Clause 60

Energy Bill – in a Public Bill Committee at 6:15 pm on 4 March 2008.

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Continuity of obligations

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

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

This clause will ensure that an operator can be held to any obligations under a programme, even when the original operator ceases to hold a nuclear site licence in relation to the site. This approach reflects the policy on the decommissioning of oil and gas installations under the Petroleum Act 1998, whereby the Secretary of State can pursue the licensee in relation to its obligations under an abandonment programme. The operator would only be released from its obligations when given notice by the Secretary of State. The notice may release the operator from all or only specific obligations, and it may relate to all or a specific part of the site, or to all the nuclear installations on-site or to one specified in the notice. It may also be unconditional or subject to conditions.

Where an operator wishes to relinquish ownership of a station, for example, the clause will enable the Secretary of State to require the outgoing operator to take the necessary action to ensure that the programme  is up to date before releasing it from any obligation under the programme. The Secretary of State could, for example, require the existing operator to make good any shortfall in the programme, such as a funding deficit or a failure to complete the building of certain waste facilities by a certain date.

Additionally, the original operator might well wish to sell the station to another entity that does not have the necessary financial security arrangements in place and for which, if it had applied to have a programme approved, the Secretary of State would not have granted approval or would have put certain conditions in place. Using the clause, the Secretary of State could hold the original operator to certain obligations under the programme until such time as the new operator can make provision for that security.

The clause will therefore provide an important protection to ensure that recourse to public funds is remote at all times, by ensuring that the current or previous operator meets the full decommissioning costs and its full share of waste management costs. The Secretary of State’s powers to approve a programme submitted by a new operator will enable the Secretary of State to distribute responsibility for such action between the old and the new operator, as he considers appropriate.

We have underlined in the draft guidance the importance of the operator informing the Secretary of State of an impending change to the identity of the licensee—through a merger or acquisition, for example. However, the fact that consent will be needed to release the operator, in line with the clause, should encourage the relevant persons to inform the Secretary of State of the change as early as possible.

There is an argument that the clause could engage with article 1 of the first protocol of the European convention on human rights, which deals with the protection of property: although the licence, not ownership, can pass from one operator to another, the Secretary of State could, by using the clause, require the original operator to continue to make further payment to the fund. However, the Government do not believe that the clause engages with article 1. It is perfectly acceptable that such payment should be made, and that can be justified, because it is the Government’s stated policy that operators should be responsible for the decommissioning and clean-up of the station and that such payments should not come from public funds. Alternatively, it is a control-of-use provision.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I am grateful to the Minister for his preamble in setting out the way that the clause will work and the matters to which it refers.

Clearly, we want to be sure that, if a nuclear installation changes ownership, people cannot simply walk away from their responsibilities. However, how would the process of transferring those responsibilities to the new owner work? How would the Government ensure that a new company, which could be foreign-based, would take on the responsibilities of the previous owner? Simply by saying that they would not release the former owner from its duties, would the Government expect it to sort them out with the new company, or would the Government have a more direct involvement in that process?

Would the Government have powers to block sales outside the competition rules for people whom they felt that they could not hold to the same duties and responsibilities? For example, they could be companies outside the jurisdiction of the United Kingdom, where they could not be held to account in the same way as the companies that had initially sought the responsibilities and initially had the duties put on them. What would happen in those circumstances?

We have also seen that, over time, some companies simply fade away. Not a single company currently in the FTSE 100 was in it 100 years ago; every one is different. Some companies demerge, are closed down or are bought by foreign companies. In those circumstances, how do the Government intend to ensure that the obligations on a current owner are transferred effectively to someone else?

Specifically on demergers, if a conglomerate that owns the nuclear plant at the outset demerges into a number of smaller parts, what happens to the duty? The Secretary of State could not impose a duty on, for example, a French company that had fragmented or simply to decide which element of that French company should bear the responsibilities. I am interested to know how that responsibility would be enforced.

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

That is an important line of questioning, and I hope that I more than touched on some of it in my opening speech.

Operators will be released at the discretion of the Secretary of State. That essentially means that he may or may not release them. He is likely to release them when he is confident that the liabilities can be met by another organisation. If he is not confident about that, they will not be released.

The Government must be notified in good time before a change in ownership or control of the station. The Secretary of State must approve the revisions to the funded decommissioning programme. The Secretary of State would not expect to release the former owner or controller from their obligations unless and until satisfied that the arrangements under the new owner or controller are adequate. Breaching the obligation to notify the Secretary of State of the change or to submit the relevant parts of the funded decommissioning programme for approval will amount to a criminal offence.

Although the hon. Member for Northavon and myself must not keep drawing comparisons with pensions, it strikes me that there is an interesting comparison to be drawn in this matter. The Pensions Act 2004, which he and I discussed a few years ago, set up the pension regulator and the Pension Protection Fund, and it is interesting that pension liabilities are now, properly, part of the equation in company takeovers and possible mergers. One can well imagine that, when a company seeks to take over another company, nuclear liabilities will be on the balance sheet in the negotiations and in the discussion. That is perfectly proper.

Question put and agreed to.

Clause 60 ordered to stand part of the Bill.