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Mr. Geoffrey Lofthouse (Pontefract and Castleford) : My hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) referred to the fact that the Government are buying advice from 47 companies. If the Government were sincere in their beliefs about the work and the worth of the Energy Select Committee and other Select Committees, there would have been no need for them to spend that sort of money. I thought that I saw four members of the Select Committee here today. That pleased me, although I think that the Chairman has now left the Chamber, as has the hon. Member for Erewash (Mr. Rost). All four were party to the Energy Select Committee's third report of 6 July 1988. I may be wrong about the hon. Member for Cambridgeshire, North -East (Mr. Moss), but I think they all were a party to it.
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The Government never wanted that report to be published. Hon. Members may recollect that, on one particular morning, the Select Committee was to discuss the possibility of taking evidence and producing such a report, and because of pressure from the Whips, Conservative Members were supposed to object to such an investigation. Unfortunately, for some reason, some Conservative Members failed to turn up to the Committee, and the Opposition Members--we do not usually split on political lines--were then in the majority. That is why that report saw the light of day.That was an excellent report, in which the Committee advised the Government --who were hell-bent on shoving forward their privatisation programme, and had produced a White Paper with very little consultation on electricity privatisation--that they were in danger of producing spatchcock legislation [Interruption.] The Committee suggested that the Government might be well advised to defer the implementaton of the legislation until they had had sufficient time to consider it.
The hon. Member for Cambridgeshire, North-East wanted to know what spatchcock legislation means. I am prepared for that one. I have been asked that question many times, and I have failed to answer it, but now I have found the answer. I understand that a spatchcock is a cock bird, a bird unplucked or unhung, and not ready for cooking. I think that that explains the word, and the motives behind the Select Committee's decision. The Committee saw the dangers of that hasty legislation.
I believe that the Select Committee has been proved right. They produced a report after seeking much expert evidence. I would have thought that the Government would have been wise to consider that report, but no, they did not. The Select Committee said in its third report ;
"First, we are worried about the costs of nuclear power Secondly, if there are to be additional costs from nuclear power, we are concerned about where they will fall."
In recent times, as the present Chairman knows well, we have taken much expert evidence in Committee on the cost of nuclear power. Why did the electricity supply industry and Lord Marshall get their sums wrong? Why has the country been told for many years that the comparison of costs between coal and nuclear showed that nuclear was always much cheaper? That was never true ; it was probably hidden from the public and from the Government --in fairness to them.
Mr. Lofthouse : Yes, for a time. But it was certainly hidden from the country.
The Secretary of State has not altered one word in his speech about the nuclear sector, part of which will be generating electricity in Britain. The big question mark over electricity prices is, how much will it cost, bearing in mind the proportion of 25 per cent. generation by non-fossil fuel? We are aware that there will be a colossal cost, and no one knows the real cost of decommissioning. Somewhere down the line someone will have to foot that bill, but who? It will not be the private sector. Nuclear power generation has been pulled out of the sale because it would not be attractive to the private sector. I appreciate that there have to be alternative sources of energy, but I do not believe that effort and money should be put into the nuclear industry.
When we talk about costs, we immediately think of financial costs, but of leukaemia clusters and other things
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there are greater costs. Evidence is now coming to light in some areas of nuclear activity. Nobody knows the extent of the problem. It has been denied for many years, but now people are beginning to wonder. What a cost we may have to be prepared to pay for the nuclear generation of electricity. What a social cost, and what misery we may cause families.There is also a risk of major accidents. I believe that the reason for pushing nuclear energy as an alternative supply is purely dogma. It is to whip the miners, who have never been forgiven and never will be while the Government are in power. The Government will live to regret the day that they ran down the coal-mining industry to the extent they have. Once mining cannot meet the demands of the next generation of industry in this country, we shall have to pay through the nose for coal--whether it is desulphurised or not. That is purely a result of dogma. I hope that the Government will think again, and will do what they can to provide some nuclear power costing. No less a person than Lord Marshall, on whose guidance the Government have relied for many years, told the Select Committee only last week or the week before that he agreed with the view in its report that the Government had produced spatchcock legislation, and Conservative Members know full well that that view is correct. He also said--in his final question to the Committee's Chairman, I believe--that, after 25 years of advising Government, he had failed. I believe that he is now a very disillusioned nuclear scientist, as are many of his friends.
If costing is to be fair and properly controlled, there can be no place for nuclear power generation.
6 pm
Mr. Malcolm Moss (Cambridgeshire, North-East) : I should have thought that it was obvious that, on an Opposition day, the Opposition--in this case, the Labour party--should choose a subject on which they had a good record when in office, and on which their spokespersons were renowned for the accuracy of both their research and their pronouncements. Labour's record on both electricity prices and care for the environment is woefully and pathetically weak. Far from being a shining beacon of achievement and endeavour, it is hardly measurable in megawatts. Candle power would be more appropriate : even in that context, however, it is short on the light of inspiration and long on the wax of fudge and obfuscation. Let us look first at Labour's record on prices. Between 1974 ad 1979, domestic electricity prices rose by 9 per cent. in real terms. Under the present Government, between 1985 and 1990, they fell by 8 per cent. in real terms. Opposition Members may not like the figures, but they represent the truth. Under Labour, industrial prices rose by 6 per cent. in real terms ; they have fallen by 10 per cent. under the present Government. [ Hon. Members :-- "That was 10 years ago."] I hear Opposition Members protest that their record was established 10 years ago. Has anything changed? Have they learnt anything? Is their understanding of the electricity supply industry any more intelligible, and are their predictions any more accurate? In December 1988, the hon. Member for Sedgefield (Mr. Blair) forecast a 25 per cent. rise in electricity bills as a result of privatisation. Misleadingly, he lumped together the 1988 rise, the forecast rise for 1989 and the fossil fuel
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levy, which was already an integral part of electricity bills. Earlier in the debate, the Secretary of State announced that this year the average price for all consumers would increase only in line with inflation. The hon. Member for Sedgefield was some 17 percentage points out : I wonder whether that is why he has moved to employment. As recently as last September, the hon. Member for Cardiff, West (Mr. Morgan) said that industrial customers faced rises of between 15 and 25 per cent. in April, but it was announced today that the Government had obtained an undertaking from the industry to offer a real-terms price freeze, at least to the larger industrial users.Under privatisation, downward pressures will be exerted on prices as a result of competition between generators. Prices will also be strongly regulated through the control of transmission and distribution pass-on costs and the firm and rigid implementation of the pricing formula, RPI minus X plus Y. The fossil fuel levy--which has just been set at 10.6 per cent. of the final sales to be borne by all customers--does not represent an additional cost, because the nuclear costs are already included in electricity bills. As recently as November last year, the hon. Member for Holborn and St. Pancras (Mr. Dobson) predicted that the levy was likely to be about 15 per cent.
Privatisation has brought about an entirely new competitive structure for the industry. At over 10 MW, customers will be entitled to contract supply ; at under 10 MW, they will be entitled to a tariff supply from the public electricity suppliers. At over 1 MW, customers are free to obtain supplies from any supplier, and from March 1994 those at over 100 KW will have that option. In March 1998, all customers will be free to seek alternative supplies. That will achieve a well-ordered phasing in of total competition, stabilising the market. PowerGen will testify to the fact that the present position is uniquely competitive.
Labour's energy policy is entirely irresponsible. If Labour had its way, electricity supplies would depend entirely on the coal industry, and we would be in hock to the National Union of Mineworkers. Not only do Labour Members ignore the need for security and diversity of supply ; they have shot themselves in the foot in the second part of the motion, which refers to the environment. I note that the motion, rather than dealing with the environment as a whole--as did the original version--confines itself to acid rain. Where is Labour's consideration of the problems of carbon dioxide and the greenhouse effect?
Any future Labour Government who failed to protect the country from the whims of the NUM or the OPEC cartel would be guilty not of selling off the family silver, but of giving it away under duress. Where is Labour's consistency? When in office, the party backed nuclear power. Labour Members were responsible for the disastrous AGR programme ; they started the PWR programme, and now they cannot ditch it fast enough. With what would they replace it? Why, with carbon-dioxide-producing coal-fired power stations, of course. The United States Environmental Protection Agency has estimated that between 60 and 65 per cent. of the greenhouse gases are produced through energy use, and that half the global warming effect is produced by carbon dioxide. In this country, 80 per cent. of carbon dioxide comes from the burning of fossil fuels--oil, gas and coal.
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About 36 per cent. of our carbon dioxide emissions is caused by electricity generation, and another 11.6 per cent. by solid fuel. Labour's plan to replace nuclear power with fossil fuel would increase carbon dioxide output by about 53 million tonnes per annum-- 25 per cent. above the current levels. What hope is there of reaching the Toronto target of a 20 per cent. reduction by the year 2005? Each PWR saves 6 million tonnes of carbon dioxide each year. Surely it is somewhat premature, and a little irresponsible, to rule out entirely the future of PWRs in this country and in the wider European dimension?Mr. Dobson : Will the hon. Gentleman give way?
Mr. Moss : I must press on : other hon. Members wish to speak. The most significant change in the electricity supply industry is the Government's non-fossil fuel obligation. In 1990-98, 8,000 MW of nuclear power is to be contracted under the levy. Renewables have also been given a major boost : some 300 new projects have been submitted to the area boards, including one in the Wash, near my constituency--an offshore wind generating farm.
The response from the renewables, and from industries seeking to build renewable generating capacity, has been so overwhelming that the Government intend to give the area boards two more months in which to negotiate with prospective operators before laying a second non-fossil fuel obligation order relating specifically to renewables. Only under privatisation has the importance of renewables come to the fore : it has been the key to unlock their potential.
I cannot allow the debate to end without some reference to energy efficiency. The Government's proposals in the Electricity Act break new ground. The Act places a duty on the Secretary of State and the Director General of Electricity Supply to promote energy efficiency on the part of suppliers, and also efficient use of the electricity that they supply.
Spending on energy efficiency is now six times as large as it was some 10 years ago. Since 1983, the Energy Efficiency Office has helped to achieve annual energy savings worth over £500 million. There has been a dramatic improvement in the United Kingdom's energy ratio. Consumption of electricity has remained unchanged since 1979, but in the meantime the gross domestic product has risen by over 20 per cent.
The Labour party is committed to renationalising the electricity supply industry. Not a word, however, has so far been said about how it intends to do that. Will it have a CEGB mark 2, with all its attendant cost-plus accounting procedures, with a bulk supply tariff imposed from above by the monopoly supplier, and no questions asked? Will the Labour party buy back the shares of millions of investors? If so, what price will it pay for the shares? It is the same old package of political interference, customer irrelevance and large subsidies from the taxpayer.
Nothing positive has been said by the Opposition in the debate. They have given no details of what they plan to do. They have offered nothing new or beneficial regarding electricity prices. They have offered nothing that is either viable or workable that would help to improve the environment. As we have come to know, they never did and they never will.
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6.10 pmMr. Alexander Eadie (Midlothian) : As the debate progresses, we can see that nothing but lies, damned lies, are provided as information by Conservative party headquarters. I was surprised when the Secretary of State referred to the Opposition's barefaced effrontery, yet he ignored entirely what happened between 1974 and 1979. My hon. Friend the Member for Dunfermline, West (Mr. Douglas) drew his attention to the political and economic climate at that time. Oil cost $40 a barrel. Its price increased three times, just like that. The country had to pay over £5 billion across the exchanges for oil. No previous Government enjoyed the bounty that this Government have enjoyed of £70 billion to £80 billion in North sea oil revenues. However, the Secretary of State had the barefaced effrontery to compare the economic climate then with the one that we have now. What worries me even more about the Secretary of State's speech is that it seems that there is to be no energy policy, either for price or for production. I referred to the problems surrounding energy costs across the exchanges. My hon. Friend the Member for Wentworth (Mr. Hardy) referred to the fact that the Government's energy policy would lead to the contraction of the coal industry, thus committing the nation to a £3 billion deficit across the exchanges. The Opposition believe that such a policy is illogical.
The Secretary of State does not appear to understand the political consequences of the Government's pricing and energy production policy. He said that there would be a further massive contraction of the coal industry : that pits which produce low-sulphur coal will inevitably have to close. It would be economic lunacy to adopt an energy policy that led to the loss of our indigenous supply. Scotland well illustrates the lunacy of the Government's energy policy. A few weeks ago I was asked to meet local authorities and British Coal to discuss the serious position in Scotland, where the coal industry has been decimated. In a political sense, the Conservative party in Scotland will not thank the Secretary of State for Energy. Its standing in the opinion polls in Scotland is about 16 per cent. If his policies are pursued, the consequences for the Conservative party in Scotland will be dire.
At that meeting, we discussed Longannet colliery and two other pits that are mothballed. The Frances pit is mothballed, although it produces 45 million tonnes of the best coal in Europe, since its sulphur content is very low. The other pit that is mothballed is Monkton hall, which is in my constituency. It will remain mothballed for two years, according to the agreement that was reached. However, I have little confidence, after the Secretary of State for Energy's speech, that the pit will be reopened after two years. He referred to the conversion of coal-fired power stations to gas. How much that will cost I do not know, but the Secretary of State said that when he was in Scotland he was impressed by the fact that all those to whom he spoke in the electricity industry were optimistic about the future.
Scotland has three power stations with a capacity of 13,500 MW, of which 3,500 MW is produced by coal. Scotland produces 90 per cent. more energy than it needs. We require an outlet for that capacity. The Secretary of State for Energy did not provide us with much hope. Ministers told us that they intended to strengthen the interconnector so that some of the additional capacity
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could be exported. That capacity--13,500 MW- -has already been paid for. It is already available. The interconnector could take the output of between 1.5 million and 2 million tonnes of coal, but nothing is going through the interconnector. Scottish industry is locked into legal battles in the courts.The question is whether the South of Scotland electricity board should take more coal-fired energy. The people at Longannet are worried about what is to happen ; so are the people at Monkton hall and Frances. Ministers have said that the intention is to strengthen the interconnector, but that would cost about £80 million and take three or four years.
I am glad that the Minister of State, Scottish Office, is sitting on the Treasury Bench, since he waxed eloquent over the fact that all that needs to be done is to strengthen the interconnector. However, even though I met the local authorities and the Coal Board, the reality is that nothing is being done about the interconnector. Having listened to the Secretary of State for Energy, I have very little confidence that anything will happen.
I believe that the Government have decided further to contract the coal industry. If they have decided not to go ahead with low-sulphur coal at Monktonhall, not to get an agreement at Longannet, not to strengthen the interconnector, which can export 1.5 million to 2 million tonnes of coal output, I am afraid not only for the miners, but for the Conservative party in Scotland. I hope that the Government will take to heart what I have said because it has political consequences for them.
6.20 pm
Dr. Kim Howells (Pontypridd) : I am sure that the Minister will correct me if I am wrong, but I believe that the Secretary of State for Energy has blown some of his circuits as he has discovered the anomalies in the privatisation machine which his predecessor, the current Secretary of State for Transport, left him. One major anomaly is the big fix, which means that he attempted to get rid of a great monopoly generator and supplier of electricity and replaced it with a duopoly, the two companies of which have been allowed to carve up the most lucrative markets.
It is a tribute to the present Secretary of State's political nous that he recognised that the big fix was likely to crank up electricity prices and wind down public support for the Government. He has opened up the supply sector to a wider range of generators, and I welcome that, although the range is still far too restricted, and planned additional generators are still too thin on the ground. I should like to quote Doug Rodger, a representative of the Chemical Industries Association. I am sure that the Minister will know that that organisation represents intensive users of electricity. He said that large industrial consumers would be much happier with a longer transitional period than is currently being offered on pricing. They are not convinced that new generators will be entering the market to provide the promised competition. Mr. Rodger expressed the hope that the new mechanism would be open to scope and flexibility when all the details became clear. Government sources, however, indicate that licence prices and the operation of the price
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control formula are likely to be reviewed as late as 1995, which they believe is too late for heavy industrial customers if the terms prove inflexible before then.How would it be possible to assure people such as Doug Rodger that they will not be priced out of an increasingly competitive market after 1992? Not by searching the world for parcels of relatively cheap low-sulphur coal. Low-sulphur coal is rapidly becoming a premium fuel, with premium prices attached, and major customers such as the United States, Germany, Denmark and Britain are seeking increasing amounts of the stuff. Nor will prices be reduced by relying on increased imports of French nuclear- generated electricity, as my hon. Friend the Member for Wentworth (Mr. Hardy) said. Apparently, the electricity which comes to Britain via the cross-Channel interconnector has been the target of a number of our newly privatised area distribution boards. I was informed yesterday by a very distinguished and authoritative source that Electricite de France has lately received a number of distinguished British visitors. A delegation from one of our southern English area electricity boards visited Paris. I am told that they enjoyed a marvellous lunch in the Eiffel tower and they asked Electricite de France whether they could purchase some of its surplus electricity. "Of course," said EDF--I shall not put on my Clouseau accent-- "How much are you prepared to offer us for it?" The delegation replied, "We will offer you what the CEGB offered you for it." There was a French shrug, they smiled and said, "We will think about it."
A week or so later, a delegation from another southern English area electricity board arrived, who again enjoyed a splendid lunch up there in the Eiffel tower and afterwards asked EDF, "Would it be possible for us to purchase some of your marvellous, cheap electricity?" "Certainly," said EDF, "But how much are you prepared to offer us for it? We have already had one offer from a neighbouring area electricity board." The delegation replied, "We will offer you 10 per cent. more than they offered." No doubt Electricite de France ordered another glass of Medoc and said, "We shall think about it. We have some other visitors arriving."
The following week, a delegation for another electricity board--I shall not be too specific ; I am aware that I have a mortgage to pay--arrived in Paris, enjoyed another marvellous lunch in the Eiffel Tower and said, "We should like to buy some of your electricity." "Certainly," said EDF, "How much are you prepared to offer us?" "We will offer you 10 per cent. more than that outfit from southern England offered you," was the reply. That is no way to secure cheap supplies of electricity to guarantee the future of British industry.
Mr. Eadie : They will get it as long as there is not a drought.
My very bitter but distinguished source informed me that it was fine to buy French electricity, as long as the CEGB remained a monopoly purchaser. He said, "We could screw them rotten," as far as the price was concerned. But we no longer have such a monopoly. We will find it increasingly difficult as a nation--borrowing my distinguished source's phrase--to screw any nation or
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transnational corporation that possesses the fuel that we decide we need. That includes Colombian coal, South African coal, middle eastern oil and French nuclear-generated electricity. We will have to pay the going rate for any electricity we purchase in future and for any other fuel that we may need to generate electricity.I do not believe that we should reduce ourselves to a nation that travels around the garage forecourts of the world looking for cheap bags of coal or cheap cans of oil in the hope that we will be able to muddle through, as we have so often in so many crucial and strategic sectors. We have to make the most of our abundant natural resources. We have had it easy until now. I am not defending the strategies of the past, whether they have been implemented by Labour or Conservative Governments.
We have had disastrous fuel policies in the past and we have landed ourselves with a dirty, stinking, unimaginative generating industry which was frequently determined by monopoly characteristics and not by the needs of consumers and which favoured the building of huge power stations and corporations to supply those power
stations--whether it was undemocratic British Coal or secretive British Petroleum. We need a complete and imaginative review of the way in which we generate electricity in Britain. We should not begin that review by making our nation a hostage to fortune.
6.30 pm
Mr. Peter Rost (Erewash) : I am anxious, in the brief time available to me, to explain that, as a student of energy policy for 20 years--I readily declare my interest as an energy consultant--I have seldom heard so much inconsistency and hypocrisy from the Opposition Front Bench. Labour Back Benchers have been somewhat less inconsistent.
All the energy policies that Opposition Members have been advocating for the last 20 years are now happening as a result of electricity privatisation, yet they do not have the courage to admit it. All that they have been campaigning for--greater energy efficiency, a chance for renewable energy to come into play, greater environmental control, combined heat and power, less pollution and greater competition in affecting prices, enabling industry to shop around--is happening as a result of privatisation, yet they oppose it.
Opposition Members have mostly been opposed to the nuclear industry. The electricity privatisation proposals have, for the first time, exposed the real cost of nuclear, an aspect which Opposition Members have been raising for many years. They, and some of us, have been campaigning on behalf of new coal technologies--fluidised bed technology and so on--which the CEGB continually refuse to consider. All that is now happening because of electricity privatisation, yet Opposition Members are opposed to it. I have never heard so much inconsistency and hypocrisy as I have heard from Opposition spokesmen today, yet everything they want is happening.
Mr. Dobson : Where is it happening?
Mr Rost : All the policies that Opposition Members have been advocating over the years are now coming to fruition as a result of the Government's proposals to privatise electricity, yet they are still opposed to privatisation. I wish that the occupants of the Opposition
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Front Bench would have the guts to say why they are opposed to electricity privatisation, when they must know that we are at last beginning to realise all the objectives of energy policy for which they, and many of my hon. Friends, have been campaigning over the years.6.32 pm
Mr. Kevin Barron (Rother Valley) : I recall the hon. Member for Erewash (Mr. Rost) arguing in the House not long ago about the need for a combined heat and power policy. He wanted it written, as a policy, into the Electricity Act 1989. He knows, as vice-president of the Combined Heat and Power Association, that those attempts failed both here and in the other place. How can he say that electricity privatisation is providing a helping hand to the nation, in view of his previous utterances about combined heat and power?
The House should be grateful to the Opposition for providing this opportunity to discuss the position of the electricity supply industry. I regret that the Secretary of State is not in his place, because I want to congratulate the Government on their sense of humour in writing into their amendment the way in which, in their view, we should recognise
"the significant progress made by this Government in preparing the electricity supply industry for privatisation".
It is clear from what we have heard--perhaps I should say, from what we have not heard--from the Secretary of State today that we are witnessing another chapter in the shambles of the saga of privatisation that has continued for the last 12 months.
The first element of shambles was the removal of the magnox stations from the flotation. On 27 September last year, the Secretary of State said in a radio interview that the Government believed that the AGRs and PWRs should be part of National Power. It was not long before he changed his mind and removed them from the sell-off. There then followed a series of changes that will prevent, rather than encourage, competition. The hon. Member for Cambridgeshire, North-East (Mr. Moss) talked about competition, but accepted that we would have to wait until 1998 before that competition was introduced. That represents a considerable time scale in the energy industry, and in electricity in particular.
In addition to the eight-year protection period for distribution companies, we had the introduction of the price mechanism. In Committee on the Electricity Bill, the hon. Member for Canterbury (Mr. Brazier) spoke about the poor pricing system, and said that it would resemble bidding on the stock exchange for electricity. We fear that the sort of competition that Conservative Members speak of in relation to electricity cannot exist.
There followed the moratorium on direct contracts and the continuation of cross-subsidisation. All that has not been sorted out from the point of view of heavy industry. Many other matters remain to be settled, despite the statements in December 1987 about the way in which the Government would privatise the electricity supply industry and introduce competition.
My hon. Friend the Member for Wentworth (Mr. Hardy) spoke eloquently about electricity prices. In 1988, electricity prices went up by 9 per cent., at a time when there was no need for an increase, certainly not from the point of view of the industry. They went up by 5 per cent. in 1989, again for no real reason ; massive profits were being made by the generating and supply companies.
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The Secretary of State said that a further rise was on the way. I am not clear whether he meant to say that it would be below the rate of inflation. If we interpret that as meaning another increase of 7 per cent., then that, too, is totally unnecessary at a time when the industry is making massive profits as a result of the investment that has been made in it over the years.The hon. Member for Cambridgeshire, North-East spoke about my hon. Friend the Member for Sedgefield (Mr. Blair) referring to a price rise of 25 per cent. It is all very well for the Government to talk in their amendment about
"the downward pressure that this will put on customers' electricity bills",
but how can such a downward pressure exist when increases of that magnitude are occurring?
Privatisation is not about reducing prices : it is about raising them, before and after the sale of the industry--before the sale, to fatten up the industry and, after the sale, to meet the demands for higher profits. I regret that the hon. Member for Rochford (Dr. Clark) is not in his place, because he likened the rate of return for the CEGB, as it was, to the profits of the then Post Office. It is clear that, if the sort of investment that is being made in the electricity industry had been made in the Post Office, a higher rate of return would have been required.
The London business school conducted a study into the subject of rates of return and the drive to maximise them. That study concluded that prices in the electricity industry could rise by as much as 33 per cent. by 1995, after privatisation. It also suggested that, if the industry stayed in the public sector, with its present rate of return, prices could fall by 12 per cent. That is the crux of our argument.
It was all very well for the Secretary of State to argue in terms of a target of 5 per cent. based on the last Labour Government's White Paper on energy policy, but he did not finish the story by saying what National Power and PowerGen believe should be their rate of return when the industry has been sold off. We are well aware why he did not do that, for he would have been predicting the sort of electricity price increases that were postulated by the survey conducted by the London business school. We need regulations to ensure that, if the sale goes ahead--I am by no means sure that the industry will be floated in the way that the Government believe-- the consumers are protected.
We are faced with a threat not only to cancel the Government's programme to deal with the problem of acid rain, but it is being suggested that the programme is not of any great worth. In 1986, the CEGB first announced a 6,000 MW FGD programme. In November 1987, the Government signed the EC large combustion plant directive, which increased the FGD programme to the CEGB's estimate of about 12,000 MW.
It took until February 1989 for the CEGB to give the go-ahead for the retrofit at Drax. It now looks as though that will complete only half its first stage, even though estimates suggest that changed circumstances have increased the amount of coal burn that must be retrofitted to achieve the limits laid down in the EEC directive. Indeed, the estimates have increased the figure to about 20,000 MW because of the changes that have been made.
Conservative Members have been trying to raise the flag in favour of the PWR. But the cancellation of the three
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PWRs has meant our having to retrofit a large amount of coal burn than would have been the case between 1986 and 1988.On 17 May last year, the CEGB issued a press release proclaiming the successor company's commitment to the environment. It gave a pledge that
"all existing major coal fired stations will be fitted with special burners to reduce nitrogen oxide emissions and many will be fitted with sulphur removal plants."
What has happened since last May? Why does the Secretary of State refuse to reaffirm that commitment?
Short-term economic gain has led to the reduction of the FGD programme. Originally, the contract was for six burners at Drax, but I understand that that may have been reduced to two.
The Secretary of State said that he would give my hon. Friend the Member for Holborn and St. Pancras an undertaking, but how much faith can we have in undertakings given by Secretaries of State for Energy? The previous Secretary of State for Energy, the right hon. Member for Hertsmere (Mr. Parkinson), said in a debate on the coal industry : "I am able to confirm today that we have asked the privatised generators to continue to plan on the basis of installing 12,000 MW of FGD capacity during the 1990s If we were to revert to low-sulphur coal, we would have to import massive quantities from overseas. The fitting of Drax and other stations with FGD equipment will ensure that there is a substantial market for British Coal". --[ Official Report, 26 June 1989 ; Vol. 155, c. 764-65.]
Everyone knows what has happened between May and today. The Government have decided to sell to those who want to make profits from electricity privatisation. They are prepared to sell out not only the consumer but the environment.
The Minister must know that we have insufficient capacity to import the amount of low-sulphur coal necessary to meet the low-sulphur directive. Twelve large coal-fired power stations retrofitted with FGD would be necessary to meet the new estimate of 20,000 MW. Plant will be replaced, but it will not be enough drastically to limit SO emissions. We shall have to consider small types of plant that can burn efficiently using circulating fluidised bed combustion. The hon. Member for Erewash said that we are now seeing freedom in electricity generation and the development of clean-coal technology, but that flies in the face of what has happened since I have been a Member. Labour Members, with the support of some Conservative Members, have argued time and again for the Government to match the amount being spent on developing clean-coal technology at Grimethorpe.
Mr. Rost : The hon. Gentleman has criticised me, but, like the hon. Member for Holborn and St. Pancras (Mr. Dobson), he keeps referring to the high profits made by the CEGB. Is he aware that, if it had correctly costed nuclear power, it would now be showing not a profit but a loss? It has fudged the figures. If its costings had been done on a commercial basis, it would have shown a loss.
Mr. Barron : The CEGB has been making a profit. I accept that there have been fudges.
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Mr. Barron : As my hon. Friend says, its costs may have been fiddled, but that does not explain why the Government have decided to ring- fence the expensive nuclear power industry and guarantee it a generating base for the foreseeable future, leaving other more profitable means of electricity generation to fight with foreign coal in the market.
In 1988-89, the revenue of the electricity industry increased by £1,000 million. It made profits of £777 million, paid back £1,779 million to the Government and made capital investment of £1,492 million. On my reckoning, that means that £4,000 million was available to it in that year. The Secretary of State smiles ; no doubt many people in the City will smile when they realise that that will soon be up for auction.
A retrofitting programme will have to go ahead. Even if the Government abandon it for short-term economic gain, it will have to come some time. It will offer Britain several major benefits. It will create and maintain jobs in the beleaguered power engineering industry, which, despite having the technology and expertise, has been starved of orders over the past decade. It will ensure markets for coal that is mined in Britain, thereby maintaining jobs in an industry that has been cut to the bone and keeping reserves accessible for the future.
Despite all that the Secretary of State said about the British coal industry and how well it has done over the past five years, the Government cancelling the FGD programme is a stab in the back for everyone who works in the industry, from the smallest coal mine to Hobart house. If manufacturing industry had done half as well as the coal industry in Britain over the past five years, we would not be in the economic mess we are in at present.
The retrofitting of FGD will contribute to relieving pressure on the balance of payments by eliminating the need for imported coal. Our energy deficit last year, in this energy-rich country, was £567 million. Are the Government seriously suggesting that we should import tens of millions of tonnes of low-sulphur coal? If they are, what will be its cost, not to generators but to the country? The retrofitting programme will ensure that we are capable of meeting our commitments to the international environment. As my hon. Friend the Member for Holborn and St. Pancras said, we lag many years behind other industrial nations in our attitude to and action on sulphur emissions. The retrofitting programme will reduce sulphur emissions. It must go ahead, and at some stage it will go ahead. It cannot be avoided by the Government trying to ease the flotation of the electricity industry to ensure that they have a better chance at the next election. The Government are doing a disservice to consumers who will have to pay more and, more so, to the international environment, to which Minister after Minister says that the Government are committed.
6.47 pm
The Parliamentary Under-Secretary of State for Energy (Mr. Tony Baldry) : The Government welcome this opportunity, provided by the Opposition, to trumpet the continuing success of our energy policies, the continuing progress of our policies to improve the environment and the continuing success of our policies on privatisation. The debate has been all too short, but some telling contributions were made by my hon. Friends the Members
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for Rochford (Dr. Clark), for Exeter (Mr. Hannam), for Cambridgeshire, North-East (Mr. Moss) and for Erewash (Mr. Rost). My hon. Friend the Member for Rochford, who is the well-regarded Chairman of the Select Committee on Energy, made some telling comments. I thank him for his clear support for the straightforward and sensible decision on nuclear power, made by my right hon. Friend the Secretary of State. He rightly said that progress to the full privatisation of the electricity industry is well on course. My hon. Friend the Member for Exeter, who has long made a leading contribution to the development of energy policy, rightly highlighted the contribution that competition will make to continuing downward pressure on electricity prices. He rightly drew attention to the number of new independent generators who are eager to enter this new marketplace. He rightly recognised the energy efficiency and environmental benefits of combined heat and power.My hon. Friend the Member for Cambridgeshire, North-East, who is a keen member of the Select Committee on Energy, is correct to draw attention to the failure of the Labour party's energy policies when it was last in government, and to the wildness and inaccuracy of its predictions on electricity prices and energy policies since it has been in opposition. He is right to reiterate that we are establishing a competitive electricity market--a market in power--which will ensure that for the first time, there will be genuine competition in electricity supply.
Mr. Barron : Can the Minister tell us what the Government's estimates are on the rate of return of the newly privatised generators?
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