HL Deb 18 November 1992 vol 540 cc620-2

3 p.m.

The Lord Bishop of Chester asked Her Majesty's Government:

Whether they will act to prevent the potentially substantial number of job losses which is likely to be incurred by ICI and other companies as a result of the increases in electricity prices since privatisation.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Baroness Denton of Wakefield)

My Lords, electricity prices will no doubt be only one of the factors which ICI and other companies take into account in determining future plans. ICI has said that it is also facing significant expenditure for environmental and other reasons. Overall, average electricity prices to large industrial users have fallen in real terms during the past three years. All customers whose maximum demand is more than one megawatt can now shop around in a competitive market for their supplies at the keenest possible prices. That includes ICI.

The Lord Bishop of Chester

My Lords, I thank the Minister for that Answer. Is she aware that my request for government intervention in this matter accords with the speech made by the Chancellor of the Exchequer at the Guildhall on 29th October when he urged us to do everything to support industry? Is she further aware that, according to ICI's figures, electricity price rises since privatisation amount to 60 per cent. and therefore Runcorn's ICI chlorine plant, which uses more electricity than the City of Liverpool, will close because it cannot compete in world markets if it cannot obtain electricity at a better price than at present, and that will have a domino effect on the chlorine-related industries in Runcorn, with the loss of 4,000 jobs at first and possibly 18,000 jobs? That will cause devastation to this important area of my diocese.

Baroness Denton of Wakefield

My Lords, I am pleased to inform the right reverend Prelate that we work to the same policy as the Chancellor. It has been our policy to open up the electricity market to competition wherever possible, to expose the utilities to private sector discipline and to ensure that customers' interests are looked after by an independent regulator. I quoted ICI's statement that there were environmental and other reasons for the expenditure at sites such as Runcorn. Furthermore, prior to privatisation of the electricity supply industry ICI and other large users received favourable terms for electricity under the QICS scheme. That scheme is essentially incompatible with a competitive market.

Lord Rochester

My Lords, will the Minister give the House an undertaking that the Government will give detailed consideration to the written evidence which I understand ICI will give the DTI's coal review, including proposals for a mechanism to resolve the problems of major energy users as regards pool pricing?

Baroness Denton of Wakefield

My Lords, I am pleased to assure the noble Lord that DTI officials are engaged in dialogue with the energy intensive users' group and the major users' energy council. After collecting all the relevant information we shall be able to consider this issue in future.

Lord Skelmersdale

My Lords, is not the real problem the operation of the electricity generating pool? Why is it not possible for this particular factory to have an allocated power station from the National Grid?

Baroness Denton of Wakefield

My Lords, it is perfectly possible for companies to generate their own electricity, as indeed ICI does at Teesside.

Lord Williams of Elvel

My Lords, is it not the case that the Electricity Act gave to the regulator regulation over prices for domestic consumers and even for small business users but not for large business users? Given that ICI at Runcorn consumes approximately 1 per cent. of all the electricity transmitted at high tension in the National Grid and given that with this extraordinary price increase closure at Runcorn would cause devastation in the area, is it not the case that there should be some change in the Act to make sure that Offer has the power to regulate prices to industrial consumers? Competition is simply not working.

Baroness Denton of Wakefield

My Lords, I disagree with the noble Lord that competition is not working. Prices to industrial consumers, including some large consumers, have fallen in real terms since privatisation. Indeed, prices to industrial customers fell by about 12 per cent. in real terms between the second quarter of 1989 and the second quarter of 1992. Therefore, it cannot be said that competition is not working.

Lord Williams of Elvel

My Lords, how does the Minister respond to the report by Phillips and Drew that some £60 million has moved directly from ICI profits to the profits of the generators?

Baroness Denton of Wakefield

My Lords, as I said earlier, it is not for industries to subsidise certain other specific industries.

Lord Tordoff

My Lords, if competition is working, why is it that competitors in Germany are able to buy electricity at more favourable prices than the British chemical industry?

Baroness Denton of Wakefield

My Lords, we are aware of situations in Europe in respect of these issues. Where we have specific instances and where companies have specific interests in incidents, they can and will be referred to the Commission. The Government are committed to the development of a single energy market in Europe.

Lord Stoddart of Swindon

My Lords, if the Minister believes that one industry should not subsidise the electricity prices of another, why is it that all of industry and all domestic consumers must subsidise the nuclear electricity industry through the nuclear levy?

Baroness Denton of Wakefield

My Lords, I must disagree with that comment. The nuclear levy is imposed to cover the cost of decommissioning nuclear power stations. That levy is required whether or not stations are producing electricity.

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