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Lord Inglewood: I am grateful to the noble Lord, Lord Clinton-Davis, for expanding his comments. I wish to take up only two points. I found a certain degree of contradiction in his comments about this being a new market. I recall that before the dinner break the noble Lord, Lord Peston, referred to a depot not far from where he comes from that carries spare parts for the very market that we are describing. There appears to be an internal contradiction in their comments.

Of course, we will reflect on what has been said. Indeed, we always reflect on the comments that are made in the Chamber. We will consider the matter further but I can give no commitment that anything will follow from that.

Lord Clinton-Davis: I am obliged to the Minister. I do not ask him to give any commitment because, after all, who knows what will happen after next Tuesday? How can he enter into any binding commitments? I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.30 p.m.

The Deputy Chairman of Committees (Viscount Allenby of Megiddo): I must inform the Committee that if Amendment No. 141 is agreed to I cannot call Amendment No. 142.

Lord Haskel moved Amendment No. 141:

Page 54, line 36, leave out ("the promotion of") and insert ("securing").

The noble Lord said: In moving Amendment No. 141 I shall speak also to amendments Nos. 142 to 146A. The amendments in the group relate to energy efficiency and affordable warmth. There is a strong argument in favour of encouraging energy efficiency, affordable warmth and lower fuel bills, especially for the poorest and least energy efficient pensioner households. The argument is distinct from the environmental arguments relating to CO 2 emissions and the Rio commitments.

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There is enormous scope for this improvement. Poorer pensioner households cannot fund the energy efficiency improvements which achieve affordable warmth and lower fuel bills. The 1994 Budget contained a measure to provide basic insulation. That was estimated by the building research energy conservation support unit to save an average of only £9 per year on the annual fuel bills of those households which improved under this scheme. That is not very much.

The duty to promote efficiency and economy on the part of the licence holders refers to the efficient use of gas conveyed through pipes. Does that mean that the duty to be efficient applies only to gas that is conveyed through pipes? What about energy efficiency in the home when the gas is being burnt in heaters and cookers?

Obviously, it is being left to the market to deliver such energy efficiency improvements. But can the market be relied on to deliver them? We must remember that the competition is based on the price per unit and not on the total cost. I do not believe that that does very much to promote efficient use. Perhaps I may also remind the Minister that, in contrast to the director general of the gas company, the director general of electricity supply has fixed targets for reductions in consumption. I beg to move.

Lord Ezra: The noble Lord, Lord Haskel, has raised an important issue and I support the thrust of the amendments. We are talking about promoting energy efficiency, in particular among those who cannot afford to spend the necessary money. The noble Lord referred to the extra sums made available for basic insulation. I am involved in the organisation Neighbourhood Energy Action which handles those sums. Indeed, the homes of almost 2 million people on low incomes have been insulated.

However, as the noble Lord, Lord Haskel, pointed out, they are basic forms of energy saving and much more could be done. The legislation provides us with a unique opportunity to ensure that such further action is taken. We have the framework by which that can be done. The director general is in a position to create the necessary conditions. We also have the Energy Savings Trust, which was intended to do much more than it is presently financed to do. The mechanisms, the need and the opportunity exist. We ask the Government to bring all those together and to do something that is highly desirable not only as regards helping people on low incomes and the elderly but also as regards saving energy.

Lord Cochrane of Cults: I believe that this group of amendments is somewhat misguided. Amendment No. 146 refers to the means by which certain people can be helped to improve the efficiency with which gas is consumed. The difficulty is that gas is consumed at the moment it is burnt. What happens afterwards is different and has nothing to do with the consumption of gas. The noble Lord, Lord Haskel, referred to the necessity for insulation. To some extent, that is a red herring, although not a total red herring. If one wants to make a house warmer one must adopt a practical method of stopping the draughts. That will improve fuel efficiency. The whole tenor of the campaign to achieve that should first be dictated by the necessity to reduce the draughts in a house

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before one deals with anything more elaborate. It is an educational problem and to that extent I have sympathy with the noble Lord's amendment.

Lord Ezra: The noble Lord, Lord Cochrane, with whom I almost always entirely agree, suggested that there are no ways in which one can improve the efficiency with which gas is burnt. But, of course, there are vast numbers of appliances and some are more efficient than others. There are many ways of burning gas with an efficiency that could rise to 70 per cent. or to 90 and 95 per cent. I believe that all those areas need investigating. Insulation is important but the way in which gas is consumed is equally important.

Lord Cochrane of Cults: I willingly accept the noble Lord's gentle reprimand. Of course, he is right, but the majority of appliances have a fairly standard level of efficiency. I do not propose to pursue the matter further.

Lord Inglewood: I understand and very much support the need to promote cost effective energy efficiency. I suspect that few Members of the Committee would disagree with that general proposition. I must begin by explaining that in general terms I agree with the approach of my noble friend Lord Cochrane of Cults. The Bill will, I believe, do a great deal for energy efficiency by harnessing the forces of competition to work in favour of, rather than against, energy efficiency.

A monopolist in an energy market will very rarely have any commercial benefit from energy efficiency; all he would be doing is shrinking the size of his market. In a competitive market, individual players can use energy efficiency to differentiate their product and win business, although the total size of the market may fall.

I see energy efficiency playing a key role in two ways. First, suppliers will tend to compete in selling warm houses and not just gas. The Bill enables suppliers to bundle gas and, say, a high efficiency boiler on a long-term contract, which is protected from the normal termination provisions in the licence. Secondly, suppliers may offer home energy audits as a benefit for switching supplier. For example, "Come to us and we'll show you how to cut your bill by 10 per cent." might be the message.

However, I do not believe that the amendments here proposed would be an effective way of building on these positive incentives. In fact, they could distort the market and perhaps work to undermine those very principles of the Bill which will, in the way I have described, work to harness the profit motive to the benefit of energy efficiency.

I turn briefly to Amendments Nos. 141 and 142, which seek by regulatory means to secure energy efficiency by consumers. We have previously discussed the promotion as opposed to the achievement of energy efficiency. The director is not in a position—I return to the points made by my noble friend Lord Cochrane—to ensure that customers use energy efficiently. Nor is a gas supplier entitled to enter premises for the purpose of closing windows and turning down thermostats. The very idea seems comical. All that either of them can do is to make sure that the incentives and the means are in place to encourage consumers to use gas efficiently.

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Turning to Amendments Nos. 144 and 146, the Government are well aware of the importance of gas to pensioners and disabled customers. That is why we propose in the standard conditions of licences to provide for special services to them. However, we need to ask whether the provision of help to such persons with energy efficiency is properly a matter for the economic regulation of the gas market or whether it is a job better discharged by groups such as Neighbourhood Energy Action, to which the noble Lord, Lord Ezra, referred. The Government have a very high view of that organisation, which is an example to other similar non-governmental organisations. It is through funding such groups and organisations like the Energy Savings Trust that real gains can be made. If we over-regulate so that pensioners and disabled people are unreasonably expensive to serve there is a risk that they will not benefit from competition as much as they should.

Lord Haskel: I thank the noble Lord, Lord Ezra, for his support for the amendment and the Minister for his response. Obviously we all support energy efficiency, as the Minister said. Where we disagree is on whether the market will or will not deliver efficiency. If one is to have pricing and competition based on costs per therm or costs per unit rather than on the total cost, I cannot see how there is any incentive to gas suppliers to improve the efficiency of the use of gas. There may be home audits and other offers to persuade customers to change, but at the end of the day that will not provide more energy efficiency.

This is an important matter. Obviously I shall not divide the Committee. However, we shall probably return to the matter at Report stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 142 to 146A not moved.]

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