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Lord Jenkin of Roding: I am sorry to interrupt, but I want to make sure that I understand the noble Lord. While that applies to the standard conditions and licences, would it apply where there is a modification of an individual licence that has been granted to a particular person? Do the earlier clauses apply to them? That is what distinguishes this case from the others.

Lord Triesman: Section 49A applies to the following decisions of the Secretary of State: the revocation of a licence, modifications of the conditions of a licence, the giving of any direction or consent in pursuance of a condition included in a licence by virtue of other sections of the Act, the determination of a question referred in pursuance of a condition included in a licence by virtue of the section, a determination of a dispute referred to under the various sections of the Act, the making of final orders, the making or confirmation of provisional orders and the revocation of a final or provisional order which has been confirmed. In short, it is comprehensive. I hope that I made it clear in my answer that it is the conditions of the other clauses that require the Secretary of State to publish reasons as soon as reasonably practicable after modifying the conditions of a licence in all those circumstances. I sought merely to add the thought that it also includes modifying the standard conditions themselves. It is genuinely comprehensive. I hope that that answers the question put by the noble Lord.

The notice would need to be published in a way considered appropriate by the Secretary of State for the purpose of bringing the matter to the attention of persons likely to be interested. Ofgem must also send a copy of the notice to the licence holders to whom the modification relates. Ofgem is subject to the same requirements if it makes a modification to the licence conditions. It cannot escape from the set of criteria that I have just outlined.

I hope that noble Lords will forgive me for elaborating at length, but I thought that a comprehensive response was the only appropriate way to deal with the serious question put to me by the noble

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Lord. I hope, too, that the noble Lord will feel that I have addressed the principal concerns expressed in the two amendments.

Lord Jenkin of Roding: I am extremely grateful to the noble Lord for his very comprehensive reply. I turn first to the second amendment. He has answered in full the point that I sought to make. The only point I want to add is that I am full of admiration for the speed with which the piece of paper was put into his hand. He is well served by his officials. If there are now blushes behind the Minister, then so be it.

On the first issue, the only point I wish to make is that I hope it will not necessarily be taken as a point against an amendment that it has not been suggested by one of the outside interests. This Committee is a place in which Members can apply their own judgment to the legislation before them. Many points have been proposed for amendments that were not suggested by outside interests. I hope that that is not regarded as an argument against an amendment. Perhaps the outside interests have greater faith in the competence of Ministers to regard modifications as appropriate because they will only be the ones that they will not mind. I am not sure that they would be wise entirely to accept that view.

However, the Minister said that there are plenty of precedents for the use of the word "appropriate" and that he does not like the word "necessary". I shall read carefully his words, but in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 129 and 130 not moved.]

Clause 140 agreed to.

Clause 141 agreed to.

Baroness Miller of Hendon moved Amendment No. 130A:


    After Clause 141, insert the following new clause—


"EXERCISE OF REGULATORY FUNCTIONS
Where an energy administrator has been appointed in relation to a protected energy company in accordance with the provisions of this Chapter, the Secretary of State and GEMA, in carrying out their respective functions under Part 1 of the Gas Act 1986 (c. 44) (gas supply) and Part 1 of the Electricity Act 1989 (c. 29) (electricity supply), must have regard to the need to ensure that the energy administrator is able to fulfil his obligations in relation to the business of the company."

The noble Baroness said: In the case of an ordinary commercial company regulated by the Companies Act, the duties of a receiver or manager are primarily to the secured creditor who has appointed him. It is a duty to recover the debt owing to that creditor, even though that may not suit the wishes or even the best interests of the other creditors or shareholders.

However, when the Secretary of State appoints an energy administrator, she is doing so in the interests of ensuring continuity of supply and of protecting customers. The aim of the amendment is to require Ofgem, the gas and electricity regulator, to take account of the functions and duties of an energy administrator appointed in relation to a protected company.

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The purpose of the amendment is to ensure that there can be no risk that the work and objectives of an energy administration regime could be frustrated by a conflict with an inappropriate regulatory action.

It is a matter of concern that the regulatory actions of Ofgem during the period of an energy administration will set the framework within which the energy administrator can perform his functions, but may also impact on his freedom of movement in the exercise of his discretion. There is, therefore, the potential for Ofgem, in exercising its statutory functions, to clash with the energy administrator in the exercise of his functions.

That is not just a hypothetical possibility. This amendment was inspired by a recent event. In the special administration of Railtrack, such a dispute did arise. Without going into unnecessary detail, that case arose in relation to the rail administrator's important power to determine track access charges. The case went as far as the Court of Appeal, with both parties being funded, in effect, by the taxpayer. The litigation revealed that the relevant legislation did not establish a clear predominance of powers between the administrator and the regulator.

The lesson has clearly not been learnt because the same defect is evident in the treatment of energy administration set out in the present Bill. The issue is a particular problem in the case of energy supply. Although the regulator's duties and those of the administrator may overlap in some cases, they are not the same. In some cases, therefore, that could lead to each of them reaching a different conclusion.

Energy administration as provided for in the Bill is, in essence, a variation of the normal insolvency regime. As I said at the beginning of my remarks, energy administration must reflect the public interest in the operation of the network. But the regulator has no duty to recognise the functions of the administrator when he exercises his own powers. That is an undesirable situation which this amendment seeks to put right.

To avoid any unnecessary clashes and misunderstandings, and even the potential for them, as between the administrator and the regulator, the amendment places a duty on the regulator to have regard to the functions and duties of the administrator. Bearing in mind that the administrator will have been appointed at the behest of the regulator, this should not be an onerous burden, rather it should be one which the regulator should be willing to assume without having been told to do so. Indeed, it might be an unreasonable exercise of his powers if he fails to do so.

The amendment does not create, or even suggest, any ascendancy of the administrator over the regulator, or vice versa. On the contrary, the amendment will help to foster a relationship of mutual co-operation which is more conducive to meeting the purposes of an administration regime quickly, efficiently and in the public interest. I beg to move.

Lord Whitty: I understand the concerns that the interaction between the regulator and the energy

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administrator should be clear and that the administrator should not be unreasonably frustrated by the operation of the regulator. However, I draw a slightly different conclusion from the recent court case of Winsor v Bloom in relation to Railtrack.

The decision, and the moratorium on the enforcement of proprietary and legal rights against a company in special administration, also applicable in an energy administration, provide ample clarity as to how the two bodies should interact. The moratorium provisions prevent the instigation of legal proceedings against the company without either the consent of the energy administrator or, alternatively, the leave of the court. That provides the protected company with a "breathing space" in order for it to organise its financial affairs.

In Winsor v Bloom the court considered the moratorium and its effect on the enforcement of proprietary and legal rights. The decision in that case confirms that a company in energy administration will still be under a duty to comply with all its legal and regulatory requirements. Those duties would be unaffected by the energy administration order. Ofgem will still be able to carry out its regulatory function in respect of the company, including the making of determinations and imposing enforcement orders. However, under the moratorium provisions, Ofgem would need either to secure the consent of the energy administrator or the leave of the court to institute legal proceedings against the company, should it be required to enforce any of its decisions.

That decision of the Court of Appeal seems to strike a balance different from that proposed in the amendment. Energy administration should not reduce the regulatory obligations of the company in energy administration, nor should it affect the duties of the regulator, except in accordance with the moratorium, the safeguards and the built-in breathing space. The law following Winsor v Bloom seems clear and clarifies the relationship. It would be inappropriate and unhelpful for the Bill to make slightly different provisions, as the amendment would do, in respect of energy administration.

It should also be borne in mind that Ofgem is under a duty to have regard to the need to secure that the company can finance its own activities. The duty on Ofgem is not altered by the fact that the company is in energy administration.

In my submission, the courts have now provided ample clarity on the relationship between the regulator and the special administrator, covering the regulator's actions towards the company in administration. They will obviously be constrained by the usual dictates of administrative law, and also by Ofgem's special requirements to have regard to the need to secure that the company can finance its activities.

I draw a slightly different conclusion: the courts have already given us ample clarification of the relationship, and it would be wrong to put it in different terms on the face of the Bill.

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7.15 p.m.

Baroness Miller of Hendon: I thank the Minister for his explanation. I have forgotten the name of the case he quoted and I would be grateful if he could repeat it.


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