The Insolvency (Moratorium) (Special Administration for Energy Licencees) (Regulations) 2020

Kwasi Kwarteng Excerpts

Wednesday 30th September 2020 General Committees

[The Minister for Business, Energy and Clean Growth (Kwasi Kwarteng)]

I beg to move,

That the Committee has considered the Insolvency (Moratorium) (Special Administration for Energy Licencees) (Regulations) 2020 (S.I. 2020, No. 943).

It is always a pleasure to conduct these affairs under your chairmanship, Mr Davies. The regulations were made on 2 September and laid before the House on 4 September. The Committee will be aware that the Corporate Insolvency and Governance Act 2020 introduced a free-standing moratorium regime for companies in financial distress. Those companies were allowed a breathing space from their creditors to pursue a rescue or restructure.

The regulations modify the way in which that moratorium regime, inserted into the Insolvency Act 1986 last year, applies with respect to companies that hold an electricity distribution or transmission licence or a gas transporter licence, to a smart meter communication licensee, and to companies that hold an electricity or gas supply licence.

The purpose of the regulations is to require a relevant energy company such as those I have described to notify the Secretary of State and Ofgem when it applies for, enters, extends or ends a moratorium under part A1 of the Insolvency Act. The regulations will avoid any delay to the ability of the Secretary of State or Ofgem to make a decision about whether to apply for a special administration order.

The regulations also modify the part A1 restrictions on enforcement and legal proceedings during a moratorium, so that Ofgem can continue to engage in legal processes, including enforcing licence obligations and revoking licences, without first having to seek the court’s permission. That feature of the regulations will enable Ofgem to act promptly to protect consumers. It should be noted that special administration has never been used in the energy sector, and the Government’s view is that it remains an unlikely resort.

The regulations are a short, simple and proportionate step to align the changes that the Government have made to provide businesses with flexibility and breathing space, which they need to continue trading during difficult times. They are also necessary to protect the interests of energy consumers and other market participants.

--- Later in debate ---

[Kwasi Kwarteng]

I appreciate that the hon. Member for Southampton, Test (Dr Whitehead) is not in his place, and I welcome the hon. Lady as his temporary replacement, but I detect his hand in many of her remarks; it was extremely characteristic of him to widen the scope of the debate. This is just an SI, but I was asked how many companies I thought would be insolvent. If I had a number, I would certainly never divulge it in this public forum. A lot of the questions posed by the hon. Lady are relevant, but they are not specifically tied to the nature of this debate or our specific requirement to consider the SI. I am happy to engage with her and her colleague in subsequent debates—that is an open invitation. I thank the hon. Lady for her contribution. I also thank you, Mr Davies, for the patient way in which you have chaired this debate.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Is my right hon. Friend looking at making it easier for communities to produce and distribute their own energy, and if so, would this SI affect their capability to do so?

[Kwasi Kwarteng]

I appreciate the enthusiasm of hon. Members to engage with this debate, but we have to be specific about the nature of the SI. I am absolutely happy to debate and talk to my hon. Friend individually about the scope for local communities to engage with energy provision, but the scope of the SI is, unfortunately, very narrowly concerned with the financial distress in which energy companies—as defined in the measure—may find themselves. Those companies will essentially have to pre-warn or give warning to the Secretary of State, so that the Secretary of State and Ofgem can act swiftly to address the situation. That is what the SI relates to, but I am of course happy to debate wider considerations in another forum.

[Chi Onwurah]

I thank the Minister for his comments and his recognition of the contribution of my hon. Friend the Member for Southampton, Test, the shadow Minister. However, I am slightly confused. As the Minister says, the SI is about insolvency provisions for energy suppliers, yet he seems to believe that any consideration of the likely level of distress and insolvency of energy suppliers, and indeed the impact of covid-19 on the energy market, which has given rise to the need for this SI, to be out of the scope of this debate. I have to say that I find that hard to understand, given that this SI is addressing that issue.

[Kwasi Kwarteng]

We can get into a debate about what the SI does.

[Chi Onwurah]

That is the purpose of the meeting.

[Kwasi Kwarteng]

I have tried to be as clear as possible, but I have been dragged in all sorts of different directions. When financial distress occurs the SI has two provisions. First, it enjoins, instructs or demands that companies give information to the Secretary of State, so that the Secretary of State and Ofgem can intervene. Secondly, it modifies the moratorium regime that the hon. Lady described in respect of those companies and puts restrictions on legal proceedings by creditors of those firms, so it essentially protects those firms in financial distress from their creditors. The causes of the financial distress, the impacts of covid-19, are not actually addressed in the SI.

I am sure the hon. Lady will want to come back on that, but I have resisted by saying that I am prepared to debate those issues in another forum. I do not think this is the right forum in which to engage with that, because we could be here all morning if that is what she wants to do. I am struck by the fact that, if she is very engaged with the debate, so few of her colleagues have attended this critical SI, which rather tugs against her contention that we can debate those wider issues in this format.

[Chi Onwurah]

rose—

[Kwasi Kwarteng]

I am not going to give way. In conclusion, I would like to say that the regulations align the corporate moratorium regime that the Government introduced last summer with existing powers to protect energy consumers and other market participants, and on that basis I commend the regulations to the Committee.

Question put and agreed to.