Clause 2 - Designation of nuclear company

Nuclear Energy (Financing) Bill – in a Public Bill Committee am 12:30 pm ar 18 Tachwedd 2021.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Amendment proposed: 2, in clause 2, page 2, line 14, at end insert—

“(c) the nuclear company is not wholly or in part owned by a foreign power.”—

This amendment prevents the Secretary of State designating a nuclear company owned or part-owned by the agents of a foreign power.

Rhif adran 1 Nuclear Energy (Financing) Bill — Clause 2 - Designation of nuclear company

Ie: 5 MPs

Na: 8 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

The Committee divided: Ayes 5, Noes 8.

Question accordingly negatived.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

I beg to move amendment 3, in clause 2, page 2, line 14, at end insert—

“(c) the Secretary of State is of the opinion that the nuclear company is able to complete the nuclear project.”

This amendment requires the Secretary of State to give a view that a designated nuclear company is able to complete the project for which it is designated.

I am grateful to you, Ms Fovargue, for grouping amendment 3 on its own so that we can talk about it in its own right. Like the previous amendment, it seeks to add into the clause the designation of a nuclear company. We have not talked about the designation process, although I am sure we will.

The designation process is where a nuclear company that appears to have an interest in a plant, and has at least taken some steps to develop it beyond the conceptual state, is then given a preferential initial contract and a window—again, we will discuss the timescale of the window later—where it goes through the various processes of modifications of its licence to set itself up to take part in a RAB. It agrees to various things relating to the counterparty in the RAB process and agrees the initial ceiling for allowable costs for the project, which it has at the time of designation brought to a position where work can start to proceed. It is therefore on a track, but not in the RAB process at that point.

We attempted to put a third designation criterion in the clause a moment ago, which states that the designation criteria are that

“the development of the nuclear project is sufficiently advanced to justify the designation of the nuclear company”.

In other words, the project is more than just a drawing board idea. As I am sure the Minister will be painfully aware, we have had a plethora of nuclear projects in this country at various stages of advancement that have fallen by the wayside for various reasons. Some of them were relatively advanced and some were just concepts, but they were all reflected in the original planning documentation in, I think, 2011 in terms of consortia and sites and various other things that were given an overall green light in the planning process. The sites were not designated in the sense we are considering here, for nuclear development, but it is certainly true that a number of the projects suggested for those sites would not have passed the designation test before us today on the work having been done to advance the project.

I take that designation criteria—in subsection (3)(a)—as requiring evidence that the company is serious about its intentions and has started to invest money in some of the preparatory works, that a lot of the paperwork on how the company stands on the project has been completed, and that there is, most importantly, a significant grip on all the elements of the project, such that conclusions could start to be drawn, for example about the general area of allowable costs, in advance of the RAB process itself. That is criterion (a) of the designation criteria.

Criterion (b) is that

“the Secretary of State is of the opinion that designating the nuclear company in relation to the project is likely to result in value for money.”

That is much more challenging. I assume it means that the Secretary of State would want to be satisfied that the resulting power from the plant would be at a reasonable cost, that the company would be able to get its construction done in such a way that value for money would result in the production phase, and that the costs and arrangements for the plant were reasonably curtailed and in good order.

What is missing from the criteria is the big question of whether the company would, in the Secretary of State’s opinion at the time of designation—I appreciate that circumstances can change and so on—be in a good position to be able to complete and deliver the project.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Energy and Climate Change) 12:45, 18 Tachwedd 2021

I understand where the hon. Gentleman is going, but where is the fall-back?. The Secretary of State is desperate to get a nuclear deal signed off, so he just signs it off: “Yes, I am of the opinion that this project will be completed.” Ten years down the line, it all falls apart and the project cannot be completed, a bit like the Californian example. What protection would the amendment introduce? It seems that the Secretary of State can just sign this off based on his opinion. If there are repercussions down the line, they do not come back on that Secretary of State.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

The hon. Member makes an important point, at least part of which we will discuss when we come to the procedures under which a potentially failed project might be rescued or transferred to other undertakings so that it can be delivered and completed, or if already operating, can continue to operate.

Photo of Jamie Wallis Jamie Wallis Ceidwadwyr, Pen-y-bont ar Ogwr

In what circumstances is it conceivable that a nuclear project would be deemed not to have a realistic prospect of completion but at the same time to be value for money?

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

It is quite possible that the Secretary of State could deem the first two criteria on the basis of work that the company had done to approach designation. However, unless the Secretary of State has in mind the whole picture at the point of designation—in the previous group of amendments, we touched on some of the things concerning the whole picture—it would be possible for him to conclude that, yes, on the basis of the work done so far, the particular mechanisms looked like they might produce, say, value-for-money electricity at a rate per kilowatt-hour that was compatible with market levels of electricity at that point or in the future or with value for money as far as other electricity production is concerned, but he might still not have a handle on whether the undertaking that the nuclear company was about to engage in was sound in the overall, as far as completion was concerned.

The hon. Member for Kilmarnock and Loudoun touched on an important lesson in that respect, which ought to be put before the Committee. He mentioned a case in California—it was not quite in California; it was a little way a way, although it began with the same letter. I am talking about the experience of a nuclear power plant in South Carolina in the United States. When I say the experience of a nuclear power plant in South Carolina, I do not mean that—because there is no nuclear plant in South Carolina; there are a bunch of a concrete foundings, walls and various other things that look like a nuclear power station, but it does not operate, it has never produced a single kilowatt of electricity and it remains abandoned.

More significantly, that project not only was abandoned but was commissioned precisely on the sort of criteria that are contained in the Bill. All those things were gone through by the South Carolina legislature, which put in place something remarkably similar to a RAB. Indeed, the bill payers of South Carolina were required to stump up money for the project as it progressed, and I am sure hon. Members will be interested to know just how much money went from the bill payers of South Carolina to that project and how much they got out of it as a result of introducing a RAB model in South Carolina. The answer is nothing. Some £9 billion of customers’ money went into the project, and they will continue to pay for that lump of concrete for the next 20 years in their bills because of the way in which the thing was constructed, all on the basis of agreements that looked pretty similar to what is in the Bill.

What South Carolina did not do was ask serious questions about the resilience of the various partners and companies involved in the project in the light of changing circumstances in terms of the construction of the project and the health of the companies involved. Among other things, costs went through the roof, the timescale increased substantially and one of the companies that was in charge of the project effectively went bust—it called for chapter 11 protection and was therefore unable to continue with the project. All those things could have been foreseen by the South Carolina legislature, but were not. The project went ahead, with the customers footing the bill, as various reviews subsequent to the collapse of the nuclear programme said, on the basis of something that was extremely unlikely to ever come to fruition as a nuclear power plant, not only because of the dodgy nature of the financing of the project but because it had completely unrealistic timescales—those involved expected to produce electricity within six years from the start of production and so on, none of which was properly overseen.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Energy and Climate Change)

I appreciate the hon. Gentleman giving way once more; I am starting to feel like I am on a mission to annoy each contributor—apologies. He makes valid points, and I understand his concerns and what he is trying to do, but I still do not understand how the amendment would preclude such a scenario. Surely, as well as the amendment, the Secretary of State would need to look at a list of criteria, with their sign-off verifying what factors have been considered to reach the opinion that the project is viable. Otherwise, the Secretary of State could just say, “I think this project will be completed—let’s move on.”

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy)

Yes, indeed. The hon. Gentleman is right, to the extent that the amendment does not actually guarantee the success of a project as a result of its placement in the designation clauses. Of course, it is not possible to do that, because changing circumstances can mean that projects cannot come to fruition. The difference the amendment would make is that the Secretary of State would be required to look at all those sorts of things in the overall scheme of things as far as the company and the prospects for success of a particular project are concerned, in such a way that he could form an opinion, which he would undoubtedly have to publish, that he was as satisfied as he could be, having done all that work, that the project had a very high prospect of being completed, and he would have to underwrite that.

One thing I did not say about the South Carolina project is that a lot of it is now the subject of legal action, and various state officials are being hauled up before the courts for their lack of diligence in actually looking at the overall circumstances of the project when they gave the go-ahead on a similar basis to that which we are discussing. If the Secretary of State had to sign off, on the basis of the amendment being in the Bill, that it was all okay and could go ahead, and it turned out that it was not okay and could not go ahead, under circumstances that could have been foreseen, he would then be liable. That is potentially quite an important concentration of the mind, ensuring that the work had been done, as much as it could be done—I accept that it would not be a perfect operation—to ensure that there was a reasonable or good prospect that the company involved could complete the project. That is all the amendment says. It would be an important addition to the designation process.

We need to be clear that, as much as we can do the work, we have done the work in getting the designation clearly marked on the basis that the company really can deliver a nuclear plant and produce electricity for customers. As I have said, we are engaged in a RAB process, which ultimately lands on the customers. We absolutely do not want to ever land the customers of the United Kingdom in the same position that the customers of South Carolina are in today, so far as a nuclear power plant is concerned.

Ordered, That the debate be now adjourned.—(Mark Fletcher.)

Adjourned till this day at Two o’clock.