HL Deb 25 July 1989 vol 510 cc1339-49

4A Line 2, leave out "may" and insert "shall".

Lord Ezra

My Lords, the amendment passed by your Lordships was one of the most important amendments carried during the long drawn-out debate on the Electricity Bill. It was a measure of the importance we attached to it that we had support from all sides of the House. The purpose of the amendment was not only to emphasise the importance of energy efficiency in the use of electricity but to introduce a degree of mandatory control and regulation which would ensure that energy efficiency was achieved.

I was personally very dismayed when I read the report of the debate in another place on the amendment and the remarks of the then Secretary of State for Energy at col. 553 of the Official Report of 20th July. The purpose of the amendment was a laudable, desirable and conscientious one. It should not have been referred to in that way. My amendment to the alternative amendment proposed by another place seeks to stiffen the Government's wording.

It has been explained in some detail by the noble Lord, Lord Sanderson, that this clause should be read in conjunction with other parts of the Bill and in conjunction with the terms and conditions of the licence which is therefore strengthened. But as this is the operative clause it should be strengthened. The way in which it is currently drafted suggests that the director may or may not come forward with the standards. There is no indication of any sanctions that might be applied if they are not carried out. The purpose of the amendment to the amendment is to strengthen the wording and to replicate—it is the first reference in the Bill to energy efficiency—what comes later. If, later, there are strong supporting powers for this clause, the wording should reflect that; it should not be drafted in this conditional manner. The clause on its own suggests that there may or may not be standards set, as it appears in the opinion of the regulator. Nothing is laid down about the carrying out of those standards: they would simply be published. I put the amendment forward for your Lordships' consideration. I beg to move.

Lord Shepherd

My Lords, the tone and quality of the Minister's speech were in marked contrast to what was heard in another place. I welcome that. However, before speaking to the amendment moved by the noble Lord, Lord Ezra, I wish to raise a matter of supreme importance to the House—the relationship of its Members with Ministers. In the Select Committee of another place the Secretary of State said that the mover of the amendment recognised and acknowledged that the clause was unworkable. That was the main accusation which he made against the decision taken by noble Lords in Committee.

Reference was made to my undertaking that if there were imperfections in the drafting of the clause, I would be most willing to co-operate with the Minister. In that connection, I should say that I received an invitation from the noble Baroness, Lady Hooper, who was then the Minister responsible for the Bill, to go to see her in the department. Of course I went, as many noble Lords have done in the past. As a Minister, I also received people in the same way. Such meetings—and this is what I wish to establish—have always been based on confidentiality. This can provide the means to find a way out of a difficulty. Of course minutes are taken of such meetings and they are usually taken for the protection of the Minister as to what he or she may have said or what undertakings may be alleged to have been given.

Having been a member of your Lordships' House for over 30 years, I have never under any circumstances known of an occasion where what took place in a Minister's room under such conditions was used in Parliament as an argument against what the mover had put to the House.

I recognised that there were imperfections after the clause had been included in the Bill. Moreover, I undertook—and we agreed to this on Report—to remove them. I was so gravely disturbed about the grounds of confidentiality, because I had never used the words in question in any other place under any other circumstances, that I went to the Chief Whip. I explained to him the circumstances. I made it very clear that if we could not continue with the basis of confidentiality between Members and a Minister, that would have grave repercussions for the way in which this House conducts its affairs as a revising Chamber.

I received a letter of apology from Mr. Parkinson. It was unreserved. It was an apology. I replied and said that so far as I was concered the issue was one of confidentiality between Members and Ministers. I also said that in the light of his letter I would regard the matter as dead, as being finished. Therefore, I was dismayed when I read the Hansard report of another place of Thursday, 20th July 1989. I direct the Minister's attention to col. 552, which reads: It is not disputed that their Lordships' proposals are defective. The person who proposed them has accepted that. The subsequent amendments only made matters worse". It appears Mr. Parkinson forgot that he sent me a letter of apology and he used confidential conversations in the House of Commons to recommend to Members of that place that they should not accept your Lordships' amendment.

I believe that this is matter of great importance for the future. I say that because, if you cannot have the traditional relationship between Members of this House and Ministers, the activities of this House as a revising Chamber will be placed in great jeopardy. One should always remember too this fact. I referred to the minutes. They are never available to anyone other than the Minister. I want to make it clear that I acquit the noble Baroness, Lady Hooper, of responsibility in the matter. She behaved with great honour and, I believe, great distinction throughout the passage of this long Bill.

I now turn to the clause in question and to the amendments moved by the noble Lord, Lord Ezra. The Government have gone a very major way towards meeting the anxieties of Members of this House in regard to energy efficiency. Moreover, taking into account their original position both in this House and in another place, I think that it would be quite ungenerous not to accept the major step which they have taken in bringing forward this proposed clause in replacement of Clause 3.

As I said, this is a major step forward, but, it is still permissive and it is still without teeth. The House of Lords' Select Committee, Sub-Committee B, as the Minister will remember, said that the Bill as then drafted was inadequate. The House of Commons Energy Committee considered not only our reports but also the amendment which your Lordships' House passed. I should like to quote what the committee put in the concluding part of its report. It reads: There are a number of basic principles in the Lords Amendment which we believe that the Government should now ensure are inserted into the Electricity Bill. These are: Public Electricity Suppliers must be under a statutory obligation to promote more efficient electricity use"— I think that the Government have gone a good way, if not the full way, in that regard. The report then continues, That statutory obligation must be re-inforced by penalties to ensure that it is met. The most effective penalty is for tariff increases to be refused, especially where such increases, caused by additional supply investment, could have been avoided by investment in energy efficiency". Therefore the difference between what the Government and the House of Commons are proposing is in those two phrases of the House of Commons Energy Committee. But how important is that?

I was listening to the former Secretary of State for Energy on the programme "Any Questions" which was broadcast last Saturday at midday. He said that we are giving a prime duty to the director general. My understanding of a prime duty is that it is beyond a general duty; it is a superior duty. It is a duty which those who promote the Bill believe is necessary in the national interest. But how can you have a prime duty if you do not have the ability to enforce it?

The Minister dealt with what will be in the conditions within the licences. With difficulty of course one can obtain sight of a copy of those conditions in the Library of the House of Lords. I have had a quick look at them. I shall take the Minister's assurances as to the way in which the director general can achieve the compliance of the suppliers. But there is still a doubt as to how effective those assurances can be.

Is it conceivable that the director general would revoke a supplier's licence, because that in the end is about the only sanction that he has? However, the supplier will own all the means by which power finds its way into people's houses. It is not like an ITV licence. It is beyond understanding that a director general could ever revoke a licence, even under the most extreme circumstances. I have doubts, not as to the Government's present position in regard to what they propose in the clause and the effectiveness of it, because they are constrained within the legislation as it is now proposed within the Bill.

I should infinitely prefer to see the amendments tabled by the noble Lord, Lord Ezra, included in the Bill; in other words, instead of "may", the director general "shall"—as contained in the original Clause 3 passed by your Lordships—and also the various sanctions which the noble Lord proposes. I doubt whether, even if those sanctions were available, they would ever have to be used. So much in life depends for compliance upon the degree of the sanctions available.

However far the Government have gone—I recognise that they have gone a long way in that regard—they should go one stage further, as proposed by the noble Lord, Lord Ezra, and then I believe many who are concerned about energy efficiency would be more than satisfied. The Government in the end would be applauded for it. I hope that the House will support the noble Lord, Lord Ezra.

Viscount Hanworth

My Lords, I agree with everything the noble Lord, Lord Shepherd, has said. The trouble is that, although one thanks the Government for taking all this on board, as the noble Lord, Lord Shepherd, said, there are not the sanctions that there should be.

One must go back to first principles. Although the Government appear to be all in favour of action for the adverse greenhouse effect—as we all know, the most important thing that we can do quickly is energy efficiency and conservation—they have resisted all this—I am thinking again of combined heat and power—and putting anything in the Bill which is effective. One again, we find that what we have suggested could be more effective.

I have listened each time to the noble Baroness, Lady Hooper, trying to explain why the Government do not want to do so. None of her explanations has made any sense whatever. The reduction of CO2 from our power stations is predominantly something that we can achieve by reducing the ongoing requirements for energy. The Government simply do not seem to take that point on board and try as hard in the Bill as they can against it.

That is everything that I have to say. It is most dispiriting that when it comes to practicalities the Government should not take our suggestions on board rather harder than they have done.

Lord Hatch of Lusby

My Lords, perhaps I may pick up one word used by the noble Lord, Lord Shepherd; that is, "permissive". The Government propose powers which are permissive. The director "may". The noble Lord, Lord Ezra, whose amendments I unreservedly support, is trying to make the power mandatory. Why is that important? It is important, as has been observed by no less a body than the energy committee of the other place in its sixth report. I propose to confine myself to the relevant quotations from that report, which was published last week.

I again wish, as I said earlier this afternoon, that the noble Baroness, Lady Hooper, were here, because I have to refer to her, as does the report. The report replicates the debates that I had with her during the Bill's progress.

The first reason that it is essential that energy efficiency should be made mandatory in the Bill is illustrated by two quotations. The first is in paragraph 82 of the report of the Energy Committee of the other place: nuclear power is not a solution by itself to global warming, and that energy efficiency is the most important response to the problem". The second quotation comes from paragraph 84. we do not believe that further investment in nuclear power beyond the present programme is likely to occur in the current climate"— That is the current climate of public opinion— The contribution which nuclear power will make in the next 10 to 20 years to reducing CO2 emissions should not be overstated". That is my first point. It is essential to combat the propaganda that has been put out by the Government and the CEGB that nuclear power is the answer to the greenhouse effect.

The second point relates to the importance of energy efficiency itself and the Government's failure, and continuing failure, to recognise that fact and to use the powers which they have to put into practice the energy efficiency which they claim. I quote again, this time from paragraph 104: However, the budget of the EEO has been cut drastically, is planned to be cut further, and there seems to be a misplaced complacency that consumers are `now well aware of the case for energy efficiency' ". That paragraph concludes with the statement: We believe that the apparent relegation of energy efficiency initiatives in the Department's priorities indicates a misjudgment both of the evidence and of the analysis of this issue". If the Government, with their energy efficiency unit, are apparently reducing the priority which they should be giving to energy efficiency, we need still more the imperative within the Bill to make it mandatory that the director "shall" insist on energy efficiency; and that he "shall" achieve that efficiency by a given time; and if that is not achieved, that there shall be sanctions against whoever is lacking in that respect.

My next quotation is from paragraph 111. I repeat that I am sorry that the noble Baroness, Lady Hooper, is not here, I apologise to her for having to use her name in her absence, but the report does so because she gave evidence to the Committee. Paragraph 111 reads: Baroness Hooper took the view that 'the advantages of energy efficiency are so real and manifest that a programme to encourage voluntary compliance is the most effective'. We have to disagree. We have been left in no doubt that, if the Government is to respond swiftly and effectively to the threat of global warming, it will have to review most carefully its strategy towards the encouragement and promotion of energy efficiency—both the public and private sectors of the economy—and will have to adopt a much higher profile and pro-active stance". That is precisely what some of us have been saying to the Government and to the noble Baroness, Lady Hooper, throughout the progress of the Bill. She has said to us on behalf of the Government that the public was sufficiently well informed in order for market forces to produce energy efficiency.

This report shows that there are those in another place who are supporters of the Government and members of the government party who agree with the criticism that we have been making on the cuts that have been made in the energy efficiency unit. They do not believe that the Government's general policy on energy efficiency is sufficient to off-set the dangerous global warming effect which is now becoming a commonplace phrase but which is a very real menace to the future of mankind.

There is one final argument that has been used by members of the Government after our urging them to increase the mandatory requirement for the use of energy efficiency. It is that it is no use thinking that this country can halt global warming by its own actions. We know that.

Perhaps I may end simply with one of the conclusions reached by the House of Commons Energy Committee at paragraph 156, entitled "UK and the World". This is the second point that it makes: The UK should set an example to the world by seriously tackling its own emission problems in advance of international understanding: the world response will be the sum of individual countries' responses". This is an opportunity for the Government to accept these amendments on the basis of the evidence, the arguments and the analyses of which I have just given examples from the Energy Committee of another place. Without the mandatory imperative that energy efficiency must be applied, that if it is not applied there will be sanctions applied against it and that it must be applied by a specific date, as the noble Lord, Lord Shepherd, said we are simply giving a permissive direction, a permission to the director. Parliament should be giving an imperative. I believe that in doing so it would be following the very detailed work that has been done by the Energy Committee of another place.

5.30 p.m.

Lord Williams of Elvel

My Lords, I was very shocked by the account that my noble friend Lord Shepherd gave us of his conversations with Ministers and the subsequent use that was made of those conversations. I very much hope that the noble Lord, Lord Sanderson, will take this up with the Leader of the House. It seems to me intolerable if Members of the House cannot have confidential communications with Ministers on the basis that they will not be revealed to the outside world, let alone revealed in a party political context.

As regards the substance of the amendment moved by the noble Lord, Lord Ezra, to the Commons amendment, of course I agree with him. The Government have offered probably one-eighth of a loaf when we put in the whole loaf in a Division in the House. Nevertheless, we must be grateful for one-eighth of a loaf, and the amendments of the noble Lord, Lord Ezra, might make it something like one-third or two-thirds of a loaf. Therefore we support the amendment.

Nevertheless, the Government recognise that any imposition of duties on public electricity suppliers which are liable to damage their profits makes them less marketable. It is as simple as that. If one wants to sell them, they are probably about the only thing that can be sold out of the industry after what has happened. If one wants to sell them, one has to alleviate the burdens on them for protecting the environment. Therefore one simply funks the issue. That is what has happened, as I understand it. Nevertheless, we are grateful—to be generous to the noble Lord—for a quarter of a loaf rather than one-eighth of a loaf.

Lord Sanderson of Bowden

My Lords, I thank the noble Lord, Lord Ezra, for moving these amendments. I think that it will come as no surprise to him that I am not able to accept them, but I want to go through them in turn, particularly the third amendment, which is exceptionally important.

The first amendment that we are considering resurrects the old chestnut from our previous deliberations on the Bill. I merely remind your Lordships that the word "may" is used in these legislative provisions when a person is given a measure of discretion as to what he is to do or as to the manner in which he is to do it. "Shall" is appropriate only when legislation specifies in detail what is to be done. In this case the clause does not specify what the standards are to be or how they are to be published. The director is given a discretion to decide that. It is only right that it is the director who will have the necessary expertise to decide on the content of the standards. In addition, he needs flexilibity to be able to adapt to the standards and to changing circumstances.

There is no doubt whatsoever that the director will make such standards and I can give the House an assurance on that. The use of "may" is simply a matter of drafting and I hope that the explanation which I have given to the noble Lord will take care of that.

As concerns the second amendment, I cannot accept the proposed change of wording. It is the director who will set the standards for the promotion of the efficient use of electricity and they will therefore necessarily be those which he believes the suppliers should meet.

The wording of the subsection accurately reflects this process. Also the second amendment attempts to make it mandatory for the suppliers to achieve the standards set. That would defeat the object of the exercise. The director will set standards which will be objectives for the suppliers. They will be high standards and as time passes they might become progressively higher. But for reasons that I shall give when I deal with the third amendment, there is no need to attempt to make the attainment of the objectives mandatory. Our approach to enforcement is, I would suggest to the House, a little more subtle and I hope more realistic.

I turn to the final amendment. I have to say that the noble Lord's proposals to set a date by which the standards must be achieved and lo apply such standards as are necessary if they are not met are simply not necessary at all. It will be, first, for the director to decide upon and to set the standards. He may well decide to set a standard for which a target date might not be appropriate. For example, he may wish to require the public electricity suppliers to ensure that all their customers receive certain guidelines about the efficient use of energy. This would clearly be an on-going process, as a supplier would be continually adding new customers to his list, and a target date for the completion of such a standard simply would not be appropriate. Of course it will be open to the director to include in his standards target dates for completion where this is appropriate. He may well do so, but to include such a proviso in the Bill could limit the director considerably in the kinds of standards he would set.

The second part of the amendment would enable the director to apply such sanctions as appear necessary if the standards are not met. However, the Bill already provides for the director to be able to take action through enforcement procedure. As I have explained, condition 17 of the draft public electricity supply licence will be expanded to require the licensee to conduct his business in the manner he considers best calculated to achieve the standards set. If he fails to do so—here we come to one of the points made by the noble Lord, Lord Shepherd—the director has clear and effective powers under the Bill to enforce the licence condition. If the director thought further action necessary, considered that there was an effect adverse to the the public interest but was unable to agree changes with the supplier concerned, he could go to the Monopolies and Mergers Commission to amend the licence using the evidence gained by his monitoring of the performance in the area. Therefore, we believe there is no need to provide for extra sanctions in the clause.

The noble Lord, Lord Shepherd, asked about revocation. Revoking the licence, as I have tried to explain, is not the first or the most appropriate sanction. As I have said, enforcement powers under the Bill can be used to make orders telling the company what to do. The second sanction is to approach the MMC and, thirdly, the courts for an injunction. Finally, the Secretary of State can, if necessary, revoke the licence.

I turn now to the speech of the noble Lord, Lord Shepherd. I say to the noble Lord, Lord Williams of Elvel, that I take the remarks that were made at the beginning of the speech most seriously. I shall draw the matter to the attention of my noble friend the Leader of the House. I understand very well the feelings of the noble Lord, Lord Shepherd. As to the substance of his remarks, I have studied most carefully the fifth report of the Energy Committee, dated 4th July, and indeed the conclusions to which the noble Lord referred. However, I must say that I think the noble Lord, Lord Shepherd, thinks he has obtained more than one-eighth of a loaf as a result of—

Lord Shepherd

My Lords, that was the noble Lord, Lord Williams, not me.

Lord Sanderson of Bowden

Yes, my Lords, I know that. But the noble Lord, Lord Shepherd, has, I think, been a little more generous than the noble Lord, Lord Williams of Elvel. He was gracious enough to say that the first of the conclusions of the Energy Committee's report had been met by the Government—that is conclusion 5a. However, we differ when we come to the last conclusion which concerns the most effective way of dealing with this matter and brings in the question, on which the noble Lord touched, of penalties.

The Energy Committee suggested that the most effective penalty was for tariff increases to be refused, especially where such increases, caused by additional supply investment, could have been avoided by investment in energy efficiency. This approach—the notion of "a least cost planning obligation—confuses two quite different sets of decisions. Decisions on the efficient use of electricity are for individual consumers to take. Decisions on the amount of electricity that will need to be generated will be for the suppliers, based on their estimates of demand, including of course their estimates of consumers' decisions on energy efficiency.

A least cost planning obligation would involve the electricity supplier or regulator deciding that a particular energy efficiency measure was preferable, because it was cheaper, to contracting for electricity supply. We believe that such a planning process takes decisions away from customers. Least cost planning puts security of supply at risk if the anticipated reductions in electricity demand do not occur.

Finally, I should mention the various initiatives being taken by the Government on the question of energy efficiency. I believe the noble Lord, Lord Hatch of Lusby, was concerned that the Government were not taking this whole matter seriously enough. It would take me too long to go into details of core warmth, the best practice programme, the new building regulations, the public sector campaign announced only last week on matters of energy efficiency, and indeed the major study proposed for domestic electrical compliances. I hope that the noble Lord, Lord Ezra, will realise that we have looked most carefully at his amendment. However, in the light of what I have said, perhaps he will consider withdrawing it.

5.45 p.m.

Lord Hatch of Lusby

My Lords, the noble Lord referred to my concern that the Government were not doing enough in the matter of energy efficiency. Did he not understand that this was the concern expressed by the Energy Committee of another place which has criticised the cutting down, and apparently the future cutting down, of the energy efficiency unit which the Government set up? It is not important whether I consider that the Government are doing enough as regards energy efficiency. The Energy Committee of another place, with a majority of Conservatives on it, stated that it did not consider the Government were doing enough. The committee specifically criticised the cutting of the energy efficiency unit.

Lord Sanderson of Bowden

My Lords, with the leave of the House, of course, I understand what the noble Lord is referring to. All I was trying to say in replying to the noble Lord was that various initiatives are taking place which place energy efficiency high up the agenda of this Government. I hope he will accept the remarks in the spirit in which they are made.

Viscount Hanworth

My Lords, the energy efficiency unit has done a great deal, but all the Government can say at the moment is that they do not need to promote energy efficiency further, and that therefore they can save something on promotion. However, the concept has only just begun to come across. How can the Government justify reducing the funds as they have done?

Lord Sanderson of Bowden

My Lords, with the leave of the House, I should say that we have discussed this matter of the energy efficiency unit on at least three occasions during the passage of the Bill through this House. The Government have tried to make very clear the importance we attach to energy efficiency. I am very happy to write to both the noble Lord, Lord Hatch of Lusby, and the noble Viscount, Lord Hanworth, giving them details of the initiatives that have been started of late by this Government in the matter.

Viscount Hanworth

My Lords, the noble Lord does not need to do that. The point still remains that much more should be spent in that direction. Unless the noble Lord has an answer to that point, I do not think that writing to me is of any consequence.

Lord Ezra

My Lords, I am indebted to the noble Lord, Lord Sanderson, for the detailed reply which he gave in respect of the amendment which I moved, and also to those noble Lords who have spoken in support of it. I shall try to be as brief as possible. Two specific issues arise in connection with the amendment that has come to us from another place. The first is that, in spite of the wording, can we be satisfied that the director will establish these standards of performance in relation to energy efficiency? We have been assured by the noble Lord, Lord Sanderson, that he will do so. The use of the word "may" is something we have reluctantly had to get used to. It does not mean that something may be done at all, but rather that the director will get on with the matter. I do not quite understand why we cannot adopt the normal usage of the English language. There appears to be some constitutional impediment to using the word "shall" when we mean shall; instead we use the word "may". As I understand it, the word "may" means will. That is what the noble Lord said. I am satisfied that everything will be duly recorded and that if the director does not prepare these standards, we can refer back to this debate.

The second issue concerns enforcement. Here I need clarification, The noble Lord, Lord Sanderson, said that in paragraph 17 of the licence there will be provision for the enforcement of these standards and that that will be specifically referred to. The standards in this clause will, as I understand it, be specifically referred to in paragraph 17 of the licence. I understand that they will be enforceable. As I understood it, the noble Lord said that there was no need to put the question of enforcement into this clause of the Bill because it is adequately covered in paragraph 17 of the licence. I have not seen the licence so I cannot tell. Is that what the noble Lord meant?

Lord Sanderson of Bowden

My Lords, with the leave of the House, that is indeed what is meant. The noble Lord will not have seen the licence because it has not yet been published. I have given the assurance that condition 17 of the draft licence will be expanded to require the licensee to conduct his business in a manner that he considers best calculated to achieve the standards set.

Lord Ezra

My Lords, does that imply that if the licensee does not do so the director can apply the various sanctions allowed for in the licence?

Lord Sanderson of Bowden

My Lords, yes.

Lord Ezra

My Lords, it seems to me that the Government have come a considerable way to meeting our requirements. I have elucidated the two points which seemed to me to be of prime importance in putting forward the amendments, namely that the director will set those standards and that he will have powers of enforcement. I should have preferred it all to have been stated clearly in the Bill. However, if it is contained within the meaning of the clause, supported by the appropriate condition of the licence, I ask your Lordships' leave to withdraw the amendment.

Amendment No. 4A, by leave, withdrawn.

[Amendments Nos. 4B and 4C not moved.)

On Question, Motion agreed to.