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Lord Sefton of Garston: My Lords—

Earl Ferrers: My Lords, I shall give way in half a moment. The noble Lord really must let me finish what I was saying. On the previous occasion I said that there are some people in the Labour Party who have not moved one inch during the past 50 years and that the noble Lord, Lord Sefton of Garston, is one of them. I believe that his speech today confirms that view—

Lord Sefton of Garston: My Lords, does that mean that you disagree with what I said? If so, that means that the question of "bizarreness" was directed to me personally. Perhaps I could remind you of the "Companion of Honour", so called, in this House.

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Earl Ferrers: My Lords, I can remind the noble Lord of one of the rules of procedure, which is that one talks in the third person and not in the second person. I was not being offensive to the noble Lord. Indeed, I was not being offensive but saying merely what I thought of his speech—

Lord Sefton of Garston: My Lords, you would be better off answering the argument.

Earl Ferrers: My Lords, I do not wish to be distracted by the noble Lord, Lord Sefton, any more than is necessary.

The noble Lord, Lord Peston, was most constructive in his opening remarks. He said that a number of the points that he wished to make were Committee points and he then gave indications of them. These are technical matters and we must deal with them.

I was grateful to the noble Lord, Lord Ezra, for paying tribute to the great industrial achievement of British Gas during the past 40 years. It is astonishing and we must never forget it. My noble friend Lady Macleod was right to pay tribute to Sir Dennis Rooke and the work done by British Gas at Bacton in Norfolk. It deservedly has earned a reputation for showing great sensitivity in the work that it has undertaken there.

I am sorry that the noble Lord, Lord Clinton-Davis, thought that I was telling him how to make his speech. I should never dream of doing such a thing. I did not actually tell him not to refer to cherry picking; I merely said that I thought that he would because he did so last time. The noble Lord avoided doing so today and I regret the fact that I referred to the matter because it enabled a number of my noble friends to use that horrible expression. My noble friend Lord Caithness made the matter worse by talking about level playing fields, which I believe is an equally objectionable expression.

The noble Lord, Lord Clinton-Davis, has spurred me into saying something that I had not intended to say about British Gas. I do not wish to enter into discussions about the showrooms which British Gas has closed or the salaries paid to chief executives. However, perhaps I may make it clear that when British Gas was privatised there were 4 million individual shareholders, who were commonly known as "Sids". There are now 1.7 million shareholders and they hold 22 per cent. of the shares of the company. Of those people, 4,500 attended the annual general meeting and nearly 12 per cent. of the 1.7 million returned proxy cards. It is interesting to note that 88.5 per cent. of those individuals, whom we call "Sids", decided not to vote. That is similar to what has happened in previous years when 90 per cent. of those individuals have not voted. Therefore, what happened last week is a reflection of what happened in the past. I am bound to say to the noble Lord, Lord Clinton-Davis, that it is not an argument to say that the block votes of the institutions stop proposals being carried. There is no comparison between the block voting of the institutions and the block voting in the Labour Party. The fact is that all institutions—all shareholders—have the right to vote, but if they do not wish to vote they need not do so. The fact is that 50 per cent. of the capital voted, which is interesting to note.

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Your Lordships asked a number of questions and I shall answer them as best and as expeditiously as I can. The noble Lord, Lord Clinton-Davis, referred to consumers. There is an important protection for consumers in the Bill. It is the duty of the Secretary of State and the director to protect the interests of consumers. The noble Lord said that in the Bill there is a balance between consumers and industry. That is not so; the Bill is about consumers. The balance comes when the industry can compete within itself and one against another for the interests of consumers—

Lord Clinton-Davis: My Lords, I am grateful to the Minister for giving way. He has taken my remarks out of context. I said in a totally different context that the balance lay in the duties of the Office of Fair Trading.

Earl Ferrers: My Lords, I apologise to the noble Lord for having noted his words incorrectly. It is a hazard in trying to take notes but I shall study what he said in Hansard. The noble Lord referred also to the Secretary of State's veto. The provisions follow the Electricity Act. Let us assume that an amendment tabled on Report narrowed the power of the veto for the standard conditions only. We believe that the veto is appropriate to ensure that there is proper parliamentary oversight as regards the changes to the standard conditions. The obligations placed on companies by the licences are just as effective and as effectively enforceable as those imposed by the Bill.

The noble Lord, Lord Peston, said that the Monopolies and Mergers Commission stated that there would be losers. That assessment was based on a table submitted to the commission by British Gas. However, the table was withdrawn in October 1994 in evidence to the Trade and Industry Select Committee of another place. There is no reason to believe that competition will lead to higher prices for any consumers. However, the nature of a competitive market is that one can never guarantee that. There may be some price variations on the general downward trend and we must see what the result is.

The noble Lord was also anxious about the drafts of the licences being available in Committee. It is our intention to publish a new text of the supply licence for the Committee stage, if that is at all possible. We plan to leave the technical revision of the other licences—and they are more technical—for later consultation.

The noble Lord, Lord Peston, was also concerned about disabled people and pensioners being dealt with separately, but not the people who have difficulty in paying. He asked why that was. Pensioners and disabled people have special needs in relation to gas. If their supply fails they may be more susceptible to cold, they may need their meters moving to more accessible locations or they may need adaptors for appliances. Low income users do not have such special interests. Their real interest is in cheaper gas, which is similar to the interest of every other consumer. However, the director has a duty to protect the interests of gas consumers in respect of the continuity of supply. That includes possible disconnection and provisions to avoid unnecessary disconnection.

That point is not dissimilar to an anxiety expressed by my noble friend Lady Macleod. She asked whether we can reduce the standing charges for disabled people. The

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role of the standing charge is to recover the fixed costs of supply. However, one benefit of a competitive market is that different suppliers can adopt different practices and marketing strategies in order to win customers. One supplier has said that he is considering offering a zero standing charge, which would meet not only my noble friend's anxieties but those of many other people.

The noble Lord, Lord Peston, asked whether there would be a single pensionable age and why not leave it at 60. The Bill defines the pensionable age as the female pensionable age, so it is quite discriminatory! That is the lower of the two pension ages. However, when the age is equalized at 65 it will be inappropriate for us to define people below that age as pensioners.

The noble Lord was anxious to know whether there is a statutory obligation to supply and whether the obligation is to supply a household or a premise. That is an important point. The obligation to supply is set out in standard conditions of the gas supplier's licence. It applies to prospective customers and that means persons at a particular premises. But each flat in a block of flats would normally be regarded as separate premises for that purpose.

The noble Lord was concerned also about whether British Gas's debt and disconnection code would continue. The answer is that it will. British Gas will continue to operate to its current code. The only difference is that in future, it will operate that code as a requirement under its new licence as a gas supplier rather than under its old authorisation as a public gas supplier.

The noble Lord was anxious about why the Secretary of State is taking new powers to regulate. The Secretary of State has been given further reserve powers so that Parliament can be assured that the regulator cannot change major policy issues without political consent for which the Secretary of State will be accountable to Parliament.

He asked also about how many new entrants there might be. It will be for new entrants to make their own decisions on how and whether to make an entry into the market. But so far, some 20 suppliers have taken a close interest in the formulation of the licence conditions for domestic supply.

The noble Lord asked whether the code of practice on disconnections would apply. All suppliers will be required to follow debt and disconnection procedures which will apply to any customer who has genuine difficulties in relation to paying his bills. They are set out in the supply licence standard conditions and I gave your Lordships an idea of what they would be when I made my opening remarks.

The noble Lords, Lord Peston and Lord Ezra, asked whether the public should not be notified of the evaluation of the pilot phase. We have made it clear that the purpose of the phased transition to national competition is to provide an opportunity to test the necessary technical and administrative systems. It will allow British Gas, TransCo and competing gas suppliers to iron out any problems with their systems while they are operating on a relatively small scale. The pilot is not intended to test the principle of whether competition will go ahead. It is intended to test how it will work in practice. The director will obviously

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wish to monitor the progress of competition and we expect to seek the feelings of consumers and suppliers as to their experiences during the transitional phase. If the monitoring by the director showed that the licence conditions were not operating in the intended way, the director could make proposals to change them. That monitoring process will enable Ministers and the director to report appropriately to Parliament about progress, and it is our intention to do that.

The noble Lord, Lord Ezra, was concerned about the promotion of energy efficiency and the protection of consumers being a secondary duty upon the Secretary of State and the director. In a perfect world, we should like all duties to be primary, but the Bill imposes both primary and secondary duties on the Secretary of State and the director. The primary duties are concerned with providing that there is an effective framework for the competitive supply of gas; for example, to ensure that licence holders can finance their activities and that there is proper competition. The interests of consumers in relation to energy efficiency, important though they are, must obviously be subject to those primary duties. It is no good trying to secure the interest of consumers if no companies are competing in the market.

The noble Lord referred to the assignment of contract. The Government made a detailed statement on that in another place. Schedule 5 follows closely similar provisions in several other statutes, and a major feature of the arrangements that we propose is the separation of the functions of gas transportation and supply. That is to ensure that competing suppliers, including the supply arm of British Gas, use the pipeline network on the same basis. It follows from that that provision must be made for a scheme under which British Gas will allocate its various rights and obligations between the different legal entities which it will need to create in order to carry on its business. The ending of the monopoly of British Gas and the consequent loss of its market share will inevitably mean that a certain amount of adjustment to contractual arrangements will have to be made. The Government believe that that will be achieved best by discretion on a commercial basis among the parties involved.

My noble friend Lord Caithness was worried about the terms of British Gas privatisation. He said that he did not particularly like the Bill. I thought that was rather disparaging because I believe that it is a very good Bill. He said that he thinks that the measure will affect the price of what is a public company. The prospectus for the sale of the shares in British Gas, which described the policy at the time when British Gas was privatised, said that it was to retain the monopoly. But of course it is quite appropriate and legitimate for policy to change at a later stage in the light of experience. British Gas says that it supports those proposals.

I understand my noble friend's anxiety about other countries being able to supply into our pipelines even though they do not allow us to supply into theirs. It may be that in time, people will realise that total competition such as that which we are having in the UK works best for our consumers in a way which would seem, in the end, to work better for consumers in those other countries. They may then decide that we are adopting the right policy.

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My noble friend Lord Wade referred to combined heat and power. I agree with him about the available opportunities in that regard. The endless strengthening of competition which is taking place in the industrial market for gas provides a substantial boost for combined heat and power. That will continue.

I referred earlier to the fact that I did not like the reference made by my noble friend Lord Caithness to a level playing field but, as he used that expression, I shall use it back to him. I assure my noble friend that the guiding principle in the drafting of the legislation and the licences has been to ensure a level playing field among all the suppliers and the transporters, including British Gas. New companies will be able to compete on a fair basis and that is one reason why we rejected the idea proposed in some quarters that there should be some kind of target for the market share of British Gas.

The noble Lord, Lord Ezra, said that there is too little in the Bill and that too much is left to the licences. I understand why he says that. That is a criticism which is often made. He will know that there is a very good reason for that; namely, that the Bill provides the basic structure and the licences have to deal with the details of the matters. It is far more flexible to do that in the licences rather than by including it irrevocably in statute.

My noble friend Lady Gardner of Parkes was concerned about the obligations in the legislation. We believe that it is necessary for suppliers to publish their prices for domestic consumers, at least initially. The reason for placing that obligation in the licences rather than on the face of the Bill is that we do not know exactly how the market will develop. It will be necessary to have a degree of flexibility to allow the regime to adapt to what happens in the market. We wish to be able to change those requirements if experience shows that that will be in the interests of consumers.

Perhaps I may give one example of that. The requirement on British Gas to have published a price schedule in the industrial market was considered to be good a few years ago. Ofgas is now proposing to remove that requirement after representations were made by customers who said it prevented them negotiating. If that requirement were placed on the face of the Bill that flexibility would not exist.

My noble friend Lord Wade was concerned about pipelines over the land. Schedule 3 to the 1986 Act, which we are not amending materially, provides proper compensation for landowners where pipelines are built across their land.

The noble Lord, Lord Ezra, and my noble friend Lord Skelmersdale expressed the desire that the high levels of service provided by British Gas at present should continue. All suppliers will be required to provide special services to the elderly and disabled customers and to those who have genuine difficulties in paying their Bills.

In relation to service standards generally—reading meters, answering questions and so on—competitors will be able to win business only by offering customers what they want and by offering them a better service than that offered by other suppliers. That is why the Consumers' Association does not think that British Gas's 39 service standards, which state, for example, how quickly they

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should answer the telephone, should be imposed on all suppliers once the monopoly ends, because competition must set that free.

My noble friend Lord Gisborough was concerned about the vesting of the gas contracts to the new contracts. It is not practical within the structure of the legislation to alter that aspect in the way that my noble friend would like. If the consent of counter parties was required, they could prevent the Bill from taking effect by refusing to sanction an assignment. Therefore, it is necessary that those assignments should be continued. British Gas would not legally be able to continue in operation if its trading activities could not be moved to another body and the Bill would not come into effect if that were the situation.

My noble friend Lady Gardner of Parkes referred to the Citizen's Charter. That relates to provisions of public services to consumers where the consumers have no choice as to where they go for services. They are not relative to a competitive market where consumers can seek the service which meets the required needs and are not stuck with a monopoly supplier.

My noble friend wondered why the words "made available a supply" were used as opposed to "give a supply". I had not realised that that wording would cause the difficulties that it obviously does to my noble friend. I shall consider what she has said and see whether further clarification or elaboration is required.

My noble friend Lord Cochrane referred to caravan parks and visiting forces. My noble friend has great knowledge of that subject which was rewarded with the passing, as a very rare Private Member's Bill from your Lordships' House, of the Gas Exempt Supplies Act 1993. That legislation successfully deregulated holiday parks that supplied liquid petroleum gas. My noble friend asked whether it was possible to extend the exemption to those caravan holiday parks which distribute natural gas. Clause 4 of the Bill provides adequate powers to the Secretary of State to grant exemptions in those cases. Officials in my department are in touch with my noble friend and with the various trade associations to establish the scope of the exemption that would be appropriate and any conditions for safety and consumer protection that should be applied.

The scope of the exemption is not straightforward; there is a balance between deregulation and ensuring in appropriate cases that customers are able to choose their gas supplier. The technical discussions that are under way with my department will, I hope, achieve the best result.

The noble Lord, Lord Clinton-Davis, expressed concern about prepayment meter costs. Ofgas examined the differential in price and decided that that differential was appropriate.

I am grateful for the way in which noble Lords have considered the Bill at Second Reading. It is an important Bill. There should be safeguards for consumers in certain important respects, for example safety and provision of special services for vulnerable customers. Those matters are being addressed in the Bill and the licence. We are concerned to allow consumers the choice of not one supplier but a number of suppliers. That, in the long run, will lower prices and bring efficiency. I know that the noble Lord, Lord Sefton of Garston, finds that point difficult to absorb, but I expect that as time goes on he

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might be able to absorb a little of it. There are a number of points that noble Lords will wish to discuss at Committee, but I am grateful for the way in which your Lordships have addressed the Bill.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

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