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The noble Lord said: Amendments Nos. 10 and 11 were spoken to with Amendment No. 8. I beg to move.
On Question, amendments agreed to.
Schedule 2, as amended, agreed to.
Clause 4 [Forward work programmes]:
Lord Jenkin of Roding moved Amendment No. 12:
The noble Lord said: In moving this amendment I shall speak also to my related amendment, Amendment No. 15, and, if I may, to Amendments Nos. 17, 19, 26, 27, 37 and 49 in the names of my noble friends on the Front Bench.
At Second Reading I referred to the undoubted fact that whereas the onshore utilities industries--gas and electricity--are currently regulated by two regulators and will be regulated by the new authority, those regulators' remit stop at the beach. The offshore oil and gas industry comes under an entirely different system of regulation; namely, the Department of Trade and Industry. The thought that lies behind the two amendments in my name, as I adumbrated briefly at Second Reading, is that it is perfectly possible--indeed, there has been recent experience to suggest--that a zealous pursuit of the regulatory objective by the onshore regulator Gas and electricity markets authority--GEMA--could adversely impact upon what I would call, in the industry parlance, the upstream industry. In other words, overzealous and immediate protection conceived to be in the interests of consumers could operate to their detriment by inhibiting investment financing for that part of the offshore industry. That industry has an astonishing record since gas field resources became apparent and it started operating in the early 1960s. There have been huge discoveries, bringing massive advantage to the UK economy. Some £160 billion in taxes has been paid since the 1970s, and in 1998 exports were valued at £3 billion, which is a massive contribution to our economy.
The gas supplied by the offshore industry is already making a major contribution to our nation's ability to meet the Kyoto dioxide targets. Switching to gas-fired power stations has enabled carbon emissions to fall by 12 million tonnes per annum between 1990 and 1997. The offshore industry supports one of the main thrusts of the Bill because it will enable the Government swiftly to remove the current embargo, such as it is, on the construction of new gas-fired power stations. As I made plain at Second Reading, I have always regarded that measure as misconceived. The Government recognise that when the new arrangement is introduced, they will be able to abandon that restriction.
There is a regulatory gap between the responsibilities of GEMA and the DTI. The amendments to Clauses 4 and 5 seek the Government's views on whether there might be the opportunity to achieve some meshing of the two regulatory systems, so that the one takes account of the other in managing energy policy. We all want a sustainable, viable and
The amendment to Clause 4 seeks to ensure that GEMA is obliged to make a cost/benefit analysis of projects proposed in forward work programmes--not of every decision that it makes, as that would be wholly inappropriate. When making recommendations and decisions about the strategic relevance of a forward work programme, GEMA should take account of its impact. That would ensure full understanding of the cost of burdens and regulations throughout the whole energy chain, to minimise the impact on a competitive and diverse energy market--which is in the overwhelming interests of consumers. If existing and future consumers are to be protected in the longer term, some way must found of closing that regulatory gap.
I am most grateful to the noble Lord, Lord McIntosh, for receiving a delegation from the industry a few days ago. With him were representatives of the department responsible for the Bill and the bodies that regulate the offshore industry, so we were able to test the arguments on both sides.
My amendment to Clause 5 seeks to ensure, particularly in light of subsequent changes to projects in the forward programme--notwithstanding that they may have been occasioned by representations--that the authority will make an assessment of the costs, benefits and impact on businesses and include it in the annual report. That is proposed to mesh the two different regulatory systems, which might otherwise operate to the detriment of consumers.
While the initial concerns that I voiced at Second Reading reflected the views of the offshore industry, it entirely recognises that the interests of the whole energy chain need to be considered if a competitive and diverse energy market is to be maintained. The two amendments seek to recognise points made at Second Reading. The noble Lord, Lord Borrie, indicated that the regulator should not concentrate wholly on the narrow focus of an immediate reduction in prices but should ensure adequate investment for the future. The amounts that have to be raised from the market and spent by the industry offshore run into hundreds of millions of pounds. The noble Lord was right and the amendments reflect what he usefully said on that occasion.
Consideration and understanding of the real impact of regulation across the market will prevent one particular part of the energy chain carrying a disproportionate burden that could ultimately feed through to the market and consumers and to the supply and use of energy sources in the long or short term. The amendments support the Government's intentions; will facilitate more effective competition; provide a more consistent, transparent and predictable regulatory framework; ensure that regulation is flexible enough to accommodate and encourage future market development; and ensure that gas can continue to make a contribution to the Government's environmental objectives.
At Second Reading, the noble Lord, Lord Currie of Marylebone, made the valid point that if one is making a cost/benefit analysis, it is often easier to assess the cost than to gauge the benefit. All of us who have tried to do so will endorse his remarks. However, I should just point out that I do not believe that that is a reason for not trying so to do.
The introduction of this check and balance, which the proposal would require of the authority, would surely lead to a greater understanding on the part of the authority of the impact of regulation throughout the whole energy chain--that is to say, the offshore oil and gas wells, and so on, although we are talking primarily about gas wells here. In that way it would be able to shed some light on the benefits that can be gained from the proposals that the authority might be considering. I suggest also that such an approach would be consistent with the current regulatory regime with which government departments have to comply to ensure a transparent and accountable regulatory framework.
In later amendments, I shall revert to the problem that the gas industry has experienced as a result of quite inappropriate forms of regulation by the present regulators which, instead of helping consumers, has led to a considerable increase in prices. That is merely an indication of what can happen if there is no clear understanding of what the impact of such regulation will be.
I understand that we cannot have seamless regulation. In a sense, we are dealing with two different parts of the same industry for which a different regulatory regime currently exists and, as far as I am aware, there is no proposal that they should be merged. But they should be meshed in such a way as to enable them to take account of each other. That is something that the Bill does not provide at present. I believe that my amendments suggest a way forward. I beg to move.
Baroness Buscombe: I rise to speak in wholehearted support of what my noble friend Lord Jenkin of Roding has articulated so clearly in relation to the need to take a realistic and practical approach to the forward work programmes. His point about the need for meshing is also most important.
It is not necessary to repeat the arguments that my noble friend put forward, but I should like to add a few comments on Amendments Nos. 26 and 27, which deal with the costs and benefits of regulation and the regulatory impact issues. These amendments would enable the issue of the set-up costs for the council and the authority, which may be recovered from licence holders, to be probed. The amendments would require the expenditure involved to be "reasonable".
Amendments Nos. 37 and 49 would impose additional obligations on the authority in discharging its primary duty, requiring it to ensure that the obligations imposed on licence holders are the minimum necessary to attain the principal objective
We are looking for the minimum necessary to be placed upon licence holders. It is worth remembering that the Secretary of State, Stephen Byers, said in another place in April of this year that the central objective of the Government's energy policy was to ensure secure, diverse and sustainable supplies of energy at competitive prices. That objective cannot be realistically achieved without having regard to the additional financial burdens placed upon licence holders as a result of this Bill.
In essence, the consumer is being put first in this Bill; but, ultimately, what the consumer wants is more for less. Therefore, a balance has to be struck if licence holders are to able to do their job for the benefit of the consumer. Expecting the financial viability on the part of the provider to be low priority is, therefore, unrealistic.
( ) The Comptroller and Auditor General shall--
(a) examine, certify and report on each statement of accounts received by him under sub-paragraph (3), and
(b) lay a copy of each such statement of accounts, and of his report on it,").
Page 2, line 32, at end insert ("and an initial assessment of the costs, benefits and impacts for businesses throughout the energy supply chain of carrying out and implementing each project").
4.30 p.m.
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