exploration.

(4) ‘Carbon storage information’ means information acquired or created by or on behalf of a licensee in the course of carrying out activities under the licensee’s carbon storage licence.

(5) ‘Carbon storage samples’ means samples of substances acquired by or on behalf of a licensee in the course of carrying out activities under the licensee’s carbon storage licence.

(6) ‘Sanctionable requirement’ means a requirement imposed on a person by or under a provision of this Chapter which, by virtue of the provision, is sanctionable in accordance with this Chapter.—(Andrew Bowie.)

NC8 to NC28 and NS1 and NS2 make provision about carbon storage information and samples, and the powers of the OGA, corresponding to the provision made by Chapters 3, 5 and 6 of Part 2 of the Energy Act 2016 in respect of offshore petroleum. They are intended to form new Chapter 4A in Part 2. This new clause defines key terms for the purposes of the intended new Chapter.

Brought up, and read the First time.

[Andrew Bowie]

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

[Andrew Bowie]

New clause 8 provides the key definitions for the purposes of this new chapter, enabling the effective understanding of all carbon storage information and samples provisions. The powers provided by this chapter specifically support the Oil and Gas Authority, the business name of which is the North Sea Transition Authority, in its role as a regulator of carbon storage.

New clause 9 provides the Secretary of State with the power to make regulations on the retention of information and samples acquired by carbon storage licensees acting under the authority of the NSTA. The provisions will align carbon storage information requirements with existing petroleum licensing provisions, as established in the Energy Act 2016.

The specific type of information and samples that licensees will be required to retain will be set out in regulations. That will be alongside the form and manner in which they are to be retained, the period of retention and the events that trigger the commencement of such requirements. The various exploration, appraisal and monitoring activities that will be carried out on and under the seabed by carbon storage licence holders will yield important information, supporting the NSTA to carry out its regulatory functions.

New clauses 10 and 11 establish requirements for the preparation and agreement of information and samples plans. These are agreements between the NSTA and a carbon storage licence holder that set out what should happen to carbon storage information and samples held by the licence holder before the occurrence of certain carbon storage licence events. Provisions involving information and samples plans were introduced for petroleum licences in the Energy Act 2016. We therefore expect them to provide the same benefits for carbon storage licence events.

New clause 12 establishes provisions for the designation of information and samples co-ordinators, which will monitor compliance with obligations imposed under the new chapter, uphold the requirements of any information and samples plans, and help to protect against the risks of data loss during a licence event. Information and samples co-ordinators are expected to prove a valuable aid in respect of data reporting compliance. That is evident in the instrumental role they currently play in relation to petroleum licensees under the Energy Act 2016.

New clause 13 establishes powers for the NSTA to obtain information and samples collected through carbon storage activities to support its regulatory functions. This includes information and samples held by persons in accordance with regulations made under new clauses 9 and 10.

New clause 14 prohibits the NSTA from disclosing any information and samples it holds in accordance with the powers in this chapter, subject to the provisions of new schedule 1 and the power of the Secretary of State to obtain information from the NSTA in new clause 15. This will provide carbon storage licensees with the reassurance that any information and samples provided to the NSTA in support of their regulatory functions will not be allowed to be disclosed, except in specified circumstances.

New schedule 1 sets out the circumstances in which, to whom, and for what purposes the NSTA can disclose information. This includes providing for disclosure in accordance with regulations made by the Secretary of State that may permit protected material to be published, or made available to the public, after a specified period. The public disclosure of this information after a suitable period of confidentiality will support effective regulation by the NSTA.

New clause 15 provides powers to the Secretary of State to require information and samples held by, or on behalf of, the NSTA. It will align powers for carbon storage information and samples with the equivalent powers established for petroleum information and samples under the Energy Act 2016. This power will be used to enable the Secretary of State to carry out statutory functions, to monitor the performance of the NSTA, or to provide information for the purposes of parliamentary proceedings. Carbon storage licences return to the Government once storage sites have been closed for a designated period, and the Government are liable for any potential future leakage.

I turn now to new clauses 16 to 25. New clause 16 provides the NSTA with powers to issue sanction notices to persons who fail to comply with the requirements imposed on them under this chapter of the Bill. Such sanction notices can be in the form of an enforcement, a financial penalty, a revocation or operator removal notices. New clauses 17 to 20 make the necessary provisions for each of those types of notice. Importantly, new clause 21 places a requirement on the NSTA to issue a sanction warning notice ahead of any sanction notice that it proposes to issue under the powers established in new clause 16.

New clause 22 establishes that the NSTA may publish details of any sanction notices issued under new clause 16, including details of any sanction notice that is cancelled or withdrawn. New clause 22 also provides that the NSTA may not publish information that it considers to be commercially sensitive, not in the public interest or otherwise inappropriate to publish. New clause 23 places a restriction on the NSTA issuing more than one sanction notice in respect of the same contravention. New clause 24 provides the NSTA with the power to withdraw any sanction notices issued. Finally, new clause 25 enables the NSTA to require specified documents or information to support an investigation into whether a sanction notice ought to be provided under new clause 16.

New clause 26 introduces new schedule 2 to the Bill. Alongside new schedule 22, new clause 26 provides for an appeal to be made to the first-tier tribunal against any decision made by the NSTA. This is in relation to the NSTA exercising its new power to require carbon storage information samples. As I am sure Committee members will agree, the right of appeal for licence holders is a necessary and important part of conferring new regulatory powers on the NSTA.

New clause 27 will require the NSTA to determine and publish the procedure it proposes to follow in its decision making when issuing a sanction notice under new clause 16, which ensures public transparency in how the NSTA will enforce the sanctionable requirements and provides clarity for licence holders in respect of the NSTA’s procedures.

Finally, new clause 28 provides definitions to aid the interpretation of the provisions relating to carbon storage information samples detailed in this chapter. The definitions cross-reference the relevant existing legislation where appropriate.

[Dr Whitehead]

This group consists primarily of new clauses that the Government introduced. A substantial number of new clauses relate to the very sensible business of securing samples and various other things that can be of use in the regulation of the process and quality control, and in various other things relating to carbon capture and storage activity. So far, so good. These are certainly sensible clauses that establish arrangements for disputes and various other things, such as sanctions for when samples are not properly provided and so on—all good stuff.

However, there is an important point about the collection and retention of samples, as set out in the factsheet, which was subsequently published, that the Minister kindly provided me with when he said he intended to produce these new clauses. By the way, the factsheet refers to the NSTA, but the legislation refers to the OGA—again, maybe that is something we can discuss later. The Government say:

“We are legislating to provide the NSTA with appropriate powers to require carbon storage licensees to retain and report information and samples gathered as part of activities associated with the geological storage of carbon dioxide, and to enable the NSTA to publicly disclose this information after a suitable confidentiality period.”

I understand and appreciate the need for a suitable confidentiality period, but it is really important that the samples and data collections are available publicly for the greater benefit of the sector as a whole, in terms of its future development of carbon capture and storage. Government new clause 14 has a fairly fierce title: “Prohibition on disclosure of information or samples by OGA”. It effectively prohibits disclosure except under slightly unclear circumstances set out in new schedule 1, which states that the material may nevertheless be published and put into the public domain, but there is no real definition of how that may be done.

Energy Bill [ Lords ] (Twelfth sitting)

Lord Whitehead Excerpts

Committee stage
Tuesday 20th June 2023 Public Bill Committees

[Andrew Bowie]

That is a good question. In fact, I was just coming to the process. The GDF siting process is a consent-based approach that requires a willing community to be a partner in the project’s development. The siting process is already under way. Four areas have entered the process: three areas in Cumberland—in Copeland and Allerdale—and one in East Lindsey in Lincolnshire.

Government amendment 120 removes superfluous wording in new section 3A of the Nuclear Installations Act 1965. A licensed disposal site, as defined for the purposes of the new section, is not a nuclear installation within the meaning given by section 26(1) of the Act, so does not need to be mentioned explicitly in subsection (3). The amendment therefore removes it from the clause to correct this error. Amendment 121 is consequential on amendment 120 and removes the unnecessary definition of a licensed disposal site from new section 3A of the Nuclear Installations Act 1965.

The UK’s nuclear decommissioning programme is accelerating as older nuclear sites approach the end of their life cycle. As the first major nuclear sites will reach their final stages of decommissioning in the 2030s, it is essential that our nuclear legal framework is fit for purpose, while continuing to ensure an absolute focus on safety and security as the key priority. The Nuclear Installations Act 1965, which provides such a framework for nuclear safety and nuclear third-party liability, was written before serious consideration was given to decommissioning.

Clause 257 will amend the procedures for exiting nuclear third-party liability. Currently, the 1965 Act has the effect of requiring nuclear sites to remain subject to nuclear third-party liability for longer than is required by internationally agreed standards. The clause implements an alternative route based on internationally agreed recommendations and will apply to nuclear installations in the process of being decommissioned. It adopts a simpler and equally safe route out of the NTPL regime for non-nuclear parts of the nuclear site, such as laboratories, workshops, offices, car parks and land.

Clause 257 changes procedures for ending nuclear licences and regulation by the Office for Nuclear Regulation. It will require the licensee to apply to the ONR to end the licence and will require the ONR to consult the Health and Safety Executive before accepting an application. The ONR will accept an application when it considers that all nuclear safety matters have been resolved. Once the licence has ended, the ONR’s regulation of the site will cease. HSE will pick up responsibility for regulating the health and safety of work activities, while the relevant environmental agency will continue to regulate environmental matters for years or even decades after the end of the nuclear licence.

The clause has the effect of removing a barrier to the on-site disposal of suitable low or very low-level radioactive waste and avoiding the unnecessary excavation and transport of this material. Demolition work results in the creation of large amounts of rubble and waste, a small percentage of which may be lightly contaminated with radioactivity. Excavating that material can create radioactive dust, which is a hazard for workers. Transporting waste to disposal facilities can have noise and traffic impacts for local residents.

The existing environmental legislation, which the clause does not modify, was developed with land remediation in mind. It allows the operator to apply to the relevant environmental agency for a permit to dispose of suitable low or very low-level radioactive waste on site. Applications are subject to robust analysis, and an environmental permit would be granted only if disposing of the waste on site would be a safer and more sustainable option than excavating it and transporting it to disposal facilities elsewhere.

Finally, the clause will allow operators to apply to the ONR to exclude those disposal facilities for nuclear waste that do not require a nuclear licence from the nuclear licensed site boundary. To be clear, the clause does not constitute a relaxation in the standards for public protection. It aligns with UK radiological protection law, international standards and UK Health Security Agency guidance.

Clause 258 will bring an international agreement on nuclear third-party liability into UK law. Its aim is to lower the financial and regulatory burden on low-risk radioactive waste disposal facilities. Sites that meet the criteria will be exempted from the requirement to make provision for third-party claims. Injuries or damages will instead be covered by ordinary civil law, which is robust, proportionate and established. The clause allows the Secretary of State to set out by regulation the conditions that must be met to be excluded from nuclear third-party liability under the OECD Nuclear Energy Agency’s criteria.

The clause includes limits for radioactivity concentration that disposal facilities must meet. Only facilities with sufficiently low concentrations of radioactivity and negligible nuclear risk will be exempted from the requirement to hold nuclear third-party liability. The measures will help to ensure that the UK has sufficient disposal facilities for low and very low-level waste as the decommissioning of the UK’s legacy facilities accelerates and new nuclear projects are developed.

Clause 259 gives effect to schedule 20, which amends the Nuclear Installations Act 1965 to enable UK accession to a second international nuclear third-party liability treaty called the convention on supplementary compensation for nuclear damage. Nuclear third-party liability regimes aim to ensure that victims of a nuclear incident have access to adequate compensation. They also support investor and supply chain confidence by channelling liability to the nuclear operator and placing limits on their liability. The UK already has a robust nuclear third-party liability regime, being party to the Paris and Brussels agreements. The schedule 20 amendments to the 1965 Act that enable UK accession to the CSC will enhance the existing UK regime. Accession to the CSC enhances several of the benefits of our current nuclear third-party liability regime.

Government amendments 124, 125, 126, 127, 128, 129 and 132 make minor and consequential changes to schedule 20 to ensure the accurate implementation of the CSC. They will ensure that, following accession to the CSC, the UK does not inadvertently close off routes to compensation for nuclear damage. That applies to countries and victims that are currently able to claim under our existing nuclear third-party liability regime. To establish that, they seek to remove unnecessary consequential amendments as a result of the further amendments tabled. The changes also ensure that victims from a non-nuclear CSC state can claim under the appropriate conventions.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship again, Dr Huq. It is also a pleasure to hear the Minister rattle through the Government amendments at really high speed. As he identified, this part of the Bill is about civil nuclear sites. Among other things, it is about the repository that we do not have at the moment—in other words, we have not yet found a repository. It would be helpful if the Minister were able to tell us where we are in that search. Does he think the clauses take that process further forward? Or do they impede or lengthen that search?

I am sure the Minister recalls that, some while ago, his party indicated that no new nuclear development would be signed off and authorised until a repository had been located and established. Now, of course, two civil nuclear sites are under active development. Hinkley C is under active development—the reactor core is in place and connected works are under way. I visited the site a little while ago and it really is in a very advanced state, so we can anticipate that nuclear power will come on stream in, I guess, about 2026. I have been guessing that it will come on stream every year since 2017, but we hope that will happen.

Advance discussions and some initial site works have been done for Sizewell C. The reactor that is going in is essentially the twin of the Hinkley C reactor, and a lot of the site works are being replicated to speed up that process a bit. I have not visited Sizewell C yet because—rather like in the story I told a while ago about the underground cable—there is not a great to deal to see at the minute, but we can anticipate that we will have four new nuclear reactors onstream by the early 2030s. All that is taking place alongside a process for a nuclear repository—a final solution for the issue of long-term nuclear waste.

[Alan Brown]

Does the hon. Gentleman agree that there is a real paradox here? Allegedly the site rate for Hinkley Point C already has built into it the decommissioning costs for the storage of nuclear waste at the end? We are told that the estimates for Sizewell C will include all the costs of decommissioning and disposal up front, but how can EDF properly allow for those costs when it does not even have the new geological disposal facility that it needs to access?

[Dr Whitehead]

The hon. Member makes a good point. I would think that it is very difficult under the present circumstances. I was about to talk about that briefly. On both those sites the question arises, as he alluded to, of what we do with the nuclear waste from their operation, and what plans are in place for their eventual decommissioning at the end of their lifetime. Having served on various Bill Committees with me, the hon. Member will recall that in a recent nuclear Bill the question was raised of ensuring that a reasonably accurate built-in planning arrangement for decommissioning would be in the programmes that are agreed for nuclear power plants. The plans both for decommissioning and for what happens to nuclear waste as we go along are rather important to get right, given that there is no geological repository either under way, unlike the new nuclear power stations, or finally identified.

We could say that the provisions apply to something that is not really there. It may be there in a little while, or it may not be there for quite a while. Meanwhile, the two nuclear power stations are getting under way and being build. We know that quite a lot of the nuclear waste that has arisen from activities around Sellafield is stored in ponds, which are open to the surface and are safe to the extent that the nuclear waste is firmly stored underwater and there is no risk of it spilling out, except if someone planted a bomb in the pond. The pond would then disperse its contents, but obviously a geological facility is proofed against that occurring. The question is about what sort of planning the new nuclear power stations are likely to undertake for the storage of nuclear waste during their operation, and for its storage and disposal when they are eventually decommissioned.

--- Later in debate ---

[Dr Whitehead]

I appreciate that Sizewell B is already storing nuclear waste, and I understand that it is doing so quite effectively, although I have not actually been to see it. Obviously, Sizewell B is the newest nuclear power station in the fleet, even though it is not that new. The storage of newer nuclear waste is pretty good and, as the hon. Member rightly points out, the amount of nuclear waste is much lower than in, say, the old Magnox reactors. The issue of the storage of nuclear waste is largely about legacy waste, not new waste, but that is not to say that a fair amount of both high-level and low-level nuclear waste will not arise in the operation of new power stations—Sizewell C and Hinkley C—and, as is clear in the amendments that the Bill makes to nuclear legislation, there is still an obligation, upon full decommissioning, to ensure that there is no hazard whatever on the site from any radiation. That is quite a high bar. I am sure that is something we would all support.

Do the planners and organisers of new power stations—Hinkley C and Sizewell C—plan for on-site storage over the next period and for forms of disposal upon decommissioning that are not geological disposal sites, as a contingency in the event that we still do not have a geological disposal site when those plants are up and running? Or do they rely on the idea that there might be a geological site coming along, although we do not quite know when? We think it might be in the not-too-distant future, but we have not quite got there yet.

As the hon. Member for Kilmarnock and Loudoun correctly points out, that creates quite a difficulty in planning contingency, when building a nuclear power station in the first instance, for decommissioning and the safe storage and disposal of waste nuclear material. I am not sure how that has been resolved in the protocols that have been agreed with the power stations that are under way at the moment, and nor am I exactly up to date with where we are on the geological disposal site. I think I am up to date to the extent that we have not actually found one yet and that, although we have offered favourable terms to several communities to host a nuclear geological disposal site, we have yet to receive support to get it under way.

It would help us to judge the clauses a little better to get a brief rundown of where we are in that process and what plans the Government have either to accelerate it or to determine it in the end, so that as we develop our new nuclear programme we can be reasonably certain that the protocols in place for disposal and decommissioning will be reliable in future. I would be grateful if the Minister would let the Committee know that information.

I have a query and concern of a rather different order about schedule 20. As the Minister said, schedule 20 is about accession to the convention on supplementary compensation for nuclear damage. That international convention, which eventually came into force in 2015, having been agreed, I think, in 1997, sets out the supplementary compensation for nuclear damage on an international tariff basis, so that there is consistency in how compensation is dealt with in the event of accidents or other problems at civil nuclear installations in different parts of the world. So far, so good—it is a good convention and it is important that we are part of it. Indeed, the schedule ensures that we are fully a part of that convention.

There is a bit of a puzzle here. The Government have inserted into the Nuclear Installations Act some proposed new subsections about

“further non-CSC-only claims to compensation”

and have denominated all those claims, and how the provisions about them work, in euros. That is in the Bill. Proposed new subsection (3BA), for example, states that

“the appropriate authority may be required to satisfy them up to the equivalent in sterling of 1,500 million euros”.

Proposed new subsection (3BB) states:

“To the extent that further non-CSC-only claims for compensation are CSC claims, the appropriate authority may be required to satisfy them up to the equivalent in sterling of the aggregate of 700 million euros”.

Proposed new subsection (3BC) states:

“To the extent that further non-CSC-only claims for compensation are both special relevant claims and CSC claims, the appropriate authority may be required to satisfy them up to the equivalent in sterling of the aggregate of 1,500 million euros”.

I do not know whether this is the secret explanation for why the then Secretary of State for Business, Energy and Industrial Strategy, the right hon. Member for North East Somerset (Sir Jacob Rees-Mogg), withdrew the Bill during its passage through the Lords—because he thought that this was a plot to move against Brexit—but it is a bit odd that compensation is denominated in euros, when of course the rate is variable and we would be in a position to vary claims according to the relationship of sterling to euros. In any event, this is an international convention. Perhaps there is a simple explanation, which I hope the Minister has in front of him, but we are signed up to an international convention, not a European convention.

It may be—I do not know—that these measures are a hangover from our membership of Euratom, which we of course de-acceded from at the time of Brexit. It be that if we were a party to Euratom, Euratom would take the place of national membership of the convention and therefore everything would be denominated in euros, but of course we are not now a member of Euratom—we are our own actor, as far as various conventions relating to nuclear safety and activity are concerned—yet we are still denominating things in euros.

While I do not wish to amend the Bill so that we do not denominate claims in euros—I am concerned that the Minister’s career may be in jeopardy if he does not do the job of creating instruments that get us out of being in thrall to the EU and euros—I gently point out that it looks a bit odd. Is there an intention at any stage to regularise that procedure?

[Andrew Bowie]

The hon. Member’s concern for my career is welcome, and I thank him for expressing it in such kind terms. However, I reassure him and every person in this room—and, indeed, anybody else who might be following the proceedings—that the Government are not secretly taking us into the eurozone through accession to the CSC. It is not an EU treaty. The reason that the sums involved are denominated in euros is simply that the moneys referred to in the treaties that we are currently signed up to—the Paris convention and the Brussels supplementary convention—are expressed in euros. This is just a continuation of the same process. The CSC is an international convention, and we are therefore using the same denominations as in those other conventions. I am sure the hon. Member will be relieved to hear that there is no secret plot. The CSC, of course, is under the International Atomic Energy Agency.

[Dr Whitehead]

So the Minister can state that all signatory countries to the CSC denominate their compensation in euros, just the same as we do.

[Andrew Bowie]

I would think that those that are signatories to the Paris and Brussels conventions may. I am led to believe very strongly that it is not the case that all signatories denominate in euros, but we do, as a result of our current membership of the Paris and Brussels conventions.

[Dr Whitehead]

So we do not have to denominate these things in euros, because a number of signatories to the CSC do not, and presumably their membership of the CSC is not in jeopardy as a result. Presumably, we would have the opportunity not to use euro denomination, like those other members, but we nevertheless we do.

[Andrew Bowie]

I feel that we may be going round in circles. The Paris convention is a base convention. That is why there is carry-over into the new convention that we are acceding to—the CSC—to maintain the denomination in euros. However, I would suggest that those who are seeking compensation do not really care in which denomination their compensation is paid as long as they receive it in the end for any damage that is caused. I think we have spent quite enough time debating the denomination in which people will receive compensation.

--- Later in debate ---

To touch on one of the other problems that the hon. Gentleman identified, current plans already account for legacy waste, which is far and away the majority of waste by volume, and 16 GW for new nuclear projects. Nuclear Waste Services, the developer of the GDF, is confident that it can meet the waste requirements of the up to 24 GW of new nuclear projects set out in the energy security strategy. It is already planning for two thirds of that—the 16 GW that I referred to—and is in the very early stages of a flexible and adaptable design process. I want once more to praise the work of the Nuclear Decommissioning Authority and all those working at Sellafield and around the country to ensure that the current fleet is supported and that waste is disposed of safely.

[Dr Whitehead]

I hope that my comments about the fact that we do not yet have a community that has said it will support a geological waste facility does not necessarily mean that there is not support for the facility to be sited in various parts of the country. It is just that, as I understand it, no authority has actually said, “Yes, we’re happy to have this facility in our area and we wish to proceed with it.” I assume that that is a factor in the question I was trying to get at: when can we expect a geological facility to be timetabled, developed and finally established, and to what extent does that timeline cohere in the context of the nuclear power stations that we are presently commissioning and will bring online in the future?

[Andrew Bowie]

I thank the hon. Gentleman for his question and for clarifying his earlier comments. As I said, we are at the beginning of the process of identifying a geological disposal facility. Surveys are under way. We are working with communities that have already expressed an interest and we will continue to do so as we move forward.

Question put and agreed to.

Clause 256 accordingly ordered to stand part of the Bill.

Clause 257

Decommissioning of nuclear sites etc

Amendments made: 120, in clause 257, page 223, line 15, leave out

“or a licensed disposal site”.

This amendment corrects a minor and technical drafting error in new s.3A of the Nuclear Installations Act 1965: a licensed disposal site (as currently defined for the purposes of the new section) is not a nuclear installation (within the meaning given by s.26(1) of the Act) and so the carve out in subsection (3) is not necessary.

Amendment 121, in clause 257, page 224, leave out lines 5 to 8.—(Andrew Bowie.)

This amendment, consequential on Amendment 120, removes the unnecessary definition of “licensed disposal site” from new section 3A of the Nuclear Installations Act 1965.

Clause 257, as amended, ordered to stand part of the Bill.

Clauses 258 and 259 ordered to stand part of the Bill.

Schedule 20

Accession to Convention on Supplementary Compensation for Nuclear Damage

Amendments made: 124, in schedule 20, page 374, line 9, leave out sub-paragraph (4).

This amendment and the Minister’s other amendments to Schedule 20 make minor and consequential changes to that Schedule to ensure accurate implementation of the CSC.

Amendment 125, in schedule 20, page 375, line 7, leave out

“, (3BA), (3BB), (3BC), (3BD) or (3BE)”

and insert

“or, in a case where the relevant reciprocating territory is also a CSC territory (as defined by section 16AA), (3BB)”.

See the Minister’s explanatory statement for Amendment 124.

Amendment 126, in schedule 20, page 377, line 4, at end insert—

“(c) a country mentioned in section 26(1B)(b),

(d) an overseas territory mentioned in section 26(1B)(c) or (d), or

(e) a relevant reciprocating territory.”

See the Minister’s explanatory statement for Amendment 124.

Amendment 132, in schedule 20, page 378, line 11, at end insert—

“(as amended or supplemented from time to time)”.

This amendment ensures that the definition of “the CSC” in Schedule 20 is to the Convention on Supplementary Compensation for Nuclear Damage as amended or supplemented.

Amendment 127, in schedule 20, page 379, line 13, leave out

“In section 26 of the 1965 Act (interpretation),”

and insert—

“(1) Section 26 of the 1965 Act (interpretation) is amended as follows.

(2)”.

See the Minister’s explanatory statement for Amendment 124.

Amendment 128, in schedule 20, page 379, line 27, at end insert—

“(e) after the definition of ‘overseas territory’ insert—

‘“the Paris Convention” means the Convention on Third Party Liability in the Field of Nuclear Energy of 29 July 1960, as amended by the Additional Protocol of 28 January 1964, by the Protocol of 16 November 1982 and by the Protocol of 12 February 2004;’.”

This amendment sets out a definition of the Paris Convention for the purposes of the amendments to the Nuclear Installations Act 1965 to which Amendment 129 relates.

Amendment 129, in schedule 20, page 379, line 27, at end insert—

“( ) In subsection (1A)(a)—

(a) in the opening words, for ‘a relevant international agreement’ substitute ‘the Paris Convention’;

(b) in sub-paragraph (i)—

(i) for ‘relevant international agreement’ (in each place it appears) substitute ‘Convention’;

(ii) for ‘agreement’ (in the third place it appears) substitute ‘Convention’;

(iii) for ‘agreement’s’ substitute ‘Convention’s’;

(c) in sub-paragraph (ii), for ‘relevant international agreement’ substitute ‘Convention’.”—(Andrew Bowie.)

See the Minister’s explanatory statement for Amendment 124.

[The Chair]

We now come to the Question that schedule 20, as amended, be the Twentieth schedule to the Bill. [Interruption.] Dr Whitehead, anything else?

[Dr Whitehead]

Sorry, Dr Huq, I was making a comment from a sedentary position.

[The Chair]

Chuntering is a bad habit.

Schedule 20, as amended, agreed to.

Clause 260

Provision of additional police services

[Dr Whitehead]

I beg to move amendment 162, in clause 260, page 230, line 23, at end insert—

“(d) the provision of the additional police services in question is within the competence and in accordance with the usual operational practices of the Civil Nuclear Constabulary”.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 163, in clause 260, page 230, line 33, after “Secretary of State”, insert “or the Police Authority”.

Clause stand part.

Clauses 261 to 263 stand part.

[Dr Whitehead]

I remain quite amused that we smuggled a euro or two into our flexibility structure a moment ago. I am sure that that will go down in history.

Clauses 260 to 263 relate to the Civil Nuclear Constabulary. For those who do not know too much about that constabulary, as I must admit that until recently I did not—

[Mark Jenkinson]

I am sorry for taking up so much of the hon. Gentleman’s time this morning, but on that note, I have a drop-in with the Civil Nuclear Police Federation at 12 o’clock today in room Q in Portcullis House. I encourage all colleagues to attend.

[Dr Whitehead]

That is a very helpful intervention, because among other things it means that our business will have to be finished by 12 o’clock this morning to facilitate our collective visit to the drop-in to be better informed about the Civil Nuclear Constabulary.

The Civil Nuclear Constabulary was established under the 1965 Act. It has about 1,500 officers nationally; they occupy eight sites in England and three in Scotland. There is a headquarters in Culham, with a chief constable and so on. It is just like a police authority, only not geographically in one place. Its prime responsibility is not guarding nuclear sites—that is for the Ministry of Defence police and the Army, basically—but the security of the sites and all that goes with policing around nuclear sites. I think it has jurisdiction up to 5 km away from nuclear sites. I will be interested to hear more about this, but as I understand it, it is a very specialised force.

All members of the Civil Nuclear Constabulary are routinely armed and are trained to that extent. They undertake virtually no arrests. A couple of years ago, they made a total of 24 arrests; last year I think they made 10, two of which turned out not to be arrestable. In comparison, an ordinary police force of the same size, such as Dorset police, would make about 7,500 arrests in an average year. The profile of the Civil Nuclear Constabulary’s activity and specialities is very different from that of an ordinary police force.

That is not saying very much about the Civil Nuclear Constabulary, other than that it is a specialist force, has jurisdiction relating to nuclear sites and, as far as I understand it, does a very good job at what it is asked to do. The clauses before us are not about the Civil Nuclear Constabulary itself, but about the extent to which its officers might, as it were, be rented out to other police forces. “Rented out” sounds a rather pejorative way of putting it; it is not intended to be, but that is really the only way I can describe it.

The clauses concern the circumstances under which officers can be seconded—I would say rather more than seconded—to other forces, subject to a decision of the Secretary of State. Clause 260(1), which will amend the Energy Act 2004, states:

“The Constabulary may, with the consent of the Secretary of State, provide additional police services to any person”,

which basically means to any other police authority.

Clause 260 also states that the Secretary of State

“must not give consent for the purposes of subsection (1) unless satisfied, on an application made by the Police Authority”,

which I assume means the Civil Nuclear Police Authority, that the application

“is in the interests of national security”

and

“will not prejudice the carrying out of its primary function under section 52(2)”

of the 2004 Act.

The establishment of the Civil Nuclear Police Authority is a little anomalous, by the way. It was originally under the jurisdiction of the Department for Business, Energy and Industrial Strategy and has now effectively been transferred to the jurisdiction of the Department for Energy Security and Net Zero, rather than the Home Office, as is the case with ordinary police forces.

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[Mark Jenkinson]

Room Q in Portcullis House.

[Dr Whitehead]

If we go to room Q, we will find out more, but civil nuclear constables are special police. They are recruited and trained in a different way, their responsibilities are different, and the activities they undertake are normally different. That gives rise to questions about whether civil nuclear constables can easily be transferred to other police authorities. I assume that the rental agreement would state whether they should undertake the ordinary activities that constables in comparable authorities undertake. Are they to be rented out on the basis that they will become ordinary police constables in a particular authority, or on the basis that they have special arrangements? They clearly will not have special arrangements concerning arresting people, so I imagine that the arrest rate of a police authority that had recruited police constables from the Civil Nuclear Constabulary for additional services would not go through the roof. Such constables are routinely armed, so there is also a question about whether they would be disarmed for the purpose of undertaking their duties in other police forces.

The answers to such questions do not appear in the clauses before us. There is just an arrangement that police constables can be rented out, that compensation can be paid for them, that the Secretary of State can intervene if he or she thinks there are problems, and that the police authority has to be consulted about renting out and, as it were, de-renting—that is all that the clauses cover.

I do not necessarily imagine that our amendments will be pursued to a great extent, but I would very much like to hear the Minister’s response to what they are trying to do. On the renting out of police, amendment 162 would clarify that

“the provision of the additional police services in question is within the competence and in accordance with the usual operational practices of the Civil Nuclear Constabulary”.

That is, those police who are rented out are not to be turned into ordinary police, and the circumstances of the renting out should be within the competence of the Civil Nuclear Constabulary, so we should not reasonably expect them to turn out to be ordinary policemen in other police authorities.

Also, we want the Civil Nuclear Police Authority to be rather more involved in decisions as to whether to continue renting out, so amendment 163 would add the words “or the Police Authority” after “Secretary of State”. We are trying to tighten up both the concept and the practice of these arrangements, to ensure that there is respect for the fact that the Civil Nuclear Constabulary is a specialist service, with staff who have special skills, qualities and qualifications that may differ from those of police in other forces. Renting-out arrangements should respect that. We should be a little careful to ensure that we do not put a square peg in a round hole through this renting out, even though there may be circumstances where a freer interchange of police between the Civil Nuclear Constabulary and county police forces could take place, and would benefit both sides.

I appreciate that clauses 260 to 263 to some extent supply what was left out from the Energy Act 2004, in which the Civil Nuclear Constabulary was defined, but I am not sure that the clauses do the job completely, and make sure that the strengths and qualities of the Civil Nuclear Constabulary are properly reflected in any renting-out arrangement, and that its constables are not expected to do things for which they are not trained, or in which they do not have experience, if they are seconded to other constabularies.

[Andrew Bowie]

First, as the Civil Nuclear Constabulary will be in room Q, Portcullis House, at midday today, at a meeting hosted by my hon. Friend the Member for Workington, I pay tribute to all the officers and staff who serve so diligently in that constabulary. I had a very enjoyable and informative meeting with Chief Constable Simon Chesterman and the chairman of the Civil Nuclear Police Authority, Susan Johnson, a couple of weeks ago. The constabulary serves this country and does incredibly important work protecting our civil nuclear fleet. It is incredibly well trained for that.

The hon. Member for Southampton, Test, referred to “ordinary” policing. Yes, Civil Nuclear Constabulary officers are highly trained in armed policing, and in the specialties that they have to be trained in to carry out their job, but they are also trained in what he described as ordinary—unarmed—policing, and are held to stringent College of Policing standards, such as those set out in the authorised professional practice armed policing guidance. That is consistent across the organisation, regardless of which site an officer is deployed to, and that would remain the case if there was any expansion of the constabulary’s services.

The Secretary of State must consult the chief constable before providing consent to the constabulary providing additional services. That ensures that the views of the person who is arguably best placed to assess competence and operational arrangements is taken into consideration. Should the CNC take on additional responsibilities outside the civil nuclear sector—we have been talking about that today—the chief constable will be responsible for ensuring that any additional training requirements are identified and delivered. I hope that addresses the concerns of the hon. Member for Southampton, Test, on that point.

The Civil Nuclear Constabulary is a crucial component of our civil nuclear security system, as the specialist armed police force dedicated to the protection of our most sensitive civil nuclear facilities, and of civil nuclear material in transit. In the evolving national security and energy landscape, we want to ensure that we are making the best use of our resources to protect the UK’s essential services and critical national infrastructure, as well as our wider national security interests.

--- Later in debate ---

Turning to clause 263, the Civil Nuclear Police Authority is the body responsible for ensuring that the Civil Nuclear Constabulary remains effective and efficient in delivering its vital nuclear security mission. Under the Energy Act 2004, the authority is required to publish a three-year strategy plan, which sets out the police authority’s medium and long-term strategies for policing by the CNC to be achieved over a three-year period. The Act requires the authority to publish such a plan at the beginning of each financial year. The annual publication requirement creates significant administrative burdens, and introduces an element of uncertainty to the CNPA’s delivery of its policing priorities in each three-year strategy-plan. Following a review of the governance procedures by the Department and the CNPA, it was concluded that the Energy Act should be amended to require a three-year strategy plan to be published every three years. That will improve efficiency and provide greater long-term certainty and stability for the organisation. Clause 263 does not affect wider obligations for the authority to publish annual reports and policing statements.

[Dr Whitehead]

The Minister addressed the overall subject of the Civil Nuclear Constabulary well, but I do not think that he entirely addressed our questions, which were not about the competency of the constabulary, or its establishment or function. Our questions were about the new provision that the Government are seeking to introduce regarding the extent to which police personnel could perform a wider function, depending on circumstances in the Civil Nuclear Constabulary.

By the way—this may be a reasonable topic for discussion in a drop-in—I would not like the Civil Nuclear Constabulary to be assumed to be an ancillary police force with some special responsibilities. It is clearly a very specialised and highly trained police force with a particular set of duties. By and large, it should have the necessary number of police constables to perform its duties. If over time—this may be something for the Department to consider, since it has special responsibility for the constabulary—the general conclusion is reached that this is a police force to which, to put it a bit unpleasantly, other forces can help themselves when they are in periods of stress, that would not be very good for the future of the constabulary.

There is another alternative. As the Minister mentioned, the police authority has to carry out three-year reviews. If during those reviews it is thought that substantial numbers of the police force had been rented out over the review period, there may be a temptation for a future Secretary of State—not present Ministers; I am sure they have a very close eye on what the Civil Nuclear Constabulary is doing and how it carries out its role—to say, “The Civil Nuclear Constabulary does not need all these people. Let’s reduce its size. Let’s cut it down to a smaller number, because that will do for its operations—we can see that it is renting out quite a lot of its force for other purposes.” That would be a retrograde step.

The Minister prayed in aid, as a reason not to pass the amendment, proposed new section 55A(4)(c) of the Energy Act 2004, in which the Secretary of State must judge that

“it is reasonable in all the circumstances for the Constabulary to provide those services.”

That is a bit of a problematic, I would have thought; how do we judge what is

“reasonable in all the circumstances”?

For that to apply, the officers must be “surplus to requirements”, but most reasonable judgments would be, “Well, they are not surplus to requirements. They are a key part of the Civil Nuclear Constabulary and they are doing a good job.” I would therefore expect that there would be a fairly high bar as to what was

“reasonable in all the circumstances”,

but that is not defined. Our amendment attempts to define that effectively, by saying that the release of these officers would be

“within the competence and in accordance with the usual operational activities of the Civil Nuclear Constabulary.”

We do not want to press the amendments to a vote, but I would like the Minister to give some assurance on the record that the

“reasonable in all the circumstances”

judgment would, in practice, be a full and close partner to the definition we attempted to apply to the leasing arrangement through amendment 162. Unless that is stated on the record, we will worry about the temptation to play fast and loose with the Civil Nuclear Constabulary when there are pressures elsewhere.

[Andrew Bowie]

To clarify, the expansion of the CNC will not in any way affect the CNC’s core mission. We are absolutely not playing fast and loose with the Civil Nuclear Constabulary. The CNC’s priority and core function will remain the protection of civil nuclear sites and material, in line with the UK’s international obligations. Before granting consent for the CNC to take on additional services, the Secretary of State must be satisfied that the CNC’s core nuclear supervision will not be prejudiced in any way. This legislation includes an ongoing statutory duty for the CNC’s chief constable to ensure that that remains the case. I hope the hon. Member will withdraw his amendment on that basis.

[Dr Whitehead]

I thank the Minister for that intervention. Following the assurances he has given on that basis, among others, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 260 to 263 ordered to stand part of the Bill.

Clause 264

Civil nuclear industry: amendment of relevant nuclear pension schemes

[Kerry McCarthy (Bristol East) (Lab)]

I beg to move amendment 103, in clause 264, page 234, line 31, at end insert

“, or on benefits in deferment or pensions in payment;”

This amendment means that the Secretary of State may not put a cap on revaluation of benefits in deferment or pensions in payment.

--- Later in debate ---

[Andrew Bowie]

The hon. Gentleman heard my answer to that very point. I do not think I need to labour it much more.

[Dr Whitehead]

Is the Minister saying that we should have access to those supplies in order to back the system up? And by the way, I do not think that tripping out, which came up a little while ago, was just about coal.

[Alec Shelbrooke]

It was a gas turbine.

[Dr Whitehead]

It was a gas turbine that tripped out. It was not about coal, as far as I understand.

Is the Minister saying that we should have access to those supplies until, but not after, 2024? We will not have anywhere to burn them after 2024 because the intention is to have phased out coal by then. What exactly is the Minister saying? By the way, coal is unlikely to be burned in a UK power establishment in the future, if such establishments survive.

[Andrew Bowie]

This is the Energy Bill, so I understand why the focus has been on energy and energy security. However, coal is not just required for energy purposes, and that is another reason why we will vote against the clause.

Energy Bill [ Lords ] (Eleventh sitting)

Lord Whitehead Excerpts

Committee stage
Thursday 15th June 2023 Public Bill Committees

[The Chair]

That is not quite actually what the Minister should be moving. The Minister is moving amendment 135, proposed to clause 245, as on the amendment paper; the question is that the amendment be made. The Minister does not move clause stand part. I move stand part; the Minister doesn’t.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

As the Minister has said, we are making progress with this enormous Bill, part of which is the enormous clause 245 and everything that goes with it. Hon. Members will see that Mr Gray has undertaken a difficult task in accommodating these clauses, which cover various factors, and a considerable number of amendments in a single group for debate. I am afraid that that means that a considerable amount of unpacking is necessary, so I hope that hon. Members will forgive me for spending a little time doing so.

To put the Government and Opposition amendments in context, I will reflect briefly on how part 12 seeks to better incorporate in planning arrangements a combination of circumstances relating to offshore wind electricity generation. The reason for that is to ensure that those planning arrangements proceed much more efficiently, including by reducing the time spent getting consent for offshore wind developments. It also proposes bringing a number of other things into the zone—I will give one or two examples in a moment—in order to make the offshore wind planning process much more holistic, as opposed to current approach of wind farm by wind farm, and device by device. It is about making sure that the process can be carried out much more efficiently by speeding it up and redefining it. We must also try to ensure—and we will come to this in a moment—that we take a balanced approach towards speeding up the process, by considering environmental and conservation issues both offshore and in the North sea.

Various clauses in this group deal with different aspects of what we are trying do with offshore wind. Hon. Members will see that both the Bill and the Government amendments suggest doing so via particular routes. The purport of the Government amendments, as far as I understand them, is mainly to ensure that issues wider than just wind farms are included in the whole planning discussion.

Government amendment 136 states that “offshore wind electricity infrastructure” means

“a generating station, in the UK marine area, that generates electricity…or infrastructure, in the UK marine area, used or intended for use in connection with—

(i) an offshore wind generating station, or

(ii) the conveyance of electricity generated by an offshore wind generating station.”

That includes not just the generating stations themselves, but the cables, wires and other arrangements going to and from the stations, including to the point where they are landed onshore.

That is particularly important, given that it is inevitable—indeed, this should have been the case a long time ago—that offshore generation will be undertaken not by point-to-point arrangements with cables to individual wind farms, but by cabling systems that will, for instance, connect wind farms with nodal points to collect their power at sea and then convey that power via one common cable, perhaps to a particular landing station, as opposed to our current point-to-point arrangements.

The development of a grid highway in the North sea—or, indeed, in the Celtic sea—will be integral to the future operation of those wind farm arrangements. It is, therefore, quite proper that that should be considered in the overall planning arrangements. Government amendment 136 allows for that and also very helpfully states in its explanatory statement that it also covers bootstraps. I am sure that everybody knows what a bootstrap is. In a sense it has nothing to do with offshore wind. It is actually an interconnector cable that is anchored at one point on the shore—on land in the UK—and conveys a high-voltage current, via the seabed, to another land point, particularly to get around constraints of onshore cabling congestion.

--- Later in debate ---

[Katherine Fletcher (South Ribble) (Con)]

While I understand the argument that the hon. Gentleman is trying to prosecute, surely we should not let the perfect be the enemy of the good. We are talking about how to sensibly protect the environment while establishing a broader regime for offshore wind, which has huge benefits for the environment. Can he understand that what he proposes might tip the balance towards making the perfect the enemy of the good?

[Dr Whitehead]

The hon. Member makes a valid point. Certainly, we do not want to effectively veto the development of offshore wind by putting restrictions on it place by place, scheme by scheme, in such a way that those schemes cannot go ahead. However, the North sea and the Celtic sea, for example, are very large places. They have a great many sites that can be used for offshore wind development in a perfectly good and environmentally conscientious way, which allows for enhanced development to take place without trashing the marine environment. The issue is not whether we make the best the enemy of the good, but how we pursue the good in tandem with environmental considerations, while not stopping the progress of that enhanced development.

[Katherine Fletcher]

I am grateful to the hon. Gentleman for giving way again, and I will make this my last intervention. He has just described offshore wind as trashing the marine environment. I really do not think that we can leave that on the record. In fact, we could highlight the good about offshore wind development. One of the most destructive marine practices is bottom trawling, which is made much more difficult with wind turbines in place. Once installed, wind turbines actually create nursery environments for the marine life that I was so fortunate to study at university.

[Dr Whitehead]

The hon. Member would be absolutely right again, had I said that offshore wind was trashing the environment. I think that when we get the record back we will see that I said, “so that we can proceed without trashing the environment.”

[Katherine Fletcher]

There is an implication there.

[Dr Whitehead]

Okay. What I was trying to convey—perhaps I did not do so in quite the pellucid way I might have—was what we want to achieve with offshore wind development. As I have said, the Opposition are committed, along with the Government, to a huge increase in offshore wind, which we think can be achieved, most importantly, while taking proper note of the environmental considerations that surround those sites. As the hon. Member for South Ribble says, in the right places and under the right circumstances offshore wind can be, in the end, a substantial enhancement of the underwater habitat and environment.

[Kerry McCarthy (Bristol East) (Lab)]

I think my hon. Friend made it perfectly clear that some places are appropriate for offshore wind and some are not because of the nature of the marine environment. Does he share my concerns about existing protections? A lot of marine protected areas are described as little more than “paper parks” because they are not achieving what they are meant to. We need to enhance the protections for those designated areas. Just as in some places it is appropriate to fish and in others not, we ought to respect the fact that in some areas, marine protection has to be the No. 1 priority.

[Dr Whitehead]

My hon. Friend is quite right. She will no doubt be thinking back to the Marine and Coastal Access Act 2009, which started to develop exactly the concept that she sets out—that there are right and wrong places for development. There are places that we should seriously ensure are protected as much as possible—marine conservation zones—and it would be really quite a sin to put development on those. There are also places where there are known marine traffic routes, and siting an offshore wind farm right in the middle of a major offshore traffic route would not be a good idea either. There are other areas where the communications required for offshore wind farms could themselves be subject to environmental considerations, and those need to be taken into account too.

After the 2009 Act was passed, a number of marine conservation areas were supposed to be set up. Many of them have not been, and those that were have not had the level of policing and enforcement that they should have had.

[Kerry McCarthy]

As Labour left government, we had plans for an ecologically coherent network of, I think, 113 marine conservation zones. Does my hon. Friend share my disappointment that we are now 13 years on and still far from achieving that? It is important that we do not go backwards on the issues that we are discussing today. Obviously, we need to go forwards, but going backwards would be even worse than remaining in the same place.

[Dr Whitehead]

My hon. Friend is right again, and she recalls the exact number of conservation zones, which had escaped my memory. We might say that if we had those marine conservation zones in place now, we would be much clearer today about exactly what we will be doing as far as planning in the North sea and Celtic sea is concerned.

Lyme Bay fairly near me, which should be a marine conservation zone—I am not sure that it is—has cold-water coral features, and it would be quite lethal to those formations were we to develop offshore activities there. That is why that zone should be protected. Other areas further down—

[The Chair]

Order. I am reluctant to interrupt the hon. Gentleman because he is a great expert on these matters and I greatly enjoy his expositions. However, marine conservation zones do not come into this part of the Bill. If he could tether his remarks to the question of offshore wind, they might be more within scope.

[Dr Whitehead]

Yes. I think, Mr Gray, you are drawing an analogy between floating offshore wind and tethered offshore wind and saying that I should restrict my remarks to tethered offshore wind rather than free-floating.

[The Chair]

Yes, be tethered.

[Dr Whitehead]

Indeed. I will endeavour to tether my remarks to the offshore wind in the North sea that we are thinking about.

What I was trying to get clear is not that Labour Members want to restrict unnecessarily or negatively the development of offshore wind—we want it to go ahead as quickly as possible and on as many sites as possible in the North sea—but that we want it go ahead on the basis of a proper regime that ensures that we equate environmental protection with the development that goes ahead. We are not at all sure that the compensation principle, which appears to be applied here substantially, is the best way to do that.

Amendment 164 very much goes along with what the Government have now put in their own amendment, so amendment 164 is probably pretty redundant. It seeks to bring in a more holistic picture of what it is to develop offshore activities and would, according to our explanatory statement,

“extend the fast-track consenting process for offshore wind to supporting marine development necessary to support the offshore wind project.”

The Minister might want to comment, but I think that is pretty much covered by the Government’s amendments, so I am happy about that.

Amendments 165 to 167 get rather more to the heart of what I have been talking about. Clause 248, which concerns the assessment of environmental effects, allows the Minister by regulation, among other things, to switch off a number of environmental protections—I will not read them all out because it would take a very long time—that are already in place and replace them with the compensation arrangement. We do not think it is right that those protections should be switched off, and with amendments 166 and 167 we seek to switch off the switching off. Amendment 166 would leave out subsection (4)(i), which refers to

“any relevant Habitats Directive rights,”

and amendment 167 would switch off subsection (5), which lists the provisions set out in subsection (4)(i)(i). As I said, it is a long list of sections of Acts and regulations that very much underpin marine environmental protection.

Having done that, we want to replace those provisions with a positive alternative, set out in amendment 165. As I said, we want the appropriate authority to

“have regard to the particular importance”—

I emphasise “have regard”—

“of furthering the conservation and enhancement of biodiversity.”

The amendment also states that the appropriate authority

“may make regulations under this section only if satisfied that the regulations do not reduce the overall level of environmental protection or the level of protection for individual sites and species, and…before making regulations under this section, must publish a statement explaining why it is so satisfied.”

The amendment would also require the appropriate authority to

“seek advice from persons who are independent of the authority and have relevant expertise,”

and to

“include an explanation relating in particular to protection provided by”

measures such as the Marine and Coastal Access Act, the Conservation of Habitats and Species Regulations 2017 and the Conservation (Natural Habitats, &c.) Regulations 1994. The positive alternative we have put forward is that the Secretary of State should have regard to all those things.

As underlined by the brief exchange between myself and the hon. Member for South Ribble, I mean not that the environmental regulations have a veto on progress, but that the Secretary of State should have regard to them and should make regulations that are compatible with them as far as possible. If they are not compatible, the Secretary of State needs to provide a good explanation as to why, and the circumstances under which that projected development has gone ahead. The development arrangements should work with provisions such as the Marine and Coastal Access Act, rather than against them. That is a much more sensible way to proceed, with a combination of proper and rapid planning consideration and proper environmental protection.

As the hon. Member for South Ribble said, the ultimate outcome should be one where we have a settled marine environment, which is beneficial overall. That includes, for example, the additional assistance that fish conservation may receive from wind farms being in particular places, allowing species to flourish and expand out of the range of fishing vessels, under the shelter of the turbines and so on. The possibility of producing a beneficial outcome overall for marine environments as a result of our trying to develop these new sources of low-carbon power need not be an oppositional activity. It is not a zero sum game; we can have the two together. We think our amendments set out the right way of doing that.

I look forward to the Minister defending the alternative way, as set out in the clauses. The extent of what he has to say will determine whether we decide to divide on any of the amendments. It is important that we get this right together. Ideally, the Minister would come at least some way towards encompassing our alternative method, rather than that which is presently set out in the clauses.

--- Later in debate ---

[The Chair]

Technically, the Minister does not actually move clause stand part. I move clause stand part; the Minister merely speaks to the debate. However, I am being a bit picky, just for the sake of it. Does the shadow Minister wish to take part?

[Dr Whitehead]

Yes, Mr Gray, I intend to take part—briefly, the Committee will be relieved to hear. As the Minister has mentioned, the clause concerns the development of new forms of activity in the North sea that might be seen as analogous to those involving oil and gas, but are actually not. However, the activities might share quite a lot of infrastructure and other things, so it is appropriate that the arrangements for responding to such circumstances are analogous to the arrangements for oil and gas.

This part of the Bill is very different from the last one, in that it tries to ensure that developments go ahead in a safe and reasonable way, that we have plans in place should there be problems, and that those plans are based substantially on the plans that are in place already for oil and gas. That is my understanding of the clause, and I hope the Minister can confirm that. Other than that, I do not have anything much to say about clause 251, which seems sensible for the future.

It is noted that in clause 252, on the effects on habitats of offshore oil or gas activities—new things such as carbon capture and storage—no one is switching anything off in that area, which is also something that the Opposition support.

Question put and agreed to.

Clause 251 accordingly ordered to stand part of the Bill.

Clause 252 ordered to stand part of the Bill.

Clause 253

Charges in connection with abandonment of offshore installations

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

[Andrew Bowie]

The clause amends existing powers to allow for the making of a charging scheme in respect of decommissioning functions, under part 4 of the Petroleum Act 1998, to charge for regulating decommissioning of offshore oil and gas. The decommissioning of offshore oil and gas installations and pipelines on the United Kingdom continental shelf, or UKCS, is regulated through the 1998 Act, and the responsibility for ensuring that the requirements of that Act are complied with rests with my Department.

Owners of oil and gas installations and pipelines are required to decommission their offshore infrastructure at the end of a field’s economic life. The current powers allow us to charge for regulating offshore oil and gas decommissioning activity at only two fixed points in the regulatory process. The existing charging framework is no longer fit for purpose. Currently, the Government are unable to recover the full costs of undertaking the regulatory functions from industry, leaving the taxpayer liable for the shortfall. Furthermore, the current regime is too inflexible and will be unable to recover the full costs of decommissioning the offshore carbon storage infrastructure of the project.

Clause 253 will amend the 1998 Act to allow for the establishment of a new charging regime for activity related to the regulatory functions for the decommissioning of offshore oil and gas installations. The clause will also make amendments to future-proof the cost recovery mechanism in line with the “polluter pays” principle of environmental law, as already established. Maximising our cost recovery will enable us to ensure a sufficiently resourced regulator. That will ensure that we do not cause the industry to delay decommissioning projects, which would adversely affect the industry’s contributions to reducing emissions and achieving their net zero ambitions.

Further details of the new charging regime, including how it works and what rates will be charged, will be set out in the scheme itself, which will be established administratively and then published. The charging scheme is intended to be in line with other charging schemes operating for complex regulatory functions within my Department and elsewhere across the Government.

[Dr Whitehead]

I have a question on clause 253, which makes provision for decommissioning where, clearly, the decommissioning of new forms of offshore installation cannot be undertaken. When the well is exhausted—obviously there is not a well to exhaust under these circumstances—the decommissioning has to be under other circumstances. An example would be when the carbon capture and storage site has been agreed to be full, and is capped off.

On traditional oil and gas decommissioning, there are provisions for sanctions on companies that have responsibility for decommissioning but do not actually carry out the decommissioning. Does that carry across to the new forms of offshore activity? Or should there be legislation to ensure that when someone is up for decommissioning, they really do it and do not abdicate their responsibility? That is not just a question of charging; it is a question of responsibility for the future.

[Andrew Bowie]

In answer to the hon. Gentleman’s important question, it is the intention, through this regulation and the existing regulations, that those who are responsible follow through with their commitments to decommission—the “polluter pays” principle has been well established. Nothing in this regulation would stand in the way of that. Nor, we hope, would it put barriers in the way of that. What the regulation seeks to achieve is a new updated charging regime to enable the decommissioning to take place in such a way and in such a fashion that it does not leave the taxpayer liable for any shortfall from the operator who is liable for the decommissioning of an asset in the North sea.

Question put and agreed to.

Clause 253 ordered to stand part of the Bill.

Clause 254

Model clauses of petroleum licence

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

[Andrew Bowie]

Currently, the North Sea Transition Authority can only retrospectively challenge a change in control of a petroleum production licence. Clause 254 will allow the NSTA to consider a proposed change of control of a petroleum production licensee before it takes place, to ensure that the governance, technical and financial capability of a licensee in possession of a such a licence remains appropriate.

Companies that wish to drill and extract petroleum must do so under a petroleum production licence granted by the NSTA to the licensee under the Petroleum Act 1998. Prior to issuing these licences, the NSTA satisfies itself that the prospective licensee company and any parent company are fit to hold the licence and will meet their obligations.

At times during the life of a licence it may be the case that the ownership and control of a licensee should pass to a new parent company or person. An undesirable change of control could undermine investor confidence in the commercial environment, making the United Kingdom continental shelf a less attractive place for investment. The NSTA is currently able to take remedial action to a change of control of a licence holder only after such a change has occurred. This is seen by both the NSTA and industry as being inefficient and of limited effectiveness in preventing harms, both to wider industry and the Government.

Clause 254 sets out the amendments that schedule 19 will make to the model clauses in the Petroleum Licensing (Production) (Seaward Areas) Regulations 2008 and the Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014. The changes will introduce new before-the-event powers for the NSTA regarding the change of control of a licensee in possession of current and future seaward or landward petroleum production licences. The clause also sets out how provisions inserted into a petroleum production licence by schedule 19 may be altered or deleted.

Schedule 19 amends existing legislation to replace the current after-the-event powers in relation to a change of control of petroleum production licensees with powers intended to apply before a change of control has taken place. The schedule has a similar effect to that which schedule 6 has in relation to carbon storage licensees.

The schedule will introduce a requirement for licensees to apply in writing to the NSTA for consent to a change of control at least three months before the planned date of the change. Following receipt of an application, the NSTA may give unconditional or conditional consent, or refuse consent to the proposal. Conditions imposed may be financial and/or relate to the timing of the change of control and/or relate to the performance of activities permitted by the licence.

In the case of conditional consent or refusal, the NSTA must give the licensee the opportunity to make representations and must consider those representations. The NSTA must decide an application within three months of receiving it, unless it writes to interested parties to notify them of a delay in its decision making. The NSTA’s decision on an application and any conditions must be given in writing.

The schedule also introduces amendments in respect of the NSTA’s powers of revocation and partial revocation of a licence, intended to replace the existing after-the-event powers with before-the-event powers. The NSTA will be able to revoke a licence if its prior consent has not been obtained for a change of control. The NSTA will therefore be able to regulate the suitability of petroleum production licensees in a more robust and timely manner. This will reduce risk and boost confidence in a sector that will play a key part in helping the UK to achieve its net zero goals.

Clause 255 introduces information-gathering powers in relation to a change or potential change of control of a petroleum production licensee in the same way that clause 101 does for carbon storage licensees. Currently, the NSTA does not have information-gathering powers to assist it in considering a change of control in respect of a petroleum production licensee. In some instances, the NSTA is therefore limited in conducting proper due diligence to determine whether a change of control of a licensee is undesirable.

Clause 255 will allow the NSTA to request that a relevant company or person provide it with any information it may require in exercising its functions in relation to a change or potential change of control of a licensee. The information will help the NSTA to consider the financial and technical capability, operational and commercial plans, and governance and fitness of the licensee in relation to its proposed controlling entity. This will provide the NSTA with the necessary information to appropriately consider an application for consent, or when considering whether to revoke a licence where a change of control has occurred without consent.

Information that would be protected from disclosure or production in legal proceedings on grounds of legal professional privilege or, in Scotland, confidentiality of communications is not included under clause 255.

[Dr Whitehead]

I do not have much to say about the detail of the clauses, inasmuch as they appear to be sensible measures, but I gently point out to the Minister that when he presented the clauses he referred repeatedly to the NSTA as the authority, but of course the NSTA does not exist other than as a trading name. Indeed, clause 254 specifically mentions the Oil and Gas Authority, which is of course the real name of the organisation, as opposed to its trading name. We will come to that later in our deliberations, but I highlight to the Minister that issue or problem, which may be germane to his thoughts when we get to that discussion. Other than that, I have no issue with the substance of the clauses.

Energy Bill [ Lords ] (Tenth sitting)

Lord Whitehead Excerpts

Committee stage
Thursday 15th June 2023 Public Bill Committees

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)]

It is a pleasure to serve yet again under your chairmanship, Dr Huq. The clause—the final clause in part 10—simply sets out the interpretation of terms used in the clauses on the energy savings opportunity scheme, which we discussed at length on Tuesday. It also explains where provisions fall within devolved competence for the purposes of this part of the Bill.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Welcome to the Chair again, Dr Huq; it is a pleasure to serve under your chairmanship. The clause concerns just the interpretation of previous clauses—I am sure that they are great interpretations and will go down in history as such—and I have no comments on it.

Question put and agreed to.

Clause 221 accordingly ordered to stand part of the Bill.

Clause 222

General objective

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

[The Chair]

With this it will be convenient to discuss clause 223 stand part.

[Andrew Bowie]

The clause marks the start of part 11, which concerns core fuel sector resilience. By “core fuels” we mean the essential liquid and gaseous fuels used for transport and other purposes, whether derived from crude oil or renewable transport fuels.

Ensuring resilience and security of supply for such fuels has become even more critical given the change that we are experiencing in the energy sector globally. Although renewable technologies are making inroads—electric cars, for example, are of growing importance—core fuels still account for more than 95% of the energy used for transport, and over 1.5 million households use heating oil or liquefied petroleum gas for heating. The Government are determined to reduce our dependence on fossil fuels, but that will take time, and it will be a challenging time for the industry.

Analysis by His Majesty’s Government has shown that there are already single points of failure in the fuel system that are critical to regional fuel supply, and those risks require better management. Recent events, such as covid-19, the tanker driver shortages of 2021 and protest activities at oil terminals, have demonstrated the level of risk to fuel supplies. It is therefore a responsible approach for the Government to take powers to ensure that fuel supplies remain secure.

Existing powers are available to Ministers under the Energy Act 1976; however, those are essentially reactive and may be used only when a disruption to fuel supplies is an actual or threatened emergency. The purpose of these measures is to enable us to mitigate risks before they develop into actual disruptions to supply.

Risk management is at the heart of these measures. Not all risks can be eliminated, but a resilient system is more likely to withstand shocks and to recover from them faster. The Government seek to strengthen the resilience of the sector, now and through the net zero transition, and to proactively minimise and address risks that could cause disruption to the supply of fuel.

Clause 223 provides clarification on the scope of the powers and who they can be applied to. The intention is to cover all the critical operators in the supply chain for core fuels, including refiners, infrastructure operators, suppliers, hauliers and wholesalers. The clause sets out which products are considered core fuels, including conventional transport fuels from oil—such as petrol, diesel and jet—heating oil, liquefied petroleum gas and renewable transport fuels.

[Dr Whitehead]

We have reached an important part of the Bill, concerning core fuel sector resilience. As the Minister stated, we need to ensure that our core fuel supplies are not cut or interrupted by external circumstances, that we have resilience in our supplies, and that we can be assured at all times that petroleum and so on is getting to and from refineries, and to where it is supposed to go. The Minister has reflected already on past disruption to fuel supplies, which hon. Members will recall. It is understandable that we wish to be assured that supplies are secure.

The Minister also stated that we have powers already to ensure that, where disruption takes place, action can be taken to secure resilience. However, these measures on the principle of core fuel resilience go further than that. As the Minister says, this is about trying to anticipate potential disruption and problems as far as core fuel sector resilience is concerned, and then providing the Government with powers to respond proactively, rather than reactively, to the anticipated issues.

I suggest that one needs to be very careful in how one drafts something for that purpose. I assume that what we do not want, although perhaps the Government do, is to get into the situation in the film “Minority Report”, quite a while ago, in which the lead actor, who happens to be Tom Cruise—not that I regularly watch Tom Cruise films—

[Olivia Blake (Sheffield, Hallam) (Lab)]

Why not?

[Dr Whitehead]

Oh, all right. We can have a debate about whether Tom Cruise makes good films or not, but I think the general consensus would be no. The point about that film is that he was, as I recall, a detective who had to go round anticipating crimes before they were committed. Indeed, he did not just anticipate crimes—I think my hon. Friend the Member for Bristol East is looking this up on her iPad—

[Kerry McCarthy (Bristol East) (Lab)]

I have no idea what you are talking about. I am not sure I have ever seen it.

[Dr Whitehead]

In that film, people were profiled in case they might commit crimes in later life, and they were arrested well before they could commit a crime, or because their profile suggested that they might do so in the future. That is the problem that we may come across with these clauses.

As we will unpack when we come to later clauses, the way the Bill is drafted puts the onus on suppliers and the owners of undertakings that relate to possible disruptions to do “anything”—that is the word in the Bill —to secure core sector resilience. As we will see, if the people in those sectors fail or fall short of doing “anything”, there are penalties: they can be imprisoned, and they can be fined at the discretion of the Secretary of State.

I am interested to hear what the Minister has to say about that, but it seems to me that that gets rather close to the “Minority Report” line about anticipating offences and, as it were, taking people out before they have committed an offence. Furthermore, it puts an enormous onus on the people carrying out those activities to do things that perhaps ought to be for the Government to undertake and enforce, as the Minister said earlier, at the time that a disruption takes place. It could be said that these clauses are about anticipatory activity. The Government quite properly have powers under previous environmental legislation to deal with disruption.

Clause 222 sets out the general objective for core fuel sector resilience and states that the Secretary of State’s functions must be exercised with a view to

“ensuring that economic activity in the United Kingdom is not adversely affected by disruptions to core fuel sector activities, and…reducing the risk of emergencies affecting fuel supplies.”

That is a very wide brief.

--- Later in debate ---

[Andrew Bowie]

I do not want to stray into Captain Mainwaring and Lance Corporal Jones territory, but I think we have been delving into the realms of fantasy. Just for the record, I should state that Tom Cruise is a fine actor and director. The “Top Gun” films, the “Mission: Impossible” series, “Jerry Maguire” and “Minority Report” are all excellent films that I enjoy watching, and Tom Cruise does a very good job acting in them.

The hon. Gentleman is right to mention the existing powers, but those are reactive; we are seeking to be proactive in order to mitigate the risk to the supply of fuel. Some of us—I was still at school—remember the fuel crisis of 1999 under the last Labour Government. Of course, we would not like to see anything like that happen again. There have been disruptions more recently, and we need to take action to mitigate them.

The power in part 11 allows the Government to regulate the sector, but the intention is to have an effective power to preserve fuel supply for end users. A narrower power would risk missing the next unexpected event, and we would end up with an extensive list of possible risks and actions, which we do not want. The hon. Gentleman is right to say that, in most circumstances, the sector acts voluntarily. However, we must remember that such companies are commercial entities and will always act in their interest. Therefore, it is the Government’s role to ensure that there is a protection in place nationally to support the supply of fuel and ensure that this essential service continues for the British people.

Question put and agreed to.

Clause 222 accordingly ordered to stand part of the Bill.

Clause 223 ordered to stand part of the Bill.

Clause 224

Directions to particular core fuel sector participants

[Dr Whitehead]

I beg to move amendment 116, in clause 224, page 191, line 17, at end insert—

“(9) The Secretary of State may not issue directions to core fuel sector participants that are in contravention of the Trade Union and Labour Relations (Consolidation) Act 1992.”

This amendment sets in legislation the need for the Secretary of State to act in accordance with the Trade Union and Labour Relations (Consolidation) Act 1992 when dealing with core fuel sector participants.

[The Chair]

With this it will be convenient to discuss clauses 224 to 226 stand part.

[Dr Whitehead]

The amendment is, I hope, germane to the general picture that I have painted of the purport of part 11, which places an onus on companies and those engaged in core fuel sector activity to undertake activity—quite often anticipatory activity—that will ensure that the Government’s aims for core fuel sector resilience are achieved.

We saw in clause 223 the range of activities that are envisaged as being covered by part 11: storing oil, handling oil, the carriage of oil or renewable transport fuel by sea or inland water, transporting oil by road or rail, conveying oil or fuel by pipes, processing or producing oil or renewable transport fuel, and so on. That covers a huge range of industrial concerns, companies and undertakings, and all those companies and undertakings will effectively be bound by clause 224. That means that those companies and undertakings can have directions given to them to do various things, on a substantial anticipatory basis, that are necessary for core fuel sector resilience.

Clause 224(4) states:

“If the Secretary of State considers that there is a significant risk of disruption to, or a failure of, continuity of supply of core fuels, the Secretary of State may direct a person to whom this section applies to do anything in relation to the person’s relevant activities or assets which the Secretary of State considers necessary or expedient for the purpose of…reducing the risk, or…reducing the potential adverse impact of the disruption or failure.”

That is not a very closely specified list of things that the participants in core fuel sector resilience—those people who are doing all those activities—may be directed to do. The Secretary of State can direct those companies to do “anything”.

The amendment seeks to clarify one particular area of what “anything” might mean. The clause could be construed as saying that, in doing “anything”, the Secretary of State could assume—again, on an anticipatory basis as far as core fuel sector resilience is concerned—that the companies concerned may or should start to infringe the rights of their employees in relation to employees’ activities in those companies. That is a pretty wide-ranging power. It suggests that, if it is thought that there might be disruption, the onus is on the companies to take actions that might infringe other established provisions in our legal system in order to carry out what the Secretary of State directs them to do in relation to resilience.

From the structure of the clause, it certainly looks as though the Secretary of State might assume—again, at arm’s length—that those companies could, for example, take actions in relation to their employees not because the employees had done something, but because they might do something in the future that affects core fuel sector resilience and therefore means that the companies would be in breach of the Secretary of State’s directions. Of course, the things that might be done include the company’s employees exercising their trade union rights. As we set out in our amendment, those rights are established by the Trade Union and Labour Relations (Consolidation) Act 1992, which governs and regulates the sort of actions that are reasonable for employees to undertake in respect of their trade union and workplace rights. We do not think they should be thrown away on the basis of an anticipatory direction requiring companies to do things in relation to the Secretary of State’s concerns about fuel sector resilience.

I can see the pretty good labour relations with those engaged in fuel sector resilience, which exist in most circumstances in the sector, turning into very bad relations if there is a sort of undefined onus on the companies, at the direction of the Secretary of State, to do something— anything—about something that may or may not happen. Even though there are rules and regulations governing the companies’ relations with their employees, the temptation—in fact, the rational response—will be for them to say to the trade union representatives, “We are going to make sure you cannot exercise your rights in our firm because we are worried that we might fall under this direction in the future.” If an employer were to do that, even though nothing had happened but something might happen in the future, that would be a guaranteed way to break down labour relations, and might quite possibly precipitate the sort of crisis that the Minister is seeking to deal with on an anticipatory basis.

It is therefore conceivable that the very existence of these arrangements could precipitate crises of fuel sector resilience rather than prevent them. I think all hon. Members would agree that we would not be very happy to have that on the statute book, so we want to add a clear understanding that the Secretary of State’s directions should not imply or direct that the companies should act in contravention of the 1992 Act. That is an attempt to clear up a little this series of very vague and far-reaching powers and arrangements.

The amendment would not, of course, impede the force of the Secretary of State’s directions to ensure that the companies involved in core fuel sector resilience are doing everything they can to ensure resilience, but it would framework the circumstances under which they and the Secretary of State act so that the anticipatory arrangements are within reasonable bounds. I am sure the Minister will see the force of the issue: we may conceivably make anticipatory arrangements into real arrangements if we are not careful about how we go about it. I therefore think that the amendment is a protection not just for those who are employed in core fuel sector resilience areas, but for their employers and for the Secretary of State, such that what the Secretary of State is anticipatorily doing has some clear boundaries as far as what that activity may mean.

--- Later in debate ---

[Andrew Bowie]

Industry participants would be companies, the industry as a whole, trade union bodies and so on. They are absolutely part of the entire process and, of course, if any of them had an issue with the direction being issued, they would have the right to appeal such a decision.

Clause 224 gives the Secretary of State the power to issue directions for the purpose of maintaining or improving core fuel resilience or to recover from or reduce the risk of a disruption to continuity of core fuel supplies. The past few years have demonstrated that the resilience of the core fuel sector needs to improve significantly. We have seen queues at pumps and stock-outs at petrol stations more often than we should. The supply of fuel remains critical to the operation of the country’s economy and essential services.

The individual companies in the supply chain are flexible and manage their own risks. In extreme cases that are out of these companies’ control, it is likely that they can declare force majeure, meaning that because of the extenuating circumstance, they will not be held liable for their failure to perform contractual obligations. It is therefore crucial that the Government have the power to direct key players in the sector to take actions necessary to manage the risk of disruption to fuel supply that could arise.

The clause gives the Secretary of State the power to issue a person carrying on core fuel sector activities, or a facility owner in the core fuel supply sector, with a direction in three different circumstances. The first is to maintain or improve resilience. It is important to note that this power can be used only if the Secretary of State considers that insufficient progress has been made by the proposed recipient to take the steps necessary to address the issue.

A direction can also be issued to restore continuity of supply or to reduce a significant risk of disruption to supplies. Such directions can be issued without waiting for the sector to make progress voluntarily, given the impact that a disruption or significant risk might have on the public. A direction will be issued only if circumstances mean that it is not practicable to make regulations. That could be because of the urgency of the issue or because of the number of cases—if they are not sufficiently numerous to justify making regulations.

A direction can be issued only to persons carrying on core fuel sector activities in the course of a business with capacity in excess of 500,000 tonnes or to a facility owner if the facility has capacity in excess of 20,000 tonnes. That will cover refineries, terminals, pipeline operators and hauliers when a disruption associated with an individual company could have a significant impact on the continuity of supply of core fuels in our United Kingdom. The direction might be to take an action or to stop the recipient doing something that could have an adverse impact on the resilience of the sector. There is a requirement to provide written notice to the recipient and the reason for the direction, so the sector should be reassured that the recipient will be duly informed and will have the opportunity to make representations regarding such a decision.

The power is designed to cover a broad range of scenarios, because the range of conceivable risks is wide and inevitably uncertain. For that reason, we are unable to provide guidance as to the circumstances in which the power will be used. However, I emphasise that His Majesty’s Government intend to work with industry on a voluntary basis whenever possible and that the power can be considered as only a backstop power where a voluntary approach is not effective.

Clause 225 sets out the procedure to be followed before issuing a direction. The recipient of the direction must be given a written notice that sets out the proposed direction, the reason why the direction is being issued and when the direction is intended to come into effect. They will also get an opportunity to make written representations in respect of the proposed direction.

Given that directions will relate to sites covered by regulations for the control of major accident hazards, it is also appropriate that the relevant competent authorities —such as, in England, the Health and Safety Executive and the Environment Agency—are consulted to ensure that the direction does not inadvertently compromise safety. There is also provision to consult other persons whom the Secretary of State deems appropriate. The Secretary of State will consider any representations from the recipients, or those authorities, when deciding whether to issue the direction.

Clause 226 sets out the consequences for failing to comply with a direction. There could be severe impacts to the security of supply if there is non-compliance. It is therefore essential that there are criminal as well as civil sanctions to deter businesses from failing to comply. The offences set out in this clause are criminal offences and they serve as a deterrent measure so that they can provide credibility to the direction power.

The clause sets out both summary and indictable offences for either imprisonment or a fine, or both. The severity of the offence will determine whether it will be a summary conviction or a conviction on indictment. There has always been a history of compliance in the sector. Our hope is that the provisions will be a strong deterrent to future non-compliance and that businesses will realise that it is cheaper and more responsible to comply.

[Dr Whitehead]

I put what I hoped was a fairly reasoned case for amendment 116. I understand what the Minister has said about the circumstances in which directions would be given and the aim of working on a voluntary and collegiate basis with the industry and ensuring that things proceed, as far as possible, on a voluntary basis. However, the circumstances about which we are talking may tempt the Government to remove themselves from that principle. The Minister may say that is his aim, but I always think that we have to legislate for the worst circumstances, not the best.

It would be a good idea to have the requirement in the amendment in the part of the Bill that talks about directions. I am not particularly satisfied by what the Minister has said about how the clause will work generally and would like a Division on the amendment, because we want it on the record that we think it is important. It is not because we wish to undermine the Bill’s progress in any way, but the amendment relates particularly to what the Minister said about the circumstances under which he thinks directions should or should not be made. We may discuss some of those things in the debates on other clauses as they come up, but at this point I wish to press the amendment to a Division.

Question put, That the amendment be made.

--- Later in debate ---

[Dr Whitehead]

The clause further underlines what I said about this part as a whole. It relates to the powers of the Secretary of State to make regulations and to the circumstances in which those regulations may be made. As hon. Members will have read, subsection (4) states:

“If the Secretary of State considers that there is a significant risk of disruption to, or a failure of, continuity of supply of core fuels, the Secretary of State may by regulations require persons of a class or description specified in the regulations to do anything in relation to their relevant activities or assets which the Secretary of State considers necessary or expedient for the purpose of…reducing the risk, or…reducing the potential adverse impact of the disruption or failure.”

Once again, we have the word “anything”, which should trouble considerably hon. Members in Committee and, rather more so, the employees and companies involved in core fuel activity.

What discussions and consultations has the Minister had with the industry involved in the resilience of the core fuel sector? What was the response, formally or informally, to the provisions that the Secretary of State will be enabled to put in place under this clause? Did the sector react favourably or unfavourably to the clause? If it reacted unfavourably, was anything done about further discussion with the companies involved—or, by the way, the trade unions at those particular companies—to address such concerns?

If the Minister is proceeding without such a consultation, that rather calls into question what he has said in the past about the good relationship with the industry. Bearing in mind that the Minister and the Secretary of State are asking the industry to do some potentially onerous things—we cannot get more onerous than “anything”—it would be of relevance to the Committee to hear, whether now or in future, what employees and companies think about it. How easy do they think it will be possible to make arrangements that comply with the directions? After all, as we will come to, it is a question not just of their being subject to the directions, but of them actually going to prison if they do not get it entirely right—rather an important point for employers to consider when responding to the clause. If the Minister has useful information to convey to the Committee, that would be helpful to our considerations.

--- Later in debate ---

[Andrew Bowie]

Clause 228 introduces a power for the Secretary of State to require information from individuals or companies in the core fuels supply sector. It will enable the Government to have an accurate picture regarding the resilience of the sector.

Currently, the Government rely on the sector to voluntarily provide the information necessary to assess, mitigate and respond to any disruption to the core fuels sector. Although most companies comply with requests, some do so only partially and there is a lack of consistency in the quality of some information collected. There is a risk that that leaves the Government unprepared and unable to assess a situation that might impact security of supply.

Clause 228 will apply to operators with throughput in excess of 1,000 tonnes, which encompasses the majority of key sector players. The type of information requested can vary given the circumstances. It may include information around site infrastructure, operations, supply capacity and volume supplied.

The notice to require information specifies the way that the information must be provided, ensuring that the quality of information provided is consistent. The Secretary of State must notify the proposed recipient of the notice in advance to allow them to make representations, and must consider any such representations before deciding whether to issue such a notice.

Clause 229 places a duty to report a notifiable incident and outlines a clear protocol for businesses to inform the Government, should they identify or suspect a potential risk of disruption. It is expected that businesses should be required to report only a notifiable incident relating to an incident that disrupts or causes failure to—or, indeed, creates a significant risk of the same—the continuity of supply of core fuels.

Guidance is currently being developed, following engagement with industry representatives, to set out the parameters for incident reporting. Examples of the sorts of incidents or risks that might be included are physical and operational issues with infrastructure, industrial action and insolvency. The duty is imposed on core fuel sector players with throughput in excess of 500,000 tonnes, such as refineries, major oil terminals and oil hauliers, but that list can be expanded through regulations.

Clause 229 also permits the Secretary of State to seek further information from the person who has reported the incident. That will aid the Government in identifying supply issues before they develop into emergency situations and in taking appropriate action when necessary. The Secretary of State must notify the proposed recipient of the notice in advance to allow them to make representations and must consider any such representations before deciding whether to issue a notice.

Clause 230 creates an offence where there has been a failure to comply with the requirement to provide information when notice has been given to do so. It also creates an offence when there has been a failure to report incidents and a failure to provide further information about a reported incident on request. The Secretary of State has the right to request information from the sector by written notice for the purpose of ensuring resilience. Failure to comply with those requirements without reasonable excuse means that an offence has been committed. Similarly to clause 226, the offences are criminal offences and are designed to act as a deterrent.

Clause 231 allows the Secretary of State by regulation to require information to be provided at specified intervals. The Government currently conduct periodic reviews of resilience in the system through a voluntary approach. The current reporting scheme does not provide sufficiently detailed information to allow the Government to understand fully the risks and capabilities of the sector, and the voluntary nature of the approach carries the risk that the industry could stop providing the information needed at any time, without notice.

The provision of information at specified intervals—for example, annually—will allow the Government to monitor the supply chain, anticipate pinch points in the system and identify any potential issues. The information provided will then be used by the Government to better monitor resilience and to support decision making in relation to determining whether further action, such as issuing a direction, should be taken. Much like other clauses in this part, there are powers to create criminal offences relating to non-compliance with any regulations.

Clause 232 sets out the circumstances in which the Secretary of State may disclose information provided under clauses 228, 229 or 231 to any Government Department or devolved Administration for the purposes of maintaining sector resilience or restoring a disrupted supply, or, if necessary, for the purpose of a criminal proceeding. The clause does not give the Government the right to contravene the Data Protection Act or certain limits under the Investigatory Powers Act 2016.

Clause 233 sets out that His Majesty’s Revenue and Customs has the power to disclose information to the Secretary of State solely for the purpose of facilitating the Secretary of State’s functions relating to core fuel sector resilience. HMRC currently collects data from core fuels operators on the volume of fuel sold to customers, which provides information on their market share and is important in the assessment of their resilience. The power would allow HMRC to disclose that information when needed for the purpose set out in the clause. That will help to ensure that the Department has a robust and reliable understanding of the state of fuel supply and resilience across the sector and can take appropriate action if needed.

The power is important in ensuring that the Government do not seek the same information from the sector twice, and helps to reduce any administrative burden imposed by His Majesty’s Government. It is also worth noting that protections are in place to prevent the disclosure of information if it breaches provisions under Data Protection Act and certain parts of the Investigatory Powers Act 2016. I commend the clauses to the Committee.

[Dr Whitehead]

I have no further comments on the clauses; we are happy for them to proceed.

Question put and agreed to.

Clause 228 accordingly ordered to stand part of the Bill.

Clauses 229 to 233 ordered to stand part of the Bill.

Clause 234

Appeal against notice or direction

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

[Andrew Bowie]

The clause sets out the appeal options available to a person who has been issued with either a notice under clause 224 or, under clauses 228 and 229 respectively, a notice to provide information or a notice to provide further information about a reported incident. I commend the clause to the Committee.

[The Chair]

Is anyone else up for a bit of a debate on this one?

[Dr Whitehead]

I think I come under the category of “anyone else”, Dr Huq.

I may be wrong, but the clause appears to be about appeals against a notice or direction that relates not just to the immediate clauses we have discussed but in particular to clause 227, on the power to make regulations and, as I have said previously, direct

“persons of a class or description specified in the regulations to do anything in relation to their relevant activities”.

If we set that against clause 234, on the authority to undertake an appeal against a direction, it is noticeable that an

“appeal to the First-tier Tribunal against the direction or notice”

can be made on the ground that the decision is

“based on an error of fact...is wrong in law, or...is unfair or unreasonable”.

Does the Minister consider that the extremely vague wording of the requirement to do “anything” could give rise to a lot of income for lawyers, shall we say? Employers could go along to a tribunal and say, “We were required to do ‘anything’ but do not think that is particularly fair or reasonable under the circumstances, because we could not understand what ‘anything’ constituted.” Employers may be under a direction to do things that they are not clear about and, indeed, that could require them to do something they consider to be directly against the interests of the companies they run and, indeed, the broader question of good relations and so on in respect of energy sector resilience.

--- Later in debate ---

[Dr Whitehead]

I am a little puzzled by what the Minister has said previously about the extent to which there has been consultation and discussion with industry and employers in this area. The Committee needs to be clear that he is now advocating Ministers undertaking enforcement of directions that, as we have discussed, apparently have sanctions, certainly for conviction on indictment, of imprisonment for a term not exceeding two years—or 12 months in Scotland and six months in Northern Ireland, given the respective general limits in magistrates courts.

In other words, we are discussing sanctions on employers—one might say that is an interesting turnaround from sanctions on employees—that could lead to their being imprisoned for a time. That appears to be disproportionate to what is suggested as far as enforcement undertakings are concerned, in particular in view of the arrangements that we have already agreed on regarding the circumstances of a direction and the situation that an employer may or may not find him or herself in as far as trying to comply with those directions is concerned.

Certainly, were I an employer or a company engaged in this area, I might well say to the Minister or the Secretary of State: “Yes, we understand that you may be placing on us particular actions in relation to anticipated disruption, but we would be pretty unhappy if failure to comply with a direction, which might not be entirely in our own hands as a company, could result in us as the directors going to prison for two years.” I would not like that to be a consideration were I a director of such a company.

I am therefore a little surprised, because either those companies have perhaps not read the detail of the Bill—although this bit has been around long enough—or the Government simply have not drawn their attention to it, or consulted them, or discussed the circumstances under which such exist. Have the Government just conjured up these important undertakings and the penalties attached to them as a list in the Bill, or was it the result of iterative discussions with the industry as to what is and is not proportionate for the industry?

[Andrew Bowie]

I do not wish to go over the same ground in too much detail, but a consultation took place in 2017 and an open discussion and debate continues with the industry on this and many other issues. I know the hon. Gentleman speaks with the best of intentions, but he did mention the detail of the Bill, and it is in that detail that there is a choice to enforce either criminal offences or civil sanctions. In many cases, it is in the interests of both parties and the public to use civil penalties to guarantee enforcement, and that would be appropriate. However, there will be cases in which criminal offences are better for enforcement. The Department will consult on guidance and sanctions, which are also subject to parliamentary scrutiny after Royal Assent, so we will have another chance to debate this. The best way to avoid a sanction or, indeed, going to prison is not to break the law.

[Dr Whitehead]

That’s what Tom Cruise says. [Laughter.]

Question put and agreed to.

Clause 239 accordingly ordered to stand part of the Bill.

Schedule 18 agreed to.

Clause 240

Guidance: criminal and civil sanctions

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

[The Chair]

With this it will be convenient to discuss clause 241 stand part.

--- Later in debate ---

Financial assistance can be in different forms, some of which have been included in the Bill. Treasury consent will be required for any expenditure by those means, ensuring that the funding provided meets the appropriate controls for value for money. I reassure the Committee that any financial assistance provided will be subject to subsidy control requirements. That addresses concerns with the provision regarding the distortion of competition. We do not want businesses thinking that this is a bail-out scheme. That is why the Government intend to publish guidance on how the power will be used. The power will be used only in exceptional circumstances.

[Dr Whitehead]

I hear what the Minister says. It is certainly a balanced approach that the power should be used only in exceptional circumstances, and is not a general bail-out or financial handout. I still have some residual concerns about the way the clause was originally worded. As a result of the amendment, it is to be worded marginally differently. The explanatory statement states that the amendment

“does not alter the substantive effect of clause 242(1).”

I am reminded of the following statement by an analytical philosopher whose name escapes me:

“A difference which makes no difference is no difference at all.”

I did not get a clear answer when we talked about clauses 103 and 134. The Minister moved an amendment to clause 103 to take out the words

“out of money provided by Parliament”,

leaving the clause to state that financial assistance may be provided in general. Is there a difference to clause 242 as a result of this similar amendment? If the Government may draw on moneys that have not been provided by Parliament for the purpose of financial assistance, where are they likely to come from, and what controls would Parliament have?

The present wording of clause 242 provides control, inasmuch as if moneys are provided by Parliament, Parliament has the ability to scrutinise and account for them. If removing that element of the clause gives rise to moneys provided not by Parliament but by, say, the Government of Kazakhstan, might that not worry us a little, or is there no need to worry because the Government’s ability to raise money by non-parliamentary means is tempered by other things?

[Andrew Bowie]

There is absolutely nothing for the hon. Gentleman to worry about. That is what I say in response to his question on parliamentary oversight and ensuring that there is scrutiny of where the money comes from. We are currently in the process of agreeing a protocol with the Energy Security and Net Zero Committee. We propose that the Secretary of State will write to the Chair of the Committee to notify them of instances where the Department has provided financial assistance under the power, so there will be parliamentary scrutiny throughout the process. I am reliably informed that this is a consistent point with respect to Bill drafting.

Amendment 22 agreed to.

Clause 242, as amended, ordered to stand part of the Bill.

Clause 243

Power to amend thresholds

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

[Andrew Bowie]

The clause contains a power for the Secretary of State to amend or modify the threshold for capacity in excess of which these measures can be applied. Capacity refers to the tonnage of oil that the operator has handled in the previous calendar year. This would not change the person to whom the powers under this part could apply.

The core fuel sector is dynamic, and our net zero goals may change the landscape of the sector in the future. We therefore need to future-proof the legislation to account for potential changes that may occur in the sector such that the thresholds may need to be changed over time. It is important to stress that any regulations made under the power are subject to the affirmative procedure.

[Dr Whitehead]

I have no particular comments on the clause, although my hon. Friend the Member for Bristol East has reminded me that the philosopher was William James.

[The Chair]

Fastest finger first—Kerry McCarthy.

Question put and agreed to.

Clause 243 accordingly ordered to stand part of the Bill.

Clause 244

Interpretation of Part 11

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

[Andrew Bowie]

The clause identifies several key terms that are used throughout part 11, and lets readers know which sections contain the corresponding definitions. It is therefore intended solely as an aid in interpretation.

[Dr Whitehead]

I have no comments other than that the word “anything” does not appear in the definitions. That is a minor observation.

Question put and agreed to.

Clause 244 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Joy Morrissey.)

Energy Bill [ Lords ] (Ninth sitting)

Lord Whitehead Excerpts

Committee stage
Tuesday 13th June 2023 Public Bill Committees

[The Chair]

Before proceedings commence, may I indicate that I am very relaxed and if Members wish to remove their jackets, that is fine by me?

[Dr Alan Whitehead (Southampton, Test) (Lab)]

On a point of order, Ms Nokes. It has come to my attention that an article published today by Politico says that the Secretary of State has

“signaled a coming U-turn on the government’s plan to put a levy on household energy bills to support the nascent hydrogen gas sector in the U.K.”

The article reports the Secretary of State as saying that

“while hydrogen was a ‘great opportunity’ for the U.K. it was ‘unlikely’ that the gas would be a major future source of domestic heating.”

Pertinent to this Committee, he said that the Government did not want to see

“a situation where a levy is penalizing people who don’t use it”

—almost the exact words that were discussed in Committee—and added that hydrogen would be

“a better bet for heavier industry”

and transport.

The Secretary of State was also reported as saying:

“We’ll look at ways to create a levy or a financing that works for everybody as best as possible”.

What I take from that is that the Government are actively looking at ways to undertake a form of levy different from the one we discussed in Committee recently. You will recall, Ms Nokes, that you had to cast the deciding vote on the relevant amendment. I am sorry that the Minister was unable to give us the information that the Secretary of State has given us in that article, in particular that the Government are actively looking at developing an alternative levy arrangement. It is more than conceivable that had that information been available to the Committee at the time, that vote may have had a different outcome. In particular, the convention of the Chairman casting the deciding vote in favour of the status quo, which you quite correctly did at that time in your position as Chair, Ms Nokes, could have meant that a vote could have been cast for a different status quo—that is, one in which the Government were actively looking

“at ways to create a levy or a financing that works for everybody as best as possible”.

The original formulation in the Bill would therefore have fallen, in effect.

Ms Nokes, do you have any guidance on how we could rectify this problem? Might we invite the Government to table a new clause, which could be discussed at the end of our deliberations on the Bill? As Chair of the Committee, would you accept a new clause later in the Bill that might allow a debate to take place in the light of the information we now have before us? It is entirely in your hands to decide, Ms Nokes.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Further to that point of order, Ms Nokes. It is great to serve under your chairmanship. I am sure the hon. Member for Southampton, Test recalls the comments that I made in the fourth sitting when I abstained on the vote. Hansard will confirm the exact language that I used, but I believe I said that the Government had said to me that they were actively looking to table an amendment on Report. The article that has been produced today ties in with the comments that I made on the record a few sittings back, and I am relieved to hear that because it shows that we are moving forward. I do not believe there is any material change in what has happened because, as I said, I was told that the Government were actively looking at making an amendment on Report.

[Dr Whitehead]

Further to that point of order, Ms Nokes. I thank the right hon. Member for Elmet and Rothwell for his point of order, which related to mine. Far be it for me to downplay his importance in proceedings but, although he is quite right, the material difference is that I was quoting what the Secretary of State said, even though the right hon. Gentleman was clearly well informed in what he said to the Committee.

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)]

Further to that point of order, Ms Nokes. I said in Committee at the time, in response to contributions from the hon. Member for Southampton, Test and other right hon. and hon. Members, including on the Government Benches, that we are listening and carefully considering the situation regarding that specific clause. We are listening to all the concerns raised in Committee, on the Floor of the House on Second Reading and in the other place. I gave that commitment in this Committee and see nothing that contradicts that in what the Secretary of State said to Politico this morning.

[The Chair]

I remind the Committee that with this we are discussing the following:

Amendment 161, in clause 199, page 170, line 21, after “section” insert

“‘high risk vendors’ means vendors of appliances that pose potential or actual security and resilience risks to energy networks,”.

Clause stand part.

Clauses 200 to 203 stand part.

That schedule 17 be the Seventeenth schedule to the Bill.

New clause 40—Designated load controller—

“(1) The Secretary of State may give a designated load controller direction only if the Secretary of State considers that—

(a) the direction is necessary in the interests of national security; and

(b) the requirement imposed by the direction are proportionate to what is sought to be achieved by the direction.”

This new clause ensures that load controllers undergo national security checks to establish the nature of connections to potentially hostile actors and the threats they may pose.

[Dr Whitehead]

It seems rather a long time since I got through the first half of my remarks on this clause, but I am happy to continue. I will recapitulate briefly what is in the clause, and then we can move on to the next business.

Members will recall that, with amendments 160 and 161 and new clause 40—I appreciate that it will be voted on later in proceedings, not today—we are drawing attention to the possible risks attached to certain load controller activities relating to appliances that are under the authorisation of load controllers. As we have discussed, appliances that are used in smart energy networks may be able to undertake autonomous information and data transmission activities—and, indeed, activities relating to their own operation—independently of the consumer or the person who installed the device.

I previously drew attention to a company that secured a 6% or 7% share of the market in SMETS2 smart meters by putting its price 30% below the market average, thereby ensuring that energy companies have an interest in commissioning third parties to purchase and install that brand of meter. I pointed out that that company, Kaifa Technology, has very close links to—indeed, is controlled by—the state-owned China Electronics Corporation, which has been sanctioned by the United States regarding high-risk activities concerning data and electronics. Kaifa smart meters are not available for installation in the United States as a result of that sanction, yet in the UK we are apparently going ahead with no concerns whatsoever.

I am not saying that Kaifa smart meters are necessarily a source of the possible transfer-link use of data. I pointed out this morning that there are remote-switching facilities within smart meters, so it is possible that a smart meter could be switched off by an outside agency, or that its data could be transferred for not necessarily very good purposes. We have a pretty strong regulatory regime, which was recently strengthened by an information security Act. I am certainly not pointing the finger at Kaifa smart meters and saying that they are definitely not to be pursued, but we do not have any method in our current legislation—nor, indeed, in this Bill—that would enable scrutiny to be brought to bear on companies such as Kaifa in relation to national security and resilience, so that our questions can be answered. We should be as certain as possible that, should these things come to be a part of our smart energy network environment they do not, as it were, just slip in under the carpet. It should be done consciously through a review of what they mean as far as our energy security is concerned and, indeed, in respect of the security of smart energy networks.

[Alec Shelbrooke]

The hon. Gentleman is making an important point about energy security and the ability for outside players—certainly, if we consider this from a Chinese perspective—to take control. On energy security, does he share my concern about the fact that 98% of the materials used in renewable energy come directly out of China? Does that not in itself represent a similar security risk to the one he is outlining?

[Dr Whitehead]

I thank the right hon. Member for his intervention, but I do not quite share his implied view that everything that comes out of China needs to have that level of security clearance. There are concerns about the proportion of our solar panels that are made and manufactured in China, for example, and a concern that one particular country has effectively captured the market in solar panels. It would be a good idea for those purposes, not for the purposes I am talking about, to rectify that situation. China is also increasingly manufacturing components for wind turbines and various other renewables, so yes, it would be a very good idea to have a much more diverse supply chain for renewables. As far as China is concerned, that is an issue of commerce; I am talking about a potential issue of national security and resilience. Yes, it involves the same country, but there are different concerns and, indeed, concerns about other countries that may be in the same position as I outlined as far as their smart energy technology offerings are concerned.

--- Later in debate ---

[Andrew Bowie]

It is an absolute pleasure to serve once again under your chairmanship, Ms Nokes. I thank the hon. Member for Southampton, Test for his amendments; he is of course right to consider the security impacts of load control devices. We share his concern that grid security should be protected, which is why I am happy to reassure him that we have already spent considerable time preparing means to manage the risks associated with hostile actors and the transformation of our energy system.

The outcome of our recent consultation on delivering a smart and secure electricity system confirmed our intent to regulate all organisations that remotely control large electrical loads, using the Network and Information Systems Regulations 2018, or the NIS regulations. Under those regulations, load controllers would be required to take appropriate and proportionate security measures to manage risks to their network and information systems. They would also be required to report to the relevant authority incidents that disrupt the continuity of services and take action to rectify those incidents.

The application of the NIS regulations in the energy sector in Great Britain is based on outcome-focused principles, using the cyber assessment framework developed by the National Cyber Security Centre. This approach focuses on proportionate risk management. Moreover, the licensable activities established through the powers in the Bill could impose security requirements on those organisations within its scope. The licence would complement our separate enhancements to the NIS regulations made through the Bill.

Finally, the National Security and Investment Act 2021 includes a broad range of powers enabling the Secretary of State to intervene in transactions that give rise to national security concerns. That includes the power to scrutinise transactions based on national security risks for electricity purposes. That incorporates acquisition of ownership of load controllers, who control electricity on behalf of their customers. On that basis, a power to direct a load controller on national security grounds, which new clause 40 would introduce, would be excessive in comparison with the rest of the electricity sector.

The Secretary of State does not have powers to direct private companies outside of an energy emergency or crisis scenario. Establishing such a precedent may risk undermining the development of the sector, with little compensatory benefit in additional security protections. Given our existing measures to control foreign investment, and our intentions to increase the cyber-resilience of load controllers, an additional power for the Secretary of State to direct on national security grounds would be disproportionate.

Amendments 160 and 161 centre on alleviating any security risks posed at the device level in the provision of load control. Amendment 160 would give the Secretary of State the power to regulate or prohibit the provision of load control by or to appliances supplied by vendors that are deemed to be high risk. Amendment 161 would define that group as

“vendors of appliances that pose potential or actual security and resilience risks to energy networks”.

I assure the hon. Member for Southampton, Test that measures to maintain the security of energy smart appliances are already in place. For example, the Electric Vehicles (Smart Charge Points) Regulations 2021, which are already in effect, require most private charge points for domestic and workplace use to meet minimum device-level cyber-security requirements. In addition, we committed through our response to the consultation on delivering a smart and secure electricity system to ensure that licences for the purpose of domestic and small non-domestic load control should include cyber-security requirements. We are confident that, taken together, the existing regime is sufficiently robust and that a further power to amend the licensing condition is unnecessary. I hope that with those reassurances the hon. Member will be able to withdraw his amendment.

Clause 199 sets out how the Secretary of State may modify conditions of licences granted under the Electricity Act 1989 and certain licences granted under the Gas Act 1986 for purposes of load control. It also provides powers for the Secretary of State to modify industry codes that are maintained under those licences for such purposes. More generally, the powers give the Secretary of State the flexibility to amend existing regulatory arrangements to reflect the introduction of a new licensing regime for load control. That new licensing regime will be introduced using the powers provided for in schedule 17.

Clause 200 sets out the process that the Secretary of State must follow before making changes to the conditions of licences, or documents maintained under them, for load control or related purposes, as set out in clause 199. The requirement to consult the parties listed in subsection (1) before making changes to licence conditions or documents maintained reflects standard practice in such cases and is consistent with other clauses. When modifying the conditions of a licence, the Secretary of State must specify the date on which the modification will take effect and publish the details of any modifications as soon as reasonably practicable after they are made.

Clause 201 establishes that the Secretary of State may make a modification to a standard condition of a licence using clause 199. It also establishes that that does not prevent any other part of the condition from continuing to be regarded as a standard condition. In essence, the power will allow the Secretary of State to make targeted changes to parts of a licence, without changing the overall status of that licence, or changing any other standard conditions to that licence. When the Secretary of State makes changes, the Gas and Electricity Markets Authority will amend future licences so that the amended standard conditions apply to future licensees. The authority will also publish the modification to the licence.

Clause 202 extends the regulatory provisions in relation to licensing that were established in the Gas Act and the Electricity Act to load control. The clause amends the Gas Act, the Electricity Act and the Utilities Act 2000 to apply several provisions of those Acts to the Secretary of State’s exercise of regulatory powers to load control. More specifically, the clause will extend several of the duties and obligations on GEMA within the Acts, particularly those in relation to protecting the interests of current and future consumers of electricity. GEMA would need to apply to the Secretary of State when exercising powers under clauses 195 to 197. Finally, clause 202 defines “gas licence” and “electricity licence”.

Clause 203 introduces schedule 17, which makes provision for the regulation of the load control of energy smart appliances. Schedule 17 amends the Electricity Act, allowing the Secretary of State to make regulations that amend the list of activities subject to the licensing framework to include activities connected with load control. The schedule sets out the terms of that regulation-making power, including the extent to which the regulations can make consequential or transitional provisions.

[Dr Whitehead]

I heard what the Minister had to say about the amendments. I am pleased to hear that the Government are taking this seriously, and I hope that the measures that he suggests by which they will do so are sufficient for the purpose. I think that the Secretary of State in question for the National Security and Investment Act is the Chancellor and not the Secretary of State for Energy Security and Net Zero, so the option to do anything about it will be at one remove from his Department, although I am sure the Secretary of State would be able to communicate with the Chancellor were there serious issues.

On the understanding that the Government are going to pursue this as a serious issue as part of the development of energy smart networks, and will incorporate that view at the heart of the arrangements, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 199 to 203 ordered to stand part of the Bill.

Schedule 17 agreed to.

Clause 204

National Warmer Homes and Businesses Action Plan

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

[Andrew Bowie]

The Government have carefully considered the effect of the clause, which was added on Report in the Lords. On 17 May, I tabled an amendment indicating my intention to oppose the clause. The Government do not consider that it would be effective in helping to deliver our commitments to improve the energy performance of buildings and to deliver net zero. However, I know that opinions among Committee members differ, and I look forward to the discussion that we may well be about to have.

The heat and buildings strategy, published in autumn 2021, sets out how the Government plan to reduce emissions from buildings and provides a clear long-term framework to enable industry to invest and deliver the transition to low-carbon heating. The Climate Change Committee already plays a key role, providing independent advice and scrutiny, and holding the Government accountable by publishing statutory progress reports to Parliament. Those are comprehensive overviews of the Government’s progress. The clause would simply duplicate those efforts.

The Government have already set out our aim to phase out the installation of new and replacement natural gas boilers from 2035, in line with natural replacement cycles, while scaling up the installation of low-carbon heating. We recognise that there are many options with the potential to play an important role.

The Government remain committed to the aspiration for as many homes as possible to reach energy performance certificate band C by 2035 where cost-effective, affordable and practical, as set out in the clean growth strategy. There has been good progress towards achieving that aim, with 47% of homes in England having reached EPC band C, up from a measly 14% in 2010.

In our net zero growth plan and energy security plan, the Government announced that we will publish a consultation on options for upgrading houses in the owner-occupier sector by 2023. The content of the consultation has not yet been finalised, and we need to gather further evidence on the potential impacts of interventions in that sector. More time is needed to ensure thorough consideration of options in this area, and the clause would not allow that time.

We are also taking significant steps to encourage businesses to reduce their energy demand through voluntary schemes and regulations. In the 2020 energy White Paper, the Government proposed that the trajectory for the minimum energy-efficiency standard for non-domestic rented buildings should be EPC band B by April 2030, with an interim milestone of EPC band C by April 2027.

We are evaluating the responses to our consultation and will publish the Government response in due course. It is important that the impacts, such as those on business and supply chain readiness, can be fully considered. The clause would pre-empt the response and commit the Government to a timeframe for implementation different from the one that has been consulted on.

The Government have set an aspiration to introduce the future homes standard by 2025. We will publish a full technical consultation for it in 2023. We intend to introduce the necessary legislation in 2024, ahead of implementation in 2025.

I thank Baroness Hayman and Lord Foster of Bath in the other place for raising these matters.

[Dr Whitehead]

We are in a curious position with this clause, which is a bit akin to my writing to the then Energy Minister to ask him to reintroduce the Bill as soon as possible. The Government at the time seemed not to want to introduce their own Bill as soon as possible, whereas we wanted them to do so. Clause 204 was introduced as an amendment in the House of Lords, so it has come to us as a substantive part of the Bill. We therefore find ourselves in the position—if I can persuade Opposition Members to vote accordingly—that we support the Bill as it stands and the Government apparently do not.

That is made more curious by what the clause actually says. With one small exception to do with dates, it takes things that the Government have already agreed to do—by the way, as far as I know, the future homes standard is not an aspiration; it is something the Government have already said will be mandatory by 2025—and says that the Secretary of State must produce an action plan for how they will be done. That seems to me a pretty good idea in any legislation, and in anything that anybody says will be the case in legislation. It is really not good enough to go around saying that things may well happen and that there might be legislation, and then not have any idea how that legislation can be properly discharged.

The clause puts that right by making sure that there is some kind of plan in place for these things to be achieved. It draws attention to the following targets: achieving

“100% of installations of relevant heating appliances and connections to relevant heat networks by 2035,”

which is in the energy security strategy; achieving

“EPC band C by 2035 in all UK homes where practical, cost effective and affordable,”

to which the clean growth strategy and the heat and buildings strategy contain specific commitments; achieving

“EPC band B by 2028 in all non-domestic properties”—

that is in a consultation that has already taken place, and the Government intend to produce either regulations or legislation to ensure that it happens, as I have mentioned—and introducing

“Future Homes Standard for all new builds in England by 2025,”

which the Government have already said they want to do.

In a sense, the clause is a bit of a break with how things have been done before, but in another sense it is not, because it just recapitulates things that already exist, puts them in order and states that we need some form of plan to ensure that they happen. Frankly, I am really surprised that the Government have decided that they want to knock the clause out. It is not superfluous. In fact, it supports the Government in delivering their plans and ensures that we all know where we stand.

That brings me to the purpose of this Committee. The amendment that the Government tabled to remove the clause has not been selected, which means that the only way for them to achieve their desired outcome is for the Committee to vote against clause stand part. That puts Committee members in a different position from that of voting on an amendment.

The likelihood of anybody having a go at any member of this Committee for voting in favour of this Bill is remote. Therefore, I would have thought that Committee members should be allowed to exercise their own judgment as to whether they support or oppose the clause. By asking us to vote against clause stand part, the Government are in effect asking the Committee to vote against itself. If members on both sides of the Committee support the Government’s targets and aspirations—and I would have thought that everybody does—and if they think that it would be a good idea to encapsulate them in an action plan, I do not think that they should be sanctioned for voting in favour of that and, in a sense, securing Government policy.

That is code for saying that no one should be pulled up by the Whips—although perhaps the Whips have a different idea—if they vote in favour of the Bill. I assume, although I do not know this yet, that every Opposition member of the Committee will vote to retain the clause, and I would hope that every Government member will also—

[The Chair]

Order. May I gently suggest, Dr Whitehead, that you have moved away from the substance of the clause and are somewhat straying into whipping arrangements?

[Dr Whitehead]

As always, you are right, Ms Nokes, so I will temper my remarks. I hope that common sense will prevail and that a thumping majority will ensure that the clause is retained so that the Bill can progress to its next stage intact. The clause is important to Government policy, so it should not be taken out and disabled in the way suggested.

[Olivia Blake (Sheffield, Hallam) (Lab)]

It is a pleasure to serve under your chairship, Ms Nokes. I rise to speak in defence of clause 204, and I agree with the shadow Minister, my hon. Friend the Member for Southampton, Test, that the Government have suggested an interesting tactic.

Our housing stock has been described as the least energy-efficient in Europe. That means we are the least prepared to absorb future price hikes, like those experienced in recent years, and to address future temperature changes. In England alone, more than 13 million homes—59% of them—are below a C rating on the energy performance certificate standard. As a result, housing is one of the main sources of carbon emissions in the UK, accounting for around 20% of total emissions.

We should be making massive efforts and strides to improve in this policy area, yet energy efficiency programmes have been cut and home insulation rates have plummeted over the past decade. In 2013, the coalition cut energy efficiency programmes, after which insulation rates fell by 92%. The number of energy efficiency insulations peaked at 2.3 million in 2012, yet fewer than 100,000 upgrades were installed in 2021. That is rather pathetic, it has to be said.

The Bill and clause 204 in particular provide a golden opportunity to put in place the financial structures and programme to give the necessary upgrades to the 19 million homes in our country that are below band C on the EPC scale. Clearly, that is what a Labour Government would do.

--- Later in debate ---

[Andrew Bowie]

It is a pleasure to respond to the debate. There is some confusion at the minute. Indeed, I was slightly confused at the beginning of the debate, given that the hon. Member for Southampton, Test seemed at one stage to be whipping on behalf of the Government and giving advice to Conservative Members— I urge all colleagues on this side not to listen to his words. If I am not mistaken, he was suggesting that the clause we are against was tabled by the Government in the other place; Baroness Hayman is a Labour peer and Lord Foster of Bath is a Liberal Democrat peer.

[Dr Whitehead]

For clarity, I did not say that it was introduced by the Government, nor would I say that, because it certainly was not. The point I was trying to make was that it is now a part of the Bill, not that it was introduced by the Government in the other place.

[Andrew Bowie]

I am glad that is clarified for the Committee. For further clarification, we are seeking to revise the Bill back to its original state as drafted and remove an amendment that was made by Labour and Liberal Democrat Members of the House of Lords. I believe that is a relatively regular occurrence for the House of Commons. There should be no confusion on that.

Again, as they were when we were talking about smart meters, the Opposition are such a glass half-empty kind of party. We have made huge progress in the energy efficiency of UK homes. I understand why the Opposition do not want to speak about this: when they left office only 14% of homes had an EPC grading of course; now, after 13 years of Conservative Government, the proportion stands at 47%, and we are driving forward to get it over 50% soon. As for the suggestion that we do not have a plan to move forward, the Government do have a plan. We have set out a heat and buildings strategy and we have announced further measures in the net zero growth plan, which was announced just recently.

--- Later in debate ---

[Andrew Bowie]

Clause 205 will provide the Secretary of State with the power to make changes to the existing Energy Performance of Buildings (England and Wales) Regulations 2012 to ensure that they are fit for purpose and contribute effectively to improving the energy efficiency of premises. Following the UK’s withdrawal from the European Union, it is necessary to create new primary powers to permit changes to be made to the 2012 regulations, as that power was lost with the repeal of the European Communities Act 1972.

Clause 206 will enable the Secretary of State to make changes to the Energy Performance of Buildings (England and Wales) Regulations in relation to new premises. That includes new premises in the process of being constructed or changed, as well as new premises whose construction or adaption is planned but has yet to be started. The changes will ensure that the anticipated energy usage and energy efficiency of new premises are taken account of.

Clause 207 enables us to ensure that we have an effective enforcement regime underpinning the energy performance of premises policy by amending existing requirements. We will review the current enforcement regime to ensure that there are sufficient enforcement options in place, with a view to improving compliance with the energy performance of premises framework. The existing regime includes civil penalties, and the clause enables us to amend those penalties or provide for new civil penalties by enforcement authorities up to a maximum of £15,000.

Finally, clause 208 provides that the regulations made under part 9 may amend, repeal or revoke provisions made in primary legislation and that this must be done through the affirmative resolution procedure. It also provides that the affirmative resolution procedure will be used if new criminal offences or civil penalties are created. This will ensure that there is parliamentary oversight of the uses of the power. I commend the clauses to the Committee.

[Dr Whitehead]

Clause 205 is the beginning of the part of the Bill on the energy performance of properties. I must admit that I thought for a moment there was going to be a spectacular U-turn on the previous clause, but I was sadly disappointed when the Minister decided which way he was really going to vote. I fear the same result in respect of this part of the Bill.

Let me speak briefly to our new clauses 41 and 42, which would considerably strengthen the Bill’s provisions on the energy performance of premises. They relate specifically to energy performance regulations for existing premises. Rather like clause 204, which is now not in the Bill but contained previous Government aspirations and claims in respect of outcomes, new clause 41 relates to things the Government have already said about energy performance certificates for properties in the private rented sector, about what should happen in respect of the improvement of properties in that sector to bring them up to an appropriate band, and about the amount specified in legislation that private landlords should spend on getting their properties up to that level before they are exempted from having to make further improvements.

The really important bit in new clause 41 would require the Secretary of State to make regulations

“amending the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (S.I. 2015/962) to require that, subject to subsection (2)”—

which contains exemptions—

“all tenancies have an energy performance certificate (EPC) of at least Band C by 31 December 2028”.

The new clause would also require the Secretary of State to make regulations

“amending the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019”—

which Members will recall introduced a £3,500 cap on the cost to landlords of achieving band E—to raise to £10,000 the amount that should be invested before landlords are exempt.

Those are reasonably ambitious outcomes for the private rented sector, but they were completely presaged by the Government’s previous proposals, which we supported at the time. Specifically, in September 2020 they consulted on improving the energy performance of privately rented homes in England and Wales. The consultation had proposed outcomes at its heart, but—well I never—there has not yet been a Government response. Only three years have gone by. We hope that there may be a response one day fairly soon, so that progress can be made.

The proposed outcome of the consultation—the favoured option at the time—was exactly as set out in subsection (1) of new clause 41: raising the energy performance standard of private rented properties to band C, a phased trajectory to get there by 2028, and a £10,000 average per-property spend under a £10,000 cap. Everything in the new clause is already there in what the Government said they would do in respect of private rented sector energy efficiency. The only difference is that the Government have not actually done anything about it.

I recently looked up the reaction to the proposals, and a number of commentators and advisers are saying, “Well, landlords, you perhaps ought to get yourselves steeled up to the idea that your properties, to be lettable in future years, will have to be band C, and that you may have to spend up to £10,000 to make your properties lettable at that point.” By the way, that seems a relatively small amount to have to spend, bearing in mind that this is essentially a question whether a property is of merchantable quality. In any other area of commerce, if it were not of merchantable quality, it would not be sold. These measures, if implemented, would ensure that properties were merchantable for letting purposes as far as efficiency standards are concerned, and landlords would be required to spend that relatively small amount before they were exempted and to use every endeavour to get their properties up to that point.

[Mark Jenkinson]

In my constituency of Workington, I have some wonderful conservation areas with lovely old stone-built houses. A Labour council will not allow the replacement of single-glazed windows with uPVC double glazing, for example, which we know works well for energy efficiency. Why does the hon. Gentleman think that they would not be of merchantable quality?

[Dr Whitehead]

If the hon. Member cares to go back to the consultation in 2020, he will see that there are certain exemptions, depending on things such as conservation areas, from getting properties up to the standard that we are discussing provided that other things are in place. I have no particular insight into the workings of the hon. Member’s local authority, but it may be that something like that is at the heart of those concerns.

The point is that in general, we would certainly support—and we did at the time—what is set out in the consultation and the Government’s declaration of policy intent. One area where energy efficiency needs to move forward quite rapidly is the private rented sector; after all, that is the housing sector with the worst energy efficiency record. It is just not good enough to stand by the idea that properties in band E, which is a very low energy efficiency band, should be at that level any longer—certainly not in the 2020s, when we are trying to get all the properties that we can up to a standard fit for 2050.

--- Later in debate ---

[Andrew Bowie]

I thank the hon. Member for Southampton, Test and my right hon. Friend the Member for Elmet and Rothwell for their comments on the new clauses. In answer to the question of why we have not produced a full response to the consultation, we are committed to raising standards in the sector in line with our ambition, set out in the clean growth strategy, and we will publish a summary of responses to the consultation on improving standards in the private rental sector this year.

[Dr Whitehead]

This year?

[Andrew Bowie]

Yes, this year.

We are continuing to refine the policy design to ensure that the costs and circumstances relating to energy efficiency improvements are fair and proportionate for landlords and tenants, as my right hon. Friend the Member for Elmet and Rothwell pointed out. The economic headwinds that have been buffeting us, and the changing circumstances in the private rented sector in particular, have made it difficult at the minute, but as I said, we will be publishing our response—a summary of responses, anyway—this year.

New clause 41 seeks to require the Secretary of State to make regulations in relation to energy performance in existing rented premises. His Majesty’s Government agree on the need to improve the energy efficiency of buildings to lower energy bills and deliver carbon savings to meet our net zero and fuel poverty targets. Indeed, this is reflected in the Government consultation on proposals to raise the minimum energy efficiency standard for privately rented homes. Under the Energy Act 2011, the Secretary of State already has powers to amend the private rented sector regulations in order to raise the minimum energy efficiency standards and set the dates by which landlords must comply with the new regulations. The new clause would not allow us to reflect the valuable feedback that the Government received from the consultations in the final policy design, which is essential to ensure that the final policy design is fair and proportionate for landlords and tenants. As I have said, the Government have committed to publishing the summary of responses by the end of this year.

Let me turn to new clause 42. In September 2020, we published the energy performance certificate action plan, in order to ensure that consumers can trust energy performance certificates and to make sure that certificates are accurate and reliable. Certain actions are expected to require regulatory change under the new powers to be implemented. The energy performance certificate is designed to rate the energy performance of a building, as considered as an asset that passes from one occupant to another during sale or rental.

As those occupants may or may not possess energy optimisation technologies or an electric vehicle with bi-directional charging capability, it is not currently considered appropriate to assume a benefit from this in the calculated energy performance rating. Including this nascent technology, which relies on consumer behaviours and equipment not integral to the premises, would increase the complexity of the EPC scheme. Bi-directional charging is a promising technology, but it is not yet viable for use in the mass market.

Question put and agreed to.

Clause 205 accordingly ordered to stand part of the Bill.

Clauses 206 to 208 ordered to stand part of the Bill.

Clause 209

Energy savings opportunity schemes

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

[Andrew Bowie]

We now turn to part 10 of the Bill, which deals with the energy savings opportunity scheme, which I will refer to as ESOS.

Clause 209 provides a power relating to ESOS. ESOS mandates energy audits of large undertakings at least once every four years, which cover their buildings, transport and industrial processes. The audits result in cost-effective recommendations for improving energy efficiency. The power would replace the repealed power in the European Communities Act 1972, under which the UK established ESOS in 2014, and without which ESOS is a frozen scheme and cannot be updated.

ESOS is important to the UK’s plans to meet net zero targets and reduce energy costs for businesses. The existing scheme’s net benefit is estimated at £1.6 billion. The power covers four core options, as set out in the July 2022 ESOS consultation response: to standardise ESOS reports, improve the quality of audits, add a net zero element to audits, and require public disclosure of information from ESOS reports. It also covers two potential longer-term options to mandate action and extend ESOS to medium-sized enterprises, which are for future consultation. The power will enable the amendment of ESOS, or the establishment of such a scheme, and sets out the general provisions to make regulations.

Clause 210 sets out the application of ESOS, including in relation to geographical application and determining responsibility for energy consumption for the purposes of ESOS. It allows regulations to set the description of undertakings that fall within scope of ESOS, and to provide for two or more participants to be treated as a single participant. It would allow ESOS to extend to a far wider range of undertakings, subject, of course, to future consultation. I therefore commend clause 209 to the Committee.

[Dr Whitehead]

I do not have anything to say on these clauses, other than to note that we are now into the energy savings opportunity scheme, and that the Minister is indeed right that schemes would have been frozen under EU regulations. However, I am not yet sure whether what would have been the case under the EU regulations is reflected accurately in the things coming forward. I hope that it is. The scheme looks okay to me, but I would like an indication from the Minister that, in effectively updating the scheme for the purposes of this legislation, nothing has been lost from what previously was there.

[Andrew Bowie]

I am happy to give that guarantee. Indeed, one of the benefits of our now not being in the European Union is that we can devise and implement schemes that are fit for businesses and, indeed, homeowners—people within the United Kingdom—depending on the circumstances that we are facing at the time.

Question put and agreed to.

Clause 209 accordingly ordered to stand part of the Bill.

Clause 210 ordered to stand part of the Bill.

Clause 211

Requirement for assessment of energy consumption

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

--- Later in debate ---

[Andrew Bowie]

Clause 211 makes provision for regulations to set out when, how and by whom an ESOS assessment should be carried out, and other requirements. It introduces a new power for future details from ESOS reports to be published to increase the transparency of the scheme and promote the uptake of energy efficiency measures.

Clause 212 enables regulations to set out functions and requirements relating to ESOS assessors, including who may be an assessor, the maintenance of assessor registers, and requirements on designated bodies that maintain assessor registers. New powers are provided to the Secretary of State or the scheme administrator to ensure the standards of assessors. The powers will allow intervention where there is evidence that an assessor or designated body is not carrying out its responsibilities under ESOS regulations appropriately, to improve the overall quality of ESOS reports.

Clause 213 includes a power to introduce new requirements for ESOS participants relating to the production and publication of an ESOS action plan covering intended actions to reduce energy use or greenhouse gas emissions. The requirements aim to increase participants’ engagement with ESOS and stimulate greater uptake of energy efficiency measures.

Clause 214 introduces a power to impose new requirements on ESOS participants to achieve energy savings or greenhouse gas emissions reductions. It sets out two approaches: ESOS regulations may either require participants to take specific actions, or may set out other requirements, such as the public reporting of actions, that aim to encourage participants to take those actions. Regulations would be able to specify that the requirements should refer to a cost-benefit analysis. As stated in the Government response to the ESOS consultation, the former approach would be subject to further consultation before any decision was taken regarding its introduction. Regulations making such provision would, under clause 218, also be subject to the affirmative parliamentary procedure.

[Dr Whitehead]

I have nothing to add to what the Minister said. I am happy for the clauses to stand part of the Bill.

Question put and agreed to.

Clause 211 accordingly ordered to stand part of the Bill.

Clauses 212 to 214 ordered to stand part of the Bill.

Clause 215

Scheme administration

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

[The Chair]

With this it will be convenient to discuss clauses 216 and 217 stand part.

--- Later in debate ---

Clause 216 enables regulations to make provision for scheme administrators to enforce ESOS requirements, including in relation to penalties. It also enables the creation of offences so that breaches could become criminal rather than civil matters in future, should that be desirable. Clause 217 enables regulations to allow the right of appeal for anyone subject to any decisions, penalties or enforcement under ESOS. In the case of financial penalties, it requires a right of appeal to a court or tribunal.

[Dr Whitehead]

Clause 215 is about administrators and the administration of schemes, and those administrators will have at their elbow action plans determined by previous clauses. It is good to see in the context of this afternoon’s discussions that a part of the Bill has action plans as a requirement and that those action plans will be positively administered. Having a plan seems to be a bit of a sine qua non for administrators; we do not seem to have that in other parts of the legislation. The Opposition have been assiduous in trying to put that idea forward, but it is nice to see that that line has been breached at least as far as these clauses are concerned.

[Andrew Bowie]

I am very happy that the hon. Gentleman is very happy.

Question put and agreed to.

Clause 215 accordingly ordered to stand part of the Bill.

Clauses 216 and 217 ordered to stand part of the Bill.

Clause 218

ESOS regulations: procedure etc

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

--- Later in debate ---

[Andrew Bowie]

This is another short one. Clause 219 provides the Secretary of State with a power to give directions to a scheme administrator, with which it must comply—for example, when views differ over the interpretation of legislation or when the Secretary of State wishes to order a scheme administrator to remove an individual from its designated register of persons who may be appointed as a lead assessor. Clause 220 enables the Secretary of State to provide or arrange for financial assistance to scheme administrators and ESOS participants.

[Dr Whitehead]

I will just mention in passing that there is an interesting progression in clause 219, relating to directions. Subsection (1) says:

“The Secretary of State may give directions to a scheme administrator.”

So far, so good. Subsection (2) says:

“The power to give directions under this section includes a power to vary or revoke the directions.”

From that, it appears that the Secretary of State has the power to revoke their own directions—

[Andrew Bowie]

He has the power to change his mind.

[Dr Whitehead]

Indeed, but presumably if the Secretary of State changed his mind, he would not start with subsection (1) in the first place, so it is a bit of a strange formulation. I think that had the Opposition moved that as an amendment, the Minister would have said it was superfluous and unnecessary. I do not know why that particular formulation has been put in but we know that subsection (3) says:

“A scheme administrator must comply with any direction given to it under this section”—

however confusing—so it is probably all right then. But I must admit that subsection (2) looks a bit odd.

[Andrew Bowie]

I understand the hon. Member’s question and the direct answer is yes, the Secretary of State can revoke his own direction. I think it is important to set that out in the Bill and, indeed, there is precedent for it in comparable provisions in section 51 of the Climate Change Act 2008, passed by the then Labour Government.

Question put and agreed to.

Clause 219 accordingly ordered to stand part of the Bill.

Clause 220 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Joy Morrissey.)

Energy Bill [ Lords ] (Eighth sitting)

Lord Whitehead Excerpts

Committee stage
Tuesday 13th June 2023 Public Bill Committees

[The Chair]

There is no interest from elsewhere. The Question therefore is—[Interruption.] If the shadow Minister wishes to take part in the debate, he needs to let me know; otherwise, we will move on.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I did raise my hand, but it was my left hand rather than my right hand.

[The Chair]

You might stand up—that might be helpful in future—or tell me, or something.

[Dr Whitehead]

I should start by apologising to you, Mr Gray, for being marginally late. Those who know me will know that although I am usually rather close to the line in getting to my seat, I am rarely not actually there in time. I apologise for that slight problem this morning; I blame the lifts in Parliament.

The regulation of the whole system of heat networks, and combined heat and power for district heating schemes, is an important part of the Bill, which is long overdue in its arrival. Members will be increasingly familiar with district heating schemes in their constituencies, which provide heat, power and sometimes cooling both to properties and to industrial and commercial premises within a network scheme.

District heating schemes are by no means new. A number of them have been operating for many years, such as the system in Pimlico—the system in Westminster has been going for many years. Partly because such schemes have been going for many years, they have fallen out of the spotlight in terms of regulation and bringing their provisions into line with what customers expect from elsewhere in the energy system, particularly in relation to customer-facing retail and so on.

Because district heating schemes are enclosed, they are essentially monopoly providers of heat within their own area. They are generally advantageous to customers because they provide reliable heat, usually at a considerably lower price than the general market. The Government are seeking to promote the idea of local authorities extending heat networks for precisely those reasons. They are potentially very low carbon, and agnostic in terms of heat sources for the network. The key is that the network goes around a particular area, providing heat directly to people’s homes, and, as I said, to offices and industrial premises.

In many ways the schemes just do not fit: they stand aside from what customers are normally expected to pay attention to these days, and the energy, gas, heat and power that they receive. As I said, that is because the heat networks in this country, and indeed the combined heat and power systems relating to heat networks, quite often provide electricity as a by-product of the heat-engine process. But they predominantly provide heat for customers.

A number of problems relate to the customer arrangements, and customer expectations, regarding that closed system. Because each of the individual extant networks in the country is effectively a mini-business in its own right, they have at their heart an arrangement whereby a company, not-for-profit or local authority, in some instances, that runs a scheme is responsible for procuring the fuel as if it were a retail energy company for the network, and then supplying it to customers through the heat engine and the network that goes into people’s homes.

The issue for customers is quite often, first, whether the company that is providing supplies for the heat network has procured them in a reasonable and cost-efficient manner. Secondly, is the system that is delivering the heat for customers efficient in its own right? Particularly in older schemes, there are a number of circumstances in which the system provides heat to customers, but not efficiently. The pipework may be old, furred up and not functioning well. Of course, it is extremely difficult for the customer to recognise whether the system is efficient. Sometimes its inefficiency comes to light only when people start being charged unreasonably large bills. The company that is providing the service will then go through its reasoning about the supplies coming in and the service being provided, but not the efficiency of the service.

There is little customer redress in the systems because they generally are not regulated. They have voluntary regulation, run by the Association for Decentralised Energy, whereby heat networks sign up to a redress programme, but currently it covers only a minority of the total heat networks in operation. Bearing all those things in mind, as well as the system’s likely future, the system is long overdue being regulated in a way that delivers for customers the certainty of a good service, redress where the service is not so good, and access to an understanding of how the system as a whole works, and what the companies that provide the service are doing—hopefully in the interests of customers, but in some circumstances not.

The system as a whole works pretty well: most of the companies that run heat networks are honourable organisations, often set up on a not-for-profit basis to provide a district heating scheme. The issue is at the margins of those schemes that do not run their service particularly well, or that do not provide decent redress for their customers and have a monopoly situation as far as their supply is concerned.

--- Later in debate ---

[The Chair]

We now come to the Question on clauses 172 to 174 stand part—we have just debated them. With the leave of the Committee, I will take them together.

[Dr Whitehead]

Do you want to know whether I am going to withdraw amendment 101, Mr Gray?

[The Chair]

No. The hon. Gentleman should not interrupt me while I am putting the Question. In answer to him, however, his amendment 101 comes after the decision on clauses 172 to 174. I thank him for his intervention, but he is wrong.

Clauses 172 to 174 ordered to stand part of the Bill.

[The Chair]

The Question now is whether the Opposition wish to move amendment 101.

[Dr Whitehead]

I will include an indication of our position on new clause 39, Mr Gray, although I understand that any vote on the new clauses will take place at the end of our proceedings and not today. That is right, is it not? I will also say something on amendment 101.

[The Chair]

The hon. Gentleman has already spoken to amendment 101 as part of the group that we have just debated.

[Dr Whitehead]

Yes. I am seeking to state why I might wish to withdraw amendment 101, or otherwise, and in so doing I was seeking clarification, Mr Gray. My understanding is that new clause 39, which is included in the group, will not be up for a vote now, because that would come at the end of our proceedings.

[The Chair]

That is correct. New clauses come at the end of proceedings. If the hon. Gentleman wishes to move amendment 101, he may do so now. Immediately after that, we will come to the Question on schedule 16 —that is the next thing to happen. The Question on new clause 39 comes at the end of our proceedings, so is for a decision later. Right now, the only question is whether he wishes to move amendment 101.

[Dr Whitehead]

Yes. I was actually trying to save time, Mr Gray.

[The Chair]

Leave that to me.

[Dr Whitehead]

Right.

On amendment 101, I do not think that there is anything explicit in schedule 16 relating to the position of efficiency in regulation. Having had a look at the schedule again, I am confirmed in that view. I take what the Minister said about the intention to ensure that that is part of regulation, but I am afraid we are a little in the hands of what the Minister may decide about the regulations as far as efficiency goes. The Minister is an honourable one, so I am sure that he will seek to carry out what he has said today to the letter. I am therefore happy not to move amendment 101, but I note that that was one of the purposes of regulation should have been made rather more explicit in the schedule.

[The Chair]

The amendment is therefore not moved.

Schedule 16 agreed to.

Clauses 175 to 179 ordered to stand part of the Bill.

Clause 180

Regulations about heat network zones

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

--- Later in debate ---

[Dr Whitehead]

I do not have much to say other than that we now move on to heat network zones as opposed to heat networks themselves, and we will be debating what the term means and how the zones work. Clause 180 sets the stage, and as we will be debating amendments on a future clause, I have nothing further to say about this one.

Question put and agreed to.

Clause 180 accordingly ordered to stand part of the Bill.

Clause 181

Heat Network Zones Authority

[Dr Whitehead]

I beg to move amendment 102, in clause 181, page 152, line 27, after “the Secretary of State” insert

“or the Gas and Electricity Markets Authority”.

This amendment is to ensure that the Gas and Electricity Markets Authority may be designated as the regulator for heat network zones.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 115, in clause 181, page 152, line 30, at end insert—

“(5) The Heat Network Zones Authority shall be responsible to and regulated by the regulator.”

This amendment makes the regulator responsible for Heat Network Zones.

Clauses 181 and 182 stand part.

[Dr Whitehead]

We have tabled two amendments to clause 181. As far as I understand it, the clause adds to the heat network system, which, as I have said, has evolved over the years into a number of heat networks in various parts of the country.

A good idea for future heat network development would be to have a much more systematic approach and an understanding of where our heat networks may be most appropriately sited and the best conditions for them to be established. We know a number of potential good and bad conditions for heat networks. For example, a certain density of population, buildings and so on is needed for heat networks to be efficient, although there are in existence small heat networks that serve very small communities. Indeed, heat networks can range from being marginally larger than a few properties to covering large parts of cities.

There are five major heat networks in my city of Southampton, one of which serves the whole city centre and surrounding areas, and has an 18 km heat delivery pipe network. It is connected to a geothermal scheme in the city centre, so it efficiently provides heat to that whole area. It is connected not just to domestic properties but to a number of commercial users, which I think includes the nation’s only geothermally heated supermarket, civic centre, health authority centre, and so on.

One component of a decent heat network is what is in the network to validate the load that is supplied. A heat network may be just for domestic properties, as is the case in some housing developments in Southampton, but that is not the most efficient way of developing a heat network because the load from domestic properties changes seasonally. If a heat network is connected both to a number of properties—an estate or whatever—but also has industrial or commercial users, the load can be spread out and equalised over the years.

The Southampton schemes operate quite efficiently within the right places for zones. Nevertheless, it is—or should be—a function of local circumstances that heat networks are more likely to be applied in constituencies where there is a considerable gathering of industrial and commercial activities and population zones, and are less applicable in large rural constituencies, although there are some heat networks in small towns and villages. Within that zone understanding, there may be arrangements that pertain to local circumstances: for example, zones may be organised in such a way that ensures the likelihood of success for the heat network is relatively high.

I understand that this section of the Bill seeks to ensure that local authorities are required to look at research, to consider where it would be good to have a heat network and to produce a heat network zone plan, so that as we develop heat networks for the future we have a much better picture of where the schemes would work well, where investment may best go and the extent to which success is likely to be high, rather than someone perhaps taking a flyer on something that probably will not work well for the future.

We are happy with the idea of heat network zones being put into the Bill, that we approach them in the way that I have described and that they complement the regulation of the system in as much as the whole system now is much more in the mainstream of energy planning and energy futures as a whole. I hope that our amendments are complementary to the general scheme of things. They simply try to align the regulation of the heat zone development process with that of heat zones themselves, proposing that the process of heat zone discovery and development should be regulated by the same regulator that regulates heat as a whole: the Gas and Electricity Markets Authority.

It is important that there should be a regulator for this particular activity so that it does not stand alone from everything else happening as far as heat networks are concerned. I do not think that would impede the development of heat networks—on the contrary, it would assist them by making sure that the way we were bringing forward heat zone arrangements was generally of assistance to heat networks as a whole.

What if a local authority or similar body involved with developing heat network zones were not interested in heat networks? It might locally regulate heat zones in a way that did not take seriously the whole question of heat network development. The regulation of heat zone arrangements under the circumstances that I am discussing would ensure that there was a pretty uniform approach as far as heat network development was concerned. Those engaged in it would know that someone was looking over their shoulder to make sure that they were doing the job properly. That is all we want to add to the measure and I think the Minister will agree that it is a pretty positive addition. It certainly does not detract in any way from the validity of the heat network process and the idea that there are right and wrong places for heat networks. We must get them in the right places so that they can succeed for customers as well as they possibly can.

[Andrew Bowie]

I thank the hon. Member for his amendments, all of which are designed to ensure that the regulatory frameworks for heat networks and the building-up of capacity in this country for heat network zoning gets to a place that will support the growth of the industry in the future. I resist the amendments only because I feel that the powers in the Bill meet the required level of engagement and regulation necessary at this stage for what is currently a nascent but will in time become an incredibly important part of the wider energy mix.

I turn first to amendment 102, which relates to designating GEMA as the heat network zones authority. The zones authority will be a national body responsible for zoning functions that require national-level standardisation or are most efficiently or effectively carried out at a national level. This approach will allow for national standards and consistent rules to apply in the initial identification of a potential heat network zone.

As for who could fulfil the zones authority role, clause 181(3) is explicit that

“The Secretary of State may, but need not, be designated”

as the zones authority. Therefore, the clause, as drafted, already provides that regulations may appoint GEMA as the zones authority.

The zones authority will fulfil a different function from the heat network regulator, which we propose, as set out in clause 172, should be fulfilled by GEMA for Great Britain. That role will cover all heat networks, both within and outside heat network zones. We do not envisage a separate regulator for heat network zones in England.

We will specify the zones authority’s functions and responsibilities within the regulations when they are brought forward. That will be subject to further consultation in due course as we continue to develop our policy proposals, and we look forward to engaging with Parliament on that. Appointing the zones authority in regulations will allow for amendment, should that be required, as and when its functions change over time and as heat networks become more established throughout the United Kingdom. I hope that has helped to clarify our proposed approach and the scope of the powers already provided for in the Bill.

I turn to amendment 115, regarding the relationship between the Heat Network Zones Authority and the heat network regulator. As I have said, we intend for GEMA to fulfil the heat network regulator role in Great Britain. The zones authority will be a national body responsible for certain zoning functions. We will consult on who should fulfil the zones authority role in due course, but we do not consider that the zones authority should itself be subject to oversight by the heat network regulator. I hope this has helped to clarify our proposed approach regarding the zones authority and how its role relates to the heat network regulator, and I therefore ask the hon. Member for Southampton, Test to find it within himself to withdraw his amendment.

--- Later in debate ---

The clause describes what regulations the Secretary of State can make about the zoning co-ordinator. It also enables the zones authority to intervene, for example, in cases where there is a risk that a substantial heat network zone may not be realised. Those powers may be necessary in cases where a local authority fails to act or is unable to act. In those instances, the zones authority may carry out any function of a zone co-ordinator, may direct a zone co-ordinator to carry out its functions and/or may require a local authority to establish a zone co-ordinator.

[Dr Whitehead]

Once again, the bona fides of the Minister are not in any question at all, but what he is saying to us relies quite a lot on the regulations that will follow from the Bill and how the Secretary of State may designate under clause 181 a person to act as the Heat Network Zones Authority. If the Secretary of State decides that there should be a Heat Network Zones Authority, we are not sure exactly how that will come about. It may be that we do not have an authority as such, but the Department effectively operates as the authority, or a complete Heat Network Zones Authority could be set up with offices and civil servants or quasi-civil servants, although that might be a bit bureaucratically overbearing.

Again, the Bill does not specify how that authority, whatever it is, will be tucked into the system as a whole. The Minister says, “I’m sure it will be, because we are sensible people and we will make sure we do it,” but that has not been put on the face of the Bill, which is always good practice. Whatever our intentions may be today in this Committee—and they are good intentions—a piece of legislation has to stand in circumstances where those intentions may not be so good under a future Government. That is why we tabled our amendment, but I hear what the Minister has said, and that is on the record. Given my boundless trust in the Minister’s good intentions for the future, I hope that he will do what he has said regarding heat network zones authorities, and their regulation and operation. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 181 and 182 ordered to stand part of the Bill.

Clause 183

Identification, designation and review of zones

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

[The Chair]

With this it will be convenient to discuss clauses 184 and 185 stand part.

[Andrew Bowie]

Clause 183 gives the Secretary of State the power to make regulations to establish the process for creating heat network zones, which we have just discussed. In the legislation that is referred to as identifying and designating a zone. The clause also gives the Secretary of State the power to make regulations to establish the process for the review of zone designations. A review of zones could lead to changes in the boundary—for example, making the zone larger or combining two existing zones.

Subsection (2) provides that the regulations must require the identification of zones to be done in accordance with the zoning methodology, which is established under clause 184. Subsection (3) outlines further matters that the regulations may specify in relation to the designation of areas as zones. Subsection (4) outlines what may be specified in regulations regarding changing or revoking zone designations. Subsection (5) outlines regulations that can be made about the review of zone designations.

Clause 184 gives the Secretary of State the power to establish a methodology for identifying heat network zones. The methodology will standardise the identification of zones nationally. Proposals for the use of, and approach to, that national methodology received widespread support from stakeholders during the Government consultation.

Clause 185 allows the Secretary of State to make regulations about the ability of the zones authority and zone co-ordinators to request the information required to support the national methodology for the identification, designation and review of heat network zones. The clause, and the regulations that follow, will facilitate the zones authority and zone co-ordinators in requesting and receiving the necessary information to ensure that heat network zones are situated in the right locations. As I discussed in the context of zone reviews under clause 183, the location of heat network zones can be changed as necessary to reflect the impact of changing technologies and neighbourhoods over time.

[Dr Whitehead]

The Minister reflects that circumstances may change over time so it is necessary to have such a power. He is right that circumstances are not static; indeed, we may well miss a lot of good opportunities if we place too much emphasis on the static nature of what we have designated for the future. I think that we will debate, in a future clause, circumstances concerning the development of heat networks within zones, but on the changes that may be necessary in order to keep heat network zones up to date, this is a sensible provision that we support.

Question put and agreed to.

Clause 183 accordingly ordered to stand part of the Bill.

Clauses 184 and 185 ordered to stand part of the Bill.

Clause 186

Heat networks within zones

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

[The Chair]

With this it will be convenient to discuss that clause 187 stand part.

[Andrew Bowie]

Clause 186 allows the Secretary of State to make regulations about heat networks within heat network zones. That includes specifying which buildings may be required to connect to a district heat network within a designated zone. Subsections (2)(a) and (2)(b) allow regulations that specify the types of buildings within zones that will be required to connect to heat networks, when they must connect, and how they are notified of that requirement.

Subsection (2)(c) allows the regulations to specify when and how the zone co-ordinator can grant exemptions from the requirement to connect to the heat network. Subsections (2)(e) to (2)(h) allow regulations to make provision about requiring heat sources in zones to connect to a heat network. Subsections (2)(i) and (2)(j) allow regulations that provide for the zoning co-ordinator to set local limits on emissions from heat networks and any grace period to comply with that limit.

Subsection (5) allows regulations to specify when the zoning co-ordinator may or must ask a heat source to connect to a heat network, the types of heat source that can cover, and how the heat source owner can appeal against the requirement to connect. Subsection (6) allows regulations to specify how local limits on emissions from heat networks in zones are set. Subsection (7) provides details about what regulations can be made about grace periods for local emissions limits.

Clause 187 allows the Secretary of State to make regulations about the delivery of district heat networks within heat network zones. Those regulations will give structure to the zoning co-ordinator’s role and responsibilities. “Delivery” refers to the design, construction, operation and maintenance of heat networks. His Majesty’s Government recognise that there are several feasible models for delivering heat networks in zones depending on local circumstances, including the level of involvement of the zone co-ordinator. The clause, and the regulations that flow from it, aim to provide a flexible approach to zone delivery.

The engagement we have had with the heat network industry and with local government has highlighted a desire for flexibility in how heat networks are delivered within zones, as there are a range of ownership and delivery models that could be employed in the future. The Government’s expectation is that the regulations will define what decisions zoning co-ordinators and other bodies can take regarding zone delivery, with guidance from the zones authority to help inform their decisions. The clause provides that regulations may determine when zone co-ordinators may decide what heat networks are delivered in their zones, and by whom, including circumstances in which the zoning co-ordinator may deliver heat networks themselves.

The Government recognise that there is a risk that leaving decisions about zone development solely in the hands of zone co-ordinators could risk a heat network zone not being developed. Therefore, subsection 5(g) allows regulations to define the circumstances in which zone co-ordinators may lose the ability to make decisions about heat network delivery in zones. The intent is that that will happen if the zone co-ordinator has not taken certain steps to develop the zone following a set period after the zone designation.

[Dr Whitehead]

Clause 186 rather reminds me of Bertrand Russell’s definitions of propositions that are automatically members of their own class and propositions that are not automatically members of their own class, but I do not think we will debate that to any great extent this morning.

[The Chair]

No. We will avoid that at all costs.

[Dr Whitehead]

It is an interesting debate in its own right.

[The Chair]

Perhaps for some other time.

[Dr Whitehead]

For no other time, probably. Clause 186 is a relevant and necessary proposition concerning the development of heat zones and heat zone authorities, but one thing that does rather concern me is that although it is important that heat networks are able to develop in the most appropriate way and under the most appropriate circumstances, it is also important that the connections between heat networks can develop in the most appropriate way within a particular area.

I mention that point because there are circumstances in which heat networks may develop independently in parts of cities. The geographical and other siting considerations could lead to the development of interconnections between heat networks so that their joint efficacy is improved. If an extensive heat network, such as the one in Southampton, has a number of independent networks relatively nearby that have developed under different circumstances but are providing the same thing, there is considerable advantage in ensuring that they are interconnected so that they can share heat production and, if necessary, heat network inputs.

As I am sure the Minister is aware, heat networks are agnostic as to the fuel that goes into them. It could be from a heat engine, a geothermal source or a low-carbon source—hopefully, we will develop those to a much greater extent—such as multiple ground source heat pumps or hydrogen engines, which are already in existence and can replace gas engines in heat networks.

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[Andrew Bowie]

Clause 191 is the final clause in chapter 2, which concludes part 7 and the clauses on heat networks. The clause covers definitions for the heat network zoning clauses.

[Dr Whitehead]

I have nothing to add, other than “Hooray, we’ve got to the end of that part!” We now have lots of regulations in place, which is a good thing.

Question put and agreed to.

Clause 191 accordingly ordered to stand part of the Bill.

Clause 192

Energy smart appliances and load control

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

[Andrew Bowie]

Clause 192 introduces part 8 of the Bill, which relates to energy smart appliances and load control. It defines the key concepts relating to that part, namely energy smart appliances, energy smart function, load control signals and load control.

The smart energy market is in its early stages but is growing rapidly, as we discussed in detail on Thursday. As the take-up of electric vehicles and other devices such as heat pumps increases, we need to remain agile in responding to new developments in the market. This is to ensure that we maintain grid stability and protect consumers from cyber-security risks. Transitioning to a smart and fully flexible electricity system will play a vital role in decarbonising the power system by 2035. Such a transition could reduce costs by up to £10 billion a year by 2050.

I will briefly set out some key definitions. Energy smart appliances are electrical consumer devices that are communications-enabled and capable of responding automatically to signals such as energy price changes. In response to such signals, they can adjust their electricity consumption or production in line with consumer choice and cost preferences. Load control refers to the act of sending and receiving those signals and adjusting the consumption of the product in response.

Subsequent clauses in part 8 will limit powers to make regulations to products with functions such as refrigeration, cleaning, battery storage, electrical heating, and air conditioning or ventilation.

[Dr Whitehead]

We have now moved smoothly and efficiently to the question of energy smart appliances and load control; I will have something to say about load control later. The arrangements for energy smart appliances are important, given the increasing range of activities that appliances can now undertake. The specified purposes set out in clause 193—refrigeration; “cleaning tableware”, or dishwashing; “washing or drying textiles”, or using washing machines; and energy storage—are all circumstances in which things can be added to devices to allow them to operate independently, to operate at particular times and to respond to dynamic demand requests. For example, a chip can be put in a refrigerator to allow the appliance to respond to signals from outside saying, “Switch yourself off between 3 am and 4 am,” which will save some power or regulate the power in a better way.

Appliances increasingly have the potential to operate as mini-computers in their own right: they have IP addresses and various other things. It is possible to capture a series of washing machines that are smart-enabled and use them as locks under certain circumstances. Indeed, I think there was a recent prosecution of some young men who had done just that; I am not quite sure for what purpose, but they secured a number of smart devices in order to operate them in concert. It is important that we have energy smart regulations that enable us to deal with such circumstances and get them in hand. Of course, this is potentially a subset of the debate about AI and the extent to which our devices in the home may be subject to the control of other authorities entirely.

From the customer’s point of view, it is important that they know that they are in control of their own devices. Smart appliances offer various exciting advantages such as allowing people to change central heating controls before they get home, by pressing a button when they are 50 miles away, but the principle behind the security arrangements should be that the customer—the person in the home—is the eventual arbiter of how those things work. Does the Minister think that the way the clause is drafted will ensure that the customer—the person who is operating those smart systems, or who thinks they are—actually has eventual control, and particularly the consent for the operation of those smart devices in the way that we have described?

[Alan Brown]

I realise that this is an introductory clause and the Minister was doing some scene setting. The clause mentions load control signals and digital communications. I draw the Minister’s attention to my written parliamentary question No. 186867, submitted following a meeting I had with representatives of the Energy Networks Association. They tell me that to take forward a proper smart grid, the energy network companies need additional radio spectrum access. The Government need not just to put in place regulations, but to facilitate that radio spectrum access.

In response to my question, the Minister for Energy Security and Net Zero, the right hon. Member for Beverley and Holderness (Graham Stuart), said that the Government are moving forward on the issue with a study and a calculation of costs. I know that the Under-Secretary cannot write a blank cheque, but the reality is that radio spectrum access will be needed. I just put that on his radar.

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[Andrew Bowie]

I am not able to give any firm dates right now, but the Government’s hope is that we will move quickly to consultation on the regulations as soon as the Bill receives Royal Assent.

Relevant economic actors will be required to monitor and report on their compliance with the terms of the regulations, as well as to take specified steps to remedy any non-compliance. Clause 195(2) includes provision for a range of investigatory powers to track and assess non-compliance for use by enforcement authorities. Those include powers of entry, inspection, search and seizure, and powers to enable the testing of energy smart appliances by enforcement authorities. Finally, the Secretary of State may make payments or provide resources to the enforcement authority for the purpose of enforcing the energy smart regulations.

Clause 196 establishes that energy smart regulations may impose a range of sanctions for non-compliance. A full list of offences will be set out in the final regulations, on which the Government will consult publicly and which will be subject to debate in both Houses. I hope that answers the question from the hon. Member for Kilmarnock and Loudoun. The clause sets out several offences, including contravening requirements imposed by enforcement authorities or knowingly providing false information to enforcement authorities. Punishments for such offences will be provided for in regulations. The punishments will not include imprisonment. Regulations may also allow enforcement authorities to recover their costs by means of civil fines.

Clause 197 makes provision for the regulations to include a right of appeal to a court or tribunal against a requirement or civil penalty made by an enforcement authority. The right of appeal to a court or tribunal against a requirement or penalty for non-compliance, as set out in energy smart regulations, can include, but is not limited to, provisions set out in subsection (2). The right of appeal can be extended by the regulations beyond those parties against whom the requirement has been imposed. The Secretary of State may revoke or amend subordinate legislation, including an Act of the Scottish Parliament or the Senedd, where they consider it appropriate for the purpose of any provision falling within subsection (2).

Clause 198 sets out the procedure by which energy smart regulations will be made. The clause begins by setting out that energy smart regulations made under clause 193 may provide for exemptions or exceptions in their coverage. It requires the Secretary of State to consult before making regulations that subject a specific type of energy smart appliance to regulations or that amend the list of relevant purposes in clause 193. It also sets out the cases in which the affirmative scrutiny procedure is to be used when making regulations under clause 193. I commend the clauses to the Committee.

Question put and agreed to.

Clause 193 accordingly ordered to stand part of the Bill.

Clauses 194 to 198 ordered to stand part of the Bill.

Clause 199

Power to amend licence conditions etc: load control

[Dr Whitehead]

I beg to move amendment 160, in clause 199, page 170, line 3, at end insert—

“(f) regulate or prohibit the provision of load control in relation to appliances that are provided by high risk vendors.”

[The Chair]

With this it will be convenient to discuss the following:

Amendment 161, in clause 199, page 170, line 21, after “section” insert

“‘high risk vendors’ means vendors of appliances that pose potential or actual security and resilience risks to energy networks,”.

Clause stand part.

Clauses 200 to 203 stand part.

That schedule 17 be the Seventeenth schedule to the Bill.

New clause 40—Designated load controller—

“(1) The Secretary of State may give a designated load controller direction only if the Secretary of State considers that—

(a) the direction is necessary in the interests of national security; and

(b) the requirement imposed by the direction are proportionate to what is sought to be achieved by the direction.”

This new clause ensures that load controllers undergo national security checks to establish the nature of connections to potentially hostile actors and the threats they may pose.

[Dr Whitehead]

We now come to the section of the Bill concerning licensing of load control. Load control is very much associated with the previous debate, inasmuch as it relates to how energy smart appliances operate overall, and such appliances will often operate under the aegis of a load controller—a body or person who is responsible for the network within which they work. It is important that we regulate and license not only the appliance but the bodies and people that control the load arrangements that smart appliances potentially give rise to.

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[The Chair]

If the interests are declared in the Register of Members’ Financial Interests and the right hon. Gentleman believes that they are relevant to the debate, it would be prudent for him to call the Committee’s attention to the register. That is not enforced entirely, but the question is whether there might be a perception of bias. Therefore, if the Member has interests that he believes might be of importance, it is probably worth his calling them to the attention of the Committee before he speaks.

Dr Whitehead, will you be concluding in the next 20 seconds?

[Dr Whitehead]

I will not be that brief.

[The Chair]

In that case we will adjourn, it being as close to 11.25 am as it can possibly be.