Draft Nuclear Decommissioning Authority (Pension Scheme Amendment) Regulations 2024

Debate between Kerry McCarthy and Andrew Bowie

Tuesday 20th February 2024 General Committees

[Andrew Bowie]

I thank the shadow Minister and my hon. Friend the Member for Amber Valley for their questions. The hon. Lady asked about the time it has taken for us to bring the changes forward. She is absolutely right: it is sub-optimal that it has taken this long. Having met the unions in the latter part of last year, I am aware of the concern and the not inconsiderable worry caused by how long it has taken us to bring this forward. However, we did need to wait for parliamentary time and the actions that we brought forward through the Energy Act to allow us to make the changes required to bring the NDA’s pension schemes into a much better place than where they were.

It should be recognised that the pension is very good. Allowing a full pension award at 60 for the majority of members when most public pensions are linked to a state retirement age of 67, as my hon. Friend the Member for Amber Valley mentioned, was a considerable win for workers at the NDA and something we are proud to have achieved. It means that the Nuclear Decommissioning Authority—a vital part of our effort to maintain a safe, sustainable nuclear estate in this country—will continue to be attractive to the best and brightest. We all agree that that should be an ambition.

The NDA will, of course, continue to engage extensively in communicating the reform to employees affected by the changes and the trade unions that provide representations across the NDA group. Of course we are always happy to look at the impact of the changes once they have been implemented. There is the ability after the implementation of this secondary legislation to make changes to how the schemes operate.

[Kerry McCarthy]

Did the Minister address the point about the £200 million savings or did I miss that?

[Andrew Bowie]

No, the hon. Lady is absolutely right. Sorry, I had forgotten that she asked. There will be significant savings, of course, for the NDA and that is a good thing. We have reached a good settlement on the new pension scheme. It is a good pension for members. We will continue to attract the brightest and best into the organisation and give people certainty about where they are going to be when they hit retirement age, while providing significant savings for the Nuclear Decommissioning Authority, which will allow it to carry on with its important work for this country, at Sellafield and the other nuclear sites in which it is engaged across the UK. That work is only set to grow, by the way, as more of our civil nuclear fleet reaches the stage of having to consider moving into decommissioning mode. The NDA’s work is about to increase exponentially so the savings made by the changes will be important and allow it to do more and do it effectively.

The Government remain committed to ensuring that pension schemes are fair, efficient and in line with the wider public sector. The regulations are essential to the successful implementation of a CARE-based pension reform of the NDA group. Crucially, they preserve commitments to excellent benefits, including provisions for members to retire at the current retirement age. They also yield financial savings that will be used to bolster the NDA’s mission of responsibly decommissioning the UK’s nuclear legacy. I urge the Committee to support the draft Nuclear Decommissioning Authority (Pension Scheme Amendment) Regulations 2024.

Question put and agreed to.

2.41 pm

Committee rose.

Energy Bill [ Lords ] (Sixteenth sitting)

Debate between Kerry McCarthy and Andrew Bowie

Committee stage
Tuesday 27th June 2023 Public Bill Committees

[Kerry McCarthy (Bristol East) (Lab)]

As always, it is a pleasure to see you in the Chair, Ms Nokes.

I rise primarily to speak in support of new clause 38, but it has quite a lot of overlap with new clause 2. Our new clause 38, on the restriction of the use of prepayment meters, says:

“The Secretary of State may by regulations restrict the installation of new prepayment meters for domestic energy use.”

It makes provision to ensure that consumers have full and informed consent on the installation of a prepayment meter, and that vulnerable customers are not put on to prepayment meters. We heard from the hon. Member for Kilmarnock and Loudoun some of the reasons why we have shared concerns about that. Some of my points will be very familiar to the Minister if he followed the debate earlier this year, when it reached crisis point.

Citizens Advice estimates that the number of people moved on to prepayment meters reached 600,000 in 2022, up from 380,000 in 2021. We know that that comes at a cost to them. There is a poverty premium on some of the most vulnerable, and on people on the lowest incomes, because of the shift to prepayment meters, and their use should be restricted as a result. Those with prepayment meters are more likely to be in fuel poverty and facing significant debts already. We find ourselves in a situation in which those requiring the most support are being forced to pay the most and are given the least help.

Citizens Advice revealed at the start of the year, at the height of the energy crisis, that someone was being cut off from their energy supply every 10 seconds, with millions unable to afford to top up their prepayment meters. We also know that so-called voluntary self-disconnection was a thing. People simply could not afford it, so they would not necessarily feature in the numbers. Labour’s call for a moratorium on the forced installation of prepayment meters was dismissed until the March Budget. The Secretary of State told the House on a number of occasions that he was talking to Ofgem and that plans were in motion, but during that period we were still hearing horrific stories about forced entry to people’s houses, warrants being issued and energy companies continuing to go down that path.

Our view was very much that it was the Government and the energy regulator’s responsibility to ensure that people were not left at home in the cold and the dark, yet we had to press incredibly hard before anything was achieved. Over the winter, more than 130,000 households that included a disabled person or someone with a long-term health condition were being disconnected from their energy supply at least once a week because they could not afford to top up. The same report also said that

“63% of PPM users who had disconnected in the last year said it had a negative impact on their mental health. This rises to 79% of disabled and people with long-term health conditions.”

Really good work was done by organisations such as Citizens Advice, but it also took tireless investigations from UK newspapers to expose the scale of the crisis. An investigation by the i in December showed that magistrates were batch processing hundreds of warrants in the space of a few minutes to allow the forced installation of prepayment meters, with one court in the north of England approving 496 warrants in just three minutes. At some point, we were given reassurances that people’s circumstances and vulnerabilities were being taken into account before the warrants were issued, but if nearly 500 are issued in three minutes, clearly they are not taking any information into account; it is very much a rubber-stamping exercise.

An undercover report by The Times in February highlighted how British Gas was employing debt collectors to break into people’s homes. Among them were customers described in the staff notes as a woman in her 50s with “severe mental health bipolar”, a woman who

“suffers with mobility problems and is partially sighted”,

and a mother whose

“daughter is disabled and has a hoist and electric wheelchair”.

We heard in debates at the time that many MPs had their own stories of constituents who were affected by the forced installation of prepayment meters; hopefully we will hear from some today to back up what we are calling for.

It was therefore a relief when action was taken in April, and a code of practice was introduced by Ofgem, but we have to wonder why the scheme is voluntary rather than compulsory. Just yesterday, the Committee on Fuel Poverty, in its annual report, expressed disappointment with Ofgem’s code of practice, stating that it is

“disappointingly limited in ambition”.

We have to wonder what the Government’s role is in that. I argue that Ofgem has proven incapable of dealing with the situation and it is up to the Government to step up and take control. That is what we seek to achieve with the new clauses.

The code’s voluntary nature still leaves too much power and judgment in the hands of energy suppliers, and the vulnerable and the voiceless should not be exposed to the dangers that prepayment meters pose, so I call on the Minister to give us some assurance that he accepts that it is the Government’s responsibility to act in this case—we cannot continue to leave it to voluntary codes of practice—and to support new clause 38.

[Andrew Bowie]

It is an absolute pleasure to serve under your chairmanship again, Ms Noakes, for sitting 16 in the final week before we conclude our proceedings in Committee. I thank Members for tabling their new clauses.

New clause 1 places a duty on the Secretary of State to ensure that all legacy prepayment meters are replaced with smart meters before the end of 2025. The Government have been clear that our aim is for as many households as possible to benefit from smart metering, including those that prepay for energy, which is why we have set minimum installation targets for suppliers until the end of 2025. To ensure effective scrutiny and transparency, large suppliers are also required to publish their performance against their targets, broken down by credit and prepayment mode. That ensures that they have strong incentives to deliver.

Although we agree with the hon. Member for Kilmarnock and Loudoun that smart prepayment is highly superior to legacy prepayment meters, it is also true that those customers who would benefit the most from prepayment meters can be among the hardest audiences to reach and the most vulnerable in our society. It is therefore critical that we tread carefully and do not place unrealistic targets in statute that may cause unintended consequences.

As drafted, the new clause could result in the prioritisation of the replacement of traditional prepayment meters. That may inadvertently deprioritise smart meter installation for credit consumers, many of whom are in vulnerable circumstances. Data from Ofgem indicates that around 70% of those with disabilities pay by direct debit and may therefore benefit from the automated readings that smart meters deliver.

Let me turn to the requirement to end self-disconnections within six months of the Bill becoming law. It is critical that the market delivers a fair deal for consumers, with an energy market that is resilient and investable over the long term. Ofgem’s recently published code of practice on prepayment is clear that when self-disconnection occurs, suppliers must make multiple attempts to contact the customer to understand the reasons for self-disconnection and offer appropriate support, including additional support credit. If frequent or prolonged periods of self-disconnection are identified, energy suppliers should assess whether a prepayment meter remains a safe and practicable option for that consumer.

As announced in the 2022 autumn statement, His Majesty’s Government have committed to work with consumer groups and industry to consider the best approach to consumer protection from April 2024, as part of a wider retail market reform. In addition, as announced at the spring Budget, we are keeping the energy price guarantee at £2,500 for an additional three months from April to June. That means we have covered nearly half a typical household’s energy bill through the energy price guarantee and energy bill support schemes since October, with a typical family saving £1,500. That is in addition to the expanded warm home discount scheme, which has been extended until 2026 and provides £475 million in support per year in 2020 prices.

New clauses 2 and 38 would allow the Secretary of State to restrict the use of prepayment meters, especially in relation to vulnerable consumers or where consumers are not aware that they are being moved to a prepayment mode. It is of course critical that our most vulnerable energy users are protected. The findings in The Times regarding British Gas customers were shocking and completely unacceptable. The Government acted quickly to tackle that issue of inappropriate prepayment meter use, and the Secretary of State wrote to energy suppliers insisting that they revise their practices and improve their action to support vulnerable households.

Following that intervention, all domestic energy suppliers agreed to pause the forced installation of prepayment meters and the remote switching of smart meters to prepayment mode. Ofgem rules are clear that suppliers can install a prepayment meter to recover a debt only as a last resort. They also require energy suppliers to offer a prepayment service only when it is safe to do so, with clear obligations on energy suppliers regarding support for customers in payment difficulty. The Secretary of State has called for more robust Ofgem enforcement on those issues, and Ofgem has responded by announcing a further review of supplier practices relating to prepayment meter customers.

[Kerry McCarthy]

The Minister may be about to come to this point, but I am wondering how it is going—does he know how many warrants are now being issued by the courts? Is he aware of statistics on how many prepayment meters are now being installed or on the type of customers who are being put on them?

[Andrew Bowie]

I do not have the exact numbers at my fingertips, but I am happy to write to the hon. Lady with that information. I can tell her that the senior presiding judge has ordered magistrates courts to immediately stop authorising warrants for energy firms to forcibly install prepayment meters while the process by which suppliers bring forward such applications is being reviewed.

--- Later in debate ---

[Kerry McCarthy]

As I said, the Government have had their green jobs taskforce, and now they have the delivery group. They are also doing things on the nature side. I would argue that they should have had all the information and expert advice; it is all available out there.

What we need are more incremental steps. Rather than setting up a body, we need something concrete from the Minister on what the Government are doing, for example, to ensure that further education colleges are tying up with the potential needs of businesses in their areas. Some incredibly good further education colleges are working on that—going into schools, working with businesses and encouraging young people to look at those careers—but as I said it is piecemeal and depends on the quality of the college, and the relationship with other agencies in the local area. I sympathise with focusing on a just transition, but I have concerns about whether setting up another body is the way to do it.

[Andrew Bowie]

I thank the hon. Members for Kilmarnock and Loudoun and for Bristol East for their contributions. The Government agree with the intention behind the new clause; however, we already view transition as a consideration embedded across all Government policy actions. We are committed to managing the transition to net zero in such a manner that the positive opportunities are maximised for the economy and the population, while protecting individuals, communities and the economy.

Given that the majority of the low carbon economy lies outside London and the south-east of England, Government action to deliver our net zero commitment and build a low carbon economy will help to level up the UK and spur on the transition. That is demonstrated through the North sea transition deal agreement in March 2021, through which the UK became the first G7 country to agree a landmark deal to support the oil and gas industry’s transition to clean, green energy, while supporting 40,000 jobs in industrial heartlands across the UK.

Since delivering a net zero workforce transition needs joint action by Government, industry, and the education sector, the Government have established the green jobs delivery group. The group is headed up by Ministers and business leaders to act as the central forum for driving forward action on green jobs and skills, and has committed to publishing a net zero and nature workforce action plan in 2024, which will consider the workforce transition. We will continue to join up across the devolved Governments, who have already made excellent progress, with the Welsh Government having launched their net zero skills plan in March 2023, and the Scottish Government and Skills Development Scotland having launched their climate emergency skills action plan 2020-2025 in 2020.

Energy Bill [ Lords ] (Fourteenth sitting)

Debate between Kerry McCarthy and Andrew Bowie

Committee stage
Thursday 22nd June 2023 Public Bill Committees

[Andrew Bowie]

Well, I hope it will remain a pleasure—I am sure it will. Here we are on day eight, sitting 15 of the Committee. There has been a comprehensive debate on the clauses, and I thank all Members on both sides and from all three parties represented for their full contributions. I will respond to some of the points that were made.

The hon. Member for Stretford and Urmston just referred to the Ofgem net zero duty. I am delighted that the Committee has welcomed the Government’s commitment on the duty and our new clause, and I pay tribute again to Members across the House and in the other place for their constructive dialogue on the issue. I confirm to the hon. Member for Kilmarnock and Loudoun that the measure will allow for anticipatory investment. I have engaged with industry and others, and they are confident that that is the case and welcome this step.

Community energy projects can have real benefits for the communities in which they are based, which is why so many Members supported the private Member’s Bill on the issue. However, the Government and I do not believe that every consumer should have to bear the cost of such projects. That does not seem a fair way to fund them.

[Kerry McCarthy (Bristol East) (Lab)]

Will the Minister explain why he does not think that consumers should bear the cost of community energy projects but does think that they should bear the cost of new hydrogen, through the hydrogen levy? That seems rather inconsistent.

[Andrew Bowie]

As the hon. Lady knows, we are listening and acting on the concerns raised by many in this place and the other place, including on Second Reading in the Commons, when issues regarding the hydrogen levy were raised. I am sure that we will have much more to say on that when the Bill comes back to the Floor of the House.

I am also not convinced that the Lords amendments tackle the real issues faced by community energy groups: high start-up costs and lack of expertise. I have had positive engagement with Members on that. The Government are therefore considering other options that could tackle such issues in a fairer and more proportionate way ahead of Report stage. I hope that members of the Committee and those who are following our proceedings with interest are reassured by those comments.

The hon. Member for Kilmarnock and Loudoun spoke at length, as did other Members—I hope to cover most contributions in my response—about coal. The hon. Gentleman specifically mentioned exporting coal to Germany. It is rather ironic that the only reason that Germany is importing coal is its nonsensical position on nuclear and new nuclear power—a position that is shared by the Scottish Government in Edinburgh. The hon. Gentleman might want to take that away and consider it.

The hon. Gentleman also mentioned that he disagreed with the comment by my hon. Friend the Member for South Ribble that the debate in Committee the other day was one of the “most jaw-dropping” moments of her political career, given the events of the week. I concur with the hon. Gentleman that that was a bit surprising, given that this was the week that a former leader of Aberdeen Labour claimed that Labour’s energy policies were the “final straw”—this is a Labour councillor saying this—and that

“Margaret Thatcher never delivered a more brutal put down of an industry than that delivered by Keir Starmer in Edinburgh.”

In the same week, a Green Minister in the Scottish Parliament faced a vote of no confidence, the Whip was withdrawn from a former SNP Minister, and a person of interest in an ongoing police investigation professed their innocence but could not do the same for another person of interest, to whom she is married. The last week was quite an exciting week for politics—I agree.

Our reliance on coal is rapidly diminishing, but there is still a need for it in industries such as steel and cement, so now is not the right time to make these licensing changes. I thank colleagues, including my hon. Friend the Member for South Ribble, for highlighting the role that these industries play in our constituencies, where they provide jobs and contribute to the economy.

Energy Bill [ Lords ] (Twelfth sitting)

Debate between Kerry McCarthy and Andrew Bowie

Committee stage
Tuesday 20th June 2023 Public Bill Committees

[Kerry McCarthy]

It is a pleasure to see you in the Chair, Dr Huq. These clauses relate to nuclear pension schemes, and the amendment would provide certainty that Nuclear Decommissioning Authority pensions would not be capped. There is some ambiguity in the drafting of the Bill, and the door has been left open for the introduction of regulations to cap pension increases when that is not part of what has been agreed in the past among Government, unions and nuclear workers.

I say the door has been left open for such regulations because subsection (3) (c ) of the clause specifies that only increases for revaluation—that is, active deferred members—cannot be capped. It does not mention pensions in payment. The wording is

“not involving imposing a cap on any revaluation or revaluation rate”.

The amendment would mean that the Secretary of State could not put a cap on revaluation of benefits in deferment or pensions in payment, as well as the other schemes I have mentioned.

The provision as it stands is contrary to the heads of terms agreement between BEIS and the NDA, which explicitly states that pension increases will be in line with inflation, as measured by the consumer prices index, with no reference to any cap. It is also important to note that, although members of recognised trade unions in the NDA group voted in favour of the reforms that these measures facilitate, I am told that there was by no means an overwhelming endorsement. Many voted in such a way because they feared the Government would impose even worse reforms, which had been threatened, if they did not agree to what is now on the table. They felt that that was the best deal they could get, but they feel that the promises made to them have been broken and they are not happy. Given that, it is even more important that we ensure that the Bill reflects the compromise agreement that was reached.

It is also wrong to say that these reforms would bring pension provision across the NDA group into line with wider public sector pensions, which I think is what the Minister in the Lords said. Those pension schemes underwent much more radical reform long before Lord Hutton’s review of public sector pensions, and they have been closed to new entrants for many years. Lord Hutton recommended that public sector pension accrual remain on a defined-benefit basis, but pension provision across the NDA group is mostly on a defined-contribution basis. I have been approached by representatives of trade unions who are eager to meet the Minister to ensure that reforms are fully consistent with Lord Hutton’s review. I do not know whether the Minister can offer today to meet those representatives, so I can take that back to them.

An amendment is necessary to remove any doubt about the status of nuclear workers’ pensions. I am sure we all agree that the effectiveness of the Civil Nuclear Constabulary is essential to maintain the UK’s nuclear security, and that the work of everyone at the NDA is really important, as we have already heard this morning. Those people are integral to keeping the public safe, and that should be recognised when legislation is being determined.

I hope the Minister accepts that the amendment has been tabled in a constructive spirit. It is designed to remove any uncertainty, and I hope he will accept it.

[Andrew Bowie]

I am searching in vain for a second Minister to take some of this Bill. Unfortunately, they do not seem to be available. I thank the hon. Member for Bristol East for moving her amendment and allowing us to debate an important issue, especially for employees of the Nuclear Decommissioning Authority. I recently had a constructive meeting with trade unions representing workers from the NDA and was happy to discuss the issues they are concerned about in depth and specifically the one we are debating today.

The Nuclear Decommissioning Authority agreed with unions as part of negotiations that the consumer price index should be used for revaluations and that it should not be capped. Both the reference to the CPI and that revaluations should not be capped are referenced in the clause. As the clause sets out, revaluations include pensionable earnings, benefits in deferment and pensions in payment. Pensionable earnings relate to the pension payments contributed by employee and employer while they are working. Benefits in deferment are those benefits that have been built up by an employee who has left the pension scheme but has not yet accessed it. Pensions in payment relate to those receiving their pension.

The Government are content, therefore, that the legislation as drafted does not exclude benefits in deferment and pension in payment from the non-capping of the revaluation of earning by CPI. It is therefore in line with the agreed scheme. However, I am happy to put on record that in the new scheme, both benefits in deferment and pensions in payment will be uprated by CPI and will not be capped. While I appreciate the hon. Member for Bristol East raising the issue and the importance of ensuring that those with benefits in deferment and pensions in payment do not have their revaluations capped, I do not think the amendment is necessary.

[Kerry McCarthy]

Can the Minister confirm that when he discussed this with the trade union representatives, they were happy to accept his assurances that that is what the Bill says? Certainly, they have not communicated that to us. As far as I am concerned, they still believe that getting our amendment into the Bill is still important.

[Andrew Bowie]

That specific element was not discussed or brought up in the meeting, but I am happy to meet trade unions again to continue the discussion on the matter.

[Kerry McCarthy]

If there is some ambiguity, is there a reason why he feels that putting a clarification in the Bill to spell it out and give those reassurances would not be acceptable? The amendment does not seek to change his position as I understand it; it just seeks to make sure that that is clear.

[Andrew Bowie]

I understand why some Members, including the hon. Lady and trade unions, would find that helpful. We do not believe it is necessary because I have stressed today on the record—it will be in Hansard—that it is the Government’s position that those benefits in deferment and pensions in payment do not have revaluations capped and that they will be uprated by CPI. We do not think it is necessary because that is already the Government’s position. It is on the record and I am happy to stand by that.

Turning to clause 264, the 2011 report by Lord Hutton of Furness started the Government on the road to the reform of public sector pensions. While the Public Service Pensions Act 2013 made a large number of reforms, it did not cover all public sector bodies, including those within the NDA group. The NDA is the statutory body responsible for the decommissioning and safe handling of the UK’s nuclear legacy, with 17 sites across the United Kingdom, including Sellafield. Even though the NDA was created in 2005 via the Energy Act 2004, many of its sites have been operating since the middle of the 20th century. That lengthy history has led to a complicated set of pension arrangements, which include two pension schemes that, while closed to new entrants since 2008, provide for final salary pensions and are in scope for reform. They are the combined nuclear pension plan and the site licence company section of the Magnox Electric Group of the electricity supply pension scheme. 

In 2017, the Government and the NDA engaged with trade unions to agree a reformed pension scheme that was tailored to the characteristics of the affected NDA employees. That resulted in a proposed bespoke career average revalued earnings scheme which, following statutory consultation with affected NDA employees and a ballot of union members, was formally accepted by the trade unions. Subsequently, a formal Government consultation was launched in 2018, with the Government publishing a response in December of that year confirming the proposed change.

The reformed scheme still offers excellent benefits to its members. Notably—and unusually compared with other reformed schemes—it still includes provision for members to retire at their current retirement age. For nearly everybody, that will be 60 years old. However, the complicated nature of the pension schemes, in the context of the statutory framework that applies to pension benefits across the NDA estate, means that specific legislation is needed to implement the new scheme.

Clause 264 provides the Secretary of State with the power to make secondary legislation designating a person who will be required to amend the provisions of a nuclear pension scheme. That is necessary, as at the current time the scheme rules limit the NDA’s ability to make changes to pension scheme arrangements. Clause 264 uses the phrase “relevant nuclear pension scheme” to describe the types of schemes that a designated person could be required to amend by virtue of that amendment. Clause 265 explains what is meant by that phrase. Clause 265 also clarifies the UK Atomic Energy Authority pension schemes and pension schemes that benefit persons specified in the Public Service Pensions Act 2013 are not relevant pension schemes.

Clause 266 relates to the provision of information. In order to implement the proposed pension reforms, the NDA—and, in the case of the MEG-ESPS, Magnox Limited—will need information from others. Clause 266 gives a person who has been required to amend a relevant nuclear pension scheme the power to require persons holding any information they might reasonably require to provide that information. That could include the number of members in a pension scheme, and the salaries and ages of those members.

Data protection legislation may still prevent the information from being shared. The clause specifies, however, that in making that assessment, the requirement to disclose imposed by the clause must be taken into account. The clause also provides that disclosure does not constitute a breach of confidence or breach of any other restriction on the disclosure of information.

Clause 267 sets out definitions relevant to the clauses about amendments of relevant nuclear pension schemes. Clause 268 relates to the protection that is in place that would currently block any change of pension. Although the reformed pension to be provided to affected NDA workers is still excellent, it has always been clear that the reforms to public sector pensions would result in lower levels of benefits to members than is currently the case. Although that is the acknowledged effect of Government policy in this area, it does bring it into conflict with existing legislation. Both schedule 8 of the Energy Act 2004 and regulations made under schedules 14 and 15 of the Electricity Act 1989 effectively mean that any change to NDA pensions must be “no less favourable”.

Clause 268 effectively expands a power made under an earlier clause, providing the ability for regulations made by the Secretary of State to amend or disapply schedule 8 of the Energy Act 2004 and regulations made under schedules 14 and 15 of the Electricity Act 1989. Given that this is not a hybrid Bill, we believe it is more appropriate for those powers to be exercised via regulation rather than primary legislation.

Clause 269 relates to the procedure for the regulations under this chapter. The Government believe it is right and proper for regulations under this chapter to be subject to the affirmative procedure. We also believe that these regulations should not be subject to the hybrid instrument procedure. There has been considerable consultation with those affected, and the policy is in line with pension reform across the public sector.

[Kerry McCarthy]

I welcome the Minister’s assurances and his offer to meet the unions to discuss this point. I have spent a lot time looking at the wording. Although I agree that it could be interpreted in the way the Minister says, that is arguable. I still feel it would be best to have clarity in the Bill and, therefore, would like to press the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Andrew Bowie]

That is demonstrated by the clause, and that is why I believe that now is not the right time to make the changes suggested by the Labour party. We will oppose the clause.

Finally, I will address clauses 272 and 273 on community energy, which I also oppose. I recognise that several Members spoke in support of these clauses on Second Reading. However, the Government continue to believe that this is a commercial matter that should be left to suppliers, and further work is needed before considering whether primary legislation is needed.

In evidence submitted to the Committee and published on 13 June, Energy UK set out its in-principle support, much like the Government, for community energy, and recognised the role that it will play in our energy system. However, it asks that

“these measures be removed to give the Government, the regulator, and the industry time to fully consider the best approach to integrating community energy effectively, protecting consumers and preventing additional costs being added to all consumers’ energy bills on behalf of a currently small portion of the population.”

[Kerry McCarthy]

Does the Minister accept that the wording inserted in the Bill by the Lords reflects the exact same wording of a private Member’s Bill—I think it is the Local Electricity Bill—that more than 120 Conservative MPs previously pledged to support? I checked to see whether any members of the Committee supported that Bill, and apparently the hon. Members for Hyndburn and for West Aberdeenshire and Kincardine were among those 120 MPs. I think the rest of the Committee gets off the hook on that. Would the Minister like to explain why he has changed his mind?

[Andrew Bowie]

The hon. Lady is hearing me explain at great length why the position of the Government is what it is.

Clause 272 seeks a minimum export guarantee scheme. Community energy projects can already access power purchase agreements, which are arrangements for the continuous purchase of power over a given period with market-reflective prices. For example, Younity, a joint venture between Octopus and Midcounties Co-operative, already purchases electricity from more than 200 community groups of all sizes. It has PPAs of varying contract lengths, from six months to five years. Renewable Exchange has also enabled more than 100 community projects to sell electricity via PPAs since 2018.

When we introduced the smart export guarantee, we consciously moved from a consumer-funded subsidy model to a competitive market-based system with cost-reflective pricing. That was in line with the vision to meet our net zero commitments at the lowest net cost to UK taxpayers, consumers and businesses. Introducing a fixed price would be a step backwards, as it requires all energy consumers to pay more than the market price for electricity to subside local communities that benefit from community energy projects. An electricity export guarantee indexed to the wholesale price is inconsistent with the Government’s aim to decouple renewable generation from a wholesale price linked to the marginal cost, usually fossil fuel generation or gas. A static export price could also dampen price signals needed in the system, for example, in the use of intraday batteries.

History suggests that such a support scheme would have only a minimal impact on deployment. For example, deployment of community energy projects over the final five years of the much more generous feed-in tariff subsidy scheme was still very low. These projects are also typically more expensive than larger utility-scale renewable projects, with small solar and onshore wind projects between 50% and 70% more expensive. The proposal would be mandatory for suppliers with more than 150,000 consumers, and would therefore introduce a huge new administrative burden. Suppliers would face the additional one-off costs of putting in place process and IT infrastructure, as well as ongoing costs of managing the scheme, which would be passed on to consumers in higher bills. It is likely that it will disproportionately impact smaller suppliers, sitting just above the 150,000 customer threshold.

Similarly, on clause 273 it is the Government’s view that a local tariff is unlikely to result in a better price for consumers. Suppliers would incur potentially significant costs in setting up and delivering the scheme. They would also have to recoup the additional costs, which we anticipate would be via the service fee and would therefore be recoverable only from local consumers. A small-scale low-carbon generator is also unlikely to guarantee a supply of electricity to local consumers at all times. Suppliers would have to buy additional wholesale energy to cover all local consumer demand, while continuing to charge for all other supply costs incurred. The local tariff would also need to reflect the export price paid to the generator. Presumably that is intended to ensure that local consumers benefit from cheaper export prices, but it would create an unintended outcome whereby higher export prices benefit the generator and increase the tariff price.

I hope that I have explained at length why I, as the Member for West Aberdeenshire and Kincardine, am espousing this position. I reassure the Committee that I am working with my officials to explore what other credible options are available to support the community energy sector. Indeed, work continues as we speak. We are taking these issues seriously, but for the reasons that I have provided I will oppose the clauses.

Energy Bill [ Lords ] (Tenth sitting)

Debate between Kerry McCarthy and Andrew Bowie

Committee stage
Thursday 15th June 2023 Public Bill Committees

[Andrew Bowie]

The powers in the clause are important to ensure resilience and address disruption in the core fuel sector. I thank the hon. Member for Southampton, Test for his amendment and reassure him, and the hon. Member for Sheffield, Hallam, that the powers are not intended to interfere with any rights to industrial action or any other employee rights. The Government have maintained a good working relationship with the industry over the years and aim to be aware of proposed industrial actions and to work collaboratively, as we have in the past, to understand the impact and potential mitigations for the risks that might arise.

Clause 224 enables directions to be issued for particular purposes only: to improve and maintain resilience, to restore continuity of supply or to reduce the risk or impact of a disruption. In a situation in which a proposed industrial action is assessed to cause a significant risk of disruption, the direction power could be used to ask core fuel sector participants to make contingency plans to mitigate the risk. It is not intended to cut across the rights in the legislation that the hon. Members have highlighted.

I emphasise that the Government will always seek a voluntary solution in the first instance before issuing a direction and, of course, we believe that industry participants will have a chance to make representations before a direction is made and to appeal a direction when issued. I therefore ask that the hon. Member withdraw his amendment.

[Kerry McCarthy]

Will the Minister clarify what he means by “industry participants”?

[Andrew Bowie]

Industry participants would be companies, the industry as a whole, trade union bodies and so on. They are absolutely part of the entire process and, of course, if any of them had an issue with the direction being issued, they would have the right to appeal such a decision.

Clause 224 gives the Secretary of State the power to issue directions for the purpose of maintaining or improving core fuel resilience or to recover from or reduce the risk of a disruption to continuity of core fuel supplies. The past few years have demonstrated that the resilience of the core fuel sector needs to improve significantly. We have seen queues at pumps and stock-outs at petrol stations more often than we should. The supply of fuel remains critical to the operation of the country’s economy and essential services.

The individual companies in the supply chain are flexible and manage their own risks. In extreme cases that are out of these companies’ control, it is likely that they can declare force majeure, meaning that because of the extenuating circumstance, they will not be held liable for their failure to perform contractual obligations. It is therefore crucial that the Government have the power to direct key players in the sector to take actions necessary to manage the risk of disruption to fuel supply that could arise.

The clause gives the Secretary of State the power to issue a person carrying on core fuel sector activities, or a facility owner in the core fuel supply sector, with a direction in three different circumstances. The first is to maintain or improve resilience. It is important to note that this power can be used only if the Secretary of State considers that insufficient progress has been made by the proposed recipient to take the steps necessary to address the issue.

A direction can also be issued to restore continuity of supply or to reduce a significant risk of disruption to supplies. Such directions can be issued without waiting for the sector to make progress voluntarily, given the impact that a disruption or significant risk might have on the public. A direction will be issued only if circumstances mean that it is not practicable to make regulations. That could be because of the urgency of the issue or because of the number of cases—if they are not sufficiently numerous to justify making regulations.

A direction can be issued only to persons carrying on core fuel sector activities in the course of a business with capacity in excess of 500,000 tonnes or to a facility owner if the facility has capacity in excess of 20,000 tonnes. That will cover refineries, terminals, pipeline operators and hauliers when a disruption associated with an individual company could have a significant impact on the continuity of supply of core fuels in our United Kingdom. The direction might be to take an action or to stop the recipient doing something that could have an adverse impact on the resilience of the sector. There is a requirement to provide written notice to the recipient and the reason for the direction, so the sector should be reassured that the recipient will be duly informed and will have the opportunity to make representations regarding such a decision.

The power is designed to cover a broad range of scenarios, because the range of conceivable risks is wide and inevitably uncertain. For that reason, we are unable to provide guidance as to the circumstances in which the power will be used. However, I emphasise that His Majesty’s Government intend to work with industry on a voluntary basis whenever possible and that the power can be considered as only a backstop power where a voluntary approach is not effective.

Clause 225 sets out the procedure to be followed before issuing a direction. The recipient of the direction must be given a written notice that sets out the proposed direction, the reason why the direction is being issued and when the direction is intended to come into effect. They will also get an opportunity to make written representations in respect of the proposed direction.

Given that directions will relate to sites covered by regulations for the control of major accident hazards, it is also appropriate that the relevant competent authorities —such as, in England, the Health and Safety Executive and the Environment Agency—are consulted to ensure that the direction does not inadvertently compromise safety. There is also provision to consult other persons whom the Secretary of State deems appropriate. The Secretary of State will consider any representations from the recipients, or those authorities, when deciding whether to issue the direction.

Clause 226 sets out the consequences for failing to comply with a direction. There could be severe impacts to the security of supply if there is non-compliance. It is therefore essential that there are criminal as well as civil sanctions to deter businesses from failing to comply. The offences set out in this clause are criminal offences and they serve as a deterrent measure so that they can provide credibility to the direction power.

The clause sets out both summary and indictable offences for either imprisonment or a fine, or both. The severity of the offence will determine whether it will be a summary conviction or a conviction on indictment. There has always been a history of compliance in the sector. Our hope is that the provisions will be a strong deterrent to future non-compliance and that businesses will realise that it is cheaper and more responsible to comply.

Energy Bill [ Lords ] (Second sitting)

Debate between Kerry McCarthy and Andrew Bowie

Committee stage
Tuesday 23rd May 2023 Public Bill Committees

[Andrew Bowie]

I thank the hon. Member for Southampton, Test and share his optimism that in a few years’ time we will be in a position to continue with appointments in relation to what we are legislating for today.

Amendment 1 corrects a drafting error in relation to the statutory basis on which the devolved Administrations are to be consulted in relation to regulations that may be made under the powers in part 1. The amendment ensures that the statutory basis for consultation is consistent across the drafting of the relevant clauses.

I turn to clause 9. The Government’s CCUS cluster sequencing programme is under way to identify the first CCUS clusters eligible for Government support. The first transport and storage licences will be granted through that process. The enduring regulatory regime will need a licence application process, and clause 9 provides for such a process to be set out in regulations. The process includes the procedure for licence applications, the conditions under which the applications may be made and the procedure for objecting to licence applications.

[Kerry McCarthy (Bristol East) (Lab)]

I was waiting for the Minister to mention the word “fee”, and he did not. I apologise for coming in right at the last moment, but clause 9 says that a fee would be payable. I know that the Minister spoke earlier about the need to avoid unnecessary burdens on some of the smaller companies that might come forwards. Does he envisage that the fee would be proportional to the size of the enterprise or would a fixed amount apply to everybody? Is that being considered?

--- Later in debate ---

[Andrew Bowie]

The Government are always open to suggestions and ideas about how we can improve legislation. As I said earlier, it is important for the industry, nascent as it is, that there is as much clarity as possible about how it is governed and about the regulatory process that it must follow. We must also understand that, as the market and the technology grow, evolve and develop, we will need to keep that under review. However, I am happy to give a commitment to the hon. Member that we will consider whether it is possible to tighten up the language so that exactly what is meant is made clear to industry.

[Kerry McCarthy]

As we have heard, there could be subjective interpretations regarding the importance and urgency of an impact assessment, and questions raised over whether one is appropriate or impracticable. I think the Minister will share my concern that the broadly worded clause could result in people seeking judicial review if they feel that the economic regulator should have carried out an impact assessment. I do not know what the process would be for bringing such a review, but does he share my concern that the vaguer the language, the more open it is to challenge?

[Andrew Bowie]

I also do not know the exact procedure that would lead to a judicial review in this instance, but I agree that we need to be clear and give certainty to the industry. Where we can, we should look at what we can do to tidy up the language so as to ensure that we do not end up in that situation.

Question put and agreed to.

Clause 28 accordingly ordered to stand part of the Bill.

Clauses 29 to 31 ordered to stand part of the Bill.