Baroness Anelay of St Johns (Con)
My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Energy Bill, have consented to place their prerogative and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Clause 3: Further duties of the Secretary of State
Amendment 1
Baroness Worthington
“(9) Where carbon intensity of electricity generation is reported to have increased year on year for not longer than three consecutive years, starting from the date of Royal Assent, the Secretary of State shall report to both Houses of Parliament, setting out both the reasons for the increase and the additional actions that will be taken to reverse this increase in carbon intensity.”
Baroness Worthington (Lab)
My Lords, during our scrutiny we have come to know this Bill as the “decarbonisation Bill” as it has passed through this House. It has been referred to in that way by a number of noble Lords and it is a reasonable description. The Bill represents a significant intervention in the electricity market that is justified on the basis that it will help to decarbonise our electricity system. Noble Lords will be aware that we have had lengthy discussions about the setting of a decarbonisation target in the Bill in order to give that clarity of purpose and to create a responsibility on the Government to deliver through the powers that they are taking. Unfortunately, we were unsuccessful in bringing forward the setting of a date for the setting of such a target. However, on Report the Minister was kind enough to give a partial concession in relation to the Government’s commitment to monitoring carbon intensity and to acting if carbon intensity remained high. The concession was that, should carbon intensity rise year on year for three consecutive years, the Government would report to Parliament, setting out why this was the case and the additional actions that would be taken to counteract that increase.
The concession is welcome. It is not a replacement for a carbon intensity target by any means, partly because carbon intensity is currently at an astonishingly high level. This is because the merit order currently favours inefficient old coal plant over more efficient, cleaner gas stations. Therefore, currently carbon intensity is higher than would otherwise be the case. Intensity seems unlikely to increase. If it did, something would be seriously awry with government policy. The concession, while welcome, does not go far enough but I should hate to lose it. The purpose of this amendment is to place that commitment in the Bill to introduce into it a measurement of progress and a mechanism through which the Government will report back to the House on that progress and take corrective action.
It is fair to say that the interventions in this Bill and the powers that are given to the Secretary of State are so extensive that they ought to be matched with responsibility and a system of holding the Government to account to see that they are delivering. The measure of progress should be carbon intensity, the issue the Bill seeks to address. Therefore, I hope the Minister will accept this amendment in the spirit of enhancing that important part of the Bill that justifies why it has been introduced and the powers that have been taken. I beg to move.
Lord Teverson (LD)
My Lords, this is a worthy amendment. However, Parliament is grown-up enough for those of us who are interested in these issues and see them as really important to notice what happens and seek answers from the Secretary of State and the Government about carbon intensity. The issue is important but the amendment adds little to the Bill.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I thank the noble Baroness, Lady Worthington, for tabling the amendment. The Government fully support the aim of clear and transparent reporting. However, like my noble friend Lord Teverson, I do not think it necessary to introduce an additional statutory reporting requirement to the Bill as the noble Baroness proposes. I shall set out quickly the reasons.
First, as the noble Baroness recognises, at Report I made a commitment to Parliament that the Government would undertake reporting measures once any decarbonisation target range had been set. This would supplement those reporting measures that are already included within Part 1 of the Bill. I repeat what I said on Report, which was that,
“where carbon intensity is reported to have increased year on year for three consecutive years, the Government will explain the reasons why, and, where appropriate, report additional actions to address it within the annual statement of grid carbon intensity”.—[Official Report, 28/10/13; col. 1366.]
Secondly, it is important to recognise that, under the Climate Change Act 2008, there are already high levels of scrutiny of the progress made to meet our economy-wide carbon targets. This includes coverage of the power sector within the context of our wider economy. For example: the Government currently report annually on emissions in the power sector through the UK’s greenhouse gas emissions inventory; the Committee on Climate Change publishes an independent and impartial report each year on our progress towards meeting our carbon budgets and the 2050 target; the Government provide annual responses to the committee’s recommendations, which include a dedicated chapter on the power sector; and the Government publish updated energy and emissions projections each year, setting out the future trajectory we anticipate the economy taking.
Lastly, the amendment proposes that these reporting measures start from the date of Royal Assent. The Government’s view is that it is logical for any additional reporting measures to be triggered by the setting of a decarbonisation target range rather than by the enactment of the Bill. That would ensure alignment with the existing reporting framework that is already included in Clause 3, and we should not forget that we already report on grid carbon intensity ahead of any decarbonisation target range being set. Section 5 of the Energy Act 2010 requires a three-yearly report to Parliament on progress in decarbonising electricity generation. That report sets out the policy framework and explains trends in grid carbon intensity over the reporting period.
In conclusion, the Government are already proposing a clear and robust target framework that includes regular reporting on progress in meeting any target range. That is in addition to the high levels of scrutiny that are already in place to meet our economy-wide carbon targets. For those reasons, it would be unnecessary to introduce another statutory reporting requirement. I hope that the noble Baroness will agree with me that the existing commitments are sufficient and will, on that basis, withdraw her amendment.
Baroness Worthington
I am grateful to the Minister for her response and for the contribution from the noble Lord, Lord Teverson. I agree that we are all mature in looking at these things and that people who scrutinise and follow this in detail will raise issues as they occur. However, something is clearly not working, otherwise why is it that carbon intensity has been allowed to rise to such high levels recently with the Government apparently incapable of acting to bring it down? Obviously, many factors play into that, but the whole purpose of the Bill is to bring some of those factors under greater control and to allow the Government to intervene in the market to create contracts for difference that bring forward investment in the low-carbon economy that would not otherwise be supported by the market.
There is a problem, given that carbon intensity remains stubbornly high; the measure of the success of the Bill will be that starting to fall. It is regrettable that the Government are not prepared to start monitoring that or reporting on it, in terms of actively managing it, until 2016, which is a number of years away. I understand that the Bill has existing requirements on reporting carbon intensity, and that it is routinely reported now, so I am happy to withdraw, but this is something we need to keep a close eye on. I am sure that the noble Lord, Lord Teverson, and others will join me in ensuring that we do just that.
Lord Jenkin of Roding
Lord Jenkin of Roding (Con)
My Lords, Part 2, which is really the heart of the Energy Bill, contains all the proposals for the reform of the electricity market. Chapter 3 of Part 2, in respect of which I am moving this amendment, deals with a very important part of the reform, the introduction of the capacity market. As the noble Baroness has just mentioned, that is of course designed to try to attract investment which the market might otherwise find it difficult to support. It is one of the measures that the Government are introducing, if I may put it crudely, to keep the lights on—to make sure we have enough generating capacity to keep the power flowing. At this stage of the Bill, I do not think it is necessary for me to start spelling out all the details of this, which have been very substantially debated at Second Reading, in Committee and on Report.
However, I think it right once again to draw the attention of the House to the fact that most of the detail of this is to be in regulations. We are hoping that the Bill will be Law before the end of the year—indeed, I hope well before the end of the year—and that the regulations will follow next year, and we are waiting for those. I have to say to my noble friend that the Government have been extremely good at producing drafts of what all the really important regulations would contain. It is a substantial document and I do not propose to read it out, but there is an enormous amount of detail in it and it is helpful for those who have to operate the new system to have that detail now.
Baroness Worthington
My Lords, we support the amendment moved by the noble Lord, Lord Jenkin. Possibly it is merely an oversight that those who wish to become capacity providers are currently excluded from the list of consultees. As the noble Lord has explained, this part of the Bill is very important and should be open to new and independent players to attract them into the market. If all the capacity mechanism does is provide security to the existing incumbents, it will have failed in its aim to deliver capacity at least cost, with a good degree of competition enabling prices to be kept to the minimum. Given the context, it is an eminently sensible amendment and I really hope that the Minister will be able to support it.
Baroness Verma
My Lords, I thank my noble friend Lord Jenkin for his amendment. Both the electricity capacity regulations and the capacity market rules form the legal framework that will enable the introduction of the capacity market. The capacity market rules will be subsidiary to the regulations, for which the Secretary of State will continue to have responsibility.
Much of the content of the capacity market rules will comprise provisions of a technical and administrative nature, designed to supplement the regulations and ensure the efficient running of the capacity market; for example, the rules will set out how the delivery body is to conduct capacity auctions and the pre-qualification process, as well as its duties to maintain a capacity market register and carry out monitoring and testing.
Given the technical and administrative nature of the rules, we therefore expect changes usually to be of a minor and technical nature, with the primary purpose of ensuring the efficient operation of the capacity market. It is important to make the duty to consult on those changes proportionate, and to get the balance right between consulting widely and implementing the change within an appropriate timeframe.
Potential capacity providers may not necessarily be affected by a proposed rule change in the same way as existing capacity providers; for example, existing providers will have rights or obligations under the capacity market that might be affected by a change in the rules. I am therefore of the view that potential capacity providers should not be added as parties that the authority must consult on every proposed change.
Nevertheless, it is important that if the authority were to propose a significant change to the rules that affected a wider range of parties, consultation on that change should go beyond existing suppliers and capacity providers. I therefore reassure my noble friend that we expect the authority to consult more widely, as appropriate, for any significant changes to the rules that might affect a wider range of parties, such as prospective capacity providers. This is reflected in the draft electricity capacity regulations 2014, published for consultation in October, which would oblige the authority also to consult the Secretary of State, the delivery body and,
“such other persons as the Authority considers it appropriate to consult”.
The authority will be producing guidelines on the process it intends to follow for making changes to the capacity market rules, including its processes for consultation and for considering rule changes proposed by a third party. The authority intends to publish these draft guidelines next spring before finalising them, allowing all potential capacity providers the opportunity to comment on them.
I hope that my noble friend has been reassured that the consultation provision in the Bill is not exhaustive and that the authority can, and will, consult more widely where appropriate. I hope, therefore, that he will withdraw his amendment.
Lord Jenkin of Roding
My Lords, I am extremely grateful for the support from the noble Baroness, Lady Worthington, and it is very nice to know that if I had decided to divide on this I would have had her party with us. However, my noble friend has indeed been reassuring. I entirely accept that all these people should not be consulted on every minor change, but she has given us a clear assurance that, on anything of any significance, both the department and the regulator will consult all those who might reasonably expect to be affected. On that basis, I am happy to withdraw the amendment.
Baroness Verma
Baroness Verma
My Lords, government Amendment 3 responds to a recommendation from the Delegated Powers and Regulatory Reform Committee regarding delegated powers in the capacity market. I am grateful to the committee for its recommendation and to my noble friend Lord Roper for raising it on Report. Amendment 3 will limit the powers of the authority to make capacity market rules and to confer additional functions on itself when exercising powers under Clause 34(3). It will do this by requiring the authority to obtain the Secretary of State’s consent on each occasion that it seeks to confer a function on itself when making capacity market rules. This will ensure that there is a sufficient level of oversight when the authority makes changes to the capacity market rules. I hope that my noble friend finds the explanation of my amendment helpful and I beg to move.
Lord Roper (LD)
My Lords, I thank the Minister for having put forward this amendment which, as she says, follows the discussion that we had on Report and the report of your Lordships’ Delegated Powers and Regulatory Reform Committee. It is a most satisfactory amendment and, again, I thank the Minister for it.
Lord Grantchester (Lab)
My Lords, after much debate in Committee and on Report we also welcome this further government amendment in response to the 11th report of your Lordships’ Delegated Powers and Regulatory Reform Committee, which was published at the end of October. It is indeed important that no blanket powers or consents should be given for making particular categories of rules.
Baroness Worthington
Baroness Worthington
My Lords, this amendment follows on from our discussion about the decarbonisation aspects of the Bill. Noble Lords will be aware that an important amendment was successfully added to the Bill at Report. It would close a current drafting loophole in the Bill that would allow old, inefficient, polluting coal stations to upgrade and seek extensive life extensions without the need to comply with any kind of emissions performance standard. This will now, of course, be debated in the Commons, and we look forward to seeing the results of that.
However, in succeeding in having this part of the Bill accepted, an interesting definitional issue has arisen. Bear with me as I try to explain it. The industrial emissions directive, which requires tightened quality standards to apply to coal stations from 2016, applies at a station level. A station is defined as “a common stack”, meaning a chimney that can be used by multiple units. This has interesting implications because the EPS limits can therefore be met by one unit upgrading to fit filters while another unit remains unabated but still operating unencumbered and at full capacity. Our intention in closing a loophole that could potentially extend coal’s life span to late into the next decade was that the EPS should apply at the same level at which the IED applies, meaning that if a station with four units decided to retrofit two of the four in order to comply with the IED, the station as a whole would then be caught by the EPS.
Lord Oxburgh (CB)
My Lords, I support the amendment. The noble Baroness, Lady Worthington, is too modest. She has made it abundantly clear that clarity is needed in the legislation because, as the wording stands, simply part of an operating unit may be upgraded. I therefore hope that the Government can accept the amendment.
Lord Teverson
My Lords, I welcome the amendment because clarification is needed—and, indeed, I thought that the explanation given by the noble Baroness was very good. I would be very interested to hear the Government’s view on how this issue should be resolved, as it is clearly important for the way in which the industry moves forward.
Baroness Verma
My Lords, I am grateful to the noble Baroness, Lady Worthington, and I hope that I can add a little clarity on the matter she has raised. Under the existing provisions, and save for the circumstances provided for under Schedule 4, the EPS will apply to the entire generating capacity of any new fossil fuel power station consented after the EPS comes into force. For example, where planning consent is given for a new fossil fuel power station, the generating units that comprise the consented power station are, for the purposes of the EPS, the “generating station”.
A generating station will report its carbon emissions under the EU Emissions Trading Scheme and the intention is that those reports will be used to reconcile total carbon emissions in a year against the EPS limit for the generating station, which is calculated using the formula in the Bill—I hope that noble Lords are following me thus far.
In respect of the circumstances provided for under Schedule 4, paragraph 1(1) of Schedule 4 gives the Secretary of State a power to make regulations to apply the EPS to a generating station consented before the EPS came into effect where it replaces or installs an additional main boiler—so where it effectively adds to or renews its generating capacity.
Paragraph 1(1)(b)(iii) of Schedule 4, on which the Government were defeated on Report, would extend the scope of Schedule 4 to enable the Secretary of State to apply the EPS also to an existing generating station that fitted substantial pollution abatement equipment. The exercise of the power to make regulations under Schedule 4 is at the discretion of the Secretary of State, and it would be premature to comment on whether or how that power may be used.
Sub-paragraphs (1) and (2) of paragraph 1 of Schedule 4 together allow the EPS to be applied with or without modifications and to different parts of a generating station. For example, it could be applied to only those units that are new or have replacement boilers or to only those units that have fitted substantial pollution abatement equipment.
While I recognise that the proposed amendment may be one way of determining how the EPS will apply to fossil fuel plant, it does not cater for a wider range of circumstances in the way intended by Schedule 4. The regulation-making power in Schedule 4 provides for alternative approaches and, due to the potential complexities and impacts on existing assets were we minded in the future to exercise these powers, we would want to consult fully on possible options before making regulations. I believe that this would provide a more properly informed debate and I therefore ask the noble Baroness to take my reassurances at this stage and withdraw her amendment.
Baroness Worthington
My Lords, I am grateful to the noble Baroness for her reply. Discretion gives flexibility but equally it gives a lack of certainty for industry. I am not quite sure why this proposal is premature as we need to give clarity to those affected by this Bill as soon as possible. It seems to me that in maintaining this discretion, we are prolonging lack of certainty for the industry. I think that it is very important that we do this consultation quickly and that we give clarity as soon as possible, whether that is through the regulations that follow or in a separate process. I am sure that there are many people sitting in boardrooms around the country looking at their assets, who need to know this information and need to know how the department is interpreting its powers.
If the department is minded to have an EPS apply only to the units which fit the filters that make the upgrade, that will have the very perverse affect of allowing unabated plant—the other corresponding units—to operate indefinitely at very high load factors. That is precisely what we are trying to avoid with this amendment. There is a very strong reason why we do not believe that discretion is necessary and why the definition should be at a plant level. However, I understand that the Government may wish to consult and to seek a little extra time before making this issue fully clear. I hope that that is completed in the shortest time possible, as prolonging uncertainty will make life harder for the industry and investors in deciding what their next move should be following the passage of the Bill. I beg leave to withdraw the amendment.
“( ) how the Authority shall incorporate social and environmental factors in carrying out its functions.”
Lord Judd (Lab)
My Lords, in moving this amendment I remind the House that I am involved in a voluntary capacity in a number of NGOs concerned with the environment.
On Report, the Minister said that energy production and consumption should be sustainable. I remind the House of an important point made by my noble friend Lady Worthington, that we face a “quadlemma” in which we must tackle climate change, keep bills affordable and keep the lights on without sacrificing social and environmental standards in the process. It is very much in the spirit of this observation that I am pursuing this amendment.
On Report, the Minister helpfully reminded us that Ofgem has social and environmental duties and can consider sustainability when carrying out impact assessments for particular schemes. She also informed us that in future Ofgem’s forward planning must show how it will implement the new strategy and policy statement and that it must report annually on how it is contributing to the delivery of the Government’s policy outcomes. The Minister further explained that the Bill seeks to remove social and environmental guidance provision because it has,
“not achieved coherence between the Government’s energy strategy and the regulatory regime”.—[Official Report, 6/11/13; col. 263.]
She explained that it would be replaced by a strategy and policy statement setting out the Government’s strategic priorities. She emphasised that Ofgem must have regard to strategic priorities and carry out its functions in the way that it considers best calculated to deliver the policy outcomes, and argued that this would be a stronger obligation on Ofgem than existed in current guidance.
The Minister undertook to write a letter to me and place a copy in the Library of the House setting out precisely how the Government will satisfy themselves that Ofgem will pay due regard to the effect on the environment of activity connected with the conveyance of gas through pipes or the generation, transmission and distribution of supply of electricity, including what measures, benchmarks and associated matters will be taken into account and used in establishing those benchmarks. The Minister has indeed written to me and the letter is in the Library, and I am grateful for the detailed advice about Ofgem’s various duties and responsibilities. However, I am afraid that her letter failed to establish how social and environmental safeguards would be implemented, not weakened, by the Bill.
We seem to be in a circular argument. As I explained in some detail on Report, the strategic priorities set out in the Ofgem policy statement are functions to which the principal objective and general duty is applied. This duty is to be found in Section 4AA of the Gas Act 1986, with equivalent provisions in the Electricity Act 1989. These provisions make it clear that the principal objective is to protect the interests of existing and future customers of electricity and, wherever appropriate, to promote competition. They are not about social and environmental considerations.
Furthermore, the Bill has been set out in such a way that, should the Secretary of State decide to issue social and environmental guidance in future, it would be subordinate to Ofgem’s commercial responsibilities. I have taken into account counsel’s advice that the reality will be that if the Bill is enacted as the Government propose, the explicit responsibility to issue social and environmental guidance will disappear. There is nothing in the Minister’s letter that indicates how it will be replaced. To be crystal clear about this, it is not a requirement that the strategy and policy statement should cover social and environmental issues, which it should if the present level of protection is not to be significantly weakened. My own views remain unchanged: Ofgem’s social and environmental responsibilities will be weakened by this legislation. If that is not the Government’s intention, there should be a clear statement in the Bill that the Secretary of State will indeed provide social and environmental guidance to the regulator in the strategy and policy statement. This small amendment would achieve that.
Even at this stage, I ask the Government to think very carefully about this and ask themselves: where is the vision? What does the word “sustainability” really mean? What sort of environment do we want to be living in, in future? What of the incalculable psychological and emotional value of landscape and its contribution to national well-being? If the Government recognise the quadlemma to which my noble friend referred and wish to address it, what are they actually doing to avoid the gradual destruction of the natural environment in their pursuit of energy goals? If current policy is anything to go by—it all seems to be about streamlining development—the answer seems to be not a lot. In short, it seems to be the Government’s express intent to remove environmental safeguards in the quest for growth. I beg to move.
Viscount Ridley (Con)
My Lords, I support the noble Lord, Lord Judd, in his amendment. I declare my interests as listed in the register.
I have only one minor correction to make. It is very important to draw attention to the fourth leg of the quadlemma, but we should really be calling it a tetralemma if we are going to be consistent in Greek. It is important that the concerns that the noble Lord has raised, which are vital to communities all over the country, about the desecration of landscapes that is being visited on them should be taken seriously. I look forward very much to what I hope will be a reassuring reply from the Minister.
Lord Jenkin of Roding
One thing which seemed to be missing from the letter to which the noble Lord, Lord Judd, referred was the role of the Environment Agency. I have raised this before. There are two separate agencies. There is Ofgem, as the regulator, and then there is the Environment Agency, which has some very specific responsibilities in this direction. When my noble friend replies to the debate, I hope she will put this in context.
I totally understand the point that has been made by the noble Lord, Lord Judd. I will not use the Latin, but the trouble is that what you put into one list automatically excludes anything else. That is a canon of legal construction. My noble friend has made it very clear that when there was a list of people who would be looked after socially—the disabled and chronically sick, those of pensionable age, those on low incomes and those residing in rural areas—that should not be taken as implying that regard might not be had to the interests of other types of consumer. That statement was made by the Minister, obviously on advice, so that I think the social thing is all right, but I accept the point that my noble friend Lord Ridley has made. We need to make sure that the environment is properly protected, but I had always understood that that was primarily the responsibility of the Environment Agency and other similar organisations. I hope that my noble friend can put this into context.
Baroness Whitaker (Lab)
My Lords, I, too, would like to record briefly my support for my noble friend’s amendment. The Minister’s letter is helpful, although I received it in a very roundabout way, but I do not think it goes far enough. There is a lot at stake here. Our environment is precious and is also vulnerable. Unless these safeguards are explicit in the way that my noble friend has drafted I am sure that they will come second to other considerations.
Lord Teverson
My Lords, one of the things that I certainly enjoy when I get up when I am at home is seeing a living countryside rather than the one bathed in aspic, as some of my colleagues sometimes talk about. It is great to see a countryside that is there alive helping to generate the power that we need for this country and for its economy to move forward. It is a great delight to me and to many of my colleagues.
Baroness Worthington
I support my noble friend’s amendment. Getting the regulator to incorporate social and environmental factors was a hard-fought battle. It would be a great shame if the passing of this Bill should see us going backwards on that front. I am grateful to the noble Viscount for the correction, although I prefer quadlemma, because we can then talk about the effect that Cuadrilla will have on the quadlemma. I look forward to the Minister’s response.
Baroness Verma
My Lords, I thank the noble Lord, Lord Judd, for his amendment and for raising the matter of Ofgem’s social and environmental duties. I recognise the importance that the noble Lord and others attach to this. It is recognised in primary legislation, which sets out Ofgem’s duties, including those concerned with environmental sustainability and social issues. The noble Lord will be aware that Ofgem has other duties, including its principal objective to protect consumer interests, including their interest in a reduction of greenhouse gases and security of supply, as well as duties to promote efficiency and economy and the need to ensure that energy businesses are able to finance their activities.
The Government recognise that Ofgem’s role to a large extent is concerned with identifying what is an appropriate balance between all of those different objectives. This is a case of an independent economic regulator. The Government’s principles of economic regulation state that,
“regulatory decisions are taken by the body that has the legitimacy, expertise and capability to arbitrate between the required trade-offs”.
In the case of energy, that body is, of course, Ofgem.
We are introducing the strategy and policy statement as a result of the Ofgem review, which concluded that this was necessary to provide more coherence between the Government’s strategic energy priorities and the way Ofgem regulates the energy sector. It is crucial, however, that the statement should not undermine independent regulation. The review also concluded that Ofgem should remain responsible for the consideration of trade-offs between economic goals and broader goals, including social and environmental matters. That is why Ofgem will now have additional duties to take into account the contents of the statement when carrying out its own regulatory functions, which will stand alongside its existing duties. As before, Ofgem will be expected to continue to achieve the appropriate balances between its objectives.
The strategy and policy statement will set out the Government’s strategic policy and identify policy outcomes which are relevant to what Ofgem should achieve, but it will not specify how Ofgem should act to achieve these outcomes or specify outcomes in a way that would compromise Ofgem’s independence. It is not necessary to restate Ofgem’s objectives within the strategy and policy statement and it would not be appropriate to include text which could be seen as directing Ofgem on how it should interpret its duties.
I repeat my previous reassurances that we will take social and environmental matters into account when we draft the strategy and policy statement and that there will be opportunities for interested parties to comment on its contents when we consult next year. Both Houses will be able to consider the contents of the statement before it is designated.
My noble friend Lord Jenkin raised the role of the Environment Agency. Ofgem is a regulator of the energy sector and the strategy and policy statement is aimed at achieving coherence between government energy policy and regulatory actions. It is not aimed at doing the work of the Environment Agency which, as my noble friend rightly said, is a duty on that agency.
However, the noble Lord, Lord Judd, and others have raised important points about visual amenity and other environmental concerns. Existing planning and environmental habitat legislation are operating in tandem with national policy guidance on planning matters. This provides the framework to ensure that this is done, and done properly. Environmental impacts are considered at all stages of the planning process, from the development of proposals by applicants, including, for example, through preparation of environmental statements, to consideration by the Planning Inspectorate and final determination and assessment by the Secretary of State. Environmental considerations are also taken into account when government are taking policy-making processes. Key guidance on considering planning for nationally significant infrastructure projects is contained in the national policy statements.
There is a lot already out there for Governments to utilise so, given all those reassurances, I hope that the noble Lord, Lord Judd, feels better reassured and will therefore withdraw his amendment.
Lord Judd
My Lords, as I have said before, I have no doubts whatever about the Minister’s good will. What I am concerned about is the muscle that will ensure the objectives for which I have been arguing. I listened carefully to the words of the Minister. I am of course an optimist by nature and I hope that what she said will lead to the right conclusions. I would, however, be misleading the House if I did not say that I have a profound sense of foreboding of another grim slide downwards in the character and quality of our countryside. This really is a profoundly serious issue. We shall see what happens but I hope I am allowed to say that I am absolutely confident that if this Government fail to reverse the trend, it will be reversed by the future Labour Government who, after all, will be the heirs to all that fine and imaginative legislation between 1945 and 1951 which enshrined the importance of the countryside in our national profile. I beg leave to withdraw the amendment.
Lord Jenkin of Roding
“Secretary of State able to amend Authority’s powers after review
(1) If a formal review of the regulation of competition in the energy industry discloses that the Authority lacks the powers necessary to implement any changes recommended in that review, the Secretary of State may make regulations to amend the Authority’s powers so as to enable it to give effect to those changes.
(2) Regulations are to be made by statutory instrument.
(3) An instrument containing regulations which make provision falling within this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
Lord Jenkin of Roding
My Lords, this amendment is also in the names of my noble friend Lord Roper and the noble Lords, Lord Berkeley and Lord Cameron of Dillington. I am very glad to see the noble Lord, Lord Cameron, back in his place; he sent me the first e-mail from Ethiopia that I have ever received, only a day or two ago. I cannot promise to be quite as brief with this amendment as I was with the previous one that I moved.
The House will remember that on 31 October my noble friend Lady Verma repeated a long Statement about the Government’s energy policy, made in the other place by my right honourable friend the Secretary of State for Energy and Climate Change, Ed Davey. Towards the end of that Statement, following an announcement made earlier in another place by the Prime Minister, Mr Davey gave further details of a proposal to set up,
“annual reviews of the state of competition in the energy markets”.
He referred to them as “competition assessments”, to be undertaken,
“by Ofgem, working closely with the Office of Fair Trading and the”,
newly established,
“Competition and Markets Authority, when it comes into being”.—[Official Report, 31/10/13; col. 1771.]
As noble Lords will be aware, there is now serious public mistrust of the way in which the regulatory system has been working. The recent spate of announcements of, in some cases, swingeing price increases for energy have simply inflamed that mistrust, so there has been a cautious welcome to the announcement. I say “cautious” because I think most people remain to be convinced that these reviews will make any difference in practice. They see that, in place of the more than 20 generating companies which we had before 1997, there are now only six major firms which control 92% of the generating market. They also see what they rightly perceive as the failure of the regulator to get tough with the industry, even to the extent of failing to use its existing powers; there can be no doubt about that—I am glad to see my noble friend on the Front Bench nodding her assent.
Last week the Secretary of State delivered what he called “a tough message” when he spoke to the industry’s main trade association, Energy UK. It is a long speech but I will quote just one or two bits of it because it very much reinforces the case for this amendment. Near the beginning of his speech he says:
“Trust between those who supply energy and those who use it is breaking down. You’ve admitted as much to me. For it is so difficult for people to work out what exactly they are paying for, that they fear the big energy companies are taking them for a ride when bills go up. Fair or not, they look at the big suppliers and they see a reflection of the greed that consumed the banks. So this is a ‘Fred the Shred’ moment for the industry to avoid the reputational fate of the banks”.
That was indeed a very tough message. He went on to make the claim:
“The Government and Ofgem have been acting to open up the market, to increase competition, and put consumers in control of where they get their energy, and how they use it”.
I suspect that few people are able to see that that claim has been actually happening.
This is not the time or place to quote more of what I believe was, by any standards, a forceful and effective speech, but I will allow myself one more quote. After making the point that tough and rigorous competition bears down on costs and prices, he referred to the annual competition reviews. He said:
“Competition works. We’ve seen small suppliers gain substantial business on the back of this year’s high price rises. And today’s announcement by”—
he mentioned one of the companies—is, he said, another welcome thing. However, he said, this,
“will only work … when there is a relationship of trust between suppliers and consumers”.
He went on to talk about the reviews which had been announced.
Lord Berkeley (Lab)
My Lords, I support this important amendment. The noble Lord, Lord Jenkin, has fully and clearly outlined the reasons behind it. Many of the concerns probably stem from misunderstandings, intentional or not, as to what Ministers, in particular, mean by the word “competition”. We hear that word a lot, usually in connection with the price consumers pay for their power, rather than the competition between the generators, or the unfair competition that results from the vertical integration between retail and the generators, which we discussed fully on Report.
The noble Lord, Lord Jenkin, is right to say that trust has broken down. There is a complete lack of transparency, and I do not think that the present structure is fit for purpose. Conflicts of interest seem to abound. I am still surprised that, apparently, Ofgem either does not have the powers or chooses not to use them. It should have done so long ago. Even if there is to be a competition assessment, why do we have to wait for it? Why has it not been done before? However, we are where we are, and as the noble Lord, Lord Jenkin, said, the amendment would be an important addition, as it would avoid several years’ delay if primary legislation were required before any action could be taken.
I would go one step further. If the Minister does not accept the amendment I shall suspect that the Government are completely in the pocket of the big six, and do not want it because it would cause trouble. They are more frightened of the lights going out—that is what the big six have said would happen—than they are willing to establish a structure for the industry that will take us forward into the future. I look forward to hearing what the Minister has to say in reply to the amendment.
The Earl of Caithness (Con)
My Lords, I must speak against the amendment. My noble friend Lord Jenkin made some very good points about trust and getting more competition. That is absolutely true. However, competition narrowed considerably under the previous Labour Government. The noble Lord, Lord Berkeley, and the noble Baroness, Lady Worthington, have waxed lyrical during our discussions but we ought to recall that the previous Secretary of State for Energy under the Labour Government—Mr Edward Miliband—did absolutely nothing to correct the situation and refused to refer any of the energy companies to the Competition Commission.
My concern is that this amendment is the wrong way to solve the problem highlighted by my noble friend Lord Jenkin because it would take away parliamentary democracy. The amendment refers to,
“a formal review of the regulation of competition”.
That formal review could be held at any time. Let us imagine that we have a Government whom none of us in this Chamber likes. If the amendment is passed, they will turn to this new clause and announce that they will carry out a formal review. The formal review will have whatever outcome they want and they can implement its findings without primary legislation. That would take away a hugely important role not just of this House but of the other place.
Lots of little things could be done by secondary legislation. Having been a Minister, I am sure that officials and civil servants have already worked out as many areas as possible that can be dealt with by secondary legislation. However, very significant changes may arise which need to be properly debated in both Houses of Parliament, but which could escape that close scrutiny if this amendment is passed. If a future Government of whatever persuasion were to use this new clause, I can imagine the row that would erupt in this House and the complaints that would ring around this Chamber that there had been a lack of opportunity for debate, particularly from the noble Lord, Lord Berkeley. We should not put ourselves in that position.
Lord Cameron of Dillington (CB)
My Lords, hotfoot from Ethiopia, I rise to support this amendment. Unlike the noble Earl, Lord Caithness, I believe that this is a fallback amendment which cannot in any way harm either the general thrust or the detail of the Government’s policy, as spelled out in the Bill. As I said on Report, and the noble Lord, Lord Jenkin, has made amply clear this afternoon, the Secretary of State continually talks the talk about the importance of competition to all parts of the energy industry, yet the Government seem strangely reluctant to walk the walk when it comes to the Bill. I remain rather mystified by that.
I am sure that the noble Lord, Lord Jenkin, will respond to the comments of the noble Earl, Lord Caithness. However, the amendment refers to drafts of instruments being approved by each House of Parliament, so I do not see that the Secretary of State would be denied democratic freedom under the revolutionary scenario that the noble Earl made out. I hope that the unassuming, safety-net nature of the amendment will prove an exception to the Government’s reluctance to walk the walk in respect of competition.
Lord Roper
My Lords, this proposed new clause follows up debates we had in Committee and on Report and is, I believe, a matter of considerable importance. I shall therefore listen with great care to what the Minister has to say in reply.
Baroness Worthington
My Lords, here we are at Third Reading debating an issue of such fundamental importance that it merely serves to illustrate the point that, although this Bill is considerable in size and breadth, it fundamentally fails to do what it says it is going to do: that is, reform the market.
Although I am sympathetic to the defence of this amendment that has been put forward, it simply is not enough. It hinges on whether one believes that a review undertaken by Ofgem will deliver anything. On this side of the House, we are absolutely certain that it will not. We have had numerous reviews from Ofgem, and Ofgem has clearly demonstrated that it is not fit for purpose. That is why the Labour Party and the leader of the Opposition have been absolutely crystal clear that under a Labour Government we would have a complete restart of that regulatory body to refocus it on putting the consumer first and bringing genuine competition across the market, not just in supply, tariffs and the consumer-facing parts of the industry, but all the way through the chain. That includes the generation market and the wholesale market, but also, importantly, the regulated aspects of this industry.
Baroness Verma
My Lords, I am grateful to my noble friend Lord Jenkin for his amendment and for raising again the important issue of competition. I reassure my noble friend that we are deadly serious about greater competition. Competition is at the heart of the Government’s drive to make sure that energy bills are as low as they can possibly be, to ensure that all consumers are getting a fair deal and, as importantly, to build the trust that my noble friend referred to.
In response to the noble Lord, Lord Cameron, we are walking the walk. That is why we have seen a great number of new entrants since 2010. The Government announced in the annual energy statement that Ofgem and the competition authorities—the Office of Fair Trading and the newly created Competition and Markets Authority—will conduct an annual competition assessment of the energy market. The first assessment will be completed by spring 2014. Together, these independent regulators already have extensive powers to investigate the market and to implement the full range of structural and behavioural remedies to strengthen competition. The statutory framework includes important safeguards to give market participants confidence in a fair and predictable regime. The Government have established the Competition and Markets Authority, which will have strengthened responsibilities and powers and will take on the work of the Competition Commission and a number of responsibilities of the Office of Fair Trading. This will lead to more robust and faster decision-making.
We are strengthening Ofgem’s hand through the Bill. The Government are taking powers to enable Ofgem to step in to improve wholesale market liquidity should its reforms be frustrated or delayed, and we are giving statutory backing to Ofgem’s retail market reforms. We are also giving Ofgem a new power to compel energy businesses to provide redress to consumers. These measures will further strengthen Ofgem’s ability to take effective and timely action to strengthen competition.
I listened carefully to the noble Baroness, Lady Worthington, about the weakness of Ofgem and what her party would do, but Ofgem’s inception was under her Government, and they had 17 reviews. They had ample time to reform Ofgem, if they had wanted to. While I keep hearing from the noble Baroness that her party would abolish Ofgem, they have never given us a sound, credible alternative. When she says that the leader of the Opposition has put consumers at the heart of prices, I remind her that the Prime Minister highlighted the need to simplify the many thousands of tariffs that cropped up under the previous Government.
I should say to the noble Lord, Lord Berkeley, that we are not frightened of the big six. That is why Ministers in my department have been having tough, robust conversations with all energy providers to ensure that they understand quite clearly that this Government are determined to ensure the best outcomes for the consumer.
Finally, the strategy and policy statement will give Ofgem clear guidance on the policy outcomes that are to be achieved to implement the Government’s strategic energy priorities. The Government stand ready to act in support of the regulators where necessary, as I have already said to my noble friend. We had a constructive conversation yesterday in which I wanted to reassure him that those powers are already there. It is for us to ensure that they are being utilised properly. My noble friend mentioned the Which? report on ring-fencing. Ofgem, the Office of Fair Trading and the Competition and Markets Authority will consider all measures that may be necessary in the competition assessment. Together they have far-reaching powers and are able to put in place the full range of remedies, which may include some forms of ring-fencing. It is for the competition authorities to decide what needs to be done, based on evidence. I hope that my noble friend is reassured that the Government are indeed taking this matter very seriously. The regulators have extensive powers to act, which are being strengthened by the creation of the Competition and Markets Authority. I hope that on that basis he is content to withdraw his amendment.
Lord Jenkin of Roding
My Lords, my noble friend has gone quite a long way to reassure me, but I have one or two other questions. However, before I come to them I shall respond to my noble friend Lord Caithness. This amendment simply creates a new power to make regulations that confer powers on the regulator; it does not attempt to say what should be in those regulations. Of course they would be subject to consent by both Houses of Parliament, and I have no doubt that if a significant new power were required, that, too, would have to be subject to an affirmative resolution, or possibly a super-affirmative resolution, in both Houses. I do not see this as being undemocratic and without parliamentary review. The parliamentary review would happen inevitably at each stage. I cannot accept my noble friend’s suggestion that this is the wrong answer.
I recognise and am grateful for the support that the amendment has received, even the somewhat doubtful support from the Opposition Front Bench. I can only echo my noble friend on the Front Bench. The Opposition have yet to explain of what this new marvellous—what should we call it?—“restart” of the whole system is to consist of. I believe in building on what we have got and improving it, rather than taking a leap in the dark and making some entirely new start. These reviews that have been announced—I caught wind of them some time before the Prime Minister made his statement in the other place—are a major new effort to get at why competition has not been working largely because of the reduction in the huge number of generators under the previous Government.
I am grateful to those who supported the amendment. I agree that the main purpose of stronger competition is to protect consumers. A recent National Audit Office report looked at the impact of infrastructure investment on consumer bills. Its view was that,
“Government has made no assessment of the overall impact of infrastructure on future bills or whether those bills will be affordable. Therefore government and regulators are taking decisions on behalf of consumers in the absence of full information about the situation for consumers”.
This is a worrying report. It points to a considerable shortcoming of not just this Government, but all Governments. It is interesting that its first two recommendations are aimed at the Treasury. The Treasury has to set up the structures whereby consumer interests can be considered during the whole question of the infrastructure investment. I do not think I am being unduly alarmist by pointing out that if there has been neglect of the consumer interest in the consideration of the Government’s infrastructure investments, it is not altogether unreasonable to assume that it has also been neglected elsewhere in government, and that this is a wider problem. I do not want to pursue that now except to say that I shall be looking forward to the Government’s response to the National Audit Office report.
My noble friend has gone a long way. She referred to the new powers in the Bill. She also referred to the extra powers that may be available to the Office of Fair Trading and the new Competition and Markets Authority. I shall take her at her word that these are the kind of things that could deal with the proposal that has been made by Which? about separating out the vertically integrated forms. She indicated that that could well be part of the process. On that basis, it would be wrong to divide the House. One point on which I do agree with the noble Baroness on the Opposition Front Bench is that this is a very late stage to raise an important issue. It arose out of the Statement that was made on 31 October. That was the first time that we got the details of these reviews. I hope I have not been wasting the time of the House in bringing this forward, but in this circumstance it would not be right to take the opinion of the House. I beg leave to withdraw the amendment.
Baroness Verma
“(f) provision for requiring a licence holder to provide information to domestic customers about the licence holder’s costs, or profit, attributable to its domestic supply contracts, which may, in particular, include information about—(i) particular kinds of those costs, and(ii) the extent to which domestic customers’ costs are attributable to any of those kinds of costs, or to profit;”
Baroness Verma
My Lords, this group of amendments has the effect of giving the Secretary of State the power to require energy suppliers to provide a breakdown of costs to consumers. This includes both information about their costs in supplying domestic customers and costs passed on to domestic consumers through the Government’s environmental and social programmes. It also enables the Secretary of State to set out the categories of costs to be included and to determine the frequency with which this information must be provided. I am grateful to my noble friend Lord Forsyth, who sadly is not in his place today, and to other noble Lords who raised this matter on Report. I listened very carefully to the views expressed and the Government have brought forward this amendment in response.
The Government are in complete agreement on the importance of providing clear information on the costs that contribute to consumers’ energy bills, including the costs of government policies. Indeed, that is why the Government publish each year a detailed assessment of the impact of our policies in the Estimated Impacts of Energy and Climate Change Policies on Energy Prices and Bills. However, I recognise the strength of feeling on this issue and that is why we will now go one step further and ensure that this information is provided directly to consumers. We will be working with consumer groups, including Which? and Consumer Futures, to take this forward. Four of the largest suppliers already provide a breakdown of their costs on consumer bills. As a first step, I will be seeking a voluntary agreement with other suppliers to ensure that they also provide a breakdown of their costs to consumers.
It is right that we should first pursue a voluntary agreement, as this is the quickest and most cost-effective route to getting this information out to consumers. In the event that the Government are unable to reach agreement to a voluntary approach, the Secretary of State will exercise this power. We need to strike a balance between providing sufficient detail on the costs associated with supplying gas and electricity, and significantly increasing suppliers’ costs, which would inevitably end up being passed on to consumers.
I will explain the types of costs about which suppliers might be required to provide information. I expect to see costs broken down into the following types of categories: wholesale energy costs, network and distribution costs, costs of complying with government environmental programmes, VAT, operating costs and profit. How suppliers display these costs should be left for them to decide, provided they include these categories. I believe the approach we are taking strikes the right balance by providing transparency to consumers on the costs incurred by suppliers without imposing significant additional burdens. I beg to move.
The Lord Bishop of Chester
My Lords, I welcome this amendment, which began its life, I think, in an interchange between the noble Baroness and me in Grand Committee. She has pretty much supplied everything that I asked for then, and I am very pleased. The only point that I will make now is that the Government rightly want to make it easy for consumers to switch suppliers. That is a good thing and it is very helpful that this information will be made available one way or another on bills. However, it needs to be made available consistently, in the same form, by different suppliers, so that if you are comparing a bill from one supplier with a bill from another, the information is supplied in the same form on each bill. The noble Baroness did not quite make that point in what she said. I hope that she can assure us that these costs will be disclosed—either voluntarily or by the exercise of the power that she is taking—not only transparently but consistently and comparably by different suppliers.
Baroness Maddock (LD)
My Lords, I have one question for my noble friend. She talked about making environmental costs clear to customers on their bills. In the past few weeks, we have had lots of discussions about eco and green taxes, and it has become quite clear that the big six, in particular, have sometimes not pointed out to their customers, or admitted in their discussions, that some of those costs are social costs. Everything is in a bit of a state of flux at the moment but, depending on how things work out, it is also important that we are quite accurate on the bills about what is a social cost and what is a so-called green tax. I will also just say that I am very sorry that I was not here for the previous stage of the Bill when the noble Baroness accepted my amendment about the clarity of bills. I hope that the point that was raised by the right reverend Prelate will be covered in the amendment that was passed on Report concerning the clarity of Bills.
Lord Teverson
My Lords, I very much welcome this government amendment. However, I have a concern which is similar to the concern expressed by my noble friend Lady Maddock about how these numbers are produced. When the price increases came through from the energy companies, a bill that I saw, to family members, bullet-pointed the green energy costs as being at the top of the list, giving the impression that this was the most important thing. We all know that numbers are subjective. Numbers in company accounts are as objective as they can be but they are subject to how things are interpreted to some degree; as we know, for example, in terms of the lack of tax that is paid by some multinational companies. Do the Government have any view about how these numbers should be somehow independently audited or at least be auditable, if we feel that they fall below standard?
Lord Jenkin of Roding
I will just add one point before my noble friend replies. I was very glad to hear her say that she would rather this was done voluntarily, but a back-up power is important to encourage the right response from the industry. I apologise to the right reverend Prelate. I was moving amendments on this subject during proceedings on the last energy Bill but one. Those amendments suggested that we needed to see more detail in the Bill. As other noble Lords have said, one needs to have a very clear view as to what these figures actually mean, which is not always apparent. I get bills with pie charts and other things from British Gas. I have one in front of me, to which I have referred before, from Southern Electric. Many of them try to do their best, but such is the lack of trust now between the public and the industry that the public need to be reassured that the figures actually mean what they say. I look forward to seeing what comes from this but, along with other noble Lords, I very much welcome these amendments.
Viscount Ridley
My Lords, as someone who spoke in favour of the amendment of the noble Lord, Lord Forsyth, on Report, I, too, welcome this amendment and think that it goes in exactly the right direction. I particularly welcome the emphasis on voluntary reporting, which will result in a much more flexible and effective way of finding out exactly what these costs are, and where they are, than if we tried to micromanage it by specifying the details ourselves as hopeless legislators rather than people who know how these things are done.
Lord Grantchester
From these Benches, I am happy to endorse the spirit of the amendments in the interests of consumers and providing them with more information on their bills. These amendments seem more neutral than those proposed on Report in that they do not seek in the Bill to mandate energy suppliers to highlight certain designated costs. The amendments thereby avoid the claim that they are targeting so-called green levies on behalf of one strident viewpoint. I listened carefully to the Minister’s words in proposing these amendments and, like the noble Baroness, Lady Maddock, I am not sure that I picked up entirely how the Minister expected costs to be broken down to include the social costs. Can she clarify that in her reply? The impact of different costs, especially the so-called green or environmental costs, should be balanced and it is important how that is portrayed to consumers.
We welcome the consultation that this will enable so that all views can be expressed prior to the introduction of regulations—if any are introduced. However, we are concerned that the transparency of the whole market needs to be enhanced, not simply transparency with respect to the costs of energy supply companies. I refer here to generating costs and transfer pricing within each of the big six power companies, which can make big margins on their generation that would not then show up as the Government may intend.
We remain concerned that these clauses do not go anywhere near far enough. From these Benches, we contend that without proper reform of the market, the data available at any later date are likely to be of severely limited use. At this stage, we are content with the amendments but regard them as highly immaterial to the overall transparency of the market.
Baroness Verma
My Lords, I am extremely grateful to all noble Lords for, by and large, their support for my amendments. I will quickly respond to the right reverend Prelate the Bishop of Chester and to my noble friend Lady Maddock about transparency. The Government and Ofgem both agree that it is important that suppliers are transparent about their costs, including the costs of complying with government environmental and social programmes. One part of the list to which I referred earlier was about complying with greater transparency on those costs. The suppliers would be expected to be able to comply on the cost of delivering government environmental and social programmes. Just to reassure noble Lords, the power enables the Secretary of State to specify the particular kinds of costs that suppliers must refer to, so if we need to get further detail, there is scope to enable that to happen.
I have tried to provide a balance between not overcomplicating the Bill and enabling consumers to be able to look at a bill, see how much their energy is costing them and see whether they are able to get a cheaper deal elsewhere. Providing that information in a way that is clear and easy to understand is what my amendment proposes to do.
Baroness Verma
“(4A) Provision that may be included in a licence by virtue of subsection (2)(d) or (f) may in particular—”
“( ) make provision about the times at which information is to be provided;”
Lord Whitty
Lord Whitty (Lab)
My Lords, in moving this amendment I shall also speak to Amendment 12. I had better declare an interest on this: I am the chair of a small fuel poverty strategy. I do so because the Minister was, I am glad to say, present at the opening of our conference today, which I am very grateful for.
We come now to fuel poverty. I am not quite sure how many “lemmas” we now have in energy policy, whether it is a tetralemma or a quadlemma, but clearly one of the objectives of energy policy must be to rectify the detrimental effects that arise from fuel poverty on some of the poorest in our land. The House will be well aware of how important it is to regard tackling fuel poverty as one of the priority aims of energy policy. There will still be millions of households in severe distress this winter because they cannot heat their homes properly. As a result, there will be millions of pounds of expenditure by the NHS in treatment of cold-related diseases, and sadly there will be some thousands of premature deaths.
Because of this background and because of the inexorable rise in consumer energy prices since about 2004-05—whatever programmes existed then were struggling against a rising trend of prices—the original intentions to eliminate fuel poverty, set down as far back as 2000, were no longer achievable. It was therefore of some concern to many of us that when the first version of this Bill appeared in another place, there was no mention whatever of fuel poverty.
In Committee, the Minister herself produced the provision that attempts to rectify that situation. It was commendable of her to persuade her colleagues that this was necessary, and the Government’s commitment in Clause 145 to producing a new strategy for fuel poverty in a maximum of six months’ time was broadly welcome—and I still welcome it. However, many of us also considered that more detail was required to make clear the nature of this strategy. As colleagues will remember, a number of more detailed proposals for inclusion in this part of the Bill were considered both in Committee and on Report. The Government rejected all of those, unfortunately, but at least the strategy is there.
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, for his amendment. Rightly, he has again highlighted the seriousness of fuel poverty, as he has throughout the debates on this Bill, and I know that on all sides of the House there is a real determination to ensure that the interests of the fuel poor are represented properly. Indeed, earlier today I attended an event with fuel poverty experts to gain a better understanding of how to tackle the problem, at the invitation of the noble Lord, Lord Whitty, for which I am extremely grateful.
The Government are determined to act to ensure that consumers get a good deal and affordable energy bills. Indeed, our analysis suggests that as a result of the electricity market reform measures in this Bill, household electricity bills will be, on average, around 9% lower per year over the period 2016 to 2030 relative to what they would be if decarbonisation were achieved through existing policy instruments. As such, the impact of EMR will be to reduce fuel poverty compared to what it would have been without these policies in place.
The noble Lord’s amendments would set an objective to reduce the number of persons living in fuel poverty and improve the energy efficiency of their dwellings. The Government are intent on tackling fuel poverty at its heart, with improving energy efficiency for fuel-poor households a real priority. We agree that improving the energy efficiency of fuel-poor homes can make a sustained improvement to the situation of households struggling to keep warm and it is therefore the right type of target to aim for. However, the right balance must be struck between what is set out in primary legislation and what is subsequently laid out in regulations, in order to maintain an appropriate use of parliamentary time and the level of government accountability.
Therefore, we have proposed setting out the detail of this objective through secondary legislation because we believe that this strikes the right balance between the certainty of a legislative target and the need for flexibility in the future. We know from Professor Hills’s independent review that the way in which we understand the problem can change over time, as well as the best ways of tackling it. Primary legislation is not the appropriate vehicle to set out the detail of the target, given the importance of a nuanced, flexible approach to tackling fuel poverty.
The issue with the current legislation is that there is a very specific target which does not make sense in the context of how we have come to understand the problem of fuel poverty. That is why we have framed the new provisions in the way that we have, to ensure that there is an objective to address fuel poverty but with the detail of that objective set out in secondary legislation. Our proposals ensure that the setting of the target, and any changes to it, will be subject to full parliamentary debate, and the importance of that debate is why we have suggested from the outset that these provisions will be subject to affirmative resolution by both Houses.
Furthermore, from a practical perspective, it would not be sensible to make specific reference to improving the energy efficiency of dwellings, as this could mean that every time the methodology for measuring energy efficiency is updated, the primary legislation would need amending. As this could occur every couple of years, it would not represent a proportionate use of parliamentary time for what would be very technical amendments.
To reflect on what the noble Lord, Lord Whitty, said about the measures we are currently using under ECO, thus far 311,250 energy-efficiency measures have been installed in around 273,000 properties through ECO and the Green Deal, to the end of September. The vast majority have been installed through ECO so we believe that ECO is working. It is reaching out to the very families that I know the noble Lord and I both believe need the greatest assistance.
In summary, I agree with the spirit of the noble Lord’s amendments but do not believe that it would be sensible to put this detail in the primary legislation However, since we are agreed on the intention, I hope that my response has reassured the noble Lord and he will withdraw his amendment.
This is the last group to which I will speak, so before I sit down I would like to put on record my thanks to everyone who has played a role in the passage of the Energy Bill through this House. I start by thanking the Lord Speaker and all Deputy Speakers and Deputy Chairmen who have facilitated our proceedings. I also thank all those who have worked behind the scenes: the clerks, Hansard, the doorkeepers and the officials from the Ministry of Defence, the Department for Communities and Local Government and the Department for Environment, Food and Rural Affairs who have supported the Government. I add my particular thanks to my officials from DECC, who have worked tirelessly—even to the point of giving up annual leave during the Summer Recess—to be able to provide the information that your Lordships required, which was made possible by the way they performed so heroically during the passage of this Bill.
I also thank all noble Lords who have taken part in our debates for their constructive contributions to the Bill. We have scrutinised it in full and I have no doubt it is leaving us in a better state than it arrived in, thanks to the expertise of this House. We have added new provisions on fuel poverty, access to markets and enabling the level of the small-scale feed-in tariffs threshold to be raised. Thanks to my noble friend Lord Roper and the Delegated Powers and Regulatory Reform Committee, we have also improved the level of scrutiny afforded to the delegated powers in the Bill.
I particularly thank my noble friend Lord Gardiner, who has so ably assisted me at the Dispatch Box, as well as my noble friends Lord Courtown and Lord Teverson, who have assisted from the government Benches.
I am also extremely grateful to all members of the House of Lords informal scrutiny group on the Energy Bill, which first convened for pre-legislative scrutiny and has continued its most helpful and appropriately challenging scrutiny in parallel to the Bill’s passage. I particularly thank the noble Lord, Lord Oxburgh, who I do not see in his place, for his long-standing chairmanship of this group.
We have not agreed on everything but I am grateful for the broad support there has been for the intentions of this Bill. As I am sure noble Lords will agree, it is now important that the Bill proceeds to Royal Assent as swiftly as possible in order to secure the investment that is vital for growth, jobs and the decarbonisation of our economy.
Lord Whitty
My Lords, I echo the noble Baroness’s sentiments in relation to the passage of this Bill. Although, apart from the Minister herself, we are now discouraged from making lengthy speeches at Third Reading, I would like to underline her thanks to her staff, because they have been extraordinarily helpful to other Members of this House. The meetings we have had under the auspices of the noble Lord, Lord Oxburgh, and the noble Baroness have been extremely helpful.
As the noble Baroness says, we have not always agreed. We do not entirely agree on this clause. Some of what she addressed in her reply related to earlier discussions we had on Report. I am not trying to specify targets in any detail; I am saying simply that the fuel poverty strategy should be about reducing the number of fuel poor, including by improving the energy efficiency of their homes. I would have thought that was pretty incontestable and really should have been reflected in this Bill.
I will not pursue this tonight but I will just say to the noble Baroness that because of when this was introduced, the other place has not actually considered the fuel poverty dimensions of this Bill. I rather suspect that her colleagues in the House of Commons will have some lengthy discussions on this and, in the light of that prospect, I will withdraw my amendment tonight. I reiterate my thanks to the Minister and her staff for the conduct of the whole passage of this Bill.
“Smoke and carbon monoxide alarms
(1) The Secretary of State may by regulations make provision imposing duties on a relevant landlord of residential premises in England for the purposes of ensuring that, during any period when the premises are occupied under a tenancy—
(a) the premises are equipped with a required alarm (or required alarms), and(b) checks are made by or on behalf of the landlord in accordance with the regulations to ensure that any such alarm remains in proper working order.(2) “Required alarm” means—
(a) a smoke alarm, or(b) a carbon monoxide alarm,that meets the appropriate standard.(3) Regulations may include provision about—
(a) the interpretation of terms used in subsections (1) and (2);(b) the enforcement of any duty imposed by regulations.(4) Provision made by virtue of subsection (3)(b) may in particular—
(a) confer functions on local housing authorities in England;(b) require a landlord who contravenes any such duty to pay a financial penalty.(5) Provision about penalties made by virtue of subsection (4)(b) includes provision—
(a) about the procedure to be followed in imposing penalties;(b) about the amount of penalties;(c) conferring rights of appeal against penalties;(d) for the enforcement of penalties;(e) about the application of sums paid by way of penalties (and such provision may permit or require the payment of sums into the Consolidated Fund).(6) Regulations may—
(a) include incidental, supplementary and consequential provision;(b) make transitory or transitional provision or savings;(c) make different provision for different cases or circumstances or for different purposes;(d) make provision subject to exceptions. (7) Consequential provision made by virtue of subsection (6)(a) may amend, repeal or revoke any provision made by or under an Act.
(8) Regulations are to be made by statutory instrument.
(9) An instrument containing regulations may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.
(10) Subject to provision contained in regulations, in this section—
“the appropriate standard”, in relation to a smoke alarm or a carbon monoxide alarm, means the standard (if any) that is specified in, or determined under, regulations;
“local housing authority” has the meaning given in section 261(2) of the Housing Act 2004;
“premises” includes land, buildings, moveable structures, vehicles and vessels;
“regulations” means regulations under this section;
“relevant landlord” means a landlord in respect of a tenancy of residential premises in England who is of a description specified in regulations;
“residential premises” means premises all or part of which comprise a dwelling;
“tenancy” includes any lease, licence, sub-lease or sub-tenancy (and “landlord” is to be read accordingly).”
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Stowell of Beeston) (Con)
My Lords, in moving Amendment 13 I will speak also to Amendments 14 and 15. Before I get to that, though, I will start by paying tribute to the noble Baroness, Lady Finlay of Llandaff, and indeed your Lordships’ House, for raising and debating the important matter of carbon monoxide poisoning during the passage of this Bill.
As noble Lords will recall, in Committee the noble Baroness, Lady Finlay, explained the effects of carbon monoxide poisoning and highlighted, as indeed did other noble Lords, some of the recent tragic cases. The noble Baroness tabled an amendment that would have introduced regulations for carbon monoxide detectors in the Bill. We could not accept that amendment but it provoked a debate within government which led me to announce on Report a couple of weeks ago that we would extend our review of private rented accommodation to examine whether landlords should be required to install carbon monoxide detectors.
Baroness Finlay of Llandaff (CB)
My Lords, I am delighted to add my name to this amendment. This is Carbon Monoxide Awareness Week so the amendment is extremely timely and I am glad the Government have been prudent, and prudent enough to extend it to smoke alarms as well. I am most grateful to the Minister for the time that she has spent with me on this issue and also to the noble Baroness, Lady Verma, in her role as Minister taking this Bill forward. I hope that the Public Health England warning that went out yesterday over fossil fuel and wood-burning stoves for Carbon Monoxide Awareness Week will become a thing of the past. It is important that the cost of a working smoke alarm at European Standard EN 50291, guaranteed for seven years, is put in context. One year’s protection costs less than a large cup of coffee at a motorway service area. Some 40 people a year on average lose their lives through carbon monoxide poisoning and about 4,000 people end up in A&E. This is a really important step. I wish that we did not have to take it but I am sure that we will end up needing to have regulations made. I will continue to question the Government as it goes through and I will be watching the review very carefully. In the mean time, I am most grateful and I am sure that the victims’ families are also grateful that the Government have listened carefully and acted at a point where they could.
Baroness Maddock
My Lords, I, too, added my name to this amendment and I am very grateful to both Ministers for bringing this forward. Like most people who have campaigned on this issue over the years, it began with a personal experience. My first experience was in a private home where a room had been made in a roof and there were fumes as the builder had not properly sealed the chimney. I hope that at some point we can look also at homes other than rented ones.
My experience was 20 years ago and over those 20 years a number of groups and individuals have campaigned on this. During the passage of this Bill, we got the old familiar answer that, “It is not our department”. I am very grateful to the Minister because she did not stop it there and the noble Baroness, Lady Finlay, and I had a very productive meeting with her and her officials—she took on board that we really ought to sort this out. It must be somebody’s responsibility somewhere. I had hoped that there might be some regulations somewhere that we could add this on to but that is not exactly what has happened. I also raised it with my right honourable friend Ed Davey, the Secretary of State at DECC, and he took this seriously as well, so I know that a lot of work has gone on to bring this forward.
I, too, thank the Minister for the amazing access we have had and the information that we have all been party to through the passage of the Bill through this House. As other noble Lords have said, we always make legislation better when it comes here. We have certainly done that and I thank the Minister for bringing forward the fuel poverty strategy. We know that it is not perfect but we are really grateful as it was not there before. As the noble Baroness, Lady Finlay, said, on behalf of all those who have campaigned about the unnecessary deaths from this silent killer, carbon monoxide, we thank everybody who has brought forward these amendments today. However, like the noble Baroness, Lady Finlay, I shall be watching what happens in future because the dreaded word “may” is in the Bill; it is not “must”.
Lord Grantchester
My Lords, we, too, thank the Minister for joining with the energy department to bring forward this sensible amendment which, if implemented, will undoubtedly save lives. We also thank the noble Baroness, Lady Finlay, and other noble Lords, including my noble friend Lord Harrison who cannot be in his place today, who have campaigned strongly on the issue. Deaths from carbon monoxide and from fire are avoidable. These alarms are cheap to buy and fix and must be among the most efficient life-saving devices ever on the market. It must also be stressed that there can be no substitute for regular maintenance. I am glad to see that element also included in the amendment.
While welcoming the consultation to capture views on how the measure may be taken forward as part of a wider review, our only concern is that the Government may not bring forward the necessary regulations despite the undoubted value of these devices, which could save hundreds of lives a year. Will the Minister tell the House when the review announced on 16 October will report? We see no reason to hold up this welcome measure unnecessarily while the review looks at a number of other, quite unrelated issues. We therefore urge the Government to move with some haste on this measure, so saving tenants across the country from the risk of death either from fire or from carbon monoxide poisoning.
Baroness Stowell of Beeston
I am grateful to all noble Lords who have spoken and for their support for these government amendments. I share the views expressed by my noble friend Lady Maddock and the noble Baroness, Lady Finlay, on the work that my noble friend Lady Verma has done in this area. It was she who responded to the debates in Committee and ensured that there was the greater collaboration across government departments that led to the announcement that I made on Report. We have worked together on this, but the amendment was triggered by her response to the debates that took place in Committee.
I do not think that there is a great deal more for me to add to the points that I made when moving the amendment. I am grateful to the noble Lord, Lord Grantchester, for his support for the amendment. As I said in my opening remarks, the review that the measure forms part of will conclude next June. We will be as swift as possible in making public our conclusions in response to that review. As I have said and as I have demonstrated today, if the outcome of that review is a decision that we should regulate, we now have in place the order-making powers that would make that possible. The noble Lord urged us to go further, but as I said when we discussed this matter at the previous stage, his own Government conducted a comprehensive review of this area only in 2009 and concluded that they should limit regulations to just the installation of solid-fuel appliances. I accept his challenge and the pressure he puts on me to make sure that we go further, but we are doing this by way of review because we think that it is the right thing to do. I am quite confident that, by conducting a comprehensive review, we will be able clearly to demonstrate that our conclusions are evidence-based and well informed.