John Bercow
Main Page: John Bercow (Speaker - Buckingham)
The Minister of State, Department of Energy and Climate Change (Michael Fallon)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
Government new clause 9—Capacity market rules: procedure.
Government new clause 10—Capacity market rules: further provision.
New clause 5—Expert panel—
‘Schedule [The Expert Panel] has effect.’.
New schedule 1—
‘The Expert Panel
1 Regulations shall establish a panel of experts (in this Act referred to as “the Expert Panel”) in accordance with paragraphs (2) to (6) below.
Duty to consult
2 (1) Regulations made by virtue of paragraph 1 shall provide that before—
(a) any contracts for differences are entered into under Part 1; or
(b) any investment contracts are entered into under Schedule 3
the Secretary of State shall seek advice from, and the opinion of, the Expert Panel in relation to the matters specified in sub-paragraph (2) below.
(2) The matters in relation to which advice and opinion is to be sought from the Expert Panel are—
(a) any advice provided to the Secretary of State by the national system operator;
(b) the financial and other terms on which it is proposed a contract for difference or an investment contract be entered into;
(c) whether the agreed strike price (or equivalent) and the term of the contract represents value for money for consumers; and
(d) whether, in all the circumstances, it is appropriate for the CFD Counterparty to enter into the relevant contract.
(3) Where the Secretary of State proposes to disregard in whole or in part any of the advice or opinion provided by the Expert Panel, he shall be under a duty to ensure the Expert Panel is provided with his reasons for disregarding or disagreeing with the advice or opinion and place a copy of the reasoning in the Library of the House.
3 (1) provide that it shall be the duty of the Secretary of State and the national system operator to provide the Expert Panel with all such information as it may require;
(2) require the Expert Panel to provide the Authority and Parliament with details of any advice and opinion provided under this Part;
(3) require the Expert Panel to publish minutes of its meetings; and
(4) permit the Expert Panel to publish such information as the Expert Panel thinks fit about the advice it gives.
Membership etc. of the Expert Panel
4 The members of the Expert Panel shall be appointed by the Secretary of State and shall comprise a Chairman, a consumer representative, a representative of the Committee on Climate Change, a representative of the Authority and such other members as the Secretary of State may decide.
5 (1) In appointing persons to be members of the Expert Panel, the Secretary of State must secure, so far as practicable, that the Expert Panel—
(a) is independent; and
(b) is comprised of technical, academic, economic, legal and such other experts necessary to give the informed advice required.
(2) The Expert Panel must not include any person who is—
(a) employed by an eligible generator, or who has been employed by an eligible generator in the previous 12 months;
(b) employed by an electricity supplier, or who has been employed by an electricity supplier in the previous 12 months; or
(c) employed by the national system operator.
(3) The Chairman and every member of the Expert Panel—
(a) shall be appointed for a fixed period, specified in the terms of their appointment, but shall be eligible for reappointment at the end of that period;
(b) shall not serve on the Expert Panel for longer than eight years in total;
(c) may at any time be removed by a notice from the Expert Panel to the Secretary of State following a majority vote.
Committees and other procedures of the Expert Panel
6 The Expert Panel may make such arrangements as they think fit—
(a) for committees established by the Expert Panel to give advice to it about carrying out the Expert Panel’s functions, providing such committees only include persons who are members of the Expert Panel;
(b) for regulating its own procedure and for regulating the procedure of committees established by them, including timescales of giving advice, as it sees fit;
(c) as to quorums and the making of decisions by majority.’.
Amendment 162, in clause 5, page 4, line 42, at end add—
‘with predominating weight given to (2)(c) the cost to consumers.’.
Government amendment 52.
Amendment 163, in clause 6, page 5, line 21, at end insert—
‘(c) which is a public document and will be made available, together with all related documents, by the Secretary of State and the parties to the contract.’.
Amendment 23, page 5, line 28, at end insert—
‘, with the exception of electricity generated from nuclear power stations’.
Amendment 32, page 5, line 29, at end insert—
‘ “Biomass” means fuel used in a generating station where—
‘(a) at least 90 per cent of its energy content is derived from relevant material (that is to say, material which is, or is derived directly or indirectly from, plant matter, animal matter, funghi or algae), and
(b) if fossil fuel forms part of it—
(i) the fossil fuel is present following a process—
(aa) to which the relevant material has been subject, and
(bb) the undertaking of which has caused the fossil fuel to be present in, on or with that material even though that was not the object of the process; or
(ii) it is waste and the fossil fuel forming part of it was not added to it with a view to its being used as a fuel.
“Qualifying combined heat and power generating station” means a combined heat and power generating station which has been accredited under the CHPQA.’.
Government amendments 53 to 60.
Amendment 33, in clause 10, page 8, line 28, at end insert—
‘(10) A direction may not be given under this section to a fossil fuel or renewable energy plant with a rated capacity of 15MW or greater that use any biomass unless they are—
(a) a qualifying combined heat and power generating station; or
(b) an operational carbon capture and storage plant.’.
Government amendment 61.
Amendment 24, in clause 11, page 8, line 37, at end insert—
‘(3) Payments offered under a contract for difference relating to the supply of electricity generated by nuclear power must not exceed payments offered under any contract for the supply of electricity from renewable sources.
(4) For the purposes of subsection (3)—
(a) the calculation of payments must include both the strike price and the duration of the contract;
(b) renewable sources are defined in accordance with Article 2 of Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources.’.
Government amendments 62 to 65.
Amendment 152, in clause 17, page 11, line 6, at end insert—
‘(2A) In determining for the purposes of an order under subsection (1) whether the maximum cost provided for by the order has been reached, or a cost greater than that maximum would be incurred, a cost is to be taken into account if, and only if, it has been incurred, or is to be incurred, in connection with low carbon electricity generation.
(2B) The Secretary of State may give a direction suspending the effect of an order under subsection (1) for such period, and in relation to costs of such description, as are specified in the direction.
(2C) Before giving a direction under subsection (2B) the Secretary of State must consult such persons as the Secretary of State thinks appropriate.’.
Amendment 164, in clause 18, page 11, line 33, at end insert—
‘(i) All consumers of electricity upon whom the costs of the regulations will fall.’.
Amendment 27, page 11, line 35, at end insert—
‘(3) Before making regulations under this Chapter which relate to nuclear electricity generation, the Secretary of State must ask the National Audit Office to carry out an examination of and produce a report on whether the terms of the contract for difference offer value for money.
(4) The Secretary of State may ask the National Audit Office to carry out an examination and produce a report on the terms of a contract relating to non-nuclear generation.
(5) The National Audit Office report and recommendations must be published one month before a contract is laid before Parliament.’.
Amendment 48, in clause 21, page 12, line 40, at end insert—
‘capacity may be secured by capacity auctions or by the establishment of a strategic reserve or by other means’.
Amendment 165, in clause 22, page 13, line 15, after ‘agreement’ insert—
‘is a public document to be made available, together with all related documents, by the Secretary of State and the parties to the agreement; and’.
Government amendments 101 and 102.
Amendment 29, in clause 22, page 13, line 21, at end insert—
‘(2A) Electricity capacity regulations may not make provision in respect of fossil fuel plants.
(2B) For the purposes of subsection (2A) “fossil fuel plant” means an electricity generating station which satisfies the conditions in Chapter 8, Section 42(4)(b).’.
Amendment 28, page 13, line 23, at end insert—
‘(3A) Capacity agreements may not be made in respect of nuclear electricity generation.’.
Amendment 49, page 14, line 6, at end insert—
‘(e) conferring on the Secretary of State the power by regulation to introduce a system of strategic reserve of supply; and
(f) conferring on The Secretary of State by regulation the power to designate a nominated person to hold and manage the Strategic Reserve on his behalf (“the Strategic Reserve Operator”).’.
Government amendment 103.
Amendment 50, page 14, line 9, at end add—
(a) A person is eligible to be designated as the Strategic Reserve Operator if the person is—
(i) a company formal and registered under the Companies Act 2006; or
(ii) a public authority, including any person whose functions are of a public nature.
(b) The Strategic Reserve Operator must contract with the System Operator for the circumstances under which the Strategic Reserve Operator supplies power to the System Operator.
(c) The Secretary of State must approve the drawing up of any contract between the System Operator and the Strategic Reserve Operator and may from time to time vary the terms of the contract should circumstances require.
(d) The Secretary of State must lay before Parliament a reasoned case for any change of content under subsection (5).
(e) Strategic Reserve regulations may make provision for payments to be made by electricity suppliers or capacity providers to a settlement body for the purposes of enabling the body—
(i) to meet such descriptions of its costs that the Secretary of State considers appropriate;
(ii) to hold sums in reserve;
(iii) to make payments to the Strategic Reserve Operator for the purpose of securing and operating Strategic Reserve capacity.’.
Government amendment 104.
Amendment 166, in clause 27, page 15, line 40, leave out ‘may’ and insert ‘must’.
Government amendments 105 to 107.
Amendment 94, in page 23, line 5, leave out clause 38.
Amendment 151, in clause 38, page 23, line 34, at end add—
‘(5) The Secretary of State may not exercise the power under subsection (1) if the consequence would be to raise the price of electricity for consumers.’.
Amendment 153, in clause 41, page 25, leave out lines 35 to 42.
Amendment 154, page 27, leave out lines 9 and 10.
Amendment 155, page 28, line 17, leave out ‘may’ and insert—
‘must, so as to make good the shortfall,’.
Amendment 156, page 27, line 14, before ‘make’, insert—
‘and insofar as subsection (12) applies must,’.
Amendment 157, page 29, line 8, leave out subsection (6).
Amendment 158, page 29, line 7, leave out ‘(10)’ and insert ‘(9)’.
Amendment 159, page 34, leave out from line 8 to end of line 37 on page 35.
Amendment 160, page 36, leave out from line 1 to end of line 46.
Amendment 161, page 37, leave out lines 18 and 19.
Amendment 167, page 36, line 5, leave out ‘the costs’ and insert ‘the publicly substantiated costs’.
Amendment 168, page 36, line 8, leave out ‘the income’ and insert ‘the publicly substantiated income’.
Amendment 169, page 36, line 24, at end insert—
‘(g) the costs to consumers’.
Amendment 170, page 38, line 10, leave out
‘A certificate purchase order may provide for’
and insert—
‘A certificate purchase order will require at least the same level of information as required under the Renewables Obligation and may provide for’.
Amendment 171, page 38, line 37, leave out ‘may’ and insert ‘must’.
Amendment 172, page 38, line 38, leave out ‘subsection (3)’ and insert ‘Section 32X’.
Amendment 95, in page 42, line 27, leave out clause 42.
Amendment 173, in clause 42, page 42, line 28, at beginning insert—
‘Unless the Secretary of State or the Regulator permits otherwise in the consumer interest,’.
Amendment 174, page 42, line 31, leave out ‘7.446’ and insert ‘8.760’.
Amendment 179, page 42, line 35, at end insert—
‘( ) Section 42(1) is not to apply in relation to CCS plant until completion of the commissioning and proving period that shall last no longer than 3 years.’.
Amendment 150, page 42, line 36, leave out ‘2044’ and insert ‘2029’.
Amendment 96, in page 43, line 41, leave out clause 43.
Amendment 175, in clause 43, page 43, line 43, at end insert—
‘or significant risk of other disadvantage to the consumer.’.
Amendment 97, in page 45, line 14, leave out clause 44.
Amendment 98, in page 45, line 32, leave out clause 45.
Amendment 99, in page 46, line 36, leave out clause 46.
Amendment 176, in clause 50, page 50, line 16, leave out
‘As soon as is reasonably practical’
and insert ‘Within one month’.
Amendment 177, page 50, line 16, leave out ‘five years’ and insert ‘one year’.
Government amendment 66.
Amendment 178, page 50, line 31, at end insert—
‘(d) assess and detail the impact on electricity prices to the various classes of consumers of the measures described in the Act.’.
Government amendments 119 to 125.
Amendment 21, in clause 121, page 92, line 15, leave out from ‘objects’ to end of line 17.
Amendment 22, page 92, line 17, at end insert—
‘(f) requiring a licence holder to ensure that—
(i) customers on prepayment meters shall be charged the lowest tariff available from that licence holder;
(ii) no more than 20 per cent. of each payment made goes towards meeting outstanding debt.’.
Government amendments 126 to 133, 68 and 134.
Amendment 26, page 106, line 40, in schedule 2, at end insert—
‘(2A) Before entering into an investment contract, the Secretary of State must ask the National Audit Office to carry out an examination of and produce a report on whether the terms of the contract offer value for money.
(2B) The National Audit Office report and recommendations must be published one month before a contract is laid before Parliament.’.
Government amendment 71.
Amendment 25, page 107, line 43, in schedule 2, at end insert—
‘(6A) An investment contract may not include provision to underwrite or provide state guarantees for all or part of the construction costs of nuclear generation plants.’.
Government amendment 72.
Amendment 9, page 108, line 24, at end insert—
‘( ) For the purposes of paragraphs 1 and 2, information is “confidential information” only if it constitutes a trade secret.’.
Amendment 8, page 108, line 26, leave out paragraph 3.
Government amendments 73 to 90.
Amendment 148, page 119, line 13, in schedule 4, at end insert—
‘(iii) substantial pollution abatement equipment dealing with oxides of sulphur, oxides of nitrogen, heavy metal emissions or particles is fitted to the generating station.’.
Amendment 149, page 119, line 39, leave out ‘42(5)(b)’ and insert ‘42(6)(b)’.
Michael Fallon
I rise to speak to Government new clauses 8, 9 and 10, and Government amendments 52 to 66, 68, 71 to 90, 101 to 107, and 119 to 135. I should also like to respond to the amendments tabled by hon. Members. I ask the indulgence of the House if my speech is necessarily fuller than it might be so that I can do justice to each of the six main areas in the group, namely the transparency of investment contracts; the counterparty arrangements; the capacity market; nuclear power; other issues including biomass, emissions performance standards and the costs of electricity market reform; and consumer tariffs.
I thank Opposition Members and other hon. Members for their contributions in Committee. The Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), said at the time that the Bill needed clear accountability and that Parliament must have the information it needs to scrutinise the delivery of electricity market reform properly.
New clause 5 and new schedule 1 seek to establish an expert panel to scrutinise electricity market reform. Let me assure hon. Members that development of the contracts for difference and investment contracts will be informed by close consultation with relevant experts. We have already taken a number of steps in that regard, which is why I suggest that new clause 5 and new schedule 1 are unnecessary.
Our decisions on strike prices for CFDs will be informed by analysis from the National Grid. The robustness of that analysis will be scrutinised by an independent panel of technical experts who will report to the Government. Their report will be published. Any divergence of opinion between the panel, the Government and National Grid will be reported and explained. Given the existing role of the panel of technical experts, I do not see a wider remit for another expert panel to look at CFDs.
I agree that investment contracts should be subject to rigorous scrutiny and the best available advice, which they will be. For investment contracts relating to renewables projects, I am minded to use the draft CFD strike prices informed by the robust process just outlined. For other low-carbon technologies, which are bilaterally negotiated, specialist advice will be sought as appropriate and there will be rigorous scrutiny. For example, for Hinkley Point C we have appointed technical and financial specialists to advise on whether any proposal represents value for money. We will publish details of that contract when and if it is negotiated.