House of Commons
|Session 2006 - 07|
Publications on the internet
Public Bill Committee Debates
Draft Electricity (Single Wholesale Market) (Northern Ireland) Order 2007
The Committee consisted of the following Members:
Eliot Wilson, Committee Clerk
attended the Committee
First Delegated Legislation Committee
Monday 12 March 2007
[Ann Winterton in the Chair]
Draft Electricity (Single Wholesale Market) (Northern Ireland) Order 2007
The Chairman: Before I call the Minister, I have some information for members of the Committee. If hon. Gentlemen wish to remove their jackets because they are overcome by the heat, they may do so.
Mr. Laurence Robertson (Tewkesbury) (Con): On a point of order, Lady Winterton. We are considering important legislation, and it is unfortunate that we are doing so again through a statutory instrument when we hope that the Assembly will be up and running within two weeks. I feel even more strongly about the matter, given that not one member of the Committee in the room represents Northern Ireland. That position may changethe hon. Members may be slightly delayedbut it is most unsatisfactory.
The Chairman: I am sure that members of the Committee and others will have noted your remarks, Mr. Robertson, but as you will probably be aware this is not a matter for me.
That the Committee has considered the draft Electricity (Single Wholesale Market) (Northern Ireland) Order 2007.
May I begin, Lady Winterton, by saying whata pleasure it is again to be serving under your chairmanship? I am sure that I speak for all members of the Committee when I say that I am confident that you will keep us in good order and keep our proceedings as concise as is commensurate with the importance of the subject that we shall debate today.
The order was laid before the House on 19 February 2007. Its purpose is to enable the establishment and operation of a single wholesale electricity market covering Northern Ireland and the Republic of Ireland. The single electricity market is a key building block in the development of a sustainable all-island energy market covering electricity and gas. The aim of the order is to enhance the mutual economic and social benefit, including security of supply, of cross-border co-operation on energy matters.
Development of an all-island energy market has been a strategic policy objective since the time of the first Northern Ireland Assembly. I hope that what I am saying will go some way towards dealing with whatthe hon. Member for Tewkesbury said in his point of order about the importance of such legislation being considered by the Assembly. All I can say to him is that, if the Assembly is up and running within the next couple of weeks, which we hope it will be, it will be able
Adam Afriyie (Windsor) (Con): Is there a specific reason why the measure is being considered today? Could it have been delayed for perhaps three weeks until the Assembly was in place?
Maria Eagle: The best answer for me to give is that, because of the uncertainty that there has been for monthsindeed, yearsabout the restoration of the Assembly, it has been the policy of the current Administration to proceed as swiftly as possible with the implementation of the market. It is to be implemented on 1 November 2007. A delay beyond this month would make it impossible for us to complete the legislation in the time scale necessary to get the market up and running. We have already delayed matters for some time and a further delay would not enable us to complete the work before the implementation date, as there are some things that we cannot do until the legislation is carried.
The work was begun in 1999 by devolved Ministers. Although there are of course issues of controversy in designing the market between the jurisdictions, we have already had to put off its implementation from July to November because of the technical difficulties of doing so. Further delay would be difficult to countenance partly because of the costs that it would impose on industry players. I hope that the hon. Gentleman will accept that I am not just being pedantic. It might seem that a short delay would not cause too much difficulty, but he will recall that the Assembly was supposed to be back up and running in November. We are now nearing the end of March. It is not possible, and it has been our view as direct rule Ministers that it is not right, for us simply to put the lives of people in Northern Ireland on hold to ensure that we do nothing until the Assembly returns. We hope very much that it will do so by 26 March and that it will be thereafter in the happy position of being able to complete what it began back in 1999, but we do not think that a delay would benefit consumers in Northern Ireland.
Adam Afriyie: On a point of clarity, does the Minister understand it to be the case that from26 March, if the Assembly sits again, such orderswill be within its competence rather than that of Parliament?
Maria Eagle: Energy is a devolved matter, so it would be a matter for the Assembly to deal with. There are some slight ambiguitiesthat is why the order is being made under two pieces of legislationas to the vires in respect of some of the orders aspects. We have therefore been extremely cautious to ensure that we have cited both pieces of legislation, some of which will be devolved while other parts will not. Our view is that the matter would all be devolved, but we have been extra careful to ensure that there are no difficulties by citing both pieces of legislation in the order.
Mr. Mark Field (Cities of London and Westminster) (Con): I have some sympathy for the situation in which the Minister finds herself, particularly as the date by which the devolved Assembly is likely to be operating has been delayed and delayed by many months. However, has her Department given thought to the real
Would it not therefore be better and more correct, as my hon. Friend the Member for Windsor was perhaps intimating earlier, for the devolved Assembly to deal with the matter as and when it is up and running? There are some dangers in going down this route, particularly in relation to the potential uproar in the minds of many Northern Ireland citizens if they find that the wholesale market leads to rapidly increased electricity prices in the way that the water industrys prices have risen.
Maria Eagle: The wholesale electricity market is designed to benefit consumers, and cost-benefit analysis shows that it will. It is there primarily to protect the interests of consumers north and south, and we expect that as a result of its implementation, consumers north and south will receive net present value benefit.
I emphasise that I am not seeking to be intransigent. The legislation must be in place by the end of the month to underpin the implementation and trialling of the new systems and procedures before the go-live date of 1 November. If we delayed and did not put the order on the statute book, the go-live date would have to be put back. That is not in the interests of consumers north or south. The order is being passed in parallel with similar legislation in the Irish Parliament. We must co-ordinate them to ensure that the go-live date is met.
Maria Eagle: I will in a moment. The industry expects a go-live date of November and is planning for that. Any delay would cause an increase in costs; there is no doubt about it.
Andrew Mackinlay: I can barely contain myself. As usual, the Opposition have asked the wrong question. The question that the Minister needs to answerbefore the Committee is why the Dail Eireann, the Irish Senate and the President of Ireland have passed comparable legislation through all scrutiny and legislative stages and given it the equivalent of Royal Assent, yet we are being given one and a half hours late in the day for reasons that the Minister fully accepts. When I come to catch your eye, Lady Winterton, I shall amplify on that. Of course the order is now urgent, but why has it been delayed so long? We should be told.
The Chairman: Order. Before I call the Minister, I ask Committee members for brief interventions. I have allowed one long one from each side, so that is even-steven, but I am looking for something a little briefer in future.
Maria Eagle: It has not been easy to draft the legislation. We have had to design the market, and the regulators, north and south, have co-operated on that.
Obviously we have done that in parallel, although different Parliaments have different ways of passing legislation. At present, such orders are how legislation in Northern Ireland is put through the House. We hope that devolution will shortly enable the Assembly to assume its responsibilities in that respect. By the time that happens, the legislation will need to be passed. That is why we have brought it to the House today, and I make no apology for doing so.
Mr. Bone: I entirely understand the Ministers argument, but it seems extraordinary that thisdebate should be scheduled when no Northern Ireland Members can be present. If we have to pass the legislation by an order, surely we ought to ensure that it is scheduled for a day on which Northern Ireland Members can be present.
Maria Eagle: I do not know why some membersof the Committee, which includes Northern Ireland Members, have not found it possible to be here. There are always competing demands on the time of Members. Whether Members turn up to the Committee is not a matter for me. I am at the Committee and it is certainly possible for anybody else who is a member of it to turn up. It is part of a Members job in Parliament to ensure that they schedule their time and can be here when legislation is being considered. I criticise nobody, but it is not for me to say where the members of the Committee are.
Maria Eagle: No, it is not about that. I want to discuss the merits of the issue. It is not for me to answer where the other members of the Committee might be spending their time.
The initial work in respect of the order in 1999 led to the signing of an all-island energy market development framework in 2004, and action to put in place the flagship element of that work, namely the creation of the single electricity market. The draft order is made under the Northern Ireland (Miscellaneous Provisions) Act 2006 and the Northern Ireland Act 2000. I welcome the constructive comments, as well as the common-sense approach to co-operation with the Republic of Ireland, in the debate on the 2006 Act, last June. The hon. Member for Tewkesbury will remember taking part in that. The proposal to legislate forreform of the existing wholesale electricity markets in Northern Ireland and the Republic are set out in a memorandum of understanding between the United
The single electricity market is a groundbreaking project at the forefront of European Union energy market integration. It is a good example of what can be achieved by pragmatic co-operation. It will bring together two small and isolated markets to form a larger, more competitive marketplace. Along with improvements to both north-south and east-west electricity interconnection, the market is a sensible and practical first step towards longer term British Isles co-operation within a wider UK-Ireland-France electricity market. The market is firmly set in the context of the EUs internal markets for electricity and natural gas, and the growing regionalisation of national markets, all of which will help to secure security of supply.
Angela Eagle (Wallasey) (Lab): Will my hon. Friend say in non-technical terms what the advantages of the proposals are, so that consumers who might come across this debate can understand? Will the order lead to cheaper electricity prices, more stable markets or the routing of electricity from one place to another in order that high prices do not have to be paid at the margin? What will the order actually do for the average consumer in Northern Ireland?
Maria Eagle: My hon. Friend gets straight to the point in her typical fashion, which I know very well. The Northern Ireland consumer will benefit from increased competition, efficiencies and economies of scale, which should put downward pressure on the wholesale costs that should ultimately be passed through to consumers. At present a net benefit of£103 million is expected to accrue from the creation of the single market. It is envisaged that the benefits will be split, with about 44 per cent. for Northern Ireland and 56 per cent. for the Republic of Ireland. Most of them82 per cent. in each jurisdictionwill go to benefit consumers. That means that a £45 million benefit for Northern Ireland will come from the value of creating the market. That benefit will be shared;82 per cent. will go to consumers and 18 per cent. to producers.
There is no question about the fact that the market will not only create better security of supply and increased competition, but directly benefit consumers from both north and south. Indeed, one of the aims of the market, and of the regulators who will make sure that it works, will be to benefit consumers north and south. We hope that as a direct result of the creation of the market, consumers will, in the medium and longer terms, see cheaper electricity prices.
Mr. Robertson: The Minister may need to write to me about this technical point. Can she provide an estimate of how many consumersactually, they are not so much consumers as suppliershave long-term contracts with generators of electricity? The system will not be as fluid as Great Britains until that situation changes. A lot of people in Northern Ireland are on fixed, long-term contracts, are they not?
Maria Eagle: Let me make it clear that we are talking about the creation of a wholesale single electricity market that will not immediately affect retail prices. The issue is about creating a single wholesale market, which should feed through to lower electricity prices for consumers as a consequence but will not directly create a single retail electricity market. Committee members should bear that in mind.
One might say that there are certain rigidities or anti-competitive pressures on the retail side in the electricity markets of both the Republic of Ireland and Northern Ireland. The hon. Member for Tewkesbury and other Opposition Members may recall that some of the anti-competitive factors involved in keeping Northern Ireland electricity prices for consumers somewhat higher than they might otherwise havebeen are a consequence of how the Conservative Government privatised electricity in Northern Ireland. Some contracts tie in extra costs that feed through to consumers. For example, desulphurisation equipment is about to be installed at the Kilroot power plant, which will have a right to claim all those costs back from the Northern Ireland consumer.
In both markets there are anti-competitive pressures, such as a lack of supply or rigid contracts, that prevent consumers from benefiting fully from competition in retail markets. However, in the medium to long term, the wholesale market will provide more pressure to cut prices for consumers. Prices from wholesalers and generators will be better than they could possibly bein the two small, isolated markets that there are nowanti-competitive markets at that.
What we are legislating for today will not directly impinge on retail prices, but involves the creation of a single wholesale electricity market. However, there will certainly be such impacts in the medium term. The market should enable consumers to get cheaper prices as it expands, as security of supply is extended, as more generators come into what will be a bigger marketand as better interconnection between Scotland and Northern Ireland, and Ireland and Wales, comes into play and makes transmission easier. All that will put a downward pressure on prices. The order will be a key part of making sure that consumers get a better deal in future.
Mr. Robertson: I am grateful to the Minister, although I should say that we have two and a half hours. She referred to the fact that the Conservative Government privatised the Northern Ireland electricity market and said, I think, that that led to the problems. That is not so; this Government introduced new electricity trading arrangements or NETA. They are now called BETTA, or British electricity trading and transmission arrangements, as they have been extended to Scotland. Why did the Government not extend that scheme to Northern Ireland?
Maria Eagle: It is not right of the hon. Gentlemanto try to wriggle out of his partys responsibility forthe way in which electricity was privatised and the consequences for consumer prices. Two generators in
Maria Eagle: I have given the hon. Gentleman plenty of opportunities to intervene and he is now heckling me from a sedentary position.
Current interconnector capacity between Great Britain and Northern Ireland is not large enough to provide for the full integration of GBs BETTA market and the Northern Ireland market, so it is unlikely that Northern Ireland wholesale prices would converge with GB levels. GB generators will be able to access the new market subject to having sufficient interconnector capacity.
At present, a north-south interconnector runs between Northern Ireland and the Republic of Ireland, and the Moyle interconnector runs between Scotland and Northern Ireland. That is insufficient interconnector capacity to improve the efficiency of the market. The trading relationship will be further enhanced when the east-west interconnector between Dublin and Wales is built and when the second north-south interconnector comes on stream. This kind of infrastructure is expensive and takes time to build.
The single market that we are legislating to create today will play a vital part in improving the efficiency of the markets, in bringing in further generating capacity and in respect of security of supply, becauseit will play a part in increasing competition. The integration of the Northern Ireland and Irish markets will exploit the islands existing geographic and economic links and infrastructure, and will be a step on the way to much more competition and security of supply. All this will be fed by greater competition across the whole island and by better interconnection with Britainand hopefully with France and the continent thereafter.
Mr. Bone: I am grateful to the hon. Lady for making the case for a single market, because it is an extremely good thing. Is not the crux of the issue the complete failure of the European Union to liberalise its energy market? We have liberalised in the United Kingdom, but the European Union is letting us and consumers down. What are the Government going to do about that?
Maria Eagle: The hon. Gentleman, as is the wontof many in his party, gets very exercised when the European Union is even mentioned. It has plans for more regional electricity markets and for improving the interconnection across the whole EU. That can only be good for the future protection of security of supply across the EU.
The creation of the single wholesale market onthe island of Ireland will play an important part in ensuring that that process can go ahead. The hon. Gentleman, like other Committee members, will know that creating interconnection for electricity generation is expensive. It also cannot be done overnight or in a couple of months on a whim, so long-term planning
The creation of the single market will reassure new generators who wish to enter the market to sell their electricity that the interconnection that they will find will enable them to sell in the north of Ireland, the south of Ireland and in the BETTAor NETAareas over in GB in due course. These things cannot be created overnight or simply by an Order in Council; they require a lot of investment by players in the industry.
We hope that the order will put in place the correct conditions to ensure that that is the case. That can only be good for consumers in the north and south of Ireland who will benefit from more competition in electricity generation and will, in due course, benefit from falling prices.
The order brings together two isolated and small markets to form a larger and more competitive marketplace. Along with improvements to both north-south and east-west electricity interconnection, the market is a sensible and practical first step towards longer-term British isles co-operation within a wider UK-Ireland-France electricity market. It is firmly set in the context of the EUs internal market for electricity and natural gas and the growing regionalisation of national markets.
The project has been ably led and managed by the two regulatory authorities, the Northern Ireland Authority for Energy Regulation and the Commission for Energy Regulation. The two authorities are working closely with the industry to deliver the new market by 1 November. The project is very complex, and I would like to commend the work that they have done. In addition to their domestic duties, the two regulatory authorities will be responsible for the development and governance of the single electricity market. That will include common trading arrangements and licensing of market participants. Day-to-day trading will be managed by a market operator that is being established by the two transmission system operators, Systems Operator for Northern Ireland and EirGrid, as a contractual joint venture.
The need to secure mutual benefits from the market was raised during the consultation on the draft order. It is vital that consumers are the beneficiaries of the new market. If they are not, there is no point in developing one. Consumer interests have been paramount in the work of the two Governments and the regulatory authorities. I agree that the promotion of competition in the market will be a key factor in delivering those benefits.
The memorandum of understanding and thedraft order made it clear that the new single electricity market should be a competitive market in which there is effective rivalry between generating companies. That is in the best interests of consumers. I have worked closely with Irish Energy Minister Noel Dempsey TD to ensure that necessary action is taken to deliver competition to the new market. We agreed that
The Electricity Supply Board will be prevented from building any new plants for at least six years. That process will start this year, and will have a real impact on competitiveness and help to attract new entrants into the all-island market. Those are strong measures, supported by the Northern Ireland Authority for Energy Regulation. The Irish Governments White Paper on energy, which has been published today, builds on those measures. I welcome their commitment to opening up competition to their generation sector. It presents business opportunities for UK and Northern Ireland-based companies, but we must be realistic about how much competition can be delivered.
The all-island market is still very small compared with other EU markets. Although the market will cover a large geographical area, it will only be the size of Greater Manchesters in terms of output and customers.
This is a short technical order of 12 articles and four related schedules. It covers the provisions needed to get the market up and running. The order was amended following the consultation exercise, but it was not possible to take on board all of the proposals that arose. For example, the order was amended to cover best regulatory practice, but it was not possible at this stage to include provision for a separate appeals mechanism. That issue will be considered further in the light of discussions with interested parties on the existing arrangements for the single electricity market.
Articles 3, 4 and 5 of the draft order provide for the Department or the authority to modify the conditions of licences for the generation, transmission or supply of electricity in connection with the single electricity market. They also provide for the introduction of a licensing regime in respect of the function of the market operator of the single electricity market and for property arrangement schemes to facilitate the transfer of property rights and obligations between the owner and operator of a transmission system to implement the single electricity market.
Articles 6 to 8 provide for the establishment of a special committee of the authority to be known as the SEM committee. That committee will take any decision regarding the exercise of certain functions of the authority, especially where it considers such functions materially affect the single electricity market or are likely to do so.
Andrew Mackinlay: I understand that the SEM committee will be a joint authority created by the Irish Republic and the United Kingdom. Will its decisions become wholly writ, or law, in the Irish Republic and the United Kingdomwhich is to say, Northern Ireland? Does the committee have the power to create what I would call byelaws or regulations? What is the status and authority of the committee?
Maria Eagle: Technically, the committee will be a sub-committee of the Northern Ireland Authority for Energy Regulation; it will be mirrored in the Republic by the Commission for Energy Regulation committee, which will be a sub-committee of the CER. In practice, the two committees will have the same membership and will function as one to co-ordinate regulation across the two jurisdictions. The two committees will cometo the same decision in each jurisdiction and each regulator will collectively have one vote, as willthe independent member. Each regulator will be responsible for implementing the decisions of the SEM committee in its part of the island. That is the ingenious way in which the problem that my hon. Friend raises has been dealt with in the legislation, and I see no reason why it should not operate well.
Articles 11 and 12 clarify the effect of the draftorder on certain agreements between licence holders and provide for certain minor or consequential amendments. Articles 9 and 10, which I should have mentioned before articles 11 and 12, provide for the imposition of the new SEM-related duties on the Department, the authority and the SEM committee when carrying out their functions in relation to the SEM. I hope that I have given the Committee some sense of what the draft order does.
Mr. Robertson: Welcome to the Chair, Lady Winterton. I made a point of order and we had some debate earlier about the wisdom of implementing this legislation via statutory instrument. I think that it is unsatisfactory so to do. The Minister is in a difficult position because, as the hon. Member for Thurrock mentioned, there is the question of similar legislation being enacted in the Republic of Ireland.
Mr. Robertson: Indeed. We are not setting up one system as such; we are having comparable legislation in both jurisdictions.
This is a difficult matter. We are only two weeks, or perhaps less, away from getting the Assembly up and running, although I do not know that that delay makes all that much difference. I have a good relationship with the Democratic Unionist party, the Ulster Unionist party, although we often vote differently, and indeed with the Social Democratic and Labour party, and I do not want to be over-critical of the Northern Ireland political parties. However, it is regrettable that Conservative, Liberal Democrat and Labour Members have given of their time to discuss such an important Northern Ireland matter, yet there is no representation here at all from the Province. Such a situation undermines this place. I have complained about SIs before, but today I feel particularly strongly.
Adam Afriyie: Does my hon. Friend share my concern that there could well be a case for the Northern Ireland Assembly, when it convenes in three weeks time, challenging some of the statutory instruments that have been brought to the House, considering that there are sometimes no Northern Ireland Members present?
Mr. Robertson: My hon. Friend has a good point. I have no idea whether Northern Ireland Members agree with the measure: they might be in complete disagreement. We are trying to discuss the measure without any input at all from the Province. I think that it is a good measure and that it sets things off in the right direction, but I do not live in Northern Ireland.
Having had my rantI feel strongly about the matterI want to pick up a point that the Minister made. She referred to the privatisation of the industry. The present Government rightly introduced NETA, which changed to BETTA and now cover Scotland. Both moves were right, as they led to a big fall in electricity prices for consumers in this country, although for global reasons those prices are now edging up. That fall happened because the long-term contracts, although they still exist, were largely changed. People traded electricity rather like they trade shares on the stock market. The system was so online, and enabled such finger-tip control, that the price of electricity fell. That system does not exist in Northern Ireland. That, rather than what the Minister says, is the explanation for the difference. I understand that many long-term contracts for the supply of electricity, not to the household but from the producer to the supplier, will remain in place. If that is the case, it will be some time before consumers in Northern Ireland benefit from the change. That is the central pointthey will not get the benefit if long-term contracts are still in place.
We have mentioned that there is comparable legislation in the Republic. Will the Minister confirm that we are setting up two regulatory systems that are similar, or maybe identical? We need to be clear on that. Are we setting up regulatory systems or a single market? The two are very different.
My hon. Friend the Member for Wellingborough made a good point when he asked about the European situation. I was a little disappointed with the Ministers response given that only an hour ago the Prime Minister said about the situation in Europe that:
It is true that we still need to do more, especially in respect of the vertically integrated energy companies.
My hon. Friend is absolutely right; the European situation is a big problem. The Minister is right to say that the market in Ireland will still be relatively small. We need to consider creating a UK-Ireland energy market. That is not impossible. It cannot easily be donethese things are never easybut that is where we should be looking. We should also consider a Europe-wide energy market. I am the last person to offer Europe any sovereigntywe have given it far too much, and we ought to bring it backbut surely energy trading is what Europe is supposed to be about. Trading is what Europe is supposed to be about. The things that Europe is supposed to be about are the things that we do not have. Even the Prime Minister has recognised that.
If we are to enable consumers in Northern Ireland to benefit from the changes, we must end the long contracts, create arrangements like those in Great Britain, and consider integrating the all-island market with the United Kingdoms and probably with Europes. That has to be the way forward. I accept that
May I ask a technical question? When it was first raised with me, I found it somewhat amusing but it is important if the Government want to make use of renewable energy. I understand that the Republic lays claim to the sea bed around the whole island. It might seem fanciful, but if tidal power orheaven forbidwindmills out at sea are to be depended on, it is important to deal with that.
Although this is a limited order, I accept that it is moving in the right direction, so I shall support it.
Mr. Alan Reid (Argyll and Bute) (LD): It is a pleasure to serve under your chairmanship today, Lady Winterton.
I welcome the order. A single electricity marketfor Northern Ireland and the Irish Republic has the potential to bring many benefits to consumers and the environment. Greater competition between different suppliers should in the long run, through market forces, help to bring down prices and lead to greater fuel efficiency at generating stations, thus benefitingthe environment. Also, a large number of different generators feeding electricity into the grid should mean less frequent interruptions to supply, since there will always be other generators ready to step into the breach in the event of a failure at any one power station. A greater number of generators will also make routine maintenance easier to schedule. Those are clear potential benefits.
There is one question that I want to raise with the Minister. Although we will have a single electricity market for the whole of the island of Ireland, and that market will be regulated, Northern Ireland and the Irish Republic will still each have their own separate policies and practices in such areas as carbon emissions trading schemes and support mechanisms for renewables. It seems clear that differences in those schemes have the potential to distort the all-island trading, and could give competitive advantage to companies operating in one jurisdiction or another. For example, if one jurisdiction decided to impose a regulation that electricity companies had to generate a certain proportion of their electricity from renewables but there was a different percentage figure in the other jurisdiction, clearly that could give an advantage to companies operating in one jurisdiction. Will the Minister explain how the Government envisage that the drive to encourage generation by renewables will work when we have one competitive market but different sets of rules on support for renewables on either side of the border?
Andrew Mackinlay: Consideration of the order and its contents cannot be separated from the time scale in which it has been before Parliament. As for attendance in Committee, if we are charged with providing scrutiny and accountability, it is not unreasonable for Members of Parliament to say that in this caseas in many others, but particularly nowthe process is seriously flawed. What I want to say does not reflect on
The Department concedes in the explanatory notes that, but for the special arrangements for Northern Ireland, the order would be primary legislation. We are familiar with the criticism that we do not deal with primary legislation in one and a half hours. I accept that extraordinary arrangements have to be made for Northern Ireland, but for primary legislation some notice is given and hon. Members who specialise in the subject are involved. By natural selection, as it were, they contribute on Second Reading, and those with other specialisms tend to abstain. The members of this Committee, who are supposed to scrutinise the statutory instrument, may know nothing about electricity, but we see it as our duty to provide scrutiny and accountability in this place, none the less
The arrangements by which many of us must consider the measure at short notice are woefully inadequate. I have criticised Northern Ireland Members in the past, but I do not think that they can be criticised for not being here. According to the Bible, the Almighty was able to be in two places at once only on one occasion. We expect those Northern Ireland Members to do it week after week, and it simply cannot be done.
If you think that I am over-egging it, Lady Winterton, may I ask you to look at the explanatory notes? It says that some of the delay has been due to a question of vireswhether the order could be introduced under the Northern Ireland Act 2000. It seemed to me, from reading between the lines of the notes, that some diligent person in the Department said, Whoops, hang on a moment, we may be in trouble here. I think that some panic set in, and people found that they would have to embrace the provisions of the Northern Ireland (Miscellaneous Provisions) Act 2006.
It is not unreasonable, given that I had to travel to get here, that, despite the issue of vires being the kind of thing that fascinates me, I have not been able to study the relevant pieces of legislation since Friday. We cannot be certain even now that the order is competent in that respectI have certainly not been able to examine it. I do not think it unreasonable that legislators should be given adequate time to consider proposed measures.
After all, it is not unprecedented for legislation emanating from the Northern Ireland Office or otherwise relating to Northern Ireland to be substantially flawed. I once challenged a piece of legislation in this very Committee room, and it had to be taken back because it was flawedthat is just my personal experience. I notice that members of the Bar and learned Members are present in the Committee. Had they been given time, they might well have found deficiencies in the order, so time is a valid matter to which to draw attention. I fully accept that the legislation is necessaryI welcome itbut it is unreasonable that significant and important measures should come to us in such a way.
I want to ask a few questions. I understand that there will be two regulatorsone for the Republic of Ireland and one for Northern Ireland. However, again because
I notice that, according to paragraph 42 of the explanatory notes, the authority is charged with protecting the interests of gas consumers in Northern Ireland. However, the order does not elaborate on how, why, and to what extent that should happen. Will the Minister amplify on that too?
Another point has been touched on, perhaps unintentionally, by the Opposition spokesman, who referred to some of the territorial, historical and constitutional matters. That reminded me of the fact that the boundaries of County Londonderry are still a matter of dispute with the Irish Republic. That factis not unimportant to energy renewables and environmental impact. The United Kingdom holds that the boundaries of Londonderry go to the western banks shoreline of the Foyle, but I think it goes without saying that the Irish Republic would not agree. It would say that the line is a dotted line down the middle of Lough Foyle. I do not pretend to know the answer to that point, but I mention it because the single energy market will result in sources such as wave power and wind turbines being considered. We need to take into account the location of such installations and their impact on waterways, as well as on the critical and fragile life that such waterways contain.
I notice that the order refers to various bodiesI think that they are described as the Department, the authority and the committeethat are charged as one would expect with having regard to the environment. I am concerned that, in the zeal to ensure energy supply and to produce energy and electricity within the island of Ireland, there may be cutting of corners with respect to the environmentally disadvantageous impact of things that at first glance might seem environmentally friendly. Certainly hon. Members and I wish to encourage wind turbines as a matter of broad policy, but they can have a seriously detrimental effect on the beautiful landscape of places such as Ireland. Some evidence also suggests that wind turbines placed in the wrong area can detrimentally affect stocks of fish and other marine life. The order does not spell out adequately the duties, responsibilities or need for environmental impact assessments, or how we will resolve differences that relate not necessarily to the regulators but to the legitimate interests of the two jurisdictions.
The third point that I want to explore with the Minister is this. As I understand it, we have one interconnector between the mainland United Kingdom and Northern Ireland, and there is to be another, either from England or from north Wales, that will probably interconnect with the Republic of Ireland. That must be very welcome to consumers, whether in Ireland or the mainland UK, but it raises a question. Surely we are talking about a single market for electricity not for Ireland but for the British Isles. As electricitysome of it, incidentally, produced by atomic energycomes
Paragraph 14 of the explanatory notes says that amendments were made to the draft order during the consultation period. I wish that the notes had amplified on those amendments so that in the brief time available to study the order, one might have had some appreciation of the work involved.
The way that we deal with statutory instruments is a charade. There was a point of order at the start of the Committee, and subsequently I spoke rather testily, but what I do not understand about the administration of the Northern Ireland Office is why everything that is done must be done urgently. Actually, I fully accept that. I do not think that hon. Members of the Opposition are probably fully aware of thisI do not mean that as a criticism in any waybut there is now a case for urgency. Apart from anything else, it is politically embarrassing. I understand that in Dublin today, the Republics Government produced an energy White Paper. In a phone call that I made earlier, I was told that the Irish Republic expected the measures to be in place by May. HoweverI am open to correction, as the Minister has no doubt read itthe White Paper said that they should be in place by June, not November. The November date that she mentioned will be news to our friends in the Irish Republic. In any event, I am fully seized of the need for urgency.
I have a complaint about the Northern Ireland Office. I know that we have different legislative processes, but the Irish Parliament mirrors the Westminster systemmore so than many Commonwealth Parliaments. The Dail Eireann gave the legislation Second Reading and Committee consideration, as did the Senate, and it received presidential assent. It is on Irelands statute books. We, however, do not have to go through that, so we could have passed the legislation a lot quicker. But we did not do it a lot quicker; instead, we are doing it at the last minute. I cannot understand why.
The Northern Ireland Office does this time aftertime after time. Ministers inevitably stand up dutifully to defend their loyal civil servants, but somebody somewhere in the Northern Ireland Office is tardy. I just look forward to the time when the Legislative Assembly does meet in Belfast. Presumably some socks will have to be pulled up. There has been a lack of scrutiny for 25 years. They have been slow and sloppy. The draft order is just one example of that today.
The Minister will no doubt say, My hon. Friend is unfair, but I do not think that it is unfair. There is no reason why adequate time could not be given to enable everyone to study the order. Perhaps some Members who know about electricityI do not lie awake at night thinking about it too muchcould have volunteered to be on the Committee and contributed to the debate. I am a little concerned about that.
I hope that the Minister will answer my specific question about gas consumers. Reference is made to them in the order and I should be grateful if she could expand upon that and on how any differences that may exist between the two regulators will be resolved.
Mr. Bone: It is a great privilege to serve under your chairmanship for the first time, Lady Winterton. It is
I am not getting at the Minister today, because it is not her fault, but Northern Ireland legislation is rushed. The last time that happened was when the sexual orientation regulations were debated before the Joint Committee on Statutory Instruments met. When it did meet it drew attention to the fact that there were seven faults in the instrument. It seems to me thatsuch rushing is a real problem. Can the Ministertell us whether this instrument has gone to the Joint Committee or whether it was exempted?
Will the Minister tell us the make-up of the SEM committee? Is it 50:50 from the Irish Republic and Northern Ireland? What happens if there is a dispute? If, say, the Government in Northern Ireland decide that they do not like it, what sort of role do Governments have in challenging the SEM committee?
On the European Union, I thought that we had common ground on both sides of the House about the energy market. The real problem is the fact that the EU refuses to follow what the Government are doing in the United Kingdom. Our industry was paying twice as much for wholesale energy only last year because of the EUs failure to liberalise. I am not trying to make a party point here, because we have unity on the issue. How will the Government tackle the matter, however? Our consumers and our industry are losing out as a result.
Finally, I want to take issue with the Minister over the scheduling of todays debate. I know how hard-working Northern Ireland Members are. They always attend Committees when Northern Ireland business is being discussed. Clearly there must be some very good reason why no Northern Ireland Member is present. I do not accept that it is up to hon. Members to turn up. We have a very special situation in Northern Ireland where we are passing laws in this Committee that would normally be debated by a Parliament,and it is up to the Government to ensure that their timetabling allows Northern Ireland Members to be here.
You can call me suspicious, Lady Winterton, but I think that the Government may have picked this dayto rush through the measure because they knew that Northern Ireland members could not be here. I might be entirely wrong, but because the Government scheduled the sitting when Northern Ireland Members cannot attend, we have a right to be suspicious. That is the fault of the Government. The Ministers rolling her eyes at me will not change my view.
Angela Eagle: I am not sure whether the hon. Gentleman has spent any time in the Whips Office during his tenure in this place. If he had, he would know how such things are scheduled. It is not usualto give individual Back Benchers a veto on when
Mr. Bone: That would be entirely true in normal circumstances, but we are debating Northern Ireland legislation. I believe that elections were held in Northern Ireland recently. [ Interruption. ] If the Government take the view that Northern Ireland legislation should be pushed through the House without Northern Ireland Members present, I believe that they are totally wrong.
Maria Eagle: The hon. Gentleman is putting words into the mouth of someone who has been sitting down, but Northern Ireland Members knew last Wednesday when this debate would be held.
Mr. Bone: So they found out only last Wednesday; that is not a lot of notice, which rather proves my point. Did the Minister speak to those hon. Members to find out whether there was a reason why they could not attend today? Could the debate not have been scheduled for another day? Or does she just not care?
Maria Eagle: It is not my practice as Minister to ring the members of a Committee to ask whether they will attend. They are informed, as I am, about the timing of debates, and one hopes that they have it mind to turn up for parliamentary debates on issues about which they have some interest and concern. As I said earlier, it is not for me to tell people whether they should be here.
Mr. Bone: We will simply have to disagree. I believe that a special case can be made for Northern Ireland business, as we are making decisions that would normally be made by an Assembly or a Parliament. The Minister should have organised the debate through the usual channels so that those Members could have been present.
The only slight concern that I have now is that if all hon. Members are the same, why did Northern Ireland Members know about the debate on Wednesday, while hon. Members such as me did not find out until Friday?
Maria Eagle: May I ask you for advice, Lady Winterton? I am not sure whether the hon. Gentleman is seated or inviting me to intervene.
The Chairman: I had the impression that the hon. Gentleman was sitting down and had ended his remarks.
We have had a lively debate, albeit in the absence of some members of the Committee. I will do my best to deal with the points that have been raised.
The hon. Member for Tewkesbury expressed some strongly held concerns, which were reflected in the remarks of other hon. Members, including those of my hon. Friend the Member for Thurrock, about the way in which we deal with Northern Ireland business that should technically be devolved at a time of direct rule.
As a direct rule Minister, I of course understand the concern among Committee members and across the House, and in the other place, about using Orders in Council to deal with devolved matters. It is not something that the Government wish to see continue. We have made clear efforts to restore devolution, and we continue to do so. We have every hope. We are very optimistic about the fact that devolution might be restored in the next couple of weeks, at which point these issues will not be of such great concern.
I remind the Committee that, because of the concern across the House and in the other place about the Order in Council procedure being undemocratic, we have made it clear that if devolution is not restored by 26 Marchwe all hope very much that it will bewe will introduce measures to make direct rule more accountable. We have committed ourselves to do that in the event of such a failure. We have said that we will move quickly to introduce such measures. However, we are not focusing on that at present; we are focusing on getting devolution restored. That is the No. 1 priority for those who care about the future of Northern Ireland. We very much hope that that will not be an issue after 26 March, because devolution will indeed be restored. That is what we are focusing our effort on now.
Of course, we are now in the short period between the end of the elections and, hopefully, devolution. We hope that this will be the last hurrah for those who have concerns about the democracy or otherwise of the Order in Council procedure.
Mr. Robertson: I entirely agree with the Ministers objectives. However, she will be aware that another statutory instrument is coming up, although I am not sure of the date. I suppose that that is plan B, as it will extend the ability of the Government to run Northern Ireland by statutory instrument should the Assembly not be up and running. Why is that statutory instrument going to introduced when the Government have assured us that if the Assembly is not up and running, they will find a different way of governing Northern Ireland? I am rather confused about their approach.
Maria Eagle: The hon. Gentleman refers to the modification order to extend the powers to make legislation by Order in Council. I assure the Committee that that order has been laid purely on a contingency basis. We fully expect, hope for and wish devolution to be restored on 26 March and the Northern Ireland Act 2000 to be repealed on 28 March, with its Order-in-Council-making power. However, we have to bear in mind the fact that there are circumstances in which it might not be restored. In such circumstances, the Assembly will be dissolved and there will be an
Maria Eagle: I can hardly say any more than I have already said. I am stressing the point as much as I possibly can.
Mr. Robertson: The Minister did not address the point. Of course, some arrangement has to be in place. However, the Government have assured us that they will look into governing Northern Ireland in a different way, not by statutory instrument. Why are they going to introduce an order that will continue the practice for the next six months in exactly the way in which they have said that it would not continue?
Maria Eagle: It does not take a genius to work out that we will then need to debate with those with an interest in the matter the best way of taking forwardan alternative arrangement in the very sad event that devolution should not be restored on 26 March. It would not be right for us to have a gap in powers in the interim.
Now, rather than spending our time talking to interested parties about what will happen in the event of failure of devolution on 26 March, we are focusing our efforts and attention on making sure that devolution gets up and running. The order is, therefore, purely a contingency to ensure that there is an ongoing power to legislate if such be needed. If devolution fails on 26 March, we will immediately turn our attention to consulting about making better arrangements for more accountable direct rule. It would not be right for us to direct the efforts of civil servants who are currently spending their time trying to ensure that devolution works to talking about what would happen in theevent of failure. That is the situation, and the hon. Gentleman should not see it as sinister. We are merely ensuring that there is no gap in the capacity to legislate, just in case legislation is needed in the interim. We hope that devolution will be restored and that we can all cease discussing accountability for Northern Ireland legislation in this place, because it will be taking place where it shouldthe Assembly.
The hon. Member for Tewkesbury and a number of his colleagues have asked why the order could not be left for another few weeks until the Assembly wasup and running. The regulatory impact assessment highlighted several areas in which benefits would be lost if there were a delay in establishing the market. Those included variable cost savings, avoided costs of redundant market operator systems and avoided transmission costs. We have already seen a four-month delay, which estimated to have cost the regulators and system operators some £10 million. We are talking about large amounts in the case of a delay. While I understand the concerns that hon. Members on both
The single electricity market legislation needs to be in place early enough to underpin implementation of the new systems and procedures from June, in advance of the go-live date of 1 November. That is the key to why we need to go ahead.
Adam Afriyie: I thank the hon. Lady for being so generous in giving way. She mentioned the cost of delay. If we were to delay for, say, 14 days, what does she estimate the costs would be?
Maria Eagle: Unfortunately, it is not quite so simple. The delay would probably not be 14 days if we did not take through the legislation and waited for the Assembly hopefully to get up and running. The delay would probably push the start of the electricity market back to next April at the absolute earliest. We are talking not about a 14-day delay, but about a much longer delay; at best, it would probably be a number of months. We have already seen increasing costs that will be visited upon regulators, generators and industry players in the market as a result of the delay in respect of the technical issues involved in designing the market and making sure that it works.
I assure members of the Committee that there has been very broad support since 1999 for the single electricity market. More particularly, since 2004 when the proposals were put forward, there has been extensive consultation among industry players, consumer organisations and Northern Ireland parties. The broad support across all parties has been based on the market bringing mutual benefits to consumers north and south. That is not to say that questions have not been asked. Of course, there have been questions about whether it will work as well as it should and about the technical arrangements.
Angela Eagle: Is my hon. Friend surprised to hear the main Opposition party arguing for increasing uncertainty and possible increases in costs being visited upon business?
Maria Eagle: I must say that I am a little surprised, but there we are. We cannot tell what the Opposition believe these days. No doubt, we shall work it out in due course as they gradually produce their much-awaited policies. I shall certainly not stand here and argue for the imposition of millions of pounds of extra costs on industry players and consumers in the north and south. [ Interruption. ] The hon. Member for Tewkesbury is chuntering away. I have repeatedly given way to him. If he wants to get up again, he can do so. Clearly he does not.
There has been wide-ranging consultation, including with political parties throughout Northern Ireland. While there have been questions about whether the proposal is the best design for the market and so on, there has been wide-ranging support for it. It would be fair to say that the DUP has been sceptical about some aspects of the single market, but even it has stated that,
The hon. Member for Tewkesbury referred to long-term contracts. Some can be potentially cancellable in 2011-12. That is the first time that they can be cancelled following privatisation. Competitive markets are required to be in place before they can be cancelled, otherwise it would not be to the benefit of Northern Ireland consumers to cancel the contracts and put security of supply at risk. I argue that it is important to have the competitive market ahead of the potential for cancelling the long-term contracts. If it is in place, we will not run into potential hikes in costs to consumers or threats to security of supply as a result of cancellation of the contracts in 2011-12.
The single electricity market will create conditions and offer opportunities for Northern Ireland consumers to access more competitive generation. At the same time, we need more interconnection to enable us to do that. I make that point to the hon. Member for Tewkesbury in respect of tapping into the more competitive arrangements in BETTA and NETA. We hope that the second north-south interconnector and the east-west interconnector between Dublin and Wales will be up and running by 2011-12. That ought to facilitate more competition and a better deal for consumers north and south.
The hon. Gentleman also made a point about the Irish claim on territorial waters. The Republic certainly makes a general claim on territorial waters and seabeds. However, in respect of the proposed offshore wind farm at Tunes plateau, for example, there is some co-operation between the north and south to try to secure an agreement with the Irish Government to license and share responsibility for that area without prejudice to either side on jurisdiction. Rather than getting caught up in a huge fight about who owns the seabed on the basis of more general legislation in the south, we would rather make pragmatic agreements about mutual benefits from renewables.
That relates to the point that the hon. Member for Argyll and Bute made about renewables. The potential for new generation in Northern Ireland through renewables is quite enormous, partly because of the potential for wind and wave power. Some 1,000 MW of wind power applications are currently in the planning system in Northern Ireland, which would represent£1 billion of new renewable energy investment. It is important that the arrangements for the new single market encourage the regulators who run it to focus on the importance of diversity of supply, away from the traditional coal, gas and oil-fired stations that currently exist in the south and in Northern Ireland andmore towards renewables. There is great potential. The regulators administering the market will have to have regard for diversity of supply and for ensuring that there is more scope for renewables.
The completion of the second north-south interconnector also offers opportunities for existing conventional Northern Ireland generators to expand
Mr. Reid: Part of the concern is that there could bea market disadvantage if one of the jurisdictions said that a certain proportion of electricity had to be generated from renewables but the other took a separate decision. Will the regulator in the joint committee have the power to dictate to both jurisdictions that a certain proportion of the electricity needs to be generated from renewables?
Maria Eagle: No; the regulators have to have regard to diversity of supply and to ensuring that the way in which the market is run enables renewables to play a part. The regulators do not set percentages. National policy, south and north, will still lie with the national Governments. The hon. Gentleman needs to remember that the regulators are independent of Governments. The regulators certainly do not make policy, but they have to have regard to the policy, which the north and the south both have, to try to expand the capacity of renewables to contribute to energy supply in the future. There might well be different renewables regimes in the north and the south, both with the hope of increasing the supply from renewables, but it is not for the market regulators to make a judgment about what the percentage ought to be.
The environment and renewable energy fundingthe Secretary of State for Northern Ireland has set aside some £59 millionwill enable us to bring forward three or four significant energy-from-waste proposals, which, after the pilot phase, will offer opportunities for local investment in heat and power from agricultural and municipal waste and from wind and wave power. It might well be that, for a period, Northern Ireland will have a significant advantage as a location for the generation of renewables. The market will not be responsible for policy making; it will merely have regard to our need to diversify and promote renewables generally.
My hon. Friend the Member for Thurrock made clear his disapproval of the arrangements for the scrutiny of Northern Ireland legislation. I heard what he said. On his vires points, I should like to draw to his attentionhe has read it, because he referred to itthe explanatory memorandum, which says that there was a vires issue, which struck officials and those who worked on the legislation. As a result of the caution of officials, who wanted to ensure that there was not a vires problem, a provision was inserted into the Northern Ireland (Miscellaneous Provisions) Act 2006, on which the hon. Member for Tewkesbury remarked during his contribution at the time. It would have been possible to assume that the vires was okay and to go ahead with
My hon. Friend asked a number of questions about the two regulators and the differences between them in the way that they will operate and resolve disputes. The Department, the Northern Ireland Authority for Energy Regulation and the SEM committee will be under a duty, as will their counterparts in the south, to carry out their functions in accordance with best regulatory practice. Their function is to regulate the market as it will be. It is modelled on the duty imposed on the Northern Ireland Authority for Utility Regulation and the gas and electricity functions of the Gas and Electricity Markets Authority in Great Britain. Primarily, the regulators will carry out a regulatory function.
On the issue of whether Governments north and south can interfere in the work of the SEM committee to protect domestic interests, both Governments have sought to ensure independent regulation of the single electricity market. The Department will retain its existing consent functions in relation to the granting of licences and the modification of licence conditions. In carrying out their functions, the Department, the authority and the SEM committee will be required to have regard to the need to avoid unfair discrimination between consumers north and south, as will the CER and the SEM committee in the south. The committee will not interfere in non-SEM domestic electricity matters. Its powers will extend only to the regulation of single electricity markets; it is not going to interfere in anything else. Excluded domestic functions are set out in article 6(5).
The quite ingenious way in which the committee works is that the sub-committee of each regulatorwill have the same people on it, so that, although technically and legally there will be two different sub-committeesone in each jurisdictionthey will have the same membership. Therefore there will be one decision-making process. The regulators, north and south, will then implement the decisions of the committee for the best regulation of the market. One hopes that that will work in a quite positive way.
The Department is not required to approve the working arrangements between the authority and the SEM committee, because the authority is an independent body whose existing working arrangements do not require our approval, so there will not be political interference from Ministers north or south in the way the arrangements work. However, as a corollary, the committee will be there purely to regulate things that relate to the market. It will not extend its powers, functions or efforts beyond that.
As to the environmental impact of renewables, the order does not make any change to the existing safeguards on environmental protection. Both Northern Ireland and the Republic will operate within their existing planning
The hon. Member for Wellingborough made points similar to those of other hon. Members about the order being rushed. There is little more that I can say about that, and we may have to agree to disagree.
Adam Afriyie: I thank the Minister for being so generous in taking interventions. I want to press her a little further about the price of delay. She mentioned that there was potentially a £45 million saving to be made in Northern Ireland. I do not know where that figure comes from. With a population of 1.7 million that is about £26 per person. If that is spread over a 10-year time frameI assume that there would be a gentle drip throughthat is £2.60 per year per person, so once again I ask the Minister to explain the difference that will be made by a delay of 14 days, or even several months, which she may argue is the case. It seems that it would be about 20p per month per person in Northern Ireland. Is that correct?
Maria Eagle: No; I do not want to be unpleasant to the hon. Gentleman, but that is a simplistic way of looking at the matter. The costs of delay are not simply a result of putting things back, or failing to acquire as quickly as possible the net present value of the benefits that the market will bring. The single market is a big change for electricity generators and industry players, so they all incur costs in getting ready for implementation, which would be multiplied by our delay. There are thus other costs of delay. I referred to some of them earlier. It is not simply a question of putting off the benefits of the single market if we delay.
I cannot accept that two weeks would be the entire extent of the delay. We would probably be dealing with a minimum delay of several months, during which the industry that had been planning to operate in a single market would have to incur the costs of continuing to operate the current arrangement. It is too simple to say that all that would happen is that the benefit would be put off for a couple of weeks. I do not accept that that would fully encapsulate the cost of the delay of not proceeding with the order.
The hon. Member for Wellingborough made some points about the independence of the SEM, and I think that I have already covered those in responding tomy hon. Friend the Member for Thurrock. He also, along with, I think, the hon. Member for Tewkesbury, accused the EU of failing to be sufficiently robust in its own liberalisation. I am not going to stand and argue; the EU has been as liberal as it could have been, as fast as it could have been. However, there is certainly a clear direction from the EU towards liberalising and creating regional markets and eventually an all-EU market for electricity.
There is increasing pressure from Brussels for pro-competitive measures and separation of vertically integrated energy utilities. Obviously, such measures cannot be achieved quickly or cheaply, otherwise
Mr. Bone: I am sure that the hon. Lady did not mean to avoid my question, but I asked about the make-up of the SEM committee. She explained how it worked, but what is the original make-up? Is it 50 per cent. from the Republic of Ireland and 50 per cent. from Northern Ireland? How do those important members get chosen?
Maria Eagle: It would be an equal number from north and south, plus an independent member; I think
I am sure that people have heard enough from me, so on that point I commend the order to the Committee.
Question put and agreed to.
That the Committee has considered the draft Electricity (Single Wholesale Market) (Northern Ireland) Order 2007.
Committee rose at two minutes past Six oclock.
|©Parliamentary copyright 2007||Prepared 13 March 2007|