Simon
Hughes: The arguments from objective
commentators—not from politicians—were about the issues
for the UK in 2015-16 and beyond. I do not think that the hon.
Gentleman would find any objective commentator—National Grid,
Ofgem or others—who in the last month said that we were at risk
of not having sufficient gas supply for the UK
need.
Mr.
Ellwood: It was a first step—a
precaution.
Simon
Hughes: But the burden of the Conservative song over
recent weeks has been to suggest that we are running out of gas. That
was the implication. Of course, using up some of the gas storage means
that there is less storage, but as the hon. Member for Wealden has
fairly put it today, we have significant connections through the
recently established interconnectors with Norway and the Netherlands.
Norway is the most significant contributor. The interconnectors have
worked almost without interruption since they were set up. There was
one technical hitch in the supply from Norway—that is
correct—but we have liquefied petroleum gas supplies coming into
Milford Haven and the Isle of Grain, which we did not have 10 years
ago. We also have our indigenous supplies from the North sea. The hon.
Member for Wealden is right to say that when demand is
greater—we had record demand—we turn to alternative
suppliers such as the coal industry.
The
Chairman: Order. May I remind all members of the Committee
that we are debating whether the law should be changed to make further
provision for the storage of gas, rather than debating comments made by
Members in the last week or so? I hope we will focus on the content of
the amendment.
Simon
Hughes: I am happy to do so. I was arguably distracted by
the hon. Member for Bournemouth, East.
Charles
Hendry: The hon. Gentleman referred to the quote I
attributed to Alistair Buchanan in the Financial Times. I
specifically referred to 2015-16. If we can see a pressure point now,
five years out, does it not make sense for us to react to it now and
put the gas storage in place so that if there is a pressure point
within that time
scale we have taken steps well in advance to prepare for it? I did not
use the quote to suggest that it related to the problems of the last
week or so, but simply to say that it enhances the case for taking
sensible preparatory steps at this
point.
Simon
Hughes: The hon. Gentleman knows that I agree with that
proposition. I have never dissented from the fact that we need proper
long-term planning for our energy security. It is hugely important. As
it happens, the UK is relatively well placed, as is Europe. The hon.
Gentleman will have read that the International Energy Agency
think-tank made an announcement this month, repeating its assessment
that the “gas glut” was likely to grow up to 2015. It
then
said: “Europe
is geographically well placed to secure gas supplies from a variety of
external
sources.” The
reality is that because of our indigenous supplies, our connections
already in place, our contracts in place, our new use of liquid
petroleum gas and our plans for the future, we are well placed. But,
yes, we need to plan to make sure that we have security.
I hope we
will realise that no alarm bell was sounded by Ofgem or by National
Grid over the last few weeks. The companies that had their supplies
interrupted because they had an interruptible contract, which meant
that they knew the risk, had, as the Minister of State suggested,
alternative supplies available. They planned against the knowledge that
they might have a reduction in contract. No domestic supplies were
curtailed and therefore we got through a very difficult period
relatively comfortably.
We may have
more difficult winter periods in the next few days if today’s
forecast was accurate. Weather forecasts are less believed nowadays.
The hon. Member for Wealden is on the right track with a variant of new
clause 20 as the way forward. I do not think that we need to tinker
with clause 16 in the way that is suggested because that point is
covered if it needs to be covered. No doubt we will hear the
Minister’s response to all these things any second
now.
Mr.
Weir: I want to make a few brief points. I have a lot of
sympathy with what the hon. Member for Wealden is trying to do with new
clause 20, although I am not sure that it will achieve what he sets out
to do. He talks about a minimum requirement for the amount of gas to be
secured. He does not say that it has to be by storage. I am sure that
many will argue that the long-term contracts in place for LPG and
others are securing the supply. He mentioned the contract that Germany
had entered into with Qatar as part of its energy security.
There are a
lot of problems. I mentioned in an intervention my concerns about the
way the interconnector works and the difference between the liberal
market in the UK and the less liberal market on the continent. That is
an important point. Continental energy systems work very differently
from ours. If we are to have new gas storage and security of supply for
consumers in the UK we will have to go an awful lot further and look at
re-jigging the UK market completely so that we could prevent the export
of gas from the UK, a point to which the hon. Gentleman
alluded.
The whole
point of the interconnector is that it is supposed to react to market
signals. It should be bringing gas from the continent to the UK to
enhance our security when the price is high and there is demand for
gas. That is simply not happening to a significant degree at the moment
because of the way the market works on the continent. If we are to do
as the proposal suggests, it seems to me that we have to work with our
European partners to change the market on the continent to a more
liberal one, or make the UK market less liberal, to ensure that we do
not have that problem, which is exacerbated by most of our energy
companies now being offshoots of the large European energy companies.
Some would argue that they have a feeling for their home market more
than indigenous companies might. To build new
storage capacity would place an enormous cost on the energy companies,
which would inevitably be passed on to the consumer. They have been
piling cost upon cost on to the consumer and will reach a limit at
which the consumer will rebel. That has to be borne in mind. I have
sympathy with the hon. Gentleman’s cause, but I am not convinced
that the proposal will achieve what he is setting out to
do.
Joan
Ruddock: As always, Mr. Bayley, it is a
pleasure to serve under your direction. I will try to deal with a
couple of the issues raised before I make my main pitch regarding the
amendments and the new clause.
The hon.
Members for Angus and for North Southwark and Bermondsey both made
measured speeches in response to the amendments, illustrating some of
the complexity in trying to determine whether we have sufficient and
safe supplies of gas. The Conservative party has tried to raise alarm
over those issues, quite wrongly in our view. The facts do not bear out
the arguments that the Conservatives have been making.
The hon.
Member for Bournemouth, East said that interruptible contracts were not
good for the economy. It is obviously the view of companies who
voluntarily take interruptible contracts—nobody is forcing them
to do so—that it is good economics. If a company gets as much as
10 per cent. off energy bills for a decade, one interruption probably
makes very good financial sense. That is the situation in which they
find themselves. There were, of course, no forced cut-offs but only
contractual arrangements, freely entered into and undertaken according
to the clear financial preferences of the companies involved. There was
never a threat to domestic consumers and no one external to Government
ever suggested that was the case during that period. I stress that
alarm was raised completely wrongly in our view.
The hon.
Gentleman also raised the question of Russian gas and, of course, the
UK takes virtually no—or very little—Russian
gas.
Mr.
Ellwood: The Minister is right that we take very
little—about 3 per cent. of Russian gas ends up here—but
I am trying to illustrate that Europe is very much one village and
relies heavily on Russian gas. If the taps are turned off, it will
affect the price of gas and its distribution, and that will have
repercussions. I do not know how severe they might be, but there would
certainly be repercussions on the gas supply to the UK. If the Minister
denies that, I do not think she is taking the matter as seriously as
she should.
The second
point the Minister raised was about interruptible contracts. They are a
reflection of the system that developed in the UK, with the North sea
oil
supply acting as our huge reserve. Times have now moved on and we do not
have the storage capacity of France or Germany. Rather than look back
and keep contemplating what happened in the last cold snap, we are
saying that we should use the Bill as a vehicle to improve our storage
capability by 2015, when the situation may get worse. Let us be
prepared for that longer cold snap because, had the last one been two
or three more days, the businesses that grabbed contracts because they
were cheaper would have suffered because they would not have been able
to keep their alternative power supplies
going. 11.15
am
Joan
Ruddock: The only business that I saw on record clearly
said that it had two weeks’ supply of alternative fuel and did
not in any sense feel at risk. When I come to my major points, I think
that the hon. Gentleman will see that he is looking to one single
solution and that the market is much more complex. There are many
solutions to the gas supply problem, which I hope to describe in a
moment. The
Conservatives have also made much of their statement that there were
only eight days’ gas left. There has been a failure to
understand what gas storage means. Saying that there are only eight
days’ gas left implies that no other gas was coming into the
country. [Interruption.] But that is the
implication, that there is eight days’ gas left.
[Interruption.] No, if the lay person on the
street was told eight days’ gas was left they would believe that
all gas supplies would run out in eight days. That is a common-sense
interpretation. Those who, sophisticatedly of course, know much better
should not put out simplistic statements that clearly lead the lay
person to believe that they would have only eight days’ gas
left.
Charles
Hendry: If the Minister goes back and looks at the press
release at the time, she will see that it was made absolutely clear
that that was not the case. Therefore the statement that we put out,
which was a beacon of clarity, did not say that. Others may have
interpreted it, or it may suit the Minister to interpret it, in that
way, but that is not what we said at the
time.
The
Chairman: Order. Before the Minister continues may I give
some guidance to the Committee? I think that we have probably heard
enough about whether the press statement of a week or two ago was
alarmist. It is, of course, relevant to debate whether there are
sufficient gas reserves. That is what the amendment is about, and I
hope that the Committee will focus on that from now
on.
Joan
Ruddock: Thank you, Mr. Bayley, for that
guidance. I think that you, I and the hon. Gentleman all know that in
politics it is the headline that matters and not the content of the
press
release. Anne
Main (St. Albans) (Con): Will the Minister give
way?
Joan
Ruddock: Let me just describe the facts and I will then
happily give way. During the difficult period—the cold
snap—overall storage was about two-thirds full and, had the cold
weather gone on, that would have
enabled a contribution at the level that was being made from gas storage
to continue for over seven weeks. The gas storage facility does not
have to replace all the gas being used because gas is still flowing
from everywhere. The storage makes a contribution, which at that level
would have been able to continue for seven weeks. The reality, for the
record, is that that is what we have in the most extreme circumstances
that we have faced in a long
time.
Anne
Main: Putting it simplistically for the man in the
street—as the hon. Lady said—surely we should be asking,
“Do we have less gas storage than other countries? If we do, do
we have sufficient or should we have more?” To ensure that we
have more, the change should be made to the
Bill.
Joan
Ruddock: I am sorry to tell the hon. Lady that she is
entirely wrong. That is not the question. When I come to my main
contribution, I hope that she will understand the points I make
then.
Mr.
Binley: The Government have intimated on a number of
occasions that we need more gas storage. Is the Minister now arguing
otherwise? She sounds complacent about the issue, but perhaps she will
tell me that we shall move on to talk about the need for more gas
storage. If so, I am happy with her remarks in that
respect.
Joan
Ruddock: I can assure the hon. Gentleman that I will come
on to talk about more gas storage, but it is so important to understand
that the point raised by the hon. Member for St. Albans is clearly
about how adequate our supply of gas is, which is not the same as
saying, “How adequate is our storage of gas?” Those are
not the same thing, and I seek to make that
point. Let
me say again how extreme the situation was. The previous record demand
was in 2003 and was for 449 million cubic metres
per day. On 7 January this year it was 454 million cubic
metres per day and on 8 January it was 468 million cubic
metres per day. We were dealing with unprecedented demand over those
few days. What we have to ask ourselves, and what the person in the
street wants to know, is, given unprecedented demand in unprecedented
cold weather, did our gas supply stand up to the test? It
did.
Amendments 33
to 35 and new clause 20 all relate to the debate that we have just had
on gas storage. I must acknowledge that the hon. Member for Wealden has
clearly said that the preference is for accepting new clause 20 rather
than the amendments, but, for the record, I shall speak to the
amendments. They expand clause 16 to make it explicit that when Ofgem
is carrying out its principal objective of protecting consumer
interests, those interests include the need for gas storage. The
clarifications to Ofgem’s principal objective that clause 16
will implement will, without amendment, put beyond doubt that the
interests of consumers include ensuring secure gas supplies. That is
the point that the hon. Member for North Southwark and Bermondsey
made.
I agree with
the hon. Member for Wealden that gas storage is an important element of
security of gas supply, but it is just one element. What is really
important to consumers and businesses is that Britain has secure gas
supplies, and that can be achieved in a number of
ways, not just through gas storage. Clause 16 will comprehensively cover
those interests, whereas the amendments focus on just one element. Gas
storage is specifically encompassed by the
phrase “commercial
activities connected with, the...supply of
gas” in
new subsection (1B) in clause 16(3). Amendments 33 to 35 are,
therefore, superfluous.
The aim of
new clause 20 is to allow the Secretary of State to set a minimum
requirement for an amount of gas to be secured for use by the suppliers
of domestic and business customers and gas-fired power generators. It
would also allow the Secretary of State to specify which customers
and/or generators would benefit from that secure supply. I do not
believe that the power is
necessary. The
UK’s market arrangements have been tested rigorously during the
recent cold weather. The market delivered secure supplies even though
demand for gas reached record highs at the same time as four major
losses of supply from Norwegian fields due to technical
difficulties.
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