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20 Jul 2004 : Column 294
Energy Bill
Lords message considered.
8.35 pm
The Minister for Energy, E-Commerce and Postal Services (Mr. Stephen Timms): I beg to move, That this House does not insist on Commons amendment No. 10 to which the Lords have disagreed, and agrees to their amendments to the words so restored to the Bill.
We argued in both Houses that the three pillars of sustainable development—economic, social and environmental—are already covered by legislation. However, not everybody was convinced by the persuasive arguments that I advanced. We have listened closely to views from both Houses. I was especially impressed by the strong feelings expressed on Report by my hon. Friends. I am also aware that the sustainability duty has considerable cross-party support and that it has support outside the House, including from industry.
There is a widespread view that the current arrangements leave a gap. My hon. Friends have argued that if the duty can be made to work for the water regulator, why not for energy? The proposed amendment thus closely follows provisions in the Water Act 2003 and, for consistency, we are amending the Gas Act 1986 so that there is a similar duty in respect of gas and electricity.
I am pleased and relieved finally to be arguing that a sustainable development duty be added to those already imposed on the Secretary of State and the Gas and Electricity Markets Authority under the Gas and Electricity Acts, reflecting our strong commitment to sustainable development.
Mr. Laurence Robertson (Tewkesbury) (Con): I am amazed that the Minister's eloquence failed to persuade everybody. We support the amendment.
The Bill, which we support, has been greatly improved by work in another place; in particular, Lady Miller of Hendon, Earl Attlee and Lord Jenkin have done an incredible amount of work and have added provisions that have made the Bill even better. I do not intend to detain the House, so I will say only that the Government have our support for the amendment.
Brian White (Milton Keynes, North-East) (Lab): As I have been arguing for such a provision since the passage of the Utilities Act 2000, I am grateful to the Minister for proposing the amendment, which will be key to Ofgem's response to the Bill. Ofgem responded well to the regulatory impact assessment provisions of the Sustainable Energy Act 2003, so I am sure that it will respond equally well to the new duty set out in the Energy Bill.
I thank the Minister again for listening and for taking on board the views of his Back Benchers.
Mr. Andrew Stunell (Hazel Grove) (LD):
We, too, welcome this very important step back from the Minister's original position. We need to remember that a majority in Committee believed that the clause should stay in the Bill and that the Government insisted that it should come out. I am delighted that they have had
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second thoughts and that they are taking a much more rational approach to gas, water, electricity and, of course, sustainability, which is the key element of the strategy that was missing before. We very much welcome the Government's change of heart.
Mr. Colin Challen (Morley and Rothwell) (Lab): I echo the words of my hon. Friend the Member for Milton Keynes, North-East (Brian White) and thank my hon. Friend the Minister for his consideration of the words "sustainable development", which are very important because they are more concise and define more clearly what some of us who sit on the Labour Back Benches were always seeking: the proposed extra duty. That is to his credit. Indeed, I praise how he took us through the Committee, clearly showing a very good grasp of the brief, which has persuaded us in the end that we are now pursuing the right course.
Mr. Michael Weir (Angus) (SNP): I am sorry to break the love-in over the clause. I support the aspect relating to sustainability, but it seems to point to a contradiction in relation to sustainability that lies at the very heart of the Bill—a contradiction that my colleagues and I have mentioned on numerous opportunities.
This amendment relates to the duty of the Secretary of State and the Gas and Electricity Market Authority in relation to sustainability. That is fine in so far as it goes, but a large part of the argument about sustainability relates to renewable energy, particularly in the north of Scotland. The amendment would give GEMA a role in achieving sustainability, but I have serious concerns about the role of Ofgem, which has been mentioned already.
In Committee and on Report, I referred to transmission charges in the north of Scotland. The Minister may not be surprised to learn that that issue is at the heart of my concerns because those charges will have a huge impact on sustainability. As part of our preparation for the debates on Report, my hon. Friend the Member for Banff and Buchan (Mr. Salmond) and I met representatives of Ofgem to press our concerns about their policy on transmission charges. Three times during that meeting Ofgem's representatives were asked whether they supported the Government's targets for renewable energy; three times they refused to answer.
I can only conclude therefore that Ofgem is not interested in pursuing policies that would assist in establishing those targets. I ask the Minister just what effect the amendment would have on dealing with the regulators? How will GEMA
"contribute to the achievement of sustainable development",
as the amendment states, when the regulator seems to be acting in direct contradiction to the policy that is supposedly being pursued by the Government and, presumably, by the Secretary of State?
The problem goes further than that, however, because what Ofgem and the National Grid Company wish to pursue by means of locational charges will lead to a huge increase in transmission charges in northern Scotland. Given that clause 177 provides a sunset provision solely to help renewable generators with those charges, the economic viability of future renewable energy projects in the north of Scotland will be completely undermined,
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thus seriously damaging the only existing conventional generator there—the most efficient combined gas cycle plant in Europe.
At that meeting with Ofgem's representatives, I asked why they thought that the charges should be higher in the north of Scotland. They replied that they felt that generation capacity should be located nearer to centres of population because of the large number of applications for generating capacity in Scotland. I ask hon. Members to think about that for a moment in the light of the fact that, under the amendment, the sustainability objective will be imposed on the Secretary of State and GEMA.
I would put it to Ofgem that there were so many applications in northern Scotland because they were for renewable energy development and that it was the obvious and most appropriate area for such projects, as the Government recognise in clause 177. Ofgem, to be fair, agreed with that. The regulators accepted that renewable generators were seeking to set up in the area, which the Government recognise as suitable for such generation, but in pursuance of their own madcap economic theory, those regulators were seeking effectively to price the generators out of the market by imposing substantial transmission charges.
8.45 pm
Brian White: Does the hon. Gentleman accept that this was not included in Ofgem's terms of reference, so Ofgem was right to look at economic interests? With the amendment, it will have to take into account renewables and his argument will be completely different in future.
Mr. Weir: I do not accept that. Throughout the passage of the Bill there have been arguments about Ofgem in particular. My meeting with Ofgem left me extremely depressed. I do not think that it has any idea about the realities of renewable energy, that there is any support for renewable energy within Ofgem, or that the provision will make much difference. It will mean that projects will be sabotaged.
Paddy Tipping (Sherwood) (Lab): The hon. Gentleman makes an important point. Does he believe that Ofgem should be disestablished?
Mr. Weir: In its present form, Ofgem is not serving the move towards renewable energy well. In my discussions with its representatives, it seems to be intent on sabotaging that. Hon. Members may draw their own conclusions from that. If someone is going to set up a renewable energy generation system in the north of Scotland they will, at best, face a massive increase in transmission charges halfway through the life of that project. That would mean that Ofgem—if there is anyone on the Tory Benches, perhaps they should listen to this—wanted to see a massive expansion of energy production not in Scotland but in southern England. Perhaps we can envisage large wind farms across the Sussex downs, or tidal barrages in the English channel.
The amendment seeks to impose on both the Secretary of State and GEMA a duty to pursue sustainability, yet other provisions in the Bill and the work of Ofgem in particular will undermine that. That
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contradiction is at the heart of the Bill. Even with the amendment, I do not think that the clause will contribute to the achievement of sustainable development.
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