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Energy Bill [Lords]

Energy Bill [Lords]

Column Number: 395

Standing Committee B

Thursday 17 June 2004


[Mr. Jonathan Sayeed in the Chair]

Energy Bill [Lords]

8.55 am

Clause 118

Discharge of renewables obligation in Great Britain by payment

Brian White (Milton Keynes, North-East) (Lab): I beg to move amendment No. 1, in

    clause 118, page 94, line 33, after 'day', insert 'within the relevant period'.

The Chairman: With this it will be convenient to discuss the following:

Amendment No. 2, in

    clause 118, page 94, line 33, at end insert—

    '(1A) After section 32(8) of that Act, insert—

    ''(8A) In this section and section 32C 'the relevant period' means the period that—

    (a) begins with the passing of the Energy Act 2004, and

    (b) ends four years after the coming into force of section 32D.''.'.

Amendment No. 3, in

    clause 118, page 94, line 38, after 'obligation', insert 'during the relevant period'.

Amendment No. 4, in

    clause 118, page 95, line 2, after 'day', insert

    'and ending no later than the last day of the relevant period'.

Amendment No. 5, in

    clause 118, page 95, line 22, at end insert

    'provided that any such period shall end no later than the last day of the relevant period'.

Clause 118 stand part.

Amendment No. 6, in

    schedule 23, page 274, line 11, at end insert—

    'Section 32C.'.

New clause 1—Discontinuation of provisions for discharge of renewable obligations by payment—

    '(1) In section 32(1) of the 1989 Act (renewables obligation), for ''32C'', substitute ''32D''.

    (2) After section 32C of that Act insert—

    ''32D Replacement of provisions for payment as alternative to complying with order under section 32

    (1) The Secretary of State shall, within a year of the passing of the Energy Act 2004, lay before Parliament a report on proposals for methods that promote the objectives of the renewables obligation in circumstances where the provisions of an order under section 32 are not complied with other than the method of payments provided for under section 32C.

    (2) Section 32C shall cease to have effect at the end of the period of four years after the coming into force of this section.''.'.

New clause 22—Compliance with sections 32 to 32C of the 1989 Act—

    '(1) In section 25 of the 1989 Act (orders for securing compliance), in the definition of ''relevant requirement'' in subsection (8), for ''32C'' substitute ''32D''.

Column Number: 396

    (2) In sections 32A(4) and 32A(7) of that Act (which relate to information powers and other functions of GEMA), at end insert ''or to any obligation arising under section 32D''.

    (3) After section 32C of the 1989 Act, insert—

    ''32D Prevention and remedying of default in compliance with sections 32 to 32C

    (1) An order under section 32 may provide that an electricity supplier must pay such a sum to the Authority, corresponding to the supply of a given amount of electricity by the supplier in a particular period, as may be—

    (a) necessary to make good in aggregate so much of any unrecovered default in the payments referred to in section 32C(1) by other suppliers in relation to previous periods as may be determined by or under the order; and

    (b) determined by the Authority and published at least so long before the start of that period as may be specified in the order.

    (2) The supplier shall make the payment to the Authority no later than the specified day in relation to that period (''the payment date'').

    (3) Any sums received under subsection (1) shall be paid by the Authority to electricity suppliers in accordance with a system of allocation specified in the order.

    (4) The system of allocation specified in the order may provide for payments to specified categories of electricity supplier only.

    (5) Where the Secretary of State is satisfied that it would be proportionate to do so, and that competition in the supply of electricity would not in consequence be unduly distorted, the order may also make provision as to the form and extent of any measures which a supplier is to take for the purpose of securing, in whole or in part, its discharge of the renewables obligation.

    (6) The order may provide that any figures necessary to make or provide for the derivation of any calculation under this section can be estimated by the Authority or the Secretary of State.

    (7) The reference to ''make good'' in subsection (1) may include adjustment of sums upwards to reflect accrual of interest, at a rate determined by or under the order, between the times of the defaults in relation to previous periods and the payment date.

    (8) This section is without prejudice to the enforcement powers available to the Authority in relation to any provision of section 32 to 32D that is a relevant requirement within the meaning of section 25(8)''.'.

New clause 23—Supplementary provision relating to the renewables obligation—

    '(1) In section 32A of the 1989 Act (orders under section 32: supplementary), after subsection (2) insert—

    ''(2A) An order may provide, in relation to any specified period—

    (a) for anything required to be done at a particular time (''the normal time'') by a supplier or the Authority in relation to that period to be done on an interim or partial basis at one or more times prior to the normal time;

    (b) where something is so done, for the position to be reconciled at the normal time by reference to the underlying requirement that would have existed but for this subsection, and for any appropriate adjustment to be made; and

    (c) that any figures necessary to make or provide for the derivation of any calculation under this section (other than the assessment at the normal time of the underlying requirement) can be estimated by the supplier, the Authority, or the Secretary of State.

    (2B) The order may provide, in relation to an appropriate adjustment, for interest to be included over such periods, at such rates, and in such circumstances as may be determined by or under the order.''

    (2) After subsection (6) of that section, insert—

    ''(6A) Any function of the Authority under the order may be exercised by, or by employees or agents of, such person (if any) as may be authorised in that behalf by the Authority.

    (6B) In relation to such exercise of functions—

Column Number: 397

    (a) a function so exercised shall be treated for all purposes as if it had been exercised by the Authority;

    (b) the Authority may place such restrictions and limitations on its authorisation as it sees fit;

    (c) the Authority may withdraw its authorisation at any time, but without prejudice to any actions taken before that time by a person so authorised or to any contractual obligation it may have to that person;

    (d) the order may disapply subsection (6A) in respect of such functions, in such cases and circumstances, as may be specified in the order; and

    (e) 'employee', in relation to a body corporate, includes any director or other officer of that body.''.'.

Brian White: In the absence of my hon. Friend the Member for Brighton, Kemptown (Dr. Turner), I shall briefly move the amendment, given that the important debate today will be on clause 120. The amendments are intended to tease out from the Minister how we will progress in the current carbon trading climate, although they are probing and not intended to change the Bill. How will we proceed in an era in which climate change and carbon trading are reality?

Mr. Laurence Robertson (Tewkesbury) (Con): How nice to see you back in the Chair, Mr. Sayeed. I tabled amendment No. 92, which would strike out subsection (1), as a probing amendment to enable us to discuss the clause, and I hope that the Minister puts my mind at rest on a couple of concerns.

The clause is designed to facilitate the renewables obligation and make it more workable. I am worried that the late buy-out aspect will add to the problem rather than address it. Recently, TXU and Maverick Energy have gone into liquidation owing the renewables obligation buy-out fund £23.6 million. Although the Government have said that they will consult on the issue of shortfalls, they have rightly and understandably said also that the industry must bear the risk. The difficulty is that the company that goes into liquidation does not pay the shortfall; the rest of the industry picks up the bill.

My noble Friends in the House of Lords were concerned about that—an amendment was discussed but not accepted. I am not seeking to reintroduce that amendment, but I ask the Minister to explain how the clause will make the buy-out fund more secure and enable it to work more flexibly and better.

Speaking of BETTA—British electricity trading and transmission arrangements—I also ask the Minister what the logic is, when we move to that from new electricity trading arrangements, in keeping the buy-out funds in England and Scotland separate. I am not seeking to remove the clause or to add to it, but I would appreciate an explanation on the issues I have raised.

Mr. Andrew Stunell (Hazel Grove) (LD): I shall speak to new clauses 22 and 23. Like other speakers this morning, I believe that this is not a matter of grave contention, but some serious and potentially deep difficulties arise with the settlement process when operators go out of business. TXU, Maverick and possibly Atlantic have provided examples. The basic problem is that the defaulting company leaves the pool

Column Number: 398

to be redistributed depleted, which results in losses all round—losses that cannot easily be factored in as a risk by the remaining companies.

New clause 1, which was tabled by the hon. Member for Milton Keynes, North-East (Brian White), would not deal with the problem in any feasible way. I like to think that new clauses 22 and 23 would provide some relief and ways to mitigate the difficulties. Those difficulties take two forms. There can be quite a considerable delay in settling accounts, during which defaults can arise. New clause 23, in particular, is designed to speed up that process by allowing partial and provisional settlements, which would speed up the throughput of payments and minimise the amount outstanding at any one time, and therefore the amount at risk if an operator defaults. New clause 22 would provide a mechanism for a softer landing in the event of a default.

I do not want to detain the Committee by examining the technicalities of how the system works and how the new clauses might improve it, but the Minister has questions to answer. Is he satisfied that, in an active and still maturing industry, the mechanisms are sufficiently robust and provide sufficient protection for existing and potential new players? Are they sufficiently free of the risk of being brought down like a pack of cards by other players going out of business? Can he give a reasonable assurance or guarantee that the mechanisms work?

We have some doubts. Flaws have developed in the market, and although it is perfectly natural that some businesses should flourish and others collapse, the mechanisms were not designed with an eye to what happens when a business collapses. Both our new clauses represent an attempt to provide the Minister and the Secretary of State with additional tools that might help to plug that gap, mitigate losses and therefore reduce the risks to the industry.

We shall be interested to hear what the Minister has to say, either to rebut the arguments behind the new clauses or, we hope, to propose tweaking the system himself to make it more satisfactory for existing players and less risky for new entrants.


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Prepared 17 June 2004