Energy Bill [ Lords ] (Third sitting)

Alan Brown Excerpts

Committee stage
Thursday 25th May 2023 Public Bill Committees

[Dr Whitehead]

As the Minister says, these clauses are important in establishing reporting requirements relating to carbon capture and storage strategy and policy statements, and the requirement to report how the policy is going and what the problems are. It is important that we establish proper mechanisms for ensuring that the report is properly brought before Parliament. Given the interest of Members in the progress of CCUS, they may well want to debate the report in the House, and to have the Minister answer questions on it.

Clause 41(7) states:

“The Secretary of State must”—

it is nice that the provision has the word “must” in it—

“lay a copy of each annual T&S report before each House of Parliament”.

As the Minister will know, the phrase “lay before” has a lot of possible interpretations, just as “publication” does; we discussed the general question of publication in a previous sitting. Just laying a report before each House of Parliament has, potentially, a number of problems attached to it. Is it likely to be flagged up in any way that the report has been laid before Parliament? Is the onus on every Member of Parliament to find out whether that has happened? Do the Government intend to be proactive about laying reports before Parliament, and in offering opportunities to debate the report, or at least answer questions on it? Those are all extensions of the idea of laying a report before the House.

I do not want to say that the wording is inadequate, because it is the general wording on laying reports before the House, but the Minister will appreciate and understand that some legislation enters into greater detail on how a report is to come before Parliament. It would be helpful if the Minister gave his interpretation of the provision and said how he intends to transfer or convey the policy report from the regulator to the Floor of the House.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Dr Huq. I will make only a few comments. I will not object to these clauses, which I realise are important, but I share the concerns expressed by the hon. Member for Southampton, Test. It is critical that we have confidence in proper parliamentary oversight, and in Parliament being able to hold the regulator and particularly the Secretary of State to account. I am slightly concerned that the clauses give the regulator too much power to decide what they report on, how they report and what information they bring forward. As the Minister described, it is up to the regulator to explain why they have not brought forward a statement, for example. We need more than that. It should not be at the whim of the regulator whether to bring forward a statement; if they do not bring one forward, they should say why. It is for the Secretary of State to make sure that these things happen, obviously with parliamentary oversight.

Subsection (2) says:

“That description must include the objectives of each relevant project.”

Clearly, we need a lot more than just the objectives; we need to know how the objectives are being met. I know that the Minister will not want to make the Bill too prescriptive about what goes in the report, but we need that to include, for example, details of the efficiency of the project. Cynics say that carbon capture does not capture enough of the emissions, whereas obviously the industry says that we can capture 95% of them. I want to see how efficient projects are, and how they contribute to meeting net zero.

There are concerns that carbon capture might lead to the burning of more fossil fuels, so we need to understand the level of extraction of fossil fuels, what the inputs and outputs are, the emissions from any extractions of fossil fuels, and where the fossil fuels come from, including whether they come from other countries; we need to know that when it comes to meeting that wider net zero objective. Those are the things that I would want set out, so that I could question the Secretary of State in Parliament on them and make sure that we have confidence in how these objectives will be met.

[Andrew Bowie]

I thank the hon. Members for Southampton, Test, and for Kilmarnock and Loudoun for their questions.

I am very glad that the hon. Member for Kilmarnock and Loudoun has spoken, because it gives me a chance to congratulate him on his team’s success last night, which probably staved off their relegation from the Scottish premier league. They are not quite making Europe, as some other teams did last night, but that is still quite good. On his questions about what should be in the annual report, that is already set out. It should be: progress on activities described in any forward work programme for that year; the extent to which activities proposed in the forward work programme for the previous year had not been delivered, and the reasons for that, as well as the proposals to remedy that; how the delivery of the programme’s functions have been contrary to any strategy and policy statement that has been designated; and any enforcement action pursued by the economic regulator.

Of course I share the concerns that both hon. Members expressed that any report laid before Parliament should be open, accessible and visible. Of course, there is precedent for this; reports are laid before Parliament by Government all the time. Of course, it is incumbent on Parliament to hold the Secretary of State to account once the report is laid before Parliament. It is in the gift of this Parliament to call any Secretary of State to the Floor of the House, as we have seen over the course of the past six years in particular, to explain in detail any reports that have been laid before Parliament and to take any questions from any Member of the House from any party. That process, which is well established in our Houses of Parliament, is the one by which we will proceed with this report.

Question put and agreed to.

Clause 39 accordingly ordered to stand part of the Bill.

Clauses 40 and 41 ordered to stand part of the Bill.

Clause 42

Transport and storage administration orders

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

[Andrew Bowie]

I am happy to speak to clauses 42 to 49. Chapter 4 of the Bill provides for a special administration regime for licensed carbon dioxide transport and storage companies. In the unlikely event that a carbon dioxide transport and storage company becomes insolvent, the Secretary of State, or the economic regulator with the Secretary of State’s permission, may apply to the courts for the appointment of a special administrator. The objective of the administrator would be to ensure that services continue until it is unnecessary for the administration order to remain in force for that purpose.

Given the importance of carbon dioxide transport and storage networks to support carbon reduction from a range of emitters—many of which will be supported by Government—the importance of those networks in delivering net zero and the need to ensure that networks are maintained and decommissioned safely, in a company insolvency scenario the interests of creditors, which usually take priority in a normal administration, may not align with the public interest in keeping the network operating. The ability to apply a special administration regime in the event of a carbon dioxide transport and storage network company insolvency would enable services to continue for emitters connected to a network.

Clause 42 defines some of the relevant terms for this chapter that are necessary for the effective functioning of the legislation. It also requires that the relevant administrator must perform its functions as administrator to achieve the objectives set out in clause 43.

Clause 43 establishes that the objective of transport and storage administration is to secure that the activities authorised by the licence commence or continue in a manner that is efficient and economical, and that ensures the safety and security of the transport and storage network, or the part of the network to which the licence relates, until the company can be rescued as a going concern. The administrator also has the option to transfer all or parts of the undertaking to run as a going concern. Special administration is intended to act as an interim solution, rather than a long-term fix. If the ongoing operation of the transport and storage network is no longer viable in its form, the Secretary of State may wish the Government to take ownership and/or transfer the network assets to facilitate a restructuring or the safe decommissioning of the assets, using the statutory transfer scheme provided for in chapter 5 of this part of the Bill.

I turn to clause 44. Under the proposed special administration regime, if a carbon dioxide transport and storage company is running out of funds or likely to become insolvent, the Secretary of State, or the economic regulator with the consent of the Secretary of State, can apply to the High Court for a special administration order, which will allow a special administrator to be appointed. The Energy Act 2004 provides for special administration regimes in the energy sector. In order to establish the process and procedure for carbon dioxide transport and storage administration orders, the Bill extends the provisions of the Energy Act 2004 to transport and storage administration, with the appropriate modifications. As provided for by these amendments, the detailed procedural rules governing the establishment of a transport and storage administration will be set out in secondary legislation.

At present in the energy sector, section 159(3) of the Energy Act 2004 applies the power in section 411 of the Insolvency Act 1986 to make separate insolvency rules for each of the supply, network and smart meter communication device company special administration regimes. Clause 45 amends section 159(3) of the Energy Act 2004 to allow the Secretary of State additionally to make company insolvency rules for carbon dioxide transport and storage.

Clause 46 enables the Secretary of State to modify the conditions of a carbon dioxide transport and storage company’s economic licence while an administration order is in force. As the Secretary of State may provide financial support to a transport and storage company that is subject to an administration order to secure the objectives of the special administration regime, the power is intended to allow the Secretary of State to recover any financial support provided. Under that power, the Secretary of State may modify the licence to include conditions relating to the recovery of amounts owed to the Secretary of State in relation to financial assistance given while an administration order is in force, and the raising of funds for the purpose of meeting expenses arising in relation to the administration order. Before making any licence modifications, the Secretary of State must consult the economic regulator and any relevant carbon storage licensing authority.

The Enterprise Act 2004 conferred powers on the Secretary of State to make consequential amendments to insolvency legislation. As the special administration regime for carbon dioxide transport and storage companies contains several provisions from the ordinary administration and insolvency regimes, the use of those powers in the Act may affect the special administration regime in the Bill. Clause 47 therefore extends the power of modification or application conferred on the Secretary of State in sections 248, 254 and 277 of the Enterprise Act to make such consequential amendments to chapter 4 as the Secretary of State considers appropriate in connection with any other provision made under those sections of the Act. That will ensure that the special administration regime for carbon dioxide transport and storage is maintained as broader insolvency law evolves, and that it adopts the same approach taken in other recent special administration regime legislation. Not providing for such a power could have detrimental impacts on the operability of the special administration regime in the event of a relevant company’s insolvency.

[Alan Brown]

The Minister mentioned special admin-istration regime legislation. Given the Government’s review, I wondered how the special administration regime process worked for Bulb Energy, and what lessons had been learned? Has that had an impact on the legislation?