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(7)   Before making an order, the Secretary of State must consult—

(a)   the Authority;

(b)   the Council;

(c)   the fossil heating fuels suppliers to whom the proposed order would apply;

(d)   the generators of heat from renewable sources; and

(e)   such other persons, if any, as he considers appropriate.

(8)   In this section—

"fossil heating fuels" means coal, substances produced directly or indirectly from coal, lignite, natural gas, crude liquid petroleum, or petroleum products sold for the purposes of generating heat energy;

"natural gas" and "petroleum products" have the same meanings as in the Energy Act 1976;

"renewable heat sources" means metered sources of heat energy other than fossil fuel or nuclear fuel, but includes biodegradable waste;

"specified" means specified in the order.

(9)   An order under this section shall not be made unless a draft of the instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.

(10)   The order may provide for the Authority to issue from time to time, in accordance with such criteria (if any) as are specified in the order, a certificate to the operator of a renewable heat installation or to a renewable heat supplier.

(11)   A certificate is to certify—

(a)   that the operator of a renewable heat installation or in the case of a renewable heat supplier, a renewable heat installation specified in the certificate, has generated from renewable sources the amount of heat stated in the certificate; and

(b)   that it has been supplied to customers in Great Britain (or the part of Great Britain stated in the certificate).

(12)   If a heat supplier produces a certificate to the Authority, it is to count for the purposes of subsection (3) as sufficient evidence of the facts certified.

(13)   The order may provide that instead of producing evidence under subsection (3), an electricity supplier may discharge (in whole or in part) its renewable obligation (or its obligation in relation to a particular period) by making a payment to the Authority.

(14)   The order may make provision—

(a)   as to the sum which for the purposes of subsection (12) is to correspond to the supply of a given amount of heat;

(b)   for different such sums in relation to different periods;

(c)   for different such sums in relation to heat generated in different ways specified in the order and

(d)   for any such sum to be adjusted from time to time for inflation by a method specified in the order (which may refer to a specified scale or index or to other specified data of any description, including such a scale or index or such data in a form not current when the order was made, but in a subsequent form attributable to revision or any other cause and taking effect afterwards).

 
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(15)   The Authority must pay the amounts received to renewable heat suppliers in accordance with a system of allocation specified in the order.

(16)   The system of allocation specified in the order may provide for payments to specified categories of renewable heat supplier only.'.

New clause 20—Electricity to be exempted when determining electricity supplied—

'In section 32A of the 1989 Act, after subsection (1)(h), insert—

"(i)   that electricity generated by a generating station producing a heating or cooling effect in association with electricity shall not count towards the amount of electricity supplied by an electricity supplier that is subject to the obligation.".'.

New clause 21—Further amendment of the 1989 Act relating to combined heat and power—

'In section 32A of the 1989 Act, after subsection (1), insert—

"(1A)   For the purpose of securing that the amount of electricity generated under the obligation is not reduced by the exercise of powers contained in subsection (1)(i), the Secretary shall have the additional power to vary an order under section 32 so as to vary the obligation requirement, based on either the previous calendar year's production of electricity generated by the combined heat and power process or else by his estimate of that which will be produced by the same process in the current year.".'.

Government amendment No. 1

Amendment No. 20, in page 64, clause 81, leave out lines 2 to 24 and insert—

'(1)   The main duties of the Secretary of State and the Gas and Electricity Markets Authority (in this Act referred to as "the Authority") in carrying out their respective functions under this Part are—

(a)   to protect the interests of consumers in relation to electricity conveyed by distribution systems, wherever appropriate by promoting effective competition between persons engaged in, or in commercial activities connected with, the generation, transmission, distribution or supply of electricity or the provision or use of electricity interconnectors;

(b)   to carry out their respective functions under this Part in the manner which he or it considers is best calculated to further the duty set out in paragraph (a), having regard to—

(i)   the need to secure that all reasonable demands for electricity are met, and

(ii)   the need to secure that licence holders are able to finance the activities which are the subject of obligations imposed by or under this Part, the Utilities Act 2000 or Part 3 or 4 of the Energy Act 2004; and

(c)   to ensure that there is no detriment to the promotion of—

(i)   renewable energy, and

(ii)   sustainable development.'.

Government amendments Nos. 2, 13, 14 and 8 to 10.

Mr. Timms: I hope that we will be able to make brisk progress to cover the topics before us. I shall begin by speaking to new clause 4 and the Government amendments in the group, and I hope to catch your eye later, Mr. Deputy Speaker, to speak to amendments and new clauses tabled by other hon. Members.
 
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There is no doubt that microgeneration has an important role to play in reducing greenhouse gas emissions. As the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Edinburgh, South (Nigel Griffiths) said in Committee, we are already supporting microgeneration to the tune of £35 million through our funding of the major photovoltaic demonstration programme and the clear skies initiative, which provide grants towards the cost of residential or community renewables projects. The distributed generation co-ordination group, which was established by the Department of Trade and Industry and the Office of Gas and Electricity Markets, already specifically examines the integration of microgeneration. We have recently legislated to make it easier for small renewables generators to receive renewables obligation certificates so that they may benefit from such arrangements.

The clause on a strategy for microgeneration that was originally proposed in the other place caused us some difficulties. For example, the inclusion of a duty to set specific targets for the small-scale generation of electricity could have conflicted with other commitments in the White Paper. However, it is clear that there would be distinct benefits if we were to have a clear strategy for microgeneration. Lord Ezra, among others, put it to me that a legal duty to establish a strategy would give confidence to the industry and potential investors, and I accepted that argument before I tabled new clause 4. The provision will impose a clear duty on the Government to publish a strategy on microgeneration within 18 months of its commencement and then to take steps to ensure its implementation.

Government amendment No. 10 is a consequential amendment that will ensure that the microgeneration strategy does not cover Northern Ireland, given that energy is a devolved matter. However, we will remain in close touch with Northern Ireland colleagues as we take the work forward.

On Government amendments Nos. 1, 8 and 9, I do not think that there is much difference between the intention of several Members of this House and the other place and what the Government want to deliver. The aim of the original draft of clause 81 and amendment No. 20, which was tabled by my hon. Friend the Member for Brighton, Kemptown (Dr. Turner), was to ensure that there was a commitment to the development of renewable energy sources and to the principles of sustainable development. I agree with those aims, but if clause 81 remained in the Bill—even as amended by amendment No. 20—it would cause serious problems.

When we published the Green Paper "A Fair Deal for Consumers" in 1998, we made it clear that protecting the interests of consumers would be at the core of independent economic utility regulation, and that was reaffirmed in the Utilities Act 2000. Clause 81 represents a drastic move away from that principle, so it would not be appropriate to adopt it without the minimum requirements of consultation and a full regulatory impact assessment. I argue that Ofgem's current principal objective provides the right balance between existing and future consumers while maintaining the competitive position of the industry. One problem is that clause 81 would be likely to lead to higher electricity
 
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prices, which would increase the problem of fuel poverty. Alan Asher, the chief executive of Energywatch, said that the clause would

"have grave consequences for consumers."

We have delivered a long-term framework that will allow investments to be made with confidence, including those in renewable energy.

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