Clause 102 - Agreement about modifying decommissioning programme

Energy Bill [Lords] – in a Public Bill Committee at 10:30 am on 21st June 2011.

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Photo of Edward Leigh Edward Leigh Chair, Public Accounts Commission, Chair, Public Accounts Commission 10:30 am, 21st June 2011

We now come to amendment 173 to clause 102, with which it will be convenient to debate amendments 174 and 175.

Photo of Charles Hendry Charles Hendry The Minister of State, Department of Energy and Climate Change

On a point of order, Mr Leigh. Over the past week or so, I have had discussions with Members on both sides of the Committee, and there is clearly  concern that the clause as drafted does not deal with the unforeseen circumstances that might arise in the course of a long-standing—perhaps for decades— agreement. Having reflected, I have decided that it would be sensible not to have clause 102 stand part of the Bill, but instead to work further on the assurances needed to deal with unforeseen circumstances in a spirit of co-operation with Opposition Front Benchers, and to table a new clause dealing with that issue on Report. Some amendments to the clause have been tabled, but I thought that it would be helpful to clarify the Government’s intentions before the debate proceeded.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Energy and Climate Change)

Further to that point of order, Mr Leigh. In the same spirit, it is clear that the Minister and Opposition Front Benchers are trying to do the right thing with the clause. The amendments, which were tabled in the names of my hon. Friends, myself and others, seek to find the right balance between the need to protect the interests of the taxpayer and the energy bill payer, the need to give certainty to potential nuclear investors that a future Secretary of State could not act unreasonably in loading disproportionate and unexpected costs on top of already agreed contracts, and the need to protect against unknown future eventualities. We recognise the tripartite consensus existing around the potential contribution of nuclear energy to a low-carbon, energy-secure future. If, as the Minister has described, his intention is to adjust and improve the measure and to bring back a new clause on Report, we support him in that aim and we hope to support the improved clause when it appears. I simply ask the Minister to give us as early a sight as possible of any changes.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Even knowing what we now know about the Government’s position on the clause, Mr Leigh, I wish to say a few words about my amendments. I therefore beg to move amendment 173, in clause 102, page 80, line 7, leave out ‘, or not to exercise’.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Commission, Chair, Public Accounts Commission

With this it will be convenient to discuss the following:

Amendment 174, in clause 102, page 80, line 11, leave out

‘and the other party to agreement.’.

Amendment 175, in clause 102, page 80, line 18, at end add—

‘(4) The powers given to the Secretary of State in this section may not be exercised—

(a) in order to modify a programme in such a way that a decommissioning programme becomes less effective than would previously have been the case;

(b) in order to provide subsidy for a decommissioning programme from public funds.

(5) Section 48 of the Energy Act 2008 (approval of decommissioning programme) is amended as follows.

(6) In subsection (3) leave out “, in particular,” and insert “only”.

(7) Leave out subsection (3)(b).’.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I make it clear from the outset that the amendment is about nuclear decommissioning and the process under which that is undertaken, not about whether we should have nuclear power in the first place. It relates to what should be decided, when a licence agreement is made, about the decommissioning programme, particularly concerning the subsequent 60 or 100 years, or perhaps more.

The amendment would return us to the position, with some modifications, in the Energy Act 2008 in relation to the Secretary of State’s power to intervene. That Act essentially provided for nuclear site licence holders to submit a funded decommissioning programme, for that to be approved and modified by the Secretary of State and for future modifications to be accommodated should new circumstances arise. Under section 48, if new circumstances arise, proposals to modify the decommissioning agreement and programme may be made by either the Secretary of State or the operator, but the Secretary of State has a power not only to make the final decision on approving a modified programme, but to act unilaterally should unforeseen circumstances arise.

My understanding is that the clause conflates that process. The Secretary of State would decide whether he may subsequently modify a programme, whether he may give notice that someone can modify it, or whether he may take no action at all to modify it at the time the programme is agreed and the licence issued. In pursuit of attempting to modify the Secretary of State’s ability to act unilaterally should unforeseen circumstances arise, the clause effectively appears to give him no ability to act in such circumstances, or to act only should there be agreement on both sides that something different needs to be done.

The process might stretch over many decades. Many hon. Members share my view that it would be a considerable feat of clairvoyance if, at the point at which a licence was issued, the Secretary of State could imagine all the circumstances relating to a possible modification. He must operate at that level of clairvoyance, however; otherwise his options to act properly on behalf of the taxpayer and in the country’s interests might be fettered as a result of the clause. They might also be fettered in the unusual situation of a nuclear operator acting unreasonably in unforeseen circumstances in a decommissioning programme.

Although the 2008 Act sets out a number of circumstances in which a decommissioning programme can change by agreement, and those are implicit in the clause, or additional programme expenses can be built into a modified programme as it goes forward, unforeseen circumstances and balance of reason in making decisions do not appear to be taken into account in the clause. I therefore very much welcome the Minister’s statement about withdrawing it. I hope that he will introduce a new clause that, while providing as much certainty for both sides as is possible about decommissioning programmes, takes unforeseen circumstances into account and gives the Secretary of State power to deal with them, provided that such a power is used reasonably.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party 10:45 am, 21st June 2011

I rise to add my voice to the pleasure expressed by the hon. Member for Southampton, Test about the Government’s  intention to withdraw the clause. The number of signatures on the amendment signal the strong feeling on both sides of the Committee and the real concern about the wording in the clause. I back the original purpose of the amendments, because I want the Secretary of State to retain his powers to modify a decommissioning agreement on his own, without requiring the agreement of the plant operator. I want to ensure that any decommissioning agreement can be modified such that obligations are added and not removed.

I am glad that the clause will not stand part, but can the Minister assure us that we will be involved in the drawing up of the new provision, so that we know what will be brought back and that it will not suddenly be presented to us? Some letter or process whereby, early on in the process, we can see what is being proposed would be helpful. We are beginning to run out of time, and all of us would appreciate not simply being presented with a solution on Report, on a take it or leave it basis. There is scope for us to find something that could get wider agreement.

Photo of Ian Lavery Ian Lavery Labour, Wansbeck

There are a lot of problems with nuclear energy and not a lot of confidence that the decommissioning costs will not be borne by the taxpayer. When the provision is brought back, will the Minister ensure that there is clear and concise information on who will bear any financial costs arising from unforeseen events? There is a great fear that the Bills being pushed through Parliament and the view being taken of future energy requirements are hugely weighted in favour of nuclear power, in terms of the carbon floor price, the EU emissions trading scheme and the emissions performance standards. There are huge concerns among the general public about the direction we are taking.

Will the new clause tabled on Report set out in detail what will be or could be classified as unforeseen events? What about the finances? We cannot turn around to the taxpayer even in five, 10, or 15 years’ time and say, “This is an unforeseen circumstance. We, as a Government, will now pay the decommissioning costs.” That would show a huge bias towards nuclear that people, rightly or wrongly, believe currently prevails.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Commission, Chair, Public Accounts Commission

We have had a very wide debate, far wider than the amendments, so I will rule that we have had an adequate debate when we come to clause stand part. If anyone else wants to speak about the clause, this is your chance to do so. No? I call the Minister.

Photo of Charles Hendry Charles Hendry The Minister of State, Department of Energy and Climate Change

I am grateful for the contributions that we have had. I will start by responding to the points made by the hon. Member for Wansbeck. The issues he mentioned are already covered in legislation. The nature of the funded decommissioning programme is that there is a regular assessment every few years of how much money the programme will cost and how much is being set aside for that. If any more is needed, because costs are increasing faster than expected, there is an automatic obligation on nuclear companies to provide that extra funding. The issue that the hon. Gentleman mentioned, of potential taxpayer subsidy for the decommissioning costs, cannot apply. That is already enshrined in the process.

He asked me to explain some of the things that could be unforeseen circumstances. That would be slightly Rumsfeldian, talking about foreseeable unforeseen events or unforeseeable unforeseen events. The challenge we have is that, because we are looking so many years into the future, it is hard to be comprehensive or to give some sense of the range of issues that might apply and require this comfort to be provided. We also understand why hon. Members want these amendments to be made.

As the hon. Member for Southampton, Test said in his opening comments, the clause is about decommissioning. It is not about waste, which is separate; it is not about subsidy, which is separate. We made it clear that there will be no public subsidy. The reason for the change was that it became clear to us that the power introduced in the 2008 Act was very strong. It gave the Secretary of State an absolute power, to use at will, to change what the nuclear companies would have seen as a legal contract. They were concerned that they were being asked to invest billions and billions of pounds when at any point in the future a Secretary of State could change the ground rules. Understandably, they said that they felt that they had to have a greater sense of equity.

The proposal within the agreement that goes with the funded decommissioning programme would specify where the Secretary of State would continue to have that absolute power. In addition, that power would be reduced in other areas, so that there was a greater sense of certainty for investors. However, given that we cannot be certain what might arise in 10, 20, 30 or 40 years’ time, we have decided that it is appropriate. We understand the worries that have been expressed, and we will work on such matters before discussing them again on Report.

To answer the hon. Member for Brighton, Pavilion, we will work with the official Opposition to reach agreement. It might be challenging on some nuclear issues to reach agreement with the hon. Lady as we approach them from a slightly different direction, but we will try to find a form of words that has as much support throughout the House as possible and to share it with members of the Committee well ahead of the Bill being discussed on Report. I am grateful for the comments that we have heard during our discussion and I hope that, given my assurances, we can go forward as I have suggested.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Clearly, since the clause will be withdrawn, it is appropriate that the amendment should also be withdrawn, which I am happy to do. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 102 disagreed to.