HL Deb 03 May 1983 vol 442 cc10-29

3.3 p.m.

Report received.

Clause 7 [Charges for purchases by Electricity Boards]:

Lord Ezra moved Amendment No. 1: Page 4, line 34 leave out ("other than the Central Electricity Generating Board").

The noble Lord said: My Lords, in the unavoidable absence of my noble friend Lord Tanlaw, I beg to move Amendment No. 1. The amendment proposes that the words, other than the Central Electricity Generating Board", should be omitted from Clause 7 of the Bill. The reason for putting forward this amendment (which was also put forward at the Committee stage) is because we consider that if the object of the clause is to introduce transparency in regard to the basis on which the electricity authorities purchase electricity produced by other bodies, there should be total transparency. We see no reason why the electricity boards, which undoubtedly will be purchasing the bulk of the electricity privately or otherwise generated, should have to prepare their tariffs, while the CEGB, which, on the noble Earl the Minister's own admission, might occasionally have to purchase such electricity, should be exempt from this obligation. The noble Earl stated that in the circumstances in which the CEGB had to purchase electricity which was privately or otherwise generated, it would itself fix the terms on which it might be purchased. But if that were to be the policy, why does it not apply throughout?

What we are complaining about from these Benches is that there seem to be two systems. The electricity boards have to publish tariffs so that the prices are transparent and known to everybody, but the CEGB, which on occasion might have to purchase privately or otherwise generated electricity, can apparently negotiate terms which it considers desirable. In my opinion, based on my experience, it is possible that the amount of electricity which the CEGB might have to purchase will grow. If there are organisations which generate electricity throughout the country, due to the fact that they have branches in various parts of the country, I see no reason why they should not be in a position to negotiate centrally for the sale of that electricity.

On these Benches we understand that the Government believe in the market philosophy, which implies the exercise of options by those who want to dispose of a product, and we believe that this philosophy should be carried through in this clause. I therefore wish very strongly to press the amendment, under which it is proposed that there should be introduced into the Bill total transparency in regard to the terms on which electricity should be purchased by either boards or the CEGB. I beg to move.

The Parliamentary Under-Secretary of State, Department of Energy (The Earl of Avon)

My Lords, I am sorry that my earlier reply on the amendment during the Committee stage has failed to satisfy both the noble Lords, Lord Tanlaw and Lord Ezra. In that reply I explained the main reason for exempting the CEGB from Clause 7. It is that there is little point in asking the CEGB to fix a purchase tariff which is unlikely to be used. Virtually every private generator will be dealing with an area board. Selling direct to the CEGB would be a specific case, and the terms would need to be individually negotiated; and at one stage the noble Lord, Lord Ezra, himself used the term "centrally negotiated". If I were to give an example, I would refer to tidal power or something of that kind, which would need a very specific, and a negotiated, settlement outside the tariffs that we are discussing.

I am aware of the noble Lord's concern that the bulk supply tariff should not be used as the yardstick for purchasing supplies from private generators. There is of course no mention of the BST in the Bill. If someone approached the CEGB wishing to sell significant amounts of electricity on a regular basis, the two parties would establish an operating regime which might involve the private station becoming integrated in the CEGB's system and accepting operational control like any other CEGB station. In these circumstances the bulk supply tariff would almost certainly be an inappropriate measure of the station's contribution to electricity supply, particularly, for example, at times of peak demand. In contrast, for a small and less predictable producer supplying an area board, the BST, as the reference point, might be as generous at certain times as it is ungenerous at others, and thereby it would reflect on average the value of the producer's output.

The noble Lord, Lord Ezra, said that the CEGB would not be exempted. I feel that I must emphasise that where the CEGB proposes a price to a private generator, that price must conform with the same fair terms embodied in the Bill for purchases by other boards, including the principle that it must reflect the board's avoided costs. The price proposed by the CEGB is also subject, as are prices proposed by other boards, to the disputes procedure in the Bill under Clause 9. The CEGB would therefore not have complete discretion over the price offered to the private generator.

The Government are satisfied that the private generators will not be at a disadvantage because the CEGB is exempt from setting tariffs. The exemption is a practical one arising from the recognition that the CEGB will rarely be called upon to purchase privately generated electricity. On that rare occasion, special circumstances are likely to arise. I hope that, in the light of this further explanation, the noble Lord, Lord Ezra, will feel able not to press his amendment.

Lord Ezra

My Lords, we have all listened with great care to what the noble Earl, the Minister, has said. I still feel that it would have been desirable for the CEGB to publish its tariffs and then negotiate around those tariffs in the normal negotiating manner. However, if he has given us the assurance that any negotiation conducted by the CEGB will take full account of the terms on which electricity boards negotiate and that it will not, as a result of its central position, discriminate in any way against those negotiating with it, I am happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Strabolgi moved Amendment No 2: After Clause 10 insert the following new clause:

("Waste disposal authorities

(".—(1) This section applies to the production and use of electricity in accordance with section 21(3) of the Control of Pollution Act 1974 (production of heat and electricity from waste, etc).

(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) 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, wherever practicable, to adopt and support schemes—

  1. (a) for the combined production of heat and electricity, and
  2. (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.

(4) 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).

(5) 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.

(6) 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: My Lords, I move this amendment in the names of the noble Lords, Lord Tanlaw and Lord Ezra, the noble Viscount, Lord Ridley, and myself. It is a repeat of the amendment put down in Committee which we have felt bound to table again. In the interval, there has been some discussion and correspondence with the noble Earl—we thank him for his courtesy in outlining the Government's attitude and for looking into the matter—but we do not feel that what he says is sufficiently reassuring. We have therefore felt bound to return to the matter again.

It is clear that the main purpose of the Bill is to encourage generation of electricity by private enterprise, in part as a spur to greater efficiency in the public sector electricity supply industry. However, it is also clear that, for some reason that is not evident, the Government believe that the present Bill need not, and should not, increase the powers and responsibilities of local authorities in the field of transmission.

At present, only the Greater London Council is directly generating electricity from waste. There is however much enthusiasm, which should be welcomed and encouraged, among local authorities wishing to contribute in every possible way to the principle of energy conservation. With the price of energy increasing at a far greater rate than prices generally, it can only be a matter of time before waste disposal authorities decide that it would be economic for them to manufacture electricity for their own consumption.

Authorities will not take kindly to manufacturing electricity from waste, selling it to electricity boards at a predetermined price and then being forced by the boards to buy the same product at a higher price for their own consumption. In our view, the Government should not be supporting the principle of one part of the public sector making a profit from another. Such a course can surely only lead to unproductive bureaucracy. We know how much the Government are against that—as, indeed, are all of us.

It seems strange that the Government, with their commitment to energy conservation, should be opposing on ideological grounds a proposal which, although it may not be put into practice in the immediate future, will undoubtedly in the long run make a worthwhile contribution towards the energy resources of this country. When the Government talk about encouraging the generation of electricity by private enterprise, they seem to mean different things at different times, as the mood takes them. I should have thought that private enterprise would mean any enterprise that was not part of the nationalised electricity industry. But this is apparently not so according to the rather myopic manner in which the Government view the matter. As Humpty Dumpty said, "When I use a word, it means just what I choose it to mean: neither more nor less".

There is no consistency in the Government's attitude except that they are clearly biased against local authority private enterprise. In other words, local authorities are to be treated as a sort of second-class sector, way below private contractors, and are thought not to be worthy of being entrusted with this task. Unless the noble Earl has a better explanation, we shall feel bound to press the matter.

Lord Balogh

My Lords, I commend the amendment because it is an improvement on what now exists. However, it does not eliminate the basic foolishness of the Bill. The measure has little to do with energy as such. It has something to so with the regressive redistribution of income and the wrong allocation of resource capacity to the country. Far from improving underlying competitiveness, this will weaken it. A horrifying shrinkage of economic knowledge is plainly displayed. The Administration have forgotten, if they ever knew, that the impact of decreasing cost industry increases the probability of monopolistic worsening of the situation.

No one in his right mind would propose measures that would depress the industrial pattern of a decreasing cost and increasing returns industry. Yet this is exactly what is proposed. The Prime Minister, duly echoed by the Energy Secretary, has been crowing about successes. Actually, what has happened is that the decline has been halted by the steadying of the market, and no more. She discerned a brisk advance and the creation of what she calls real jobs. This would—she says—achieve optimum function of the economy. The words "market forces" flew around like a disturbed swarm of bees. What in fact happened, and will continue to happen, in the short run, if the proposed Bill is effective, is reallocation of resources and certainly not optimum allocation of capital.

I well remember the days when I had to change or buy convertors for all my electrical gadgets when I was moving from 44 to 28 Gordon Square because they were supplied by different firms having different preferences. We are certainly at the moment on the way down. We can only hope that this trend will be altered before we are down and out.

Lord Ezra

I support the amendment moved by the noble Lord, Lord Strabolgi, and supported by the noble Lord, Lord Balogh. This is a very moderate amendment and entirely in keeping with the sense of the Bill. We are suggesting here that local authorities which take the initiative to generate electricity by using waste products to greater advantage than has so far been the case should be entitled to negotiate with the electricity authorities to transmit that electricity to other local authority locations. This is what the Bill proposes for private enterprise which takes such an initiative in generating its own electricity. There is no restriction to the generation of electricity on the basis of waste; it can generate it on the basis of any fuel it likes. So this seems to be a discrimination against the initiative which could be shown by local authorities.

The noble Earl the Minister, in his comments on this amendment as moved at the Committee stage, said that the effect of this change might be a return to the days when electricity supply was concentrated in local authorities. But we are here talking about a very limited operation requiring a great deal of courage and initiative—namely, the generation of electricity from waste. I believe that, in the interests of energy conservation, we should be giving every encouragement to bodies—whether they be local authorities or others—who are prepared, instead of having to find more and more places in which to dispose of domestic waste, to convert it into usable energy.

Therefore, we from these Benches request that the Government think yet again about giving local authorities the same degree of incentive for the promotion of energy efficiency as is provided in this Bill for private enterprise, bearing in mind that we are here talking about converting waste to a useful resource, bearing in mind that it will be a very limited amount of electricity that will be generated from this source for a long time to come, and bearing in mind that all we are asking for is that local authorities should have the ability to negotiate with the electricity generating authorities about the disposal of this electricity to other locations within their control.

We believe that this is a very moderate proposition—entirely in line with the sentiment of this noble House—for generating electricity in the most efficient way and for giving every conceivable encouragement to energy efficiency. Therefore, I should like to press very strongly that the Government concede this point in those interests.

Viscount Hanworth

My Lords, I should like to support the amendment from these Benches. The points which are really important have just been made by the last speaker. There is a move, of course, to try to use refuse for producing power, and it really needs a bit more incentive to make it a practical realisation.

Baroness Gardner of Parkes

My Lords, I wish to oppose the amendment, The sentiments that have been put forward sound very impressive and very environmentally conscious but they fail to appreciate exactly the environmental situation at the vast waste disposal station at Edmonton which is now the place from which the Greater London Council generates its electricity from waste. In order to produce sufficient refuse to incinerate to produce enough electricity, there has to be an enterprise of vast size. From the local environmental point of view, it brings in great numbers of heavy and noisy vehicles which have to queue up in order to tip their waste into the great bays that are provided. Anyone living in the Edmonton area—and I must say that I represent a seat not far from there on the Greater London Council—is rather grateful to hear that the Greater London Council considers that the cost of producing the electricity and of running the station means that probably nothing of its type will ever be constructed again.

As the noble Lord, Lord Ezra, has said, it is likely that only a small number of people would want to produce electricity from waste in the future. Certainly at Edmonton the cost of production has been found to be great. However, it has simply been a waste product and, therefore, it has been used and people are pleased that is has been used. It has always been sold through the electricity grid. In the past the problem has been the price that was paid for it. Because the electricity boards are the monopoly controllers of the power system, the power that was generated was purchased at a very, very low price. The Minister has now assured us that that will not be the case and that the Bill will ensure that the Greater London Council receives a fair price for its power. Similarly, if these schemes come into operation in other areas—as has been suggested by other noble Lords—and perhaps on a smaller scale, then again I would think that to get a fair price for the power that is generated would be very adequate.

I would deplore local authorities going into the electricity business. I do not think that that is the duty of local authorities. There are specific statutory obligations now placed upon local authorities. They have more than enough responsibilities at present. Indeed, at present they frequently seem to stray into their own, in my opinion, undesirable private enterprise. I certainly would not want to see them going into the electricity generating business. I would most strongly oppose the amendment, and ask your Lordships to do the same.

Lord Somers

My Lords, I do not wish to oppose the amendment in spirit but I wonder whether the noble Earl would say in his reply whether there is any provision for generation at the correct voltage; in other words, that it should be AC and not DC? Also can he say whether the electricity so generated will be supplied to the national grid?

The Earl of Lauderdale

My Lords, noble Lords will remember that in Committee I appealed to the Government to have another look at this matter provided that the noble Lord, Lord Strabolgi, would withdraw his amendment at that stage. Those of us who have been able to be in touch with the department and with my noble friend the Minister in the meantime, are grateful for the care and attention which he has shown in dealing with it.

It is a sadness to me that my noble friend Lord Ridley, with his vast local authority experience, cannot be here today, as he could not be present at the Committee stage. By the same token, the contribution of my noble friend Lady Gardner, as a local authority expert, is very timely indeed. As one has looked into the matter—and I, too, have thought about it while the Government have had another think—the question that arises is whether the local authorities really need the right to their own transmission systems to their own premises.

We already have it from the noble Lord, Lord Ezra—whose presence here is so welcome to all of us who are interested in energy, and whose contributions are of such interest—that it is likely to be a very limited operation in any event. I am rather surprised that the noble Lord, Lord Strabolgi, in his ideologically myopic approach to private enterprise did not cite a whole lot of examples of local authorities that actually want this to take place. We do not know how many of them want it. We do not know at all and no one has given us any indication of how many extra refuse generators could be expected to result from the local authorities being given the transmission rights. We do not know what extra kilolwattage of energy is in view. Surely the big incentive has already been provided in the Bill, which is to enable local authorities to sell at a fair price. That is the new provision; that is what is being offered to private enterprise, that is what is being offered to local authorities; and that is really the ultimate incentive.

The noble Lord, Lord Strabolgi, said that, as matters were, local authorities would have to buy the electricity back from the boards at a higher price than that at which they sell it. I do not know whether that is so or not: it is a new slant. But surely it is equally fair to suggest that if local authorities have to provide their own transmission system in parallel with that already existing in the grid, it can only raise the cost and would be a needless duplication. So whether local authorities having access to a transmission system of their own would lead to a cheaper product is certainly questionable and one is surprised that the movers of this amendment have not adduced any evidence in support of it. It would certainly mean some extra capital expenditure. The electricity boards—monopolists that they are and no friends of mine on that account—are supposed to be the experts. The idea now is that local authorities would be just as expert, no doubt by taking on extra staff at public expense.

But I think that one has to see this in proportion. This is not a local authority Bill. It is essentially an electricity Bill enabling non-board producers to sell at a fair price. That applies equally to the pure private enterprise or the kind of surrogate private enterprise which now enters the ideology of the noble Lord, Lord Strabolgi. The critical aspect is the incentive of fair price, which is new. Surely anything more than that will widen the local authorities' powers in a sense that would hardly be appropriate to the purposes of this Bill.

I take the point made by the noble Lord, Lord Ezra, that it makes competition wider still. Indeed, that is the argument that I used in Committee. But having looked at the matter further, I am not sure that that is other than a collection of words. The real point is whether this is a Bill about local authorities or whether it is a Bill about electricity. Because it is an electricity Bill—an energy Bill—I do not think that one should seize this opportunity to widen the powers of local authorities to a degree that may in any case be counter-productive and would only arise (so we are told) on a very small scale.

This would of course tend to turn the clock hack towards localised generation of electricity, and although I would not oppose that in itself, it comes strangely from noble Lords opposite, with their love of centralisation, to argue that case. I believe that the real question is whether this is an appropriate amendment for this Bill at this time. I should like to suggest that I do not think it is—I do not think it is any longer. Therefore, I hope that noble Lords will not press it. I should like to express my thanks and that of others to my noble friend Lord Avon for the care and attention which he has given to the matter meantime.

Lord Mottistone

My Lords, as always, I was impressed by the contribution of the noble Lord, Lord Ezra; but he made the point about the opportunity for local authorities to exercise initiative. As I read the amendment, it is not about initiative; it is about the production of electricity. I should have thought that local authorities should be encouraged to use their initiative if this is a good way of disposing of their waste. But it is good that, having taken the initiative, they should go to a private enterprise, which inevitably and always looks carefully at whether the particular operation will be cost-effective, because that is what they are in business for and they go out of business if they are not cost-effective. They will get a much better deal from somebody who tackles this problem properly for, as my noble friend Lord Lauderdale has said, because local authorities do not really have the same type of disciplines for balancing their books as does private enterprise, there is a tendency for them to embark on projects that perhaps are not profitable. This would be bad because the whole exercise would be a disaster—as indeed my noble friend Lady Gardner has indicated is the case as regards the Edmonton exercise of the same sort.

I should have thought that the principle of what the noble Lord, Lord Ezra, is seeking—which is to allow local authorities to have initiative in this area—is in no way harmed by the Bill as it stands, and in fact might produce a rather bogus and non-cost effective result if this amendment were passed. Therefore I suggest to him that the amendment goes much further than he is mainly seeking.

Lord Leatherland

My Lords, it has been suggested from the other side that the powers of local authorities would have to be widened. My experience tells me that over 70 years ago refuse disposal departments were either generating electricity themselves and feeding it into the main or else selling steam from the burning of the refuse to the neighbouring electricity generating authority. I know this very well because about 70 years ago I was the chief cost accountant of the Birmingham Corporation refuse disposal department, and we took great pride in the way in which we were making money and saving money for the ratepayers by burning their refuse instead of transporting it miles out into the country to tip it, and then securing an income from the electricity authorities from the steam which we supplied to them.

The cost of alternative methods of dealing with refuse is very expensive. For example, there is tipping. If you are in the middle of a big city, your tipping opportunities are limited to the country districts which are perhaps 10 miles away, and you have to transport the raw refuse, or the clinker after it has been burned, to country districts well outside the boundaries of the city. You have to use canal boats or motor vehicles to transport it, and both of those forms of transport are very expensive and put a burden on the rates.

The burning of refuse also costs money; it is a fairly extensive operation. So there is a way of securing a set-off against the cost of dealing with refuse. Selling the steam from your refuse destructor boilers is one way. We used to do this in Birmingham and we received quite a substantial income from it. We sold the steam to an electricity station a few miles away, and it was of course transported through pipes.

I do not think that there is anything to be said against the proposals that are put forward in this amendment. The amendment will give some extra powers to local authorities. Those local authorities who have such powers at the moment are finding them very successful, and I see no reason why it should not be extended to others.

Lord Shinwell

My Lords, I gather from the speeches to which I have listened that the Government are opposed to this amendment because they fear that this would turn the clock back, by which is meant that we would return to the period when local authorities generated electricity by using waste products. But they did nothing of the sort; they never did that at any time. It is obvious that those who talk in that strain know nothing about the history of electricity. I intervene only because I confess that I prepared the Bill for the nationalisation of electricity, and long before then—way back in the period of the First World War—was concerned when, through the medium of the metropolitan gasworks in London, we sought to process coal for the purpose of producing oil and other by-products. That is another story.

There is a history about this matter. What was the situation 30, or 40 or 50 years ago? A number of local authorities were responsible for generating electricity, not by using waste products but by generating it from coal, and from no other mineral. That was the situation. It was because of the conflict between those local authorities and private electricity undertakings that it was decided by a Labour Government to nationalise electricity. The first step was taken, not by a Labour Government but I believe by the Baldwin Government in creating the Central Electicity Generating Board. That was the situation. That is the history.

I cannot understand why we should object to local authorities using their waste products to generate electricity. I should like to remind noble Lords of what happened in 1946–47. I do not like those dates because they remind me of some of my misadventures. There was an occasion when electricity was in short supply. What happened? We discovered that throughout the country there were various industrial undertakings which had the equipment to generate electricity, and we used them. Without them we should never have been able to overcome the crisis which assailed us at the time.

Why were we assailed by a crisis? It was not a coal crisis. One has only to search the Cabinet records 30 or 40 years after the event to discover that. It was because of transport. There was plenty of coal at the sidings. We could not get it to the electricity power stations where we required it. That was all. What is the objection to this proposition? Why not use the local authorities? Are we afraid of the local authorities?

The Earl of Avon

My Lords, will the noble Lord give way? We can use it. We are encouraging them to do it. It is only the question of whether they can use the transmission or not. We are encouraging them to use waste, to burn waste to make electricity. It is all in the Bill.

Lord Shinwell

My Lords, do I understand that the Government are afraid of competition? I thought they rather admired competition. Perhaps this is a change. Is this a U-turn? They are troubled about competition? Why should not the local authorities enter into competition even with the Central Electricity Generating Board, or any other electricity undertaking which has the support of the Government? Why should they not enter into competition so long as we get the electricity when we require it?

It does not mean that the local authorities will immediately begin to generate electricity if it is not required. There must be a market for it. I am not sure, if I may say so, that the noble Earl, Lord Avon, is intensely interested in this subject. He is working, and I can understand it, on a brief. Have the department never read the history of the electricity industry? Have they never heard of those occasions when electricity was in short supply because of something that went wrong at the electricity undertaking in the winter, or any other time? What is the trouble about it?

Of course the Minister is no longer interested. He is not paying the slightest attention to me. I can understand it. Ministers get that way sometimes. They begin to fancy themselves, and why should they take any notice of me or any other Member of your Lordships' House? Anyway, I put the point again: here is a proposition to enable local authorities to use waste products to generate electricity. What is wrong with that?

The Earl of Avon

My Lords, it is in the Bill.

Lord Shinwell

It is in the Bill? Well, why are you objecting to it?

The Earl of Avon

My Lords, we are not objecting to it at all. The noble Lord, Lord Shinwell, is quite right. If he reads the Bill he will find that we are encouraging local authorities to generate electricity which can be bought by the boards.

Now may I come back to the Report stage of this Bill. I thought that the noble Lord, Lord Strabolgi, made an excellent thesis, and I thought he skated very well on thin ice somewhere between telling us a little on how we ought to privatise, and balancing it a little by the point made by the noble Lord, Lord Balogh, which is basically that the party opposite do not like this Bill very much.

For a start, let me make it clear that local authorities already possess adequate powers relating to the generation of electricity and heat. They are able to generate electricity from waste or from other fuels. Since 1974 they have had the right to sell their electricity to electricity boards; a right given to private generators for the first time in the Bill before your Lordships. The problem—I think I could even say complaint—of local authorities was that the price the boards offered was not of true value. Now the Bill establishes a framework under which the electricity boards will have to offer fair prices for electricity supplied by both local authorities and private generators. Therefore, I believe that this Bill removes the local authorities' major worry.

There has been emotive talk of converting waste, energy conservation, initiatives, incentives and efficiency. The noble Viscount, Lord Hanworth, mentioned the word "incentive". The Government agree with all these aspects, and we encourage the local authorities to promote electricity through waste generation. The noble Lord, Lord Somers, asked me a couple of questions. The electricity supply sold by local authorities to boards would be at the suitable voltage or frequency and would indeed go on the national grid.

Local authorities also have comprehensive powers to participate in combined heat and power schemes. They may produce, acquire and dispose of heat; they may produce electricity and dispose of it to electricity boards on fair terms; they can establish and operate installations; they can construct, lay and maintain heat mains, and they can even break open streets. In practice, the advantage taken so far of these various powers by local authorities has been very limited. Only one authority, the GLC, generates electricity from waste, though it may be that others will be encouraged—and the Government hope this will happen—to develop schemes in the light of the new provisions in the Bill on fair prices for the sale of electricity.

May I give one example of what is going on at the moment, just to encourage the House that things are on the way that they feel they should be. Local authorities have been involved in active discussion with electricity boards and other interested parties on potential developments. We expect them to continue to do so. Indeed, we know of one possible waste burning combined heat and power project on which a board and a local authority are working closely together. The local authorities have of course also played a constructive part in the feasibility programme. In all these local authority involvements with CHP the Bill will remove impediments and provide encouragement.

The new clause proposed by the noble Lords would allow a local authority which generates electricity from waste to use an electricity board's transmission and distribution system to transmit this electricity to other premises occupied by the authority. As I have mentioned, the only authority at present in a position to take advantage of any such step is the GLC. I suggest to the House that the present arrangement by which the GLC sells its output to the Eastern Electricity Board is the way forward. This Bill offers them a fair price. My noble friend Lady Gardner of Parkes has spoken to this effect.

The Government believe that it would be wrong at this stage to contemplate extending the powers of local authorities in the way the noble Lords propose. In the first place, there is no case on practical grounds for such an extension of local authority powers. My noble friend Lord Lauderdale mentioned this. The economics of transmission of electricity for use at locations remote from the site of generation seem unlikely to be more favourable for local authorities compared with selling to the electricity boards at a fair price. The viability of CHP schemes depends upon the economics of the distribution of heat, not upon local distribution of electricity.

In the second place, the main purpose of the Energy Bill is to encourage generation of electricity by private enterprise, in part as a spur to greater efficiency in the public sector electricity supply industry. In the third place, for all their merits, we do not expect that local authorities, who have little or no experience in the electricity supply business, will enter into this field. The generation of electricity is not a function of local authorities other than as a by-product. The generation of electricity following the Bill will be a trading enterprise in which the private sector can be expected to invest risk capital in the expectation of making profits. We do not believe that local authorities are in this line of business, nor should they be.

I would argue that the first priority for local authorities is to run their existing operations with the greatest possible efficiency. The Government have already said in another place, and I willingly repeat it to this House, that it may be necessary in the future to review legislative and organisational arrangements in the context of the development of CHP district heating. This we shall do. The question of use by local authorities of the transmission and distribution system could be looked at again at that time should there be any new arguments or evidence. The Government believe that the present Bill need not, and should not, increase the powers and responsibilities of local authorities. I hope that with the reassurance that I have given, and the reasons that I have stated, I have been able to convince the House that this is so.

Lord Balogh

My Lords, before the Minister sits down, may I ask him what is a fair price? Who is going to determine it, and under what principles?

The Earl of Avon

My Lords, this is Report stage. If I may be able to reply to the noble Lord with the leave of the House, this point is in the Bill, and I think we debated it at Committee stage.

Lord Strabolgi

My Lords, I think this has been an interesting debate, and I am grateful to all noble Lords who have taken part in it. Of course, this is not a party matter. As your Lordships are aware, this amendment has been supported by noble Lords from all sides of the House. I am sorry we have not had the advantage of the presence of the noble Viscount. Lord Ridley.

The noble Earl, Lord Lauderdale, said that he did not know how many local authorities wished to have this power. As has been made clear by the noble Earl, the power is not to generate electricity (a facility which they have now) but to use the electricity board's transmission and distribution system. I can tell the noble Earl that it is wanted by the Association of County Councils, which represents all the local authorities in that sector.

The Earl of Lauderdale

My Lords, I am grateful to the noble Lord. My question was not whether the association professes that all its members want it, but how many local authorities are known to want it, which is a different question.

Lord Strabolgi

My Lords, all I can say about the association, from what little experience I have, is that it mirrors the wishes and policy of its members.

As the noble Lord, Lord Ezra, says, this amendment is really to give local authorities some degree of initiative. It is a moderate proposition to encourage energy efficiency. The noble Earl, Lord Avon, and the noble Baroness, Lady Gardner of Parkes, said that they were opposed to local authorities going into the electricity business. Why ever not? This is a Bill to privatise electricity generation and transmission. The Government are taking away the monopoly from the electricity boards. That is accepted by the Bill, which has been passed by another place and is shortly to be passed by your Lordships' House—but why discriminate? Once this power is taken away from the electricity boards, why is it then given only to private contractors and not to local authority contractors? We on this side of the House cannot see the difference. Why should there be this bias against local authorities? We think that the House should divide and that we should press this so that your Lordships can come to a decision.

3.52 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 80; Not-Contents, 114.

Amherst, E. Chitnis, L.
Amulree, L. Cledwyn of Penrhos, L.
Ardwick, L. Collison, L.
Bacon, B. David, B. [Teller.]
Balogh, L. Denington, B.
Banks, L. Donaldson of Kingsbridge, L.
Beaumont of Whitley, L. Elwyn-Jones, L.
Beswick, L. Ewart-Biggs, B.
Birk, B. Ezra, L. [Teller.]
Bishopston, L. Fisher of Rednal, B.
Blyton, L. Gallacher, L.
Brockway, L. Gladwyn, L.
Brooks of Tremorfa, L. Granville of Eye, L.
Bruce of Donington, L. Gregson, L.
Byers, L. Hale, L.
Hampton, L. Phillips, B.
Hanworth, V. Pitt of Hampstead, L.
Hatch of Lusby, L. Ponsonby of Shulbrede, L.
Hunt, L. Prys-Davies, L.
Irving of Dartford, L. Roberthall, L.
Jacques, L. Rochester, L.
Jeger, B. Rugby, L.
Jenkins of Putney, L. Sainsbury, L.
John-Mackie, L. Scanlon, L.
Kennet, L. Shinwell, L.
Kilbracken, L. Spens, L.
Kilmarnock, L. Stewart of Alvechurch, B.
Leatherland, L. Stewart of Fulham, L.
Lee of Newton, L. Stone, L.
Listowel, E. Strabolgi, L.
Llewelyn-Davies of Hastoe, B. Taylor of Gryfe, L.
Lloyd of Hampstead, L. Taylor of Mansfield, L.
McCarthy, L. Underhill, L.
McNair, L. Wallace of Coslany, L.
Mais, L. Walston, L.
Mayhew, L. Wedderburn of Charlton, L.
Milford, L. Wells-Pestell, L.
Nicol, B. White, B.
Oram, L. Wi[...]oder, L.
Peart, L. Wootton of Abinger, B.
Airey of Abingdon, B. Kinnaird, L.
Alexander of Tunis, E. Lane-Fox, B.
Allen of Abbeydale, L. Lauderdale, E.
Allerton, L. Lawrence, L.
Ampthill, L. Long, V.
Avon, E. Loudoun, C.
Bellwin, L. Lucas of Chilworth, L.
Belstead, L. Lyell, L.
Berkeley, B. McAlpine of Moffat, L.
Bessborough. E. McFadzean, L.
Caccia, L. Mackay of Clashfern, L.
Campbell of Alloway, L. MacLehose of Beoch, L.
Carnegy of Lour, B. Macleod of Borve, B.
Chesham, L. Malmesbury, E.
Clitheroe, L. Mancroft, L.
Cottesloe, L. Mansfield, E.
Craigavon, V. Margadale, L.
Cullen of Ashbourne, L. Marley, L.
Daventry, V. Massereene and Ferrard, V.
Davidson, V. Merrivale, L.
De Freyne, L. Mersey, V.
De La Warr, E. Minto, E.
Denham, L. [Teller.] Molson, L.
Dilhorne, V. Morris, L.
Drumalbyn, L. Mottistone, L.
Duncan-Sandys, L. Mowbray and Stourton, L.
Ebbisham, L. Moyne, L.
Eccles, V. Murton of Lindisfarne, L.
Effingham, E. Newall, L.
Ellenborough, L. Nugent of Guildford, L.
Elliot of Harwood, B. O'Hagan, L.
Elton, L. Orkney, E.
Ferrers, E. Orr-Ewing, L.
Fraser of Kilmorack, L. Porritt, L.
Gardner of Parkes, B. Portland, D.
Garner, L. Rankeillour, L.
Glanusk, L. Reigate, L.
Glenarthur, L. Renton, L.
Glenkinglas, L. Romney, E.
Gore-Booth, L. St. Aldwyn, E.
Greenway, L. St. Davids, V.
Gridley, L. Sandys, L.
Haig, E. Selkirk, E.
Hailsham of Saint Marylebone, L. Sempill, Ly.
Skelmersdale, L.
Harmar-Nicholls, L. Somers, L.
Henley, L. Strathspey, L.
Hives, L. Sudeley, L.
Hornsby-Smith, B. Suffield, L.
Hylton-Foster, B. Swinton, E. [Teller.]
Ilchester, E. Teviot, L.
Jessel, L. Thomas of Swynnerton, L,
Kilmany, L. Tranmire, L.
Trefgarne, L. Vivian, L.
Trenchard, V. Westbury, L.
Trumpington, B. Wynford, L.
Vaux of Harrowden. L. Young, B.
Vickers, B.

Resolved in the negative, and amendment disagreed to accordingly.

Clause 12 [Meters to be of approved pattern]:

4 p.m.

Lord Ezra moved Amendment No. 3: Page 8, line 12 after ("State") insert ("and the Electricity Consumers' Council").

The noble Lord said: My Lords, I beg to move Amendment No. 3, which proposes that the words, "the Electricity Consumers' Council" should be inserted in this clause. This clause deals with the question of the approval of meters for the measurement of electricity, which is very important for consumers because it is on that basis that they are charged for the electricity that they consume. Therefore, we consider, in the interests of consumers, that the Electricity Consumers' Council should be associated with the approval of these meters. I beg to move.

The Earl of Avon

My Lords, the purpose of Clause 12 is to require meters used by a person other than an electricity board to measure the electricity he supplies to another person to be of an approved pattern. This means a design approved by the appropriate United Kingdom or European Community metrological authority. Approval in the United Kingdom is given by the Department of Energy's chief electricity meter examiner on behalf of the Secretary of State.

The effect of the amendment of the noble Lord, Lord Ezra, would be that for approval to take effect in this country the meter would also have to be seen by the Electricity Consumers' Council. We all recognise the valuable work on behalf of consumers done by the Consumers' Council—which is indeed being given statutory status in later clauses in this Bill. However, pattern evaluation for approval involves a critical examination and testing of meters requiring highly specialised staff and equipment to ensure that meters conform to the requirements of the appropriate British Standard Specification, BS5685. I am sure that the Consumers' Council themselves would accept that they do not possess the competence or apparatus to carry out such technical analysis. Nor am I aware that they are dissatisfied with the chief electricity meter examiner's performance.

I am aware of the interest shown by the Electricity Consumers' Council in the introduction of new metering technology involving remote meter reading and load control. One, the mains-borne telecontrol system, which allows for reading and control of electricity, gas and water supplies, has already been given approval for trial purposes, and others will, as they become available, be examined by the chief meter examiner, who keeps in close touch with these developments. The question of their introduction for domestic use is of course a matter for the industry in consultation with consumer interests. Pattern approval is a separate technical question. I hope that, in the light of this explanation, the noble Lord will feel able to withdraw his amendment.

Lord Ezra

My Lords, I have been closely associated with an energy consumers' council for many years and, as their name suggests, what they like to have done to them is to be consulted. They are not experts in most of the technical fields for which they are being consulted and nor, I suggest, in this particular case, would the Secretary of State himself be an expert in metering. He depends upon technical advice. The purpose of this amendment is that the technical advice should be rendered both to the Secretary of State and to the Consumers' Council and that they should consult together in order to decide what are desirable meters and what are not. I would hope therefore—and it is not my intention to press this amendment—in withdrawing this amendment, that the Secretary of State would, however, be prepared to consult with the consumers' council in these decisions in order to make sure that there is nothing in their view that might be contrary to his opinion.

Amendment, by leave, withdrawn.

Lord Ezra moved Amendment No. 4: Page 11, line 28 at end insert ("promote",).

The noble Lord said: My Lords, this amendment relates to the insertion of the word "promote" in Clause 19. This was a matter which was debated at some length at the Committee stage. From these Benches, we should like to ensure that the maximum possible stimulus should be given to the electricity authorities to promote CHP schemes. Indeed—and I am quoting from the report of our deliberations at the Committee stage on 19th April—the noble Earl the Minister then said that: as drafted, the clause gives electricity boards a clear duty to promote CHP schemes". If that is the duty which they are given, then we fail to see why the word "promote" should not be used. If we are serious about this, then we should make it very clear to those who are going to have to apply the legislation that that is the case. If it is the intention that these schemes should be promoted by the electricity boards, then we consider that it is not unreasonable that the word "promote" should figure in the legislation. I beg to move.

Lord Strabolgi

My Lords, I should like to support this amendment moved by the noble Lord, Lord Ezra. I think that to include the word "promote" greatly strengthens the wording of this particular subsection of the Bill and gives great support to words like "adopt" and "support" which are basically somewhat nebulous and which are not nearly positive enough. Of course, it is very necessary that everything should be done to encourage combined heat and power in future. The other day, when we had the general debate on energy, I had some rather hard words to say about the Government's lack of initiative in this respect and how we were lagging far behind our European partners. I think it would be an indication for the Government to show that they are serious about this if they adopted the words in the noble Lord's amendment. Therefore, I support everything that the noble Lord, Lord Ezra, has said.

The Earl of Avon

My Lords, the noble Lord, Lord Ezra, really wants every inch of this one. He rightly said that I had said that this should read exactly as he wants it. I will try to explain once more why we believe the present wording not only includes what he wishes but goes, I think, further. I explained at Committee that the wording of Clause 19 was deliberately chosen in order to give the boards a clear and specific duty to adopt and support schemes for CHP and the use of heat generally.

The noble Lord, Lord Tanlaw, stated during Committee that the position of the Government on CHP was unclear. Surely the inclusion of Clause 19 in the Bill is a clear indication of the Government's attitude. The clause gives firm encouragement to this type of project and removes any doubt about the attitude which boards should adopt.

The Government have also made a positive commitment to investigate thoroughly the economic potential of CHP district heating and is currently assessing the consultants' report on the economic and practical feasibility of CHP district heating schemes in nine locations.

As I said in Committee, I am confident that this clause will encourage the development of CHP schemes and that the amendment of the noble Lord is unnecessary. I must repeat what I said at Committee stage. The boards will be able to carry out schemes themselves or to participate in the schemes of others to adopt and support schemes. If the word "promote" were added to the clause they would then be obliged to promote schemes of other parties acting on their own. I do not believe that it would be practicable to impose such a duty in respect of schemes in which boards have no involvement. I am sorry that I did not make this point clearer at the Committee stage. We are not quibbling at all over what we want: it is just a question of how the Bill should be drafted.

Baroness Phillips

My Lords, before the noble Lord, Lord Ezra, replies, I wonder whether the Minister can explain what happens if the hoard does not carry out the duty that is imposed upon it. It is such a glib phrase to say, "It shall be the duty". But what happens if boards do not "adopt and support" these schemes?

The Earl of Avon

My Lords, with the leave of the House, I should be happy to answer the noble Baroness by saying that if there was any question of a price not being agreed, I think the matter would go to my right honourable friend the Secretary of State for him to adjudicate.

Lord Ezra

My Lords, we have heard what the noble Earl the Minister has said. It is quite clear that it is the Government's view that the electricity authority should do everything possible to promote the development of CHP. It still puzzles me somewhat as to why, if that is their intention, they cannot state it in the Bill. However, if the answer is very clear as a result of this discussion and what the noble Earl the Minister previously said—namely, that they wanted the authorities to promote this but, for some reason (which is unclear to some of us) do not actually want to say so—then I should be very happy to leave matters there. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.14 p.m.

Lord Ezra moved Amendment No. 5: Page 12, line 1 leave out from ("the") to end of line 3 and insert ("minimum financial criteria set by the Secretary of State for this type of investment by an Area Board").

The noble Lord said: My Lords, the proposal here is that we should introduce into Clause 19 the words: minimal financial criteria set by the Secretary of State for this type of investment by an Area Board".

The reason for this amendment is that we believe it is so necessary to encourage these new forms of electricity generation that the criteria pertaining to them on a financial basis may not necessarily be the normal criteria which those authorities apply for their normal schemes. We should therefore like to leave it to the Secretary of State, depending upon the circumstances, to agree with the board concerned what those criteria should be. We consider that this proposed amendment would introduce a degree of flexibility and a degree of incentive, and we hope it will be entirely acceptable to the Government.

The Earl of Avon

My Lords, before replying to the noble Lord, Lord Ezra, may I say a word to the noble Baroness, Lady Phillips, in answer to her question on Amendment No. 4. I said to her that the Secretary of State would be able to do something; but may I say that in point of fact he could direct the board if it was not doing its statutory duty; and that is how it would be done.

If I may now refer to the amendment of the noble Lord, Lord Ezra, it is suggested that special rates of return—that is, lower rates of return—should be set by the Secretary of State for investment in combined heat and power projects. This follows the line of the amendment tabled by the noble Lord, Lord Tanlaw, at Committee stage. It proposes that combined heat and power schemes should be singled out for special treatment and that criteria other than financial should be given priority when a board is considering a scheme.

The Government's overall approach to nationalised industry investment remains that which was outlined in the previous Administration's own White Paper on the nationalised industries (Cmnd, 7131). The nationalised industries should plan their investment so as to achieve a proper rate of return for the programme as a whole. To do otherwise would be to squander national resources. Within this guideline it is for the industries themselves to judge which individual projects seem most worthwhile, but there would need to be special reasons for a board to invest in a major project of any kind which did not seem likely to make its proper contribution to this overall rate of return. I feel that to say such things to the noble Lord, Lord Ezra, is rather idiotic because for 13 years he chaired one of these boards himself; but when I came here today I did not know that he would be moving the amendment rather than the noble Lord, Lord Tanlaw, whom I welcome back in his place.

I would not disagree with the noble Lord that combined heat and power schemes could provide social benefits; but I would point out that CHP investment is not the only type of investment in generating plant where social benefits could arise.

There is therefore no particular reason to use the argument of social benefit to justify a lower rate of return criterion on CHP projects than on other projects undertaken by the boards. Equally, nor is it the case that electricity boards would be able to impose a requirement that CHP schemes should provide higher rates of return than other projects. The Bill clearly states that the boards should treat CHP schemes on the same economic basis as other projects: no more and no less. Electricity boards would be expected to apply the same criteria to proposals of this kind as they apply to other types of investment. "Financial criteria" is specified in the Bill so that it is clear that the boards are not obliged to adopt or support uneconomic schemes which could result in an increased burden on consumers generally. I hope that the House will agree to leave it like this.

Lord Tanlaw

My Lords, in supporting my noble friend Lord Ezra, may I clarify one point to the noble Earl. I do not think we are asking for charity: that is not the point of this amendment. We are not asking for any special or lower rate of return. We are asking for recognition by the generating boards that different criteria are applied to CHP schemes than those which are applied to straight generating schemes. The noble Earl referred to waste. The whole point of a combined heat and power scheme is to prevent the waste of excessive heat going up the chimney into the atmosphere. In terms of efficiency and lack of waste, I should have thought that the recognition of this alone would have meant a different type of criteria in order to judge such a scheme.

I would also ask the noble Earl to consider that the capital costs may well be higher in putting in the heating pipes, and so on, in a conurbation. But let us take into account the actual increase in employment that this will involve, and which must in a way save money for the Exchequer, which is having to pay out money on unemployment benefits. We have particularly recommended that these schemes should be considered in areas of high unemployment. Therefore the object of this amendment is not in any way not to recognise the Government's strictures laid down in the Command Paper referred to by the noble Earl, but to recognise different criteria by which those rates of return are to be judged. Because there has not been such a scheme in operation in this country before, it is perhaps rather a nuisance for the Government and the electricity boards to work out these financial critieria.

All we are asking is that the Government will look again at this aspect and put forward financial criteria which I feel will hold up perfectly adequately in financial returns and loss of waste to the taxpayer, and which will serve to benefit the taxpayer by offering him a new and cheaper form of heating if he is fortunate enough to live in an area in which a CHP scheme operates.

The Earl of Avon

My Lords, I wonder whether, with the leave of the House, I might reply just very briefly to the noble Lord, Lord Tanlaw, as I have not been able to speak to him before today. First, the criteria which he has mentioned are very good and I will certainly draw to the attention of the boards what he has said today, but I do not think that they necessarily come within the ambit of this amendment. May I, too, repeat something I said earlier to the House when the noble Lord was not here. The Government have already said in another place—and I willingly repeat it today—that it may be necessary in the future to review legislative and organisational arrangements in the context of the development of combined heat and power district heating, and this we shall do.

Lord Ezra

My Lords, in view of what the noble Earl the Minister has said, I do not wish to press this amendment. I would only remind the House that we as a country are lagging far behind many continental countries in the application of this type of scheme. Denmark, Sweden, Germany, France and many other continental countries have gone much further ahead than we have, and I believe we have lagged behind because of our ambivalence and uncertainty about these projects. If we want to go ahead with them, there must be a determination and a will so to do. If we remain ambivalent and uncertain we shall find that these other countries will get ahead of us in the efficiency with which they utilise electricity and other forms of energy. With those remarks, I am quite ready to withdraw the amendment.

Amendment, by leave, withdrawn.

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