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Lord Peston had given notice of his intention to move Amendments Nos. 44, 45 and 46:

Page 10, line 3, after ("services") insert (", including those services that must be delivered by home advisers,").
Page 10, line 5, after ("age") insert ("or in receipt of one or more of the means-tested benefits").
Page 10, line 21, at end insert:
("( ) conditions requiring arrangements to be made to avoid disconnection from supply and the build-up of arrears and to make available payment methods which take the circumstances of customers into account;
( ) conditions requiring gas suppliers to offer energy efficiency services in addition to the supply of gas;").

The noble Lord said: I had hoped that the noble Lord, Lord Inglewood, would include these amendments in the group that he is to look at under the heading of people on means-tested benefit. At this stage I do not propose to debate them further.

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[Amendments Nos. 44, 45 and 46 not moved.]

[Amendments Nos. 47 and 48 not moved.]

Lord Inglewood moved Amendment No. 49:

Page 10, line 39, after ("licence") insert (", or under any document specified or described in the licence,").

The noble Lord said: I shall speak also to Amendment No. 51. These amendments are necessary to enable the licences to provide for the director to determine questions arising under the network code and the rules governing modifications to that code.

It has become clear from discussions between British Gas and gas shippers on the development of the code that they would like to be able to refer certain questions to the director general where they cannot agree. I beg to move.

On Question, amendment agreed to.

Lord Peston moved Amendment No. 50:

Page 10, line 51, at end insert:
("( ) Where—
(i) the holder of a licence under section 7 above who in consequence of conditions included in that licence by paragraph (b) above is required to make a payment in accordance with sub-paragraph (ii) of that paragraph; or
(ii) the holder of a licence under section 7A above who seeks a payment from the holder of a licence under section 7 above who in consequence of conditions included in that licence by paragraph (b) above may be required to make a payment in accordance with sub-paragraph (ii) of that paragraph but who is refused such a payment—
such holder may appeal to the Secretary of State against the requirement or refusal to make such a payment as the case may be and the Secretary of State shall have the power, having regard to all the circumstances, to set aside that requirement or require the making of such a payment as he thinks fit.".).

The noble Lord said: Amendment No. 50 was grouped with Amendment No. 52. However, I understand that the noble Earl, Lord Caithness, wishes to separate them, although both deal with the levy. The concept of the levy is important and needs to be supported. It is an interesting example of regulating an otherwise competitive market and goes back to my earlier point about undue proportion. There will be consumers who are particularly expensive to provide with gas but they will need the services. That will be agreed. The question is: will whoever gets stuck with supplying them receive a levy to enable the cost more easily to be met?

I know that the Gas Consumers' Council was in favour of the levy. I am not certain what the potential competitors' views are on the matter. According to a document that I received from British Gas, it is interested in the matter but it has mixed feelings about some aspects of it. I can well understand that.

My amendment deals with a rather technical matter. What happens if the regulator decides not to levy the levy? I seem to be running into great problems of exposition with those words. They sound awful. However, I hate to use expressions like "activate the levy". I hear the Minister suggest that I should say, "raise the levy". I think that is right. If the regulator decides not to raise the levy, according to my understanding of the Bill, I believe that that would be the end of the matter.

The purpose of my amendment is to provide that the Secretary of State would be in a position to make the director reconsider. Equally, the amendment as drafted

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allows the Secretary of State to reverse that and say, where a levy has been raised, that he does not think that it is appropriate. We are in very deep water here because the Government have certainly gone to some trouble to try to keep the Secretary of State in other areas out of matters which should not concern him. I am in favour of that. But, equally, the Secretary of State has been given very considerable powers and here we have an area where I think noble Lords on the Government Benches should at least reflect on whether, in the case of a levy, it can just be left to the director to decide the matter.

Therefore, the purpose of my amendment is essentially to say that, if accepted, the amendment would put the Secretary of State in a position which I do not believe is dictatorial; indeed, it is very much a backstop position with respect to the levy. However, it is one that would be useful. I beg to move.

Lord Inglewood: I am most grateful to the noble Lord, Lord Peston, for explaining the position. It is, indeed, a complicated matter. I hope that I may be helpful to the Committee in my response. I hope that noble Lords have been able to consider the revised version of the draft standard conditions of the gas suppliers' licence, which was placed in the Library on Tuesday 20th June. Standard Condition 6, which was numbered 6A on the last round, has been revised in the light of further consideration and of the detailed consultation that we have carried out.

Condition 6 sets out in detail the procedures to be followed by a gas supplier to claim for a "special customer payment". Condition 7 of the public gas transporters' licence sets out the obligations on the transporter if a claim is duly made. It should be noted that it is the companies concerned that initiate the "levy" procedure, not the Secretary of State or the director. That is an important protection for the companies concerned.

The procedures include provisions for both the Secretary of State and the director to consult the applicant and other interested parties following an application, and to consider their representations. They provide a timetable after which, if the Secretary of State and director simply do nothing, the claim is deemed to have been approved.

The supplier, therefore, has every opportunity to make his case both to the Secretary of State and to the director before a decision is made. The director is required to review claims against carefully set out criteria, and the Secretary of State then has a power to veto the claim.

The Secretary of State, therefore, already has an opportunity to form a view on a claim for payment. I do not believe it to be necessary to add the further level of scrutiny or appeal, given that the licence already sets out detailed criteria for the director's consideration. I hope that the noble Lord, Lord Peston, will find my response reassuring.

Lord Peston: I thank the noble Lord, Lord Inglewood, for his reply. I should, again, apologise to the Committee because, although I picked up a copy of the draft standard conditions of the gas suppliers' licence yesterday, I would be misleading noble Lords if I tried to pretend that I mastered it in any form whatever. My immediate response to trying to look at it at all was one of being totally appalled.

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I take it that the Minister is saying that my amendment is actually covered in the licences to the degree that he feels that I ought to be happy. For the moment, I am willing to accept that view. However, I have to warn the Minister that, being me, I am quite likely to read the document in some detail and come back saying, "My judgment is that the draft licence does not say what the noble Lord said". For the moment, all I understand is what the Minister told me and I find that to be excellent. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Inglewood moved Amendment No. 51:

Page 11, line 6, leave out ("specified document") and insert ("document specified or described in the licence").

The noble Lord said: I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 52:

Page 11, line 20, at end insert:
("(8A) Where—
(a) the holder of a licence under section 7A(1) (a) has supplied an undue proportion of premises owned or occupied by persons who are disabled or of pensionable age, or who have defaulted in the payment of charges;
(b) the conditions included in that licence make provision for the holder to apply for payments to be made to him by virtue of section 7B(5) (b) (ii) above; and
(c) that holder of that licence ("the claimant supplier") applies for such payments to be made;
the Director shall, as soon as practicable after an application has been made, require such public gas transporter as he considers appropriate so to raise its charges for the conveyance of gas as to provide the amount described in subsection (8B) below and to pay that amount to the claimant supplier.
(8B) The amount referred to in subsection (8A) above is the amount which is requisite to secure that the ability of the claimant supplier to finance the carrying on of the activities which he is authorised or required by his licence to carry on is not adversely affected by reason of his supplying premises of the nature described in subsection (8A) (a) above or such lesser amount as would be required by an efficient supplier of those premises for that purpose.").

The noble Earl said: The levy concept in the Bill is designed to ensure that suppliers who concentrate only on supplying the most profitable customers are required to contribute to the cost of supplying more vulnerable groups. High cost groups include older and disabled customers and those who have genuine difficulty in paying their bills. Indeed, my noble friend Lord Inglewood recognised this and the requirements of these groups when he replied to Amendment No. 19 earlier this afternoon.

These groups often require special services that at the moment are provided free of charge. I believe it would be clearly wrong for these special services to be unavailable. The director of Ofgas has already said that all consumers will have the choice of gas in 1998. I think that is right in theory but wrong in practice. For instance, if a company was to apply for a licence for, say, North London, it would fulfil many of the criteria that we have been discussing but the choice for the elderly could be severely restricted and thus it would be quite wrong for one company alone to

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have to shoulder the burden of supplying the elderly and those who have difficulty in paying their bills while other companies market those more fortunate around them.

The concept of the levy bridges this gap by spreading these costs across all suppliers. I would prefer it if selected marketing did not occur and the levy was not needed, but I do not think that is a practical proposition. I fear that the levy will be needed and my concern is that the Bill as it stands does not make the situation as clear as it should be. It leaves too much to the uncertainty of the behaviour of the regulator. For example, the director general of Ofgas is given discretion to determine what level of excess costs should be regarded as having materially affected a licensee's business and therefore whether a levy should be granted at all. In a competitive market, as we have seen in the industrial sector recently, suppliers' margins may be quite small and this needs to be properly considered. We should also bear in mind when considering the issue that the current regulator has already shown unwillingness to raise an energy efficiency levy for which she feels there was insufficient statutory backing.

The amendment has three objectives. The first is to set out clearly the relevant circumstances where the levy provision should apply inclusion in the statute and also takes the levy outside the regulator's discretion to change the standard licence conditions. Secondly, it would ensure a reasonably prompt reaction on the part of the director general of Ofgas to any request that the levy should be implemented; and, thirdly, it would provide some discretion for the director general as to the amount, and it would make absolutely clear that this provision is not intended as a protection for the inefficient supplier.

If there was less uncertainty about the implementation of the levy, there would indeed be some great benefits. Above all, it would increase the likelihood that customers who need special services would enjoy a choice of supplier. In doing so it would contribute enormously to securing the very choice about which my noble friend Lord Ferrers waxed lyrical on Amendment No. 3. After all, the major deterrent for new gas companies offering to supply these customers is the extra cost of doing so coupled with the uncertainty as to whether these costs could be recovered through the levy mechanism. If we remove this uncertainty, as my amendment seeks to do, we make high cost customers considerably more attractive to serve. I believe that is part of what the Bill seeks to do. I beg to move.

9.30 p.m.

Lord Peston: I support the amendment. The noble Earl put very clearly the case in relation to the levy. It also enables me again to underline my view on this "undue proportion" matter. It seems to me that a firm with a given area might say, "I should like to have a go at competing in this area of the country. I think I can make a go of it and I think that I can make some money". Someone then comes along and says, "Well, you know that there are quite a lot of old people in that area". I want the firm to be able to say that it will not take its decision on a discriminatory basis but that it wants to be a gas supplier which supplies gas on all-fours. But if it turns out that that firm has committed

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itself to undue cost, since it is providing a public service within the definition of the Bill, it deserves some recompense. That is the concept of the levy.

I like in particular the noble Earl's point about removing uncertainty. Of course any degree of competition involves taking risks. We cannot get rid of risks. It may be that the Minister will tell me that I must look at this peculiar yellow document which contains the licensing conditions and that I do not have to worry. If that is so, all well and good. But it seems to me that the noble Earl is right to say that we want firms to be disabled and pension blind. We want them to compete but we do not want them to end up bankrupt because they have done the right thing when others, in a way, have not. That is why one must be supportive of that line of thought.

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