HC Deb 25 July 1990 vol 177 cc244-6W
Mr. Day

To ask the Secretary of State for Trade and Industry what consideration he has given to the application of United Kingdom competition legislation in relation to the arrangements for the restructuring of the electricity supply industry.

Mr. Redwood

I have today laid before the House an order made under section 100(2) of the Electricity Act 1989, exempting certain electricity agreements from the ambit of the Restrictive Trade Practices Act 1976. Two previous orders were made on 27 March and 28 June respectively.

The various orders, which were made following consultation with the Director General of Fair Trading (DGFT) and the Director General of Electricity Supply (DGES), apply in relation to the following categories of agreements entered into by the electricity supply industry (ESI) in England and Wales, and in Scotland, prior to vesting day on 31 March 1990 or as a consequence of the new industry structure:

  • Pooling and Settlement Arrangements
  • Initial Settlement Arrangements
  • Contracts for Differences
  • Connection and Use of System Agreements
  • Non-Fossil Fuel Obligation (NFFO) Qualifying Arrangements
  • Non-Fossil Purchasing Agency (NFPA) Arrangements
  • French Interconnection Arrangements
  • Scottish Interconnection Arrangements
  • British Grid Systems Agreement
  • Dounreay Supply Agreement
  • Cable Maintenance Agreements.

These agreements are an essential part of the process of ensuring an orderly transition to new competitive arrangements within the ESI. By exempting them from the application of United Kingdom restrictive trade practices legislation, the orders will help to ensure a stable framework within which effective competition may develop. The actions of the various companies remain subject in the normal way to the anti-competitive practices provisions of the Competition Act 1980 and to the monopoly provisions of the Fair Trading Act 1973.

The exemptions provided by these orders are intended to remain in force for the duration of the individual agreements, provided that there is no material change in the relevant circumstances. However, where agreements last for more than five years from vesting day (or eight years in the case of the NFFO arrangements), it may be appropriate to review the continuing need for the exemptions at some stage following the expiry of those periods, taking account of the competitive environment then prevailing.

Such a review is not expected to result in wide-ranging changes in the basic arrangements now in place in the industry. In particular, the pooling and settlement arrangements, which lie at the core of the new market structure for the buying and selling of electricity, are expected to remain in place indefinitely on the basis that the relevant agreements will be subject to close and regular scrutiny by the Director General of Electricity Supply as part of his general responsibilities under the Electricity Act.

The Government are committed to the introduction of new legislation on restrictive trade practices, in implementation of the proposals outlined in the White Paper "Opening Markets: New Policy on Restrictive Trade Practices" (Cm. 727) published in July 1989. It is our intention that any exemptions still in force at the commencement of the new legislation should be carried forward in transitional arrangements. The introduction of such legislation is subject to the availability of parliamentary time.