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Northern Ireland Court Service (Abolition and Transfer of Functions) Order (Northern Ireland) 2010

Motion to Approve

6.22 pm

Moved By Baroness Royall of Blaisdon

Motion agreed.

Energy Bill

Second Reading

6.22 pm

Moved By Lord Hunt of Kings Heath

The Minister of State, Department of Energy and Climate Change (Lord Hunt of Kings Heath): My Lords, of the many challenges that we face, few can be more significant or more urgent than tackling climate change while maintaining secure energy supplies. The warming of the global climate is unequivocal and the role of human activities in the observed changes is now more apparent than ever. There is no doubt that climate change remains the biggest global threat to mankind. That is why the UK introduced a statutory target of an 80 per cent reduction in carbon emissions by 2050 and backed this up with a system of legally binding carbon budgets to help us to achieve that target.

The UK Low Carbon Transition Plan, published in July last year, sets out measures to deliver carbon emission cuts of 18 per cent on 2008 levels by 2020. As we transition to a low-carbon future, we need to ensure secure energy supplies. This means ensuring a supportive climate for the substantial new investment needed to bring forward the new infrastructure required for a low-carbon future. It means maximising the potential of our remaining oil and gas resources while

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ensuring that we have a variety of options for importing the fossil fuels that we will need during the transition. It means delivering the low-carbon trinity of renewables, nuclear and clean coal, all three of which are needed if we are to achieve our overall emissions reduction targets.

Last year we published our renewable energy strategy, setting out the path for us to meet our legally binding target to ensure that 15 per cent of our energy comes from renewable sources by 2020. The Office for Nuclear Development is taking active steps to establish and cement the right framework and conditions in the UK for investment in new nuclear with the aim of having new nuclear power stations generating electricity from around 2018. To promote the development and deployment of clean coal, we have committed to one of the most ambitious demonstration programmes in the world and have taken the unprecedented step for a coal-dependent country of saying no new coal without CCS.

The energy markets continue to have a critical role to play in delivering this transition to a low-carbon future. However, left to their own devices they would not bring forward the necessary investment that we need. We need a robust framework that will deliver on investment but also deliver a fair deal for consumers.

This Energy Bill sets out measures in three key areas that are central to the task that we face: delivering investment in clean coal technology; delivering a mandatory requirement to provide help with energy bills to more of the most vulnerable; and delivering a more robust framework for consumer protection.

The first part of the Bill mainly relates to the new carbon capture and storage incentive. Coal is the fuel with the highest carbon emissions but it is also a low-cost and reliable fuel for power generation with abundant remaining reserves. Clean coal, as part of the trinity of low-carbon energy, will provide diversity and flexibility in our energy mix. However, for clean coal to take its place in our long-term energy mix, we need to demonstrate at a commercial level the technologies required to capture, transport and store the carbon emissions created by coal-fired power stations.

Clauses 1 to 4 provide the framework, through a new CCS incentive, to deliver financial support for our commitment to deliver four commercial-scale CCS demonstration projects on coal-fired power stations. These projects will encompass both pre-combustion and post-combustion capture technologies. The framework will also allow, should it be needed, support to be provided for the retrofit of CCS to the remaining unabated capacity of these projects. The funding will be raised by a new levy on electricity supplies used solely to support these CCS demonstration projects. The collection of the levy and the payment of the incentive to the projects will be administered by Ofgem. The selection of projects, however, will be carried out by the Government.

The second part of the Bill focuses on tackling fuel poverty through helping more of the most vulnerable with their energy bills. There are three main factors in fuel poverty: household income, energy prices and energy efficiency. We are taking action on all three of them. To help household incomes, winter fuel and

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cold weather payments are currently at their highest levels since introduction. To help householders to improve their energy efficiency, we have ensured, through policies such as CERT and Warm Front, that 7.5 million homes have received loft or cavity wall insulation since 2002. The Warm Homes, Greener Homes strategy, which was launched on 2 March, announced our intention to ensure that all households are able to benefit from loft and cavity wall insulation by 2015, where practical, and to offer up to 7 million eco-upgrades by 2020.

Clauses 9 to 15 introduce a framework for mandatory social price support to tackle the third factor: energy prices. The current voluntary agreement between the Government and energy companies has provided support to over 1 million customer accounts in the first year alone. The provisions in the Bill will build on this agreement, allowing the Government to require energy suppliers to help more of the most vulnerable consumers with their energy bills.

In last year's Pre-Budget Report, we announced that suppliers would collectively be required to spend £300 million per year on social price support by 2013-14. This is double the amount that they have agreed to spend in the final year of the voluntary agreement. The powers in the Bill will also allow us to give greater direction on the types of household that are eligible for support and ensure that more of the available resources are targeted at those households that are most in need. Ofgem will monitor the operation of the scheme and energy suppliers' compliance with it.

It is fundamental to the policy that suppliers' contributions are proportionate to their market share. This will ensure that no supplier is disadvantaged by having a higher number of households eligible for support and therefore that vulnerable customers do not become unattractive to those suppliers. Clauses 11 and 12 provide the Government with the power to set up a reconciliation mechanism to allow the costs of a mandatory social price scheme to be distributed fairly between energy suppliers.

The third part of the Bill will protect consumers through improved regulation of the energy markets. Although Ofgem's principal objective remains the protection of the interests of existing and future consumers, Clauses 16 and 17 clarify that these interests include the reduction of greenhouse gas emissions and the delivery of secure energy supplies. It is important that Ofgem makes decisions within a framework that protects the interests of consumers in the widest sense.

These clauses also clarify that, while the promotion of competition remains the foundation of consumer protection in the long term, the regulator should also take steps proactively to protect the consumer interest. In essence, the Bill makes it clear that, where consumer interests are threatened, Ofgem must consider measures other than the promotion of competition in order to rectify the situation. Such measures might include more stringent enforcement of existing licence conditions or the introduction of new licence obligations.

Clauses 18 to 23 introduce a market power licence condition. This will allow Ofgem to tackle situations specific to the electricity balancing market, where

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companies may take advantage of constrained electricity capacity. It is targeted to eliminate those circumstances in which the licence holder might use market power to obtain excessive benefits by unduly exploiting balancing arrangements with National Grid, the system operator. The costs of this exploitation are ultimately passed on to the consumer. This measure is subject to a sunset clause, which means that this licence condition can be in place for a maximum of seven years. We believe that this is sufficient, as the lack of transmission capacity, which is the root cause of this type of market exploitation, should be resolved by ongoing upgrades to the transmission system. We expect these upgrades to be completed by 2018.

Clause 24 extends the time limit within which Ofgem can impose financial penalties on energy suppliers for a breach of licence conditions from 12 months to five years. This will enhance Ofgem's ability to protect consumer interests by ensuring that in future it is able to address more cases where licensees may have breached licence conditions and to take appropriate enforcement action.

Clauses 26 to 29 give the Government the power to adjust charges for gas and electricity in situations where energy suppliers treat certain customers less favourably than others according to the type of energy supplied. An example is where electricity-only customers are paying significantly higher prices than dual-fuel customers for which there is no justification in cost differentials. The Government already have similar powers to tackle such situations in the gas and electricity markets separately, but they cannot currently address situations where consumers are being disadvantaged through cross-subsidies. We have no immediate intention of using these powers, as Ofgem introduced a new licence condition last September to tackle this type of consumer detriment. However, it is important to have the power to tackle all situations where consumers are disadvantaged in case Ofgem cannot take appropriate action.

This Bill was the subject of detailed scrutiny in the other place. Following discussions during its Committee stage, several amendments were proposed and accepted. Through this, the scope of the CCS incentive was extended to allow it to be used to support the demonstration of CCS on gas-fired power should this be required in the future. However, I must make it clear that it remains our intention to deliver four demonstration projects on coal-fired power stations as our first priority. A new requirement was also introduced for the Government to report every three years, starting in 2012, on progress towards the decarbonisation of the electricity sector. These reports will set out progress in the decarbonisation of coal-fired power stations and progress in the development and use of CCS technology.

We have taken powers to allow the Government to set the period within which energy companies must inform customers of changes to their gas and electricity tariffs. This period is currently set at 65 working days, a length of time that is clearly unacceptable. Ofgem has committed to addressing the issue and will publish a consultation before Easter. In the event that Ofgem encounters difficulties, it is important that the Government have the ability to step in and remedy the situation.

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This power will be in place for only three years, as our intention will be to take action at the earliest possible opportunity and certainly before three years have passed.

Taking the measures in this Energy Bill together, we believe that they will play an important part in achieving our transition to a low-carbon economy. They will help to reduce our carbon emissions, to secure our energy markets and to provide support to the most vulnerable consumers in our society. I commend the Bill to the House and I beg to move.

6.35 pm

Baroness Wilcox: My Lords, I thank the Minister for introducing this Bill. As far as it goes, we welcome it. Most of what is in the Bill is long overdue and I do not think that it would have caused us too much trouble even if we were to have had sufficient time to discuss it in detail in Committee. I am naturally pleased to see the two meaningful concessions that were extracted from the Government in another place by my honourable friends Greg Clark and Charles Hendry.

What would have engaged our interest in this Bill is what is not included. This is a common complaint against Labour's energy policy. It took years before Labour faced up to the energy crisis that was developing under it and even now it is proceeding too timidly to address the issue successfully.

It is no surprise that, at Second Reading in another place, the debate barely touched on what was in the Bill and instead involved Labour Back-Benchers quizzing my honourable friends on the Conservative energy policy. I am glad to say to any noble Lords in this House who share that interest that we recently published a strategy paper and a detailed Green Paper setting out the urgent actions that we would implement if we were fortunate enough to win in the imminent election.

Unfortunately, there is a complete lack of any corresponding policy from the Front Bench opposite. As far as I can see, Labour's energy policy has, over the years, moved from lack of interest to outright denial and, finally, in the past couple of years, to the sort of dithering that we have come to expect when major decisions have become unavoidable.

It is clear that our country and our people, especially the disadvantaged, have been failed by Labour over energy, according to its own targets. The most vulnerable people are being expected to wait even longer to hear how Labour would ensure that they will be able to afford to heat their homes. Our businesses, too, which are already suffering from a great recession because of the mismanagement of the economy, are given nothing to indicate under what conditions they are expected to make the necessary long-term investment. The City hesitates because this Bill gives no certainty to anyone.

However, finally we have some measures before us that allow for the subsidy of carbon capture and storage. That is to be welcomed, but there is no detail on how the levy will be imposed and no criteria for how the money will be spent. This Government, who have accepted, at the final hour, that CCS needs some sort of government subsidy, appear determined to leave all questions on the subject to be answered by the next Government. Noble Lords may rest assured that,

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if the next Government are Conservative, it will not be long before those questions are answered. Within six months, we will set out how the EPS will be introduced. Without such a standard, the money raised by this levy could be frittered away with no result, as the Government have done with the revenue from the EU Emissions Trading Scheme instead of contributing to a secure, sustainable energy supply.

On energy security, the Government, despite the Minister's valiant recent efforts in the still relatively new department of DECC, which brought him and me together, have again failed to come forward with what is needed. There is nothing in the Bill about gas storage, despite Labour's acknowledgment that we have totally inadequate facilities for this country's needs. On fuel poverty, we have the same inadequate provisions. Of course, we welcome what is here, in Part 2 of the Bill. Given that the Government have failed to meet their own targets on fuel poverty, these clauses are now very necessary, but it is disappointing that, despite a few recent indications that Labour is finally starting to listen to us on the importance of energy efficiency, there is nothing to introduce a genuine green deal for households. The Government's plans for a pilot scheme covering 500 households are pitiful in comparison to the promises that we have made in this area in our document, which I hope all noble Lords will read.

Indeed, the Bill says very little about the day-to-day experience of the consumer. The Government conceded a point in another place about information on pricing changes. However, without the necessary detail in Part 1 about whom the levy will be imposed on and without a genuine engagement with households in Part 2 on how to reduce and manage their energy requirements, consumers appear to be left holding all the costs of the necessary investment with no guarantees regarding the benefits that they might expect to receive.

Much of the public's scepticism about green investment could be addressed with proper transparency around energy pricing and subsidy. When newspapers report the record profits made by energy suppliers while households struggle to meet their bills, it is critical that every household can feel confident that it is, at least, on the most appropriate tariff for its needs. With the baffling complexity of Labour's subsidy mechanisms causing problems even for the experts, the consumer must be informed of the amount of money that he or she is paying into this sector.

It is understandable why Labour is so hesitant to introduce such transparency. It has achieved so little in its time in government that there would be a public outcry if it were better appreciated how much taxpayer money has been wasted. Labour refuses to commit to an emissions performance standard, making it uncertain that investment will bear any better results in the future and, unsurprisingly, it refuses to give consumers the necessary means to see the consequences themselves.

As far as the Bill goes, we welcome it, as what is in it is long overdue. However, so little will be achieved through it that it is obvious that it will be the new Government to whom we must look to do the rest for a secure energy future, for our industry and for our national security.

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6.42 pm

Lord Wallace of Saltaire: My Lords, I am very pleased to follow the noble Baroness, Lady Wilcox, who made what I thought was a very good, Guardian-style speech, upbraiding the Government for their general conservatism in this area. I noted, from reading the Committee and Report stage debates in the Commons on the Bill, that there was a degree of Conservative backsliding by a number of her colleagues. The revival of climate-change scepticism is there on the Conservative Benches-in both Chambers, indeed-as well as Euroscepticism. I hope that the noble Baroness's excellent speech demonstrates that the Conservative leadership, at least, is standing up to what a number of American writers now call the politics of irrationality in the Republican Party, to which the Conservative Party is sometimes tempted to bend.

This is a modest Bill and we are grateful for small mercies, but we do not see it as being up to the scale of the challenge which we face. Our party has also put out its proposals for sustainable growth and a move towards a sustainable economy, in which we shift the balance away from centralisation and privatisation towards a much more decentralised system with an emphasis on small-scale generation, insulation, local schemes and integrated schemes wherever possible, as against the Government's emphasis on centralised coal and centralised nuclear-coal which is, I note, incidentally, more and more imported coal. Indeed, as I work my allotment in Saltaire, the Settle-Carlisle railway line brings imported coal down to Yorkshire power stations from Cumbrian ports. It is not, any longer, local coal; it is part of our energy dependence. The whole question of carbon capture and storage is not so much a matter of increasing our energy security, but making sure that the South African and Polish coal which we import does not add to the pollution above our land.

I welcome the demonstration project which Yorkshire has now managed to secure from the European Union and notice that the European Union, in awarding that to Hatfield, mentioned that part of the attraction of the demonstration project is, indeed, that it has the potential to be part of a much broader scheme for carbon capture and storage across Yorkshire. I drove with my wife from Lincoln over to Saltaire this summer and I was very struck, as we passed across the south Yorkshire and north Lincolnshire plain, to see, against the skyline, a succession of huge coal power stations and their heating towers. You no longer see anything in the way of wind-power generation. There are the remnants of a large number of windmills, but nimbyism and the absence of long-term planning have inhibited the sort of renewable energy that we should be pursuing across that large chunk of northern England.

We think that the Government should move a great deal further into what we call wind and wave. Indeed, as I walk up and down the Yorkshire Dales, I regularly pass the Grassington weir with its derelict power station, from which Grassington generated all the town's electricity 60 or 70 years ago. I am conscious that we have all this unused potential small-scale water power in Yorkshire, which the Government have made very little effort to encourage. We now have one demonstration project, in Settle, so if we are looking

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for ways and means to move Britain towards renewable energy-local biomass, local water and so on-there is a great deal more that could be done.

Feed-in tariffs have been very slow to be developed. It is now some 25 years since I was on holiday with my family in Brittany and we stayed on a farm, the water mill of which was already feeding locally-generated power into the French power system. Along with the Conservatives, we strongly support the proposal for an emissions performance standard and, indeed, on Report in the other place, we moved, with cross-party support, an amendment for an emissions performance standard which was to apply to all new electricity generation plant as a clear restriction on the amount of carbon dioxide that any new electricity generation plant can emit. That narrowly failed to pass in the other place. No doubt there will be discussions among the parties in this Chamber as to how far we wish to add that to the Bill. I look forward to those discussions.

My party has larger ambitions on sustainable growth and in moving to a more sustainable economy. We want to see emissions reduced and we want a reduction in energy dependence and thus, incidentally, in our very substantial trade deficit. We look to new employment in new industries and to signals to the market which encourage everyone to invest in the reduction of carbon emissions. I noted with some puzzlement the statement in the analytical annexe to the low carbon paper that an oil price of $150 per barrel would help to reduce the costs of transition. There are a lot of other things that an oil price of $150 per barrel would not help, including the international politics of the Middle East and of Russia. There are lots of other ways of achieving a similar result, including an emissions performance standard, so, from these Benches, we give a lukewarm welcome-a lukewarm front, we might say-for the modest step forward contained in the Bill.

6.50 pm

The Lord Bishop of Durham: My Lords, I am sorry that I am not going to be able to keep up the party banter that has so far characterised this debate. I am grateful for the way that the Bill proposes to sort out several issues relating to our future energy sources and needs and the way that they are handled. I am particularly interested in the first part of the Bill, which proposes this financial assistance for constructing up to four UK carbon capture and storage demonstration projects. I wish we could have gone down this road a lot sooner; indeed, some experts have been saying for several years, since the original White Paper, that we already know that CCS works and do not need any more demonstration projects so we should just get on with it.

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