Electricity Supply Industry

HC Deb 31 October 2002 vol 391 cc993-6

8. Mr. John Grogan (Selby)

If she will make a statement on the electricity supply industry. [76425]

The Secretary of State for Trade and Industry (Ms Patricia Hewitt)

Since 1998, electricity prices have fallen by between 20 and 25 per cent. for commercial consumers and domestic prices are down by 8 per cent.—the fall is greater for those who have switched suppliers. As my hon. Friend the Minister for Energy and Construction said earlier, we are currently reviewing energy policy and will publish a White Paper in the new year.

Mr. Grogan

Does my right hon. Friend agree that in the context of rapidly falling wholesale prices, electricity companies with strong retail and distribution arms tend to be doing better than the pure generators, such as British Energy and AES Drax? Does she agree that in intervening in the market it would be wrong for the Government to favour one generator over another and that one way forward may be to take excess capacity out of the market and close the ageing Magnox reactors, which lost £200 million last year, sooner than planned?

Ms Hewitt

As I have said before in relation to British Energy, we are not interested in favouring or, indeed, necessarily saving a particular company; we are interested in securing energy and electricity supplies for the British people. As for the Magnox stations, that is a commercial matter for BNFL, which has a closure programme for those stations, the last of which will be decommissioned in 2010. Of course we have whole issue of the electricity supply markets under review and we will make further statements about it, not only in relation to British Energy, but, above all, in the White Paper.

Mr. Crispin Blunt (Reigate)

Gas provides the largest and a rising share of our electricity supply needs. There are now strong indications that BP is about to begin a massive disinvestment from the North sea, following the Chancellor's tax hike in the last Budget. That will accelerate our dependence on imported gas and oil. What is the DTI's view of that contribution by the Chancellor to energy policy? Will the right hon. Lady confirm that she had not more than 24 hours' notice of that catastrophic measure?

Ms Hewitt

My right hon. Friend the Chancellor has been reviewing North sea oil taxation for some years, so the idea of there being only a few hours' notice of the measure is absolute nonsense. I also understand that BP has been reviewing its entire global operation. One of the problems that we have in the current electricity supply market is an over-supply of gas-generated electricity. That is, frankly, the direct result of the pool, which the Conservative Government supported, which artificially drove up prices and which led directly to the dash for gas. We will consider the place of gas and other sources of electricity generation in the White Paper.

Mr. Martin O'Neill (Ochil)

Does my right hon. Friend agree that not only do we need a White Paper but legislation, particularly in relation to the nuclear liabilities authority, to straighten out at long last the historical costs from the current ones that the nuclear industry must face? Equally, the shortcomings in the new electricity trading arrangements and our worries about the incentives for longer-term investment might be addressed by legislation to afford the introduction of the British electricity trading arrangements, which will incorporate the Scottish stations, of which two are British Energy's nuclear stations. I know that her Department is always far down the list in terms of bidding for such legislative opportunities, but could we not have a miscellaneous provisions electricity Bill, as we had under the old Scottish Office, in which all the different elements could be put together to get the necessary legislation through in an appropriate time scale?

Ms Hewitt

I am grateful to my hon. Friend for that suggestion, of which I am sure my right hon. Friend the Leader of the House will take note. I cannot, of course, anticipate what will be in the Queen's Speech. Let me make it clear, however, that we are proceeding as rapidly as possible with our plans for the Liabilities Management Authority, which will require legislation, just as we are proceeding with our proposals for legislation to extend proper electricity trading arrangements to Scotland to ensure that energy generated there—which includes much of our renewables energy potential capacity—is available not only to Scotland but to the whole United Kingdom.

Mr. Nick Gibb (Bognor Regis and Littlehampton)

Given that, over the next 10 to 15 years, CO₂ emissions will continue to rise unless new nuclear power stations are built, which does the Secretary of State think is the greater environmental risk: nuclear waste or CO₂ emissions?

Ms Hewitt

Those important issues will be considered in the White Paper. I made a statement to the House last year about the arrangements that we propose to make for historic nuclear waste, which is an enormous problem that has to be dealt with properly, regardless of whether new nuclear plant is built. We are dealing with that as we have outlined, most recently in the White Paper on the Liabilities Management Authority. Our commitments not only to the Kyoto targets but, well beyond that, to far more challenging targets for a reduction in greenhouse gases are absolutely essential. We will spell out in the White Paper how we propose to meet those commitments and how we respond to the recommendations of the royal commission on environmental pollution. I should stress that we will have to use a variety of measures to meet future challenging commitments on CO₂ reduction, including far more radical steps on energy efficiency, and far more effective investment in renewables, as well as other sources of electricity generation. All that will be set out in the White Paper.

Mr. Kevin Hughes (Doncaster, North)

Only a few weeks ago, the Minister had to bail out British Energy with a loan of £650 million. On top of that, the UK business of TXU, the United States energy giant, hit the rocks and the Yorkshire coal industry fast suffered serious consequences. Is it not time that the Government properly underpinned the British deep-mine coal industry, British Energy and renewable sources to give us a guaranteed, diverse and reliable base supply of energy, which would provide us with the comfort of knowing that our lights would not go out at the whim or financial misfortune of some of these foreign companies?

Ms Hewitt

TXU did get into difficulties, and, as my hon. Friend is aware, its UK operation has been sold with no disruption to continuity of supply for its customers. We have demonstrated our commitment to the UK coal industry through the UK coal operating aid scheme, in which we have invested more than £150 million to help secure the future of pits that have deep-mine reserves. We are now in the process of consulting on an investment aid scheme that might be possible under the new European rules on state aid to the coal industry. I take seriously my hon. Friend's point about the need to step up investment in clean-coal technology to contribute not only to security of supply but to our environmental objectives.

Mr. Andrew Lansley (South Cambridgeshire)

Is the Secretary of State aware that as of yesterday afternoon 17,000 people in East Anglia still had not been reconnected to the power supply after the gales on Sunday? That has caused distress and inconvenience to my constituents who contacted me from Barton, Caxton, Eltisley and Swavesey, and they continue to have problems. In conducting an inquiry, will the Secretary of State ensure that either her Department or Ofgem pursue not only the general robustness of the system but, in that particular case, the problems associated with call centres, which made it difficult for people to notify faults, why the companies were unable to provide specific information about when they could reconnect the power supply, which left people with no knowledge, and why so many low-voltage faults continue to occur across my constituency?

Ms Hewitt

I entirely understand the enormous distress and disruption caused to the hon. Gentleman's constituents and many others around the country as a result of the power cuts. As my hon. Friend the Minister for Energy and Construction said, he has commissioned a review of what happened and the lessons to be learned from it. That follows a special study earlier this year, which considered the resilience of the electricity infrastructure and whether power companies would be able to cope in extreme conditions like those last weekend. The review's conclusions were generally, but not universally, positive. The new review is considering what happened in practice, what mistakes were made and whether there were simple inadequacies. The call centre business is an important part of that review. It appears that the inability in some cases of the companies to communicate with their consumers was at least as much part of the problem as the original disruption to the supply.