Examination of Witnesses (Questions 560-567)
MR CALLUM MCCARTHY, MR JOHN NEILSON, MR NICK SIMPSON AND MR JOHN SCOTT
TUESDAY 30 APRIL 2002
560. We accept that entirely.
(Mr McCarthy) It would be enormously helpful if the Government could identify and act upon those externalities.
561. It has not done so yet in your view.
(Mr McCarthy) It is manifest that it has not done so.
562. Therefore, if you are to have those externalities properly identified it must take some action.
(Mr McCarthy) I would very much favour those externalities being identified, costed and actually internalised.
563. This is purely speculative and perhaps a little of personal interest. Given your current approach and given your current legislative framework within which you have to operate, if you had to face this situation would you have developed the hydro generation in Scotland in the places that it now exists, which as you probably know exports a substantial amount of energy out of those areas?
(Mr McCarthy) I am sorry, I do not know enough about the history of
564. It seems to me that the development of hydro power in Scotland would never have taken place if you had adopted the same approach.
(Mr McCarthy) I am not sure if that is true. It would depend on whether they were good investment opportunities at the time. I am sorry, I do not know what the costings were at the time. I am not trying to avoid the question, I simply do not know the facts that would enable me to answer it.
565. I recently had some problems with my heart, I was having some tests done and my cardio surgeon, whatever they are called, explained to me that they do two kinds of test, one when you are lying down and the machine is idling, as it were, and another kind of test when you are exercising. It is very efficient, the pumping machine, when I am idling, as it were, but not quite so efficient when I am working. I wonder if the same kind of rationale applies to your brief, that if we did not consume energy we would be doing a fine job but unfortunately we do because we have to do real things. I find there is something odd about your responses to the questions that we have been asking, a kind of casually engineered avoidance of the point, which is a very tight rationale which I understand but does not offer much hope for a solution.
(Mr McCarthy) This has become a slightly philosophic discussion.
566. Yes, it has. I have listened to the questions, they have all been very tight questions, and we have had some very tight, to put it gently, responses from your good selves but I do not think we have made a lot of progress.
(Mr McCarthy) Chairman, can I give the example of why Ofgem does take the rather careful view that it takes. Suppose five or ten years ago Ofgem, or its predecessor, had taken a view on dirty coal and had said that unilaterally we believed action should be taken to make British coal much more expensive and that had the result of closing down the British coal industry, I think there would have been many people, and I would very strongly have agreed with them, who would have regarded that as our very significantly over-stepping our brief. It is because of questions like that that we are very careful to try and discharge our responsibilities within our statutory responsibilities, to point out the issues that arise and not in a sense of trying to pass the buck but in a sense of ensuring that we do not over-step the mark but also to identify the issues to try and push them in the direction of the people who should take them.
567. I think that is a very reasonable point of view but I think what Mr Best is really saying is that maybe the system you are operating is very good for a mature market but in the rapidly changing situation which we face, not only as a result of global energy changes but also of Government policy, rightly or wrongly, it may not be the best regulatory system.
(Mr McCarthy) All I would say is we believe that it has the prospect of adjusting to very big changes and that we are working very hard to ensure that those changes can be made. The whole of the work on embedded generation which we are doing is designed to ensure that if other things happen we have actually made a system which will accommodate them, a system where the lights stay on and there is security of supply.
Chairman: Thank you all very much indeed, that was a very interesting session.