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House of Commons
Thursday 3 November 2005
The House met at half-past Ten o'clock
PRAYERS
[Mr. Speaker in the Chair]
Oral Answers to Questions
TRADE AND INDUSTRY
The Secretary of State was asked—
Energy Supplies
1. Mr. Graham Stuart (Beverley and Holderness) (Con): What discussions he has had with ministerial colleagues and others about the security of the UK's energy supply. [24334]
8. Mr. Eric Illsley (Barnsley, Central) (Lab): What assessment he has made of the level of UK gas supplies to industry for this winter. [24341]
The Secretary of State for Trade and Industry (Alan Johnson): My ministerial team and I have regular meetings about the security of the UK's energy supply, and particularly about the position for the forthcoming winter. We have also had discussions with a wide range of energy stakeholders. The gas market is likely to be tighter this year, compared with previous years, because of a larger than anticipated decline in North sea gas supplies. However, as Ofgem and National Grid have made clear, under normal weather conditions there are sufficient gas supplies and electricity generation to meet expected demand. Even in the severest of winters, their analysis shows that the market can maintain supplies. In all credible scenarios, energy supplies will be maintained for domestic customers.
Mr. Stuart: We are a net importer of gas, yet we have no strategic reserve. We have liberalised gas markets, yet we have stood by while continental countries artificially protect theirs. UK businesses and consumers pay higher prices as a result. What reassurances can the Secretary of State give my constituents at Electro Furnace Products in Saltend that their jobs are safe from gas cuts and artificial price hikes?
Alan Johnson:
It is no good me giving answers if hon. Members do not listen to them. As Ofgem and National Grid have made clear, under normal weather conditions, there are sufficient gas supplies and electricity generation to meet expected demand. Their analysis shows that, even in the severest of winters, the market will be able to maintain supplies. In relation to the hon. Gentleman's first point, we have moved from
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being a net exporter of gas to being a net importer. We are just in that process. As a result, the market is responding. As I said in my answer, the supply of gas from the North sea has run down more quickly than anyone expected it to. Nevertheless, that is what we have banked as our storage. Just as the Netherlands and Norway have no storage capacity because they have large gas fields, we still have significant storage there. We have a whole series of measures coming in before the winter, and another whole series next year. I would say to Conservative Members that the market really is working.
Mr. Speaker: Mr. Eric Illsley is not here. I call Mr. Luff.
Peter Luff (Mid-Worcestershire) (Con): In his evidence to the Select Committee on Trade and Industry on Monday, the Minister for Energy confirmed that there would be a real risk of interruptions to supply for gas users this winter if, as the Met Office predicts, we have a colder than average winter. The Minister also said that he was prepared to consider certain exemptions, to maximise flexibility in the response to gas users, such as temporary exemptions from emissions regulations or from climate change regulations. Will the Secretary of State tell us what discussions he is having with industry and with his colleagues in the Government to bring forward those sensible proposals?
Alan Johnson: I was aware of the hearing that took place with the Minister for Energy earlier this week. I am not accusing the hon. Gentleman of scaremongering in any way, although there are plenty of others around who are scaremongering on this issue. My hon. Friend the Minister was describing what would happen if there were a one in 50 winter. That is not being predicted by the Met Office, but we have discussed with the energy intensive users group a range of measures that might need to be put in place in such circumstances. That, however, is a long way from frightening domestic customers by saying that they are going to have their supplies cut off.
On the hon. Gentleman's other point, he and his Committee have quite properly explored what would happen in an emergency, if there were a one in 50 winter, which we are not predicting at the moment. They have asked what measures would be in place to deal with such a situation. It was in that context that my hon. Friend the Minister talked about emissions, from chemical plants in particular. Such measures would need the authority of the Environment Agency, and no one would want to take such steps, even in the most extreme conditions. Nevertheless, the Government have to have contingency measures in place. The problem with talking about them is that we might give the impression that we are going to need them, but, as my answer has clearly demonstrated, and as the winter outlook report from National Grid and Ofgem shows, we do not expect to be in that situation this winter.
Mr. Speaker:
Order. I have a duty to get through the Order Paper. May I ask the Secretary of State for briefer replies?
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Mr. Dennis Skinner (Bolsover) (Lab): Is the Secretary of State aware that we do not need any lectures from the party that got rid of clean coal technology, shut the pits, and privatised our gas interests? What we do need is to ensure that in the forthcoming years—not just this one—we save what remains of the British coal industry, introduce the necessary clean coal technology, stop handing out large sums of money to UK Coal, which is using it for property development and shutting pits, and start a process such as the one at Tower colliery in Wales, where the miners themselves are able to produce the coal.
Mr. Speaker: Order. I am also looking for brief supplementary questions.
Alan Johnson: I agree with my hon. Friend about the record of the previous Government in respect of coal and the environmental damage left behind from the pits that they closed down. While I do not think that we will see the days of king coal again, coal is having a resurgence, and it will be a central feature of the energy review that my right hon. Friend the Prime Minister announced recently. On the final point, we are investing £25 million, as we announced recently, to develop new carbon abatement technology such as carbon capture and storage, so there are some exciting developments that were not around even in 2003 when we published our energy White Paper.
Mr. Tim Yeo (South Suffolk) (Con): Why do the Government continue to dither over nuclear power? Is it not clear to the Secretary of State that the long-term security of our energy supplies and the achievement of our environmental commitments depends on an early decision to commission a new generation of nuclear power stations?
Alan Johnson: Where I agree with the hon. Gentleman is on the point that a decision needs to be made soon on whether we go for new build or not. That must be seen in the context of the entire energy mix: energy renewal, security of supply and energy abatement. Those issues need to be considered together. That is why, rather than dithering, the Prime Minister has announced a comprehensive review, the details of which will be announced soon.
Mr. Anthony Wright (Great Yarmouth) (Lab): Whenever there is a threat of a shortage of anything, the price of that product invariably increases. In the unlikely event of a shortage in gas supply over the coming winter, will my right hon. Friend guarantee that we will not cease in our efforts to reduce fuel poverty? Over the past eight years, the fuel poverty strategy has taken 4 million people out of fuel poverty, and I fear that, if the price increases over the winter months because of shortage, more people will fall into it.
Alan Johnson:
My hon. Friend is right to raise the issue: we have taken 4 million people out of fuel poverty, including 1 million of the most vulnerable. Now that gas prices have increased, because they are linked to oil prices, which have increased, we must redouble our efforts. We have recently announced a free helpline to provide people with advice on insulation and so on. We
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need to take other measures. The £200 winter fuel allowance this year—£300 for the over-80s—will be a welcome contribution to tackling those problems.
Norman Lamb (North Norfolk) (LD): The Secretary of State will be aware that National Grid estimates that large energy users would have to give up some 3.7 billion cu m of gas in the event of a repeat of the 1963 big freeze, unlikely though it might be, to keep gas flowing to the domestic sector. Is it not crazy that the Government are now contemplating an opt-out from the emissions trading scheme? Would it not have been better to have followed the advice of the International Energy Agency and many other experts in pursuing a much more vigorous assault on energy waste?
Alan Johnson: First, no one is predicting a 1963 winter—[Interruption.] I repeat that nobody, in the Met Office, is predicting that. Secondly, major users, to whom we talk all the time, and who have a serious problem—this is not to diminish that—in the event that we have severe weather conditions, have interruptible contracts. They sign those interruptible contracts on the basis that they would get a lower price, and they could, as they recognise, through energy efficiency, sell some of their supplies back on to the market and make a profit in a tight energy situation. I therefore believe that we have the right framework in place even if we have the most extreme winter conditions.
Paddy Tipping (Sherwood) (Lab): Does the Secretary of State accept that there is an element of scaremongering occurring? There is no question of domestic customers being cut off this year. Things might be tight for industrial consumers, but in the longer term will not new pipelines resolve the issue of gas supply?
Alan Johnson: My hon. Friend is right. We have doubled the capacity of the Belgian interconnector and introduced the new liquefied natural gas facility that has opened at the Isle of Grain in the Thames estuary. Other measures are being taken this year and more will be taken next year. On the scaremongering issue, one newspaper that puts lurid headlines above journalistic accuracy said that there would be a blackout. It quoted a guy called Jonathan Smith, the media relations manager of E. ON UK. He wrote to the newspaper. It did not publish the letter, but he copied it to me. It states:
"Throughout my conversations with your journalists I stressed that we at E.ON UK did not believe there would be any power and gas problems this winter . . . At no point during the course of the article"
"that E.ON UK does not believe that there will be power cuts this winter . . . The article as printed is simply not a true and accurate representation of the conversation that I had with your journalist and, as such, is unacceptable."
Mr. David Willetts (Havant) (Con): I am pleased to see that the Secretary of State is still here. I had half expected him to be sent back to the scene of his old triumphs in the Department for Work and Pensions.
Last week the Leader of the House was asked whether the Government could
"guarantee energy supplies to business and domestic consumers this winter".—[Official Report, 26 October 2005; Vol. 438, c. 299–300.]
The Leader of the House replied "Yes, they can". Will the Secretary of State repeat that guarantee today? If he cannot—and I suspect that he cannot—will he at least recognise that we need a clear contingency plan in case supplies are indeed interrupted this winter?
Alan Johnson: I thank the hon. Gentleman for his kind comments. I was looking forward to him becoming leader of his party, but now that he has hitched his star to Haltemprice and Howden—not Witney—perhaps it is not to be.
Let me deal with the hon. Gentleman's very serious point. At present, we have the extra capacity that I just mentioned. I could also have mentioned the new gas storage facility at Humbly Grove in Hampshire. In the unlikely event of severe winter conditions, we can switch from gas and electricity generation to coal generation. We have mothballed plant that we have made ready for use, at Didcot for coal, at Grain for oil and at Killingholme, where there is a combined cycle gas turbine. Moreover, as I said earlier, big users can reduce their energy demand and sell back to the grid. We do not expect any fuel supply problems this winter.
Mr. Willetts: I note that the Secretary of State did not repeat the guarantee that the Leader of the House gave during Prime Minister's Question Time last week. Many energy consumers will have noticed that.
I am pleased that we are making some progress this morning. We are beginning to hear about contingency plans being made in case this happens, although we all hope very much that it will not. May I press the Secretary of State further, however? What we need now is for him to publish an authoritative account of the steps that he will take if there is a threat to our energy supplies during a harsh winter, so that industry and business know where they stand. That is the least he can do.
Alan Johnson: The National Grid published its preliminary outlook in May. It published its final outlook last month. We share the wish for a debate on the Floor of the House that has been expressed by the hon. Gentleman and some of his hon. Friends. That has been dealt with by the usual channels, but we agree that the debate should take place here rather than in Westminster Hall. My hon. Friend the Minister for Energy is meeting intensive energy users and others daily, and the Trade and Industry Committee is conducting an important investigation.
We must not over-egg the pudding and cause people to become unnecessarily frightened. It would be entirely different if the Met Office were predicting a one in 50 winter and if the National Grid's report were predicting problems. That is not the case, and we therefore have an obligation not to scaremonger. The hon. Gentleman has no such obligation, and nor have any of his Front-Bench colleagues, but others have. We must ensure that such scaremongering is quashed by responsible behaviour in the House.
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