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Lord Ezra: My Lords, when my noble friend raised this issue in Grand Committee, she drew attention to the fact that a much stronger obligation to sustainability was laid on Ofwat than is proposed, even with her amendment, on Ofgem. The noble Lord, Lord Davies, in reply to that, said:

I do not for the life of me see why water, which is a prime necessity, should be treated any differently from energy, which is a prime necessity. I am very puzzled about why the Government, having dealt with the matter with regard to water in one way, should not be ready to deal in the same way with regard to energy.

Lord Jenkin of Roding: My Lords, briefly, I should like to support the noble Baroness, Lady Miller of Chilthorne Domer. It may seem surprising that I do so, given that I have regularly argued that Ofgem is primarily an economic regulator whose primary duty is to look after customers. Where I differ from the noble Baroness a little is in the reference to future customers, which was of course relied on by the Government to resist the amendment that was in the event added to the Utilities Act 2000, that Ofgem should be responsible for,

    "securing a diverse and viable",

electricity—or, in the other amendment—gas supply.

The House took a different view on that occasion, and that amendment was put into the Bill. However, I suspect that we shall hear from the Minister the same sort of argument that we heard on that occasion against those amendments. The Minister said, at col. 1497 on 5 July 2000 that,

    "it follows that amendments such as this are a distraction and would serve to confuse rather than enhance the framework of obligations and duties under the legislation".—[Official Report, 5/7/2000; col. 1497.]

I have heard that argument put comparatively recently about the amendment proposed by the noble Baroness. However, the Government were wrong on that occasion, in 2000, and the amendment was added to the Bill and is now part of the Utilities Act 2000. I do not believe that it interferes at all in how Ofgem performs its economic duties. Why should an amendment about the environment, such as the noble Baroness has moved, have that effect?

In the present circumstances, when we are facing environmental problems on a wide range of fronts, every organisation concerned in any way with regulating or operating activities that could impact on the environment should always recognise that they have the environment as one of the objectives to which they should have regard. For the life of me, I cannot see why this amendment should not be accepted by the Government. I understand the arguments that have been put by Ministers, and no doubt we shall hear them in a moment or two from the Minister on the Front Bench today. However, on this occasion, I

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believe that the noble Baroness has got it right, and I shall be happy to support her if she presses the amendment to a Division.

Baroness Byford: My Lords, I rise to support the amendment. My name is added to it, and I thank the noble Baroness, Lady Miller of Chilthorne Domer, for explaining her reasons for bringing it back. It is hugely important. As the noble Baroness said, the environmental issue that she raised in Committee has been addressed. I do not know whether she is fully satisfied, but it has been addressed. We do not feel that the issue of sustainable development has been addressed and we support her on that issue. Now the principal duties have expanded to include social and economic impacts it is important that the Government respond in a positive way.

Other noble Lords who have already spoken are anticipating that the Minister will say, "No". As it is the start of a new day, I am hoping that the Minister will say, "Yes". If he cannot say yes, he may at least say that he has heard what noble Lords have said and that he recognises the reasoning behind the amendment. If he does not like the wording of the amendment, at the start of this day we issue him a challenge for the Government to come back with a wording that will meet all our concerns.

The noble Baroness is quite right that this is a very important amendment. I was part of the team that took the Utilities Bill through the House and my noble friend Lord Jenkin has reminded us that Ofgem had to take the amendment on board in the end. The Government took it on board with great reluctance because it was not their idea but they had to accept it. I hope that we can start this afternoon in a more positive spirit. The amendment has much to recommend it. It is not asking for too much. All it is asking, in new subsection (2a), is that:

    "the Secretary of State and the Authority shall carry out their respective functions under this Part in such a manner as to ensure the contribution to the achievement of sustainable development".

We are all very conscious that we live in the present but that we must plan for the future. If this responsibility is not put in the Bill I fear that it may slip down the line of importance behind other matters that have to be dealt with. I support his amendment.

3.30 p.m.

Lord Dixon-Smith: My Lords, I have no difficulty in supporting the sentiments expressed by the noble Baroness. I am slightly puzzled by the placing of this amendment at this point in the Bill, after provisions on the police and before provisions on offshore zones. I wonder whether that is the best place for it, although I am bound to say that the more I look at the Bill, the less sure I am that there is an ideal place for it. The noble Baroness has my sympathy in that regard but I support the principle that she has enunciated.

Lord Whitty: My Lords, I am grateful for the noble Baroness's words about the issue of the environment. Her main complaint now is that we have not reflected the whole gamut of sustainable development in terms of the

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duties on GEMA. As she said, there are three strands to sustainable development: the environmental, the social and the economic. Essentially, GEMA operates in the economic sphere but it has some environmental obligations and has guidance on environmental and social matters from the Secretary of State. It contributes, via its economic activities, to sustainability. Clearly there is some crossover. For example, as the noble Baroness recognised in her opening remarks, in producing regulatory impact assessments for all important decisions GEMA must include environmental impact assessments.

The role of an economic regulator is obviously to deliver a degree of economic sustainability as well as to ensure that that is done having regard to environmental and social sustainability. The noble Lord, Lord Ezra, made the point that in the Water Bill, which most of us here discussed not long ago, Ofwat, as a regulator, has a sustainable development requirement. But the water legislation is not drafted in the same way as the Utilities Act and the legislation governing energy. For instance, while GEMA does not have a general duty to have regard to sustainable development, it does have a general duty to the environment whereas Ofwat does not, despite the fact that it is clear that sustainability in the water sector must include an environmental dimension. The balance of responsibilities between the regulator and the Secretary of State in relation to water are different from the balance of responsibilities between the regulator and the Secretary of State under the Utilities Act.

I was rarely present during debates on the Utilities Act, but noble Lords will remember that the overall duties of the energy regulator were debated in some detail. Noble Lords sought an amendment to place a sustainable development duty on GEMA. At the time, the Government's response was that it should be recognised that measures concerned with such matters will often be in the interests of consumers, in particular their long-term interests; that is, the interests not only of present but of future consumers. That is where the economic sustainability responsibilities of GEMA arise and that is the principal objective of GEMA and, to some extent, the Secretary of State.

Time has moved on in one respect since the Utilities Act but we are still dealing with a structure that was laid down in it. To accept sustainable development as a direct responsibility in all its manifestations through GEMA would be to alter the balance set down in the Utilities Act. The concept of sustainable development incorporates social and environmental, as well as economic, considerations. If we incorporate the social and environmental considerations into the principal objective then we remove the priority that GEMA, as part of this structure, has afforded to the economic interests of consumers present and future. That is confusing for GEMA and for those who deal with it.

It is also important to recognise that in the course of production of the energy White Paper extensive consultation took place in relation to how we deliver regulation and the objectives of the energy White Paper.

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The conclusion at that time was that the current drafting of the principal objective and the general duties reflected the objectives, including the balance of responsibilities. That is balance not in the sense of trading one against another but in the sense of delivering all three aspects of sustainable development via GEMA's responsibilities for the economic interests of consumers and the Secretary of State's responsibilities on the social and environmental side.

I appreciate that we have been round this circle when the Utilities Bill was considered and again with the Water Bill. We have had the present structure of regulation within the energy sector for a relatively short time. It has worked reasonably well and the energy White Paper places wider responsibilities on all players within the energy policy structure, including sustainable development. Now is not the time to alter the central responsibilities of GEMA, bearing in mind that sustainable development is mainstreamed into the Government's whole approach to energy policy and the energy strategy embodied in the energy White Paper. To place that responsibility on GEMA is not consistent with the differentiation of the functions that was set out in the Utilities Act. At the end of various consultations in which varying views were expressed we felt that, on balance, we should keep the situation as it is. I do not propose to move from that position today.

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