Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 435-439)




  435. Good evening. I am not sure who is wanting to speak; perhaps, Mr Lescoeur, you could introduce your colleagues?

  (Mr Lescoeur) Thank you very much, Mr Chairman. The Electricity Association is the trade association for the UK's major electricity generation, transmission, distribution and supply companies. The Electricity Association represents the UK industry at both a national and international level. And today, David Porter, Director of Policy and Communication, from the Electricity Association, along with three Board members of the Electricity Association are represented; Simon Bucknall, from Scottish Power, Director of Regulation, Robert Armour, Director, Corporate Affairs and Company Secretary of British Energy, and myself, Chairman and Chief Executive of London Electricity.

  436. Thanks, Mr Lescoeur. Could we maybe start, talking about the continental gas market. Perhaps I made one or two less than complimentary remarks about the behaviour of some of your fellow countrymen within France, I have to add, as regards the liberalisation of the gas market in Europe and the obstacles which are being placed in our way to secure cheaper gas prices and greater competition. What is your view—I am asking you and your colleagues about this, and you are now able to see it from the other side of the Channel, as it were—what is your view of the state of play, as far as progress in the liberalisation of energy markets within continental Europe?

  (Mr Lescoeur) Before David maybe expands on that, I would, of course, mention the fact that the electricity industry in this country is more and more interested in gas, not only at the generation level but also in selling gas to domestic customers and customers in this country.
  (Dr Porter) The UK electricity industry is, of course, now exposed to the continental price of gas because of the Interconnector, and it is a concern to us that this has led to a significant increase in the price of gas, given our dependence on gas as a generation fuel. However, we welcome moves towards liberalisation of gas markets within the EU, and the Electricity Association has been pressing hard for this, and appreciates in particular the efforts of the UK Government in pressing, in Brussels and elsewhere, for faster and deeper liberalisation, and we are encouraged that the plans now are for both electricity and gas markets to be, hopefully, fully liberalised by 2005. We are concerned, both within the EU and outside, that there are areas where monopolies exist which are fairly resistant to liberalisation, and we simply encourage the UK Government to continue to press for liberalised markets throughout Europe, as we become more and more dependent on gas supplies coming from rather long distances away. But we are not particularly concerned about imports per se, mainly that imports should be supplied via liberalised markets.

  437. Do you see, if there are problems with these liberalised markets, there being a slowing down in the commitment to gas-generated electricity, or gas-fired power stations, and, if you do, do you think there will be any impact on prices?
  (Dr Porter) I think that is very much driven by the market, and the market responds in all sorts of ways. One of the other witnesses this morning pointed out the small example of Powergen recently deciding to substitute some coal-fired generation for gas-fired generation. So we are great believers in the market, and we think that the market will continue to deliver. Obviously, if the price of gas does continue to increase, yes, that must have an impact on electricity prices, eventually.

Sir Robert Smith

  438. I just wanted to clarify the gas pricing on the continental market, because the justification for the price rise was the link with oil, the sort of layman's point was put; does that mean that, given that OPEC are now struggling to keep the price up, the price of gas will be falling in continental Europe, and therefore the link will actually bring our prices down?
  (Dr Porter) I hope so.
  (Mr Bucknall) I think there is some evidence that gas prices, certainly in the Eurozone, are softening at the moment, in response to the drop in oil prices.

  1. So the link works both ways, in a sense?
      (Mr Bucknall) Yes.

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