§ Baroness Burton of CoventryMy Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they accept the recommendation in the report of the Commons Select Committee on Energy that, in view of the confusion arising concerning the application of the financial framework to nationalised energy industries, they should clarify policy in this area by reaffirming, in comprehensible layman's language, the principles set out in the 1978 White Paper.
§ The Parliamentary Under-Secretary of State, Department of Energy (The Earl of Avon)My Lords, the Government have now replied to the Select Committee on Energy noting its recommendation. The Government's reply also reaffirms that, as the Department of Energy and Treasury memorandum to the Select Committee made clear, the financial framework remains as described in Part III of the 1978 White Paper and subsequently expanded by the Chancellor's statement of 4th August 1980.
§ Baroness Burton of CoventryMy Lords, I wonder whether the Minister, in connection with that reply, would feel able to agree that it is unfortunate for the consumer, anyway, that the London Electricity Board was not able or was unwilling to join with the London Electricity Consultative Council in a friendly legal action so that a declaration from the High Court might be made in view of the question raised on the Order Paper?
§ The Earl of AvonMy Lords, my understanding is that the LECC and the Electricity Council are at the moment in talks. I do not think that it would be right for me to comment.
§ Baroness Burton of CoventryMy Lords, is the Minister aware that my information is that the London Electricity Board was unable to agree? May I pursue that by asking the Minister whether he is aware that the two points on which a ruling was particularly required from the High Court were, first, whether the decision to increase electricity prices was in conformity with the statutory duties placed upon the industry, and, secondly, were these decisions consistent with the financial framework placed upon the industry? Would the Minister comment on those?
§ The Earl of AvonMy Lords, I stand to be corrected by the noble Baroness, but I do not believe that the High Court has actually said anything about this. My understanding is that the case is up before it.
§ Lord Stoddart of SwindonMy Lords, I have read that response to the Select Committee's report, but would the Minister, who is himself a reasonable and courteous man, nevertheless not agree that the Government's response to the Select Committee on Energy on this issue is an impertinence and discourteous to the Select Committee itself? Furthermore, does not that response mean that the nationalised industries will continue to suffer uncertainty and nagging interference from the Treasury, particularly in the matter of forcing up gas and electricity prices?
§ The Earl of AvonMy Lords, no, I do not agree with the noble Lord, particularly as I had some say in drafting the response. I should like to reaffirm that the Government accept the financial principles which were laid down in the 1978 White Paper.
§ Lord EzraMy Lords, does the noble Earl not agree that there is some risk of confusion surrounding the fixation of electricity prices in this country? Further-more, would he not agree that if the European Commission's ideas on price transparency and energy were to be applied, electricity prices in Britain would not stand up very well to such an examination?
§ The Earl of AvonMy Lords, as the noble Lord is aware, there are a number of different approaches to this matter. I have before me, in order to put it into simple layman's language as the noble Baroness asked in her original Question, the definition of the long run marginal cost. This is simply the cost of supply on a continuing basis including replacement capital cost and a satisfactory return on capital employed. We would be quite ready to have any scrutiny.
§ Baroness Burton of CoventryMy Lords, I wonder whether the Minister would agree that the public is rather confused about this. They believe that the interpretation of these principles varies from time to time according to the convenience of the Government at the moment. Could the Minister look at all that has been said today and possibly let me have a note which would at least enlighten me about what is going on?
§ The Earl of AvonI will indeed, my Lords. The noble Baroness might like to know that I have been in close touch with the chairman of the Electricity Consumer Council and intend to remain so on this topic.
§ The Earl of LauderdaleMy Lords, will my noble friend not agree that it is important that we have electricity and energy tomorrow as well as today, and therefore prices must reflect provision for meeting that need?
§ The Earl of AvonMy Lords, I agree with my noble friend, and in my reply to the noble Baroness I mentioned the words, "including replacement capital cost".
§ Lord Stoddart of SwindonMy Lords, but is it really correct that today's consumers should be paying tomorrow's prices?
§ The Earl of AvonMy Lords, that is not inherent in what I said.