§ In section 32C of the 1989 Act (payment as alternative to complying with order under section 32), after subsection (3) insert—
§ "() The system of allocation must pool the sums received in respect of supply in all parts of Great Britain and may not distinguish between evidence presented under section 32(3) (obligation in connection with electricity from renewable sources) in relation to England and Wales and such evidence presented in relation to Scotland.""
§ The noble Baroness said: My Lords, the amendment is intended to require the Secretary of State to pool the renewables buy-out funds in England and Wales on the one hand, and Scotland on the other. Figures recently published by Ofgem have shown that the current system is open to manipulation through the creation and subsequent gaming of material differences in the value of renewable obligation certificates—or ROCs—between the different buy-out funds. For example, a supplier with a large market share in Scotland has been able to under-present ROCs in Scotland, thus inflating the value of the remaining ROCs presented there, and then to use the ROCs that he did not present in Scotland to secure extra revenue by presenting them in England and Wales.
§ Such a practice constitutes an unfair distortion of trade between industry participants. It also creates unnecessary volatility in the ROC market to the detriment of the achievement of the Government's renewable objectives. Merging the funds is clearly the appropriate way to prevent these difficulties. It can be done without any detriment to consumers and would be a demonstration of the Government's commitment to secure the integrity of the renewables market. It is also something which needs to be addressed urgently, as the failure to correct the problem continues to distort the market.
§ We know that evidence of the manipulation which I mentioned has been given to government officials. They are aware of the problem. It is therefore time for action to deal with a real problem. I beg to move.250
§ 9.30 p.m.
§ Lord Davies of Oldham
My Lords, I appreciate the way in which the noble Baroness moved the amendment and also the concern that lies behind it: the prevention of any possible gaming by a dominant supplier in one market. That would be fulfilling its obligation in one country by using ROCs while meeting the other, in which it commercially dominant, mainly through paying the buy-out. If that were to happen, such a supplier would reduce the amount of buy-out recycled to its competitors in the market where it complied using mainly ROCs while maximising the amount of buy-out fund available for recycling in the other market. It will be recognised that this is a serious matter. I assure the House that we are keeping a close eye on it. Indeed, we recently received a representation on just this point, and we shall be examining the need for action with Ofgem.
I would emphasise that the issue of a pooled buy-out fund for Great Britain is a key one for the forthcoming review of the renewables obligation. But before decisions can be taken, we need to consider the effect on consumers in the constituent parts of Great Britain, how great these effects would be and how to encompass the new renewables obligation planned for Northern Ireland.
In the meantime, it would be premature, to say the least, to move forward with this amendment when we have not yet carried out a detailed analysis of the effect of such a move on consumers. It is very important that we take the time needed to consider its effects in the round, not merely implement the measure with a limited grasp of the full effects.
Should the amendment come into force at the same time as the rest of the Bill, it would affect the obligation period for 2003–04 for which any payments into the buy-out fund are due on 1 October this year. Suppliers may choose to make their payments before that date. If the amendment were to come into force around late September, that would leave open the distinct possibility of some suppliers deciding to comply early under the existing system and others complying under the new system. To put it at its mildest, that would be a confused and highly undesirable situation.
Furthermore, the amendment would have serious consequences for powers that have previously been executively devolved to Scotland. Fully to achieve the purpose of the amendment of having a single buy-out fund will probably mean the introduction of a single Great Britain-wide obligation, rather than the two obligations we have at present. Taking powers back to Westminster that have already been executively devolved is no light or casual matter.
Therefore, although I feel obliged to resist the amendment, I want to emphasise that we are giving the most careful consideration to this issue in the review of the renewables obligation. It would be possible to take measures that would meet the purpose behind the amendment using secondary legislation and without the need to pull back powers which we have already devolved to Scotland. With a firm undertaking that the issue will be considered fully in the review, and in view of our real awareness of the seriousness of the position, 251 as the noble Baroness indicated in moving her amendment, I hope that she will feel able to withdraw the amendment.
§ Baroness Carnegy of Lour
My Lords, before the noble Lord sits down, of course none of us wants cheating in the system, but it is very nice to hear the noble Lord defend the interests of Scotland in so far as matters have been devolved hitherto. There could be a distortion in the system if a measure such as that proposed by my noble friend—I know that she has done so in very good faith—was introduced at the wrong moment. Therefore, personally I very much welcome the noble Lord's reply and I am grateful to him.
§ Baroness Miller of Hendon
My Lords, I am grateful to the Minister for saying that evidence has been given about this manipulation and that it is a very serious matter which needs to be considered. I shall make only one or two comments. I said very clearly that this proposal could be implemented without any detriment to consumers. That is what the organisation that briefed me strongly on the need for the amendment made very clear. I was surprised to hear the Minister say that we must look into what its effect would be on consumers on the basis that nothing has been done until now.
I heard what my noble friend Lady Carnegy said on this issue and I understand her views clearly. However, the fact remains that at present the system is simply not working. In fact, it is continuing to distort the market and will continue to do so unless something is done about it.
I believe I heard the Minister say that somehow or other this matter can be dealt with by secondary legislation. I wonder how a certain matter can be devolved and then, in a sense, corrected by secondary legislation. Unless I did not hear the noble Lord correctly, it seemed to me that that was the gist of his comments. I want to make it clear that at this stage I have no intention of dividing the House. As the Minister said, the Government take this matter seriously, but I simply want an assurance that they will make an effort to see that it is dealt with in the other place. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
Baroness Miller of Hendon moved Amendment No. 18:
After Clause 122, insert the following new clause—