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The Duke of Montrose: Will the Minister clarify one point? He said that the present renewables trading arrangements would require a positive message from both Houses of Parliament, but Clause 106 states that if the Secretary of State considers it necessary or expedient to change something, he may do so. That wording appears similar to that of the amendment. Is the Secretary of State allowed to modify licence conditions in such a manner as he considers appropriate—as provided in subsection (5)—on his own say-so, or does that also require the positive procedure?

Lord Davies of Oldham: As I said, the amendment envisages significant changes to what we all recognise is a complex and sensitive mechanism. We are talking about a market which involves substantial interests and to which substantial resources are devoted. In our view, that will require both a proper basis for consideration and adequate parliamentary scrutiny. That is the case as the Bill stands. The amendment would detract from that.

I assure the noble Duke that changes to the renewables obligation require affirmative resolutions of both Houses. Other than by introducing new primary legislation, we cannot be more assertive about parliamentary scrutiny than that.

Baroness Carnegy of Lour: Can the Minister give other examples of market-sensitive matters involving a lot of money for commercial organisations which are decided by order laid before Parliament, albeit by affirmative resolution?

Lord Davies of Oldham: I have no comparable reference before me. But the noble Baronesses will recognise that because of the significance of this market—there was the one regrettable failure with regard to TXU (UK) Limited—it has all along been envisaged that changes that affect it and have such a dramatic impact on significant interests should require that level of parliamentary scrutiny by affirmative order. That is what we envisage. I recognise the importance of flexibility; that is why, as I said, we made some positive responses to opposition amendments during our previous sitting. I am concerned that, in such a significant incident, we would need to protect proper parliamentary scrutiny. That is why I reject the amendment and defend the Bill's provisions.

Baroness Byford: Perhaps I may follow on from what my noble friend Lady Carnegy said. In Committee, we have been trying to clarify the use of words such as "substantial", "significant", "proper" and "appropriate", and at what time and level decisions are made. My noble friend makes a good point.

I accept that the matter falls under the affirmative rather than negative resolution procedure, which is a blessing, and that the amendment may not be the right

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one in the right place. I further accept what the Minister said about accepting some of our arguments during the previous sitting, for which we are grateful. However, I take my noble friend's point. I have raised the issue during the passage of many Bills.

The Minister partially answered my noble friend's question but many of us would much rather things were written into a Bill than into an order. Even if an order is introduced under the affirmative procedure, all we can do is talk about it; ultimately, the Government of the day get their way. So it is a flag-flying exercise. If, however, the provision is in the Bill, it must be adhered to. Perhaps the Minister will enlarge a little in response to both of our queries.

4 p.m.

Lord Davies of Oldham: I am grateful for the noble Baroness's contribution but I emphasise that the present arrangements in an area that we all recognise to be of great importance and sensitivity enable us to address a substantial difficulty within a matter of months. We all recognise that the failure last year with the default of TXU on 1 October was a substantial difficulty affecting the market. Under the present arrangements, we will have completed all the necessary changes by 1 April, a time of only six months.

As to the issue of licence conditions raised by the amendment, we do not envisage being able to effect change vastly quicker than that. Under the amendment proposed by the noble Baroness, Lady Miller, sensitivity with regard to the market would still be a major inhibiting factor on prompt action. Evaluation of the impact would still be necessary. It might appear that all that is necessary is a limited technical change, but we would need to work through all the implications for the market.

I understand the basis of the noble Baroness's argument to increase the element of flexibility. That is to be desired if we can effect it. We are meeting the representations made under previous amendments but we do not think that this amendment will advance that objective.

Baroness Miller of Hendon: I thank all Members of the Committee who have spoken in this short debate and the Minister for his remarks. It may well be that the amendment is not correct; I would not suggest for one moment that any amendment that we table will provide a 100 per cent solution. The problem is that no one seems to have a solution.

The Minister was helpful before by saying that he would take the amendments away, but I do not know with what he will return. I well remember that when we debated an amendment I suggested that securitisation was the way but that mutualisation was a possibility because others wanted it that way. The fact is that there is a black hole that we must in some way seek to fill. I am happy that the Government are taking away the other amendments to consider. I shall read carefully what the Minister said. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Clause 107 [Alteration of transmission activities requiring licence]:

Baroness Miller of Hendon moved Amendment No. 116B:

    Page 87, line 30, after "place" insert "(the function of doing so being the "system operator function" for the purposes of this Act)"

The noble Baroness said: I shall speak also to Amendments Nos. 116C, 116D and 116E. Inasmuch as we have no Divisions, every amendment before the Committee is, in essence, a probing amendment. This group of amendments is even more probing, if I can describe it in that way. This is a probing probing amendment.

Let me first put on record that the amendments were tabled in consequence of representations made to me and my colleagues by Scottish Power. They can be explained in few words. Amendments Nos. 116B and 116C are paving amendments for Amendment No. 116D. The two amendments simply seek to insert the technical words, "system operator function" and "system provider function" into paragraphs (3)(a) and (b) respectively. They are intended to define the difference between the transmission owner and the systems operator.

As I have said, the purpose of the two definitions is to pave the way for the main amendment, to Clause 108. In essence, it would prohibit the same body from being both the system provider and the system operator. The logic of the amendment is to ensure that not too much commercial power and control over the separate components of the combined generating and distribution systems fall into one set of hands. It is argued that there should be sufficient legal separation of the functions of system operator and transmission operator to ensure that the system operator cannot discriminate against other transmission owners in favour of their own transmission business.

Having put that as succinctly as I can, I must tell your Lordships that I have also had representations from Transco vigorously putting the opposite point of view, speaking strongly against the amendment and the concept of the strict separation of functions.

Perhaps I may summarise the argument against my Amendment No. 116B as fairly as I can. It is that the question of separation of transmission owner and system operator was extensively considered during the consultation process over the British Electricity Trading and Transmission Arrangements (BETTA). This consultation process was conducted over a period of two years, first by Ofgem and the DTI and then by the Trade and Industry Select Committee in the course of its pre-legislative scrutiny. I said at the outset of my remarks that the amendment I have tabled is supported by Scottish Power.

However, I am informed that while the separation of transmission owner and system operator functions is acceptable in Scotland, entirely different considerations apply to England and Wales. I understand that during the consultation and scrutiny, the separation of transmission owner and system operation functions was rejected. This is because in

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England and Wales, transmission and system operation are wholly separated from generation and supply. Transco has strongly represented to me, and no doubt to the Government too, that separation in England and Wales would result in a substantial loss of efficiency and increased cost to consumers. I have to admit that this is far too technical a matter for me to be able to judge the relative merits one against the other. Clearly, they have been examined at great length by experts. That is why at the beginning of my remarks I described this as a probing amendment—even a probing amendment to a probing amendment—and we look forward to hearing the Government's views on the subject.

For lay people such as us, this is a technical Bill. We have experts in the Room—the noble Lords, Lord Tombs, Lord Ezra and Lord Jenkin—and we on this side and the Ministers try to do our best to explore all the different issues. However, because security of supply and so forth are so important and necessary, it is right that when we are being lobbied by two different views and are unsure we should put them fairly and ask the Government to give us what they consider to be the answer. Obviously, when it comes to the Report stage, noble Lords will make up their minds when they have heard all the arguments. I beg to move.

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