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27 Jan 2003 : Column 613—continued
Madam Deputy Speaker (Sylvia Heal): Order. May I bring the hon. Gentleman back to the content of the Bill, which is the restructuring of British Energy?
Dr. Ladyman: I certainly take your advice on board, Madam Deputy Speaker, but I simply point out in my defence that we are seriously debating whether to accept the Bill and, if we say no to the Bill tonight, we are saying no to British Energy and no to nuclear power, so the context in which we make that decision must be clearly understood.
I do not see a future for nuclear power unless we accept the Bill, and we must therefore ask ourselves whether we should make a one-off loan and provide new arrangements for the industry and whether that solves our problem, or whether we are simply going to find ourselves in the same position six months, 12 months or a few years down the line.
My concern is that although my hon. Friend the Minister for Energy and Construction addressed very well the need to support British Energy in the short term, what he did not do so well—presumably because he expects to have such a debate when the White Paper is published—is talk about the industry's long-term framework, in which nuclear power can flourish as one of the components of a balanced portfolio.
Brian White (Milton Keynes, North-East): Does my hon. Friend accept that there is a role for renewable sources and sustainable energy in the wider context?
Dr. Ladyman: I absolutely agree that there is such a role, but we can make a reality of that role only by distorting the marketplace in exactly the way—
Madam Deputy Speaker: Order. Once again, may I bring the hon. Gentleman back to the purpose of the Bill—the financing of British Energy?
Dr. Ladyman: I shall certainly do that, Madam Deputy Speaker.
The Bill will give British Energy a future. It minimises the expense that we can expect the Government to incur in guaranteeing that future. We must ensure that a way forward is built into the White Paper that will guarantee us a safe and consistent energy supply in the future and that will involve the least hardship for British Energy.
Points have been made about how British Energy got into this mess, and we have to accept that there have been considerable management failures, some of which my hon. Friend the Member for Ochil (Mr. O'Neill) mentioned earlier. I agree with him that management caused some very serious problems, but, equally, the Government must accept that NETA has had an impact on British Energy. Decisions about the rateable values of the company's sites have had an impact on its economic viability. Both those things need to be addressed if the Bill is to succeed in its aim of maintaining British Energy as a viable, going concern.
We must accept that the current wholesale price of energy generation—about £16 per megawatt hour—is lower than the economic price of generation for all electricity suppliers, not just the nuclear power industry. Indeed, British Energy's current price is very close to the wholesale price at about £17 per megawatt hour. However, it is not sustainable to have all forms of generation generating below the wholesale price, and I hope that my hon. Friend the Minister will address that in his winding-up speech.
My hon. Friend the Minister should accept that, although NETA has forced down the wholesale price, the retail price has not reduced so dramatically. If we take away the discounts that people in the domestic sector receive for changing their supply company and the short-term offers that some companies make, the retail price of electricity is about £66 per megawatt hour—four times the wholesale price. That seems a rather strange margin to allow the industry, and we need to consider how NETA operates, not only because of its impact on British Energy but because the whole energy industry is unsustainable at that price.
Apart from the rateable value of sites, which various hon. Members have already mentioned, we should recognise the fact that the nuclear power industry is the only form of generation that has to internalise the costs of waste and all the environmental costs. If we were to force the carbon-burning industry—whether clean coal, gas, or even including burning petrol in cars—to take account of its environmental costs, it would be by far the most expensive form of energy on the market today, and we have to judge the Bill's merits in that context.
The Bill is very much a short-term solution to British Energy's problems, but it will not stand alone. It must go hand in hand with other measures included in the White Paper to promote a balanced portfolio and ensure that this country's nuclear power industry has a future, so that we can continue to produce clean energy from nuclear sources, as well as developing the other forms of energy that are required.
We need a package of measures on top of the Bill to create a sustainable energy policy for this country, but at least the Bill is a good start. Opposition Members would be very unwise to vote against it because they will be judged in the long term by the impact that their action would have on British Energy's share value and on the environmental damage that, by implication, they would force on our country.
6.27 pm
Mr. John Horam (Orpington): I was very interested in the remarks made by the hon. Member for South Thanet (Dr. Ladyman) because he hit on one of the crucial points that none of the Front-Bench spokesmen have emphasised so far, which is that the whole energy industry cannot sustain the present prices. He quoted the figure of £16 per megawatt-hour, whereas £22 per megawatt-hour is needed for anyone to be profitable, but he must ask why prices are so low. Of course the answer is—
Madam Deputy Speaker: Order. Once again, may I remind all hon. Members that the Bill is about financial assistance to British Energy?
Mr. Horam: With due respect, Madam Deputy Speaker, the reason that British Energy is in this position is that it is not profitable because it has had to operate in a market where the prices are simply unsustainable. That is the reason why we are discussing the Bill today, and I am concerned about the operation of NETA, which the Government imposed about 18 months or so ago, and the prices are unsustainable as a result. Of course there are other reasons why we are in this position. I fully accept the Minister's point that British Energy's problems are not simply to do with prices.
Mr. Clapham: The hon. Gentleman makes a point about NETA, but does he accept that the way in which nuclear energy was favoured under the marginal pricing system of the pool is the reason why it was able to appear to be economic and that, when it had to face competition under NETA, it could not hack it?
Mr. Horam: That is a substantial point. The problem has been that we have gone from the pool situation, on which the hon. Member for Ochil (Mr. O'Neill) commented favourably, to the reverse situation in which no one can make any money at the current price. That is because we have too much capacity—I think that the Minister mentioned 22 per cent.—and because of the way that the NETA system operates. It is a brutal market system.
Richard Ottaway: Yet another reason is that the market has not been allowed to operate freely. The most uneconomic generators—the Magnox nuclear stations—are hopelessly unprofitable and are forcing prices down, and the market cannot therefore operate in a genuine way.
Mr. Horam: Whatever may be the case, the fact is that the Government brought in a system that is wholly predicated on a straightforward, simple, unaffected market system, leading to prices that are unsustainable, which, among other factors, has led to the present pass of British Energy. Nothing will change until something is done about the NETA system—that is the point that I want to get across.
The arrangements that the Government are currently introducing, as the Minister has argued, may be necessary, short-term palliatives to deal with a crisis situation. What he cannot escape, however, is the
Government's responsibility for introducing a pricing system that has led to this pass. That is the argument with which the Government must contend.In response to the arguments of the hon. Member for South Thanet, I agree that we need a balanced system with regard to the various types of energy supply. Not only do we need a balanced system but we need to take into account the social consequences, in terms of jobs, and the environmental consequences of our energy policy. That is extremely complicated, and not all of those factors can be taken into account in dealing with a short-term situation such as British Energy and its continuing performance.
That is why my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) was right when he teased out from the Minister his casual approach to the question of the White Paper. Waiting for that White Paper is like waiting for Godot—we have been waiting for months and months. The Committee that I chair, the Environmental Audit Committee, published a report on renewable energy last July in the expectation that some sort of White Paper would appear in the autumn. Autumn passed, December and Christmas came, we began to expect it in January or February, and we are now told that it may appear in February or March. While I respect the Minister's point that he would rather get it right than produce it too early, the way in which this debate is taking place is like "Hamlet" without the prince. We need to consider energy policy in the round, which the Government should also do before they make crucial decisions involving millions and potentially billions of taxpayer's money without any of us knowing where we are proceeding in terms of wholesale energy policy.
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