HC Deb 01 November 2001 vol 373 cc780-1W
Dr. Desmond Turner

To ask the Secretary of State for Trade and Industry if she will make an announcement on the Government's response to Ofgem's reports, 'The New Electricity Trading Arrangements-Review of the First Three Months' and 'Report to the DTI on the Review of the Initial Impact of NETA on Smaller Generators' of 31 August. [12614]

Mr. Wilson

The Government believe that NETA has been a success in its own terms. The introduction of a more efficient regime into a more transparent, inclusive and efficient pricing system has meant that wholesale electricity prices are up to 25 per cent. lower than the artificially high prices that existed under the Pool arrangements. In addition, Ofgem's findings show rapid emergence of a strong and liquid forward curve—this will contribute to UK's longer-term security of energy supply by providing reliable longer-term price signals for investors to use in planning new generation.

The Government recognise the issues faced by smaller generators under NETA. The Government remain strongly committed to renewable and combined heat and power generation. At the same time, we are committed to the regulatory framework set out in the Utilities Act 2000, the principles and structure of NETA, which has already delivered a good deal of real benefit to consumers, and promises to do so in future as well.

The Government have reviewed and considered Ofgem's reports, as well as views put forward by industry, both in the course of Ofgem's review, and to DTI. In light of these, I have issued a consultation document today, seeking views on the issues raised by Ofgem's reports and specific proposals. The Government's key proposals are, broadly: ensuring imbalance prices are genuinely cost reflective—this will reduce the risk for everyone, but for smaller and unpredictable generators in particular; and ensuring that effective consolidation services emerge—this will reduce the risks for smaller generators further. The Government have proposed setting up a working group that will look urgently at obstacles to market driven consolidation, including the possibility of encouraging consolidation. The Government are also seeking views on other proposals put forward by industry.

I have placed copies of the consultation document in the Libraries of the House.