Nuclear Energy (Financing) Bill

Greg Hands Excerpts

2nd reading
Wednesday 3rd November 2021 Commons Chamber

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

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

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

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

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

Will the Minister give way?

[Greg Hands]

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

[Alan Brown]

I will do so later, but the Minister knows nuclear waste is a key issue. On proven technology working alongside renewables, he will be well aware that pumped storage hydro can provide that. Why will the Government not give the go-ahead for Coire Glas in the highlands, which has been progressed by SSE?

[Greg Hands]

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

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

[John Redwood (Wokingham) (Con)]

Does that not mean much more nuclear is needed if it is the preferred means of backing up wind? The new nuclear the Minister is talking about will not even replace the nuclear that is closing.

[Greg Hands]

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

[Neil Parish (Tiverton and Honiton) (Con)]

Further to the question from my right hon. Friend the Member for Wokingham (John Redwood), Hinkley Point C will produce between 7% and 8% of the nation’s electricity needs once both reactors are up and running. A further plant of the same size would perhaps take it to 16%, but surely we need at least 25% to 30% if we are to make sure we have enough power to keep the grid going when the wind stops and there is no sunlight.

[Greg Hands]

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

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

Is not the problem with the Government’s proposals that the new financing model, which is very favourable, goes towards only one technology? Are the British Government not therefore picking a winner from the available technology options? Does that not go against Conservative ideology?

[Greg Hands]

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

[Mark Tami (Alyn and Deeside) (Lab)]

Will the Minister give way?

[Greg Hands]

I will make a bit more progress.

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

[Mark Tami]

Will the Minister give way?

[Greg Hands]

I will make a bit more progress.

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

[Mark Tami]

rose—

[Greg Hands]

I am going to make more progress.

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

[Mark Tami]

rose—

[Greg Hands]

I am going to make some more progress.

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

[Mark Tami]

I thank the right hon. Gentleman. Does he agree that since the advanced gas-cooled reactor programme, we have not had a programme of new nuclear reactors? We have had very drawn out processes for one-off plants, whether at Sizewell or Hinkley. We need to plan and have new reactors, preferably with the same build. If we look at what the French have done, we see that they can take one part of one reactor and put it in another one. We have always tinkered with reactors, rather than see this as a long-term project.

[Greg Hands]

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

[Mark Tami]

rose—

[Greg Hands]

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

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

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

[Mark Tami]

I actually came here in 2001, but I will leave that there. I have been a long-time supporter of nuclear power. I think that the problem, on both sides of the House, is that we have energy review after energy review, we identify what all the problems are and we do absolutely nothing about it. We need a long-term plan, and I am talking about both sides of the House here. I will certainly be supporting this Bill tonight.

[Greg Hands]

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

[Mark Jenkinson (Workington) (Con)]

Just to carry on the point about Labour’s involvement in this, I should point out that at his final party conference Tony Blair said:

“10 years ago I parked the issue of nuclear power. Today, I believe without it, we are going to face an energy crisis and we can’t let that happen.”

For the first time in my life, I am going to say that Tony Blair was right. The French are reaping the rewards of Messmer’s nuclear legacy. Will my right hon. Friend commit today to his Messmer-style nuclear legacy for the UK?

[Greg Hands]

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

Let me move on—

[Jonathan Edwards]

Will the Minister give way?

[Greg Hands]

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

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

[Jill Mortimer (Hartlepool) (Con)]

I congratulate my right hon. Friend on this landmark Bill, which will help us to reach our net zero targets by 2050. Does he agree that it creates an incredible opportunity to replace the soon-to-be-decommissioned reactor in Hartlepool with a new advanced modular reactor, which could create the high-quality, high-temperature steam that we need for hydrogen production in Teesside?

--- Later in debate ---

[Greg Hands]

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

[Sir Desmond Swayne (New Forest West) (Con)]

When will I be able to get one of these little modular, Rolls-Royce reactors?

[Greg Hands]

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

[David Morris (Morecambe and Lunesdale) (Con)]

My understanding is that eight sites around the UK currently have planning permission for new nuclear power stations. I have two nuclear power stations in my constituency and we would welcome a third; will the Bill help in some way to speed up the planning process so that we can get investment into communities? My local nuclear power stations are supposed to be decommissioned within the next 10 years.

[Greg Hands]

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

[Alan Brown]

Will the Minister give way?

[Jonathan Edwards]

Will the Minister give way?

[Greg Hands]

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

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

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

[Jonathan Edwards]

rose—

[Richard Fuller (North East Bedfordshire) (Con)]

rose—

[Greg Hands]

I will make a little more progress.

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

[Jonathan Edwards]

Will the Minister give way?

[Greg Hands]

I will make progress.

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

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

[Angus Brendan MacNeil]

rose—

[Greg Hands]

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

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

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

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

[Angus Brendan MacNeil]

rose—

[Greg Hands]

I have given away enough.

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

[Angus Brendan MacNeil]

rose—

[Greg Hands]

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

[Angus Brendan MacNeil]

I am very grateful to the right hon. Gentleman. We had many a good exchange at that stage, but I want to take him back a little further to when I was Chair of the Energy and Climate Change Committee. It was pointed out in representations that were made to me that, sometimes, the Government ask the wrong questions. When they say they want nuclear, what they really need are 6 GW baseload. That might be achievable with a mix of technologies and at a cheaper strike price. Hinkley, for instance, is £92 per megawatt-hour, index linked to, I think, 2012 prices. Had that question been asked differently, not stipulating nuclear but asking for 6 GW, the price achieved might have been around £70, saving bill payers, taxpayers and everybody an awful lot. I caution the Government against going down one route and prescribing the technology—the Minister did mention technologies. Perhaps he should say what he needs, which is 6 GW baseload.

[Greg Hands]

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

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

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

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

[Alan Brown]

Will the Minister give way?

[Greg Hands]

No, I am going to make more progress.

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

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

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

[Angus Brendan MacNeil]

Will the Minister give way?

[Greg Hands]

No; I am going to have to finish.

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

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

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

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

Nuclear Energy (Financing) Bill (Third sitting)

Greg Hands Excerpts

Committee stage
Thursday 18th November 2021 Public Bill Committees

[The Chair]

We can now resume.

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

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

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

[Alan Brown]

The Bill is mainly about Sizewell C. Can the Minister tell me where any European pressurised reactor is operating at scale connected to the grid at this moment in time? He is talking about proven technology.

[Greg Hands]

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

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

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

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

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

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

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

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

--- Later in debate ---

[Alan Brown]

The Minister will have noticed in the evidence session on Tuesday when I put the question to the Sizewell C company about the derivation of the £1.7 billion and what discussions the company had had with the Government about that, the lady did not seem to know, or to believe there had been discussions with the Govt. How does this £1.7 billion get defined if the Sizewell C company does not know its derivation?

[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—

[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.

[Alan Brown]

The Minister made a key point: this is taxpayers’ money. Surely, we as taxpayers have a right to know, even roughly, what services will be procured from this £1.7 billion. I would still expect the Sizewell C company to have discussions with the Government and say, “We need to do x, y and z in order to de-risk this project and get it to the final investment decision stage”.

[Greg Hands]

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

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

[Matthew Pennycook]

I take the point about the National Security and Investment Act. The Minister will know that that was given Royal Assent only in 2021. The strategic investment agreement that applies to Sizewell C was signed off—agreed—in October 2016. I think that I am right in saying that the National Security and Investment Act does not apply retrospectively, so how does it cover the specific arrangements in place as a result of that deal? Can he expand on what regulation is in force to give us assurance about safeguards in relation to foreign states and investment in civil nuclear?

[Greg Hands]

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

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

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

[Matthew Pennycook]

I would like to pick up and press the Minister on the thrust of amendments 2 and 1, which is a consequential amendment. I take what he is saying about the purpose of the Bill being to attract, potentially, more UK investment—we do not know how much, but potentially—and about not wishing to exclude foreign investment. I take the point that he made earlier about the language used in our amendments and how he sees it as meaning a blanket ban. I would argue that it does not have that intent. There are complexities here, but does he not differentiate in his own mind between state-sponsored companies and state-controlled companies—controlled by foreign powers—that his own Government say pose a systemic challenge, and if he does, why does he not think that it is worth putting this in the Bill? Surely there is a need to differentiate and ensure that those types of companies—the latter—are not able to access RAB funding.

[Greg Hands]

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

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

and amendment 1 states that owned by a foreign power means

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

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

[Matthew Pennycook]

If the Minister is unhappy with our language, will he undertake to introduce Government language on Report that satisfies that differentiation?

[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.

--- Later in debate ---

[Greg Hands]

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

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

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

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

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

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

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

[Matthew Pennycook]

I thank the Minister for his response. I also very much welcome his opining on the sanctity of the UK-EU trade and co-operation agreement—a refreshing change.

I agree with the Minister entirely that we are aligned on the importance of national security in our critical national infrastructure, but I am afraid he has not done enough to reassure me. From the argument he made, as long as the two criteria that he spoke to are met, it seems that we could still end up, having passed the Bill, with financing from companies such as China General Nuclear in future UK nuclear projects. Also—this is critical—because of the sequencing agreement that has been spoken about at length and has been agreed already, that would allow China in theory to own, plan, finance and operate a site at Bradwell. We might have not only CGN financing involved, but CGN operation.

I remain unconvinced by what the Minister said about the national security regulation that is in place. In essence, he said, “Trust the Secretary of State when the point of decision comes”, but we do not think that that is enough. We think this should be in the Bill. If he is unhappy with the wording of the amendment, I invite him to propose wording more appropriate to his mind, but that does the job. We will therefore press amendment 2 to a Division—not amendment 1, which is definitional in nature and consequential. I beg to ask leave to withdraw that amendment.

Amendment, by leave, withdrawn.

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

[Greg Hands]

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

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

[Alan Brown]

I appreciate that the Minister has been generous with his time. Will he clarify whether Sizewell C has an electricity generation licence? I could not find that on Ofgem’s website.

[Greg Hands]

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

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

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Designation of nuclear company

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

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

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

Nuclear Energy (Financing) Bill (Fourth sitting)

Greg Hands Excerpts

Committee stage
Thursday 18th November 2021 Public Bill Committees

Question again proposed, That the amendment be made.

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

Welcome back to the Chair, Ms Fovargue.

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

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

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

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

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

Sorry. I was just wondering to myself whether the Minister had looked all this up during lunchtime. If so, I congratulate him on doing so.

[Greg Hands]

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

[Dr Whitehead]

I fully accept that the Minister did not look that up at lunchtime and that he is fully apprised of the circumstances surrounding the South Carolina project. However, does he not accept that the issues that he has mentioned as relevant to the failure of that project—it was entered into without proper consideration of a lot of things that, as he said, were at least in part responsible for its failure—are precisely the sorts of issues that we would expect him to take into account and sort out before deciding on the designation of a project in this country?

[Greg Hands]

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

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

[Dr Whitehead]

I hear what the Minister says about the amendment, but I am not entirely convinced that he has made the case that he thinks he has made as to why this addition is not necessary for the designation process. After all, we are not talking here about a particularly adept and alert Minister in a particular Administration taking a decision on Sizewell C. As the Minister has said, this Bill is supposed to deal with decisions that might be taken under other circumstances, for other projects, at other times, with other Ministers, and possibly other Administrations. It is important that we put in legislation everything that we think could go wrong with a project and its designation process, so that the legislation is robust for the future.

On South Carolina, the Minister is right. The project failed as a result of a series of interlocking issues. Those issues were not necessarily associated with the RAB process, which is what we are considering in this Bill, but there were wider concerns that should have been apparent to legislators in South Carolina when the project was commissioned and went ahead. Many of the things that the Minister alluded to that occurred in South Carolina were not unforeseeable events. They were events that could have been analysed out at the time of the designation of the plant. Essentially the amendment seeks to address that issue.

We will not press this amendment to a vote—indeed, we will withdraw it—but we have put on the record our belief that the Secretary of State should have a very substantial hand in ensuring, as far as possible, that the project really can come to completion. I am sure that the Minister is with me on that and agrees that that should be the process by which we conduct designation.

Even if it is not explicitly in the Bill, the fact that the Minister has indicated that he thinks that a number of these issues can be covered within the designation elements is perhaps a step along the path to ensuring that these processes can be carried out properly. I do not wish to proceed with the amendment on that basis, but we need to do a proper job at the point of designation, for the protection of investors, for the project and for the customers who pay for it.

[Greg Hands]

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

[Dr Whitehead]

The Minister puts that as a binary choice, but it is not because there are circumstances. That is essentially what happened in South Carolina. A number of people thought that it was a fine project that would go ahead; they put forward impossible timelines for the project to work on, there were very difficult financing arrangements and the RAB was placed on top of that. Yes, they may have thought that the project could come to completion, but it was not a very well-founded thought, and nor was it arrived at on the basis of the sort of diligence we should expect from the approach to a project the size of, say, Sizewell C.

The amendment’s intention is not to make the Secretary of State make a choice based on a potential view, when designating a project, that it might not be completed. He should do all that work, and indeed be publicly accountable for it, when ensuring that his view is as well founded as possible and that it will stand the test of time as the project progresses. There are points of landing between knowing whether a project is not going to be completed, and being sure that it is going to be completed. When making a designation, the Secretary of State should be held accountable for arriving at an informed position, which can be scrutinised in future, on whether it is reasonable and realistic to say that a project is likely to be completed. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[Greg Hands]

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

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

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

I will come to this in my own comments, but is it not the case that the Secretary of State gets to sign off whether he thinks a project is value for money and sufficiently advanced, and then a statement is published giving the reasons for that? However, the Secretary of State gets to write the rules for the sign-off. Is it not the case that no clear structure or checklist will be gone through so that the Secretary of State can sign off such projects?

[Greg Hands]

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

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

[Alan Brown]

Following on from my intervention, I have real concerns about the clause—we will come later to clause 3—and the lack of transparency in what constitutes value for money. In signing off projects, the Secretary of State has to give an opinion on whether they are suitably advanced to justify a designation, but what constitutes “suitably advanced”? What considerations must the Secretary of State be compelled to make to ensure that a project is suitably advanced to give the correct level of detail and analysis for cost definition in sign-off? We should bear in mind that sign-off for a 60-year contract ties up consumers.

I do not see those considerations in the Bill. The Minister said that he would take the Committee through them, but how does the Secretary of State consider how suitably advanced a project is? Does there have to be a working prototype? There is no working prototype of the evolutionary power reactor model generating electricity to the grid. The projects in France and Finland are years late, over cost and still not connected to the grid—and, as I said earlier, the Taishan 1 EPR is now offline due to safety concerns. How can the Secretary of State have any confidence that a project such as Sizewell C is suitably advanced when there is no working prototype?

What other permissions need to be taken into account to determine whether a project is suitably advanced? Does it need to have planning permission? Does it need to have gone through all its environmental appraisals and have all its environmental approvals in place? Are there other things to consider? How far is outline design to be developed? Is there a level of detail to consider to determine whether a project is suitably advanced? How much site investigation work needs to be undertaken before a Secretary of State can have confidence that a project is suitable advanced, bearing in mind the cost of a 60-year contract? Should consideration be given to a company’s track record on deliverability? That takes us full circle to how there is not an EPR up and running. In a way, that touches on what the shadow Minister said about having confidence that a project can be delivered when not one project has yet been delivered successfully.

The Government are in advanced negotiations on Sizewell C, which is the most well developed nuclear project at the moment. Does it come close to the definition of “sufficiently advanced” or does a lot more work need to be done? That takes us full circle back to the discussions earlier about the £1.7 billion allocated in the Red Book. The Minister has still not given us any clarity on what the £1.7 billion is for. Is it to allow the Sizewell C company to develop the project further to get it to a position that the Secretary of State thinks is sufficiently advanced? That would mean that, by default, the Secretary of State knows what “sufficiently advanced” means, so we should be able to understand what the £1.7 billion is going to pay for. Hopefully, all that can be explained.

EDF has claimed it is using Hinkley as a prototype that it will replicate at Sizewell C. It will accrue savings and just move the design almost lock, stock and barrel from Hinkley into the footprint at Sizewell C. I would have thought that, by default, that means the project is sufficiently advanced such that we do not need the £1.7 billion to advance it any further. A bit of clarity on that would be useful.

We need a lot more clarity on subsection (3)(b). What is the process for the Secretary of State assessing and giving the opinion that

“the project is likely to result in value for money”?

What are the intended governance and transparency protocols? We have spoken about the designation in a statement, but there is no clarity on what the Secretary of State will consider and what will be provided in the statement.

In recent months we have had the dodgy covid contracts. How do we ensure good faith rather than backroom negotiations and that there is public trust in what goes on in the signing-off of contracts? When I asked the Treasury a written question about the £1.7 billion and the discussions the Chancellor has had, the answer I was given was:

“Details of any meetings with companies regarding funding are commercially sensitive.”

If the Treasury will not even tell me who it is meeting and when, how can we have any comfort about what goes on behind closed doors in respect of the negotiations and the assessment of value for money? I hope to come back to value for money later in Committee, because I have tabled a relevant new clause.

It seems to me that as it stands, subsection (3)(b) means nothing, other than that the Secretary of State can rubber-stamp something that he believes to be value for money. Let us bear in mind that this is the Government who told us that Hinkley was value for money, even though everybody argued that the strike rate was too high. With this Bill, they are telling us that Hinkley was actually a rubbish deal, so we need the RAB model in the Bill to save taxpayers’ money.

The Government explained on Second Reading that a contract for difference had to be used for Hinkley because it was the first of a kind, so all the risk was on the developer, but that raises further questions. If a CfD was needed for Hinkley because it was the first of a kind in the UK, how on earth can the Government make a final decision to proceed with Sizewell C under a RAB model before Hinkley is even operational?

Hinkley is 25% over budget and at least a year late, with a possible further 15-month delay on top of that. How can the Government have any confidence in signing off on something like Sizewell C, for which the impact assessment talks about a 2023 construction start date? How can that project be anywhere close to “sufficiently advanced”? How can the Secretary of State do a proper value-for-money assessment given all the outstanding issues with Hinkley?

As I said, we need a lot more clarity on that £1.7 billion. Is that going to be the way forward in future? Is it the intention that, for a project to get to a stage where it is sufficiently advanced and the Secretary of State can make a value-for-money assessment, something like £1.7 billion will be allocated to each developer that is in the mix for a new nuclear project? That is crucial for value for money overall.

Paragraph 50 of the explanatory notes gives four criteria that might be used to consider value for money, but three of them are just the traditional Government tropes to justify nuclear in the first place: security of supply, low-carbon electricity and net zero targets. The Minister alluded to that in his opening speech. Those same arguments have been put forward to justify new nuclear for the past 15 years. We still do not have a new nuclear plant operational, so when the Secretary of State looks at the reasons for value for money, it will be very easy because those are the arguments that they will use.

In particular, the security of supply argument was used to justify Hinkley, but Hinkley was supposed to be required by December 2017 to stop the lights going out. It will not be operational for at least 10 years after that original date, and the lights have not gone out, so security of supply is almost a nonsense argument for value for money. That confirms to me that the criteria are too loose and will be too easy. There will be a lack of transparency, but the Secretary of State will sign it off and say, “Yes, I think the project is value for money.” Again, we have this Bill because they are desperate to get Sizewell signed off at any cost.

In conclusion, for me the clause is too loose and too vague. It is set up to encourage backroom negotiations without transparency. At the very least, it would be nice if the Government conceded to an independent assessment of the risks and value for money for consumers. That was suggested in the witness session on Tuesday by Citizens Advice. I look forward to the Minister’s response, but he will have to go a long way to satisfy me that there is a robust procedure in place to assess value for money and how suitably advanced the project is for designation.

[Greg Hands]

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

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

[Alan Brown]

Earlier, the Minister talked about UK pension funds as well in terms of levering in capital. Is some of the £1.7 billion going to be matched funding with pension funds, for example, or is it to provide some guarantees so that the pension fund can invest at a guaranteed rate of return, where the guaranteed rate of return comes from the taxpayer?

[Greg Hands]

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

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

[Alan Brown]

I want it no ways.

[Greg Hands]

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

--- Later in debate ---

[Dr Whitehead]

Indeed. The hon. Member has drafted her own, perhaps more succinct, amendment on the fly. I would welcome hon. Members tabling amendments if they feel that they can do it better, or more succinctly, than we can. She is right that it is a test of the relevance of the consultation process. Her suggestion does not quite cover the point because I would like the Secretary of State to say why those people are being consulted. Essentially, the amendment requires the Secretary of State to not just think that people are relevant but tell us why. It is not a big point, but I think that would improve the Bill a little were it to be accepted.

[Greg Hands]

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

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

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

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

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

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

[Dr Whitehead]

I am certainly happy to withdraw the amendment, but in passing I mention that the Minister has drawn attention to the word “must” in clause 3(2), which precedes the people who the Secretary of State is listed as consulting. I am glad that he drew attention to that, because it may reflect on an amendment that I will move later concerning the words “may” and “must”. The Minister will know that a regular concern of mine is that legislation needs to be written in the right way concerning the imperatives on the Secretary of State rather than the allowances. We have made progress from that point of view.

Although this clause contains a fairly standard way of putting things, that may just mean that legislation has been slightly lax in the past, which may be considered less than satisfactory in future. I take the Minister’s point, however, that it is not an exceptional way of putting things, and I take his assurance that a question of relevance would be in the Secretary of State’s mind when he consulted anybody under such circumstances. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[Greg Hands]

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

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

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

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[Kirsty Blackman]

It is a pleasure to be able to take part in this Committee. Thank you very much for your excellent work in chairing today’s sitting, Ms Fovargue.

I have just been on the Subsidy Control Bill Committee, and the Subsidy Control Bill has an incredible lack of information. We spend a huge amount of time asking for more transparency in that Bill, but this Bill is significantly worse than the Subsidy Control Bill in the lack of information that has been provided. To be honest, I cannot believe that the Bill is actually considered appropriate for primary legislation, because there is a totally stunning lack of info and an absolute lack of transparency.

The Secretary of State has to publish the reasons for the designation. What does that mean? What does the Secretary of State actually have to say in their reasons for the designation? Do they just write, “I think it’s a good idea. Let’s go for it.”? There is not enough information. As my hon. Friend the Member for Kilmarnock and Loudoun asked earlier, does the Secretary of State have to take into account whether there is planning permission in place? Does the Secretary of State have to take into account the licences that have been put in place? It is totally unclear how this is likely to work.

I have a specific question for the Minister in addition to my general dismay at the clause. Subsection (3) talks about the people who have to be consulted. It says that if part of a site is in Scotland, the Scottish Ministers and SEPA have to be consulted. It also says something similar in relation to Wales and England. We know that if something is to be built in a border area, it will likely have cross-border environmental effects, so two environmental agencies could be involved should a project be fairly close to a border.

I would like the Minister to give me some comfort by saying that he would consider consulting more than one environmental agency, because if a project were to be on the border between England and Wales but slightly more on the English side, it might still have environmental impacts in Wales. It would be relevant, therefore, for the Minister to ensure that the consultations are slightly broader than simply where the footprint of the site is, because we know that any large thing that is built—whether it is something as potentially likely to cause massive environmental problems as nuclear or something much less of a potential environmental risk—has wider environmental issues than simply its footprint. It would be useful if the Minister could confirm that he would give consideration to that happening in the event that it is really pretty close to a border.

[Greg Hands]

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

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

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

[Dr Whitehead]

I do not want to be accused of trying to be too helpful to the Minister but, as I understand it, this part is about the designation of an existing nuclear company for the possibility of receiving RAB payments for a project it has not yet undertaken. That is it. It seems to me that what we are concentrating on in this part of the Bill—although not later on in the Bill—is just the designation process. I hope the Minister will agree that that is not the project or the RAB process itself, on which we would expect considerable transparency as it goes through, but not necessarily at this particular stage.

[Greg Hands]

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

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

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[Mark Jenkinson (Workington) (Con)]

Is it not the case that the rest of the UK can learn from Scotland’s lead on net zero when we see the low-carbon content of their grid, which is thanks to nuclear technology?

[Greg Hands]

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

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

[Alan Brown]

The Minister has already said that energy generation is a reserved power. Is he confirming that if the devolved Administrations say no in a consultation, that could be overruled by Westminster, with the imposition of a nuclear power plant?

[Greg Hands]

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

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

[Kirsty Blackman]

I appreciate that really helpful clarification.

A couple of points about the lack of transparency in the clause have not been covered. Subsection (2)(a) states that the Secretary of State has to “prepare draft reasons”. Subsection (5)(b) states the Secretary of State must provide the reasons “amended as appropriate”. We have not heard what those reasons look like. Do they say something along the lines of, “The Secretary of State gives designated status because he feels like it”? I presume not, but there is no information about what those reasons would include. Could we have something in writing about what could be in those reasons? There is no framework here at all—the Bill seems to be quite lacking.

[Greg Hands]

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

[Kirsty Blackman]

rose—

[Greg Hands]

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

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4

Expiry of designation

[Dr Whitehead]

I beg to move amendment 5, in clause 4, page 3, line 24, leave out “5” and insert “4”.

This amendment shortens the maximum time allowed by the Secretary of State for the designation period of a nuclear company.

[Dr Whitehead]

The amendments are grouped because one follows directly from the other—amendment 6 is consequential on amendment 5. The previous debate about the designation process was helpful for discussion of this clause, because clause 4 looks at how long a designation may last once the process has started. That is important because the process can cease to have effect either on the expiry of the designation—that is, a company has been designated for moving along the path to eligibility for a RAB and various negotiations will take place as the company develops its plant—[Interruption.]

[Greg Hands]

The House has adjourned.

[Dr Whitehead]

Hon. Members have such Pavlovian responses these days, automatically running out of the door whatever the circumstances.

The expiry date of a designation could well arrive because the company has received a designation, but has done nothing about it, or because the Government have got a designation through, but are a bit lax in pursuing the subsequent process. Alternatively, as the clause suggests, it could be because a project is under way, the revenue collection contract starts biting, investment is secured and the project goes ahead.

However, I am a little concerned that the expiry date is set at a period of five years, beginning on the date of the designation notice in question. As such, both the nuclear company and the Government have five years to get their act together on the RAB process, although that could lead to a going slow or delays. We already know that nuclear projects have a habit of running over time, sometimes due to construction issues and so on, but we do not want projects to be further delayed because people have not got themselves organised for a proper RAB process or because the Government cannot be bothered to get things going at a certain time and believe that they have five years to sort that out.

We have made the modest suggestion that that period should be four years; that might concentrate minds a little on moving from the process of hopefully being designated to the process of having a revenue collection contract and getting under way properly. There would not be that time to mess about between the two ends of the process, as might be the case under the five-year designation period.

I agree that we could pick any one of a number of different dates; the four-year period is just to suggest that we should concentrate minds a little. The amendment does not lay down the law: if the Government think it could be reconstructed in a different but more concentrated way, we would be happy with that. The amendment just suggests an indicative new date so that the point is borne in mind. I hope the Government will be able to accept it on that basis.

[Greg Hands]

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

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

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

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

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

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

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

[Dr Whitehead]

As the Minister has said, the amendment was essentially a probing amendment to seek a little more clarification on why five years is considered to be the appropriate time. I am not sure that the Secretary of State has fully answered the question about the extent to which that might allow people not to get on with things as quickly as they might otherwise do, but I appreciate that in a complicated project such as those we are considering, there are processes that take quite a lot of time; it may well be that getting on for five years is the time necessary for such projects to be completed.

The overall point is that we want to make sure that, once designation has been undertaken, we move to the next stage as quickly as possible. I am sure that the Secretary of State would concur with that particular aim. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[Greg Hands]

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

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

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

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

Revocation or lapse of designation

[Dr Whitehead]

I rise to speak to amendment 7, in clause 5, page 4, line 16, leave out “either” and insert “any”.

This amendment is consequential on amendments 2 and 3.

This amendment was tabled to deal with the possible eventuality that we would have three designation criteria in clause 2(3), rather than two, as is the case at the moment. We moved an amendment to try to place three criteria into that clause, which the Committee did not accept. The statement, therefore, that either of those two criteria are relevant stands as far as the Bill is concerned, and the word “either” should therefore not be replaced by “any”. On that basis, amendment 7 logically falls, so I have no wish to move the amendment.

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

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[Greg Hands]

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

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

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

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

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Licence modifications: designated nuclear companies

[Dr Whitehead]

I beg to move amendment 8, in clause 6, page 5, line 3, at end insert—

“(2A) Prior to exercising the power under subsection (1), the Secretary of State must publish a statement setting out how the exercising of the power will facilitate investment in the design, construction and commissioning of nuclear energy generation projects.”

This amendment requires the Secretary of State to justify the exercise of a power to modify the electricity generation licence of a nuclear company.

The clause concerns modifications to the licences of companies that have entered into a designation with regard to the RAB process. It sets out a number of powers enabling the Secretary of State to make modifications to licences in order to square the designation process with the licence process. It occupies a lot of other areas, but would be particularly relevant to the licence as it applies to, say, the Sizewell C project.

Subsection (2) states that the Secretary of State is able to exercise the power under subsection (1)—to modify licences—

“only for the purpose of facilitating investment in the design, construction, commissioning and operation of nuclear energy generation projects”,

which restricts the powers of the Secretary of State to modify the licences, concentrating it in the field of the design, construction and operation of the nuclear project.

Hon. Members will notice that that restriction stops there—that is, the Secretary of State may exercise that power for that purpose, but no one else needs to know about it. The Secretary of State may consider doing that, or restricting himself or herself to that particular designation, and may consider that he or she has done that, but it is a completely opaque process.

This amendment seeks to ensure that the Secretary of State publishes a statement setting out how his decision does indeed facilitate investment in the design, construction, commissioning and operation of nuclear energy generation projects, so that when he is considering exercising that power, it is a publicly exercised power, and information on what he has done is in the public domain.

The publication of the statement does not restrict what the Secretary of State can do; it sheds a light on what they can do, and ensures that they are carrying out that particular power correctly, as laid out in the legislation. We think that would be a good, safe addition to the Bill. It does not fundamentally alter its direction, but sheds a little more light on the process as the directions of the Bill are undertaken.

[Greg Hands]

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

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

[Alan Brown]

Could the Minister give an example of an existing licence that the Government have granted that could likely need to be modified to facilitate the investment that the Government are looking for? Could he explain what that process looks like?

[Greg Hands]

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

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

[Dr Whitehead]

We do not intend to press the amendment to a vote, but I will say that we think it is a good idea, which adds to the Bill’s transparency. The Minister has given examples where certain elements of that transparency would be facilitated by other components of the Bill, but I would note that most of those are post hoc rather than before the process. Nevertheless, I take some assurances from what the Minister has said about the proper transparency of the process, so we will not pursue that this afternoon. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[Dr Whitehead]

It is at the conclusion of the construction stage because the construction stage gives way to a production stage. That is the point at which electricity is produced, when the customer—I am assuming we can describe the consumer and customer as an entity—or those acting on behalf of the customer can start to think about the extent to which some of that money may come back as a result of the way that production is carried out within the ceiling set for overall RAB programme costs.

There could be circumstances under which, as the RAB process comes to an end, the customer recoups—in lower bills, dividends and so on—a lot of the money that was put in. There will always be excessive production over the allowed costs level, so money will come back to the customer. We will see later in the Bill the methods by which that money might be restored to the customer. Yes, there is a real interest, post the construction phase, in recouping those costs.

A second issue for the consumer is the eventual outcome of the ownership of the plant at the end of the RAB period, as it goes into production. As it is a regulated asset base, by the end of the RAB period, the company that has undertaken the construction and run the production of the plant will have received all the money it should have received through the regulated asset base arrangement, and will have worked successfully as a result of the support that the RAB process provides.

Depending on how many years are set out for the RAB process to take place, if it reaches its end within the working life of the nuclear plant, the question then arises of who owns the nuclear plant at the end of that period. Does the consumer own it at the end of that period? If they do, that is a little bit like a mobile phone contract, whereby the consumer would expect the charges to reduce substantially after paying off the cost of the phone in their contract. Clearly, it is in the interests of customers to have an active involvement not just in spending their money wisely, but in recouping or changing it into a different form as the RAB process sets its course. Indeed, under those circumstances, the Secretary of State might need to consider the length of the RAB contract, and how far it goes into the operating life of the nuclear power station, to carry out the terms of the contract and to consider what arrangements might be made for life at the end of that contract.

I suggest that those are all things that the Secretary of State ought to have regard to over and above the passive involvement of consumers that is set out in subsection (4). That is why we tabled the amendment, which states that the Bill should take account of

“the interests of existing and future consumers of electricity in relation to their prospects of recouping their contribution at the conclusion of the construction phase of the project”.

That is an active consideration in the management of customers’ contracts, not just a passive one where the customer stands by and waits for the money to be deducted from their account to pay for these projects forever. The Secretary of State should have an active view on that in terms of how to get the best value for the customer from the project overall, over and above the best value for the project itself.

[Greg Hands]

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

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

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

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

--- Later in debate ---

[The Chair]

Order. Interventions are getting very long. There will be an opportunity to respond at the end of this debate, Dr Whitehead.

[Greg Hands]

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

--- Later in debate ---

[Kirsty Blackman]

It is not low-cost energy. It may be slightly lower than more expensive nuclear, but it is still way more expensive than offshore wind, onshore wind, solar and such. Characterising it as low cost is simply wrong.

[Greg Hands]

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

[Kirsty Blackman]

rose—

[Greg Hands]

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

[Kirsty Blackman]

I was not aware that there was a political debate about the cost. The Department for Business, Energy and Industrial Strategy’s figures say that offshore wind costs £47 per megawatt-hour; nuclear is £93, onshore is £45 and large-scale solar is £39. Those are BEIS figures, so I did not think there was any debate. I am concerned that the Minister is inadvertently misleading us by using the term “low-cost”. He can use “low-carbon”, but to say “low-cost” is simply not true, even by BEIS figures.

[Greg Hands]

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

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

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

[Dr Whitehead]

This really worries me. What does the Minister think consumers are doing in contributing to a RAB process? If the Minister does not think that that is in any way a form of investment in the plant and that consumers are just completely passive recipients—that they are good for whatever money is required to get the system through and should have no interest in the proceedings, other than being a milch cow for the process—I am afraid that we differ.

--- Later in debate ---

[Dr Whitehead]

Yes, indeed. This is perhaps a separate debate, but we have a position not just on this particular instance of nuclear power, but on similar arrangements that relate to the RIIO process for energy distribution and network companies, whereby they are enabled to charge an additional amount on bills in order to secure assets that they own and that consumers or the public do not. The consumers, however, are expected to pay for the privilege of having that piece of technology at their disposal subsequently, but the question of ownership never comes into it, because they pay collectively for someone else to have an asset to call its own. That is exactly the situation with the nuclear plant.

We therefore need to take the consumer rather more seriously than just being a passive contributor in the way often set out in such processes—“Oh well, the customer will pay an additional levy in the bill. As long as it doesn’t look too serious at any particular time, that’s okay.” Not only is that not okay, in particular for levies with no consequences if applied to customers, but it is not okay to have a cumulative set of levies that put a lot of money on electricity and gas bills over a period for particular purposes that the consumer has no hand in at all.

I agree that the concept of the consumer being a part investor in the process might sound a little odd to those who have a traditional view of an investor and how an investor works, it is nevertheless a real thing: the consumer is in effect investing in the success of the plant. The Secretary of State—the Minister; I have promoted him already—has set out how he sees the customer being involved in the process, but that completely ignores the proper interest and protection of the consumer and bill payer as far as the overall process is concerned.

The amendment would not make the RAB process impossible; it merely states that as part of that process—we will come to the debate about where allowable costs have been exceeded—yes, the customer invests in it, but the customer also has reasonable expectations of some quid pro quo for that investment. That ought to be looked after. The quid pro quo in this instance, as I set out—I am sure the Minister agrees that this takes place in the RAB process—is that in the production process, if there is an excess over the allowable costs of production, the fact that it is a regulated asset means that that money goes back to someone. In this instance, it should be the customer.

That is what I mean by the customers’ interests being protected in recouping their investment. The Minister surely cannot deny that that is part of, not instead of, the RAB process in the production period. That is actually set out in the notes that accompany the Bill. I am therefore a bit mystified as to how the Minister takes the position that he does, given what is in his own Bill and in the arrangements for RAB that he himself is putting forward. I see no reason why he should not accept the amendment if he has the customers’ interests at heart, because it does not detract from RAB; it adds to it by recognising who is paying the money, what their interests are and how they should be protected.

I will not press the amendment to a vote, but I want to record my disappointment in the Minister’s apparent lack of either understanding or empathy for the customer’s position. We are discussing a Bill in which the customer is central, because they are bankrolling a substantial part of the project as it goes forward. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[Greg Hands]

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

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

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

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

[Alan Brown]

I will be brief, because I know that time is getting on, and far be it from me to speak to a clause that both Front Benchers have agreed adds transparency to the Bill—albeit that, being facetious, I would say that doing so is a low benchmark. Subsection (2) clearly states that the licence can be modified only to facilitate

“investment in the design, construction, commissioning and operation of nuclear energy generation projects.”

Given that clause 1 states that a company can be designated only if it already has a generation licence, I would like the Minister to provide more clarity on what could be in a generation licence that prohibits the investment that he says that we are seeking to unlock by modifying it. That is the part that I am not quite clear on.

Clause 6(5) says that it is all about being able to change the revenue mechanism to allow a company to create more money. The Minister rightly said that subsection (4) lists some of the things that need to be considered as part of a licence modification. I ask him to consider that in the light of what I said earlier about clauses 2 and 3, and about there not being enough information in the Bill about what the Minister or Secretary of State should consider. We could also look at that in the round on Report, but we would like a wee bit more information about why the licence would need to be modified to release this so-called investment.

[Greg Hands]

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

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Licence modifications: relevant licensee nuclear companies

[Dr Whitehead]

I beg to move amendment 11, in clause 7, page 7, line 8, at end insert—

“(3A) When exercising the power in subsection (1), the Secretary of State must not cause the excess of expenditure being incurred over the allowable revenue cap to lead to further charges upon revenue collection contracts.”

This amendment prevents the Secretary of State from allowing the levy of further consumer charges should an increase in allowable revenue be agreed following increases in costs or timescale of a nuclear project.

--- Later in debate ---

[Dr Whitehead]

With these amendments, we get to the heart of the consumer interest in the Bill. They are closely related, so it is appropriate that they are grouped and spoken to together.

As I think hon. Members know, when the RAB process gets under way, one of the first things that will happen is that Ofgem will be required to draw up a programme of allowable revenue. That is the sum total of the amount that is considered to be within the RAB process. Much of the rest of the Bill is about how that allowable revenue is collected from customers, placed with the counterparty and allocated out to the nuclear company that undertakes the construction and subsequent production of a nuclear plant, and about the safeguards and concerns surrounding that process. The question of allowable revenue is crucial to the rest of the Bill.

Allowable revenue is made up of a number of building blocks. The return on capital must be assessed, as must depreciation, operating costs, the project’s taxation, grid costs, the funded decommissioning programme, incentives and other adjustments. Those all go into the pot of the allowable costs regime, which sets a ceiling for the amount of money that can be taken from the consumer, albeit that that is a contribution towards the process made by lots of people in small amounts on their bills over a period of time. It sets out the quantum of those contributions, and many adjustments can be made to how that works, in relation to the timescale of the process, the part of the allowable costs element that is placed into construction and the part that is placed into production. That is set out later in the Bill as part of the process of allocation from the counterparty body to the body that carries out nuclear construction and production.

As was mentioned earlier, it is not always the case that nuclear power plants are constructed exactly to cost and exactly to time. Indeed, if we look at the construction of nuclear power plants across the world, we find that all but one has run over time or over cost or both—in some instances by very large amounts. The allowable costs ceiling is therefore important for us to get a clear scope of what the customer will have to bear in this process. However, there is also a process in the Bill that allows that allowable costs ceiling to be raised, on the Secretary of State’s consideration, if the circumstances change. If the costs rise or the timescale slips, the Secretary of State can allow the allowable costs ceiling to be raised.

What that means in principle for the consumer is potential catastrophe, because the consumer thought they were in for a particular allowable costs ceiling that had been determined. We have heard already about the rather heroically optimistic cost assessments provided for in the Bill, and on that sort of allowable costs arrangement consumers would have about £1 put on their bills in the design phase, with a lot more—perhaps £10—on their bills in the construction phase. The amount would then taper down as production gets under way, with the possible payback of some money in the process. The overruns on construction costs or time costs could double or treble that amount, particularly during the construction period, in a way that the consumer would not have anticipated.

In the amendments, we suggest that the consumer should be in for the initial allowable costs ceiling estimate—and that is it. In circumstances where the Secretary of State is contemplating what should happen with the allowable costs ceiling, he should not cause any excessive expenditure simply to be plonked on to customers’ bills. At that point, if the costs or the timescale have changed, there are a number of options open to him as to how to deal with the new cost ceiling; that need not necessarily be done by simply raising the allowable costs ceiling. For example, it could be by adding a particular taxpayer’s investment to the project, or it could be by issuing nuclear bonds, which puts additional money into the company but does not impact on customer bills.

We are seeking to cap the RAB in terms of what the customer expectation of it is. That does not necessarily mean that the function of the RAB is determined by that cap; it just means that the exponential milking of the customer to fund the RAB does not take place and that the Secretary of State has recourse to other means and should publish, as amendment 12 says, what the plans would be in the event of an excess over the ceiling to make the project a success.

That is a very important part of the new deal as far as RAB is concerned. The customer is now being asked to invest, in the first instance, in the hope for a plant, well before the plant has been established; that is new—the CfD process is post the construction of the plant. They are being asked to underpin the expensive costs that are incurred during the construction period. They are also being asked to engage in a two-way process whereby, yes, they get cheaper bills but they are still potentially contributing to a RAB process as the production phase continues. So the very least we should expect on behalf of the customer is that they know what they are letting themselves in for at the time of the outcome of the project.

We are not talking about capping costs necessarily; we are talking about how those additional costs are paid for under the circumstances where they do rise. We obviously hope that, as the project progresses, those costs and timescales do not increase, but if they do we do not see that the customer needs to foot the additional bill; there needs to be other recourse. That is what we have put in these amendments, and should the Secretary of State consider in any way that the customer is an investor in this process, we hope he would consider that a reasonable way of dealing with the investment that the customer is undertaking in the process as a whole.

[Greg Hands]

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

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

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

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

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

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

--- Later in debate ---

[Dr Whitehead]

I beg to move amendment 10, in clause 7, page 7, line 17, after “operations” insert

“and have generated power for placement onto the National Grid”.

This amendment amends the definition of the completion of construction of the nuclear project to include initial generation of power.

The amendment relates to statements made, for the purpose of licence modifications, about the completion of the construction of a nuclear project. Clause 7(5) states that completion of the project should be based on

“successful completion of such procedures and tests relating to the project as constitute, at the time they are undertaken, the usual industry standards and practices for nuclear energy generation projects in order to demonstrate that they are capable of commercial operations.”

I wonder whether hon. Members can spot what is missing from that subsection. This is not a quiz, and I think hon. Members have long gone to sleep—but in case not, the answer is that there is no suggestion in it that the nuclear power station actually has to produce anything. Construction could be regarded as complete provided that all the hoops have been jumped through, even if no button has actually been pressed. Presumably what one would regard as the original purpose of the whole operation is that it should produce some power that goes into people’s homes, buildings and so on.

The amendment simply says that not only must all those things be completed, but the project must do what it was originally supposed to do: generate power. As the amendment describes it, the project must

“have generated power for placement onto the National Grid”.

That seems a very modest amendment, but it would put right what I think is rather a serious omission in clause 7(5) with respect to the whole idea of what a nuclear power station is for. Surely we must agree that generating power is the purpose of a nuclear power station, and that completion must therefore be based on that purpose.

I cannot see any great reason why the amendment should not be accepted, but I am sure that the Minister has a very good argument why not.

[Greg Hands]

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

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

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

[Dr Whitehead]

I concede that I may not have fully understood all the various tests that are undertaken to usual industry standards, but nowhere in this clause does it say that those tests include the production of power. That is my central point. It is a bit like going into a car showroom and being shown a really nice vehicle. It has all the bells and whistles on it, and all the guarantees; it looks greats and the paint is really good. But when one asks to go for a test drive, the person in showrooms says, “I’m sorry, you can’t do that, Sir; it hasn’t got an engine in it.” Surely it must be about producing power. That ought to be explicitly in the Bill. That is my only point. If the Minister thinks that, concealed in all these various tests is the production of power, which does not seem to be the case to me, then maybe that is not needed on the face of the Bill. I think it would be rather good if it were on the face of the Bill.

--- Later in debate ---

[Alan Brown]

Again, I will be brief. I have a few comments on clause 7 stand part. Subsection (2) and paragraph 83 of the explanatory notes confirm that a licence can be modified to allow the cost cap to be exceeded, but also, critically, so that additional revenue can be collected. The Minister spoke about transparency. How can that power be applied transparently? Clause 7 references clause 6(4), but that subsection does not provide enough scrutiny of governance.

I will give an example. What is to stop a nuclear company begging another £1 billion? With the costs of a nuclear project, £1 billion here or there does not make much difference in the overall scheme of things. If the Secretary of State thinks, “I am so worried about security of electricity supply”—that is an argument we keep hearing on nuclear—under clause 6(4)(b), they can then decide, “Yes, this power station is so critical for future energy security, I will just throw more good money after bad.” It is an easy step, and one that could be repeated several times—£1 billion here or there makes no difference.

This Government have already proven to be so pro-nuclear that they signed up to the most expensive power station in the world, Hinkley Point C, and so pro-nuclear that, after market failure, we are here debating this Bill, and, as was said earlier on, they have committed £1.7 billion just to develop Sizewell C to the final investment stage. We know they are so desperate to get Sizewell C over the line for the final investment stage, they are making that the newest, most expensive power station in the world, which we will be paying for for 60 years. So I do not understand how the clause gives protection and transparency for consumers, if costs go up. Invariably, costs will go up. It is unlikely that the risk is going to be carried by the developer. The risk under the RAB model is going to be carried by the consumers.

[Greg Hands]

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

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

[Alan Brown]

Will the Minister explain how he sees the cap being set? Obviously, on a construction project, there is usually agreed risk sharing and that effectively sets a cap, but presumably, given the way the Minister is talking, there will be even more headroom here. How is that headroom going to be set and how transparent will that be, in terms of understanding what costs have increased to reach the cap?

[Greg Hands]

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

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

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

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

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Procedure etc relating to modifications under section 6 or 7

[Dr Whitehead]

I beg to move amendment 13, in clause 8, page 8, line 11, leave out from “power” to end of line.

This amendment strengthens the requirement on the Secretary of State to publish details of license modifications.

Ms Fovargue, as there are no amendments or objections to the clauses from this one to the end of part 1, I suggest that it might be possible to dispose of them collectively to get to the end of part 1 this afternoon. The Opposition would have no objection to that.

I will be brief. Amendment 13 simply says that if the Secretary of State is going to publish something, they should get on and publish it. As it stands, the clause states:

“The Secretary of State must publish details of any modifications made under a relevant power as soon as reasonably practicable after they are made.”

That is a weaselly dilution of the “must” at the start of the line—if the Secretary of State must publish details, they should just get on with it. Hon. Members will see that the following subsection states:

“If…the Secretary of State makes a modification…the Authority must…publish the modification.”

That does not have the little weasel phrase at the end, so why is that weasel phrase in subsection (5) and not subsection (6)?

--- Later in debate ---

[Dr Whitehead]

Yes, that might have been a good idea, but unfortunately it is not on the amendment paper this afternoon. My amendment is, so I hope the Minister will consider ensuring that subsections (5) and (6) are consistent, so that both modifications made under both are required to be published, full stop.

[Greg Hands]

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

“as soon as reasonably practicable”

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

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

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

[Dr Whitehead]

I think we perhaps have a slight divergence of opinion here. We were seeking to simplify and create an imperative for publication by reducing the qualifications on that publication. The Minister has sought to suggest otherwise. We will have to disagree on that; however, we do not wish to push this to a vote this afternoon, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 8 ordered to stand part of the Bill.

Clause 9

Expiry of modifications made under section 6

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

[The Chair]

With this it will be convenient to discuss clauses 10 to 14 stand part.

[Greg Hands]

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

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

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

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

Nuclear Energy (Financing) Bill (Fifth sitting)

Greg Hands Excerpts

Committee stage
Tuesday 23rd November 2021 Public Bill Committees

[The Chair]

Thank you.

Clause 15

Regulations about revenue collection contracts

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

[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.

[Alan Brown]

The other point that I was making was about transparency. What options are available for the likes of me, an opposition MP, to scrutinise and challenge what is being signed off as a good deal?

[Greg Hands]

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

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16

Designation of a revenue collection counterparty

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

[Greg Hands]

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

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

[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.

[Greg Hands]

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

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

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

[Alan Brown]

Isn’t the problem with some of the schemes aimed at protecting the most vulnerable that they are paid for by other consumers? By default, the schemes are always creating another cohort to move into fuel poverty, because actual schemes to help people are paid for by other consumers.

--- Later in debate ---

[Greg Hands]

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

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

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

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

The Minister has just mentioned the obligation on the Secretary of State that is in the Bill. My hon. Friend the Member for Southampton, Test made the point that this levy may be £10 a year on average, or it may be more. Have the Government made any assessment of the number of customers that that increase will potentially tip into a qualifying benefit, therefore making them eligible for the warm home discount? Have they assessed what a nuclear RAB might do to the number of people who are eligible for that discount? The argument we are trying to make is that there is potentially a saving for Government here by socialising the risk among non-warm home discount consumers when it comes to funding these types of projects.

[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.

--- Later in debate ---

[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.

[Alan Brown]

What is there in the Bill that protects suppliers from having to pay too much collateral?

[Greg Hands]

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

[Kirsty Blackman]

Could the Minister provide more information on that, in the form of a letter perhaps? We have raised concerns on how companies, and therefore consumers, will be protected. I appreciate what he says, but that was not obvious to us, so a response in writing would be hugely helpful.

[Greg Hands]

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

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

[Alan Brown]

It was no surprise that the Minister did not accept the amendment. It will be no surprise to him that he has not completely satisfied me either with his explanation. We keep hearing the argument that we are trying to replicate the CfD model, which is interesting considering that we are introducing the RAB model. It was said that CfD would not work for nuclear, but now we are trying to replicate certain things. He said that there will be consultation and secondary legislation, but there are no guarantees on what the Government will do or how they will respond to any consultation. Secondary legislation can easily get steamrollered through this place anyway. Given that, I would prefer to press my amendment to a vote.

Question put, That the amendment be made.

--- 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.

--- Later in debate ---

[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.

[Matthew Pennycook]

That raises an interesting, and quite concerning, point: what in the legislation prevents a supplier from overcharging its customers on the basis that it is levying the RAB? Is there a limit to which a supplier can levy the customer? On the basis of what the right hon. Gentleman has just said, the supplier could overcharge the customer, make the payment owed to the counterparty and find itself with additional funds raised from those customers.

[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.

[Matthew Pennycook]

I rise to speak briefly to amendment 17, because it relates to an important matter that builds on our earlier discussions. I listened to the Minister and heard what he said about the revenue collection contracts arrangement seeking to replicate the tried and tested CfD arrangement, as he put it. The thing that makes what we are talking about different is that there has never been a CfD arrangement of the size of the RAB nuclear model. The scale of the capital commitment involved in a nuclear project dwarfs anything that we have seen before. The changes in total nominal amounts that are likely to happen from year to year in the scale of that capital value could mean that we have large fluctuations in the amounts being collected by the counterparty.

The Minister has said that regulations will address that and are forthcoming via the affirmative procedure. He expects that the reconciliation process of attempting to ensure that the revenue stream matches the allowed expenditure will happen twice a year, but there is the possibility that very large sums will sit within the counterparty, even if just for months. The amendment tries to address the possibility of those funds, or a proportion of them, finding their way into the Consolidated Fund.

It surely has to be the case, and I assume that it is the Minister’s intention via regulations, that the reconciliation process should be as frequent as possible so that the revenue stream matches the allowed expenditure at any point in the construction. I foresee circumstances in the production phase, however—perhaps not in the construction phase, because it is unlikely that a future nuclear project will come in under budget given their history—in which a company’s revenue from power sales might exceed the allowed revenue. There is a chance that we could see large mismatches and, therefore, lots of funds being stored up in the counterparty.

The central thrust of what the Opposition are trying to do with the Bill is to protect consumers and ensure that they pay the lowest possible amount to get a project such as the one that we are talking about onstream. It is therefore really important that we ensure that the Treasury cannot in any circumstances, unless it has exhausted all other options, take part of the funds that may sit with the counterparty for relatively brief periods. The Treasury could decide to take sizeable amounts, and it is important that they flow back to suppliers and, ultimately, to customers. That is the thrust of the amendment.

[Greg Hands]

As the hon. Members for Southampton, Test and for Greenwich and Woolwich laid out, amendment 17 addresses the situation in which funds held by the counterparty may be paid into the Consolidated Fund, which of course is the Government’s general bank account at the Bank of England. Currently, the legislation allows the revenue regulations to provide for sums to be paid into the Consolidated Fund. The intention of the amendment is to narrow the scope of that so that the regulations can provide for sums to be paid into the Consolidated Fund only where there is no alternative.

I thank the hon. Members for the amendment, which they explained well. It certainly echoes my sentiment that consumer funds should not generally go into Government accounts. I reassure Members that we envisage the power to have limited but important uses. For example, it could be used to ensure that the counter- party repays a loan given by the Government—by the taxpayer—to respond to an emergency. That is not a hypothetical situation. We saw the importance of it quite recently in the course of covid, when the Government did indeed have to provide a loan to the counterparty for the contract for difference regime: to the Low Carbon Contracts Company.

The taxpayer should be able to be repaid that loan, but the amendment provides that sums cannot be paid into the Consolidated Fund where there is an alternative. I could see a number of people making an argument that different things that could be done with that money would provide alternatives to what is being envisaged: in this case, repaying the taxpayer. If passed, the amendment would unnecessarily narrow the scope of the power in a way that would limit its use. I hope that my explanation has shown Members the importance of the power, which is in my view unlikely to be used. However, I have given a real example from the last couple of years of where exactly such a situation arose.

[Alan Brown]

The Minister has given the example of an emergency loan, but surely the regulation is all about

“apportioning sums…received by a revenue collection counterparty from electricity suppliers under provision made by virtue of section 19”.

Clause 19 is about collecting money from electricity suppliers; ergo, the example of a loan does not equate to what this is about.

[Greg Hands]

I disagree with the hon. Gentleman. My understanding is that the loan would not be repayable if an alternative were there. The ambiguity of an alternative would unnecessarily narrow the scope of the power, though I appreciate where he is coming from.

[Alan Brown]

I ask the Minister to read clause 21(1)(a), which contains the reference I quoted to clause 19, which I do not think covers the emergency loan situation.

[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.

Nuclear Energy (Financing) Bill (Sixth sitting)

Greg Hands Excerpts

Committee stage
Thursday 25th November 2021 Public Bill Committees

[The Chair]

I welcome Members back to the line-by-line consideration of the Nuclear Energy (Financing) Bill. I will not trouble you with the parish notices that you have heard before, with the exception of reminding you that Mr Speaker has encouraged us to wear masks when we are not speaking, which I will do, but of course it is a matter for individual choice.

Clause 31

Relevant licensee nuclear company administration orders

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

[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.

--- Later in debate ---

[Alan Brown]

New clause 5 does relate to clause 32. I will refer to it just briefly. All I would say is that the new clause sets out considerations that would need to be addressed before anyone contemplated taking over a nuclear power station. I will return to that when we debate the new clause.

I have concerns about clauses 32 and 33, when considered together with clause 41. We will return to this, but clause 41 possibly gives the Secretary of State an open-ended blank cheque to do what he wants to keep a power station operational; I dare say that ensuring security of supply will be the excuse given.

The hon. Member for Southampton, Test, referred to the provisions relating to the special administration regime under the Energy Act 2011, which have now been applied to Bulb Energy. It would be good if the Minister could enlighten us on how those provisions will operate with regard to Bulb Energy, and how the similar provisions in clause 32 would operate if they had to be used. Also, will he commit to reviewing how the special administration regime operates in the Bulb Energy scenario, and to making improvements to the Bill, if they are required, following that process?

[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.

--- Later in debate ---

[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]

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 ---

Lastly, we also need to consider any other consequential costs. As part of the Hinkley Point C deal, it was reported, the strike rate of Hinkley Point C would reduce from the extortionate £92.50 per megawatt hour strike rate to £89.50 per megawatt hour if Sizewell was given the go-ahead. However, presumably when that arrangement was agreed it was on the assumption that Sizewell would also be continuing on the contract for difference model. If a RAB funding model is agreed for Sizewell C, will we still see that reduction in strike rate for Hinkley Point C, or is that by default a further hidden cost of the RAB model if taken forward for Sizewell C?

[Greg Hands]

As the hon. Gentleman just explained, new clause 1, tabled by himself and the hon. Member for Aberdeen North, seeks to place additional reporting requirements on the Secretary of State. In particular, it will oblige the Secretary of State to lay a report before Parliament outlining expected overall capital and up-front costs of the project, before the licence modification powers are exercised. I want to thank the hon. Member for engaging with the substance of the Bill. He is right that I challenged him on the first day because he had not tabled any amendments; now he duly has, and it is our job to debate and scrutinise those amendments.

While we agree that it is important for the Secretary of State’s decision making with respect to a RAB to be transparent, a requirement to publish details of a negotiated deal prior to the licence modifications could jeopardise our ability to complete a successful capital raise—that is the point here. That could in turn impact our capacity to secure value for money for consumers; at the end of the day, that is what this Bill is all about. I want to reassure the hon. Member—

[Alan Brown]

Can the Minister explain more fully why giving detail on what the anticipated capital costs of the project are will somehow endanger the sign-off of that deal?

[Greg Hands]

At the point of the licence modification, we then go into the raising of the capital. Raising the capital may be more difficult, or be jeopardised, if that information has been published. It must be in the best interests overall for the Secretary of State to make the judgment as to how they can best effect best value for money for consumers, and ultimately for the sake of the taxpayers.

[Alan Brown]

I am still not clear how putting in the public domain what the capital cost is would make it difficult for somebody to secure private investment. First, they will have already looked at securing investment; and secondly, once the costs are known it would surely be easier for them to secure additional private investment.

[Greg Hands]

The hon. Gentleman may be mixing up what is in the public domain and what is part of the negotiation. You will know, Mr Gray, that it is important for the Secretary of State to be able to, in the negotiation, get the best deal—that is what we are looking for here. That is the whole purpose of the legislation; the purpose of the RAB model is to save consumers money overall. It responds to the National Audit Office report that mentioned Hinkley Point C, and said that there ought to be the ability to save money overall by sharing costs between consumers and taxpayers. That is what the RAB model is seeking to do. What we are debating overall with this legislation is how to best effect a saving for the consumer, which we estimate to be in the region of £30 billion overall. That is a very effective saving for consumers.

I would like to reassure the hon. Member that the allowed revenue for the project will be calculated by the authority throughout the construction period, thus helping to ensure that the company is spending money efficiently and economically. In response to that part of the new clause looking for detail on capital costs, these will be a key input to a project’s value for money assessment as it goes through relevant approvals. As set out in our consultation on RAB, when assessing the value for money of new nuclear projects, the Government would be focused in particular on whether the project was expected to contribute to the target of net zero emissions by 2050 and deliver security of supply at a lower total electricity system cost for consumers than alternatives without the project, so additional considerations do come into play.

In response to the part of the new clause that asks about the up-front costs of a project, we have suggested elsewhere that any initial costs to the project financed under a RAB model would be very small. For example, a project beginning construction in 2023 would cost only a few pounds per dual-fuel household in this Parliament.

The new clause is not necessary, given the steps that we have taken elsewhere in the Bill to ensure that the modification procedure and the designation process that precedes it are as transparent as possible. We believe that sufficient transparency is already embedded in the Bill. The Secretary of State will be obliged to publish the designation statement setting out how they will assess nuclear companies against the designation criteria, including value for money, for a RAB project. The Secretary of State will also need to consult with a list of key independent bodies, including Ofgem as the RAB regulator, the UK’s nuclear and environmental regulators and the devolved Administrations, on their draft reasons for project designation, which will include the Secretary of State’s assessment of the project’s value for money. They will then be obliged to publish these reasons at the point that a project is designated.

The Secretary of State is also required to consult named persons prior to making any licence modifications, which will allow expert voices to input on whether the licence modifications are effective in facilitating investment. Following the consultation, the Secretary of State must then publish the details of any modifications made as soon as reasonably practicable after they are made. This approach—of consultation followed by publication—is well precedented in other licence modification powers.

I turn to a couple of points raised by the hon. Member for Kilmarnock and Loudoun. He asked some questions about potential the savings of Sizewell relative to Hinkley. First, of course we are expecting there to be savings—learnings from the Hinkley process to be transferred to the Sizewell process. Secondly, going back to what I said earlier, we would expect that the RAB model would also lead to savings overall for the consumer over the life of the plant.

The hon. Member then asked about the strike price reduction. Under the RAB model, it is not appropriate to talk about a strike price, because it is a fundamentally different financing construct, without a strike price, which is applicable under a contract for difference regime. It would not be appropriate to use a strike price in this case. It is fundamentally different.

[Alan Brown]

My point was that part of the original strike rate deal agreement for Hinkley Point C was that if Sizewell C followed on, there would be a consequential reduction in the strike price for Hinkley. I know this is about a RAB model; but I am asking, will that consequential price decrease in the strike rate nevertheless be made—or, because of the RAB model, does Hinkley remain at £92.50?

[Greg Hands]

The hon. Member raises a very good question. The negotiation is ongoing at the moment with Sizewell. I reiterate the point made by the Secretary of State that the learning process from Hinkley is ultimately transferable to Sizewell. There are also aspects of the supply chain that were established for Hinkley that are transferable to Sizewell. If I understand correctly, there have been savings during the construction of Hinkley, with learnings from the earlier part of the construction going into the later part. We expect those savings to go forward to Sizewell. However, I stress again that comparing a RAB model strike price with the strike price of a contract for difference is not appropriate. There is no strike price with a RAB model.

By following this model and allowing the Secretary of State to lead on negotiations, as is standard for a project of this type, we will be able to achieve the best deal for consumers and taxpayers. I hope that demonstrates to hon. Members the Government’s commitment to transparency in the licence modification and the processes that support it. I hope they will withdraw the amendment.

[Alan Brown]

I have listened to the Minister and I am still not convinced in any way that what he outlined will provide the transparency that I am looking for. Again, the argument is, in terms of construction costs, “Well, it is only a few pounds per dual-fuel household per month for the duration of this Parliament.” That is one of the points I keep returning to. “We are talking about just a few pounds per month per consumer” is a way of trying to minimise the actual costs that are being committed, and I do not think it is sufficient. That is why I want to see much more transparency on the actual costs that are committed.

It is also interesting that the Minister made an assessment about security of supply and the whole-system cost, and looking at the value for money of a nuclear power project on that basis. I would like to understand a bit better how the Government actually undertake that. I refer him to the Imperial College report that demonstrated that using pumped storage hydro would save £690 million a year compared with nuclear energy. So, clearly, it is all about how we look at the metrics and which other technologies we consider when looking at the whole system and looking ahead to 2050.

I will not press the new clause to a vote at the moment. We will look at bringing back something on Report to try to encapsulate what we are looking for in terms of that transparency. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

Report on agreed strike rate

“(1) When granting an electricity generation licence to a nuclear company in relation to a nuclear

energy generation project, the Secretary of State must lay a report before Parliament.

(2) The report under subsection (1) must set out—

(a) whether the Government has offered the nuclear company a guaranteed strike price for the sale of electricity onto the National Grid;

(b) the strike price included in any such arrangement;

(c) the duration in years of any such arrangement.”—(Alan Brown.)

In respect of new nuclear projects, this new clause would require the Secretary of State to publish details of any agreement reached offering a guaranteed strike price for the sale of electricity onto the National Grid.

Brought up, and read the First time.

[Alan Brown]

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

I will be very brief because most of my new clauses are quite self-explanatory. This new clause seeks full clarity on any commitments that we undertake in a new nuclear project. It has previously been suggested that once a new power plant is operational, the actual cost of the electricity will be deducted from the RAB payments and, arguably, somehow the RAB payments could then be nullified by that arrangement. I do not see how that is credible.

If we are entering a 60-year contract to pay back a lot of the capital cost of the project, it does not make sense that the electricity would work to counterbalance that. I am concerned that a strike rate or some sort of minimum floor price will be agreed with a company, else it might not want to commit to the £20 billion or £20 billion-plus capital expenditure. That is what the new clause is all about. If there are any agreements on the price for the sale of electricity that is baked into contracts or negotiations—although it might not be called a strike rate—we need to understand that. Again, we need to have that full transparency on the costs that will be committed to consumers’ bills.

[Greg Hands]

I thank the hon. Member for Kilmarnock and Loudoun for probing, but I will briefly point out two reasons why we cannot include his new clause in the Bill. First, the new clause makes reference to “granting an electricity licence”; to be clear, the Bill does not give powers to the Secretary of State to grant any licences but, instead, to amend existing generation licences. Purely on language terms—important terms—we cannot accept the new clause. Secondly, the new clause proposes that the Secretary of State must report on any strike price agreed in relation to a project and provide further detail on that price. As I have already said, “strike price” is not an appropriate term because there is no strike price in a RAB model. For those reasons, I ask that the hon. Gentleman withdraw his new clause.

--- Later in debate ---

[Greg Hands]

I thank the hon. Gentleman for tabling the new clause. He is right that, in my view, it cannot be accepted into the Bill because it refers to granting rather than amending a licence; however, I welcome his attention to the costs of decommissioning, which is an important issue across all these projects. It is important to note that the Energy Act 2008 legislated to ensure that the operators of new nuclear power stations have secure financing arrangements in place to meet the full costs of decommissioning. Nothing in the Bill would alter in a negative way the provisions of the 2008 Act.

Under the 2008 Act, operators are required to submit a funded decommissioning programme to the Secretary of State for approval. I stress to the Committee that it is a legal requirement to have an approved FDP in place before any nuclear-related construction can begin on site. When making a decision on an FDP to approve, reject or approve with conditions, the Secretary of State must have regard to the FDP guidance, which sets out the guiding factors that the Secretary of State must be satisfied are met. The guidance stipulates key documentation and so on, and consultation with the ONR, the Environment Agency and Ofgem.

All of that is laid out in the 2008 Act, so I hope to have demonstrated that the robust FDP legislation, combined with the RAB model and our insolvency measures, will ensure that the costs of decommissioning are met. For all those good reasons, in addition to the reason that the new clause talks about granting rather than modifying the licence, I ask that the hon. Gentleman withdraw the new clause.

[Alan Brown]

I will not press the new clause to a vote. Equally, I am not convinced that there is enough transparency on the decommissioning costs. It is certainly something that I would like to revisit. I understand what the Minister says about the process, but of course we have not had a chance to test how robust it is. It has been applied to Hinkley, but decommissioning is some way off. We know how much liability the taxpayer has at the moment in terms of the existing decommissioning, which it is estimated will cost £132 billion over the next 100 years. We have an astonishing nuclear waste legacy that the taxpayer is having to pick up. That is why I am really keen to explore the robustness of the process, and more importantly what costs there are, but I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 4

Report on proposed payments to a nuclear administrator or relevant licensee nuclear company

“(1) Prior to making payments for the purpose described in section 41(2)(c), the Secretary of State must prepare and publish a report on the proposed payment and must lay a copy of the report before Parliament.

(2) Before the payment is made, the report under subsection (1) must be approved by the House of Commons.”—(Alan Brown.)

This new clause would require any payments under clause 42(2)(c) to be approved by the House of Commons before being made.

Brought up, and read the First time.

--- Later in debate ---

[Greg Hands]

New clause 4 would add another new report for the Secretary of State to lay before Parliament, as the hon. Gentleman said, to detail the funding that the Secretary of State would propose to make to a nuclear administrator or relevant nuclear licensee company, and further requires that the report be approved by the House of Commons. As I have already made clear, I think the clear and transparent process that we have already laid out in the Bill achieves the objective overall, but in this particular case such an amendment could have negative implications for the operability of the SAR, or the special administration regime. This may place additional risk on consumers being unable to realise the benefits of the plant that they have contributed to building and significant sink costs. Of course, these are powers that we hope the Secretary of State will never have to use, and money that will never need to be spent.

As well as the need for pace, there is also a need for all relevant parties to be comfortable that the SAR is deliverable. In order to take on the administration appointment, the administrator would need to be assured that funding in the form of loans, guarantees or indemnities would be available from day one of the SAR. That is a crucial part of how a SAR regime operates. The administrator must know that funding is available from day one. The proposed amendment could introduce a degree of uncertainty over the funding pending a report from the Secretary of State to be deposited in Parliament, such that the administrators might be reluctant to take on the appointment.

I remind the House that the objective of the RLNC administrator is to commence or continue the generation of electricity, and we expect that in doing so the administrator must be able to act swiftly. It is imperative that an administrator has quick access to the funding required to ensure that such outages do not occur—we are talking, after all, about a nuclear power plant—and security of supply is maintained. More importantly, such swift action must also be conducted safely, and any lapse in funding could result in safety-critical operational expenditure not being spent. I therefore consider that such a reporting obligation on the Secretary of State would hinder the effectiveness of the special administration regime, so I ask the hon. Gentleman to withdraw the motion.

[Alan Brown]

I really do not buy the argument that getting approval for expenditure somehow jeopardises getting that expenditure and getting the plan operating. It makes no sense whatever. I think the Minister just wants to retain the open chequebook policy that allows the Secretary of State to do whatever he wants, but he argued it was necessary for security of supply.

It feels as though the end is in sight. I am not going to press this to a vote, given that we will simply lose it, so I am happy to withdraw, but, again, I would like to reconsider it because, to repeat myself, I want greater clarity and transparency on the costs that could be committed in future. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 5

Report on transfers falling within section 32(3)

“(1) Prior to a transfer falling within section 32(3), the Secretary of State must lay a report before Parliament.

(2) The report under subsection (1) must set out—

(a) the liabilities associated with the nuclear company;

(b) any estimated costs of getting the plant operational again if it has been temporarily shut down;

(c) the estimated lifespan of the nuclear power station; and

(d) decommissioning costs and confirmation of any funding provided by the nuclear company for this purpose.”—(Alan Brown.)

This new clause would require the Secretary of State to publish a report on the matters listed prior to any transfers falling within clause 32(3).

Brought up, and read the First time.

[Alan Brown]

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

Lastly and briefly, new clause 5 ties in with the debate that we had earlier on amendment 18 to clause 32. These are the key considerations that the Government would need to consider before committing to maintaining the operation of a nuclear power plant. In the case of a company becoming insolvent, it cannot be taken over as a going concern and cannot be transferred. In terms of the going concern aspect, what liabilities are associated with the nuclear costs? Obviously, there are the actual costs of getting the plant operational again if it has had to shut down. The estimated lifespan of a nuclear power station and the decommissioning costs and confirmation of any funding that is provided by the nuclear company for that purpose again gets into the value for money argument and making a sensible decision. Do the Government take over the operation of the plant, for example, or do they start the decommissioning process and shut it down to get best value for the taxpayer?

[Greg Hands]

I thank the hon. Member for Kilmarnock and Loudoun for describing his proposed new clause 5. It is important to understand that the new clause, like the previous ones, would oblige the Secretary of State to lay before Parliament a report, in this case detailing the liabilities associated with a nuclear company, the estimated costs of restoring operation in the event of a shutdown, the estimated lifespan of the nuclear power station and the decommissioning costs of the project.

Obviously, I welcome the hon. Gentleman’s desire to increase transparency and the robustness of the Bill. However, I would like to bring to the Committee’s attention that it is of course the court that has the final say, as it is the court that appoints the time at which the energy transfer scheme is to take effect, following approval by the Secretary of State. It is a matter for the court. Therefore, the proposed reporting obligation on the Secretary of State must be considered unnecessary, as sufficient transparency is already offered through the court process. The courts will make an informed decision and will have ultimate responsibility for the decision on when an energy transfer shall take effect.

The proposed reporting requirement might oblige the Secretary of State to publish sensitive material, including of a commercially sensitive nature, which could have implications for the effectiveness of the RLNC administration order, the ability to achieve the objective and also to bring the administration to an end. It might well act against the public interest. The new clause risks the failure of the RLNC administration order’s objective and considerable sunk costs to consumers. I therefore ask the hon. Gentleman to withdraw the motion.

[Alan Brown]

In each response, the Minister says that he welcomes my desire for greater transparency, but he then rejects all my requests for greater transparency, so it does not quite feel like that. Presumably it means that we will be able to agree something on Report to get the transparency that we desire. Again, I am not convinced that doing this report would jeopardise the process, but I am happy to withdraw the new clause at the moment and to try to find ways to get the answers and transparency that I am looking for. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Question proposed, That the Chair do report the Bill to the House.

[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.

Nuclear Energy (Financing) Bill

Greg Hands Excerpts

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

[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.

[Sarah Owen (Luton North) (Lab)]

Will the Minister give way?

[Greg Hands]

I am not going to take an intervention. I will respond to the debate first.

Whatever the intent of the hon. Member for Southampton, Test with amendments 1 and 2—this is the crux of the argument, ably pointed out in interventions by my hon. Friend the Member for Gloucester—they could rule out many companies from investing in new projects under a RAB model. The RAB model is designed to bring in new investment, but in my view and in the view of the Government, his amendment would severely restrict who could invest. It could extend to some of our closest international partners. My advice is that EDF itself would be very much in scope, or at least it would be arguable in court as being in scope, of his amendment. It could also mean the rejection of huge amounts of potential investment from bodies such as major sovereign wealth funds of friendly or allied countries.

I am sure that the hon. Member’s intent does not lie in that direction, as that could make it much harder to bring new projects to fruition, and the purpose of the RAB model is to find new investors. We also need to maintain resilience in our fuel supply chain, referred to in amendment 2. I put on record my visit to Springfields recently to give the UK Government’s support, including funding announced in the spending review recently, to make sure that we have that flexibility.

--- Later in debate ---

[Alan Brown]

Will the Minister explain why he does not want to put forward a report that explains the public funding that is allocated to a project? I do not understand why that would be so difficult for him.

[Greg Hands]

We think those processes are already in place, and it is right that this should be a commercial decision and negotiation, but with transparency. We think the balance in the legislation as proposed currently meets that.

On amendment 9, also tabled by the SNP, the additional reporting obligations are unhelpful and unworkable. The requirement to publish up-front capital costs of a project could jeopardise our ability to complete a complex and lengthy capital raise. The amendment’s requirement to publish the floor price is simply not workable. In the context of a RAB model, there is no minimum floor price, and nuclear companies’ allowed revenues are determined by the economic regulator throughout the life of a plant.

[Alan Brown]

Will the Minister give way once more?

[Greg Hands]

No, I will not. I will try to respond to the debate.

Amendments 3 and 4, tabled by Labour, address how additional costs beyond the financing cap could be paid for. I agree that any RAB scheme must have adequate protections in place for consumers. However, given the size and importance of a new nuclear project, there must be a mechanism in place, with appropriate protections, to allow additional capital to be raised to ensure completion of a project where the financing cap is likely to be exceeded. The amendments proposed by the official Opposition would nullify the ability to be flexible. We are making sure that we do not have to go down that course to carry out robust due diligence on the project in the first place, having learned from existing and current projects to set a robust estimate of project cost.

SNP amendments 7 and 8 refer to reporting requirements. Planned outages at nuclear power stations may happen for a variety of reasons, and it is right that they are governed by the amount of time required to complete the maintenance—the actual cause of the outage in many cases—rather than the arbitrary time limit set out in the SNP’s amendment. Both the Office for Nuclear Regulation and National Grid already work closely with nuclear operators with regard to outages and availability, and they should do so independently of the Government. Nevertheless, I would like to reassure the hon. Member for Southampton, Test that we are aiming to design the RAB regime so that the nuclear company is incentivised to maintain availability.

I turn now to amendment 5, tabled by Labour. It deals with situations whereby a RAB project

“cannot be rescued as a going concern”,

having entered special administration. Of course, I share the wish of the hon. Member for Southampton, Test that the special administration regime should protect consumer interests, but the amendment could have the impact of damaging those interests. We expect the insolvency of a nuclear RAB company to be a highly unlikely event. However, there may be even rarer circumstances within this where it is actually in the best interests of both consumers and taxpayers to discontinue the project, and for it to be safely decommissioned—for example, if a safety fault, which is very unlikely, discovered at a plant made it, in practical terms, inoperable. It is important that the Secretary of State retains the discretion to act in whichever way can achieve the best outcomes for consumers or taxpayers during the insolvency of a relevant licensee nuclear company, and the Opposition’s amendment would remove this discretion.

Finally, I would like to discuss amendment 10, tabled by the SNP. It is important to make it clear that special administration is a court-administered procedure and that the nuclear administrator is an appointee of the court. There is already an appropriate level of transparency through the court process for the transfer.

I will now deal with other points raised in the debate. My right hon. Friend the Member for Wokingham (John Redwood) asked about new supply, particularly in relation to gas, which is not on the face of the Bill. I can tell him that six new gas fields came on stream in the last quarter of the last year: Arran, Columbus, Finlaggan, Tolmount, Blythe and Elgood. It is not the case that there are no new gas fields coming on stream. Gas is, of course, heavily incentivised at present, simply by the price, for there to be more extraction. According to the developers’ estimates, Hinkley Point C could be online or start to come online as early as 2026. However, my right hon. Friend is right that we need to think ahead. I should Make it clear that I welcome the official Opposition’s support for the Bill overall, but let us not forget that awful 1997 Labour manifesto, which said:

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

not just state-owned nuclear power stations, as my right hon. Friend said. Hinkley Point is being built, and an amazing job has been done to keep that construction work going through the pandemic. Our nuclear industry deserves congratulations.

The hon. Member for Bath (Wera Hobhouse) said that we should be rolling out renewable energy. That is exactly what we are doing. We have massively expanded our offshore wind power, and we are quadrupling it over the next decade. I think she said that Germany did not have any wind, but it has a target of 30 GW of offshore wind. There is a lot of wind in Germany. I know that she is from Hanover, which is a long way from the sea, but there is even a famous film—it is one of the best German films—called “Mit dem Wind nach Westen”, which is all about wind carrying people in balloons from east Germany to west Germany. There is most definitely wind in Germany.

[Wera Hobhouse]

Will the Minister give way?

[Greg Hands]

No, I will not give way.

My hon. Friend the Member for Ynys Môn (Virginia Crosbie), who described herself as one of the original atomic kittens—my hon. Friend the Member for Copeland (Trudy Harrison) is the other one—gave a passionate speech in favour of civil nuclear power. She is right that the Bill is all about financing, making cheaper and alternative sources of finance.

Again, I welcome the Opposition’s support for the Bill, but the hon. Member for Warrington North (Charlotte Nichols) was wrong to point the finger of delay at the Government. I should point out the 1997 Labour party manifesto and how nothing happened for 13 years. Hinkley Point C is now being built.

My hon. Friend the Member for Isle of Wight (Bob Seely) made a fantastic speech. He was quite right that the Bill’s purpose is to reduce dependence on foreign developers. He is right that we are not in a perfect position when it comes to energy or to nuclear power, but the Bill will significantly improve that position by creating options and establishing expertise for us to go forward.

The hon. Member for Strangford (Jim Shannon) made important points about Northern Ireland. I speak to Gordon Lyons quite often, and obviously Northern Ireland has a special status for energy and electricity.

My hon. Friend the Member for Gloucester made a fantastic speech and fantastic interventions. I am sure that his hub of expertise in Gloucester will come in incredibly useful, and I of course agree to visiting it.

I turn finally to my right hon. Friend the Member for Maldon (Mr Whittingdale). Bradwell, which has been a successful site in Britain’s civil nuclear experience, is at a very early stage of development and not a decision for now. Of course, in terms of the future of the site, the Bill is not site-specific; it is all about financing.

This has been an excellent, wide-ranging debate and I thank all right hon. and hon. Members for their contributions.

[Ronnie Cowan (Inverclyde) (SNP)]

Will the Minister give way?

[Greg Hands]

No, I am winding up now. For the reasons that I have set out, I cannot accept the amendments tabled and therefore ask right hon. and hon. Members not to press them. I hope that I have nevertheless shown that our aims are closely aligned for Britain’s brilliant nuclear renaissance, and the Bill will be a key part of that. I urge the House to reject new clause 1 and amendments 1 to 10.

[Alan Brown]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Clause 1

Key definitions for Part 1

Amendment proposed: 1, page 1, line 15, at end insert—

“(6) ‘Owned by a foreign power’ means owned by a company controlled by a foreign state and operating for investment purposes.”—(Dr Whitehead.)

This amendment is a definition of “foreign power” set out in Amendment 2.

Question put, That the amendment be made.