Gas Bill

HL Deb 22 June 1995 vol 565 cc491-520

8.47 p.m.

House again in Committee.

Clause 6 [Licensing of gas suppliers and gas shippers]:

[Amendments Nos. 28 and 29 not moved.]

Lord Haskel moved Amendment No. 30:

Page 8, line 1, at beginning insert: ("() A licence shall not be granted under this section to a person until they have in place a 24 hour staffed emergency public telephone number for reporting and logging emergency calls from members of the public or the emergency services, on gas escapes and other emergencies agreed with Health and Safety Executive.").

The noble Lord said: In moving this amendment I shall speak also to Amendment No. 31. These amendments deal with the safety of the general public. Although I understand that the safety regulations appear on the licence, we wish to ensure, by debating these amendments, that the proper safety of the general public is maintained. Even if the transporter is responsible for all gas escapes and emergencies, regardless of where the customer buys the gas, the public may still be confused and possibly phone the wrong number. It is no good the customer being told to ring another number or, even worse, get an answerphone.

Suppliers and shippers must take responsibility for dealing with the call, logging the time and recording what action they took. They must also take responsibility for passing on the information to the transporter; otherwise a number of emergency calls may go missing or be lost in the system. I imagine that this can be properly handled in large companies, but what about small suppliers such as housing associations which may not have adequate safety resources? I beg to move.

Lord Skelmersdale

About a year ago I made inquiries on exactly this subject. It was just as pertinent then as it will become under this legislation. I discovered that now, by statutory instrument, there has to be a telephone number attached to each gas meter. Obviously, the gas meter is the place where, in an emergency, the average gas consumer will go to find such a telephone number. Clearly, under the new regime, the number on the gas meter will be that of TransCo which, as the noble Lord explained, is responsible for dealing with gas escapes and emergencies. I am told that that will cover the situation, but I hope that my noble friend on the Front Bench will be able to confirm what I have said.

Lord Ezra

The noble Lord, Lord Haskel, has raised an important issue, the question of safety. We cannot sufficiently emphasise how important that is. The fact that TransCo has that responsibility is satisfactory in the sense that it will inherit from British Gas the ultimate responsibility. Unfortunately, the market is now to be fragmented and people will become confused about whom they should get in touch with in an emergency. The obvious person is the supplier. It seems right that we should have both belt and braces in this situation and that the supplier should make arrangements to have the telephone manned permanently, immediately transmitting to TransCo or dealing with the matter in whatever way may be satisfactory in order to minimise any safety problems.

Lord Cochrane of Cults

I agree entirely with the noble Lord, Lord Ezra, who has very adequately set out the situation. I should like to establish that the smaller suppliers are not required themselves to have a man sitting at the end of the telephone but that they can contract that task to a reputable firm such as Air Call, or something similar, which operates a nationwide emergency call-out service for a variety of purposes, including doctors. That should be perfectly sufficient. Indeed, that situation appears acceptable—at least at present—in relation to exempt suppliers. A great deal of confusion was caused earlier by suggestions of Ofgas that telephone systems had to be operated individually by each supplier, no matter how small. If my noble friend can assure us that independent and fragmented suppliers may use a contractor to carry out the necessary reception and transmission of calls, I am sure that we shall be able to make progress.

Lord Inglewood

As my noble friend Lord Ferrers said earlier, safety is paramount in these matters. As Members of the Committee may know, we asked the Health and Safety Commission to look at the safety implications of the liberalisation of the gas supply market and we have accepted the recommendations of its report.

The Health and Safety Commission concluded that there should continue to be a single contact point for reporting suspected gas leaks and that it should be the responsibility of pipeline operators to provide the emergency response. We understand that British Gas is putting in place a single 0800 freephone telephone number. This is provided for in the draft of the standard conditions of the transporter's licence—Condition 13—which requires transporters jointly to arrange for the maintenance of a single continuously attended telephone service for the receipt of reports of escapes of gas. They are also required to secure adequate publicity for the service and its telephone number. I hope that that answers some of the concerns.

I believe that it is preferable for there to be one party responsible for receiving reports of gas leaks and arranging for them to be dealt with rather than requiring each and every supplier and shipper to have their own procedures in place. That would lead to a multiplicity of telephone numbers and services which would only serve to confuse the customer with potentially dangerous results.

If someone concerned about a possible gas leak rings the wrong telephone number, the person on the receiving end of that call will have absolutely no doubt about what number to give out. Therefore, not only is simple confusion avoided, but what might be described as "compound confusion" is also avoided.

We understand that the Health and Safety Commission will shortly be consulted on new safety regulations for gas. These will in due course supersede the provisions in the Bill. The duties in respect of emergencies will be further considered at that stage. I hope that the noble Lord, Lord Haskel, will find those comments a helpful explanation of the position.

Lord Haskel

I thank the noble Lord for that reassuring response. Obviously, it is preferable for there to be only one number; otherwise there will be confusion. When the new regulations are prepared, can they be publicised in some way so that we all know about them? We have aired our concerns and have had some reassurance from the Minister and, in view of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 31 not moved.]

Lord Inglewood moved Amendment No. 32:

Page 8, leave out lines 6 to 12 and insert: ("(b) in the case of a licence under subsection (1) (b) above, as if it were also a licence under subsection (1) (a) above and any premises specified in the direction were specified in the licence, and references in this Part to, or to the grant of, an extension under this section, or an extension of such a licence, shall be construed as references to, or to the giving of, such a direction. () The Director may, with the consent of the licence holder, direct that any licence under this section shall have effect as if any premises specified in the direction were not specified in the licence; and references in this Part to, or to the grant of, a restriction under this section, or a restriction of such a licence, shall be construed as references to, or to the giving of, such a direction.").

The noble Lord said: This is a technical amendment enabling the director to respond to the wishes of those who are already licensed to supply the commercial and industrial market and subsequently wish to supply the domestic market as well. It enables her to extend a non-domestic licence so that it becomes a domestic one.

There is no need for such licence holders to obtain a second separate licence in order to supply the domestic gas market as their supply licences will contain the standard conditions which include the provisions necessary for the domestic market.

The same statutory provisions govern applications for licence extensions as those which apply to the grant of new licences. The director will still need to be sure that the extension of the licence does not appear artificially to exclude an undue proportion of elderly or disabled customers. I beg to move.

Lord Peston

I should like to make just one blanket point. A number of government amendments have been tabled which all seem to he technical in nature. I received the Notes on Clauses for those amendments only a couple of hours ago and I have to confess that I have written a question mark by each, meaning that I do not understand. If the noble Lord, Lord Inglewood, agrees, I should prefer not to have to speak to each technical government amendment. I say that with one proviso. If in due course I discover that they are not technical, I trust that the Government will not object if I find a means of at least exploring them. I do not expect that to be the case, but it would help the passage of business at this time if the noble Lord could comment on that suggestion.

Lord Inglewood

I am grateful to the noble Lord, Lord Peston. That seems an entirely acceptable way of proceeding. I am sure that he will not find any problems.

On Question, amendment agreed to.

Lord Peston moved Amendment No. 33:

Page 8, line 25, leave out ("an undue proportion of").

The noble Lord said: We now have a number of amendments which my noble friend Lady David and I have tabled on various matters relating to means-tested benefits. The first time this provision was raised by my noble friend Lady David, the noble Lord, Lord Boyd-Carpenter, and others intervened and the noble Lord, Lord Inglewood, said that he was still convinced that the Government were correct. He also said that he thought that the amendment was worth looking at in case the Government had missed anything.

I do not think that noble Lords would like me to repeat on amendment after amendment exactly the same arguments put so cogently by my noble friend and others. I wonder whether the noble Lord, Lord Inglewood, is willing to agree to this suggestion with, I emphasise, no commitment. I am not necessarily convinced that he will change his mind, but as we have made the point already I honestly do not believe that anything is achieved by going over the same ground time and again. Therefore, perhaps the noble Lord will undertake to consider the situation as a whole. Perhaps I may pause there to see whether the noble Lord will agree to that, but I then have an extra and different word or two to say about the amendment.

9 p.m.

Lord Inglewood

I am grateful to the noble Lord, Lord Peston, for his remarks. They appear to be entirely consistent with the approach that we discussed in respect of an earlier clause. I am very happy to proceed on the basis that we will reflect again on the points that have been made. Obviously, we cannot give any commitment but we will reflect upon them. On that basis, I am delighted to acquiesce in the suggestion.

Lord Peston

I thank the noble Lord. I deal now with the more substantive point: Amendment No. 33. The amendment is to leave out the words, "an undue proportion or. I am convinced that that is right. Essentially, the Government say that one should not distort the description or area so as to exclude, or include, people on the grounds that it contains those who are disabled or are of pensionable age. The matter of principle involved here is that one should not do it. The words "undue proportion" are neither here nor there. I do not say that it may not turn out that way, but that should not be the intention. I do not believe that the Government should insist on retaining an undue proportion of premises. I do not wish to use the wrong metaphor, but to sin a little is not, in my judgment, much better than to sin a lot. It is wrong to sin. I would have thought that all noble Lords would say that these companies should not be able to take into account the number of disabled or people of pensionable age. They just should not do it. I am puzzled as to why the Government believe it is all right for companies to misbehave a little but not if they misbehave a lot. I believe that the Government should say that that will not do.

Lord Skelmersdale

I believe that the noble Lord, Lord Peston, has misunderstood this part of the Bill. As I understand it, the director has a duty to make certain that a level playing field—to use a horrible expression—exists in these particular circumstances. I do not believe that the noble Lord should have a problem. It is not the companies who exert undue influence; it is the director who has to ensure that they do not.

Lord Peston

I am afraid that the noble Lord is wrong. This is concerned with the director considering the description of the area. I take that to mean the description of the area as formulated by the companies. If the director does so, I believe that it is even more wrong. It would be an outrage if the director bore in mind these matters in taking a decision. After all, the director is still a public servant. I freely admit that I may be wrong, but I understand that this is concerned with the director taking decisions about what companies propose to do.

Lord Skelmersdale

One makes an application for a licence and the director has the duty to decide whether or not to grant it. In formulating that decision he or she will take cognisance of these words in the Bill. However, to be safer, I give way to my noble friend.

Lord Cochrane of Cults

This matter presents a further problem. The words proposed in the amendment and in the Bill tend to provide a snapshot view of the area to which gas is to be supplied. We are not considering the supply of gas for just a day but for a number of years. Demographic shift may come into it. An area may go down hill or it may become gentrified (to use a ghastly word). In any event, its character may change. Does that then bring down the wrath of the director in order to reduce in one case or increase in another the proportion of customers who fall within that area?

Lord Inglewood

It is important to be clear that, in exercising her duties, the director is obliged to comply with the matters described in Clause 1 of the Bill: the general duties of the Secretary of State and director. Any decisions that the director may take in any particular circumstances have to be set against that backdrop. We are trying not to regulate the profile of licence areas down to the last consumer. Some variations nationally are to be expected. We reject the suggestion that all suppliers should be required to develop an identical portfolio of customers. It would be absurd to set supply companies quotas for certain numbers of different customers.

Reference has been made to the words "undue proportion", which appear in the amendment. It appears to me that the best way to see how the test works is to return to the underlying duties of the director. The words "undue proportion" may be described as the label that the director will use to identify whether or not there is any sin, to use the words of the noble Lord, Lord Peston. Clearly, there will be some people in these particular categories in every area. We are concerned with a situation where the matter gets out of kilter. To draw the description too tightly may make it very difficult for the director to grant licences, particularly if competitors threaten judicial review. We believe that "undue" gives a margin before she is required to reject an application. It is a form of words that is intended to be helpful to the director to enable the director in the circumstances of any particular case—every case will have different characteristics—to come to a proper conclusion on the facts.

Lord Peston

I always worry when I appear to be the only one who believes he is in step and that no one else understands the particular part of the Bill. My point is precisely what the noble Lord has said. Companies should not take account of the number of people who are disabled or of pensionable age in determining the area. Whether it is a lot or a few, they should not be allowed to take that into account. As I understand it, that is the nature of the Bill. Equally, the director should not be able to say to the companies that they do not have enough people in those areas. The companies may say that they have not framed it in that way but in a way that is convenient to them. It may also happen that those areas do not contain a lot of old people or the particular one does. My point is that that has nothing to do with it. That is the spirit of the Bill, and that is why "undue proportion" is wrong.

If "undue proportion" was right, they could say that they had looked at the number of old people and had decided that it was not an undue proportion; in other words, that they had borne it in mind and had decided to discriminate against old people, but they were not discriminating very much. I believe that that would be outrageous. However, that is the only way in which this particular part of the Bill can be read. In another context, I would say that both the companies and the director should be colour blind, to use that racist expression, or age blind and disabled blind. However, "undue proportion" would enable them to take it into account as long as it was not too much. I cannot believe that that is what the Government want or that they wish to go for that form of words. I beg to move.

Lord Inglewood

I am grateful to the noble Lord for explaining his concerns. I am sure that there is nothing between us in what we are trying to do. In these circumstances, we are endeavouring to ensure that in any particular instance a licence holder does not discriminate against those classes of people. We are talking about classes of people who will inevitably be dispersed and scattered throughout the community.

We do not want the applicant deliberately to frame his applications to, as it were, abandon them. Bearing in mind that wherever one looks in society some people fall into those categories, it is important to give some kind of indication and test to the director so that in looking at the matter against the backdrop of her general responsibilities she knows how to look at the way in which the applications may be drawn up to ensure that discrimination does not occur. We are concerned to avoid discrimination.

Lord Peston

I shall give up at this point. The noble Lord makes the correct point: we are concerned that there should be no discrimination. The Bill says, "Yes, there can be some as long as it is not unduly large", which is what "undue proportion" means. That is what I am trying to get over to the noble Lord. The Bill ought to say that there should be no discrimination. That is what he has just said. That is what my amendment does.

Perhaps we are becoming tired. That often happens at about this hour. If it would help the noble Lord, perhaps he would like to think about what I have said. I shall certainly reflect upon what he has said, and we will come back to it. I am genuinely puzzled, because since what he said is what I believe, what I do not seem to be able to persuade him of is that the Bill does not say what he says. Having said that, I think the best thing is to beg leave to withdraw the amendment now, and we shall come back to it.

Amendment, by leave, withdrawn.

[Amendments Nos. 34 and 35 not moved.]

Lord Inglewood moved Amendment No. 36:

Page 8, line 27, at end insert: ("(6A) If the holder of a licence under subsection (1) above applies to the Director for a restriction of the licence, or for the revocation of the licence in accordance with any term contained in it, the Director shall, subject to subsection (6) above, accede to the application if he is satisfied that such arrangements have been made as—

1. (a) will secure continuity of supply for all relevant consumers; and
2. (b) in the case of each such consumer who is supplied with gas in pursuance of a contract, will secure such continuity on the same terms as nearly as may be as the terms of the contract.

(6B) A person is a relevant consumer for the purposes of subsection (6A) above if—

1. (a) immediately before the restriction or revocation takes effect, he is being supplied with gas by the holder of the licence; and
2. (b) in the case of a restriction, his premises are excluded from the licence by the restriction.").

The noble Lord said: It is important to ensure that a gas supplier is free to withdraw from the gas supply market if he wants to. The lack of a clear right to do that would be likely to deter potential new entrants to the market and inhibit the development of competition. However, it is obviously important that suppliers should not withdraw simply by cutting off their customers, leaving them without gas while they tried to find a new supplier.

The amendment therefore provides that the director should not be required to revoke or restrict a supplier's licence until the supplier has made arrangements to ensure that the customer continues to receive a supply of gas, in the case of a contractual customer, on the terms set out in his contract.

The right to withdraw from a part of the market is subject to the provisions forbidding restrictions which artificially include an undue proportion of vulnerable customers. I beg to move.

On Question, amendment agreed to.

Lord Inglewood moved Amendment No. 37:

Page 8, line 38, leave out from ("no") to ("before") in line 39 and insert ("domestic supply licence shall authorise the supply of gas to any premises").

The noble Lord said: In moving Amendment No. 37, it may be for the convenience of the Committee if I speak also to Amendments Nos. 39, 40 and 41.

The amendments provide for certain cases where parties other than British Gas should be able to obtain a licence to supply gas outside the pilot areas during the transitional phase to full national competition. Some companies other than British Gas are already supplying gas to domestic consumers in special cases, normally where they use their own pipeline systems. It would he quite wrong if, on the way to full competition, such companies were prevented from continuing that activity.

These amendments are therefore intended to ensure that, while there is to be no direct competition between gas suppliers for domestic customers outside the pilot phases, it will be possible for suppliers other than British Gas to continue to supply gas to domestic customers in special cases before full nationwide competition is introduced. I beg to move.

On Question, amendment agreed to.

Lord Haskel moved Amendment No. 38:

Page 8, line 42, at end insert: ("(2A) In the period before the relevant date the Director shall—

1. (a) monitor the effect of the granting of a licence under subsections (3) to (5) below on such persons as in his opinion are appropriate; and
2. (b) consult such persons and organisations as appear to him to represent the interests of persons affected by the granting of a licence under those subsections, and such other persons as he considers appropriate, on the effects of granting such a licence.

(2B) No licence shall be granted under section 7A(1) (a) of the 1986 Act (other than by virtue of subsections (3) to (5) below) until the Secretary of State has laid a report before both Houses of Parliament indicating—

1. (a) the results of the monitoring and responses to the consultation referred to in subsection (2A) above;
2. (b) the effect, in his opinion and in the opinion of the Director, of the granting of licences under subsections (3) to (5) below and Schedule 5 to this Act in the period before the relevant date; and
3. (c) the reasons why, in his opinion, it is in the interests of all persons affected that licences under section 7A(I) (a) of the 1986 Act should be granted.").

The noble Lord said: The purpose of the amendment is to implement the Trade and Industry Select Committee's recommendations outlined in its recent report the Domestic Gas Market to consider the impact of competition in the pilot areas. The amendment is similar to Amendment No. 25. I do not wish to go over all the arguments and discussions that we had then. The Minister said that he would go away, think about it, and come back later.

The amendment requires the regulator to monitor the effect of competition in the pilot areas on those affected and to consult them and others, as appropriate. I beg to move.

9.15 p.m.

Earl Ferrers

We have always accepted that competition should be introduced in a phased manner. It has taken root successfully in the industrial sector, and we recognise that the domestic market requires a phased approach, not least because of the number of premises involved.

The gradual transition to national competition will provide an opportunity to test the necessary technical and administrative systems for the balancing of gas and the transfer of customers. It will allow British Gas TransCo and competing gas suppliers to iron out any problems with their systems while they are operating on a relatively small scale.

We must be clear that the pilot is not intended to test the principle of whether competition will go ahead. Such an approach would cast a cloud of uncertainty over the industry—both onshore and in the North Sea—which would be in nobody's interest and which might well mean that suppliers did not make the investment needed for competition to be a success. It would be wrong to try to re-open, through the back door, the principle of a competitive gas market.

However, although the pilot is largely about getting systems right, that is not its sole purpose. Clearly, the director will wish to consider carefully how things go, taking particular note of the results from the Gas Consumers' Council and other groups with comparable expertise. If that monitoring showed that licence conditions were not having the desired effect the director could make proposals to change them. We also recognise that there needs to be adequate information on the development of competition. This will be the case in the pilot phase and beyond.

That is why, when we discussed Amendment No. 25, I said that we would be prepared to bring forward an amendment to Section 39 of the Gas Act, which would provide for the director, in her annual report, to report not just on her activities but also on the state of competition in the gas supply market in general. That report will, of course, be laid before Parliament. We believe that this will provide a proper basis for reporting by the director on competition, both in the limited pilot phase—as Amendment No. 38 suggests—and also for many years to come.

Lord Haskel

I thank the Minister for that response and for the confirmation that a report will be made on the state of competition. With that in mind, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Inglewood moved Amendments Nos. 39, 40 and 41:

Page 8, line 43, leave out from ("to") to ("premises") in line 2 on page 9 and insert ("a domestic supply licence in so far as it relates to—

1. (a) any premises to which subsection (3A) below applies; or
2. (b) any premises to which that subsection has ceased to apply at any time and which are situated in an area which has not, at that or any later time, ceased to be an authorised area of a particular public gas transporter.

(3A) This subsection applies to any premises at any time if, at that time, the public gas transporter in whose authorised area the premises are situated is an associate of the holder of the domestic supply licence in question. (4) Subsection (2) above shall not apply in relation to a domestic supply licence in so far as it relates to any premises to which gas is conveyed in pursuance of an exemption from section 5(1) (a) of the 1986 Act granted under section 6A of that Act. (5) In so far as a domestic supply licence relates to").

Page 9, line 7, leave out from ("in") to ("includes") in line 8 and insert ("this section to a domestic supply licence").

Page 9, line 10, leave out from ("In") to ("if") in line 14 and insert ("this section— domestic supply licence" means a licence granted under subsection (1) (a) of section 7A of the 1986 Act, a licence having effect as such a licence by virtue of a direction given under subsection (4) (b) of that section, or a licence treated as so granted by virtue of a scheme made under paragraph 4 or 12 of Schedule 5 to this Act; public gas transporter", and "authorised area" in relation to such a transporter, have the same meanings as in Part I of that Act. () For the purposes of this section a public gas transporter is an associate of the holder of a domestic supply licence").

The noble Lord said: I have already spoken to these amendments. I beg to move.

On Question, amendments agreed to. Clause 6, as amended, agreed to.

Clause 7 [Licences: general]:

[Amendments Nos. 42 and 43 not moved.]

Lord Peston had given notice of his intention to move Amendments Nos. 44, 45 and 46:

Page 10, line 3, after ("services") insert (", including those services that must be delivered by home advisers,").

Page 10, line 5, after ("age") insert ("or in receipt of one or more of the means-tested benefits").

Page 10, line 21, at end insert: ("() conditions requiring arrangements to be made to avoid disconnection from supply and the build-up of arrears and to make available payment methods which take the circumstances of customers into account; () conditions requiring gas suppliers to offer energy efficiency services in addition to the supply of gas;").

The noble Lord said: I had hoped that the noble Lord, Lord Inglewood, would include these amendments in the group that he is to look at under the heading of people on means-tested benefit. At this stage I do not propose to debate them further.

[Amendments Nos. 44, 45 and 46 not moved.]

[Amendments Nos. 47 and 48 not moved.]

Lord Inglewood moved Amendment No. 49:

Page 10, line 39, after ("licence") insert (", or under any document specified or described in the licence,").

The noble Lord said: I shall speak also to Amendment No. 51. These amendments are necessary to enable the licences to provide for the director to determine questions arising under the network code and the rules governing modifications to that code.

It has become clear from discussions between British Gas and gas shippers on the development of the code that they would like to be able to refer certain questions to the director general where they cannot agree. I beg to move.

On Question, amendment agreed to.

Lord Peston moved Amendment No. 50:

Page 10, line 51, at end insert: ("() Where—

1. (i) the holder of a licence under section 7 above who in consequence of conditions included in that licence by paragraph (b) above is required to make a payment in accordance with sub-paragraph (ii) of that paragraph; or
2. (ii) the holder of a licence under section 7A above who seeks a payment from the holder of a licence under section 7 above who in consequence of conditions included in that licence by paragraph (b) above may be required to make a payment in accordance with sub-paragraph (ii) of that paragraph but who is refused such a payment—

such holder may appeal to the Secretary of State against the requirement or refusal to make such a payment as the case may be and the Secretary of State shall have the power, having regard to all the circumstances, to set aside that requirement or require the making of such a payment as he thinks fit.".).

The noble Lord said: Amendment No. 50 was grouped with Amendment No. 52. However, I understand that the noble Earl, Lord Caithness, wishes to separate them, although both deal with the levy. The concept of the levy is important and needs to be supported. It is an interesting example of regulating an otherwise competitive market and goes back to my earlier point about undue proportion. There will be consumers who are particularly expensive to provide with gas but they will need the services. That will be agreed. The question is: will whoever gets stuck with supplying them receive a levy to enable the cost more easily to be met?

I know that the Gas Consumers' Council was in favour of the levy I am not certain what the potential competitors' views are on the matter. According to a document that I received from British Gas, it is interested in the matter but it has mixed feelings about some aspects of it. I can well understand that.

My amendment deals with a rather technical matter. What happens if the regulator decides not to levy the levy? I seem to be running into great problems of exposition with those words. They sound awful. However, I hate to use expressions like "activate the levy". I hear the Minister suggest that I should say, "raise the levy". I think that is right. If the regulator decides not to raise the levy, according to my understanding of the Bill, I believe that that would be the end of the matter.

The purpose of my amendment is to provide that the Secretary of State would be in a position to make the director reconsider. Equally, the amendment as drafted allows the Secretary of State to reverse that and say, where a levy has been raised, that he does not think that it is appropriate. We are in very deep water here because the Government have certainly gone to some trouble to try to keep the Secretary of State in other areas out of matters which should not concern him. I am in favour of that. But, equally, the Secretary of State has been given very considerable powers and here we have an area where I think noble Lords on the Government Benches should at least reflect on whether, in the case of a levy, it can just be left to the director to decide the matter.

Therefore, the purpose of my amendment is essentially to say that, if accepted, the amendment would put the Secretary of State in a position which I do not believe is dictatorial; indeed, it is very much a backstop position with respect to the levy. However, it is one that would be useful. I beg to move.

Lord Inglewood

I am most grateful to the noble Lord, Lord Peston, for explaining the position. It is, indeed, a complicated matter. I hope that I may be helpful to the Committee in my response. I hope that noble Lords have been able to consider the revised version of the draft standard conditions of the gas suppliers' licence, which was placed in the Library on Tuesday 20th June. Standard Condition 6, which was numbered 6A on the last round, has been revised in the light of further consideration and of the detailed consultation that we have carried out.

Condition 6 sets out in detail the procedures to be followed by a gas supplier to claim for a "special customer payment". Condition 7 of the public gas transporters' licence sets out the obligations on the transporter if a claim is duly made. It should be noted that it is the companies concerned that initiate the "levy" procedure, not the Secretary of State or the director. That is an important protection for the companies concerned.

The procedures include provisions for both the Secretary of State and the director to consult the applicant and other interested parties following an application, and to consider their representations. They provide a timetable after which, if the Secretary of State and director simply do nothing, the claim is deemed to have been approved.

The supplier, therefore, has every opportunity to make his case both to the Secretary of State and to the director before a decision is made. The director is required to review claims against carefully set out criteria, and the Secretary of State then has a power to veto the claim.

The Secretary of State, therefore, already has an opportunity to form a view on a claim for payment. I do not believe it to be necessary to add the further level of scrutiny or appeal, given that the licence already sets out detailed criteria for the director's consideration. I hope that the noble Lord, Lord Peston, will find my response reassuring.

Lord Peston

I thank the noble Lord, Lord Inglewood, for his reply. I should, again, apologise to the Committee because, although I picked up a copy of the draft standard conditions of the gas suppliers' licence yesterday, I would be misleading noble Lords if I tried to pretend that I mastered it in any form whatever. My immediate response to trying to look at it at all was one of being totally appalled.

I take it that the Minister is saying that my amendment is actually covered in the licences to the degree that he feels that I ought to be happy. For the moment, I am willing to accept that view. However, I have to warn the Minister that, being me, I am quite likely to read the document in some detail and come back saying, "My judgment is that the draft licence does not say what the noble Lord said". For the moment, all I understand is what the Minister ,J1d me and I find that to be excellent. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Inglewood moved Amendment No. 51:

Page I1, line 6, leave out ("specified document") and insert ("document specified or described in the licence").

The noble Lord said: I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 52:

Page 11, line 20, at end insert:

("(8A) Where—

1. (a) the holder of a licence under section 7A(1) (a) has supplied an undue proportion of premises owned or occupied by persons who are disabled or of pensionable age, or who have defaulted in the payment of charges;
2. (b) the conditions included in that licence make provision for the holder to apply for payments to be made to him by virtue of section 7B(5) (b) (ii) above; and
3. (c) that holder of that licence ("the claimant supplier") applies for such payments to be made;

the Director shall, as soon as practicable after an application has been made, require such public gas transporter as he considers appropriate so to raise its charges for the conveyance of gas as to provide the amount described in subsection (8B) below and to pay that amount to the claimant supplier.

(8B) The amount referred to in subsection (8A) above is the amount which is requisite to secure that the ability of the claimant supplier to finance the carrying on of the activities which he is authorised or required by his licence to carry on is not adversely affected by reason of his supplying premises of the nature described in subsection (8A) (a) above or such lesser amount as would be required by an efficient supplier of those premises for that purpose.").

The noble Earl said: The levy concept in the Bill is designed to ensure that suppliers who concentrate only on supplying the most profitable customers are required to contribute to the cost of supplying more vulnerable groups. High cost groups include older and disabled customers and those who have genuine difficulty in paying their bills. Indeed, my noble friend Lord Inglewood recognised this and the requirements of these groups when he replied to Amendment No. 19 earlier this afternoon.

These groups often require special services that at the moment are provided free of charge. I believe it would be clearly wrong for these special services to be unavailable. The director of Ofgas has already said that all consumers will have the choice of gas in 1998. I think that is right in theory but wrong in practice. For instance, if a company was to apply for a licence for, say, North London, it would fulfil many of the criteria that we have been discussing but the choice for the elderly could be severely restricted and thus it would he quite wrong for one company alone to have to shoulder the burden of supplying the elderly and those who have difficulty in paying their bills while other companies market those more fortunate around them.

The concept of the levy bridges this gap by spreading these costs across all suppliers. I would prefer it if selected marketing did not occur and the levy was not needed, but I do not think that is a practical proposition. I fear that the levy will be needed and my concern is that the Bill as it stands does not make the situation as clear as it should be. It leaves too much to the uncertainty of the behaviour of the regulator. For example, the director general of Ofgas is given discretion to determine what level of excess costs should be regarded as having materially affected a licensee's business and therefore whether a levy should be granted at all. In a competitive market, as we have seen in the industrial sector recently, suppliers' margins may be quite small and this needs to be properly considered. We should also bear in mind when considering the issue that the current regulator has already shown unwillingness to raise an energy efficiency levy for which she feels there was insufficient statutory backing.

The amendment has three objectives. The first is to set out clearly the relevant circumstances where the levy provision should apply inclusion in the statute and also takes the levy outside the regulator's discretion to change the standard licence conditions. Secondly, it would ensure a reasonably prompt reaction on the part of the director general of Ofgas to any request that the levy should be implemented; and, thirdly, it would provide some discretion for the director general as to the amount, and it would make absolutely clear that this provision is not intended as a protection for the inefficient supplier.

If there was less uncertainty about the implementation of the levy, there would indeed be some great benefits. Above all, it would increase the likelihood that customers who need special services would enjoy a choice of supplier. In doing so it would contribute enormously to securing the very choice about which my noble friend Lord Ferrers waxed lyrical on Amendment No. 3. After all, the major deterrent for new gas companies offering to supply these customers is the extra cost of doing so coupled with the uncertainty as to whether these costs could be recovered through the levy mechanism. If we remove this uncertainty, as my amendment seeks to do, we make high cost customers considerably more attractive to serve. I believe that is part of what the Bill seeks to do. I beg to move.

9.30 p.m.

Lord Peston

I support the amendment. The noble Earl put very clearly the case in relation to the levy. It also enables me again to underline my view on this "undue proportion" matter. It seems to me that a firm with a given area might say, "I should like to have a go at competing in this area of the country. I think I can make a go of it and I think that I can make some money". Someone then comes along and says, "Well, you know that there are quite a lot of old people in that area". I want the firm to be able to say that it will not take its decision on a discriminatory basis but that it wants to be a gas supplier which supplies gas on all-fours. But if it turns out that that firm has committed itself to undue cost, since it is providing a public service within the definition of the Bill, it deserves some recompense. That is the concept of the levy.

I like in particular the noble Earl's point about removing uncertainty. Of course any degree of competition involves taking risks. We cannot get rid of risks. It may be that the Minister will tell me that I must look at this peculiar yellow document which contains the licensing conditions and that I do not have to worry. If that is so, all well and good. But it seems to me that the noble Earl is right to say that we want firms to be disabled and pension blind. We want them to compete but we do not want them to end up bankrupt because they have done the right thing when others, in a way, have not. That is why one must be supportive of that line of thought.

Lord Inglewood

This is obviously an important point and it is very much on the same subject matter as the penultimate amendment that we discussed. I am most grateful to my noble friend Lord Caithness for setting out his case at length.

I suspect that I shall not disappoint the noble Lord, Lord Peston, because I must tell him that it is important to look at the yellow document and at Condition 6 which deals with special customer payment claims. That document stretches to five pages and covers many of the points which are germane to this matter. The amendment sets out criteria which the director must use in considering whether a levy should be raised; removes the Secretary of State's veto; and requires a decision as soon as practicable alter an application has been made. We have considered very carefully representations that have been made to us about the criteria and timescale for the director's decision on such a levy under Standard Condition 6.

The purpose of having an economic regulator is precisely to ensure that these sorts of decisions are taken by an independent person with expert knowledge of the industry, and are not subject to political intervention. Condition 6 sets out a clear set of criteria and it will be up to the director to exercise her role in the levy payment arrangements in the light of those criteria and of her statutory duties.

The revised draft condition contains a clear timetable for the decision and detailed criteria to be applied. We believe that these form a more appropriate balance than the necessarily abbreviated description in the amendment. We also consider that the Secretary of State's veto should be retained, as a levy has a clear political component.

I hope that my explanation will have assisted my noble friend, in particular by drawing attention to the new draft conditions, because they go a long way towards meeting many of his anxieties.

The Earl of Caithness

I am grateful for the support of the noble Lord, Lord Peston, and I am grateful also for my noble friend's reply. Like the noble Lord, Lord Peston, I shall have more time to read these documents in the future than I have had in the past 24 hours. I must get used to that, having been very spoilt for 10 years being served with lots of briefs at the right time. It is much more difficult trying to do it all oneself.

The simple point which I hope that my noble friend has taken on board is that we want there to be not only competition among gas suppliers but competition for every single group of people within the area where licences are granted. That is extremely important.

My noble friend Lord Skelmersdale said that he has been inundated already. That does not surprise me because nothing has happened yet. When independent gas suppliers start to look at areas throughout the country, it would be easy to say that, although they have a licence for that area, they will not target the elderly or those who find it difficult to pay. As my noble friend Lord Ferrers would love it to be called, they will cherry pick the good ones and one company will be left under a duty to supply the elderly and those most disadvantaged. That company will then have to absorb the extra costs and the costs of the free service. That is not equal and fair competition. That is the point. I hope that it is covered to my satisfaction in the documents to which my noble friend referred. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7, as amended, agreed to.

Clause 8 [Standard conditions of licences]:

The Earl of Caithness moved Amendment No. 53:

Page 12, line 30, leave out from beginning to ("unless")

The noble Earl said: In moving Amendment No. 53, I speak also to Amendments Nos. 116 and 118.

We move to the standard conditions that will be applied. I believe that standard conditions should apply to all types of licence holders. In fact, standard conditions apply to gas shippers and gas suppliers, but they do not apply to, and are excluded under the Bill, as regards gas transporters. That seems to be an anomaly. I wonder why that is so. Perhaps my noble friend will explain. I beg to move.

Lord Inglewood

I am pleased to have the opportunity to explain the position to my noble friend. I thank him for proposing the amendment.

The competitive position for a public gas transporter under the new regulation framework is not comparable to that of a gas supplier or gas shipper. A gas supplier, or a gas shipper, will be in equal competition for the same customers with other gas suppliers, or gas shippers. That is the point of introducing competition and we want to ensure, by restricting the director's ability to modify licence conditions in ways which might offer unfair competitive advantage to some players, that such competition takes place on an equal basis.

A public gas transporter, however, will have a monopoly on gas conveyance in his own authorised area. Not only that, but British Gas TransCo will undertake the great majority of gas transportation for the foreseeable future. There is no question of TransCo being equal to other public gas transporters, and there will be numerous special conditions applicable to it.

There will be direct competition between public gas transporters in the creation of new pipeline networks and the conveyance of gas through them. Here, both the director and the Secretary of State are under a duty to secure effective competition under their general duties.

The director will be required to bear this general duty in mind when considering modification to a public gas transporter licence.

I hope that my noble friend will now feel that he understands the position underlying the clauses.

The Earl of Caithness

I am grateful for my noble friend's explanation; it certainly helps. However, I believe that we still have a problem. Of course the position of the gas transporter is different from that of the suppliers and producers by the very nature of the pipe system at present. However, competition will increasingly be developed in that area as more people wish to put in their own pipelines as extensions from the existing TransCo system. There is, indeed, a system at Swindon at present. As more such systems develop, there needs to be a degree of certainty in the minds of the existing pipeline company, TransCo, and those who wish to come into the market, that they will all be treated equally.

I come back to the same point regarding equal competition. There needs to be security of supply and equal treatment of the shippers who use that pipeline.

We do not want conditions relaxed, so that a developer asks for tenders for a supply to a new housing development, takes the cheapest supply from a new competitor in the market, and finds that the size of the pipe does not produce enough gas to keep everyone warm and all the systems working in the first sharp cold winter that we have. Those are the kinds of conditions which could be relaxed. That is the point that I am driving at. When I read the Official Report tomorrow, I hope that what my noble friend says will reassure me. Perhaps we could arrange to have a discussion between now and a later stage to make certain that my concerns are met. Unless my noble friend wishes to say something further, I shall beg leave to withdraw the amendment.

Lord Inglewood

It may be of assistance to my noble friend if I explain that there will be standard conditions for public gas transporters but that it is right to have more flexibility to take account of the differing characteristics of public gas transporters.

The Earl of Caithness

That is indeed more helpful. We are making a lot of progress. When shall I be able to see those standard conditions?

Lord Inglewood

I am very pleased to tell my noble friend that they are available now.

The Earl of Caithness

I apologise to the Committee. I was not as well briefed as I should have been. I shall read them. I have more homework to do. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 54 not moved.]

Lord Haskel moved Amendment No. 55:

Page 12, line 50, at end insert: ("() Standard conditions for gas suppliers shall include a duty on licence holders to ensure that all written material produced by a gas supplier for use by customers or potential customers must be expressed in plain, intelligible language.").

The noble Lord said: The purpose of this amendment is to ensure that gas suppliers produce written material for customers and potential customers in plain language so that they do not have some of the problems that the Committee has had this evening. It is important that all customers should receive information from competing gas suppliers that is easy to understand. The duty could apply to such written materials as letters, bills, price information, and promotional material. Contracts from gas suppliers are already covered by the unfair terms in consumer contract regulations. The requirement can then be extended to the broader range of materials. I beg to move.

Lord Inglewood

We agree that it is important that information provided to customers should be readily comprehensible. If I am allowed to introduce a personal aside, it would not necessarily be obvious to the average customer from reading the Bill exactly what is being proposed. Obviously, that is important, particularly in the context of the safety considerations that apply. However, we would expect competition to provide a strong incentive to suppliers to make themselves clearly understood. If they produce leaflets full of incomprehensible jargon, they are unlikely to be very successful in winning and retaining customers.

As the noble Lord, Lord Haskel, said, certain protection is provided by the new regulations on unfair terms contracts. We argue that to go further would involve excessive regulatory intervention. It ought not to be for the director general to tell suppliers how to write their advertisements.

Lord Haskel

I agree entirely with the Minister. The director general writing advertisement copy could bring many gas companies to bankruptcy. At this late stage I do not want to pursue the matter but it is important to have it on the record that material should be written clearly and that people should not be confused. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 55A not moved.]

Clause 8 agreed to.

[Amendment No. 56 not moved.]

Clause 9 agreed to.

Lord Peston moved Amendment No. 57:

After Clause 9, insert the following new clause:

("Unfair terms in gas supply contracts

. After section 47 of the 1986 Act there shall be inserted the following section—

'Unfair terms in gas supply contracts.

47A.—(1) This section applies to any term in a contract made between a gas supplier and his customers.

(2) Subject to subsection (3) below, any person may bring proceedings for an injunction (in which proceedings he may also apply for an interlocutory injunction) against any gas supplier appearing to him to be using or recommending use of an unfair term in contracts concluded with customers.

(3) An application for an injunction under this section shall not be made unless—

1. (a) the applicant has been or would be adversely affected by any matter to which the application relates, or
2. (b) the applicant is the Director or the Council, or
3. (c) the court considers that it is in the public interest for the applicant to make the application.

(4) The court on an application made under this section may grant an injunction on such terms as it thinks fit.

(5) An injunction may relate not only to use of a particular contract term but to any similar term, or a term having like effect, used or recommended for use by any party to the proceedings.

(6) In this section— term" means any term or condition including any term or condition in a contract provided under a scheme made under paragraph 12 of Schedule 5 to this Act. unfair term" has the same meaning as in the Unfair Terms in Consumer Contracts Regulations 1994.".").

The noble Lord said: I apologise to Members of the Committee who may have thought that we were about to have a great row on Amendment No. 56. I felt that this was not the time of night to get involved in such matters.

Amendment No. 57 stands in the names of the noble Baroness, Lady Gardner of Parkes, the noble Lord, Lord Ezra, and myself. The noble Baroness regrets that another engagement prevented her staying in the Chamber for this amendment. It is an extremely important one, and I thought that at least I should air some of the argument now, although I am fairly certain that we shall want to return to it.

As the Committee is aware, next month the Unfair Terms in Consumer Contracts Regulations 1994 come into effect. They are supposed to implement the European directive on unfair terms in consumer contracts. The directive states that persons or organisations having a legitimate interest under national. law in protecting consumers should be able to take representative legal action to prevent the continued use of unfair terms in consumer contracts. That is an easier way of ensuring justice than the complainers having the expense and hassle of taking legal action themselves.

The difficulty with the directive—I blame myself partly—is that the Government gave that role exclusively to the Office of Fair Trading. I and my advisers are convinced that this does not place into English law either the wording or the intention of the directive. Since I am speaking for the Opposition on this matter, I have to admit that I do not have the faintest idea of what happened on that occasion. I do not recall being involved with the matter. I do not know how it got through without my arguing about it or even saying that the regulations would not do. At some point, when I have a little time, I shall find out just where I blundered on all these matters.

'The fact remains that our version of the directive, as we put it in regulations, is flawed. Here, at least in the case of gas, is an opportunity to put the matter right. In the simplest possible terms, the amendment ensures that the powers that the regulations which the Government gave to the OFT to act on the directive would be extended to Ofgas and the Gas Consumers Council so far as gas supply contracts are concerned. It will also permit other bodies of a similar nature to bring proceedings provided that the courts thought that it was in the public interest for them to do so.

I believe that this is an immensely important matter. It is not a topic that I want to debate at this hour of the night when we are discussing detailed matters concerned with implementing a European directive. I wanted simply to take this opportunity to place the arguments on record. I do not propose to divide on the amendment at this stage. However, I warn the Chamber that this is not the last that it will hear on the matter. That is partly because I blame myself for bungling the whole thing in the first place. I beg to move.

9.45 p.m.

Lord Skelmersdale

In that case, perhaps I may be permitted at this late hour to give a preliminary view on what the noble Lord, Lord Peston, has just said. Notwithstanding the arguments that he has advanced on the right way to implement a directive of this or any other kind emanating from Brussels, I am absolutely certain in my own mind that one should not pick off industries one by one.

I know that there is a great temptation, simply because there is a Gas Bill going through this place or indeed Parliament generally, to do just that. But whatever the answer to the conundrum posed by the noble Lord, it seems to me that it ought to be general and not specific.

Earl Ferrers

This new clause seeks to give the Gas Consumers Council, the director and anyone acting in the public interest, the right to seek an injunction to prevent the continued use of unfair terms. I understand that the Consumers' Association has sought judicial review of the Government's implementation of Article 7 of the Unfair Contract Directive. The matter is therefore now before the courts.

The Government are confident that they have correctly implemented the directive. Regulation 8 of the Unfair Terms and Consumer Contracts Regulations provides the Director General of Fair Trading with the power to seek an injunction to prevent the continued use of unfair contract terms.

The issue of to whom it is appropriate to grant such a power is one which goes a great deal further than just gas supply. It relates to consumers in general. I agree with my noble friend Lord Skelmersdale. It is inappropriate to deal with the matter in a piecemeal manner in this way and solely in relation to gas.

We also consider it unnecessary and undesirable to extend that power of the Director General of Fair Trading to seek injunctions to other bodies such as the director, the Gas Consumers Council or anyone acting in the public interest. Ofgas and the Gas Consumers Council will be able to liaise with the Office of Fair Trading in the usual way over any relevant consumer complaints. It is undesirable to establish an alternative route by which unfair terms can be challenged. That would cause duplication of the role of the Director General of Fair Trading and possible inconsistencies.

This is not a matter for the Bill. It should be addressed, if at all, in the context of the regulations. It would be anomalous to have different provisions for gas than for other industries.

Lord Peston

I thank the noble Earl. I must be extremely careful, bearing in mind his remarks on judicial review. If I say anything which the noble Earl feels is out of order, I hope that he will immediately leap to his feet and stop me.

I must say to him in terms, having read the directive, that it is inconceivable that our regulations incorporate the provisions correctly in English law. I do not seek to bias whoever is taking the decisions on judicial review, but the directive does not stand up for one minute to anybody who has read it. What we have done is simply not right. Let me add, since I have been involved in one or two other attempts to say this sort of thing, that the noble Earl's department has been getting other implementation directives in regulations wrong as well. Those are matters I shall come back to.

I understand the argument raised originally by the noble Lord, Lord Skelmersdale, and now by the noble Earl, Lord Ferrers. It would be infinitely better for the whole thing to be sorted out once and for all. That is what judicial review may do and that would suit me. On the other hand, if I can reverse the argument, the Gas Bill is the Bill before us. We do not have a Bill on general representations or anything else. This is all we have got. I tend to make the best of a bad job. If the Gas Bill is all I have, then that is the bit I shall try to make a little better.

The noble Lord and the noble Earl are not wrong. There is always a problem of picking off a specific industry. However, we do not have before us a general industry privatisation Bill or anything like that. The Gas Bill is what we are dealing with and I am trying to deal with it. I have made my points, which is what matters to me. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 58 and 59 not moved.]

Lord Ezra moved Amendment No. 59A:

After Clause 9, insert the following new clause:

("Disclosure of information

.—(1) Section 42 of the Gas Act 1986 shall be amended as follows.

(2) For paragraph (b) of subsection (1) the following paragraphs shall be substituted.

1. "(b) if disclosed would constitute an unwarranted invasion of the privacy of any individual; or
2. (c) relates to the commercial affairs of any particular business and whose disclosure would prejudice those affairs to an unreasonable degree."

(3) In subsection (2) at the end there shall be inserted the following paragraph—

1. "(g) by the Director and consists of information relating to the commercial affairs of a particular business where, in the opinion of the Director, any prejudice to those affairs arising from the disclosure is outweighed by the public interest in making the information available."").

The noble Lord said: Amendment No. 59A relates to Section 42 of the Gas Act 1986 and suggests various modifications in order to create greater transparency, but at the same time safeguard the interests of individuals and commercial concerns with regard to the disclosure of information. That relates to the amendment proposed for paragraph (b) of Section 42(1) of the 1986 Act. In the case of subsection (2) there is inserted a paragraph which will enable the director to reveal information if, having weighed up the harm that it might do to a specific business, nevertheless he decides that disclosure is beneficial to the public interest. I beg to move.

Earl Ferrers

The wording in the 1986 Act is carefully drafted to ensure a proper balance between the public interest and the commercial and private interests of individuals and businesses.

I believe it is right to allow individuals and businesses to decide whether they are prepared for information relating to their affairs to be disclosed. If it becomes necessary, the Secretary of State has the power under a new subsection (3A), which was inserted by government amendment in another place, by order to modify the scope of the exemptions to the general restriction on the disclosure of information.

The restriction applies only to information obtained under or by virtue of Part I of the 1986 Act, as amended. Information obtained about consumers during the normal course of business by gas companies is covered by the Data Protection Act.

Lord Ezra

I thank the noble Earl for those comments. I should like to study them. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10 agreed to.

Clause 11 [Amendments of Part III of 1986 Act]:

Earl Ferrers moved Amendment No. 60:

Page 14, line 4, leave out ("the use by gas shippers of') and insert (", or to activities connected with—

1. (i) the introduction of gas into;
2. (ii) the taking out of gas from; or
3. (iii) the use by gas shippers of,").

The noble Earl said: The majority of amendments which are down in my name today and which will he down in the future are very technical amendments. What I propose to do, if I may, is to move them formally. If Members of the Committee wish to ask me about them, they are at liberty to do so. I assure Members of the Committee that I have no intention of bouncing them, but I just think that such a course would be expeditious for the proceedings. They are all technical amendments. I beg to move.

On Question, amendment agreed to.

Clause 11, as amended, agreed to.

Baroness Nicol moved Amendment No. 61:

After Clause II, insert the following new clause:

("Compensation for damage or loss caused by public gas suppliers'

construction work

. In Paragraph 1(3) of Schedule 4 to fix 1986 Act (Power of Public Gas Supplies to break up streets, bridges, etc.), after the second "shall" there shall be inserted "as promptly as possible", and after "any" there shall be inserted "loss caused or".").

The noble Baroness said: I regret that I cannot be quite as speedy in moving this amendment because I feel that this is rather an important amendment and I want to give it full attention. Its purpose is to enable businesses to claim compensation for damage or loss caused by public gas suppliers' construction work.

Digging up streets or roads outside small businesses can have a devastating effect on those businesses if the disruption continues for any length of time. Small retailers are especially vulnerable to hazards or barriers which arrive outside their premises. Most of them have only one entrance and making it less accessible can deter potential customers and will certainly curtail window gazing. I need not remind the Committee of the valuable contribution made by small businesses to our economy and to the creation of jobs, but so many of them at the moment are on the edge of viability and the losses caused by the reduction of trading during the roadworks could mean the difference between survival and extinction.

There is an anomaly in that at present a water company has to compensate anyone to whom damage is caused while it is performing its functions as a water company. In fact, compensation amounting to roughly £130 million annually is paid by the water companies in this way. That proves the necessity for this amendment because the disruption is exactly the same as that caused by the water companies and it also illustrates that the calculation of such losses is feasible. It also establishes a precedent, if one is required.

The amendment is supported by the Association of British Chambers of Commerce, which represents some 200,000 businesses, and by the British Retail Consortium. Both organisations have evidence of difficulties caused to small businesses in the circumstances I have described and they have supplied details of many actual cases where businesses have been pushed over the edge. I had intended to quote those cases but in view of the lateness of the hour I shall leave them for the moment.

An amendment similar to this was proposed during the Report stage of the Bill in another place following discussion between the Association of British Chambers of Commerce and the Minister. But the amendment was withdrawn at the request of the Minister on the basis of a letter he had received from the chairman of British Gas saying that he would, consider whether it might be possible in narrowly defined and extremely exceptional circumstances to make some form of ex-gratia payment".

Later, the Minister admitted that even the ex-gratia payment might not be possible. It is, after all, a discretionary payment which British Gas might or might not choose to pay. That does not seem a satisfactory solution.

I find it very difficult to understand the Government's resistance to this proposal. They have constantly reiterated their belief in the value of small businesses to the economy. They applaud the fact that those businesses are an important element in providing jobs. There is no doubt that businesses are suffering loss as a result of interruptions caused by roadworks. The payments involved would not come from the taxpayer and, indeed, need not come from the gas consumer, in view of the large profits enjoyed by British Gas at the moment.

As I said, the water companies must compensate for their damaging activities, so why not British Gas? The Minister's honourable friend in another place gave examples of businesses which, having been compensated by water companies, were dismayed to find that in similar circumstances British Gas was under no obligation to do the same. I hope that this Committee can now fulfil its function of giving the Government time to think again on the previous answer. I beg to move.

10 p.m.

Lord Peston

Despite the lateness of the hour, perhaps I may say that I regard this as an immensely important amendment. There are two aspects of it which I was hoping that my noble friend would clarify since I read the matter slightly differently. Although she mentioned small firms, the need for compensation does not apply just to them. I assume that it applies to any firm damaged by these activities.

Baroness Nicol

Perhaps I may interrupt my noble friend for a moment. I concentrated on small businesses because the effect on them is so much more immediate and so dire.

Lord Peston

Nevertheless, as my noble friend says, the provision would apply to all businesses. My reading of the matter is that the responsibility is not to British Gas but to any gas company that digs up the road and generally creates economic disruption. In other words, there is no specific reason why British Gas should be singled out here.

That takes me to what I regard as the most important point of all, which I have argued before. Once we privatise utilities we are dealing with private businesses. Therefore, rights that we would have given to public utilities do not necessarily carry over. I am trying to persuade Members of the Committee all the time that we are now talking of the private sector. Just as any other private firm would not be given the right to disrupt another firm's business in anyway whatsoever—it would have to compensate and there are laws to deal with that—that applies to utilities generally. Since we are discussing British Gas, it applies to that company. I made the point about pylons on another occasion.

One of the problems is that the Government have not faced up to the consequences of privatisation, particularly in the context of competition. It seems that all that is being stated here by my noble friend is a general proposition that if a business engages in activity which is damaging to another business in the sense of this case—namely, that it is made difficult to get into that business's premises or they are made less attractive to customers—they should be liable to compensate. I assume that arbitration would lead to decent outcomes.

My noble friend did not mention this point. If we are discussing work that has to be done because of danger, then clearly it must not be held back. Nonetheless, even in the case of danger, if someone smells gas and the gas supplier digs up the road, and the result causes me, a small retailer, to lose business for a few days, I do not see why I should bear the cost. I did not cause the gas leak; I am just trying to run another business.

I am convinced in my own mind that the line taken by my noble friends Lady Nicol and Lady Hilton of Eggardon and by the noble Baroness, Lady Gardner of Parkes, is the correct one. To put it mildly, I shall he interested in any counter-argument. I am not going to delay for that tonight, but if there is a counter-argument, I am sure that I can produce further arguments. We are now discussing private firms delivering their products. They have to deliver them in a way which is not damaging to other private firms trying to do the same.

Lord Skelmersdale

I thought that was a temptation for me to produce a counter-argument. I have absolutely no such argument to produce on this occasion. It was very refreshing to hear the dulcet tones of the noble Baroness contributing to this debate. She has been very generous in waiting a very long time so to do. On this particular issue, as on so many others, she has hit the nail on the head, and I agree with her every inch of the way.

However, it occurs to me that since the Gas Act 1986 was enacted we had in 1991 the New Roads and Street Works Act which, to a tiny extent, this Bill amends. Therefore, if there is validity in the general point—and I think that there is; the noble Baroness mentioned water and the noble Lord, Lord Peston, almost went so far as to talk about the electricity industry which probably has a bearing on this, as does the telecommunications industry—I suggest that all these matters could be tidied up in the New Roads and Street Works Act.

Lord Ezra

Perhaps I may ask the noble Earl to give us a little elucidation about the way in which this legislation is being handled. Schedule 4 to the Gas Act 1986 is entitled: Power of Public Gas Suppliers to Break Up Streets, Bridges Etc. But we have a different situation now. We have TransCo and people with transport licences. The gas suppliers merely supply the gas. I would find it confusing if we were to proceed on the basis of amending an Act which is not relevant to the new situation. I am following a point which the noble Lord, Lord Peston, made. How is one to interpret the provisions? Should they not apply to transporters of gas and not to public gas suppliers?

Earl Ferrers

I do not blame the noble Baroness, Lady Nicol, for producing this amendment and for speaking to it in the way that she did. The question of streetworks by utilities, and in particular by public gas transporters, is an important one. Often, we may not appreciate the complex engineering exercise that is necessary to keep a reliable supply of gas available on tap to some 18½ million customers at any one time. Maintaining this network in a safe and effective state requires a great deal of work for which street openings are necessary.

The Government do not think that there should be a general right for automatic compensation for economic loss arising from streetworks. We believe that such a general right would be inappropriate for two reasons. The first is that of practicality. There would be a great risk of inefficiency from having to process large numbers of claims arising from the extensive streetworks which a company like British Gas needs to execute, and a concern that money spent in this area will inevitably feed through to the cost of gas.

The second reason relates to the general principle of how streets are used. Successive governments have always taken the view that businesses should not have a right in law to any given level of passing trade and that traders must take the risk of loss due to temporary disruption of traffic flows along with all the other risks of running a business. If that principle is not accepted, one wonders where one would stop. As well as utilities' works, streets are resurfaced, closed or made one-way; and the emergency services can affect the traffic, too. One can go on for quite some time, listing all the different permutations of how businesses can be affected.

However, I recognise that the legal position, which the Government are not minded to alter, could bear heavily on small businesses on the very rare occasions when long-term and substantial disruption takes place. There comes a point when the general interest in utilities being able to operate streetworks efficiently and the general principles I have described could lead to harsh costs falling on such a small business.

It was for that reason that the Minister for Industry and Energy asked the chairman of British Gas what further he could do to assist. The chairman informed my right honourable friend that TransCo is revising its existing procedures to improve communication and co-operation with owners of commercial premises. British Gas will discuss with individual business owners issues including vehicular access, customer access, special notices and any special requirements. Beyond this, and subject to certain conditions, British Gas has undertaken that in those exceptional cases where small businesses suffer severe and clearly established loss of business over a prolonged period as a direct result of streetworks carried out by British Gas or its agents, British Gas will give sympathetic consideration to claims in respect of financial loss on an ex gratia basis.

Since the discussions in Committee in another place, to which the noble Baroness, Lady Nicol, referred, British Gas has agreed to set up a compensation scheme for small firms. That was put on the record in another place at Report stage. My right honourable friend in another place has put on record the precise terms of this undertaking. On those terms, I hope that the noble Baroness can feel satisfied that something is being done to help small firms. With regard to the point raised by the noble Lord, Lord Ezra, Schedule 3 amends the words in the old Act so that it refers to public gas transporters.

The Earl of Caithness

I had not expected to intervene on this amendment. However, I am slightly disappointed by my noble friend's reply. He said that one of the reasons for not accepting it was the cost of processing claims. This is now a private industry. It is not the Government but a private industry that must bear the cost in a fair and equal competitive market. We must let the industry face up to the real world. I believe that the noble Baroness has a point.

I should like to press my noble friend on two areas. First, given the strong arguments that he has adduced, why do we have the present situation for water? He did not answer that particular point. The noble Baroness made a convincing case to make the same rule for water apply to gas companies. Secondly, we will have more competition in the pipeline industry. We already have a separate pipeline system in Swindon. As developments take place around the country which serve both residential and commercial properties, it will not just be TransCo that provides the pipeline system. It is all very well for British Gas to say this, that or the other. It does not apply to all the players in the market. Now that the monopoly has been broken, if that is the answer and what everybody supports, I feel that added strength is given to the argument of the noble Baroness.

Earl Ferrers

My noble friend said that he was not convinced by what I had said. I am disappointed. I thought that I was wholly convincing. However, my noble friend is enormously stubborn sometimes in his reception of ideas. I will try to explain the position to him. He said that now British Gas was privatised, it was a private company. I say to my noble friend that that has nothing to do with it. We are talking about what happens when streets are dug up. I tried to explain to the Committee that if British Gas was told that if it dug up a street it would have to inquire of everyone in the street who would be disaffected, and by how much, it would result in quite a large exercise in processing documents and paying people.

My noble friend says that that is different now because British Gas has been privatised. That is not so. I do not know where my noble friend lives. Perhaps he lives in a very esoteric place. The whole area in which I live has been disrupted recently because of the installation of fibre-optic cable. I do not know whether everyone has received compensation, but I have not. Perhaps I was not sensible enough to apply for it. One starts with water. It was decided to resurface my particular street a short while ago, and the whole area was closed. Should one say that everyone should get out their claim forms and claim for that? I do not believe that to be realistic.

My noble friend also said that the noble Baroness Lady Nicol had a point. I agree with him. I said that she had a point, and I told her what my right honourable friend the Minister for Energy had said in another place. He has spoken to British Gas who have made some provisions. I hope that I have satisfied both my noble friend and the noble Baroness, Lady Nicol, in which case that will be two birds with one shot, and both in the opposite direction.

The Earl of Caithness

What my noble friend says makes me even more stubborn. There is a huge difference. If it was a public company owned by the Government, it would be taxpayer's money that would be used to pay compensation. In this case it is private sector money, and therein lies the difference. It is now in competition with other potential transporters of gas. The situation is dramatically different. Of course, one is talking about digging up streets. I have to say to my noble friend that if he thinks that I am stubborn, I find his arguments even less convincing on that second attempt.

10.15 p.m.

Lord Peston

I shall intervene only briefly, but I am still disturbed that the Minister continues to refer to British Gas. We are no longer discussing British Gas. We are now discussing the potentially competitive privatised gas industry. British Gas will have no special role once the Bill becomes law. The chairman of British Gas can talk about handing out money, but we are not discussing that any more. We are discussing the principles of a competitive private industry. Assuming the Government do not fall within the next few days, the Bill will become law. We must forget about British Gas, and think of it as just another rather good firm. Okay, but it is just another firm.

Earl Ferrers

I accept the noble Lord's rebuke. It is what one describes as a slip of the tongue. I should have made it clear that it was any gas transporter, and not just British Gas, which is affected.

Baroness Nicol

My noble friend is right. The gas industry has been freed from the constraints of public ownership with much acclaim all round. It must be prepared to accept the responsibility that goes with that freedom. That includes being responsible for the loss and damage that it causes and for paying up in the way that any other commercial organisation must pay up.

I am disappointed that all the answers given by the Minister were those given in another place. He has added nothing new. The letter from British Gas is the one that is already being discussed with the British Retail Consortium and the Association of British Chambers of Commerce. They were totally dissatisfied with that as a solution. It is because of that continuing dissatisfaction that I felt that I could bring the amendment forward tonight.

We should have further discussion on this issue with the Government to see whether there is not some way in which we can move forward. The Minister has not answered why it can work for water and not for the gas industry. I do not know whether he has an answer he wants to give before I decide what to do with the amendment. It seems to me that the two cases are a parallel. On the question of road works the matter is different because the thing is over and done with in two or three days at the most, and it is in the public sector and for the general good.

My noble friend Lord Peston is right. When the stand was taken that no compensation could be paid by the gas industry, it was then a publicly owned corporation. We were all expected to shoulder the burdens of it, because we all shared the benefits. That has changed completely. It is now open to competition and to taking on its responsibilities. Does the Minister want to answer the question as to why water is different before I decide what to do with the amendment?

Earl Ferrers

That is fair. I did not answer the question about water, and I apologise for that. The noble Baroness did, incidentally, talk about British Gas. After my rebuke by the noble Lord, Lord Peston, I grovelled with an apology and said that the provision applied to all privatised gas companies. Of course TransCo will retain a de facto monopoly in the transportation of gas in most of the country for some time. Of course, the provision would apply to any transporter.

Water, of course, is different. The arrangements in respect of street works by water companies are anomalous. None of the other utilities, local authorities, highway authorities, or any other person with rights to break or close streets is subject to a requirement to pay compensation for economic loss to businesses which are affected by the works. The requirement in water appears to have arisen following judicial interpretation of disputed wording in old legislation, which was subsequently clarified in a consolidation Act.

I should add that the compensation provisions in water go wider than street works, and include compensation for interfering with a person's right to enjoyment of his own land where economic loss is clearly appropriate. The existence of a provision for compensation in respect of street works by water companies, whose origin is unclear, is not a justification for introducing an inappropriate obligation in the case of gas, but I recognise that the Committee is concerned about this point.

The noble Baroness made a number of good points and I wish to consider all that has been said before the next stage of the Bill. Obviously, I cannot tell the noble Baroness what my conclusions will be but I shall consider what has been said.

Baroness Nicol

I am grateful to the Minister for agreeing to consider what has been said today. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 [Acquisition of rights to use gas processing facilities]:

Earl Ferrers moved Amendment No. 62:

Page 15, line 25, leave out from ("facility") to ("and") in line 26 and insert ("for the purposes of any business carried on by him;").

The noble Earl said: This is a technical amendment. I beg to move.

On Question, amendment agreed to.

Clause 12, as amended, agreed to,

Earl Ferrers moved Amendment No. 63:

Before Clause 13, insert the following new clause:

Duty of Director to advise etc

("It shall be the duty of the Director General of Gas Supply, where either he considers it expedient or he is requested by the Secretary of State to do so, to give information, advice and assistance to the Secretary of State with respect to any matter in respect of which any function of the Secretary of State under this Act is exercisable.").

The noble Earl said: Amendments Nos. 63 and 67 are technical amendments. I beg to move Amendment No. 63.

On Question, amendment agreed to.

Clauses 13 and 14 agreed to.

Clause 15 [Minor and consequential amendments]:

Earl Ferrers moved Amendments Nos. 64 to 66:

Page 16, line 43, leave out from second ("any") to ("before") in line 44 and insert ("public general Act passed").

Page 17, line 6, at end insert: ("(2A) The Secretary of State may by order make such consequential modifications of any provision contained in any local Act passed, or in subordinate legislation made, before the appointed day as appear to him necessary or expedient.").

Page 17, line 7, after ("(2)") insert ("or (2A)").

The noble Earl said: Thaese are technical amendments. I beg to move.

On Question, amendments agreed to.

Clause 15, as amended, agreed to.

Clause 16 agreed to.

Earl Ferrers

I believe that we have gone far enough. Indeed, I am not sure that we have not gone too far. There are other amendments that we wish to table before the next stage of the Bill and therefore, if it meets with the approval of the Committee, I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

House adjourned at twenty-three minutes past ten o'clock.