I hope that these regulations will be slightly less controversial than the previous ones. The noble Lord, Lord Paddick, looks sceptical.
In the summer, the Government moved quickly to introduce the Corporate Insolvency and Governance Act 2020—many Members here took part in those debates—which inserted new Part A1 into the Insolvency Act 1986, introducing a moratorium regime for companies in financial distress. The moratorium gives those financially distressed companies breathing space from their creditors to pursue a rescue or restructure. The company’s existing management remains in control during the moratorium period but a monitor is appointed to oversee the moratorium.
There was wide support in your Lordships’ House for the new moratorium provisions and the other measures in the Act to help financially distressed businesses, particularly at this time, and I thank noble Lords for that. The Government will be publishing statistics on the use of the new procedures of company moratoriums and restructuring plans later this month. The Corporate Insolvency and Governance Act also inserted Section A50 into the Insolvency Act 1986, which enables regulations to be made to modify the application of Part A1, the moratorium provisions, in relation to a company for which there is a special administration regime.
Similar to other sectors, there are special administration regimes in the energy sector. These cover companies that hold an electricity distribution or transmission licence or a gas transporter licence, a smart meter communication licensee and energy supply companies. The energy special administration powers exist to ensure that essential services, such as electricity and gas supply or the maintenance of distribution networks, continue and that customers continue to be served at the lowest reasonable cost. These powers can also be used to mitigate the risk of financial contagion and to maintain market stability and consumer confidence. This instrument will modify the application of Part A1, the moratorium provisions, in relation to these energy companies.
Therefore, if a relevant energy company enters or has applied to enter a moratorium, the Secretary of State and Ofgem will want to promptly consider whether there is any need to apply for a special administration order. Special administration has never been used in the energy sector and the Government’s assessment is
that it remains unlikely, but as a prudent Government we must ensure that we have the powers and processes in place to act swiftly to protect consumers and other market participants should that become necessary.
This instrument will ensure that the Secretary of State and Ofgem will be promptly notified of any moratorium or proposed moratorium for a relevant energy company so that an application for a special administration order can be considered. This will avoid any delay in making that decision and therefore reduce uncertainty for consumers and market participants.
This instrument does one other thing. A relevant energy company in a moratorium will continue to trade and operate as an entity licensed and regulated by Ofgem. Therefore this instrument will ensure that during the moratorium Ofgem can continue to engage in legal processes in relation to relevant energy companies, including to enforce licence obligations and revoke licences without first having to seek the court’s permission, as it would have to where a company was not in a moratorium. This will avoid any delay in Ofgem acting to protect the interests of consumers.
These regulations build on the moratorium provisions in the 2020 Act to ensure that those provisions work effectively alongside the special administration powers for energy supply, energy networks and smart metering, and that the Government and the regulator, Ofgem, are able to take all necessary action to protect the interests of consumers. The regulations, unlike the previous ones, are a short, simple and proportionate step to align the moratorium provision with the need to protect the interests of energy consumers and other market participants. I beg to move.
12.38 pm