Examination of Witnesses (Questions 435-439)|
TUESDAY 20 NOVEMBER 2001
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 viewI 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 werewhat 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
(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.
- So the link works both ways, in a sense?
(Mr Bucknall) Yes.