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Lord Fraser of Carmyllie: Perhaps I may briefly add my voice of support to the amendment moved by my noble friend. If he is right, I believe I share his perplexity. I cannot understand why what is contained within the amendment is not wholly acceptable to the Government; indeed, I thought that it contained much of what was intended to be achieved by the Bill. If my noble friend is correct in believing that the answer he will receive is that this securing of,
- "a diverse and viable long term energy supply",
If, as the Government have been keen to emphasise, there is to be a set of, if you like, "ringing declarations" in the Bill about what is to be achieved, it would seem to me to be infinitely more desirable to set out such provisions in this clear unequivocal way rather than relying on the somewhat obscure subjection (6), which gives us a definition of "consumers".
Baroness Sharp of Guildford: I should like to support the amendment of my noble friend Lord Ezra, and those of the noble Lord, Lord Jenkin. We spoke earlier about the concept of hierarchy. My noble friend has reminded me that there was indeed a time when the CEGB ran a hierarchy, or a merit order, which was established in order to ensure security of supply on the part of the electricity industry.
Having moved away from the managed market of the CEGB into this much more diverse market system, it is important to recognise that the market does not necessarily provide for security of supply. Should the electricity system fail in this county, we know very well that it would not be just a matter of the lights going out; it would also be a matter of all the computers going down. Great difficulties would arise in the event of that happening. Therefore, the buck has to stop somewhere. Someone has to take responsibility for ensuring that there is security of supply in this country. It would seem obvious that the authority should take that responsibility. However, if that is not so, I repeat the question put by the noble Lord, Lord Jenkin: whose responsibility is it?
Lord McIntosh of Haringey: This is the Utilities Bill; it is concerned with the economic regulation of gas and electricity. As I said before, it is not an energy Bill or an energy policy Bill. The responsibilities to which the noble Lord, Lord Jenkin, and others have referred are very real; but they are the responsibilities of government. To achieve those objectives, government must exercise a wide range of policy instruments, which can include securing properly functioning utilities markets. That is the purpose of the Bill. But it can also include the management of the United Kingdom Continental Shelf and securing stability and access to overseas sources of energy.
Most of the issues regarding a diverse and viable long-term energy supply fall far outside the scope of utilities legislation, as defined in the Bill. However, that is not to say that establishing appropriate economic regulation of the gas and electricity utilities is not an important element; indeed, that is the Bill's purpose. It imposes a principal objective: to protect the interests of consumers, wherever appropriate, by promoting competition; and a duty to secure that all reasonable demands for electricity and--as far as it is economical to do so--for gas, are met. To all intents, that is ensuring security of supply in the context of utilities legislation.
The amendments proposed are, therefore, a distraction and would serve to confuse rather than enhance the framework of obligations and duties under this legislation. This is simply not the place to make a law imposing such wide-ranging duties--duties that no government could conceivably neglect. Perhaps I may assure the Committee that the Government are indeed working to ensure security of supply.
On a day-to-day basis, the markets will ensure that energy supplies are maintained. The diversity of approach and the ability to change quickly that are provided by competitive markets ensure the sort of responsive system needed to underpin security and diversity. But, of course, the Government are acting to meet their responsibility to set the framework within which the energy markets can achieve that.
The Bill makes provision for the new electricity trading arrangements, which we shall discuss next week. These will increase the incentive on generators
and suppliers to ensure that adequate generation is available to meet demand. Generators and suppliers will face commercial penalties, which could be large, if they do not meet their contractual obligations. This will be an important further contribution to security of supply. The new electricity trading arrangements will also ensure that the appropriate price signals are given to bring forward new investment when this is needed, and that customers manage their demand to the benefit of energy security.The existing framework of regulation provides for tough service standards on transmission and distribution companies. These are monitored by Ofgem, the industry regulator, and include guaranteed standards whereby the distributor must pay the customer if the service levels laid down are not met. There are also licence conditions applying to gas suppliers and transporters that lay down quantified standards of security of supply in relation to meeting demand. These are enforced by Ofgem. The measures are backed up by wide-ranging emergency powers under the Energy Act 1976. These will permit the Secretary of State to make orders regulating or prohibiting the production, supply and acquisition of fuels to ensure security of supply.
The Electricity Act also includes powers to give directions on the level of stocks and the use of generating stations. Further measures are set out in the Electricity Supply Regulations 1988, which provide for the continuity and safety of electricity supply. Those require electricity supplies to be constant except in certain limited circumstances.
We shall continue to keep strategic issues relating to diversity and security of supply under careful review. Future energy policy will increasingly be conducted in the context of global and European markets. We have been working actively with the European Commission and other member states to help to build a single European market. That will not only help to promote free trade in energy but should assist in improving the security of supply across Europe.
I hope it is clear from what I have said that there is no derogation in any way by government from their obligation, which we fully recognise, to secure a diverse and long-term energy supply. It is simply that these amendments are in the wrong Bill. Those are issues of government policy and not the economic regulation of the utilities.
Baroness Sharp of Guildford: If those were obligations on Ofgem, how is it that they do not become obligations of GEMA?
Lord McIntosh of Haringey: In so far as they are obligations on Ofgem, they are obligations on GEMA. Nothing detracts from that. But the objectives of GEMA are set out very deliberately, as in all these cases, to ensure that it is not possible or necessary to play off one objective against another.
There is a direct analogy with the Bank of England Act 1998. There was pressure from all sides of the House to say that, in addition to the objective of price stability which was set for the Monetary Policy Committee of the Bank of England, there should be all sorts of other objectives--many proposed by Members on my own Back Benches--on exchange rates, employment and many other thoroughly worthy objectives. If a body like the Monetary Police Committee or GEMA is set a number of different objectives which are potentially in competition and conflict with each other, it does not know what to do. There must be a hierarchy and something at the top. The interests of consumers are at the top.
Lord Ezra: In dealing with the question of safeguarding the security of electricity supplies, was the Minister telling us that that is dealt with adequately in other legislation which is still in operation?
Lord McIntosh of Haringey: It does not all require legislation. Those are issues of government policy, some of which require legislation and some of which do not. I set out a whole list of legislation going back 25 years. Some of our obligations in securing a diverse and viable long-term energy supply are indeed in legislation. Some are not and do not need to be. Governments do not operate only through legislation.
Lord Jenkin of Roding: We are grateful to the noble Lord for his reply. He has obviously gone into the matter in some length. But what worries me about his reply is that I think he believes it.
Having heard the arguments on this and other amendments, I cannot for the life of me see why we cannot write into this Bill that GEMA should have regard to those other government obligations. I just do not understand why some of those are included and some are not and why there has to be a sort of hierarchy.
But the Minister has been kind and given the Committee a lengthy explanation of the amendments. I am sure that the noble Lord, Lord Ezra, and others will want to consult together to see how we can best reflect our objective of having those matters included on the face of the Bill without interfering with the Government's objective of having a Bill to regulate the gas and electricity industries. We shall want to return to the matter on Report, but, with that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
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