Clause 65

Energy Bill – in a Public Bill Committee at 9:30 am on 6 March 2008.

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Security for decommissioning obligations

Amendment made: No. 3, in clause 65, page 52, line 36, at end insert—

‘(5) In subsection (4) “enactment” includes an instrument made under an enactment.’.—[Malcolm Wicks.]

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

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

Thank you, Mrs. Humble, for reminding us about that important amendment, which I did not immediately call to mind.

Hon. Members will remember that we discussed protection from insolvency for decommissioning funds in the context of nuclear waste. The clause will ensure that moneys set aside for decommissioning of offshore renewables installations cannot be accessed by creditors in the event of a company becoming insolvent. It will do that by disapplying the relevant insolvency legislation. It will ensure that any such moneys will not be restricted or prevented from being used for decommissioning if the company with the decommissioning obligations becomes insolvent. Similar arrangements to safeguard funds already exist in section 29 of the Coal Industry Act 1994.

Without such provision, if a company with decommissioning obligations were to become insolvent, creditors could access moneys set aside for decommissioning. In other words, payments could be returned to creditors for purposes other than decommissioning. That could mean that there would not be sufficient moneys remaining to pay for decommissioning after those payments to creditors.

The clause will also allow the Secretary of State to direct that the information regarding relevant financial security arrangements be published by the person responsible for the decommissioning programme—for example, in the financial pages of that person’s website. That will ensure that informed decisions can be made by creditors: they will know that there are certain earmarked funds that they cannot access.

To ensure compliance with the direction to publish information about relevant financial security arrangements, the clause also enables the Secretary of State or a creditor of the person responsible for a decommissioning programme to apply for a court order if the direction is not followed. It is Government policy to ensure that developers make adequate provision for the cost of decommissioning their installations—to protect the environment, but also to protect the taxpayer and to meet our international obligations. By protecting any funds set aside for decommissioning from insolvency, we are minimising the risk to the taxpayer.

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

I have a couple of quick questions. Will the trust fund have to be set up within the United Kingdom, or might it be set up offshore—at the risk of a pun, an offshore offshore fund? That is a serious issue. If the fund is set up offshore—for example, in Liechtenstein—it may not be subject to UK laws. How would it be covered by the legislation?

The Minister talked about the super-grid, which also raises an interesting issue. The super-grid would have a range of offshore installations in a range of different territorial waters. How is that covered? Will there be a fund specifically for decommissioning the turbines in UK territorial waters? What will be in place to stop that fund being used to decommission the turbines that happened to be in German or Dutch territorial waters? Will the use of such funds to decommission facilities that have been set up in someone else’s territorial waters be explicitly prevented?

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

The second question is for the future, because we are not there yet. The European Union has asked the former German Energy Minister, Mr. Adamowitsch, to look at the issue as related to  offshore wind—we noted his role in earlier conversations. I have had discussions with him, but he has not yet reported. That is an important point for the future. No doubt those issues will be looked at then, in an appropriate way. The hon. Gentleman has raised an interesting question but, with due respect, it does not require an urgent answer, because we are not there yet.

In terms of offshore offshore, I might need to take advice. [Interruption.] I thought it was a sound line, but it fell to the ground immediately. The Secretary of State will clearly have to be certain that there are appropriate arrangements for the funds. I anticipate that funds proposed by a developer will be approved case by case by the Secretary of State, so he or she—who knows, in the future?—will make a judgment on the suitability of the funding proposal. It is unlikely that we will approve a programme if the fund is outside the UK. It comes down to the Secretary of State’s sound judgment on such matters.

Question put and agreed to.

Clause 65, as amended, ordered to stand part of the Bill.