Amendment 1

Part of Nuclear Energy (Financing) Bill - Report – in the House of Lords at 4:00 pm on 24 March 2022.

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Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 4:00, 24 March 2022

I thank all noble Lords who have contributed to the debate. There was a certain element of déjà vu about it from the discussions in Committee. In particular, the noble Baroness, Lady Bennett, rehearsed her well-documented and faintly nonsensical views. She will be pleased to know that I will resist the temptation to tackle them again as we did in Committee, not least because it was done fairly expertly by my noble friends Lord Howell and Lord Trenchard, the noble Baroness, Lady Worthington, and the noble Viscount, Lord Hanworth, who made some very good points. If I would leave her with one word in response it would be “intermittency”, which is the key argument against her point.

Starting with Amendments 1 and 3, I remind noble Lords that designation is only one step in a rigorous process to ensure that a potential nuclear RAB project is sufficiently scrutinised, evaluated and subject to all relevant approvals prior to a final investment decision. As discussed in Committee, we have set out a transparent designation process which requires the Secretary of State, at the point of designation, to be of the opinion that designation is likely to result in value for money. This process requires the Secretary of State to draft reasons for designation and to consult on those reasons with consultees as set out in the Bill. Importantly, as my noble friend Lord Trenchard reminded us, they will include Ofgem, which, as per its principal objective to protect the interests of existing and future consumers, will ensure that consumer impacts are fully considered at the point of designation.

I reassure noble Lords that the Bill requires the final designation notice to be made publicly available. It will include the reasons for designation, which will incorporate details of the value-for-money assessment made to support the designation decision. We would expect that a value-for-money assessment at this stage would consider the potential impact of designation on consumers, using all relevant information available at the time.

However, as per my previous comment, designation is only one of a number of approvals that will mature our understanding of a project’s costs, alongside intensive negotiations. I feel therefore that Amendment 3, tabled by the noble Lords, Lord Oates and Lord Stunell, perhaps comes too prematurely in the overall process of approving a project to receive the benefit of the RAB funding model.

It is important that we retain our flexibility in how we negotiate with different project companies that are designated for the purposes of the RAB model. We can therefore commit that, at the point of directing a revenue collection counterparty to offer to enter into a revenue collection contract with a designated nuclear company, the Secretary of State will publish a value-for-money assessment of the project and its impact on consumers, along with all the appropriate documentation, save for information which the Secretary of State considers would be likely to prejudice someone’s commercial interests or would be contrary to the interests of national security. I can confirm that this would mean that value-for-money considerations would be published at two key points in the approval process: both when designating a project company in its final designation notice, as I outlined previously, and once the outcome of negotiations and market engagement have been reflected in project costs. I am not sure that even two value-for-money assessments would convince the Liberal Democrats of the value of this, but nevertheless I am prepared to give it a go.

On Amendment 10, I will begin by slightly correcting the figures used by the noble Lord, Lord McNicol. I value the noble Lord’s support for the principles of the Bill and Labour’s support for new nuclear. I think that the noble Lord used the figures of £1 to £2 per week for this model. Our estimate is closer to £1 per month. This will obviously depend on the negotiations, but it is not quite as drastic as the noble Lord implied.

I understand and share the desire from noble Lords to protect vulnerable consumers. Of course, we all want to do that. The Government agree on the importance of supporting low-income households, particularly at this time of high energy prices. I will remind noble Lords of the commitments which we have made to supporting households to meet the costs of energy bills. This includes the energy bills rebate scheme, worth a total of £9.1 billion and covering a £150 non-repayable rebate for households in England in council tax bands A to D, as well as an additional £144 million of discretionary funding for billing authorities to support households that are in need but do not meet the council tax criteria. This is in addition to the actions we are taking through the warm homes discount, cold weather payments and the household support fund, which the Chancellor announced yesterday will be doubled to £1 billion from April this year. All of these are aimed at providing immediate support for vulnerable households.

Over the longer term, we are helping to lower energy prices by supporting increases in energy efficiency through the energy company obligation, the sustainable warmth programme, the local authority delivery scheme and the home upgrade grant. I know that the noble Baroness, Lady Bennett, does not want to be reminded of this, but the Government are spending considerable funds, of up to £6.6 billion in this Parliament, on energy efficiency schemes. To that extent, I agree with the noble Baroness that energy efficiency is a good thing to do, and indeed we are doing it. Noble Lords will see from this programme that the Government take the support of low-income households at this time incredibly seriously. However, it is our strong view that this challenge is best tackled holistically.

On the specifics of Amendment 10, as my noble friend Lord Trenchard said, the RAB model charges suppliers rather than consumers. The amendment means that suppliers could be required to pay their full share of the RAB charges but not pass the cost down to consumers on universal credit. Suppliers would be very unlikely to meet those costs themselves. Instead, they would most likely spread the additional charge among other consumers who are not exempt, placing addition burden on, for example, low-income households and those who were not on benefits. The amendment would also create a substantial administrative burden, as suppliers would need to accurately identify and verify benefits recipients—information which could be difficult for them to access. Again, it is likely that they would choose to pass the administrative costs of this on to other consumers, including other vulnerable groups, such as pensioners.

I also have concerns about the compatibility of the amendment with a scheme which, if implemented, could last for many decades over the life of nuclear projects. For instance, the amendment specifically references universal credit and “any legacy benefits”, and it is likely that alternative benefits will be brought forward during this period. Referring to universal credit on the face of the Bill would result in updates to the legislation being needed whenever changes to the existing benefits system were made. I hope that noble Lords will accept that this would clearly be impractical.

Ultimately, it is expected that the overall RAB charge will make up only a very small proportion of overall energy costs for consumers, which are largely driven by volatile global fossil fuel prices. The Government’s policy is to consider holistically the impact of all cost drivers of energy bills, and to develop plans to support households in the light of these. If, however, circumstances arose in which it was considered that the burden of charges to contribute to nuclear RAB projects was felt to be too great, the Secretary of State could also, if considered appropriate, include provision in revenue regulations under the Bill to exempt part or all of a supplier’s obligation to pay RAB charges, for example based on the consumer base.

Although I have set out our strong support for a holistic approach to supporting households in meeting the cost of energy bills, I can commit to the House that, as part of the statutory consultation required on the revenue regulations, we will explore further the arguments for introducing such an exemption, and whether the administrative arrangements required to give effect to this would be considered proportionate and appropriate. Placing the requirement in primary legislation would prevent us giving the proper careful thought that any such proposal would properly deserve.

I thank noble Lords for their consideration of these matters, and I want them to know that their concerns have been heard. I therefore hope that, with the reassurance I have been able to provide that the Government are taking the necessary steps to deal with the concerns behind their amendments, noble Lords will feel able not to press Amendments 1, 3 and 10.