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Lord Davies of Oldham: The noble Lord is in no danger at all of spoiling my speech; he might well have spoiled my evening, but that is a different matter altogether. When he makes his representation, we shall examine it with the greatest care, and I hope that we shall be able to reply to him effectively. In any case, I would not be too sanguine about the possibility of the issue not arising again on later stages of the Bill. I am sure that we shall return to it.

Baroness Carnegy of Lour: When the Minister gets my noble friend's letter, will he bear in mind that to make a change that creates a level playing field is one thing, but to then allow a change to be made to create a newly uneven playing field is another? They do not necessarily cancel each other out. My noble friend will doubtless write more clearly about that, but perhaps he will refer to what I have said. He will find that there is some nonsense going on.

Lord Davies of Oldham: I hear what the noble Baroness says. She is talking to a former sportsman, and I have never liked the analogy of the level playing field. It does not matter whether most playing fields on which sports are played are level, because everyone changes round at half time. I merely indicate that Scottish generators have an equal score with their competitors in England and Wales. I hear that the noble Lord is challenging the figures that I cited to him and which I predict that we shall examine later. At present, so far as the Government are concerned, the score is level, so it is not for the Government to worry about the playing field.

Lord Tombs: I thank the Minister for giving way yet again. The interruptions to his flow do not show; nevertheless, I apologise. I want to make two points. One is rather specific and relates to his reply on the transmission costs. I keep saying that the geography is different, and that in Scotland a much sparser and simpler transmission system has developed. In many ways it is simpler because the Scottish boards historically did things differently from those in England and Wales. There is a physical case for different charges in Scotland. Quite apart from that is the question, if we do not have transition, of the impact on the trading arrangements. It would be extremely difficult and, I think, unacceptable to the Scottish boards.

On a much broader point, when I was responsible for the Scottish system some years ago, I was very conscious as an Englishman of London as a centre for decisions, which tended to throw Scotland to one side. I was a member of a so-called nuclear power advisory board, which consisted of five people and met regularly in London. When I asked if we could have one meeting in five in Scotland, I got the reply, "But Scotland is so far away". I pointed out as solemnly as I could that the distance from Glasgow to London was the same as that from London to Glasgow, but that did not have any effect and we still met in London.

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It is a fact that National Grid Transco, the DTI and Ofgem are all located in London. Glasgow seems a long way away, and we are talking about something smaller than the main system. The Minister must be very much aware of that and guard against it, because it will provoke unfairness, rapid decisions made local to other pressure points, and a sense of unfairness that may find its way through political channels and other routes.

Baroness Carnegy of Lour: We cannot change sides to either side of the border at half time.

Lord Davies of Oldham: One cannot so far as the border is concerned, but one can with regard to the playing field on which one is operating. The proposal is that BETTA will operate on the basis that there is no discrimination between the generators. I understand the arguments made on the transitional position; I merely indicate that we do not think that the case has been made out, in terms of unfairness and so on.

The implications of the amendments are clear enough: they would discriminate against generators in England and Wales, which would have to pay increased charges as a result of the transitional relief granted to Scottish generators. That is a straightforward distortion of competition. I understand the motive behind it, but let us not make any bones about the fact that we seek to create a fair, open and transparent market. The amendments would certainly distort that. On that fairly important point of principle, I hope that the amendment might be withdrawn.

Given the protracted nature of my reply—not all of it of my own wont, as the Committee will recognise—I hope that I have responded to most of the points and that the noble Baroness will withdraw her amendment.

Baroness Miller of Hendon: I thank all Members of the Committee who have contributed in various ways to the whole group of amendments. I started off by apologising to the Minister, as it seemed a disparate group, although Scotland was the binding element of the amendments. Other than that, some of the issues were quite different.

I also thank the Minister for giving way on so many occasions and dealing with the group so charmingly, if I may say so. Once again, he has drawn the short straw. He did so during another sitting, and it was most unfortunate for him. I tried to help this time by tabling the amendments in the order that I did, only to discover that he thought that he would deal with them from the easiest to the most difficult. He found that the one with which he started was perhaps the most difficult of all. I feel for him; he had an excellent stab at a hard point.

I hope that the Minister will take Amendment No. 117B away and that his officials will try to find some different words; it does not look as though we are turning the world upside down. The Minister did not answer the second part of what I said on Amendment No. 118A. I asked whether, if any scheme made

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changes retrospectively, he could assure us that no one would be required by this legislation to find sums of money relating to past performance. On Amendment No. 118, he said that the discretion was very narrow within the licence. However, we are still concerned about it, and the Minister could come back with a different form of wording to make it clear that the amount of discretion was very tightly controlled. That might meet our difficulties.

With regard to the main body of amendments—Amendment No. 117A and the consequential amendments—we must agree to disagree. We were trying to search out from the Government what they felt about the issue. We are talking about complicated measures. We did not intend to make an uneven playing field, although there was a suggestion of that. We were trying to provide for phasing in during the transitional period, as has been done previously. The example that I gave of when it had been done before was not a precedent, so our proposal is not something against anyone's policy. We suggest a gentle phasing in to make the beginning somewhat easier. On that note, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[The Sitting was suspended for a Division in the House from 5.24 to 5.35 p.m.]

[Amendments Nos. 117B to 118C not moved.]

Schedule 17 agreed to.

Clause 111 [Grant of transmission licences]:

Lord Gray of Contin moved Amendment No. 118D:

    Page 89, line 40, leave out subsection (5).

The noble Lord said: After the excitement of the previous group, we return to our more wearisome progress through the Bill. This is a small amendment to leave out subsection (5); grouped with it is Amendment No. 118E, which would leave out lines 42 and 43. On Amendment No. 118D, I was encouraged by one remark of the Minister about how the Government hope to proceed by agreement. If that is a sign of how we shall proceed for the remainder of the Bill, we will all heave a sigh of relief.

This is a probing amendment designed to elicit the Government's motivation: why is the restriction considered necessary? Is there not a grave danger that if the Secretary of State may exercise the power only on a single occasion for a single licence there may be unfair advantage for a single company or person? Such advantage could turn out to be seriously unfair. The Minister has been good at giving examples to illustrate what the Government will do under the Bill. Perhaps he could now give us an example of the nature of the argument that could result in his directing GEMA to grant a transmission licence. It is undoubtedly implied in the wording of the Bill that if he did not so direct, GEMA itself would not necessarily grant the licence.

Amendment No. 118E is also probing. Is the Bill's wording constructed to mean that the Secretary of State may direct GEMA to refuse an application and then direct it to accept another one? Or is the intention to stop the Secretary of State from directing acceptance and then changing his mind and instructing

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that the application be refused after all? Or is the intention to restrict the Secretary of State to a single overruling of GEMA, whether that be to accept or reject a specific application?

Can the Minister give us another example of a set of circumstances in which he would want or need to issue an instruction to aid implementation of the new trading and transmission arrangements? On whose advice would he overrule GEMA? I beg to move.

Lord Triesman: I thank the noble Lord, Lord Gray. I promise him that I shall not add to the excitement following the previous group. I am not sure whether the amendment and this part of the Bill are simply complex or so significantly obscure that excitement is almost impossible. In trying to deal with the nature of the argument, as he put it, I shall try to set out the purpose of the clause, to enable everyone to understand what it is intended to achieve. It may well be that, not so much examples, but what is already happening, will illustrate the points that have been so appropriately raised with us.

The purpose of the clause is to enable the Secretary of State to appoint the GB system operator by requiring the Gas and Electricity Markets Authority (GEMA) to award a licence or to refuse any one application. Perhaps I should add in parentheses that, at present, under the Utilities Act, Ofgem has that power and it will be transferred to GEMA; it is not a power of the Secretary of State. Under Amendment No. 114, it might have been thought that the Secretary of State still had that power, but I want to be clear that it is GEMA that holds it.

That power will need to be exercised only if a GB system operator is not one of the existing transmission licensees. That is because in such a case, the licence will be modified to switch on the conditions applicable to the system operator. That will be done through the licensing scheme. If that power is commenced, it should not be capable of being exercised more than once, as the intention is that there should be only one system operator for Great Britain.

However, the power is unlikely to be used—this is where my explanation may be more useful than the provision of examples. In August 2002, invitations were sent out for applications from parties interested in being the system operator for Great Britain, and the process closed in September 2002. One application was received from the National Grid Company plc. Rather than giving examples, let me state that that is the company that made the application.

Amendment No. 118E would remove from the Bill a subsection the purpose of which is to enable the Secretary of State to appoint a GB system operator. In doing that, it is important to ensure that the authority—Ofgem/GEMA—turns down all but the chosen application. We cannot conceive of the Secretary of State overruling GEMA. The Secretary of State is making the transmission licence award because it is considered that such an important appointment should be considered and made by the Government direct; in no other circumstances would it be contemplated that that should happen.

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It is therefore necessary to include the power in the subsections to ensure that the authority refuses all but the successful application to achieve that single application status. However, that power needs to be available only prior to the appointment by the Secretary of State of a system operator for Great Britain. Once the system operator is appointed, there is no need to refuse anyone else.

It may be asked why the power is necessary when I have already said that NGC, an existing transmission licensee, is to be the only Great Britain system operator. The Bill cannot at this stage constrain the Secretary of State's choice as to who is the appropriate candidate. The Secretary of State has issued a statement saying that she is minded to appoint NGC as the single GB system operator under BETTA. However, it is not possible to make that designation until the legislation is in force; we are at a step before that.

The amendment would allow the Secretary of State at any time to request that the authority turn down an application for a transmission licence. I hope that I have demonstrated that that would be neither necessary nor appropriate for BETTA in the circumstances. I understand the exploratory nature of the amendment, which was intended to elicit that information, and hope that the noble Lord will feel able to withdraw it.

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