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Mr. Crispin Blunt (Reigate) (Con): While the right hon. Lady is making clear the value of the competitive market, will she also tell us that that competitive market has lifted far more people out of fuel poverty than her Warm Front initiative?

Ms Hewitt: The significant fall in electricity prices resulting from our reforms of the previously rigged market have indeed helped many low-income households out of fuel poverty, as have the substantial improvements in low-income families' incomes resulting directly from benefit improvements and the tax credits introduced by my right hon. Friend the Chancellor of the Exchequer. All that is in addition to the Warm Front programme.

Let us consider what happened last winter. The House will remember that at the beginning of the winter, just before Christmas and subsequently, we continually heard from various prophets of doom that there would be a winter of black-outs. [Interruption.] No, we did not hear that from the hon. Member for Eddisbury (Mr. O'Brien), but we heard it from many people who were extensively quoted in the press.

What actually happened was that early in the winter, National Grid Transco signalled its prediction of the plant margin that might be available. The result of that clear information was that generators brought mothballed plant back, in response both to the NGT signals and to rising prices. Capacity increased, the lights stayed on and the scaremongers were proved wrong.

Mr. Martin O'Neill (Ochil) (Lab): My right hon. Friend is to be congratulated on getting the mothballed plant into place, but the only problem—or perhaps I should say the advantage—was that it was never tested, because last winter was a good winter. It cost money for the companies to hold that hitherto mothballed plant in readiness for dramatic drops in temperature. How can we encourage them to do the same next winter? I hope that, again, it will not be cold, but the companies will still have the expense of keeping the kit ready for immediate switch-on.

Ms Hewitt: My hon. Friend makes an important point. As that mothballed plant, which had been
 
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withdrawn in response to low prices, was brought back on stream, the margin was about the same as it had been in previous winters. That was the market operating properly.

I am concerned that as drafted, clause 1, which was introduced in another place, undermines the principle of properly working markets and independent regulation. We are therefore working with the energy industry to determine the best way forward. Members may have noticed a letter of 26 April to the Financial Times from the chief executive of Centrica and the managing director of British Gas. They said that what is certain is that if the Government change the rules now, regulatory risk would increase and potential investors in new capacity, including British Gas, would reconsider.

Ms Joan Walley (Stoke-on-Trent, North) (Lab): Irrespective of the changes and the discussions that my right hon. Friend is having on clause 1, can she assure the House that she will speak to the Association for the Conservation of Energy, which is obviously very concerned about this issue?

Ms Hewitt: If ACE has not already been part of those discussions, I am happy to give my hon. Friend that assurance.

Part 4 of the Bill contains a number of provisions to promote competition in the energy market. Chapter 1 establishes a single wholesale electricity market for Great Britain—British electricity trading and transmission arrangements, or BETTA—which will provide access to a larger market for all generators. That is especially important to those in Scotland, where capacity already outstrips demand by 70 per cent., and where many of the new renewable generation projects are being built. But the new system will also help consumers: we estimate that Scottish customers' electricity bills should fall by some £13 a year on average.

Chapter 2 implements European electricity and gas legislation—

Paddy Tipping (Sherwood) (Lab): Prices have fallen in real terms for many years, but the renewables obligation, the need to rewire Britain, emissions trading and energy efficiency will all add to costs. Is it not true that the days of relatively cheap power have gone, and that we need to think through the social, economic and political cost of increasing prices?

Ms Hewitt: As my hon. Friend says, energy prices have fallen very significantly; in most cases, they are at a 20 or even 30-year low. We have to ensure that a market framework is in place—the White Paper made this case in some detail— that gives proper signals about the cost of environmental pollution, which is why we are so committed to the principle of the European emissions trading scheme. We also have to ensure much more investment in, and emphasis on, energy efficiency, which we all accept is by far the cheapest and most effective way of achieving our environmental, fuel poverty and security of supply objectives.

Mr. Andrew Stunell (Hazel Grove) (LD): Will the Secretary of State give way?
 
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Ms Hewitt: I shall give way one more time on this point and then I will make some progress.

Mr. Stunell: I am very encouraged to hear the Secretary of State's comments on energy efficiency, but can she explain, therefore, why the energy efficiency targets published last week reduced the original figures, rather than maintaining or increasing them?

Ms Hewitt: I have already dealt with our determination to ensure that we make progress on energy efficiency, in response to an intervention from the hon. Member for Lewes (Norman Baker).

Chapter 2 implements European electricity and gas legislation and, crucially, ensures fair access for third parties by extending the current licensing regimes to the electricity and gas interconnectors that will become increasingly important as we diversify and become dependent on imported gas supplies. Chapter 3 provides for an energy administration regime to be available in the event of the actual or threatened insolvency of a protected energy company.

Chapter 4 provides for a mechanism for appeals to the Competition Commission against decisions of the Gas and Electricity Markets Authority—a key outcome of our consultation with industry. That will deliver greater accountability without unduly increasing regulatory uncertainty or delay. But the mechanism is tightly constrained to prevent trivial and vexatious appeals, involving a tightly defined process to ensure a swift outcome. The remaining clauses in chapter 4 and part 5 cover a number of smaller market-related items.

I return to the point that my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) made about clauses 100 and 101, which deal with shipping. We do indeed intend to retain the substance of those clauses. We are considering whether they need to be amended to make them work in practice, and we shall of course reflect on the Transport Committee's recommendations.

The second main area of the Bill deals with renewable energy. Every developed country is turning to renewable energy technology to deal with the increasingly urgent problem of climate change. Renewable energy undoubtedly offers huge business opportunities, as well as being a way of addressing an urgent environmental imperative.

Mr. Michael Jack (Fylde) (Con): I was personally delighted to discover the terms of clause 128 on renewable transport fuel obligation, because the clause reflects exactly the line that I put to the House a year ago when I spoke about the development of a biofuels industry. Does the Secretary of State have any intention of exercising the powers in the clause, according to which, she

"may, by regulations, introduce a renewable transport fuel obligation."?

Is it her intention so to do?

Ms Hewitt: In association with my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs and her colleagues, we are looking into that matter. The right hon. Gentleman made an important point last year, and we certainly believe that there is the possibility of that power being extremely valuable in future. We are looking further into the detail at present.
 
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I stress that, although we are making progress on renewable energy, we start from a very low base, particularly by comparison with some of our European colleagues. In 2002, less than 2 per cent. of the UK's electricity was generated from renewable sources, so hitting the target of 10 per cent. by 2010 will require about 10 GW of renewables regeneration capacity.

Dr. Desmond Turner (Brighton, Kemptown) (Lab): There has been intense debate about the performance and innovation unit report and the White Paper. The expectation in many quarters was that the legislation arising from that would make considerable advances in the deployment of renewable energy. I have to say that, per se, this Bill contains little that will contribute to the more rapid deployment of renewable energy. Will the Secretary of State tell us whether the Bill represents the last word on Government policy, or can we look forward to a further Bill that will actually drive renewable energy?

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