Energy Bill [H.L.]

HL Deb 01 March 2004 vol 658 cc149-202GC

(Tenth Day)

The Committee met at half past three of the clock.

[The Deputy Chairman of Committees (Lord Brougham and Vaux) in the Chair.]

The Deputy Chairman of Committees

Good afternoon and welcome to the 10th and, I hope, final day of the consideration of the Energy Bill in Committee. I believe that the Minister has a statement to make. I remind the Committee that if there is a Division in the Chamber, we shall adjourn for 10 minutes and resume thereafter.

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty)

I should like to make a brief statement about the issues initially raised by the noble Baroness, Lady Miller of Hendon, on 20 January on parliamentary privilege. The noble Baroness described her concerns about an "atmosphere of anxiety" among operators within the nuclear industry that they might face adverse consequences from a government department if they were to provide information to noble Lords opposite. The Department for Trade and Industry was mentioned in that context.

This is a serious matter so let me start by setting out the position with regard to nuclear operators, specifically UKAEA and BNFL as the owners of sites that will become the responsibility of NDA on its inception. These organisations are not staffed by civil servants. They have the right to brief members of any political party either in this House or the other place. It would be improper for a government department to prevent either organisation from briefing Members of Parliament. That, of course, applies to any organisation that has been set up on an independent basis.

Similarly, questions from any member of this Committee about the important matters under discussion in this Bill—or in any other—must be handled professionally and in accordance with the normal practices of this House.

With those principles in mind, the Secretary of State for Trade and Industry and the DTI's Permanent Secretary have considered the comments of noble Lords opposite and received reports from senior officials on the department's relationship with the nuclear operators and discussions held over the past few months more specifically about Part 1 of this Bill.

We are satisfied that there is no attempt by DTI to prevent nuclear operators or other organisations from briefing the opposition, whether that briefing takes the form of answers to specific questions, general information about policy options, or detailed amendments to the Bill. We want, of course, to promote debate rather than constrain it. It is right that there should be a network of contacts at various levels to discuss the general principles governing the Bill, to consider policy options, to test the implications of amendments and, not least, to reach sensible decisions about the way in which business should be handled.

With that in mind, so that there can be no misunderstanding on either side, the DTI is writing to the UKAEA and to BNFL. The letter will draw their attention to this statement and the principles which I have set out. My statement will also be drawn to the attention of those in DTI working not only on the Energy Bill but all other Bills in this Session. That will ensure that officials can be in no doubt about expectations of them when talking to stakeholders.

Baroness Miller of Hendon

I am grateful to the Minister for initiating the investigation and for reporting back to the Committee today in the form of the statement. Obviously, we accept what the Minister has said. I do not for one moment suggest that we do not, because we do. However, it is worth noting that four people related their concerns to us. It is right that that fact should be noted; otherwise, I would not have mentioned the matter.

Lord Whitty

I appreciate the noble Baroness's remarks and note that information. There is a further matter with which I need to deal before we turn to the amendments. At the beginning of the previous Committee Sitting, the noble Baroness, Lady Miller of Hendon, and the noble Lord, Lord Jenkin of Roding, asked whether the Government would make a statement about the chairman of Ofgem, Sir John Mogg's, public intervention on the Government's potential amendment which is designed to give some dispensation from high transmission charges for renewable generators in peripheral areas of Scotland.

I feel that I should start by agreeing with the Opposition that indeed the language used and reported appeared to be strong and that when an independent regulator criticises the Government in this way, we should think carefully about what has been said. However, it is not unhealthy for an independent regulator to criticise government. Indeed, Ofgem has a long-standing reputation for independence.

I shall explain the source of the disagreement. As my noble friend Lord Davies said on 12 February. Ofgem and DTI both agree that, in general, we should have a transmission charging methodology that is cost reflective, non-discriminatory and that promotes competition in generation and supply. This will encourage transmission assets to be built and charged for in the most efficient way. In turn, this will minimise the cost to the consumer. Ofgem believes that this sort of charging methodology should apply to all generators, including renewables.

However, the Government must, of course, take its wider energy objectives into account. While Ofgem plays a part in delivering these objectives as recognised by the breadth of its statutory duties, decisions about trade-offs between environmental and economic objectives are ultimately for government and for Parliament, as we said previously during the Committee. As part of the consultation on transmission charging issued in August, the Government raised the question of whether special dispensation was needed for those renewable generators in peripheral areas that have high renewable potential and that would otherwise be impacted by the highest transmission charges in order to ensure that the Government's renewable targets can be met.

I should mention that Ofgem made it clear at the time that it objected to the Government's consultation on this issue. After some consideration of the concerns raised by the renewables communities and, indeed, echoed in this Committee stage, we agreed to consider Amendment No. 113ZL, which sought to protect renewables from the high transmission charges. We also specified that the amendment that we are likely to table on Report would aim to take a power to give renewables in a specified area some dispensation to protect them from the impact of high transmission charges.

In conclusion, and to make matters clear, Ofgem continues to disagree with any intervention on transmission charges, including any dispensation for renewables. The Government believe that they are entitled to consider a dispensation on transmission charges for renewables if that safeguards their wider energy objectives.

Baroness Miller of Hendon

I thank the Minister for that explanation. At this stage, as we have not seen the amendment, I am prepared to say only that it is clearly not for me to say today what our policy would or would not be. We shall obviously consider the amendment on its merits when it appears before us. I very much hope that that will be in time for us to make a considered opinion and that it will not appear merely a day before the first day of the Report stage.

Lord Jenkin of Roding

Perhaps I may add to the comments of my noble friend Lady Miller by thanking the Minister for what has been a very clear statement on this issue. I did not for one moment imagine that Sir John Mogg's statement on 14 February, or whatever the date was, was the first shot in a war that had been going on for some time. The Minister has confirmed that.

Interestingly, I raised this issue at a conference held last week under the auspices of the Adam Smith Institute, where representatives of a number of interests concerned with both onshore and offshore wind power and other renewables were present. I asked for advice on whether we should believe the Secretary of State or the argument of the chairman of Ofgem. No one was particularly prepared to raise his head above the parapet. I do not want to echo the previous statement that was made but, since then, I have received two notes from those who were present but did not take part in the discussion to say that, in the last resort, it may be a matter of indifference because the customer will pay whichever way it goes and it is simply a question of the route through which the customer will pay for the transmission charges. I am not sure that that is entirely right, but we shall clearly need to debate the subject carefully when we come to the Government's amendment on Report.

My only other point is that I draw a very clear distinction between that issue, which we have yet to reach and which the noble Lord, Lord Davies of Oldham, foreshadowed in his speech on 12 February, and the issue that we shall reach this afternoon, which is not about transmission but about distribution. The noble Lord, Lord Whitty, stated in the Second Reading debate that that was to come. I have no difficulty with the proposals concerning distribution. We may need to consider them in detail, but I believe it is the transmission charges which are the issue. We shall debate that amendment on Report in the light of what the Minister has said to us this afternoon.

Clause 144 [Appeals to the Competition Commission]:

Lord Kingsland moved Amendment No. 131ZA:

Page 11, line 19, leave out "whose interests are materially affected by it" and insert "with a sufficient interest in that decision"

The noble Lord said: I hope that after the statement by the Minister about the differences between the DTI and the regulator, the Minister will find my amendments relatively uncontroversial. I shall begin by speaking to Amendments Nos. 131ZC and 131B, before going on to Amendment No. 131 C and following the rest sequentially, beginning at Amendment No. 131ZA.

In my submission, the Bill fails to provide an effective right of appeal against Ofgem's decisions under certain industry codes. In our view, that is a very serious deficiency. Industry codes, such as the balancing settlement code, the connection and use of system code and the gas network code, set out the fundamental trading and governance rules for competitive market operations in the gas and electricity industries. Since each gas or electricity licence will contain a condition requiring a licensee to be a party to, and comply with, the provisions in the relevant code, any contravention of the code by the licensee is equivalent to a breach of licence, against which Ofgem can take enforcement proceedings.

In addition, modification decisions taken under those codes by Ofgem can have a commercial impact on licensees that is at least equivalent to, and sometimes much greater than, changes to the conditions of their operating licences. It must follow that Ofgem's code modification decisions should be exposed to the possibility of challenge by a process that is at least as rigorous and thorough as that operated by the Competition Commission to resolve disputed licence modifications. That process, first introduced in the Telecommunications Act 1984, is widely accepted as being both fair and final. However, the Energy Bill does not achieve an analogous process.

The Bill provides only a statutory codification of some of the existing principles of judicial review. We consider that something closer to a full and genuine right of appeal on the merits is justified. The recent DTI consultation paper on appeals mechanisms, entitled Strengthening the Transparency and Accountability of the Gas and Electricity Industry Code Modification Process, published in April 2003, clearly accepted that judicial review does not provide, and is not equivalent to, a right of appeal on the decisions of Ofgem. The DTI subsequently concluded, in a document entitled Government Response, published in November 2003, that the transparency and accountability of the code modification process would be improved by the creation of a right of appeal.

In fact, the Energy Bill fails to provide a right of appeal on the merits. Clause 146(4) gives four grounds on which an appeal against an Ofgem decision may be allowed. In my submission, it is wrong for market participants in the energy sector to be deprived of a legal right of appeal to an independent body on the merits of the key decisions taken by Ofgem, when Parliament has recognised that that is required under other legislation that addresses similar issues in other major regulated industries. The gas and electricity industries have had a legitimate expectation that any rights of appeal provided by the Energy Bill would at least be effective rights. That expectation should be met.

I understand that the officials in the DTI Bill team have claimed that Clauses 144 to 148, while not providing any right of appeal on the merits of a decision, create something more substantive than judicial review. However, we do not find that anywhere in the drafting of those clauses. Nor is it spelt out anywhere in the Explanatory Notes to the Bill, or in any DTI consultation paper. Very clear and specific drafting and clear Explanatory Notes would be required to create something that achieves what the DTI is reported as wanting to achieve.

The very use of the word "appeal" in the Bill is positively misleading. In our view, the appeal provided for under the Bill should be a genuine appeal made on the merits of the case. That could be achieved simply by following the approach taken at Section 192 of the Communications Act 2003, which provides a right of appeal from Ofcom. That Act properly relies on the language of appeal to create a jurisdiction in which the decisions of Ofcom may be reconsidered afresh by the relevant tribunal. That Act requires appellants to specify only whether they allege errors of fact or law in the original decision, or whether they are complaining about how Ofcom has exercised its discretion.

I now turn to our two amendments on this matter. Following the language of the Communications Act, we propose the deletion of Clause 146(3) and (4) from the Bill and the insertion in Clause 144 of a new subsection which states:

"In applying to the Competition Commission for permission to bring an appeal under this section, the grounds of appeal must be set out in the application in sufficient detail to indicate—

1. (a) to what extent (if any) the appellant contends that the decision appealed against was based on an error of fact or was wrong in law or both; and
2. (b) to what extent (if any) the appellant is appealing against the exercise of a discretion by GEMA".

In line with the approach taken in the communications industry, the amendment would require appellants to specify only whether they allege an error of fact or law in the original decision or whether they are complaining about how the authority has exercised its discretion.

On the actual language of the Bill, even looking at the Government's purported solution from the narrow grounds of the common law of judicial review, we find that the Government's provisions fall well short of what is required. The list of grounds at Clause 146(4), although derived from judicial review, are an incomplete reflection of the grounds of challenge available in that form of action. Notably, the four categories mentioned do not include the unreasonableness of the decision, even in the limited sense set out in the textbook Wednesbury case, or lack of proportionality. Indeed, the absence of the latter criterion may, in certain circumstances, have the effect of rendering the appeal procedure incompatible with the requirements of the Human Rights Act 1998, contrary to the formal statement made by the noble Lord, Lord Whitty, on the face of the Bill.

Those limitations are significant because judicial review is a discretionary remedy, which is not generally available if a specific statutory alternative exists. That means that the effects of the Bill are, first, to remove an existing right and, as it does not appear to replace it by something that is at least equivalent, secondly, to substitute an inferior right. Therefore, the overall effect is to derogate from the rights of the industry and of consumers in an area where the Government have accepted that they most need to be enhanced. In that context, we have provided a second, alternative, more modest amendment to Amendments Nos. 131ZC and 131B in the shape of Amendment No. 131C, which inserts the criteria of reasonableness and proportionality.

We regard this amendment as being less desirable than the first but nevertheless enhancing the rights of any appellant. No appeals mechanism under the Bill as it stands, whether it will be dignified by the description of appeal or otherwise, will be able effectively to strengthen the rights of energy industry participants, including consumers, in relation to regulatory decisions, unless it provides for the appeals body to conclude that, in its opinion, Ofgem's discretion should have been exercised differently in all the circumstances of the case.

I now turn more briefly, as I am sure your Lordships will be relieved to hear, to deal with the remaining amendments. As far as Amendments Nos. 131ZA and 131ZB are concerned, Clause 144(3) provides that those who have the right to appeal against a decision of the authority must be "materially affected" by the decision. The more usual approach to the question of eligibility in this sort of context is to require that those with a right to appeal must have a "sufficient interest", something which has been elaborated by case law and interpreted generously.

The focus in the Bill on being materially affected rather than having sufficient interest suggests that the policy objective is to restrict, significantly, the class of persons able to bring an appeal. For example, there is no guarantee under the Bill's approach that all the parties to an industry code would be equally entitled to appeal in relation to a particular decision. This would be, in my view, an erosion of rights which is undesirable as a matter of principle. Accordingly, therefore, the amendments aim to ensure that persons with a sufficient interest in the regulatory decision will be entitled to appeal against it.

On Amendment No. 131ZD, one of the defining features of those decisions of the authority that are to be subject to appeal is that they must be taken in relation to a document that the Secretary of State has designated, by order, under subsection (2)(b) of Clause 144. Subsection (6) puts a duty on the Secretary of State, before making that order, to consult, first, Ofgem, and, secondly, such other persons as he considers appropriate. This is far too discretionary.

Given the crucial importance of the designating power, it is only right that the parties to the documents to be designated—in other words, the market participants—should be clearly specified as a category of persons that must be consulted in all cases. The appropriate formula would therefore be that the Secretary of State be required to consult: first, the authority; secondly, the parties to the documents that he is minded to designate under subsection (2)(b); and, thirdly, such other persons as he considers appropriate. In my submission, our amendment would achieve that result.

As to Amendments Nos. 131ZE and 131ZF, Schedule 22 sets out in meticulous detail the procedure to be followed for appeals raised under Clause 144. Schedule 22(1)(3) requires an appellant to apply to the Competition Commission for permission to bring an appeal within 10 days of the relevant Ofgem decision. This requirement has been set in such a narrow time limit as to be unworkable in practice. In effect, within the space of 10 working days parties must assimilate the Ofgem decision and the reasons for it; take advice on the prospects for successful appeal; obtain a senior-level decision on whether or not to appeal; and compile a full and complete statement of their case.

The 10-day time limit would be tight, even if that limit related only to the time within which an indication of intent to appeal had to be given. No company will lightly commence an appeal and is most unlikely to require board level approval for any such decision. In short, this time limit is wholly unrealistic.

Furthermore, it contrasts unfavourably with the 20 working days given to the authority later in the schedule to undertake the lesser task of submitting its own observations on the appeal, and it takes no account of the dire consequences of paragraph 7 of the schedule. The effect of paragraph 7 is to remove any certainty that, at a later stage, an appellant will be able to raise issues that were not outlined in his initial request for permission. The result, in practice, is that it will be essential for the request for permission to contain a full and complete statement of all the bases for appeal.

While it is of course desirable for the appeals process to be undertaken and conducted swiftly, the particular time requirement of paragraph 1(3) is severely overly restrictive and likely to be unfair in its operation and to be prejudicial to appellants. It is inappropriate for the period of time within which an application for permission to appeal must be made to be anything less than 20 working days.

In addition, it is not good practice to provide that the timetable starts to run from the earliest day on which the decision is published by the authorities. There are many ways to publish a decision, all of which are not guaranteed to draw the matter to the attention of the relevant parties. It is therefore important that the time should not start to run until the decision has been published in such a way that it is likely to be seen by all potential appellants.

I turn, finally, to Amendment No. 131A. Schedule 22(14)(2) allows the Secretary of State to modify by order any time period specified for the purposes of the appeals procedure set out in the schedule, subject only to the negative resolution procedure.

The appeals provisions of the Bill undermine and weaken existing legal rights by effectively removing parties access to action by way of judicial review for the reasons I have already explained. It is therefore quite unacceptable for an order-making power, which could be used restrictively, further to limit legal rights to be subject only to negative resolution. At the very least, the power should be subject to a no lesser safeguard than that of the affirmative procedure. It would be even better to subject the power to the special procedure for delegated power that is provided for at Amendment No. 146B, and so Amendment No. 131A is framed accordingly. I beg to move.

4 p.m.

Lord Jenkin of Roding

I yield to no one in my admiration of my noble friend Lord Kingsland in the masterly way in which he has deployed the several cases for this group of amendments. I rise to my feet only because I tabled Amendment No. 132, to add the additional ground of appeal, that the decision was so unreasonable that no reasonable regulator would make it". When I drafted that, I think I was already aware that that was the common law and within the normal rules of interpretation for a judicial review or an appeal. However, I have no intention whatever of pressing it because it was tabled before the group of amendments to which my noble friend has spoken. My only question was whether I should have withdrawn it or grouped it. I merely say that I think that my noble friend's amendments are very much preferable. As he has so eloquently said, they spell out much more clearly the grounds on which there could be an appeal.

[The Sitting was suspended for a Division in the House from 4.1 to 4.11 p.m.]

Lord Jenkin of Roding

I was about to conclude by saying that, as a gloss on what my noble friend Lord Kingsland said, I accept there cannot be an appeal from Ofgem that simply amounts to a rehearing of the case. One has to draw the line, and I thought he drew it with great skill. I entirely endorse what he said which was to provide grounds when matters have manifestly gone wrong, but not simply a second hearing of a case where Ofgem has considered the issues and come to a conclusion. However, I wholly support what my noble friend has said and I hope that Ministers will treat the matter seriously.

4.15 p.m.

Baroness Miller of Hendon

Not only has my noble friend Lord Kingsland spoken with enormous eloquence, as usual, but he is also a man of enormous modesty. I suggested to him that on this occasion, as our shadow Lord Chancellor, he might like to speak from the Front Bench which would indicate that his views are the views of our Front Bench. That will please noble Lords opposite because I can now simply sit down.

Lord Triesman

I join noble Lords on the Opposition Front Bench and those behind them in thanking the noble Lord, Lord Kingsland, for the clarity of the propositions that he has made. I shall not go through the amendments in the order in which he went through them. I intend to try, as best as I am able, to deal with the key themes and that may mean that I group the amendments somewhat differently, but by either route we shall get to the heart of the argument that the noble Lord has put to the Committee.

This is a large group of amendments. I hope I shall be able to include all those in the Marshalled List. A few moments ago I worried whether I had missed some, although I am confident that the noble Lord, Lord Kingsland, has included them all. The amendments in this large group deal with a number of aspects of the provisions for appeals against Ofcom decisions on code modification. I shall explain how I shall deal with them.

First, Amendments Nos. 131ZE, 131ZF and 131A concern a number of the aspects of the procedure for appeals which are set out in Schedule 22 of the Bill; secondly, I shall address Amendments Nos. 131ZA and 131ZB, which concern the categories of person who may appeal a decision; thirdly, I shall address Amendment No. 131ZD which concerns the consultation on secondary orders arising from these provisions; and fourthly, I shall address those amendments that concern the scope of the appeals procedure, the process itself and the role of the Competition Commission. I propose to address Amendments Nos. 131ZC and 131B together, as I believe that they are designed to work in unison. Having listened carefully to the noble Lord, Lord Kingsland, I believe he has made the point that they are intended to work together as well. I shall then address Amendment No. 131C and finally Amendment No. 132.

It may be helpful if I preface these groupings by trying to provide some definitions which I hope will be a working basis for understanding what we mean by the various terms that are used. I am conscious of the fact, particularly when dealing with an eminent lawyer, that what is meant by the word "appeal" in different contexts could be thought to mean different things. So I would like to proceed on the basis of what the Government believe they mean.

The debate in the area can become systematically and semantically confusing. Industry parties sometimes refer to what we term "appeal by way of a rehearing" as a full appeal on the merits. To avoid confusion, I want to describe what we are providing as an appeal by way of a review on the merits to distinguish it from an appeal by way of a rehearing and to avoid the language of a full appeal on the merits, one of the points made by the noble Lord, Lord Jenkin, in his submission about what it might or might not be appropriate to do.

I also want to deal with one or two other definitions which have come up in your Lordships' debate on the Bill on a few occasions and which I, with the greatest respect, feel could do with a little more definition as well. We have all, on all sides of this debate, referred to the desirability of transparency and, in the course of today's debate, particularly to accountability. I am aware that much of what I will have to say will also deal in a slightly more elaborate way with the concept of proportionality—that any action should be in proportion to the risk and that the penalties should be in proportion to the harm done. Otherwise, I fear we will be looking at processes in a way that could lead to a far greater than proportionate response and, of course, part of our debate is about whether it is proportionate or not. For those reasons, I prefer the clarity.

I also hope that what I have to say will bear on consistency and targeting. If we are to talk about principles of good regulation, those are also important principles to observe as we try to construct a legal framework.

With that preamble, let me start with Amendment No. 131ZE. I am grateful to the noble Lords Opposite for this amendment; I am aware that the initial period of time in which to bring an appeal is something about which a number of parties in the industry have had real concerns. Many of those have been highlighted by the representations made this afternoon. In particular, the noble Lord, Lord Kingsland, has talked about the time that will be needed for a process, the time that will be needed for a full board consideration of such a process, and so on. I took careful note of all that he said.

I stress that our principal concern remains to ensure that the appeals process is proportionate—I defined proportionate a few moments ago—and does not introduce unnecessary regulatory uncertainty and delay. That benefits nobody. Generally, I remain satisfied that the timescales are suitable for the process we are providing. I am concerned that doubling the period in which it would be unclear to market participants whether a decision is to be subject to an appeal, as envisaged by the amendment, would unduly increase the degree of regulatory uncertainty to which I have just referred. However, I have concluded that we might usefully look again at the length of the initial period in which parties can make an application for permission to appeal to the Competition Commission. I therefore propose to take the matter away for further consideration and to come back to the question at Report.

I turn to Amendment No. 131ZE. This amendment to Schedule 22 would require Ofgem to publish its code modification decision, in a manner which is appropriate for bringing it to the attention of persons likely to be affected by it". The proposers will be aware that the processes for code modifications are currently laid out in the licence conditions relating to a particular code and the various codes themselves. Section 49A of the Electricity Act 1989 and Section 38A of the Gas Act 1986 require Ofgem to publish reasons for any direction or consent it gives in pursuance of a licence condition which includes code modifications. That matter was covered in part by our debates in the last meeting of the Grand Committee, which I believe noble Lords will find at col. 105 of the Official Report.

The reasons for Ofgem's decision are to be published in a manner such as Ofgem considers appropriate for the purpose of bringing the matter to the attention of persons likely to be interested. Pursuant to Section 49A(3) of the Electricity Act and Section 38A(3) of the Gas Act, Ofgem also sends a letter with a copy of the decision and Ofgem's reasons for the decision to every licence holder to whose licence or to whom the decision relates. Therefore, our view is that the amendment is unnecessary. The provision exists in legislation and, again, I urge noble Lords to look at those provisions in other legislation to satisfy themselves that the matters are covered and that my contention is a good one.

Amendment No. 131A relates to the provision of a special procedure for the exercise of the power contained in paragraph 14 of Schedule 22, which enables the modification of the time limits which apply for the purposes of appeals to the Competition Commission against decisions of GEMA under Clause 144. That power is limited to substituting different time limits for the ones in Schedule 22 and is subject to the negative procedure, as Members of the Committee will have observed. Amendment No. 131A would introduce a mandatory parliamentary consultation on a draft order before a draft statutory instrument could be laid before the House.

According to my recollection, we have already discussed this kind of provision on a significant number of occasions in this Grand Committee—on Amendments Nos. 119D, 144A, 146A and 146B. I do not believe that it would add a great deal to reiterate all the arguments from those previous debates this afternoon, beyond saying that paragraph 14 of Schedule 22 is far removed from the type of power for which Parliament has considered that a special procedure should apply.

We believe that the Competition Commission review of the regulator's decision, which I have described, strikes the right balance. The Government's concern throughout has been to find a proportionate appeal mechanism. That requires increasing accountability for code modification decisions without undermining the independence of Ofgem as a sector regulator or introducing undue regulatory uncertainty or delay. The appeals mechanism provided for in the Bill is a proportionate policy solution. I shall say a little more in due course about how the mechanism compares with judicial review and why the process is different for licence condition appeals—all matters which, quite properly, were raised.

I now turn to the amendments concerned with the categories of people who can appeal. Amendments Nos. 131ZA and 131ZB seek to replace the requirement for appellants to be parties "materially affected" by a decision with a lesser requirement that they be parties, with a sufficient interest in that decision". The parties here may be legal persons or bodies representing them, such as Energywatch. Indeed, a number of other possible examples are cited in the Explanatory Notes.

I am aware that some within the industry are concerned that "materially affected" represents too narrow a test. I hope that I can use this opportunity to allay some fears on that point. While it may be a matter for the Competition Commission to consider whether a party bringing an application is "materially affected", we envisage that, in the case of the appeals process, it will include industry participants who are parties to the codes and it could include groups of consumers or even, conceivably, major individual consumers.

I find it difficult to imagine what additional parties the proposers would hope to allow to appeal, but if any were to emerge the Competition Commission would be able to decide whether they met the test. It follows that, in our view, this amendment is unnecessary. The formulation as drafted in the Bill is a proportionate solution. The proposition is a disproportionate solution.

Amendment No. 131ZD seeks to require the Secretary of State to consult the parties to the codes which we intend to be within the scope of appeals before making any orders under this section of the Bill. I agree with the proposers that it is right that the Secretary of State should consult parties to these codes. However, such persons would be caught by the existing requirement for the Secretary of State to consult, such other persons as he considers appropriate". The amendment is therefore unnecessary.

I turn to the important issue of the scope of the appeals mechanism and the role that the Competition Commission will play. I have already made one brief comment on the matter. Noble Lords may be aware that this is an area of considerable interest—and for very obvious reasons—to the industry. There are differences of opinion between industry players about the issues. While some are pressing for a much broader right to appeal than we are providing, others do not agree with that broadening. Centrica, for example, is opposed to broadening the scope of the appeals process and has indicated that it is "fully supportive" of the provisions as drafted. National Grid Transco has taken a similar position. There is no unanimity about the process in that sense.

I intend to address the various amendments relating to this issue before setting out the Government's thinking and the way forward. I propose to address Amendments Nos. 131ZC and 131B together as they are designed to work in unison.

Amendment No. 131ZC would require appellants to set out the detailed grounds for their appeal in their application for permission to appeal. Amendment No. 131B would remove subsections (3) and (4) of Clause 146 which set out what evidence the Competition Commission may have regard to when determining an appeal and grounds on which it may find that a decision was wrong.

The joint effect of Amendments Nos. 131ZC and 131B would be to mirror the provisions in the Communications Act, a point that was made to us. The effect would be that the appeals process might in some cases amount to a rehearing. On the basis of the amendments, it is hard to see that it could lead in another direction. This would broaden the scope of the appeals process unacceptably and introduce an unacceptable level of regulatory uncertainty and delay. We do not consider that to be an appropriate approach here.

Amendment No. 131C seems to be designed to achieve a similar end to Amendments Nos. 131 ZC and 131 B. I should apologise for the alphabet soup. I hope that everyone can follow it; it appears to be trying to do the same thing by a different route. I would add that an additional ground for appeal would significantly widen the potential scope of the appeals process. Again, I do not consider the amendment to be appropriate as it would introduce an unacceptable level of regulatory uncertainty and delay, and that cannot be a proportionate solution.

I turn to Amendment No. 132. I am aware that this amendment appeared before some of the earlier ones and therefore I want to try to reflect on it with some care as it may have implications for amendments that appear later.

The amendment would add an extra ground on which a code modification could succeed. It is proposed that an appeal might succeed where a decision was, so unreasonable that no reasonable regulator would make it". That is what is known as "Wednesbury unreasonableness"—from the case in which it was defined.

I assure Members of the Committee that it is intended that, were Ofgem to act with "Wednesbury unreasonableness" in reaching a decision, an appeal against that decision should succeed. The provisions are designed to allow for a review of Ofgem's decision, and one way in which an applicant might succeed would be by showing that, no reasonable regulator would have taken such a decision". However, I should say to the noble Lord, Lord Jenkin, that his amendment has given us occasion further to examine whether the provisions as drafted could usefully be clarified. That is why I made the point, without commitment, to think about the matter in terms of some of the amendments that came later. I am aware that there may still be a lack of clarity as to exactly what form of appeals mechanism is being proposed here. I take this opportunity to clarify what the Government intend and to explain why we believe that our provisions strike the right balance. However, we shall consider whether to table a government amendment on Report to ensure that the policy intention is as clearly expressed as it can be.

The Government's concern in this area has been to find a proportionate appeals mechanism, reflecting industry concerns in consultation responses that the mechanism would need to strike the right balance. The mechanism, as drafted, is intended to do just that. It provides for an appeal by way of a review of the decision of Ofgem on its merits but it falls short of providing for a full rehearing or investigation of all the issues by the Competition Commission. The Competition Commission will review Ofgem's decision against the objectives of the code in question and Ofgem's statutory duties, as well as reviewing whether the decision was correct in fact and in law.

Clause 146 provides that the appeal can be allowed if the Competition Commission is satisfied that a decision was "wrong" on certain specified grounds. The word "wrong" here is significant as it reflects the fact that the Competition Commission should adopt the same approach as would, for example, the Court of Appeal in hearing an appeal against a decision of a lower court. In that situation, the civil procedure rules which govern procedure in our civil courts make it clear that the appellate court may intervene when a lower court has made a decision which was "wrong". Those rules go on to elaborate what it means for a decision to be "wrong" by reference to various decided cases—in particular, the House of Lords case of G v G in 1985.

In relation to the exercise of discretion by the regulator, it means that Ofgem is able to set its policy in order to reach decisions hut, in circumstances in which it chooses from a number of possible options to implement its policy, the Competition Commission will be able to review those options. If the Competition Commission considers that in relation to the exercise of a discretion by Ofgem there is a permissible approach different from the one taken by Ofgem, then, before the Competition Commission can hold that Ofgem had erred, it must first ask itself two questions. It must ask itself, first, whether the other permissible approach is better and, secondly, whether the difference between its view and that of Ofgem falls outside the boundaries of reasonable disagreement. The Competition Commission can say that Ofgem's decision was "wrong" only if it satisfies both those criteria.

The Competition Commission will therefore look at the substance of the decision and not only at the process by which it was reached. That was one of the key burdens of the points put forward in Committee today. It should be clearly understood that there is no matter on which Ofgem has discretion to review a code modification that will not fall within the scope of the Competition Commission's powers of review. However, the Competition Commission will not hold a rehearing requiring it to rework all the analysis. That would add substantially to the length of the process and introduce an unacceptable level of regulatory uncertainty and delay.

It will be clear to your Lordships from this analysis that what we intend therefore is a tailored appeals mechanism. It is different from judicial review, which does not allow a review of the merits of the decision in the manner proposed here. It is also different from a full rehearing of the case, such as is possible within the scope of the provisions in the electronic communications sector. It is a tailored mechanism, and we believe that it should be a tailored mechanism. I am confident that it will suit the purpose for which it is designed. That is why I mentioned the kinds of criteria at the beginning that should be applied, including consistency.

However, on re-examining the provisions in the light of the noble Lord's amendment, we have concluded that the provisions as drafted could be usefully clarified to make more explicit what we intend. I therefore wish to agree to consider Amendment No. 132 with the provision I have made about amendments that have arrived subsequently and examine whether an alternative formulation would better express the policy intention I have described. But I hope that noble Lords will feel—and I apologise for the length in setting the issue out—that the objectives are ones that have been put to us. In that light, I hope that the amendments can be withdrawn.

4.30 p.m.

Lord Kingsland

I thank the noble Lord for his thorough response to the submissions I made in my opening speech. As far as concerns Amendment No. 131ZE—the amendment that deals with time limits for appeal—the Minister was kind enough to say that he would go away and reflect on the matter between now and Report. I should like to say how grateful I am to the noble Lord for responding in that way. He reflected on the importance of proportionality in procedural as well as substantive matters. I, of course, agree with him; but I hope that he will reach the conclusion between now and the Report stage that, after mature consideration, the principle of proportionality is not properly respected by a time limit of a mere 10 days.

Secondly, the Minister dealt with Amendment No. 131ZF, the amendment that refers to publications. He argued, with considerable force, that the amendment was unnecessary. The provision contained in the Bill is a common provision, used in other legislation; and as far as he could recall no problems had arisen in those respects. I shall go away and look at the examples he cited and reflect on whether I should return to the matter on Report.

As far as concerns Amendment No. 131A—the amendment that deals with the modification of time limits by negative order—I am hound to say that the amendment is important to us because of the very restrictive approach the Government have taken in the Bill. Had the Government been more balanced in the way they approached the time limit issue in relation to appeals, we may have been less concerned about the fact that those time limits could be altered by negative order. In other words, our concern that even tighter time limits might follow from those already in the Bill is to some degree reflected in our amendment on the negative order.

On Amendments Nos. 131ZA and 131ZE—the amendments which relate to the parties affected—I drew some comfort from the Minister's statement, on the record, that the parties envisaged would include industrial participants, who are parties to the code, groups of consumers or major individual consumers. That is a helpful response. I am grateful to the Minister for that. In the light of that response, between now and Report stage I shall reflect on whether it would be appropriate for me to re-table the amendments in their existing or in some other form.

I turn to Amendment No. 131ZD, the amendment which draws the Committee's attention to the issue of consultation. The Minister said, in effect, "What are you worried about?". The clause in the Bill is cast very widely. That is precisely why I am worried about it. A clause cast too widely can often be as dangerous, or more dangerous, to the individual as a clause cast too narrowly. The concern here is that the degree of discretion given is such that it would be extremely difficult to pin a public authority down in any legal action if it were exercised in an irresponsible way. I have heard what the Minister says and I shall also think again about the amendment before Report stage.

I now turn to what I believe we all consider to be the most important amendments in this group: those concerned with the definition of appeal. The Minister helpfully reflected aloud on what the Bill intended to achieve. If I understand him correctly, he said that it was more than judicial review but less than a full rehearing on the merits. He used the expression "a tailored approach"; others might call it a half way house or a one third of the way house or a three quarters of the way house between judicial review and a full rehearing. The Minister was also kind enough to say that he will reconsider the text of the Bill between now and Report stage to see whether or not the tailored approach that was sought to be achieved in the Bill reflects exactly the position the noble Lord seeks on the spectrum between judicial review and a full rehearing.

I am grateful to the noble Lord for saying that and we shall look with interest to see what emerges at Report stage. I have two reflections in conclusion. The first one is that we still need from the Government to hear what it is about this Bill, and the appeal procedure contained in it, that makes it different from the appeal procedure contained in the Communications Act. Why is the gas and electricity industry different from the communications industry? Why are the appellant's rights so much weaker in the gas and the electricity industries than in the communications industry?

My second point is simply that if the Minister looks at what is in the Bill, I think it is fair to say that, on a reasonable construction of its words, he will conclude that what is in the Bill is less than judicial review. The statutory procedure is even narrower than judicial review. If I am right about that, I should be confident that at Report stage we shall see some different words in the Bill from those that we see now.

4.45 p.m.

Lord Jenkin of Roding

Before my noble friend withdraws the amendment, I should just like to say that I am most grateful for what the noble Lord, Lord Triesman, said about my amendment. With my noble friend Lord Kingsland, I look forward to seeing what the Government produce on Report. I would also ask the noble Lord, Lord Triesman, to make no apology for the length of his response. It is a hugely important matter, and I thought that he dealt with it extremely effectively. But, of course, the proof of the pudding will be in the eating at Report stage. I am most grateful.

Lord Kingsland

Now, with a degree of confidence, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[[Amendments Nos. 131ZB to 131ZD not moved.]

Clause 144 agreed to.

Clause 145 agreed to.

Schedule 22 [Procedure for appeals under section 144]:

[Amendments Nos. 131ZE and 131ZF not moved.]

Lord Whitty moved Amendment No. 131ZG:

Page 235, line 42, leave out "and"

The noble Lord said: Amendments Nos. 131ZG and 131ZH seek to correct some minor inconsistencies in Schedule 22. We are grateful to Energywatch for having alerted us to this. At present the category of persons who are required to be informed of an original application to appeal, and those who are required to be informed of a decision by the Competition Commission as to whether or not to grant leave, are differently expressed. These two amendments simply bring those two in line.

Amendment No. 131ZJ, the third amendment in this group, also seeks to correct an additional inconsistency in the appeals provisions. In the Bill as drafted, Ofgem is given a right to override a decision by the Competition Commission to "stop the clock" while an appeal proceeds if it would impact on security of supply. However, our intention is to exclude from the whole appeal procedure—for which we will use the secondary order provisions in Clause 144—decisions which relate to security of supply or become so during the course of the appeal. Therefore, this provision is redundant, and the amendment will remove it. I beg to move.

On Question, amendment agreed to.

Lord Whitty moved Amendments Nos. 131ZH and 131ZJ:

Page 235, line 43, at end insert "; and (c) to each person who was sent a copy of the application in accordance with sub-paragraph (7).

Page 237, line 29, leave out sub-paragraphs (6) to (9).

On Question, amendments agreed to.

[Amendment No. 131A not moved.]

Schedule 22, as amended, agreed to.

Clause 146 [Determination of appeals]:

[Amendments Nos. 131B to 132 not moved.]

Clause 146 agreed to.

Clauses 147 to 149 agreed to.

Lord Whitty moved Amendment No. 132ZA: After Clause 149, insert the following new clause—

"MEANING OF "HIGH VOLTAGE LINE"

(1) In subsection (1) of section 64 of the 1989 Act (interpretation of Part 1), for the definitions of "high voltage line" and "low voltage line" substitute—

"'high voltage line' means an electric line which—

1. (a) if it is in Scotland or is a relevant offshore line (as defined in subsection (1A), is of a nominal voltage of 132 kilovolts or more; and
2. (b) in any other case, is of a nominal voltage of more than 132 kilovolts, and 'low voltage line' shall be construed accordingly;".

(2) After that subsection insert

"(1A) An electric line is a relevant offshore line for the purposes of the definition in subsection (1) of 'high voltage line' if—

1. (a) it is in an area of the territorial sea adjacent to the United Kingdom or an area designated under section 1 (7) of the Continental Shelf Act 1964; and
2. (b) it is used—
1. (i) to convey electricity to a place in Scotland; or
2. (ii) to convey, to any other place, electricity generated by a generating station that is situated in an area mentioned in paragraph (a).""

The noble Lord said: I beg to move.

The Duke of Montrose

I understand that Amendment No. 132ZA is about the meaning of a high voltage line. Is the provision intended to bring the Scottish 132 kilovolt lines into the Transco network? Is this the clause that will allow Transco to take over the Scottish 132 kilovolt lines?

Lord Williams of Elvel

I understood that this amendment had already been debated. If I am wrong, then I am wrong. However, if it has already been debated, then I do not think that the noble Duke is in order.

Baroness Carnegy of Lour

I beg to differ. We are told that anyone can speak to any amendment on the Marshalled List. My noble friend asked a question and it is one that I should like to ask, too. We must be absolutely clear about what happens in this matter. I want to be clear about it because those of us who are not professionals in the electricity industry—I do not believe that the noble Lord, Lord Williams, is one either—find it difficult to follow what the Government are doing in relation to the proposals that we have heard from various parts of the industry. Can the Minister confirm that here the various categories of lines are being brought into line and that the 132-kilovolt lines can be counted as transmission? Does that apply all over the country and does it meet the submission made by the Scottish generators?

Lord Whitty

It is difficult to relate this matter to the part of the Bill to which it refers, but we are dealing with offshore transmissions here. As the noble Baroness knows, there is a difference between the voltage in Scotland and that in England and Wales. Without referring to the original text of the Bill, the amendment defines the somewhat different situation in Scotland.

The Duke of Montrose

Perhaps the Minister could write to me about that matter. With regard to the high voltage lines, the amendment states, if it is in Scotland or is a relevant offshore line". Therefore, it seems to apply to both.

Lord Whitty

I had better undertake to write to the noble Duke.

On Question, amendment agreed to.

Lord Jenkin of Roding moved Amendment No. 132A: After Clause 149, insert the following new clause—

"APPLICATION OF RENEWABLES OBLIGATION TO COAL MINE METHANE

For the definition of "renewable sources" in section 32(8) of the 1989 Act, substitute— "renewable sources" means sources of energy other than fossil fuel or nuclear fuel, but includes—

1. (a) waste of which not more than a specified proportion is waste which is, or is derived from, fossil fuel; and
2. coal mine methane;

coal mine methane" means methane vented from abandoned coal mines".

The noble Lord said: I hope not to take too long in moving this amendment, but the Minister will recognise that some history relates to this issue. The methane that escapes into the atmosphere from abandoned mines as a result of what I believe is now recognised as microbial degradation seeps up through faults and cracks in the earth and poisons the atmosphere. The question is whether that gas should receive the special treatment awarded to other forms of methane escape—for example, in landfill—and qualify for support through the renewables obligation.

I believe one has to start from the proposition that coal mine methane is a hazardous waste gas. It is possible to exemplify that by reminding noble Lords that it is not so long since a small town in Derbyshire—Arkwright Town—had to be demolished because it had become uninhabitable as a result of coal mine methane escaping into the surrounding atmosphere. It is also recognised as hazardous because housing in many areas—in particular, in mining areas—is still blighted by coal mine methane. That issue must be dealt with. If one compares it with, for example, the fuss that was made some years ago about the problem of radon in ordinary dwellings—I suspect that that was many, many times less hazardous than the methane which escapes into the atmosphere from abandoned mines—I believe one can make a case for saying that it must be dealt with.

In addition, dealing with coal mine methane would be entirely in accordance with the Government's overall environmental objectives. Such methane has what I might call a "global warming potential" 23 times greater than carbon dioxide. That has been well established and is not challenged by anybody. Therefore, if this waste gas can be captured and used for generation, it cuts its global warming potential—its GWP—by more than 100 per cent. It saves nine times more CO₂e equivalent per kilowatt hour than is generated by wind power. I shall come hack to that point in a few minutes.

Coal mine methane is therefore a clean, strategic source of energy with the potential to contribute perhaps up to 450 megawatts of generation capacity by 2010, the equivalent of hundreds of large wind turbines.

In this country, investment in capturing and using coal mine methane is virtually on hold. In contrast, the German Government fully support this new carbon mitigation technology and the industry there is now booming. There is investment; it is expanding; the methane is being captured; and more than 120 megawatts of power is now already in store there, using CMM.

An extension of the renewables obligation from 10.4 per cent to 11.4 per cent would help the Government to meet their target and help a struggling industry which was, at one time, recognised by Ministers as a viable infant industry. It is the sort of industry we ought to be dealing with to establish our position here and to deal with a very real problem.

Over the past two or three years, this case has been made to many noble Lords and Members of another place by the very active body, the Association of Coal Mine Methane Operators. I took it upon myself, some two or three years ago, to establish a small, all-party group in this House to see Ministers and make the case. The noble Lord, Lord Ezra, was a very distinguished member of that group. Two other members are, sadly, no longer with us—Lord Hardy of Wath and Lord Dormand of Easington. Both came from coal mine areas and both knew very much what they were talking about. I was very grateful to have their support.

We went to see Ministers at the DTI—Brian Wilson was then the Minister for Energy. We went to see Ministers at the Department of the Environment—in particular, Michael Meacher. Neither of those Ministers are still in that position. I eventually went to see the Chief Secretary to the Treasury—pulling rank, in a sense, because it was a job which I held about 20 years ago—and Paul Boateng was very kind in seeing me.

All those Ministers had one thing in common—they expressed a very keen desire to help. They appeared to recognise the strength of our case and each, in respect of their own responsibilities, was concerned to make it clear to them and, in some cases, to their officials, that this needed to be done. Indeed, when we went to see Michael Meacher and said that coal mine methane ought to be brought within the emissions trading scheme, he apologised to us that it was even necessary for us to come and make that case. However, nothing has happened, with the exception of the Treasury agreeing to exempt coal mine methane from the climate change levy. As I put it at a meeting of the ACCMO a little later, that was one down and two to go. There is no proper incentive to develop coal mine methane such as the renewables obligations will provide, and there is as yet no access for coal mine methane operators to any of the emissions trading schemes.

This really is a disgraceful state of affairs. It is also completely illogical. My right honourable friend Kenneth Clarke when he was Chancellor of the Exchequer established the regime for landfill gas—that is, methane. The landfill arrangements—the tax and all the other arrangements that go with it—are now an integral part of the public arrangements for dealing with energy and escaping gas. That is something which needed to be built on. But when we pointed out on the Floor of the House to the noble Lord, Lord Sainsbury, who at that stage was still answering questions about energy, which at the moment he does not seem to do—the noble Lord, Lord Ezra, will remember this—that the Germans had had no difficulty in extending their renewables obligation to coal mine methane, he said that we would not be so stupid, thereby both disappointing everyone in the House and insulting the Germans.

It was an extraordinary decision that something which another member of the Community felt perfectly able to do was apparently impossible for us to do. It is completely illogical that methane captured from landfill sites and sewage farms was included in the renewables obligation while chemically identical methane captured from abandoned coal mines was excluded.

Another point, which I think the Chief Secretary recognised when I met him, is that an increased renewables obligation would cost the Treasury nothing and add less than 0.6 per cent to consumers' electricity bills by 2010. Contrast that with the position of methane captured from working collieries. This was given a £21 million subsidy in the UK emissions trading scheme incentives auction. For some reason, coal mine methane from abandoned mines was excluded by the department of the noble Lord, Lord Whitty.

At the draft stage of the DTI independent consultants' study into support for CM M, the conclusion was that including this waste gas in the renewables obligation was the best method. I understand that when the report comes to be published, that recommendation from the independent consultants is due to be excised.

The inclusion of CMM in an increased renewables obligation is supported by the Renewable Power Association, the Welsh Assembly, several of the regional development agencies and, as I said, a cross-party coalition of noble Lords and Members of another place.

Three years ago in 2001, the British industry in this area was well ahead of the Germans. It has now fallen behind and is stagnating. One has to ask, is this yet another case of British technology with a world-wide lead being overtaken by overseas competitors because of a lack of support by officialdom in this country?

I think there is an overwhelming case that coal mine methane should benefit from the renewables obligation. I am tempted to guess why it is that Ministers can express such huge support for this proposition when we go to see them but still fail to do anything about it. I believe the reason is that they see—as with combined heat and power, which is another similar example—it as impinging on their targets for wind energy. Noble Lords may not have had the chance to read the recent report that I believe was published just before the weekend on renewable energy. I am sure that the noble Lord, Lord Whitty, will have seen it. The report states just how difficult it will be for the Government to achieve their renewable energy targets, not just by 2010 but by 2015 and beyond. It also talked about the innumerable steps that now need to be taken if those targets are going to be met. I can well understand the attraction of an argument put to Ministers—

[The Sitting was suspended for a Division in the House from 5.6 p.m. to 5.16 p.m.]

Lord Jenkin of Roding

I was drawing my remarks to a close. It seems to me that I am fated to be interrupted. My peroration disappears into the ether along, no doubt, with a lot of coal mine methane. But perhaps I may just finish my remarks. I was trying to explore the possible reasons for there appearing to be such resistance within Whitehall to the extension of the renewables obligation for coal mine methane. I suggested that one reason was the extent to which it achieved the CO₂ objectives and would draw off some of the renewables obligation money, thus impacting adversely on wind power.

I have received a comment on this issue from a director of a consulting firm, who writes: We have found the DTI privately sympathetic but reluctant to apply the resources needed to carve out CMM from the exclusions from the scheme. Internal lawyers became concerned that precedents may be set that might allow CBM or normal gas production to seek ROC accreditation". Pausing there, I regard that as rubbish. A very specific thing is being asked for here and it has been consistently asked for by the all-party groups in both Houses—coal mine methane from abandoned coal mines. The note continues: We proposed a number of solutions to these points (eg restrict the exemption to abandoned mines/historic mining areas as per your amendment)"— that is, the amendment that I am moving— but found the DTI lacking in resolve to make the required effort". My correspondent goes on to say: I hope that, with your help, we will at last achieve the fair result that will put CMM (coal mine methane) on a par with Landfill Gas". In their energy White Paper, the Government set as their central target the reduction of CO₂ emissions in order to play a part in resolving the global climate change problem. Therefore, I simply do not understand why they find that they cannot give such an emission, which is 23 times as damaging as an ordinary CO₂ emission, the necessary help to make the industry effective in this country. I beg to move.

Lord Ezra

I have much pleasure in supporting Amendment No. 132A, so effectively moved by the noble Lord, Lord Jenkin of Roding. I have had the pleasure of sitting on the joint group of Peers, which he has led for some years and which promotes this concept. Like him, I was much impressed by the way that the Ministers, whom we met, accepted the case. But, as soon as the case went into the back office, somehow or other the validity which the Ministers saw in it disappeared.

I am as perplexed as the noble Lord, Lord Jenkin, is and as, I am sure, are most noble Lords in the Grand Committee as to why there is this rearguard action to prevent such a desirable activity being pursued. Here we are talking of the escape of a really lethal gas, far more lethal to the environment than CO₂, which could easily be dealt with—and that is being dealt with under the larger schemes. But there are now a number of smaller schemes, which, without specific support, cannot go ahead, but in aggregate would amount to a good deal of CO₂ reduction. The case of Germany stands out, as that country has forged ahead, and British firms in the sector, disappointed at the lack of support in Britain, have moved there to develop their interests.

It is incumbent on Ministers, unless they are prepared to accept the amendment, to let us know what lies behind the Government's objections to it which seem totally contradictory to their environmental policy as set out in the energy White Paper. We should be quite clear what the reasoning is. The case for doing what is suggested is so compelling and the cost for doing it is so small, that it is very difficult to see how objections to the amendment can be sustained.

Lord Whitty

Noble Lords have made a strong case for regarding coal mine methane as something that could positively contribute to an energy policy. Indeed, there are aspects of government policy that already support that, and others that we are considering. What Noble Lords have not made the case for, and what is the basic objection to the amendment, is for coal mine methane to be treated as a renewable. It is not a renewable but a gas extracted from a fossil fuel. There is an argument about displacing support for other renewables, but there is also a legal and definitional point that we would not be able to obtain state aid approval, which would include the recycling of the fossil fuel fund, to support a technology under the renewables obligation, because it is not classified as a renewable under the renewables directive. There are both common-sense and legal reasons why we cannot regard coal mine methane as a renewable.

The Government certainly recognise and value the benefits that coal mine methane provides through the tapping of emissions from abandoned and working mines and putting them to beneficial use. The Government have already demonstrated their support for that through the exemption from the climate change levy in last year's Budget, to which the noble Lord, Lord Jenkin, referred. That was approved by the European Commission and came into effect on 1 November. The energy White Paper also accepts the need to control CMM emissions and promises that we shall work with the industry and relevant environmental organisations to ensure that is done effectively. To that end, the DTI has commissioned a study to see whether any possible market mechanisms would be consistent with the aims of the White Paper and could be deployed to control the emissions. That study will report soon.

The fact remains that coal mine methane cannot in the normal sense be regarded as renewable. Even when used for power generation it still emits carbon dioxide. so it cannot be said to be a clean fuel, although it does have advantages in relation to direct burning of carbon. However, it cannot be classified as a renewable fuel.

The experience in Germany has been referred to. The German approach to coal mine methane is not one that we or other member states are seeking to follow, for the very reason that it effectively treats methane as a renewable, but not a renewable under the terms of the renewables obligation. The feed-in tariff, which is the mechanism used in Germany for support of coal mine methane, is not state aid as the renewables obligation is regarded as being, specifically with regard to the recycling of the buy-out fund.

There are also difficulties with the trading scheme, to which the noble Lord, Lord Jenkin, also referred. With regard to a working mine, the amount of methane emitted can be measured and the benefit can also be measured. However, there is no measurable benefit from abandoned mines. While working mine methane is measurable, that would provide a basis on which to quantify the improvement in and the contribution to carbon saving through the emissions trading scheme. In addition to the DTI study to which I referred earlier, Defra has commissioned a separate study to determine a baseline for methane emissions which could enable coal mine methane to qualify for the emissions trading scheme and hence for the industry to receive a value for the emissions avoided through their use within the trading scheme context.

We are aware that the argument made by the industry for extending the renewables obligation has been made very forcefully and very frequently. However, as the energy White Paper emphasised, the renewables obligation has a specific aim—to develop long-term, carbon-free generation technologies to the point where they become economically viable in their own right. Offering the obligation more widely risks undermining that longer term objective. To extend it specifically to methane extraction would be difficult to justify since you would then have to make a further calculation regarding how much methane leaks naturally and how much is extracted by the process of recovery which would not otherwise have been emitted. That form of measurement, which would feed back into the baseline of the calculations for the trading scheme, is also covered by the study commissioned by Defra.

However, the basic objection—as opposed to any great conspiracy theory—to not using this mechanism to support the coal methane industry is that in no circumstances, either in logic or in law, could coal mine methane be regarded as a renewable fuel. There are, of course, safety issues, to which the noble Lord referred when he mentioned the Arkwright coal mine, which have to be taken into account by those responsible for such issues and for environmental controls, principally under the heading of health and safety. However, the environmental benefit of coal mine methane will not be able to be supported through its inclusion in the renewables obligation. There may be other ways in which we can support it, but not that way.

Baroness Byford

I am grateful to the Minister for his response to my noble friend's amendment but I am very puzzled. The Minister clearly said that at the end of the day it comes down to money and what money is allowed or is not allowed, and that the measure—I believe that I interpret him correctly—would fall foul of the state aid rule if we applied it in the way that my noble friend wishes. Therefore, my question to the Minister is, how does Germany do it? Why can Germany do something but we are not allowed to do it? We are all in the same Community battling under the same rules. I am absolutely intrigued by the matter.

The Minister said that the DTI has commissioned a study that will report soon and that Defra has also commissioned a study. How soon will those reports be published and what kind of information can we expect from them? My initial reaction is that I should have thought that what applies in one country would apply in another. I am very confused.

5.30 p.m.

Lord Whitty

Germany is not operating under the renewables obligation to support the methane industry.

Baroness Byford

Even so.

Lord Whitty

In order to benefit from the renewables obligation, we have to specify technologies that are specified in the renewables directive. That is not the way that the Germans are supporting the coal methane industry. They are doing it by means of a system which they refer to as a "feed-in tariff", which results in favourable pricing of the methane connection into the system. However, the German scheme does not include coal mine methane under a renewables obligation. That is no different. That is what would fall foul of the state aid rules, from which support for renewables has to have an exemption. It can only be those renewables that are referred to in the renewables directive.

Lord Dixon-Smith

I can understand the distinction which the Minister is drawing. If the renewables obligation defines technologies, I can understand why that is not a route we can use. However, why can we not use the route that the Germans use—which, although it is obviously outwith that, appears to be acceptable?

Lord Whitty

This may not be an entirely satisfactory answer, but the bit of the renewables obligation which would benefit coal mine methane concerns recycling of the fossil fuel fund. By any definition, that is clearly state aid. The feed-in tariff is not state aid because effectively no money is forgone or provided to the coal mine methane sector. Therefore, it does not fall foul of the state aid obligations.

Lord Williams of Elvel

I have listened very carefully to the debate and I feel that noble Lords opposite have a point. Why can we not do what the Germans do regardless of the renewables obligation?

Lord Whitty

Even if we could do what the Germans do, that is not what this amendment says. This amendment is calling for its use. So even if I accepted my noble friend's strictures on this, I could not accept this amendment. We would therefore have to return to the issue, as I suspect we will do in any case. However, tariff structures—unlike a straight payment—are not part of the normal definition of state aid.

The DTI is looking at the various options and other matters related to coal mine methane. That report should be available in a couple of months. The Defra reports will take slightly longer. We shall have to see whether the DTI report throws any light on this issue. Either way, I think that this amendment is ruled out in relation both to logic, as coal methane cannot really be regarded as a renewable, and to the legal provisions under state aid rules.

Baroness Miller of Hendon

It may very well be that Amendment No. 132A does not meet the definition of renewable obligation and the other points which the Minister mentioned. It may well be that we cannot do what the Germans seem to do. However, the Germans have gone right ahead with their industry in this way, while we are still thinking about it. The DTI is still thinking about ways that it can make it happen. The report may come out in two months, but it may not cover this particular matter.

I think that the Minister needs to go back and talk with his officials to see whether something can be done. I am quite certain that my noble friend will put his thinking cap on and find a way which is acceptable on Report. However, it would be far better if the Minister could persuade the DTI to think about how the Germans can do it. If they cannot do it within the next couple of weeks, I very much hope that they will be able to provide an answer before the Bill goes to another place for consideration there.

Lord Ezra

It seems to me that we must pursue this matter; we cannot simply leave it there. I am not convinced by the argument that this is not a renewable source. The coal reserves in this country are virtually unlimited. Be that as it may, if this is not the route to take, I believe we must seriously consider some other route and bring forward on Report something approximating the German system, which apparently does not encounter the resistance which the Government feel our amendment would meet.

Certainly, we cannot miss the opportunity provided by the debates on this Bill while we wait for these leisurely inquiries. After all, we have now been looking into this matter for a number of years. If the Government are really committed to a future with a low-carbon economy in Britain—no one is talking about a non-carbon economy; that is impossible—then this particular proposition, which would make use of colliery methane, would certainly contribute to that, and I believe we must seriously consider that option. I await with interest what the noble Lord, Lord Jenkin, has to say on the matter.

Lord Whitty

Before the noble Lord rises to speak, I should point out that under the climate change levy system we have provided for an exemption for methane, recognising the kind of benefit to which the noble Lord, Lord Ezra, refers. That has also been cleared by the European Commission and it does something which the Germans do not do. Therefore, we all have our different ways of approaching this matter and it is not necessarily the case that, just because the Germans are operating it, we should do exactly the same.

Lord Jenkin of Roding

In the mean time, firms that have been working on extracting, trapping and using coal mine methane in this country are now emigrating to Germany. That is what they are doing. A few of the big ones may still be here but all the rest are deciding that, if they are to develop and use this technology, they must go to Germany.

I should have found the Minister's reply mildly more acceptable if he had shown one iota of sympathy for the case that has been made. We have found—the noble Lord, Lord Ezra, will endorse this—that, in private, Ministers tell us that they have every sympathy with the case that we have made. However, every time a Minister stands up in public, as the noble Lord, Lord Whitty, has done this afternoon, he virtually bans it.

As my noble friend Lady Miller of Hendon said, we await the reports, which may or may not be made before this Bill is enacted. However, that is not good enough. Here is a way in which the Government could hit directly at their CO₂ target—the central thrust of the energy White Paper. The renewables are a means to that end; they are not an end in themselves. The reduction of CO₂ is the end to be achieved if we are to have an impact on climate change. Here is an equivalent source of CO₂ which could be trapped and used and which would make a marked contribution to that struggle, yet nothing has been done.

In a sense, the climate change levy was a sop. It removed a minor disincentive—that is all. However, any effective encouragement to the industry, such as the renewables obligation or, as we heard in a number of our submissions to Ministers in meetings, the equivalent of a renewables obligation—that is, something of the same value but without the tag "renewable"—is absent. Indeed, even since then, work has been carried out which establishes, I believe beyond doubt, that what is left behind when a mine is abandoned are not finite pockets of gas but gas produced by a continuous process of microbial action on the coal. As the noble Lord, Lord Ezra, said, that lasts for hundreds of years and it will continue to be produced. It is not simply the case that, once the pockets have gone, that is the end of it.

What is the difference between landfill methane and that type of methane? I find this debate infinitely depressing. It will not surprise the Minister in the least to know that we shall certainly return to the matter on Report. We shall consider what he said about the apparent magic of the word "renewable", although, as I said, the microbial action is pretty well indefinite. We shall consider what the Minister said and return to the matter, and I know that I shall have support from more than one part of the House. I am most grateful for what the noble Lord, Lord Williams of Elvel, said in his brief intervention. When we return to the matter, I believe that the Minister will need to give a far better reply if he is to persuade the House not to accept our amendment. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Hendon moved Amendment No. 132B:

After Clause 149, insert the following new clause—

"PUBLICATION OF DETERMINATIONS

(1) Section 36 of the Gas Act 1986 (c. 44) (keeping of register) is amended as follows.

(2) After subsection (2)(d) insert— ( ) every determination made under any provision of this Act;".

(3) Section 49 of the 1989 Act (keeping of register) is amended as follows.

(4) After subsection (2)(d) insert— ( ) every determination made under any provision of this Act:".

The noble Baroness said: Both the Gas Act 1986 and the Electricity Act 1989 require the energy regulator, Ofgem, to maintain a register containing the details of every determination made by him in respect of a licence. This important requirement does not extend to determinations made by Ofgem under primary legislation.

Ofgem has extensive powers under both Acts to determine disputes. There are compelling arguments that the absence of a duty to publish such determinations is anomalous. This is particularly so in relation to Ofgem's statutory determination of disputes about standards of performance. Those powers arise under Section 33AB of the Gas Act 1986 and Section 39B of the Electricity Act 1989.

The formal significance of these determinations is evidenced by the fact that the legislation specifically makes them final and enforceable as if they were judgments of what used to be called a county court, and is now called a district court. Despite this, Ofgem is not obliged to publish its determinations, and does not do so.

This situation is not compatible with the principles of public access and regulatory transparency. It does not accord with the well known principle that if justice is to be done, it must be seen to be done.

This country does not subscribe to the idea of secret courts or secret judgments. It does not facilitate judicial consistency because, in these cases, Ofgem is acting in a quasi-judicial capacity. It does not enable the companies that are regulated by Ofgem to know what are the standards they will be required to follow, or whether they have been treated in the same way as other companies in the same position.

In other words, the present situation is not compatible with the principles of regulatory transparency and consistency to which Ofgem professes to aspire. There is nothing under the existing statutory regime which prevents Ofgem publishing its decisions and its reasons and making them available to both the two industries but also to customers who have a major interest in the enforcement of standards of performance.

Let me give an example of the need for publication of such decisions. In October 2002, there were widespread interruptions to electricity supplies following a major storm. Ofgem's determination of compensation affected many thousands of consumers. It required certain distribution companies to make substantial compensation payments. In the case of one company alone, it amounted to £1 million.

The provisions of this sort of determination should in future be available to other members of the industry and to the public as of right. As I have just said, there is nothing to prevent Ofgem publishing its decisions, but it deliberately does not do so.

This amendment will rectify that. I beg to move.

Baroness Miller of Chilthorne Domer

We support the amendment.

5.45 p.m.

Lord Triesman

The noble Baroness, Lady Miller of Hendon, is quite right: the current wording of Section 36 of the Gas Act 1986 and Section 39 of the Electricity Act 1989 gives the authority adequate direction on what should be placed on the register. Both the Electricity and Gas Acts give very specific directions about what should be placed on the register. On the one occasion when the authority was challenged, with regard to the information that had not been placed on the register, the judge made no criticism of the authority, as the relevant information had been drawn to the attention of the entire industry, in any case.

As the current set-up is clearly not failing, it is a little hard to see why it is necessary to make this particular change. This is a time when all of us—I suspect that we can count on all noble Lords on all sides of these discussions to agree with this point—are seeking to minimise the burden that legislation places on private and public sector entities. However, a blanket requirement of this kind would increase the amount of work imposed on the authority, which would be all right if there was a discernible benefit. I hope I am persuading noble Lords that in this case there would not be a discernible benefit.

At a later point in Committee we shall discuss better regulatory practices. The authority is fully signed up to being guided by them. The principles of better regulation themselves include the idea that one should legislate only where it is necessary to do so—a point that we have mentioned in several of our discussions—and that legislation should be specific and targeted. The phrases in the amendment, "every determination" and "any provision", rather suggest that there would not be the kind of targeting or specificity which would be most beneficial.

Overall, the requirements of the Gas and Electricity Acts for the authority to keep a register are expressed in broad terms. We believe that this approach delivers better results than if we were to be too prescriptive. The authority is committed to placing a wide range of public information on the register once such information is in final form. I believe that only the authority is in a really sound position to decide on that.

Of course, the register in itself would not, and should not, be the only method of finding out about the authority's decisions. The authority has a thorough process when it comes to ensuring that information is drawn to the attention of those affected. I was grateful to the noble Baroness, Lady Miller, for referring to the storms of 2002 because I believe that they provide interesting illustrations of what I mean. Determinations made after the storms of 2002 were put on the public register. These determinations were also provided electronically to everyone who requested them. MPs in every area affected by the storms of 2002 were also sent copies.

Requests for determinations are rare but, when they do come in, it is already the authority's practice to send out information to everyone who has requested it, although some information such as financial declarations is considered confidential and that is omitted. The complete determination is provided only to the parties.

While the current statutory requirement requires the authority only to make the contents of the register open for inspection, the practice of sending out the information is a good example of why we believe that giving the authority some discretion already produces very effective results. There seems no need for any driving force that would make us over-prescriptive.

I understand—this seems to me to be important—that no requests for determinations have ever been turned down. I hope that provides reassurance on the point. In practice the measure seems to work as the noble Baroness, from what she has said, would wish and I hope that she will feel able to withdraw the amendment.

Baroness Miller of Hendon

In a few moments I shall certainly withdraw the amendment. I shall read very carefully what the Minister said. I do not wish to waste the Committee's time but I do not see why two Acts are able to accommodate the provision that we are discussing while this Bill cannot. The mere fact that no one has asked about the matter does not mean that the measure is not necessary. I suggest that it is not unnecessary. If the relevant information is kept in the register, that is all right. It should not be too difficult to do that. However, having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 132C not moved.]

Clause 150 [Additional inspectors]

Lord Williams of Elvel moved Amendment No. 132CA:

Page 115, line 30, after "State" insert "or the National Assembly for Wales"

The noble Lord said: In moving Amendment No. 132CA I shall speak also to Amendments Nos. 132CB to 132CF. Members of the Committee will recognise that this is an appropriate day—St David's day—on which to move such amendments. I am unsure—I shall ask my noble friend to explain—whether St Andrew is also involved in this matter. I speak only for St David although Scotland may also be involved.

I shall recite the meaning behind the amendments. This part of the Bill is concerned with general regulations amending the Electricity Act 1989. That Act was passed before devolution, so Sections 36 and 37 and Schedule 8 to the Electricity Act 1989 have nothing to do with devolution. Part of my purpose is to ensure that the Bill becomes part of the devolutionary principle.

We are dealing with planning matters; we are not dealing with the production of energy. Perhaps I may take the Committee through the existing situation. If a generating station as defined in Section 36 of the Electricity Act 1989—this is not an issue of wind farms but of any generating station which makes an application—has an installed capacity of over 50 megawatts, it goes through a certain procedure and if it is under 50 megawatts it goes through another procedure. Under Section 37 high voltage overhead lines go through a more or less similar procedure.

What are those procedures? In Schedule 8 the procedures are defined as follows: if the local planning authority objects to the planning application for a fossil fuel station, a nuclear power station, a wind farm or whatever, the Secretary of State is obliged to create a public inquiry. On the other hand, if the local authority says, "It is all very well, it seems a good idea to have a nuclear power station in Ceredigion", or wherever, as long as it is 50 megawatts plus it will not go to the National Assembly for Wales, but straight to the Secretary of State. The National Assembly for Wales has absolutely no locus in this matter at all. That was shown in one famous incident of a wind farm on the Cambrian Mountains, but I shall not go into that. That went straight to the Secretary of State, who said, "That is fine; the Ceredigion county council has said that it is okay by them". I have no particular brief against the Ceredigion county council, but I want to illustrate to the Committee what happens when Welsh county councils are, for one reason or another, decisive in their view that they want a particular piece of machinery on their hills.

When we come to a public inquiry, the Secretary of State appoints an inspector: the National Assembly for Wales, which has no locus whatever, has nothing to do with it. So Clause 150 in the Bill proposes that Schedule 8 to the Electricity Act 1989 be amended to allow the Secretary of State to appoint the lead inspector in matters concerning Wales. That does not apply to Scotland—I hope that I shall receive some information on how it may or may not apply to Scotland—but it applies to Wales.

My amendments simply say that if there are to be public inquiries, the National Assembly for Wales should have a locus. I hope that the Committee and my noble friend will consider this issue sympathetically, not because I am speaking for St David—although I am sure that if St David were here he would support me—but because I believe that if the Government wish devolution, the Government must will the means for devolution. I beg to move.

Baroness Miller of Hendon

My noble friend Lord Roberts of Conwy is unfortunately unable to be here today due to a tragedy in his family. He very much regrets that he cannot be with the Committee but, had he been here, he would most certainly have supported the amendment of the noble Lord, Lord Williams of Elvel. Although I do not have all the information that he would have given, it is right that I should tell the Committee that that is our position.

Baroness Miller of Chilthorne Domer

I am sure that if my noble friend Lord Livsey of Talgarth were here, he would also have spoken at great length—well, at some length—and would have supported the amendment very strongly.

Baroness Carnegy of Lour

I notice from the Explanatory Notes to the Bill that the reason why the clause does not apply to Scotland is that developments in this respect will be in the hands of Scottish Ministers. That is all right by St Andrew, I am sure. However, will the Minister tell the Grand Committee whether the amendment and the clause that we are discussing are affected by the Planning and Compulsory Purchase Bill? I thought that I understood that changes were being made in it that affected this issue, but I may be wrong.

Lord Jenkin of Roding

I rise only to make one point. Of course, I agree with the point made by my noble friend Lady Miller of Hendon. I should in addition like to congratulate the noble Lord, Lord Williams of Elvel, on having produced his amendment on St. David's Day. He is wearing a symbol of the day in his lapel. His ability to manage the proceedings of the Grand Committee staggers one's admiration.

Lord Davies of Oldham

Several actors on the Grand Committee have been complicit in ensuring that this amendment appeared on St. David's day, for all sorts of reasons. In responding to my noble friend, I can tell him that he has quite a good case but he has brought it to the wrong Bill. That is what I am going to argue with him in a moment. He is well aware of the fact that great concern was expressed in Wales over the proposed development of the wind farm in the Cambrian mountains. It raised very significant issues, to which he referred. I am grateful that he referred to the issue en passant, including it as substance for his case, without going substantially into the issues, as I would have recognised the strength of the position that that illustrated.

Suffice it to say that we regard the amendments as partial, in any case. They refer to additional inspectors, when what my noble friend is seeking is that the whole concept of who should appoint the lead inspector and additional inspectors and who should make the decision on the proposal should be shifted, in Wales, from the Secretary of State to the National Assembly.

We have been active in the wake of concerns that have been reflected. There is a tripartite working group of officials from the Wales Office, the National Assembly and the DTI already under way to examine the issues of whether consenting powers on power stations, and possibly other aspects of energy infrastructure, should be transferred from central government to the devolved administration. That is the burden of the amendment. That work is ongoing and will not report in the immediate future, but it will provide the base for potential legislative changes. But those changes would affect very significant statutory processes and transfer them to the National Assembly, if such a strategy were agreed on. My noble friend will appreciate that the vehicle for that transfer would probably be a transfer of functions order under the Government of Wales Act 1998 rather than this particular Bill. That work is being carried out against a background where the case which my noble friend put forward has significant substance and is strongly supported in Wales.

I have no doubt that, as the noble Baroness, Lady Miller, indicated, had her noble friend been present, we should have had the additional force of the argument being presented in lilting Welsh tones. It is a matter of great regret to us that he is not present today—for reasons that we understand. I mention, en passant, that he was unable to be present during debate on another Wales Bill last week in which I participated. Therefore, it is not only on St David's Day that the interests of Wales are involved in our deliberations in Grand Committee.

The Scots have not asked for this development, probably because Scottish planning legislation is vastly different from that of Wales. The Welsh legislation forms an integral part of the English and Welsh position. That is why the crucial question of the devolved administration and the position of the National Assembly comes into force in relation to Wales, but the same anxieties do not exist in Scotland.

I hope that my noble friend will recognise that the Government are not standing idly by against the background of the furore created last year with regard to Cefn Croes. There are other potential projects which affect Wales. But, in this respect, we are working towards the National Assembly as opposed to central government playing a proper role in this matter. However, this is not the Bill in which to provide for that and, in any event, as I believe my noble friend will recognise, the amendments fall considerably short of the necessary changes expected in legislation to achieve the objective that he seeks and for which I evince a degree of sympathy.

6 p.m.

Lord Dixon-Smith

I would not particularly blame the noble Lord, Lord Williams of Elvel, or his noble friend if they felt that, instead of being frightfully active, the Government were moving rather slowly beside them. However, surely if the noble Lord, Lord Williams of Elvel, redrafted his amendments so that, in effect, they were amendments to the Electricity Act 1989, they would be valid here and entirely appropriate. It is not for me to tell him how to table his amendments, but I thought that that point should be made.

Baroness Byford

My noble friend has poached what I was intending to say. I simply add that I am, again, alarmed to hear that the provision would be brought forward in the form of an order as the Minister suggests that this is not the right Bill and not the right place. However, I believe that we have had enough of that. If we can address this issue in a more direct way, I believe that we should do so. Indeed, my noble friend put forward a very good suggestion in that respect. I do not consider that it is acceptable simply to deal with matters in an order when we have the opportunity to put the provision on to the face of the Bill. Therefore, I support the noble Lord, Lord Williams of Elvel.

Lord Williams of Elvel

I am most grateful to my noble friend for expressing some sympathy with what I said. I agree that the amendments that I have tabled today do no more than simply trade an important issue. However, I do not believe that a tripartite group will produce anything in the immediate future. In fact, my noble friend used the words, "not in the immediate future … probably a transfer of functions order".

Nothing concentrates the Government's mind so much as an amendment on the face of the Bill. Therefore, I give my noble friend notice that, when we reach Report, I shall take further action to amend paragraph 2 of Schedule 8 to the Electricity Act 1989, which, instead of conferring powers on the Secretary of State, confers those powers, so far as concerns Wales, on the National Assembly for Wales. I hope very much, and am sure, that noble Lords opposite will support me. I also hope that the Government will understand that I am determined. For the first time since 1997, I propose to oppose the Government if my amendments are not accepted. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 132CB to 132CF not moved.]

On Question, Whether Clause 150 shall stand part of the Bill?

Lord Dixon-Smith

This is a probing debate. We need to have a serious discussion at this stage about what the Bill does. In my view, it seeks to perpetuate what I regard as an ethical anomaly in the practice of government. I stumbled on this matter by accident. I draw the attention of the Committee to Clause 150, headed "Additional inspectors", and to subsections (2), (3), (4) and (5) and I shall read another Bill to the Committee which states:

"The Secretary of State may direct the lead inspector—

1. (a) to consider such matters relating to the application as are prescribed;
2. (b) to make recommendations to the Secretary of State on those matters.

(3) After considering any recommendations of the lead inspector the Secretary of State may—

1. (a) appoint such number of additional inspectors as he thinks appropriate;
2. (b) direct that each additional inspector must consider such matters relating to the application as the lead inspector decides.

(4) An additional inspector must—

1. (a) comply with such directions as to procedural matters as the lead inspector gives;
2. (b) report to the lead inspector on the matter he is appointed to consider".

A little later on in what I am reading, it states:

"(7) In every case the lead inspector must report to the Secretary of State on—

1. (a) his consideration of the application;
2. (b) the consideration of the additional inspectors (if any) of the matters mentioned in subsection (3)(b).

There is an amazing congruence between those two pieces of legislation. They are both before the House at this time. It is not surprising that there is a congruence because this second Bill deals with planning and compulsory purchase powers. In that Bill Clause 44 deals with major infrastructure projects of national or regional significance, which would obviously include major power transmission lines and major generating stations.

The fact is that we have two planning systems in this country: we have a planning system that deals with planning matters that are normally dealt with and the energy department has its own planning system which deals with energy planning matters. I tried to find out the background to this situation. We are concerned with amending the Electricity Act 1989, but I asked myself whether that was always the situation and I do not believe that it was. Going back to the Town and Country Planning Act 1971, which is mentioned in the Electricity Act 1989, I find that statutory undertakers are dealt with and that is a different world. I suspect that the roots of this matter go right back to the 1940s. Section 225 of the Town and Country Planning Act 1971 states: Where— (a) an application for planning permission to develop land to which this subsection applies is made by statutory undertakers and is referred to the Secretary of State"— this is a planning Act and would concern a different Secretary of State from the Electricity Act— under Part III of this Act: or (b) an appeal is made to the Secretary of State under Part III of this Act … the application or appeal shall be dealt with by the Secretary of State and the appropriate Minister".

In Section 224 of the Town and Country Planning Act 1971, there is a definition of the appropriate Minister. It states: In this Act the 'appropriate Minister' … in relation to statutory undertakers carrying on an undertaking for the supply of electricity, gas or hydraulic power. means the Secretary of State for Trade and Industry", which is now the DTI. The significant part of the Town and Country Planning Act 1971 is that. an application … or an appeal … shall be dealt with by the Secretary of State [dealing with planning] and the appropriate Minister".

So, in those days there was presumably joined-up government. The department took the planning lead—responsible for planning—and it was done in conjunction with the then appropriate government department.

I went back to the Town and Country Planning Act 1962 to see whether I could get to the root of the matter, because that was the predecessor Act. I found more or less parallel wording. The fact of the matter is that we have a situation in which the government department responsible for studying and dealing with energy matters is also the planning department that has to grant the planning approval.

I suggest that that is an ethical conflict of interest, which really should be dealt with. The Bill seeks to perpetuate the situation. I can understand that because it seems to me that it will be quite complicated to try to deal with it. I wonder whether we should take the opportunity, particularly now that the power industries are private industries, to put them on planning parity with everyone else, and to remove the planning powers of the DTI so that planning matters are dealt with under the legislation which is going through the House with precisely the same words in the planning and compulsory purchase powers.

It was mere coincidence that I happened to read those two parts of these two separate pieces of legislation at almost the same time and I was alerted to this particular anomaly. It is an anomaly that could be dealt with at this stage. I thought that we should at the very least have a serious discussion to consider whether or not we should deal with it at this stage.

Baroness Miller of Chilthorne Domer

I strongly support the interest of the noble Lord, Lord Dixon-Smith, in this subject. I am very grateful to him for raising an issue that otherwise might have been in danger of passing us by. I think it is a very important issue. The issue he raised about whether the department should be judge and jury in a case, of course, is particularly significant. Few applications—even for wind turbines which I suggest are relatively benign, although I know that quite often the noble Lord takes a different view regarding land-based wind turbines—provoke such strong feelings from the public as energy generation installations.

I know that some Members of the Official Opposition have been questioning the Government on this issue—the Government have not made a statement—but if we were to envisage the building of new nuclear power stations, which we certainly do not support at this time, I would not want to see any planning system whereby the department was judge and jury. With that in mind, I think this is a very interesting question.

The second reason why I support the noble Lord in raising this issue is that the planning system is already sufficiently opaque to the public. The system is not friendly to the public even in straightforward applications, even though local authorities may try to make it so. A planning application can be considered and determined by the local authority and then appealed, and it can then be sent to an inspector who makes a different decision which is called in by the Secretary of State. The public have to come to grips with the system, and they often know how it works.

Part of that system will be changed by the Bill currently being considered by your Lordships' House. As the noble Lord has pointed out, there is a parallel system which could further confuse the issue. On an issue as contentious as power generation, I wonder whether the Government think it appropriate to have this parallel system. I must re-emphasise how grateful I am to the noble Lord for raising the issue.

6.15 p.m.

Baroness Miller of Hendon

I congratulate my noble friend for discovering this point and raising it today. I say to the noble Baroness. Lady Miller—who said she thought that she might have missed it—that this Lady Miller most definitely would have missed it if it had not been raised by my noble friend. The Minister will undoubtedly have had the benefit of all the brains of the officials behind him who have been looking into the town and country planning legislation. No doubt he will present us with an answer today, but whether it will be the definitive answer that will make my noble friend happy is another matter. We shall listen with interest to his reply on this very interesting and important point.

Baroness Carnegy of Lour

When the Minister replies to this interesting debate, will he tell us whether he is absolutely convinced that, in this respect, he is right to certify that the Bill is in accordance with the convention on human rights? I seem to remember that one of the great upsets in the whole issue of human rights occurred in Guernsey, I think, on a planning issue; it concerned someone in Guernsey wearing several hats at once. It is difficult to see how a certificate can stand up for an area that does not want a development. In the circumstances proposed here, I begin to see why Scotland does not want to join this particular club. I do not think that it applies in Scotland.

Lord Whitty

The noble Lord has raised some very interesting points. However, taken in parallel with the Bill presently being discussed in the Chamber, Clause 150 is intended to bring more into line the changes which we are introducing into planning generally with those in this Bill as regards energy projects. The noble Lord says that the clauses are effectively the same. The changes that we are introducing are creating a system that is more coherent and more streamlined in relation to major energy projects. The usual complaint about energy projects is that the planning system takes far too long and not that it excludes people. We are therefore seeking to streamline the system in parallel with other major projects being dealt with by the other Bill.

The noble Lord raises the question of whether we could have two different systems of planning. In fact, it is not entirely confined to these two systems of planning; there are different systems of planning for different aspects of the projects. Most road and railway transport projects are dealt with somewhat differently from more general planning structures. Of course, there have been times when the Department of Transport and the Department of the Environment have been the same department, and times when they have not.

The research of the noble Lord is impressive, in going back to 1962, when probably the reference to a Minister meant something different than it would now, given the current structure of the departments. The noble Baroness is correct in saying that the archivists in the DTI have material on the matter that goes hack for some time. The important role of central government with regard to energy has been recognised for a very long time. I am glad to short-circuit the weekend researches of the noble Lord, as they could have gone on for some considerable time. I am informed that that involvement in overhead lines has been going on since 1899, for example, and in power stations since 1909. I hope that I have saved him some work there.

We have a separate system, which has recognised the importance of energy supply for that long. Since that early period, the industry has been municipalised, privatised, nationalised and re-privatised. I do not see that there is necessarily an argument for departing from the system at this point because we are now dealing with a privatised system. Nor do I believe that it is conclusive to say that there is a conflict of interest in relation to the DTI's role, because the issue is dealt with in the same way as it was for transport projects under part of the DETR. We had to ring-fence the planning dimension, and the same applies to the DTI in energy matters.

Here I can refer, legally speaking, to the judgment in the Alconbury case, when transport and environment were under the same ministry. In that case, the House of Lords delivered a judgment in May 2001 that there was nothing wrong with the Secretary of State in that situation being both policy-maker and decision taker. It is not necessary to go into all the details of the case, but that was more or less a parallel system to the one that applies now. In that sense, the compatibility of the legislation with the European Convention on Human Rights does not really apply.

As for Scotland and the issues raised by the noble Baroness, Lady Carnegy, the situation in terms of special planning regimes for utilities is no different. The role of central government is performed by Scottish Ministers supported by the Scottish executive. That is referred to in Sections 36 and 37. There has not been any change in devolution in that respect; the latest change applies in England and Wales, but the basic system is similar in Scotland. That is not always a conclusive argument for retaining it in England and Wales. but I am not convinced by the tidy-minded solution suggested by the noble Lord, Lord Dixon-Smith, who wants to bring all planning systems into a single structure. In any case, on the clause that we are debating, we are, if anything, moving in his direction by moving towards the same terms and towards precisely the same form of legislation for both a general planning structure and this structure in relation to major projects.

I am not convinced by the arguments made by the noble Lord, but I hope that he will be convinced by mine. Whether the broader arguments are returned to in a separate context, the clause should nevertheless stand part.

Baroness Miller of Chilthorne Domer

Before the noble Lord replies, I have a question for the Minister. Is his parallel with major road projects a reasonable one? Major road projects are obviously public projects to be used by the public. Generating plants, as envisaged under this clause, will be developed by the private sector. Therefore, I cannot really see that the parallel is fair.

Lord Whitty

There are two aspects to the matter. One is that the product of the energy will be used by the public in the same way that the energy is used by the public and in the same way that publicly provided roads are used by the public. Of course, we also have privately provided roads, such as the north Birmingham relief road, which are subject to the same planning procedures. However, I am addressing whether the DTI can be judge and jury in the case that we are discussing. That has been considered a problem in relation to transport provision, but in the Alconbury case your Lordships' Judicial Committee found that there was no fundamental objection to such a provision. I argue that the same applies in relation to DTI and energy projects.

Baroness Miller of Hendon

My noble friend Lady Carnegy raised the question of whether or not the measure was compatible with the convention. I heard the Minister say that he believed that it was compatible with the convention. I wish to raise one small point in that regard. The Minister said that, once the Motion was tabled that Clause 150 should not stand part of the Bill, undoubtedly officials were busy consulting former Acts and so on. When considering whether the Bill was compatible with the convention, was consideration given to whether a body should be judge and jury in a case? I do not assume that one would even have thought of that when asked to consider whether the measure was compatible with the convention. My noble friend Lady Carnegy made a valuable point in that regard.

Baroness Carnegy of Lour

I was speaking from a background of having been at a meeting last week in rural Perthshire at which enormous anxiety was expressed about a very large new transmission line for which planning permission is being sought. There is great public reaction against it, and particularly against the other subsidiary lines that would have to be installed for something like 500 windmills right down the backbone of rural Scotland. It seems to me that, when something such as this occurs, it is terribly important that the process should be seen to be absolutely fair to people. It should not look like dictatorship in any way at all. That was what was worrying me—public reaction. One uses the argument about the Court of Human Rights but I did not know about the case that the noble Lord mentioned, which is probably relevant. Public relations are important with regard to this whole issue. We all know that energy has to be provided. The public know that. However, it is one's own backyard that is then damaged.

Lord Whitty

The question of compatibility with the convention is focused on what a Bill changes. What this Bill and the Bill currently under consideration in the Chamber change are some of the procedures for major projects under the relevant planning systems. The question of whether there is sufficient time and scope to object to and present cases through the planning system as envisaged by these new provisions has been judged on all legal advice to be compatible with the convention. Had the Alconbury case, to which I referred, gone the other way, it would have given us cause to raise the issue of the compatibility of the judge and jury issue that applies to existing legislation. However, it did not go the other way. Therefore, that issue was not addressed as noble Lords in their judicial capacity provided a judgment on it.

6.30 p.m.

Baroness Miller of Chilthorne Domer

Will the Minister consider another example of why streamlining might produce a difficulty? Streamlining is often a suspicious word, I think—it means that things will be speeded up, often to the detriment of the public. It may be that inquiries have taken too long in the past but if they are streamlined to the point that they stop the public taking a full part, that is undesirable.

The Government propose having several inspectors dealing with issues concurrently. Where a community chose to employ a lawyer to argue its case in front of an inspector or an expert—whether or not it was a lawyer—it would then have to have several people arguing the case concurrently in front of these inspectors, and that might cause a difficulty. At least in a planning inquiry where there is one inspector, one expert can be employed: it tends to be expensive for communities to employ such people. Have the Government considered that community representation will be somewhat undermined by this proposal?

Lord Whitty

For major inquiries, even under the previous system, there is usually a pre-inquiry at which all the significant parties talk to the inspector and decide on the way in which the procedure will operate, marshalling evidence on how that is to be conducted for the convenience of everybody.

I should have thought that if a single entity could have a number of parallel things going on at the same time, some of which were of interest and some of which were not, it would be likely to prove less expensive and time-consuming than a system which was effectively sequential, with everything taking place with the same inspector at the same time. If I was an objector to a major energy—

[The Sitting was suspended for a Division in the House from 6.32 to 6.42 p.m.]

Lord Whitty

I was about to conclude my remarks in response to the noble Baroness, Lady Miller of Chilthorne Domer. I felt that, for a community interest, it is probably more beneficial to conduct certain aspects of the system in parallel, rather than wait for a long inquiry which, like the Sizewell B inquiry, can last several years, through all of which a lawyer has to be retained. I therefore do not think there is any disadvantage in this respect to community groups and those with limited resources. I think that it will speed up the process while not diminishing the degree of engagement by all those with an interest who are rightly provided for in the planning process.

6.45 p.m.

Lord Dixon-Smith

I am particularly grateful to the noble Baronesses, Lady Miller of Chilthorne Domer and Lady Carnegy, and to my own leading Baroness, Lady Miller of Hendon, for coming in and supporting me on this point. I am very grateful to the Minister for his reply. I think that it has been worth having the discussion.

I said that this was a probing debate. I entirely accept that simply saying that the clause should not stand part of the Bill would not have met the case I sought to argue. Now that I know that the issue goes back to 1899 in respect of power lines and to 1909 in respect of power stations, I am not surprised that I had some difficulty in trying to find my way through the legislative jungle. However, the fact that the history of this goes back that far is not a reason for not changing it. When one looks at the changes that have had to be made in business procedures and practices and across the whole spectrum of commercial life to try to make the system more ethical and more understandable so that it works properly in the interests of the community and shareholders and so on, it becomes apparent that this is a quite small issue. I have to accept that if there was a judgment on the Alconbury case that specifically recognised that it was not inappropriate for a government department to be both promoter and judge in a case, it rather weakens my argument. However, even that is not necessarily a reason why we should not change.

I return to one point made by the noble Baroness, Lady Miller of Chilthorne Domer. She was concerned about complications and inquiries becoming multiple inquiries and therefore perhaps causing representational problems for some members of the public or public groups. There are two sides to that equation. I believe that the Terminal 5 inquiry at Heathrow and even the Sizewell inquiry suffered from the same problem. Ultimately, what happened—certainly with regard to Terminal 5—was that some local authorities which were making representations ran out of funds because of the length of the inquiry. There is an urgent need to speed up the whole inquiry process. I completely support the Government in that.

However, my amendment would not have attacked that issue. I was not seeking to amend the Planning and Compulsory Purchase Bill, which the noble Lord, Lord Whitty, has pointed out contains these accelerated procedures. The two Bills, as I illustrated, are running in precise parallel and therefore the accelerated procedures would still be there. But my view is that it would be ethically more straightforward if a Minister did not have to listen to all the representations that might give rise to the need for power stations. The noble Baroness, Lady Miller of Chilthorne Domer, was right to mention what might have to happen in the nuclear field and how highly controversial that would be if and when it happened.

The Minister in this one department will have the job, first, of sorting out the policy. He will then have to sort out the specific action. Then he will have to hold the inquiry because you can bet your bottom dollar that there will be one. The same man will have to pass judgment on the results of the inquiry and he will have to judge it against the question of national necessity. I feel sorry for the man who bears all those burdens. That is all I can say.

I shall want to study a little more carefully precisely what the Minister said. I shall probably want to consider the Alconbury judgment, too, but for now I beg leave to withdraw my opposition to the clause standing part of the Bill.

Clause 150 agreed to.

Lord Whitty moved Amendment No. 132D:

After Clause 150, insert the following new clause—

"ASSISTANCE FOR AREAS WITH HIGH DISTRIBUTION COSTS

(1) If it appears to the Secretary of State—

1. (a) that the costs of distributing electricity within a particular area of Great Britain are significantly higher (when calculated on a per customer basis) than in other areas of Great Britain, and
2. (b) that within that area there are at least 100,000 premises that are connected to the same distribution system,

he may make an order under this section.

(2) An order under this section is one that establishes a scheme which—

1. (a) requires authorised transmitters to make a payment each year to authorised distributors distributing electricity in that area of Great Britain of such amount as may be determined in accordance with provision contained in the scheme; and
2. (b) requires the charges imposed by the authorised transmitters on authorised suppliers to be adjusted in accordance with the scheme for the purpose of enabling the transmitters to make that payment.

(3) An order under this section establishing a scheme in relation to the distribution of electricity within a particular area must specify the area.

(4) For the purpose of facilitating the implementation of a scheme for which an order under this section provides, such an order may make such modifications as the Secretary of State considers appropriate of the conditions of the licences of authorised suppliers, of authorised transmitters and of authorised distributors.

(5) For the purpose of carrying out the functions conferred on him by or under this section the Secretary of State may require—

1. (a) an authorised supplier,
2. (b) an authorised distributor, or
3. (c) an authorised transmitter,

to supply him, in a specified form and within a specified time, with information of a specified description.

(6) Before making an order under this section, the Secretary of State must consult such persons as he considers appropriate.

(7) Subsection (6) may be satisfied by consultation that took place wholly or partly before the commencement of this section.

(8) An order under this section is subject to the negative resolution procedure.

(9) Where a scheme established under this section in relation to the distribution of electricity within a particular area is in force, no scheme shall be established under this section in relation to the distribution of electricity outside that area.

(10) Where a scheme is established under this section, it shall be the duty of the Secretary of State to carry out a review of that scheme—

1. (a) three years after its establishment; and
2. (b) thereafter at three yearly intervals.

(11) In section 25(8) of the 1989 Act (definitions relating to the provisions of that Act concerned with compliance orders), in the definition of "relevant requirement" at the end insert "or section (Assistance for areas with high distribution costs)(5) of the Energy Act 2004".

(12) In this section—

• "authorised distributor" and "authorised supplier" have the same meanings as in Part 1 of the 1989 Act;
• "authorised transmitter" means a person authorised by a licence under section 6(1)(b) of that Act to participate in the transmission of electricity;
• "distributing", "distribution" and "distribution system" have the same meanings as in Part 1 of that Act;
• "licence" means a licence for the purposes of section 4 of that Act;
• "premises" has the same meaning as in Part 1 of that Act."

The noble Lord said: The purpose of Amendment No. 132D is to replace a licence condition known as "hydro benefit" in Scotland. This licence condition requires Scottish and Southern Energy's generation business to pay a sum of money to its distribution business in recognition of the fact that the cost of providing power to customers in the north of Scotland is considerably higher than elsewhere because of the terrain and remoteness.

The hydro benefit licence condition needs to be replaced because Ofgem has received clear legal advice that it may be discriminatory under EC law—primarily because the burden falls on one company. It has therefore removed it from the licence given to Scottish and Southern Energy. SSE, however, has pledged to maintain the effects of the licence condition until the provisions of BETTA go live. Those have now been formalised in the price control mechanism. Unlike hydro benefit, the financial assistance proposed under that provision will not be recovered solely from a single company but from all suppliers. All suppliers will therefore be treated in the same way, and will all fund the payment via the transmission charges that they pay to the GB system operator.

The amendment will have the same effect as the hydro benefit provisions, in that it will prevent consumers' bills in the north of Scotland incurring significant price rises that would otherwise result from the removal of the provisions. Initial analysis suggests that a medium-sized standard credit consumer's bill might increase by 10 per cent in the absence of hydro benefit, and the replacement would therefore also avoid an increase not only in bills but also in fuel poverty in the north of Scotland, where there is a very high proportion of households in fuel poverty. It is our intention to maintain the current level of hydro benefit, which was set at £39 million per annum last year. We shall consult on the order to give effect to that for the next six months, and it will therefore be in time for inclusion in the BETTA provisions.

Finally, we are aware that for ease of reference it would be more appropriate to lay the provision as an amendment to the Electricity Act 1989 as opposed to a freestanding clause within the Energy Bill. We are also now aware that there should be a specific provision that would make it clear that the Secretary of State is not entitled to require the production of any document that a court could not require. That means that an amendment will be needed to bring the legislation into line with other information provisions in the 1989 Act. We shall have to come back to tidy that last element at Report stage. However, the main provision in this amendment will ensure that consumers in the north of Scotland do not miss out and that the burden is effectively borne by the system. I beg to move.

Baroness Miller of Hendon

I thank the Minister for his clear explanation of the amendment. It was a little surprising that it took so long to appear, but that is not meant as a criticism because the Minister did announce that he would introduce an amendment with the effect of this amendment.

There is no point in repeating what the Minister said. because we all understand the points that he made. The whole hydro benefit system was introduced by a Conservative government in 1957, and created in recognition of the higher distribution costs in remote highlands and islands. However, I have one question for the Minister. The amendment seems to be an attempt to replicate the social responsibilities of the Hydro-Electric Board—which is now called Scottish and Southern Energy. Will the Scottish Office—that is to say the taxpayer—pick up the bill now that the cross-subsidy has been forbidden? I am not quite sure whether the Minister said that now the system would pay or that all the people would contribute. I would be most interested if he could clarify that matter.

To the extent that the amendment restores the position that the Conservatives created 47 years ago, we certainly do not oppose it.

Lord Gray of Contin

I welcome the amendment. It is very important for those who live in the north of Scotland, and very important for the future of developing industries in the north of Scotland. The old north of Scotland Hydro-Electric Board had built-in provision in social clauses. Those all went when denationalisation came in, and I am not suggesting for one moment that they should have been reinstated. However, in this amendment I believe that the Government are realising the difficulties which exist in distant, remote areas. For 13 years I had the honour of representing the constituency of Ross and Cromarty, as it was then. Parts of that constituency were very remote, and the thought of having to provide a power supply to some of those places was horrific. Had provision not existed at that time for assistance to be given, many places there would not have had power.

Therefore, I am very grateful to the Government for what they are doing in the Bill to ensure that the additional costs which occur in areas such as the Highlands of Scotland are appreciated and that the benefits will accrue accordingly. I thank the Government very much. I have never been slow to criticise them with regard to certain issues in the Bill and I have no doubt that I shall wish to criticise them about many more, but I appreciate what they have done in this instance.

Baroness Carnegy of Lour

I welcome this government amendment. If noble Lords are worried that the Government are being too friendly to northern Scotland, they can observe on page 7 of the Marshalled List that, under proposed subsection (10) of the new clause, the matter will be reviewed after three years and every three years thereafter so that, should circumstances change, it need not be a permanent arrangement.

I believe I am right in saying that, at present, in the north of Scotland electricity is very expensive, even now, compared with most places. I know that my bill is absolutely terrifying. If the noble Lord had been in Scotland over the past week and had experienced the low temperatures, he would realise that that accounts for quite a lot of one's bill. Therefore, the amendment is helpful.

I am glad that my noble friend pointed out that these are not social clauses. The arrangement comes within our present system and it is being continued in this way. We are very grateful to the Government for taking the trouble to introduce it in such a way that it will not be objected to by the European Commission.

The Duke of Montrose

I do not want to delay the Committee but I have one question. Ofgem announced last month that it intended to end the hydro-benefit subsidy system in Scotland after it received legal advice that hydro benefit was probably discriminatory and contrary to EU law. I went back to Scottish and Southern Energy and asked whether it could tell me under which EU law it was found to be discriminatory. SSE was not terribly helpful. It said that it thought it might be something to do with the position on renewables, but I said that that seemed quite impossible. How would the Government manage to overcome the idea that it was probably discriminatory?

Lord Dixon-Smith

I hesitate to intervene as a Sassenach in this debate, particularly as, when I finish, I suspect that I may have some Scots in kilts harrying me down the streets of London. However, I believe it is important to point out that the costs of the generating distribution industry are finite. The charges to the customers must meet those costs and earn a profit. Therefore, if we are to give some people a lower share of the real cost, someone else must pay the extra cost because it must be met. That is where I am in danger of offending the Scots.

If the Minister tells me that the intention is to use the orders where appropriate to try to ensure that, as near as possible, the consumers all ultimately pay more or less the same price, that is one thing. I believe that that is probably the intention behind the scheme. But if he does not tell me that that is the intention, there may be many irate Englishmen complaining about the Whitty formula and comparing it with the Barnett formula, which always seems to have been slightly one-sided—to Englishmen, at any rate.

7 p.m.

Lord Whitty

Until the noble Lord's intervention, I was basking in the praise and gratitude of our Scottish colleagues. But of course there is an implication for consumers in Essex, as the noble Lord knows.

The answer to the noble Baroness's question is that rather than one supplying company bearing the cost, all supplying companies will bear the cost. Presumably, all or most supplying companies will try and pass on as much of their costs to their ultimate consumers as they can. If it is all passed on, the increase in bills would be roughly 0.3 per cent if it were spread evenly, a small part of the total bill.

To that extent, consumers elsewhere are supporting consumers in the north of Scotland, whose prices would otherwise be significantly higher. They are already high in most cases, as the noble Baroness, Lady Carnegy, says, and they would be higher were this benefit to be removed. The nationalised north of Scotland Hydro-Electric Board had the hydro benefit as part of its provisions. This was a replacement for that measure on privatisation as a licensing condition, because it could be held to discriminate against one company. That is the EU law point—once it is spread around all companies, there is no problem because we are not being discriminatory.

While always bearing in mind the point of the noble Lord, Lord Dixon-Smith, I will sit down with the support of our Scottish colleagues and say that we are trying to maintain a position which the system had, in different ways, managed to deliver to consumers in the north of Scotland for the past 45 years. We have found a way round this which I think will be beneficial and will not be at too great a cost to everybody else.

Lord Dixon-Smith

Before the Minister sits down, let me say that I entirely agree with what he says. However, he has not said that the intention behind this is, within reason, to try and equalise the costs at the point of the consumer. Is that the intention?

Lord Whitty

The point of competition policy and regulation is not entirely to equalise cost; it is, however, to provide the most cost-effective means by which to benefit the consumer. The cost to Scottish consumers is, and is likely to remain, higher than average, even after this measure is applied. That has always been the case, but the higher cost is partly offset.

Lord Dixon-Smith

Thank you.

On Question, amendment agreed to.

Clause 151 [Payments of sums raised by fossil fuel levy]

Baroness Miller of Chilthorne Domer moved Amendment No. 133:

Page 116, line 22, after first "the" insert "Secretary of State or"

The noble Baroness said: This group of amendments seeks to probe the Government on their intention with regard to the surpluses that are built up from the auctioning of income that the non-fossil purchasing agency carries out. Clause 141 contains some suggestions about what will happen in Scotland, leaving the rest of the UK in a very different position.

Let me give noble Lords the background. When the Utilities Act 2000 was introduced, changes had to be made to the contracts which are let under the non-fossil fuel obligation. The new arrangements for the NFFO contracts in England and Wales provide that, first, the non-fossil purchasing agency pays generators the contract price for each kilowatt of power generated and, secondly, the non-fossil purchasing agency auctions the output of those contracts.

At the moment, the NFPA receives more income from the auctions than it needs to pay generators and so a surplus of money is building up. A similar situation arises in Scotland with the Scottish renewables order contract in that a surplus pot of money is building up, although I understand that the details of the auction arrangements are slightly different.

As I understand it, Clause 151 enables Scotland to act in a more desirable way than the rest of the UK. The difficulty with regard to the surplus that is building up in the rest of the UK is that no provision is made for it, save for that first £60 million. The first £60 million of the pot was covered by the Sustainable Energy Act 2003 which specified that that £60 million had to be spent on renewable energy projects. However, unless the Minister tells me differently, I understand that that is less than one year's worth of the build-up of such surpluses so the surplus will continue to build and the Energy Bill, as presently drafted, does not provide for the same purpose as it does in Scotland. In other words, that surplus should go into renewable energy projects. Perhaps the Minister would intimate whether my interpretation of the Bill is incorrect. However, if it is correct, I wonder why Scotland has the benefit of the surplus being spent on renewable energy projects and England does not. I beg to move.

Lord Jenkin of Boding

I have a few words to say and then I shall ask a question. I find the argument advanced by the noble Baroness, Lady Miller of Chilthorne Domer, very intriguing. I certainly had not spotted that there is a difference between Scotland and England. I shall be interested to hear the response to that.

I am sure that Ministers will recognise that there is a hole in the buy-out fund as a result of TXU and another company going into administration—it was some £23 million short. Due to the fossil fuel levy, a sum is building up and it was suggested that it should be used for renewable energy. There you have a system that requires the money to be used for renewable energy. Why can that fossil fuel money not be used to fill the hole in the buy-out fund? When the issue first arose, we were told that that could not possibly be done. My question is why not? It seems that there is a perfectly valid use for it. As the noble Baroness, Lady Miller of Chilthorne Domer, said, it does not appear that it is being put to any other use. In a sense it is a hangover from the earlier system, before we moved to the present system and the renewables obligation. It was intended to encourage renewable energy. That was the proposal of the previous government and it was effective so far as it went. Why can it not be used for the hole in the buy-out fund?

Lord Triesman

I thank the noble Baroness, Lady Miller of Chilthorne Domer, for tabling the amendment about the use of sums raised by the fossil fuel levy. As far as I can, I shall try to answer other questions that have arisen, including the noble Lord, Lord Jenkin's, question. I was trying not to make a mistake in saying that, but there is an apostrophe S. It is a silent apostrophe, but there are now best-selling books written on such matters.

We appreciate what lies behind the amendment—it is a wish to promote renewable energy. We share that desire. However, we have already demonstrated that through our renewable energy policies and programmes and will continue to do so. We have only very recently legislated, through the Sustainable Energy Act, on the use of £60 million of the (England and Wales) fossil fuel levy surplus. Spending decisions will be decided in the 2004 spending review. The £60 million mainly for capital grants is intended to help drive forward renewables deployment and will be allocated over the next two financial years.

Some of the funding will be used to support offshore wind developments. As we have tried to persuade noble Lords during previous discussion on the Bill, these have an extremely important role to play in working towards the achievement of the 10 per cent renewables electricity target by 2010 so we shall be getting real added value for renewables from this funding.

I should like, if I may, to take a few moments to explain the Government's position more broadly. Clause 151 as proposed in the Government's Energy Bill allows Scottish Ministers to direct Ofgem to pay surplus Scottish fossil fuel levy moneys into the Scottish consolidated fund and to make provision in budget proposals to the Scottish Parliament that these sums are used to promote the use of renewable energy in Scotland.

Similar powers were obtained by the Secretary of State for Trade and Industry in respect of the fossil fuel levy fund in England and Wales through recent legislation—the Sustainable Energy Act 2003. However, the provisions in the Sustainable Energy Act cover only £60 million rather than all the funds. That, of course, is at the heart of the noble Baroness's amendment. The amendment proposed by the noble Baroness would extend the provisions of Clause 151 to cover the total amount that might arise in both funds.

The Scottish fossil fuel levy fund is based on a smaller number of contracts and is, in turn, of lower value overall than the England and Wales fund. The Scottish fund currently stands at just £3.8 million. I repeat the figures because the contrasts of magnitude are very significant for the purpose of the argument. I refer to £60 million in one case and £3.8 million in the other. It clearly would not make sense for there to be a limit on the amounts £3.8 million being a relatively small sum in these circumstances—that Scottish Ministers could direct to be used for renewables. I was asked why should there be a difference between Scotland and England and Wales in that regard. The answer concerns the sheer magnitude of the sums involved. Sub-division of the smaller sum would scarcely be likely to be effective.

The England and Wales fund stands at around £112 million and there is now a £60 million limit on amounts that the Secretary of State can direct for use on renewables. I should like to point out that no decisions have been taken on the use of the remainder of the existing sums in the England and Wales levy fund apart from the need to keep a £30 million reserve. That is the only decision about the remaining balance that has been taken. There will be further additions to the fund from the future auction of NFFO ROCs. I understand that that is pronounced "noffo rocks". When I first read the term, I thought that it must be a heavy metal rock band, but it turns out to be much more benign than that. As I say, further additions to the fund from the future auction of NFFO ROCs are expected and consideration will be given to the use of future sums in the fossil fuel levy fund in due course.

I hope I have demonstrated that we are putting the £60 million from the fossil fuel levy surplus for England and Wales to good use. However, while we understand completely the sentiment behind the proposition that has been made, we cannot accept the amendment in this form.

The noble Lord, Lord Jenkin, also asked why we should not use the Sustainable Energy Act to bail out the buy-out fund, as it would restore confidence and thus restore the ROC price to former levels. Any such loan would soon be repaid in terms of higher ROC prices. As I think was said before, the Government do not have any plans to make good the shortfall since the renewables obligation is a market-driven mechanism. Government intervention in this way would inevitably intervene in the free market in ROCs, which might well have an adverse impact on confidence in the longer term.

There would also be issues concerning the precedent. In any event, our legal advice is that the provisions of the Sustainable Energy Act do not permit us to use it in this way. That may or may not be an answer from which noble Lords will take great comfort, but that is the answer. In the light of all the elements of my answer, I hope that the noble Baroness will feel able to withdraw the amendment.

7.15 p.m.

Baroness Byford

Before the noble Baroness does that, perhaps the Minister could answer a couple of questions. He said quite clearly that at the moment there is £60 million to be spent on renewable obligations but that the fund—if I am following the argument correctly, and I hope I am—currently stands at £112 million. Of that figure the Government have decided to put £30 million into reserve, which in my quick maths leaves £22 million spare before we have any money coming in from the option. I hope that my figures are followed through.

The Minister said that some of this money would go towards helping the offshore wind farm development. How much of that £60 million is it anticipated will go for that? Where or what other sources will go towards that? He said quite clearly that it was for a capital grant over the next two years. One complaint I have had about this Bill all the way through is that it does not deal with energy per se, it deals with a very limited aspect of energy, and particularly it deals with regard to offshore wind farms on the renewables side. There are many other worthy examples and businesses trying to set themselves up to use waste products from which to extract renewable energy.

We have talked before in Committee about the question of using tidal power. Perhaps this money can be used in a slightly more creative way to look at forms of renewables other than offshore wind farms. It would be a pity if it could not be used in that way. Wind farms are hugely costly as well. So I realise that the £60 million will soon get eaten up. But it would help, certainly from my point of view—I do not know about the noble Baroness, Lady Miller of Chilthorne Domer—if we could have a little more clarity on where the money is going. Is it just in an overall general pot? It would be an opportunity missed if we could not use it in a slightly broader way. Having read this particular part of the Bill, I did not see it clearly identified.

Lord Jenkin of Roding

I listened very carefully to what the noble Lord, Lord Triesman, said. In fact he answered a different question from the one that I asked. He answered the question by saying why should not part of the £60 million that had gone into the Sustainable Energy Act be used for the hole in the buy-out fund. I understand his answer, but that was not what I asked. I asked why should not any of the surplus from the fossil fuel levy be used for this purpose temporarily—as he suggested—as a loan which would then be repaid. Working out the sums in my head, no doubt inaccurately, of the £112 million, he is putting £30 million to reserve. That takes one down to £82 million. He has £60 million for the Sustainable Energy Act. He is therefore left with £22 million. Does the Committee know what the sum of the hole in the buy-out fund is? It is just over £22 million, so he has the money to do it without drawing on any of the £60 million at all.

As the Minister rightly said, the failure to pay on the part of one of the large contributors has undermined confidence in the renewables obligation certificates. As that has resulted in a fall in the value of the RO certificates and a diminution of the incentive that the system is intended to offer—to produce more renewable energy—I should have thought that there was more to be said for the proposition of using the money to make a loan to help the fund out than the Minister perhaps allowed. Perhaps we might reflect on that.

Baroness Miller of Chilthorne Domer

While the Minister is composing his reply and doing the maths, it would help me to decide on the tone of my withdrawal of my amendment if he would say what he meant by the phrase that the Government could not accept the amendment in this form. Does he mean that if the amendment was in another form, it would be acceptable, or did he mean that the amendment would be unacceptable in any form?

Lord Triesman

Let me start by telling noble Lords that all of them have done the maths right and that it would have been perfect arithmetic if I had read them the right figure. I apologise—what can I say? I misread it, and when I tell noble Lords the right figure they will feel that their arguments are all the stronger rather than weaker. It was not £112 million but £122 million, so there was an extra £10 million that noble Lords could have pleaded in aid. I thought that I had better make a clean breast of that immediately.

I shall deal with the issues, even with the addition of the £10 million, which noble Lords will be delighted that I have discovered in addition to the sums that they worked out. First, it might be possible to discover what proportion of the £60 million has gone in capital grants, where it is intended to go. I was going to say that noble Lords will understand that I do not have the exact figures in front of me, but I am now briefed that, roughly speaking, half of that £60 million will be used on offshore wind capital projects. That is at least the beginning of an indicative figure. It may be that a more precise figure is available, but that is roughly half of it. I cannot tell noble Lords at this moment how the remaining half, approximately, will be deployed, but it is all in the service of renewables, which was the explicit intention of the provision. The allocation of much of the rest will be decided in the coming months; those decisions are not far away.

Secondly, I should say to the noble Lord, Lord Jenkin, that my point was not that the money that might be used to repair the hole in the buy-out fund should come from the £60 million, and I apologise if I spoke with insufficient accuracy. I had not intended to suggest that. I was referring to the more complete sum overall. The burden of my argument was that none the less, in a market-driven mechanism, any intervention by the state in the replacement of sums inevitably has some impact on the operation of such a market. Some might very well argue that the impact could be to restore confidence, while others might argue that one could never work out the proper way in which to fix the prices that would operate in circumstances in which trading was taking place normally and without that intervention. The case that the Government are putting forward in Grand Committee today is the latter of those cases—that it would be a distortion. In any case. I hope that I have clarified that the money would come not from the £60 million but from the remaining sum.

I understand the argument that it is important to know how the sums would be spent overall. None the less, I do not think that it would be possible to go further than to repeat the point that £30 million will be held as a reserve and that decisions on the rest have not yet been taken.

I did not want to give the impression that an amendment in a different form would find its way into the Bill at Report. My point was that there is a huge amount of sympathy with the concept of trying to utilise funds to make sure that the renewables commitment is most effectively deployed. But at this stage, the expenditure of more than the sums I have referred to is not contemplated.

Baroness Byford

I thank the Minister for trying to break down my question on where the money was going. However, I want to press him further; if he is not able to answer me this afternoon, I am quite happy about that.

There is £30 million left that can be made available towards renewable projects. My question is twofold: is that knowledge in the public domain and, if it is, can individual companies make an approach? If so, who do they approach and how do they go about it? Or do the Government want to keep the money as a reserve, to be used at some time in the future? There are quite a few companies which are trying to convert chicken waste into heat, for example, and many other projects are being carried out. This is a question of waste that could be used to be of benefit in the broader sense. Such projects often struggle because of not having enough funding to make them financially viable, and if there are moneys available elsewhere, that knowledge should be in the common domain. I wonder whether it is.

Lord Triesman

All I can say at this stage is that I have provided the figures and they are now a matter of record, so in that sense they are in the public domain.

I have also said that at this point, there is no decision on the use of the remaining sums. I cannot really speculate about what anybody in the industry might do on having had the sums set out this afternoon. All I can say is that, at present, decisions have not been taken.

Baroness Miller of Chilthorne Domer

I thank the noble Lord, Lord Jenkin of Roding, and the noble Baroness, Lady Byford, who have spoken in this debate. I thank the Minister for his reply, although naturally I am disappointed at his explanation I hat the Government could not accept the amendment in this form and for expressing the view that they were unlikely to accept it in any form.

As we interpret the Minister's words, anything above £60 million will probably simply be reabsorbed by the Treasury. Given the Government's other stated priority of hitting the Kyoto targets, it is a great shame when they know that renewable energy projects will have to be front-loaded in terms of funding; while they are at the development stage, such projects need more money. Some mechanism—and I accept that my amendment may not provide the right one—that frees up the surpluses that develop is extremely important.

So although I accept that the Scottish situation is very different for the reasons which the Minister outlined, I will want to return to the issue on Report to explore the extent of the shortfall in applications for renewable energy projects. I shall research the issue in the mean time, to see whether the targets which the Government have met could be better met if the funding were more generous. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 134 to 141 not moved.]

Clause 151 agreed to.

Lord Davies of Oldham

This might be regarded as an exceedingly convenient moment for the Committee to adjourn until 3.30 p.m. tomorrow.

The Deputy Chairman of Committees (Lord Haskel)

The Committee stands adjourned until Tuesday 2 March at 3.30 p.m.

The Committee adjourned at twenty-nine minutes before eight o'clock.