Third Standing Committee
on Delegated Legislation
Monday 10 February 2003
[Mr. Bill O'Brien in the Chair]
Draft Energy (Northern Ireland) Order 2003
Lembit Ípik (Montgomeryshire): On a point of order, Mr. O'Brien. I do not want to labour a point that we have made many times, but it will not have escaped the Committee's notice that again we have a double booking on Northern Ireland legislation. The statutory instrument before us is proceeding while the Police (Northern Ireland) Bill is being considered on the Floor of the House. I am not the only person who wanted to attend both proceedings, and it a source of continuing irritation to me and, I am sure, other hon. Members that the business managers persist in making it impossible, without cloning technology, for us to attend both. Inasmuch as you are able to do so, Mr. O'Brien, I should be grateful if you would convey to the relevant channels my annoyance and sheer frustration at being unable to scrutinise Government legislation properly because I cannot be in two places at one time. Perhaps you could give me some guidance on what I might do to get the Government to think about the matter.
Mr. John Taylor (Solihull): Further to that point of order, Mr. O'Brien. I shall not weary the Committee by reiterating the hon. Gentleman's comments, but I completely agree with him. I am in the same position.
The Chairman: Obviously, I have no control over the way in which business is arranged, but the point is on the record. I am sure that it will be taken note of and that the Whip will take on board the observations made.
The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Ian Pearson): I beg to move,
That the Committee has considered the draft Energy (Northern Ireland) Order 2003.
This order represents a significant milestone for the energy sector in Northern Ireland. It began as a Bill of the Northern Ireland Assembly and had started its Committee stage at suspension, following which it was converted into an Order in Council. I shall outline the background of the legislation and the consultation undertaken in Northern Ireland, before briefly considering its main provisions. Some adjustments were made during its conversion into an Order in Council, and I shall highlight the key changes for hon. Members.
The provisions in the legislation follow extensive consultation. In October 2001, the Department conducted a consultation on the way forward for renewable energy in Northern Ireland. Respondents to that exercise supported the creation of a renewables obligation scheme similar to that in Great Britain. In March 2002, the Department sought views on the direction of an energy strategy in Northern Ireland and priority issues for inclusion in legislation.
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Respondents agreed with the Department's view that the main priorities were reform of the energy consumer and regulatory arrangements and equalisation of gas conveyance charges through a process called postalisation.
The Assembly's Enterprise, Trade and Investment Committee also published in March 2002 its report on an extensive inquiry into energy issues. The current order implements a number of the recommendations in the Committee's report, including the new consumer representation arrangements, introduction of a renewables obligation and postalisation.
In June 2002, the Department issued a draft energy Bill and equality and regulatory impact assessments for consultation. In September 2002, the Executive approved the content of the legislation and it was introduced in the Assembly. Following suspension, I was asked to endorse the content of the legislation and to approve its conversion into an Order in Council. I had no hesitation in doing so as I believe that its provisions will benefit energy consumers and help Northern Ireland to meet the challenges of a changing energy environment.
David Burnside (South Antrim): Will the Minister confirm that one of the recommendations from his predecessor, my colleague Sir Reg Empey, and from the Committee was a low-cost borrowing provision in the legislation? Will he explain why that is not in the order and whether there have been objections from the Treasury or whether objections are expected?
Mr. Pearson: I shall discuss that in detail later, but I can tell the hon. Member for South Antrim (David Burnside) that the Assembly Committee recommended the introduction of a low-cost borrowing mechanism. Sir Reg Empey, who was the Minister at the time, explained to the Committee that that would probably have to wait for the energy strategy and not be part of the legislation. I have done my utmost to introduce a low-cost borrowing mechanism. Time has not allowed me to do so, but work is going forward on that, and I certainly intend that any future legislation will have the capability of introducing such a mechanism.
Lembit Ípik: Does the Minister feel comfortable proceeding with the order despite the exclusion of the buy-out point, which is one of the clear elements of the order, or should be?
Mr. Pearson: Absolutely. I feel comfortable in pursuing the legislation. The postalisation provisions are essential to Northern Ireland's future and the provisions covering licensing are important and urgent if transactions are to proceed in an orderly way. It is right to move the legislation forward.
I shall explain some of the details of the order. Part II establishes a new single authority for energy regulation to replace the existing separate roles of directors general for electricity and gas for Northern Ireland. The legislative provisions are modelled on those in Great Britain under the Utilities Act 2000, although the constitution of the authority will reflect the size and needs of the Northern Ireland market.
Part III of the order gives the new authority and the Department new objectives and duties. The principal
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objective for electricity reflects that which in place in Great Britain and will protect the interests of consumers, particularly vulnerable consumers, by promoting competition where appropriate. The principal objective for gas, which is still in an embryonic state in Northern Ireland, remains the development and maintenance of the gas industry in Northern Ireland.
Part IV of the order reforms the existing energy consumer representation arrangements by bringing responsibility for all energy consumer issues within the remit of the General Consumer Council for Northern Ireland. The structure differs from the self-standing energy council, Energywatch, in Great Britain, although many of the new functions and powers given to the council for its new role match those given to Energywatch.
Part V of the order alters the current licensing arrangements for electricity and gas. Those changes will enable the restructuring of energy business activities, as appropriate, to implement European obligations or improve the operation of such activities. During the conversion of the legislation into an Order in Council, significant changes to existing definitions will remove any doubt that electricity interconnectors can be licensed, and will enable separation and licensing of activities constituting participation in transmission of electricity and conveyance of gas.
Part VI of the order deals with new enforcement arrangements. Reflecting provisions in the Utilities Act 2000 in Great Britain, the regulatory authority is given the power to impose fines on licence holders of up to 10 per cent. of their annual turnover for breach of their licence conditions or other statutory obligations.
Provisions enabling the creation of a renewables obligation on all electricity suppliers to supply a certain proportion of their electricity from renewable sources are included in Part VII of the order. They are in line with the equivalent provisions in Great Britain ultimately to enable the trading of renewables obligation certificates throughout the United Kingdom. The order enables further changes to be made to the legislation to track changes made in Great Britain or to implement European obligations. Provisions have been added to the order to enable the implementation of a guarantee-of-origin scheme for Northern Ireland at the same time as it is coming into force for Great Britain. The scheme, which is a requirement of the renewables directive, obliges member states to recognise and accept certificates that verify the renewable energy source of qualifying electricity generated by any other participating European country, thereby enabling trading of such certificates.
Part VIII deals with miscellaneous and supplementary matters, including provisions to enable the extension of the gas network. The provisions have been amended following consultation with the gas companies and will facilitate ongoing discussions on the details of the postalised system. Part VIII gives the Department the legislative authority to make energy related payments, replacing a transitional
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savings provision in the Industrial Development Act (Northern Ireland) 2002. A new provision has been added to enable existing and future electricity and gas wayleaves to be made assignable, remedying a defect in the existing legislation.
I can assure the Committee that this substantial order enjoys widespread support in Northern Ireland. However, work on energy matters is by no means finished. Relatively high electricity prices in Northern Ireland are still a major cause for concern. As I explained to the hon. Member for South Antrim, it was not possible in the time frame for the order to introduce options to reduce those costs by including a possible legislative mechanism to reduce the cost of borrowing in the energy sector in Northern Ireland.
David Burnside: Will the Minister confirm that there is no national Treasury objection to such a proposal?
Mr. Pearson: I am not aware of such an objection. Various discussions have taken place between officials of my Department and of the Treasury, which have, by and large, been constructive. Obviously, were such a mechanism to be introduced, it would be a new mechanism in the UK context. As a result, wider issues of policy and principle are raised. I can assure hon. Members, however, that I remain fully committed to examining all options, not only the low-cost borrowing mechanism, to reduce energy costs. Work will continue on that in the coming months.