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Lord Campbell of Croy: My Lords, I am grateful to my noble friend for his reply. Can he confirm that such mixtures of gases in these circumstances occur in predictable places, where there are concentrations of motor traffic? Does he agree that sufferers from asthma in particular are likely to experience a worsening of their affliction when they are in those areas at the time?

Viscount Ullswater: My Lords, unfortunately, one cannot make such a generalisation. During normal conditions, ambient levels of most pollutants tend to be highest by roadsides. But ozone levels tend to be highest in rural locations, where traffic is sparse, as a result of ozone formation caused by the reaction of ozone precursors emitted from urban areas and reacting with sunlight. Everybody should be concerned about the effect on asthma sufferers, particularly parents of children with asthma. However, medical opinion is that the cause of asthma remains unclear and there is no convincing evidence that air pollution can cause asthma to develop in those who do not already suffer from the disease.

Lord Dean of Beswick: My Lords, is the Minister aware that Manchester comes within the "certain areas" referred to in the Question? Is he aware also that, from the cradle to the grave, the numbers of people dying in Manchester from the effects of the type of activity he mentioned are among the highest, if not the highest, in the United Kingdom? Can the Minister tell me, if not today then perhaps he can publish his response in the Library, the levels reached in the five largest metropolitan areas outside of London? In doing that, will he consider whether anything can be done to lessen the pollution in the city of Manchester because of its adverse effect on people in general?

Viscount Ullswater: My Lords, the Government monitor air quality extensively in major urban centres through their enhanced urban network. They are seeking to expand that network further, integrating local authority

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monitoring networks. I shall write to the noble Lord regarding the five largest metropolitan districts and the levels he asked for. However, as I indicated to my noble friend, the levels of primary pollutants will inevitably be higher in urban areas where traffic levels are higher. Government proposals published in January aim to identify those areas where national air quality targets are likely to be breached and target appropriate action to ensure that air quality is improved.

Lord Brabazon of Tara: My Lords, will my noble friend give encouragement to the use of natural gas vehicles? I declare an interest as the president of the Natural Gas Vehicles Association. Those vehicles have significantly lower levels of the type of pollution referred to in the Question.

Viscount Ullswater: My Lords, the Government are currently sponsoring research at the Transport Research Laboratory into a range of alternative vehicle propulsion technologies, including compressed natural gas. I hope that the results, when they become available next year, will point the way forward for cleaner vehicles in the future.

Lord Ezra: My Lords, the noble Viscount indicated that the Government are carefully monitoring the situation and are considering when the episodes, as he described them, occur. Can he tell us whether those episodes tend in normal circumstances, in urban areas, to occur at certain periods of the day and times of the week? If so, can measures be taken to deal with that situation?

Viscount Ullswater: My Lords, the timing of the episodes is rather difficult to predict. Ozone is a Europe-wide problem. Much of the ozone in last month's episode was carried into Britain from northern and central Europe on easterly airstreams. The correlation that the noble Lord is looking for, therefore, is not really available. The chemical smog that is made above industrial areas produces ozone concentrations at lower levels outside those areas. It is difficult to predict where the episodes may occur.

Lord Williams of Elvel: My Lords, does the noble Viscount recall that during the passage of the Environment Bill before your Lordships' House, the Government undertook—after many debates on air quality—to table an amendment in another place which would deal with the matter. Has the amendment been tabled? If not, why not?

Viscount Ullswater: My Lords, we shall be tabling amendments to the Environment Bill this week, implementing the proposals on air quality management that we published earlier this year and which were warmly welcomed. We are therefore undertaking to implement what I said in this House when the Environment Bill was before us.

The Countess of Mar: My Lords, does the noble Viscount appreciate that air pollution is not confined to urban areas? He said that ozone is prevalent in country areas, but problems also exist when farmers burn plastic bags and so forth causing dioxins and when they overspray in windy weather causing volatile pesticides to enter the atmosphere. There seem to be links between

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occurrences of asthma—it may be bronchial constriction rather than asthma—among children in rural areas. Can the Minister say what research is taking place in that field?

Viscount Ullswater: My Lords, all the items identified by the noble Countess add to the number of pollutants which are present in the atmosphere individually or collectively. The same problem occurs with photochemical smog, except that in country areas the precursors would probably be widely dispersed before it developed. It is in urban areas, where there is a concentration of pollutant emissions, not only from motor vehicles but also from power stations and so forth, that problems of ozone are created which then cause the irritants which people with respiratory diseases find uncomfortable.

Lord Renton: My Lords, is there not another factor in this matter which must not be overlooked; namely, that in any weather more air pollution is caused by oil-fired and coal-fired power stations than by nuclear and other forms of generation? Will the Government ensure therefore that in any further development of our needs for electricity, priority is given to nuclear and other forms of generation?

Viscount Ullswater: My Lords, we need to bear those matters in mind. However, it is because half of the pollutants are generated by the transport sector that we need to turn our attention more precisely in that direction in order to make certain that we alleviate the problem. Of course, my noble friend has brought out an extremely interesting and valuable point.

Baroness Robson: My Lords, does the Minister agree that it is not only motorcars, but also diesel buses that cause pollution in our cities? Oxford is a perfect example. No doubt the Minister is aware that Oxford has entered into an experiment by starting to use a number of electric buses. What assessment has been made of the success and economics of using those buses?

Viscount Ullswater: My Lords, that goes back to the research taking place at the Transport Research Laboratory into the range of alternative vehicle propulsion technologies. When we seek to achieve improvements in our air quality in urban areas, it is important that we make certain that the public sector plays its part with public transport to reduce the number of cars being used. I am extremely pleased to hear that Oxford is using electric buses because the resultant pollution from them will be minimal.

Activity Centres (Young Persons' Safety) Bill

3.8 p.m.

Lord Dean of Beswick: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.

Moved, That the order of commitment be discharged.—(Lord Dean of Beswick.)

On Question, Motion agreed to.

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Gas Bill

3.9 p.m.

The Minister of State, Department of Trade and Industry (Earl Ferrers): My Lords, I beg to move that the Bill be now read a second time.

I remember, after the war, thinking that gas—with those awful grey kitchen stoves and funny flickering railway lights and remembering, even as a child, the lamplighter going round the streets with his stick switching on individual street lights—was a relic of the Victorian era. It certainly was to me. But my goodness, how wrong could one be!

Gas over the years has transformed itself into being a clean, highly efficient, highly competitive form of energy. In my book, that is a staggering achievement and one which, in the 1950s, would have been quite unthinkable.

It is not, therefore, surprising that there has been a long history in this country—and elsewhere, for that matter—of the gas industry being organised on the basis of a monopoly. It seemed the logical and sensible thing to do. That dates back as far as the Gasworks Clauses Act 1847, which I doubt if many of your Lordships will be able to recall! Like much Victorian infrastructure, those provisions were built to last. Many of the ideas behind that legislation continue to be reflected in the current Gas Act.

But what our predecessors, nearly 150 years ago, did not foresee—and, indeed, what has only become clear in recent years—is that having a monopoly in the ownership and maintenance of the pipelines is not incompatible with having competition with the gas which is actually transported through the pipelines and which eventually ends up in the homes or businesses of the consumers.

The idea that one could separate the function of supplying gas from the operation of providing and looking after the distribution system—in other words, the pipes—has emerged progressively over the past few years as a successful and competitive market has been developed in the supplying of gas to industrial and commercial customers. That happened in 1988, and has continued since. It has happened to those premises which consume more than 2,500 therms a year. They have been able since then to choose their suppliers. In fact, independent suppliers have taken over half of the business in that particular market, and real prices to those industrial consumers have fallen by about a third.

This Bill is really a continuation of that experience by providing the necessary legislation to extend the benefits of competition to the 18 million or so domestic gas consumers in Great Britain. The proposal is that competition will be introduced progressively from next year, 1996, and it should be able to cover all of Great Britain from 1998. It will start with a pilot phase in the South West consisting of some 500,000 domestic consumers. A second phase involving 2 million customers will follow in 1997 and there will be competition nationwide in 1998.

By doing this in stages, it will be possible to ensure that the necessary technical, administrative and licensing arrangements will be operating properly before the competition is extended to all the 18 million or so consumers throughout Great Britain.

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The purpose of the Bill is to give consumers choice. It will enable them to choose the service which they want. It will provide a powerful incentive on the suppliers to become increasingly more efficient, for nothing concentrates the mind in business better than the thought that there may be somebody who can do the job which you are doing better or cheaper than you are doing it. It will provide a strong pressure for prices to be lowered. Independent suppliers have already said that they believe that they will be able to offer average savings of around 10 per cent. on British Gas's current prices.

The first supplier to confirm its intention to enter the market in the South West next year has said that it will cut existing bills by at least as much as 10 per cent., giving savings of £30 or so a year on the average domestic gas bill of £300. The provisions of the Bill will be supplemented—as was the case in the 1986 legislation—by licences. Drafts of the standard conditions of those licences have already been made available for public consultation, and they were considered when the Bill had its Committee stage in another place.

We are now considering all the comments which we have received and, while technical changes will certainly be required, we have not heard anything at this stage which would make us want at present to make substantial changes to the principles of the licences. Once we have finished that consideration, we will be able to publish the revised drafts. I hope that we will be able to do this, particularly for the supply licence standard conditions, while the Bill is still before your Lordships.

I think that it might help your Lordships if I were to outline the three important principles which have guided us in formulating the legislative and licensing proposals. First, there is safety. That is an issue, quite obviously, of the greatest importance. That is why the Government asked the Health and Safety Commission for a thorough report on our competition proposals. It made that report; we have published that report; and we have accepted that report. Its recommendations will be implemented by the Bill, by the licences or by separate regulations under the Health and Safety at Work etc. Act 1974.

British Gas will continue to provide a first-class safety service to customers through its pipeline business which is called TransCo. Members of the public will have a single, national emergency telephone number which they can contact if they suspect that there may be a gas leak, whether that is in the home or in the street.

Secondly, I would like to give some assurance about that horrible expression which is sometimes used. I have heard the noble Lord, Lord Clinton-Davis, use it. I expect he will use it again today, but I hope that he will not because I shall mention it for him. It is that horrible expression "cherry picking". That is the idea that new suppliers will just pick and choose the best customers—those assumed to be living in the largest houses and who therefore use a lot of gas—and will just ignore the rest who would then have to face higher prices from British Gas as a result.

But both theory and experience suggest that fear is wholly misplaced, and that any relative difference in prices which may emerge must be seen against the likely reductions in overall prices. Competition itself limits the

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ability of suppliers to pick and choose because it gives that right to customers. If all suppliers were to aim only at a small part of the market, there would be insufficient business to go round and the margins would be minuscule. Suppliers are much more likely to seek a broad base of customers in order that they can build up a strong market share.

Experience in the industrial gas market supports that. When we opened that market in 1988, people expressed those very doubts and thought that suppliers would just pick the best customers. But that has not happened. Instead of prices rising, industrial customers of all sizes throughout Britain have seen substantial price cuts—averaging about a third in real terms—since competition started. But in order to ensure that there is no chance of that happening, we are taking some measures which are designed to add to the market forces in bringing the benefits of competition to all customers. Not only are we proposing to impose on suppliers an obligation to supply on request any customer who resides within their licence area, but we are making that choice a real one by requiring suppliers to offer a variety of different payment methods. And there will be a requirement for the supplier to publish the terms on which he will supply the gas.

The third important point is to provide effective protection to older or disabled customers or to those who have difficulty in paying their gas bills. All suppliers to the domestic market will be required to provide a number of special services for older and disabled customers which, in the future, will all have to be free of charge. These services will include such things as a gas safety check of the customer's fittings and appliances; special controls and adaptors for prepayment meters and gas appliances; repositioning of meters; special means of confirming the identity of callers; and many others. Where customers get into genuine difficulties, they will be able to have recourse to the debt and disconnection procedures which all suppliers will have to follow. Those procedures will include offering payment plans and prepayment meters in order to help the customer to be able to discharge his liabilities and to pay for his gas.

I am afraid that the Bill itself contains some pretty technical stuff. This particular subject is not what one might call light tea-time material. I think that it is only fair to warn your Lordships that I am afraid that it will be necessary for me to put forward a number of amendments during the course of the passage of the Bill. I will endeavour, though, to ensure that, wherever possible, your Lordships receive good notice of those amendments, which will be mainly technical, together with a written explanation of why they are being made.

The Bill's main task is to divide the old "public gas supplier", which was at the centre of the Gas Act 1986, into the three separate types of gas company which will be appropriate for competition. The first type of company will be the public gas transporter. It will operate the pipelines. That function will remain a monopoly at the local level. The second type of company will be the gas supplier. It will offer consumers contracts for the supply of gas, and it will have the responsibility of actually providing services to the customer. It will be possible for several suppliers to be licensed for the same area so that they can compete with one another for the business of

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supplying the gas to individual households. The third type of company is the gas shipper. It will have the specialist function of arranging with the public gas transporter for, as it were, shoving the gas into the pipe and then ensuring that it gets out at the other end into the consumers' premises. The Bill allows an organisation to act either as supplier or as shipper or both. However, public gas transporters must be separate legal persons.

The Bill amends Part I of the Gas Act 1986 in order to reflect this new industry structure and the consequences of competition. Clauses 1 and 2 adapt the duties of the Director General of Gas Supply and the Secretary of State to the new framework and they put in place additional safety considerations. The Bill introduces a new licensing framework, which is appropriate to the three new types of gas companies, together with certain exceptions and exemptions.

Licences will be granted by the Director General of Gas Supply. These will normally be on standard conditions and they will be set initially by the Secretary of State. That will ensure that the conditions are the same, unless special arrangements are justified. Ministers will have a reserve power of veto over subsequent changes to the standard licence conditions or, where changes may be made to those conditions as a result of a reference to the Monopolies and Mergers Commission, a power of veto over the reference itself.

The Bill provides for exclusive areas for distribution of gas by public gas transporters. We expect that British Gas TransCo will continue to undertake the great majority of gas transportation throughout Great Britain. But there will be scope for other companies to compete for licences to convey gas to new areas. That will help to encourage the extension of the gas network. There are also arrangements to ensure that supply licences do not unfairly exclude pensioners or the disabled or those who are likely to default on payments. And there are provisions governing the coming into effect of the supply licences during the pilot phases and how applications for licences may be made. The Bill sets out the scope of conditions which may apply to licences, including the arrangements which may enable certain costs to be shared among all suppliers. All those matters, together with the arrangements for the standard conditions of licences, are set out in Clauses 3 to 8 of the Bill.

The new "gas code" is proposed in Schedule 2. That replaces the one in the 1986 Act. It sets out provisions on metering; on the supply of gas to consumers; on the handling of gas escapes; and on rights of entry. It also provides for deemed contracts where consumers are taking a supply of gas but where they do not have a contract with a supplier.

The Bill provides new powers for the Secretary of State to direct the operators of certain gas processing facilities in order to make them available to other people. These powers fill a gap in the present regulatory arrangements and they complement the existing powers which relate to offshore pipelines. The Bill also contains a number of detailed modifications to the existing Gas Act, reflecting the introduction of competition, and it contains transitional arrangements in order to facilitate the reorganisation of the industry. These are set out in Schedules 3 and 5.

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The whole purpose of this Bill is to bring the benefits of competition to gas consumers all over the country—and in many different ways. Perhaps I may highlight just three of them. The first is that competition will give a new commercial impetus to energy efficiency as suppliers compete, as it were, to the warming of houses rather than just to selling therms of gas. In the past, when there was a monopoly, trying to get energy efficiency programmes to work has been rather like pushing water uphill. If you run a monopoly you do not increase your business by actually selling less gas. Life just does not work that way. In the same way you do not set out to trim a tree if you are sitting on the branch which you are proposing to cut off.

But competition changes all that. In a competitive market a supplier can win business by being more competitive than his opponents. A competitive supplier is interested in the size of his particular slice of the market and not the total size of the market. It will, therefore, be in the supplier's interest to promote energy efficiency as a means of getting more custom, even though the total consumption may fall. By harnessing the power of the market to the cause of energy efficiency, we believe that substantial gains are possible. The new funding for the Energy Savings Trust that the Government have announced will get these initiatives off to a good start.

The second benefit which the Bill will provide is that consumers will welcome the opportunities of having cheaper gas. New organisations are already talking about charging 10 per cent. below the present British Gas prices when the pilot starts next April in the South West.

The third benefit which the Bill will produce is that it will bring service to the forefront. After 150 years of monopoly, there is now a tremendous opportunity for the consumer to turn the tables on the gas supplier and for the consumer to say what he or she wants as opposed to just sitting back and getting whatever is provided, and having to pay the bill without any alternative.

The Bill has been widely welcomed not only by the gas industry—including British Gas, which may surprise your Lordships—but by consumer bodies, including the Gas Consumers' Council which will play an important part in the new market. Each of those interests has qualified its welcome with its own particular points, but welcomed it they have.

I hope that your Lordships too will welcome the Bill. I have great hope, now that noble Lords opposite have done away with Clause 4 and all that jazz and have turned their backs on nationalisation that they will agree that privatisation of the gas supply is a good thing. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Earl Ferrers.)

3.27 p.m.

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