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House of Commons

Monday 18 December 1989

The House met at half-past Two o'clock


[ Mr. Speaker-- in the Chair ]


Birmingham City Council (Miscellaneous Provisions) Bill


Read a Second time, and committed.

Oral Answers to Questions


Electricity Privatisation

1. Mr. Thurnham : To ask the Secretary of State for Energy what estimate he has made of the likely impact of privatisation on electricity prices ; and if he will make a statement.

The Secretary of State for Energy (Mr. John Wakeham) : Competition in electricity generation and supply, combined with price control where monopolies remain, will put downward pressure on prices to the benefit of the consumer.

Mr. Thurnham : Will my right hon. Friend do his utmost to see that the undoubted efficiencies arising from privatisation are passed on in the form of reduced costs and to ensure that any additional future costs arising from nuclear decommissioning are not passed on as extra costs?

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Mr. Wakeham : The regulatory regime will provide for benefits to be passed on to consumers. On nuclear energy, as in the past, electricity customers will continue to pay the best estimate of the cost of the decommissioning when they purchase electricity. We have taken powers to contribute to these costs should they subsequently increase.

Mr. Alan W. Williams : With regard to the impact of privatisation on electricity prices, does the Minister understand the sense of moral outrage that there will be throughout the country at today's announcement that Lord Marshall is to receive a golden handshake of £250,000? Does the Minister agree that because of his record of advice on nuclear power and the dishonest costing of nuclear electricity, Lord Marshall's decisions and advice have cost us billions of pounds? Would it not be a suitable epitaph for Lord Marshall if the Minister had the courage to cancel the last of the pressurised water reactors and scrap Sizewell B?

Mr. Wakeham : The Government have made clear their intentions on Sizewell B. We wish to see the completion of that project. As several hon. Members know, I have today received and accepted Lord Marshall's resignation as chairman of the Central Electricity Generating Board. Lord Marshall feels that in the light of my recent decisions on nuclear power he is unable to continue as chairman of the CEGB and as chairman-designate of National Power. In accepting Lord Marshall's resignation, I pay tribute to his long and distinguished career in publc service and to his stewardship of the CEGB during the past seven years.

Dr. Michael Clark : Is my right hon. Friend aware that the low cost prices given by the CEGB in the past for nuclear electricity have now been largely discredited? In the light of that, is my right hon. Friend inclined to believe the new high cost prices for nuclear electricity that have been given in different circumstances--with the CEGB being responsible for privatised nuclear electricity--or does he think that they, too, should be treated with a pinch of salt?

Mr. Wakeham : As my hon. Friend is aware, because he studies these things closely, the indicative prices that we

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received from National Power reflected the City's perception of the financing of nuclear power. That perception made the indicative prices so high that they were unacceptable the Government. The future prices of nuclear power are at present being discussed with the Nuclear Electric company. I have no doubt that satisfactory arrangements will be made.

Mr. Barron : What exactly does the Secretary of State mean by "downward pressure on prices"? He knows that the major fuel source of electricity is British Coal and that for the past three years there has been a real reduction in the cost of that coal, with a saving in the current financial year of £850 million on the contract. However, at the same time, by Government diktat during the past two years, there has been an increase in electricity prices of 15 per cent. Given that the new contract with the generator will continue to have the benefit of that cost reduction from British Coal, which will accumulate in the third year to a saving of about £450 million, why will not the Secretary of State tell the House and consumers that electricity prices will go down as a consequence of those massive savings?

Mr. Wakeham : I certainly join the hon. Gentleman in paying tribute to the efforts of British Coal and its work force to stabilise the price of coal in recent years and its continued determination to do so. What I mean by downward pressure on prices is that competition in generation, which is responsible for 75 per cent. of all electricity costs, will be a force for reducing prices.

Gas Industry (Competition)

3. Mr. Cran : To ask the Secretary of State for Energy what representations have been received about opening up competition in the gas industry.

Mr. Wakeham : I have received a number of representations about competition in the gas industry.

Mr. Cran : Does my right hon. Friend agree that competition is beginning to develop in the gas supply industry, as evidenced by the formation of Quadrant Gas by Shell and Esso which will undoubtedly bring price and other benefits to consumers? Against that background, how does he foresee competition developing along the lines envisaged in the Gas Act 1986?

Mr. Wakeham : Like my hon. Friend, I am delighted that new companies are beginning to compete in the market place. They include not only Quadrant Gas but Associated Gas Supplies and Kinetica Ltd. There are good prospects for producers wishing to sell gas directly to the industrial market. The Government's decision that 10 per cent. of all new gas supplies should be sold to customers other than British Gas is promoting competition. As my hon. Friend knows, the power generation sector offers a significant prospect for the early development of competition in the gas market.

Dr. Kim Howells : Does the Secretary of State agree that an uncontrolled expansion of gas burning for power generation could result in an even greater escape of methane into the atmosphere than occurs at present, and that the escape of methane is an important, if not the most important, contributor to the greenhouse effect?

Mr. Wakeham : The hon. Gentleman's latter statement is wrong. CO emissions are by far the biggest contributor

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to the greenhouse effect. However, he is right to make that point. No form of energy generation is without its risks and problems, but gas has substantial advantages over several of its competitors.

Sir Trevor Skeet : Does my right hon. Friend agree that the best way to facilitate competition in the gas industry is to open a trunk pipeline to Europe? Will he do everything possible to bring that about?

Mr. Wakeham : At present there is no great demand for that, but there is a considerable improvement in the competitive environment for gas. I should like to see how that develops before taking further steps.

Mr. Morgan : Does the Secretary of State accept that, contrary to his response to my hon. Friend the Member for Pontypridd (Dr. Howells), the latest estimates in the current issue of Nature are that the escape of methane into the atmosphere contributes as much as the burning of fossil fuels in power stations to the greenhouse effect?

Before the right hon. Gentleman authorises any gas burning in electricity generation, should he not get together with the 12 area boards forming the non-fossil purchasing agency, which has just missed the 1 December deadline for 1990? Before he allows the new players in gas to sell gas for electricity generation he should first make sure that the gas board has made its pipelines as gas-tight as they can be, instead of leaking 2 or 3 per cent. of the gas into the atmosphere. Secondly, he should get together with the waste disposal authorities to ensure that landfill gas is used first for conversion into electricity through small turbines. That would make a major contribution to resolving the greenhouse gas problem.

Mr. Wakeham : The hon. Gentleman asked several questions, and I am not sure that I accept most of what he said. He asked me to confirm what the hon. Member for Pontypridd (Dr. Howells) said about methane, but he did not repeat what his hon. Friend had said in his question. I stand by what I said.

The full effects of all the different forms of gas emissions are not fully known and that is why the Government are encouraging the panel that is considering those matters. That is why we recently submitted evidence to it, which is available in the Library if the hon. Gentleman wants to see it.

Mr. Butler : Since privatisation, has the price of gas fallen or risen, and is that any evidence of increased competitiveness?

Mr. Wakeham : As my hon. Friend is wise enough to know the answer to his question before he asks it, I confirm that the price of gas has fallen.

Electricity Privatisation

4. Mr. Douglas : To ask the Secretary of State for Energy if he will make a statement on the implication for coal burn from Scottish mines of the Government's decision to exclude nuclear power stations from their privatisation proposals.

The Parliamentary Under-Secretary of State for Energy (Mr. Michael Spicer) : That will depend on commercial decisions to be taken by thSouth of Scotland electricity board.

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Mr. Douglas : Will the Minister be a little more forthcoming about what is happening to coal burn? We now have only one effective Scottish pit and its future depends on securing its outlet to the Longannet power station. Will the hon. Gentleman confirm that an agreement will be concluded soon between the SSEB, or what remains of it, and British Coal to ensure the continued employment of at least one deep mine coal complex in Scotland?

Mr. Spicer : The hon. Gentleman is right that there is a great deal of competition to coal in Scotland. That competition comes not only from nuclear power, to which his question is addressed, but from gas ; and the competition from gas will increase.

Recently £70 million has been invested in Longannet. I visited the pit fairly recently and morale is growing, with some reason : the pit is attaining record output per man shift and hitting good seams of coal. There is everything to play for at Longannet. Scotland has a rich diversity of fuel sources and the coal industry must compete against them.

Mr. Eadie : Will the Minister reflect on that answer? He must be well aware that in Scotland we are currently locked in a legal battle in the courts over precisely what the coal burn should be. My hon. Friend the Member for Dunfermline, West (Mr. Douglas) spoke about Longannet, but I have a constituency interest in Monkton Hall colliery. That colliery is mothballed and whether it will be resuscitated depends on the coal burn and on the outcome of the present legal wrangles. Will the Minister be a bit more positive instead of standing back and saying that it is a matter of commercial decisions reached by the people involved? He should say that he will do his best to see that the legal wrangles are resolved so that we know what the coal burn will be in Scotland.

Mr. Spicer : If I followed the hon. Gentleman's advice to see that the legal wrangles were sorted out, he would accuse me of interfering in the courts. The courts are currently sitting and I understand that they will pronounce on the matter soon. We must await their decision. I am sure that the hon. Gentleman would not want me to intervene in the affairs of the courts. If I did he could accuse me of intervening in the judiciary.

United Kingdom Offshore Operators Association

5. Mr. Ernie Ross : To ask the Secretary of State for Energy when he last met the representative of the United Kingdom Offshore Operators Association ; and what matters were discussed.

The Minister of State, Department of Energy (Mr. Peter Morrison) : My right hon. Friend the Secretary of State last met representatives of the United Kingdom Offshore Operators Associations on 8 November, when a number of North sea issues were raised.

Mr. Ross : Before the Minister next meets the United Kingdom Offshore Operators Association, will he take time to study the evidence given by the Manufacturing Science and Finance union to Lord Cullen's inquiry on Thursday? That evidence identified that at least one offshore operator--Philips in the Hewett field--had agreed with the union to apply offshore the health and safety regulations that apply onshore. Because of the operators' determination to apply those conditions

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offshore, employees' confidence in the system has increased. When the Minister next meets representatives of UKOOA, will he press the example of Philips on other United Kingdom offshore operators?

Mr. Morrison : I assure the hon. Gentleman that I listen carefully to any evidence relating to safety in the North sea, and MSF and put forward many recommendations. As he will be aware, Lord Cullen is still carefully considering much of he evidence and we await his report, which will be produced some time next year. We shall then look closely at the recommendations.

Mr. Doran : In his discussions with the United Kingdom Offshore Operators Association, has the matter of steel supplies for gas pipelines arisen? Is the Minister aware that because British Steel's refusal to invest in the plant necessary to produce the quality steel required by the industry, millions of pounds worth of orders are going abroad? Japan is the only country that makes the quality of steel necessary. Will the Minister discuss with UKOOA efforts to encourage British Steel and others? It is not within his ministerial responsibilities, but I know the efforts that his office has made to encourage investment and expenditure in the United Kingdom. Will he take responsibility for this problem and see what can be done about it?

Mr. Morrison : The hon. Gentleman is right ; conversations certainly take place between the operators and British Steel about the possibility of obtaining more steel from British Steel. As he is probably aware, Sir Robert Scholey, the chairman of British Steel, is a member of the oil industry advisory board which discusses such matters and was present at the most recent meeting.

Nuclear Industry (Investment)

6. Mr. Campbell-Savours : To ask the Secretary of State for Energy what his proposals are for the future of the nuclear industry investment programme.

Mr. Wakeham : The first priority is the successful completion of current programmes, including Sizewell B and the major projects at Sellafield. The question of Nuclear Electric building new nuclear stations will be considered in 1994.

Mr. Campbell-Savours : Does the Secretary of State accept that the row over the privatisation of nuclear power has done more harm to the industry than even the Windscale fire of 1957? With the industry under attack on all sides from greens, the coal lobby, the European Parliament, the Irish Dail and a number of nations throughout the world, is it not about time that he made some far more reassuring noises about future investment in these stations?

Mr. Wakeham : The Government have made it clear that we have not abandoned nuclear power. We recognise its strategic value in diversity, security of supply and the reduction of fossil fuel emissions. As I said, Sizewell B will be completed to maintain the PWR option. The prospects for nuclear power will be reviewed in 1994. I hope that during the intervening period we can look at some of the costings of nuclear power to see whether we can reduce them.

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Mr Wigley : Is the Secretary of State aware of the considerable dismay in the Welsh counties that faced the prospect of PWR stations at the Government's reluctance to give any compensation towards the costs that they incurred in preparing their cases against those PWR stations, which are now not being built? Will the Secretary of State reconsider the matter to see whether those local authorities can be properly compensated?

Mr. Wakeham : In such circumstances it is not normal for the Government to compensate people for, rightly, seeking representation and incurring expense while presenting their case. I should have thought that people to whom the hon. Gentleman referred would be well satisfied with the outcome ; I cannot say that I was, but I had to live with those circumstances.

Mr. Hannam : Is my right hon. Friend aware that some European countries have successful private sector nuclear power stations? Is there anything to stop that happening in this country if nuclear power becomes competitive again?

Mr. Wakeham : Absolutely nothing. What I said about reviewing the option in 1994 related to Nuclear Electric, which will be a state-owned successor company to the CEGB. That company's prospects will be reviewed again in 1994, but it is perfectly open for anybody who so wishes to make the necessary planning applications if they believe that to be a sensible course of action.

Mr. Rost : Before Lord Marshall is made a scapegoat for the nuclear fiasco, will my right hon. Friend acknowledge that if his advice to build PWRs had been taken 10 years before it finally was, we should probably have a family of them now producing economic electricity?

Mr. Wakeham : I certainly do not intend Lord Marshall to be made a scapegoat for anything. He is a distinguished public servant who served Governments of all types ; but, as someone more significant than I has said, "Advisers advise, and Ministers decide."

Mr. Skinner : Is it not a scandal that over the past two or three decades this Government and successive Governments have been kidding the people that nuclear power is cheap, efficient and safe--and cheaper than coal? Now the truth has been blurted out : it is two or three times dearer than coal and other forms of energy. Is it not also disreputable that the Government, who have been conning the British people, should hand over £250,000 to Lord Marshall and accuse him of being a scapegoat? I know a lot of poor people in my constituency who would be happy to be called a scapegoat and handed £250,000.

Mr. Wakeham : I understand that the hon. Gentleman must have been pondering his question while I was answering my hon. Friend the Member for Erewash (Mr. Rost) a moment ago, when I said that I did not want anyone to treat Lord Marshall as a scapegoat. I paid him a well-deserved tribute and said that he was a distinguished public servant.

The hon. Gentleman, who takes an interest in some parts of these matters, would be well advised to read carefully some of the evidence given--modesty forbids me to disclose who gave it--to the Select Committee on Energy last week. It was pointed out there that many economic factors in the various forms of energy generation

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have changed. Oil, gas and coal are much cheaper relative to nuclear power than they were. The hon. Gentleman will be wiser when he has read that evidence.


7. Mr. Jack : To ask the Secretary of State for Energy what matters he has discussed with British Nuclear Fuels plc since his recent announcement on the future for nuclear power.

Mr. Wakeham : I met Mr. Harding on 16 November when we discussed a range of matters concerning the company.

Mr. Jack : The answer that my right hon. Friend gave to an earlier question on the future of the nuclear industry will be warmly welcomed by my constituents who work at BNFL's plant at Springfields and who have striven hard to improve their productivity. Can he assure me that in future negotiations with the Nuclear Electric company over the price of nuclear fuel there will be no return to cost-plus negotiating and the consequent loss of the benefits of competitive tendering in this area?

Mr. Wakeham : Those are commercial matters for BNFL and the Nuclear Electric company, but I very much share my hon. Friend's view that cost- plus contracts are not the best way forward, and I hope that proper contracts will be negotiated. I have been particularly impressed by BNFL's progress. In 1988-89 Springfields increased its exports by 25 per cent. and contributed to BNFL's record exports of £169 million.

Mr. John Evans : Has the Secretary of State discussed with BNFL or anyone else the fears of a growing number of nuclear engineers and scientists about the inherent dangers of a PWR pressure vessel collapse? Is he aware that an increasing number of our nuclear engineers are so worried about the risks involved that they believe that Sizewell B and the whole PWR programme should be abandoned?

Mr. Wakeham : That sounds like a partial account of the position. I have had no discussions with anyone on that subject. Safety is the paramount consideration at all times in the operation of nuclear power. That will continue to be so in the future, and we have an outstandingly good record.

Combined Heat and Power

8. Mr. Vaz : To ask the Secretary of State for Energy if he will make a statement on plans to expand combined heat and power schemes.

Mr. Peter Morrison : I will continue to encourage wherever possible interest in combined heat and power. Ultimately, decisions are for the private sector.

Mr. Vaz : Will the Minister join me in congratulating Leicester city council and Leicester Energy Ltd. on the pioneering work that they have carried out with combined heat and power? The right hon. Gentleman is aware of the problems that have affected that scheme and will recall the meeting that took place in his office when he was kind enough to show us his collection of clockwork teddy bears. Will he join me in wishing the forthcoming new talks well and hoping for a happy conclusion? Will he give an

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undertaking that if the talks do not succeed his Department will do all that it can to save this environmentally safe and cost-cutting scheme?

Mr. Morrison : As the hon. Gentleman reminds the House, I was delighted to be able to see him and some of his colleagues from Leicester at the beginning of the summer recess. I hope that I left him with the impression that nobody would have been happier than I if the scheme as it then was could have gone ahead. As he knows, ultimately the negotiations between the East Midlands electricity board and Leicester Energy Ltd. did not come to fruition. If further options come forward I shall certainly do what I can to facilitate them. However, in all fairness to the hon. Gentleman I must make it quite clear that there is no question of any subsidy from the taxpayer.

Mr. Rost : Should not my right hon. Friend accept, however, that if two thirds of the energy that is presently thrown out of power stations in cooling water were used for district heating in cities, it would not only save huge amounts of fossil fuel but would be environmentally beneficial? Should he not therefore consider giving combined heat and power the same sort of support that he is giving high-cost electricity from nuclear and from renewable sources?

Mr. Morrison : In the main I certainly accept the principle of what my hon. Friend says. I know that he has been a strong supporter of combined heat and power for a long time. Ultimately, the matter comes down to commercial factors. As my hon. Friend may know, in one other city, Nottingham, there is a small district heating scheme. I hope that that example can be repeated on a larger scale in other cities. As he also knows, apart from that scheme there are many combined heat and power examples in other parts of the country. In industry there are 120 and in buildings there are about 300. Therefore, I think that the idea is catching on very well.

Mr. Dobson : Does the Minister agree that the best thing he could do to encourage combined heat and power schemes would be to follow the example of the Secretary of State for Energy and simply announce that the electricity boards would have to allow combined heat and power stations to be base load stations, in the same way as he has announced for nuclear power stations? If that were done, the economics of combined heat and power stations would be immediately transformed and they could produce the cheapest electricity in the system.

Mr. Morrison : The hon. Gentleman puts forward an alluring and very attractive idea which would make a simple solution. However, he will understand that if I agreed with him here and now, I and my right hon. Friend the Secretary of State might find ourselves in great difficulties and my ministerial career would be quickly at an end.

Community Insulation Programme

9. Mr. Fearn : To ask the Secretary of State for Energy if he will make a statement about the community insulation programme.

24. Mr. David Martin : To ask the Secretary of State for Energy what action is being taken to assist low-income households with home insulation.

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Mr. Peter Morrison : My right hon. Friend announced recently his intention to take powers for a proposed new scheme of insulation grants for low-incomes households.

Mr. Fearn : Is the Minister aware that expenditure on loft insulation and pipe insulation has fallen from £32.6 million to £9.6 million this year? Is he also aware that as a result of Government cuts resources have fallen by 15 to 20 per cent? In view of that, how can he uphold the Government's intention stated in 1983 that Britain would become the most efficient energy-saving nation in Europe by 1990? With only three weeks to go, how can he manage that?

Mr. Morrison : With regard to the hon. Gentleman's first point, the decrease has come about in part because people are not moving house at the rate that they were a year ago. In terms of general efficiency measures, if the hon. Gentleman examines the facts he will realise that the efforts of the Energy Efficiency Office over the years have been very successful. I agree with the hon. Gentleman that there are still significant gains to be made. The nation still spends about £40 billion per year on energy. The current estimate is that we could save up to 20 per cent. of that, which would amount to some £8,000 million. I agree with the general drive of what the hon. Gentleman said.

Mr. Campbell-Savours : On a point of order, Mr. Speaker. Will you disallow question No. 24 for oral answer?

Mr. Speaker : No. For many years it has been the practice that questions up to No. 25 can be linked.

Mr. David Martin : Will my right hon. Friend confirm that the new scheme to be introduced will improve access for low-income households, along the lines of the scheme under which 700,000 have been assisted since 1982?

Mr. Morrison : As my hon. Friend said, some 700,000 low-income households have benefited from the old scheme. I expect that when we have worked out the details of the new scheme, considerable numbers--an increase on the present level--will benefit from that scheme as well.

Electricity Privatisation

11. Mr. John P. Smith : To ask the Secretary of State for Energy when he expects to announce the new terms and conditions of the obligation to supply subsequent to vesting day under the Electricity Act 1989.

Mr. Wakeham : Obligations to supply electricity will rest with those authorised to supply by licence or exemption under sections 5 and 6 of the Electricity Act 1989.

Mr. Smith : I thank the Minister for that interesting reply, but is it not the case that under the present model of privatisation, which is not the model passed by the House, Britain stands to become the only advanced industrialised country which does not protect the supply of electricity to the consumer? Does this not show utter contempt for British consumers and prove that privatisation is not a means to an end but a discredited end in itself?

Mr. Wakeham : The hon. Gentleman has misunderstood the position. The area boards will continue to have an obligation to offer terms for a supply. Every customer will be able to find a supplier, and regulations

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will continue to prescribe the quality and safety of supplies. Licence conditions on all suppliers will ensure current standards of security.

British Gas

12. Dr. Moonie : To ask the Secretary of State for Energy when he last met the chairman of British Gas ; and what matters were discussed.

Mr. Peter Morrison : My right hon. Friend and I met the chairman of British Gas last month when we discussed a range of issues of mutual interest.

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