Nuclear Energy (Financing) Bill

Jonathan Edwards Excerpts

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

Amendments 3 and 4 are concerned with the process of RAB itself. As we have already discussed, a regulated asset base arrangement allows a designated nuclear company to draw funds from a collection arrangement via an intermediary to assist with the investment in the nuclear power plant, with those funds being drawn from the people who pay energy bills—the customers. Not only that, but—this is a big difference from CfDs—the funds are drawn from contributions from customers while the plant is being developed and constructed, not just when production takes place, so they have a substantial stake in the nuclear company as it moves forward, and they also obviously bear a substantial amount of the risk that goes with the nuclear power plant being developed. We are concerned about not the RAB mechanism itself but the extent to which potential overruns in time or in cost could expose the bill-paying public. This is a very pertinent and relevant discussion at the moment because those bills—those collections—are a levy on customer bills for the future, and that levy will be made for a long time to come.

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

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

[Dr Whitehead]

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

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

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

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

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

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

--- Later in debate ---

[The Secretary of State for Business, Energy and Industrial Strategy (Kwasi Kwarteng)]

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

I want to start by following right hon. and hon. Members in paying my respects to the late Member for Birmingham, Erdington (Jack Dromey). His constituency has lost a dedicated public servant and a real champion of local industry. I am sure that all our thoughts are with his wife and his family.

Civil nuclear power has worked for this country and it works for consumers, but we all know that the existing financing scheme has led to too many foreign nuclear developers walking away from projects, setting our nuclear industry back a number of years. While the contract for difference model was right for Hinkley Point C, the lack of alternative funding models has contributed significantly to the cancellation of recent potential large-scale projects, including Hitachi’s project at Wylfa and Toshiba’s project at Moorside. We urgently need a new approach to attract capital into the sector, and therefore we are introducing the new nuclear RAB model, which will deliver nuclear projects at a lower cost for consumers.

This new funding model is a win-win for nuclear and for our country. Not only will we be able to encourage greater diversity of private investment; we will also be able through this mechanism to lower the cost of financing new nuclear power and reduce costs commensurately to consumers and to businesses. New nuclear is absolutely essential if we are to have security of energy supply and diversity to ensure resilience.

We have heard from MPs across the House about how the nuclear industry in their constituencies has created and will create jobs—from Wylfa to Hartlepool to Hinkley. All those hon. Members are powerful advocates in this place for the future of the nuclear industry. Thanks to the Bill and other steps we are taking, I firmly believe that we are at the beginning of a new age, a new renaissance, of nuclear energy in the UK.

We have already made a commitment to bring at least one further large-scale nuclear project to final investment decision by the end of this Parliament, subject of course to value for money and relevant approvals. We are also creating not only an ability to invest in large-scale nuclear but a £120 million future nuclear enabling fund to tackle barriers to deploying new nuclear technologies. I am particularly pleased to refer to the fact that we have committed £210 million to back Rolls-Royce’s plan to deploy small modular reactors.

[Jonathan Edwards]

The one thing that perplexes me about this Bill is that it is for nuclear only. If the RAB model is the way forward, why is it not also available for other technologies, such as tidal?