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Energy Bill

I shall do my best to answer the two noble Lords who have asked questions, but I am sure they know that the principal aim behind these proposals is that the taxpayer should not suddenly find himself or herself faced with a considerable bill because the company involved, either through its own fault or not, has become insolvent. We were concerned, insolvency law being what it was, that unless it was set out clearly, there would be a danger that money in the fund itself could be seized or might legally belong to the creditors of that company. I hope that the general principle behind this clause is accepted; the noble Lord, Lord De Mauley, said that. The noble Lord asked why the Bill refers to insolvency. Is that not after the fact? The advice I have received is that funds are set up in advance so the necessary finances would be there. That would protect those finances; in the event of insolvency occurring at that stage, the funds would have been set aside beforehand. The noble Lord, Lord Teverson, asked what assets can be invested in. The Secretary of State would expect the funding arrangement plan to include something called a statement of investment principles, an SIP, which sets out the fund’s investment policy, designed to ensure that the money that the fund receives from the operator will be appropriately invested to generate the funds necessary to meet the operator’s liabilities when they fall due. As a minimum, before the Secretary of State would agree to a fund being set up, he would expect the SIP to include the fund’s investment objectives, the attitude to risk and how risk is defined, the asset allocation strategy, the decision-making authorities, performance measurement criteria, benchmarks, the policy on realising investments, the policy on exercising rights, the policy on the extent to which social, environmental and ethical considerations are taken into account, the mandates to all advisers and reporting requirements. Those, among others things, would be expected under statement of investment principles. Those are the circumstances under which we bring forward these amendments to deal with the situation, which may or may not arise, of a company going bust and creditors wanting to seize all possible assets. I shall need more advice on the international point raised by the noble Lord. It is an important question and I should welcome the opportunity to write to him and to other Members of the Committee with a response. As I understand it, we are setting up funds of this type for UK energy here, as opposed to elsewhere. The noble Lord made the point about globalisation very well, but whether or not the company has assets in other parts of the world, what is left in the fund is, as Clause 42 sets out, specifically for nuclear and other plants in this country. That money is protected from the danger of insolvency, thus, it is hoped, saving the taxpayer what could be a very large bill.