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Clause 9

Objectives and duties under 1986 Act

Lords amendment: No. 12, in page 6, line 24, at end insert
("or the Utilities Act 2000")

Mrs. Liddell: I beg to move, That this House disagrees with the Lords in the said amendment.

Mr. Deputy Speaker: With this we may consider the following: amendment in lieu thereof, Lords amendments Nos. 13 and 14, 15 and amendment in lieu thereof, and 16, 17, 228, 234, 235 and 241.

Mrs. Liddell: I do not want to delay the House unduly. Amendment No. 12, together with amendments Nos. 14, 15 and 17, clarify what is meant by the functions of the authority and the Secretary of State for the purposes of clauses 9 to 11 and 13 to 15. They also clarify what is meant by activities subject to obligations for the purposes of the finance duty in sub-paragraph (2)(b) of clauses 9 and 13.

Clauses 9 to 11 and 13 to 15 contain obligations that relate to the functions of the authority and Secretary of State. Clauses 9 and 13 set out their principal objective and general duties; clauses 10 and 14 oblige the authority to have regard to social and environmental guidance, and clauses 11 and 15 contain important obligations concerned with health and safety.

Following Royal Assent, the functions of the authority and the Secretary of State will be largely contained in the amended Gas Act 1986 and Electricity Act 1989, but both will also have functions under stand-alone provisions of the Utilities Bill--that is, provisions that do not simply amend the existing Gas and Electricity Acts. For example, clause 4 requires the authority to prepare, consult on and publish a forward work programme, and clause 26 empowers the authority to publish a notice issued by the consumer council setting out its reasons for refusing to supply information.

5.15 pm

The amendments make it clear that references to the functions of the authority or the Secretary of State in clauses 9 to 11 and 13 to 15 relate to their functions under the provisions of the Bill, as well as to their functions under the amended Gas Act 1986 and Electricity Act 1989.

Similarly, the amendments make it clear that, for the purposes of the finance duty in subsection (2)(b) of clauses 9 and 13, the reference to the activities of licence

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holders that are subject to "obligations" extend to stand-alone obligations under this Bill, as well as to obligations under the amended Gas Act 1986 and Electricity Act 1989.

Amendments Nos. 13 and 16, which were divided on in another place, would place the authority and the Secretary of State under a duty to exercise their functions in the manner that they consider best calculated to secure a diverse and viable long-term energy strategy. The authority and the Secretary of State must, as part of their primary duty, consider the needs of future, as well as existing, consumers. That requirement necessarily imports longer-term thinking about security of supply into their processes.

We accept that many people think that it would be desirable to make this even clearer in the Bill, and the Government are therefore prepared to accept the amendments.

Let me deal briefly with amendments Nos. 228 and 235, to assist the House. Each of those repeal provisions of the Gas Act 1986, which are replaced by equivalent provisions contained in the Bill. Amendment No. 228 repeals the latter half of section 47(7) of the Gas Act, which is the equivalent of paragraph 10 of schedule 1 to the Bill. Amendment No. 235 repeals paragraph 15(2) of schedule 7 of the Gas Act, which is the equivalent of clause 5(9) of the Bill.

Finally, amendments Nos. 234 and 241 repeal spent provisions of the Gas Act and the Electricity Act respectively, which are concerned with the compulsory purchase of land in Scotland.

Mr. Gibb: The Bill started life as the Department of Trade and Industry's great flagship Bill, with 134 clauses and a new regulatory regime for all four utilities--gas, electricity, telecommunications and water. On Second Reading, the Secretary of State introduced the Bill in glowing, almost adulatory terms. He said:

The Bill is forward-looking. It sets out a new framework for utilities regulation that is fit and appropriate for the 21st century.


The Bill puts utilities regulation on a sure footing for the 21st century, and is good for consumers, good for competition and good for the utilities.--[Official Report, 31 January 2000; Vol. 343, c. 795.]

That was on 31 January but, by 2 March, it was clear that, for the telecommunications industry and the water utilities, the Bill was bad for consumers, bad for competition and bad for the utilities. That is why both water and telecommunications were withdrawn from the Bill in a humiliating admission of incompetence by the Government, especially the Secretary of State.

I warned the Minister in Committee that there would be 900 amendments, not 1,000, as she said. In the event, there were more than 600. If I exaggerated, I did so only slightly. The Government made strenuous efforts to reduce the number of amendments by merging some of them to get the number down to 600.

Mrs. Liddell: Perhaps I should be delighted that the hon. Gentleman has joined us, because I understand that

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he was an accountant in a previous life. If he thinks that the difference between 600 and 900 is slight, I am glad that he never did my tax returns.

Mr. Gibb: It is slight in this context. Huge efforts were made by civil servants to redraft amendments to ensure that they conformed with that figure.

Mr. Stunell: Does the hon. Gentleman agree that, whether the discrepancy in his accounting is large or small, it is not as great as chopping the Bill in half and adding back 600 bits?

Mr. Gibb: The hon. Gentleman makes a good point, especially as those 600-odd amendments were to a Bill of 134 clauses. The Government could almost have started again with more efficiency than just accepting 600 amendments, the vast majority of which dealt with poor drafting and poor policy analysis. I do not wish to be unkind, but it became abundantly clear in Committee that the Ministers were not up to speed with what was going on; they were certainly not driving the policy forward.

This flagship Bill, which was part and parcel of the Government's so-called modernisation programme, has become a huge embarrassment to them, and the House even considered referring it back to Committee. It started as one of those eye-catching initiatives with which the Prime Minister likes to be personally associated, but it has finished up as an example of how not to legislate. Even the Secretary of State, who is absent today, is trying to avoid being associated with it.

The essence of the Bill is to change the role of the regulator from that of an economic regulator to one of regulating for the sake of it. The gas and electricity regulators were put in place when the industries were privatised in 1986 and 1989 to deal with the fact that they were effectively monopolies and to ensure that those monopolies did not exploit their position. They were also charged with promoting competition--a role that they have carried out in an exemplary fashion during the past 11 or 14 years. The retail prices index minus X formula applied by the regulators has given the industries huge incentives to cut costs, increase efficiency and become more customer focused. Electricity and gas prices have fallen by 30 per cent. in real terms since privatisation and huge competition exists in the gas and electricity industries.

In 1988, when the Prime Minister led for the Opposition in opposing the privatisation of electricity industry, he said:

outside of the Conservative party . . . it is barely in issue that prices will rise because of privatisation.

The truth is that they have fallen. On competition, he said:

I would have thought that it was . . . virtually impossible that anyone would build a power station and invest hundreds of millions of pounds, unless they received a guarantee covering the capital cost, the fuel cost and, probably . . . the operating costs, too . . . the idea that we will have an influx of power stations, all competing on the grid, is nonsense.--[Official Report, 12 December 1988; Vol. 143, c. 681-84.]

The truth is that there has been an influx of new power stations, all of which are in competition. There are 27 new power stations, and 50 new independent power producers have entered the generation market since privatisation with a total market share of 21 per cent.

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Under the Bill, the Government are changing the role and obligations of the regulators. That role would also be amended under the Lords amendments. It is important to understand the philosophy behind the Bill. It is set out in a pamphlet, entitled "Regulating in the Public Interest", written by Dan Corry in 1994. Some hon. Members might not be aware that Dan Corry is one of the Government's huge army of special advisers. He said that his pamphlet

tries . . . to take us back to the reasons that we have regulation in order to see whether this leads us towards a different vision for the way forward.

Interestingly, he continued:

Once we accept that regulation is here to stay, we are into the world of how we should use it. This is a classic issue of interventionism in the workings of the economy.

Sir Michael Spicer (West Worcestershire): I declare an interest as president of the Association of Electricity Producers. Does my hon. Friend agree that the situation is even worse than he suggests because the concept of social regulation will replace that of economic regulation and because the system that will replace the existing markets system is largely contract based and anti- competitive in many respects?

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