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Dr. Howells: On the Government side, we are always receptive to constructive arguments and to imaginative approaches to what are important issues.
The hon. Gentleman asked whether we were still on line for 5 per cent. It is a big challenge--I give him that--but it is do-able and the CSR will help a great deal. Essentially, we are trying to move the renewables from the margins to the centre of the market. That must be a good thing.
The right hon. Member for Bromley and Chislehurst (Mr. Forth) wanted to know more about amendment No. 81. It says that an order may provide that, to a specified level, under-achievement or over-achievement in a particular period of a supplier's obligation may be carried forward into a subsequent period--so-called banking and borrowing. I do not think that it is a fiddle. He will recognise that, sometimes, for example, a power station may be down for a time--an efficient one that does not spew out various pollutants into the air. The company that owns that power station may need a bit of time, going into the following year, to make up for the period when the power station was down, so the measure allows a bit of leeway at the end of the year. However, he is right to highlight the point because it must not be a big percentage of the obligation that the suppliers have. I hope that my saying that from the Dispatch Box will reinforce what he said--that when the Minister says something, it does matter.
Mr. Forth: When this Minister says something, it always matters. Therefore, I want to press him a little on two things. He has just touched on one of them. Is he satisfied that there does not appear to be any limit on either the percentage--therefore, that leaves it very open ended--or on the period? I am prepared to accept what he says about the power station example over a limited time, but the amendment, as I read it, appears to allow the possibility of such movements over almost any time. That does begin to look like fiddling.
Dr. Howells: Clearly, strict guidelines and time limits, where necessary, must be imposed by the authority.
There is no question about that. The right hon. Gentleman is right to raise the matter, but I am sure that he will agree that there must be some flexibility for companies--not too much; I agree about that.The right hon. Gentleman asked about amendments Nos. 85 and 86. Amendments Nos. 80 to 94 are pretty minor. They do not make substantive changes to the renewables power in the Bill, but make some technical adjustments and enable the provision to be more effectively applied.
On the specific measure that the right hon. Gentleman asked about, it provides that a different buy-out price may be set for different periods within the overall period of renewables order under clause 61, and that the buy-out price may be adjusted for inflation, which is important in case, suddenly, his party were returned to power and it became rampant again. To return to his earlier point, percentages and periods will be set in the statutory instrument.
Clause 58
Lords amendment: No. 73, in page 55, line 31, at end insert--
("( ) The Authority shall not impose a penalty on a licence holder under subsection (1) where it is satisfied that the most appropriate way of proceeding is under the Competition Act 1998.")
Mrs. Liddell: I beg to move, That this House agrees with the Lords in the said amendment.
Mr. Deputy Speaker: With this it will be convenient to discuss Lords amendments Nos. 74 and amendments (a), (b) and (c) thereto, 75 and amendment (b) thereto, and 76 to 78, 126 and 127, amendments (a), (b) and (c) thereto, and 128, amendment (b) thereto and 129 to 131, 183, 201, 219, 220 and 237.
Mrs. Liddell: Lords amendments Nos. 73 and 126 insert into the financial penalties provisions protection against double jeopardy in regard to the Competition Act 1998. They follow closely the terms of the protection against double jeopardy that already applies to licence enforcement orders in the utility statutes. They help to achieve consistency between the provisions inserted by this Bill in both the Gas Act 1986 and the Electricity Act 1989, and provisions that already exist. They also ensure that there is clarity on the interaction between licence enforcement provisions and Competition Act enforcement provisions.
Lords amendments Nos. 74 and 127 respond to concerns raised throughout the Bill's passage about the lack of a specific upper limit on financial penalties. The principal limit on the level of financial penalties remains the requirement for a penalty to be reasonable in all the circumstances of the case. We have had lengthy discussions in Committee and on the Floor of the House about the definition of "reasonable". The amendments, however, give licence holders extra comfort, in that they impose an upper limit on the amount of any financial penalty that can be imposed. That limit is 10 per cent. of the licence holder's turnover. Detailed provisions--for example, the definition of turnover--will be set out in an order made by the Secretary of State by affirmative resolution.
Lords amendments Nos. 76 and 129 relate to the 12-month time limit applying to the imposition of a financial penalty in cases in which there has been a contravention of an obligation, and no enforcement order has been made. If the amendments are accepted, no penalty may be imposed in respect of such a contravention unless, within 12 months of that contravention, the authority has issued either a penalty notice or a notice under section 28(2) of the Electricity Act 1989 or section 38(1) of the Gas Act 1986, as amended, seeking information for the purpose of its functions in relation to the imposition of financial penalties. When the authority issues a notice under either the Electricity Act or the Gas Act, no further time limits will apply to the imposition of a penalty.
The amendments will ensure that the authority has enough time to investigate alleged contraventions and to decide whether to impose a penalty. The authority will be able to determine the amount of any such penalty, particularly in large, complex cases in which it may have difficulty in obtaining information from the licence holder, or licence holders, concerned. That will mean that legitimate investigations of alleged contraventions will not run out of time as a result of licence holders taking too long in supplying the authority with information. That could well happen in the case of companies that did not wish to comply with licence requirements. The amendments remove any incentive for foot-dragging.
Lords amendments Nos. 77 and 130 are consequential on Lords amendments Nos. 76 and 129. Lords amendments Nos. 78 and 131 apply to the enforcement provisions of the Gas and Electricity Acts, as opposed to the proposed financial penalties provisions. Lords amendments Nos. 75, 128, 183, 201, 219, 220 and 237 are minor, technical and consequential amendments, replacing a reference to the commencement of a subsection with a more accurate reference to the commencement of a section of the Utilities Act 2000.
The Opposition have tabled some amendments--
It being Seven o'clock, the debate stood adjourned.
Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business) and Order of 25th October 1999,
- That, at this day's sitting, the Utilities Bill and the Postal Services Bill may be proceeded with, though opposed, until any hour.--[Mr. Pope.]
Lords amendments again considered.
Question again proposed, That the House agrees with the Lords in the said amendment.
Mrs. Liddell: The Government will resist the amendments that the Opposition have tabled to this group of Lords amendments. I shall speak to those amendments in due course.
Mr. Gibb: We have argued long and hard--on Second Reading and in Committee, as well as in the other place--for the Government to introduce a cap on the potential penalty and fines that the regulator can impose on the utility companies for failing to comply with licence conditions or breaching standards of performance obligations.
Limitless fines were one of the major concerns that industry had with the Bill. The problem with a penalty regime without a ceiling on the upper fine is that it adds
to the level of regulatory risk faced by the utility companies, and that that increased risk leads to demands from the providers of capital for a higher rate of return in compensation. As the industries that we are discussing are highly capital intensive, such demands constitute a significant hit to the profit and loss account, which inevitably will be passed on to the consumer either in higher charges or in charges that are not as low as they would otherwise be.We were delighted, therefore, that the Government eventually backed down and introduced, in the other place, a cap. However, that cap is still high. The fact is that a fine of 10 per cent. of turnover is still sufficiently high to wipe out completely any company that receives one. A significant portion of the regulatory risk will remain, notwithstanding the cap. Therefore, our amendment (a) seeks to reduce the 10 per cent. figure to 5 per cent.
Our next concern about the penalty regime hinges on the definition of turnover. The wording of the 10 per cent. turnover cap used in Lords amendment No. 74 echoes that used in the Competition Act 1998, which also has 10 per cent. turnover cap. However, we had to wait several months after implementation of that Act for "turnover" to be defined. When the statutory instrument defining turnover was finally produced, it added to rather than alleviated concerns.
In our amendments (b) and (c), we have sought to clarify the definition of turnover to avoid the same problems in this legislation. That will at least save the Minister for Competition and Consumer Affairs the inconvenience of having to produce another statutory instrument, speaking to another Committee on statutory instruments--he and I have already met in several such Committees--and swotting up on his briefings.
Our amendments will also remove the uncertainty over whether "turnover" means only the company's turnover in the United Kingdom, or whether any turnover derived from abroad should also be included. The amendments make it clear that the turnover should be derived only from the United Kingdom.
Our amendments also deal with the sleight of hand that the Government have perpetrated in the 1998 Act. In that Act, as the Minister knows, the cap for fines was set at 10 per cent. of turnover. However, the definition of turnover in the subsequent statutory instrument--which I think that he introduced--was such that it could be applied to up to three years of turnover. Therefore, at a stroke, he changed the 10 per cent. limit to 30 per cent. That is not an acceptable approach under the 1998 Act, and it certainly should not be an acceptable approach in the Bill.
Our amendment (c) defines turnover as a period not exceeding 12 months, so that the maximum fine in the Bill will remain at 10 per cent. and not be tripled by means of a subsequent statutory instrument.
I am disappointed--the Minister for Energy and Competitiveness in Europe will be pleased to hear--that the Government will resist our amendments. If they do, however, I shall try to persuade my colleagues to vote for them.
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