Nuclear Energy (Financing) Act 2022

Part 3: Special Administration Regime

Section 31: Relevant licensee nuclear company administration orders

178. This section defines the key terms of this Part and clarifies the scope of a relevant licensee nuclear company (RLNC) administration order.
179. Subsection (1) defines a RLNC administration order for the purposes of this Part.
180. Subsection (2) provides that the person, or persons appointed by the court for purpose of managing the company’s affairs, business and property, and the exercise of the functions set out in section 32, is the ‘nuclear administrator’ in this Part.
181. Subsection (3) provides that the obligation of the nuclear administrator of the company to manage its affairs and act in a way that aims to achieve the objectives in section 31.
182. Subsection (4) provides that the definitions for "relevant licence" and "relevant licensee nuclear company" are the same as those in Part 1 of the Act.

Section 32: Objective of a relevant licensee nuclear company administration

183. This section provides the objective for a RLNC administration order and the means by which the nuclear administrator has to achieve this objective.
184. Subsection (1) provides the objective of the nuclear administrator. This is to commence or continue electricity generation at the nuclear installation until it becomes unnecessary, by virtue of the relevant licensee nuclear company being rescued as a going concern or a transfer of that company’s assets to one or more companies in a manner which achieves the objective, for the order to remain in force.
185. To achieve the objective in subsection (1), the nuclear administrator will be required to ensure that the relevant nuclear licensee company continues to fulfil all of its responsibilities, including compliance with legislation, regulations and any conditions of a nuclear site licence held, including protections related to safety, security and the environment. The nuclear industry is subject to a robust regulatory regime which is overseen by the Office for Nuclear Regulation and Environment Agency (or Natural Resources Wales if in Wales, or Scottish Environment Protection Agency if in Scotland) which is unaffected by Part 3 of the Act. Failure to comply with any regulatory or legal provision, including safety, security and environmental provisions may result in enforcement action, this could lead to the plant being shut down and the objective of the RLNC administration order not being met. In those circumstances, the Secretary of State, or the Authority or the nuclear administrator, with the Secretary of State's permission, may wish to apply to end the RLNC administration order. If the rescue of the company, or the transfer of its business cannot be achieved during a RLNC administration order, the Secretary of State may consider preparing a Nuclear Transfer Scheme after the end of the order.
186. Subsection (2) outlines the means by which the administrator can achieve the objective of a RLNC administration order. This can be done through rescuing the company as a going concern or transferring its assets, rights and obligations to one or more companies.
187. Subsection (3) provides that a transfer falls within subsection (2) if the transfer of the relevant licensee nuclear company’s business as a going concern is made to one company, or different parts of the relevant licensee nuclear company’s business is transferred to two or more companies as it is appropriate to achieve the objective in subsection (1). Subsection (4) provides one example of how such transfers may take place.
188. Subsection (5) provides situations where a transfer scheme, rather than the recusing of the company as a going concern, may be used to achieve the objectives of the administrator. This includes where the rescue as a going concern is not practicable, or will not achieve the objectives, and where the transfer scheme would produce a better result for either the company’s creditors or members. The effect of subsection (5) is that the rescue of the relevant licensee nuclear company is preferred to transfers to one or more companies.
189. Subsection (6) provides that "nuclear installation" has the same meaning as in the Nuclear Installations Act 1965.

Section 33: Application of certain provisions of the Energy Act 2004

190. This section through subsection (1) to (7) applies and modifies as necessary sections 156 to 167, 171 and 196 of, and Schedules 20 and 21 to, the Energy Act 2004 to apply those provisions to the SAR for relevant licensee nuclear companies. Those provisions will apply as follows in relation to Part 3 of this Act:
     1. Section 156 of the Energy Act 2004, which provides that an application to the court for a RLNC administration order can only be made by the Secretary of State or by the Authority, with the consent of the Secretary of State;
     2. Section 157 of the Energy Act 2004, which empowers the court to consider an application for a RLNC administration order. The court may make an order in the following circumstances:
        1. The relevant licensee nuclear company is unable to pay its debts;
        2. The relevant licensee nuclear company is likely to be unable to pay its debts; or
        3. on petition from the Secretary of State under section 124A of the Insolvency Act 1986, the court is satisfied that it would be just and equitable (disregarding the objective in section 31(1)) to wind up the company in the public interest;
     3. Section 158 which provides that the nuclear administrator acts as the agent of the relevant licensee nuclear company. It further provides that the nuclear administrator must exercise management functions for the purpose of achieving the objective of RLNC administration as quickly and efficiently as is reasonably practicable. Moreover, the exercise of powers and performance of duties must be carried out in a manner which, in so far as it is consistent with the objective of the RLNC administration, best protects the interests of the creditors of the company as a whole and, subject to those interests, the interests of the members of the company as a whole;
     4. Section 159 which applies the rule making power in section 411 of the Insolvency Act 1986 (c.45). Schedule 20 provides for certain provisions, with modifications, of Schedule B1 to the Insolvency Act 1986 (covering detailed rules relating to administration) to have effect in relation to RLNC administration orders;
     5. the Sections 160 to 164, which prevent the SAR being frustrated by the granting of prior orders before the Secretary of State or the Authority have been given an opportunity to apply for an RLNC administration order;
     6. Section 165 which enables the Secretary of State, with the consent of the Treasury, to give a grant or loan to a company in RLNC administration to achieve the objective of administration. It also enables the Secretary of State to set the terms of a grant or loan including the requirement that all or part of a grant should be repaid;
     7. Section 166 which enables the Secretary of State, with the consent of the Treasury, to indemnify persons in respect of liabilities incurred or loss or damage sustained in connection with the exercise of a nuclear administrator’s powers and duties and requires the Secretary of State to lay a statement of any such agreement to indemnify persons before Parliament as soon as practicable;
     8. Section 167 which enables the Secretary of State, with the consent of the Treasury, to provide guarantees in relation to a relevant licensee nuclear company in RLNC administration and requires the Secretary of State to lay a statement of any guarantees given before Parliament as soon as practicable;
     9. Section 171 which provides interpretations of various specific terms and Section 196 which provides interpretations of various general terms.
     10. Schedule 20 provides for certain provisions, with modifications, of Schedule B1 to the Insolvency Act 1986 (covering detailed rules relating to administration) to have effect in relation to RLNC administration. This includes the court ending a RLNC administration order on the application of the Secretary of State (or the Authority or the nuclear administrator, with the Secretary of State’s permission). This may happen in circumstances where the objective of the order has been achieved, or where the objective has not been achieved and a Nuclear Transfer Scheme may need to follow;
     11. Schedule 21, which provides for the transfers to another company or companies as a going concern of the whole or part of a relevant licensee nuclear company’s assets to ensure that the objective of the RLNC administration is met. Such transfer schemes are to be made by the nuclear administrator with the approval of the Secretary of State, and at a time appointed by the court.

Section 34: Conduct of administration, transfer schemes, etc

191. This section amends section 159(3) of the Energy Act 2004 to include the Nuclear Energy (Financing) Act 2022 in the list of provisions which give the Secretary of State the power to make insolvency rules under section 411 of the Insolvency Act 1986 in relation to the Act.

Section 35: Licence modifications: relevant licensee nuclear company administration

192. This section provides a power to the Secretary of State to make modifications to the conditions and terms of the relevant licensee nuclear company’s electricity licence for the purpose of furthering the objective of the licensee nuclear company administration and may only be exercised when an RLNC administration order is in force.
193. Subsection (1) gives the Secretary of State the power to modify the conditions and terms of the relevant licensee nuclear company’s electricity licence.
194. Subsection (2) clarifies that these modifications may only be made when a licensed nuclear company administration order is in force and for the purpose of furthering the objective of the RLNC administration provided for in section 32(1).
195. Subsection (3) requires the Secretary of State to have regard to certain matters before exercising the power in subsection (1). These considerations are:
     1. the duties of the Secretary of State under sections 1 and 4(1)(b) of the Climate Change Act 2008 in relation to ‘Net Zero’ and meeting carbon budgets;
     2. the interests of existing and future consumers, including their interests in relation to cost and security of supply of electricity;
     3. the costs, expenditure or liabilities that the relevant licensee nuclear company may reasonably be expected to incur;
     4. the need for the company to be able to finance its activities;
     5. the need to ensure that the company has appropriate incentives to carry out its activities; and
     6. any other matters the Secretary of State feels are appropriate.
196. Subsection (4) provides examples of the type of modifications that could be made in section 1. This includes the calculation of the allowed revenue, the relevant licensee nuclear company providing assistance and information to the Authority and raising funds for the purposes of meeting the expenses of the RLNC administration order. These examples are illustrative and so this provision does not restrict the scope of this power.
197. Subsection (5) confers a power to the Secretary of State to modify the standard conditions of electricity generation licence (and associated documentation). Subsection (6) provides that the Secretary of State can only make these modifications if it is appropriate to do so in consequence of, or for purposes incidental or supplementary to, the making of a modification under subsection (1).
198. Subsection (7) provides the scope for what is meant by activities of a relevant licensee nuclear company in this Section.

Section 36: Procedures etc relating to modifications under section 35

199. This section sets out the procedure the Secretary of State must follow when exercising the power in section 35 of the Act.
200. Subsection (1) requires the Secretary of State to consult the named persons when exercising the powers under section 35, including the nuclear administrator in that role and as agent of the relevant licensee nuclear company, as well any other persons considered appropriate.
201. Subsection (2) provides the definition for "relevant site" in subsection (1) refers to the site for which the relevant licensee nuclear company holds a relevant licence (see the definition of relevant licence in Part 1 of the Act).
202. Subsection (3) provides the scope of the modification power which Secretary of State may exercise during a RLNC administration order. This includes generally in relation to specified cases or subject to exceptions providing specified conditions are satisfied. The modification power may be exercised for different purposes and allows the Secretary of State to make incidental, supplementary, consequential or transitional modifications.
203. Subsection (4) enables provisions included in a licence or associated document or agreement (such as an industry code) by a modification under these powers to make different provision for different purposes. It also makes clear that any provision included in a licence by such a modification need not relate to the activities that the licence authorises. Subsection (4)(c) clarifies that a provision included in a licence by virtue of a relevant power may also do anything which is authorised for licences of that type by sections 7(4), (5)(a) or (6A) of the Electricity Act 1989.
204. Subsection (5) places an obligation on the Secretary of State to publish the details of the modification as soon as reasonably practicable after they are made. Subsection (6) allows the Secretary of State to exclude certain pieces of information from anything required to be published under subsection (5), where these are commercially sensitive or should be excluded on national security grounds.
205. Subsection (7) provides that if the Secretary of State modifies the standard conditions of a licence under section 6(1)(a) of the Electricity Act 1989, the Authority must make the same modification to all licences under section 6(1)(a) of the Electricity Act 1989 granted after that point in time and are obliged to publish the modification.
206. Subsection (8) provides that a modification made by the Secretary of State to a standard condition does not prevent other parts of the condition from continuing to be considered a standard condition pursuant to Part 1 of the Electricity Act 1989.

Section 37: Modification under the Enterprise Act 2002

207. This section provides that the power to modify or apply certain enactments.
208. Subsections (1) and (2) of this section provide that the power to modify or apply enactments conferred on the Secretary of State by the Enterprise Act 2002 includes a power to make consequential modifications to Part 3 of this Act and to Chapter 3 of Part 3 of the Energy Act 2004, where the Secretary of State considers this appropriate. This power is designed to ensure that the current provisions do not get out of line with wider insolvency legislation where the Enterprise Act 2002 provisions are used to modify or apply enactments.

Section 38: Power to make further modifications of insolvency legislation

209. This section provides the Secretary of State with the power to apply enactments and modify make other alterations to existing insolvency legislation, including Part 3 of this Act. The power is designed to enable the Secretary of State to amend the detail of the regime if experience of its application highlights any difficulties or areas of concern or respond to changes in insolvency law, especially in relation to administration.
210. Subsection (1) grants the Secretary of State a power to provide for insolvency legislation to apply and to make such modifications of insolvency legislation (including any applied by virtue of section 37(1)) as they consider appropriate in relation to any provision made by or under the sections in Part 3 of the Act.
211. Subsection (2) provides that ‘insolvency legislation’ includes, the Insolvency Act 1986, and Chapter 3 of Part 3 of the Energy Act 2004, which are applied by section 33 of the Act, and any other provisions that relates to insolvency or makes provisions by reference to anything that may be done under the Insolvency Act 1986.
212. Subsection (3) provides that the power conferred on the Secretary of State by subsection (1) includes the power to amend Part 3 of this Act.
213. Subsections (4) and (5) provide that this power is exercised by statutory instrument which is subject to the affirmative resolution procedure.

Section 39: Interpretation of Part 3

214. This section defines the relevant terms for this part.