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Mr. Chope: Will the hon. Gentleman comment on last week's news that water prices in Scotland will go up by 50 per cent. over the next two years? Does he think that that is good news?
Mr. Tynan: The Scottish Executive has dealt with price increases in Scotland. There are variations across the country. In the north, for example, there has been a lack of investment, and the price of water will increase. The increases for all areas were a decision of the Scottish Executive and were accepted by the Scottish Parliament.
The Bill seeks to ensure that disadvantaged consumers will benefit. Regulation must take the needs of all consumers into account. Anyone who has been unable to turn on heating or lights will know how important the Bill is. We must pass it through the House as speedily as we can. The new duty of the regulator to take into account the interests of low-income consumers must be applauded. Energy efficiency standards and performance that will help the poor to reduce their energy bills must be welcome. The modernisation of the regulatory framework is essential to the delivery of keener prices and better services.
Increased competition in electricity supply and the emergence of multi-utility companies have created the need for a flexible framework, which must be able to respond to change and the modernisation of the utilities. Environmental objectives, such as energy efficiency, must form part of the planning process for those utilities.
I welcome the fact that Ministers have the power to make regulations to promote energy efficiency in the generation of renewable energy. It is clear from the consultation process that there is substantial support for the measure. Opposition Members have also expressed support for many of the Bill's provisions.
The primary duty of the new Gas and Electricity Markets Authority--GEMA--to the consumer will be to ensure that the regulatory body accesses and monitors the safety record of utility companies. That will lead to joined-up working between GEMA and the Health and Safety Executive. That is essential in view of the high standard of safety required in the industry.
Mr. Bercow:
In view of some of his earlier remarks, will the hon. Gentleman clarify his position? Will he confirm that he believes that prices should be set at such a level as not only to allow for energy efficiency schemes and the observation of health and safety standards, but to subsidise wage rates?
Mr. Tynan:
That is essential in relation to health and safety. However, wage rates are normally dealt with between unions and employers. It is a question not of subsidising wage rates, but of ensuring that health and safety comes first with employers. I am sure that the unions would agree with that.
Joined-up working between GEMA and the HSE is vital. In addition, we need substantial monetary penalties for breaches of licence and of standards of service. The fines must not be meaningless. We must ensure that regulation and service are protected in the way outlined in the measure. Our standards must be set high because of our commitment to safety in the industry.
We have not said much about the employees in the utilities who will deliver those essential efficiency improvements. Those employees are also stakeholders; their needs should be taken into account when we consider the measure.
Sir Michael Spicer (West Worcestershire):
The hon. Member for Hamilton, South (Mr. Tynan) asked how prices could be reduced by 10 per cent. The answer is by competition. As the Bill is anti-competition and would prevent competition, it does not have a hope in hell of reducing prices by the amount that the hon. Gentleman wants.
Before I develop my argument, I declare an interest as the president of the Association of Electricity Producers, although I suspect that much of my speech will not win the support of members of that organisation. In view of my declaration, I hope that the Whips will acknowledge that I should be a singularly inappropriate member of the Standing Committee.
The second interest that I declare is the one referred to by my hon. Friend the Member for Bournemouth, West (Mr. Butterfill): I was the Minister who piloted the Electricity Act 1989 through Committee. In that capacity, I was opposed by the then hon. Member for Sedgefield (Mr. Blair), now the Prime Minister, who, in his inimitable way, made the suggestion--quickly agreed to--that the Bill should go through fairly easily, as he wanted to get home to his young family as often as possible. On four occasions, he asked whether he could issue press releases before lunch. We agreed to that, much to the chagrin--indeed outrage--of the Labour Whip who was in charge of the Bill. However, that was overridden, and the hon. Member for Sedgefield got his way.
I refer to the 1989 Act because it is highly representative of the Conservative Government's approach to utilities and regulation.
Mr. Bercow:
The House is waiting, with eager anticipation and with beads of sweat on its collective brow, to discover whether my hon. Friend wisely retained his copies of the press releases issued by the Prime Minister when he was in opposition. If my hon. Friend has done so, we shall certainly be able to see that the right hon. Gentleman has changed his mind on every one of the issues.
Sir Michael Spicer:
My hon. Friend makes an interesting point. There have already been allusions to the many unqualified statements made at that time by the now right hon. Gentleman--to the fact that such a measure would never work and that the industry would collapse. He made such pronouncements on three occasions.
Mr. Butterfill:
Does my hon. Friend agree that those statements might well be of interest to the Bill's Standing Committee?
Sir Michael Spicer:
I have already made clear my own unsuitability for membership of that Committee--[Interruption.] I am sure that my hon. Friend the Member for Buckingham (Mr. Bercow) will tell the Whips what I said. However, I would certainly advise those of my right hon. and hon. Friends who are members of the Committee to look out those statements because there is no question but that they are worth reading.
The 1989 Act is highly representative of the previous Conservative Government's whole approach to the utilities and their regulation. The changes to that legislation included in the Bill are equally representative of the Labour Government's approach to those matters.
The general idea behind the 1989 Act was to privatise electricity in such a way as to maximise competition over time and, as that increased competition occurred, so to diminish those powers of the regulator which were specifically focused on competition. Over time, regulation would give way to competition as the best means of protecting the consumer. That aspect of regulation has escaped the Government and continues to do so.
Several features of privatisation helped to meet that objective; they are now under threat. The structure that we used militated against the vertically integrated franchise--the American model. We were against that model, because we did not want vertically integrated, local monopolies. We began with a brave move, as my hon. Friend the Member for Bournemouth, West pointed out--we broke up the Central Electricity Generating Board into about five separate players.
However, most important was the fact that we built into the measure a dynamic towards near-perfect competition, in an industry to which competitive pressures were extremely difficult to apply. We did that in such a way that not only were there new entrants to generating--to which the hon. Member for Hazel Grove (Mr. Stunell) referred--but the distribution and supply companies were subject to competitive pressures. By 1998, those companies were selling in and out of each other's markets and were entirely free from competitive restrictions, as had been planned at the outset.
The regulator was chosen, not only for his personality, but as someone who had competition at the front of his mind. Professor Stephen Littlechild was the nearest thing to a competition expert who could be found at that time. He has been replaced by someone who, whatever his merits--and Callum McCarthy has great merits--is really a high-flying civil servant. He is interested in politics and in the ways of Whitehall, but he has no experience of the marketplace, nor any particular interest in it.
Another part of the process of setting up a competitive industry--I shall return to this point--was the establishment of a half-hourly pricing system that was completely transparent. The pool may have had its faults--we can discuss them--but it was a transparent system of pricing and it allowed for marginal supply to come on-stream at the price that was appropriate.
The effect of the competitive pressure that was built into the 1989 Act has been pretty dramatic. Reference has been made to the fact that we now have a much more competitive industry, but the figures are astonishing. In 1991, two companies--National Power and PowerGen--held 74 per cent. of the generating market. By 1998, National Power's share was down to 13 per cent. from 46 per cent.--it is set to fall to 8 per cent. this year--and PowerGen's share is currently at 14 per cent., down from 28 per cent. in 1991. The two biggest players now have only 22 per cent. of the highly competitive generating market between them. Today, 30 generators use the pool, as opposed to the five or so who used it regularly when it was set up.
The electricity market has been transformed into a highly competitive market. If everything is hunky-dory, why is there a need for the Bill? The answer is that competition is no longer the Government's primary objective in their regulatory approach to the utilities. The scene is set by the proposed new section 3A(1) in clause 12. It says:
"The principal objective of the Secretary of State and the Authority in carrying out their respective functions under this Part is to protect the interests of consumers in relation to the supply of electricity, wherever appropriate by promoting effective competition".
"Wherever appropriate" is the qualification attached to that.
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