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Mr. Robertson: I accept the good intentions of the clause, but the timing is difficult in the sense that the ruling on British Energy has not yet been made. However, if the ruling went against the Government's intentions in respect of British Energy, would that mean, by implication, that the clause is worthless? Is that really the position?
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Nigel Griffiths: No. British Energy is a specific case. The Commission considers these issues case by case and it would be wrong to compare a position taken in the past, or a pending position in a case, and say how it might affect the hypothetical cases that we are dealing with now. British Energy is an unrelated issue. The clause gives us a provision that will require approval from the Commission if the guarantee constitutes state aid, and the Commission will consider that with regard to the circumstances of the specific case.
9.15 am
Mr. Robertson: I am still not entirely clear what the difference between British Energy and these companies would be, and I am not entirely satisfied that the Minister has explained the difference, although it is an analogy at this stage. I cannot see why the European Commission would view each company differently. Surely the Government or the courts would grant an energy administration order if a company could not run itself financially. I do not see the difference between company A not being able to run itself financially and company B not being able to run itself financially; it seems to provide much the same reason for taking that company over. I wonder whether these clauses are compatible with European law, and it seems that the Government are saying that they do not know either. Are we not are in a bit of a mess?
Nigel Griffiths: Not really. British Energy operates in a competitive market in which a special administration regime is for regulated natural monopolies, so the nature of the aid to British Energy, as in the case that the hon. Gentleman envisages, is different. The circumstances of the company are different. That is why there is a difference.
Mr. Andrew Stunell (Hazel Grove) (LD): On reading these clauses, I was under the impression that they applied also to regulated companies in the energy sector. Like the hon. Member for Tewkesbury (Mr. Robertson), I am mystified by the distinction that the Minister is drawing. He might want to reconsider that distinction, and perhaps write to members of the Committee separately. This is quite a technical issue, so perhaps he could take advice before informing the Committee further.
Nigel Griffiths: If, on viewing Hansard, there appear to be issues that require clarification, I undertake to write to the Committee.
Question put and agreed to.
Clause 164 ordered to stand part of the Bill.
Clause 165 ordered to stand part of the Bill.
Clause 166
Licence conditions to secure funding of energy administration
Question proposed, That the clause stand part of the Bill.
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Miss McIntosh: May I invite the Minister to comment on his Government's response to the consultation document, ''Proposals for a special administration regime for energy network companies'', which contained Government conclusions from the replies to the DTI consultation document of 16 April 2003? To support my remarks, I draw from pages 68 and 69 of the excellent Library notes prepared on the Bill, which refer especially to the procedures that would be used to secure funding of energy administration, which is the subject of clause 166. The notes say that the Government response
''indicated that all but one respondent to that consultation''—
which closed just over a year ago on 20 June 2003—
''broadly welcomed the introduction of a special administration regime . . . Most respondents believed that legislation to introduce special administration was proportionate to the risks of the networks ceasing to operate as a result of normal insolvency procedures and would ensure that consumers would continue to receive supplies of energy in the unlikely event of a network company becoming insolvent. The preferred scheme should be along the lines of the schemes already in place for the water and railway sectors.''
I have some knowledge of the Railways and Transport Safety Bill as I had the honour to serve on the Standing Committee. We had a similar debate, not so much about how the funding would be raised, but about what would happen and what the role of the regulator would be in the event of one of the companies that had been awarded a franchise under the Bill becoming insolvent. I am disappointed that this part of the Bill is silent about the role of the regulator. Was it the specific intention of the Minister and his Department not to elaborate on that?
I shall quote the Government's response about favouring an ex ante scheme. On the question of funding for special administration, the response states that the
''costs of special administration would be borne in the first instance by creditors and members, but that provisions will be made for any excess funding required to keep the network running. The Government considers that this funding should come from the industry and therefore ultimately from consumers, as the beneficiaries, rather than taxpayers but that provision for an interim Government loan or loan guarantee will be necessary in the absence of an ex-ante fund.''
In the light of my earlier probing questions to the Minister, that response establishes on the record—although it is not included in the explanatory notes or the Bill—that the Government intend to secure funding for administration.
Nigel Griffiths: What that response does is to give provision for the Government to secure funding; it does not state an intention.
Miss McIntosh: Well, it establishes the legal basis for the Government to act. Given the huge investments that companies are being asked to make to carry out their responsibilities as utility companies, what authorisation does the Minister's Department have under clause 166? Has funding been allocated as a specific budget line or is it part of a reserve allocated to the Department?
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The Library note clearly states:
''Energy administration may be ended either by rescue of the company as a going concern, or by means of transfer, as set out in the Bill. This may be to one company or by separation into several going concerns. The Bill also makes provision for the Secretary of State, with the permission of the Treasury''—
this appears in the Library note, not the Bill or the explanatory notes; the Committee ought to know the precise fiscal implications of clause 166—
''to give a grant or loan, or loan guarantees to a company in energy administration where this will help achieve the objectives of administration. In the latter case, a statement must be made to Parliament as soon as practicable after the guarantee is made, and annually thereafter until the liability is discharged.''
It would be immensely helpful, therefore, if the Minister would set out what the specific procedure is, why it is not included in the Bill, and what budgetary allocation the Treasury has made.
I return to the remarks made by my hon. Friend the Member for Tewkesbury, in response to which the Minister tried to differentiate the situation with British Energy. He is in a minority of one. The Library note clearly draws a parallel with the
''financial difficulties experienced by the nuclear generator British Energy in 2002'',
in which
''company restructuring was attempted with the aim of its becoming solvent. The Government prepared contingency plans to ensure nuclear safety and security of supply''.
There is a direct parallel and I cannot understand why the Minister does not see it. Why can he not be up front with the Committee? We are representatives for the public and we need to know the fiscal implications and the procedure. It would be immensely helpful if the Minister spelled that out and explained why it is not in the Bill.
Nigel Griffiths: I shall answer the hon. Lady's questions in order. The regulator would be expected to act in the same way towards a company in energy administration as towards other companies. I understand that that has been set out in case law with Winsor v. Bloom. The regulator must take account of the ability of the licence company to fund its activities. Clause 166 is about how a shortfall in funds after special administrations can be raised from other licensed companies; it is not about funding during special administration. The clause provides for Government funding to be recouped via charges on the industry.
If the hon. Lady contacts Library staff, she will find that the fact that a Library note uses analogies or comparative cases does not mean that it is implying that the situations are identical. I thought that I made that point clear earlier. The case that she raised is not identical to one that we envisage arising, because there are issues about whether there is a natural monopoly. There are competing companies, and other issues could well mean that any future administration of a company in this area was different and treated differently by the Commission, in particular, in giving
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permission for the Government to provide assistance. That is what this clause and previous ones deal with.
Miss McIntosh: I am sure that the Minister does not mean to be as obtuse as he appears to be, but the Railways and Transport Safety Bill, which was enacted in 2003, specifically set out the role of the regulator. The Minister's background, like mine, is in Scots law. Most of our law is codified and the position would be set out. That is our tradition, and the Government have a tradition of setting the position out in other Bills. I cannot speak about the Water Act 2003, because I am not so familiar with that, but the position for the rail sector is clear. He has not satisfied me on that point, and I repeat that the record will speak for itself.
I specifically referred to a situation that the Minister seems to be ignoring. He says that there is no monopoly. We know that there is a duopoly in Scotland, and there is clear potential for a monopoly to emerge should the two companies operating in this sector in Scotland merge. Perhaps our definitions of a monopoly are not the same, but if the two companies merged, I would consider that to be a monopoly, and presumably he could not disagree. I would have thought that these remarks carried most force with reference to Scotland.
I was interested to hear the Minister say that clause 166 calls on other licence companies to make up the shortfall relating to the costs of another utility company going into administration. That would be an amazing precedent to set. I am not sure what provision other companies, which have done nothing wrong and have not contributed to the insolvent company becoming so, can be expected to make out of the blue. That seems extraordinary. However, we have made the points, and I am sure that there will be an opportunity to return to them on Report or once the Bill is implemented.
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