§ Mr. Murphyasked the Secretary of State for Energy if he will set out the principal achievements of Her Majesty's Government within his Department's responsibilities since May 1979.
§ Mr. GrayThe 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 230W 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.
To the end of ensuring that the energy market operates as nearly as possible as a free market we have sold to the private sector Britoil and Amersham International; removed BGC's statutory monopoly of the purchase of UKCS gas and greatly reduced the scope of its monopoly over gas sales; and enabled private suppliers to have access to BGC's transmission and distribution system. BGC has also been directed to dispose of its Wytch Farm oil licence and to prepare for the disposal of its offshore oil fields. We have also introduced the Energy Bill, which will open up the electricity supply industry to private sector competition.
Within the public sector we have exerted pressure for efficiency and cost restraint through tight financial disciplines, performance aims and independent efficiency examinations of the CEGB, NCB, BGC, YEB and UKAEA. We have also taken steps to strengthen the commercial management of the energy nationalised industries.
We have established energy pricing policies based on sound economic principles to provide appropriate signals to investors in energy production and to consumers. Within the context of this policy we have encouraged the industries to be responsive to consumers' needs. For industrial consumers the electricity supply industry has introduced more flexible tariff arrangements while the gas industry has restrained prices in response to market conditions. Contract gas prices will be frozen until October 1983 and there will be a standstill in average electricity prices in 1983–84. For domestic users, new arrangements have been introduced to limit the impact of standing charges in the bills of small consumers of gas and electricity and a revised code of practice has been adopted to help those who face difficulties paying their bills.
We have encouraged oil exploration and development with the aim of maximising economic oil production over time. For the first time, production in 1982 topped 100 million tonnes, putting Britain in the top half dozen world oil producers. We have announced that no production cutbacks will be imposed before 1985 and that there is no case for imposing development delays. The seventh round of offshore licensing in 1980–81 licensed more blocks than the previous two rounds together and there has been an encouraging response to the eighth round, which has opened up new territory for exploration and renewed interest in the southern basin gas blocks. In 1982 exploration and appraisal activity was at near record levels and gas flaring from oilfields in the North Sea was halved since its peak in June 1979. Approval has been given for BGC's Morecambe Bay offshore gas development. This had given rise to £318.7 million of orders to United Kingdom equipment suppliers to the end of 1982.
The Offshore Supplies Office has encouraged United Kingdom firms to win orders from the development of oil and gas fields on the UKCS and overseas. In 1982 the United Kingdom won 73 per cent. of a total of £2.2 billion orders placed for goods and services for the UKCS and since 1979 United Kingdom industry has averaged 72 per cent. of an annual market of about £2.3 billion.
Orders have been confirmed for new advanced gas cooled reactor nuclear power stations at Torness and Heysham and encouraging progress has been made in 231W constructing nuclear stations to time and cost. A public inquiry is under way into the CEGB's proposed pressurised water reactor nuclear power station at Sizewell in Suffolk. The Government's commitment to the fast reactor programme has been re-affirmed.
While working towards the achievement of financial viability in the coal industry the Government have assisted the NCB in dealing with its financial problems, with grants of over £1½ billion since it took office, and have supported investment of £3.16 billion invested in the coal industry during the same period which has led to improved productivity. The coal firing scheme introduced in 1981 has helped industry to convert equipment for oil and gas fired equipment to coal burning. This scheme has been extended to the end of the year.
The Government's energy conservation policy, based on the economic pricing of fuels, has encouraged considerable improvement in the efficiency of energy use, leading to energy savings of more than 4 per cent. In particular, the energy conservation demonstration projects scheme has done much to encourage innovations in industry, commerce and local authority sectors: over 200 projects have been approved under the scheme, and these have already led to replications in over 300 cases.
The economic potential for combined heat and power schemes for district heating has been the subject of a major study by outside consultants, the recommendations of which are now being closely examined.
A thoroughgoing review of the organisation of the Government's efforts in the energy conservation area has been undertaken under the aegis of Lord Rayner; and we are pressing ahead towards the implementation of the recommendations in the Rayner report.
We have concentrated renewable R and D expenditure principally on wind power and geothermal energy work, which has the greatest economic and technical promise.