MPs pass nuclear financing bill

Government legislation to establish a new financing mechanism for nuclear power has been approved by MPs despite Labour warnings that safeguards should be created to ensure it does not become a “milch cow” for consumers.

The House of Commons voted overwhelmingly on Monday night (10 January) to back the legislation, which allows the Regulated Asset Base (RAB) model for financing infrastructure to be used to nuclear projects.

The RAB model is designed to cut loan costs by allowing developers to collect payments from bill payers while projects are still being built and has been used for large infrastructure projects such as the Thames Tideway super sewer.

MPs voted for the third and final reading of the Nuclear Energy (Financing) Bill by 458 to 53, with the main Labour opposition swinging behind the government.

However, shadow energy minister Dr Alan Whitehead put down an amendment to the legislation stating that there should be a cap on the sums customers are expected to pay for RAB-financed nuclear projects if costs over-run, resulting in additional calls.

Pointing to figures showing that 175 of 176 large nuclear projects across the world had gone “substantially over time and over budget”, he said: “We need to be very clear that we should not commit the general public to fund these proposals completely open-endedly.”

“Should there be a cost overrun or a time overrun, the secretary of state should seek an increase in the agreed revenue ceiling without further recourse to customer funds… They should not increase the ceiling for customers to pay exponentially at the same time,” he said, adding that the additional funds could be suppled through bonds or further state funding.

“Although RAB has been used for other projects, a RAB model of the size and scale needed for Sizewell C has never been attempted. We urge the government to be very careful about how they deploy the RAB model in terms of the customer interest, to not just regard customers as a milch cow for overruns or time delays in nuclear power for the future.”

However, the Labour amendment was defeated, with energy minister Greg Hands arguing that it would “nullify” the ability to set up flexible financing arrangements.

He said: “Given the size and importance of a new nuclear project, there must be a mechanism in place, with appropriate protections, to allow additional capital to be raised to ensure completion of a project where the financing cap is likely to be exceeded.

“We are making sure that we do not have to go down that course to carry out robust due diligence on the project in the first place, having learned from existing and current projects to set a robust estimate of project cost.”

The Commons also rejected a Labour move to provide for the establishment of a public company as a “backstop” to the special administration regime, which has most recently been used for the failed supplier Bulb, for nuclear projects that enter insolvency.

John Redwood MP, former Conservative minister and a backbench member of the Tory Net Zero Scrutiny Group, used the debate on the bill to criticise steps to increase the UK’s reliance on electricity supplied via interconnectors by neighbouring European countries.

“Linking us into the European system is not a secure thing to do, because those countries are chronically short of reliable green power. Poland and Germany are in the middle of trying to phase out coal and lignite.”