Draft Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2022

Alan Whitehead Excerpts

Monday 31st January 2022 General Committees

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

It is a pleasure to serve under your chairmanship, Mrs Miller, albeit I have a slight apology to make for turning up at the very last moment. I ought perhaps to advise the Committee that the recently refurbished lift that takes hon. Members from the ground floor opposite the Strangers’ Bar does not stop at the first floor, which necessitated a rather circuitous route to get here. I apologise for being right on time, or marginally later, and I hope that the House of Commons authorities may have a look at whether the lift ought to stop at the first floor, which would be a good idea for good order in this House.

This statutory instrument is essentially uncontroversial, although the operation of the UK ETS is perhaps a little more controversial. The reason we are here this afternoon is because the SI seeks to put right an amendment order of 2020, which was put through under the negative procedure. However, the Joint Committee on Statutory Instruments decided that it should have gone through the affirmative procedure, which is why we are debating this SI.

The changes in this SI, as opposed to those in the 2021 amendment order, are minimal to the point of being nothing. What we have in front of us is an amendment to the 2020 order, clarifying and adding various things in the way the Minister has described on aviation, on unused allowances and on definitions of how certain procedures of the order would work. One could argue that those perhaps might have been put in the 2020 order in the first place, but I am pleased that they are with us now.

I do not have any particular concerns or objections about those particular things in the order itself but, since we do not get many, or any, opportunities to examine the operation of the UK ETS, it is worth considering briefly what is happening to the scheme and whether it might have been a good idea to place some further amendments to the scheme before the House, both in terms of what has happened in the EU as far as the UK ETS is concerned and what has happened during the early stages of the scheme’s operation.

I therefore have two brief questions for the Minister about the operation of the UK ETS. Although my hon. Friend the Member for Rotherham kindly sent me a note of what she intends to talk about, I will not—in the best traditions of theatre critics not to give away the plot of the play—tell the Committee exactly what she will say. However, I want to reflect on two things that are important to the operation of the UK ETS.

First, the intention of the UK ETS, at least for the first few years of operation, is that it should pretty closely shadow the EU ETS. As we know, that has not been the case. UK ETS prices have come in considerably higher than those of the EU ETS over that period. The intention behind the 2020 order, as set out in its impact assessment, has not been realised. It might have been wise to put in place linking mechanisms with the EU ETS much earlier—the Government have said they would consider doing so at some future date but have not done anything about it, as far as I know—bearing in mind that the EU ETS and the UK ETS have diverged in price in a way that was not originally envisaged.

My first question to the Minister is this. Does he intend to look at linking mechanisms with the EU ETS at an early stage to prevent future divergence, which may otherwise be increasingly wide? Among other things, businesses and commerce in this country want to be able to anticipate what will happen with carbon pricing. We do not disagree with the principle of carbon pricing, but businesses need some stability in their forward understanding of it.

Since the 2020 order, from which this amendment order derives, the EU has adopted in principle a proposal for a new carbon border adjustment mechanism. That mechanism would deal with the consequences of carbon leakage—that is, where the EU’s carbon taxes and carbon trading arrangements mean that third countries have a considerable trade advantage, because they can import goods without such arrangements attached and bring them within the EU’s borders. As far as I know, the UK has not yet taken any action on considering or implementing a carbon border adjustment mechanism. If the EU proceeds with such a mechanism, as seems likely, the UK will be in an even worse position than it is now when it comes to carbon leakage. We will be external to a carbon adjustment mechanism, so we will have punitive elements against us. At the same time, people will be able to import goods into the UK, safe in the knowledge that they are not subject to the same sorts of arrangements.

The Minister knows that various members of the Government—he is not one of them—have indicated that the UK should take the idea of a carbon border adjustment mechanism very seriously. My second question to him is this. Has he considered adding a carbon border adjustment mechanism to the 2020 order that brought about the UK scheme, as a successor to the EU ETS? If he has considered it, what action is his Department taking to forward the idea of a UK carbon border adjustment mechanism?

I hope that I have not stolen my hon. Friend’s thunder and that between us we will get some clarification at least from the Minister about how these things will work as the UK ETS proceeds. As a great supporter of carbon trading, I would say that a UK carbon trading mechanism—the UK ETS—should have been the obvious thing to introduce after the UK’s exit from the EU. I fully support that. What I am concerned about is ensuring that the UK ETS works as well as possible, to the net benefit of the UK and UK industry, rather than causing problems for it, as it sometimes looks like it might. I am sure the Minister will give me a full and frank run-down of the Government’s intentions in these areas. I look forward to hearing from him, but first I am very happy to hear from my hon. Friend the Member for Rotherham, who I think will develop this theme a little further in relation to particular businesses in her constituency.

Gas and Electricity Costs

Alan Whitehead Excerpts

Tuesday 18th January 2022 Westminster Hall

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

I congratulate the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) on securing the debate. I think the best way to sum up this afternoon’s debate is to call it a united front. I was going to say a cross-party united front, but the party that was going to be in that united front is now no longer in that party—the hon. Member for Newton Abbot (Anne Marie Morris) had the Whip removed for daring to say that there should be a VAT reduction on bills as a result of the energy crisis. I commiserate greatly with her. It is shameful that she has had the Whip withdrawn under these circumstances. I would have expected hundreds of her colleagues to vote with her on that occasion, because we all know that we have to do something urgently about the perfect storm in energy prices that is coming towards us. It is a perfect storm because it will be added to the ending of the universal credit uplift and other cost of living increases.

As my hon. Friend the Member for Makerfield (Yvonne Fovargue) eloquently put it, millions of people in this country are spinning plates every day to keep their bills, rent and other costs under control. To have a £600 increase in their bills coming their way very shortly—the decision may well be made within a couple of weeks—will inevitably cause those plates to come crashing down across millions of households. This is a crisis emergency that we absolutely have to tackle with equal emergency and resolution as the crisis unfolds.

Hon. Members have talked about both the causes of the crisis and the things that could be done about it. I acknowledge that one of the key bases of the crisis is the unprecedented increase in wholesale gas prices coming into the country, which has had a knock-on effect for electricity prices and bills. Of course, the crisis does not involve a spike in price; it is likely to be a price dome rather than a spike, and it will probably last a couple of years.

The Government are not responsible for that, but they are substantially responsible for making the crisis much worse, as a number of hon. Members have talked about. The Government have managed the retail markets with extraordinary negligence over recent years, allowing a large number of companies to come in and sell us gas and electricity, with no hedging and no serious support behind them. Some 28 of those companies have now gone bust, leaving the customer to pick up the bill, and not just for the transfers that they had to undertake.

About 4 million people have lost their supply and are having to transfer to other companies at the price cap, rather than at the prices they were previously charged, so there is an additional increase on their bills. The companies are potentially having to bear the costs, at about £100 per customer, for the carnage that has taken place with the energy companies that have gone bust and the cost of putting those companies into “supplier of last resort” arrangements.

The Government have also been negligent by allowing gas storage effectively to disappear in this country in 2016, putting us at risk, to a much greater extent, of volatility in the markets, as we have seen recently. There are a number of things that can be laid directly at the Government’s door for their stewardship of the energy economy over the last few years, in addition to what we know are the problems of world prices. That is a double reason why the Government have to act now to put right a number of the things that they have so negligently allowed to happen.

Many hon. Members have mentioned the idea of reducing VAT for an extended period while the crisis in gas prices runs through. That could easily be afforded because of the increase in VAT that the Government have received recently. A windfall tax on companies that have been supplying the gas is an important idea. After all, whether it is supplied to the UK from the UK sector, from the Norwegian sector or from liquefied natural gas, the price that it is sold for is the same in the end. International spot prices are the same, whatever the origin of the gas. That is why a number of companies supplying within the UK sector have made super-profits from this episode, and it is right that they should be subject to a windfall tax that can be clawed back for customers to reduce the level of prices that they are likely to pay.

Hon. Members mentioned increasing the level and extent of the warm home discount, which would be a particularly targeted way of ensuring that those who can least afford it—the real plate-spinners in our society—have an additional plate to spin in the shape of a much more generous warm home discount, and one that expands its range.

[Wera Hobhouse]

Will the hon. Member pick up on a point that I made? Customers who wanted to do the right thing and bought their energy from renewables only should not be subject to energy price rises when renewable prices are falling because energy supply companies can lump the prices together.

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[Dr Whitehead]

The hon. Lady has anticipated exactly what I will say in a moment. One of the wider issues about the energy crisis is how, regardless of where someone gets their energy from, what sources they get it from and who makes the energy, it is all delineated in gas prices eventually, so they pay what they would have done had they been a gas-to-electricity customer, even if they are not. Essentially, the whole market is now delineated—the wholesale market and the balancing market—around gas prices being the price-maker.

Hon. Members mentioned that the long-term issue is that we need to get off gas and go further on renewables, but—I put this straight at the Government’s door—we need urgently to reform the wholesale energy market and balancing market so that the market is not delineated in gas and it works in a way that properly reflects the increasingly dominant form of energy production that is renewables. Had we done that, although the gas price issue would have been considerable, it would not have been as damaging and as universal as it has been under the present circumstances.

I call on the Government to undertake measures that will take that terrible burden off the back of customers in the short term, ensuring that they are not subject, as they look to be at present, to the £600 or so increase that is likely to come their way in April, and indeed further increases that are likely to come their way as the price cap reflects the current price dome in gas.

I ask the Government to look seriously in the longer term at how the market has become so dependent on gas, how we have become so vulnerable to it, and how we can take measures to protect our industry and country from such volatility in the future by reorganising our market so that customers are substantially protected from it. This is an issue not just for domestic customers; it is a substantial issue for industry as well, which is groaning under the current price increases and, among other things, needs protection. I personally think that we need a price cap measure on volatile prices from outside the UK coming into the UK for industrial purposes, so that industry can have some certainty ahead of it regarding what prices it will pay for gas.

I hope that the Minister will have answers on all those issues. I know that the Government have been holding discussions with the industry about measures that might be taken, but the concern mentioned by hon. Members this afternoon is that nothing whatsoever has come out of that so far, and time is running out. The longer we do not know what we are going to do, the worse the crisis becomes. I hope the Minister can tell us what is to be done about this energy crisis.

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 11th January 2022 Commons Chamber

[Kwasi Kwarteng]

Very specifically in regard to her question, my hon. Friend will know that there is a £450 million boiler upgrade scheme, which was outlined in the CSR, that will provide up-front capital grants for the installation of low-carbon heating systems. She will also be aware that for lower-income households we have a £1.1 billion home upgrade grant, which will upgrade energy efficiency and increase low-carbon heating of non-gas homes across the country.

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

I am sure that the Secretary of State is aware that off-grid customers’ gas and oil supplies are not covered by the price cap, and that they will therefore experience even higher price fuel price increases this spring than the £600 or so now predicted for on-grid customers. Is the Secretary of State intending to provide any special assistance to off-grid customers, or is he going to let them stew alongside their on-grid neighbours, as the Government seem happy to do at the moment?

[Kwasi Kwarteng]

I think that is a complete misrepresentation of all the work that the Government have done to help customers. There are the winter fuel payments, as the hon Gentleman well knows, and £300 for 8 million pensioners is worth £2 billion. We have the warm home discount, we have cold weather payments. We have a full range of measures that will help off-grid customers in a difficult time.

Nuclear Energy (Financing) Bill

Alan Whitehead Excerpts

Report stage & 3rd reading
Monday 10th January 2022 Commons Chamber

[Mr John Whittingdale (Maldon) (Con)]

I do not want to detain the House for too long. However, I want to say a few words as the Member of Parliament for Maldon, which contains Bradwell-on-Sea.

Bradwell had been the home of a nuclear power station since the early 1960s, and it safely generated power for nearly 40 years before being successfully decommissioned. I remain a strong supporter of nuclear power, and I agree with my hon. Friend the Member for Isle of Wight (Bob Seely) that it is not a question of choosing between renewables and nuclear. We will need both if we are to achieve our ambitions, particularly our ambition to reduce carbon emissions.

The fact Bradwell has been the site of a nuclear power station for so long is probably the reason why it was chosen as one of the designated sites for new nuclear development. Of course, an agreement was reached between EDF and China General Nuclear Power Corporation whereby Hinkley Point and Sizewell would be majority owned and financed by EDF with some Chinese contribution, but Bradwell would be the site of a Chinese-designed and majority Chinese-financed reactor.

I visited China General Nuclear in Shenzhen when I was Secretary of State for Culture, Media and Sport, when the attitude of the British Government was perhaps a little more friendly towards China than it is today. At that time the Government were keen to encourage investment in Bradwell, partly because it appeared to be the only way that we would be able to finance new nuclear, as the Chinese were the people who had the resources and the willingness to do so.

My hon. Friend the Member for Isle of Wight referred to the concerns about Chinese technology, and my concern is not about the safety of Chinese technology. The Chinese reactor is now well advanced in the generic design assessment process, and it appears to be proceeding smoothly. I suspect it will be found to be safe, but there may be other reasons why the British Government are perhaps less keen on the idea of a Chinese-owned and designed nuclear power station in this country than they were five years ago. I fully appreciate and understand the reasons for that.

Bradwell is one of the few locations to be designated as appropriate for new nuclear, and the site is owned by CGN. If the Government decide it is not appropriate to build a Chinese reactor, I would still like to think Bradwell is a possible site for an alternative nuclear power station development. Whether or not the Government reach that decision on China, it is too early to say, and I am sure the Minister will not be in a position to say definitively this afternoon, but I would like to put it on record that Bradwell successfully hosted a nuclear power station for 40 years—Bradwell A—and I saw the benefits it brought to the local community. I would therefore still be positive about the possibility of Bradwell B, whoever designs and owns it.

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

I rise to speak to the amendments tabled on Report. You will be interested to know, Mr Deputy Speaker, that I would also like to talk about the Bill and its contents.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Dr Whitehead, do you intend to keep your mask on?

[Dr Whitehead]

Sorry, no—I have a general habit of wearing a mask whenever possible.

The Bill essentially falls into three parts. Part 1 concerns the designation of a company for the receipt of regulated asset base payments. Part 2 concerns the collection and disbursement of funds through the regulated asset base arrangements. Part 3 sets out a special administration regime, should a nuclear power plant be unable to carry out its obligations arising from the institution of the regulated asset base arrangement.

The Bill, essentially, is trying to produce a method for funding and getting over the line one particular nuclear power plant: Sizewell C. That is the only plant that is developed enough to be able to generate by 2030. A substantial part of the Bill is not about the general future of nuclear, or the relationship with nuclear renewables; it is about how one plant is to be financed over the next period so that it can actually start producing energy, hopefully by the end of this decade or shortly thereafter.

The Labour party supports nuclear power for the future and is particularly concerned that, for example, the Climate Change Committee has indicated that some 8 GW of nuclear power might be put in the mix for low-carbon renewable power for the future. Sizewell C is an important part of that process—indeed, getting it going is long overdue. Perhaps I can put the record straight, because the previous Labour Government, as the 2007 nuclear White Paper and the strategic planning documents of 2009-10 show, laid the basis for the present number of sites to be considered and, therefore, for nuclear power going forward.

[Bob Seely]

The hon. Gentleman is absolutely right, but unfortunately we lost a decade, from 1997 to 2007, when nuclear was taken off the table. Because of the timescales, which he is well aware of, will he just accept—this is not necessarily party political—that losing that decade put us back and is costing us now?

[Dr Whitehead]

The hon. Member is quite right that prior to 2007 the Labour Government did not consider the development of nuclear power by state means to be an appropriate way forward, although they never suggested that the development of nuclear power by private means could not be countenanced. However, we have since had more than 10 years of Conservative-led Government, which has produced precisely no nuclear power plants. Indeed, there is one nuclear power plant in the pipeline, and we hope a nuclear power plant that can be financed by reasonable means. One of the problems with the previous plant, Hinkley Point C, which the present Government got off the ground, was the funding arrangements, with EDF supplying most of the capital for the plant and then a CfD for the plant at the end, which looks like it will be quite disastrous, with future electricity prices being completely uneconomic.

It is therefore important that we get a method for funding those nuclear plants, and particularly Sizewell C, that does not fall into those traps and is also secure for the future. That is the concern of our amendments 1 and 2. To put the record straight, anyone who looks at those amendments reasonably closely will see that amendment 1 defines what is stated in amendment 2, and that it is defined as

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

That does not include EDF. Let us be clear from the outset that EDF is not

“a company controlled by a foreign state.”

Although it is substantially owned by a foreign state, it is not operating for investment purposes, but for production purposes. Let us be clear about what the particular concern is for the future.

[Richard Graham]

Please correct me if I am wrong, but my understanding is that EDF is majority owned by the state. If the state required it to do certain things, I do not see how the company could say no. Could the hon. Gentleman confirm if that is his understanding?

[Dr Whitehead]

It is correct that EDF is owned by the French state, but it is not controlled by the French state and, as I say, it does not operate for investment purposes. The amendment specifically excludes that kind of company from its provisions, but, importantly, it includes companies such as the China General Nuclear Power Corporation, which is clearly owned and controlled by a foreign state and operates for investment purposes.

[Richard Graham]

This is incredibly important. The amendment states

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

Factually, that is the situation with EDF. I do not have a problem with it, but I am trying to explain to the hon. Gentleman that his amendment does not say what he has just said it does, and it is therefore inaccurate, even by what he is trying to achieve.

[Dr Whitehead]

I am afraid we will have to differ on that. Amendment 1 has been written on good advice, in terms of what EDF does and does not do in its operation, and, on the contrary, what a company such as the China General Nuclear Power Corporation does. There is a clear distinction between those two particular companies and organisations.

The amendments wish to draw attention to the fact that this is not an academic issue. As the right hon. Member for Maldon (Mr Whittingdale) mentioned earlier, we have an agreement in place at the moment whereby the Chinese state nuclear corporation has a 35% stake in Hinkley Point C, a 20% stake in Sizewell C, should it go ahead, and complete control of Bradwell, should that go ahead, with ownership of the site and operations, and with the installation of a Chinese reactor. That agreement has already been reached, so the issue in this Bill is that if the regulated asset base is going to be put in place to finance and bring about the control of a nuclear power plant by the Chinese Government over the next period, we think that that would be a retrograde step for the future of nuclear power in this country, for obvious reasons.

In Committee, we asked the Government whether they wished to make any statement about the future of the agreement that is currently in place, which was agreed between 2013 and 2016 and includes the Secretary of State’s investment agreement, and about future arrangements for nuclear power. We asked if they could they confirm that RAB would not be used as an instrument to extend those arrangements, as far as the Chinese Government are concerned. They have not said anything about that at all; I regret that. Hence we have brought these amendments to try to clarify what RAB will be used for, what the position is concerning the 20% of Sizewell C that looks to be owned by the Chinese Government in the future, and how that relates to RAB overall. Although it is not central to the RAB debate, it is an important element in that debate and needs clarification for the future.

We did not particularly want to table these amendments. If we had had a statement from the Government that they were not proceeding with Bradwell and were going to bring an end to the arrangements that are in place for Sizewell C at the moment, perhaps things might have been different, but we urgently need some clarification about their intentions in relation to RAB and Chinese involvement in UK civil nuclear power in future. That is what amendments 1 and 2 would achieve.

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[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

I welcome these amendments because one of the concerns about RAB is that there are no safeguards, so the developer could run up costs and there would be nothing to stop them doing so. Therefore, if the Government do not accept the amendments, would it not be irresponsible to support the Bill on Third Reading?

[Dr Whitehead]

It would not be irresponsible to support the Bill on Third Reading, but it would be responsible of the Government to take a little more notice of these particular problems with the RAB process and possibly, as we move forward with its development, bring in mechanisms that can protect the bill-paying public in a rather better way than is suggested at the moment. That is essentially what the amendments do.

The arrangement for the RAB to be put into place is that a series of considerations are entered into to give an agreed expenditure cap for what is considered to be the proper use of the collection fund that will provide assistance to the company producing the new nuclear power plant. It can properly draw on that, up to a certain ceiling, from the general public. That is if everything goes well with the nuclear power plant, but of course that may not necessarily be the case. Of 176 nuclear power plants across the world, 175 went substantially over time and over budget, so we need to be very clear that we should not commit the general public to fund these proposals completely open-endedly. We are saying in these amendments that should there be a cost overrun or a time overrun, the Secretary of State should seek an increase in the agreed revenue ceiling without further recourse to customer funds. That may be by producing bonds or it may be by further state funding if that is the choice the Government wish to make, but they should not increase the ceiling for customers to pay exponentially at the same time.

These are very simple and straightforward amendments saying that, should there be such cost overruns or time overruns and there is a suggested further call on customer bills through RAB, the Secretary of State will have to think of something else to fund the system. Let us be clear that, with the RAB arrangements at the moment, it is suggested, I think very optimistically, there will be an increase of about £10 to £20 in customer bills. That is a really current topic at the moment, but a cost overrun would substantially increase such a levy on customer bills, and we just think that should not be part of the RAB arrangements for the future.

The third set of changes we wish to put in place are to part 3 of the Bill, which sets out what should happen and what arrangements should be in place if a company, despite all the investment from the public in the construction of a nuclear power plant, essentially goes bust. In this part, the Government have in effect lifted the provision in the Energy Act 2011 for a special administration regime. Again, that is rather current because it is precisely such a special administration regime that was used to rescue Bulb Energy when it went bust a little way ago. It was placed in such a regime under the 2011 Act—the wording is identical to that in this Bill—to allow it to continue trading for the time being, subject to the company being disposed of.

However, I would suggest that a nuclear power plant the size of Sizewell C, for example, is not remotely the same as an energy company the size of Bulb. It would be quite possible to dispose of Bulb or disperse its customers according to the special administration regime, but that would not be the case for a large nuclear power station. We are saying in amendment 5 that there should be an additional backstop so that, in the circumstances of a special administration regime, it would not be possible to pass the company on—to sell it on or to reintroduce it as a going concern through allocation to a subsidiary—and that the Government should have a plan to introduce a public company to take it over, provided it is working as a nuclear power station. That would not be the case—some Members may think the amendment means this—if the power station could not continue because the reactor head had exploded or the power plant was otherwise non-operational. If it is an operational power plant, we think that such a backstop should be available.

Hon. Members have mentioned what I think is the salutary case of the North Carolina energy plant that was conceived under RAB arrangements, or something very similar. Some $9 billion of customer money went into that plant, but the plant went bust, not because it was not operational, but because it was unfinanceable. Customers lost $9 billion of money, and there is no power station at the moment.

[John Redwood]

Is it not the case that, if the Government in power are faced with a big financial disaster from a very large project going horribly wrong and the company going bust, they will need flexibility to make the best decisions they can in the interests of the taxpayers and customers at the time, and it is quite difficult for us to pre-think that and embed it clearly in law?

[Dr Whitehead]

That is precisely why we wish to put in the Bill that there should be a direction in which the Government should go. Of course they should have flexibility in how they work, but we think this is an important backstop that will ensure customers do not lose their shirts in a company that goes bust after they have invested large amounts of money in its operation.

We will seek to divide the House on amendments 2 and 3 in the absence of any clear further Government commitments today in relation to. We may well be minded to support amendment 9, tabled by the SNP, should that also be put to a Division. However, I emphasise that we are happy to support the Bill overall. We want it to go through Third Reading, but we would like it to be strengthened as much as it can be by the addition of the amendments we have put forward today.

[The Minister for Energy, Clean Growth and Climate Change (Greg Hands)]

First, may I minute my condolences on the death of Jack Dromey? I shared his 12 years here and he made an enviable contribution to the House. Particular condolences to the right hon. and learned Member for Camberwell and Peckham (Ms Harman).

I am thankful for the excellent contributions we have heard today, and over the past few weeks during the passage of the Bill through the House, from Members throughout the House. I will attempt to address all Members’ comments and explain why the Government do not believe that today’s amendments should be accepted.

I turn first to new clause 1, tabled by the hon. Member for Kilmarnock and Loudoun (Alan Brown) for the SNP, regarding the special administration regime, but before I deal with his amendments, let me reflect a little bit on the contribution by my hon. Friend the Member for Gloucester (Richard Graham). The SNP, as we know, is talking today about transparency, but its real agenda is a hardcore anti-civil nuclear power agenda. This comes, ironically, just a few days after the closure of the Hunterston power station, which had its life extended by two decades beyond what was predicted and provided 31 years—31 years—of zero-carbon electricity to every home in Scotland. The Bill would make things cheaper, but I do not think that the SNP has got Scotland’s best interests at heart here for Scottish electricity or Scottish consumers.

Nuclear power has been a massive success story in Scotland, which is what I hope the Bill will also enable. New clause 1, tabled by the hon. Member for Kilmarnock and Loudoun, would severely risk the effectiveness of the special administration regime by delaying the speed at which an administrator could access funding to continue a nuclear RAB project construction or a plant’s generation of electricity. That could result in significant sunk costs for consumers and is not in the public interest.

I will turn now to Labour amendments 1 and 2, tabled by the hon. Member for Southampton, Test (Dr Whitehead), while responding to some of the points made in the debate. The hon. Member and I are aligned in our concern that foreign investment in our critical infrastructure should not come at the cost of national security. However, I want to be clear that the Bill is not about decisions on individual future projects; it is about widening the pool of potential investors and financing while reducing our reliance on state-owned developers to build new nuclear power stations. As the House is aware, we have committed to taking at least one project to final investment decision in this Parliament, subject to value for money and all relevant approvals. We are in active negotiations on the proposed project at Sizewell C. The hon. Member argued that the approval of Hinkley Point C would inexorably lead to the approval of other projects. That is simply not the case. Decisions on nuclear projects in this country are made on a case-by-case basis, and subject to a number of robust approvals from both Government and independent regulators.

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[Dr Whitehead]

The Bill, as its title suggests, is about how to finance nuclear power. We know that the Climate Change Committee has indicated that some nuclear power is needed in the future as part of an overwhelmingly renewable energy mix. The Bill is therefore important in ensuring that we get at least the next, and only, nuclear power plant that can generate power by the early 2030s in place and developing, as the prospects of a new plant elsewhere seem bleak.

We welcome the arrangements that the Bill will make for financing nuclear power. We need to remember that there has been a 10-year hiatus, during a time of Conservative Government, in bringing forward any nuclear power, so the Bill is welcome, but overdue. We hope that with the RAB model in place, Sizewell C will be able to reach financial closure and go ahead.

We ought to understand both the advantages and possible problems of a RAB model, in the context of the people who will fund it from their bills. Although RAB has been used for other projects, a RAB model of the size and scale needed for Sizewell C has never been attempted. We urge the Government to be very careful about how they deploy the RAB model in terms of the customer interest, to not just regard customers as a milch cow for overruns or time delays in nuclear power for the future, and to ensure that the customer contribution is properly regarded as far as nuclear power development is concerned. We think the Government should pay closer attention to customer involvement in RAB, particularly because, on this occasion, the customer is funding the nuclear plant before, and not after, it develops. Careful stewardship and close custody of how that RAB model is used is vital.

The question of ownership of plant is important for UK national security. Although the Government have rejected our amendments about foreign influenced or owned investment in nuclear power in the future, we all know what that is actually about—the role of China and the Chinese state nuclear corporation, the China General Nuclear Power Corporation, in Sizewell C, and the possibility of them owning the nuclear power plant at Bradwell in the future. Despite the Government’s bluster, we know the arrangement is now in place for that development to succeed. Is that a wise way to go with nuclear power in the future, we ask?

We consider it imperative that the Government are clear about what they think about Chinese involvement in the very near future, and that they plot a clear course whereby this RAB investment is not the vehicle for the realisation of China’s developing and owning a nuclear plant in the UK, with all the security implications that has. I urge the Government to come forward at an early stage with clarity on what they consider to be the future for that arrangement. As the Secretary of State knows, that was not arranged on his watch, but in 2013 to 2016, before he was a Minister. I hope he will be able to cast an eye over the arrangement, with a view to the future that he has set out today.

With my party being in favour of nuclear power, I repeat the question asked by the hon. Member for Kilmarnock and Loudoun (Alan Brown) about the £1.7 billion in the Red Book at the last Budget for the completion of the project. Is it about buying off China? Is it about developing this project? Is it about funding further nuclear power for the future? We have no clarity at all, as we have only one line on that investment, which is not good enough. We need much more clarity for the future.

The health and welfare of Springfields is vital to this development, as it could be and should be supplying nuclear fuel rods to the new plant, and we hope the Government will look carefully and sympathetically at the future of that company, because the delivery of British fuel rods to a British nuclear reactor is very important for the future. It is vital that the Government do not allow the company to slip away under their watch when its contribution could be so important to the future of nuclear power in the UK.

Overall, we see much to support in this Bill and believe that, properly executed, its provisions will be able to establish a viable way forward for UK nuclear power. We therefore wish to support its Third Reading.

Draft Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021

Alan Whitehead Excerpts

Wednesday 15th December 2021 General Committees

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

It is a pleasure to serve under your chairmanship, Mr Gray. I am afraid that this morning we cannot beat the record for the briefest Committee sitting, but I hope we will get reasonably close, because the Opposition not only have no wish to divide the Committee, but positively welcome the changes proposed.

The draft regulations are particularly welcome because of the importance of what the climate change imperatives facing large companies in the UK mean for the assumptions and practices—for example about the long-term duration of assets in the ground, or fossil fuels—that were previously widespread in the industry. The required disclosures will ensure that companies are clear about the risks in their operating portfolio, particularly the risks of stranded assets. Across the world, as the impact assessment suggests,

“a third of oil reserves, half of gas reserves and 80% of coal reserves should remain unused in order to meet the target of 2 degrees rise above the average global temperature of preindustrial times.”

A number of larger companies have such assets, so it is absolutely right that the risks related to continuation should be set out in their company accounts.

I could give a number of other examples, but for the sake of time I will not go into them. I think we agree that this measure to secure transparency is important for future investors’ consideration of companies. Disclosures in company accounts will be important, as will the level playing field for everybody concerned as a result of the mandatory nature of the changes made. The impact assessment mentions the alternative scenario of voluntary disclosure, but considers that the regime should be mandatory for reasons of a level playing field and because companies might otherwise consider that they would get a first mover disadvantage by disclosing when others do not.

What is not immediately apparent in the draft regulations is what sanction will be in place for companies that do not comply. Because the draft regulations are effectively folded into the Companies Act 2006, I assume that there is some form of sanction under that Act to distinguish the requirement as mandatory. I am sure the Minister agrees that if there were no definitely attached sanction, an arrangement stated to be mandatory would be no different from a voluntary arrangement. I hope that the Minister can assure me that a sanction is attached to these arrangements. It would be very helpful to the Committee if he outlined what that sanction is and how it might be applied.

Community Energy Schemes

Alan Whitehead Excerpts

Tuesday 30th November 2021 Westminster Hall

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

I congratulate the hon. Member for Bath (Wera Hobhouse) on obtaining the debate this afternoon and on putting forward the case for local energy, particularly for a community energy Bill, in such a succinct and complete way. That means I do not have to say all the things that I was going to say about a local community energy Bill, other than to say that we on the Opposition Benches thoroughly support such a Bill. We think it would make a tremendous difference to the way that local energy can move forward.

At its heart, it has a simple proposition, which is that people should be able to sell the energy they produce to their neighbours, their friends, the people down the road, their local industry and shops. As we can envisage, that sort of environment would not only make a tremendous change in how people relate to their own energy, but would potentially be a great step forward in the appreciation of what we need to do, as far as energy is concerned, in the low carbon environment we will have in the future. Energy is something that people do, rather than something they simply receive. That seems to be the essence behind the idea that people can sell the energy they produce to their local community.

It is a simple proposition and we know what a difference it would make, so why not just do it tomorrow? What are the barriers in the face of the proposal? To go to the point made by the hon. Member for Waveney (Peter Aldous), we seem to have been here on a number of occasions. He has a similarly long pedigree in talking about the same issues that I have raised, both on the Environmental Audit Committee and elsewhere. He is right that we seem to turn up in the House talking about this issue on a fairly regular basis, and nothing whatsoever changes.

My particular involvement in the issue goes back to a 2013 Energy and Climate Change Committee inquiry on local energy, which I chaired, that looked at the barriers to how local energy can go forward, remarked that there was not a great deal of local energy going on and talked about the potential for local energy. We have heard this afternoon about the potential from now on, but at the time we were saying we could have perhaps 3 GW of local energy overall in this country by 2020. What have we got today? About 270 MW, something like that.

If we look at the various projects have contributed to that 278 MW, we have heard mention of a number of the co-operatives and organisations that have actually produced local energy, but pretty much to a project—I have seen a lot of projects in my time—they have been carried out with heroic dedication, overcoming tremendous obstacles and, in some instances, have failed at great cost to themselves and other people. It would be so easy just to make it possible for those schemes to happen. I congratulate and commend all those people who have generated the 278 MW of local energy that we have so far. The fact that we have any at all is a remarkable tribute to them, not to the system we have.

That is where we need to be very clear. The obstacles in the way of local energy are very much about the question of local supply, but there are a lot of other obstacles as well, which hon. Members have mentioned this afternoon. The idea is that people are trying to set up a local scheme to produce a pretty modest amount of energy for local consumption, important though all those local schemes are in terms of aggregation across the country. However, people have many obstacles to overcome and are required by the planning system to get permission in place. They need to spend perhaps a million pounds per project just to get a modest scheme going. If the rules were different, people would be able to put that million pounds into the development of the project and not throw it away on a possibly unsuccessful scheme in the first instance.

         The hon. Member for North Devon (Selaine Saxby) gave the example of the local brewery getting its cars on the road. People might think that is a fanciful example, but it is absolutely how the grid system works at the moment. There is an assumption that every single electron that is produced goes literally from Land’s End to John O’Groats and back again before going into a lightbulb and that it is charged as such, even if it had come from two doors down the road. That is the assumption. The introduction of local energy into the system is often regarded as a tremendous nuisance and loss of load. We cannot actually see where it is, and it is not easy to balance in the grid. That means that the last to get connections into the distributing grid are the local energy schemes. The charging regime for those schemes, once in operation, assumes that they are national schemes, just locally based.

[Wera Hobhouse]

I listened very carefully to the hon. Gentleman’s explanations about the complexities of the grid. Does he agree that, when thinking about licensing for a new devolved scheme, we need to look at things such as liabilities when there are outages, for example? It is not impossible to overcome these difficulties.

[Dr Whitehead]

The hon. Member is absolutely right. It is not particularly difficult to overcome these problems. I am emphasising this deep mindset of how the grid works that has been with us for a long time. The hon. Members for Strangford (Jim Shannon) and for Kilmarnock and Loudoun (Alan Brown) mentioned the fact that the grid was designed for a bunch of providers to produce x amount of energy, which would go through the grid until it got to a lightbulb. The world is completely different these days, but the grid still operates as if that were the case. That is inimical to the success of local energy projects.

As the hon. Member for Bath says, it would not be difficult to fix that, but there is a problem. Ofgem and, to some extent, the Department are particularly concerned that if we start dismantling the grid in its old system and localise it to enable the development of local energy in the way we have discussed, there could be distortions in that original system. I suspect the Minister will talk about some of those distortions, but let us be clear: they are distortions to an old system that does not work. We actually need those distortions to come into place to make the new, low-carbon overall renewable system work in the first instance. Making local energy work in that context is a very important change we need to make.

We need to make these changes to the system as a whole. We need to get the grid on to a much more friendly basis for local energy. We need to make the possibility of local energy much more real in terms of the hurdles it needs to overcome before it can get going. We need to have positive Government support for the development of expertise and the assistance and support that local energy schemes need to go ahead. That particular area, with the preponderance of volunteers in the local energy system, would be really good to have as a draw-down arrangement for local energy for the future.

Yet again we are meeting with the idea that the future for local energy could be really bright, but I fear that we will be here in a few months’ time talking about the bright future that has not quite emerged, but may in the future. We have not got time any more to keep going round the houses before we get to a decent settlement that will allow local energy to proceed. Local energy is so important, as we have heard this afternoon, for the future of low-carbon renewable energy.

I was delighted that the Local Electricity Bill has been amended to ensure that local energy is low carbon and renewable, so that we do not have diesel reciprocators coming in and providing local energy as a result of the ability to get a local licence. That is a very good amendment, and adds further to the Bill’s force.

I have questions for the Minister that are similar to the three questions asked by the hon. Member for Bath. I hope that he can give us some reassurances about the Government’s earnestness to bring about changes to the grid arrangements that can underpin local energy, and that they will be treated as a move forward as opposed to a distortion of the system. The answer to one of the questions posed by my right hon. Friend the Member for Leeds Central (Hilary Benn) about the German system is that cities in Germany, in many instances, own their own grids—and are doing so in increasing numbers. Germany does not have the grid system, a system that is regarded as just common sense in the UK. We have to turn that common sense around and start from the bottom up, with grid and district-grid management, rather than assuming that we should work from the top down. If we do that, then there will be a fundamental turning of the tide in favour of local energy for the future. I look forward to what the Minister has to say. I hope he will be fully supportive of the local community energy Bill, but I hope he will also be understanding of what differences need to be made to the system to allow local energy to come into its own.

Nuclear Energy (Financing) Bill (Sixth sitting)

Alan Whitehead Excerpts

Committee stage
Thursday 25th November 2021 Public Bill Committees

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

May I welcome you to the Chair, Mr Gray? It is a pleasure to serve under your chairmanship. I will be brief.

Clause 31 is the first clause of part 3 of the Bill, which establishes a special administration regime for relevant licensee nuclear companies, or RLNCs. In the unlikely event that such a company becomes insolvent during the construction or operation of the power plant, the Secretary of State, or the authority—that is, Ofgem—with the Secretary of State’s permission, may apply to the courts for the appointment of a special administrator. The objective of the administrator would be to ensure that electricity generation commences, or continues, until it is unnecessary for the administration order to remain in force for that purpose.

The introduction of a special administration regime will reduce the risks of customers being deprived of the benefits of the building of a nuclear power plant using a regulated asset base model compared with normal insolvency proceedings. It also reduces the risk of requiring a replacement source of electricity generation, which may further increase the cost of electricity to consumers. The clause defines the relevant terms for this part, which are necessary for the effective functioning of the legislation. I therefore urge that the clause stand part of the Bill.

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

I thank the Minister for setting out what the clause is about. Hon. Members will recognise that the clause is deeply embedded with the rest of the clauses in this part of the Bill. Further clauses spell out in greater detail what clause 31 talks about. Hon. Members will also be aware that we have an amendment to the following clause to be discussed, which, were it to be agreed, would have implications for clause 31. Although we do not wish to oppose clause stand part, we would like it to be noted that when we discuss the amendment to the next clause we will refer back to clause 31 as one of the reasons why the amendment was tabled and the difference that might make to the whole part, should it be passed.

[The Chair]

Order. I am ready to be advised on this matter, but I suspect that if the Opposition believe that amendment 18 would have a consequence for this clause, it would have been necessary to table an amendment to this clause, or we would have to revisit this clause later. The Clerk advises that we cannot revisit. In other words, if we pass this clause stand part now, it will not be possible to amend it later. Let us cross this bridge when we come to it. That might be the sensible way forward.

[Dr Whitehead]

Mr Gray, if the amendment were to be passed, I do not think it would have an effect on clause 31. I merely raise the issue because we will be talking about all these issues in clause 32.

[The Chair]

That is fine.

Question put and agreed to.

Clause 31 accordingly ordered to stand part of the Bill.

Clause 32

Objective of a relevant licensee nuclear company administration

[Dr Whitehead]

I beg to move amendment 18, in clause 32, page 24, line 24, at end insert—

“(5A) In the event that a relevant licensee nuclear company cannot be rescued as a going concern, or if a transfer of the undertaking to a wholly owned subsidiary does not result in the establishment of a going concern, the Secretary of State must establish a Government-owned company into which the assets, liabilities and undertakings of the relevant licensee nuclear company may be transferred in order to allow electricity supply to be commenced or continued at the nuclear installation in respect of which the relevant nuclear licensee holds a nuclear licence.”

Where a failed company cannot be rescued as a going concern or successfully have its assets transferred to a subsidiary, this amendment would require the Government to establish a Government-owned company to allow operations to continue.

The amendment goes to the heart of this part of the Bill, which deals with a special administration regime for when a nuclear power plant cannot get to production levels—in other words, when the nuclear power plant is not completed at the point at which the company that is constructing it effectively goes bust—or is in production but the company that is responsible for the management and operation of it goes bust at that point. The special administration regime is put in place, as the Minister says, to protect the interests of the customer, in terms of the sums they have put into the whole arrangement through the counterparty. We discussed how that works in a previous sitting of the Committee.

We certainly welcome the setting out of the provision in part 3, because it is important in providing a backstop in case of failure, during either construction or production, of the company that is involved in doing it. That company will have gone through the process of designation, licence modification and so on, and is therefore deeply involved in the nuclear power station at that point. Although we welcome the provision, analysis of how the clause works suggests that there are potential deficiencies in the end outcome of the process that is set out. I say that partly because, as I am sure hon. Members will be interested to know, the clause is closely modelled on the special administration regime set out in the Energy Act 2011. Of course, the 2011 special administration regime is oddly pertinent this morning because of the collapse of Bulb Energy and the decision by the Secretary of State to invoke sections of the Energy Act to establish a special administration regime over and above the supply of last resort, which was previously the method used for assuring customers about their supply when energy companies went bust. On this occasion, the Energy Act has come to the rescue.

There are lots of questions about how the regime under the 2011 Act will work, but it is sufficient for us to note the closeness of the text and direction of part 3 of the Bill to sections 94 and 95 of the Energy Act. Hon. Members will have to take it on trust that the wording is so similar, but they are very welcome to go and look up the relevant piece of legislation. I have a copy in front of me, and if this were an undergraduate essay that I had to mark in a previous life, I would be immediately on the phone to the department to say that my student had been guilty of substantial plagiarism.

Of course, there is a substantial difference in the application of those two pieces of legislation. One is applied to a failed energy company, about which a number of things can be done fairly quickly, such as seeking to revive the failed energy company through a period of administration and then relaunching it at a later date, when circumstances have changed—in this instance, perhaps when the high fuel costs have abated and the company, with different set-ups, might be a going concern again. The options are to launch it as a going concern, to pass it on to other buyers—which is very possibly the case with Bulb Energy—or, as an extreme, to eventually close the company down and parcel out its customers to other companies. According to the 2011 legislation, there are a number of fairly obvious routes that end that period of administration.

That is not the case for a nuclear power station. It cannot be divided up; it is a huge, multibillion piece of investment on the books of the company, and in this case largely supported by its customers paying into the regulated asset base arrangement. The idea that a company might easily come along and say, “I know, we’ll take over the assets of this nuclear power station and run it ourselves” is a fairly unlikely proposition, as we have seen from events around the world. Nevertheless, the wording of the clause follows the 2011 wording closely enough to suggest that that would be relatively easy in the case of a nuclear power company failure.

As the Minister has already outlined on the previous clause, the court would make an order to the nuclear company to go into administration, and

“the affairs, business and property of the company are to be managed by a person appointed by the court”—

that is, an administrator. The objective, stated in this clause, is

“that electricity generation commences, or continues, at the nuclear installation in respect of which the relevant licensee nuclear company to which the administration relates holds a relevant licence”—

that is, generation continues under administration—or “that it becomes unnecessary” through two means that are set out in the next subsection:

“the rescue as a going concern of the company”

or transfers of that company that fall into the next subsection, whereby the company can be transferred to another company or two or more different companies.

As such, the path that would be followed in this instance is that an administration order would be made; the company would be kept running in the meantime; and the alternative outcomes would be that the company either becomes a going concern again as a result of administration, or is effectively sold to another company or two or more other companies. Failing that, this clause appears to suggest that that special administration continues forever. That is the conclusion one has to reach when reading these subsections.

--- Later in debate ---

[Greg Hands]

I thank hon. Members for their speeches for and against amendment 18. I remind the Committee that a relevant licensee nuclear company, or RLNC, is one that has had its licence modified under part 1, clause 6(1) of the Bill and has entered into a revenue collection contract. An RLNC administration order is made by the court in relation to an RLNC and directs that, while it is in force, the company is to be managed by a person appointed by the court. That is defined in part 3, clause 31(1), which we have just debated.

Amendment 18 addresses the course of action that the Government must take if an RLNC administration order is in force, but an RLNC cannot be rescued or a transfer envisaged by clause 32(4) effected, namely a transfer of the undertaking of the RLNC to a subsidiary that results in a going concern. The amendment seeks to ensure that, in this scenario, the plant will commence or continue electricity generation under public ownership. The amendment would require the Secretary of State to move the assets, liabilities and undertakings of the RLNC to a Government-owned company, even if a transfer envisaged by clause 32(3) to one or more companies would achieve the objective of the administration order. The amendment would put in place a new process. Although the amendment does not address who must make the assessment that the objective cannot be achieved by the means specified, it appears to limit the available options before the power plant is moved into public ownership.

First, obviously, I thank the hon. Members for Southampton, Test, and for Greenwich and Woolwich for their clear desire to ensure that a nuclear power station will commence or continue the generation of electricity—on the face of it, that seems a very reasonable objective—and for recognising that the special administration provisions add a valuable layer of protection in this area. Ultimately, that is why they are in the Bill. However, I do not consider it necessary to place a statutory requirement on the Government to take ownership of a plant in the unlikely event that a special administration fails in its objectives, because the provisions for the energy transfer scheme, applied by clause 33, already serve this purpose. The amendment may even inadvertently lengthen the period of an RLNC administration order, as one assumes that the Government-owned company would, for example, need to apply for a new nuclear site licence.

In the unlikely circumstance where rescue cannot be achieved and it is unnecessary for the administration order to remain in place, the Secretary of State—or the authority, Ofgem, with the consent of the Secretary of State—may apply to bring the administration order to an end. Once the administration has ended, the Secretary of State may prepare a nuclear transfer scheme, which would bring the plant under the control of a public body, or, for example, the Nuclear Decommissioning Authority. In such a scenario, it is envisaged that the plant would then be decommissioned and cleaned up. However, the Government would still retain the option to move the power plant into public ownership and, if deemed in the best interests of consumers and taxpayers, commence or continue the operation of the plant.

Let me say in response to comments made by the hon. Member for Kilmarnock and Loudoun that there may be circumstances in which discontinuing the project and having it safely decommissioned is in the best interests of both consumers and taxpayers. That will ultimately be down to a value-for-money process that asks: what is the best deal here for consumers and taxpayers? The Office for Nuclear Regulation may have shut down the plant for safety reasons; there may have been an environmental or security incident, or maybe something else happened that meant that trying to make that plant commence or continue to generate electricity was not in the interests of consumers or taxpayers. It is important, then, that the Secretary of State retains discretion to act in whatever way will achieve the best outcome for consumers and taxpayers during the insolvency of a relevant licensee nuclear company.

I stress to the Committee that the likelihood of those scenarios is, of course, very remote, as indeed is the likelihood of a nuclear administrator ever being appointed. I thank the Opposition for their forward thinking and consideration of what would happen in such a scenario, but I hope that I have assured the Committee that it would not be sensible to tie the hands of the Government in such a way that they had to commit further taxpayer money to a project without being able to balance that against the merits of doing so. The amendment would create an automatic process, but the Bill provides sufficient flexibility to allow the Government to pursue the option that the amendment provides for if they consider such a decision to be in the best interests of consumers and taxpayers. I therefore ask the hon. Member for Southampton, Test, to withdraw the amendment.

[Dr Whitehead]

I thank the Minister for his consideration of the processes by which a power plant might need to be rescued and/or decommissioned and/or discontinued. I think he will recognise, however, that the circumstances in which he says ministerial discretion would need to be exercised are an unlikely part of an unlikely scenario of an unlikely future.

The Minister gave the example of an accident, or something else, closing the plant down, so that it would have to be decommissioned and could no longer produce power. That would need to be done anyway, even if the company was placed in Government hands, so I do not think that those circumstances affect the path I have set out relating to Government interest in a plant that could not be bought out of administration because it was a going concern, or because it had been sold to another company—unless the Minister has it in mind that the sale of a nuclear company to another company would be done on a peppercorn basis, in which case the nuclear plant would lose all the value that the bill payer had invested in it.

In any event—this is what concerns me about the intervention by the hon. Member for Kilmarnock and Loudoun—the whole purpose of the RAB model is to produce a working nuclear plant that was invested in up front by members of the public and bill payers. That plant would then produce power as a reward for that up-front investment. If we easily closed a plant down because it was insolvent, we would be overthrowing the whole purpose of the RAB scheme, which is for the public to get something back, and we would be back to the instance that we talked about early on in Committee.

[Alan Brown]

The hon. Gentleman is right about the purpose of the RAB model, but would the unlikely event of insolvency not just confirm the failure of the RAB scheme? We should not keep throwing good money after bad in the event of such a failure.

[Dr Whitehead]

The hon. Member is right that in the event of an utter catastrophe, where the nuclear core does not work, the concrete casings are seriously deficient and the whole thing has to be closed down, we are in a scenario—this was sort of suggested by the Minister—where it would not be viable to continue the project. However, where it is in principle possible, electric power production in the plant should continue, because billions of pounds of customer payments will have been invested in the plant.

--- Later in debate ---

[The Chair]

We have had a substantial debate on clause 32 already, so I will put the question on it.

Clause 32 ordered to stand part of the Bill.

Clause 33

Application of certain provisions of the Energy Act 2004

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

[Dr Whitehead]

I have a brief question for the Minister on clause 33(7)(b), concerning the application of section 171(1) of the Energy Act 2004. It says:

“omit the definition of ‘non-GB company’.

I am slightly mystified as to why that is in the clause, because so far as I can see, the definition in section 171(1) of the 2004 Act of a non-GB company is perfectly reasonable and should continue to exist. Perhaps the Minister can shed some light on that.

[Greg Hands]

I have to confess that I am not able, at this moment, to shed light on subsection (7)(b) and why section 171 of the 2004 Act should be so amended. I pledge to write to the hon. Gentleman—I will copy in Committee members—to clarify why omission of that part of the 2004 Act is proposed.

[The Chair]

Is that acceptable, Dr Whitehead?

[Dr Whitehead]

Yes. I thank the Minister.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.

Clauses 34 to 42 ordered to stand part of the Bill.

Schedule

Minor and consequential provision

Question proposed, That the schedule be the schedule to the Bill.

[Dr Whitehead]

I suspect that the Minister may also want to write to me on this. Paragraph 4 deals with consequential repeals. I am familiar, as I am sure everybody is, with the works at the back of any Bill amending various Acts to bring them in line with the amendments made in the Bill, or in some instances repealing measures that are replaced by provisions in the Bill. I have no dispute with the way that various Acts are to be amended in the schedule.

However, the consequential repeals—I have tried to follow them through in the way I described to the Minister in our recent discussion on form guides—include repeals of section 6(10)(b) of the Smart Meters Act 2018 and section 11(2) of the Domestic Gas and Electricity (Tariff Cap) Act 2018. These actually do the same sort of thing: delete sections of various Acts regarding licence modifications. Having looked through how these two provisions apply and why they are being repealed, I cannot see what on earth they have to do with nuclear energy financing. While I am sure that this would not have anything to do with somebody trying to put a couple of repeals in the back of a Bill even though they are not strictly in scope, I would like some assurance that these repeals are actually relevant to the forthcoming Act. If they are relevant, how? Why is it necessary to repeal two provisions that, on the face of it, do not appear to have anything to do with the Bill? I am sure the Minister will be happy to write to me to set out why that is the case.

[Greg Hands]

Yes, I think I will write to the hon. Gentleman, if I may. I am told that it is to remove a double label in the legislation, so it is purely a tidying up exercise. I will write to him, copied to members of the Committee, and for convenience I may combine it with the letter mentioned in the previous debate. It would be convenient for the Committee to have that letter well in time for Report, in case Committee members wish to consider following up with an amendment on Report.

Question put and agreed to.

Schedule accordingly agreed to.

Clauses 43 to 45 ordered to stand part of the Bill.

New Clause 1

Report on expected costs

“(1) Prior to exercising the power under section 6 (1), the Secretary of State must lay a report before Parliament.

(2) The report must set out—

(a) the expected overall capital cost of the prospective projects;

(b) the expected up-front cost of the prospective projects.” —(Alan Brown.)

This new clause would require the Secretary of State to set out (a) the overall capital cost; and (b) the expected up-front cost of the prospective projects prior to exercising the power under Clause 6 (1).

Brought up, and read the First time.

--- Later in debate ---

[Greg Hands]

On a point of order, Mr Gray. I would like to thank you and Ms Fovargue for your excellent chairing of the Committee, getting us through this important process efficiently and effectively. This has been a very interesting debate on a very interesting Bill on a very interesting topic, which attracted broad interest across the House. I have to confess that this has none the less been a relatively uneventful Committee, but for connoisseurs of the topic, it will provide many future years of reading as to how nuclear financing was scrutinised by the House of Commons so effectively and in significant detail.

I thank the excellent witnesses whom we heard from last week and all members of the Committee for their constructive debate. That has allowed the Bill to go through significant scrutiny, and facilitated important discussions. I also thank the Whips—the Whips must always be thanked—on both sides for their efforts and their effective management of the time. I offer my thanks to the Clerks, the Hansard reporters, the Doorkeepers and, indeed, all the parliamentary staff, and to my excellent team of Department for Business, Energy and Industrial Strategy officials, for the smooth proceedings and ensuring that we have all been well looked after and have finished with the Bill well scrutinised, but in good time. I look forward to the next stages of proceedings on the Bill and the continued insight from colleagues across the House.

[Dr Whitehead]

Further to that point of order, Mr Gray. I would like to associate myself with the Minister’s remarks about the passage of the Bill and with the thanks that are due to the many people who took part in its processes, from witnesses to hon. Members here today. A number of them were, I know, somewhat tested on occasion by the detail into which some amendments went. But overall, we have had good scrutiny of the Bill, facilitated by the courteous way in which the proceedings were conducted. I thank the Minister for those courtesies in how our debates proceeded, and I thank you, Mr Gray, for your excellent chairing of our proceedings.

[Alan Brown]

Further to that point of order, Mr Gray. In a similar vein, I thank yourself and Ms Fovargue for chairing the Committee. I especially thank the Clerks for all they have done, and for the assistance they have provided with drafting amendments and new clauses. I must admit, although the Minister has said that some were not relevant, I trust the Clerks’ judgment more than I trust the Minister. I do not mean that to be facetious.

Energy-intensive Industries

Alan Whitehead Excerpts

Wednesday 24th November 2021 Westminster Hall

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

This has been an excellent debate, involving Members on both sides of the Chamber. It has focused on the two things that are absolutely essential for energy-intensive industries. The first is how we deal with the present spike, as it is called—although it is, in fact, a dome—in energy prices, how they affect energy-intensive industries and what action might be taken to alleviate their suffering as they attempt to cope with, and continue to plan their activities on the basis of, those unprecedented price rises. This time last year, gas was 39p a therm, but it is now well over 200p a therm. That is an enormous, fivefold increase in the price of gas, and that of course runs through into electricity prices. It is absolutely crucial for energy-intensive industries to have a stable price environment, and it is essential for their future plans and competitiveness that they have knowledge of what the future environment might be.

Secondly, the biggest challenge for the future, as mentioned by hon. Members, is how we decarbonise those vital energy-intensive industries so that they continue to produce in and for the purposes of the UK. We should not export energy-intensive production but decarbonise it, so that it continues to operate in the UK as effectively as it has done in the past. In that context, my hon. Friend the Member for Aberavon (Stephen Kinnock) pointed out that steel is not a sunset industry but very much an industry of the future. Our efforts to decarbonise such industries should not be seen as a means of closing them down or of removing elements of their activities because they are sunset industries and others can decarbonise. Our energy-intensive industries need to be decarbonised so that they continue to play a central role in future production.

We have heard excellent advocacy this morning. I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on securing the debate. He is one of several Members present from Stoke, home to the crucial ceramics industry. I also congratulate Members on both sides of the Chamber on their strong advocacy on behalf of the steel industry and on their clear understanding of what we need to do about energy-intensive industries.

It falls to me to remind Members that energy-intensive industries are not just about ceramics and steel. A little while ago, the Government helped energy-intensive industries with energy prices by exempting them from some levy costs. There was a list of 70 different sectors that are energy-intensive industries, including the manufacture of malt, the weaving of textiles, the casting of iron, the manufacture of batteries and accumulators, the manufacture of corrugated paper, rubber products, plastic products, technical ceramic products, cement, metal packaging and electronic wires, and metallurgy. Those are all energy-intensive industries across the country, not just in certain parts of the country, and they need our support on current prices and the need for decarbonisation. What I can say about prices right now—I think everyone present will agree—is that we absolutely have to tackle the harm that they are doing to energy-intensive industries, and the difficulties that such industries are experiencing.

One thing that we should all be clear about is that absolutely nothing has happened so far in this country in relation to the price rises. The Government appear to be caught like rabbits in a headlight and waiting for the price spike to go down the other side, so that they do not actually have to do anything. As I have mentioned, this is not a price spike. It is a possible future sea change in energy prices, and it needs to be approached on that basis. It is not sufficient simply to hope that this will go away in a while and things will return to normal, because they probably will not do so, and we need to have Government action to ensure that there is a regulated price arrangement for energy-intensive industries that protects those industries from high prices and the volatility that we are seeing on world markets. There are several ways in which that can be done. As far as I can see, however, the Government have not even looked at any of those things. Indeed, as hon. Members have mentioned, a number of other European countries are doing things in order to combat the price spikes, or price dome, that we are seeing at the moment, none of which are being followed by the UK Government.

There are also issues arising from the fact that a number of energy-intensive industries had a bad deal with energy prices before the present price spike. From my frequent conversations with my hon. Friends the Members for Aberavon and for Newport East (Jessica Morden), I know that UK steel has a cost price far greater than comparable steel production in France and Germany. That is partly because those countries do different things to assist their industries that we do not do in this country, concerning things such as distribution costs and the joint commissioning of procurement of energy packages. The Government would be well advised to look at such things, both now and in the long term, in order to get the stable environment for energy prices that we really need for energy-intensive industries.

At the same time, we also need to get serious about the support that we need to provide for the decarbonisation of energy-intensive industries. My hon. Friend the Member for Aberavon mentioned Labour’s £3 billion steel renewable fund, which is a fund not just to stabilise prices but to take steel well down the road towards decarbonisation by changing things such as electric arc furnaces, hydrogen production for the introduction of energy for steel generally, and a host of other things. They need to be replicated in those other energy-intensive industries with Government support, so that they can decarbonise in good time and good order and keep their production going across the country in a way that we need for the future.

That is a substantial task for the Government, both in the present and in the future, and very little has been achieved so far. I am sorry to have to say that, because it is so important that we get our act together right now and for the future, given the absolutely vital role that energy-intensive industries play in our country’s economy. I look forward to hearing from the Minister whether his Government have had a change of heart and are, perhaps even at this late stage, deciding to do something about price rises and the decarbonisation of energy-intensive industries for the future.

Nuclear Energy (Financing) Bill (Fifth sitting)

Alan Whitehead Excerpts

Committee stage
Tuesday 23rd November 2021 Public Bill Committees

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

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

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

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

It is a pleasure to serve under your chairmanship, Ms Fovargue. Like the Minister, I would like to spend a moment announcing, as it were, this part of the Bill, which I hope we can get through in an orderly and suitably speedy fashion. It is however important to share an understanding of what we think this part is about. As the Minister said, it concerns the setting-up of revenue collection contracts; the setting-up of a counterparty to hold the revenue collected from suppliers to underpin action by the nuclear company in terms of construction; and, importantly, as he said—he seemed a little concerned when I mentioned this in our previous sitting—revenue collection and distribution during both the construction and production phases of a nuclear project.

My understanding is that during the production phase, the nature of the revenue collection changes. During the construction phase, within the overall allowable costs architecture, the nuclear company is likely to absorb whatever comes its way from the counterparty for the purposes of underpinning the construction costs of the nuclear plant. Obviously, there are debates to be held on that and further regulations to be put in place concerning how the revenue stream for a nuclear company is carried out and the requirements of the construction at various phases.

We have debated to some extent the instance whereby the allowable costs ceiling is breached because of rising costs, particularly during production; whether the regulator would have the opportunity to revisit the allowable costs ceiling; and what effect that would have on the run through the regulated asset base process to customer bills as a result of those recalculations. However, there are issues with what revenue stream goes into the nuclear company, and at what stage during construction, but that is within the overall costs ceiling, or should be, in the first instance.

During the production phase of a nuclear plant, the relationship between collection, distribution and re-disbursement becomes a little more complicated. I would be obliged if the Minister could shed a little light on some of the things that happen during the production process, which are still slightly unclear. That is important because, in the production process, the receipt of funding under the RAB process becomes a comparative issue. The company is making money and producing electricity, and one would expect that, as a result of the RAB model, the money that is being made by the company would sit within the parameters of what has been agreed for the regulated rate of return under the RAB model. If the company is making more money from its production of electricity than is allowed within the overall model’s parameters, that money starts coming back to the counterparty or, at least indirectly, through to customers.

Conversely, if the company is making less money from its production than is allowed within the RAB model for production purposes, money continues to come in under the allowable costs ceiling. The best explanation is given on page 21 of the consultation document on a RAB model for nuclear, which suggests:

“Suppliers could pass the cost of the payment obligation onto their consumers, as they do with other regulated costs and could likewise reimburse their consumers (as happens under a CfD) in periods where suppliers receive payments from the project company (e.g. when the Allowed Revenue is lower than the project company’s revenue from power sales). The design process would need to consider how these charges could be made in more detail, in consultation with suppliers and consumer representatives.”

That is essentially the model during the production phase: it is potentially a two-way process.

That issue reflects, at least to some extent, the amendments that we wish to discuss this afternoon —an understanding of how the money goes into the counterparty, what the counterparty does with the money, what the counterparty does when the money is held, and what the counterparty does if that money may not be needed, or money has been paid back into it by the nuclear company during the production phase. Consideration of how that happens, where that money goes and what sort of requirements one should place on that process are at the heart of some of our amendments.

I thought it important to check whether we have a shared understanding with the Minister of how the process works. Assuming that we do, we can discuss the amendments on the basis of that shared understanding of what this part of the Bill sets out to do. That is essentially a contribution to the clause stand part debate, but I hope that it clarifies how we will proceed with part 2 as a whole, and that it will be helpful to the Committee.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship again, Ms Fovargue. It was interesting that the hon. Member for Southampton, Test spoke about a shared understanding. I wish I had one; I do not think that the Bill is good enough to have any shared understanding of what it is about. Part 1 is clearly all about the definition of designating a nuclear company, and then a blank cheque in terms of defining costs. It seems to me that part 2 is all about how the blank cheque moneys are recouped in revenue collection.

I have one point to put to the Minister. Explanatory note 119 states:

“The terms of a revenue collection contract will be bilaterally negotiated between the Secretary of State and an eligible nuclear company to be designated under Part 1.”

Would he enlighten me on what expertise the Secretary of State has in negotiating a revenue collection contract for a new nuclear power station, how that will be undertaken in a transparent manner, and what options are available for scrutiny of that?

[Greg Hands]

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

[Dr Whitehead]

I substantially agree that that is essentially how the process works, except that of course with CfDs the customer contribution does not change at all once the CfD has been implemented because there is a constant price. The difference is in the company getting the difference between the reference and the strike price, not what the customer pays for electricity bills or pays into the process itself.

[Greg Hands]

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

--- Later in debate ---

[Greg Hands]

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

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

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17

Duties of a revenue collection counterparty

[Dr Whitehead]

I beg to move amendment 14, in clause 17, page 14, line 31, leave out “may” and insert “must”.

Although I have set out some of the shared under- standings that I think necessary for the three amendments that we will move this afternoon, this is not one of them. Amendment 14 addresses the text of the Bill, and puts in place small question marks about what that text means for the Secretary of State’s responsibilities, particularly in relation to the duties of a revenue collection counterparty.

At the moment, clause 17(1) states:

“A revenue collection counterparty must act in accordance with…any direction given by the Secretary of State”

and

“any provision included in revenue regulations.”

That theme of “must” continues in subsection (4), which states:

“A revenue counterparty must exercise the functions conferred by or by virtue of this Part so as to ensure that it can meet its liabilities under any revenue collection contract”.

It is an imperative. And subsection (5) states:

“Revenue regulations must include such provision as the Secretary of State considers necessary so as to ensure that a revenue collection counterparty can meet its liabilities under any revenue collection contract to which it is a party.”

Clearly, those “musts” are imperatives for the revenue collection counterparty to undertake. It “must” act in accordance with directions given by the Secretary of State; it “must” ensure that it can meet its liabilities; and it “must” meet its liabilities under any revenue collection contract.

Then we go to subsection (2) and look at the provision for the regulations themselves, which logically should follow on from the imperatives that I have set out, but we see this statement:

“Revenue regulations may make provision”.

The regulations that carry out the imperatives of the other provisions of the clause do not appear to have the same imperative applied to them.

I appreciate that the word “may” in legislation is a perfectly reasonable and acceptable term where something can be done as part of a series of powers that perhaps a Secretary of State has. A Secretary of State may decide to do various things under those powers. Indeed, we get some enlightenment on that in subsection (3), which refers to the

“provision that may be made by virtue of subsection (2)”.

That is a proper use of the word “may”.

However, in this case, what the word “may” appears to suggest is that the regulations that follow from the imperatives do not have to make provision for these particular things; they “may” make provision. There is no direction from the senior Bill to secondary legislation to actually follow the imperatives in the Bill. If the regulations do not happen to make provision, they simply do not, because they “may” make provision; they do not have to do so. That appears to me to be not a very good way of ensuring that the things that should happen under this clause actually do happen.

I know that we are all good Members of the House—I am sure that if legislation suggested that we should do particular things, we would do them—but that is not quite the point. Legislation from this place is supposed to stand the test of time, cope with the vicissitudes of Administrations as they come and go, and ensure that what the legislation intended will actually be done, so either this legislation intends that these regulations do not have to be made or the word “may” is a little less than robust, hence the very modest and small amendment that we have suggested. It would replace the word “may” in subsection (2) with the word “must”, so that there was consistency throughout the clause. It would not be a major change to the Bill, but might strengthen it a little and give a little more certainty about its operation.

[Greg Hands]

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

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

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

[Dr Whitehead]

I appreciate that this is a habitual piece of drafting in legislation, found not just in this Bill but in a number of others. One of my hopes with legislation has always been that a group of Members might be courageous enough on one occasion to say, “This is lax writing of legislation and we should not put up with it. We should have what it means included in the Bill.” I appreciate that the lax writing of the legislation may not be lax at all—it may be deliberately giving the Secretary of State a lot more leeway where things are not entirely sorted out. When we look at this clause, we can see that there already is, in subsection (2)(c), substantial leeway for the Secretary of State to take

“further powers to direct a revenue collection counterparty to do, or not to do, things specified in the regulations or the direction.”

That is pretty wide leeway for the Secretary of State to have in the Bill already.

What the “may” does in this subsection is to cast further uncertainty on what sort of things the Secretary of State may do. I am sure that the Secretary of State will actually want, on this occasion, a “must” for what is conferred on the Secretary of State with further powers. That is very helpful to the Secretary of State for precisely the reasons that the Minister outlined a moment ago. The “may” that is in subsection (3) is a different sense of the word “may”. How it would read fully is, “the provision that may well be made by virtue of subsection (2).” It is used in the conditional, whereas the “may” in subsection (2) is a dilution of the imperative. I am sure that the Minister will be pleased to know that that is the case, but I am afraid that it does not accord with what he had to say about the use of “may” and “must” in this provision.

I am not going to press the amendment to a Division, but I think we need to be more careful about how we draft our legislation overall, to make sure that it does what it says on the outside. I am sure this will not be the last opportunity to raise this issue in the Bill. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 17 ordered to stand part of the Bill.

Clause 18

Direction to offer to contract

--- Later in debate ---

[Greg Hands]

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

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

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19

Supplier obligation

[Dr Whitehead]

I beg to move amendment 15, in clause 19, page 16, line 11, at end insert—

“(4A) Revenue regulations may make provision to prevent electricity suppliers from recovering the costs of paying a revenue collection counterparty from customers who qualify for the Warm Home Discount Scheme.”

This amendment would mean that electricity bill payers who qualify for the Warm Homes Discount scheme would not be liable for levies on their bills that pay into the RAB revenue collection fund.

Amendment 15 relates to the latter end of clause 19. Hon. Members will see that the clause suggests that revenue regulations may make provision for electricity suppliers to pay a revenue collection counterparty for a number of purposes, including

“to hold sums in reserve; to cover losses in the case of insolvency or default of an electricity supplier.”

According to our shared understanding of how the RAB would work, the regulations would require electricity suppliers to pay into a revenue collection counterparty for those purposes. Thereby, as the RAB consultation makes clear, if that company has been required to pay into the revenue collection counterparty, the company could make restitution for the money it had paid into the revenue collection counterparty by adjusting its bills to reflect that fact.

We are in exactly the same territory as contracts for difference, where there is a levy on customers and the supply company recovers the money that it has paid into the levy fund by passing that levy on to customers in their bills. We have a problem with placing additional levies on already sky-high bills, but that is how this arrangement will work. We question how that process will work. As hon. Members will also know, we currently have within our electricity supply arrangements a warm home discount scheme, which provides for a number of bill payers to get £140 off their bills each year if they qualify. There are some issues about the size of the company relating to that obligation but, in principle, pretty much all customers on a low income or a guaranteed credit element of pension credit will, or should, receive that warm home discount.

The energy company has to supply that discount to its customers. It may socialise the costs through its overall bills as a sort of secondary levy, but it gives a proportion of electricity customers a permanent reduction in their bills due to their particular circumstances, such as—as the discount suggests—particular fuel poverty-type issues in heating their homes and meeting their fuel bills.

The effect of a levy—in this instance, quite a substantial levy—to customers under these circumstances, particularly during the construction phase of a regulated asset base operation, would be to put, say, an extra £10 on the bill of someone who is already receiving a warm home discount, so that their fuel bills go up. A number of people would be placed in fuel poverty as a result of that difference, and therefore, ironically, it is quite possible that more people would be eligible for the warm home discount as a result.

When and if this levy comes on stream, we do not think that the process should include the supply company passing on that increase to those people who are already paying their bills but have a warm home discount. Those companies should not be able to recover the cost of payment into the revenue collection counterparty by passing it to those people receiving warm home discount. This would mean a socialisation of that cost to other bill payers, but the warm home discount would nevertheless remain at the right proportion of the bill, not diminish in value because that person was required to pay that levy to the energy company so that it could recoup its costs related to the revenue collection counterparty.

This is quite a simple amendment to try to return that warm home discount to the position that it would have been in before that levy was introduced. I would suggest that it is in line with what the Government intended for that warm home discount in the first place. Although other customers may pay a little more on their bills, it would maintain the relative billing position for the poorest and most vulnerable customers, including those in receipt of a guaranteed credit element of pension credit, helping those who have considerable difficulties in paying bills and are perhaps in fuel poverty as a result. We would like this power to ensure that energy companies do not incorporate those customers into the arrangements for collection and distribution of money coming into the revenue collection counterparty.

[Alan Brown]

I will just say a couple of things. I was listening to the arguments and if the amendment goes to a vote, I will be happy to support it and do anything I can to try to support the most vulnerable and not create any more fuel poverty. Listening to the arguments, they seem to confirm that the concept as a whole is a costly burden on consumers. As the shadow Minister said, it creates a levy that will put more people into fuel poverty. The levy will not just last for a few years; it starts with a construction period of 10 to 15 years in all likelihood and then a 60-year contract. Rather than tinkering at the edges, protecting some people and pushing other people into fuel poverty, the heart of the matter is that this is a costly white elephant exercise. That said, I would still support the amendment for what it aims to do.

--- Later in debate ---

[Greg Hands]

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

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

[Dr Whitehead]

I am not sure that the Minister quite gets this. The warm home discount was introduced in 2011 and has been at the level of £140 since then, so the Government suggesting that it should be increased to £150 is not an action of unparalleled generosity: it actually just catches up with inflation over the period that the warm home discount has been in place. That discount has been decreasing in value in real terms over the years, so increasing it is simply a matter of reasonable housekeeping, rather than innate generosity.

[Kirsty Blackman (Aberdeen North) (SNP)]

I thank the hon. Gentleman for giving way; apologies to my hon. Friend the Member for Kilmarnock and Loudoun for getting in first. Does the hon. Gentleman agree that, given the massive increases in energy prices that we have seen—way outstripping inflation—this increase does not touch the sides of what is needed?

[Dr Whitehead]

The hon. Member is absolutely right. I am sure that we could do some back-of-a-fag-packet calculations about what we are going to need from the warm home discount, given the rises that are likely to occur under the fuel price cap in the coming spring and over the next six months, but it will certainly be rather more than £10.

[Alan Brown]

Does the hon. Gentleman agree that another odd aspect of the Minister’s argument is that raising the warm home discount to £150—an extra £10—is really significant and helps people, but an extra £10 on their bill is okay and something we do not need to worry about? The two cannot both be right.

[Dr Whitehead]

The hon. Member makes a very interesting point, which I was rather slower than him to get to. He is quite right: if this is going to be £1 a month during the construction phase, therefore adding only £10 to £12 to the bill per year, it is contradictory to say that one is insignificant while the other is very significant.

There is also the fact that £12 a year, or £10 a year or whatever, will affect different people’s bills in different ways, because the bill for a large family, or someone with a large house, will be higher in total, and the £12 nuclear levy will be a smaller proportion of it than for someone who is eligible for the warm home discount—perhaps a single pensioner living in a small house, with a lower bill but nevertheless without the wherewithal to pay it. That £12 would be a higher imposition on their bill than it would on other people’s bills.

I think we all agree that the warm home discount is an important actor in combating fuel poverty and ensuring that the most vulnerable people in our society as far as energy costs are concerned do not have it even worse than they do at the moment and are given some assistance with their bills. We all ought to be very mindful of that when we put levies on people’s bills. What the Minister says about who we do and do not put into fuel poverty when we change levies on fuel bills is true, but that is an argument for better indexation, not for continuing with the warm home discount in the way that we are.

I am sorry to say that we will have to divide the Committee, because we think that this is an important principle that ought to be upheld. We do not want to the effects of the levies, which of course may be much more than £12, depending on how the allowable costs ceiling goes, to directly affect the warm home discount, which we think is a very important part of the energy landscape and the battle to combat fuel poverty. We would like it to be on the record that we did not simply allow this to be brushed under the carpet, and therefore wish to vote on the amendment.

Question put, That the amendment be made.

--- Later in debate ---

I hope that I have again made my concerns about aspects of the Bill clear. There are genuinely unintended consequences that could flow from the operation of clause 19 and demanding collateral up front. As I said in my optimistic opening sentences, I look forward to the Minister accepting the amendment and saying, “Well done and thank you.”

[Dr Whitehead]

I am very sympathetic to the amendment, although I do not think that it will do exactly what the hon. Member for Kilmarnock and Loudoun would like. It would be helpful to have some clarification from the Minister as to exactly how the payments will be organised by the revenue counterparty body.

Although those payments are up front, in that the electricity supply companies would be required to make a payment on behalf of the customer into the counterparty before the power station had been built, that does not mean that the payment would all be up front. It means that the payment would be staggered over a period, which might be the whole of the production period of the nuclear power plant, according to what was required at particular times of the construction, so that the counterparty had sufficient funds to meet those calls from its revenues at any one time, but did not have a large surplus against calls. The counterparty would therefore have to modulate and regulate its calls on the energy supply companies as the process of construction continued.

Presumably, then, a company’s health would not be set against an overall up-front payment in that instance. All companies would be required to pay into that levy arrangement regularly, so there would not be a greater demand on one company than another or a large amount of money demanded in one go. That is my understanding of how the system would work, but I appreciate what the hon. Member for Kilmarnock and Loudoun said about the 23 companies that have gone bust recently. As the energy market stabilises, I think there will not be many companies to take a levy from in the first place. Those companies that are able to pay a levy will by and large be those that were in sufficiently robust health in the first instance to weather the storm of high gas prices and high energy costs—there are a number of other reasons why companies may or may not be reasonably robust but that is a debate for another day.

Overall, I do not think that the amendment does exactly what it is intended to do.

[Alan Brown]

I think I understand the point that the hon. Gentleman is making, but subsection (4) says:

“Revenue regulations may make provision to require electricity suppliers to provide financial collateral to a revenue collection counterparty (whether in cash, securities or any other form).”

I still read that as meaning that cash could be asked for to be paid up front.

[Dr Whitehead]

Indeed, and that is why we need better clarification from the Minister. Is there a distinction between cash up front in general—that is, one pays before getting any result from a nuclear plant that is being built—or cash up front in the sense of taking all the stuff in the agreed revenue allowance? Would that be taken either mostly up front, all in one go, or at level that an energy company would find unaffordable during particular elements of the process? There is still some uncertainty about exactly how that process would work.

I have a lot of sympathy with the argument of the hon. Member for Kilmarnock and Loudon. If the revenue counterparty decided that it was going to take a very large amount of levy early in the process to have lots of money in the bank and to be able to cover any eventualities connected with the construction process, that would be a pretty unreasonable imposition on energy companies, particularly in the present circumstances. However, I think there are least implied elements of regulation in the Bill that would prevent that from easily happening, and I would be interested to hear whether the Minister thinks that is the case. If he does, where in the Bill is that, and which arrangements would be preferrable in terms of the revenue collection counterparty operating on a more equitable basis as the construction period progressed?

[Greg Hands]

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

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

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

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

--- Later in debate ---

[Dr Whitehead]

I beg to move amendment 16, in clause 19, page 17, line 2, at end insert—

“(10) Persistent non-payment of sums owed to the counterparty by an electricity supplier may be referred to OFGEM, which may in such circumstances place the electricity supplier’s licence under review.”

This amendment would allow cases of persistent non-payment of sums owed to the counterparty by an electricity supplier to be referred to OFGEM.

The amendment follows on quite well from our previous debate. Although the issue is not entirely certain, the collateral expected to be paid by energy supplier companies would be required in a measured way. The Secretary of State would make sure that the revenue collection counterparty did not try to scoop up huge funds in one go—not that I think that very likely—and would regulate the collateral so that it was more or less allied with the calls on it by the nuclear company at that stage.

If the revenue collection counterparty had a large pot of money sitting in its bank account at any stage, one would expect that money to be redistributed to the supplier companies from which it had been collected, and one would hope that in the end it would be redistributed back to customers. I think that there is still some way to go in deciding how exactly the regulation is to be set up, but I welcome the Minister’s statement that that is roughly how the Government assume the process will be undertaken. That being the case, there is then the question of what happens if supplier companies do not pay what the revenue collection counterparty has required of them, assuming that it is a reasonable payment. That leads on to some existing issues with how levies are collected by counterparties.

There has already been some mention of what happens with Ofgem’s collection of the renewables obligation, and of the collective obligations of energy companies to supply the right amount in buy-outs, renewables obligation payments or whatever. For those who think that the renewables obligation is done and dusted and that it came to an end in 2017, I should mention that it is still alive in a ghostly fashion and is collecting money until 2027, I think, so the obligations continue.

If one were being very unkind, one might say that a barometer of the health of some of the smaller energy companies that have recently been involved in the struggle to stay afloat has often been whether their renewables obligation payments were outstanding at the time of closure, which I think is the end of each October. There were reports from Ofgem, I think in September, that x number of companies had not paid their renewables obligation levies, and that if they did not do so by the closure date, it is conceivable that action would be taken—which could include, in the end, the removal of the company’s licence to operate.

One could say that that is what happened over the recent period, in that companies that knew they were in some difficulty with their renewables obligation payments at the end of October folded pretty soon afterwards because they were not going to pay them. That has had the unfortunate side effect that that non-payment has had to be socialised among other energy companies in order to ensure that the fund is the right amount to meet the renewables obligation certificates going around. Nevertheless, the regime appears to have a sanction relating to an energy company’s licence, so that we can ensure that payments are brought in, or that there is fairly swift closure relating to the outstanding amount, so we at least know roughly where we are regarding the payment pool at a future date.

As the Bill stands, that does not appear to be the procedure that will be adopted regarding levies into the revenue collection counterparty. Indeed, the Bill states that if payment is not received, collection will be a civil matter. In the amendment, we suggest that we adopt a similar procedure to that which is in place with Ofgem concerning non-payment of renewables obligation payments. In the case of persistent non-payment, a sanction should be available regarding the continuation of the company’s licence. The Minister may say that going through the civil courts is just as good. What concerned me about the arrangements in respect of renewables obligations was that some energy companies were borrowing their payments in order to stay in business. That is not what a healthy energy company should do, long term; it will not result in a secure landscape as regards collateral inputs to a counterparty.

A better way of proceeding would be to have in place the sort of regime that we have for the RO. The amendment would allow the Secretary of State to introduce that kind of arrangement, if he thought it a good idea for the stability of collateral payments. It gives him an extra option, and goes beyond the regime set out in the Bill, so that we can ensure that payments are properly levied, paid on time, and not resisted.

[Greg Hands]

As the hon. Gentleman outlined, amendment 16 addresses how the obligations of suppliers under revenue collection contracts should be enforced. Clause 19 deals with suppliers’ obligations in relation to the RAB. It lays out what the revenue collection regulations may provide for. This includes how the obligations placed on suppliers by RAB revenue collection contracts can be enforced by the revenue collection counterparty. The powers in clause 19 are supported by clause 22, entitled “Enforcement”, which states:

“regulations may make provision for”

obligations under revenue collection contracts to be enforced

“by the Authority as if they were relevant requirements…for the purposes of section 25 of the Electricity Act 1989.”

This means that a breach of such a contract can be treated as if it were a breach of a licence condition, and this allows the authority to obtain an order to secure compliance and impose financial penalties.

The amendment would set up a different enforcement route, outside the regulations, by allowing the revenue collection counterparty to refer suppliers who persistently fail to meet their obligations to the authority—that is, to Ofgem. Ofgem could then consider whether to remove a supplier’s licence. Of course, I welcome the Opposition’s focus on ensuring adequate protection from non-compliance. Creating strong enforcement procedures will be vital to give investors confidence that the RAB will function and that the project will receive the funds to which it is entitled. However, the amendment leaves out much of the detail necessary for a clear understanding and the smooth functioning of the enforcement procedure. For example, it does not clarify what should be classed as “Persistent non-payment”, or the process for referral. It also does not make clear what Ofgem would take into account when reviewing a supplier’s licence, or the process for appeal.

The hon. Gentleman feels that a supplier’s failure to make payments to the counterparty should have consequences for their licence, but those concerns are adequately addressed by clause 22, which states that the regulations may make provision to treat non-compliance as if it were a breach of a licence condition, and to allow the imposition of suitable penalties against suppliers through tried-and-tested, long-standing legislation. This will ensure compliance, and will mean that obligations under revenue collection contracts are met.

I welcome the hon. Gentleman’s constructive contributions, his proposing the amendment, and his recognition of the need for strong enforcement provisions, but I hope I have convinced all hon. Members of the appropriateness of the Government’s approach, which already treats non-compliance in the way that is suggested in the amendment, but in a far more watertight way, and that the hon. Gentleman therefore feels able to withdraw his amendment.

[Dr Whitehead]

The Minister talks about taking action in a more watertight way, and suggests that we look at clause 22, which relates to clause 25, which relates to a series of clauses relating to the Electricity Act 1989. It is a sort of Marx brothers’ “A Day at the Races” form guide arrangement, whereby in order to understand a guide, a person needs another one, and so on endlessly—and they end up missing the race.

The Minister will be aware that there are a number of instances in which we are asked to go way back, via regulations, into Acts such as the Utilities Act 2000 and the Electricity Act, and we are reluctant to do that. Indeed, there are a couple of quite incomprehensible repeals at the end of the Bill, to which I might draw the Committee’s attention; one has to go through four or five stages before one can understand what on earth those are about.

In this instance, it is possibly true that we could, by regulation, apply the provisions of section 25 of the Electricity Act 1989 relating to licence modification or removal; but that provision is not in the Bill, but possibly applied by regulation. In the Bill there is one remedy, and one remedy only. The Minister may say, “Trust us; we may produce regulations that have the effect that I have suggested.” However, it probably would have been wiser for some of those things to be in the Bill. Of course, the amendment does not do all those things that the Minister mentioned. I fully accept that it is deficient from that point of view, because it does not mention the four or five other pieces of legislation that have to be taken into account, amended or consequentially changed. It merely allows us to make the point that these things ought to be in the Bill, so it is a probing amendment.

I hope that the Minister will think about whether there are better ways of getting those different forms of regulatory certainty than this extended process of referring to other pieces of legislation, which may become more or less opaque as one reads them. It would be much more straightforward for this provision to be in the Bill and clear for everyone to see. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 19 ordered to stand part of the Bill.

Clause 20

Payments to electricity suppliers

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

[Greg Hands]

Clause 20 seeks to ensure that electricity suppliers can be reimbursed in cases where the counterparty has overcharged suppliers or overpaid a licensee nuclear company. The clause is similar to the approach in section 17 of the Energy Act 2013. It is proposed that suppliers will be charged their share of a RAB payment based on their expected market share. Where their actual market share is less than expected, reconciliation processes will be carried out and the revenue collection counterparty will repay them the difference.

Likewise, when the relevant nuclear licensee company’s forecasted market revenue exceeds its allowed revenue over a given period, the counterparty could be required to repay any overpayments to suppliers. Again, that would replicate the approach used in contracts for difference. Subsections (1) and (2) allow regulations to be made requiring the counterparty to make payments to suppliers in such instances. Regulations made will be subject to the affirmative procedure, given the effect they will have on electricity suppliers and other relevant bodies.

[Dr Whitehead]

I do not oppose the clause, but I want to ask the Minister about what it actually says. At first sight, it appears to say—this was the shared understanding that we established—that there were circumstances where a revenue collection counterparty could pay collateral back to electricity suppliers. We are not clear over how long a period the collateral might be repaid, or at what point it might be considered that there was sufficient additional collateral in the funds of the counterparty to warrant a repayment.

The funds might be held for quite a long time while consideration is given to whether the nuclear company is likely to overperform on its revenue generating activities in the production phase so consistently that the money can be safely restored to the supply company. The counterparty might hold the money over a considerable period, thinking there would be variations or fluctuations in the revenue stream obtained by the nuclear power company, and that the money might therefore need to be called on, if it dipped below the range implied by the overall allowed costs arrangements. There is that question of the likely length of the period over which repayments take place.

However, the second question, which is also quite important, is what would happen to that money once the counterparty had restored it to the electricity supplier. There is nothing in this clause that says anything other than, “That money is restored to the electricity supplier, and the electricity supplier is very pleased about that and puts the money in its bank account.”

However, the electricity supplier has collected that money from the customers—albeit at the direction of the counterparty—in the form of an additional levy placed on their bills. If the electricity supply company is getting that money back again, then as night follows day, the company should give that money back to the customers and not just hold it in its bank account. There is nothing in this clause to ensure that that happens. I would be interested to hear whether the Minister thinks that such a requirement ought to be added to the regulatory procedure that will be undertaken. He may want to go away and think about whether he can at least indicate to the Committee that it will be assumed, and probably will happen, that as long as the surplus funds can be distributed back to suppliers by the counterparty, they should be given back to the customers.

Essentially, we have a couple of questions, but we do not oppose this clause standing part. I am sure that the Minister will be able to reassure us about his intentions with regard to making this clause operate as well as it can.

[Greg Hands]

I will try to deal with the two questions that the hon. Gentleman raised. First, he asked whether the funds can be held for a long time, and about the period over which they can be held. Obviously, the regulations will be laid before Parliament in due course, and will be subject to the affirmative procedure. However, I point him to how the contract for difference regime works under the 2013 Act. My belief is that in this case, the reconciliation takes place after a period of months—that is probably the best way to describe it. It depends on what the hon. Gentleman means by somebody holding on to funds, or indeed having a shortfall of funds, for “quite a long time”, but we always have to strike the balance between what is operationally straightforward and what prevents somebody from holding on to funds, or from having a shortfall of funds over a period of time. However, the workings of the contract for difference regime might give the hon. Gentleman the most likely pointers as to what the regulations may look like; they will obviously be subject to consultation in due course anyway.

The hon. Gentleman also asked what happens to the money, and whether the supplier is obliged to return the money to the customer. He raises a fair point. The difficulty is that there is no obligation on the supplier to take the money for the RAB from the customer in the first place. The assumption is that the supplier will bill the customer for the cost of the RAB, but there is not an obligation to do so, so I am not sure that creating an obligation in this legislation to send back money the other way would be appropriate. Again, I refer the hon. Gentleman to the workings of the contract for difference under the 2013 Act.

[Greg Hands]

First, the whole process will be regulated by the authority—in this case Ofgem—which would have oversight. Secondly, that would also be a matter for the regulations that are to be published in due course. Thirdly, the frequent reconciliations would obviate risk of that happening in the way the hon. Gentleman describes.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Application of sums held by a revenue collection counterparty

[Dr Whitehead]

I beg to move amendment 17, in clause 21, page 17, line 34, leave out from ‘are’ to end of line and insert ‘not to be paid into the Consolidated Fund unless there is no other alternative.’

This amendment would require the Government to consider alternatives to the absorption into the consolidated fund of sums held by a revenue collection counterparty on behalf of energy bill payers.

Amendment 17 takes aim at a different part of the undergrowth we are dealing with in the often fairly complex arrangements related to the revenue collection counterparty and all that goes with it. In this instance, we have two subsections in italics because they include a Treasury implication. Clause 21(5) says:

“The provision that may be made by virtue of subsection (4) includes provisions that sums are to be paid, or not to be paid, into the Consolidated Fund.”

In that regard, subsection (4) states:

“Revenue regulations may make provision about the application of sums held by a revenue collection counterparty.”

Effectively, that subsection allows regulations to be made about the sums held by a revenue collection counterparty. We have already discussed how long they may be held for and the circumstances under which they may be paid back—[Interruption.] The Minister and his Whip are discussing when we will finish, I suspect. They must not worry; we will finish on time.

The clause adds a new dimension to the question of where the sums held by the revenue collection counterparty may go and, indeed, suggests where they might go, presumably, after the process outlined by the Minister. At a certain stage, the existence of surplus amounts held by the revenue collection counterparty is established and then there is an issue as to where that money goes. Clause 21(5) says that the money may be paid into the Consolidated Fund, which is the Treasury. It therefore gives rise to the idea that money could have been raised from customers and paid into the revenue collection counterparty by suppliers. Levies are raised on customers and possibly overpaid, as my hon. Friend the Member for Greenwich and Woolwich has just said. The money sits in the account of the revenue collection counterparty for a time and then, when the decision is made about what to do with the money, the Treasury nicks it. That is not right and it is not what should be done. As we have established, if there are surpluses in those funds, they should certainly be returned to the supplier and the supplier should make sure that they are returned to the customer.

As we have said on a number of occasions, the customer is at the heart of the process as they are funding it through their bills. They are not paying free money into the Treasury but paying into the process on a reasonable basis of allowed costs. If those allowed costs prove to be more than is required, the least they should reasonably expect is to get their money back.

There should be no talk of the Consolidated Fund in the Bill; I do not think it is right that it should be in the Bill. We have sought to suggest in the amendment that only if there are no other recourses for the payment of those funds should it even be considered that money go into the Consolidated Fund. I can conceivably imagine circumstances in which nothing else could be done with the money but put it into the Consolidated Fund, but it is a real squeeze for me to think that.

The Secretary of State must be able to think of better purposes for the money than for it to go in that direction. The amendment strengthens the Secretary of State’s ability to do that. I hope that the Secretary of State—the Minister; I am promoting him again—will be happy to accept it as a clear understanding of what we want to do with the money unless absolutely pressed to do otherwise.

--- Later in debate ---

[Greg Hands]

We will just have to agree to disagree. I think the amendment unnecessarily narrows the scope of the power in a way that we would not wish to see in terms of protection of the taxpayer. I therefore ask the hon. Member for Southampton, Test to withdraw it.

[Dr Whitehead]

I thought that this was the most reasonable amendment by far that we have tabled. I am sorry that the Minister has responded in the way that he has. He made the point that some money that had come from the taxpayer might be sitting in the funds of the revenue collection counterparty, and should therefore be paid out of it. That would actually be covered by the amendment, which would insert:

“not to be paid into the Consolidated Fund unless there is no other alternative.”

If someone were trying to pay back a loan that they effectively got from the Consolidated Fund in the first place, there is no alternative other than to pay it back to the Consolidated Fund, so the amendment would cover that. We want circumstances in which the Treasury—I am sure that the Minister does not particularly want to be a high-ranking Treasury Minister in the future—

[Greg Hands]

Again!

[Dr Whitehead]

Again—indeed. I think the Minister will know from his previous experience that the Treasury is not above, shall we say, treating all Government money as essentially its own. In circumstances in which the Treasury thinks that it can get hold of certain amounts of money, it may well do so. Obviously, the purpose of Bills is not to be written to keep the Treasury’s hands off money that it really should not have, but it might not be such a bad idea at least to put that in regulation so that it would be fairly hard for that to happen. As the amendment is drafted, however, it is not a prohibition; it just says that there needs to be a pretty good argument—the argument made by the Minister about the loan, for example—for that money to be paid into the Consolidated Fund. That, really, is all the amendment says, and I think that is a wholly better construction than what is in the Bill.

[The Chair]

Dr Whitehead, are you pressing the amendment to a vote?

[Dr Whitehead]

Given the circumstances, I think I will.

Question put, That the amendment be made.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss clauses 23 to 30 stand part.

[Dr Whitehead]

The Labour party accepts that the clauses cover important technical matters relating to how the rest of this part of the Bill holds together, and we therefore have no objection to their being taken together.

Question put and agreed to.

Clause 22 accordingly ordered to stand part of the Bill.

Clauses 23 to 30 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Craig Whittaker.)

Nuclear Energy (Financing) Bill (Third sitting)

Alan Whitehead Excerpts

Committee stage
Thursday 18th November 2021 Public Bill Committees

[The Chair]

I have a few preliminary reminders for the Committee. Please will you switch all your electronic devices to silent? No food or drink is permitted during sittings of the Committee, except for the water provided. I encourage Members to wear masks when they are not speaking. That is in line with Government guidance and that of the House of Commons Commission. Please give each other and members of staff space when seated, and when entering and leaving the room. Hansard colleagues will be grateful if Members could email their speaking notes to [e-mail].

We now begin line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room and it shows how selected amendments have been grouped together for the debate—there is one change. Amendments grouped together are generally on the same or a similar issue. Please note that decisions on amendments do not take place in the order in which they are debated, but in the order they appear on the amendment paper. The selection and grouping list shows the order of debates. Decisions on each amendment are taken when we come to the clause to which the amendment relates. Decisions on new clauses will be taken once we have completed consideration of the existing clauses of the Bill. Members wishing to press a grouped amendment or new clause to a Division should indicate when speaking to it that they wish to do so.

We will start with amendment 1 to clause 1, but first, Dr Whitehead, did you wish to talk about the change to the selection list?

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

Thank you, Ms Fovargue. It is a pleasure to serve under your chairmanship. I want to say two things before we go into detailed line-by-line discussion: one is on the order in which we are debating the Bill—clause 1, clause 2 and so on. The other is to say to the Committee before we start that Her Majesty’s Opposition voted in favour of the Bill on Second Reading and, therefore, we hope that the amendments before us will be seen and discussed in that light, which is that they seek to strengthen the Bill and to address specific concerns that we have about elements, in particular the RAB—regulated asset base—process.

[The Chair]

Order. This should just be about the amendments and groupings; there can be no general statements about the Bill. Is everyone content to group amendments 1 and 2 together?

--- Later in debate ---

[Alan Brown]

It is a pleasure to serve under your chairwomanship, Ms Fovargue. In my intervention, I wondered if the amendments would technically preclude EDF under the RAB scheme. I hoped that the amendments were a stalking horse for Labour to come round to our way of thinking regarding a new nuclear power station, but unfortunately, that does not seem to be the case.

That said, I support the amendments. It is crazy that decisions have not been made before now about excluding China General Nuclear from critical infrastructure. The UK Government probably acted on the back of the United States’s actions to remove Huawei from critical telecoms infrastructure, so it makes no sense that a Chinese state-operated nuclear company is allowed to participate and invest in and possibly, if it gets its way, construct a new power station at Bradwell. That makes no sense. I would like to hear what the Minister has say about that. In principle, I support the amendments, although, ideally, I would rather we were not doing new nuclear.

[Dr Whitehead]

Continuing briefly from my initial remarks, I want to make it clear that the amendments—and all our other amendments—are based on the idea that the Bill should be strengthened, not subverted in any way. I can assure the Committee that the hon. Member for Kilmarnock and Loudoun’s hope that these two amendments are a stalking horse to remove EDF from the project is certainly not the intention. The intention is precisely to ensure that the nuclear programme in this country is sound, robust and integral to our security in all senses of the word.

We do not think the amendments will do anything other than put us in a much better position to ensure that the financing of nuclear is done on a clearer footing and on the basis that we know who is putting money into the project, in this instance Sizewell C. I concur with my hon. Friend the Member for Greenwich and Woolwich that effectively the Bill is pretty much about how Sizewell C gets going, comes to financial closure and gets into its construction period so that it produces electricity in good time for the grid.

It is important that the Committee thinks carefully right at the beginning of its proceedings about how we want to framework that nuclear financing; how we want to framework the arrangements which, after all, will be the umbrella under which we have all our other discussions in Committee. The framework that we have at the moment, particularly for Sizewell C, as my hon. Friend has set out, is a sequence of memorandums and a number of things further to memorandums, which appear to lock our nuclear development into an arrangement with the Chinese General Nuclear Power Corporation, which is very much an instrument of the Chinese state. Although companies have been set up—set up for the purpose of engaging in Hinkley—with one nominated director, given who those nominated directors are and how they go back to China it is very clear that those companies are centrally state-controlled, and are state-controlled vehicles for investment—just as we have stated in our amendment—for the promotion of that particular foreign power’s interests, in this instance in nuclear power.

Given those interests in nuclear power, it is important that we do not lose sight of the overall scheme of things in considering investment or otherwise in Sizewell C. It is important to understand that the deals, as it were, that were made between 2013 and 2016 were very much about that sequence of events leading from investment in a power station with a minority stake, with a reactor that would be built in France, within a framework of a company controlling that, that is a private company but has substantial state connections, but nevertheless is a very different model from what we are faced with regarding the CGN investment.

So there has been a sequence of events that starts with Hinkley C, with a minority stake, a French reactor and a French company with its own investment in the majority of the plant, and then a contract for difference at the end of it for production, moving to the second event in the sequence, which was envisaged at that time to be Sizewell C, with an undefined arrangement at the time for investment elsewhere in the plant, but a clear stake in that plant, beyond financial closure, of the Chinese General Nuclear Power Corporation, coming to 20%. And then would come the prize at the end of the sequence—certainly the prize for the Chinese Government—of the entry into European nuclear development for the first time of a Chinese reactor, the Hualong One. That would be the basis of a Bradwell nuclear plant. That reactor would separately go through a generic commissioning process; the initial moves towards that are being made. That reactor would then be at the core of the Bradwell plant, and Bradwell would be majority-owned, run, controlled and operated by the Chinese state nuclear corporation.

So, leading down the path of that sequence, Sizewell C being a stopping-post in that sequence and the end of it being Bradwell, is obviously the nuclear project that we are discussing at the moment. Therefore, the part-ownership of the nuclear company must be seen as integral to that overall process and that overall agreement; and if we do nothing and say nothing about that involvement, we are effectively condoning that whole sequence of agreements.

Those agreements were initially made in the form of a memorandum of understanding on civil nuclear collaboration in 2013, and effectively those stakes that I mentioned were set out then. George Osborne, the then Chancellor, stated that Chinese companies were taking a stake, including potential future majority stakes, in the development of the next generation of British nuclear power. So, it was pretty explicit, certainly from the UK Government side, what they thought that sequence was going to be about, and it was actually pretty similar to the idea that the Chinese had, as far as their involvement in nuclear was concerned.

That was followed, during Chinese President Xi Jinping’s state visit to the UK in 2015, by a “Statement of Cooperation in the Field of Civil Nuclear Energy”, which welcomed the minority investment and the proposal for a Chinese-led project at Bradwell B in Essex. What is less well known is that that was followed by a very lengthy document, “Secretary of State Investor Agreement”, which was primarily about investment by a number of parties, including CGN, in Hinkley but which also related to the whole sequence. It is arguable, therefore, that there is a substantial lock-on of Chinese involvement not just in 20% of Sizewell but in the whole sequence, as laid out in the various memorandums of understanding and the investment agreements undertaken between 2013 and 2016.

The question is: what are we going to do about it? The proposal is for a RAB scheme to cover the project’s investment costs. A decision will have to be made about how the RAB scheme will work and we will discuss the detail later, including how Ofgem will set out the allowable costs that form the backbone of a RAB agreement. Ofgem will have to assess the overall allowable ceiling for the project costs, particularly in its construction phase but also during its production phase. That will form the basis on which the money to meet those costs will be taken in from the general bill-paying public. The ceiling for those allowable costs will be determined to a considerable extent by how much investment is likely to be required and, therefore, how much of it will have to be underpinned by the RAB arrangement at the Sizewell plant. If a substantial part of the plant is to be financed by the China General Nuclear Power Corporation, then logically the allowable costs would relate to the rest of the required investment, rather than all of it. Crucially, the decisions and discussions that this Committee is going to enter into will be determined by what that 20% consists of.

The Red Book offers a tantalising clue as to what that might be. As my hon. Friend the Member for Greenwich and Woolwich said, a total of three lines focus on the £1.7 billion of new direct Government funding being made available, essentially for the Sizewell C project. He said that the Red Book is possibly wilfully obscure; it is certainly obscure, and for a number of reasons. All the Budget and spending review document has to say about the £1.7 billion Government funding is that it is being provided

“to take a final investment decision this Parliament, subject to value for money and approvals.”

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[Greg Hands]

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

[Dr Whitehead]

Does that mean that the evidence that was given to us in our session with Sizewell C was not correct, or was ill-informed? Or was it informed, but matters have moved on since then? Or was it—

[Mark Fletcher (Bolsover) (Con)]

Diplomatic.

[Dr Whitehead]

Was it, indeed, as the hon. Member for Bolsover suggests from a sedentary position, diplomatic? If so, was that diplomatic answer given after any sort of instigation from the Government, or was it just diplomatic on the basis that Sizewell C did not want to tell us?

[Greg Hands]

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

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[Greg Hands]

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

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

[Dr Whitehead]

I am afraid the Minister cannot have it both ways. Either the Bill is about financing Sizewell C or it is about financing nuclear power more generally, in which case Bradwell surely has to come into the equation. We could be committing today to a RAB model that could, in principle, help to fund Bradwell, if it goes ahead. It is part of the linked sequence that has already been agreed in heads of terms by the UK Government and the Chinese Government, effectively. He says that it is not a discussion for today, but that is true only if the Bill is just about Sizewell C, in which case his statement that the Bill is potentially about other things is not correct. Which is it?

Although the Bill is effectively about financing Sizewell C, it has implications elsewhere. The Minister says that it is not relevant because the Hualong reactor does not yet have generic approval. That is not a question of making a decision about the involvement of foreign powers or anything like that; whether the reactor gets generic approval for use in UK nuclear markets is just a technical issue. I presume that he would want the nuclear authority to take that line and to give approval, or not, on the technical merits of the Hualong reactor, not on who is running it. That is the issue, however, concerning Bradwell. It has nothing to do with generic commissioning or otherwise; it is a much bigger issue, and he needs to recognise that.

[Greg Hands]

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

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

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

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Division 1

Ayes: 5

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Labour: 4
Scottish National Party: 1

Noes: 8

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Conservative: 8

[Dr Whitehead]

I beg to move amendment 3, in clause 2, page 2, line 14, at end insert—

“(c) the Secretary of State is of the opinion that the nuclear company is able to complete the nuclear project.”

This amendment requires the Secretary of State to give a view that a designated nuclear company is able to complete the project for which it is designated.

I am grateful to you, Ms Fovargue, for grouping amendment 3 on its own so that we can talk about it in its own right. Like the previous amendment, it seeks to add into the clause the designation of a nuclear company. We have not talked about the designation process, although I am sure we will.

The designation process is where a nuclear company that appears to have an interest in a plant, and has at least taken some steps to develop it beyond the conceptual state, is then given a preferential initial contract and a window—again, we will discuss the timescale of the window later—where it goes through the various processes of modifications of its licence to set itself up to take part in a RAB. It agrees to various things relating to the counterparty in the RAB process and agrees the initial ceiling for allowable costs for the project, which it has at the time of designation brought to a position where work can start to proceed. It is therefore on a track, but not in the RAB process at that point.

We attempted to put a third designation criterion in the clause a moment ago, which states that the designation criteria are that

“the development of the nuclear project is sufficiently advanced to justify the designation of the nuclear company”.

In other words, the project is more than just a drawing board idea. As I am sure the Minister will be painfully aware, we have had a plethora of nuclear projects in this country at various stages of advancement that have fallen by the wayside for various reasons. Some of them were relatively advanced and some were just concepts, but they were all reflected in the original planning documentation in, I think, 2011 in terms of consortia and sites and various other things that were given an overall green light in the planning process. The sites were not designated in the sense we are considering here, for nuclear development, but it is certainly true that a number of the projects suggested for those sites would not have passed the designation test before us today on the work having been done to advance the project.

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[Alan Brown]

I understand where the hon. Gentleman is going, but where is the fall-back?. The Secretary of State is desperate to get a nuclear deal signed off, so he just signs it off: “Yes, I am of the opinion that this project will be completed.” Ten years down the line, it all falls apart and the project cannot be completed, a bit like the Californian example. What protection would the amendment introduce? It seems that the Secretary of State can just sign this off based on his opinion. If there are repercussions down the line, they do not come back on that Secretary of State.

[Dr Whitehead]

The hon. Member makes an important point, at least part of which we will discuss when we come to the procedures under which a potentially failed project might be rescued or transferred to other undertakings so that it can be delivered and completed, or if already operating, can continue to operate.

[Dr Jamie Wallis (Bridgend) (Con)]

In what circumstances is it conceivable that a nuclear project would be deemed not to have a realistic prospect of completion but at the same time to be value for money?

[Dr Whitehead]

It is quite possible that the Secretary of State could deem the first two criteria on the basis of work that the company had done to approach designation. However, unless the Secretary of State has in mind the whole picture at the point of designation—in the previous group of amendments, we touched on some of the things concerning the whole picture—it would be possible for him to conclude that, yes, on the basis of the work done so far, the particular mechanisms looked like they might produce, say, value-for-money electricity at a rate per kilowatt-hour that was compatible with market levels of electricity at that point or in the future or with value for money as far as other electricity production is concerned, but he might still not have a handle on whether the undertaking that the nuclear company was about to engage in was sound in the overall, as far as completion was concerned.

The hon. Member for Kilmarnock and Loudoun touched on an important lesson in that respect, which ought to be put before the Committee. He mentioned a case in California—it was not quite in California; it was a little way a way, although it began with the same letter. I am talking about the experience of a nuclear power plant in South Carolina in the United States. When I say the experience of a nuclear power plant in South Carolina, I do not mean that—because there is no nuclear plant in South Carolina; there are a bunch of a concrete foundings, walls and various other things that look like a nuclear power station, but it does not operate, it has never produced a single kilowatt of electricity and it remains abandoned.

More significantly, that project not only was abandoned but was commissioned precisely on the sort of criteria that are contained in the Bill. All those things were gone through by the South Carolina legislature, which put in place something remarkably similar to a RAB. Indeed, the bill payers of South Carolina were required to stump up money for the project as it progressed, and I am sure hon. Members will be interested to know just how much money went from the bill payers of South Carolina to that project and how much they got out of it as a result of introducing a RAB model in South Carolina. The answer is nothing. Some £9 billion of customers’ money went into the project, and they will continue to pay for that lump of concrete for the next 20 years in their bills because of the way in which the thing was constructed, all on the basis of agreements that looked pretty similar to what is in the Bill.

What South Carolina did not do was ask serious questions about the resilience of the various partners and companies involved in the project in the light of changing circumstances in terms of the construction of the project and the health of the companies involved. Among other things, costs went through the roof, the timescale increased substantially and one of the companies that was in charge of the project effectively went bust—it called for chapter 11 protection and was therefore unable to continue with the project. All those things could have been foreseen by the South Carolina legislature, but were not. The project went ahead, with the customers footing the bill, as various reviews subsequent to the collapse of the nuclear programme said, on the basis of something that was extremely unlikely to ever come to fruition as a nuclear power plant, not only because of the dodgy nature of the financing of the project but because it had completely unrealistic timescales—those involved expected to produce electricity within six years from the start of production and so on, none of which was properly overseen.

[Alan Brown]

I appreciate the hon. Gentleman giving way once more; I am starting to feel like I am on a mission to annoy each contributor—apologies. He makes valid points, and I understand his concerns and what he is trying to do, but I still do not understand how the amendment would preclude such a scenario. Surely, as well as the amendment, the Secretary of State would need to look at a list of criteria, with their sign-off verifying what factors have been considered to reach the opinion that the project is viable. Otherwise, the Secretary of State could just say, “I think this project will be completed—let’s move on.”

[Dr Whitehead]

Yes, indeed. The hon. Gentleman is right, to the extent that the amendment does not actually guarantee the success of a project as a result of its placement in the designation clauses. Of course, it is not possible to do that, because changing circumstances can mean that projects cannot come to fruition. The difference the amendment would make is that the Secretary of State would be required to look at all those sorts of things in the overall scheme of things as far as the company and the prospects for success of a particular project are concerned, in such a way that he could form an opinion, which he would undoubtedly have to publish, that he was as satisfied as he could be, having done all that work, that the project had a very high prospect of being completed, and he would have to underwrite that.

One thing I did not say about the South Carolina project is that a lot of it is now the subject of legal action, and various state officials are being hauled up before the courts for their lack of diligence in actually looking at the overall circumstances of the project when they gave the go-ahead on a similar basis to that which we are discussing. If the Secretary of State had to sign off, on the basis of the amendment being in the Bill, that it was all okay and could go ahead, and it turned out that it was not okay and could not go ahead, under circumstances that could have been foreseen, he would then be liable. That is potentially quite an important concentration of the mind, ensuring that the work had been done, as much as it could be done—I accept that it would not be a perfect operation—to ensure that there was a reasonable or good prospect that the company involved could complete the project. That is all the amendment says. It would be an important addition to the designation process.

We need to be clear that, as much as we can do the work, we have done the work in getting the designation clearly marked on the basis that the company really can deliver a nuclear plant and produce electricity for customers. As I have said, we are engaged in a RAB process, which ultimately lands on the customers. We absolutely do not want to ever land the customers of the United Kingdom in the same position that the customers of South Carolina are in today, so far as a nuclear power plant is concerned.

Ordered, That the debate be now adjourned.—(Mark Fletcher.)