House of Commons Hansard Debates for 16 May 1995

Mr. Spearing: And petrol filling stations, as my hon. Friend says. I do not think that the Government can deny that. Is that unconnected with what my hon. Friend the Member for Newham, North-East reminded us of, if we needed reminding--the downturn in service standards and upturn in complaints? Does the Minister deny that the one follows the other? That is before the appointed day and before the 40,000 competing service engineers get going.

I wonder what sort of cut-throat competition there will now be in the industry. Is competition really required? We may disagree with double gas pipes in the ground--that may seem stupid enough--or gas from different suppliers going into one house on a

take-it-or-leave-it basis, but is it necessary to have people other than suppliers competing? The Minister must either deny that that is going on or accept it and, I hope, support the amendment. The depot at Bromley-by-Bow, with the skills and loyalty of its staff who are working all the time, is a symbol of service to the public throughout the nation. The knock-on effect of its closure and its replacement by the church hall, motorway flyover and filling station, about which we have just heard from my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands), is a symbol of the downturn in the standards of maintenance.

What about the skills in the gas service industry? Many years ago in my other job, I helped to place school pupils--experience outside the House, as Lord Nolan calls it, and very useful--and I found that British Gas apprenticeships were not only the most sought after but were often the start of lifelong careers. Many people from my part of the world and that of my hon. Friend the Member for Newham, North-East served the gas industry for most of their lives and were pleased to do so under the relatively benign regime of the Gas Light and Coke Company and the even better regime of British Gas and the publicly owned sector of it. Their skills and those of

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the private contractors under some sort of licence which some think is not good enough, were built up on the apprenticeships of the gas industry. What will happen to those skills?

This is part of so-called privatisation. This commodity, which is of great value to us, is not produced privately. It is publicly owned gas in the middle of the North sea, or thereabouts, piped to us. The gas in the North sea cannot be owned other than by the British people. I see that the Minister nods. Under this legislation, it is being privately distributed by a curious system of competition under the regulator. The obligations on the supplier should be to maintain those services that we have had from private and public gas suppliers alike. I believe that that is incorporated in the amendment. Even if we do not get very far tonight, I am looking to the Minister to deny any of the facts that I have presented and to say why the obligation in the amendment, perhaps in another form, should not be incorporated in this important Bill, which for the first time disaggregates the obligation of the supplier to supply, maintain and provide--at a reasonable cost, of course--for the safety of the equipment upstream of the meter.

Mr. Eggar: I do not want to be unnecessarily unkind to the hon. Member for Newham, South (Mr. Spearing), but at least some of his obiter dicta suggest that he has not read the Bill in its entirety and does not understand the full implications of what is proposed. In fairness to him, however, I concede that he was concentrating on a constituency point.

The hon. Gentleman failed to appreciate that the 40,000 competitors to whom he and, I believe, Mr. Blacker referred have been around for a long time. For years, they--the so-called Corgi-approved operators--have competed with British Gas, including the element of British Gas that looks after appliances "upstream of the meter", as the hon. Gentleman put it. There has never been any obligation on those operators to stock limitless spare parts; like garages, they have developed a system that has allowed them access to warehouses. I believe that they have sometimes had direct access to British Gas warehouses.

The amendment proposes that new suppliers should be obliged to keep a stock of spares for which, in fact, they would have no use. Many of those suppliers supply only gas, and have no desire to supply appliances. They recognise not only that British Gas will continue--presumably--to provide an effective spares service, but that those 40,000 competitors will do the same. The hon. Gentleman's proposal constitutes an imposition on potential suppliers: it is rather like requiring water companies to supply washers to repair leaking taps, which no one has ever suggested.

I entirely understand the hon. Gentleman's concern about employment in his constituency, and appreciate that, as a constituency Member, he must support the interests of his constituents. I must say, however, that the logic of his amendment is fundamentally flawed. The competitive marketplace has provided many sources of servicing and spares, and I have no doubt that it will continue to do so without the need for legislative intervention.

Mr. Nigel Griffiths: My hon. Friend the Member for Newham, South (Mr. Spearing) has done the House a service in highlighting the problems that now face gas

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consumers. They are of recent making. British Gas is fearful of the opening of a competitive market, and the impact on the public is clear to my hon. Friend and to me--and, I think, to 8 million gas consumers. It is a good prelude to what will happen when the Bill is enacted.

Before 1 January, British Gas service engineers held a range of spares in their vans. Those spares were held in depots throughout the country, in case engineers were called out in an emergency to cut off cookers or heaters because they contained defective parts. That was part of the service for which customers paid, and it enabled engineers to reconnect many appliances because their vans contained standard stock from the depots.

In Committee, the Minister argued forcefully for an end to that practice. He failed to take on board not just the fact that members of the public might be left without a working cooker or heater--which, of course, is a tremendous imposition on the elderly and disabled--but the fact that an irresponsible or, indeed, criminally negligent person might reconnect the appliance without having it fixed. That would mean a cost to the community: not merely the person concerned, but his or her family and neighbours, might be blown up. In his creditable amendment, my hon. Friend the Member for Newham, South seeks to ensure that gas suppliers supply more than just gas itself. A very old hand--a former director of British Gas, now retired- -told me, "The problem with the gas market now is that you do not have to know anything about it; you just have to have a phone, a desk and a sympathetic bank manager. You order the gas on the phone, at beach-head prices, and agree to supply it somewhere--and British Gas TransCo has to put it down its pipes. You have no social obligations; you have no obligations to hold spares that the public might want." My hon. Friend the Member for Newham, South focused perceptively on my main fear, eliciting a hopelessly inadequate response from the Minister. I fear that the new gas competitors will merely supply gas, and that people who have problems with their gas

appliances--regardless of whether they have been supplied by British Gas-- will be left to lump it, no matter how old, poor or crippled they may be. I fear that the new competitors, as private contractors, will be able to walk away from the problem.

My hon. Friend rightly sought to pin the Minister down, and he did so with a degree of cleverness which belied the Minister's own clever view of himself. He pinned the Minister down to saying, "Why should people who are simply supplying gas--for that is what competition is about--supply any additional services? Why should they keep spare parts at all?"

Having discussed the amendment with my hon. Friend, I can say that he knows that this excellent measure is likely to receive a sympathetic hearing from people more thoughtful than the Government.

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Mr. Spearing: With the leave of the House, Mr. Deputy Speaker--

Mr. Deputy Speaker: Order. The hon. Gentleman usually knows the rules of the House in great detail, but I must point out to him that on this occasion he does not need the leave of the House to speak.

Mr. Spearing: I am grateful to you, Mr. Deputy Speaker, but I believe in good insurance policies.

I shall, I hope, find it not too difficult to demolish the logic of the Minister, who claims that I am illogical. He began by saying that I had not read the Bill--I confess that I have not read all of it--and that something in the Bill rendered the amendment redundant. Having implied that the evidence was there, however, he did not produce it. He also said, "Of course I forgive the hon. Gentleman, and pat him on the head: he was making a constituency point, which he had to make. We all know about that, ho ho."

In fact, my point applies to 8 million consumers. It is illustrated by what is happening in a depot in West Ham, which is three times the size of a football pitch and which, according to the accountants, will be too costly to maintain. "Oh," says the Minister, "There will be 40,000 contractors, all ready and waiting. Indeed, they are there now." He means the CORGI contractors.

I shall not go into the details, because we must make progress, but there is considerable worry about the standards to which those so-called CORGI contractors operate. That may have been dealt with in other parts of the Bill. Those contractors have been riding on the backs of the gas suppliers, especially in my part of the world, which is covered by North Thames Gas.

The Minister says, "Well, the contractors will be able to provide spares from somewhere else." Owing to various factors and the involvement of other people, however, the cost of the operation will escalate. Showrooms have been mentioned. I recall that someone in another place about which we are not supposed to know wrote a wonderful article about how he tried to obtain a new electric stove. It was possible to go to a one-stop shop for electrical appliances, which provided advice and a variety of products, but will that be possible in future? Will it be possible to pay bills, obtain advice, examine appliances and secure spare parts? I very much doubt it. There will not be such a service. The Minister said that there would be an imposition on new suppliers, and therein lies the rub. He is defending the new suppliers but is there not an obligation on all public gas suppliers, whether old or new, to make the supply safe for the consumer?

6 pm

The Minister used water supply as an analogy. Perhaps he does not know that many years ago I had a slight connection with the water industry--not, I hasten to add, in terms of income but as a decorative vice-president of the British Waterworks Association. There is all the difference in the world between a leaking tap and a gas leak. A water leak is visible and the supply can be turned off at the main or other action taken. Perhaps the Minister does not know that water companies readily supplied free washers. A consumer could telephone the supplier, who fitted the washer free. It was covered by the water rates, in the old days when we paid water rates and not water charges. The Minister's analogy with the water industry and water taps is therefore wrong.

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It is clear that people want gas and are willing to pay for it, but they want it supplied in a safe manner and they want to be assured that equipment and spare parts are available. The Bill will not maintain the standards to which people in this country have been accustomed from the gas industry for perhaps more than a century. I hope that at some later stage in the progress of the Bill that will be understood and rectified. As I know where the Bill goes next, and as the Government may have second thoughts, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn .

Schedule 3

Other amendments of Part I of 1986 Act

Amendments made: No. 69, in page 28, leave out lines 31 to 35 and insert--

`(4) Subject to subsection (5) below, a consent under subsection (2) above may be given subject to compliance with--

(a) such modification or other conditions as the Director considers necessary or expedient for the purpose of protecting the interests of consumers; and

(b) such incidental or consequential modification conditions as he considers necessary or expedient.'.

No. 70, in page 29, line 25, after `4', insert `, 7A'. No. 71, in page 35, line 13, leave out

`with gas by a gas supplier'

and insert

`by a gas supplier with gas conveyed to particular premises'. No. 24, in page 30, line 45, leave out `after consultation with' and insert `with the consent of'.

No. 25, in page 31, line 30, at end insert--

`( ) the making or maintenance of the connection would involve a new or increased supply of gas to the premises in question;'. No. 26, in page 31, line 35, leave out `that rate' and insert `the new or increased supply'.

No. 27, in page 33, line 35, at end insert--

`( ) The Director may by notice in writing require a public gas transporter to give to the Director, or to any person appointed by him for the purpose, within such time and at such place as may be specified in the notice, such information as the Director may reasonably require for the purpose of making regulations under this section or of giving directions under such regulations.'

No. 28, in page 34, line 18, leave out second `of' and insert `owned or occupied by'.

No. 4, in page 36, line 53, leave out `and (4)' insert `to (4A)'. No. 5, in page 37, line 14, leave out `the stamping of' and insert `another person to stamp'.

No. 6, in page 37, line 18, leave out

`or authorised to stamp it'.

No. 7, in page 37, line 21, leave out from `submission' to `and' in line 22.

No. 8, in page 37, line 24, at end insert--

`(4A) A meter examiner may authorise another person to stamp a meter, notwithstanding that he has not himself examined it, if-- (a) the meter was manufactured or repaired by that person; (b) that person has obtained the consent of the Director to his stamping of the meter; and

No. 29, in page 43, line 9, leave out from beginning to `with' in line 10 and insert `he has consulted'.

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No. 9, in page 43, line 48, leave out from beginning to `shall' in line 2 on page 44 and insert

`licences under section 7 above, licences under subsection (1) of section 7A above or licences under subsection (2) of that section, he--

(a)'.

No. 10, in page 44, line 5, at end insert `and

(b) may make such incidental or consequential modifications as he considers necessary or expedient of any conditions of licences under that provision granted before that time.'.

No. 72, in page 46, line 34, leave out `this section' and insert `subsection (1A) above'.

No. 11, in page 46, line 48, leave out from `holder" to `a' in line 49 and insert--

`(a) in relation to a reference under subsection (1A) above, means the holder of a licence to which the reference relates;

(b) in relation to the modification of'.

No. 12, in page 46, line 50, leave out

`a licence holder whose licence'

and insert

`the holder of a licence which'.

No. 30, in page 48, leave out lines 6 to 8 and insert--

`(b) for paragraph (b) there shall be substituted the following paragraph--

"(b) the circumstances are as mentioned in section 73(1) of that Act (order on report on merger reference) and at least one of the two or more enterprises which ceased, or (in the application of that provision as it has effect by virtue of section 75(4)(e) of that Act) which would cease, to be distinct enterprises was or, as the case may be, is engaged in the carrying on of activities authorised by a licence;".'

No. 73, in page 53, leave out lines 1 to 3 and insert--

` "(a) such activities as are mentioned in section 5(1) above; and

(b) activities ancillary to such activities.".'.

No. 74, in page 54, line 11, leave out from `activities' to `and' in line 12 and insert

`to which this subsection applies'.

No. 75, in page 54, leave out lines 22 to 24 and insert `the carrying on of activities to which this subsection applies'. No. 76, in page 54, line 26, at end insert--

`( ) Subsections (2) and (3) above apply to--

(a) activities required or authorised by licences;

(b) such activities as are mentioned in section 5(1) above, whether or not so authorised; and

No. 31, in page 56, line 11, leave out `road' and insert `motor'.-- [Mr. Eggar.]

Schedule 4

Minor and consequential amendments

Amendments made: No. 32, in page 64, line 23, after `and' insert `section 22A(1)(b) of and'.

No. 77, in page 66, line 42, at end insert--

`Central Rating Lists Regulations 1994 (S. I. 1994/3121) . In Part 3 of the Schedule to the Central Rating Lists Regulations 1994, for the words "public gas supplier", in both places where they occur, there shall be substituted the words "public gas transporter".'.-- [Mr. Eggar.]

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Schedule 5

Transitional Provisions and Savings

Sir John Hannam (Exeter): I beg to move amendment No. 40, in page 68, line 19, leave out from `register' to end of line 22 and insert--

`and

(b) subject to that and to the provisions of any contract entered into before the passing of this Act shall be binding on all persons.'.

Madam Deputy Speaker (Dame Janet Fookes): With this, it will be convenient to discuss amendment No. 41, in page 68, line 27, at end insert- -

`(7) No provision such as is mentioned in sub-paragraph (4) above shall apply to any contract entered into before the passing of this Act.'.

Sir John Hannam: The amendments deal with the assignment of rights and liabilities. Like so many of my hon. Friends, I welcomed the Bill when it was introduced in March. Consumers in the industrial and commercial gas supply market have already benefited by substantial savings of up to 20 per cent. as a result of competitive marketing. In April 1996, when the domestic gas pilot project comes into operation in the south-west, my constituents in and around Exeter will be some of the first domestic users to benefit from the liberalisation of this market.

The anticipated price differential from which my constituents will benefit can be compared with the reductions that occurred in the telecom market when increased competitiveness forced British Telecom to become more efficient, allowing it to narrow its margins in line with the rest of the market. That has been the experience in the supply of gas to the industrial market, almost to the point at which the independent suppliers are now finding it hard to realise a respectable return on their investment in such a competitive marketplace.

When the industrial market was opened up, the composition of the initial supplier or producers of gas from the North sea remained unchanged, as did the size of the marketplace, creating the demand for a supply of gas in factories, smelting works and brick works throughout the United Kingdom's industrial base. Similarly, exploration and production companies will continue to produce gas from the fields that they have been operating for as long as 15 years, and the domestic market will remain constant, or its size and the demand for gas may increase.

For those reasons, I am concerned at the precedent that is being set in paragraph 2 of schedule 5 to the Bill, which effectively invites the renegotiation of gas supply contracts at the well or production end just because the gas supplier at the street or consumer end will possibly change at some time between 1996 and 1998 or beyond.

Historically, most gas sale contracts have been long-term arrangements, typically for the projected life of a field, and they were concluded between the field owners and British Gas. For example, the Hewett field principal agreement was concluded in 1968 and still survives.

Gasfield owners require some certainty that the buyer will buy a certain amount of gas in each contract year, and British Gas required some certainty that the seller

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would deliver those same amounts each year. Gas sale contracts have been concluded in that way for a number of reasons, principally that, first, gas is not a commodity which can be easily moved around the world like oil. Therefore, a seller's choice of buyer is restricted and for many years the only customer has been British Gas. Secondly, the cost of offshore operations is such that, as soon as the field is brought on stream, it cannot be economically suspended. The decision to invest hundreds of millions of pounds in a particular asset has been taken on the basis of a secure long-term contract to sell the gas that is produced. I should mention that the capital investment going into that hundreds of millions of pounds development has been raised to commission exploration and development projects, and has been offered by banks on the understanding that repayment would be achieved from a steady revenue stream arising from one long-term contract and one long-term customer: British Gas, which, one would assume, has an exceptional credit and status rating in corporate lending circles.

Paragraph 2 of schedule 5 as currently drafted would permit British Gas to assign gas contracts, without counter-party assent, to an affiliate that may not have the financial means and structure necessary, or even the inclination to meet commitments that British Gas made on freely entering into those contracts, such as take or pay contracts. As written, that could and would include existing gas supply contracts. As the hon. Member for Clackmannan (Mr. O'Neill) said:

"If the going got really rough, British Gas could allow those smaller operations to founder as companies and its obligations would then disappear. The gas suppliers would be left to pick up the tab."--[ Official Report, Standing Committee A , 27 April 1995; c. 327.]

If the provision were enacted in its current form, it would have profoundly damaging consequences, both in relation to the future development of Britain's offshore oil and gas resources--and hence longer-term gas supply security--and internationally to the sanctity of contracts, a principle that is fundamental to the interests of a country whose offshore sector enjoys such extensive international investment.

By applying the schedule in a retrospective manner, there is a strong chance that the sanctity of contracts, an essential prerequisite of long- run international business, will be threatened. Let us not forget that those contracts were freely entered into by two responsible and consenting parties.

I know that this matter has been discussed to some extent in Committee, when my hon. Friend the Minister likened the guarantees for gas contracts to other items "of varying magnitude" which British Gas purchases. He mentioned everything from computers, to telephones to office cleaners. With all due respect, it is not quite appropriate to compare gas contracts worth millions of pounds with cleaning contracts.

As we know, liberalisation is happening in a phased manner, commencing with a trial area of approximately 2 million homes in the west country around April next year. I can find no valid reason why the assigning of rights and liabilities should not apply to gas contracts negotiated and agreed after the Bill has received Royal Assent.

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My proposed amendments avoid the provisions of schedule 5 applying to contracts in existence before Royal Assent. Amendment No. 41 makes the transfer binding on everyone, subject to the consent of anyone whose consent would otherwise be necessary under the terms of the contract. That serves to clarify the position that the amendments, grouped together, attempt to preserve only existing contractual positions.

Any gas supply contracts negotiated after Royal Assent would be subject to liabilities being reassigned, but then at least both parties negotiating would be aware of that extra dimension during negotiation.

In that way, sanctity of contract would be maintained and the future development of Britain's offshore oil and gas resources, and hence longer- term gas supply security, would no longer be threatened. The United Kingdom continental shelf would continue to receive the extensive international investment that it enjoys.

I know that my hon. Friend has had meetings with the United Kingdom Offshore Association in recent days and over the past week and that he is fully aware of the concerns of the gas supply industry. I hope that he will respond to those fears today.

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