Energy Bill (Hansard, 20 July 2004)

§ The Minister for Energy, E-Commerce and Postal Services (Mr. Stephen Timms)
I beg to move, That this House does not insist on Commons amendment No. 10 to which the Lords have disagreed, and agrees to their amendments to the words so restored to the Bill.
We argued in both Houses that the three pillars of sustainable development—economic, social and environmental—are already covered by legislation. However, not everybody was convinced by the persuasive arguments that I advanced. We have listened closely to views from both Houses. I was especially impressed by the strong feelings expressed on Report by my hon. Friends. I am also aware that the sustainability duty has considerable cross-party support and that it has support outside the House, including from industry.
There is a widespread view that the current arrangements leave a gap. My hon. Friends have argued that if the duty can be made to work for the water regulator, why not for energy? The proposed amendment thus closely follows provisions in the Water Act 2003 and, for consistency, we are amending the Gas Act 1986 so that there is a similar duty in respect of gas and electricity.
I am pleased and relieved finally to be arguing that a sustainable development duty be added to those already imposed on the Secretary of State and the Gas and Electricity Markets Authority under the Gas and Electricity Acts, reflecting our strong commitment to sustainable development.

§ Mr. Laurence Robertson (Tewkesbury) (Con)
I am amazed that the Minister's eloquence failed to persuade everybody. We support the amendment.
The Bill, which we support, has been greatly improved by work in another place; in particular, Lady Miller of Hendon, Earl Attlee and Lord Jenkin have done an incredible amount of work and have added provisions that have made the Bill even better. I do not intend to detain the House, so I will say only that the Government have our support for the amendment.

§ Brian White (Milton Keynes, North-East) (Lab)
As I have been arguing for such a provision since the passage of the Utilities Act 2000, I am grateful to the Minister for proposing the amendment, which will be key to Ofgem's response to the Bill. Ofgem responded well to the regulatory impact assessment provisions of the Sustainable Energy Act 2003, so I am sure that it will respond equally well to the new duty set out in the Energy Bill.
I thank the Minister again for listening and for taking on board the views of his Back Benchers.

§ Mr. Andrew Stunell (Hazel Grove) (LD)
We, too, welcome this very important step back from the Minister's original position. We need to remember that a majority in Committee believed that the clause should stay in the Bill and that the Government insisted that it should come out. I am delighted that they have had 295 second thoughts and that they are taking a much more rational approach to gas, water, electricity and, of course, sustainability, which is the key element of the strategy that was missing before. We very much welcome the Government's change of heart.

§ Mr. Colin Challen (Morley and Rothwell) (Lab)
I echo the words of my hon. Friend the Member for Milton Keynes, North-East (Brian White) and thank my hon. Friend the Minister for his consideration of the words "sustainable development", which are very important because they are more concise and define more clearly what some of us who sit on the Labour Back Benches were always seeking: the proposed extra duty. That is to his credit. Indeed, I praise how he took us through the Committee, clearly showing a very good grasp of the brief, which has persuaded us in the end that we are now pursuing the right course.

§ Mr. Michael Weir (Angus) (SNP)
I am sorry to break the love-in over the clause. I support the aspect relating to sustainability, but it seems to point to a contradiction in relation to sustainability that lies at the very heart of the Bill—a contradiction that my colleagues and I have mentioned on numerous opportunities.
This amendment relates to the duty of the Secretary of State and the Gas and Electricity Market Authority in relation to sustainability. That is fine in so far as it goes, but a large part of the argument about sustainability relates to renewable energy, particularly in the north of Scotland. The amendment would give GEMA a role in achieving sustainability, but I have serious concerns about the role of Ofgem, which has been mentioned already.
In Committee and on Report, I referred to transmission charges in the north of Scotland. The Minister may not be surprised to learn that that issue is at the heart of my concerns because those charges will have a huge impact on sustainability. As part of our preparation for the debates on Report, my hon. Friend the Member for Banff and Buchan (Mr. Salmond) and I met representatives of Ofgem to press our concerns about their policy on transmission charges. Three times during that meeting Ofgem's representatives were asked whether they supported the Government's targets for renewable energy; three times they refused to answer.
I can only conclude therefore that Ofgem is not interested in pursuing policies that would assist in establishing those targets. I ask the Minister just what effect the amendment would have on dealing with the regulators? How will GEMA contribute to the achievement of sustainable development", as the amendment states, when the regulator seems to be acting in direct contradiction to the policy that is supposedly being pursued by the Government and, presumably, by the Secretary of State?
The problem goes further than that, however, because what Ofgem and the National Grid Company wish to pursue by means of locational charges will lead to a huge increase in transmission charges in northern Scotland. Given that clause 177 provides a sunset provision solely to help renewable generators with those charges, the economic viability of future renewable energy projects in the north of Scotland will be completely undermined, 296 thus seriously damaging the only existing conventional generator there—the most efficient combined gas cycle plant in Europe.
At that meeting with Ofgem's representatives, I asked why they thought that the charges should be higher in the north of Scotland. They replied that they felt that generation capacity should be located nearer to centres of population because of the large number of applications for generating capacity in Scotland. I ask hon. Members to think about that for a moment in the light of the fact that, under the amendment, the sustainability objective will be imposed on the Secretary of State and GEMA.
I would put it to Ofgem that there were so many applications in northern Scotland because they were for renewable energy development and that it was the obvious and most appropriate area for such projects, as the Government recognise in clause 177. Ofgem, to be fair, agreed with that. The regulators accepted that renewable generators were seeking to set up in the area, which the Government recognise as suitable for such generation, but in pursuance of their own madcap economic theory, those regulators were seeking effectively to price the generators out of the market by imposing substantial transmission charges.

§ Brian White
Does the hon. Gentleman accept that this was not included in Ofgem's terms of reference, so Ofgem was right to look at economic interests? With the amendment, it will have to take into account renewables and his argument will be completely different in future.

§ Mr. Weir
I do not accept that. Throughout the passage of the Bill there have been arguments about Ofgem in particular. My meeting with Ofgem left me extremely depressed. I do not think that it has any idea about the realities of renewable energy, that there is any support for renewable energy within Ofgem, or that the provision will make much difference. It will mean that projects will be sabotaged.

§ Paddy Tipping (Sherwood) (Lab)
The hon. Gentleman makes an important point. Does he believe that Ofgem should be disestablished?

§ Mr. Weir
In its present form, Ofgem is not serving the move towards renewable energy well. In my discussions with its representatives, it seems to be intent on sabotaging that. Hon. Members may draw their own conclusions from that. If someone is going to set up a renewable energy generation system in the north of Scotland they will, at best, face a massive increase in transmission charges halfway through the life of that project. That would mean that Ofgem—if there is anyone on the Tory Benches, perhaps they should listen to this—wanted to see a massive expansion of energy production not in Scotland but in southern England. Perhaps we can envisage large wind farms across the Sussex downs, or tidal barrages in the English channel.
The amendment seeks to impose on both the Secretary of State and GEMA a duty to pursue sustainability, yet other provisions in the Bill and the work of Ofgem in particular will undermine that. That 297 contradiction is at the heart of the Bill. Even with the amendment, I do not think that the clause will contribute to the achievement of sustainable development.

§ Dr. Desmond Turner (Brighton, Kemptown) (Lab)
I add my gratitude to my hon. Friend the Minister for the amendment. We had several quite intense debates about the role of the Secretary of State and Ofgem in relation to renewable and sustainable energy. It is a matter of great joy to me that the will of the populace has prevailed. The Minister has recognised not only that Ofgem is a pivotal player in determining future growth of renewable and sustainable energy, but that it has been seen as something of a barrier and has operated on neoliberal economic principles that were not compatible with some of the difficulties of renewable energy. That recognition is now in the Bill and it is totally consistent with the Government's intentions. I always think that that is what legislation should be like—it should say what it means on the tin. Now that we have the amendment, I am very glad.
On the point that was made by the hon. Member for Angus (Mr. Weir) concerning the effect of locational charges on renewable generators, I still have some difficulties with the locational charges argument. After all, wave heights and tidal streams are not very strong at the notional centre of consumption just north of Birmingham. The system disfavoured renewable energy and therefore needed the protection of clause 177, or clause 181, depending on which version of the printed Bill one looks at.
Unfortunately, the Bill contains sunset clauses. I still cannot understand why they are there. It is slightly sad that we ran out of time on Report in the House and did not get to the amendments seeking to delete those sunset clauses. It is important, if we are going to make the best use of the magnificent natural resources off the northwest coast of Scotland, that we give investors the confidence to tackle the big challenges that they face over and above the straight commercial challenge. On the face of it, the sunset clauses introduce a note of unpredictability and uncertainty, and a lack of protection.

§ Mr. Weir
Does the hon. Gentleman agree that more is at stake? The time scale for the projects is very long—it will probably be about 25 years—but there is a maximum of 10 years relating to investment. Not all projects will necessarily start at the beginning of that 10-year period.

§ Dr. Turner
The hon. Gentleman is right; I was about to make the same point, and he has saved me the labour of doing so.
I suggest to my hon. Friend the Minister that the Government will have to address that issue and give some assurance to investors in renewable energy that there will be consistency of approach over a time span sufficient to match the development and investment time scale that is involved.
298 We have made a significant step forward with the amendment. I am grateful to the Minister and I do not think that anyone will oppose it.

§ Mr. Timms
With the leave of the House, Mr. Deputy Speaker.
I am grateful to my hon. Friends the Members for Milton Keynes, North-East (Brian White), for Morley and Rothwell (Mr. Challen) and for Brighton, Kemptown (Dr. Turner) for their kind remarks. I am also grateful to the hon. Members for Tewkesbury (Mr. Robertson) and for Hazel Grove (Mr. Stunell), who both played a very constructive part in our debates in Committee and in the House, as have hon. Friends of theirs who have had the opportunity to speak in this debate. I agree with what the hon. Member for Tewkesbury said about the constructive contribution that has been made in the other place as well.
I think that the hon. Member for Angus (Mr. Weir) spoke in favour of the amendment. I was not entirely sure, but I believe that that was the import of his speech. I understand the point that he raised, which has been drawn to my attention by others as well. There is a process that will lead to a decision on transmission charging later in the year, and it will be for the independent regulator to make that decision in the light of the duties that have been imposed on it. I would not want to anticipate at this stage precisely what the outcome will be, but I understand the concerns that he has raised.
I hope that my hon. Friend the Member for Brighton, Kemptown is right and that the amendment will command universal approval.