HC Deb 22 July 1982 vol 28 cc247-9W
Mr. Latham

asked the Secretary of State for Energy whether he will make a statement on the results of his Department in achieving the Government's policy programme since his predecessor's reply to the hon. Member for Melton on 14 July 1981, Official Report, c. 371.

Mr. Lawson

The principal objective of the Government's energy policy is to ensure that the vitally important energy sector functions as efficiently and effectively as possible within the context of economic policy as a whole.

The two main thrusts of our policy have, therefore, been, first, to set a framework which allows market forces to operate in the energy sector with a minimum of distortion, and, secondly, to ensure that those parts of the energy sector which necessarily remain in the public sector and enjoy monopoly privileges are subjected to compensating disciplines which stimulate efficiency.

Within the constraints of economic pricing principles reflecting the cost of maintaining supplies in the longer term, energy prices must be as competitive as possible; prices must be sensitive to market conditions. But there must also be some room for flexibility in pricing, for example, to enable us to respond to international pressure on British industry. For this reason, my right hon. and learned Friend introduced £250 million worth of concessions to large industrial energy users in his last two Budgets. Under these arrangements the electricity industry in England and Wales has introduced a new load management scheme for large industrial consumers with special three year contracts. This can reduce charges by up to 16 per cent. The British Gas Corporation is holding gas contract prices, after the first 25,000 therms, until the end of 1982. Foundry coke prices are being held until the same date. These measures, together with an expansion of the coal firing scheme encouraging the use of coal to cover a wide range of equipment and conversions from gas as well as oil were announced by my right hon. and learned Friend in his last Budget speech.

The Government have taken a number of steps to encourage efficiency in the nationalised energy industries. These include the references of the NCB and the Yorkshire and South Wales electricity boards to the Monopolies and Mergers Commission, which were included in the announcement by my right hon. Friend the Secretary of State for Trade on 3 March, and the independent efficiency study of BGC which I announced on 7 April. My hon. Friend announced on 6 May that my Department and the UKAEA had jointly commissioned a study of the authority's efficiency and the economy with which it uses available resources.

Discussion with the electricity and gas industries and with consumer representatives following the report of the Policy Studies Institute has led to the industries' agreement to changes in the code of practice on the payment of bills.

The passage of the Oil and Gas (Enterprise) Act 1982 will allow the Government to press ahead with the biggest privatisation measure in this country's history. The Act provides for the disposal of BNOC's oil producing business and parts of BGC's business—my initial intention in respect of BGC being to dispose of its offshore oil interests. The Act also permits competition in the supply of gas through the removal of BGC's statutory purchasing privileges and by affording opportunities for private gas suppliers to seek access to BGC's pipeline network. In addition, the Act strengthens existing petroleum legislation, particularly on offshore safety.

The direction requiring the BGC to transfer its holding in the Wytch Farm oil licence to the private sector came into effect on 13 October 1981. I have approved BGC's plans for developing the Morecambe gas field.

I have taken action to increase exploration for oil and gas through the award of 18 exploration and 18 production licences for areas onshore. Offshore, I awarded a further 11 licences under the seventh round, bringing the total to 90. Exploration is at its highest level since 1977. I have recently announced proposals for an eighth round, and I am confident that oil companies will wish to explore the new territories. I announced on 8 June that I would not impose oil production cutbacks before 1985 at the earliest. Gas flaring per barrel of oil produced has continued to fall substantially through the year.

United Kingdom crude oil production has topped 2 million barrels a day. In 12 years the United Kingdom has risen from nowhere to become fifth in the world oil production league.

Arrangements for the public inquiry into the CEGB's application to construct a pressurised water reactor nuclear power station at Sizewell are now well under way, with the main hearing to open next January. The first pre-inquiry meeting was held last month, and the second take place late in July.

I have disposed of all the Government's shares in Amersham International.

New direction has been given to the Department's renewable energy programme in the light of the recommendations of my advisory committee on research and development. The Camborne geothermal project has made good progress, as has the geothermal aquifer demonstration project at Southampton. The encouraging work on wind power using both horizontal and vertical axis machines continues.

The efficient use of energy is built upon economic pricing, supported by a Departmental programme of information and advice. I have continued to provide assistnce to industry through the energy survey scheme and the demonstration project scheme and am working with the NEDO and CBI to promote voluntary programmes of energy monitoring and efficient management of energy use. I have established the building research energy conservation support unit to concentrate on managing energy conservation demonstration projects in domestic buildings. I have doubled the money available to the successful scheme to help voluntary organisations with insulation projects in the homes of elderly and others on low income, using unemployed labour.

I have received the report from the lead consultants examining the feasibility of combined heat and power—district heating in specific locations and will be circulating it shortly to interested parties.