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Lord Ezra: My Lords, I support the noble Lord, Lord Jenkin, in his amendment. I, too, am extremely puzzled why the Government have persistently, in earlier stages of our consideration of this Bill, refused to insert the words of the amendment even though the Minister has stated repeatedly that it is an objective of government.

So far the Government have not introduced any legislation setting out their energy policy. This is the nearest we have got to it. Therefore such an important statement of intent should be included. The regulator must surely bear in mind that this is a major intention of government in regard to energy policy. There are a number of likely changes in energy development in the years ahead. For example, we in Britain will see the phasing out of nuclear power. It started with the Magnox stations and it will go on to the AGRs. In due course the PWR reactors will be phased out. The question will then arise as to how this capacity is to be replaced.

There is also the issue of gas supply. At present we are well supplied from the North Sea, but that is a limited resource. In due course we shall have to depend on supplies from more distant places which are not entirely reliable. There is the role that coal may have to play, assuming that we can progress the use of clean coal technology. These are all issues which bear directly on the future regulation of the gas and electricity industries. Therefore, it is very difficult to see why the Government persist, on what appear to be purely technical grounds, in leaving this important

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element of their energy policy out of account on the face of the Bill. I strongly support what the noble Lord, Lord Jenkin of Roding, said.

3.30 p.m.

Baroness Byford: My Lords, I apologise for being a minute or two late arriving in the Chamber. I support both my noble friend and the noble Lord, Lord Ezra. It is perplexing that the Government say that they have a commitment to make sure that we have a diverse supply of energy but cannot accept this amendment. It seems very contrary. I cannot understand why the Government are taking that tack. Perhaps the Minister will tell us.

I hope that I am not out of order. I thank the Minister for responding to my Amendment No. 54 tabled at Report stage. However, I did not receive the reply until this morning, which was too late for me to do anything with it. I have contacted the other people concerned with the amendment. They appreciate the Minister's reply and accept what he says. In principle it is possible to have renewable resources, but I am told that commercially it is still unlikely to happen, as it would have been if my amendment had been accepted. Therefore, I hope that the Minister will be able to respond. I support both noble Lords.

Baroness Sharp of Guildford: My Lords, I also support this amendment. My name is attached to it. In the debates both in Committee and on Report we discussed at length the issue of whether security of supply was necessary. The Minister conceded that the market will not always provide. As the noble Lord, Lord Jenkin, mentioned, security of supply is a matter of government policy. If that is so, then, as the noble Lord, Lord Jenkin, said, this is an obvious place where the Government devolve that responsibility to the regulator. It is natural that the Government should do that.

The amendment takes up three other issues which were of concern to us during the debates. One of them is diversity of supply. We have spoken about the offshore gas and oil industry and later we shall be talking about renewables. The advantage of writing these provisions into the terms and objectives of the regulator is that it would write the diversity of renewables into the heart of the regulator's objectives.

We also talked at some length about clean coal technology. Coal is a fossil fuel where the United Kingdom is best endowed. It is vitally important that we do not lose the technology completely. As my noble friend Lord Ezra made clear at both Committee and Report stages, we were at the leading edge of the technology, but we have allowed it to lag and for other countries to take over. If we write such a provision into the heart of the objectives of the regulator, it would provide at least a little chink through which we could get something more done.

Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Jenkin, began by saying that he made no apology for raising again at Third Reading a matter dealt with both at Committee and Report stages and,

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indeed, at Second Reading. I do not know whether that means that I should make an apology for the fact that I have very little new to say on a matter which has been debated on several occasions in very similar terms with very similar arguments to those put before. Some people would say that it is an abuse of Third Reading to deal with the matter in this way. I do not express any view on that, but if the House finds it helpful I shall be happy to repeat what I have already said.

The essence of our position is that where the Bill involves issues of security of supply, the current provisions in the Bill are already sufficient and the amendments add nothing. The authority and the Secretary of State are already given a principal objective to protect the interests of consumers. Clauses 9 and 13 of the Bill make clear that that includes future as well as existing consumers. The noble Lord, Lord Jenkin, does not seem to believe that that is important. Everyone else to whom I have spoken seems to believe that it is enormously important. If we were concerned only with existing consumers, it could be argued that short-term considerations were paramount. However, the needs of future generations of energy consumers are clearly set out in the objectives of the Bill. To me that is a very fundamental sign of dedication to security of supply in the longer term.

Of course, consumers have a fundamental interest in securing that reasonable demands for gas and electricity are met. That is what the clauses are intended to achieve. But it is the Government's responsibility--and I stress that--and not just that of the regulator for ensuring supply, which involves the exercise of a whole range of policy instruments, most of which raise issues or concern matters which fall far outside the scope of utilities regulation. I indicated by a nod of the head to the noble Lord, Lord Jenkin, when he asked whether I meant legislation or regulation, that I meant utilities regulation. That is what this Bill is about: it is a utilities regulation Bill. As I said, to the extent to which the Bill can play a part in ensuring security of supply the provisions of Clauses 9 and 13 already achieve that.

The noble Lord, Lord Ezra, and the noble Baroness, Lady Sharp, believe that if one has an energy policy one needs legislation to set it out. It does not follow from having a government policy that one has to have legislation to enforce it. Anyone who has been in government will recognise that one does not introduce legislation unless one has to. Legislation is not introduced giving government powers if they already exist or if they can, by their own free will, so to speak, adopt, for example, the climate change levy objectives. One does not need legislation for that as such but only to implement certain parts of it. Where legislation is required, it has been, and is being, introduced.

Perhaps I may illustrate the range of policy issues which contribute to the maintenance of security of supply. Quite apart from the issues raised by the Bill, they include the management of the UK Continental Shelf and such matters as securing stability and access to overseas sources of energy. All issues which are

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relevant to the offshore energy industry not covered by this legislation need not necessarily be covered exclusively by legislation anywhere. The Government can have effective policies on those issues. Many of them are far outside the scope of the utilities regulation. To the extent that this legislation for utilities regulation is appropriate, the Bill makes appropriate provision.

But the Bill is not the whole picture. The Government are working to ensure security of supply. On a day-to-day basis the markets will ensure that energy supplies are maintained. Diversity of approach and the ability to change quickly, which are provided by competitive markets, ensure the sort of responsive system needed to underpin security and diversity. The Government will use their ability to set the framework in which the energy markets will achieve this.

The Bill makes provision for the new electricity trading arrangements. 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 for 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 for customers to manage their demand to the benefit of energy security.

The existing framework of legislation 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 that apply to gas suppliers and transporters which 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 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. These require electricity supplies to be constant, except in certain circumstances.

It is obvious that we are continuing to keep the strategic issues that relate to diversity and security of supply under 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. This will not only help to promote free trade and energy but should also assist in improving the security of supply across Europe.

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The hierarchy of duties in the Bill already contains all the duties that are relevant for the purposes of this legislation and which are necessary for the security of supply. As I said in Committee, it follows that amendments such as these are a distraction and would serve to confuse rather than enhance the framework of obligations and duties under the legislation.

I must apologise to the noble Baroness, Lady Byford, for not having referred earlier to her point about access by renewables generators to the network under NETA, which was the focus of her previous Amendment No. 54 on Report. As I said in my letter to her, we are seeking to resolve this point in the context of the balancing and settlement codes rather than on the face of the Bill. Amendments to the Bill would not make matters any better. They would not make anything worse; but they would not make things any better. This is another example of not seeking to do everything by means of primary legislation.

I believe that it is a well-established fact--in this House at any rate--that the volume of legislation is increasing and ought to be diminished. I suggest that noble Lords should not seek to make legislation the only source of expression for government policy.

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