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27 Jan 2003 : Column 583—continued
Mr. Wilson: I congratulate my hon. Friend on getting in early, but I do not recognise the validity of his comments. No such conclusion or interpretation could be extrapolated from what I am about to say.
I return to the Government's policy objective in relation to the Bill and to our dealings with British Energy. It is essential, first, to guarantee nuclear safety and, secondly, to maintain the security of electricity supplies. Failure to act as we did would have jeopardised those two objectives, which remain vital and will continue to be our priorities. As we move forward, we also need to factor in longer-term considerations, especially how to deal with those of British Energy's nuclear liabilities that already exist as a result of previous stations' operations. It is vital that they are dealt with safely and effectively, but we must consider how to do that at the least cost to the taxpayer while ensuring that electricity generation from those stations contributes as much as possible to the nation's needs. All that applies irrespective of whether the restructuring succeeds or fails.
Mr. Simon Thomas (Ceredigion): The Minister mentioned security of supply, which is one of the two main reasons underpinning the Government's actions in this regard. Does he not accept that the Office of Gas and Electricity Markets has estimated that over-supply in the UK electricity market is about 22 per cent., which is precisely the figure that British Energy supplies to the electricity market? The security of supply issue cannot be addressed through British Energy alone and he is, at very best, taking a short-term approach in the Bill.
Mr. Wilson: I shall not quibble over the hon. Gentleman's figures, but if there is 22 per cent. overcapacity and 22 per cent. is taken out, that will leave us without much margin. That seems to be a pretty fundamental arithmetic calculation. Of course, many issues relate to security of supply, but I would have thought that there is a pretty broad consensus in the House—irrespective of the history, as this is the reality—that we get about 22 per cent. of capacity from nuclear. Therefore, the idea that we can countenance its withdrawal over a short period, or even the medium term, is not viable.
I know that there are some in the House who would want all those nuclear stations to be shut down tomorrow. I strongly disagree with that view. For one thing, the sudden shutdown of a nuclear reactor is not a practical option. Reactors take many months to defuel
and the infrastructure is not set up to allow all those stations to defuel their reactors at once. In practical terms, it would be many years before that process were complete.Beside that practical point, however, there is an equally important argument on the economic rationality of such a move. Those stations more than cover the additional costs of their operation. To put it another way, continuing to run them generates surplus revenue, which can then be put towards paying for the liabilities that are already incurred and cannot now be avoided. Shutting down those stations and forgoing the financial contribution that they could make towards their liabilities would be economic madness, which is doubtless why it commends itself to the Liberal Democrats.
On 28 November, we identified three key outcomes that the company would have to achieve if the restructuring package were to succeed. The first was that it would need agreement from existing creditors to a temporary freeze on payments and a write-down in the value of what they were owed. The company is engaged in a dialogue with its creditors to achieve that.
Secondly, it was recognised that the company would need to sell the north American part of its operations. Since the November statement, it has announced that it has successfully entered into a binding agreement to sell Bruce Power in Canada. That will be subject to a shareholder vote on 10 February. The third part of the restructuring package was the implementation of a new trading strategy. The company is negotiating with potential trading partners.
The negotiations with the various counter-parties to achieve those three outcomes are in the hands of British Energy and are clearly commercially sensitive matters for that company. The House will therefore fully understand that it would not be appropriate in the circumstances for me to be drawn further on those specific matters today.
Mr. Mark Hendrick (Preston): Given that the emissions trading regime is coming from the European Union, does the Minister believe that British Energy can benefit from that? Will he assure me that generators will not be given an opt-out when the trading regime is introduced?
Mr. Wilson: My hon. Friend raises an interesting question. Of course, the emissions trading directive is still being negotiated, but, in its current form, it includes electricity generators from the outset of the scheme. I can certainly say today that the Government have no plans to seek an opt-out for the electricity generators.
I know that Members are interested in the wider details of the British Energy case, so I hope that that background information and progress update have been helpful. If I may, I shall discuss the specific provisions of the Bill. Perhaps I should say first that successful implementation of the restructuring plan also depends on receiving formal approval of that plan from the European Commission under the state aid rules and provisions on rescuing and restructuring firms in difficulty. We are preparing that plan, which is due to be submitted to the Commission by 9 March.
Mr. George Osborne (Tatton): Does the Minister concede that one burden placed on British Energy has
been the climate change levy, which, according to some estimates, has cost the company between £80 million and £100 million? Does he agree that since the levy was designed to reduce the emission of carbon dioxide, it is complete nonsense to apply it to the nuclear industry, which does not produce it?
Mr. Wilson: I do not intend to go into wider areas of energy policy. The hon. Gentleman has made his point effectively, and I am sure that it will be noted.
Richard Ottaway (Croydon, South): Given the leaks last week to the effect that the Government do not plan a new generation of nuclear generators, if British Energy goes into administration and if the Minister subsequently takes it over, will he seek to prolong the life of existing nuclear generators while the renewables programme gains momentum?
Mr. Wilson: The hon. Gentleman has a genuine interest in these matters, but for as long as I have done my present job not a week has gone by in which no one has written nuclear stories saying "yes, no or maybe" about our policy. There is a preoccupation with such stories and I assure the hon. Gentleman that the stories of which he spoke fall into that category.
It is not for me to say whether the life of existing stations would be prolonged; that will be a regulatory matter at the appropriate time, which is some way down the road for all the stations in the British Energy stable. It will be open to the company to seek to prolong those stations' lives, and that will be an economic decision for the company as well as, clearly, a regulatory decision for the nuclear installations inspectorate and the Health and Safety Executive. There is nothing to preclude such an application.
David Hamilton (Midlothian): Surely the Minister is not saying that if we are bailing the company out to the tune of millions of pounds, we will have no say in whether stations should have an extended life. Surely phasing them out would be the natural way forward.
Mr. Wilson: That is not the subject of the Bill. As things stand, the nuclear power stations operated by British Energy have a defined life span. I was responding to the purely hypothetical question of whether it would be open to operators to apply to extend those life spans, as has happened in the past. I merely confirm that that option exists. I know of nothing that could stop it. That does not prejudge the issue in any way, and whatever else that issue may be, it is not a political issue. It has to do, above all, with technical decisions and safety, and it will be judged in those terms at the appropriate time.
I quibble with the reference made by my hon. Friend the Member for Midlothian (David Hamilton) to millions of pounds being put towards bailing the company out. We are talking today about the precise reasons why what we are doing is being done not in the company's interest, but in the public interest.
Hon. Members are interested in the wider details of the British Energy case, but having given some general background I want to discuss the specific provisions of the Bill.
The Bill will ensure that we are properly prepared for the future in relation to British Energy. It authorises expenditure on the company generally, providing specific statutory authority for the support that we are currently giving and for measures that we may need to take in future. It ensures that we can deliver our part of the solvent restructuring deal, should it succeed. On the other hand, it ensures that we will be prepared if the deal should fail and the company go into administration.
I shall turn to the role of the Bill if the deal succeeds and solvent restructuring is achieved. As part of the deal, the Government have agreed to contribute significantly to British Energy's historic nuclear liabilities. However, British Energy will in turn pay its own way in future. That is an important principle: liabilities that arise from future operations at its stations must be paid for by the company. On top of that, British Energy will make additional contributions to its nuclear liabilities, including £275 million worth of bonds and 65 per cent. of the cash available each year. The more successful the company is, therefore, the more it will contribute.
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