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Lord McIntosh of Haringey: Yes. Although the offshore industry is important, it is not the only factor which is important. If you start to write into a Bill the need to take account of the concerns of the offshore industry, through the old legal maxim that the inclusion of one means the exclusion of others, you may end up by neglecting, for example, the coal industry or the plant manufacturers.
I did not wish to embark on a discussion of the economics of the offshore industry, on which the noble Lord, Lord Jenkin, is far more expert than I am.
Lord Jenkin of Roding: I shall obviously read what the Minister said on the subject generally. He said that if he dealt with the offshore industry, he would also have to deal with the other industries. I am reminded, inevitably, of that marvellous publication Cosmographica Academica which has the memorable phrase, "I cannot be fair to you because if I was fair to you I would have to be fair to everybody else too". I understand the logic of that. That wonderful short, slim volume is full of bons mots of that kind. Although the title is in Latin, the quotations are all, of course, in English.
I am not sure that the noble Lord has really addressed himself to the question of the two different systems of regulation. I am grateful to my noble friend on the Front Bench for picking up the suggestion that they should be more effectively enmeshed in some way. After all, they are part of the same supply chain. I understand what the Minister said; namely, that this is a Bill about the onshore industry--gas and electricity suppliers. But one has to ask also, particularly of gas but also of electricity: from where do they get their materials? Is that not absolutely at the heart of their business?
If the regulator, because of his pursuit of what is now his primary objective--the protection of consumers--is tempted to ignore the long-term concerns of the supplying industries, one's last state will be worse than the first. It seems to me that that is something of which the Government need to take rather closer note.
We shall want to study carefully what the Minister said in his reply. Unless my noble friend on the Front Bench wants to add anything about her amendments, at this stage, I shall seek leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey moved Amendment No. 13:
- Page 3, line 2, at end insert--
On Question, amendment agreed to.
Clause 4, as amended, agreed to.
Clause 5 [Annual and other reports of the Authority]:
Lord Kingsland moved Amendment No. 16:
The noble Lord said: I rise to move Amendment No. 16 and to speak to Amendment No. 18. Although the two amendments would lead to differing demands on the authority, they have a common objective; that is, they both seek to probe the reasons why the Government wish to have regulation in these two sectors.
I have no doubt that the Minister will have read carefully the proceedings of the Bill in another place. He will recall, in the Second Reading debate, that the Secretary of State accepted the argument that regulators are not appropriate in those circumstances in which a utility sector is fully exposed to competition, as the following extract from the debate illustrates. My honourable friend Mr Gibb asked:
In addition, the Government also stated at Second Reading that the Bill would result in the outcome of every utility facing competition, as the following additional extract illustrates. My honourable friend Mr Alan Duncan said:
I am of course aware that, in the course of the Second Reading debate in your Lordships' House, and in response to some remarks made by me, the Minister said that there was an important caveat to be made about competition in the utilities sector, particularly relating to electricity and gas. As he rightly pointed out, in the electricity sector there is a national grid, and in the gas sector certain pipelines are common to all parties and cannot be subject to the kind of fierce competition to which the Secretary of State referred without some artificial intervention by a regulatory authority to mimic competition.
I accept that, in those circumstances, a continuing role for the regulator will be required. But, apart from those circumstances, does the Minister accept that, as long as the conditions of fierce competition are established, the roles of the regulators in both sectors
Lord Borrie: I hope that my noble friend does not entirely accept the tempting arguments of the noble Lord, Lord Kingsland. He said, rightly, that for some while now, and certainly for some years to come, competition will be developed, in which case regulation can quietly be reduced. In recent times, Ofgem has been able to say in relation to the supply to customers throughout the country that price caps are no longer needed because competition is such that that would be "otiose", to use the word of the noble Lord.
The noble Lord, Lord Kingsland, rightly said that, in relation to the pipes and the wires--to use my own shorthand--ongoing monopoly inevitably means that there has to be regulation. I only rose to speak because the noble Lord did not make these points and add only that he should pay regard to the fact that fuel--we are talking about gas and electricity--is an essential for the community. Therefore, the social and environmental aspects referred to in the Bill are extremely important in regard to regulation. Despite the merits of competition, with which the noble Lord and I agree, there are circumstances in which competition may result in the disadvantaged consumers in society (disadvantaged either because they are poor or because they live in remote areas) being excluded from the desirable situation whereby all members of the community have the benefit of the supply of those essential fuels.
I shall not develop the environmental points. But there are social and environmental aspects of regulation which we should not ignore. Competition on economic grounds, although tremendously beneficial, does not necessarily meet all those requirements.
Lord Ezra: I support the remarks of the noble Lord, Lord Borrie. I fully endorse the view that regulation should diminish as competition develops and the market-place functions effectively. However, some aspects of the two fuels are basic, as the noble Lord, Lord Borrie, mentioned, and will probably continue to require a degree of intervention or regulation over many years. I refer to the disadvantaged consumers, who specifically need help. Reference is made to them in the Bill in clauses which we shall debate later.
Environmental aspects are particularly serious at a time when the price of fuel (particularly of electricity) is diminishing. The interest in energy efficiency and the achievement of the Government's objectives in reducing pollution may be ignored unless there is some degree of intervention to deal with it, as proposed in the Bill.
Therefore, while I support the concept that, as competition develops, the role of regulator should be adapted accordingly, I still feel that in the aspects referred to by the noble Lord, Lord Borrie, there will be a continuing role for some time to come.
Lord Currie of Marylebone: Perhaps I can add to the remarks of the noble Lord, Lord Ezra, and those of my
A unique feature of the national grid system is the need to balance it on an almost second-by-second basis, without which it will become unstable. So it is not merely a question of a monopoly grid needing regulation; it is also a question of the need to balance the system centrally. That means that supply issues need a watching eye close to real time when the need to balance the system is pressing. Some players in the market have momentary but important monopoly positions. We need to watch and regulate that. That aspect will be crucial, even when supply competition is highly vigorous.
Many followers of the electricity industry argue that that is a reason why competition in supply cannot work effectively. I do not believe that. I believe that reforms in electricity trading are vital. But we should be aware that there will be a special need to have a watching brief over competition and supply because of the unique characteristics of electricity. Gas also has some of those features, but not to the same extent.
Lord Hardy of Wath: I support the view taken by my noble friend and endorse the comments that the noble Lord, Lord Ezra, has made. One expects healthy competition to be a good thing. However, I am sure that many in Westminster will be aware that over the past two or three years there have been some grim examples of hard-sell competition. For example, pensioners have had their doors knocked on repeatedly at night. Therefore, I believe that we need to have a monitoring capacity to protect the consumer, who otherwise might benefit substantially from free competition.
("( ) The Authority must send a copy of any notice given by it under subsection (4) to the Council.").
Page 3, line 25, at end insert ("; and
( ) an estimated timetable, when, if at all, it expects competition in each particular sector to be sufficient to enable the Authority to withdraw from regulating that sector").
"Does the right hon. Gentleman believe that there is still a role for the regulator when the utility sector involved--even if it is a narrow one--is fully exposed to fierce competition?".
The Secretary of State responded:
"There may be a limited role, but it would depend on the specific circumstances. As a general rule, my personal view is that regulators are not appropriate in those circumstances, and I should much rather have the discipline of an effective market".--[Official Report, Commons, 31/1/00; col. 793.]
Given that the Secretary of State accepted that point, it is surely appropriate to build a timetable into the Bill which enables the Government to assess when full competition has been reached so that regulatory bodies and associated costs can be scaled down at that point.
"Over the past few years, most of the privatised utilities have faced new entrants and new competition. Which utilities does the Secretary of State consider remain monopolies facing no competition?".
The Secretary of State responded:
"As a result of the measures that we are introducing, there will be none".--[Official Report, Commons, 31/1/00; col. 785.]
In the light of those exchanges, does the Minister agree with his right honourable friend?
5 p.m.
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