§ 2.58 p.m.
§ The Parliamentary Under-Secretary of State, Department of Energy (The Earl of Avon)
My Lords, 478 I beg to move that the House do now resolve itself into Committee on this Bill.
§ Moved, That the House do now resolve itself into Committee—(The Earl of Avon.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The LORD ABERDARE in the Chair.]
§ Clauses 1 and 2 agreed to.
§ Clause 3 [Nuclear-powered generating stations]:
§ On Question, Whether Clause 3 shall be agreed to?
§ Lord Tanlaw
In proposing the amendment to leave out Clause 3 I appreciate that it may appear at first glance to defeat itself, and by removing this clause one would be removing an important safeguard in the Bill in which the Secretary of State's consent will be required for the building, extension or operation of nuclear-powered generating stations, and it would be an offence to proceed without such consent.
When I proposed this amendment I felt that it should be seen in the overall context of public misgiving and some doubt about nuclear power generation in general. I am asking Her Majesty's Government to look at this clause again and ask themselves whether it should be in the Bill at this stage. I hope the Minister will agree that the Bill, even without Clause 3, will be perfectly operative in the sense that the situation covered in Clause 3—that is, of a private nuclear generating plant—does not exist in this country today and is unlikely to exist for a very long time into the future. It is also within the context of a large excess of generating capacity in the country today. Do we need any more generating plant in both the private and public sector? Also the clause appears in the Bill at a time before the Sizewell inquiry has completed its deliberations on major matters of principle about the future of generating capacity in this country.
On the whole this is an excellent Bill which has our general support. I am asking the Government why we should detract from some of the good qualities of the Bill by interposing Clause 3, which many people will hold against the Bill as a whole. It is the private generating industry in the United States, and, in particular, the Three Mile Island incident, which has created public misgiving about nuclear power as a whole. I think that there are still many doubts that there would be cost-cutting and possibly cutting in safety matters if private nuclear generation happened here prematurely. I am asking the Government to take this clause away and to think again. They have always time to bring in such a clause at a later date.
There is another factor which the noble Earl may be able to give himself as a reason for consideration of why this clause should be withdrawn and looked at again. It concerns the definition of "nuclear power generating plant". In this clause, that definition of such a plant is covered, apparently, under Section 1 of the Nuclear Installations Act 1965. Is there in this Bill an actual definition of what is a nuclear generating plant? It is my understanding that there is not such a definition. I should like to ask the noble Earl whether, if companies such as Amersham (where they are doing many experiments with nuclear material) created a 479 generator which in any way could be described under this Bill as a nuclear generator, this would not be within the meaning or the whole point of this clause in the Bill. As I understand it, such a generator, even for experimental purposes, would come under this clause. If I am correct in that, I do not believe that this clause is properly drafted. I hope that the noble Earl will give a definite answer to that question.
If he is unable to do so, perhaps he will consider this reason—apart from the general one of the misgivings which I and my party have about the whole business of private nuclear generation—as one which would allow the Government to take the clause away, to look at it again; or, possibly, to remove it altogether. Under Clause 2 of the Bill, there are plenty of safeguards on the size of the generation plant. I am not going into a long provocative debate about nuclear power. It is merely a question of whether this clause enhances the Bill, whether this clause has contained in it some parts which are not actually correct and whether the Bill would be much better without this clause. I beg to move.
§ Lord Strabolgi
I should like to say a few words in support of this amendment to which I have given my name. I have little to add to the case and to the speech made by the noble Lord, Lord Tanlaw. I agree with him that the Bill would be just as good without the clause, and that it makes very little difference to the general aims of the Bill. I think that this Committee stage gives us the opportunity to ask the Government to justify their wish to privatise nuclear energy. I know that they like to privatise everything they can but, as the noble Lord, Lord Tanlaw, has said, nuclear energy is really something different. It is an unknown field in many ways. I think it is something that does not lend itself to private enterprise.
On Second Reading, I said that it is not something with which the private sector should seek to dabble. Therefore, we shall look forward to hearing what the noble Earl has to say. With regard to its relevance to the whole Bill, I am interested to see that in the Long Title to the Bill nothing is said about this matter. The only reference to nuclear is in Part II of the Bill, the nuclear installations. I would submit that we go ahead with the rest of the Bill, which has been passed by another place, without this clause unless the noble Earl gives a very good reason why it should be in the Bill—beyond the Government's general policy and mania for privatisation, wherever they can.
§ Lord Somers
I am no scientist and, therefore, I cannot speak with any authority on the question of nuclear power stations. I wish that my noble friend Lord Halsbury were here, because he speaks with authority on this question; and he has assured the House more than once that it is perfectly safe. There is one point which comes to my mind. It is that we have very little else in the way of natural sources of power. Switzerland, for instance, has all the hydro-electric possibilities that it could want. We have practically none. If we do not adopt nuclear power stations, I am wondering from where we are going to get our power.
§ Lord Strabolgi
Before the noble Lord sits down, may I say I was not attempting to say that we should 480 do without nuclear power. I am a very firm advocate of peaceful nuclear power; I have said so in many speeches in this House. The question is this. Who is to run it?—whether it be the public sector or the private sector. This is the point at issue.
§ 3.7 p.m.
§ The Earl of Avon
There was a great deal of (I believe) artificial worry generated in another place about the prospect of privately-owned nuclear power stations. These fears are unfounded as I hope your Lordships will realise once I have outlined the system of licensing and the protection which exists in the United Kingdom to ensure safe nuclear power. The most important point to bear in mind is that it is not the ownership of plant which governs its safety but the comprehensive regulatory system which this country enjoys. This has several stages which apply to all prospective operators of nuclear power stations, whether in the public or private sector.
First, ministerial consent must be obtained, under Section 2 of the Electric Lighting Act 1909 for electricity board stations and under the Bill for private stations. I must emphasise that Clause 3 introduces a new consent procedure for private nuclear stations and strengthens the existing requirement which would allow private nuclear stations whose output was mainly for the operator's own use to be established without such consent. Far from liberating private generators in this area we are, in fact, closing an existing loophole and introducing a further safeguard. If the Secretary of State considered it desirable, he could cause an inquiry to be held. A proposal to build a private nuclear station would be an unusual and rare event. I would fully expect an inquiry to be held so that all issues of public interest could be aired.
Secondly, the proposal for any nuclear power station would come before the Nuclear Installations Inspectorate of the Health and Safety Executive which would have to grant a nuclear licence under the Nuclear Installations Act 1965. The Health and Safety Executive is a unique organisation independent, not only of all other Government departments but of Ministers in its day-to-day operation. It provides independent advice to the Government on all aspects of industrial safety including nuclear safety.
The proposal would receive detailed and thorough scrutiny from the inspectorate, which is experienced in all matters relating to nuclear safety. No nuclear power reactor may be constructed or operated without a nuclear site licence granted by the NII (the Nuclear Installations Inspectorate). This carries out a monitoring process that starts at the initial planning stage, continues throughout the design, engineering and commissioning stage, covers the operation of the plant throughout its lifetime and ends only when, after decommissioning, there is no longer considered to be any radiation hazard at the site. At no point in the succession of events can an operator proceed to the next stage until the inspectorate is satisfied that all safety criteria had been met. Once a plant has been commissioned, its operation continues to be governed by the conditions attached to the nuclear site licence. These are designed to ensure that all possible steps are taken by the licensees to protect their staff and members of the public and the environment generally 481 against the risks associated with nuclear material. A typical operating licence will have up to 60 conditions covering such matters as plant operating limits; testing and maintenance procedures; modifications; radio-logical protection; arrangements for dealing with accidents or emergencies; and management of radio-active waste.
The third stage in the prospective operator's proposal is to obtain planning permission. The applicant would be subject to all the planning procedures of the local authority and the Department of the Environment. A local authority may impose conditions on the granting of planning permission. If planning permission is refused, the developer can appeal to the Secretary of State for the Environment, who may also call in for decision by him an application made to the local authority. In this case, a public inquiry will be held and the Secretary of State will usually impose conditions.
Given this background and the extent of scrutiny afforded to both public and private stations, the Government are satisfied that any private development would take place within a well-established and highly efficient framework of regulatory control.
I should like to suggest to the noble Lord, Lord Tanlaw, that he withdraw his amendment. I am sure that this was not his intention, but were we to accept his amendment private nuclear stations could be established without ministerial consent. I have already mentioned the regulatory control system. Although there are at present no private nuclear power stations in this country, they do exist in other countries: for example, in the United States, Finland, Spain and Japan.
It is estimated that about half the 270 nuclear power stations throughout the world are owned and operated by the private sector. It is a common feature in all countries where nuclear power stations exist that whether these are publicly or privately owned the Government take responsibility for ensuring that plant meets strict requirements throughout all stages of planning, construction and development. This recognises legitimate public concerns over nuclear power, but leaves the case for banning for all time any private nuclear station still to be made.
Those who have argued against private nuclear stations, both in your Lordships' Chamber and in another place, have not put forward compelling reasons why the Government should encourage private generators generally but close to them one particular method of generation. Our nuclear safety record is second to none, and our regulatory system, including the new consent procedure under this clause, will ensure that it remains so.
The noble Lord, Lord Tanlaw, asked what is a nuclear power station, as defined in this Bill. I understand the definition here is: a generating station for which a nuclear site licence is necessary. Whether or not a station generates electricity is a matter of fact. We believe that the private sector should be allowed to go ahead with nuclear as well as with conventional power stations. I hope that the Committee will agree with me and enable this clause to stand part of the Bill.
§ The Earl of Lauderdale
I must apologise to the noble Lord, Lord Tanlaw, because I was not in my place to hear him proposing his amendment: I was held up on the way. I have thought about it beforehand and I wanted to make several points. Most of them have now been made by my noble friend, but there is one other point I should like to raise. Another country which allows private enterprise operation of a nuclear power station is Germany, and that country was not listed by my noble friend.
But surely the critical point is that a private enterprise operator would be subject to all the conditions to which the CEGB is now subject—all the Sizewell inquiry business: the lot—so there would be no differentiation here. And—if I may go back to the phrase used by the noble Lord, Lord Strabolgi, on Second Reading—it is not a case of private enterprise "dabbling in nuclear power". It is a responsible operator whose responsibility is attested in the same way as is the CEGB. So I hope that the Committee will support my noble friend in resisting this amendment.
§ The Duke of Portland
If the proposed amendment were to be accepted and Clause 3 were left out of this Bill, nuclear-powered generating stations would remain subject to the Nuclear Installations Act of 1965, in which some 30 clauses and two schedules lay down a complicated procedure for the licensing of privately-owned nuclear-powered stations and do not afford any encouragement for the private construction and operation of such stations. It is unlikely that applications will be made in the near future for a licence to construct privately-owned nuclear-powered stations, as small nuclear-powered stations of some 200 to 250 megawatts are not yet economically viable.
However, if the construction of small, privately-owned nuclear powered stations were to be encouraged rather than obstructed, greater efforts might be made to develop those stations. When they succeed, and a 200 to 250 megawatt privately-owned station is operating economically in the United Kingdom, it is probable that foreign orders will be received, in particular from developing countries. That would restore to our nuclear industry the lead which this industry has been losing during the past 25 years. Therefore I urge that the proposed amendment be rejected.
§ Lord Tanlaw
I have listened with great care to what the noble Earl the Minister has said and I accept most of the points he has raised, except perhaps one major one. I fail to see how, if this clause was removed from the Bill, anyone would wish to make a nuclear power station generating fewer than 10 megawatts, in which case he would be forced to come under scrutiny and prevention under Clause 2 of the Bill.
I want to make the position quite clear that nuclear power, whether private or public, has not yet been tested as to whether it can produce cheaper electricity than any other form of generation in this country. I was asking Her Majesty's Government to consider whether it is necessary to have any more nuclear power stations, private or public, since this has yet to be decided. I am not against it in principle; but from what the noble Earl has said, I cannot see how a privately-built and operated nuclear power station that went through all the regulations and checks that this Bill 483 puts forward could produce cheaper electricity for the general public. That would have to be proved; and especially if the cost of a public inquiry would have to be put on top of that of the construction of the power station.
I am extremely grateful to the noble Earl because this is of more than passing interest to me to know that a public inquiry would be necessary. I think this would be an encouraging factor for those of us who have had some doubts about this clause. Also, to take the noble Duke's point, this would in no way affect British industry in contributing to nuclear power stations in this country or abroad. I think that if the truth were told, and if the noble Lord, Lord Weinstock, were in his seat, he would infinitely prefer to supply parts to a nuclear power station rather than to be asked to build one and make electricity.
There are two very different matters here. One of them is that British industry will prosper in providing parts for nuclear power stations. However, I do not see how a private nuclear industry would prosper—and the noble Duke confirms this—because it cannot make an economical power station. But in view of what the noble Earl has said and taking account of the comments made by other speakers, I am quite happy at this stage to withdraw this amendment.
§ Clause 3 agreed to.
§ On Question, Whether Clause 4 shall be agreed to?
§ Lord Drumalbyn
I should like to ask one question on this clause. I doubt whether many of your Lordships will have gleaned very much from reading this clause. Also, I should like to know how it is that the Scottish Office (I take it) have decided on this particular formula. At present it is unlawful, except with the consent of the Secretary of State given after consultation with the two Scottish Boards, for any body or person to establish in the district of either of the two boards a new private generating station operated by water power and having plant exceeding, as it is at the present time, 50 kw, or to extend any existing private station so operated in that district by the installation of plant with a rating exceeding 50 kw. We have been talking in terms of 2,000 mw and goodness knows what, and the clause is concerned with raising the present limit of 50 kw for hydro-electric stations to 1 megawatt. Anything over 1 mw would require the permission that is at present required under the Electricity (Scotland) Act 1979 for anything over 50 kw. I think that I have correctly stated the position.
I am wondering to what kinds of establishment in Scotland this clause would apply. On what grounds has this limit of 1 mw been fixed and what will be the social benefits of this? I quite understand that my noble friend may not be able to give a full answer on this matter for Scotland. But I should be grateful if he would confirm what I believe to be the effects of this series of amendments, and perhaps he would be good enough to write to me and give a fuller explanation of the effects that are likely to occur. In other words, what benefit is likely to flow from these amendments so far as Scotland is concerned?
§ The Earl of Avon
This clause is primarily concerned with bringing the wording of Section 35 of the Electricity (Scotland) Act 1979 into line with the terminology used in this Bill. As my noble friend noted, the one significant change is to increase from 50 kw to 1 mw the level above which a private hydro-electric station in Scotland requires the consent of the Secretary of State for Scotland. It also ceases to be a criterion, for the purposes of consent, whether the output of the station is for sale to others. Hydro-electric stations are of special significance to energy policy in Scotland, and particularly in the NSHAB area. Their development is politically sensitive and could have significant environmental implications. Moreover, control over developments is required to ensure that a new scheme does not abstract water which is used to power another scheme.
The limit above which hydro-electric schemes in Scotland will require the Secretary of State's consent is, as I have said, being raised from 50 kw to 1 mw. We have raised the limit to encourage the development of hydro schemes, but we wish to retain consent above 1 mw because of the significance of such schemes in terms of the environment, energy supply and the potential impact of one scheme upon another. We believe that developments should take place in a planned fashion. After saying those words, I very much hope that my noble friend will feel able to accept this clause. I will, of course, write to him with more details when I have been able to read his remarks.
§ Lord Ross of Marnock
I do not want to press the Minister very far on this, but, if he is going to write to one Scottish Lord, can he write to the rest of us as well?
§ The Earl of Avon
I think that to write to all Scottish Lords would be very burdensome, but I will certainly write to the noble Lord, Lord Ross.
§ Lord Bowden
Before the noble Earl sits down, may I ask him whether, when a plant of this kind is built and is privately owned, there is any obligation on the Central Electricity Generating Board's distribution circuit—in other words, the grid—to buy power which it generates if it is surplus to requirements and available, or is this not to be insisted upon?
§ The Earl of Avon
If I understood the noble Lord correctly, this is the main purpose of the Bill. This now makes arrangements for private generators to sell to the boards.
§ Clause 4 agreed to.
§ Clause 5 [Private generators and Electricity Boards]:
§ 3.25 p.m.
Lord Strabolgi moved Amendment No. 1:
Page 3, line 19, leave out ("or local authority")
§ The noble Lord said: I beg to move Amendment No. 1 and, with the Committee's permission, I should like to speak to Amendments Nos. 2, 9 and 11, which are consequential on it. These amendments are of great interest to local authorities. The GLC, for example, is already engaged in generating electricity by incinerating solid waste at the Edmonton solid waste incineration plant. In fact, the GLC is the largest 485 private contributor to the United Kingdom grids and sells some 160 million units of electricity each year to the Eastern Electricity Board, creating an income in 1981–82, for example, of £3 million.
§ The council's power to generate electricity is, of course, as a waste disposal authority under Section 21 of the Control of Pollution Act 1974, or as a local authority under the similar provisions of Section 1 1 of the Local Government (Miscellaneous Provisions) Act 1976. Under these two parallel provisions, local authorities which generate electricity may use it themselves at the installation where it is produced or in any premises occupied in connection with the installation, or they may sell it, but only to an electricity board.
§ Developments in the field of combined heat and power district heating may lead to an increasing involvement by local authorities in the generation of electricity, and it is felt that the opportunity presented by this Bill should be taken to free local authorities from the restrictions on them concerning the production and disposal of electricity contained in the 1974 and 1976 Acts, in order that they may be in a position to play a positive role in any future developments and optimise both the use of resources hitherto wasted and the production and conservation of energy, where practicable, through combined heat and power district heating schemes.
§ Amendments Nos. 1 and 2 are therefore proposed in order to apply to local authorities the same provisions as will apply to other private generators—I am sure that this will find favour with the noble Earl, Lord Lauderdale—and other suppliers of electricity in their relationships with the electricity boards, concerning the supply or purchase of electricity by the boards, and the use of the board's transmission and distribution systems.
§ Amendments Nos. 2 and 9 will amend the Control of Pollution Act 1974 and the Local Government (Miscellaneous Provisions) Act 1976 and empower local authorities to sell or otherwise dispose of electricity generated by them under those enactments to persons other than electricity boards. The remaining amendment is consequential. I beg to move.
§ Lord Ezra
I should like to support the amendment proposed by the noble Lord, Lord Strabolgi, on the ground that I think it most important, when the effective use of energy is so vital to this country, that we should be giving local authorities every conceivable stimulus to use their powers and their skills to make sure that, in their conversion of refuse into heat and electricity, they can dispose of the resultant electricity as freely as anybody else. I should declare an interest, since I am the chairman of a heat service company which is working very closely with the GLC on this very subject. The prospects are very considerable. The Bill provides us with the opportunity to give full stimulus to local authorities to go ahead with these projects. I believe therefore that the amendments proposed by the noble Lord are worthy of the full support of this Committee.
§ The Earl of Avon
The noble Lord, Lord Strabolgi, supported by the noble Lord, Lord Ezra, seeks further 486 to amend the position of local authorities under the Bill. The noble Lord, Lord Strabolgi, wishes local authorities to be considered under the Bill as private generators, thereby extending their powers under the statutes governing the generation and disposal of electricity by local authorities. The noble Lord spelled out these particular Acts.
I should like to emphasise to the Committee that local authorities already have certain rights and that this Bill gives others to them. First, they already have the right to a supply from a board, subject to the normal conditions. Second, since 1974 they have had the right, which this Bill will only now confer on other electricity producers, to sell surplus electricity to an electricity board, and the board is already obliged to take that supply. Third, in response to representations in another place, the Government agreed to extend to local authorities the provisions in the Bill to ensure that boards pay fair prices for all electricity sold to them. Fourth, the Bill also gives local authorities access to a procedure for determining disputes over the price offered or payment demanded by the board in taking a supply.
In the context of a very limited generation of electricity by local authorities, it seems to us to be entirely right that they should benefit from these rights which are given to private suppliers under the Bill. But the Government see no compelling reason why it should be necessary to treat local authorities as private generators in terms of the use of a transmission and distribution system. We are of course currently aware of only one local authority electricity generating scheme. It may well be that other local authorities may be encouraged to develop schemes in the light of the new provisions on fair prices for the sale of electricity to boards, as well as our provision for combined heat and power. This is part and parcel of the Energy Bill, and we hope that it does so encourage. But the Government believe they have gone as far as necessary to achieve this. They would prefer to leave the Bill as it stands and not to accept the amendments moved by the noble Lord, Lord Strabolgi.
§ The Earl of Lauderdale
I am sure that the Committee will have listened with great interest to my noble friend's answer. Some of us have been wondering what that answer would be. We are told that there is no compelling reason for the amendment and that the Government would prefer to leave things as they are. If the purpose of the Bill is, as I understand it to be, to provide for the community as a whole a better and, hopefully, a cheaper supply of electricity by offloading the capital cost to others and not confining it to the public sector, the greater the competition the better. The amendment moved by the noble Lord, Lord Strabolgi, and supported by the noble Lord, Lord Ezra, surely fits the Government's philosophy of competition.
A further amendment which appears on the Marshalled List relates to a particular aspect of local authorities' disability in this matter, but I appeal to my noble friend to find out whether or not the Government would be prepared to have another look at it. It will not turn local authorities into greater dictators than some of them already are. It will not convert the GLC into a bigger soviet than it already is. It will not 487 damage the rights of the citizen in the eyes of county councils, district councils, metropolitan councils and the rest. It will not damage the system in any way. All it will do is to tighten and sharpen competition. I appeal to my noble friend to show a little flexibility and to say that, in the light of what has been said, he will have another look at the matter.
§ The Earl of Avon
My noble friend spelled out many ideas for the future, which I am not at all sure I go along with. The difference between the Government and my noble friend relates particularly to the transmission and distribution system. At the moment, under the Energy Bill local authorities are able, just as is a private generator now, to sell their surplus supply, as laid down in the Bill, to an electricity board. The question is whether to go one step further and make available to local authorities something which is now available to the private generator. I am not convinced by this argument. If, however, my noble friend would like me to take it back and have another look at it I shall be willing to do so. However, I make no commitment that I shall be able to give ground.
§ The Earl of Lauderdale
I am much obliged to my noble friend for his response. Because he is a very reasonable and kindly person and has an open mind on all these matters, his response was very much what I felt sure it would be. For my part, I can only say that I am glad my noble friend has made this offer—without, of course, any commitment. I hope that the noble Lord, Lord Strabolgi, will feel able to respond in the same sense.
§ Lord Drumalbyn
I wonder whether my noble friend would also agree to discuss this particular amendment in relation to its impact on the Highlands of Scotland. There must be several areas in the Highlands of Scotland where there is no form of distribution system. If a private system on a local authority basis were to be established, or if it were to be a Highlands and Islands Development Board system or a private enterprise system, it would need, in order to be effective, to have its own local distribution service.
§ Lord Strabolgi
I am grateful to the noble Lord, Lord Ezra, and to the noble Earl, Lord Lauderdale, for their powerful support. I saw a little chink of light in the speech of the noble Earl, Lord Avon. I hope that, with his colleagues, he will look seriously at this matter. I do not see why local authorities should be treated as a second-class sector, much below the public sector and far below the private sector. Why they cannot be treated the same I cannot understand. If we are going to have greater competition, why cannot local authorities be brought into it? There seems to be no logic in the Government's attitude. I was inclined to divide the Committee, but in view of the noble Earl's undertaking to look again at the matter—besides which there will be two more stages of the Bill—I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.488
§ Lord Strabolgi
I should like to move Amendment No. 2 formally so that it appears in the Official Report, otherwise it will not.
Lord Strabolgi moved Amendment No. 2:
Page 3, line 23, leave out ("or local authority").
§ The noble Lord said: I beg to move Amendment No. 2 formally, for the reason I have already given.
The Lord Chairman of Committees
Amendment proposed:Page 3, line 23. leave out ("or local authority").
§ The Question is that this amendment be agreed to. As many as are of that opinion will say, Content? To the contrary, Not-Content?
§ Amendment, by leave, withdrawn.
§ Clause 5 agreed to.
§ Clause 6 [Charges for supplies by Electricity Boards]:
§ On Question. Whether Clause 6 shall stand part of the Bill.
§ Lord Tanlaw
I wish to speak briefly on Clause 6, which determines how charges are to be made for the electricity supplied by an electricity board to a private generator or supplier. While a considerable amount of information is presented in the CEGB accounts, it is not clear what the cost of electricity from each power station is when both fuel and capital and maintenance overhead costs are taken into account. There is bound to be a variation between some nuclear plants which are very efficient and some nuclear plants which may not be so efficient. The same variation will apply in the case of coal plants, either because of technical problems, or because some of them are running very well, or because some of them are old while others are new. There is bound, therefore, to be a quite considerable variation in the efficiency of plants.
This is averaged out to the average price of electricity, which at present is apparently 3.980 pence per kilowatt hour, according to the minutes of evidence before the Select Committee on Energy, given in another place on 9th December 1982. The price of electricity has come in for some criticism from industry. In particular, this criticism appeared again in the report of Sub-Committee F on the EEC Community, on page 281, which showed that the price disadvantages suffered by, in particular, the larger HLF users in Great Britain have tended to worsen in 1982.
The reason I am asking this is because under this clause tariffs have to be set. It is not clear to me (and is it clear to the Secretary of State?) in terms of figures supplied by the CEGB, as to the varying economic efficiency of the plants operated by the CEGB. If appropriate capacity credits are to be given to private generators, and if there is to be a clear picture of the cost of electricity produced by different generating stations, then surely it is highly desirable that, in the same way as large companies produce reports and accounts for their subsidiaries, the CEGB should 489 produce accounts for the Secretary of State to show the differing efficiency and the cost of electricity of the individual generating plants under the CEGB.
I should be very interested to know these various costs, as a member of the public. What concerns me is whether the Secretary of State has access, under the law or in effect, to the operating figures of these plants. Or are these figures merely kept by the CEGB and not made public to the Secretary of State? If the Secretary of State is to make any decisions on the matter of tariffs—and on purchasing tariffs in particular—then he should have these figures at his disposal. All I want the noble Earl to say is whether or not he has these figures at his disposal and whether or not he had them under consideration when this Bill was put before your Lordships' House.
§ The Earl of Avon
Clause 6 is an explanatory clause. It makes clear that where any electricity board supplies electricity to a private generator under an agreement resulting from this Bill, its price is to be in accordance with tariffs fixed by the board in the same way as prices to consumers generally. Tariffs for elecricity supplied to any consumer are subject to the Electricity Act 1947 and the Electricity (Scotland) Act 1979. These Acts establish the way in which tariffs for electricity are to be framed and published, and make provision for a system of consultation with consumer representatives. They also allow for a special agreement to be made where tariffs are not appropriate to the case in question. This will apply only where there are genuinely special circumstances.
In most cases the private generator will wish to take a supply to supplement his own or his customers' needs, or he may seek only to have a standby supply of electricity. In that case he will pay the board for making the supply available and will pay also for any electricity he subsequently takes. Clause 17 of the Bill provides that the supply tariffs may also include such availability charges. The clause ensures that, as far as possible, there is common treatment of private generators and other consumers as regards supply tariffs. I believe that the noble Lord, Lord Tanlaw, went fairly wide of this clause when he asked whether the CEGB have individual figures for their generating plants. Indeed, they do have these figures, and the Secretary of State is aware of these figures. I may be wrong, but I rather thought that these figures had been made available for the Sizewell B inquiry; but I should like to look at that again. I commend this clause to your Lordships.
§ Clause 6 agreed to.
§ Clause 7 [Charges for purchases by Electricity Boards]:
§ 3.44 p.m.
Lord Tanlaw moved Amendment No. 3:
Page 4, line 34, leave out ("other than the Central Electricity Generating Board").
§ The noble Lord said: This amendment brings in the Central Electricity Generating Board, which has been excluded under the Bill from setting tariffs for the purchase of electricity. The reason for doing this may not be apparent at first glance but it is my view that 490 this effectively means that any setting of tariffs for electricity purchase from private generators is to be determined by the bulk supply tariff. It would be much more beneficial, in national terms, if the tariffs which were to be paid for electricity purchased by the electricity industry as a whole were allowed to develop as a totally separate structure. I do not see that electricity is different from any other commodity in which there is always a buyer's and seller's price. I cannot see the particular advantage of sticking to the same price both for the buyer and the seller, so to speak.
§ Noble Lords will be aware that the CEGB sells electricity to all the other boards and then they make their profit on that price to the consumer. If we look at this in reverse, a satisfactory tariff for the sale of electricity may not be a satisfactory tariff for the purchase of electricity, particularly as those wishing to invest in generating capacity look ahead for more than one year, whereas the rates of return set by the Government, which affect the cost of electricity in the bulk supply tariff, have varied from one year to another and can be subject to short-term manipulation—whereas any purchase tariff needs to be based on longer periods for its time horizons.
§ This is a major point to the private industrialist who wishes to invest in a plant which will no doubt help him industrially but at the same time will sell electricity to the board. He wants to know what price he is going to get, not just 12 months ahead but for a considerably larger period of time than that. It would appear that, under the Bill as at present, he cannot be given a price for more than 12 months ahead. I may have got this wrong, but when the noble Earl replies, perhaps he will be able to confirm whether or not that is the case.
§ Also, the removal of these words will produce a far more consistent arrangement in terms of the price paid by privately generated electricity where it is purchased by area boards on the one hand or by private consumers on the other. At present, under Clause 8 of the Bill, a private generator may rent the grid system in order to sell electricity to another party. It is quite possible that those wishing to generate electricity privately may use this part of the Bill to do so, in the sense that it would be more profitable for them. In the long term, this would be an unfortunate tendency, simply because there were not these two proper prices—a purchase price and a selling price—for a commodity such as electricity.
§ If there is to be no latitude in the area boards in negotiating their price for the purchase of electricity, many industries which are looking forward with acclamation to the passing of this Bill will be slightly depressed. The area boards will be able to take into consideration many of the criticisms that have been made against the CEGB, and indeed against the Government, for fixing the price of bulk electricity too high. If the area boards were able to negotiate and were able to operate a commercial purchase price for electricity, they might be able to assist to a very considerable extent some of the bulk users of electricity in their areas. It is those same bulk users of electricity who have been complaining to the Government and to others that they are paying too much for electricity.491
§ I hope that this amendment will be looked at closely by the Government. When the noble Earl replies, I suspect that he will have to justify—with some difficulty in my view—why the bulk supply tariff should be used as a purchasing guideline as it is a selling guideline. These are two entirely different parameters. Also, those parameters differ even with the BST because, if economy is to be the yardstick of how the board sells its electricity, the overnight rate for electricity, which is less than the cost of the fuel needed to generate it, is not economic. I hope that this amendment will be considered to be a constructive one, and one that could be conceived of as being of general benefit to bulk users of electricity so that they may be able to reduce some of their criticisms of the Government in respect of the high price they are having to pay for electricity at the moment by comparison with their overseas competitors in Europe.
§ The Earl of Avon
Clause 7 requires area electricity boards and Scottish boards to fix tariffs for the purchase of privately generated electricity. This will ensure that private generators will know in advance the price that they are likely to receive for their electricity. Incidentally, in response to the noble Lord, Lord Tanlaw, there is nothing to stop contracts from being agreed between private generators and boards for periods beyond one year; the Bill places no restriction on that.
Where these tariffs are not applicable or appropriate. a board will be able to propose a price to the private generator. Both the tariffs and the prices proposed by a board in the absence of a suitable tariff will be subject to the same principles. I shall return to this shortly. The point of exempting the CEGB from the requirement to fix a purchase tariff is based purely on the practical situation. First, private generators invariably sell to an area board because of the amount of electricity likely to be involved. There are currently about 50 cases where area boards purchase from non-CEGB suppliers, but there is only one case where the CEGB purchases from a company. That company is BNFL, which is of course itself in the public sector. So there is no-one at present who will be interested in a CEGB tariff.
Second, there is only a handful of cases where the CEGB supplies direct to a customer, because of special circumstances relating, for example, to the size of load, voltage or location of supply. These same factors mean that it would rarely be appropriate for the CEGB to purchase electricity although it has said it is willing to do so in suitable circumstances. Such purchases would need to be negotiated on a case by case basis, and it would not, therefore, be sensible for the CEGB to fix a general tariff.
I am sure, however, that it is right to introduce a greater degree of transparency into private generators' dealings with boards. In that context let me emphasise that any price proposed by the CEGB for the purchase of privately generated electricity would have to be in accordance with the principles applying to tariffs and prices proposed by other boards which is stated in Clause 7(3); that is, that while electricity prices generally should not increase as a result of that purchase, the price must reflect the board's avoided 492 costs. The price would also be subject to the disputes procedure under Clause 9. I hope that in the light of this explanation the noble Lord may feel reassured and will not wish to press his amendment.
§ Lord Tanlaw
I will have to read Hansard to follow the detail of what the noble Earl the Minister has said. I have the gist of it and the reassurance is given. But the outstanding question that I have, which no doubt was covered, was this difficulty of seeing why under Clause 8 the CEGB is included and under this clause it is excluded. No doubt it was covered and possibly I did not follow the noble Earl fully. Therefore, I will take his view, as I understand it, and withdraw my amendment. May I say in doing so that that I hope the noble Lord the Chairman of Committees will put it to the Committee, as he seems to have omitted to do with my first amendment. I beg leave to withdraw the amendment.
§ The Chairman of Committees (Lord Aberdare)
The first amendment was on the Question that the clause stand part; it was not an amendment to the clause. Is it your Lordships' pleasure that this amendment be withdrawn?
§ Amendment, by leave, withdrawn.
§ Clause 7 agreed to.
§ Clauses 8 to 10 agreed to.
§ 3.54 p.m.
Lord Strabolgi moved Amendment No. 4:
After Clause 10, insert the following new clause:
§ ("Waste disposal authorities
§ (2) Where a disposal authority wishes to use any such electricity on premises occupied by the authority other than the installation at which it was produced and requests an Electricity Board to permit the authority to use the Board's transmission and distribution system for the purpose of supplying the electricity to those premises the Board shall offer to comply with the request unless on technical grounds it would not be reasonably practicable to do so.
§ (3) Subsections (3) to (6) of section 5 shall apply to an offer under this section as they apply to offers made under section 5(2).
§ (4) Tariffs of charges made under section 8 above shall apply to the use by disposal authorities of Boards' transmission and distribution systems made under this section as they apply to the use of such systems by private generators and suppliers under section 5 above.
§ (5) Section 9 above and regulations made thereunder shall apply to disputes as to offers made under this section as they apply to disputes within section 9(1)((a) to (e).").
§ The noble Lord said: I beg to move Amendment No. 4 and, with your Lordships' permission, to speak also to Amendment No. 10. The noble Viscount, Lord Ridley, has been unavoidably detained and is unable to reach London, and he has asked me to extend his apologies to your Lordships.
§ The Association of County Councils is concerned about this aspect of the Bill and I know would be interested in an amendment of this kind being included in it. The association represents non-metropolitan county councils in England and Wales, who are responsible for the function of waste disposal. Household and commercial refuse is collected mainly 493 by district councils, although an increasing amount of commercial refuse is being handled by private companies. Both local authorities and commercial concerns, however, hand over the waste that they collect to the county council for disposal. Disposal of waste is carried out at present mainly either by land-fill or by incineration. An increasing amount is, however, being converted into fuel and fuel pellets and sold to electricity boards and others. The Greater London Council uses some refuse for electricity generation, and it may be expected that other waste disposal authorities will see the financial sense of this as fuel becomes scarcer and electricity becomes more expensive.
§ This fact was recognised some years ago when, by Section 21 of the Control of Pollution Act 1974, waste disposal authorities were given the power to generate heat and electricity from waste. That section gave authorities unlimited power to sell heat generated as a by-product of waste disposal or to use it for their own purposes either on site or elsewhere. Electricity, however, was treated differently. Under the 1974 Act it may either be sold to the electricity board or used by the authority on the waste disposal site but not elsewhere. These limitations were acceptable to the association at that time as they conformed to the general limitations on electricity generation imposed on the country as a whole.
§ However, under the Bill as presently drafted any person may generate electricity and may request an electricity board either to purchase such electricity or to permit the use of the board's transmission and distribution system to enable such electricity to be supplied to other premises owned by the private generator. The Bill also contains provisions to enable the price for such services to be fixed and for the settlement of disputes. However, local authorities are expressly excluded from the class of organisations given the power to generate electricity.
§ The Government have indicated that the Bill is intended to encourage electricity generation in the private sector, and the Association of County Councils accepts this. The Government have also indicated that to give local authorities access to the use of the boards' transmission and distribution systems would raise much wider issues of local authorities' powers. The associations recognise the Government's problems in this area and have accordingly framed the present amendments to take account of this. I beg to move.
§ Lord Tanlaw moved, as an amendment to Amendment No. 4, Amendment No. 5:
After subsection (2), insert the following new subsection—
("( ) Where a disposal authority produces electricity in accordance with the said section of the Control of Pollution Act 1974, it shall be the duty of that authority to adopt and support schemes—
- (a) for the combined production of heat and electricity, and
- (b) for the use of heat produced in combination with electricity, or incidentally from its generation, for the heating of buildings or for other useful purposes.")
§ The noble Lord said: I wish to propose this amendment, which is really a supporting amendment in terms of the one put forward by the noble Lord, Lord Strabolgi. I would hope that this would be considered constructively by the Government, in the sense that if local authorities have to dispose of waste, 494 which is one of their main tasks, they will do so in such a way as to maximise its use, not only by producing electricity but by doing it through the combined heat and power process which also would involve district heating as well.
§ I think that the Association of County Councils might on the face of it be slightly worried by the amendment which I am proposing to the Committee, on the basis that they would feel that they would be forced to do this. I hope the Government will see this in the sense that if a county council has a waste disposal problem that is not near a conurbation, then it would be able to combine with other county councils to maximise the unit for waste disposal, in that it could generate electricity and at the same time provide heat for industrial as well as domestic purposes, if the site of the waste disposal plant was some way from a conurbation.
§ In order to generate electricity, and to give your Lordships some idea, I am informed that it needs 700 tonnes of waste a day to keep a plant remotely viable and to produce electricity. Therefore such a plant, by warrant of the amount of waste needed, must be near a conurbation in which there are dwellings. If the Government are giving more than just lip service to combined heat and power this would be an excellent area in which CHP could be done on a small scale.
§ In doing so, let me make it clear to the Committee that this kind of use of combined heat and power with district heating is on a completely different scale from that which comes later, in Clause 19, where there would be a massive urban CHP programme for heating a great city. It is the question of scale on which I want to make this distinction. This amendment is concerned with local and county waste disposal whereby the community can benefit from the disposal of waste in terms of less cost, in getting cheap heat and possibly even a reduction in the rates by selling electricity.
§ I hope that the amendment put forward by the noble Viscount, Lord Ridley, and the noble Lord, Lord Strabolgi, which I fully support, will be taken together with my amendment by the Government, and if they are not in perfect form for the drafting of the Bill they will be somehow incorporated in the Government's legislative programme so that communities can benefit in the way put forward by those of us proposing these amendments. I beg to move my amendment to Amendment No. 4.
§ The Earl of Lauderdale
I sometimes think that combined heat and power is treated as a sort of religious solution to many of our energy problems. I know that is not the intention or implication of the noble Lord, Lord Tanlaw, but that is a common impression given by exponents of it. I am a tepid supporter of CHP, but I still believe that it is worth supporting. I therefore hope that the Government will take a further look at these two amendments, and I hope that the noble Lord, Lord Strabolgi, and the noble Viscount, Lord Ridley, in his absence, will be able to accept the amendment to their amendment proposed by the noble Lord, Lord Tanlaw.
Speaking generally, this whole business of the local authority position is already open to question. My noble friend has been good enough to say that he will 495 have another look at the local authority position as it was raised on an earlier amendment. I hope that he will be able to do the same on these amendments, because if at the end of the day the effect is to encourage the generation of even a few kilowatts of extra power from waste, somewhere or other, and to generate a little more heat for houses—say, old people's homes—at even a one penny cheaper rate, then it is worth having. However marginal the benefits may be—and I think they are perhaps more marginal than the enthusiasts may think—they are still worth looking at. I therefore hope that my noble friend will be able to respond to these amendments in the same generous and constructive way as that in which he has already responded to the previous amendment on the position of local authorities.
§ Lord Ezra
I support the plea that the noble Earl, Lord Lauderdale, has addressed to the Government Benches that this whole matter be reconsidered in line with what has already been agreed by the noble Earl the Minister in relation to a previous amendment. The position of the local authorities in this whole matter is crucial. They need to be given every encouragement. Already many officials in local authorities and elected members are very keen on going ahead in this field. However, if it is felt by them, as is evidenced by the letter some of us have received from the Association of County Councils, that they feel they are somehow being discriminated against, then a worthy and desirable endeavour may be limited in its application.
I do not see how the amendment proposed by the noble Lord, Lord Strabolgi, and the amendment to it by my noble friend Lord Tanlaw, can do other than reinforce what is intended in the Bill. Those of us who are putting forward this amendment are in support of the intentions. What we are saying is: let us make it work and give the local authorities every possibility of contributing to those endeavours.
§ Lord Alexander of Potterhill
I am no expert in the field of energy, but I support this amendment in principle on the simple issue that I find it difficult to understand a Government which, with great regularity, badgers local authorities to become more efficient, to show more initiative and to become more cost-effective, but seem to be discouraging rather than encouraging when they do so.
§ The Earl of Avon
We are not trying to encourage or discourage; we are trying to get the method right on how the local authorities should supply their electricity to the boards. That is really the point, and the argument we had earlier was about generation.
Perhaps I can start by replying to the noble Lord, Lord Tanlaw. I see, of course, the apparent logic of giving local authorities a duty parallel to that placed by the Bill on electricity boards. But there is a difference in terms of the need for such a duty in each case. We can see that electricity board statutes, based primarily on electricity production, leave room for doubt over the role they might be expected to play in the use of heat. The Bill puts this beyond equivocation. On the other hand, local authorities have responsibility for waste disposal and specific powers in connection with 496 electricity generation from waste. Under the Control of Pollution Act 1974 they may,use waste belonging to the authority for the purpose of producing from it heat or electricity or both.I see nothing unclear about that.
We are aware that local authorities are keen on CHP/district heating from their involvement in the lead city scheme feasibility programme. They already undertake limited generation from waste. They may expand this activity, given the right to fair terms for electricity which the board confers on them, and we hope that they will pursue the economic opportunities that this may offer to them. I do not believe that their general statutes constrain them on these matters.
To return to the amendment of the noble Lord, Lord Strabolgi, this proposes only a limited extension to the powers of local authorities by enabling those who generate electricity from waste to use the transmission and distribution systems in order to supply other premises occupied by them. I appreciate the intention that this should encourage the generation of electricity from waste. However, I would suggest that having the right to sell to the boards at fair prices should be encouragement enough.
Let us consider what would be the effect of the further changes proposed. They are redolent of a return to the days when electricity supply was concentrated, before nationalisation, in local electricity authorities. I am delighted by the Committee's faith in the fact that local authorities would be able to make a profit in this way of generating electricity. I wish I had equal confidence. The noble Lord contended that limiting local authorities to using the transmission and distribution system only for the supply of local authority premises will avoid this radical extension of their powers. But to what premises does the clause refer? Either it is to a very limited number of premises occupied by the local authorities for their own administrative purposes, such as offices, or it applies to the generality of local authority premises, including public buildings, blocks of flats and street lighting.
It will hardly be worthwhile negotiating arrangements for such small and probably isolated pockets of demand, and an arrangement to sell electricity to, and to buy it from, the board would surely be preferable. As the noble Lord. Lord Strabolgi, will be well aware, this is very similar to Amendments Nos. 1 and 2 that he moved. I said that I would take that point back and look at it, and as these amendments are consequential in everything but fact on those amendments I am prepared to do the same, on the same terms.
§ Lord Strabolgi
That is very generous and constructive of the noble Earl, if I may say so, and in view of that undertaking I beg leave to withdraw the amendment.
§ Lord Tanlaw
I was not sure of the formal order of speaking, but if I may repeat what the noble Lord, Lord Strabolgi, said and put words into his mouth, in view of what the noble Earl said and the very helpful way in which he has taken to the thinking behind these amendments, which we on these Benches greatly appreciate, I shall be pleased to withdraw Amendment No. 5.
§ Amendment to the amendment, by leave, withdrawn.
§ Lord Strabolgi
I apologise to the noble Lord, Lord Tanlaw, for jumping the gun, and I beg leave to withdraw Amendment No. 4.
§ Amendment, by leave, withdrawn.
§ Clauses 11 to 15 agreed to.
§ Clause 16 [Regulations relating to supply and safety]:
§ Lord Strabolgi moved Amendment No. 6:
Page 9, line 28, at end insert—
(c) securing so far as practicable that any tariff in accordance with which prices are to be charged for the supply of electricity by an Area Board, a Scottish Board, or any other person (other than the Central Electricity Generating Board), is presented in such a way as to enable the prices to be charged in accordance with that tariff to be readily comparable with the prices to be charged under any other tariff").
§ The noble Lord said: Consumers, especially small industrial and commercial businesses, can be faced with problems which, because they may not have the expertise available to a large concern, they do not satisfactorily resolve when endeavouring to choose the most suitable rate presented to them by an electricity board's tariffs for the supply of electricity. The enactment of the Bill could, in my view, worsen the situation where consumers were in a position to choose a supply of electricity from a board or a private supplier. It is felt highly desirable that both private suppliers and the boards should be required to present their tariffs in a readily understandable form to allow a detailed comparison of prices to be made. It is thought that this might best be achieved by empowering the Secretary of State to make appropriate regulations under Clause 14 of the Bill. I beg to move.
§ The Earl of Avon
I must admit to the noble Lord that I did not at once see why he had tabled this particular amendment to this clause, as the clause deals more with technical and safety matters. However, I should like to point out to the noble Lord, Lord Strabolgi, that the presentation of supply tariffs is already dealt with in existing legislation. Under Section 37 of the Electricity Act 1974, supply tariffs (and these will include supply tariffs for private generators) must be framed so as to show the methods and principles by which the charges are to be made, as well as the prices to be charged, and must be published.
This is precisely the arrangement we have adopted for tariffs for purchase of privately generated electricity and for use of the system. Boards are obliged to set and publish tariffs so that private generators may see the prices and charges applicable for the service they are requesting from the board. The tariffs may not always be applicable, but will be an important basis for negotiation in special cases. All consumers will be able to see the different tariffs available for supply. They are also protected by the provisions under which boards are prevented from showing undue preference to or undue discrimination against any person or class of 498 persons. There must be parity of treatment among all classes of consumer. I hope that, with that assurance, the noble Lord, Lord Strabolgi, will not feel it necessary to press his amendment.
§ Lord Strabolgi
I am grateful to the noble Earl. This was a probing amendment only. If I may say so, I think that it was worth venturing to move it because we have elicited this useful and full explanation from the noble Earl. In view of what the noble Earl has told the Committee, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 16 agreed to.
§ Clause 17 agreed to.
§ Clause 18 [Purchases by electricity boards from local authorities]:
§ 4.13 p.m.
§ On Question, Whether Clause 18 shall be agreed to?
§ Lord Strabolgi
I do not propose now to move that we should leave out Clause 18. This clause is acceptable in itself but I should prefer a clause drafted on the lines of the amendments previously moved, which the noble Earl has said that he will look at. This clause was inserted by the Government in another place. As I said, it is acceptable so far as it goes but it does not go far enough. I hope that when the noble Earl comes to look at this matter he will perhaps see whether we can take it a bit further. In view of this, I do not propose to move the amendment.
§ Clause 18 agreed to.
§ Clause 19 [Combined heat and power]:
Lord Tanlaw moved Amendment No. 7:
Page 11, line 28, at end insert ("promote,")
§ The noble Lord said: The amendment is clear; it asks to insert the word "promote" into the Bill. The worry that I have had over the Bill with regard to combined heat and power has been that it is quite possible, without any alteration to the existing legislation—without having this Bill at all—that the Government and the Department of Energy could say that they are extremely keen on combined heat and power and are doing all that they can to put schemes forward, except that there are problems with economics. The provision has been put into the Bill. The object of the amendment is to elicit from the Government more than just lip service that they will actively promote this method of heat and electricity generation.
§ I have placed on the Library table and made available to other noble Lords a copy of an extract from Energy Paper No. 35 of 1979 which was put to the Department of Energy. It was entitled Combined Heat and Electrical Power in the United Kingdom. It is quite clear from this paper that for primary energy requirements for the long term (that is, after the year 2000) combined heat and power, with district heating, is by far the most cost-effective way of producing electricity and heat to citizens in any country. Either this paper is completely wrong and misleading or it is 499 right. Therefore, in my view the Government have to clarify their position more than they have done to date.
§ The object of the amendment is to elicit from the Government whether they are going to promote actively combined heat and power on the basis of Energy Paper No. 35. It is the most effective way of keeping our nation warm and giving people cheap electricity. There are other considerations apart from the obvious environmental ones—and the environmental considerations are considerable. If and when legislation is forced on us, either from Europe or from movements in this country, that the sulphur emissions from coal-fired power stations should be reduced, there are even more and greater reasons why CHP should be used as a standard form of electricity generation on a very large scale indeed.
§ There is another factor as well. It has been assumed—and I have said in this House on other occasions—that the space heating market after the year 2000 will be covered by the increase in nuclear electricity generation. It will be cost-effective and it will replace gas, which will be too expensive owing to the shortage of supply. From the debate that we have had in this House on other occasions, it is clear that the gas will be available in very large quantities by the year 2000, and that the pure electric space heating market will not be there. It will not be cost-effective. Therefore, it is my conclusion that the Central Electricity Generating Board has to look at combined heat and power as the only way in which it will get into this market at all.
§ The noble Earl is well aware of this paper. If he looks at the chart in the paper he will see that straight-forward electricity space heating is one of the most expensive and uneconomical systems when compared with the heating provided by CHP. This is a major policy point. The Government have not made their position clear, and nor has the CEGB, as to what they mean by encouraging combined heat and power. I should like to see the word "promote" put into the Bill to ensure that this is done on a massive scale in our conurbations. I beg to move.
§ The Earl of Avon
In speaking to this amendment, which proposes the insertion of the word "promote", the noble Lord has taken us on a grand tour of the energy industry. I think that the first sentence of my reply expresses my real feeling. As drafted the clause gives electricity boards a clear duty to promote CHP schemes. Existing statutes are designed principally around the production of electricity. Their duties in respect of associated heat are limited. This clause removes doubt as to the attitude that the boards are to adopt in connection with schemes for the use of heat from ordinary power stations. To their credit they have developed some of these projects on the grounds of energy efficiency and commercial sense.
There is also doubt in the statutes as to the attitude that boards are to adopt to CHP schemes where the production of heat at useful temperatures is an integral part of the design, and where the production of electricity is accordingly affected. There is no doubt that CHP schemes can lead to a high level of efficiency in terms of energy use, and we want them to go ahead 500 where they are economically viable. The Bill gives boards a clear duty to promote such schemes, but nothing in the Bill means that boards have to act uneconomically; not does it impose additional burdens on their consumers.
If I may turn to the noble Lord's amendment, I would say that it seeks to require boards to promote CHP schemes. The words "adopt and support" were used to enable boards to carry out schemes themselves and to participate in schemes of others. Therefore, the words encompass most of what the word "promote" conveys. However, by adding that word an additional duty would be imposed on boards actively to encourage others to adopt CHP schemes on their own, and I do not think that it would be practical to impose a duty in respect of such schemes in which the boards have no involvement. On that rather technical point I would therefore ask the noble Lord, Lord Tanlaw, to withdraw his amendment, and I would hope that he will be happy to accept my opening words, which, if I may, I shall repeat: the clause gives electricity boards a clear duty to promote CHP schemes.
§ Lord Tanlaw
I cannot ask for much more than that, apart from the Committee accepting the amendment. The noble Earl's words are good enough for me at this stage, and therefore I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ 4.22 p.m.
Lord Tanlaw moved Amendment No. 8:
Page 12, line 27, after ("financial") insert ("and social").
§ The noble Lord said: Notwithstanding what the noble Earl the Minister has said, in speaking to this amendment I should like some further reassurance. A situation could arise where a board does everything actively to promote CHP only to find that the scheme is returned from the accounts department because it is stated not to be viable. Therefore, perhaps much to its relief, the board is able to say that under the terms of the Bill it does not have to pursue the scheme because it appears that it is not financially viable. I hope that that will never happen, but under the Bill as it stands it is a possibility.
§ I want to ask the noble Earl two questions. First, when the financial criteria are applied will they include savings in relation to foreign exchange and the actual cost of purchases of alternative fuel in competition with combined heat and power? There would be a great saving to the nation in terms of foreign exchange if CHP were used. Secondly, are there to be different rates of return imposed on CHP schemes because they are providing two different functions: one is to create electricity, the other is to create heat? I do not believe that they are directly comparable with existing financial criteria applied in respect of a normal, standard generating station.
§ I feel that adding the word "social" would enable a board to make a major contribution to a whole area under its domain. For instance, in Liverpool only 20 per cent. of the urban population are without central heating. In Newcastle 40 per cent. of the population are without central heating. Sadly, both of those areas have high unemployment rates, which are certainly not improving. I believe that there is a very strong case 501 for introducing a CHP scheme, with the encouragement and promotion of a board, to alleviate the social circumstances in those cities, the inner parts of which are in serious decline, as well as to help the unemployment situation there. It would be wrong if a board were to look at the Bill as a straightforward electricity Bill, and no more. By adding the word "social" the Government have a wonderful opportunity to enable the board's directorate to look wider than the confines of its own balance sheet in producing electricity in the area.
§ I have raised this particular point on previous occasions in your Lordships' House. It seems that while the Government are quite happy for pavements to be dug up in inner city areas and disruption to be caused in order to provide cable television, they accept the CEGB's view that it is too disruptive to dig up pavements to lay pipes for a district heating scheme. In other great cities the sewerage systems are deteriorating. Successive Governments have constantly been reminded about this, but they have put it off from year to year. Is there not a case for looking at these matters altogether?
§ Can I possibly inspire the noble Earl to indulge in some lateral thinking in this area? I am sure that he is more than capable of that. Lateral thinking must be used in CHP schemes. I believe that such schemes will bring future social and financial benefits in a way which has not been achieved by any other scheme to which the noble Earl has put his name, so to speak. I hope that he will be as responsive and as receptive to this amendment as he has been to other amendments involving CHP which he has said he will look at. I beg to move.
§ Lord Strabolgi
I should like to add my plea to that of the noble Lord, Lord Tanlaw, because I believe that this matter has social as well as financial implications. The trouble with so much of the Government's cost-conscious policy, good and necessary as it may be, is that it is counterproductive and can have bad effects in other ways. This morning I received a copy of the latest issue of Practical Energy for April/May, which I was very glad to see contains an important interview with the noble Earl, Lord Avon. I should like to quote part of the interview to your Lordships. The editor of the magazine asked the noble Earl the following question:Why is more not being done about District Heating? In Denmark, for example, over 40 per cent. of homes are heated in this way, thereby not only saving the consumer money but conserving fuel. Many of the heating plants consume refuse and straw while others use waste industrial heat.In reply the noble Earl, Lord Avon, said:We are doing research into combined heat and power and are awaiting the results. It seems to me, speaking before we've got any official reaction, that this sort of thing looks tremendously like commonsense. However, when you get the figures out to do the mathematics, the savings can turn out to be very small. One of the troubles we have found with combined heat and power is that when we make suggestions to industry they turn down the idea as the return on capital takes such a long time".So judging from that, it seems that we are still very much in the cost-conscious world, and subject to a cost-conscious outlook and policy, important though it may be. However, I think that there are also important social implications which can be farreaching 502 not only now, but in the future. Therefore I hope that the noble Earl will be able to give some reassurance when he replies to the amendment.
§ 4.30 p.m.
§ The Earl of Avon
I knew I had been talking too much, but I had not expected my remarks to be quoted back at me to that extent today. I understand there is to be a debate on energy tomorrow. This second amendment of the noble Lord, Lord Tanlaw, I found rather intriguing. I was wondering what he would have to say. It would, in fact, require a Scottish board, if considering a CHP scheme, to apply the social criteria that applies to other expenditure. However, I presume that the noble Lord meant what he has been speaking to, and it is that to which I shall reply.
The clause specifies that a prospective scheme must meet the same financial criteria applied to other board expenditure. This is to ensure that the board is not obliged to adopt or support uneconomic schemes that would result in increased prices to consumers generally. This is one of the main principles underlying the part of the Bill dealing with private generation. I am sure that the Committee agrees that it is an essential one. The Government take the view that the nationalised industries should plan their investment according to commercial criteria. Effectively, that means that there must be a proper market for the goods that justifies the investment. We see no reason to depart from that principle for the electricity industry because it might be marketing heat as well as power.
In suggesting that the industry applies less stringent criteria to CHP schemes than to other investment, the noble Lord, Lord Tanlaw, is perhaps suggesting that CHP should be to some extent subsidised on the assumption that it would not compete directly with other forms of energy supply in terms of efficiency and value to the consumer. To adopt such an approach to CHP would not only distort the boards' investment programmes in favour of projects which were admittedly less efficient in contributing to their overall operations; such subsidies would also have to be paid for in the long term. They would be paid for by consumers meeting the costs of a less efficient overall supply system and by the nation as a whole through investment decisions which added less rather than more to the national wealth.
That does not represent any bias against CHP. Indeed, the Goverment's purpose is to encourage the industry to look positively at such schemes, but not at the expense of more productive investment. However, if two similar projects came forward at the same time and their investment appraisal indicated that there would be little to choose between them when taking into account all financial costs and benefits, the final outcome would rest on the many other factors which would come into play. I would suggest that these are, first, social, and then environmental, industrial and technical factors.
I do not believe that there can be any hard and fast rules, since the board must make its own investment decisions on the merits of each particular project whether it is a combined heat and power scheme or any other project. I know, of course, of the noble Lord's interest in CHP. I hope that, following our various talks on the subject, he will realise that the 503 Government continue to look at these schemes, put forward in the Atkins Report.
§ Viscount Hanworth
I hope that financial viability will be considered broadly. There are, after all, enormous variables. First, one must rightly decide whether the plant, or whatever it is, is going to be viable over its expected life. Especially with CHP, financial viability depends enormously on interest rates. If interest rates are fairly low, it is easy to make a very good case. If, on the other hand, interest rates are high, the reverse may be true.
Another factor that cannot be determined with certainty is by how much—I emphasise the words "how much"—the cost of energy will rise in the future. That it will rise in real terms, I have little doubt. This has to be taken into account in assessing financial situations. It is not a straight equation as matters stand today. That is why I say that I hope finance will be examined in the broadest possible terms.
§ Lord Ezra
I should like to support the view expressed by the noble Viscount, Lord Hanworth. Financial viability can be regarded in a variety of ways. If all projects are to be treated on the same relatively short-term basis, there is no doubt that schemes of this sort will not come into effect. These are long-term schemes requiring fairly large amounts of money. They may cost a good deal in capital investment in the initial stages in order to bring long-term benefits. I hope very much that, even if the amendment cannot be accepted, the Government will make clear that the term "financial viability" is to be interpreted fairly flexibly in relation to these important schemes that can bring such important long-term benefits.
§ Lord Tanlaw
I apologise to the Committee for submitting an amendment in the wrong place. As the noble Earl has pointed out, it should have come after the word "financial" in line 1. It is possibly by chance that financial viability came under the Scottish section. As the South of Scotland Electricity Board has 100 per cent. over-capacity of electricity, it shows that assessment of viability or future projections cannot necessarily be perfect in the electricity industry. Indeed, if the noble Earl is saying that district heating is not viable through CHP, I become worried about Department of Energy Paper No. 35, which shows that it is viable. Its popularity has been proved in Denmark. To take up Lord Strabolgi's point, I was informed only today that cities in Denmark have had to be zoned because all the inhabitants wished to have CHP district heating. It was, however, the wish of the Government to introduce gas in certain areas, which costs more. There was no choice about the use of gas. The Government insisted that in certain zones gas had to be used even when the citizens would have preferred to use CHP district heating systems. It works effectively. People like it, and it is cheaper.
I am most grateful to the noble Earl for exposing the Government's thinking behind the clause. It appears that the Government are prepared under certain conditions to examine CHP, and that they do not simply intend to cut off their nose to spite their face in certain areas simply because the figures do not add up. 504 The figures can be examined in many different ways. It would be sad if this great project of CHP district heating was abandoned simply on accountancy grounds. This would be to misread the general feeling of the public today. In view of the thoughts expressed by the noble Earl, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 19 agreed to.
§ Clause 20 agreed to.
§ Clause 21 [The Electricity Consumers' Council.]:
§ On Question, Whether Clause 21 shall be agreed to?
§ Lord Renton
I would be grateful if my noble friend Lord Avon would explain to a greater extent than one can derive from the Bill or the Explanatory Note, which is virtually silent on the matter, the proposed new Electricity Consumers' Council. The area consultative boards introduced under the 1947 Act have carried out, as intended, the function of acting as a two-way exchange of ideas. They have enabled the interests of consumers to be brought to the notice of those who are producing electricity, and have also acted as a channel of communication in the other direction.
It would seem that the Electricity Consumers' Council will be virtually a central council of area electricity consultative boards. That is a good idea. However, as it is rather difficult to derive this intention from a study of Clause 20 and Clause 22, it would be helpful if my noble friend could explain: first, what exactly will be the position of the Electricity Consumers' Council; secondly, what will be their relationship with the area consultative councils, all of whose chairmen are to serve upon it; and, thirdly, are the present functions of the area boards likely to be modified in any way as a result of the appointment of the Electricity Consumers' Council?
§ The Earl of Avon
I think that I can set my noble friend's mind at rest. The Electricity Consumers' Council already exists. These clauses simply put it on a statutory basis and, therefore, put it on the same basis as other consumer councils. We discovered when looking at the Bill that the Electricity Consumers' Council was the only one that was not statutory. All the area boards in point of fact have statutory consumer councils, and it is only this body that is left out. So that was our reason for doing it.
Statutory authority will increase the Electricity Consumers' Council's authority with the electricity supply industry and with the 12 area electricity consultative councils. The clauses will not entail any increase in the level of funding provided by the Government and it is expected that the ECC's workload will remain largely unchanged. The clause reflects the precedents established in the statutes establishing the area electricity consultative councils and the national consumers' councils. With that, I hope that I have set my noble friend's mind at rest.
§ Lord Renton
I am much obliged. One just wonders how it is, therefore, that the Electricity Consumers' Council—which, as my noble friend has pointed out and as I did not realise, already exists—has managed 505 to derive statutory authority for the expenditure which it has incurred. No doubt some way of getting round that lack of statutory authority has been found, and nothing unlawful has been done. I am grateful to my noble friend for his explanation.
§ Clause 21 agreed to.
§ Clauses 22 to 38 agreed to.
§ Schedules 1 and 2 agreed to.
§ Schedule 3 [Electricity: minor and consequential amendments]:
§ Lord Strabolgi moved Amendment No. 9:
§ Page 30, line 39, at end insert—
1976 c. 57.
11B. In section 11(1) of the Local Government (Miscellaneous Provisions) Act 1976, after the words "or otherwise dispose of heat" there shall be inserted the words "or electricity".").
§ The noble Lord said: This amendment is consequential on Amendment No. 1. I beg leave to move it formally so that it appears in the official record. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Schedule 3 agreed to.
§ Schedule 4 [Enactments repealed]:
§ Lord Strabolgi moved Amendment No. 10:
§ Page 33, line 56, at end insert—
|("1974 c. 40.||The Control of Pollution Act 1974.||In section 21 the words "in connection with the installation, but shall not use any of it elsewhere".").|
§ The noble Lord said: This amendment is consequential on Amendment No. 4. I beg leave to move it formally for the same reason. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Strabolgi moved Amendment No. 11:
§ Page 33, line 56, at end insert—
|("1974 c. 40.||The Control of Pollution Act 1974.||In section 21, the words "subject to sub-sections (2) and (3) of this section" in sub-section (1); sub-sections (2) and (3).|
|"1976 c. 57.||The Local Government (Miscellaneous Provisions) Act 1976.||In section 11, the words "subject to sub-sections (2) and (3) of this section" in sub-section (1); sub-sections (2) and (3); and the words "(except the restrictions imposed by subsection (3))" in sub-section (7).").|
§ The noble Lord said: I beg leave to move Amendment No.11. This is consequential on Amendment No.1. I ask for the indulgence of the 506 Committee in explaining that I am moving these amendments formally because, unless they are moved, they do not appear in Hansard at all. This is particularly important because, if there are several amendments that are linked and a decision is taken on the first, which may consist of one word or two words, none of the other amendments appear at all in Hansard and they will mean very little to people outside the Committee. Therefore, with your Lordships' permission, I beg leave to move this amendment formally. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Schedule 4 agreed to.
§ House resumed: Bill reported without amendment.