Energy Bill

HL Deb 28 March 1983 vol 440 cc1409-28

7.28 p.m.

The Earl of Avon

My Lords, I beg to move that this Bill be now read a second time.

Electricity has long been generated and supplied outside the public electricity supply system. This Bill is designed to accord this private generation its proper place in the country's overall electricity supply and to enable the private sector to take advantage of the economic opportunities it may have to expand this resource.

The first legislative obstacle which has stood in the way of such opportunities has been the ban, dating from 1909, on anyone who wished to supply electricity as a main business activity other than an electricity board. Clause 1 of the Bill accordingly removes this prohibition. It also removes the requirement for anyone to obtain the Secretary of State's consent before building or extending a generating station whose output is mainly for sale to others. This requirement has meant that a large private station could be built for its owner's use without such consent, while even a small station whose output was sold would need consent. This is not a logical position; nor is it one which meets the planning needs of the electricity boards, since either type of station reduces actual or potential demand upon the boards.

Therefore, in order that the boards can take proper account of private generation in planning their own systems for the future, Clause 2 provides for them to be informed of any proposal to build or extend a generating station above 10 megawatts in output. This output has been suggested by the Electricity Council as the level at which a private power station might begin to have a significant impact upon the planning or operation of an electricity board's system. In context, if this provision were already in force it would have meant that boards would have been notified of 90 per cent. of all private generating capacity.

So far I have dealt with matters which will liberalise the régime under which private generators may operate. I come now to two areas where for different reasons we have provided or maintained Government controls. First, the Government thought it appropriate to remove the existing anomaly that a large company would be able to build a nuclear powered generating station to produce electricity for its own use without having to seek ministerial consent. Clause 3 of this Bill therefore requires anyone to seek such consent before building, extending or becoming the operator of a nuclear station. The need for consent to operate is designed to deal with the case of someone acquiring a nuclear station from, say, the CEGB. Let me say that this clause makes it neither more nor less likely that anyone will wish to build a nuclear power station. This is a new control which is additional to the sophisticated system we have in this country for ensuring the safe design, construction and operation of nuclear power stations.

The second control, which we have retained in Clause 4, is that over private hydro-electric plants in Scotland. Not only does hydro-electricity occupy an important position in terms of energy policy in Scotland, but by its nature one project can have a direct impact on another by influencing the water flow. It therefore seemed right for consent to continue to be needed. However, the output above which consent is needed is raised from 50 kilowatts to 1 megawatt, so that very small schemes will no longer need consent.

Clauses 5 to 11 contain the real heart of this Bill. They establish both the arrangements which may be made between private generators and the electricity boards and the terms on which the commercial relationship between the two is to be conducted. Clause 5 sets up a system of requests and offers by which private generators are given certain rights to seek services from the electricity boards, and the electricity boards are given corresponding duties to supply those services. First, a private generator will be able to seek a supply of electricity not only for his own premises, as at present, but also in respect of other premises which he supplies. Second, a private generator will be able to ask an electricity board to purchase any electricity which he wishes to sell to the board; and, third, and perhaps most important, the private generator will be allowed to ask an electricity board to permit him to use the board's transmission and distribution system to convey electricity. In responding to these requests the electricity boards may include in their offer such reasonable terms and conditions as are necessary to ensure that the board may recover any expenditure it incurs, and to ensure that compliance with the request does not affect the control by electricity boards over the electricity supply system.

As to the supply which an electricity board may be asked to give to a private generator, the electricity board is to charge under Clause 6 precisely the same price as that which would obtain if the private generator were any other customer. Where a tariff for these supplies is not appropriate, the board must specify a price in its offer to the private generator.

The terms upon which electricity boards are to carry out their duty to purchase privately generated electricity are contained in Clause 7. Boards are to fix tariffs of prices that they will pay for such electricity, or in the absence of an applicable or appropriate tariff they must specify the price they propose. These tariffs and prices may be based upon any principle which the board wishes to invoke, provided that one of these principles is that the board's prices to other customers for electricity supplies must not be increased as a result of the purchase, and, secondly, that the tariff or price must reflect the costs that the board would have incurred had it not purchased the electricity from this particular source.

The clause goes on to recognise that in making a purchase from a private generator the board may itself incur costs arising from the administration of the purchase or from the fact that it has had to employ its own assets in taking the electricity. In the latter circumstance, the payments which the board may seek from the private generator may be sufficient to ensure that the board earns the same kind of return on any assets it employs in taking privately generated electricity as that which it would expect to receive on a similar asset which it used for its own purpose.

Clause 8 of the Bill provides for electricity boards to fix tariffs and charges for the use by private generators of their transmission and distribution systems. Where a board establishes a tariff or makes an offer in connection with the use of its system, one of the principles that it must invoke is that charges should be no more than sufficient to give the board a return on the assets it employs in meeting the request of the same order as that which the board would expect to receive on such an asset used for its own purposes. This principle is set by analogy with Clause 7.

Having established this basis for fair dealings between the private generators and the electricity boards, the Bill goes on in Clause 9 to enable any dispute between a private generator and an electricity board to be referred to the Secretary of State, or to an arbitrator appointed by him, for determination. Clause 10 requires the electricity boards to consult the Secretary of State on the principles underlying the tariffs that apply to dealings with private generators. I have dwelt on these provisions in order to explain to the House the guiding principles behind this central part of the Bill. I now come briefly to the remaining provisions of Part I.

Clause 11 enables one board to propose to another that the latter might more appropriately meet a private generator's request; and Clause 12 provides for pattern-approved meters to be used for measuring electricity supplied by private generators to their customers. Clause 13 relieves an electricity board of its duty to supply consumers who are supplied by private generators through the board's system. This measure is designed to clarify the board's statutory and commercial obligations to private generators. Clause 14 is concerned with the application of certain powers and duties of boards, electric inspectors and electricity suppliers. Its aim is to ensure that private suppliers and their customers have parity of treatment with the electricity boards and their consumers.

Clause 15 gives effect to the further provisions relating to meters which are contained in Schedule 1. The presentation of the schedule is complex because of the bulk and antiquity of the electricity legislation, but it does three relatively simple things. First, it provides for certified meters (which are used by boards to measure supply to their consumers) to be used also to measure electricity supplied by a private supplier through a board's system, and for these meters to be subject to the statutory procedure for determining disputes about accuracy; second, for meter manufacturers and repairers to be authorised to certify meters; and, third, for regulations to be made in respect of the recovery of costs incurred by my department's meter examiners in determining disputes about meter accuracy.

Clause 16 replaces the existing powers to make safety regulations with a new and up-to-date power under which the present regulations will be gradually replaced with more comprehensive ones which will apply to both public and private supplies of electricity. Clause 17 allows boards to include a standby charge in their tariffs, and Clause 18 enables local authorities to benefit from the provisions relating to fair prices for the purchase by boards of electricity, and also for arbitration in disputes over this matter.

Clause 19 gives electricity boards a new duty to promote economic schemes for combined heat and power and the use of heat from power stations generally. This clarifies their rights and obligations in this field, and puts beyond doubt that such schemes are to be considered part of the board's normal operations. Clause 20 abolishes two unnecessary and unused powers of entry available to boards.

Finally, Clauses 21 and 22 of Part I of this Bill establish the Electricity Consumers' Council on a statutory basis and give other bodies duties in relation to that council. The council has the duty of considering any matter affecting the interests of electricity consumers generally, who are supplied by electricity boards in England and Wales. These may of course include general matters, such as those related to contracting, or sales of appliances, as well as those more directly related to electricity supply.

I turn now for a few moments to Part II of the Bill. This amends the liability and compensation provisions of the Nuclear Installations Act 1965, by restoring the value of the compensation sums provided for in that Act in order to take account of inflation. Although I should be pleased to set out the effects of Part II more fully if the House wishes me to do so, let me just say at this stage that in broad terms the changes make good the effects of inflation upon the United Kingdom's original provisions for compensation in respect of nuclear incidents. They also, inter alia, allow for new compensation figures to be changed by order.

The safety record of our nuclear power industry is second to none. Nevertheless, it is prudent to have a proper system of liability and compensation to ensure that nuclear injury or damage is properly compensated, and to keep that system up to date. I hope that noble Lords will agree that this is a sensible objective. The Bill was carefully scrutinised in the other place. A number of amendments were made. I believe that it reaches us in a workmanlike state. I shall look forward to debating further issues on it in Committee. On that note I commend the Bill to the House. I beg to move.

Moved, That the Bill be now read a second time.—(The Earl of Avon.)

7.41 p.m.

Lord Strabolgi

My Lords, we are grateful to the noble Earl, Lord Avon, for explaining the provision of the Bill so clearly, and we on these Benches should like to thank him for that. Since I shall not be speaking again in the debate, I should like to say how much we are looking forward to the maiden speech of the noble Lord, Lord Taylor of Hadfield.

Having said that, and turning to the Bill, I feel bound to ask why the first 18 clauses of it have been included at all. Who really wants this privatisation? No one, so far as I can see, except the Government; and then of course the Government want privatisation only on ideological grounds, and because they have an obsession about it.

The Bill follows other measures of the same nature, such as those dealing with the Britoil sale, which was so disappointing from the Government's point of view, the totally unnecessary Amersham sale, and the breaking up of the gas industry. These are all the actions of a Government who see everything in crude, simple terms, and in black and white. Everything publicly owned and operated is no good, in the eyes of the Government. Everything privately owned automatically finds favour in their eyes.

Fortunately, this Bill has been much improved during its passage in another place (as the noble Earl has said), where several important safeguards were introduced. The public sector is now at less of a disadvantage, compared with the private sector, as was the case in the original draft. I understand that consultations are taking place between the Government and the industry over the matters to be covered by the regulations relating to supply and safety which are to be issued under Clause 16. This is much more reassuring.

Clause 10(6), which was introduced in another place, now ensures that no undue preference will be shown to consumers in the private sector at the expense of public consumers. I am glad also that Clause 19, too, was introduced in another place, dealing with the important matter of combined heat and power. What is extraordinary—I am really surprised that I have to say this—is that such a clause was not in the Bill originally. Indeed, a short Bill dealing with combined heat and power was probably all that was needed for much of Part I. Much of the rest of this part of the Bill seems to be irrelevant, if not potentially harmful to our public sector electricity industry. Let us hope that no lasting harm will be done before wiser counsels prevail.

We are particularly concerned over Clauses 2 and 3. As the noble Earl said, Clause 2 requires a person to notify the relevant board of his intention to construct a generating station. But such a person—the private generator—will not have to obtain the permission of the Secretary of State for Energy for the construction of a new generating station unless he proposes to construct a nuclear-powered station. All that the private generator will need will be planning consent under the Town and Country Planning Act 1971.

There is no provision for an inquiry procedure to consider any private sector proposals, as there is for vetting applications by the electricity boards to build publicly-owned power stations. An electricity board, in future, could be required to undergo a lengthy and expensive public inquiry into an application to build, say, a 100 megawatt power station, while a private generator could construct a power station of similar capacity without such an inquiry. The balance seems to be loaded against the public sector with a vengeance!

Clause 3 will allow private persons to build and operate nuclear power stations, with, of course, the consent of the Secretary of State. There is so much public concern about nuclear safety and other factors in this difficult and controversial field that to allow private operators to dabble in it does not seem to me to be desirable. Here again the Government's obsession seems to have got the better of their common sense.

I much regret that the Government did not take the opportunity afforded by the Bill to put forward some constructive proposals for the whole reorganisation of the electricity supply industry, following the review in the last Parliament by the Plowden Committee. As your Lordships are aware, the present structure comprises 12 area boards, the Central Electricity Generating Board, and the Electricity Council. All these are autonomous bodies, yet all seem to have the same overall aims and objectives. Many decisions, I understand, are taken within the CEGB, and often without adequate debate within the supply industry as a whole.

There is, I submit, an urgent need to review the whole organisation and to have about six all-purpose authorities, under a single unified authority at the centre. There is the need for a central authority to deal with fundamental questions, such as the procurement of primary fuels, the siting of power stations, the choice, type, and design of generating stations, future research, central finance, and long-term strategic planning. In our view it would have been better if the Government had tackled these fundamental questions, which will surely have to be tackled one day, instead of making the future control of the industry and its unification more difficult by the disruptive proposals contained in much of this Bill.

7.48 p.m.

Lord Tanlaw

My Lords, from these Benches we wish first to take the opportunity to congratulate the noble Earl the Minister on piloting his first Energy Bill through your Lordships' House. We are looking forward to the maiden speech of the noble Lord, Lord Taylor of Hadfield. In this connection I would suggest to the noble Earl that it is rather late in the day to have a Second Reading debate which includes a maiden speaker, bearing in mind that another maiden speaker, the noble Baroness, Lady Cox, is to take part in the debate on the Unstarred Question which is to follow later this evening. It is rather unfair for maiden speakers to have to wait until so far into the evening to make their speeches.

We want to give a general welcome to the Bill. Of the first 18 clauses, we on these Benches should like to dispose of only Clause 3, which deals with nuclear energy generating stations in the private sector. I should like to ask the noble Earl the Minister whether, before the Bill was drawn up, any discussions were held in order to look at the various roles of the Department of Energy and the other statutory bodies involved in the whole energy industry. In this country there are 17 statutory bodies involved with energy. They comprise the Central Electricity Generating Board, the Electricity Council and the regional generating boards. There has here been a golden opportunity to take up the Plowden Committee's recommendations, and possibly even to extend them. My main disappointment over the Bill is that this has been an opportunity missed.

I am not sure whether the moment has not now come for another look to be taken at the role of the Department of Energy. It was formed, as the noble Earl will recall, in rather a rush after the first energy crisis as an offshoot of the Department of Trade and Industry. I wonder whether its role should not now be examined carefully to see whether the taxpayer is getting the best value for money from the department as presently constituted. I recall a debate on the rational use of energy in your Lordships' House—an excellent debate of an amazingly high standard—which showed up the activities of the Department of Energy and other departments towards conservation. I feel that more could be done by the Government through the Bill about conservation. It is a great disappointment to find that there seems to be a lack of enthusiasm, emanating from the Secretary of State downwards in the Department of Energy, on the whole nature of conservation. One would like to see more public enthusiasm. I believe that the noble Earl, with his responsibilites, will no doubt be able to inject some of that much needed enthusiasm in the months to come.

I wish to touch briefly on the role of the Electricity Council. This is a body which no one seems to do much about. Some of its work is grossly underestimated, as is its value to consumers, to industry and to all in Parliament who take part in energy debates. I should like to know from the Minister whether consideration has been given to granting more powers to the Electricity Council and possibly fewer powers to the Central Electricity Generating Board. When one looks at the role of the CEGB over past years, one can easily appreciate, with admiration, its ability to generate paper. It has also generated a certain heavy-handedness in its dealings with its regional boards, which is becoming uproductive.

This Bill could have provided a start for an open, non-political discussion on how the energy industry is run from the Department of Energy through the Electricity Council and the CEGB, to see whether the taxpayer and the consumer are getting their money's worth from these excellent bodies containing excellent men. I believe, however, that their direction may be slightly awry. On the Second Reading of the Bill now being discussed, I feel I can say this; it is one of the few opportunities that arise. I hope it will be taken up in some other areas at a later date.

The Electricity Council should be given more powers and more assistance to help in the new technologies available in the electricity industry. More help could also be given to alternative energy systems, and how best they can be installed within the regional boards. The Minister may be able to express a view on whether the bill of £22 million for advertising electricity is to continue. Consumers have a right to know whether this amount will be spent annually, often to tell consumers to use electricity when they have little option to use anything else A similar amount—it is about £23 million—is spent on advertising gas. There is a need for the nationalised industries to examine this expenditure. This Bill may be a means of bringing reasonable common sense into the industry.

I wish to deal now with the parts of the Bill that I welcome. I refer to alternative energy generation. As chairman of PARLIGAES, a group involved in alternative energy strategies, we are pleased to see that those who operate generators of wind or water will be able to benefit to a certain degree under the Bill. There is another aspect on which I should like to hear the Minister's comment. It was depressing to see that the CEGB ordered a foreign made windmill when it got round to examining wind generation of electricity. I hope that under the Bill greater enthusiasm will be given to small businessmen and small companies that are manufacturing, under great difficulty, some alternative energy systems of electricity generation. It is not only this country that I have in mind. In fact, there is little application for them in this country. A far greater application for them exists overseas. I should like to see the Ministry of Overseas Development make more effort than to date in exporting alternative energy systems working on the passive system of energy generation.

There is another point on which I should be grateful for guidance from the Minister. Will these private generating companies, particularly hydro power companies, be able to go back into the market and raise funds through debentures and the issuing of shares, as used to be the case? I believe that the first hydro electric scheme in this country operated in Galloway. I stand to be corrected but I think that there was a debenture that was popular with the public. Nothing is stated precisely in the Bill about the ability to raise funds from the public. I hope that the Minister will be able to help when he replies.

Clause 12 covers metering. Out of 19 million domestic consumers, I understand that 1.5 million have pre-payment meters. This leaves 17.5 million consumers, 2 million of whom I am told by the Electricity Council have outside meters. I am also told that 90 per cent. of new customers will have outside meters. Is the Minister satisfied that the Bill gives adequate guidance to local authorities and architects to site electricity meters so that they may be read either remotely electronically or electrically and sited on the outside of the house so that the householder will not have to be bothered about arranging an appointment with the meter reader? This action should be taken in conjunction with the gas authorities and water boards. One does not want to see this kind of rule going into the statute book. It has, however, created an untold amount of unnecessary aggravation for householders. This is obviously the right Bill for a metering amendment to be included. I wish to know whether it is necessary. Any guidance from the Minister would be helpful.

I wish, finally, to touch upon combined heat and power. Why was it necessary for people outside the Government, Back-Benchers in the Conservative Party, through great persistence, to produce a new clause to cover combined heat and power? This was recommended in the Plowden Report in 1976. Who stopped it? It was the CEGB, which was never enthusiastic about it. Nor were the gas authorities, which did their best to stop it. What is the purpose of these boards? They are meant to help consumers to be warm and comfortable by providing them with cheap electricity. Why not cheap heat? They can produce what arguments they like against it. The fact is that it took the persistence of Back-Benchers, with support from other bodies outside Parliament, to get Clause 16 through. The Government were not interested. The Government had to be forced to accept it. This is disappointing, nor is it a hopeful sign for the future.

The local boards can still stop combined heat and power coming about in their areas. They can prove that it is uneconomic in one way or another. I should like the Minister tonight to state categorically that, in places like Merseyside, Clydeside and anywhere else where CHP would be of real benefit to the community the social side will be considered as well. Why is it all right to dig up the streets for the installation of cable television when there is already plenty of television, but not all right to dig up the streets to put down pipes for combined heat and power? The argument which has been put forward by the CEGB is that it would disrupt the communities too much. We can dig up the streets to put down cables for cable television, but apparently we cannot dig them up to improve low cost housing and to keep people in the low income groups at least warm during the winter at very reasonable cost. I shall pursue this matter from these Benches if the Government are not going to press the CEGB in turn to press the regional boards to make combined heat and power a reality.

At this late hour I have spoken for long enough on the main points that we shall wish to emphasise during the Committee stage. On the whole, we welcome the Bill. There are some signs of hope that the Government are prepared to listen in regard to energy generation to people other than the CEGB. They obviously have done so to get the Bill this far. I hope that they will continue to keep on listening and activate some of the points that have been raised from these Benches.

8.1 p.m.

Lord Taylor of Hadfield

My Lords, in my maiden speech I wish to support the Energy Bill, but first I should like to thank all the noble Lords in this House who have been so friendly and so helpful and have given me wise advice. It is a great honour for me to be a Member of the House of Lords, and an honour which I never dreamed would come to me. I hope that your Lordships will forgive me, but after 62 years as a builder I really am more fitted for the scaffold than to be speaking in this noble House. However, my company, which I serve, does spend thought, time and energy in promoting and achieving good human relations. We believe that that is very important.

On Sunday I had the pleasure of reading an article by the Leader of our House, the noble Baroness, Lady Young, who was writing of the things that she wished she had known when she was 18 years of age. It was a most interesting, stimulating and instructive article. In my life I have made many mistakes. In 1921 when I was 16 years of age the bank very kindly loaned £400 to build my first two houses, which was the start of the Taylor Woodrow Company. Like the noble Baroness, Lady Young, had I known then that this evening I would be trying to make my maiden speech in your Lordships' noble House, I would have asked the bank to lend me not just the £400 to build the two houses, but another £7 because in that day and age for £7 I could have had a complete course in public speaking!

In my short experience of membership of your Lordships' House many kind noble Lords have given me good advice. One noble friend in particular who is in the House but who shall be nameless said. "You do not need to hurry with your maiden speech. I inherited my title when I was 22 years of age but I did not make my maiden speech until I was 54". On that basis I would he 110 by the time I made my maiden speech and while the noble Lord, Lord Shinwell, I am sure will be able to make his speech at 110, I doubt whether I could do so. However, the Energy Bill was scheduled for tonight and it deals with matters of which I have had comprehensive experience in my business life and so I am sure that my noble friend will not mind me taking this opportunity.

The Energy Bill is a very interesting one which, may I repeat, I wish fully to support. Of course, in some ways it may be controversial and I have been advised that I must keep my speech short and non-controversial. However, I must confess that my company had the honour of building the first commercial atomic power station in the world at Calder Hall. That was completed in 1956 and opened by the Queen in October of that year. It was designed to produce 184 megawatts; today, 26 years later, it is still giving wonderful service and producing 200 megawatts.

My company has built 26 electric power stations of which 14 are coal burning; three are gas turbine; one is oil burning; and eight are nuclear, of which three are in the later stages of construction. May I quote from a reliable source the cost to produce electricity, which I hope will be of interest to your Lordships. For coal fired, the cost is 2.05 pence per kilowatt hour; for oil-fired, it is 3.22 pence per kilowatt hour; and for gas turbine there is no figure. As regards nuclear, for the first Magnox type the cost is 2.57 pence per kilowatt hour, and for the later type, the AGR (the advanced gas reactor), the cost is 1.57 pence per cubic hour.

In Part I of the Energy Bill, Clause 19 imposes duties on electricity boards to adopt and support schemes for the combined production of heat and electricity and for the use of heat from electricity generation. This is a splendid idea. For far too long the heat generated from the cooling systems in our electric power stations has been barely used. With the excellent technical advances achieved by the Central Electricity Generating Board and industry, in the future may we hope that it can be utilised for the heating of homes, factories, glasshouses for the production of food, and in other useful ways.

Your Lordships will be pleased to know that very exciting schemes for the use of waste heat have already started. There is one in North Yorkshire where the Central Electricity Generating Board and the Express Dairy Company have joined and formed the Exel Produce Company. This company has built a 20-acre horticultural project at Camblesforth near Selby in North Yorkshire. This represents the successful marriage of modern technology and advanced horticulture. The glasshouses are heated from the Central Electricity Generating Board's Drax power station in North Yorkshire using the reject heat from the power station's cooling water. On this project in 1982 the average production of tomatoes was 110 tonnes per acre, which I am sure your Lordships will agree is very good indeed. The CEGB is also working on an exciting scheme for fish farming which I believe will have very good effect.

Part II of the Energy Bill deals chiefly with the nuclear installations and wisely reviews the provisions for compensation in respect of a nuclear incident by the operator and public funds together, including contributions from other countries party to the Brussels Convention. I feel sure that noble Lords will agree that this is a wise and prudent measure and deserves the support of noble Lords of this House, although one sincerely hopes that it will never be required. So far the record in the United Kingdom has been remarkable.

Since 1956 in this country we have had the benefit of more than 300 reactor-years of operating experience without one emergency at a nuclear power station. My noble friend Lord Avon said that that is a record second to none. It is the result of good design engineering and construction teams, maintenance of standards by the Nuclear Installations Inspectorate and, in particular, the policies and practices of the CEGB in designing, building and running these power stations.

That brings me to the last point that I wish to make. The various schedules to the Bill indicate the antiquity of much of the legislation governing this industry. For example, meters are important instruments in electricity supply and concern most people in our country. Is it appropriate in the 1980s that our new laws in Schedule I should have to rely on amending the Electric Lighting (Clauses) Act 1899? Although no doubt it is a worthy piece of legislation, it surely demonstrates the need for a modern consolidating Act for this important industry.

In closing, may I say that I have great affection and great concern for our country. I believe that this noble House is vital to the good will and the good government of our country, and I shall give it my full support at all times. Thank you.

8.14 p.m.

The Earl of Lauderdale

My Lords, one of the happy chances which the law of averages brings one's way from time to time is the opportunity to follow a maiden speaker and to say a few words. To follow the noble Lord, Lord Taylor of Hadfield, who is an adornment of the House and of the nation in his own right, is a particular pleasure and privilege. We have listened to a maiden speech that was witty and crisp; it was modest, brief and factual, and yet in the compass of a few minutes he showed a width of scope from Calder Hall and nuclear power to horticulture and fish farming—a magnificent compression of information and insight. The becoming modesty of the noble Lord's demeanour, both personally in the House and in his speech tonight, will have commended itself to everybody. He referred to good human relations in his industry—a self-built, self-help undertaking—but when he referred to the possible need for courses in public speaking, I am sure the House will agree that he has no need of such. We shall all listen to his interventions with great interest in future and hope that they will be frequent.

One thing that is quite clear to me is that there is nothing in the nature of things to show that a monolithic monopoly supplier is necessarily better—and I say "necessarily" better—than a variety of private suppliers. There is much valuable reading to be had in the evidence of the Select Committee on CHP in the other place. I noticed the words of the chairman of the Midlands Electricity Board, Mr. Shepherd, who said in his evidence: If you get huge monolithic corporations, and basically the electricity supply industry is such an organization, it does not exactly lead to innovation unless it has competition at least in comparison of performance if not in fact of actual supplies". That was said on 24th November 1981. Frankly, I was rather disappointed with the noble Lord, Lord Strabolgi, who outside the House I count as a personal friend but inside the House we do tangle occasionally. He was pretty ideological in his approach to this Bill. The fact is that many industries generate their own power and could sell more cheaply to the grid if they were encouraged to do so. Despite the antiquated provisions of the Electric Lighting Act 1909, private enterprise generation already accounts for 6 per cent. of the country's total supply and some 15 per cent. of industry's use. This in itself is important because energy costs to industry are a long-term concern of general energy policy, and it is because of that that I particularly welcome this Bill.

When private enterprise can produce electricity more cheaply, this is to the general advantage, whether it is for that enterprise's own use or mainly so, or whether it is meant as a contribution to the grid supply. When private enterprise investment can increase the supply, this can only lessen the need for public sector investment at the taxpayer's expense. There have been cases where it has been evident that private enterprise could have supplied energy to CHP schemes had the area boards been co-operative. At this hour of the night I shall not take up your Lordships' time with examples of this, but they are to be found in the Select Committee's report, which I am sure the noble Lord, Lord Strabolgi, has already read but chosen to leave mentally on one side. However, since CHP is itself a Labour aim in Labour's 1982 programme, one would have thought that the noble Lord would have given this Bill a warmer welcome than he did. Of course, they see electricity more as a vehicle for social engineering in the countryside than as a critical input to industry.

There might well be some heat, if not power, generated by the attitude of this Bill to nuclear generation. But, of course, as my noble friend Lord Avon said in moving the Second Reading, it is legally possible even now for private enterprise to set up a nuclear power station. However, the Bill adds the special extra provision of great importance, that it can only be done with the consent of the Secretary of State. Moreover, the operator would still require a nuclear site licence from the Health and Safety Executive under Section 1 of the Nuclear Installations Act 1965.

What it is important to get into the record, because no doubt somebody will challenge this later on, is the fact that private enterprise generation of nuclear power is already established without disaster in Germany. It is established in Japan. It is established in Spain. So those who are frightened of what the noble Lord, Lord Strabolgi, called private enterprise dabbling in nuclear power need not really hunt for bogeys under the bed. Anything done in this field would still be under the watchful eye of the National Nuclear Inspectorate, and the onus lies always on the operator to satisfy the NNI. The NNI will not give a guarantee that nothing will go wrong. It is up to the operator to satisfy the NNI that it is going to be safe.

This Bill has had a signal blessing from the Electricity Council acting for the supply industry. To quote a letter which I received a day or two ago, they say: Arguments put forward have been carefully considered by the Government". No fewer than seven safeguards that they sought were all given in the proceedings in another place. The Electricity Council are not seeking further safeguards or protection. That speaks for itself. This is not the hour for political controversy, but like others who have spoken I wish my noble friend good fortune in the further stages of the Bill.

8.21 p.m.

Lord Ezra

My Lords, I should like to join in the tribute paid by the noble Earl, Lord Lauderdale, to the noble Lord, Lord Taylor of Hadfield. I have had the privilege of knowing him for a good many years, and in my previous activities dealt a great deal with his company which he founded, as he explained to us and led with such distinction and still leads to the great benefit of all who have dealt with it. It is a particular personal delight to me to feel that we shall be colleagues in the House, even though we are looking at each other across the Chamber.

I should like to raise two points associated with this Bill. The first concerns the organisation of the electricity supply industry, and the second concerns the question of combined heat and power and other ways of more efficiently generating electricity. As to the first question, the organisation of the electricity supply industry, this has been a matter which has been of great concern for many years. I regret that this Bill, which deals with a number of aspects of the electricity generation in this country, does not deal more deeply with this whole question of the organisation of the industry itself. This was a point that the noble Lord, Lord Strabolgi, made as also did the noble Lord, Lord Tanlaw.

Unfortunately, it is a bit of a muddle. The very important report prepared by Lord Plowden's committee went into this whole question with great thoroughness, and many organisations testified as to what might be done. It is a pity that that report, produced some five or more years ago, has not so far found any place in legislation. I should like to ask the noble Earl, Lord Avon, what the Government's attitude is to that report and to any further steps that might be taken to reorganise the electricity supply industry, quite apart from the measures introduced in this Bill.

On the question of combined heat and power, it is satisfactory to know that a short clause has now been introduced into the Bill. I do not believe it goes nearly far enough. The fact is that Britain falls behind many other countries in the development of combined heat and power, district heating schemes, and other ways of making much better and more efficient use of electricity generation combined with the production of other forms of energy. It is not enough, after two important reports have been prepared over the years on this subject—Sir Walter Marshall's report and then Sir William Atkins' report—simply to say that a duty is now put on the area electricity boards to promote the development of this form of energy.

Much more is required if we are going to get anywhere near the efficiency with which other countries—for example, Denmark, Germany, or France—have developed in this field. The technology, I regret to say, is all being developed abroad. There are few instances of large-scale combined heat and power plants in this country, and very few instances of large-scale district heating schemes, which go together. I hope, therefore, that we might get some guidance from the noble Earl, Lord Avon, when he replies later to the debate on what further steps and measures the Government may be contemplating to promote this much more efficient use of energy.

8.25 p.m.

Viscount Ridley

My Lords, I should like to add my congratulations to the noble Lord, Lord Taylor, on his magnificent speech, and also say how delighted I was to listen to the noble Lord, Lord Ezra. In view of the Statement that we had earlier this afternoon, I hope your Lordships will all agree that in securing the services here of a former chairman of the Coal Board we are very lucky not to have had to pay £1½ million to Lazard Frères or anybody else, although the noble Lord is worth all of that, even if he is, for the moment, sitting on the wrong side of the House. It has been most interesting to hear him.

My own purpose in speaking tonight is simple, and I hope to be as brief as this debate has been so far. Indeed, we are setting an example after proceedings on the Transport Bill. I welcome Part I, which allows the private producers to add electricity to the grid and to use the board's transmission systems, But on Clause 18, it was added in another place at Report stage that local authorities would be allowed to sell electricity produced from waste disposal plants to the electricity boards. This concession is indeed a good one, but it was added only at a late stage. Unfortunately the Bill does not, as we see it, allow that such local authority generated electricity has the right to use the transmission systems, even where this electricity is to be used in premises owned and occupied by the local authority itself. I do not know why this should be so, and why there should be a distinction between private generation and local authority generation. I hope we can come to that later.

I believe that the generation of electricity from waste disposal systems is still very much in its infancy, although the GLC have, I understand, started to do this. It may well come in due course to be an economical and standard practice. Surely this is something which must be greatly encouraged as a conservation and energy-saving measure. I hope that the Government will do all that they can on grounds of equity to ensure that there is no distinction between private and local authority sources of energy in this respect, and also add a spur to the development of such practices and encouragement to use waste economically, We should take the opportunity in this Bill to put that right. I readily admit that this is purely a Committee stage point, but it is of such importance that it should briefly be raised tonight as a curtain raiser to what may come in the Committee stage. I do not, of course, expect an answer from the Government at this stage.

8.28 p.m.

Lord Kennet

My Lords, most speakers in this debate, and indeed in the House of Commons, have not, it seems to me, made enough of the fact that we are seeking to permit the privatisation of an industry which has been nationalised since 1909. That is longer than most of our nationalised industries by a long way. There was a pretty confused situation before 1909. The simplicity which was imposed then under the banner of public enterprise has not served the country badly. This is not to say that the Bill is wrong, or that I urge that it should be thrown out, but simply that we should look at all the things it does and ask whether it is really necessary to have a change, since unnecessary change merely unsettles an industry. Clearly I expect that in certain respects it is necessary, but there are one or two others where one may raise doubts.

It seems to me—and this is only a layman's impression from reading the Bill; it could look different on the ground in the industry, and the Government will, no doubt, tell us if that is so—that the burden of rights and duties to be imposed respectively upon the new private generators and upon the existing electricity boards is quite uneven. If we look through the Bill we find that it specifically lays two duties on the private generators, and it specifically lays eight new duties on the electricity boards. Most of those duties are concerned with helping out the private generators when they get into difficulties—or so it can appear.

Under the Bill, the private generator is under no obligation to his customers—and we shall want to see in Committee whether that provision is on all-fours with the provision which still governs the electricity boards—and the private generator has a right to a stand-by supply from the electricity board, with a corresponding duty on the electricity board to provide that supply—presumably, for when the private generator's gear breaks down. I must say that it seems that the whole picture is one of public industry being forced to carry the risk of a lot of amateurs riding on its back, which is no doubt very nice; but it will impose a lot of worry on the electricity boards, and we want to see that they are not shouldering burdens which they will have to pass on to their customers—because that would be the most inequitable thing imaginable.

There are one or two other minor points before coming to my main worry. The Secretary of State is assigned the role of arbitrator between the public and the private sectors in the new mixed electricity economy—a role which he will, no doubt, be called upon to play fairly often; the Bill in itself is so complicated. I doubt whether he is the right arbitrator for the following reason. Will he not, according to whether he is a Minister of the Left or the Right, give judgments of differing impact and differing value, so that the industry will be rocked from side to side, as other industries have for so long been, and, in default of the absolute certainty that there will be an Alliance Government for ever more, might it not be wise to revert to the ordinary commercial practice of commercial arbitration? These are points which we can probe further at Committee stage.

To turn for a moment to Part II, which deals with the new nuclear accident liability—"upping" the total which is a good thing in itself, so far as it goes—I see that throughout Part II there is a class of persons known as prescribed licensees. It appears that the new provisions will apply to everybody, except those people to whom the Secretary of State says that they need not apply. I do not particularly ask the noble Earl to answer this point now on Second Reading, but in debate we must probe it. Who are the prescribed licensees who will not have to be subjected to the same discipline as other private licensees, how will the Secretary of State decide who they are and why should there be an exempt class of persons at all?

I turn now to the main objection to this Bill. I would just remind the House that the Alliance parties in the House of Commons voted against the Bill on Third Reading, for the simple reason that it permitted private nuclear generation at all. I think the question of whether or not private nuclear generation should be licensed by the Secretary of State is a minor one. Obviously, the Bill is slightly improved by the Government's amendment agreeing that the Secretary of State should license this class of operations. I do not want to make too much of it. To people like us in our parties, and to the Labour Party, too, it goes without saying that you just do not risk it.

What is the point of risking it? There are plenty of other fuels for the private sector to generate with. Why breach the great principle that the transport and management of the nuclear fuel cycle has been under strict public control, and almost entirely in public hands, since the beginning? I am against it. To be persuaded to be for it. I should like an early answer to a lot of questions—once again, at Committee stage. Amendments will be forthcoming which will produce those answers.

First, what about the foreign ownership of private nuclear plants in this country? There is nothing against it in the Bill. Are we happy with that? What about United States' experience of profit-orientated nuclear power generation? To the naked eye, it looks deplorable. It seems that these private nuclear generating plants are closed down repeatedly and for long periods by the federal agency because they are simply not performing well. I should like the Committee of the House to see, when it comes to that stage, proper comparative figures of the performance, in number of hours on-stream and so on, of privately owned nuclear power stations in the countries where they exist, compared with publicly owned nuclear power stations. I think that the House should be reluctant to see this private nuclear industry grow up, without having those figures before it.

I should also like to know in which countries there is a privately owned nuclear generating industry. I know that there is one in the United States. Let us have some figures about other countries as well. I should like to know, too, what arrangements can be made to ensure that the International Atomic Agency in Vienna, and its safeguard system, applies with equal rigour to the private nuclear generating stations as to the public ones. Lastly, what will be the duties of the internal constabulary, which at present safeguards our nuclear power stations from terrorist attack? What will be their rights and duties in respect of private nuclear generating stations? Unless and until all those facts can be presented to the House in a specific manner, I, for one, shall be against permitting this experiment—because experiment it will be in British terms—at all.

8.37 p.m.

The Earl of Avon

My Lords, we have had a wide-ranging debate and I should like to thank all noble Lords for their contributions. In particular, I should like to thank my noble friend Lord Taylor of Hadfield for his excellent maiden speech. It is an incredible achievement to have put his name to such a well-known national and international firm in such a short period as 62 years. I also appreciate very much his wise remarks about the electricity supply industry and, judging by other noble Lords' contributions today, they will all welcome his points about CHP, in particular. We look forward to hearing his contributions a lot in the future.

I should first like to respond to the point made by a number of noble Lords, and started by the noble Lord, Lord Strabolgi, on the reorganisation. This Bill makes no attempt to deal with reorganisation or privatisation of the public issues. I have, of course, been made well aware of reports such as the Plowden Report, and I shall also read what the noble Lord, Lord Strabolgi, had to say to see exactly what he himself put forward. I was not quite sure whether or not these were going to be power boards, but I shall read Hansard tomorrow to find out.

This Bill aims to stimulate competition. Of course, we keep the structure of the public industry always under review, and in this context I should just pay tribute to the present chairman, Sir Austin Bunch, who will be leaving his job in three days' time. The noble Lord, Lord Strabolgi, asked: who wants the Bill? We undertook a consultation exercise to find out the demand, and we are satisfied that there is such demand. The Bill will be beneficial to all companies which generate electricity, because of the fair terms provisions. There have been many criticisms in the past about the terms offered by the boards for privately generated electricity. These new provisions will give greater confidence to private generators and, as my noble friend Lord Lauderdale said, will encourage the development of alternative sources of energy.

The noble Lord, Lord Strabolgi, asked: why not ministerial consent for private generation? The prohibition on generating electricity as a main business is, we believe, out of date. Private electricity already makes a valuable contribution to supply—about 6 per cent. overall and about 15 per cent. of industry's needs—and we want to remove the barriers so that we can realise further potential in this field. The prohibition, in itself, has probably not been a major check on the scale of private generations, but it is an obstacle to competition with electricity boards, and private generators will now be able to set up a new business, or to expand existing operation into a main business. Under Clause 2, electricity boards will be able to take full account of the private sector's plans for replacing existing load, or meeting new load with private plant. This will avoid duplication of investment. Plant of 10 megawatts and above can have significant effects upon public supply. There is nothing bureaucratic about this measure. Notification will help to ensure the co-operation of the electricity boards, assist the development of private generation and prevent later problems. This Bill is not loaded against the public sector but there is a delicate balance. A number of noble Lords raised the point of nuclear power stations. May I say once again that ownership here does not govern the safety of a plant. This Bill does not remove any existing restrictions on nuclear stations. The most important requirement remains; and that is to obtain a nuclear site licence.

May I once again stress that the Bill imposes additional controls. Whether the output of a power station is for the operator's own use or for sale to others, he would now have to obtain ministerial consent. If anybody wished to purchase and use a nuclear power station, he would need consent to his becoming the operator. The noble Lord, Lord Strabolgi, mentioned the planning inquiry procedure. Most inquiries relating to public generating stations are held under Section 34 of the Electricity Act 1957, which requires the Secretary of State to hold an inquiry of a local planning authority if it objects to a generating station proposal. If a local planning authority objected to a private station, a similar inquiry would be held under the Town and Country Planning Act.

The noble Lord, Lord Tanlaw, asked whether power companies will be able to raise capital. Yes! The whole aim of the Bill is to open up electricity supply to the market forces. Most noble Lords, if not every noble Lord, mentioned CHP. The Government have made a positive commitment to investigate thoroughly the economic potential of CHP and district heating and that is why they were very happy to help in the drafting of Clause 19. The purpose of this clause is to make this clear to everyone. We are undertaking a programme of work to test the economic and practical feasibility of CHP schemes in nine individual locations. The noble Lord, Lord Ezra, referred to this. The main report, known as the Atkins Report, on this matter has been issued to those interested. We are now awaiting comments on this report and it will be considered fully before a further statement is made. If I may elucidate a little, we hope that that may be towards the end of May. It is a very voluminous report and a very complicated one, as well.

The noble Lord, Lord Tanlaw, asked about legislation necessary for outside meters. No changes are needed to the legislation to enable outside meters to be installed. He followed through a theme which I am beginning to know from him about meters generally and I believe he knows equally that I support him in his view. We will continue to press on with this. He also brought out the question of a foreign windmill. I am led to understand that Taylor Woodrow are being supported by my department and the Department of Trade in developing the wind generator for the Orkneys. We are keen to see British technology used wherever possible. Nearly all the demonstration projects in the energy conservation field are using British technology.

My noble friend Lord Ridley spoke also of waste. There are experiments now going on with the biofuels both by London Brick and also by Ford of Dagenham. This is an art which my department are keeping a careful look at. Why not do more for conservation? This was a plea made by the noble Lord, Lord Tanlaw. The Government do a lot for this but, since we had a debate on this only some three or four days ago, I think I could leave that now.

My noble friend Lord Ridley asked why we should not allow local authorities to use the boards' transmission and distribution systems. I believe that this is a wider issue concerned with the powers of local authorities. The main purpose of the Bill is to encourage the production of electricity in the private sector. We have agreed that it is right for local authorities to be treated on the same basis as private generators as regards the purchase of their electricity; but we do not see a strong case for extending the powers of local authorities to generate and use electricity. This, we think, will be a decision for the Secretary of State for the Environment and for Scotland.

The noble Lord, Lord Kennet said that I need not take up any of his points as they are mainly Committee points. He mentioned prescribed sites and, if I could reply to him on that, there have been complaints over the years from the operators of small installations such as university research reactors about the burden of the existing £5 million operator limit. They have said that their installations could not cause damage on such a scale and that it is unfair to impose on them the burden of insuring for so large a sum. The Nuclear Installations Inspectorate have advised that there are small installations which, under the worst conditions, would not be capable of causing as much as £5 million damage at current money values. We think therefore that it would be unfair to require such operators to insure for £20 million. Clause 27 of the Bill therefore exercises a new option given by the protocols and retains the present limit of £5 million per installation in respect of the licencees of such sites as may be prescribed. The noble Lord, Lord Tanlaw, also mentioned advertising. There was reference at Question Time in another place today to energy matters and I believe my colleague there, the right honourable the Minister of State, spoke on this subject. I should like to check in Hansard what he said before repeating it to the noble Lord.

Turning finally to the principles of the Bill, our aim has been to remove the legislative and institutional barriers to economic private investment in power generation. We expect this to be of particular benefit to those with schemes for the combined production of heat and power and for renewable forms of power generation. We have sought to achieve this aim consistent with the principles of fairness and safety—fairness in the arrangements between boards and private generators, so that there is no financial subsidy either way; and safety through the sensible safeguards which we have provided, where necessary. The electricity supply industry has been closely consulted at every stage of the Bill and their legitimate concerns have already been met by amendments in another place. If I have not covered any particular points, I will read Hansard and come back to the noble Lords as appropriate. The Government consider that this is a workable Bill and I commend it to the House.