Examination of Witnesses (Questions 100-119)|
MONDAY 8 MAY
Q100 Mr Davidson: So there is going
to be an unsteady trend then there will be a variable trend, but
there will be a discernible trend which will be getting things
better and fewer leaks.
Mr Gray: I would expect so, but
there is a difference between electricity distribution and gas
Q101 Mr Davidson: I am not asking
you about electricity distribution: I am not interested in knowing
Mr Gray: I was just drawing an
Q102 Mr Davidson: I am asking you
about gas leaks. Can I just be clear that what you are saying
to me is that you would anticipate that over a period, if we come
back to this in five years' time, there will be a steady trend
with variations indicating a decline in the number of gas leaks?
Mr Gray: Yes.
Q103 Mr Davidson: Fine. We actually
accept a yes. A yes is entirely satisfactory, indeed that will
possibly come up at your trial in due course. May I just ask,
in terms of the other health and safety indicators that you have,
that you are working on with the HSE, firstly whether you could
just give me an indication of how many there are and secondly
whether or not you would similarly expect a trend in the appropriate
direction, upwards or downwards, depending whichever is safer?
Mr Gray: Health and safety is
very much the responsibility of the Health and Safety Executive.
As well as us having to approve the sale and the Secretary of
State for Trade and Industry having to approve it, the third party
which has to is the HSE. They lead on safety initiatives. It is
not our territory, except to the extent that obviously we have
to make sure that nothing we do in the price controls prejudices
the ability of the companies to do what the HSE wants them to
do. However, it is not our job to enforce measures on safety.
It is our job to make sure the companies have the money to be
able to do what the HSE calls for.
Q104 Mr Davidson: Well that is interesting.
So if we saw an increase in lack of safety and it was reasonable
to assume that the companies were pursuing financial strategies
which resulted in less money being spent on safety measures and
there was therefore an increase in those numbers, are you saying
in those circumstances you would be absolutely powerless?
Mr Gray: I should imagine that
the Health and Safety Executive would want to know from us whether
we thought we had done anything which was imposing that pattern
of behaviour on the companies. If there were any evidence of that,
we would change it. Then it is very much for the Health and Safety
Executive to set the targets.
Q105 Mr Davidson: Let me be clear.
If the companies find themselves in a position where the number
of health and safety breaches is increasing, a plausible defence
for them is to say that they cannot afford to do it because you
are squeezing them too tightly.
Mr Gray: Yes, they might say that.
Q106 Mr Davidson: Presumably you
have taken all that into account. It seems to me that would be
the first refuge of somebody who wanted to increase their profits
in some way by simply arguing that they were being squeezed so
tightly that they could not afford to maintain the service.
Mr Gray: The industry blames all
sorts of things on us of that sort, but in the end they have quite
strict legal and licence obligations to maintain satisfactory
levels of performance. If they were breaching those licence obligations,
then either they would be in breach of something the HSE had imposed
and they would take action on it or, if it were a breach of the
licence for which we were responsible, we should take enforcement
action on that.
Q107 Mr Davidson: I take it you could
reassure us that you would not fall for that one, if they simply
argued that you were being far too tight on them financially and
that was why the number of accidents was going up.
Mr Gray: In all regulated businesses
there is always a discussion around the service required out of
these companies. One of the services required is a very great
focus on safety.
Q108 Mr Davidson: In terms of the
service you require, I notice that in the bad old days it was
going to take 51 years to replace all the at-risk pipes, and that
is down in paragraph 6.4, and now in the bright new dawn it is
going to take 30 years to replace all the pipes at risk. If my
house were one of the ones which were not going to be dealt with
until 29 years and a bit from now, I am not sure I should regard
that as all that much of an improvement, would you?
Mr Gray: That arrangement whereby
the pipes were to be replaced was one which was agreed between
HSE and Transco as it was then. Our role in it was simply to ensure
that the industry has sufficient funds to make sure that it could
replace the pipes on the agreed timescale. We took action in the
last price control review.
Q109 Mr Davidson: This is the "It's
nothing to do with me guv" effect, is it?
Mr Gray: It is very much to do
with us in the sense that we have to make sure they have the money.
Q110 Mr Davidson: Are you happy then
with a position where these pipes which are potentially dangerous
only have to be replaced within 30 years?
Mr Gray: It is not our responsibility
to judge the period over which it should be done.
Q111 Mr Davidson: That is the "It's
nothing to do with me guv" effect, is it?
Mr Gray: It is just a question
of who is responsible for what in this kind of situation. It is
not our responsibility to set the safety measures.
Q112 Mr Davidson: You have accepted
a position where the HSE and the companies have settled on 30
years and you have taken the view that is not something you would
intervene in or express a comment on, you just take that as a
given. Is that correct? We will settle for a yes.
Mr Buchanan: Yes. The HSE have
set that parameter and we have a very close working relationship
Q113 Mr Davidson: Fine. I just want
to be clear about who is responsible for that. May I turn now
to the question in paragraph 6.11 of extensions to the gas network?
I wonder whether or not this is all somebody else's fault as well.
I should have anticipated that there would be some pressure under
any new regime to improve the extension of the gas network beyond
that which was there before, rather than simply leaving it as
it was previously. The fact that it indicates here "... expected
to have a neutral impact on the number of extensions" indicates
to me that there is an opportunity missed. Is that fair?
Mr Buchanan: You may regard this
as good news: this is something we are going to be addressing
and there will be a consultation paper out shortly as part of
the price review we are doing. This is almost a classic example
of what you can do in a corporate transaction or what you can
do when it is your turn. Our turn is in the price reviews and
we are going out to consultation on some of the issues which should
potentially be looked at with regard to the extension of the gas
Q114 Mr Davidson: What position will
you take going into this? You do not walk into this with no idea
Mr Buchanan: That is a very good
point. Our opening position is largely covered by what is called
section 4A of the 1986 Gas Act, which says that we have to look
at situations where it is reasonably economic and therefore we
shall have to make a judgment in the light of the consultations
as to whether it is reasonably economic. One of the examples on
which we may get feedback is that there is a ten-metre free rule,
but if you are more than 23 metres away from a gas main you lose
that. Is that fair? Should we revisit that? Those are the kinds
of things we want to revisit in the consultation and should welcome
your views on this.
Q115 Mr Davidson: A consultation
like that is likely to be dominated by those who would gain by
Mr Buchanan: As regulators we
are pretty cynical as to where people are coming from. May I give
you comfort that we are cynical?
Q116 Mr Davidson: I just wonder whether
my urban constituents would be yet again forced to subsidise farmers,
who in my view already get far too much. Is that a fair way of
seeing how the thing could progress?
Mr Buchanan: At the moment I do
not want to prejudge it because we are opening up the issue for
discussion. I very much welcome your views on it.
Q117 Mr Williams: This question of
leaks and replacement of pipes. The 23,000 leaks a year, most
of which are minor, represent over 60 a day, which is a surprisingly
large number. When you think of the number of customers, if it
is all tiny household leaks, it could be seen in a different perspective.
Looking at paragraph 6.4, a point is made that over a five-year
period to 2001 an average of 1,840 kilometres a year of at-risk
pipe were replaced, that is 1,150 miles. Let us stick to milesI
am not metricated. You were replacing 1,150 miles a year of at-risk
pipe, which means that if it were going to take 51 years that
would be 58,000 miles of pipe at risk. If we look at paragraph
6.2 and turn the kilometres back into miles there, that means
that one third of the existing network is regarded as at risk.
That is staggering, is it not?
Mr Buchanan: It is very serious
Q118 Mr Williams: Not just serious,
but very serious.
Mr Buchanan: Yes, very serious.
Q119 Mr Williams: What now is intended
is that you replace within 30 years, but in 30 years it would
mean you would have to replace at the rate of 2,000 miles a year.
Mr Buchanan: Yes.