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Lord Inglewood moved Amendment No. 36:

Page 8, line 27, at end insert:
("(6A) If the holder of a licence under subsection (1) above applies to the Director for a restriction of the licence, or for the revocation of the licence in accordance with any term contained in it, the Director shall, subject to subsection (6) above, accede to the application if he is satisfied that such arrangements have been made as—
(a) will secure continuity of supply for all relevant consumers; and
(b) in the case of each such consumer who is supplied with gas in pursuance of a contract, will secure such continuity on the same terms as nearly as may be as the terms of the contract.
(6B) A person is a relevant consumer for the purposes of subsection (6A) above if—
(a) immediately before the restriction or revocation takes effect, he is being supplied with gas by the holder of the licence; and
(b) in the case of a restriction, his premises are excluded from the licence by the restriction.").

The noble Lord said: It is important to ensure that a gas supplier is free to withdraw from the gas supply market if he wants to. The lack of a clear right to do that would be likely to deter potential new entrants to the market and

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inhibit the development of competition. However, it is obviously important that suppliers should not withdraw simply by cutting off their customers, leaving them without gas while they tried to find a new supplier.

The amendment therefore provides that the director should not be required to revoke or restrict a supplier's licence until the supplier has made arrangements to ensure that the customer continues to receive a supply of gas, in the case of a contractual customer, on the terms set out in his contract.

The right to withdraw from a part of the market is subject to the provisions forbidding restrictions which artificially include an undue proportion of vulnerable customers. I beg to move.

On Question, amendment agreed to.

Lord Inglewood moved Amendment No. 37:

Page 8, line 38, leave out from ("no") to ("before") in line 39 and insert ("domestic supply licence shall authorise the supply of gas to any premises").

The noble Lord said: In moving Amendment No. 37, it may be for the convenience of the Committee if I speak also to Amendments Nos. 39, 40 and 41.

The amendments provide for certain cases where parties other than British Gas should be able to obtain a licence to supply gas outside the pilot areas during the transitional phase to full national competition. Some companies other than British Gas are already supplying gas to domestic consumers in special cases, normally where they use their own pipeline systems. It would be quite wrong if, on the way to full competition, such companies were prevented from continuing that activity.

These amendments are therefore intended to ensure that, while there is to be no direct competition between gas suppliers for domestic customers outside the pilot phases, it will be possible for suppliers other than British Gas to continue to supply gas to domestic customers in special cases before full nationwide competition is introduced. I beg to move.

On Question, amendment agreed to.

Lord Haskel moved Amendment No. 38:

Page 8, line 42, at end insert:
("(2A) In the period before the relevant date the Director shall—
(a) monitor the effect of the granting of a licence under subsections (3) to (5) below on such persons as in his opinion are appropriate; and
(b) consult such persons and organisations as appear to him to represent the interests of persons affected by the granting of a licence under those subsections, and such other persons as he considers appropriate, on the effects of granting such a licence.
(2B) No licence shall be granted under section 7A(1) (a) of the 1986 Act (other than by virtue of subsections (3) to (5) below) until the Secretary of State has laid a report before both Houses of Parliament indicating—
(a) the results of the monitoring and responses to the consultation referred to in subsection (2A) above;
(b) the effect, in his opinion and in the opinion of the Director, of the granting of licences under subsections (3) to (5) below and Schedule 5 to this Act in the period before the relevant date; and
(c) the reasons why, in his opinion, it is in the interests of all persons affected that licences under section 7A(1) (a) of the 1986 Act should be granted.").

22 Jun 1995 : Column 499

The noble Lord said: The purpose of the amendment is to implement the Trade and Industry Select Committee's recommendations outlined in its recent report the Domestic Gas Market to consider the impact of competition in the pilot areas. The amendment is similar to Amendment No. 25. I do not wish to go over all the arguments and discussions that we had then. The Minister said that he would go away, think about it, and come back later.

The amendment requires the regulator to monitor the effect of competition in the pilot areas on those affected and to consult them and others, as appropriate. I beg to move.

9.15 p.m.

Earl Ferrers: We have always accepted that competition should be introduced in a phased manner. It has taken root successfully in the industrial sector, and we recognise that the domestic market requires a phased approach, not least because of the number of premises involved.

The gradual transition to national competition will provide an opportunity to test the necessary technical and administrative systems for the balancing of gas and the transfer of customers. 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.

We must be clear that the pilot is not intended to test the principle of whether competition will go ahead. Such an approach would cast a cloud of uncertainty over the industry—both onshore and in the North Sea—which would be in nobody's interest and which might well mean that suppliers did not make the investment needed for competition to be a success. It would be wrong to try to re-open, through the back door, the principle of a competitive gas market.

However, although the pilot is largely about getting systems right, that is not its sole purpose. Clearly, the director will wish to consider carefully how things go, taking particular note of the results from the Gas Consumers' Council and other groups with comparable expertise. If that monitoring showed that licence conditions were not having the desired effect the director could make proposals to change them. We also recognise that there needs to be adequate information on the development of competition. This will be the case in the pilot phase and beyond.

That is why, when we discussed Amendment No. 25, I said that we would be prepared to bring forward an amendment to Section 39 of the Gas Act, which would provide for the director, in her annual report, to report not just on her activities but also on the state of competition in the gas supply market in general. That report will, of course, be laid before Parliament. We believe that this will provide a proper basis for reporting by the director on

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competition, both in the limited pilot phase—as Amendment No. 38 suggests—and also for many years to come.

Lord Haskel: I thank the Minister for that response and for the confirmation that a report will be made on the state of competition. With that in mind, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Inglewood moved Amendments Nos. 39, 40 and 41:

Page 8, line 43, leave out from ("to") to ("premises") in line 2 on page 9 and insert ("a domestic supply licence in so far as it relates to—
(a) any premises to which subsection (3A) below applies; or
(b) any premises to which that subsection has ceased to apply at any time and which are situated in an area which has not, at that or any later time, ceased to be an authorised area of a particular public gas transporter.
(3A) This subsection applies to any premises at any time if, at that time, the public gas transporter in whose authorised area the premises are situated is an associate of the holder of the domestic supply licence in question.
(4) Subsection (2) above shall not apply in relation to a domestic supply licence in so far as it relates to any premises to which gas is conveyed in pursuance of an exemption from section 5(1) (a) of the 1986 Act granted under section 6A of that Act.
(5) In so far as a domestic supply licence relates to").
Page 9, line 7, leave out from ("in") to ("includes") in line 8 and insert ("this section to a domestic supply licence").
Page 9, line 10, leave out from ("In") to ("if") in line 14 and insert ("this section—
"domestic supply licence" means a licence granted under subsection (1) (a) of section 7A of the 1986 Act, a licence having effect as such a licence by virtue of a direction given under subsection (4) (b) of that section, or a licence treated as so granted by virtue of a scheme made under paragraph 4 or 12 of Schedule 5 to this Act;
"public gas transporter", and "authorised area" in relation to such a transporter, have the same meanings as in Part I of that Act.
( ) For the purposes of this section a public gas transporter is an associate of the holder of a domestic supply licence").

The noble Lord said: I have already spoken to these amendments. I beg to move.

On Question, amendments agreed to.

Clause 6, as amended, agreed to.

Clause 7 [Licences: general]:

[Amendments Nos. 42 and 43 not moved.]

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