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Lord Ezra moved Amendment No. 39:
- Page 7, line 1, leave out ("Subject to subsection (2)") and insert ("In performing that duty").
The noble Lord said: In moving this amendment I wish to speak also to Amendment No. 51. The amendment refers to the functions of the Secretary of State and the authority in regard to the promotion of efficiency and economy on the part of persons authorised by licence to carry gas, or, in the case of electricity, similarly, and to protect the public from the dangers arising from the conveyance of gas, or, in the case of electricity, appropriately.
Our concern is that this important issue is made subject, in the case of gas, to subsection (2) and appropriately in the case of electricity. We feel that these are matters of such importance that the same words as are used in introducing subsection (3)--namely, "in performing that duty"--should be introduced. We fail to see why these important issues--promoting efficiency and economy, and protecting the public from dangers--should be relegated to an inferior position. The case for re-emphasising the importance of promoting efficiency is tied in with the whole of the Government's environmental policy and, therefore, should be emphasised accordingly. It is extremely surprising that the question of safety should be relegated in this way.
It is perfectly true that later on in the Bill in the case of gas--in Clause 11--the Secretary of State and the authority have to consult the Health and Safety Commission about all gas safety issues, and similarly in Clause 15 regarding electricity. But that does not alter the fact that in the duties of the Secretary of State and the authority safety is made, in Clause 9(5), subject to subsection (2) which deals with the need to secure, as far as possible, that all reasonable demands for gas to be conveyed through pipes are met and that licence holders are able to finance their activities. It does not seem to be proper that those two considerations should predominate over dealing with these issues. Matters of efficiency and safety should therefore be
treated more seriously than they are on the face of the Bill. This can easily be corrected by introducing the words "in performing that duty" in place of "subject to subsection (2)". I beg to move.6.45 p.m.
Lord McIntosh of Haringey: I gave a quite full response to the same issue when we were debating Amendments Nos. 31 and 42. Both those amendments were concerned with raising the profile of environmental and social issues in the authority's general duties. These amendments seek to achieve the same purpose by elevating the duties to promote energy efficiency, protect public safety and have regard to the environment to a level equal with that of the principal objective.
As I said before, regulation is intended to mimic the effects of competition by putting downward pressure on costs and by creating incentives to improve efficiency and customer service. It is right that the authority's general duties should have an economic focus. However, we recognise that the way in which the authority exercises its functions can have significant social and environmental consequences. That is why the authority is subject to secondary duties in relation to energy efficiency, public safety and the environment and will be required to take account of social and environmental guidance issued by the Government.
As I said on the previous amendment, that ensures that when the authority is making a choice between alternatives of equal benefit to the consumer, it should lean to the one that does the most for energy efficiency, public safety and the environment and takes account of the Government's social and environmental objectives. But it would be wrong to remove the priority afforded to the interests of consumers by making these considerations of equal importance to the principal objective in the way proposed by Amendments Nos. 39 and 51. To do so would run counter to the principal purpose of regulation. Measures which run counter to the interests of consumers, which could arise if we gave it equal prominence, fall outside the scope of economic regulation and are properly matters for government.
I am sorry that I am not able to say any more on this matter, but I dealt very fully with the previous amendments. In my view, the amendments raise essentially the same issues and create the same problems.
Lord Ezra: I thank the noble Lord for that answer. I think that there is some contradiction in the way that subsection (3) and subsection (5) are treated. Subsection (3) uses the words "in performing that duty". It could be argued that that derogates from the main objective because it refers to a particular class of consumers.
Lord McIntosh of Haringey: That is indeed correct; it refers to a particular class of consumers. But it is still within the context of the interests of consumers. It is because the other issues of energy efficiency, public
safety and social and environmental objectives do not come within the same envelope that they have to be dealt with in a different way.
Lord Ezra: I do not agree with that analysis. I feel that efficiency, and, particularly, public safety, rate higher treatment than is proposed. However, I do not suggest that we should divide on this issue. I shall reflect on what the noble Lord said and come back to the matter at a later date. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Jenkin of Roding moved Amendment No. 40:
- Page 7, line 14, at end insert ("and to the securing of a diverse and viable long-term energy supply").
The noble Lord said: I, too, am puzzled by the hierarchy, which defies logic. Certain matters are central and are summed up by the words "in the interest of consumers". The raising of capital and other matters are next in the hierarchy. Environment and safety--to which the noble Lord, Lord Ezra, referred--come later in the Bill. Some matters do not appear to rank in that hierarchy at all. One of them is securing a diverse, viable and long-term energy supply.
I fail to understand how objectives can be regulated by a points system according to where they appear in the Bill, which seems to be the logic of the Government. At least the matters mentioned by the noble Lord, Lord Ezra, are in the Bill, whereas the impact on the energy chain is not. I suspect that I will receive the same answer as I did to my Amendment No. 12 about the long-term impact on the upstream industry and the problems of ensuring that GEMA will take account of it. The Bill rests on the phrase "future consumers" and that is not enough. It ought to spell out the other considerations that the regulator must bear in mind when exercising his powers to protect consumers.
On Second Reading I referred to recent changes in gas trading arrangements that have the effect of increasing the cost to new entrants to the transmission pipelines, because the regulator insisted on auctions to match gas production with the ability to transmit it. That regulation was implemented without assessing the impact on long-term supply. Doubt is immediately cast in people's minds as to whether they ought to invest. If gas supply begins to languish, that will not be in the interests of consumers because they would have to use higher-cost imported gas.
Another fear looming on the horizon, of which the regulator should be bound to take account, is Ofgem's ambition to change gas and electricity trading and balancing regimes. It may make sense on paper to have a similar system for recognising that the load varies at different times of the day and week and--unlike the half-hourly electricity pool--finding ways of balancing supply and demand, but to move to a shorter balancing day for gas would significantly increase costs to the entire offshore industry--particularly the more mature fields, which depend on a regular offtake to operate efficiently. The result
could be premature decommissioning of fields no longer regarded as viable, accelerating the need to import gas. Ofgem's apparent ambition to merge the two could quickly operate to the disadvantage of consumers, as auctions have done.We all want a secure, efficient, competitive and diverse energy market, but while some of those objectives are written into the Bill others are not. How can we expect GEMA to take account of the wider objectives if there are no references to them in the Bill? My amendment would ensure that the authority will have regard to the need to secure a diverse and viable long-term energy supply. The noble Lord, Lord McIntosh, owes the Committee a better explanation of how the hierarchy is supposed to work and why some objectives have been omitted. I beg to move.
Lord Hardy of Wath: I offer a word or two of support for the noble Lord's amendment. In the 1970s and early 1980s, working out the UK's energy requirements was almost a parlour game. The only certain thing was that no one produced an accurate detailed forecast. I do not suggest that detailed forecasts of energy requirements in 20 years should be attempted now. The Magnox stations will be phased out shortly and relatively soon we shall have one nuclear power station at Sizewell and be increasingly dependent on imported gas. The oil situation is such that no one today contemplates establishing oil-fired power stations to replace anything we have or to meet future needs.
Although I have argued strongly for the retention of the coal industry in Britain, I have emphasised the need for improvements in the technology so as to enable coal to be burned cleanly. Given the enormous volume of coal that will continue to be burned in India, China and elsewhere, clean burning is clearly an international need. The last government were at fault for not giving adequate priority to research and development in that technology.
I was shocked the other day by a reference to a proposed substantial investment in wind power on the Yorkshire coast. That may be desirable--although as an environmentalist, I am not happy about the bird mortality that would inevitably result. The estimated annual output of that wind farm would be equivalent to six days of operation at a Drax power station. Opposition Members will recall that Drax power stations are flue gas desulphurised. While we may insist on a contribution from renewables, they may not provide more than the target the Government have rightly set. Not only must that target be met but also the fuel and power needs of our country. For that reason, I trust that the noble Lord accepts my support and that if I make a reference to the need for coal consumption and a mining industry in Britain, it is on the basis that they are environmentally clean.
7 p.m.
Lord Ezra: I, too, should like to support the amendment moved by the noble Lord, Lord Jenkin, and Amendment No. 52. I do so very much for the reasons so eloquently outlined by the noble Lord,
Lord Hardy. This brings us back again to the issue of the Bill being seen in the longer-term context; in other words, that decisions which simply have a short-term impact should not be taken by the authority. The securing of a diverse and viable long-term energy supply is a crucial long-term consideration. Therefore, I support the proposal that this should be included in the Bill.As it has been grouped with these two amendments, I should like to speak to Amendment No. 46, which is tabled in my name and that of my noble friend Lady Sharp. It proposes to insert the words,
- "and to safeguard the security of electricity supplies",
The proposal here is that that responsibility should lie with the Government and the authority. If that is not so, perhaps we may hear from the Minister who does have that responsibility. When dealing with utilities and one as fundamental as electricity, I believe that this point should be made.
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