I conclude with this thought. Throughout the 1980s and 1990s, the mainstream political debates of the day
hinged on questions of economic decentralisation. The big debates were about whether and how to decentralise control of the economy, trade union reform, making the Bank of England independent, privatisation and the big bang in the City. Each of those issues was a step towards decentralising economic control. The new political questions of our age will hinge on decentralising control, not of the economy but of politics and public services. This Bill is a small step towards that overarching aim. I commend the Bill to the House.
Mr. Douglas Carswell accordingly presented a Bill to extend and improve methods of electoral registration: And the same was read the First time; and ordered to be read a Second time on Friday 17 October, and to be printed [Bill 102].
Malcolm Wicks: The purpose of these technical amendments is to prevent gas storage and unloading developments from being subject to double regulation, namely under the planning regime, through town and country planning legislation on the one hand, and under the new regime for offshore gas unloading and storage developments that the Bill introduces on the other. Chapter 2 of part 1 of the Bill provides a new regime to license the unloading and storage of gas in the offshore area, comprising the area within 12 nautical miles of the territorial sea and an area beyond that, extending up to a total distance of 200 nautical miles.
The measures have been widely welcomed by the industry and received cross-party support in Committee. However, in written submissions and discussions, industry players have sought clarity on the relationship between onshore town and country planning regimes and the licences provided for in this part of the Bill. They are particularly anxious to avoid double regulation in cases in which an onshore development falling within the scope of the town and country planning legislation
extends, in part, to the area of the territorial sea, thereby attracting the offshore regulatory regime established in the Bill.
In response to those concerns, we have tabled a new clause and amendments that are designed to prevent an overlap between those onshore and offshore regimes. The effect of those amendments will be to exempt an onshore gas development from needing an offshore gas licence, even if part of the structure or gas storage area in question extends into the offshore area. Such onshore developments will continue to require consent under town and country planning legislation, but they will not need a licence from my Department as well.
Charles Hendry (Wealden) (Con): I am grateful to the Minister for tabling the amendments. It seems sensible to address this potential loophole now, and we agree that investors, above all, need absolute clarity. We support the proposed changes, but feel that they should be considered against the general concern that not enough is being done to address the issue of storage.
We all know that about two and a half years ago we nearly ran out of gas. I have teased the Minister before about that because it happened within hours of his saying that we were awash with gas. We are aware of that significant challenge two and a half years ago, but still not enough has been done to address the issue, which should be seen in that context. Much has happened since then, with new pipelines coming into action, new liquefied natural gas facilities being built and the storage facilities at Rough, which were half out of action, now operating fully again.
The situation is nothing like as tight as it was, but we need a more strategic approach to storage, and the Bill is a missed opportunity in that respect. The Minister should be proposing to the House that he will report to Parliament every year on how much storage he believes we will need to address our energy needs in the medium to long term. If he did that, he would also be able to tell the House what steps were being taken to ensure that that need would be met. I regret that such measures are still missing from the Bill, but we are pleased that the potential loophole that we have discussed is being addressed.
Malcolm Wicks: Let me reply to that point, which featured in our Committee debates. We all recognise that with the decline of gas in the UK continental shelf, in the North sea, we will be ever more reliant, as we approach 2020, on imported gas. For energy security, therefore, we need more gas storage. The Bill is designed to facilitate that with an appropriate, fit-for-purpose regulatory regimehence the technical amendments to clarify the relevant planning aspects.
Several companies are coming forward with proposals for extra gas storage, and we strongly welcome that. I am not sure that there is a great deal of difference between the hon. Gentleman and me, but I am pleased that he has had the opportunity to make that point again. On the technical amendments, however, there is nothing between us.
(1) Where the Secretary of State enters an agreement for, or in connection with, the disposal of relevant hazardous material by or on behalf of the Secretary of State, the agreement may provide for a fee to be paid to the Secretary of State.
(a) such amount as the Secretary of State considers prudent by reason of any uncertainty which exists about the relevant expenditure which will or may be incurred in connection with the Secretary of States obligations under the agreement in relation to the relevant hazardous material;
(i) the relevant expenditure which has been, will or may be, incurred in connection with the design and construction of a repository in which material (including any hazardous material to which the agreement relates) is to be disposed of, and
(ii) such amount as the Secretary of State considers it prudent to make allowance for by reason of any uncertainty which exists about the relevant expenditure which will or may be incurred as mentioned in sub-paragraph (i).
This issue attracted a good deal of attention in Committee, and properly so. The new clause makes explicit in the Bill the policy that the Government have made clear in the nuclear White Paper, in the consultation on the guidance for funded decommissioning programmes, on the Bills Second Reading and in Committee. The Secretary of State will set a fixed unit price for new nuclear operators, including a significant risk premium for the disposal of waste. The new clause makes transparent our intentions regarding the pricing of long-term waste management.
Let me give a brief recap of our intentions for the benefit of Members who were not present in Committee. We are creating a framework to ensure that operators of new nuclear power stations are responsible for, and make prudent provision to meet, the full costs of decommissioning and their full share of waste management costs. The effect of the framework will be to ensure that operators of new nuclear power stations return the sites, after those stations have been decommissioned, to a state that will be agreed with regulators and the planning authorityit is likely to be similar to a greenfield state.
That will be financed by making provision, throughout the generating life of the power station, for back-end costs.
Under the framework, any potential operator will have to submit a funded decommissioning programme to the Secretary of State for approval. Such programmes will have to include the technical steps that will be required to manage and dispose of radioactive waste and spent fuel and to decommission the power station and clean up the site. They will also have to include a prudent estimate of the costs involved in those steps and proposals on how the operator will accumulate funds to meet those costs. Our intention is that before development consents for new nuclear power stations are granted, the Government will need to be satisfied that effective arrangements exist, or will exist, to manage and dispose of the waste that they will produce.
Mr. Mike Weir (Angus) (SNP): The Minister says that before such projects go ahead, provision will have to be made for cost, but will that be monitored by the Government over the life of the station and the life of the disposal of the waste, which could be for a long time? How will it be dealt with over such a length of time?
Malcolm Wicks: I welcome the interest in the issue from Scotland. We are introducing a regime to put into practice the principle that new nuclear must pay its full costs, including those for the disposal of waste. We are setting up a new committee to help us get the finances right, but the purpose of the fixed price is to give the investor confidence at the beginning of the life of a nuclear reactor about what the costs will be [Interruption.] It may help if I make a little progress. We missed the hon. Gentleman in CommitteeI know he would have aided our deliberationsand I am sure that I would have been able to persuade him that new nuclear has a role in a modern economy, whether it be in Scotland or elsewhere in the UK.
Paddy Tipping (Sherwood) (Lab): Will the Minister remind us whether the Bill applies to Scotland? Like him, I welcome the comments from the hon. Member for Angus (Mr. Weir), but my impression is that some political parties in Scotland say no to nuclear, which is not a sensible long-term policy.
Malcolm Wicks: That is also my understanding. Some in Scotland are saying no to nuclear, so the Bills provisions in respect of these issues do not, sadly, apply to Scotland. Let me make some progress.
The Government will set new-build operators a fixed unit price for the disposal of their intermediate level waste and spent fuel. That figure will contain a significant risk premium over and above the expected costs of disposing of intermediate level waste and spent fuel. The fixed unit price will be set by the Government on a case-by-case basis when a new-build operator comes forward to construct a new power station. The risk premium added to the fixed unit price
will reflect the level of uncertainty in the cost estimates of waste disposal at the time the agreement is entered into.
For example, the fixed unit price for waste disposal for a power station being constructed in five years time might well be different from the fixed unit price agreed for a power station being constructed in 10 years time. The difference arises because, over time, it is likely that understanding of the expected costs of the geological disposal facility and associated activities will increase. Therefore, at the time the agreement is entered into, the Government could be more comfortable attaching a different risk premium to the fixed unit price.
Dr. Stephen Ladyman (South Thanet) (Lab): That raises a question, does it not? We do not know how many people are going to come forward to build new nuclear power stations. If we make an estimate based on, say, five new stations being built, that will imply a certain share of the depository costs being divided five ways. If, in the end, 10 such stations are builtor the Scots come to their senses and allow some new nuclear build in Scotland so that more than the estimated number of stations are builtthe share of the repository costs later on will be lower than they were earlier on. Will there be any process to enable rebates to be given to those who made a more than fair share of the contribution because they came forward earlier?
Malcolm Wicks: Obviously, the time scales are important, and they are likely to be long. It is not possible to say exactly when the geological repository will be built and up and running, but it will be some time hence. When a proposal is made to build a new nuclear station, the more immediate taskI appreciate the difficultiesis to seek to estimate what would be a reasonable share of decommissioning and of the costs in the geological repository. Because of the uncertainties, we believe it important to go for the fixed price concept, but also to include the risk premium.
Steve Webb: I am grateful. The form of words used by the Department has always been the full cost of decommissioning and the full share of the costs of cleaning up the waste, but the concepts of full and share seem to be at odds with each other. Either it is a share, or it is the full amount. For the sake of clarity, would it be more precise to refer to the charge as for the full marginal costs?
When it comes to the cost of decommissioning the plant, it is relatively straightforward, although there are all sorts of technical ramifications, but we recognise that we have a duty to clear up our legacy of nuclear waste in any casehence, as the hon. Gentleman knows, the process to seek a volunteer community for the geological repository. We need a geological repository for the legacy anyway, but with new nuclear reactors, to put it in simple terms, extra space will be needed for new
nuclear waste. Our determination is to ensure that the market or the companies pay the full cost of that extra space.
Steve Webb: I am trying to distinguish between marginal and average costs. If extra waste is produced because I set up a new nuclear power plant, marginal costs will arise, but am I expected to meet only those marginal costs associated with the disposal of that extra waste or should I also make a contribution to the average fixed costs of the operation?
The risk premium should help ensure that the operator bears the risks associated with uncertainty in waste costs. We believe that it will provide the taxpayer with protection against the eventuality that the actual costs of geological disposal exceed the projected costs.
The fixed unit price and risk premium will provide new-build operators with clarity on the maximum amount they would be expected to pay the Government. That cost certainty will enable them to make investment decisions and seek financing for new-build. Should the actual costs of providing the waste disposal service prove lower than expected, those lower cost savings would not be passed on to nuclear operators. Instead, they would accrue to the Government because companies would have forgone any advantage in the form of lower costs in return for certainty in the price of waste disposal. Because the Government have taken on the risk, it is only right that they keep any upside that accrues.
In light of the debate in Committee on the fixed price for waste and the request for greater transparency, we decided to draft the new clause to set out clearly the Governments policy intentions on the issue. In essence, the new clause translates our existing stated policy on waste disposal set out in the nuclear White Paper and in the draft guidance on nuclear decommissioning programmes into the Bill. I am now happy to give way to my right hon. Friend.
Mr. Morley: I am grateful to my hon. Friend, who has already addressed some of the risk premium issues that I was contemplating. Will there be a ceiling on what nuclear investors will be expected to pay? Depending on cost overruns or unforeseen costs, which are very likely, they will presumably be charged up to the ceiling on the premium. Is my understanding correct?