Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Jenkin of Roding: The noble Lord said that he cannot conceive circumstances in which a transmission company might find itself in the difficulties envisaged in the clause. One must remember that this does apply only to transmission companies. However, the same might have been said about British Energy shortly before it had to come before the Secretary of State to say that there would be a number of unpaid bills. The Government had to step in with substantial sums of money with the threat of administration hanging over their head. I heard this morning, in a report to the all-party nuclear group, that British Energy is well on its way to hauling itself out of its difficulties and may be able to repay its Government loan. I regard that as good news.

On the whole, the British Energy situation was reasonably well handled. But one must recognise why it arose. As the noble Lord, Lord Sainsbury, told us in the debates on the Electricity Act last year, British Energy got into difficulties because it did not have a retail arm that could pay the losses on its generating arm, whereas most other generating companies had a retail arm, with the result—as we know well and the Select Committee in another place complained—that there was no reduction in retail electricity prices to reflect the 40 per cent reduction in wholesale electricity prices. Therefore, in one sense, Ofgem's

24 Feb 2004 : Column GC99

administration of NETA was a direct cause of the collapse of British Energy, which drove prices down to a level at which British Energy could no longer make a profit.

For most of today, we have been talking about the regulation of transmission companies and the issue of licences, changes, codes, and so on. I am sorry to speak for so long, but I come to my point. In the light of the experience that we saw with NETA, I do not believe that the regulators would not drive the transmission company into a position where it is unable to meet its obligations.

The Government have recognised that this is a very serious matter by introducing an entire chapter to this part of the Bill to give them the power to do so. I would regard it as quite strange if they said that it is purely hypothetical and will not happen. It happened at British Energy, with considerable embarrassment to the Government, who had to step in. That is all history—but I do not regard a recurrence as inconceivable.

I hope that the new administration at BETTA will recognise that there is no future in driving prices down—whether generating prices or transmission costs—to the point where companies cannot pay their bills. This is an important chapter. It is important to have appropriate safeguards. I have listened carefully to what the noble Lord, Lord Triesman, said. I hope that the Government will give some further thought to this so that they do not simply step in and take the actions envisaged under this chapter without there having been a proper opportunity for the directors of a company to explain their case and where they stand.

Lord Triesman: It is entirely right and fair that the noble Lord, Lord Jenkin, should refer our attention to British Energy. I understand that potentially such occasions could occur. I think that they would be relatively unusual occasions. A critical point in the noble Lord's submission was that here was an example where, with time and a great deal of discussion, the company has begun to develop ways in which it can successfully survive. I hope that the generality of cases would be ones in which time was available for all kinds of consultation and opportunities to seek expert advice, as a result of which the company could survive.

In general, the regulator will be required to assure the financial viability of the network companies and it would be something of a surprise to stumble on some of these events without knowing that they might occur. None the less, I accept that it could happen. I do not want to speculate about such circumstances overmuch. I concede that such a scenario is a possibility. However, it is hard to imagine that an emergency might frequently occur where the Secretary of State felt that he had no time at all to consult or to think about any options of the kinds mentioned by the noble Lord, Lord Jenkin.

I should like to pose the question in different terms. Could we guarantee that such a scenario would never in any circumstances occur? The answer is that probably none of us are satisfied that that could never happen. In circumstances where we are not satisfied

24 Feb 2004 : Column GC100

that it could never happen, there needs to be some reserve powers that give sufficient authority to ensure that the lights stay on.

6.45 p.m.

Lord Jenkin of Roding: I should like to draw the noble Lord's attention to a point that I made at Second Reading. Under the operations of NETA, the Ofgem regime of the time, Callum McCarthy thought that he was doing a marvellous job in getting prices down by 40 per cent. When it was pointed out to him that he was simply driving one generator after another into administration or bankruptcy, he said, "Well, that's the cost of getting prices down". I hope that Sir John Mogg and his colleagues at Ofgem will not take that high-handed view. When Callum McCarthy went off to run the Financial Services Authority, my comment in the House was, "God help the banks".

Lord Triesman: I should be very careful not to trespass into the reasons why British Energy or others faced difficulties, but I understand the point made by the noble Lord. I hope that noble Lords will forgive me for reiterating that if we ourselves cannot be satisfied that a really urgent circumstance could never occur, it is sensible to make provision for that very rare possibility.

Baroness Miller of Hendon: I thank my noble friend for his timely intervention and for pointing out the situation with regard to British Energy and NETA, which I think that most noble Lords accept are the real reasons why British Energy unfortunately got itself into so much trouble. We only hope that BETTA really is better in that respect. It is interesting that Part 3, Chapter 3, is such a large chapter dealing with the special administration regime for energy licensees, energy administration orders, and so forth. I do not imagine for one moment that it could be quite that rare, otherwise it would be unusual to have such a big portion of the Bill dealing with the matter. I think that that is there as insurance so that people know what to do.

I am sorry that the Minister does not see a need for my amendment. He was quite complimentary about how it was dealt with and spoken to. However, I shall read carefully what he said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 126 not moved.]

Clause 128 agreed to.

Clause 129 agreed to.

Clause 130 [Energy administrators]:

[Amendment No. 127 not moved.]

[Amendment No. 127A had been withdrawn from the Marshalled List.]

Clause 130 agreed to.

Clause 131 agreed to.

24 Feb 2004 : Column GC101

Schedule 20 [Conduct of energy administration]:

Lord Whitty moved Amendment No. 127B:

    Page 220, line 1, leave out sub-paragraph (2) and insert—

"(2) In sub-paragraph (6) of that paragraph, for paragraphs (a) to (c) substitute—
"(a) a voluntary arrangement approved under Part 1, or
(b) a compromise or arrangement sanctioned under section 425 of the Companies Act (compromise with creditors and members).""

The noble Lord said: In speaking to Amendment No. 127B, I shall speak also to Amendments Nos. 127C to 127G. The amendments correct minor drafting errors in Schedule 20, which provides for Schedule B1 to the Insolvency Act 1986, to which I referred earlier, to have effect in relation to energy administration, amended to allow for the circumstances of energy administration.

I assure Members of the Committee that none of the amendments makes any difference to the substance of the schedule. I therefore hope that Members of the Committee would be prepared to accept them. I beg to move.

Baroness Carnegy of Lour: The schedule seems most amazing. I would not have the slightest idea whether the amendments were an improvement; nor would any lawyer at present. Would it not be possible to republish the schedule, rather than referring to countless amendments? It is very difficult to understand, which seems bad drafting practice.

Lord Whitty: It is normal drafting practice, but no doubt the noble Baroness is nevertheless correct to say that it is pretty incomprehensible. It would obviously have been better had we reproduced the 1986 schedule as amended by our proposals in the original Explanatory Notes. I regret that we did not do so, but we can provide a version of what is now Schedule B1 before the next reprint of the Explanatory Notes, if that would be helpful, and copy it to the Committee. I shall need to check whether, if the amendments are accepted now, they can be incorporated, so that all the infelicities of drafting can be removed. That might be helpful. However, the individual amendments are minor and it would make more sense to make a complete schedule available before Report.

Baroness Carnegy of Lour: I am concerned not so much for the Members of the Grand Committee, this House or the other place, but the people who must operate the Bill when enacted. The amount that it will cost in legal fees for someone to sit looking up what all the changes amount to will be enormous over the years. There is a strong argument for reproducing the schedule in its final form in the Bill. That is what I was suggesting, but perhaps I am wrong about that.

Next Section Back to Table of Contents Lords Hansard Home Page