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5.39 p.m.

Lord McIntosh of Haringey moved Amendments Nos. 33 and 34:

    Page 131, line 3, leave out ("inserted") and insert ("substituted").

On Question, amendments agreed to.

Clause 57 [Information with respect to levels of performance]:

Lord McIntosh of Haringey moved Amendment No. 35:

    Page 57, line 22, leave out subsection (6) and insert--

("(6) Subsection (3) shall cease to have effect.").

The noble Lord said: My Lords, in moving Amendment No. 35, I shall speak also to Amendments Nos. 80, 96, 100, 126 and 129. Companies are under a duty to provide the authority with information concerning the standards of performance they have attained in their dealings with customers. At present (and ever since standards of performance were introduced) failure to comply with this duty is a criminal offence, triable in the magistrates' courts, carrying a maximum fine of level 5 on the standard scale (currently £5,000).

These amendments taken together decriminalise the failure to provide information, making it instead a "relevant requirement". Failure to comply with a "relevant requirement" can lead to action by the authority, through enforcement orders up to financial penalties. I say this to the noble Lord, Lord Renton, who raised a question about how the information on standards of performance could be enforced. I did not go into detail because I did not want to anticipate the fact that we are now making it a civil rather than a criminal offence.

Specifically, Amendments Nos. 35 and 80 decriminalise failures to provide information. Amendments Nos. 96 and 100 make the duty into relevant requirements, and Amendments Nos. 126 and 129 are technical consequential amendments to the schedule of repeals.

The reason for this change is consistency, on two counts. First, all the other duties relating to standards of performance are relevant requirements and, secondly, almost all the other duties requiring the provision of information to the authority are also relevant requirements. The one exception is failure to provide information which the authority has requested when investigating possible breaches of relevant requirements. Clearly, if that failure were subject to the same enforcement provision, we should get into endless loops.

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There is no ulterior purpose behind the amendments. It is simply neater if all the standards of performance provisions are treated consistently. I commend the amendments to the House. I beg to move.

Lord Renton: My Lords, for the reasons that the noble Lord has given, I am glad that he is doing this. I hope that my noble friend on the Front Bench will agree to support his amendment on this occasion.

On Question, amendment agreed to.

Clause 59 [Financial penalties]:

Baroness Buscombe moved Amendment No. 36:

    Page 58, line 10, at end insert--

("( ) The Authority shall not impose a penalty on a licence holder under subsection (1) where it is satisfied that the most appropriate way of proceeding is under the Competition Act 1998.").

The noble Baroness said: My Lords, this amendment relates to the possibility of double jeopardy arising from the combination of the authority's competition and regulatory functions. The point was raised at Second Reading by my noble friend Lord Kingsland.

The authority has a dual role in its sector, as regulator and as the competition authority. Its competition powers are exercised concurrently with those of the Director General of Fair Trading. If the new United Kingdom competition regime is to develop in a fair, consistent and coherent manner and undertakings are to receive the benefit of the safeguards provided by the Competition Act, competition matters must be dealt with by means of competition powers across industry as a whole, including the regulated sectors.

During the passage of the Competition Bill, provisions were added by the Government which amended the Electricity Act 1989 and the other sectoral statutes to ensure that double jeopardy did not arise where the exercise of competition powers was more appropriate. This amendment makes similar provision to Section 25 of the Electricity Act 1989, as amended by the Competition Act 1998. It would prevent the authority from imposing a penalty where the contravention is one which the authority is satisfied should be dealt with under the Competition Act. I beg to move.

Lord McIntosh of Haringey: My Lords, the amendment is based on the fact that the provisions on licence enforcement orders in the Gas and Electricity Acts contain a restriction that the regulator shall not make an order if it is satisfied that the most appropriate way of proceeding is under the Competition Act. This provides a substantial measure of protection against what has been described as double jeopardy. But there is no equivalent restriction in relation to the penalties provisions in Clauses 59 and 95 of the Bill.

The position in relation to financial penalties is not exactly the same as that on enforcement orders. The regulator has a duty to make licence enforcement

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orders. The limitation that is now in Section 25 of the Electricity Act was, therefore, essential if overlapping enforcement was to be avoided. However, the power to impose penalties is only a discretion and the regulator therefore has the ability to avoid any overlap.

Nevertheless, the Government naturally wish to achieve as much consistency as is practical between provisions which the Bill inserts into the Gas and Electricity Acts and provisions that are already there; and they wish to achieve as much clarity as it practical on the interaction between licence enforcement provisions and Competition Act enforcement provisions.

The noble Baroness has raised an issue that merits attention and I am grateful to her. I have considered the drafting of Amendment No. 36 and I am pleased to accept it. We shall bring forward an equivalent amendment for gas at Third Reading.

Baroness Buscombe: My Lords, I thank the Minister for his support for the amendment.

On Question, amendment agreed to.

5.45 p.m.

Baroness Buscombe moved Amendment No. 37:

    Page 58, line 10, at end insert--

("( ) the Authority shall not impose a penalty under subsection (1) where the licence holder shows that--
(a) he used his best endeavours to avoid the contravention or failure in question; or
(b) the contravention or failure was due to circumstances beyond his control.").

The noble Baroness said: My Lords, penalties may be imposed on licence holders on the basis of strict liability. Therefore, a company may be liable to a penalty even where it has taken all possible steps to avoid any breach of its licence. That means that a company may be penalised for matters entirely beyond its control: for example, power outages caused by storm damage. I always think of the example of the storms of 1987, which I thought were an "act of God". Indeed, when I was a law student we often referred to "acts of God", which do not seem to be discussed any more, not least by this Government.

A company may also be penalised where the allowed capital and operating expenditure inherent in the price control regime results in the ability of the company to implement the optimum replacement and maintenance regimes being curtailed, potentially leading to an increased likelihood of power failures and longer restoration times.

The Government's justification for this draconian approach seems to be that consumers are not concerned how a problem occurs but merely want someone punished for it. We feel that that approach is unfair and unjustified. When one looks, for example, at the rate of power system failures elsewhere in the developed world, it is evident that the utilities in this country have provided services to an extremely high standard when compared to those elsewhere. One has only to go on holiday to places such as France and

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Spain to be made aware of what amazing services we receive in this country and have received for some considerable time.

The amendment would provide a "best endeavours" defence against such penalties, ensuring that companies are not penalised for matters beyond their control as a consequence of the constraints placed on them. If the standards deteriorate, who is to blame? Is it the companies; or is it the body which now effectively controls the amount that can be spent on replacement and maintenance? If a company can demonstrate that it is spending in accordance with the allowances, is it to be penalised by the very body that determined those allowances? I beg to move.

Lord McIntosh of Haringey: My Lords, the amendment seeks to preclude the imposition of financial penalties in cases where the licence holder concerned uses his "best endeavours" to avoid a contravention or failure, or where the contravention or failure was due to circumstances beyond the control of the licence holder. It is similar to an amendment tabled by the noble Lord, Lord Kingsland, and the noble Baroness, Lady Buscombe, at Committee stage, but that sought to limit penalties to cases of recklessness and negligence.

We have resisted amendments of this kind throughout the passage of the Bill and we are going to do so again on behalf of consumers. There are valid precedents for the approach that the Government have adopted. The National Lottery Act 1998 and the Broadcasting Acts 1990 and 1996 provide for the relevant regulatory authority to impose financial penalties for contravention of licence conditions. They do not provide get-out clauses for companies which breach their licences without negligence or intent; they do not even provide an automatic get-out where circumstances are beyond their control or their best endeavours. There is a good reason for this. We see no reason why the Government should provide a weaker power in relation to vital public services such as gas and electricity. We hold to the view that the onus should be on the licence holder to maintain compliance, particularly when the consumers concerned cannot move to another service provider, as in the case of electricity transmission and distribution companies and gas transporters.

Let us look more closely at the matter. There may be circumstances, for example in relation to repeated failures to maintain security of supply, where the individual contravention cannot be traced directly to any fault of the licence holder on that occasion but the underlying picture is one of inadequate investment in the long term. Contraventions involving interruption of supply can cause considerable harm to the interests of consumers, both domestic and business. It is entirely right that the onus should be on the licence holder to comply and that the authority should have the opportunity to impose a reasonable financial penalty where the obligation is not fulfilled.

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Another point to stress is that, as I explained in response to similar amendments in Committee, these amendments entirely ignore the nature of the powers that we are providing. The authority will have a power, not a duty, to impose financial penalties; it will not be compelled to do so. Any penalty that it imposes must be reasonable in all the circumstances of the case. It is very unlikely that any penalty which did not take account of efforts by a licence holder to correct a contravention could be considered reasonable in all the circumstances of the case. Any such penalty would certainly be likely to be challenged in the courts. However, consumers deserve proper protection and the amendment does not help in that respect. I hope that the noble Baroness will withdraw her amendment.

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