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7.44 pm

Mr. Andrew Stunell (Hazel Grove): I welcome the opportunity to contribute to the debate, which, so far, seems to have been based on the question: privatisation, good thing or bad--yes or no? With varying mixtures of embarrassment and triumphalism, it seems that the answer is that it was a good thing.

I was a little surprised, particularly by some of the things that the hon. Member for Mid-Worcestershire (Mr. Luff) said in relation to privatisation. He seems to have forgotten that one of the principal benefits of privatisation of the electricity industry as practised by the Conservatives is that it has allowed portions of it to be renationalised, but by the French. The idea that the Prime

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Minister was nationalising the whole country by the back door struck me, and, I think, quite a number of other hon. Members, as somewhat comical.

The hon. Member for Bournemouth, West (Mr. Butterfill) pointed out that it was easy to make calculations and to judge the correctness of policies in hindsight. I hope that the debate might turn its attention a little to foresight, and not dwell entirely on hindsight. A good foresight question is not about privatisation, but about energy policy. Should there be an energy policy and have we got an energy policy?

At the moment, it is not clear that the Government have such a policy. They have plenty of aspirations. I fully sign up to most of them, as do my colleagues. The Government set energy targets, many of which are commendable, although we are some way short of achieving them. They have commissioned many energy reviews. We must ask whether the Bill plays a constructive part in taking those three things--reviews, aspirations and targets--to a state where implementation can begin.

Having listened to Conservative Members, it seems that many of them are still in the age when oil and gas were laid down--the Jurassic age, when there was limitless oil, endless gas and plenty of fossils. Certainly, there was no threat of global warming.

Mr. Fabricant: Will the hon. Gentleman concede that, in the Jurassic age, there were no fossils, but that they were formed in that age, to be found in this age?

Mr. Stunell: I assume that the hon. Gentleman was there at the time, but my O-level geology of quite a number of years ago tells me that he is 600 million years out. However, let us not worry too much about that--the typical gap in knowledge of Conservative policy makers.

It is a pity that the Conservatives have ignored the long-term issues that the country and the planet face. I find that all the stranger because they are, after all, the party of inheritance: the party that believes in taking from our parents and preserving it for our children. However, in the utilities sector, they seem to be the party of get rich quick, sell the silver and ruin the planet. The hon. Member for West Worcestershire (Sir M. Spicer) had the best of it with his commitment to unbridled compulsory competition in all things, which at one moment seemed to stretch even to ensuring that rural electricity customers had to pay more than urban electricity customers, with the difference made up by a Government subsidy.

It is a complete myth that no regulation and no regulatory system are needed in the energy industry, or in many other industries. The energy industry has always been closely regulated, and it will always need to be closely regulated. When one starts to unpick the mythology of the Conservatives, one can see almost immediately the folly and, to some extent, the hypocrisy of their argument. The Liberal Democrats' view is that what is needed to improve the Bill is almost exactly the opposite of the critique in the Conservatives' amendment. We need a strong regulatory framework to counterbalance the power of the markets.

I remind Conservative Members that those who take part in a market want to sell more of their product at a higher price. They want to concentrate on profitable sales to customers who will pay promptly. A market player wants to exploit the lowest cost short-term resource that

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is available. All those are entirely legitimate things for a player in the market to want to do, but they are hostile to the preservation of the environment and to the development of protection and defence of social justice. We shall therefore have to examine the Utilities Bill and decide the extent to which it will help to modify the market, to achieve some of those very necessary ends.

Liberal Democrat Members believe that we can give a qualified and provisional yes to the Bill, but we also think that some of its provisions need to be strengthened.

We have to have a regulatory system that increases efficiency in use of the product. As I said in an earlier intervention, although the market will certainly ensure that the generation side operates efficiently and at the lowest cost, the very last thing that a market maker wants to do is ensure that his product is used efficiently.

The Bill will also have to ensure that the right fuel choices are made for the future. As hon. Members have said in the debate, although the Bill contains mechanisms to ensure that renewables play a more active part in the generation market, there are still considerable concerns about how they will operate. There are certainly concerns about the impact of the mechanisms on combined heat and power.

In the past 10 years, the market has helped the Government to meet their targets--although the more cynical might say that the market has defined what those targets should be by making its CO 2 savings in the switch from coal to gas. As hon. Members have already said, however, that dash for gas has its limits. Once we have dashed and all the coal is stopped, there will be no more CO2 savings to be made by letting the market rip.

Meanwhile, as has been pointed out many times, the nuclear sector of the generating market will drop out and, unless it can be replaced by renewables or some other low-carbon emission technology, the market will drive CO 2 emissions in the wrong direction. The Utilities Bill will have to lay the foundations for ensuring that that does not happen.

Mr. Gibb: Is the hon. Gentleman saying that the Liberal Democrats' energy policy is that, when nuclear power starts coming off stream as Magnox stations are decommissioned, they will regulate the system even more, and that that will address entirely the issues of what to replace nuclear power with and the huge increase in CO 2 emissions expected from 2020 onwards?

Mr. Stunell: It is perhaps fortunate for Liberal Democrat Members that we do not have the one-eyed, one-lever policy-making process operated by Conservative Members, who have thrown all their weight behind competition. It is utter fantasy to think that it is even remotely feasible that, by 2020, CO 2 emissions will be as low as they are now, let alone 10, 12.5 or 20 per cent. lower than now. The hon. Gentleman, who speaks for the official Opposition, cannot possibly be arguing that competition provides the means of meeting those targets.

Mr. Gibb: What is the Liberal Democrats' policy?

Mr. Stunell: If the hon. Gentleman is interested in that, I should be very happy to sell him a copy of the book that I published last September.

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We shall also have to ensure that the Bill provides the means of reaching the emissions targets that the Government have set themselves, first, in accepting the Kyoto targets, and, secondly, in establishing their own domestic target for 2010. The Bill will also have to establish a framework to give electricity generators some certainty for their investment plans beyond 2010.

The Bill will have to provide a framework to protect the weak and vulnerable in society. The hon. Members for Plymouth, Sutton (Mrs. Gilroy) and for Harrow, West (Mr. Thomas) have stated some of the necessities of achieving that goal.

How do we judge the Bill against those criteria? Although I share some of the concerns that have been expressed about the new electricity trading arrangements--NETA--I accept that they might well produce lower prices. Nevertheless, although I am not quite as sceptical as some Conservatives have been on the subject, it remains to be seen the extent to which those lower prices materialise. One consequence is clear: the new arrangements will make it significantly harder for new entrants and small players to enter the electricity generating market. It is also clear that those new entrants and smaller players will generally be the renewables and the combined heat and power players.

The Bill therefore seems to fall at the first hurdle, as it would seem both to inhibit and to promote the introduction of renewable generating capacity at the same time. I plead with Ministers to do what they can to join up their thinking, to ensure that the Bill is coherent in its policy aims and reflects fully what all Departments wish to achieve. In Committee, Liberal Democrat Members will make some detailed points and criticisms on those issues.

Liberal Democrat Members want regulatory guidelines that are tough in delivering environmental objectives and impose on the market some long-term objectives, which the market itself is very poor at adapting to voluntarily--bad money drives out good; short-termism drives out long-termism. If we want to achieve a good environmental outcome, we shall have to find a way of imposing on the market a framework that not only allows profitable operation, but achieves those environmental outcomes.

The regulatory guidelines need to be tough in securing the objective of the elimination of fuel poverty. The hon. Member for Plymouth, Sutton certainly spelt out some of the issues of fuel poverty, but there are other issues--such as how sufficient funding could be generated to tackle the national disgrace of fuel poverty. Other issues that have to be brought within the regulatory framework are warm homes, pricing and disconnections.

The regulatory system needs to be tough on greed. We must have a system that allows sufficient profit to be generated for investment, and we should allow sufficient head-room for companies and market participants to achieve the targets that are being established for them--no one could argue with either of those statements--but we have to have effective penalties for those who are greedy and those who fail.

In judging the Bill, we need to look beyond it. We have to consider the Government's long-term aims, and we have to have an idea of the firm action planned by the Government. That information is not in the Bill, and we should not expect it to be there. As the Bill is passed, however, please, may we ensure that none of the Bill's

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provisions will stand in the way of the longer-term objectives that the Government claim that they want to achieve?

The industry itself wants certainty, but it is not as fundamentally opposed to regulation as some Conservative Members would have us believe. The industry wants a sure and steady framework in which it will be able to take its investment decisions and develop its marketing strategies.

From that point of view, however, one regulatory framework is not a lot different from another. A regulatory framework that requires the industry to subsidise rural consumers is neither better nor worse than one that requires it to subsidise poor consumers. A regulatory framework that ensures the entry of new participants to create a competitive market with multiple participants is neither better nor worse than a regulatory system that insists on long-term investment decisions to bring new technologies to the market.

The industry is concerned not so much about regulation as about the uncertainty and the fickleness of Government policies, from whichever Department they may originate.

Liberal Democrat Members want to see evidence of joined-up thinking not only in the Bill, but beyond it. We should like to achieve an all-party consensus on the direction of the United Kingdom's energy policy for the next 20, 30 or 40 years. We should like a Bill that allows investment, but not excessive profit taking. We should like a Bill that allows the energy industry to be reshaped, but not simply on the basis of a little bit here and a little bit there.

When it comes to matching society's environmental objectives with its economic growth objectives, what we do with energy--how we control and develop it--will determine whether we are able to have one, the other, both or neither. If we do not get it right--this Bill gives us an opportunity to begin to get it right--it is highly likely that we will finish up with neither.

I want to give two cheers to the Bill, and there are many points that we will want to bring forward in Committee. I hope very much that the Minister and the Secretary of State will take our critical support in the spirit in which it is intended--to see good outcomes for Britain.


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