§ 7.17 p.m.
§ The Parliamentary Under-Secretary of State, Northern Ireland Office (Baroness Denton of Wakefield) rose to move, That the draft order laid before the House on 18th December be approved.
§ The noble Baroness said: My Lords, the order would enable Northern Ireland to enjoy for the first time the economic and environmental benefits of a natural gas industry which have been available to the rest of the United Kingdom for many years. I shall comment 1614 briefly on the order and then say a few words about the detailed provisions. The purpose of the order is to provide the legislative and regulatory framework for the establishment of a downstream natural gas industry in Northern Ireland and its rapid development into a mature competitive industry. The introduction of natural gas into the Northern Ireland energy market will add to the choice of fuels and therefore increase competition. That can only lead to lower energy bills which are of vital importance both to domestic and business consumers in the Province. In addition, the use of natural gas, which is widely recognised as the greenest of the fossil fuels, will contribute to a cleaner environment.
§ As your Lordships will appreciate, establishing a new gas industry entirely from scratch presents a considerable challenge, particularly in the face of strong competition from other long established fuels. The draft order aims to provide a balanced framework which will facilitate and encourage the development of the new industry while providing essential consumer safeguards and ensuring high health and safety standards. The principal provisions establish a licensing regime for the conveyance, storage and supply of gas; provide for the appointment of a regulator and require the regulator and the Department of Economic Development to promote the development and maintenance of an efficient, economic and co-ordinated gas industry in Northern Ireland, and to facilitate competition; require the regulator and the General Consumer Council for Northern Ireland to safeguard the interests of gas consumers; and provide the Department of Economic Development with necessary health and safety powers in relation to the new industry.
§ The draft order broadly replicates a number of provisions contained in the Pipe-lines Act 1962 and the Gas Act 1986, as amended by the Gas Act 1995, which provide the framework for the natural gas industry in Great Britain. It also incorporates a number of amendments based on the response to the widespread public consultation which, I am pleased to say, was supportive of the proposed introduction of the order. Detailed regulatory arrangements would be contained in licences granted by the Department of Economic Development under the order.
§ The opportunity to develop a commercially viable natural gas industry in Northern Ireland follows the conversion of Ballylumford power station from oil to gas firing which is now taking place. An undersea pipeline has been constructed from Scotland to Northern Ireland which will meet the requirements of both the power station and a downstream industry supplying domestic, industrial and commercial consumers. Subject to the passage of the draft order, it is planned that first supplies of gas should enter the downstream market in late 1996-early 1997. Overall, the development of a natural gas industry will enhance the rapidly improving economic prospects in Northern Ireland and create hundreds of new jobs.
§ I am required to draw your Lordships' attention to the proposed use of the Northern Ireland civil contingency fund for the initial funding of the office of the regulator for the new gas industry. Parliamentary approval to this 1615 new service will be sought in a supplementary estimate. Pending that approval, urgent expenditure, estimated at £190,000, will be met by repayable advances from the contingency fund. This is an important order for Northern Ireland. I beg to move.
§ Moved, That the draft order laid before the House on 18th December be approved.—(Baroness Denton of Wakefield.)
§ Lord Morris of Castle Morris
My Lords, the House will be grateful to the Minister for introducing the order and for the clear and helpful way she led us through a detailed and wide-ranging document. We on these Benches—both of us—welcome the order. We hope that it will go a long way towards creating a vigorous diversity of energy supply for Northern Ireland. Some unsympathetic English critics have been heard to say that the people of the Celtic countries in the United Kingdom have far too much gas already and need no further supplies. That cannot be the case in Northern Ireland.
It was pointed out that when the order was discussed by the Third Standing Committee on Delegated Legislation in another place that to supply gas to Northern Ireland will be expensive and, in some cases, even uneconomic. The Minister's honourable friend was not especially specific in reply. That prompts me to ask whether the Minister can help by describing briefly, but a little more precisely, the proposed pricing structure, especially as it relates to the effects on the pricing of both electricity and oil. Can she explain the timescale which is likely to be planned? For example, if gas becomes available to Belfast, how long is it likely to be before it is available to Derry?
I would also welcome reassurance about the future of the Ballylumford power station. I am informed that Ballylumford supplies about 45 per cent. of Northern Ireland's electricity, and the directive covering large combustion plants would require it to close by the year 2003 unless it reduces its emissions. Is it not also the case that Ballylumford's entire output is contracted to Northern Ireland Electricity until at least the year 2010 and that the cost of the gas pipeline through to the power station will be borne by Northern Ireland Electricity and so will fall on the electricity consumers of Northern Ireland? Can the Minister say whether the volume of this activity is sufficient to make the future of Ballylumford completely secure until the end of what is predicted to be its natural life as a power station?
The question of monopoly rights and exclusivity periods has been raised in another place and elsewhere. To my mind it has not been clearly answered. Can the Minister say whether or not it is the case that British Gas is asking the Government for monopoly rights on distribution and whether or not its subsidiary, Premier Energy, is seeking agreement for "phased competition", which I take to mean no competition until Premier Energy is ready to take it on? How long is a "phase"?
There are two other, smaller points I wish to raise before my final assault on the Minister's patience. The first relates to the provisions of Article 24 of the order, which deals with the resale of gas. Will there be a 1616 penalty against any person who resells gas over and above the price set by the director? The Minister's honourable friend, dealing with this in his reply on 17th January, was less than transpicuously clear on the point. Secondly, can the Minister bring us up to date on the research being done on Beaufort's dyke? On 17th January the Minister's honourable friend said,a less encouraging finding is a legacy of munitions outside the authorised dump site. Current scientific opinion supports the conclusion that dumped munitions are not a significant risk to human health and the marine environment if they are left undisturbed. The survey found no direct evidence that phosphorous objects recently washed up on either the Northern Ireland or the Scottish coast came from that area".—[Official Report, Commons, Third Standing Committee on Delegated Legislation, 17/1/96; col. 12.]Phrases like "no direct evidence" do alert the sceptical spirit which is sometimes to be discerned in the minds of noble Lords on this side of your Lordships' House.
§ My final inquiry relates to the role of the General Consumer Council for Northern Ireland, as described in Articles 33 and 34 of the order. The council has been given the responsibility of representing the interests of gas consumers. It has a high reputation for producing quality work and it also enjoys a very visible public profile within Northern Ireland. So it is well placed to assume this new rôle. The reference in Article 33(2) to the power of the director-general to defray expenses incurred by the council is a necessary and, need I say, welcome feature of the order. The order will cost money: this section of it will cost money.
§ A critical new area of work for the council will be the handling of complaints and representations from gas consumers. Research from a number of sources has shown the importance of making it as easy as possible for consumers to make a complaint. The council must create straightaway a quality complaints procedure.
§ In line with the best practice of the Citizens' Charter guidelines, it will be important for the council to be seen as the single point of entry for complaints. The council would have to work together with the director and the gas suppliers in the overall task of dealing with dissatisfied customers. Clearly, it would be preferable—not least in order to avoid public confusion—for the council to be the central complaints handling organisation. This would require adequate funding. I am informed by a usually reliable source that the council has not yet been informed either by the Department of Economic Development or by the Department of Finance and Personnel about the precise details of its duties. It is still very much in the dark. I hope that enlightenment may come very soon.
§ The gas supplier will have sole supply rights for eight years for domestic consumers. Since world fuel prices and movements cannot be forecast that far in advance, surely it would be prudent to make some provision for a worst case scenario maybe by giving the director-general the power to intervene in exceptional circumstances. Otherwise Northern Ireland gas consumers might so easily find themselves in the same position as electricity consumers are now—paying well over the odds with no real prospect of price reductions.1617
§ An additional problem for gas consumers is that, unlike other high street goods and services, it simply is not practical to shop around for another provider. Once gas is installed in a house, it would not be an affordable option for many people to remove that gas system in favour of a system powered by a different fuel. Is any reassurance available on that point?
§ We have duly scrutinised the order, and those are the only small questions that we have been able to come up with. So we welcome the order as a new and powerful source of energy for Northern Ireland—though since the noble Baroness the Minister took up her post I do wonder why they need any more energy.
§ 7.30 p.m.
§ Baroness Denton of Wakefield
My Lords, I thank the noble Lord for his scrutiny of the order and for his support of the nation at the beginning of his speech. I am not sure that I agree with his definition of "small questions". The noble Lord raised some important issues. I shall try to be rather more transparent in my replies than he suggested was the case with my honourable friend's answers in another place. However, I believe that those answers covered many of the issues raised. If, on reading Hansard, I feel that I have not properly clarified any point, I shall write to the noble Lord.
In a relatively short speech, the noble Lord touched on many issues. First, he rightly praised the General Consumer Council for Northern Ireland. It is a body of great strength and deservedly attracts much respect in Northern Ireland. It fights many doughty battles. I believe that, on occasions, people who have seen its chairman coming have trembled.
Once the order is in place we shall define the duties. If a need for extra funding is proved, we shall consider it seriously, as we did when we considered bringing the Coal Advisory Service within the ambit of the General Consumer Council. We do not intend to leave the consumer unprotected. I believe that by giving that responsibility to the General Consumer Council we have made a resolute commitment to the protection of the consumer. The noble Lord is absolutely right that in an area such as this, where commitment to appliances means that the option to change is not an easy one, one has to be sure that the conditions are right.
The noble Lord said, in what was perhaps a slightly throw-away line, that people in Northern Ireland are paying well over the odds already for their fuel. We are well aware of the need to work constantly on energy costs, which is why we are bringing forward the opportunity for downstream gas to be provided to Northern Ireland. We are currently looking at the allocation of £60 million for energy bills in Northern Ireland. That money is coming from the Government and is intended to help to reduce the bills of both industrial and residential consumers.
The noble Lord asked whether Ballylumford would have to close due to emission standards. Its conversion to gas will solve its emission standard problems, so closure is not an issue. The noble Lord asked how long it would he before Derry had the opportunity to avail 1618 itself of gas. The current situation is that there is an opportunity to use the old Belfast gas infrastructure. If, in due course, someone feels that it is commercially viable to take gas into the north-west of the Province, which has a fast growing economy, that is for them to decide. There is much interest in exploring the tight gas field in Fermanagh and Cavan. If that proves viable it will provide an opportunity for cheaper fuel in rural areas, which would be a great advantage.
The noble Lord had some concerns about Article 24 and asked that we consider the question of a penalty against a supplier who resells gas. The order provides for the imposition of a penalty so that the purchaser of the gas can recover from the supplier, through the courts, any excess charges plus interest. In any case, it is envisaged that resales of gas—for example, landlords supplying tenants—would he undertaken under exemptions granted by the Department of Economic Development. An exemption would require the holder to comply with any directions given by the director. Failure to comply with such directions could result in the exemption being revoked. Therefore, I believe that protection is provided.
The noble Lord rightly queried the price of gas compared with the price of other fuels in Northern Ireland. The new gas industry will be developed by the private sector and will proceed only on the basis of commercial viability. It will be necessary for gas to he able to compete with existing fuels in Northern Ireland such as coal, oil, electricity and LPG. Therefore, it will be essential for gas suppliers to supply gas as cheaply as possible in order to compete with other fuels. Perhaps, philosophically, I have more faith in market forces than any noble Lord on the Opposition Benches, but I believe that in this instance there is a fair expectation that the suppliers of established fuels will react strongly to the competition from gas. The benefit of that will he downward pressure on energy prices which will benefit the whole economy. It will improve the quality of life for domestic users and help the growth of industrial companies.
The noble Lord queried the exclusivity arrangements. The agreement reached in principle with Premier—it must be "in principle" because I am placing a draft order before the House tonight—provides for the introduction of competition in the supply to large industrial and commercial consumers; that is, to those taking more than 250,000 therms per annum three years after the introduction of gas to their area, and to all consumers no later than eight years from the operational start-up. It gives Premier the exclusive right to lay pipes in the licensed area for a period of 20 years. However, third parties would be permitted to lay transmission pipes through the licensed area to another area. We have worked hard to ensure that the provisions are attractive and bring competition into the supply of energy in Northern Ireland while ensuring that, as soon as possible, the position becomes open to other challenge. My own faith in the growth of the economy in Northern Ireland is such that I believe that we shall see that come about very quickly. We have recently seen growth in 1619 the area of combined heat and power and people now recognise the opportunity to grow in a much healthier economic climate than we have seen for many years.
The noble Lord also asked about Beaufort's dyke. Perhaps I may reassure him first as to the safety of the pipeline. The pipe-laying is completed, but it is the responsibility of the DTI to grant approval for the pipeline to be brought into use. That will be granted only if the Health and Safety Executive is satisfied that the company has met its legal obligations over the proper control of the risk. I am sure that the noble Lord is aware that further government survey work in the area was announced at a press conference on 8th January in Aberdeen. I know that colleagues in other departments arc working on that. The results will be made available in due course. I believe that that will give the noble Lord some comfort because I am told by people who know more about these things than I do that one of the most dangerous actions is to touch munitions that have been lying out there for some time. It is a matter for experts.
I hope that I have answered all the questions raised. I have promised that I shall read Hansard carefully and write to the noble Lord on any points I have not covered. I commend the order to the House.
§ On Question, Motion agreed to.