Electricity Transfer Within the EC (Hansard, 18 June 1991)

§ Lord Cavendish of Furness
My Lords, a directive on electricity transit is due to be implemented by 1st July. This provides for one grid company to obtain transit of electricity across another grid to a third grid company across Community frontiers. I understand that the European Commission is currently considering options for further opening up electricity markets in the Community. My right honourable friend the Secretary of State for Energy is encouraging the Commission to bring forward proposals speedily.

Lord Campbell of Croy
My Lords, I am grateful to my noble friend for his Answer. Are there now, or will there be, restrictions caused by limited capacity of 41 interconnection across frontiers, as have existed between France and the United Kingdom and even between Scotland and England?

§ Lord Cavendish of Furness
My Lords, the transfers of electricity will be limited by the capacity of the transmission system. Between England and France the interconnector capacity is two gigawatts and between Scotland and England a nominal capacity of one gigawatt. The present interconnector is not used to full capacity at all times. Therefore, if cheap electricity is available in Europe market liberalisation will benefit our consumers. If the capacity of interconnectors proves to be insufficient, market liberalisation may stimulate the further construction of new capacity. Whether or not the new interconnectors are economic is a matter for the market to decide. The Government's role should be to ensure that there are no artificial constraints to their construction.

§ Lord Dean of Beswick
My Lords, does not the Minister agree that it would be a great irony if nuclear generated electricity were to be imported to this country from Europe, especially from France, when in fact our own nuclear energy is at present constrained by an almost total moratorium? Should we not look at our own situation before we start importing such energy and consider producing it ourselves?

§ Lord Cavendish of Furness
My Lords, the nuclear programme is under review. The results will be known in 1994. It will be in everyone's best long-term interests to have an open and transparent electricity market.

§ Lord Hailsham of Saint Marylebone
My Lords, contrary to what the last question implied, is it not a fact that we are importing and exchanging electrical power with France?

§ Lord Cavendish of Furness
Yes, my Lords, my noble and learned friend is right.

§ Lord Peston
My Lords, will the noble Lord clarify his reply that the relevant number of connectors will be determined by the market? Has he not seen in almost all the serious newspapers recently the view that our own electricity industry is insufficiently competitive? It clearly cannot be in the interests of the industry to allow in more competitors. Surely it is much more a responsibility for the Government to see that there is appropriate interconnected capacity so that the market can work. The market on its own seems to be very happy with the lack of competition. Is that not the case in our own industry?

§ Lord Cavendish of Furness
My Lords, we do seek an open market. The question of the interconnector is twofold. If there is not ample capacity at the moment, liberalisation will have the effect of guaranteeing transparency with our European partners; that will mean that British industry will be operating on a level playing field. Alternatively, if the market deemed it right then it will be in the long-term interests of everyone.

§ Lord Peston
My Lords, the noble Lord keeps saying "if the market deemed it right". The real point 42 is that cheap electricity is in the interest of the consumers of electricity. However, surely the consumers of electricity do not build interconnectors; it is the producers that build them. Obviously it is not in their interests to build interconnectors if they can shield themselves from competition without them. That is the question I am asking the noble Lord. Surely the Government should take a more positive interest in encouraging competition across, so to speak, the maximal European grid.

§ Lord Cavendish of Furness
My Lords, we are taking the initiative here and we are ahead of everyone else. In fact, we are having some difficulty with our European partners. However, we are encouraging the Commission to bring forward proposals on further opening up the electricity markets in the Community. This is in four key areas: the third party access for generators to supply large industrial consumers or regional distributors in other member states; the publication of non-discriminatory tariffs for third party access; the ability to establish generation projects in other member states; and, finally, the ability to construct transmission lines, including interconnectors, to and within other member states.

Lord Campbell of Croy
My Lords, do the British Government regard the freedom to transmit electricity between member states of the EC as part of the internal market to be achieved in 1993?

§ Lord Cavendish of Furness
My Lords, we do indeed; and the four points that I made are directed to that end.

§ Lord Williams of Elvel
My Lords, how will the pricing of French or Scottish electricity coming into the English and Welsh grid be determined? Is it not the case that up to now the French interconnectors have operated almost entirely one way—between France and the United Kingdom and not between the United Kingdom and France? That is because the base load in France is generally nuclear-produced, which gives the French a substantial price advantage. Are we prepared to say that we shall establish new interconnectors and increase the throughput of the present interconnectors on the basis of what is a marginal cost to the French?

§ Lord Cavendish of Furness
My Lords, I am not entirely clear how the French calculate their prices. It is a fact that the consumer in France is not able to distinguish between the transmission prices and the generation prices. We seek an open and transparent market where these facts will be known and the true prices revealed.