§ 3.48 p.m.
§ Lord McIntosh of Haringey
My Lords, I beg to move that this Bill be now read a second time. I shall set out the key objectives and provisions of the Bill in a moment. However, before doing so, I wish to explain briefly the position regarding telecommunications and water.
During consideration of the Bill in another place, the provisions relating to telecommunications and water were removed from the Bill in response to representations from industry. In the case of telecoms, they will be taken forward in the broader context of the 1135 White Paper on reform of communications regulation, which the Department of Trade and Industry will be bringing forward later this year. In the case of water, they will be carried forward in a draft water Bill which the Department of Environment, Transport and the Regions intends to publish later this year. In this way, Parliament will be able to consider the proposed changes to the regulatory regime for water, alongside other proposals resulting from the review of competition in that sector.
The Bill that we are considering today remains a substantial and important piece of legislation. It delivers for the energy sector the key proposals to emerge from our review of utility regulation. It has five key objectives, with which I shall deal in turn: first, to secure a fair deal for all consumers, including the disadvantaged; secondly, to facilitate more effective competition in the energy sector, particularly in the generation and supply of electricity; thirdly, to modernise the regulatory framework for the next decade, while building in flexibility to accommodate future developments; fourthly, to ensure that the gas and electricity sectors contribute to environmental objectives; and, fifthly, to provide a more consistent, transparent and predictable regulatory framework.
Before I deal with each of those points in turn, I apologise in advance for the awkward structure of the Bill. The structure arises because the Bill amends two separate Acts, the Gas Act 1986 and the Electricity Act 1989. This means, as will become apparent as I proceed, that two clauses are needed for each change that is made. The good news is that the Bill is about half as long as it looks, because many of the amendments are common to both gas and electricity.
I return to the five main subjects and I deal first with consumers. This Bill contains a package of measures aimed at putting the interests of consumers at the heart of utility regulation. We refer in this respect to all consumers, large and small, business and domestic, including the disadvantaged.
The framework of regulatory duties that we inherited from the previous government put the interests of shareholders first. This Bill puts the balance right. The Bill replaces the individual energy regulator with the gas and electricity markets authority. Clauses 9 and 13 of the Bill give this new regulatory authority a principal objective of protecting the interests of consumers, wherever appropriate, by effective competition.
Competition is the best way of serving consumer interests. But there are areas where it is not yet an effective discipline and areas where, even though effective competition is developing fast, there is still work to be done to ensure minimum standards of service and build consumer confidence.
Provisions in Parts I and III of the Bill establish an independent gas and electricity consumer council and provide it with its functions. This new body replaces the existing Gas Consumers Council and the Electricity Consumers Committees. It will be a powerful consumer champion, operating independently of the regulator. It 1136 will have the job of investigating and seeking to resolve complaints against utility companies, passing on to the authority any matters that raise licence enforcement issues. It will provide a single point of contact for consumers, ending the uncertainty about who consumers should turn to for assistance with a complaint or for information and advice on how to get the best out of competitive markets.
It will work effectively with the authority through a memorandum of understanding and will seek constructive links with local consumer advice bodies, such as trading standards offices and citizens' advice bureaux. The council will have strong rights of access to the information that it needs from the authority and from the utilities in order to carry out its functions effectively. It will have powers to publish information in the consumer interest. Finally, the council is being set up to act as a powerful advocate for consumers, providing advice to regulators, government, companies, and others with an influence on the regulatory system about consumer needs and interests.
An influential consumer council, advising customers and championing their interests, will have an important part to play in eliminating the causes of complaints at source and in driving standards up and prices down. But consumers must also be confident that minimum standards of service will be maintained, even when they switch suppliers. Clauses 58 and 94—and this is an example of the "two clause one subject" to which I referred—fill an important gap in the regulator's powers. They give the authority a power to impose financial penalties for past and continuing breaches of licence conditions, standards of performance and other obligations. It is a reform which is long overdue. It is not good enough that companies can get away with simply promising to do better in the future. For the first time, the authority will have an effective tool for ensuring that companies comply with their obligations. It will be properly equipped to tackle company failures, such as persistent malpractice in doorstep selling tactics.
These are tough new powers and they are meant to be, but companies that play fair with consumers and meet their obligations have nothing to fear. The powers will be used in a transparent way. There will be proper due process, and companies will be able to challenge in the courts both the imposition and the amount of a penalty.
As regards directors' pay, Clauses 60 and 96 include measures to encourage gas and electricity companies to link directors' pay with the achievement of customer service standards. This will be achieved by requiring price-regulated gas and electricity companies to publish the links, if any, between directors' pay and service levels achieved. Regulation will not gain widespread credibility if consumers see directors of monopoly and dominant companies awarding themselves high salaries where service is inadequate. This is more than naming and shaming. There are real incentives for directors to give customer service standards the priority that they deserve. We have already urged the regulator to take into account the levels of consumer service and satisfaction when 1137 setting new price caps. The new powers to impose financial penalties will focus minds still further. Companies will see it as in their interests to link directors' pay with service standards.
We have said consistently that we want to ensure that the economic benefits of competition in gas and electricity are spread fairly among everyone. We have also said that tackling fuel poverty is a high priority for this Government. We take it very seriously. The benefits of competition should be enjoyed by the many, not just the few, not just big business and not just those able to pay by direct debit.
The Government are taking action on a number of fronts to tackle fuel poverty. The Budget, for example, made changes to increase winter fuel allowance and to apply reductions in VAT to home insulation and heating systems. The energy regulator, at the Government's behest, is carrying forward a social action plan to give vulnerable groups more choice and to make it easier for consumers to pay their bills and avoid debt. The Bill, however, makes a significant contribution in its own right to setting a framework for combating fuel poverty and social exclusion.
First, Clauses 9 and 13 of the Bill impose on the authority a duty to take into consideration the interest of low-income consumers alongside other disadvantaged or vulnerable groups. By referring to disadvantaged groups in this way, the Bill does not require the authority to discriminate in their favour, but we are ensuring that the authority must always bear in mind the interests of those groups in exercising its functions.
Secondly, Clauses 10 and 14 place the authority under a duty to have regard to statutory guidance issued by Ministers on their social objectives for the gas and electricity sector. Draft guidance is currently out to consultation.
Thirdly, the new powers in the Bill to set energy efficiency targets will have benefits for the fuel poor. Energy efficiency measures are aimed primarily at environmental objectives but they can have significant benefits for the disadvantaged, if focused on them, by reducing their energy costs and enhancing their comfort and well-being.
Finally, the Bill backs this up by giving Ministers reserved powers, in Clauses 68 and 97, to create schemes which would have the effect of cross-subsidising disadvantaged consumers to reduce the charges that they pay for gas and electricity. The powers might be used, for example, to reduce price differentials between pre-payment meter and frequent cash payment scheme rates, and rates for other consumers who use cheaper payment methods. The power would be used only in the event that other avenues for tackling fuel poverty which are being taken forward by the regulator and the industry fail to deliver a satisfactory outcome. But it does underline our determination to deliver a fair deal for all.
My second main theme is competition. I have said that competition is the best means of serving the interests of consumers. Regulation is sometimes 1138 necessary, but it is second best. The Government's record in driving forward competition in gas and electricity supply speaks for itself.
When we took office, competition in energy was not adequately developed. Indeed there were questions about whether competition in electricity would happen at all. We now have a full roll-out of competition in gas and electricity supply. There are about 210 gas licences and about 160 electricity licences.
Consumers are increasingly taking advantage of the choice that is now available. In October 1998, 16 per cent of domestic gas consumers were supplied by companies other than Centrica. At the end of December 1999 that figure had risen to 27 per cent, or 5.3 million domestic consumers. For electricity, customers have been switching at the rate of about 100,000 a week since last summer. By December, 3.7 million domestic consumers had switched supplier. It is an impressive record, but we can go further.
The Utilities Bill takes important new steps to secure more effective competition in energy markets, particularly in electricity generation and supply. In particular, the current electricity pool is fundamentally flawed. It is a price-setting mechanism, not a market. There is no buyer participation. The result is that market power is in the hands of the generators. The system is not transparent. It distorts the market to the disadvantage of flexible plant, including coal-fired plant. There is inadequate regulatory oversight of the pool's operations. It has had 10 years to address its shortcomings but has failed to do so. Consumers have suffered from unnecessarily high electricity prices for too long.
Clause 67 of the Bill gives the Government powers necessary to implement the new electricity trading arrangements in England and Wales. Under the new arrangements, the current electricity pool will be replaced with a new trading system based on a series of bilateral markets designed to encourage competition and remove current market distortions. It will increase competition and drive down electricity prices. It will remove the distortions present in the pool and level the playing field for generators and suppliers. It involves buyers directly in setting prices; and it will introduce better governance arrangements and proper regulatory oversight.
The new system will complete the reform of the electricity market, allowing the lifting of the stricter consents policy for gas-fired power stations.
The result will be a more competitive market working to the benefit of consumers. We have consistently said that we anticipate that the package of reforms for the electricity sector will result in reductions of 10 per cent or more in wholesale electricity prices. There is strong evidence from the markets that reductions are already being achieved in anticipation of the new arrangements. Forward market prices are down some 20 to 25 per cent in real terms. That is a big prize. The wholesale electricity market for the UK is estimated at £8.5 billion. A 1139 10 per cent reduction means ongoing annual savings for consumers of £850 million. That means lower prices for domestic consumers, and lower input prices for UK business.
The Government intend to exercise the powers so as to enable the new trading arrangements to be brought into effect in the autumn of this year. We are determined to ensure that consumers, domestic and industrial, benefit sooner rather than later from these essential reforms.
Provisions in Part IV of the Bill will also stimulate further and more effective competition and choice in electricity supply. They do that by separating supply, which is competitive, from electricity distribution, which is a monopoly. Separating supply and distribution will facilitate further restructuring of the electricity industry where that is commercially sensible, subject to the normal provisions of competition law. It will also remove the existing distinctions between public electricity suppliers and other suppliers, thereby ensuring a fair market for all electricity supply companies.
This Government have already pushed ahead vigorously with competition in gas and electricity supply. We are taking further steps, through the Bill, to introduce effective competition into the wholesale electricity market. In addition, we introduced a Competition Bill into this Government's first parliamentary Session, following years during which the Opposition talked about the reform of competition but did nothing about it. The powers in the Competition Act came into force on 1st March this year. From that date, the energy regulator and the other regulators took on strong new powers to tackle anti-competitive behaviour in their sectors.
My third main theme is the regulatory framework which is part of the Government's programme of reform and modernisation. The privatisation of British Gas took place 14 years ago; electricity 11 years ago. The existing Gas and Electricity Acts need to be modernised to take account of market developments such as increasing competition, the dramatic increase in the number of licensees, and the convergence of gas and electricity markets.
Having brought regulation up to date, we must ensure that it is flexible enough to accommodate and encourage future market development while not compromising regulatory certainty and predictability. The Bill provides for the alignment of the regulatory systems for gas and electricity under a single regulatory authority—the gas and electricity markets authority—recognising that energy markets have converged.
Clauses 34 and 81 streamline the process of modifying gas and electricity licences so that the authority no longer needs the individual consent of all licensees to a change to standard licence conditions. It will be able to proceed if it secures the consent of a significant majority. With hundreds of licensees, collective licence modification procedures are vital to allow the regulator to deal effectively with necessary licence changes, and to adapt to changes in the market.
1140 My fourth theme is environmental provisions. This Bill is primarily about economic regulation but, at the start of this century, we cannot ignore environmental concerns. The energy utilities have a big impact on the environment. So they have a big part to play in the achievement of our environmental objectives— particularly those for energy efficiency and the control of greenhouse gases.
The Bill contains provisions to ensure that the energy sector contributes to those objectives. It puts an end to the confusion we inherited from the previous government about the respective responsibilities of Ministers and regulators for environmental matters.
Clauses 61 to 66 give Ministers powers to set obligations on electricity supply companies for the supply of electricity from renewable sources. The Government will use those powers to meet our target of 10 per cent of electricity from renewable sources by 2010, subject to the cost to consumers being acceptable.
Clauses 69 and 98 provide powers for Ministers to impose obligations on gas and electricity companies to achieve specified energy savings targets—targets which are to be achieved through activities to improve efficiency in the use of energy by consumers. On 9th March, my right honourable friend the Secretary of State for the Environment, Transport and the Regions launched consultation on the use of those powers. He is proposing an obligation which would result in savings of about 750,000 tonnes of carbon a year.
Clauses 10 and 14 place the authority under a duty to consider statutory guidance issued by Ministers on environmental objectives relevant to the gas and electricity sectors.
These are important provisions. Guidance will ensure that the authority is alert to the Government's environmental objectives, thereby ensuring that regulation makes a proper contribution to the attainment of those objectives. At the same time, they maintain the principle that the authority operates at arm's length from government on matters of economic regulation.
My fifth and final theme is consistent, predictable and transparent regulation. Our extensive consultation revealed that we can do much to build confidence and stability into regulation through a more predictable, consistent and transparent regulatory framework. Improving regulatory procedures does not catch the eye, but it is vital in securing better decisions, more widely accepted decisions, and regulatory stability over time.
Our willingness to engage in improving regulatory procedures has been welcomed by consumers and companies alike. The Bill requires the authority to publish and consult on its forward work programme, and give reasons for key decisions.
Clauses 38 and 82 strengthen the position of the Competition Commission as an effective appeals body when disputed licence conditions are referred to it by 1141 the authority. In that way, companies will have greater certainty that the commission's findings will be properly implemented.
The rapid development of competitive energy markets has made the task of regulating those sectors increasingly complex. The interests of hundreds of licensees have to be considered and balanced. Decisions in that context are best undertaken by a regulatory authority. Therefore, Clause 1 of the Bill will replace the individual energy regulator with a regulatory authority, the gas and electricity markets authority, to which I have referred. Regulatory decisions will no longer be the responsibility of one individual. They will be less dependent on the personality of a single regulator. The whole process will provide for greater continuity, reducing the jolts every time a new regulator is appointed.
To conclude, the proposals in the Bill have been the subject of wide consultation. They are forward looking, and they are seen by the regulator, consumer groups, regulated companies and others as sensible, balanced and fair. The Bill establishes a modern regulatory framework which is stable, fair to all consumers and in which the respective roles of Ministers and the regulator are clear. It will ensure that the gas and electricity sectors make a contribution commensurate with their importance to the achievement of the Government's environmental objectives.
The Bill provides a framework that will ensure a fair balance between the needs of consumers and the legitimate interests of companies. The Bill will promote high quality services for consumers, exert downward pressure on prices and will promote further and more effective competition in the gas and electricity sectors. It is good for the environment, good for consumers, good for the utilities and good for competition. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord McIntosh of Haringey.)
§ 4.10 p.m.
§ Baroness Buscombe
My Lords, I am grateful to the Minister for his introduction to this Bill, at least, to what is left of it. This was to be, as the Secretary of State said in another place, a "flagship" Bill,part of that agenda of modernisation and reform".—[Official Report,Commons, 31/1/00; col. 782.]This so-called "modernisation" is proving to be a very risky business. The Secretary of State referred to the "current ramshackle legislation". What we have now is a diminished, disappointing, ramshackle Bill.
However, at least it serves one real purpose: it exposes this Government's dilemma between the desire to try and show that they support business and understand the needs of consumers, with the fact that they cannot bring themselves to accept that competition, unshackled by expensive regulations, together with consumer choice—as opposed to consumer protection—is the best way to serve the customer.
1142 Indeed, the Second Reading of the Bill in another place—when it was a whole Bill—was very enlightening. It confirmed the continuing, deep-seated rift between the New Labour hierarchy and what I call "Real Labour". While the principal objective for the regulators set out in the Bill is,to protect the interests of consumers".Members on the Government Benches in another place exposed their will to respond to this priority by articulating their blanket distrust for the private sector and by lamenting privatisation, with the resultant belief that those operating in the private sector must be penalised and compromised with increased bureaucracy and regulation.
Perhaps in their willingness to serve their leader, the Prime Minister, they had not forgotten his contribution to the Second Reading of the Electricity Bill in 1988. As the then honourable Member for Sedgefield said,We are proud that we took the industry into public ownership. When we come to power it will be reinstated as a public service for the people of this country, and will not he run for private profit".—[Official Report,Commons, 12/12/88; col 689.]In other words, "We will reinstate it as a proper public service under public control".
One of the many issues that the then opposition failed to appreciate was that, following privatisation, and thereby with the development of open competition, the consumer would benefit from real reductions in the cost of utilities as well as an increase in the quality of provision and service.
In fact, since 1989, electricity prices have fallen by 29 per cent in real terms and gas prices have fallen by 29 per cent in real terms. Indeed, I would like to talk about domestic telephone charges, which have plummeted by 50 per cent in real terms, but I presume that now I am not supposed to dwell on that latter success story.
In contrast, the Government's regulatory impact assessment makes it clear that the extra administrative costs of arrangements in the remaining parts of the Utilities Bill will add at least £5 million a year to the cost of regulation. Who will pay for that? At the end of the day, the consumer will pay.
We understand from the Secretary of State (at col. 788 of Commons Hansard)that "extensive and wide-ranging consultation" took place before the Bill was introduced. Yet half of it was dropped and 359 government amendments were tabled during its passage, with scant opportunity for consideration and consultation with the utilities industries. British Gas said of the new clauses,They have been brought forward in a piecemeal way and have not been the subject of any"—I repeat the word "any"—consultation".That extraordinary situation has created enormous uncertainty, both for consumers and providers. In some cases, it has already had the effect of driving down share prices, which reduces the ability of the providers to invest and take a long-term view as capital intensive industries, such as utilities, have to do. As for 1143 the consumer, and with particular regard to those 16 million over the age of 65, we are considering the provision of essential services. So much for the "attainment of social policies", mentioned in Clauses 10(1) and 14(1) of the Bill.
Does the Government's handling of this Bill thus far mean that they are undecided about their policy for energy? Do the Government have a policy for energy? If they do, I, for one, am unaware of their intent. On the one hand, the Government have announced a £100 million lifeline for the coal industry; on the other hand, the announcing of the lifting of the moratorium on gas-fired power stations will provide further competition to the coal sector. What about renewable sources of energy? The most recent research shows that, since they came to power three years ago, the Government have invested less than £10 million in research into renewable energy sources. Are their hearts not in looking to the future? Whatever, their policy, that is far from clear having regard to their actions and the words in the Bill.
At this stage, perhaps I should make it clear that we support some aspects of the Bill. In short, we welcome the merging of the electricity and gas regulators into a new combined Ofgem, particularly since those sources of energy have started to supply each other's products. However, we are concerned that joining the two together should not double the cost of the combined authority. It is rather worrying to learn that three years ago Ofgem's predecessor authorities were spending a total of £29.8 million a year, while Ofgem's budget for 2000–01 is a rather staggering £64.5 million. That means that more costs will be passed on to the consumer.
We also welcome the new combined gas and electricity council. In addition, we support the separation of the licensing of the distribution and supply of electricity, which is something that we would have done to complement the growth in competition, as it further defines and limits the area which remains a natural monopoly. In practice, that move, in due course, should mean a reduction in the regulatory involvement in all those areas which are now competitive. Instead, however, we now have a Bill that will impose more regulation in the mistaken belief that that will benefit the consumer. Again, I refer to Clauses 10(1) and 14(1) which state:The Secretary of State shall from time to time issue guidance about the making by the Authority of a contribution towards the attainment of any—I repeat the word "any"—social or environmental policies set out or referred to in the guidance".The guidance, of course, is very much hidden from view, by which I mean that it is not on the face of the Bill. I interpret that drafting as a completely open ticket for the Government—not an arm's-length, independent regulator—to pick up and run with any social and environmental pursuits into the future and place them, via the authority, at the door of the utilities companies for the latter to accept, develop, fund and implement.
1144 In fact, the Minister spoke about the importance of continuing an arm's-length situation for the regulator on matters of economic regulation, but I argue that most activities will have an economic impact. In principle, that sounds like an excellent idea and one that is kind to the consumer as well as being green. However, in practice we have grave doubts. We have looked at the repercussions of the Water Industry Act 1999, where, for example, so-called "guidance" has already required the banning of disconnections. In that instance, guess which bill is now paid last by the consumer, who knows his or her rights? Those repercussions demonstrate that the word "guidance", in practice, means "prescription".
Some of those environmental and social policies will be good. There is no doubt about that. However, if the private sector is now to be required to carry out the Government's social engineering for them, who will bear the cost in the end? It will be the consumer. Is this kind to the consumer?
A further, glaring issue that we fought hard against in another place and which we shall oppose in your Lordships' House, is the limitless fines that the Bill will enable the authority to impose on the utilities companies. Again, who is the ultimate loser? It will be the consumer. Perhaps I may quote the shadow Secretary of State in another place when she articulated this point with clarity during the debates on Report:The consequence will be a huge increase in the level of regulatory risk being faced by the industry. Higher regulatory risk means higher rewards for the provider of capital to the industry to compensate for the increased risk. That in turn translates into higher interest costs, which inevitably end up being passed on to the consumer".—[Official Report,Commons. 19.4.00; col. 1070.]Can the Minister tell the House if that is really what the Government intend? How can the Government's stated priority—that is, to protect the interests of consumers—be achieved when they quite blatantly intend to increase regulation and government interference? Those moves are bound to destabilise the business climate and, ultimately, penalise the consumer.
The results of privatisation of the gas and electricity industries speak for themselves. The Minister has already said today that they have an impressive record. With the separation of licensing of the distribution and supply of electricity, we would have continued to see more competition, improved quality of service to the customer, and savings to the customer as a result of that competition.
In conclusion, perhaps there is some truth in what the then honourable Member for Sedgefield said back in 1988 during the Second Reading of the Electricity Bill when he talked about reinstating a public service under public control. It is for these Benches to remind us all—"us", the consumers—that the greatest loser under public control—the control of the Government—was the public.
§ 4.21 p.m.
§ Lord Ezra
My Lords, I wish to declare a long and continuing interest in the energy sector which, at 1145 various stages, has covered coal, oil, gas, electricity, renewables and CHP. I cannot think of any others for the moment.
We on these Benches welcome the main thrust of the Bill and its principal provisions. In particular, we support the emphasis placed on the protection of the interests of consumers, especially those in difficult circumstances. Having actively participated in the debates on the privatisation of gas and electricity in the 1980s, and having closely followed all the changes that have occurred since, I consider that the wide-ranging review, of which this Bill is the outcome, has been appropriate and desirable. I am glad to note that many of the views expressed in the consultation period have been taken into account.
Our attitude to the Bill as it passes through its various stages will be to seek improvement to provisions which we basically support. I should like to start with Clauses 9 and 13, which set out the main objectives. In stating that,The principal objective of the Secretary of State and the … Authority in carrying out their respective functions … is to protect the interests of consumers",it is not made clear that this should be done on a sustainable basis. In view of the considerable importance attached by the Government to the concept of sustainability and their reference to this in the draft social and environmental guidance to the authority, it is surprising that an amendment to this effect should have been rejected in another place. I feel that there is a strong case for coming back to this matter.
As regards the same clause, I am concerned about the lesser importance given to the promotion of efficiency in the use of gas and electricity and to the protection of the public from the dangers arising from the supply of these fuels. I should have thought that both of these vital issues would rank in importance with the other objectives and should not be subsidiary to them.
I support the formation of a single regulatory authority—as does the noble Baroness, Lady Buscombe—to cover gas and electricity, in view of the growing inter-relationship between the two markets. Having had the opportunity of meeting Mr Callum McCarthy and his colleagues on a number of occasions, I am impressed with their determination to make a success of the new authority. The authority will of course have close relations with the Government, with the enterprises in the sector and with the new consumers' council. It is important that these interrelationships should be clearly established and I believe that the Bill and supporting documentation go a long way towards doing this.
I have two points to raise. First, in putting so much emphasis on the interests of consumers, the Government may be giving the impression that they are lukewarm about the enterprises. I am sure that that is not so, but it needs to be demonstrated. A particular cause for concern is the power to be given to the authority to impose financial penalties, to which the noble Lord, Lord McIntosh, referred in his opening 1146 remarks. Obviously, some such power is necessary to reinforce the position of the authority. Indeed, it already exists in present legislation in relation to gas. What has raised concern is the fact that there is no limit to the amount of the financial penalties, as is the case in the Competition Act. A cap of some kind seems desirable. This is another matter to which I hope we shall return at later stages.
Secondly, both the authority and the consumers' council are given the right to obtain information from the enterprises. That is clearly desirable, otherwise they could not do their jobs effectively. However, it is important that there should be no duplication. If information is already available to the authority, it should supply it to the consumers' council. A more vexed question arises as to how this information will be used. Like other noble Lords, I have received briefing material from the Consumers' Association on the one hand and the CBI on the other, taking totally different views. The Consumers' Association is concerned that the council might be muzzled by the enterprises when it tries to publish what it considers to be relevant and important information, while the CBI is concerned about the commercial interests of its members. I do not believe that we have yet struck the right balance in the Bill on this issue and I hope that this is another matter to which we shall return.
Like the noble Baroness, I fully support the creation of a combined and independent consumers' council. For years I have been pressing for the consumers' councils in the utilities sector to be given independent status, as was done in the original privatisation Acts only in the case of the Gas Consumers' Council. For that reason I am delighted that this principle has at long last been adopted. Having said that, I hope that the aim of the new council will be, wherever possible, to work with the enterprises rather than against them. Of course there could be instances where an adversarial situation is unavoidable, but I hope that those will be few and far between and that the aim of both the council and the enterprises would be to combine together to serve the best interests of consumers.
I had experience of this when I was in the coal industry. We had a strong Domestic Coal Consumers' Council, but to emphasise the need for close co-operation I was, as marketing director of the NCB at that time, a member of the council and tried to help it perform its task as effectively as possible.
I should like to mention a concern that has come to me about the proposed regional organisation of the council. There is to be a substantial reduction from the present spread of regional councils. While some degree of rationalisation is obviously desirable, in view of gas and electricity coming together, there is none the less a fear that what is now proposed will materially diminish the services which the council could make available to consumers on a regional and local basis. I have received representations from Yorkshire and the south-west on this, and apprehensions in the northeast were mentioned in debates in another place. We shall need to come back to this issue.
1147 It is eminently desirable, as proposed in the consultative documents, that the Government should provide the authority with social and environmental guidance. There have been areas, as the noble Lord, Lord McIntosh, stated, where, under existing legislation, the role of the regulators, particularly in relation to government in many areas, has remained uncertain. That is now clarified.
Under social objectives, the Government place particular importance on dealing with fuel poverty, an objective I fully support. It is estimated that there are still over 4 million households in fuel poverty; that is, where they have to spend more than 10 per cent of their income on energy. The introduction of the new Home Energy Efficiency Scheme will go some way to dealing with this long-lasting problem. But very much more action is required. I am glad that the authority has already issued its Social Action Plan, to which the noble Lord, Lord McIntosh, referred, for dealing with this, and has been encouraged by government to proceed vigorously with it. Have the Government considered what is happening to alleviate this problem abroad? A number of measures have been taken in France in the electricity law of 10th February, including the establishment of a social or reduced price for families in difficulty.
I am also glad to note the general intent of the environmental objectives. But I should like to raise certain issues in that connection. The Government accept the advantages of embedded generation; that is, generation within the local distribution network. They recognise that the main problem is access to the network on fair and transparent terms. That has been a real difficulty for small generators which cannot gain access to the network on a reasonable basis which would enable them to proceed with their business.
I understand that a working party under Ofgem is looking into this. Can we be assured that the Government will have the powers necessary to implement any appropriate recommendations which are likely to emerge after this Bill has been through its various stages? If micro CHP schemes, on which much technical work has been done, for introduction into domestic premises are to be encouraged—it would show considerable savings—net metering, which equates the prices of electricity into and out of the network and is widely practised in the United States and elsewhere, would be necessary, otherwise such projects could not go forward.
A big step forward in the promotion of energy efficiency is the transfer of the energy efficiency standards of performance (EESOP) from the regulator to the Government. The present EESOP goes up to the year 2002. The Government have proposed a further EESOP to cover the period up to 2005, which would put an obligation on gas and electricity suppliers to stimulate their customers to carry out energy-efficiency projects. A target would be set for each supplier. That is an important development and much to be welcomed. I hope that it can be supplemented by 1148 other measures, such as the widening use of energy audits to establish the energy efficiency of individual homes.
The Government have committed themselves to a target of 10 per cent of renewables by the year 2010 compared with a present level of between 2 and 3 per cent. I agree with the noble Baroness that so far progress in that direction has been fairly limited. There is also an intermediate target of 5 per cent to be achieved by 2003. That is an important commitment and it is surprising that the Government resisted an amendment in another place to put it on the face of the Bill. I feel that that is something to which we should return.
I declared at the start of my speech that I had an interest in combined heat and power. For many years I have been an advocate for this process of making use of the heat from power generation which would otherwise be wasted. There is a strong case for dealing with CHP on the same basis as renewable energy. There is also a case for mentioning clean coal technology, which came up at Question Time. The Government have recently committed themselves to providing the coal industry with an important measure of short-term aid, to which the noble Baroness referred. But the long term must be considered as well. If coal is to remain a major source of energy, it must be made more environmentally acceptable. Therefore, stronger support needs to be given to the development of clean coal technology, both for use in this country and, as was mentioned at Question Time earlier today, to be promoted abroad.
The preparations for introducing the new electricity trading arrangements, to which the noble Lord, Lord McIntosh, referred, are now well advanced. The Minister said that he expected those to be introduced in the autumn. Perhaps he can confirm later whether or not that will be so. There is some feeling that the arrangements could take a bit longer.
§ Lord McIntosh of Haringey
My Lords, I can respond immediately. It is our intention to introduce them in October. That, of course, requires Royal Assent for this Bill by the end of July.
§ Lord Ezra
My Lords, I am glad to have that confirmation. But I was going on to say that, if it took a bit longer, I would not regard that as a matter for criticism as it is so important that these arrangements are correctly prepared.
I should be interested to know—perhaps the Minister can also answer this straightaway—what the overall costs of introducing the new system are likely to be, not only for the authority, but also for all the enterprises involved. In the debates in another place, figures of £500 million and even £750 million were mentioned. Those are extremely large sums, no doubt fully justified; but how are they to be recouped?
Furthermore, a specific concern in relation to the new electricity trading arrangements is the way in which the balancing and settlements procedures could act to the disadvantage of smaller operators, 1149 particularly in the CHP and renewable sectors. Those operators could not control and balance their generation in the same way as larger operators and could therefore incur the penalties of oversupply in the balancing market as presently contemplated. Even in advance of NETA, the prices offered for exported electricity from CHP plants have fallen between 20 and 28 per cent below last year's level. In its environmental appraisal of NETA, the DTI said that,it is likely to affect adversely the economies of some categories of CHP and other embedded generation".I know that this issue has been much discussed, but it would be useful to know the Government's latest thinking on the matter, bearing in mind the importance which they attach to renewables and to CHP.
In conclusion, I trust that I have shown that I support the broad intentions as well as the individual proposals contained within this Bill. I have drawn attention to a number of issues which, if they could be dealt with positively, would, in my opinion, enhance the effectiveness of the Bill.
§ 4.38 p.m.
§ Lord Borrie
My Lords, it is always a pleasure to follow the noble Lord, Lord Ezra. In the energy industry he has a tremendously wide and longstanding knowledge and interest. He declared a large number of interests at the beginning of his speech; I have but one interest to declare. I am a non-executive member of the management board of Ofgem, which is the Office of Gas and Electricity Markets. It was set up last year after the regulatory offices for gas and electricity were merged and Callum McCarthy was appointed regulator for both industries. The management board is intended to be some kind of model for the statutory authority created by Clause 1 of the Bill.
Like the noble Lord, Lord Ezra, I have long supported the view that it is desirable for utility regulation to be governed by an authority or board of some kind rather than to continue with the one-person regulator model which was established when the privatisation statutes were passed in the 1980s. Experience over many years has shown that, especially in the case of telecommunications and gas where privatisation resulted in the conversion of a public monopoly to a private monopoly, there is a likelihood of undue personality clash and confrontation between, on the one hand, the regulator, and, on the other, the chairman or chief executive of the powerful monopoly, which clearly is not in the public interest. In the case of the gas industry, we had to live for a very long time with the unfortunate decision of the Conservative government in the mid-1980s to privatise British Gas as a single private sector monopoly. According to the most interesting memoirs of the noble Lord, Lord Lawson of Blaby, who was Secretary of State for Energy in the early 1980s, he would have preferred to break up the British Gas Corporation because he judged competition to be a much more important consideration and objective than maximising government revenue. But, as he records, his successors 1150 as Secretary of State for Energy took a different view. He suggests that they were pretty obviously leaned upon by a man—for those who can remember or picture him, it would not have been a very pleasant experience—namely, Sir Denis Rookie, then chairman of British Gas.
The noble Lord, Lord Lawson of Blaby, described Sir Denis as,a large, craggy, overbearing man … treating Ministers and officials alike with a mixture of distrust, dislike and contempt … To break up the Corporation in any way was a negation of his life's work".But, and noble Lords may recall, confrontation and somewhat vitriolic disputation from time to time did go on between the regulator and the utility industries, even when the personalities involved changed. The regulator, supported by the Monopolies and Mergers Commission, was determined to seek to bring about a separation of the natural monopoly elements of the energy industry—usually referred to as the "pipes and the wires" and for which no one advocates competition—that required continued regulation and the other elements of the energy industry such as generation, supply, and so on, where competition could be introduced and regulation eased as time went by. I stress the fact that regulation would be eased because, contrary to what has been said in the other place and, to some extent, by the principal Opposition Bench today, regulation is being eased all the time and, most properly, as competition progresses.
In 1997, at the time of the general election, the Labour Party's manifesto said in relation to the utility industries:We will promote competition wherever possible. Where competition is not an effective discipline … we will pursue tough effective regulation in the interests of customers".To my mind, this Bill pursues that in a very straightforward way. It certainly makes regulation more effective; for example, through the statutory confirmation of the merger of the gas and electricity regulatory offices that has taken place, the creation of the gas and electricity markets authority, and the creation of a truly independent and separate consumer council. Very rightly, the Bill puts up front as the principal objective of the Secretary of State and of the authority the protection of the interests of consumers, adding the important wording, which noble Lords will also have noticed in other Bills,wherever appropriate by promoting effective competition".As I see it, the consumer interest objective is not simply the most obvious one of ensuring lower prices, desirable though that may be and desirable though their achievement may have been up until now through competition. Clearly, consumers have an interest in security and continuity of supply, so that continuing adequate investment is also required in the interests of consumers, not just in those of the companies, and so on.
Perhaps I may impertinently remind the Opposition Front Bench that the word "consumers" is defined in the Bill so as to include future consumers as well as present consumers. That clearly puts an emphasis on the need for the regulator to ensure that he does not 1151 concentrate wholly on a narrow focus of immediate reductions in prices but ensures that there is adequate investment.
As we know, competition has already been pursued with considerable vigour so that business consumers and private consumers—at any rate, those who pay by direct debit—are assumed by the regulator to be adequately protected by competition and regulatory price caps are no longer needed. However, with all the enthusiasm and success that competition has had so far, I should like to remind your Lordships that a 70 per cent share of the domestic market is still held by British Gas. It may be thought that it will settle down at about that figure. It is true that consumers throughout the country have choice from rival suppliers, but I quote the retiring chairman of the Gas Consumer Council who said in her recent report that,essentially consumers lack confidence in the new market".Some may ask why they lack confidence. There have been some well-publicised, bad selling practices; there have been problems with changing suppliers; and there have been unauthorised transfers and similar, as the chairman put it, "tales of woe". These have all impacted on consumer opinion, and market share between the rivals may not alter much more until consumer perceptions and greater consumer confidence change and develop.
One also needs to say, as did my noble friend the Minister, that competition alone is insufficient to create—and I use my own words—overall consumer welfare. I emphasise to your Lordships that gas and electricity are not discretionary services that people can choose to take or not take. Moreover, although we would like them to solve as many problems as possible, market forces will not solve them all. The clauses to which my noble friend the Minister referred very properly provide for ministerial guidance to be issued on social and environmental matters. The Bill does specify "guidance", so I disagree with the noble Baroness, Lady Buscombe, who said that guidance inevitably means prescription. It does not; the words are different. As a member of the management board of the energy authority, I regard them as different.
The Bill also provides that the Secretary of State, the authority and the consumer council must have particular regard to the interests of the disadvantaged consumer. I suppose that is one of the reasons why I said that market forces are not entirely sufficient in this respect. If you do not give special consideration to the disadvantaged consumer and you price solely and only according to cost, then, inevitably, those who pay frequently—for example, the poor who want methods of payment whereby they can pay regularly by cash—will be faced with a more costly exercise. They will have to pay more. I hope noble Lords agree that it is good to see that standing charges are being removed. They can impact harshly on small users, such as a single old-age pensioner living alone. Surely we do not want too large a differential between the price paid by customers using direct debit and others using, let us say, pre-payment meters.
1152 As my noble friend the Minister indicated, Ofgem has produced a comprehensive social action plan. I am sure that noble Lords will agree that there are a number of practical proposals in it to combat fuel poverty and social exclusion. Whether or not noble Lords agree with all of them, I am sure they will agree with many of them. They include easier access to payment facilities for those who want to pay frequently in cash; energy saving schemes of various kinds; and improved access to the competitive market for customers who are in debt and to whom market forces may not easily have regard.
In the future there will be a more powerful deterrent against misselling and other malpractices through the possibility of financial penalties being imposed by the authority. The gas consumer council already had that power, as the noble Lord, Lord Ezra, mentioned, but it has now been broadened and is of a more general nature. I have difficulty with the restriction that is imposed in the Bill which states that the authority may not impose a penalty unless notice relating to it is served within 12 months of the contravention or failure to which it relates. That may leave insufficient time for investigation of the alleged malpractice. It may also leave insufficient time for the authority to decide whether to use its powers under the Bill, or its powers under the Competition Act 1998. It would be unfortunate for the period to be left as short as 12 months.
I say to the Opposition Front Bench that the Bill gives the licensee a lot of protection with regard to the clauses on penalties. The clauses not only require any penalty to be of such amount,as is reasonable in all the circumstances of the case".The authority must publish a statement of policy to which it must have regard, and there is a right to go to the courts on what may be called "judicial review grounds". However—this is one of the points on which I agree with the noble Lord, Lord Ezra—there is no general right of appeal to the courts on the merits and, unlike the Competition Act 1998, no limits are set out in the Bill. I am not sure that that is satisfactory. As my noble friend the Minister is aware, a number of Bills are before the House at the moment and the Competition Act was recently enacted. The House is entitled to ask why there are discrepancies as regards the matters we are discussing as between one Bill and another.
Although the Bill does not explicitly say so, I believe that the consumer council is to have an advocacy role. This is not stated in so many words but at Second Reading of the Bill in another place Mrs Helen Liddell stated that that is its key role. She used the phrase,partisan on behalf of consumers".—[Official Report,Commons, 31/1/00; col. 873.]I have no objection whatever to that, but if that is the case I wonder about the appropriateness of the council also acting as arbiter of consumer complaints as between the consumer on the one hand and the company on the other. Why is there no ombudsman scheme? At this very moment my noble friend the Minister is piloting the Financial Services and Markets 1153 Bill through the House which promotes, justifiably, the most powerful ombudsman scheme in the country as regards that area of regulation. Why has it not been thought of in regard to the matter we are discussing? I commend the Bill but I look forward to detailed discussion in Committee on a number of issues.
§ 4.53 p.m.
§ Lord Jenkin of Roding
My Lords, it is always a pleasure to follow the noble Lord, Lord Borrie. I enjoyed his excursion into the initial steps that were taken in this country to set up regulatory mechanisms.
One must remember that it is less than 17 years since I introduced the White Paper which foreshadowed the privatisation of the telecoms industry. My studies on that occasion convinced me that to follow the model of the federal authorities in the United States would have been a grave mistake. At that stage we believed that it was absolutely right to establish a highly authoritative, prestigious and respected individual to take on the function of regulator. That step was so successful that it has been imitated in many other countries. Naturally enough, it was adopted for the energy industries. However, as the process matures, it is probably right now to consider a more corporate approach to regulation. I do not in any way object to the proposals in the Bill both for merging the two regulatory bodies—which in practice has happened already--and for them to be in the form of a body rather than an individual.
However, what is striking looking back over 17 years is the total and utter transformation that has overtaken the Labour Party in that time. Every single one of the Bills we are discussing was opposed root and branch by the party opposite. The Telecommunications Bill was filibustered for months by the then opposition in another place. We were told that the Electricity Bill and the Gas Bill were bound to put up prices. My noble friend on the Front Bench has described what actually happened. Now noble Lords opposite, such as the noble Lord, Lord Borrie, argue passionately the benefits of competition. One can only welcome that conversion.
The noble Lord, Lord McIntosh, addressed a number of the criticisms made of past legislation in this area. This country pioneered the privatisation of major public utilities. The telecoms privatisation was the first of its kind in the world. I am sometimes asked what I think about that. I hope that it may earn me a footnote in history! That privatisation has been imitated all over the world. When one considers the transformation that has taken place as regards the quality of service, the range of choice, the prices that are paid, and the huge diversity of provision that now exists in the telecoms industry—it has grown at an almost exponential rate—can anyone believe that that would have occurred under public ownership? One has only to make the comparison with what is happening in Germany to appreciate what privatisation of the British telecoms industry has achieved. I am sorry that we are not addressing the telecoms industry. It has been excluded from the Bill. But its progress constitutes an exciting story. However, even with the 1154 benefits that privatisation brings in terms of price reductions and choice, it takes time for people to get used to having a choice of gas and electricity suppliers. Nevertheless the picture is now a vast improvement on the position before privatisation.
There are two areas of the Bill which think will require amendment in Committee. They concern electricity and gas respectively. The electricity point relates to the proposed arrangements that are to replace the non-fossil fuel obligation. I was not a member of the Select Committee inquiry into non-food crops chaired by my noble friend Lady Hogg. However, I warmly supported its recommendations. Indeed, I was a member of the Select Committee that endorsed those recommendations. We supported the recommendations on the use of renewable fuels—our report discussed at length short-term coppicing—for the purpose of generating energy. The use of waste to generate energy is already making a small but growing contribution. There is considerable potential in the use of biomass although that is not, strictly speaking, a non-food crop. I am glad to see the noble Lord, Lord Haskel, in his place because I believe that he too is a supporter. The main thrust of the report was that these, as it were, industrial crops require a champion in Whitehall. We made a very strong recommendation that the Minister for Science—I am a little surprised not to see him on the Front Bench for this Bill—should have been appointed chairman of a committee to bring together the various interests. For whatever reason, the Government rejected that recommendation. The result is that we have a policy with responsibility still divided among the Ministry of Agriculture, the Department for Trade and Industry and other departments. We published a supplementary report quite recently criticising the Government's failure to accept what seemed to us a very sensible, indeed overdue, recommendation.
So we now have a proposed energy crop scheme to be introduced by the Ministry of Agriculture. Fisheries and Food. It is being treated simply as an extension of farming. Perhaps for that reason, this recently announced scheme seems to bear absolutely no relation whatever to what is contained in this Bill. I hope that the Minister will be kind enough to deal with my question in his reply. Can he explain how that scheme, which is concerned with energy, is going to fit in with the provisions for renewables in the Bill? It seems to me a classic example of what the Select Committee was aiming at; namely, to have—using the phrase favoured by the party opposite—joined-up government. There is absolutely no sign here of joining up what has been introduced by MAFF and the arrangements made in the Bill to replace the NFFO.
The criticism of the new arrangements is that the Bill sets out proposals for an obligation on suppliers to source part of their electricity production from renewable resources, but it is not technology-specific. It is proposed that the price be capped by means of a buy-back procedure enabling suppliers who are unable to meet their supply requirements in he market to pay the Government to relieve them of the proposed obligation.
1155 I have been told that under these circumstances there will be no incentive for renewable developers to engage in the risks of research and development. As the report of my noble friend Lady Hogg made clear, there is still need for a great deal of R&D if we are to realise the potential. There is no incentive for the developers to engage in the risks which are also more expensive than the cheapest renewable resource. Allied to that is the lack of a guaranteed long term supply contract which must be at the heart of any policy of trying to achieve the substitution of renewables for traditional sources of energy. This means that where developers, for instance, are willing to attempt biomass power station development, they will find it extraordinarily difficult to raise the funds in the market to finance it. That is an example of where there appears to be a change which has not been properly thought through. One wonders how it is going to work.
It would be very expensive in Exchequer terms, and it is unlikely to fill the funding gap. I understand that the DTI proposes that there should be a grants regime to help, but that is not in the Bill. My Lords, that is not the way to do it. What is needed is a system which requires electricity suppliers to source a specified proportion of renewables, for instance, from biomass at a fixed price on long term contracts. That is the condition which will produce the most rapid and effective introduction of this much needed technology.
The costs would then form part of the costs of supplying electricity. That is as it should be. It should not fall onto the taxpayer through a grants system. I give the Government notice that I hope to move amendments to Clauses 61 and 62 in order to go into the issue rather more deeply in Committee.
My point concerning gas is quite different. It is the indirect effect of the downstream regulation on some of the upstream suppliers, notably the offshore oil and gas industry. The remit of Ofgem—as people are still calling it although no doubt we shall get round to calling it the gas and electricity markets authority, GEMA, or whatever—does not extend offshore with the minor exception of Clause 100 concerning gas quality. As Callum McCarthy has said, his jurisdiction stops on the beach. The offshore oil and gas industry is regulated separately by the DTI. As I said, in industrial parlance, the Bill relates to downstream matters and yet if it is not amended there is a risk that it will do considerable damage to the upstream industry.
I make it absolutely clear that the offshore industry is very keen to see the Bill enacted. The very simple reason is that it supports the new electricity trading arrangements. It will allow the Secretary of State to rescind the stricter consents policy on gas fired power stations. It is no secret that that misguided decision by the Government has had a quite damaging effect on the offshore industry and offshore gas field development. There is no doubt that bringing that to an end will be widely welcomed.
I do not share the view of the noble Lord, Lord Ezra, that this matter is something that can be allowed to drift on. We have to introduce the new arrangements 1156 in the autumn. I hope that we shall see this Bill on the statute book by July because there is no doubt that the sooner we can lift the stricter consents policy the better.
Where does this take us as regards regulation? Perhaps the House will bear with me for a moment while I give a specific example of where things have gone wrong recently. I shall go into detail in Committee. The Minister will be aware of the ending of the pool system for electricity, which has been welcomed on all sides. There was also a system for gas. However, that is a little more flexible because it can be stored in modest quantities. The old Ofgas engaged in consultation as to how best to balance the needs of suppliers and consumers. Quite obviously, the key issue is achieving capacity in the distribution network. After one or two false starts, a system of auctions was introduced. The offshore oil and gas industry criticised that pretty fiercely, but sadly it was not listened to. Such a method, the industry said, was bound to increase prices, and that is precisely what happened in successive auctions. The first was held in September 1999 for capacity in October. The prices increased. The auction system was amended. The March auction in the following year saw further significant price increases. The result is that the weighted average cost of entry capacity at St. Fergus, which is one of the very big landing stations, increased from 0.95p per therm in September 1999 to 2.75p per therm in March 2000. Under the old regime, prior to the auctions, the price was two-thirds of that per therm at 0.665p.
What is feared is that the same kind of thing will happen—I share the anxieties of the noble Lord, Lord Borrie—as regards giving primacy to immediate consumer interests. If GEMA looks for short-term benefits to consumers it could impact damagingly on the long-term supply of gas from the offshore oil and gas producers. That is exactly what happened with that system of auctions, and the industry is genuinely concerned that it will happen again. The result will be that a Bill which is intended to protect consumers will, in the end, make them worse off.
What is the answer? We need to have an effective cost-benefit analysis of any regulatory step that will impact on the upstream suppliers. The Minister referred to the need for transparency. He is right. Transparency is necessary, and this is one of the ways we can achieve it. Transparency was argued for in another place—it gained support from some government Back Benchers in Standing Committee—but so far the Government have not listened to the argument. Yes, they have consulted widely— they have been told precisely what are the dangers—but they have not done anything about it. We in this House have a duty now to pursue the issue and to ensure that, under the new gas trading arrangements, Ofgem is obliged to submit a full cost-compliance analysis of any of its proposals.
I support the main thrust of both NETA and NGTA, but the Government's objectives are not likely to be met unless they are prepared to accept amendments to the Bill to remove the difficulties to which I have drawn attention.
§ 5.11 p.m.
§ Lord Judd
My Lords, the noble Lord, Lord Jenkin of Roding, always makes an enjoyable speech. However, I think that, on reflection, he may feel that his entertainingly provocative remarks at the outset rather carried him away.
What impresses me about the Bill is that it reasserts some of the principles which we on this side of the House have always been about in our political lives. It reasserts the principle that we are looking not only at the efficiency of industries for their own sake—be they public utilities or not—but at the contribution they make to the well-being and quality of society as a whole. The Bill reasserts the importance of balancing the responsibility to shareholders—which is a very real responsibility—with the responsibility to consumers, not least the most vulnerable members of our society. At a time when many people in Britain have become sickened by a prevailing culture of greed, the Bill reasserts the principles of responsibility in leadership and administration by emphasising the importance of the links between directors' remuneration and the standards of the electricity service provided.
I cannot help recalling a discussion I had not long ago with an industrial chaplain whose responsibilities included one of the largest power stations in the country. He was not a particularly political man in party political terms. He remarked that one of the things which had always struck him was that in the old days of the publicly-owned electricity industry, whatever the difficulties (and he did not underestimate the difficulties), and whatever the bloody-mindedness (and he did not underestimate the bloody-mindedness that existed at times), there was a feeling that, at the end of the day, it was about Mrs Jones, Mr Brown and the people down the road getting their electricity. It was not primarily about producing a profit for the firm as an end in itself.
I believe that the Bill addresses that issue. I am glad to see that the Government are addressing it and I congratulate them on that. Potentially, the Bill can make a significant contribution to the morale of those working within the public utilities; to the whole industrial culture of our society; and to the rehabilitation of the concept of public service, whether provided within the public or the private sector.
The Minister referred to the environmental elements in the Bill. I should declare an interest because, in a voluntary capacity, I am a vice-president of the Council for National Parks and I serve on the north-west regional committee of the National Trust, as well as being a member, in an individual capacity, of various environmental groups.
In Clauses 10 and 14 of the Bill there are references to environmental responsibilities and to the guidance which should be given in this respect. In Clause 61, for example, there is a firm reference—the Minister underlined it--to energy from renewable resources. But when we look at the Bill and consider these different elements, there are potential contradictions which need to be taken seriously. If, for example, in endeavouring to fulfil the obligations spelt out in 1158 regard to the provision of energy from renewable resources, there was a rush for and an ill-considered increase in the number of onshore wind-power systems, that may well represent a totally unacceptable pressure on important landscapes, including the national parks.
It is interesting to note that already it is envisaged that there may be proposed as many as nine significant major wind-power developments on the edge of the Lake District National Park, where I live. Such developments would also have severe implications, in some instances, for the Yorkshire Dales National Park.
When the Bill is considered, I hope that the Government will be prepared to accept the case for making it an explicit responsibility of the Secretary of State to take fully into account the national parks and other similar concerns when drawing up and making the renewables order. This would not only help to protect the landscape but would surely benefit those seeking to develop renewable energy; it would give greater certainty and clarity to the decision-making process; and it would ensure that projects—into which, necessarily, a lot of work had been put—were likely to succeed. They would have been assessed environmentally at an early stage of the process and would therefore be less liable to negation on planning grounds. This would positively assist the Government in reaching their renewable energy commitments.
There are a number of sources of renewable energy—small-scale hydro-electrical power, for example. It would surely be sensible to place an obligation on the Government to consult local communities and relevant interests in areas of high landscape quality—such as areas of outstanding national beauty and national parks—to ensure that only the most appropriate schemes are considered.
A word now about the regulatory authority. Under the Bill, the primary duty of the regulatory authority, like that of the Secretary of State, is to protect consumer interests. This is obviously altogether good. However, there is room for some debate on exactly what are consumer interests. Many of us would argue that in a highly stressful and pressurised society, the interests of consumers very much include space for recreation and enjoyment, and the qualitative, scenic and aesthetic value of the countryside. It is disturbing, therefore, that there is no specific reference i n the Bill to environmental protection or to landscape and amenity issues as a significant duty of the regulatory authority.
It is true that the regulatory authority is required to have regard to any environmental guidance issued by the Secretary of State but, as I understand it, there is no obligation to respect that advice if the authority believes that it goes against the primary duty to protect consumers in a more immediate, limited, short-term economic way. I hope that the Government will be prepared to give the authority specific responsibilities in this respect and to lay down that where the authority takes action in this regard, there will be a duty on the Treasury, if necessary, to support what is required.
1159 That could make a huge contribution to environmental protection and enhancement by, for example, leading to more overhead cables being place underground.
Similarly, the gas and electricity consumer council should—I hope that the Minister will agree with me—have a statutory responsibility to report on the wider environmental performance of utilities and not just, as at present stipulated, on the fulfilment of energy efficiency obligations.
In this context, it is important to note that it has been the practice of the regulator to make calculations on a comparative cost basis. This inevitably means that standards are set by places like East Anglia, where costs are less and where, usually, straight lines can be planned through good soil across flat ground. This, of course, puts operators in less favourable terrain at a considerable disadvantage. The financial constraints on them can be considerable. Consequently, they can see themselves having no alternative but to put in overhead cables where environmental and aesthetic considerations make underground cables the obvious requirement. This works against the highly commendable aspects of government policy which aspire to precisely such wider environmental concerns. The Bill needs to be tested by how far it makes the utilities instruments for delivering wider policy in this respect rather than instead undermining the Government's expressed intentions, not least for the national parks.
If as a society we want a decent environment, to be enjoyed by all, we have to pay for it and the costs should be fairly distributed across the nation as a whole. Hence, the importance of my reference to the role of the Treasury. I hope that the Minister will be able to indicate that these points are taken seriously by the Government and that he will introduce amendments to respond to them, thereby still further enhancing an otherwise sensible and encouraging piece of legislation.
I should like to finish as I started. I find the Bill exciting not only because it is practical and sensible but also because it reasserts the sense of responsibility at the heart of our industrial affairs.
§ 5.23 p.m.
§ Baroness Byford
My Lords, I join other noble Lords in thanking the Minister for proposing the Bill so clearly. I welcome the setting up of a single regulatory body and a combined and independent consumer council, and the opportunity to consider additional social help for those in greatest need who carry the greatest burden of cost because, unfortunately, they cannot pay upfront through direct debits. Furthermore, I share the concern expressed by other noble Lords about the extra regulatory burdens that may be carried by industry and, with them, the extra costs. We shall come to those points in Committee.
My interest in the Bill is mainly related to the proposed obligation for suppliers of electricity to source a proportion of their production from 1160 renewable materials. My noble friend Lord Jenkin rightly stressed what he saw as the lack of investment in R&D. I believe that there may be a need for some pump priming in this area. Perhaps the Minister will respond to that point when he replies. A committee, ably led by the noble Baroness, Lady Hogg, looked into the issue of renewable energy and came up with a number of recommendations on non-food crops. It recommended that a Minister of Science should promote those products, a point mentioned by my noble friend Lady Buscombe.
The use of waste, especially in incineration plants like that of Tyseley, is both impressive and a hopeful indication of one way of coping productively with what may be the major problem of this century. Hydro-power has always been awe-inspiring if only because the surrounding scenery is wonderful and the conversion plants are so massive. Wind power, to which the noble Lord, Lord Judd, referred, both onshore and offshore, is perhaps a mixed blessing, but given time and more research I am sure that it will contribute greatly to sustainable power generation. I smiled a little when the noble Lord, Lord Judd, said that he welcomed wind power but "not in my back yard". Many of us would take that view. I realise that national parks and AONBs have their place, but they have their responsibilities too.
My overwhelming concern, however, is with the use of non-food crops. At this point I should perhaps declare an family farming interest, which seems out of context in this debate but because of certain provisions of the Bill is not. Things seem to have gone quiet recently in the area of willow chip power generation. I suspect that I shall be asking the Minister for information on progress, or lack of it, any time now. That is for the future. Today I should like to ask about the intentions that lie behind the words in Clauses 61 to 66, to which other noble Lords have referred.
Will the Minister confirm that the Secretary of State will have powers progressively to increase the proportion of power to be generated by each supplier from renewable sources, whether in the form of an annual uprating or a periodic hike? Will he indicate whether the Government are minded to publish their proposals in the form of long-term plans to enable the producers of each renewable source to undertake necessary preparations to meet the demand? It is obviously a long-term project.
I am also concerned at the inclusion of Clause 64, which frankly I do not understand, even with the help of the Explanatory Notes. It seems to indicate that any electricity supplier which does not supply the requisite level of output generated from renewable sources can pay a sort of on-the-spot fine that will then be distributed by the authority among the electricity suppliers. Presumably the one fined will not be eligible to partake in the share-out of his own penalty, but it does not say that he cannot benefit from fines paid by other suppliers who commit the same misdemeanour.
1161 Clauses 58 and 94 specify that financial penalties for breaking the licence conditions shall be paid to the Consolidated Fund. Would it not be more consistent for such penalties to be paid to the electricity suppliers, as in Clause 64?
I should like to suggest that there should not be a get-out from the obligation to use renewable sources, but that if there is shown to be good and sufficient reason for this escape route, the fines should be punitive and devoted in their entirety to research into the production and pre-treatment of renewables and into cleaner methods of power production from fossil fuels.
I am concerned also at the implication, in Clause 28, that exemptions to the licensing requirements may give rise to an overburden of bureaucracy for those people who rent out accommodation in rooms or flatlets and have their own power meters controlling the supply. Would it not be preferable to allow electricity and gas to be supplied without a licence up to a specified amount each year by any one supplier? That would eliminate the need to have a system for granting exemptions to, for example, the thousands of people who let out two rooms as bedsits. I apologise if my questions to the Minister are a little specific, but they relate to an important, albeit small, part of the Bill.
We should also like to now how much money has been allocated already under regional development regulation grants to those who produce non-food crops.
I agree with the comments of other speakers regarding the extra regulatory burdens and look forward to debating the matter in greater detail in Committee.
§ 5.30 p.m.
§ Lord Beaumont of Whitley
My Lords, I, too, should like to thank the Minister for his exposition of the Bill. He rather depressed me as far as the end of his third theme. He seemed to be concentrating very much on monetary saving and lowering the cost of energy. I do not believe that to be a major consideration, or that it is necessarily to be welcomed. In the interests of defeating global warming, the costs of energy probably have to be kept up. They must include the costs of global warming, and that will raise energy prices enormously.
The question of the poor, which no one who knows my record in this House will think that I underrate, is to he dealt with in different ways: by t he redistribution of wealth, which no one has appeared prepared to tackle, and by individual arrangements suggested in the Bill and in relation to its provisions. I am on the side of that approach. The matter is not to be dealt with by merely reducing the price of something that already costs the whole world a great deal.
I agree almost entirely with the remarks of the noble Lord, Lord Judd. I share the vice-presidency of the Council of National Parks and I have read its briefing, although I do not necessarily agree with all of it. For instance, I have a slight weakness for wind generators and have crossed swords with the right reverend 1162 Prelate the Bishop of Worcester on the matter. I hope that we shall hear from the right reverend Prelate in Committee. I am aware of the necessity of sorting the matter out, so that it is seen to be taken into account. It is important that everyone who has a case to argue is given the chance to do so.
As the noble Lord, Lord Judd, said, we need to discuss consumers, not as spenders of money but as enjoyers of wealth—people being given satisfaction in regard to the environment in which they live and the knowledge that the environment as a whole, in terms of global warming, is being cared for by their government.
If we take these matters into account, there will be a large number of amendments for debate in Committee. I very much look forward to the Committee stage, which I believe will be very worth while. I hope that the Government are prepared to meet people such as the noble Lord, Lord Judd, and myself on the matters that we shall be putting forward. I suspect that I shall find myself in the same Lobby as the noble Lord, and I am sure that I shall not find myself in the same Lobby as the Conservative Front Bench, who seem to make the mistake of concentrating almost entirely on the monetary values involved in the Bill rather than social and environmental values. Those are important. They are the business of the Government. I pay tribute to the Government to the extent that they have already included those concerns in the Bill's content, and to the extent that that has attracted an attack by the Conservative Party. That can be nothing but a badge of honour. I hope that they will see their way to producing more in the forthcoming stages.
I commend the Bill. It is an enormous step forward. However, there are improvements to be made.
§ 5.35 p.m.
§ Baroness Wilcox
My Lords, as my noble friend Lady Buscombe has so eloquently and movingly said, it is a great disappointment that the Government removed the telecommunications and water provisions from the Bill during its Committee stage in another place. I disagree with the suggestion by the noble Lord, Lord Beaumont, that my noble friend spoke only of money.
Water now rates its own Bill—so disadvantaged water consumers will just have to wait. A White Paper on communications regulations might eventually result in an "Ofcom" and a consumer council to mirror it—so telecommunications consumers too will just have to wait. I find that very disappointing.
So what have we? I am looking forward to the promised and heralded shift in the balance of regulation in favour of consumers of energy. I am looking also for a more accountable, open and consistent approach to utility regulation across the board, combined with effective and independent consumer representation. I and the many consumer representatives across the country will judge the Bill on whether it lives up to these criteria.
1163 We are talking here of essential services. The United States has right-to-know legislation, over and above the Freedom of Information Act, which recognises how essential and life-supporting the utilities are, and how powerless and lacking in effective choice the domestic consumer often is, especially the poor and disadvantaged consumer. On this point, I agree with the noble Lord, Lord Borrie. I have long argued, as I did during my time as chairman of the National Consumer Council, and as does David Hatch, its present chairman, for the establishment of independent consumer councils across the utilities, and that they should be independent and strong advocates of the interests of domestic consumers in their particular sector. The effectiveness of the legislation that is before the House will depend on some of the Bill's detailed provisions. Perhaps I may outline four key areas of concern to consumers.
As well as operating transparently and openly, the gas and electricity consumer council (GECC) should have a research capacity to enable it to speak authoritatively about consumers' experiences and the activities of the regulated companies. I welcome the Government's amendment in the Commons to require the GECC's work to focus on the needs of disadvantaged consumers under the provisions of Clause 17.
The ability of consumer councils to gain access to company information and to disclose and publish information will be crucial in enabling them to carry out their job effectively, independently and authoritatively, and to gain the confidence and respect of consumers. There are concerns about the provisions relating to GECC's access to company information and the disclosure test for the publication of information.
Secondly, I believe that GECC's power to publish information is crucial to its role in protecting consumers. I am concerned that the criteria set out to enable it to decide whether to publish (Clause 19(3) and (4)) may be too restrictive in certain circumstances. GECC will be able to publish information only if it satisfies one or more of three criteria: that the individual body or concern has consented to the disclosure; that the information is available to the public from some other source; or if, in the opinion of the council, the publication of the information does not,seriously and prejudicially affect the interests of the individual or body".The GECC must also consult the body concerned and have regard to any opinion expressed by the authority about the publication of information. I am concerned that there may be cases in which the GECC wishes to publish information to protect consumers but it may be seen to affect "seriously and prejudicially" the interests of the energy provider. Currently, the Bill does not allow the GECC to publish 1164 information which is in the interest of the consumer but which might,seriously and prejudicially affect the interests of",the company concerned. I believe that that is an omission and that the GECC should be able to take account of the public, or even consumer, interest in deciding whether to publish such information. Other bodies such as the Food Standards Agency have a duty to consider the public interest when deciding whether to publish information.
Thirdly, I am concerned that the GECC will be able to access such information only via the regulator. I welcome the provision in the Bill to give it direct access, but I am concerned about the provision which enables the GECC to refer to the regulator refusals by companies to provide information. I do not believe that the regulator is the appropriate authority to deal with it, given that part of the consumer council's role is to scrutinise the decisions of the regulator. Therefore, there is a potential conflict of interest in arbitrating on such information requests. The National Consumer Council believes that the most suitable authority is the information commissioner—that position is established under the Freedom of Information Bill—and I support that suggestion.
Fourthly, third party rights to challenge the competition decisions of the Office of Fair Trading were given to consumer bodies under the Competition Act 1998. Given that the legislation gives utility regulators concurrent powers with the OFT on competition matters, it is open to the consumer council and other consumer bodies to challenge the regulator's competition decisions. However, this Bill does not give third parties the right to challenge the regulator's other decisions and I believe that it is, therefore, inconsistent. The Bill imposes a bias in favour of the companies over the consumer, as they will be able to challenge the decisions of the regulator on both competition and non-competition issues, and I believe that that is a further inconsistency. For the sake of consistency and to reflect the shift in emphasis of the regulatory systems in favour of consumers, as we are told the Bill seeks to do, the GECC and all consumer bodies should have that right.
Finally, the businesswoman in me always hopes for a free and active market that competes for every kind of customer. However, for the present I believe that in the case of essential life-supporting services which are still moving out of their old monopolies—sometimes into new ones, sadly—some kind of intervention in the market remains essential. I look forward to following through these points at Committee stage.
§ 5.43 p.m.
§ Lord Currie of Marylebone
My Lords, like my noble friend Lord Borrie, I start by declaring an interest as a non-executive member of the Ofgem management board, a special adviser to Ofgem and the DTI on the reform of electricity trading arrangements, and director of the Solar Energy Group.
I greatly welcome this Bill. It provides a much sounder basis for the joint regulation of the electricity and gas sectors, and an appropriate focus on 1165 consumers, both present and future. The Bill will also greatly enhance competition. Contrary to some of the voices on the Benches opposite, I believe that the Bill will allow regulation itself to bring down the weight of regulation. The Bill also gives due weight to social and environmental concerns and clears the way for the long overdue reform of wholesale electricity trading arrangements.
I should like to comment briefly on the withdrawal of telecommunications and water from the Bill. Contrary to the observations of the noble Baroness, Lady Buscombe, I do not believe that the result is a ramshackle Bill; on the contrary, we now have a much more coherent measure. The case for dropping telecommunications and water in view of the need for future legislation is a good one. The noble Baroness, Lady Wilcox, was concerned that consumers in the water and telecommunications sectors might have to wait, but I believe that to be a misrepresentation. A great deal can be done under existing provisions, as is demonstrated, for example, by the social action plan which Ofgem has developed under current legislation ahead of this Bill.
I make one plea. I hope that when those Bills come before Parliament we do not lose sight of the ambitions of the 1998 Green Paper A Fair Deal for Consumers which sought to modernise and make consistent across the sectors the framework of utility regulation. That future legislation must be aware of the need for consistency which will bring considerable benefits.
One of the key elements of this Bill, as noted by the Minister, is the sounder basis of governance that it gives to regulation. There was a real need for consistency between gas and electricity regulation which separate regulators simply did not provide. With the two sectors being so intertwined on both the supply and demand sides, and many major companies operating in both sectors, it was crucial to provide consistency in regulation to avoid important distortions to the competitive marketplace.
Like my noble friend Lord Borrie, I believe that the proposed structure of governance for the authority is a good one. My experience of the management board of Ofgem is that it works well in an advisory capacity, and I believe that in an executive capacity it will work well in the form of the new authority. It helps to depersonalise regulation—that is a great advantage—and does not slow down decision making. The creation of the single regulator helps to lighten the regulatory burden that faces companies. It means that they do not have to face two regulators simultaneously.
A crucial part of the Bill is the facilitation of the reform of wholesale electricity trading. Royal Assent to this Bill is required as soon as possible if the very tight timetable for implementation of that reform is to be achieved. Many other matters must be achieved by Ofgem, the DTI and the companies, but the key element is Royal Assent to the Bill. We are all familiar with the failures of the old pool system which remained unreformed for far too long. Along with retail competition and tough and fair regulation of the 1166 monopoly part of the business, the reform of electricity trading will deliver very major benefits in the form of lower prices.
Business is now preparing for this new trading environment. The private sector has come forward with proposals to launch power exchanges, and companies are preparing for the implementation of NETA. Traders are entering the market to create a much more vigorous, vibrant and deep market. Vigorous forward trading of electricity now takes place in anticipation of the reforms to come. If one looks at the prices revealed by that forward trading, which did not happen before because of the dominance of the monopolies, one sees that they are very substantially reduced. If one looks several years ahead, one sees that the reduction is of the order of 20 to 25 per cent. That is an indication of the major benefits which will flow to customers, not just from the reform of electricity trading, but from the introduction of competition into this sector.
It is not just a price benefit that we shall see. The broad evidence is that distortions to competition impede innovation while truly competitive markets provide a major spur to innovation and change. I have no doubt that the abolition of the pool, and the genuine competition in electricity that that can bring, will surprise us by the nature of the changes and innovation that it can bring.
I congratulate the noble Lord, Lord Jenkin of Roding, on being the architect, among others, of telecom privatisation. Few of us could have foreseen the benefits. However, I caution about the specifics raised in his detailed remarks. He referred to the need of careful cost/benefit analysis before regulatory change. But it is easy to identify the costs of changes, and difficult to identify the benefits. I have argued strongly that Ofgem should not attempt a cost/benefit analysis of reform of electricity trading because it will easily identify the costs, but the real benefits which arise from competition, particularly innovation, are hard to identify. Therefore, if one is considering regulation to promote competition—that is a key part of the regulatory function—one will impede change in that direction by a requirement of that kind. We shall need to look carefully at the detailed proposals.
The noble Lord, Lord Ezra, referred to the position of renewables and CHP. There is concern that the new trading arrangements will hit CHP and renewables. Much has been done to allay those concerns. Lower electricity prices, of course, will hit all generators. It will make their position less easy because they will receive a lower price. However, it is worth noting that many CHP plants are, on average, net importers from the grid. Companies in that position will benefit from the reform of trading arrangements.
The lower prices resulting from these reforms make it a good time to bring in the climate change levy if it is well targeted to promote the use of clean, green fuels and technologies and to discourage the use of dirty fuels. That should help the position of CHP and renewables.
1167 However, it is clear that the new trading arrangements place a greater premium on that type of generation which is predictable, consistent and forecastable, and disadvantage generation which is uncertain. I think that that is entirely appropriate. When there is unpredictable supply to the market, the system operator has to buy in expensive flexible plant to meet any shortfall. That is an additional cost that unpredictable sources of generation, whether clean or dirty, place on the system. That should be recognised in the system. It was not recognised in the old pool. One of the advantages of the new arrangements is that it will be recognised; and that will give an incentive for generators to be more predictable and reliable.
However, those renewables which are, unavoidably, less predictable may bear some cost. That has been mitigated. Some technical arrangements to do with aggregation will mitigate the effects on those unpredictable sources of supply. I would expect to see aggregators come into the market to help to manage this risk on the part of such generators. The team implementing the reform of electricity trading and Ofgem have gone to considerable lengths to examine whether there are additional problems that renewables and CHP face which need to be dealt with.
A lot has, therefore, been done. It would be a mistake to allow concern for this sector—as I said, I have a direct interest—to deflect us from the crucial aim of getting maximum efficiency from our generation sector. That is an appropriate objective. If prices fall sharply, and that raises environmental concerns, let us respond in the appropriate way: to tighten, strengthen and extend the climate change levy to deal directly with those environmental concerns.
I have a few more detailed points on the Bill to which I shall want to return in Committee. There has been discussion on whether there should be a cap on the level of fines that the new authority can impose. I see little advantage to the authority in having the freedom to impose unlimited fines. I do not see why the position should not be consistent with legislation such as the Competition Act. It is the type of feature which could discourage inward foreign investment. When people make foreign investment decisions, they consider the regulatory map, and a provision for unlimited fines might discourage. It is an issue to which we should return in Committee.
As my noble friend Lord Borrie said, the time limit of 12 months for the imposition of financial penalties may well be too short. In addition to the need to carry out the investigation, such a time limit could easily give an incentive for an alleged culprit being investigated to engage in a variety of delaying tactics. That is an undesirable feature.
There may also be an omission from the Bill. As regards gas, we already have arrangements to provide for a supplier of last resort in the event of commercial difficulty. I do not think that there is such a provision in the Bill for electricity. That is a concern because with the extension of competition we must expect the failure 1168 of a supplier in the more competitive environment and we must avoid that leading to any unnecessary disruption of supply to ordinary customers.
Finally, I welcome the independent role of the consumer council together with its information-gathering powers. In Committee we should consider whether the precise powers are consistent with other legislation such as the Freedom of Information Bill, to avoid undesirable scope for legislative arbitrage (if I may use the term) between the differing powers of various Acts. I share the concern of the noble Baroness, Lady Wilcox, that the authority appears to be adjudicator in the event of disputes between the council and the authority on information questions. That is an uncomfortable position to put the authority in.
I welcome the Bill. It will bring great benefits to customers, both large and small, and I look forward to the more detailed discussion in Committee.
§ 5.57 p.m.
§ Lord Kingsland
My Lords, my noble friends who spoke from the Opposition Benches today have reaped such a rich political harvest that I see no need either to embellish their language or elaborate their arguments. It would be both impertinent and otiose on my part. I should be like a gleaner in stubble land. I shall look ahead, therefore, to the Committee stage of the Bill in order to ask the Minister some questions.
However, before doing so, perhaps I may respond to one remark by the noble Lord, Lord Beaumont of Whitley. He made one or two—if I may so say in all generosity—unsporting comments about the excellent speech of my noble friend Lady Buscombe. In particular, he referred to my noble friend's monetary approach to the Bill. But he will have heard the Minister say that since the passage, by the previous government, of the gas and electricity legislation the consumer has benefited not in monetary but real terms by some 30 per cent.
That is real wealth creation, by measures passed by a Conservative government, for the consumer. What could be a more tangible contribution to the welfare of the nation than that? The Minister quoted that statistic, not my noble friend. But his charm and self-effacing manner prevented him from attributing it directly to the Conservative Party.
The noble Lord, Lord Beaumont of Whitley, made an observation about the social and environmental benefits of the Bill. If he takes the trouble, which I am sure he will, to read my noble friend's speech in Hansard, he will see that she said that those benefits were highly desirable. What my noble friend rightly objected to was the fact that the benefits were being delivered through the Bill by more regulation, at higher cost to the consumer; and not by the general tax and welfare legislation initiated by the Treasury in the normal course of managing the Budget. I have no difficulty in endorsing the position taken by my noble friend.
§ Lord Beaumont of Whitley
My Lords, I entirely take the noble Lord's point and accept what was said by his 1169 noble friend. However, it is that measure in the Bill of which I approve and I was protesting against her disapproval of it being in the Bill.
§ Lord Kingsland
My Lords, I did not attribute any mischievous motive to the noble Lord; but having heard what he has just said I urge him to look again at Hansard because I believe that my noble friend was making quite a different point.
I turn to the Bill. I want to make three observations, the first two rather tersely and the third, I fear, at greater length. My first observation concerns Clause 13, which deals with the objectives. The clause states:in carrying out their respective functions under this Part is to protect the interests of consumers in relation to electricity conveyed by distribution systems, wherever appropriate by promoting effective competition between persons engaged in, or in commercial activities connected with, the generation, transmission, distribution or supply of electricity".Does the Minister see any circumstances in which it would not be appropriate to achieve such consumer benefits by promoting effective competition between persons engaged in the generation, transmission, distribution or supply of electricity? I understand that, as regards the National Grid, such competition is impossible to generate. But apart from that, would the Minister accept that the generation of competition between these commercial actors will always benefit consumers?
My second point of detail concerns the use of privileged and confidential information which the authority and the National Consumer Council can, on occasions, require a licence holder to yield. I was most interested in what the noble Lord, Lord Borrie, said about potential inconsistencies between this Bill and the Competition Bill. Perhaps I should also add the Financial Services Bill and the Freedom of Information Bill. They all deal with the difficult question of privileged and confidential information and the circumstances in which it is publicised or passed on to third parties.
Perhaps I may invite the Minister to consider whether this is not an appropriate moment in the legislative timetable to iron out the differences between the various Bills and Acts so that we can have a common approach to the treatment of privileged and confidential information. It is a matter of extreme importance to the way in which licence holders conduct their business.
I accept that there will always be circumstances in which it is necessary for a regulatory authority to obtain such information; but, equally, I suggest to the Minister that the circumstances in which such information is passed on ought to be most carefully considered. Only when it is really necessary to do so—and then on the basis of an objective test—should permission be given to a regulatory authority to pass such information on to other parties.
The point I want to make at greater length concerns the question of penalties. As the noble Lord, Lord Borrie, pointed out, Clause 58 introduces a new Section 27 into the Electricity Act 1989. Essentially, the clause states that new Section 27A will, where a 1170 licensee breaches the condition of a licence, or a requirement of the Act, or a specific performance requirement, that licensee will be vulnerable to a penalty. As the Bill stands, that penalty is of unlimited scale. I believe that the current provisions are not only incompatible with existing legislation, but also threaten the undertaking that the Secretary of State will have given that the Bill conforms with the European Convention on Human Rights.
Perhaps I may explain the position which the Opposition propose to take in Committee on this matter. As regards unlimited penalties, the only constraints on the regulator in the Bill are, first, that the penalty must be reasonable in the circumstances; and, secondly, that at some stage there will be produced under new Section 27B some policy guidance. It would be extremely helpful to the House if the Minister could produce a draft of the policy guidance before the end of the Committee stage.
To the extent that the policy guidance constrains the circumstance in which the penalty can be unlimited, I am sure that the guidance will be favourably received by the Opposition. However, to the extent: that the regulator has the widest discretion to impose a penalty of unlimited scale, there is clearly a danger that such a penalty will fall foul of the criminal provisions of Article 6.1 of the European Convention on Human Rights.
The second point I want to make about new Section 27A is that it introduces the potential for multiple jeopardy. As the noble Lord, Lord Borrie, will recall, in the course of the long passage of the Competition Bill 1998 through this House great care was taken to ensure that where a regulator in either the gas or electricity industries decided that a particular matter was more appropriately dealt with by the competition provisions under the aegis of the Director-General of Fair Trading rather than under the regulatory provisions, the regulator would go down the Competition Bill route and would forgo his right to use, say, in the case of electricity, Section 25 of the Electricity Act 1989.
However, no such limitation is introduced into proposed new Section 27A. In other words, it would be possible for the electricity regulator, the new joint regulator, not only to penalise a licence holder under the Competition Act, but also to penalise the licence holder under the Electricity Act at the, same time. In my submission, that is totally against the spirit of what the Government decided when they were promoting the Competition Bill 1998 in your Lordships" House.
There is also double jeopardy in another sense because under the Electricity Act there is already a power for individuals who are adversely affected by a licensee who fails to perform to an appropriate standard. A provision already exists which requires the licensee to pay compensation to an adversely-affected party.
Thirdly, with respect to penalties, in the Competition Act the circumstances in which a penalty can be imposed are limited by the requirement that the wrongful act is committed intentionally or negligently. No such constraint exists in this Bill.
1171 I hope that, over the next week or two, the Minister will take the opportunity to consider the question of penalties and whether it would be appropriate to narrow the discretion in which the regulator can operate. Of course, I have no doubt that the Minister will say to me, "Well, that is all very well. But later on under Section 27 the licensee has a right to appeal".
That is, of course, true. Under new Section 27E, in circumstances where the regulator acts ultra vires or where he breaches some expressly-stated procedural requirement in imposing the penalty or where he gets wrong the date at which the penalty is required to be paid, the decision can be quashed by the court.
However, in my submission there are no circumstances in which the court is capable of reassessing the amount of the penalty. Although the Act states that the tribunal in question can impose a lesser penalty, there are no powers for the tribunal to look at the complaint of the licensee so that that objective can be achieved.
How does this measure up to the European Convention on Human Rights? In my submission, badly. Article 6.1 of the convention requires a hearing to be by an independent and impartial tribunal and requires the hearing to be fair and public. How can the regulator, who determines the penalty, be an independent and impartial tribunal? The regulator decides whether he will pursue the licensee. He assesses whether the licensee has broken the terms of his licence. He then decides what the penalty is. He is an individual appointed by the executive. As has been said in the context of another piece of legislation for which the Minister is responsible, he is legislator, prosecutor and judge, all rolled into one. In my submission, that does not meet the standards laid down in Article 6.1.
Moreover, what rights does the individual have to a fair and public hearing in this procedure? None whatever. He can only make representations. The Minister may say to me, "Well, nevertheless, there is an appeal to the court". In my submission, for the reasons that I have already given, that appeal is wholly inadequate because the facts cannot be reviewed by the court.
I shall listen with keen interest to what the Minister says because he is responsible for another Bill in your Lordships' House: the Financial Services Bill. I wonder to what extent the principle of "Chinese walls" applies to the approach of the Minister.
He will be well aware that, in relation to exactly the same situation in the Financial Services Bill, the Government have come up with a completely different solution: a solution which, although in my view still not attaining the standard required by Article 6.1 of the convention, at least meets it more closely. Under the Financial Services Bill, the regulator can only recommend a penalty. Moreover, the right to go to a tribunal is a right to have the case completely reheard de novo, including a complete rehearing of all the facts.
1172 For reasons that the Minister knows intimately, I still do not believe that the Financial Services Bill meets the standard required. However, in my submission, this Bill certainly does not. Therefore, perhaps I may suggest to the Minister that, at least, he should be prepared to go so far as to imitate what he has already done in the Financial Services Bill in Clause 58 of the Utilities Bill.
I have dwelt at some length on this matter; but we in Opposition take it very seriously. We believe that the consumer deserves a fair deal under the Bill. However, it is the licensee who generates the services and in my view the licensee also has rights. He certainly has human rights under the European Convention on Human Rights, which very soon is to become part of the law of the land.
§ 6.15 p.m.
§ Lord McIntosh of Haringey
My Lords, I am grateful to all noble Lords who have taken part in the debate. The noble Lord, Lord Kingsland, kids himself that he has reaped a rich political harvest out of it. I can assure him that very few points made from the Opposition Benches have not been anticipated and are not capable of response. However, whether I shall have time to respond to every one is quite another matter. Therefore, I make the usual proviso that, if I miss any points, I shall certainly undertake to write to noble Lords. At the same time, perhaps I may say that, as is always my practice with regard to legislation of this kind, I am very happy to meet noble Lords on any and all Benches to discuss matters of mutual interest and concern where potentially we could minimise misunderstanding and disagreement by such a meeting.
My noble friend Lord Judd described this as an "exciting" Bill. I believe that some noble Lords may not entirely agree with that. I have found the study of this subject absorbing. However, I believe that it is fairer to say that a great deal of the Bill is very technical in its application and that, if I am really looking for excitement, I might go elsewhere.
I detect five strands in the debate this afternoon and I shall try to deal with each of them in turn. The first is the accusation that the Bill adds to the cost of regulation and that, in effect, it forms a stealth tax on the consumers of energy to finance the Government's social and environmental programmes. That accusation was made by the noble Baroness, Lady Buscombe, but was not repeated by anyone else. I was grateful for that.
The second strand is the whole issue of financial penalties, alluded to by many noble Lords. The third concerns the whole range of issues about the environment. To that, I believe I must append "energy efficiency" as I do not believe that I can distinguish between the two in debating the issues which have been raised. Then there is a series of questions relating to the consumer council, its powers of research and publication, and the way in which it will operate. Finally, there are questions about fuel poverty. I hope that I can subsume most of the points that have been made into those five general areas.
1173 Perhaps I may start with the accusation made by the noble Baroness, Lady Buscombe, that the way in which we are tackling environmental and social issues represents what she called an "open ticket" to environmental and social taxation. I must say that the guidance which is described here and about which the noble Baroness, Lady Buscombe, seems to be not enthusiastic, is guidance and not direction. That is an important distinction and one which was recognised by my noble friends Lord Borrie and Lord Judd. However, my noble friend Lord Judd recognised it in the sense of looking for greater and more specific responsibilities than could be achieved by guidance.
The important point is that the authority has a range of other statutory duties which have to be weighed when considering how best to contribute to policies. If the Government want to implement social or environmental policies with significant financial implications for consumers or for regulated companies, they are committed to doing so not only by means of guidance but by separate legal provision. It is not our intention to use guidance as a substitute for legal provision. The fact that powers to set energy efficiency and renewable obligations are specifically provided for in the Bill and not left to guidance is proof of this policy and action. The concept of guidance is widely supported. It will ensure that social and environmental matters are properly factored into the authority's decision-making process without compromising arm's-length economic regulation, which is what we aim to achieve.
Before leaving that matter, I should refer to the point made by the noble Lord, Lord Kingsland, about com petition, because it does not fit in anywhere else. He asked whether there are any circumstances in which promoting competition is not appropriate. He immediately answered his own question with an example about pipelines, but there are many such areas—electricity generation, gas and electricity supply—which inevitably have monopoly characteristics. Competition cannot always be the right framework. We are simply not going to duplicate gas pipelines or electricity cables. We are going to find ways round the problem by virtual competition. It is still the case that we want to secure benefits for consumers by competition, but we recognise that that will not always be the case. This must, however, be set in the context that this Government have effectively promoted competition.
I was accused of adding excessively to the cost of regulation, costs which have to be borne by consumers. The noble Baroness, Lady Buscombe, referred to the trend in the Ofgem budget. We have to distinguish in the Ofgem budget between the one-off costs for the establishment of the new electricity trading arrangements and the office merger, which are forecast at £68.3 million, and the remainder of the costs. If those costs are struck out, the costs trend is only very slightly upwards. For 1997–1998, it was £29 million; for 1998–1999, £35.7 million; for 1999–2000, £34.5 million; for 2000–2001, £36.4 million. These costs are not sufficient to justify the kind of statements which have been made.
1174 The noble Lord, Lord Ezra, asked how much the new electricity trading arrangements will cost the industry and consumers. Of course, all these figures are to be found in the Explanatory Notes which have been supplied with the Bill, particularly in paragraphs 167 to 170. The total central and industry start-up and operating costs for NETA were estimated in the July 1999 NETA document as being between £136 million and £146 million per annum for each of the first five years. If that is passed on to consumers, as it ultimately will be, it will mean an annual increase of less than 1 per cent in electricity prices, compared with the projected 10 per cent fall in wholesale prices which NETA will bring about.
I know that that will not satisfy the noble Lord, Lord Beaumont, who wants more expensive power. However, it is our objective, in the context of this Bill, to bring benefit to consumers. If it were to be a general principle of public policy for the Labour Party, as it is for the Green Party, to have more expensive power, I have no doubt that we would have to put that into a manifesto and that it would be judged by the electorate, as the Green Party's proposals will also be judged by the electorate. After the first five-year period, the operating costs will be about £30 million for the industry as a whole. No amount of money is insignificant, but it is certainly not of the sort that is being suggested.
The noble Baroness, Lady Byford, made a couple of related points. The first was about exemptions for landlords. We expect landlords to be covered by a clear exemption, without needing to apply for it, so there should not be any increase in regulatory costs for them.
With regard to financial penalties and the issue of whether or not there should be a limit on financial penalties, as there is in the Competition Act, the noble Lord, Lord Kingsland, raised, as he did on the financial services market, his fear that there is a contravention of Article 6A of the European Convention on Human Rights and that these will become criminal offences rather than civil offences. We are doing all that we can to ensure that they are civil offences. We believe that they are civil offences. We do not believe that they are in contravention of the European convention. It is for that reason that we do not use the word "offences". We have referred to them as "contraventions" or "breaches of obligations", rather than "offences", which was the word used by the noble Lord, Lord Kingsland.
This, of course, is not new. As the noble Lord, Lord Ezra, pointed out, the Gas Act provides for penalties in rather the same way as this Bill. Although the European Convention has not yet been incorporated into British law, it is available and there have not, as far as I know, been any challenges of the penalty regime. The fact is that the current enforcement system is weak. A regulator is always one step behind companies which breach their obligations, and we need to put this right.
We do not need a limit on the level of penalties. That would undermine the effectiveness of the powers. It has been honourably pointed out by my noble friends 1175 Lord Borrie and Lord Currie, who subjected me to friendly fire on this point, that a penalty imposed must be reasonable in all the circumstances of the case. A serious contravention could attract a considerable penalty; a minor contravention could attract only a minor penalty. If we had a limit, we should not be able to impose a penalty which was reasonable in all the circumstances. The Competition Act is different. These are different—
§ Lord Kingsland
My Lords, I am most grateful to the Minister for giving way. As a substitute for the word "reasonable", will the Minister consider the word "proportional"—a proportional penalty?
§ Lord McIntosh of Haringey
My Lords, I resisted that in the Financial Services Bill and I shall resist it here. The word "reasonable" is well understood in law. I am not at all sure that "proportional" is understood in law. Proportional to what?
§ Lord Kingsland
My Lords, I am most grateful to the Minister for giving way again. The notion of proportionality derives from the European Convention on Human Rights. The noble and learned Lord the Lord Chancellor was rich in the language of proportionality during the passage of the Human Rights Bill through your Lordships' House; and I believe that, at least, certain sections of the Government are most familiar with this concept which will become enshrined in our law from 2nd October.
§ Lord McIntosh of Haringey
My Lords, the noble Lord, Lord Kingsland, has a greater knowledge of government legislation than I. I look forward to debating the point when he puts down an appropriate amendment. My understanding is that "reasonable" works pretty well. Despite what he and the noble Lords, Lord Borrie and Lord Currie, have said, the Competition Act is under a different regime with limits which can be traced back to European competition law limits, and there is no reason why the Utilities Bill should follow that precedent.
I was asked about the safeguards which exist for companies in terms of financial penalties. There are many safeguards for companies, and that is relevant to the ECHR point. First, it must be reasonable in all the circumstances of the case. Secondly, the authority will have to produce and consult on a statement of policy on the imposition of penalties. Thirdly, the authority must serve notice of its intention to impose a penalty, setting out which obligation has been breached; which action or omission constituted the breach; and the proposed level of the penalty. Fourthly, the authority must bring to the attention of interested parties and take account of representations received. The authority may then vary the proposed level of the penalty. The company may challenge the imposition or amount of the penalty or payment schedule in the courts. So companies which honour their obligations in all of those respects have nothing to fear.
1176 My noble friends Lord Borrie and Lord Currie both suggested that the proposed time limit of 12 months is too short. I shall think about that point. It is important that these provisions, which plug a significant gap in the regulatory authority's powers, should be fully effective, but I shall think about that between now and the Committee stage.
The noble Lord, Lord Kingsland, asked me when the statement of policy would be produced. That is a matter for the authority and not for the Government. However, I shall find out what further information I can on the point and write to him about it.
The noble Lord, Lord Kingsland, asked me also about the relationship between the Competition Act and the Utilities Bill. The Competition Act strengthened the sectoral regulators' power to investigate and remedy anti-competitive behaviour in the utility sectors by providing for them to exercise powers concurrently with the DGFT. That is joined-up government. That was anticipated in the Competition Act.
The thrust of the proposals in the Utilities Bill is to improve sectoral regulation, making it more accountable, transparent and predictable and to ensure that consumers receive a fair deal. There is no contradiction between those aims.
The noble Lord also asked me about the relationship with the Freedom of Information Bill. This Bill's information provisions are concerned with proactive publication by the regulator and the consumer council. There is a clear distinction between that and freedom of information which is a right to information when it is requested of public authorities by persons. Of course, the freedom of information regime will apply in due course both to the regulator and to the consumer council.
I have a more complicated answer on multiple jeopardy. Since I am half way through the maximum time which I wanted to allow myself and nothing like half way through my response, and since nobody else raised the issue, perhaps the noble Lord, Lord Kingsland, will allow me to write to him about that. The same is true of the imposition and amount of financial penalty.
Therefore, perhaps the House will allow me to move on to the issue of environmental friendliness, which has been a major topic of debate this afternoon. The starting point must be that we have environmental commitments, but they go wider than this legislation. The climate change programme, for example, which we published on 9th March involves matters concerned with this legislation but not only matters which are concerned with it. My noble friend Lord Judd and others asked that environmental and energy efficiency objectives for the authority should be put in parallel with those in relation to the consumer. I say to them that that would not be appropriate. The primary purpose must be to serve the interests of consumers. In itself, that involves an element of environmental protection and energy efficiency. But it is not the only way in which environmental protection and energy efficiency will be achieved.
1177 But the Bill makes a major contribution in that sphere. It includes a duty on Ministers to give guidance to regulators on social and environmental aspects of government policy. It involves new renewables obligations and new energy efficiency obligations. Our renewables obligation is, and has been clearly stated as being, in relation to carbon emissions, saving 2.5 million tonnes by 2010 from achieving 10 per cent generation from renewables. The noble Lord, Lord Ezra, thinks that that should be written on to the face of the Bill, but it is a firm commitment by the Government which affects much legislation and it would not be appropriate to put it on the face of one Bill.
The Bill provides a level regulatory playing field for embedded generation, including combined heat and power and small-scale solar generation.
Perhaps I may start at the beginning of the questioning about renewable technology. The noble Baroness, Lady Buscombe, suggested that our funding on research was inadequate and represented only £10 million. In fact, it was £10.5 million in the last financial year; it is £14 million this year; and will be £18 million next year. I believe that that is a suitable answer to the noble Baroness, Lady Byford, who asked for pump-priming finance.
The noble Baroness, Lady Byfordl, asked me also about whether the Government can increase the renewables obligation. The answer to that is yes. She asked me when the Government will publish their long-term plan for renewables. We have already declared our target. We shall consult further on the target as we get into the period of the build-up towards achievement of that target. We shall establish a clear, long-term framework.
I was asked by the noble Lord, Lord Ezra, about the impact of the new electricity trading arrangements on combined heat and power and renewables. The problem is that those are not homogenous. The impact of ]META on them will vary, as indeed, the environmental proposal document., which was published last October, made clear. Most combined heat and power sites are net importers of electricity, as my noble friend Lord Currie said, and will benefit from cheaper wholesale electricity prices. Renewable plants which have unpredictable outputߞfor example, wind generatorsߞmay incur imbalance charges but not all renewables generators have unpredictable input.
The noble Baroness, Lady Byford, is enthusiastic about energy from waste. Many in the environmental lobby are not at all enthusiastic about energy from waste and there is great controversy on that subject among those who are concerned with those matters.
I was asked by the noble Lord, Lord Ezra, about net metering. The Bill is neutral on that. There can be agreements. There have been some agreements about net metering; in other words, those who are generating electricity from generated plant selling back to the generator at the same price as they could buy in. The answer can only be that sometimes it is appropriate and sometimes it is not. The problem with the surplus 1178 from embedded generation is that it is unpredictable and, particularly from solar power, is likely to come at a time when demand generally is much lower unless we make better use of air conditioning than we do at the moment.
§ Lord McIntosh of Haringey
My Lords, that may have to be done by contract rather than by law, by encouraging net metering. We are certainly not discouraging net metering by anything which is being done.
The noble Lord, Lord Jenkin, asked me some very interesting questions about biomass and renewables and again, those are quite technical and were specific to him. Perhaps he will forgive me if I write to him about them.
In general, the suppliers will need to draw on new technology such as offshore wind and energy crops and non-food crops in order to meet their obligation in the longer term.
The point about the traded obligation is very clear If you do not have a traded obligation, some suppliers will achieve their objective and then rest on their laurels and not go any further when they could go further; and some will not be able to achieve their objective. If you have traded obligations, you have a financial incentive for those who could go furl her than their minimum objective to do better.
§ Lord Jenkin of Roding
My Lords, I shall be happy to receive a letter from the noble Lord. I totally support the idea of traded obligations. In fact, my maiden speech in this House was on that subject some 14 years ago. In his correspondence with m. I hope that he will be able to deal with the point about the MAFF scheme.
§ Lord McIntosh of Haringey
My Lords, I shall certainly try to do that.
The noble Lord, Lord Judd, raised the issue of wind farms near national parks. That is an example of the way in which renewable energy is not universally approved of by everybody, as the noble Baroness, Lady Byford, said. There is an element of not wanting the hum or the sight of wind farms too close. That does not apply just if one lives near national parks, but wherever one lives in the countryside.
The noble Lord, Lord Jenkin, made a specific point about the effect of regulation on the offshore industry. For the purpose of the principal objective of the authority, which is to protect the interests of consumers, the word "consumers" is defined to include future consumers; in other words, our children and grandchildren, who, in due course, will have their own electricity bills. So would it be consistent with the objective to impose measures that, even if they were 1179 attractive in the short term, would reduce the supply of affordable gas in the longer term? If the offshore industry believes that that would be the effect of any particular proposal, we would listen to it. We shall be glad to receive any correspondence or hold any meetings that would be appropriate for that purpose.
I now move on to the issue of the consumer council. Perhaps I should set out the role of that council in dealing with individual consumer complaints. The noble Lord, Lord Borrie, appears to believe that it would be appropriate for the council to have an arbitration system. The present arrangements for the consumer council are confusing and frustrating. They are different for electricity and gas, as those concerned with consumer interests know. The joint council will have a duty to investigate complaints and the right to require—not request—information from the companies relevant to a complaint, so that it can assemble the whole picture. It will try to resolve the complaint satisfactorily in the light of its investigations, and it will seek, by agreement, to resolve complaints as far as possible by mediating between the consumers and the utilities. It will also inform the regulator if complaints raise enforcement or regulatory policy issues.
I believe we are providing the classic consumer protection service: expert assistance, backed by information gathering powers so that the complaint can be resolved satisfactorily. That is complemented by the publication powers that are not exactly those of the authority, which go wider, but the council will be able to publish anything that it believes will promote the interests of consumers without the consent of those to whom the information relates, unless the publication will have serious and prejudicial effects on those persons. The council may publish information, even commercially confidential information, which has adverse effects as long as they fall short of serious and prejudicial effects. Serious and prejudicial effects are not an exemption from publication by the authority because the authority is there to come down like a ton of bricks on people who behave badly. That is not exactly the role of the consumer council.
In relation to most consumer protection organisations, the harm threshold is a high one. However, I understand why the noble Lord, Lord Ezra, says that there is a conflict in the advice he has been given by the Consumers' Association and the CBI. I acknowledge that we fall in between the two, and probably cannot satisfy either of them.
I hope that I can reassure the noble Baroness, Lady Wilcox, that what I have said includes the right to gather information, the right to conduct research as well as publication itself. If direct access to information is refused by the utilities, there is the possibility of a reference to the authority—the licensing authority—which will have sanctions that it can apply in appropriate cases.
Perhaps I should say more about the role of the information commissioner, mentioned by the noble Baroness, Lady Wilcox, and by the noble Lord, Lord Currie. We accept that there may be a role for the 1180 information commissioner, or perhaps some other arbitrator, in adjudicating disputes about the council's access to information. That may be in cases where the licensee or the authority considers that it has a right to reject a request for information under the regulations setting out the exceptions to the council's right to information. The regulations aim to provide an objective test.
Currently, the Bill provides that the authority will decide those matters, but we see a case to retain some flexibility as to who may be the best person to adjudicate so we intend to bring forward an amendment in Committee to allow for the appointment of an adjudicator by regulation.
The issue of reasonable consumer interests, raised by the noble Lord, Lord Ezra, is a difficult one that I do not have time to deal with now. If it comes up in Committee, we can discuss the matter then. The noble Lord has received representations. Ann Robinson, the chairman designate of the new consumer council, is consulting on a five-office regional structure. Perhaps we can re-address this problem when her consultation is complete.
Perhaps I should say a word about fuel poverty. In general I am grateful for the support expressed for the fuel poverty provisions, but I must make it clear that fuel poverty is part of a wider problem of social exclusion. The ministerial group on fuel poverty goes across a number of departments and affects many aspects of government, of industry and of regulation. Because we have a more competitive energy industry in this country, it is not appropriate for us to adopt the French experience of a social price, to which the noble Lord, Lord Ezra, referred.
I was particularly interested in what the noble Lord, Lord Borrie, said about prepayment meter prices. Again, that is a matter that can usefully be discussed between now and Committee stage.
I have trespassed on the kindness of the House for too long. It is clear that we believe that this is a Bill that, effectively, promotes the five objectives that I set out in introducing it. It would be inappropriate for me to repeat those objectives. I believe that the Bill will put gas and electricity regulation on a secure footing for the next decade. It is capable of adapting to changes in markets and capable, at all times, of protecting consumers. I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.