Joint Committee on Draft Civil Contingencies Bill Minutes of Evidence

Examination of Witnesses (Questions 340-353)


21 OCTOBER 2003

Q340  Lord Bradshaw: Without there being a regional or national team?

  Mr Miller: Yes, they would. They would work within the electricity or the water sector. If it required more extensive resources outside those sectors then we could call on military aid for instance, we could call on the informal arrangements with local authorities and putative category 1 responders, but it is at that stage that those informal arrangements start becoming less reliable, whereas the mutual aid arrangements within the sectors we are fairly confident of and understand the resources available to us.

Q341  Lord Bradshaw: Is there anything you would like to add to that?

  Mr Turner: Yes. I agree that the procedures we have today would work within the current rules and requirements. What is being proposed in the Civil Contingencies Bill is to standardise and get some consistency across the UK. I was asked how BT would meet those requirements and assist across the UK without incurring huge amounts of cost. A national forum for emergency planning would allow us to liaise with one body, to agree policy and standards so that companies such as BT, which covers the whole of the UK, do not have to do it in nine or ten separate forums against different standards.

Q342  Lord Bradshaw: Which is your preferred option, to do it in nine or ten separate silos or to have what is bound to be more costly regional and national teams?

  Mr Turner: I would prefer to discuss policy and standards setting, to get generic plans set up certainly for the telecoms aspect in one national forum. You need to discuss specifics for the regions at the local level.

Q343  Lord Bradshaw: And tactically at the local level.

  Mr Turner: Yes.

Q344  Kali Montford: Mr Miller, you have just made some very interesting observations about the mutual arrangements that are required in the case of an emergency, but in a recent answer to a Select Committee another utility company said that if we started looking at compensation in emergency arrangements those mutual agreements may break down because of commercial considerations. How much do you think we ought to be thinking about that in considering this Bill?

  Mr Miller: I would use the example of the water sector. There is a requirement on water utilities to prepare for their worst case scenario and to have adequate resources to deal with that worst case scenario. There is a debate going on between the sector and Defra at the moment over the extent to which our worst case assumptions remain appropriate post 9/11. So we are geared up for a single incident within our own area or even multiple incidents, but if you extended that multiple incidents scenario, when does it become unreasonable to be prepared and to rely entirely on your own resources rather than on mutual aid? The responsibility in terms of compensation for an organisation remains with that organisation, so it will have a risk appetite and it will resource itself appropriate to its risk appetite as a commercial business. If there were accountabilities in compensation terms for failure to meet expectations and standards they could not be exported through the mutual aid arrangement.

Q345  Kali Montford: So are you telling me not to bother?

  Mr Miller: If you were another organisation that we were attempting unsuccessfully to resource the mutual aid from we would not expect to come back to you with a compensation bill.

Q346  Mr Jones: Gentlemen, I would like to ask about financial issues. First of all, could you tell us how much your organisations spend on contingency planning? Do you actually agree with the regulatory impact assessment which says that the proposals in the Bill achieve the Government's policy objectives without imposing significant burdens on your sector? If you do not agree with that, how much would it cost to implement what is laid out in Part 1 of the Bill?

  Mr Miller: We spend of the order of £200,000 per year on operational staff directly associated with emergency planning within north-west England. The plant maintenance costs associated with emergency planning are of the order of £150,000 per year. There is a distributed resource amongst the 4,000 staff who contribute to emergency planning, maintaining contingency plans and the like, that would be of the order of an additional £200,000 per year. We do not fundamentally disagree with the impact assessment although we believe it is slightly weighted on the low side. So it is not an order of magnitude wrong but it is perhaps two or three times too small in our view. In terms of reasonable take up of duties under the Bill providing category 1 responders do not go to extremes and the water and utilities sector does not represent an undue proportion of high risks in their portfolio of risks, then it might be reasonable to expect our costs to increase by of the order of 25 per cent, but we do not see a doubling or a trebling of those costs. If the risk appetite and the desire to be seen to be compliant with the legislation really took off then I would say all bets are off in terms of the cost.

  Mr West: Within Western Power contingency planning is part of our legal obligations and is in our distribution licence conditions, so there is a whole raft of activity there in terms of resilience planning, IT, architecture and so forth which is included anyway. Excluding all of that, we have spent £250,000 in the last year on contingency planning. The level of expenditure may vary between different distribution companies. For example, a wholly urban distribution company might face little risk from high winds but might face an enhanced terrorist risk. Alluding to a point from the last question in terms of cost, there are mutual aid arrangements in place between the electricity companies in the UK. The electricity regulator, Ofgem, has in place a set of information and incentives project standards governing the performance of distribution company networks and if they fail to meet those standards they are penalised by up to two per cent of their income. If you are calling for aid under the mutual aid arrangements then there are arrangements in place whereby those penalties can be put on hold by Ofgem. However, there are no arrangements in place to deal with the situation where someone is providing aid and that is something we are discussing with the regulator as it is a disincentive at the moment.

Q347  Mr Jones: Mr Miller, what control do you think there is going to be over the excesses you mentioned and what part do you think you should play in curbing some people's excesses?

  Mr Miller: To be frank, I see very little to curb those excesses at the moment. Inevitably there will be a range of perspectives on risk exposure within the category 1 responders and that will be influenced by people who have got considerable experience in the field. The threat of a utility presenting a high impact risk to a county can be quite significant, but the likelihood of that occurring as opposed to an air crash or a train crash is considerably lower. We would hope that experience, judgment and common sense is brought to bear, but if somebody got the bit between their teeth and decided to exploit the duties of a local authority in demanding information and a response from us and that became seen as good practice then it would be increasingly difficult to meet those demands.

Q348  Mr Jones: Does it not concern you that common sense cannot really be written into this Bill? I am sure we will come across "jobworths", whether it be civil servants or regional civil servants or council officials who will put a long list of demands on you. Should there not be something in here to curb those demands or some sort of arbitration between those people who are asking for these demands and yourselves?

  Mr Miller: There is one defence that I would bring to bear in a minute, but I would not demur from a proposal to bring additional control and reinforcement of common sense to bear. Within the water and electricity sectors the nature of the contract with our regulator is such that, providing it passes triviality and materiality tests, we can recover an appropriate level of cost consistent with an equitable balance of risk between the customer and the shareholder. If additional costs were incurred then we might expect to see a proportion of that cost recovered through our charging formula, but there is no guarantee of that and it would be in part down to the regulator.

  Chairman: I will have to stop you there because there is a division in the House of Lords.

The Committee suspended from 5.16pm to 5.30pm for a division in the House of Lords

Q349  Chairman: Is there anything you wanted to say in response to that question or were we just about finished?

  Mr Miller: No.

  Chairman: That is fine. Lord Archer, you are next.

Q350  Lord Archer of Sandwell: I wonder whether you could assist us a little further following on from the answers you gave a few moments ago. I think my question is directed principally to Mr Turner because in the BT paper, in answer to question 8, there is a clear suggestion that the Treasury ought to fund any costs which arise from the Bill. If we turn to Part 1, clause 2 of the Bill and you see the duties imposed on a schedule 1 component, they seem to be, as I think Mr West said a few moments ago, things you would do normally in the course of your operation, that is from time to time assess the risk of an emergency occurring, assess the risk of an emergency, making it necessary for the person to perform any of his functions. If you look all the way down that list, all of them seem to be things which would be incidental to what you do in any case. There may be those who would ask why should the Treasury fund operations which are incidental to what you do anyway.

  Mr Turner: First of all, BT does not believe there should be a statutory duty on Government to cover all of the costs of category 1 and 2 responders for costs incurred before, during and post emergencies, just some of them. The costs to be recovered would be incurred as a result of activities beyond individual operational and business as usual costs. If you look at the duties of category 1 responders in the Bill and you then say what is the knock on impact of that to category 2 responders, at the moment BT can service the category 1 responders in their interpretation across the country of the implementation of current duties and I think currently we interface with about 250 separate organisations across the country and you might say how can you possibly do that. The way we do that is that the draw on our time is actually disproportionate, so some authorities might have two emergency planning officials, another may have a part of a person who is doing it. A lot of it depends on where they are physically, do some have major tunnels in their area, do some have ferry ports, it depends on the authority. However, if the interpretation of the Bill is such that that then puts a requirement on everyone nationally to implement certain standards then the implication certainly on ourselves to support that level of activity is far greater than we do currently. At the moment we can support London and the London Resilience Team by putting it as a top priority within my unit, so we have not increased the head count, we have just put it as a high priority, but if I had to do that nationally that would give me an issue to resolve in terms of resourcing and it would also add cost to BT from a manpower perspective. The other issue would be that as the Bill goes live we could have a lot of regional authorities having to step up and do more than they did before at the same time. So it is not just a matter of supporting meetings, there is a lot of detailed work to be worked through with a fire brigade or an ambulance service in a region. Just to name one category 1 responder, say an ambulance authority wants us to work with them to look at the resilience and the fall back arrangements for their key sites, be it hospitals, ambulance stations or whatever, that is a phenomenal amount of detailed work which is different to BT planning resilience and contingency planning for its own key sites and exchanges. If you had asked me which key service is served by building X I could tell you quite readily, but if you were to ask me if I knew the resilience of supply to this authority or this key person, that is a different level of detail. It also means BT is not necessarily the owner of that customer. You then get down to the details of how is the supply chain managed, ie a key authority may buy its retail service off another service provider who may then subcontract the whole of that service back onto BT or onto another telecom supplier. You are actually moving down to a greater level of detail and it depends how that is managed and rolled out across the country. So BT is not saying the Government should cover it all, we are saying there is a health warning here as to how much is wanted to be done, in how much detail and what timescales as to what load you could put onto us.

Q351  Lord Archer of Sandwell: If you were claiming recompense, would you as a matter of accountancy be able to identify the costs which were due to the requirements here?

  Mr Turner: Yes, we would because it would be incremental to what we do now.

Q352  Chairman: Have you anything to add?

  Mr West: On the same issue from the electricity side, within the list in clause 2 there is an item called "prevention of emergency". That is fine providing that the requirements there are no different from those already set in regulatory requirements. If local authorities believe more is required then obviously that is something we would have to discuss with our regulator.

Q353  Baroness Ramsay of Cartvale: I wondered if you could give us some indication of the kind of business continuity and emergency plans you have in place. I am sure you are all speaking for companies that do have them, but what would your reaction be to the idea that utility organisations should have a statutory duty to devise a business continuity and emergency plan?

  Mr Miller: The water sector does have that statutory duty already under the Security and Emergency Measures Direction. It is difficult to conceive how a utility organisation could behave in a business like and professional manner and inspire investors' confidence without the demonstrable existence of those plans. If we take our organisation as an example, we have a pyramid of plans, a single crisis management plan at the apex, five operational emergency plans to deal with major incidents in each of our Group businesses and then at the lowest level we have over 2,000 continuity plans for our water assets. That is fairly typical of a large utility.

  Mr West: Within electricity there is already a legal requirement under section 96 of the Electricity Act as amended and the DTI within the last year have undertaken two very major studies into the contingency planning of the electricity companies. The first was announced by the Energy Minister on 11 February last year and reported some three months later. The study covered the quality of emergency plans, the factors affecting confidence in plan execution and so forth. There was a further detailed study announced by the Energy Minister on 29 October into the October storms and that reported in December. In the press release the minister said that he wanted the system geared—I take it he meant the system of regulation—to incentivising the sort of investment which provided the bench mark performance and failure to invest being punished rather than rewarded, which gives the impression that he saw that within the regulatory environment.

  Mr Turner: From the BT perspective, I agree with my colleagues that it is essential to have business continuity plans. The only question I would then ask is up to what point do you have business continuity plans, so continuity in what circumstances, in what circumstances does it become economical, where the cost exceeds the risks, but BT have got detailed continuity plans which go from sustaining its cash flow down to a major mobile exchange capability to restore a smoking hole scenario.

  Chairman: Thank you very much for that. I think time has defeated us. We must not keep our other witnesses waiting any longer. We would be grateful if we could have written responses to the last three questions. Thank you.

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